Fair Value Measurements

The Company measures its cash equivalents at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:


•	Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Financial Assets and Liabilities

The carrying amount of cash, accounts receivable, and accounts payable approximate their fair value due to their short-term nature. The Company's assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of December 31, 2016 and December 31, 2015, are summarized as follows (amounts in thousands). The Company’s restricted cash balance of $4.0 million at December 31, 2016 and $5.4 million at December 31, 2015 is not held in a money market account and is not included in the following table.



	December 31, 2016								December 31, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	3,076	$	—	$	—	$	3,076	$	4,059	$	—	$	—	$	4,059
Foreign currency derivative contracts	—		108		—		108		—		102		—		102
Total assets	$	3,076	$	108	$	—	$	3,184	$	4,059	$	102	$	—	$	4,161

Liabilities:
Contingent earn-out	$	—	$	—	$	210	$	210	$	—	$	—	$	377	$	377
Foreign currency derivative contracts	—		66		—		66		—		310		—		310
Total liabilities	$	—	$	66	$	210	$	276	$	—	$	310	$	377	$	687

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions based on the best information available.

The Company's money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy. The Company's contingent earn-out liability and foreign currency derivative contracts are measured at fair value on a recurring basis and are classified as level 3 and level 2, respectively, within the fair value hierarchy. On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. The Company uses an income approach and inputs that constitute level 3. During the third quarter of each year, the Company evaluates goodwill for impairment at the reporting unit level. The Company uses qualitative factors in accordance with ASU No. 2011-08 to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. This measurement is classified based on level 3 input.

During the twelve months ended December 31, 2015, the contingent earn-out decreased by $4.1 million in connection with the acquisition of CAO! due to both re-measurement to fair value of $3.2 million and cash payments of $0.9 million. The contingent earnout was also decreased by $0.9 million in connection with the Engage acquisition and by $1.6 million in connection with the acquisition of Synchronite due to both re-measurement to fair value and cash payments. During the twelve months ended December 31, 2016, the contingent earnout was decreased by $0.2 million in connection with the acquisition of CAO! due to cash payments. The contingent earn-out amounts are recorded in accrued expense on the consolidated balance sheets as they are payable in 2017. The contingent earn-out relating to Engage was based on the potential earn-out consideration if certain revenue targets are achieved. There was no remaining contingent earn-out in connection with the acquisition of Engage as of December 31, 2016. The contingent earn-out relating to Synchronite is based on the fulfillment of a complete product integration and a minimum number of “Co-Browse” interactions per month. There was $0.2 million of contingent earn-out remaining in connection with the acquisition of Synchronite as of December 31, 2016. There was no remaining contingent earn-out in connection with the acquisition of CAO! as of December 31, 2016.

The changes in fair value of the Level 3 liabilities are as follows (amounts in thousands):



	Contingent Earn-Out
	December 31,
	2016			2015
Balance, Beginning of year	$	377		$	6,940
Cash payment	(167		)	(2,883		)
Changes in fair value	—			(3,680		)
Balance, End of year	$	210		$	377

Derivative Financial Instruments

The Company is exposed to foreign exchange risks that are managed in part by using derivative financial instruments. Beginning in January 2015, the Company entered into foreign currency forward contracts related to risks associated with foreign operations. The Company does not use derivatives for trading purposes and at December 31, 2016 has no derivatives that are designated as fair value hedges. Derivatives are recorded at their estimated fair values based upon Level 2 inputs. Derivatives designated and effective as cash flow hedges are reported as a component of other comprehensive income and reclassified to earnings in the same periods in which the hedged transactions impact earnings. Gains and losses related to derivatives not meeting the requirements of hedge accounting and the portion of derivatives related to hedge ineffectiveness are recognized in current earnings.

In accordance with the foreign currency forward contracts, the Company was required to pledge cash as collateral security to be maintained at the bank. The collateral shall remain in control of the lender, and these funds can be used to satisfy the outstanding obligation. Accordingly, the Company had cash at the bank of approximately $4.0 million at December 31, 2016 and is recorded as cash held as collateral in current assets.

The following summarizes certain information regarding the Company’s outstanding foreign currency derivative contracts related primarily to intercompany receivables and payables for the periods presented (in thousands):



	As of December 31, 2016		As of December 31, 2015
Notional amount of foreign currency derivative contracts	$	44,438	$	43,431
Fair value of foreign currency derivatives contracts	42		(208		)

The fair value of the Company’s derivative instruments is summarized below (in thousands):



	Fair Value of Derivative Instruments
	Balance Sheet Location	As of December 31, 2016		As of December 31, 2015
Derivative Assets
Derivatives not designated as hedging instruments:
Foreign currency derivatives contracts	Prepaid expenses and other current assets	$	108	102

Derivative Liabilities
Derivatives not designated as hedging instruments:
Foreign currency derivatives contracts	Accrued expenses and other liabilities	$	66	310

The following summarizes certain information regarding the Company’s derivatives that are not designated or are not effective as hedges (in thousands):



	Gain (losses) on Derivative Instruments Recognized in Income Statement
	Income Statement Location	December 31, 2016		December 31, 2015
Foreign currency derivatives contracts	Other (Expense) Income, net	$	73	(54	)