Quarterly report [Sections 13 or 15(d)]

Note 18 - Fair Value Measurements

v3.25.1
Note 18 - Fair Value Measurements
3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

18.          Fair Value Measurements

Fair value is defined under U.S. GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

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Level 1 – observable inputs such as quoted prices for identical instruments traded in active markets.

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Level 2 – inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

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The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2025 and  December 31, 2024, respectively, are as follows:

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As of March 31, 2025

 

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Liabilities:

 

   

   

   

 

Contingent earn-out

  $     $     $ 2,451     $ 2,451  

Total liabilities

  $     $     $ 2,451     $ 2,451  

 

 

As of December 31, 2024

 

Liabilities:

 

   

   

   

 

Contingent earn-out

  $     $     $ 5,896     $ 5,896  

Total liabilities

  $     $     $ 5,896     $ 5,896  

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available. The approach to estimating the contingent earn-out associated with the Company’s business combinations uses unobservable factors such as projected cash flows over the term of the contingent earn-out periods.

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The Company’s investment in treasury bills are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy. The Company’s contingent earn-out liability is measured at fair value on a recurring basis and is classified as level 3 within the fair value hierarchy. During the fourth quarter of each year, the Company evaluates goodwill for impairment at the reporting unit level. The Company uses qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a goodwill impairment test. This measurement is classified based on level 3 input.

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The following table presents the changes in the Company’s level 3 financial instruments measured at fair value on a recurring basis:

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Balance December 31, 2024

  $ 5,896  

Contingent earnout paid

    (3,559 )

Change in fair value of acquisition contingent consideration

    136  

Translation adjustments

    (22 )

Balance March 31, 2025

  $ 2,451  

 

During the three months ended March 31, 2025, the Company made a contingent consideration payment of $3.6 million in cash related to the acquisition of Spinnakar Limited, which was completed on August 18, 2022. The payment was made based on Spinnakar's achievement of targets outlined in the acquisition agreement.