Company: DXPE
Filing Date: 2025-04-30
Form Type: ARS
Source: 0001020710-25-000081
Chunk: 79

Company: DXP ENTERPRISES INC
Filing Date: 2025-04-30
Form: ARS
Chunk 79
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 for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means. Level 3 Inputs Level 3 inputs are unobservable inputs for the asset or liability which require the Company's own assumptions. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks and discount rates based on an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as discussed above, as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured during each reporting period and reflected in our results of operations. During the twelve months ended December 31, 2024, we recorded $16.3 million in other current and other long-term liabilities for contingent consideration. See further discussion at Note 16 - Business Acquisitions. Table of Contents 59

For the Company's assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balances for each category therein and gains or losses recognized during the last three fiscal years (in thousands): Contingent Consideration Balance at December 31, 2021 $ 905 Acquisitions and settlements: Acquisitions 8,200 Settlements (1,250) Total remeasurement adjustments: Changes in fair value recorded in other (income) expense, net 2,311 Balance at December 31, 2022 $ 10,166 Acquisitions and settlements: Acquisitions 2,682 Settlements (5,833) Total remeasurement adjustments