v3.24.3
FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 2024
FAIR VALUE MEASUREMENTS [Abstract]  
Fair Value Measurements NOTE 6. FAIR VALUE MEASUREMENTS

The following table represents the fair value of assets and liabilities, as of September 30, 2024 and December 31, 2023, respectively, including the following:

(In thousands)

Balance at
‎September 30,
‎2024

Level 1

Level 2

Level 3

Assets:

Cash equivalents

$

296,668

$

296,169

$

499

$

—

Municipal bonds

7,194

—

7,194

—

Corporate debt securities

35,032

—

35,032

—

Asset-backed securities

10,569

—

10,569

—

Government, federal agency, and other sovereign obligations

31,442

—

31,442

—

2025 Hedge

471

—

471

—

Liabilities:

Senior Convertible Notes due 2025

439,179

439,179

—

—

Bifurcated Conversion Option of the Senior Convertible Notes due 2025

471

—

471

—

Business acquisition liabilities

113,858

—

—

113,858

(In thousands)

Balance at
‎December 31,
‎2023

Level 1

Level 2

Level 3

Assets:

Cash equivalents

$

203,689

$

203,689

$

—

$

—

Municipal bonds

18,057

—

18,057

—

Corporate debt securities

58,838

—

58,838

—

Asset-backed securities

17,161

—

17,161

—

Government, federal agency, and other sovereign obligations

31,869

2,928

28,941

—

2025 Hedge

687

—

687

—

Liabilities:

Senior Convertible Notes due 2025

417,363

417,363

—

—

Bifurcated Conversion Option of the Senior Convertible Notes due 2025

687

—

687

—

Business acquisition liabilities

139,358

—

—

139,358

Our marketable securities and certain cash equivalents are classified as Level 2 within the fair value hierarchy, as we measure their fair value using market prices for similar instruments and inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

The bifurcated conversion option and 2025 Hedge are classified as Level 2 within the fair value hierarchy, based on implied equity volatility. The estimated fair value of the 2025 Notes, inclusive of the embedded conversion option, at September 30, 2024 was $439.7 million. The fair value was determined based on the quoted price of the 2025 Notes in an active market on the last trading day of the reporting period and has been classified as Level 1 within the fair value hierarchy.

Fair value of the revenue-based business acquisition liabilities was determined using a discounted cash flow model, probability model, and an option pricing methodology. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility and discount rates, market price risk adjustment, projections associated with the applicable milestone, the interest rate, and the related probabilities and payment structure in the contingent consideration arrangement.

The following are the significant unobservable inputs used in the two valuation techniques:

Unobservable input

Range

Weighted Average*

Revenue risk premium

1.9%

-

5.7%

3.0%

Revenue volatility

14.0%

-

20.0%

14.8%

Discount rate

5.2%

-

8.5%

6.4%

Projected year of payment

2024

-

2034

* The weighted average rates were calculated based on the relative fair value of each business acquisition liability.

The change in the carrying value of the business acquisition liabilities during the three and nine months ended September 30, 2024 and 2023, respectively included the following:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2024

2023

2024

2023

Beginning balance

$

121,332

$

65,352

$

139,358

$

68,258

Purchase price contingent consideration

1,603

66,873

22,669

66,873

Changes resulting from foreign currency fluctuations

—

—

246

—

Contingent cash payments

(4,201)

(2,754)

(55,087)

(8,278)

Contingent RSU grants

(1,339)

(951)

(1,856)

(1,510)

Changes in fair value of business acquisition liabilities

(4,132)

1,151

8,608

4,431

Contractual payable reclassification

595

295

(80)

192

Ending balance

$

113,858

$

129,966

$

113,858

$

129,966

Purchase price contingent consideration includes obligations acquired in the NuVasive Merger in addition to other immaterial acquisitions. Changes in the fair value of business acquisition liabilities are driven by changes in market conditions and the achievement of certain performance conditions.