Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

14.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).

	2020		2019
Business acquisitions contingent consideration,    current	$	49,902	$	8,614
Business acquisitions contingent consideration,    long-term		4,565		379
Conversion option		20,886		—
Contingent put option		—		7,100
Warrant option		—		16,878
Total	$	75,353	$	32,971

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
	Business Acquisitions Contingent Consideration, Current			Business Acquisitions Contingent Consideration, Long-term			Conversion Option			Contingent Put Option			Warrant Options			Subordinated Debt Embedded Derivative			Total
Balance—at January 1, 2018	$	1,345		$	—		$	—		$	—		$	—		$	2,647		$	3,992
Acquisitions		2,951			—			—			—			—			—			2,951
Changes in fair value included in    earnings		(158	)		—			—			—			—			(352	)		(510	)
Payment of contingent consideration    payable		(1,384	)		—			—			—			—			—			(1,384	)
Issuance of financial instruments		—			—			—			—			12,818			—			12,818
Write off of financial instruments		—			—			—			—			—			(2,295	)		(2,295	)
Balance—at December 31, 2018	$	2,754		$	—		$	—		$	—		$	12,818		$	—		$	15,572
Acquisitions		5,022			379			—			—			—			—			5,401
Changes in fair value included in    earnings		1,392			—			—			7,100			4,060			—			12,552
Payment of contingent consideration    payable		(554	)		—			—			—			—			—			(554	)
Balance—at December 31, 2019	$	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

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

Business Acquisitions Contingent Consideration—The fair value of the contingent consideration payable associated with the acquisition of CTEH was determined using a Monte Carlo simulation of earnings in a risk-neutral Geometric Brownian Motion framework. The fair values of the contingent consideration payables for all 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—The fair value of the embedded derivative associated with the issuance of the Convertible and Redeemable Series A-2 Preferred Stock (Note 17) 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 16).

Warrant Options—The warrant options were exercised on July 30, 2020 (Note 12). As of December 31, 2019, 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:

Series A-1 Preferred Stock Warrant Option	July 30, 2020			December 31, 2019
Common stock value (per share)	$	22.22		$	31.60
Expected volatility		44.35	%		47.51	%
Risk-free interest rate		0.55	%		1.92	%
Expected life (years)		10			10
Series A-2 Preferred Stock Warrant Option	July 30, 2020			December 31, 2019
Common stock value (per share)	$	22.22		n/a
Expected volatility		44.35	%	n/a
Risk-free interest rate		0.55	%	n/a
Expected life (years)		10		n/a

Subordinated Debt Embedded Derivative—The fair value of the embedded derivative associated with the automatic conversion feature of the Company’s subordinated debt repaid in October 2018 was estimated using a probability weighted expected return method based on the expected proceeds from conversion through an IPO scenario less the value of the debt itself. The unobservable inputs were based on probabilities that the debt would convert upon an IPO at various dates. The considerable quantifiable inputs in the embedded derivative were: (i) the future value of the conversion feature, (ii) the fair value of the debt, (iii) the present value of the total instrument, as well as the present value of the conversion feature plus the fair value of the debt, and (iv) the risk free and discount rate.

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.