Quarterly report [Sections 13 or 15(d)]

Fair Value Measurements

v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of fair value and the supporting methodologies and assumptions. The Company uses various pricing sources and third parties to provide and validate the values utilized.
The degree of judgment used in measuring the fair value of financial instruments is generally inversely correlated with the level of observable valuation inputs. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment.
Assets recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of the three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
•Level 3: Unobservable inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Management estimates include certain
pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Recurring Fair Value Measurements
The Company values its investments including commercial paper and floating net asset value money market funds recorded in cash, cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, assets held in the rabbi trust, deferred compensation liability, contingent consideration and investments in convertible notes at fair value on a recurring basis.
Fair values for investments included in cash, cash equivalents, and restricted cash and marketable debt securities, available-for-sale were determined for each individual security in the investment portfolio and all securities are Level 1 or Level 2 measurements as appropriate.
Fair values for assets held in the rabbi trust and related deferred compensation liability were determined based on the cash surrender value of the Company-owned variable life insurance policies and underlying investments in the trust, and are Level 2 and Level 1 measurements, respectively.
Contingent consideration in connection with acquisitions, is carried at fair value and determined on a contract-by-contract basis, calculated using unobservable inputs based on a probability of achieving EBITDA and other performance requirements, and is a Level 3 measurement.
The Company has elected to account for its investments in convertible notes, included in other assets, under the fair value option, with changes in fair value recognized in other income, net in the condensed consolidated statements of operations. The Company estimates the fair value of each convertible note at each balance sheet date using a scenario-based framework that incorporates various scenarios weighted based on the expected likelihood of occurrence. Within each scenario, a discounted cash flow approach was utilized, taking the expected settlement for the event, and discounting it based on the expected timing and a discount rate. Each of the assumptions in the model were considered significant assumptions. The Company noted that a change in the expected probability, expected payoff, timing, or discount rate, would result in a change to the fair value ascribed to the convertible notes. As these are significant inputs not observable in the market, the valuation is classified as a Level 3 measurement.
Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):
March 31, 2026 December 31, 2025
Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3
Assets:
Assets held in rabbi trust $ 13,165  $ —  $ 13,165  $ —  $ 13,476  $ —  $ 13,476  $ — 
Convertible notes $ 5,774  $ —  $ —  $ 5,774  $ 5,630  $ —  $ —  $ 5,630 
Cash equivalents (1):
             
Commercial paper $ 20,138  $ —  $ 20,138  $ —  $ 2,396  $ —  $ 2,396  $ — 
Money market funds 20,847  20,847  —  —  78,686  78,686  —  — 
$ 40,985  $ 20,847  $ 20,138  $ —  $ 81,082  $ 78,686  $ 2,396  $ — 
Marketable debt securities, available-for-sale:                
Short-term investments:                
U.S. treasuries $ 2,003  $ 2,003  $ —  $ —  $ —  $ —  $ —  $ — 
Corporate debt 54,524  —  54,524  —  90,564  —  90,564  — 
$ 56,527  $ 2,003  $ 54,524  $ —  $ 90,564  $ —  $ 90,564  $ — 
Long-term investments:                
U.S. treasuries $ 27,042  $ 27,042  $ —  $ —  $ 29,259  $ 29,259  $ —  $ — 
U.S. government sponsored entities 2,390  —  2,390  —  2,461  —  2,461  — 
Corporate debt 51,013  —  51,013  —  54,257  —  54,257  — 
ABS and other 61,067  —  61,067  —  59,724  —  59,724  — 
$ 141,512  $ 27,042  $ 114,470  $ —  $ 145,701  $ 29,259  $ 116,442  $ — 
Liabilities:                
Contingent consideration $ 582  $ —  $ —  $ 582  $ 720  $ —  $ —  $ 720 
Deferred compensation liability $ 9,652  $ 9,652  $ —  $ —  $ 9,786  $ 9,786  $ —  $ — 
(1)Included in cash, cash equivalents, and restricted cash on the accompanying condensed consolidated balance sheets.
There were no transfers in or out of Level 3 during the three months ended March 31, 2026 and 2025.
Contingent Consideration
During the three months ended March 31, 2026, the Company considered current interest rates and the probability of achieving EBITDA and other performance targets in its determination of fair value for the contingent consideration. The Company is uncertain as to the extent of the volatility in the unobservable inputs in the foreseeable future.
As of March 31, 2026 and December 31, 2025, contingent consideration had a maximum undiscounted payment to be settled in cash of $6.6 million and $6.8 million, respectively. Assuming the achievement of the applicable performance criteria and/or service and time requirements, the Company anticipates these payments will be made over the next two years. Changes in fair value are included in selling, general and administrative expense in the condensed consolidated statements of operations.
A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):
Three Months Ended March 31,
2026 2025
Beginning balance $ 720  $ 4,731 
Change in fair value of contingent consideration(1)
112  (519)
Payments of contingent consideration (250) — 
Ending balance $ 582  $ 4,212 
(1)Includes immaterial impact of foreign currency translation.
Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in thousands):
Fair Value at
March 31, 2026		 Valuation Technique Unobservable inputs
Range (Weighted Average)(1)
Contingent
consideration
 $ 582  Discounted cash flow Expected life of cash flows
0.8-1.6 years
 (0.8 years)
Discount rate
5.6%-5.6%
(5.6%)
Probability of achievement
0.3%-94.8%
(94.4%)
Fair Value at
December 31, 2025		 Valuation Technique Unobservable inputs
Range (Weighted Average)(1)
Contingent
consideration
 $ 720  Discounted cash flow Expected life of cash flows
1-1.8 years
 (1 year)
Discount rate
5.2%-5.2%
(5.2%)
Probability of achievement
0.3%-100.0%
(99.8%)
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
Convertible Notes
The fair value of the convertible notes considered (i) accrued interest rates between 6% and 10%, (ii) a net weighted average maturity of 0.53 years which may be extended at the option of the holders, (iii) the expected likelihood of occurrence of various scenarios including financing, equity financing, change in control, or liquidation, (iv) a net weighted average settlement of 97% considering premiums from potential conversion into equity and losses from potential liquidation, and (v) discounted cash flow at a weighted average discount rate of 13.5%. During the three months ended March 31, 2026, the fair value of the convertible notes increased by approximately $0.1 million primarily due to a change in the estimated time of settlement. The estimated time to settlement changed from a weighted average of 0.27 years as of December 31, 2025 to 0.24 years as of March 31, 2026.
Nonrecurring Fair Value Measurements
In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a nonrecurring basis. The Company reviews the carrying value of intangibles, goodwill and other assets for indications of impairment at least annually. When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required.