Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

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

•Level 2 — Inputs other than Level 1 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 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts of cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses and other current liabilities approximate fair value because of the short maturity of these items.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019 by level within the fair value hierarchy. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):


	At June 30, 2020														At December 31, 2019
							Total Fair								Total Fair
	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Assets:
Cash equivalents	$	165,919	$	—	$	—	$	165,919	$	174,429	$	—	$	—	$	174,429
Total assets	$	165,919	$	—	$	—	$	165,919	$	174,429	$	—	$	—	$	174,429

Liabilities:
Contingent consideration, current	$	—	$	—	$	2,398	$	2,398	$	—	$	—	$	2,441	$	2,441
Contingent consideration, non-current	—		—		—		—		—		—		2,336		2,336
Total liabilities	$	—	$	—	$	2,398	$	2,398	$	—	$	—	$	4,777	$	4,777

Contingent Consideration Obligations

The following table summarizes the changes in the fair value of the contingent consideration obligation (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Fair value, beginning of period	$	4,852	$	4,552	$	4,777	$	4,477
Cash payments	(2,500)		—		(2,500)		—

Additions and changes in fair value	46		75		121		150
Fair value, end of period	$	2,398	$	4,627	$	2,398	$	4,627

The following table summarizes the significant unobservable inputs and valuation technique in the fair value measurement of Level 3 financial liabilities used to measure the contingent consideration liability at June 30, 2020:

Valuation Technique

Unobservable Input

Value

Discounted cash flow

Probability of achievement

98.9%

Discount rate

4.9%