FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2018

FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

The Company records its cash equivalents, marketable securities, and investments in privately-held companies at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability.

As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows:

• Level 1 - observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2 - significant other inputs that are observable either directly or indirectly; and

• Level 3 - significant unobservable inputs on which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The Company’s cash equivalents are composed of money market funds and time deposits, which are classified within Level 1 and Level 2, respectively, in the fair value hierarchy. The Company’s marketable securities, which are classified within Level 2 of the fair value hierarchy are valued based on a market approach using quoted prices, when available, or matrix pricing compiled by third party pricing vendors, using observable market inputs such as interest rates, yield curves, and credit risk. The Company’s investments in privately-held companies are classified within Level 3 of the fair value hierarchy and are valued using model-based techniques, including option pricing models and discounted cash flow models.

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers between levels during the nine months ended September 30, 2018.

The Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

	September 30, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	10,212	$	15,212	$	—	$	25,424
Marketable securities:
Municipal bonds	$	—	$	46,366	$	—	$	46,366
Corporate bonds		—		53,416		—		53,416
Total marketable securities	$	—	$	99,782	$	—	$	99,782
Investments in privately-held companies(1)	$	—	$	—	$	2,890	$	2,890

  ⁽¹⁾ Included in other long-term assets.

	December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	2,720	$	40,051	$	—	$	42,771
Marketable securities:
Municipal bonds	$	—	$	32,848	$	—	$	32,848
Corporate bonds		—		28,621		—		28,621
Total marketable securities	$	—	$	61,469	$	—	$	61,469
Investments in privately-held companies(1)	$	—	$	—	$	1,030	$	1,030

  ⁽¹⁾ Included in other long-term assets.

For certain other financial instruments, including accounts receivable and accounts payable, the carrying value approximates fair value due to the relatively short maturity of these items.

Assets measured at fair value on a nonrecurring basis

Assets recorded at fair value on a nonrecurring basis, including property and equipment and intangible assets, are recognized at fair value when they are impaired. During the nine months ended September 30, 2018 and 2017, the Company did not recognize any impairments of its assets recorded at fair value on a nonrecurring basis.