Fair Value Measurements

12 Months Ended

Dec. 31, 2018

(6) Fair Value Measurements

The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these items.

Certain assets, including long-lived assets, goodwill and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the years ended December 31, 2018, 2017 and 2016, no impairments were identified of those assets requiring measurement at fair value on a non-recurring basis.

The Company classifies and discloses fair value measurements in one of the following three categories of fair value hierarchy:

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.

Level 2Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At December 31, 2018 the Company’s Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis at December 31, 2018 and 2017 by level within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

	At December 31, 2018
	Quoted		Significant
	Prices in		Other		Significant
	Active		Observable		Unobservable
	Markets		Inputs		Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	47,258		—		—	$	47,258
U.S. treasury securities		—		—		—		—
U.S. government and agency securities		—		2,272		—		2,272
Short-term investments:
U.S. treasury securities		—		38,809		—		38,809
U.S. government and agency securities		—		6,732		—		6,732
Total financial assets	$	47,258	$	47,813	$	—	$	95,071
Liabilities:
Contingent consideration		—		—		—		—
Total financial liabilities	$	—	$	—	$	—	$	—

	As of December 31, 2017
	Quoted		Significant
	Prices in		Other		Significant
	Active		Observable		Unobservable
	Markets		Inputs		Inputs		Total Fair
	(Level 1)		(Level 2)		(Level 3)		Value
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	35,521		—		—	$	35,521
U.S. treasury securities		—		11,974				11,974
U.S. government and agency securities		—		50,352		—		50,352
Short-term investments:
U.S. treasury securities		—		12,972		—		12,972
U.S. government and agency securities		—		29,936		—		29,936
Total financial assets	$	35,521	$	105,234	$	—	$	140,755
Liabilities:
Contingent consideration		—		—		682		682
Total financial liabilities	$	—	$	—	$	682	$	682

Investments classified as cash equivalents approximate the fair value due to the short term nature of these investments. For the years ended December 31, 2018, 2017 and 2016, gains or losses realized on the sale of investments were not material. Investments are reviewed periodically to identify possible other-than-temporary impairments. As the Company has the ability and intent to hold these investments with unrealized losses for a reasonable period of time sufficient for the recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired for any of the periods presented.

The following table summarizes the changes in Level 3 financial instruments (in thousands).

	Amount
Fair value at December 31, 2016	$	388
Foreign currency translation		44
Contingent consideration from IDV acquisition		5,020
Change in fair value of contingent consideration obligation from IDV acquisition		(1,020	)
Payments made during the year from IDV acquisition		(3,750	)
Fair value at December 31, 2017	$	682
Foreign currency translation		(1	)
Contingent consideration from IDV acquisition		—
Change in fair value of contingent consideration obligation from IDV acquisition		(250	)
Payments made during the year from IDV acquisition		(431	)
Fair value at December 31, 2018	$	—

The Company estimates the fair value of the convertible senior notes based on their last actively traded prices (Level 1) or market-observable inputs (Level 2). As of December 31, 2018, the fair value of the convertible senior notes was determined to be $189.8 million and the carrying value of the notes were $94.1 million.

- 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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