Annual report [Section 13 and 15(d), not S-K Item 405]

Fair Value Measurements

v3.26.1
Fair Value Measurements
 12 Months Ended
Dec. 31, 2025
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS
B. FAIR VALUE MEASUREMENTS:

 

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2025 and December 31, 2024.

 

Fair Value on a Recurring Basis

 

The Company follows the guidance in ASC 820, Fair Value Measurement, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The estimated fair value of the Company’s investments and money market accounts represent Level 1 measurements. The estimated fair value of the earn-out liabilities represents Level 3 measurements. There were no transfers between levels within the fair value measurement hierarchy during the year ended December 31, 2025. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

Description   Level     December 31, 2025     December 31, 2024  
Assets:                        
Investments     1     $ 4,872     $ 8,856  
                         
Liabilities:                        
Earn-out liabilities     3     $ 560     $ 711  

Investments

 

The Company’s investments consisted of the following as of December 31, 2025:

 

    Cost     Unrealized Gain (Loss)     Fair Value  
Money market fund   $ 1,788     $ —     $ 1,788  
Corporate bonds     1,768       25       1,793  
Mutual funds     1,291       —       1,291  
    $ 4,847     $ 25     $ 4,872  

 

The Company’s investments consisted of the following as of December 31, 2024:

 

    Cost     Unrealized Gain (Loss)     Fair Value  
Money market fund   $ 4,843     $ —     $ 4,843  
Corporate bonds     2,958       (6 )     2,952  
Mutual funds     267       —       267  
US Treasury bills     798       (4 )     794  
    $ 8,866     $ (10 )   $ 8,856  

 

Earn-Out Liabilities

 

In connection with certain of the Company’s asset acquisitions, certain earn-out liabilities were established which reflect the estimated amounts payable upon the achievement of sales from acquired intangible assets over a period of time following the acquisition. As of December 31, 2025, the Company has earn-out liabilities associated with its purchase of Trend Brand Solutions, T.R. Miller Co., and Premier NYC.

 

Assumptions used in determining the fair value of the earn-out liabilities include the acquired asset’s projected gross profit, discount rates, remaining time intervals and residual earn-out percentages. The following table summarizes the key unobservable inputs into the models used to estimate the fair value of the earn-out liabilities at December 31, 2025:

 

 

Unobservable Inputs

   December 31,
2025
Projected annual gross profit   $628 - $4,398
Earnout percentage   40.0% - 45.0%
Expected volatility   25.0%
Risk-free rate   3.6% - 4.3%
Discount rate   5.0% - 5.8%
Required Metric Risk Premium   5.3% - 7.7%
Time period to settlement   0.2 - 1.9 years

A reconciliation of the earn-out liabilities is included below:

 

Balance as of December 31, 2023   $ 987  
Payments earned and paid     (68 )
Loss upon re-measurement     (208 )
Balance as of December 31, 2024   $ 711  
Payments earned and paid     (151 )
Balance as of December 31, 2025   $ 560  
         
Current portion of contingent earn-out liabilities   $ 105  
Long-term contingent earn-out liabilities   $ 455  

 

Fair Value on a Non-Recurring Basis

 

Installment Payment Liabilities

 

The estimated fair value of the installment payment liabilities represent a Level 2 measurement. The Company measures the initial installment payment liabilities at fair value by discounting the contractually agreed upon payments by Bloomberg’s B+ corporate yield curve as of the valuation date, using rates commensurate with the term to payment. The credit rating was determined utilizing Bloomberg’s default risk function for the Company as of the valuation date. The installment payments and payment date (term) are based on the purchase agreements and the discount rate represents a quoted market price classified within Level 2 of the fair value hierarchy. All assumptions utilized in the determination of the fair values of assets and liabilities acquired in the Company’s business combinations were determined to be Level 3 in the fair value hierarchy, see Note F. “Acquisitions” for the valuation assumptions used.

 

Goodwill Impairment Analysis

 

The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable. As part of this process, the Company performed quantitative impairment analyses for its reporting units during the period. The estimated fair values of the Company’s reporting units were determined using a combination of the income approach and market approach, which require significant judgments and assumptions and therefore represent Level 3 measurements in the fair value hierarchy. The income and market approaches were weighted equally in determining the estimated fair value of the Company’s reporting units.

 

Under the income approach, the Company applied a discounted cash flow methodology. Estimated future cash flows and terminal values were based on management’s forecasts and assumptions regarding revenue growth, operating margins, capital expenditures, working capital requirements, expected inflation, and broader macroeconomic conditions. These cash flows were discounted to present value using discount rates reflecting the Company’s weighted average cost of capital and reporting-unit-specific risks, including execution risk associated with the Company’s historical performance relative to prior projections. The market approach utilized the Guideline Public Company (“GPC”) method, which estimates fair value by applying valuation multiples derived from comparable publicly traded companies to the appropriate operating metrics of the Company. In applying the GPC method, the selected multiples were evaluated and adjusted based on differences in size, growth prospects, profitability, and risk characteristics relative to the guideline companies. See Note E, “Goodwill and Intangible Assets,” to the consolidated financial statements included in this report for more information.