Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements

Fair Value Measurements

Note 3.  Fair Value Measurements

Fair Value Hierarchy

The Company measures certain financial assets, including cash equivalents and marketable securities, at their fair value on a recurring basis. The fair value of these financial assets was determined based on a hierarchy of three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1:  Quoted prices in active markets for identical assets or liabilities;

Level 2:  Observable inputs other than Level 1 inputs, 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; and

Level 3:  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company did not have any non-financial assets or liabilities that were measured or disclosed at fair value on a recurring basis at either September 30, 2016 or December 31, 2015. The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015 by level within the fair value hierarchy:

	Actively Quoted		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable		Balance at
	Assets		Inputs		Inputs		September 30,
	Level 1		Level 2		Level 3		2016
	(In thousands)
As of September 30, 2016:
Assets
Money market deposits	$	10,809	$	—	$	—	$	10,809
Commercial paper		—		34,717		—		34,717
Corporate debt securities		—		14,883		—		14,883
Corporate equity securities		—		15,002		—		15,002
Total	$	10,809	$	64,602	$	—	$	75,411

	Actively Quoted		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable		Balance at
	Assets		Inputs		Inputs		December 31,
	Level 1		Level 2		Level 3		2015
	(In thousands)
As of December 31, 2015:
Assets
Money market deposits	$	13,928	$	—	$	—	$	13,928
Commercial paper		—		29,224		—		29,224
Corporate debt securities		—		22,359		—		22,359
Corporate equity securities		—		18,126		—		18,126
Total	$	13,928	$	69,709	$	—	$	83,637

The Company’s commercial paper and corporate bonds are classified as Level 2 as they are valued using multi-dimensional relational pricing models that use observable market inputs, including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. Not all inputs listed are available for use in the evaluation process on any given day for each security evaluation. In addition, market indicators and industry and economic events are monitored and may serve as a trigger to acquire further corroborating market data. The Company’s corporate equity securities are classified as Level 2 while subject to certain restrictions on sale.

In July 2016, the Company invested $6.1 million in subordinated convertible promissory notes of a private company.  As of September 30, 2016, the Company estimated the fair value of the subordinated convertible promissory notes to be approximately $5.8 million, which is not included in the table above and recorded in other assets. The subordinated convertible promissory notes are classified as Level 3 as they are valued using unobservable inputs that are primarily based on the Company’s estimate of the fair value of the underlying preferred stock into which the notes are convertible.  

All of the Company’s marketable securities are classified as available-for-sale. The following tables illustrate the Company’s available-for-sale marketable securities as of the dates indicated:

	September 30, 2016
	Cost or		Gross		Gross		Total
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
Commercial paper	$	34,615	$	102	$	—	$	34,717
Corporate debt securities		14,885		3		(5)		14,883
Corporate equity securities		10,749		4,253		—		15,002
Total	$	60,249	$	4,358	$	(5)	$	64,602

	December 31, 2015
	Cost or		Gross		Gross		Total
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
Commercial paper	$	23,684	$	41	$	—	$	23,725
Corporate debt securities		20,569		—		(10)		20,559
Corporate equity securities		13,857		4,269		—		18,126
Total	$	58,110	$	4,310	$	(10)	$	62,410

The Company realized gains of $0 and $2.0 million on available-for-sale marketable securities for the three and nine months ended September 30, 2016, respectively.  The Company had no realized gains or losses on available-for-sale marketable securities for the three and nine months ended September 30, 2015, respectively.

All of the Company’s available-for-sale marketable securities had contractual maturities of one year or less as of September 30, 2016 and December 31, 2015.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company reviews the fair value of long-lived assets, which include property and equipment, intangible assets and investments in privately held companies, for impairment whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. During the three and nine months ended September 30, 2016, the Company wrote off $2.6 million of previously capitalized software development costs related to a project for enhanced report delivery due to delay and scope change. The impairment charge related the write off is included in the selling and marketing expenses.