Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value in the consolidated balance sheets as of December 31, 2023 and 2022, based on the three-tier fair value hierarchy:


	December 31, 2023
	Fair Value		Level I		Level II		Level III
Assets:
Equity security investments	$	517	$	517	$	—	$	—
Assets to fund deferred compensation liability	17,486		17,486		—		—
Convertible notes receivable	17,078		—		—		17,078
Total assets	$	35,081	$	18,003	$	—	$	17,078
Liabilities:
Deferred compensation liability	$	17,486	$	17,486	$	—	$	—
Total liabilities	$	17,486	$	17,486	$	—	$	—


	December 31, 2022
	Fair Value		Level I		Level II		Level III
Assets:
Equity security investments	$	112	$	112	$	—	$	—
Assets to fund deferred compensation liability	13,602		13,602		—		—
Convertible notes receivable	10,352		—		—		10,352
Total assets	$	24,066	$	13,714	$	—	$	10,352
Liabilities:
Deferred compensation liability	$	13,602	$	13,602	$	—	$	—
Total liabilities	$	13,602	$	13,602	$	—	$	—

Fair Value of Equity Security Investments

The fair values of the Company’s equity security investments assets consist of funds that invest in listed equity and debt securities which are actively traded and valued based on quoted market prices.

Fair Value of Deferred Compensation Asset and Liability

The fair value of the Company's deferred compensation asset is comprised of investments in funds which are actively traded and based on quoted market prices. The Company recognized unrealized gains (losses) of $2,373, $(2,542) and $1,690 related to this asset within other (income) expense, net within the consolidated statements of income and comprehensive income for the years ended December 31, 2023, 2022 and 2021, respectively.

The deferred compensation liability is included in other long-term liabilities in the consolidated balance sheets and its fair market value is based on quoted market prices of the various investment funds in the Company’s rabbi trust that the participants have selected. The Company recognized other (income) expense, net of $(2,373), $2,542 and $(1,690) related to this liability within the consolidated statements of income and comprehensive income for the years ended December 31, 2023, 2022 and 2021, respectively.

See Note 5 for more details.

Fair Value of Convertible Notes Receivable

On June 20, 2023, the Company, as lender, entered into a loan and security agreement under which the Company agreed to purchase up to $15,000 in principal amount of convertible notes from the borrower. The notes are convertible, at

the Company’s election, into shares of the borrower’s common stock at the end of 2029. The convertible notes are classified as available for sale, and included in other assets in the Company’s consolidated balance sheets. On August 9, 2022, the Company, as lender, entered into a loan and security agreement under which the Company agreed to purchase up to $25,000 in principal amount of convertible notes from the borrower. The notes are convertible, at the Company’s election, into shares of the borrower’s common stock at the end of 2025. The convertible notes are classified as available for sale, and included in other assets in the Company’s consolidated balance sheets, respectively.

The fair value of the convertible notes receivables issued by the Company were estimated using a market yield method with significant inputs that are not observable in the market and thus represents a Level III fair value measurement. The significant inputs in the Company's Level III fair value measurement not supported by market activity included creditworthiness of the borrower, which management believes are appropriately discounted considering the uncertainties associated with these obligations, and are calculated in accordance with the terms of the respective agreement.

The change in fair values of the convertible notes receivable, net, are recognized as other comprehensive income in the consolidated statements of income and comprehensive income. The Company recognized a change in fair value, net of tax, of $143 and $(157) for the years ended December 31, 2023 and 2022, respectively.

- 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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