Fair Value

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value

6. Fair Value

The following table summarizes, by level within the fair value hierarchy, estimated fair values of the Company’s assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Condensed Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented.

	June 30, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Other assets	$	—	$	2,500	$	—	$	2,500
Total assets	$	—	$	2,500	$	—	$	2,500
Liabilities:
Contingent consideration	$	—	$	—	$	—	$	—
Borrowings		—		355,300		—		355,300
Tax receivable agreement		—		—		181,596		181,596
Total liabilities	$	—	$	355,300	$	181,596	$	536,896
	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Other assets	$	—	$	2,500	$	—	$	2,500
Total assets	$	—	$	2,500	$	—	$	2,500
Liabilities:
Contingent consideration	$	—	$	—	$	1,000	$	1,000
Borrowings		—		344,280		—		344,280
Tax receivable agreement		—		—		179,127		179,127
Total liabilities	$	—	$	344,280	$	180,127	$	524,407

Other assets

Other assets contain a minority equity investment in a privately-held company. The Company elected a measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are infrequent and occur in an inactive market.

Contingent consideration

Contingent consideration relates to potential payments that the Company may be required to make associated with acquisitions. The contingent consideration is recorded at fair value based on actuals or estimates of discounted future cash flows associated with the acquired businesses. To the extent that the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the fair value of contingent consideration is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations (“ASC 805”).

As of June 30, 2023 and December 31, 2022, the present value of contingent consideration reflects the actual anticipated payments.

The following table provides a rollforward of the contingent consideration related to previous business acquisitions.

	Six Months Ended June 30,
($ in thousands)	2023			2022
Balance at beginning of period	$	1,000		$	17,047
Purchases		—			—
Payments		(1,000	)		(12,747	)
Valuation adjustment		—			(3,950	)
Balance at end of period	$	—		$	350

Borrowings

The revolving credit facility and 2026 Notes are measured at amortized cost, which the carrying value is unpaid principal net of unamortized debt discount and debt issuance costs. The carrying value of the revolving credit facility approximates fair value because its interest rate approximates market interest rates. The estimated fair value of the 2026 Notes is determined using the quoted prices from over-the-counter markets. The estimated fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates and quoted prices are generally observable and do not contain a high level of subjectivity.

The following table provides the carrying value and estimated fair value of borrowings. See Note 9. Borrowings for further discussion on borrowings.

	June 30, 2023				December 31, 2022
($ in thousands)	Carrying value		Fair value		Carrying value		Fair value
Revolving credit facility	$	—	$	—	$	18,177	$	20,000
2026 Notes		432,742		355,300		433,142		324,280
Total	$	432,742	$	355,300	$	451,319	$	344,280

Tax Receivable Agreement

Upon the completion of the Business Combination, the Company entered into the Tax Receivable Agreement (the “TRA”) with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its condensed consolidated financial statements. The TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized within Change in fair value of tax receivable liability in the Company’s Condensed Consolidated Statements of Operations.

The Company used a discount rate, also referred to as the Early Termination Rate, as defined in the TRA, to determine the present value, based on a risk-free rate plus a spread, pursuant to the TRA. A rate of 7.04% was applied to the forecasted TRA payments at June 30, 2023, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. The TRA balance was adjusted by $0.5 million through accretion expense and a valuation adjustment, related to an increase in the discount rate, which was 6.48% as of December 31, 2022.

The following table provides a rollforward of the TRA related to the acquisition and exchanges of Post-Merger Repay Units. See Note 13. Taxation for further discussion on the TRA.

	Six Months Ended June 30,
($ in thousands)	2023		2022
Balance at beginning of period	$	179,127	$	245,828
Purchases		1,987		165
Accretion expense		—		2,657
Valuation adjustment		482		(46,727	)
Balance at end of period	$	181,596	$	201,923