Fair Value Measurements of Financial Instruments

12 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements of Financial Instruments

21.Fair Value Measurements of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2024 are presented below (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts*	$	3,673	$	—	$	—	$	3,673
Marketable securities – certificates of deposit		2,289		—		—		2,289
Marketable securities – equity securities		89		—		—		89
I Health call option		—		—		3,778		3,778
Interest rate collar		—		19		—		19
	$	6,051	$	19	$	3,778	$	9,848
Liabilities
AAMG contingent consideration	$	2,110	$	—	$	—	$	2,110
VOMG contingent consideration		—		—		15		15
Sun Labs remaining equity interest purchase		—		—		7,352		7,352
ADSC contingent consideration		—		—		4,285		4,285
CFC contingent consideration		—		—		9,949		9,949
PCCCV contingent consideration		—		—		1,351		1,351
CHS contingent consideration		—		—		5,643		5,643
Total liabilities	$	2,110	$	—	$	28,595	$	30,705

* Included in cash and cash equivalents

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2023 are presented below (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts*	$	4,842	$	—	$	—	$	4,842
Marketable securities – certificates of deposit		2,150		—		—		2,150
Marketable securities – equity securities		348		—		—		348
Total assets	$	7,340	$	—	$	—	$	7,340
Liabilities
AAMG contingent consideration	$	—	$	—	$	5,475	$	5,475
VOMG contingent consideration		—		—		17		17
DMG remaining equity interest purchase		—		—		8,542		8,542
Sun Labs remaining equity interest purchase		—		—		7,802		7,802
Interest rate collar		—		252		—		252
Total liabilities	$	—	$	252	$	21,836	$	22,088

* Included in cash and cash equivalents

The change in the fair value of Level 3 liabilities is recognized in unrealized loss on investments, other income, and general and administrative expenses in the accompanying consolidated statements of income. As of December 31, 2024, the reconciliation of our Level 3 liabilities was as follows (in thousands):

	Amount
Balance at January 1, 2024	$	21,836
Additions		19,342
Transfer out		(2,110	)
Change in fair value of Level 3 liabilities		3,093
Settlements		(13,566	)
Balance at December 31, 2024	$	28,595

Investments in Marketable Securities

Certificates of deposit are reported at par value, plus accrued interest, with maturity dates greater than ninety days. As of December 31, 2024 and 2023, certificates of deposit amounted to approximately $2.3 million and $2.2 million, respectively. Investments in certificates of deposit are classified as Level 1 investments in the fair value hierarchy.

Equity securities are reported at fair value. These securities are classified as Level 1 in the valuation hierarchy, where quoted market prices from reputable third-party brokers are available in an active market and unadjusted. As of December 31, 2024 and 2023, the equity securities were approximately $0.1 million and $0.3 million, respectively, in the accompanying consolidated balance sheets. In August 2024, the Company sold all of its common stock in Nutex Health, Inc. (“Nutex”). Gains and losses recognized on equity securities sold are recognized in the accompanying consolidated statements of income as other income. The components comprising total gains and losses on equity securities are as follows (in thousands) for the periods listed below:

	Years ended December 31,
	2024			2023
Total losses recognized on equity securities	$	(135	)	$	(6,629	)
Less losses recognized on equity securities sold		(146	)		(4,052	)
Unrealized gain (loss) recognized on equity securities held at end of period	$	11		$	(2,577	)

Derivative Financial Instruments

Interest Rate Collar Agreements

The Company’s collar agreement is designed to limit the interest rate risk associated with the Company’s Revolver Loan. The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. See Note 10—“Credit Facility, Promissory Notes Payable, Bank Loans, and Lines of Credit,” for further information on the Company’s debt. Under the terms of the agreement, the ceiling is 5.0% and the floor is 2.34%. The collar agreement is not designated as a hedging instrument. Changes in the fair value of this contract are recognized as unrealized gain or loss on investments in the accompanying consolidated statements of income and reflected in the accompanying consolidated statements of cash flows as unrealized (gain) loss on investments. The estimated fair value of the collar was determined using Level 2 inputs. As of December 31, 2024 and 2023, the fair value of the collar was $19,000 and $0.3 million, respectively, and was presented within prepaid expenses and other current assets and other long-term liabilities in the accompanying consolidated balance sheets, respectively. For the years ended December 31, 2024 and 2023, the Company recognized an unrealized gain of $0.3 million and an unrealized loss of $0.3 million, respectively.

I Health Call Option

The Company acquired a 25% equity interest in I Health which included a call option that allows the Company to purchase an additional 25% equity interest on each of the first, second, and third anniversaries of the purchase. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. As of December 31, 2024, the call option's value was $3.8 million. The I Health call option is presented within other assets in the accompanying consolidated balance sheet. Changes in the fair value of the option are presented in other income in accompanying consolidated statements of income. The 25% equity interest in I Health is accounted for under the equity method (see Note 6—“Investments in Other Entities”).

Remaining equity interest purchase

In 2021, the Company entered into a financing obligation to purchase the remaining equity interest in Diagnostic Medical Group of Southern California (“DMG”) and Sun Clinical Laboratories (“Sun Labs”) within three years from the date the Company consolidated DMG and Sun Labs. The purchase of the remaining DMG equity value was considered a financing obligation with a carrying value of $8.5 million as of December 31, 2023. In December 2024, the Company purchased the remaining DMG equity interest, and the financing obligation is no longer outstanding as of December 31, 2024. The purchase of the remaining Sun Labs equity value is considered a financing obligation with a carrying value of $7.4 million and $7.8 million, as of December 31, 2024 and December 31, 2023, respectively. For the years ended December 31, 2024 and 2023, the change in the fair value of the financing obligation was $0.4 million and $2.0 million, respectively, and is presented in unrealized loss on investments in the accompanying consolidated statements of income. As the financing obligation is embedded in the non-controlling interest, the non-controlling interest is recognized in other liabilities as of December 31, 2024 and 2023, in the accompanying consolidated balance sheets.

Contingent consideration

All-American Medical Group (“AAMG”)

Upon acquiring 100% of the equity interest in AAMG, the purchase price consisted of cash funded upon close of the transaction and additional consideration (“AAMG stock contingent consideration”) in the form of the Company’s common stock. The additional consideration is contingent on AAMG meeting certain revenue and capitated member targets in 2023 (“2023 target metric”) and in 2024 (“2024 target metric”). Additional shares would be further issued for exceeding the revenue targets in 2023 (“2023 growth metric”) and in 2024 (“2024 growth metric”). The total amount of stock that can be issued for the 2023 target and growth metrics and 2024 target and growth metrics is 157,059 and 184,357, respectively. At the end of the earnout periods, the Company concluded on the achievement of the 2023 target and growth metrics and the 2024 target and growth metrics based on actual revenue and the value of the Company stock (Level 1) to calculate payment, representing the fair value of the contingent consideration.

The 2023 and 2024 growth metrics were considered variable and were presented within other liabilities and other long-term liabilities in the accompanying consolidated balance sheets, respectively. As of December 31, 2024 and 2023, the AAMG stock contingent consideration for the 2024 growth metric had a fair value of $2.1 million and $2.9 million, respectively, and was presented within other liabilities and other long-term liabilities in the accompanying consolidated balance sheets, respectively. Changes in the AAMG stock contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income.

During the year ended December 31, 2024, the Company concluded that both the 2023 target metric and the 2023 growth metric were met. As a result, the Company recognized $4.0 million in additional paid-in capital from other liabilities and issued 157,059 total shares of common stock to the sellers. As of December 31, 2023, the 2023 growth metric was valued at $2.6 million and was presented within other liabilities in the accompanying consolidated balance sheets.

ADSC

Upon acquiring 95% of the equity interest of ADSC in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash contingent on ADSC achieving revenue and EBITDA metrics for fiscal years 2023 (“ADSC 2023 Metric”) and 2024 (“ADSC 2024 Metric”) (collectively, “ADSC contingent consideration”). The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. At the end of the earnout periods, the Company concluded on the achievement of the ADSC 2023 Metric and the ADSC 2024 Metric based on actual revenue and EBITDA to calculate payment, representing the fair value of the contingent consideration. As of December 31, 2024, the ADSC 2023 Metric and the ADSC 2024 Metric were valued at $2.1 million and $2.2 million, respectively, and were included in other liabilities in the accompanying consolidated balance sheets. Changes in the ADSC contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income.

CFC

Upon acquiring certain assets of CFC in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash contingent upon CFC maintaining or exceeding the target member month amount for the first, second, and third measurement period (“CFC contingent consideration”). The first measurement period commences on the first day of the month immediately following the close of AHMS and ending on the one-year anniversary thereof. The second measurement period is for one year after the first measurement period, and the third measurement period is for one year after the second measurement period. The contingent liability will be paid after achieving the metric in each measurement period. The Company will pay $5.0 million for each metric achieved for each measurement period, or a total of $15.0 million. In the event that the CFC first and/or second contingent consideration metrics are not achieved during the first and/or the second measurement period, if the metric is met within the second and/or third measurement period, there is a catch-up payment that shall be paid concurrently with the payments of the CFC second contingent consideration and/or CFC third contingent consideration. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. Significant unobservable inputs were a 7.5% discount rate, 7.8% incremental borrowing rate, and 21.3% volatility. As of December 31, 2024, the first metric was valued at $4.2 million and was included in other liabilities in the accompanying consolidated balance sheets. As of December 31, 2024, the second and third metrics were valued at $5.8 million in aggregate, and were included in other long-term liabilities in the accompanying consolidated balance sheets. Changes in the CFC contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income.

PCCCV

Upon acquiring certain assets of PCCCV in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash, contingent upon PCCCV meeting certain metrics related to financial ratios and member months for the first and second measurement periods (“PCCCV contingent consideration”). The first measurement period is the first day of the month immediately following the close and ending on June 30, 2024. The second measurement period is for one year after the first measurement period. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and assigned probabilities to each such scenario in determining fair value. As of December 31, 2024, the first metric was met, and $1.0 million was paid in the fourth quarter of 2024. As of December 31, 2024, the second metric was valued at $1.4 million and was included in other liabilities in the accompanying consolidated balance sheets. Changes in the PCCCV contingent consideration were presented in general and administrative expenses in the accompanying consolidated statements of income.

CHS

Upon acquiring 100% of the equity interest of CHS in 2024, the total consideration of the acquisition included contingent consideration. The contingent consideration will be settled in cash, contingent upon CHS achieving a gross profit per total member months metric for fiscal year 2025 (“CHS 2025 Gross Profit PMPM Metric”) and member enrollment metrics (“CHS Member Enrollment Metrics”) measured over four measurement periods and an additional fifth measurement period contingent upon acquisition of an entity (the “earnout period”) (collectively, “CHS contingent consideration”). For the CHS Member Enrollment Metrics, the first measurement period means the period commencing on the first day immediately following the closure of CHS and ending on the one-year anniversary thereof. The second, third, fourth, and fifth measurement periods are for one year after each of the previous respective measurement periods. If the metrics are achieved, the contingent liability will be paid after the end of the earnout period. The Company will pay up to $4.8 million for the CHS 2025 Gross Profit PMPM Metric, and up to $4.3 million for each metric achieved for each measurement period, or up to a total of $21.5 million, for the CHS Member Enrollment Metrics. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and membership and assigned probabilities to each such scenario in determining fair value. As of December 31, 2024, the CHS contingent consideration was valued at $5.6 million. The CHS 2025 Gross Profit PMPM Metric was included in other liabilities and the CHS Member Enrollment Metrics were included in other long-term liabilities in the accompanying consolidated balance sheets. Changes in the CHS contingent consideration are presented in general and administrative expenses in the accompanying consolidated statements of income.