v3.25.2
Fair Value Measurement
 12 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurement

NOTE 12 – FAIR VALUE MEASUREMENT

The accounting guidance for fair value, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants as of the reporting date. The framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The fair value measurement level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

•
Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
•
Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost); and
•
Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option pricing and excess earning models.

Items Measured at Fair Value on a Recurring Basis

The following table sets forth the Company’s financial assets (liabilities) measured at fair value on a recurring basis:

 

 

Fair Value Measurements as of June 30, 2025

 

(In thousands)

 

Level 3

 

 

Total

 

Contingent consideration

 

$

(19,350

)

 

$

(19,350

)

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of June 30, 2024

 

(In thousands)

 

Level 3

 

 

Total

 

Contingent consideration

 

$

(5,165

)

 

$

(5,165

)

Interest rate swap contracts (derivatives)

 

 

1,032

 

 

 

1,032

 

The following table provides a reconciliation of the financial assets (liabilities) measured at fair value using significant unobservable inputs (Level 3):

(In thousands)

 

Contingent
Consideration

 

 

Interest Rate Swap Contracts
(Derivatives)

 

Balance as of June 30, 2024

 

$

(5,165

)

 

$

1,032

 

Increase related to acquisitions

 

 

(17,150

)

 

 

—

 

Contingent consideration paid

 

 

474

 

 

 

—

 

Change in fair value

 

 

2,491

 

 

 

(1,032

)

 

 

 

 

 

 

 

Balance as of June 30, 2025

 

$

(19,350

)

 

$

—

 

The Company has contingent obligations to transfer cash payments to former shareholders of acquired operations in conjunction with certain acquisitions if specified operating results and financial objectives are met over their stated earn-out period. Contingent consideration is measured quarterly at fair value, and any change in the fair value of the liability is included in the consolidated statements of comprehensive income. The change in fair value in each period is principally attributable to a change in management’s estimates of future earn-out payments through the remainder of the earn-out periods.

The Company uses projected future financial results based on recent and historical data to value the anticipated future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs. The Company has classified the contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs. The Company believes the discount rate used to discount the earn-out payments reflects market participant assumptions. Changes in assumptions and operating results could have a significant impact on the earn-out amount up to a maximum of $45,501, through earn-out periods measured through March 2027.

As discussed in Note 9, derivative instruments are carried at fair value on the consolidated balance sheets. The fair market value of interest rate swaps were determined using Level 3 unobservable inputs, specifically a pricing service proprietary to Bank of America. The interest rate swap contracts matured and there is no fair value as of June 30, 2025.

Fair Value of Financial Instruments

The carrying amounts of the Company’s cash equivalents, receivables, contract assets, accounts payable, commissions payable, accrued expenses, and the income tax receivable approximate the fair values due to the relatively short maturities of these instruments. The carrying amounts of the Company’s Revolving Credit Facility would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates. During the fiscal years ended June 30, 2025 and 2024, there were no transfers of financial instruments between Levels 1, 2, and 3.