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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

6. Fair Value of Financial Instruments

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy.


	June 30, 2022
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets measured at fair value
Derivative financial instruments	$	36,717	$	—	$	36,717	$	—
Total assets measured at fair value	$	36,717	$	—	$	36,717	$	—
Liabilities measured at fair value
Warrant liability	$	1,833	$	—	$	1,833	$	—
Contingent consideration liabilities		43,385		—		—		43,385
Total liabilities measured at fair value	$	45,218	$	—	$	1,833	$	43,385


	December 31, 2021
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets measured at fair value
Derivative financial instruments	$	10,164	$	—	$	10,164	$	—
Total assets measured at fair value	$	10,164	$	—	$	10,164	$	—
Liabilities measured at fair value
Derivative financial instruments	$	385	$	—	$	385	$	—
Warrant liability		22,189		—		—		22,189
Contingent consideration liabilities		58,366		—		—		58,366
Total liabilities measured at fair value	$	80,940	$	—	$	385	$	80,555

Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of $650.0 million and $2.2 billion as of June 30, 2022 and December 31, 2021, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. As of June 30, 2022, $36.7 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets” in the Condensed Consolidated Balance Sheets with changes in fair value recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2021, $10.2 million and $0.4 million of the Company’s fair value of outstanding interest rate caps were included in “Prepaid expenses and other current assets” and “Other accrued expenses” in the Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended June 30, 2022 and 2021, the Company recorded a gain of $5.6 million and a loss of $1.2 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments. During the six months ended June 30, 2022 and 2021, the Company recorded gains of $26.6 million and $4.3 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

Forward Contracts

As of June 30, 2022, the Company had open euro forward contracts to hedge foreign currency exposure on a total of €22.1 million with maturities in fiscal year 2022. As of December 31, 2021, the Company had no open euro forward contracts. During the three and six months ended June 30, 2022 and 2021, the changes in fair value of the forward contracts were $1.7 million for both periods.

Warrant Liability

As of June 30, 2022 and December 31, 2021, 7,333,333 private placement warrants, which were owned by Conyers Park II Sponsor LLC (“CP Sponsor”), remained outstanding at fair value of $1.8 million and $22.2

million, respectively. The warrant liability was remeasured to fair value with adjustment of $4.9 million and $20.4 million reflected in “Change in fair value of warrant liability” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the three and six months ended June 30, 2022, respectively. The warrant liability was remeasured to fair value with adjustments of $7.1 million and $1.5 million reflected in “Change in fair value of warrant liability” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the three and six months ended June 30, 2021, respectively. The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the Consolidated Statement of Operations and Comprehensive Income (Loss) until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

The Company previously valued its private placement warrants using a Black-Scholes Model. The private placement warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. Beginning in the first quarter of 2022, they are classified as Level 2 based on the period of time the public warrants have been trading. The Company determined the fair value of the liability classified private placement warrants by approximating the value with the share price of the public warrants which is inherently less subjective and judgmental given it is based on observable inputs. Therefore, the value of the private placement warrants are measured at an indirectly observable quoted price in active markets for the public warrants. Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.

Contingent Consideration Liabilities

During each reporting period, the Company measures the fair value of its contingent liabilities by evaluating the significant unobservable inputs and probability weightings using Monte Carlo simulations. Any resulting decreases or increases in the fair value result in a corresponding gain or loss reported in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of June 30, 2022, the maximum potential payment outcomes were $148.1 million. The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities:


	June 30,
(in thousands)	2022			2021
Beginning of the period	$	58,366		$	45,901
Fair value of acquisitions		510			5,116
Changes in fair value		5,788			3,361
Payments		(20,882	)		(6,399	)
Measurement period adjustments		—			(1,181	)
Foreign exchange translation effects		(397	)		45
End of the period	$	43,385		$	46,843

Long-term Debt

The following table sets forth the carrying values and fair values of the Company’s financial liabilities measured on a recurring basis, categorized by input level within the fair value hierarchy:


(in thousands)	Carrying Value		Fair Value (Level 2)
Balance at June 30, 2022
Term Loan Facility	$	1,305,125	$	1,297,766
Notes		775,000		730,536
Revolving Credit Facility		45,000		45,000
Government loans for COVID-19 relief		4,411		4,625
Other		1,585		1,585
Total long-term debt	$	2,131,121	$	2,079,512


(in thousands)	Carrying Value		Fair Value (Level 2)
Balance at December 31, 2021
Term Loan Facility	$	1,311,750	$	1,406,552
Notes		775,000		894,611
Government loans for COVID-19 relief		5,212		5,615
Other		1,113		1,113
Total long-term debt	$	2,093,075	$	2,307,891

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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