Fair Value Measurements

12 Months Ended

Dec. 31, 2019

The following is a summary of available-for-sale marketable securities held as of December 31, 2019 and 2018 (in thousands):



			Gross Unrealized					Aggregate Fair Value		Classification on Balance Sheet
	Amortized Cost									Short-Term Marketable Securities		Long-Term Marketable Securities
As of December 31, 2019	Amortized Cost		Gains		Losses					Short-Term Marketable Securities		Long-Term Marketable Securities
Certificates of deposit	$	150,000	$	—	$	—		$	150,000	$	150,000	$	—
Commercial paper	73,829		23		(7		)	73,845		73,845		—
Corporate bonds	1,368,668		1,840		(378		)	1,370,130		753,538		616,592
U.S. government agency obligations	369,475		80		(74		)	369,481		165,623		203,858
	$	1,961,972	$	1,943	$	(459	)	$	1,963,456	$	1,143,006	$	820,450

As of December 31, 2018
Certificates of deposit	$	40,000	$	—	$	(7	)	$	39,993	$	39,993	$	—
Commercial paper	282,996		—		(50		)	282,946		282,946		—
Corporate bonds	685,653		1		(4,309		)	681,345		482,088		199,257
U.S. government agency obligations	50,876		—		(404		)	50,472		50,472		—
	$	1,059,525	$	1	$	(4,770	)	$	1,054,756	$	855,499	$	199,257

The Company offers certain eligible employees the ability to participate in a non-qualified deferred compensation plan. The mutual funds held by the Company that are associated with this plan are classified as restricted trading securities. These securities are not included in the available-for-sale securities table above but are included in marketable securities in the consolidated balance sheets.

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive loss in the consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive income to interest income in the consolidated statements of income. As of December 31, 2019, the Company held for investment corporate bonds with a fair value of $35.9 million, which are classified as available-for-sale marketable securities and have been in a continuous unrealized loss position for more than 12 months. The immaterial unrealized losses related to these corporate bonds are included in accumulated other comprehensive income as of December 31, 2019. The unrealized losses are attributable to changes in interest rates. Based on the evaluation of available evidence, the Company does not believe any unrealized losses represent other than temporary impairments.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities as of December 31, 2019 and 2018 (in thousands):



	Total Fair Value			Fair Value Measurements at Reporting Date Using
	Total Fair Value			Level 1		Level 2		Level 3
As of December 31, 2019
Cash Equivalents and Marketable Securities:
Money market funds	$	50,779		$	50,779	$	—	$	—
Certificates of deposit	150,000			—		150,000		—
Commercial paper	73,845			—		73,845		—
Corporate bonds	1,370,130			—		1,370,130		—
U.S. government agency obligations	369,481			—		369,481		—
Mutual funds	15,177			15,177		—		—
	$	2,029,412		$	65,956	$	1,963,456	$	—

As of December 31, 2018
Cash Equivalents and Marketable Securities:
Money market funds	$	380,260		$	380,260	$	—	$	—
Certificates of deposit	39,993			39,993		—		—
Commercial paper	282,946			—		282,946		—
Corporate bonds	681,345			—		681,345		—
U.S. government agency obligations	50,472			—		50,472		—
Mutual funds	10,016			10,016		—		—
	$	1,445,032		$	430,269	$	1,014,763	$	—

Liabilities:
Contingent consideration obligation related to completed acquisitions	$	(6,300	)	$	—	$	—	$	(6,300	)

As of December 31, 2019 and 2018, the Company grouped money market and mutual funds using a Level 1 valuation because market prices for such investments are readily available in active markets. As of December 31, 2018, the Company also included brokered certificates of deposit using Level 1 valuation as market prices for these investments were readily available in active markets. As of December 31, 2019 and 2018, the Company grouped commercial paper, U.S. government agency obligations and corporate bonds using a Level 2 valuation because quoted prices for similar assets in active markets (or identical assets in an inactive market) are available. As of December 31, 2019, the Company also included bank certificates of deposit using Level 2 valuation because quited prices for similar assets in active markets (or identical assets in an inactive market) are available. The Company did not have any transfers of assets or liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the years ended December 31, 2019 and 2018.

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

The valuation technique used to measure the fair value of the Company's Level 3 liabilities, which consist of contingent consideration related to the acquisition of Cyberfend, Inc. ("Cyberfend") in 2016, was primarily an income-based approach. The significant unobservable input used in the fair value measurement of the contingent consideration is the likelihood of achieving development milestones to integrate the acquired technology into the Company's technology as well as achieving certain post-closing financial results.

Contractual maturities of the Company’s available-for-sale marketable securities held as of December 31, 2019 and 2018 were as follows (in thousands):



	December 31, 2019		December 31, 2018
Due in 1 year or less	$	1,143,006	$	855,499
Due after 1 year through 5 years	820,450		199,257
	$	1,963,456	$	1,054,756

The following table reflects the activity for the Company’s major classes of liabilities measured at fair value using Level 3 inputs for the years ended December 31, 2019 and 2018 (in thousands):



	2019			2018
Beginning balance	$	(6,300	)	$	(8,631	)
Fair value adjustment to contingent consideration included in general and administrative expense	—			(1,835		)
Cash paid upon achievement of milestone	6,300			4,166
Ending balance	$	—		$	(6,300	)

- 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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