FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2023

The accounting standard for fair value measurements defines fair value and establishes a market-based framework or hierarchy for measuring fair value. The standard is applicable whenever assets and liabilities are measured at fair value. The fair value hierarchy established prioritizes the inputs used in valuation techniques into three levels as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities - includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets, for substantially the full term of the financial instrument; and

Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis and the level they fall within the fair value hierarchy (in thousands):


Amounts Recorded at Fair Value	Financial Statement Classification	Fair Value Hierarchy	December 31, 2023		January 1, 2023
Convertible note	Convertible note	Level 2	$	4,368	$	4,368
Contingent consideration, net	Contingent consideration, net - current and long-term	Level 3	$	8,320	$	1,081

The changes in the Level 3 fair value measurements from January 1, 2023 to December 31, 2023 relates primarily to an increase from Arroyo Consulting acquisition, including $0.7 million in accretion, offset by a $1.1 million payment for the 2021 Momentum Solutionz acquisition. Key inputs in determining the fair value of the contingent consideration as of December 31, 2023 and January 1, 2023 included discount rates of approximately 7% and 9%, respectively, as well as management’s estimates of future sales volumes and earnings before interest, income taxes, depreciation, and amortization (“EBITDA”).