Fair Value Measurements

9 Months Ended

Sep. 30, 2023

4. Fair Value Measurements

As of September 30, 2023, the Company’s Level 3 instruments consist of contingent purchase consideration liabilities related to the acquisition of Great North (Note 3). The fair value of such earn-out liabilities is generally determined using a Monte Carlo Simulation that includes significant inputs that are not observable. Significant inputs include management's estimate of revenue and other market inputs, including expected revenue volatility (7.5%) and a revenue discount rate (8.7%). The fair value of certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out periods discounted to present value. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, general and administrative expense of the Condensed Consolidated Statements of Income.

The Company’s contingent consideration measured at fair value for the periods presented are as follows (in thousands):


	September 30, 2023								December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Liability:
Contingent consideration (1)	$	3,460		-		-	$	3,460		-		-		-		-
Total liabilities	$	3,460		-		-	$	3,460		-		-		-		-

(1) As of September 30, 2023, contingent consideration includes certain amounts in accrued general liabilities and other long-term liabilities on the Company’s Consolidated Balance Sheets.

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisition measured at fair value for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023			2022		2023			2022
Beginning period balance	$	-			-	$	-			-
Additions to contingent consideration		3,571			-		3,571			-
Payments of contingent consideration		-			-		-			-
Fair value adjustment of earn-out liabilities		-			-		-			-
Currency translation adjustment		(111	)		-		(111	)		-
Ending period balance	$	3,460			-	$	3,460			-

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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