Fair Value of Financial Instruments | 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, 2021 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets measured at fair value Cash and cash equivalents $ 159,782 $ 159,782 $ — $ — Derivative financial instruments 6,142 — 6,142 — Total assets measured at fair value $ 165,924 $ 159,782 $ 6,142 $ — Liabilities measured at fair value Derivative financial instruments $ 1,143 $ — $ 1,143 $ — Warrant liability 19,701 — — 19,701 Contingent consideration liabilities 46,843 — — 46,843 Total liabilities measured at fair value $ 67,687 $ — $ 1,143 $ 66,544 December 31, 2020 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets measured at fair value Cash and cash equivalents $ 204,301 $ 204,301 $ — $ — Derivative financial instruments 1,824 — 1,824 — Total assets measured at fair value $ 206,125 $ 204,301 $ 1,824 $ — Liabilities measured at fair value Derivative financial instruments $ 1,882 $ — $ 1,882 $ — Warrant liability 21,234 — — 21,234 Contingent consideration liabilities 45,901 — — 45,901 Total liabilities measured at fair value $ 69,017 $ — $ 1,882 $ 67,135 Interest Rate Cap Agreements The Company had interest rate cap contracts with an aggregate notional value of principal of $2.2 billion as of each of June 30, 2021 and December 31, 2020, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. As of June 30, 2021, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $6.1 million and an outstanding net liability of $1.1 million. As of December 31, 2020, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $1.8 million and an outstanding net liability of $1.9 million. As of June 30, 2021, $6.1 million and $1.1 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets” and “Other accrued expenses” in the Condensed Consolidated Balance Sheets, respectively, 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, 2020, $1.8 million, $1.0 million, and $0.9 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”, “Other accrued expenses”, and “Other long-term liabilities” in the Condensed Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). During the three months ended June 30, 2021 and 2020, the Company recorded a loss of $1.2 million and a gain of less than $0.1 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments. During the six months ended June 30, 2021 and 2020, the Company recorded a gain within Interest expense, net in the amount of $ Forward Contracts As of June 30, 2021, the Company had eight euro forward contracts to hedge foreign currency exposure on a total of €3.6 million, with maturities in fiscal year 2021. As of December 31, 2020, the Company had no open euro forward contracts. During the three months and six months ended June 30, 2021 and 2020, the Company recognized immaterial changes in fair value of the forward contracts as a component of “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Warrant Liability The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the warrants on the date of issuance and on each re - June 30, 2021 December 31, 2020 Fair value warrants per share $ 2.69 $ 2.90 Share Price $ 10.79 $ 13.17 Exercise price per share $ 11.50 $ 11.50 Expected term (years) 4.3 4.8 Expected volatility 32.0 % 17.0 % Risk-free interest rate 0.7 % 0.4 % Dividend yield 0.0 % 0.0 % As of June 30, 2021, 7,333,333 private placement warrants remained outstanding at a fair value of $19.7 million resulting in $ 7.0 Condensed Consolidated Statement s Income (Loss) until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. Contingent Consideration Liabilities 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, 2021, the maximum potential payment outcomes were $233.0 million. The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities: June 30, (in thousands) 2021 2020 Beginning of the period $ 45,901 $ 47,649 Fair value of acquisitions 5,116 17,210 Payments (6,399 ) (8,859 ) Note issuance for settlements — (5,982 ) Measurement period adjustments (1,181 ) — Changes in fair value 3,361 9,532 Foreign exchange translation effects 45 (802 ) End of the period $ 46,843 $ 58,748 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, 2021 New Term Loan Credit Facility $ 1,318,375 $ 1,461,643 Notes 775,000 899,251 Notes payable and deferred obligations 2,953 2,953 Total long-term debt $ 2,096,328 $ 2,363,847 (in thousands) Carrying Value Fair Value (Level 2) Balance at December 31, 2020 New Term Loan Credit Facility $ 1,325,000 $ 1,447,993 Notes 775,000 884,826 New Revolving Credit Facility 50,000 50,000 Notes payable and deferred obligations 3,618 3,618 Total long-term debt $ 2,153,618 $ 2,386,437 |