6.	Fair Value Measurements

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

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Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;

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Level 2 Inputs - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

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Level 3 Inputs - unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):

March 31, 2018	Level 1		Level 2		Level 3		Total
Assets
Investments:
Money market funds	$	4,500	$	—	$	—	$	4,500
Marketable securities		2,091		—		—		2,091
Total assets measured at fair value	$	6,591	$	—	$	—	$	6,591
Liabilities
Acquisition-related contingent consideration obligations	$	—	$	—	$	46,526	$	46,526
Total liabilities measured at fair value	$	—	$	—	$	46,526	$	46,526

June 30, 2017	Level 1		Level 2		Level 3		Total
Assets
Investments:
Money market funds	$	4,291	$	—	$	—	$	4,291
Investment in non-marketable equity		—		—		3,000		3,000
Total assets measured at fair value	$	4,291	$	—	$	3,000	$	7,291

Level 1 investments:

The Company holds investments in equity securities acquired from the sale of an investment in non-marketable equity securities during the first quarter of fiscal 2018, which is classified as available-for-sale marketable securities at Level 1 as the investments have readily determinable fair value (see below, Level 3 investments). An unrealized holding gain on the investments was $0.7 million as of March 31, 2018.

Level 2 assets and liabilities:

The Company includes U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, and state, municipal and provincial obligations for which quoted prices are available as Level 2. There were no transfers of assets or liabilities between Level 1 and Level 2 for the periods presented.

The fair value of the borrowings under the Credit Facility is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. Due to the short duration until maturity of the credit facility, the fair value approximates the face amount of the Company’s indebtedness of $178.7 million and $93.7 million as of March 31, 2018 and June 30, 2017, respectively. Such differences are immaterial for all periods presented.

Level 3 assets and liabilities:

Certain of the Company’s assets, including intangible assets and goodwill are measured at fair value on a non-recurring basis if impairment is indicated.

As of June 30, 2017, the Company reflected its non-marketable equity investment as Level 3 in the fair value hierarchy as it is based on unobservable inputs that market participants would use in pricing this asset due to the absence of recent comparable market transactions and inherent lack of liquidity. During fiscal 2015, the Company purchased a $3.0 million equity interest in a company that operated in the enterprise software platform industry. The Company did not enter into any other transactions with the investee during fiscal 2017 or the first quarter of fiscal 2018. During the three months ended September 30, 2017, the investee was acquired by a third party. The Company received $6.8 million as consideration for its equity interest in the investee, including $5.4 million in cash and 65,937 shares of the third party’s publicly-traded common stock with a market value of $1.4 million. During the first quarter of fiscal 2018, the Company received $5.8 million of the consideration, consisting of $4.9 million in cash and 41,685 shares with a market value of $0.9 million. The remainder of the consideration consisting of $0.5 million of cash and $0.5 million of shares will remain in escrow for a period of 18 months from the date of sales for general representations and warranties. A gain of $3.8 million related to this sale was recorded in “Other income (expense), net” in the accompanying condensed consolidated statement of operations for the nine months ended March 31, 2018. The 41,685 shares received and 23,252 shares held in escrow as of March 31, 2018 were considered Level 1 investments as these have readily determinable fair value and quoted prices in active markets.

During the quarter ended December 31, 2017, the Company recorded a liability for contingent consideration related to its acquisitions of the Data Center Business and the CF Business (see Note 2 for additional information related to the acquisitions). The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs. The fair value of contingent consideration obligations is based on a discounted cash flow model. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the value of the contingent consideration obligations would be recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.

The change in the acquisition-related contingent consideration obligations is as follows (in thousands):

	Three Months Ended			Nine Months Ended
	March 31, 2018			March 31, 2018
Beginning balance	$	47,030		$	—
Initial fair value measurements		—			47,030
Payments		(671	)		(671	)
Accretion on discount		1,401			1,401
Change in fair value		(1,234	)		(1,234	)
Ending balance	$	46,526		$	46,526

There were no transfers of assets or liabilities between Level 2 and Level 3 during the first nine months of fiscal year 2018 or 2017. There were no impairments recorded for the first nine months of fiscal 2018 or 2017.