Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, the following financial liabilities are measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	2022		2021
Interest rate swap(1)	$	6,046	$	—
Total assets	$	6,046	$	—
Business acquisitions contingent consideration,    current	$	3,801	$	31,450
Business acquisitions contingent consideration,    long-term		4,454		4,350
Conversion option		25,731		23,081
Total liabilities	$	33,986	$	58,881

_____________________________

(1) Included in other assets in the Consolidated Statement of Financial Position.

The estimated fair value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon disposition, nor do they indicate the Company’s intent or ability to dispose of the financial instrument.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis:

	Level 3
	Interest Rate Swap		Total Assets		Business Acquisitions Contingent Consideration, Current			Business Acquisitions Contingent Consideration, Long-term			Conversion Option			Contingent Put Option			Warrant Options			Total Liabilities
Balance—at January 1, 2020	$	—	$	—	$	8,614		$	379		$	—		$	7,100		$	16,878		$	32,971
Acquisitions		—		—		34,661			10,543			—			—			—			45,204
Series A-2 compound embedded option		—		—		—			—			(9,361	)		—			—			(9,361	)
Issuance of warrant option		—		—		—			—			—			—			30,097			30,097
Changes in fair value included in earnings		—		—		19,119			(6,177	)		30,247			(19,240	)		9,312			33,261
Payment of contingent consideration    payable		—		—		(12,464	)		—			—			—			—			(12,464	)
Reclass of long term to short term    contingent liabilities		—		—		180			(180	)		—			—			—			—
Write off of the contingent put    option		—		—		—			—			—			12,140			—			12,140
Exercise of warrant options		—		—		—			—			—			—			(56,287	)		(56,287	)
Foreign currency translation of    contingent consideration payment		—		—		(208	)		—			—			—			—			(208	)
Balance—at December 31, 2020	$	—	$	—	$	49,902		$	4,565		$	20,886		$	—		$	—		$	75,353
Acquisitions		—		—		2,801			4,603			—			—			—			7,404
Series A-2 compound embedded option		—		—		—			—			2,195			—			—			2,195
Changes in fair value included in earnings		—		—		14,111			10,261			—			—			—			24,372
Payment of contingent consideration    payable		—		—		(50,443	)		—			—			—			—			(50,443	)
Reclass of long term to short term    contingent liabilities		—		—		15,079			(15,079	)		—			—			—			—
Balance—at December 31, 2021	$	—	$	—	$	31,450		$	4,350		$	23,081		$	—		$	—		$	58,881
Acquisitions		—		—		—			2,666			—			—			—			2,666
Changes in fair value included in earnings		6,046		6,046		500			(196	)		2,650			—			—			2,954
Payment of contingent consideration    payable		—		—		(30,515	)		—			—			—			—			(30,515	)
Reclass of long term to short term    contingent liabilities		—		—		2,366			(2,366	)		—			—			—			—
Balance—at December 31, 2022	$	6,046	$	6,046	$	3,801		$	4,454		$	25,731		$	—		$	—		$	33,986

Quantitative Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3):

Interest Rate Swap—The interest rate swap fair value is estimated based on a mid-market price for the swap as of the close of business of the reporting period. The fair value is prepared by discounting future cash flows of the swap to arrive at a current value of the swap. Forward curves and volatility levels inputs are determined on the basis of observable market inputs when available and on the basis of estimates when observable market inputs are not available. The Company does not apply hedge accounting but instead recognizes the instrument at fair value on the consolidated statement of financial position within other assets, with changes in fair value recognized as other income (expense) in each reporting period.

Business Acquisitions Contingent Consideration—The fair value of the contingent consideration payable associated with the acquisition of CTEH, MSE and Sensible was determined using a Monte Carlo simulation of earnings in a risk-neutral Geometric Brownian Motion framework. The fair value of the contingent consideration payable associated with the acquisition of Environmental Standards was determined using a Probabilistic (Scenario Based) method. The fair values of the contingent consideration payables for the other acquisitions were calculated based on expected target achievement amounts, which are measured quarterly and then subsequently adjusted to actuals at the target measurement date. The method used to price these liabilities is considered level 3 due to the subjective nature of the unobservable inputs used to determine the fair value. The input is the expected achievement of earnout thresholds.

Conversion Option—Upon the Company’s IPO, the fair value of the conversion option associated with the issuance of the Convertible and Redeemable Series A-2 Preferred Stock (Note 18) was estimated using a “with-and-without” method. The “with-and-without” methodology considers the value of the security on an as-is basis and then without the embedded conversion premium. The difference between the two scenarios is the implied fair value of the embedded derivative. The unobservable input is the required rate of return on the Series A-2. The considerable quantifiable inputs in the valuation relate to the timing of conversions or redemptions.

Contingent Put Option—The fair value of the contingent put option associated with the issuance of the Redeemable Series A-1 Preferred Stock was estimated using a “with-and-without” method. The “with-and-without” methodology considers the value of the security on an as-is basis and then without the embedded contingent put option. The difference between the two scenarios is the implied fair value of the embedded derivative, recorded as the contingent put option liability. In this case the Series A-1 was redeemed on the date of value so the value of the “with” scenario is known. The unobservable input is the required rate of return on the Series A-1 through to maturity in the “without” scenario. The contingent put option was redeemed in July 2020 (Note 17).

Warrant Options—The warrant options were exercised on July 30, 2020 (Note 13). The fair value of the warrant options associated with the issuance of the Redeemable Series A-1 Preferred Stock and the Convertible and Redeemable Series A-2 Preferred Stock was calculated based on the Black-Sholes pricing model using the following assumptions:

	July 30, 2020
Common stock value (per share)	$	22.22
Expected volatility		44.35	%
Risk-free interest rate		0.55	%
Expected life (years)		10

The method used to price these liabilities is considered Level 3 due to the subjective nature of the unobservable inputs (common stock value and expected volatility) used to determine the fair value.