In line with the Company’s strategic growth initiatives, the Company acquired certain businesses during the nine months ended September 30, 2023 and during the year ended December 31, 2022. The results of each of those acquired businesses are included in the unaudited condensed consolidated financial statements beginning on the acquisition date. Each transaction qualified as an acquisition of a business and was accounted for as a business combination. All acquisitions resulted in the recognition of goodwill. The Company paid these premiums resulting in such goodwill for a number of reasons, including expected synergies from combining operations of the acquiree and the Company while also growing the Company’s customer base, acquiring assembled workforces, expanding its presence in certain markets and expanding and advancing its product and service offerings. The Company recorded the assets acquired and liabilities assumed at their acquisition date fair value, with the difference between the fair value of the net assets acquired and the acquisition consideration reflected as goodwill.

The identifiable intangible assets for significant acquisitions are valued using the excess earnings method discounted cash flow approach for customer relationships, the relief from royalty method for trade names, the patent and external proprietary software and developed technology, the “with and without” method for covenants not to compete and the replacement cost method for the internal proprietary software by incorporating Level 3 inputs as described under the fair value hierarchy of ASC 820. These unobservable inputs reflect the Company’s own assumptions about which assumptions market participants would use in pricing an asset on a non-recurring basis. These assets will be amortized over their respective estimated useful lives.

Other purchase price obligations (primarily deferred purchase price liabilities and target working capital liabilities or receivables) are included on the unaudited condensed consolidated statements of financial position in accounts payable and other accrued liabilities, other non-current liabilities or accounts receivable-net in the case of working capital deficits. Contingent consideration outstanding from acquisitions are included on the unaudited condensed consolidated statements of financial position in business acquisition contingent consideration, current or in business acquisitions contingent consideration, long-term. The contingent consideration elements of the purchase price of the acquisitions are related to earn-outs which are based on the expected achievement of revenue or earnings thresholds as of the date of the acquisition and for which the maximum potential amount is limited.

The Company considers several factors when determining whether or not contingent consideration liabilities are part of the purchase price, including the following: (i) the valuation of its acquisitions is not supported solely by the initial consideration paid, (ii) the former stockholders of acquired companies that remain as key employees receive compensation other than contingent consideration payments at a reasonable level compared with the compensation of the Company’s other key employees and (iii) contingent consideration payments are not affected by employment termination. The Company reviews and assesses the estimated fair value of contingent consideration at each reporting period.

The Company may be required to make up to $7.1 million in aggregate earn-out payments between the years 2024 and 2026 in connection with certain of its business acquisitions, of which up to $1.5 million may be paid only in cash, up to $4.5 million may be paid only in common stock and up to $1.1 million may be paid, at the Company’s option, in cash or common stock.

Transaction costs related to business combinations totaled $1.5 million and $5.0 million for the three and nine months ended September 30, 2023, respectively, and $0.4 million and $1.4 million for the three and nine months ended September 30, 2022, respectively. These costs are expensed within selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.

Frontier Analytical Laboratories (“Frontier”) —In January 2023, the Company completed the acquisition of Frontier by acquiring certain of its assets and operations. Frontier is a specialized environmental laboratory based in El Dorado Hills, CA.

Environmental Alliance, Inc. (“EAI”)—In February 2023, the Company completed the acquisition of EAI by acquiring 100.0% of its common stock. EAI provides environmental remediation and consulting services, and is based in Wilmington, DE.

GreenPath Energy LTD (“GreenPath”) —In May 2023, the Company completed the acquisition of GreenPath by acquiring 100.0% of its common stock. GreenPath is a leading optical gas imaging and fugitive emissions management services firm and is based in Calgary, Canada.

Matrix Solutions, Inc. ("Matrix") —In June 2023, the Company completed the acquisition of Matrix by acquiring 100.0% of its common stock. Matrix is one of Canada’s leading environmental and engineering consulting companies and is based in Calgary, Canada.

Vandrensning ApS. ("Vandrensning") —In July 2023, the Company completed the acquisition of Vandrensning by acquiring 100.0% of its common stock. Vandrensning, a European-based company, specializes in water treatment solutions.

The following table summarizes the elements of the purchase price of the acquisitions completed during the nine months ended September 30, 2023:


	Cash		Common Stock		Other Purchase Price Components			Contingent Consideration		Total Purchase Price
Matrix	$	46,563	$	—	$	2,019	(1)	$	—	$	48,582
All other 2023 acquisitions		22,077		2,598		519			1,096		26,290
Total	$	68,640	$	2,598	$	2,538		$	1,096	$	74,872

____________________

(1)

Includes $1.3 million in holdback amounts payable to the seller. Cash funds to be used for payment have been classified as restricted cash in the Company's unaudited condensed consolidated statement of financial position.

The upfront cash payment made to acquire the acquisitions completed during the nine months ended September 30, 2023 was funded through cash on hand. The other purchase price components mainly consist of deferred purchase price liabilities and working capital amounts.

The preliminary purchase price attributable to the acquisitions was allocated as follows:


	Matrix (as initially reported)		Matrix Measurement Period Adjustments			Matrix (As Adjusted)(1)		All other 2023 acquisitions(1)		Total(1)
Cash	$	1,524	$	—		$	1,524	$	929	$	2,453
Accounts receivable and contract assets		15,752		2			15,754		3,441		19,195
Other current assets		2,094		(262	)		1,832		439		2,271
Current assets		19,370		(260	)		19,110		4,809		23,919
Property and equipment		2,231		—			2,231		1,705		3,936
Operating lease right-of-use asset		14,760		(7,677	)		7,083		46		7,129
Customer relationships		—		15,799			15,799		7,741		23,540
Trade names		—		2,150			2,150		222		2,372
Covenants not to compete		—		2,198			2,198		631		2,829
Other intangible assets		—		—			—		444		444
Goodwill		36,118		(15,053	)		21,065		11,702		32,767
Total assets		72,479		(2,843	)		69,636		27,300		96,936
Current liabilities		11,267		(668	)		10,599		978		11,577
Operating lease liability—net of current portion		12,500		(2,175	)		10,325		32		10,357
Other non-current liabilities		130		—			130		—		130
Total liabilities		23,897		(2,843	)		21,054		1,010		22,064
Purchase price	$	48,582	$	—		$	48,582	$	26,290	$	74,872

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(1) The Company is continuing to obtain information to complete the valuation of certain of these acquisitions' assets and liabilities.

The weighted average useful lives for Matrix's identifiable customer relationships, tradenames and covenants not to compete are 12 years, 2.5 years, and 5 years, respectively. The weighted average useful lives for GreenPath's identifiable customer relationships, tradenames, covenants not to compete, and proprietary software are 12 years, 1 year, 5 years, and 5 years, respectively. The weighted average useful lives for all of the other acquisitions identifiable customer relationships, tradenames, and covenants not to compete are 7 years, 2 years, and 5 years, respectively.

Goodwill associated with the Frontier acquisition is deductible for income tax purposes.

Frontier and GreenPath are included in the Company’s Measurement and Analysis segment. EAI, Matrix and Vandrensning are included in the Company’s Remediation and Reuse segment.

For the acquisitions completed during the nine months ended September 30, 2023, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2023 includes revenue of $29.2 million and $40.8 million, respectively, and pre-tax income of $6.5 million and $7.4 million, respectively, related to these acquisitions.

Environmental Standards, Inc. (“Environmental Standards”)—In January 2022, the Company completed the acquisition of Environmental Standards, Inc. by acquiring 100.0% of its common stock. Environmental Standards is a provider of environmental consulting and data validation services. Environmental Standards is based in Valley Forge, PA with satellite locations nationwide.

Industrial Automation Group, Inc. (“IAG”)—In January 2022, the Company completed the acquisition of Industrial Automation Group, Inc. by acquiring certain of its employees and a covenant not to compete. IAG is based in Atlanta, GA. IAG provides highly specialized engineering services which are additive to the Company’s water treatment and renewable energy technology implementations.

TriAD Environmental Consultants, Inc. (“TriAD”)—In August 2022, the Company completed the acquisition of TriAD Environmental Consultants, Inc. by acquiring 100.0% of its common stock. TriAD is a provider of environmental consulting services. TriAD is based in Nashville, TN.

AirKinetics, Inc. (“AirKinetics”)—In September 2022, the Company completed the acquisition of AirKinetics, Inc. by acquiring 100.0% of its common stock. AirKinetics is a provider of emissions testing services. AirKinetics is based in Anaheim, CA.

Huco Consulting, Inc. (“Huco”)—In November 2022, the Company completed the acquisition of Huco Consulting, Inc. by acquiring 100.0% of its common stock. Huco primarily specializes in the implementation of environment, health and safety software for industrial, commercial and government clients. Huco is based in Houston, TX.

Environmental Standards and Huco are included in the Company’s Assessment, Permitting and Response segment, IAG and TriAD are included in the Remediation and Reuse segment and AirKinetics is included in the Measurement and Analysis segment.

For the acquisitions completed during the nine months ended September 30, 2022, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2022 includes revenue of $5.6 million and $13.2 million, respectively, and pre-tax income of $1.0 million and $1.7 million, respectively, related to these acquisitions.

During the nine months ended September 30, 2023, measurement period adjustments of $0.2 million were recorded to goodwill as a result of the Company’s efforts to complete the valuation of certain acquired assets and assumed liabilities related to the acquisitions completed during the year ended December 31, 2022 (Note 8).

Supplemental Unaudited Pro-Forma—The unaudited condensed consolidated financial information summarized in the following table gives effect to the 2023 and the 2022 acquisitions discussed above assuming they occurred on January 1, 2022. These unaudited consolidated pro-forma operating results do not assume any impact from revenue, cost or other operating synergies that are expected or may have been realized as a result of the acquisitions. These unaudited consolidated pro-forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the acquisitions occurred on January 1, 2022, nor does the information purport to reflect results for any future period.


	For the Three Months Ended September 30,
	2023									2022
	As reported			Acquisitions Pro-Forma (Unaudited)			Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	167,937		$	24		$	167,961		$	130,312		$	26,595	$	156,907
Net (loss) income		(7,525	)		(5	)		(7,530	)		(5,720	)		2,896		(2,824	)

	For the Nine Months Ended September 30,
	2023									2022
	As reported			Acquisitions Pro-Forma (Unaudited)			Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma
Revenues	$	458,466		$	25,852		$	484,318		$	404,902		$	69,816	$	474,718
Net (loss) income		(29,418	)		809			(28,609	)		(21,007	)		4,442		(16,565	)