v3.25.0.1
FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 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 December 31, 2024 and 2023, respectively, including the following:

(In thousands)

Balance at
‎December 31,
‎2024

Level 1

Level 2

Level 3

Assets:

Cash equivalents

$

496,676

$

423,977

$

72,699

$

—

Municipal bonds

15,498

—

15,498

—

Corporate debt securities

54,806

—

54,806

—

Commercial paper

36,530

—

36,530

—

Asset-backed securities

19,621

—

19,621

—

Government, federal agency, and other sovereign obligations

45,298

—

45,298

—

2025 Hedge

22

—

22

—

Liabilities:

Senior Convertible Notes due 2025

443,003

443,003

—

—

Bifurcated Conversion Option of the Senior Convertible Notes due 2025

22

—

22

—

Business acquisition liabilities

123,235

—

—

123,235

(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 Hedges 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 December 31, 2024 was $443.0 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

2.0%

-

5.8%

3.1%

Revenue volatility

14.0%

-

15.8%

14.3%

Discount rate

5.2%

-

8.5%

6.3%

Projected year of payment

2025

-

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 years ended December 31, 2024 and 2023, respectively included the following:

Year Ended

December 31,

(In thousands)

2024

2023

Beginning balance

$

139,358

$

68,258

Purchase price contingent consideration

25,111

66,873

Changes resulting from foreign currency fluctuations

246

—

Contingent cash payments

(64,382)

(11,044)

Contingent RSU grants

(2,500)

(1,925)

Changes in fair value of business acquisition liabilities

26,521

17,434

Contractual payable reclassification

(1,119)

(238)

Ending balance

$

123,235

$

139,358

 

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.

We translate the financial statements of our foreign subsidiaries with functional currencies other than the U.S. dollar into the U.S. dollar for consolidation using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Some of our reporting entities conduct a portion of their business in currencies other than the entity’s functional currency. These transactions give rise to receivables and payables that are denominated in currencies other than the entity’s functional currency. The value of these receivables and payables is subject to changes in currency exchange rates from the point at which the transactions are originated until the settlement in cash. Both realized and unrealized gains and losses in the value of these receivables and payables are included in the determination of net income or loss. Foreign currency translation gain/(loss), which include gains and losses from derivative instruments, was a loss of $43.3 million for the year ended December 31, 2024 and a gain of $14.1 million for the year ended December 31, 2023, and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income.

To manage foreign currency exposure risks, we may use derivatives for activities in entities that have short-term intercompany receivables and payables denominated in a currency other than the entity’s functional currency. The fair value is based on a quoted market price (Level 1). As of December 31, 2024, a notional principal amount of $5.0 million was outstanding to hedge currency risk relative to our foreign currency-denominated receivables and payables. Derivative instrument net gain on our forward exchange contracts were $1.4 million as of December 31, 2024 and are included in other expense, net in the Consolidated Statements of Operations and Comprehensive Income. The fair value of the forward exchange contract derivative instrument asset (liability) was di minimis as of December 31, 2024. The derivative instruments are recorded in other current assets or other current liabilities in the Consolidated Balance Sheets commensurate with the nature of the instrument at period end.