Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Note 6 - Fair Value Measurements

The Company has certain financial assets and liabilities which have been classified as either Level 1, 2 or 3 within the fair value hierarchy as described below.

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements
	As of December 31, 2018
	Level 1		Level 2		Level 3			Total
Assets:
Money market funds (1)	$	255	$	—	$	—		$	255
Total Assets	$	255	$	—	$	—		$	255

Liabilities:
Contingent purchase price (2)	$	—	$	—	$	(4,196	)	$	(4,196	)
Total Liabilities	$	—	$	—	$	(4,196	)	$	(4,196	)

	Fair Value Measurements
	As of December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	492	$	—	$	—	$	492
Federal agency obligations		—		1,793		—		1,793
Corporate obligations (3)		—		52,540		—		52,540
Total Assets	$	492	$	54,333	$	—	$	54,825

(1)	Included in cash and cash equivalents.

(2)	$1.8 million is included in accrued expenses and other current liabilities and $2.4 million is included in non-current liabilities in the Consolidated Balance Sheet.

(3)	All corporate obligations were sold in December 2018, resulting in a loss of $0.2 million that was recorded in other income, net in the Consolidated Statements of Income. These investments were sold to fund a portion of the purchase of SiriusDecisions (refer to Note 15 – Subsequent Events).

During the years ended December 31, 2018 and 2017, the Company did not transfer assets or liabilities between levels of the fair value hierarchy.

Level 2 assets consist of the Company’s entire portfolio of marketable investments at December 31, 2017. Level 2 assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation methods, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

Level 3 liabilities at December 31, 2018 consist entirely of the contingent purchase price related to the acquisition of FeedbackNow. Changes in the fair value of Level 3 contingent consideration for the year ended December 31, 2018 were as follows (in thousands):

	Contingent
	Consideration
Acquisition of FeedbackNow (1)	$	(3,388	)
Fair value adjustment of FeedbackNow (2) (3)		(780	)
Foreign exchange effect		(28	)
Balance at December 31, 2018	$	(4,196	)

(1)	See Note 2 – Acquisitions, for a discussion of the fair value of the earnout as of the acquisition date.

(2)

In the period subsequent to the acquisition of FeedbackNow on July 6, 2018, the fair value of the contingent consideration increased by $0.8 million due primarily to the achievement of contract bookings during this period. This amount was recognized as acquisition and integration costs within the Consolidated Statements of Income.

(3)

As of December 31, 2018, the significant unobservable inputs used in the Monte Carlo simulation to fair value the contingent consideration included projected contract bookings, a discount rate of 23.8%, and revenue volatility of 21.9%. Increases or decreases in the inputs would result in a higher or lower fair value measurement.

- 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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