Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.22.4
Fair Value Measurements
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements
9.    Fair Value Measurements
Recurring Fair Value Measurements
Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):
December 31, 2022 December 31, 2021
Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3
Assets:
Assets held in rabbi trust $ 9,553  $ —  $ 9,553  $ —  $ 11,508  $ —  $ 11,508  $ — 
Cash equivalents (1):
Commercial paper $ 41,324  $ —  $ 41,324  $ —  $ 8,948  $ —  $ 8,948  $ — 
Money market funds 139,025  139,025  —  —  210,985  210,985  —  — 
$ 180,349  $ 139,025  $ 41,324  $ —  $ 219,933  $ 210,985  $ 8,948  $ — 
Marketable debt securities, available-for-sale:
Short-term investments:
U.S. treasuries $ 134,549  $ 134,549  $ —  $ —  $ 35,733  $ 35,733  $ —  $ — 
Corporate debt 118,041  —  118,041  —  148,135  —  148,135  — 
ABS and other 844  —  844  —  —  —  —  — 
$ 253,434  $ 134,549  $ 118,885  $ —  $ 183,868  $ 35,733  $ 148,135  $ — 
Long-term investments:
U.S. treasuries $ 20,715  $ 20,715  $ —  $ —  $ 70,767  $ 70,767  $ —  $ — 
U.S. government sponsored entities 536  —  536  —  745  —  745  — 
Corporate debt 41,358  —  41,358  —  34,013  —  34,013  — 
ABS and other 5,986  —  5,986  —  7,085  —  7,085  — 
$ 68,595  $ 20,715  $ 47,880  $ —  $ 112,610  $ 70,767  $ 41,843  $ — 
Liabilities:
Contingent consideration $ 7,067  $ —  $ —  $ 7,067  $ 9,312  $ —  $ —  $ 9,312 
Deferred consideration $ 5,119  $ —  $ 5,119  $ —  $ 9,801  $ —  $ 9,801  $ — 
Deferred compensation liability $ 6,661  $ 6,661  $ —  $ —  $ 8,001  $ 8,001  $ —  $ — 
(1)Included in cash, cash equivalents, and restricted cash on the accompanying consolidated balance sheets.
There were no transfers in or out of Level 3 during the year ended December 31, 2022.
During the year ended December 31, 2022, the Company considered the probability of achieving EBITDA and other performance targets and current and future interest rates in its determination of fair value for the contingent consideration. The Company is uncertain as to the extent of the volatility in the unobservable inputs in the foreseeable future. Deferred consideration in connection with acquisitions is carried at fair value and calculated using a discounted cash flow estimate with the only remaining condition on such payments being the passage of time.
As of December 31, 2022 and 2021, contingent and deferred consideration had a maximum undiscounted payment to be settled in cash or stock of $21.3 million and $28.6 million, respectively. Assuming the achievement of the applicable performance criteria and/or service and time requirements, the Company anticipates these payments will be made over the next one to five-year period. Changes in fair value are included in selling, general and administrative expense in the consolidated statements of operations.
A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):
December 31,
2022 2021
Beginning balance $ 9,312  $ 5,572 
Contingent consideration in connection with acquisitions (1)
—  (100)
Change in fair value of contingent consideration (161) 4,659 
Payments of contingent consideration (2,084) (819)
Ending balance $ 7,067  $ 9,312 
(1)Contingent consideration in connection with acquisitions represents a noncash investing activity. The amount recorded during the year ended December 31, 2021 relates to a measurement period adjustment. See Note 6 – “Acquisitions, Goodwill and Other Intangible Assets” for additional information.
Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in thousands):
Fair Value at
December 31, 2022		 Valuation Technique Unobservable inputs
Range (Weighted Average)(1)
Contingent consideration $ 7,067  Discounted cash flow Expected life of cash flows
0.4-4.83 years
(2.7 years)
Discount rate
6.0%-7.0%
 (6.5  %)
Probability of achievement
0.0%-100.0%
 (95.4  %)
Fair Value at
December 31, 2021		 Valuation Technique Unobservable inputs
Range (Weighted Average)(1)
Contingent consideration $ 9,312  Discounted cash flow Expected life of cash flows
1.4-5.8 years
(3.4 years)
Discount rate
2.2%-3.5%
 (2.9  %)
Probability of achievement
29.0%-100.0%
 (95.2  %)
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
Nonrecurring Fair Value Measurements
In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a nonrecurring basis. The Company reviews the carrying value of MSRs, intangibles, goodwill and other assets for indications of impairment at least annually. When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required.
MSRs were initially recorded at fair value and subsequently carried at the lower of amortized cost or fair value. The Company periodically reassessed and adjusted, when necessary, the underlying inputs and assumptions used to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. Management used assumptions in the determination of fair value for MSRs after considering default, severity, prepayment and discount rates related to the specific types and underlying collateral of the various serviced loans, interest rates, and refinance rates. In June 2022, the Company discontinued its servicing activities and signed an agreement to sell the remaining servicing rights. The sale closed in the third quarter of 2022. The fair value of the MSRs approximated the carrying value at December 31, 2021 after consideration of the revisions to the various assumptions. See Note 7 – “Selected Balance Sheet Data – Other Assets – MSRs” for additional information.