NOTE 5. Fair Value Measurements

The Company determines the fair value of certain financial and nonfinancial assets and liabilities. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value determinations utilize a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability.

Classification within the fair value hierarchy contains three levels:

The following table presents assets and liabilities measured at fair value on a recurring basis:

Level 1 assets consist of money market funds and open-end mutual funds. The fair values for these assets are determined utilizing quoted market prices for identical assets.

There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy for the years ended December 31, 2025 and 2024. The Company recognizes transfers at the end of the reporting period.

The net carrying value of accounts receivable and accounts payable approximates fair value due to the short‑term nature of these assets and liabilities. The fair value of our long-term debt as of December 31, 2025 is considered to be its carrying value as the interest rate on the bank debt is variable and approximates current market rates. As a result, Level 2 inputs are utilized to determine the fair value of our long‑term debt.

Contingent payment arrangements

WestEnd

Contingent consideration arrangements represent the WestEnd earn-out payment liability which is included in consideration payable for acquisition of business in the Consolidated Balance Sheets. Under the terms of the WestEnd purchase agreement, a maximum of $320.0 million ($80.0 million per year) of contingent payments is payable to sellers. Contingent earn-out payments are based on net revenue of the WestEnd business during each of the first four years following the close of the acquisition, subject to certain “catch-up” provisions over a five and one-half year period following the close of the acquisition.

During 2025, the Company paid $63.7 million in cash to sellers for the second earn-out period. During 2024, the Company paid $80.0 million in cash to sellers as a catch-up payment for the first earn-out period. The estimated fair value of the contingent consideration payable to the sellers was $87.6 million and $139.9 million as of December 31, 2025 and 2024, respectively.

For the years ended December 31, 2025, 2024 and 2023, the change in the liability was an increase of $11.4 million, $2.7 million and $14.5 million, respectively. The impact of decreasing or increasing the valuation of the contingent consideration liability is recorded in change in value of consideration payable for acquisition of business in the Consolidated Statements of Operations.

The estimated fair value for contingent consideration payable to sellers is estimated using the real options method. WestEnd net revenue growth is simulated in a risk-neutral framework to calculate expected probability-weighted earn out payments, which are then discounted from the expected payment dates at the relevant cost of debt. Significant assumptions and inputs include the WestEnd net revenue projected annual growth rate, the market price of risk, which adjusts the projected revenue growth rate to a risk-neutral expected growth rate, revenue volatility and discount rate. The market price of risk and revenue volatility are based on data for comparable companies. As the contingent consideration represents a subordinate, unsecured claim of the Company, the Company assesses a discount rate which incorporates adjustments for credit risk and the subordination of the contingent consideration.

New Energy Capital

Under the terms of the purchase agreement for New Energy Capital Partners ("NEC"), which closed during 2021, the Company will pay up to an additional $35.0 million in cash based on net revenue growth over a six-year period on the private, closed-end alternative investment funds managed by the NEC franchise ("NEC Funds"). The maximum amount of contingent payments, less any contingent payments previously paid, is due upon the occurrence of certain specified events within a five year period following the Start Date.

The Company determined that substantially all of the contingent payments payable per the NEC purchase agreement represent compensation for post-closing services. The Company records compensation expense over the estimated service period in an amount equal to the total contingent payments currently forecasted to be paid.

As of December 31, 2025 and 2024, the Company determined that the contingent payments are no longer probable of occurring and the liability for NEC contingent payments is zero.

For the year ended December 31, 2024, the net impact to the Consolidated Statements of Operations relating to the NEC contingent payment compensation expense was a decrease of $13.7 million in personnel compensation and benefits. The Company recorded $5.6 million in NEC contingent payment compensation expense for the year ended December 31, 2023, which is included in personnel compensation and benefits in the Consolidated Statements of Operations.

USAA AMCO

Under the terms of the USAA AMCO Acquisition purchase agreement, a maximum of $150.0 million in contingent payments ($37.5 million per year) was payable to sellers based on the annual revenue performance of certain assets over the first four years following the closing. In 2023, the Company paid $36.4 million in cash to sellers for the fourth and final earn out period payment, bringing total cumulative contingent payments to $148.9 million. For the year ended December 31, 2023, the impact to the Consolidated Statements of Operations relating to this contingent payment arrangement was a loss of $8.7 million recorded to change in value of consideration payable for acquisition of business.