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, 2018 and December 31, 2017, are summarized as follows (amounts in thousands). The Company did not have any restricted cash balance as of December 31, 2018. The Company's restricted cash balance of $1.5 million at December 31, 2017 is not held in a money market account and is not included in the following table.



	December 31, 2018								December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	2,828	$	—	$	—	$	2,828	$	2,806	$	—	$	—	$	2,806
Foreign currency derivative contracts	—		—		—		—		—		65		—		65
Total assets	$	2,828	$	—	$	—	$	2,828	$	2,806	$	65	$	—	$	2,871

Liabilities:
Contingent earn-out	$	—	$	—	$	2,372	$	2,372	$	—	$	—	$	—	$	—
Foreign currency derivative contracts	—		—		—		—		—		2		—		2
Total liabilities	$	—	$	—	$	2,372	$	2,372	$	—	$	2	$	—	$	2

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 year ended December 31, 2017, the final payment of $0.2 million was made in connection with contingent earnout recorded as a result of the acquisition of Synchronite based on the fulfillment of a complete product integration and a minimum number of “Co-Browse” interactions per month. During the year ended December 31, 2018, the contingent earnouts totaling $2.4 million were added as a result of the acquisitions of Conversable, Inc and AdvantageTec, Inc. The earn-outs are contingent upon achieving certain targeted financial, strategic and integration objectives and milestones relating.

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



	Contingent Earn-Out
	December 31,
	2018		2017
Balance, Beginning of year	$	—	$	210
Conversable, Inc. addition (see Note 7)	1,496		—
AdvantageTec, Inc. addition (see Note 7)	876		—
Cash payment	—		(210		)
Balance, End of year	$	2,372	$	—

Derivative Financial Instruments

The Company is exposed to foreign exchange risks that are managed in part by using derivative financial instruments. The Company enters 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, 2018 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.

As of December 31, 2018, the Company is not party to any foreign currency forward contracts and does not have any restricted cash balance. At December 31, 2017, in accordance with the foreign currency forward contracts, the Company was required to pledge cash as collateral security to be maintained at an Israeli bank. The collateral security would remain in control of the bank, to be available in order to satisfy outstanding obligations under the foreign currency forward contracts. Accordingly, the Company had cash at an Israeli bank of approximately $1.5 million at December 31, 2017, which was 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):



	December 31, 2018		December 31, 2017
Notional amount of foreign currency derivative contracts	$	—	$	2,866
Fair value of foreign currency derivatives contracts	—		63

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



	Fair Value of Derivative Instruments
	Balance Sheet Location	December 31, 2018		December 31, 2017
Derivative Assets
Derivatives not designated as hedging instruments:
Foreign currency derivatives contracts	Prepaid expenses and other current assets	$	—	$	65

Derivative Liabilities
Derivatives not designated as hedging instruments:
Foreign currency derivatives contracts	Accrued expenses and other liabilities	$	—	$	2

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, 2018			December 31, 2017
Foreign currency derivatives contracts	Other (Expense) Income, net	$	(50	)	$	236