Quarterly report [Sections 13 or 15(d)]

Fair Value of Financial Instruments

v3.25.1
Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Note D – Fair Value of Financial Instruments
Cash, cash equivalents and restricted cash, accounts receivable, contract assets, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses, deferred revenue and other current liabilities are reflected on the condensed consolidated balance sheets at amounts that approximate fair value because of the short-term nature of these financial assets and liabilities.

The fair value of the Company’s debt approximates its carrying value and is classified as Level 2 within the fair value hierarchy as it is based on discounted cash flows using a current borrowing rate.

Private Warrants
In September 2021, the Company issued 7,732,168 private warrants in a transaction exempt from registration under securities regulations. The warrants, which are not listed for trading on a stock exchange, entitle the holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share, subject to adjustment. The warrants will expire on September 2, 2026, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The private warrants were established as a liability at issuance. Classification of the private warrants as liability instruments was based on an analysis of the guidance in accordance with U.S. GAAP and in a statement issued by the Staff of the SEC regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies.” The Company considered whether the private warrants display the three characteristics of a derivative, and concluded the private warrants meet the definition of a derivative. However, the private warrants fail to meet the equity scope exception and thus are classified as a liability measured at fair value, subject to remeasurement at each reporting period. The changes in fair value of the private warrant liability were a decrease of $13.6 million and an increase of $1.1 million for the three months ended March 31, 2025 and 2024, respectively. These changes in fair value are recognized as other (income) expense, net in the condensed consolidated statements of operations and comprehensive income (loss).

During the three months ended March 31, 2025, 4,631,799 private warrants were exercised on a cashless basis for 2,293,739 shares of the Company’s common stock. Additionally, during the three months ended March 31, 2025, 467,174 private warrants were exercised and converted into 467,174 shares of the Company’s common stock at the exercise price of $11.50 per share for proceeds of $5.4 million. Upon exercise, the Company remeasured the fair value of the related private warrants, which was recognized as other (income) expense, net in the condensed consolidated statements of operations and comprehensive income (loss) and then released the associated liability upon issuance of the Company’s common stock. Refer to Note I – Warrants for additional information.

The private warrants were valued using a modified Black-Scholes OPM. As certain inputs are not observable in the market, the private warrants are classified as Level 3 instruments within the fair value hierarchy. The table below presents the fair value per warrant and the valuation assumptions under the Black-Scholes OPM:
March 31, 2025 February 25, 2025 December 31, 2024
Fair value per share $ 2.54  $ 6.84  $ 7.15 
Warrants outstanding 2,633,195  5,098,978  7,732,168 
Exercise price $ 11.50  $ 11.50  $ 11.50 
Common stock price $ 8.29  $ 14.34  $ 16.46 
Expected option term 1.42 years 1.52 years 1.67 years
Expected volatility 85.00  % 82.90  % 52.70  %
Risk-free rate of return 3.93  % 4.05  % 4.18  %
Expected annual dividend yield —  % —  % —  %
The table below presents the Company’s financial instruments measured at fair value on a recurring basis:
  March 31, 2025
  Balance Sheet Location Level 1 Level 2 Level 3 Total
Liabilities:
Private warrants Warrant liabilities $ —  $ —  $ 6,688  $ 6,688 
Total liabilities $ —  $ —  $ 6,688  $ 6,688 
December 31, 2024
Balance Sheet Location Level 1 Level 2 Level 3 Total
Liabilities:
Private warrants Warrant liabilities $ —  $ —  $ 55,285  $ 55,285 
Total liabilities $ —  $ —  $ 55,285  $ 55,285 
Changes in the fair value of Level 3 financial liabilities were as follows:
Liabilities:
Private Warrants
Total Level 3
December 31, 2024 $ 55,285  $ 55,285 
Changes in fair value
 (13,634) (13,634)
Settlements
 (34,963) (34,963)
March 31, 2025 $ 6,688  $ 6,688