Fair Value of Financial Measurements

6 Months Ended

Jun. 30, 2019

FAIR VALUE MEASUREMENTS

Our financial instruments include cash and cash equivalents, short-term investments, accounts receivable, customer deposits, accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their fair value due to the short-term nature of these instruments.

Liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations:



	As of June 30, 2019
	Level 1		Level 2		Level 3
Liabilities:
Contingent consideration (1)	$	—	$	—	$	4,879
Total	$	—	$	—	$	4,879
	As of December 31, 2018
	Level 1		Level 2		Level 3
Liabilities:
Contingent consideration (1)	$	—	$	—	$	5,531
Total	$	—	$	—	$	5,531

(1)

Contingent consideration liability represents arrangements to pay the former owners of certain companies we acquired based on the former owners attaining future product release milestones. We use a probability-weighted discounted cash flow model to estimate the fair value of contingent consideration liabilities. These probability weightings are developed internally and assessed on a quarterly basis. As of June 30, 2019, $2.8 million of these arrangements are reported in Accrued liabilities and $2.1 million are reported in Other long-term liabilities in our condensed consolidated balance sheet. As of December 31, 2018, $3.4 million of these arrangements were reported in Accrued liabilities and $2.1 million were reported in Other long-term liabilities in our condensed consolidated balance sheet. The remaining undiscounted maximum payment under these arrangements was $5.2 million as of June 30, 2019. The change in the fair value of the contingent consideration from December 31, 2018 to June 30, 2019 was primarily related to our payment of $0.3 million as part of these arrangements during the six months ended June 30, 2019, as well as changes in our estimates regarding the probability that the former owners will attain certain product release milestones.