Oncology Institute, Inc.TOI
Oncology Institute, Inc. Fair Value Disclosure
Marketable Securities and Fair Value Measurements
Marketable Securities
The Company accounts for its investment securities available for sale using the fair value election pursuant to ASC 825, where changes in fair value are recorded in Other, net non-operating expense (income) on the Company's Consolidated
Statements of Operations. The Company’s investments in cash equivalents and marketable securities at December 31, 2024 and 2023 is as follows:
| December 31, 2024 | |||||||||||||||||||||||
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| U.S. Treasury Bills | $ | 38,657 | $ | 5 | $ | — | $ | 38,662 | |||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| (in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| U.S. Treasury Bills | $ | 22,778 | $ | 5 | $ | — | $ | 22,783 | |||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Short-term U.S. Treasuries | 49,501 | — | (134) | 49,367 | |||||||||||||||||||
| Total available for sale securities | $ | 72,279 | $ | 5 | $ | (134) | $ | 72,150 | |||||||||||||||
The contractual maturities of the Company's investments in cash equivalents and marketable securities as of December 31, 2024 and 2023 is as follows:
December 31, 2024 (in thousands) | Due in One Year or less | Due After One Year through Five Years | Due After Five Years | Total | |||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| U.S. Treasury Bills | $ | 38,662 | $ | — | $ | — | $ | 38,662 | |||||||||||||||
December 31, 2023 (in thousands) | Due in One Year or less | Due After One Year through Five Years | Due After Five Years | Total | |||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| U.S. Treasury Bills | $ | 22,783 | $ | — | $ | — | $ | 22,783 | |||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Short-term U.S. Treasuries | 49,367 | — | — | 49,367 | |||||||||||||||||||
| Total available for sale securities | $ | 72,150 | $ | — | $ | — | $ | 72,150 | |||||||||||||||
The Company recorded a net unrealized gain of $133 for the twelve months ended December 31, 2024. At December 31, 2024, two securities were in an unrealized gain position.
Accrued interest receivable on cash equivalents and marketable securities was $37 and $242, respectively, at December 31, 2024 and 2023, and is included within in the Consolidated Balance Sheets.
Fair Value Measurements
The following tables present the carrying amounts of the Company’s financial instruments at December 31, 2024 and 2023:
| December 31, 2024 | |||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 38,662 | $ | — | $ | 38,662 | $ | — | |||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Derivative warrant liabilities | $ | 17 | $ | — | $ | 17 | $ | — | |||||||||||||||
| Conversion option derivative liabilities | 385 | — | — | 385 | |||||||||||||||||||
There were no transfers between levels for the twelve months ended December 31, 2024.
As of December 31, 2023, derivative warrant liabilities of $636 were transferred from a Level 3 to a Level 2 financial instrument as a result of the valuation being based on the market price of our public warrants, which management considers to be a similar and comparable instrument, as compared to the previous valuation which was based on the Binomial Lattice Model.
| December 31, 2023 | |||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 22,783 | $ | — | $ | 22,783 | — | ||||||||||||||||
| 49,367 | — | 49,367 | — | ||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Derivative warrant liabilities | $ | 636 | $ | — | $ | 636 | $ | — | |||||||||||||||
| Conversion option derivative liabilities | 3,082 | — | — | 3,082 | |||||||||||||||||||
| Contingent consideration liability | 1,944 | — | 1,944 | — | |||||||||||||||||||
| Non-recurring fair value measurement | |||||||||||||||||||||||
| Goodwill | $ | 7,230 | $ | — | $ | — | $ | 7,230 | |||||||||||||||
The carrying amounts of cash, accounts receivable, other receivables, and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments.
The Company measures its investments (including cash equivalents, marketable securities, and non-current investments) at fair value on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy. Investment securities, including U.S. Treasury Bills purchased in the secondary market and U.S. Treasury bonds, are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies.
The Company measures its private derivative warrants on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy because the valuation is based on the observable input of a similar instrument. The Company measures its convertible note warrant derivative liability, optional redemption derivative liability and conversion option derivative liability on a recurring basis and classifies those instruments within level 3 of the fair value hierarchy because unobservable inputs are used to measure fair value. See Note 2 for a summary of the Company’s policies relating to fair value measurements, and Note 11 for more detail on the convertible note warrant, optional redemption, and conversion option derivative liabilities.
Due to significant declines in the Company's share price during the year ended December 31, 2023, the Company performed a quantitative analysis of impairment over goodwill and determined goodwill was impaired. As a result, the Company recorded an impairment charge of $16,867 for the year ended December 31, 2023. Goodwill was valued using an equally weighted income approach and market approach. The unobservable inputs utilized in determining the fair value of the goodwill, which is categorized as a Level 3 instrument, are the discount rate of 25.0% and various revenue growth rates utilized in the financial forecast of future cash flows.
The following table presents information about the Company’s Level 3 liabilities that are measured at fair value on a recurring basis at December 31, 2024:
| (in thousands) | Derivative Earnout Liabilities | Conversion Option Derivative Liability | ||||||||||||
| Balance at December 31, 2022 | $ | 803 | $ | 3,960 | ||||||||||
| Decrease in fair value included in other expense | (803) | (878) | ||||||||||||
| Balance at December 31, 2023 | $ | — | $ | 3,082 | ||||||||||
| Change in fair value included in other expense | — | (2,697) | ||||||||||||
| Balance at December 31, 2024 | $ | — | $ | 385 | ||||||||||
As of December 31, 2024 and 2023, the conversion option derivative was valued using a Binomial Lattice, which is considered to be a Level 3 fair value measurement. The derivative warrant liabilities were valued using the public warrant trading price, which is considered to be a Level 2 fair value measurement, and the contingent consideration liability was valued
using a present value factor, which is considered to be a Level 2 fair value measurement. A summary of the level 3 fair value measurements inputs used in the valuations is as follows:
| December 31, 2024 | |||||||||||||||||
| Convertible Note Warrant Derivative Liability | Conversion Option Derivative Liability | ||||||||||||||||
| Unit price | $ | 0.31 | $ | 0.31 | |||||||||||||
| Term (in years) | 2.60 | 2.60 | |||||||||||||||
| Volatility | 112.80 | % | 112.80 | % | |||||||||||||
| Risk-free rate | 4.20 | % | 4.20 | % | |||||||||||||
| Dividend yield | — | — | |||||||||||||||
| Cost of equity | — | — | |||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||
| First Tranche Earnout | Second Tranche Earnout | Convertible Note Warrant Derivative Liability | Conversion Option Derivative Liability | |||||||||||||||||||||||
| Unit price | $ | 2.04 | $ | 2.04 | $ | 2.04 | $ | 2.04 | ||||||||||||||||||
| Term (in years) | 0.87 | 0.87 | 3.61 | 3.61 | ||||||||||||||||||||||
| Volatility | 49.40 | % | 49.40 | % | 58.60 | % | 58.60 | % | ||||||||||||||||||
| Risk-free rate | 4.90 | % | 4.90 | % | 3.90 | % | 3.90 | % | ||||||||||||||||||
| Dividend yield | — | — | — | — | ||||||||||||||||||||||
| Cost of equity | 16.90 | % | 16.90 | % | — | — | ||||||||||||||||||||
Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs
The inputs to estimate the fair value of the Company’s derivative warrant, convertible note warrant, and conversion option derivative liabilities were the market price of the Company’s common stock, their remaining expected term, the volatility of the Company’s common stock price and the risk-free interest rate over the expected term. Significant changes in any of those inputs in isolation can result in a significant change in the fair value measurement.
Generally, an increase in the market price of the Company’s shares of common stock, an increase in the volatility of the Company’s shares of common stock, and an increase in the remaining term of the derivative liabilities would each result in a directionally similar change in the estimated fair value of the Company’s derivative liabilities. Such changes would increase the associated liability while decreases in these assumptions would decrease the associated liability. An increase in the risk-free interest rate would result in a decrease in the estimated fair value measurement and thus a decrease in the associated liability. The Company has not, and does not plan to, declare dividends on its common stock and, as such, there is no change in the estimated fair value of the derivative warrant liabilities due to the dividend assumption.
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.