v3.26.1
Fair Value of Financial Assets and Liabilities
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities Fair Value of Financial Assets and Liabilities
Level 1 Financial Instruments
The Company’s cash and cash equivalents of $694 million and $199 million as of June 30, 2026 and December 31, 2025, respectively, are held in cash and money market funds, which are classified as Level 1 within the fair value hierarchy because they are valued using quoted prices in active markets. These are the Company’s only Level 1 financial instruments.
Level 2 Financial Instruments
The following table summarizes the principal amount of the Company’s indebtedness compared to the estimated fair value, primarily determined by quoted market values, as of June 30, 2026 (in millions). These are the Company’s only Level 2 financial instruments.
June 30, 2026
Principal Amount
Estimated
Fair Value (1)
9.75% Senior Secured Second Lien Notes
$500 $537 
7.00% Senior Secured Second Lien Notes
640 644 
5.75% Senior Notes
559 555 
5.25% Senior Notes
449 433 
0.25% Convertible Senior Notes
1,000 1,083 
(1)The fair value of the Company's indebtedness is categorized as Level 2.
Level 3 Financial Instruments
The Company’s Level 3 financial liabilities relate to acquisition-related contingent consideration arrangements and a Put Right liability.
Contingent consideration represents obligations of the Company to transfer cash or the Company’s common stock to the sellers of certain acquired entities in the event that certain targets and milestones are met. The primary method the Company used to estimate the fair value of contingent consideration liabilities was a Monte-Carlo simulation, which is based on inputs such as forecasted future results of the acquired businesses, which are not observable in the market, discount rates and earnings volatility measures.
The Put Right liability relates to the Company's investment in an entity that owns certain franchisees operating under the Sotheby's International Realty and Century 21 brands. The related transaction, including the Put Agreement, was entered into during the three months ended June 30, 2026, at which time the Put Right liability was initially recorded at $22 million. The fair value of this liability was determined using a lattice-based option pricing model, based on significant unobservable inputs, including estimated future cash flows of the investment and discount rates. Refer to Note 5 — “Equity Method Investments,” for further information on the related transaction.
The Company has not presented certain quantitative information regarding the unobservable inputs utilized to measure contingent consideration liabilities or the Put Right liability given changes in these assumptions have not and are not expected to materially impact the Company’s operating results during 2026 or in future periods. Changes in the fair value of Level 3 contingent consideration liabilities are included within Operations and support expense in the condensed consolidated statements of operations. For the three and six months ended June 30, 2026, there were no material changes in the fair value of the Put Right liability.
A reconciliation of the opening balances to closing balances of the Company's Level 3 financial liabilities is as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Opening balance$33 $36 $31 $31 
Acquisitions— — 1 4 
Issuance of the Put Right liability22 — 22 — 
Payments(3)(3)(3)(3)
Changes in fair value included in net income (loss)1 (2)2 (1)
Closing balance$53 $31 $53 $31 
The Company’s contingent consideration liabilities were $31 million as of June 30, 2026 and December 31, 2025. The Company's Put Right liability was $22 million as of June 30, 2026. Balances of Level 3 financial liabilities as of June 30, 2026 and December 31, 2025 were presented within the condensed consolidated balance sheets as follows (in millions):
June 30, 2026December 31, 2025
Accrued expenses and other current liabilities$8 $7 
Other non-current liabilities45 24 
Total Level 3 financial instruments$53 $31 
There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the periods presented.