Fair Value Measurements |
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| Fair Value Measurements | Note 8. Fair Value Measurements We measure 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 the following: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value. We did not elect the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair value. Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and payable, are reported at their historical carrying values. The carrying values of our assets that are required to be measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 approximate fair value because of our ability to immediately convert these instruments into cash with minimal expected change in value which are classified in the table below in one of the three categories of the fair value hierarchy described above (in thousands):
Our equity securities and available-for-sale debt securities, including U.S. Treasury notes and corporate debt securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy. We did not have any financial liabilities measured at fair value on a recurring basis as of March 31, 2026. We carry the Convertible Senior Notes (see Note 11) at face value less the unamortized discount and issuance costs on our condensed consolidated balance sheets and present fair value for disclosure purposes only. We estimate the fair value of the Convertible Senior Notes using the net present value of the payments, discounted at an interest rate that is consistent with market and risk-adjusted interest rates, which is a Level 2 input. The following table presents the estimated fair values and the carrying values (in thousands):
Under the terms of the Polar Expres acquisition, contingent consideration may be payable in cash based on the achievement of certain future EBITDA targets during annual periods following the acquisition date for a total of four years, up to a maximum of $2.9 million (undiscounted). The fair value of the contingent consideration was measured at the end of each reporting period using Level 3 inputs. The fair value of the contingent consideration for the Polar Expres acquisition was determined using a probability-weighted discounted cash flow model. The contingent consideration was determined to have an aggregate fair value of $0.6 million and $0.6 million which is reflected as contingent consideration liability in the accompanying consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively. Certain assumptions used in estimating the fair value of the contingent consideration are uncertain by nature. Actual results may differ materially from estimates. The gains recognized in earnings and the change in net assets related to the contingent consideration at March 31, 2026 were as follows (in thousands):
The gains recognized in earnings have been reported in operating costs and expenses in the condensed consolidated statement of operations for the three months ended March 31, 2026. |
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