Fair Value Measurements

3 Months Ended

Mar. 31, 2018

3. Fair Value Measurements

The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, 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—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

	March 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money market funds	$	150,526		—		—	$	150,526
Certificate of deposit		—		9,216		—		9,216
Short-Term investments:
Certificate of deposit		—		50,874		—		50,874
Total	$	150,526	$	60,090	$	—	$	210,616
Liabilities:
Contingent consideration related to Crisp acquisition ⁽¹⁾		—		—		24,500		24,500
Total	$	—	$	—	$	24,500	$	24,500

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money market funds	$	100,152		—		—	$	100,152
Short-Term investments:
Certificate of deposit		—		59,902		—		59,902
Total	$	100,152	$	59,902	$	—	$	160,054
Liabilities:
Contingent consideration related to Crisp acquisition ⁽¹⁾		—		—		18,500		18,500
Total	$	—	$	—	$	18,500	$	18,500

⁽¹⁾	Included in contingent consideration related to acquisitions

The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets. The money market funds have a fixed net asset value (NAV) of $1. The valuation technique to measure the fair value of certificate of deposits included using quoted prices in active markets for similar assets.

The fair value of contingent consideration related to the acquisition of Crisp Media, Inc. (“Crisp”) was estimated using an option pricing method and was based on significant inputs not observable in the market at December 31, 2017, thus classified as a Level 3 instrument. The inputs include expected achievement of certain financial metrics over the contingent consideration period, historical volatility and discount rate. The fair value of contingent consideration related to the acquisition of Crisp was estimated based on the expected achievement of meeting the financial metrics for the maximum payout as of March 31, 2018. Refer to Note 6 for further details related to the acquisition.

The following table represents the change in the contingent consideration (in thousands):

	Three Months Ended
	March 31, 2018
	Crisp
	Level 3
Balance as of December 31, 2017	$	18,500
Change in fair value		6,000
Balance as of March 31, 2018	$	24,500

For the three months ended March 31, 2018, the Company recorded a loss of $6.0 million, related to the changes in fair value of Crisp contingent consideration due to an increase in expected achievement of certain financial metrics over the contingent consideration period. The changes in the fair value of the contingent consideration are included as a component of operations in the accompanying condensed consolidated statements of operations.

As of December 31, 2017, the Company determined that Shopmium S.A. (“Shopmium”) did not meet its revenue and profit milestones for the years ending December 31, 2016 and 2017, during the contingent consideration measurement period. Accordingly, the Company determined that there was no payout required when the contingent consideration payment period expired on March 31, 2018.

There were no transfers between fair value hierarchies during the three months ended March 31, 2018 and 2017.

Fair Value Measurements of Other Financial Instruments

As of March 31, 2018 and December 31, 2017, the fair value of the 1.75% convertible senior notes due 2022 was $207.8 million and $196.3 million, respectively. The fair value was determined based on a quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period. Accordingly, these convertible senior notes are classified within Level 2 in the fair value hierarchy. Refer to Note 8 for additional information related to the Company’s convertible debt.

- 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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