Fair Value Measurements

3 Months Ended

Mar. 31, 2017

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 March 31, 2017 or December 31, 2016. The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016 by level within the fair value hierarchy:

	Actively Quoted		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable		Balance at
	Assets		Inputs		Inputs		March 31,
	Level 1		Level 2		Level 3		2017
	(In thousands)
As of March 31, 2017:
Assets
Money market deposits	$	12,731	$	—	$	—	$	12,731
Commercial paper		—		45,042		—		45,042
Corporate debt securities		—		9,504		—		9,504
Total	$	12,731	$	54,546	$	—	$	67,277

	Actively Quoted		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable		Balance at
	Assets		Inputs		Inputs		December 31,
	Level 1		Level 2		Level 3		2016
	(In thousands)
As of December 31, 2016:
Assets
Money market deposits	$	13,198	$	—	$	—	$	13,198
Commercial paper		—		32,421		—		32,421
Corporate debt securities		—		14,869		—		14,869
Corporate equity securities		—		9,295		—		9,295
Total	$	13,198	$	56,585	$	—	$	69,783

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.

During the year ended December 31, 2016, the Company invested $6.1 million in subordinated convertible promissory notes of a private company. As of December 31, 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 were 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. In March 2017, the subordinated convertible promissory notes were converted into preferred stock of the privately company. The Company accounted for such preferred stock using the cost method of accounting and recorded in other assets on its condensed consolidated balance sheets.

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:

	March 31, 2017
	Cost or		Gross		Gross		Total
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
Commercial paper	$	45,065	$	1	$	(23)	$	45,043
Corporate debt securities		9,503		2		(2)		9,503
Total	$	54,568	$	3	$	(25)	$	54,546

	December 31, 2016
	Cost or		Gross		Gross		Total
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
Commercial paper	$	32,350	$	71	$	—	$	32,421
Corporate debt securities		14,868		3		(2)		14,869
Corporate equity securities		7,348		1,947		—		9,295
Total	$	54,566	$	2,021	$	(2)	$	56,585

The Company realized gains of $2.8 million and $1.3 million on available-for-sale marketable securities for the three months ended March 31, 2017 and 2016, respectively.

The following table summarizes the Company’s portfolio of available-for-sale marketable securities by contractual maturity as of the dates indicated:

	March 31, 2017				December 31, 2016
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(In thousands)
Due in one year or less	$	53,670	$	53,648	$	54,566	$	56,585
Due in more than one year but less than five years		898		898		—		—
Total	$	54,568	$	54,546	$	54,566	$	56,585

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. There were no impairments recorded during the three months ended March 31, 2017 and 2016.