Fair Value Measurements

3 Months Ended

Mar. 31, 2019



Note 6	Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following tables present information about our financial assets that have been measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, and indicates the fair value hierarchy of the valuation inputs utilized to determine fair value (in thousands):



	Fair Value Measurements as of								Amortized Cost as of
	March 31, 2019								March 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Cash	$	29,530	$	—	$	—	$	29,530	$	29,530
Money market funds	7,367		—		—		7,367		7,367
Total cash and cash equivalents	36,897		—		—		36,897		36,897
Restricted cash equivalents	1,921		2,124		—		4,045		4,045
Total assets	$	38,818	$	2,124	$	—	$	40,942	$	40,942
Liabilities:
Accrued royalties, fulfillment and other current liabilities
Napster acquisition contingent consideration	$	—	$	—	$	2,586	$	2,586	N/A
Other long-term liabilities
Napster acquisition contingent consideration	—		—		9,014		9,014		N/A
Total liabilities	$	—	$	—	$	11,600	$	11,600	N/A



	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2018								December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Cash	$	22,853	$	—	$	—	$	22,853	$	22,853
Money market funds	12,708		—		—		12,708		12,708
Total cash and cash equivalents	35,561		—		—		35,561		35,561
Short-term investments:
Corporate notes and bonds	—		24		—		24		24
Total short-term investments	—		24		—		24		24
Restricted cash equivalents	—		1,630		—		1,630		1,630
Warrants issued by Napster (included in Other assets)	—		—		865		865		—
Total assets	$	35,561	$	1,654	$	865	$	38,080	$	37,215

Restricted cash equivalents as of March 31, 2019 and December 31, 2018 relate to cash pledged as collateral against letters of credit in connection with lease agreements and to a financial covenant in Napster's Amended Revolver Loan and Security Agreement (Revolver LSA). At March 31, 2019, $1.9 million of restricted cash equivalents related to the Revolver LSA covenant that requires Napster to maintain a cash balance at the bank of not less than $1.5 million at all times and 5% of all amounts outstanding under Napster's Non-Recourse Purchase of Eligible Receivables Agreement. See Note 10 Notes Payable - Napster for additional details.

Accrued royalties, fulfillment and other current liabilities and Other long-term liabilities as of March 31, 2019 include the preliminary estimated fair value of the contingent consideration for the Napster acquisition, which was determined using a fair value measurement categorized within Level 3 of the fair value hierarchy. As discussed in Note 5 Acquisitions, after completion of the measurement period or in conjunction with changes in fair value unrelated to our preliminary estimate of fair value, this liability will be adjusted quarterly to fair value through earnings.

Realized gains or losses on sales of short-term investment securities for the quarters ended March 31, 2019 and 2018 were not significant. Gross unrealized gains and losses on short-term investment securities as of March 31, 2019 and December 31, 2018 were also not significant.

Items Measured at Fair Value on a Non-recurring Basis

Certain of our assets and liabilities are measured at estimated fair value on a non-recurring basis, using Level 3 inputs. These instruments are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). During the three months ended March 31, 2019 and 2018, we did not record any impairments on those assets required to be measured at fair value on a non-recurring basis.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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