Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

5.FAIR VALUE measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Private Warrants—As of March 31, 2023, the Company's Private Warrants are recognized as liabilities and measured at fair value on a recurring basis.

The Private Warrants are valued using Level 1 and Level 2 inputs within the Black-Scholes option-pricing model. The assumptions utilized under the Black-Scholes option pricing model require judgments and estimates. Changes in these inputs and assumptions could affect the measurement of the estimated fair value of the Private Warrants. Accordingly, the Private Warrants are classified within Level 2 of the fair value hierarchy.

The valuation of the Private Warrants as of March 31, 2023 and December 31, 2022 was determined using the Black-Scholes option pricing model using the following assumptions:

	March 31,			December 31,
	2023			2022
Expected term (in years)		3.3			3.6
Expected volatility		37	%		38	%
Expected dividend yield		0	%		0	%
Risk-free interest rate		3.78	%		4.15	%

The estimated fair value of each Private Warrant using the Company's stock price on the valuation date and above assumptions was $1.98 and $2.05 as of March 31, 2023 and December 31, 2022, respectively.

Contingent Consideration Liability—The contingent consideration liability related to the acquisition of Safekeep (see Note 3), recognized within other liabilities on the condensed consolidated balance sheet, is adjusted each reporting period for changes in

fair value, which can result from changes in anticipated payments and changes in assumed discount rates. These inputs are unobservable in the market and therefore categorized as Level 3 inputs.

The estimated fair value of the contingent consideration was determined using probability-weighted discounted cash flows and a Monte Carlo simulation model. The discount rate, based on the Company's estimated cost of debt, was 10%.

As of December 31, 2022, the contingent consideration liability had a fair value of $0.1 million. As of March 31, 2023, there were no significant changes to the inputs used within the Monte Carlo simulation model and the estimated fair value of the contingent consideration liability was $0.1 million. The contingent consideration liability is classified within other liabilities in the accompanying condensed consolidated balance sheets. The Company did not recognize any change in the estimated fair value of the contingent consideration liability during the three months ended March 31, 2023 and 2022.

Interest Rate Cap—In August 2022, the Company entered into two interest rate cap agreements to reduce its exposure to increases in interest rates applicable to its floating rate long-term debt (see Note 14). The fair value of the interest rate cap agreements was estimated using inputs that were observable or that could be corroborated by observable market data and therefore was classified within Level 2 of the fair value hierarchy as of March 31, 2023 and December 31, 2022.

The Company did not designate its interest rate cap agreements as hedging instruments and records the changes in fair value within earnings. As of March 31, 2023 and December 31, 2022, the interest rate cap agreements had a fair value of $9.3 million and $12.0 million, respectively, classified within other assets in the accompanying condensed consolidated balance sheets.

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 (in thousands):

	Fair Value		Level 1		Level 2		Level 3
Assets
Interest rate cap	$	9,347	$	—	$	9,347	$	—
Total Assets	$	9,347	$	—	$	9,347	$	—
Liabilities
Contingent consideration related to business acquisition	$	100	$	—	$	—	$	100
Private Warrants		35,210		—		35,210		—
Total Liabilities	$	35,310	$	—	$	35,210	$	100

The following table presents the fair value of the assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

	Fair Value		Level 1		Level 2		Level 3
Assets
Interest rate cap	$	11,951	$	—	$	11,951	$	—
Total Assets	$	11,951	$	—	$	11,951	$	—
Liabilities
Contingent consideration related to business acquisition	$	100	$	—	$	—	$	100
Private Warrants		36,405		—		36,405		—
Total Liabilities	$	36,505	$	—	$	36,405	$	100

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis—The Company has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include those associated with acquired businesses, including goodwill and other intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the three months ended March 31, 2023 and 2022, the Company recognized no impairment related to these assets.

Fair Value of Other Financial Instruments—The following table presents the carrying amounts, net of debt discount, and the estimated fair values of the Company’s financial instruments that are not recorded at fair value on the condensed consolidated balance sheets (in thousands):

	March 31, 2023				December 31, 2022
	Carrying		Estimated		Carrying		Estimated
Description	Amount		Fair Value		Amount		Fair Value
Term B Loan, including current portion	$	788,387	$	782,100	$	790,331	$	766,260

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar instruments and fluctuates with changes in applicable interest rates among other factors. The fair value of long-term debt is classified as a Level 2 measurement in the fair value hierarchy and is established based on observable inputs in less active markets.