v3.26.1
Fair Value Measurements of Financial Instruments
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Financial Instruments
18.
Fair Value Measurements of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments as of June 30, 2026 are presented below (in thousands):

 

 

Fair Value Measurements

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts (1)

 

$

6,475

 

 

$

—

 

 

$

—

 

 

$

6,475

 

Other (2)

 

 

111

 

 

 

1,240

 

 

 

—

 

 

 

1,351

 

Total assets

 

$

6,586

 

 

$

1,240

 

 

$

—

 

 

$

7,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Sun Clinical Laboratories, a California corporation (“Sun Labs”) remaining equity interest purchase

 

$

—

 

 

$

—

 

 

$

4,080

 

 

$

4,080

 

Community Family Care Medical Group IPA, Inc. (“CFC”) contingent consideration

 

 

—

 

 

 

—

 

 

 

1,296

 

 

 

1,296

 

Collaborative Health Systems, LLC, Golden Triangle Physician Alliance, and Heritage Physician Networks (“CHS”) contingent consideration

 

 

—

 

 

 

—

 

 

 

3,287

 

 

 

3,287

 

Other (3)

 

 

—

 

 

 

—

 

 

 

1,215

 

 

 

1,215

 

Total liabilities

 

$

—

 

 

$

—

 

 

$

9,878

 

 

$

9,878

 
(1)
Included in cash and cash equivalents.
(2)
Consists of marketable securities and the interest rate swap.
(3)
Consists of a small contingent consideration liability.

The carrying amounts and fair values of the Company’s financial instruments as of December 31, 2025 are presented below (in thousands):

 

 

Fair Value Measurements

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts (1)

 

$

8,798

 

 

$

—

 

 

$

—

 

 

$

8,798

 

Marketable securities (2)

 

 

115

 

 

 

—

 

 

 

—

 

 

 

115

 

Total assets

 

$

8,913

 

 

$

—

 

 

$

—

 

 

$

8,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Sun Labs remaining equity interest purchase

 

$

—

 

 

$

—

 

 

$

7,352

 

 

$

7,352

 

CFC contingent consideration

 

 

—

 

 

 

—

 

 

 

7,026

 

 

 

7,026

 

CHS contingent consideration

 

 

—

 

 

 

—

 

 

 

7,378

 

 

 

7,378

 

Other (3)

 

 

—

 

 

 

817

 

 

 

15

 

 

 

832

 

Total liabilities

 

$

—

 

 

$

817

 

 

$

21,771

 

 

$

22,588

 
(1)
Included in cash and cash equivalents.
(2)
Included in prepaid expenses and other current assets.
(3)
Consists of a small contingent consideration liability and the interest rate swap.

The change in the fair value of Level 3 liabilities is recognized in other income (loss) or general and administrative expenses in the accompanying condensed consolidated statements of income. As of June 30, 2026, the reconciliation of Level 3 liabilities was as follows (in thousands):

 

Amount

 

Balance at January 1, 2026

 

$

21,771

 

Addition

 

 

1,200

 

Change in fair value of existing Level 3 liabilities

 

 

(8,093

)

Settlement

 

 

(5,000

)

Balance at June 30, 2026

 

$

9,878

 

Derivative Financial Instruments

Interest Rate Swap Agreement

On August 7, 2025, the Company entered into an interest rate swap agreement to effectively convert its floating-rate debt to a fixed-rate basis with the principal objective of eliminating or reducing the variability of cash flows in interest payments associated with the Company’s floating-rate debt. The swap involves a notional amount of $200 million, with the Company paying a fixed interest rate of 3.179%. Payments are exchanged monthly, starting August 29, 2025 and continuing through the termination date of August 31, 2029, with the bank having an option to shorten the term to August 31, 2027. See Note 8 — “Credit Facility and Bank Loans” for further information on the Company’s debt. The interest rate swap agreement is not designated as a hedging instrument. Changes in the fair value of the contract are recognized as unrealized gain or loss on investments in the accompanying condensed consolidated statements of income and reflected within other as an adjustment to reconcile net income to cash provided by operating activities in the accompanying condensed consolidated statements of cash flows.

Remaining Equity Interest Purchase

In 2021, the Company entered into a financing obligation to purchase the remaining equity interest in Sun Labs. The purchase of the remaining Sun Labs equity value is considered a financing obligation with a carrying value of $4.1 million and $7.4 million, as of June 30, 2026 and December 31, 2025, respectively. As the financing obligation is embedded in the non-controlling interest, the non-controlling interest is recognized in other liabilities in the accompanying condensed consolidated balance sheets. Changes in the fair value of the financing obligation are recognized as unrealized gain or loss on investments in the accompanying condensed consolidated statements of income.

Contingent Consideration

CFC

Upon acquiring certain assets of CFC in 2024, the total consideration of the acquisition included contingent consideration, to be settled in cash. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of membership and assigned probabilities to each such scenario in determining fair value. In 2025, the first metric was achieved and paid. As of June 30, 2026, the second metric was determined to have been achieved and subsequently paid in the amount of $5.0 million. As of December 31, 2025, the second metric was valued at $4.7 million and was included in other liabilities in the accompanying condensed consolidated balance sheets. As of June 30, 2026 and December 31, 2025, the third metric was valued at $1.3 million and $2.3 million, respectively, and was included in other liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets. Changes in the CFC contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.

CHS

Upon acquiring 100% of the equity interest of CHS in 2024, the total consideration of the acquisition included contingent consideration, to be settled in cash. As a result of and following the acquisition of certain assets associated with clinics in Texas in June 2026, the CHS member enrollment metrics measure was amended to provide for an earnout based on a cumulative measure of profit, over the earnout period from October 5, 2024 to October 5, 2029. The earnout payment will be further determined based on a percentage of membership contributed by the acquisition associated with the acquired clinics and reduced by the cash paid towards the purchase of such acquisition. The Company determined the fair value of the contingent consideration using a probability-weighted model that includes significant unobservable inputs (Level 3). Specifically, the Company considered various scenarios of revenue and membership and assigned probabilities to each such scenario in determining fair value. As of June 30, 2026, the amended CHS contingent consideration was valued at $3.3 million and included in other long-term liabilities in the accompanying condensed consolidated balance sheets. As of December 31, 2025, the CHS 2025 gross profit per total member months metric was not met and the related contingent consideration was not paid, and under the terms of the previous agreement, the CHS member enrollment metrics had been valued at $7.4 million and included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Changes in the CHS contingent consideration are presented in general and administrative expenses in the accompanying condensed consolidated statements of income.