Fair Value Measurements and Hierarchy

3 Months Ended

Mar. 31, 2022

See Note 2 for a summary of the Company’s policies relating to fair value measurements.

The following table presents the carrying amounts of the Company’s financial instruments at March 31, 2022 and December 31, 2021:


(in thousands)	March 31, 2022		December 31, 2021
Financial assets:
Cash and restricted cash	$	95,534	$	115,174
Accounts receivable	24,513		20,007
Other receivables	1,279		1,237
Financial liabilities:
Accounts payable	$	12,596	$	15,559
Derivative warrant liabilities	3,654		2,193
Earnout liabilities	20,578		60,018

The carrying amounts of cash, accounts receivable, other receivables, and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments.

The following table presents information about the Company’s Level 3 liabilities that are measured at fair value on a recurring basis at March 31, 2022:


(in thousands)	Derivative Warrant Liability		Earnout Liability




Balance at December 31, 2021	$	2,193	$	60,018
Change in fair value included in other expense	1,461		(39,440)
Balance at March 31, 2022	$	3,654	$	20,578

The derivative warrant and earnout liabilities were valued using a Binomial Lattice and Monte-Carlo Simulation Model, respectively, which are considered to be Level 3 fair value measurements. The primary unobservable input utilized in determining the fair value of the warrant and earnouts is the expected volatility of the common stock. A summary of the inputs used in valuing the derivative warrant and earnout liabilities is as follows:


	March 31, 2022									December 31, 2021
	Derivative Warrant Liability			First Tranche Earnout			Second Tranche Earnout			Derivative Warrant Liability			First Tranche Earnout			Second Tranche Earnout
Unit price	$	7.13		$	7.13		$	7.13		$	9.75		$	9.75		$	9.75
Term (in years)	4.62			1.27			1.75			4.87			1.87			2.87
Volatility	36.10		%	35.00		%	35.00		%	12.80		%	35.00		%	35.00		%
Risk-free rate	2.41		%	2.38		%	2.38		%	1.24		%	0.94		%	0.94		%
Dividend yield	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%	0.00		%
Cost of equity	—			13.20		%	13.20		%	—			11.14		%	11.14		%

There were no transfers between fair value measurement levels during the three months ended March 31, 2022 and 2021.

Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs

The inputs to estimate the fair value of the Company’s derivative warrant and earnout liabilities were the market price of the Company’s common stock, their remaining expected term, the volatility of the Company’s common stock price and the risk-free interest rate over the expected term. Significant changes in any of those inputs in isolation can result in a significant change in the fair value measurement.

Generally, an increase in the market price of the Company’s shares of common stock, an increase in the volatility of the Company’s shares of common stock, and an increase in the remaining term of the derivative liabilities would each result in a directionally similar change in the estimated fair value of the Company’s derivative liabilities. Such changes would increase the associated liability while decreases in these assumptions would decrease the associated liability. An increase in the risk-free interest rate would result in a decrease in the estimated fair value measurement and thus a decrease in the associated liability. The Company has not, and does not plan to, declare dividends on its common stock and, as such, there is no change in the estimated fair value of the derivative warrant liabilities due to the dividend assumption.

- 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.

+ References + Details