Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis

The following financial assets and liabilities are measured at fair value on a recurring basis. The fair values recognized in the accompanying consolidated balance sheets and the level within the fair value hierarchy in which the fair value measurements fall is as follows (in thousands):

			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Fair		Identical Assets		Inputs		Inputs
March 31, 2020	Value		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	443,936	$	443,936	$	—	$	—
Earnout related to business combinations		3,599		—		—		3,599

			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Fair		Identical Assets		Inputs		Inputs
December 31, 2019	Value		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	458,248	$	458,248	$	—	$	—
Earnout related to business combinations		13,808		—		—		13,808

Earnout Liabilities

Earnout liabilities recorded in connection with an acquisition accounted for as a business combination under ASC 805 are recorded at estimated fair value on a recurring basis. Business combinations are discussed in Note 5. Earnouts recorded in connection with asset acquisitions are recorded as earnout payments become known. As such, earnouts related to asset acquisitions are not included in these fair value disclosures.

Earnout liabilities are classified as Level 3 liabilities because the Company uses unobservable inputs to value them, reflecting its assessment of the assumptions market participants would use to value these liabilities. Changes in the fair value of earnout liabilities are recorded in other (income) expense, net in the consolidated statements of operations.

The Company generally estimates the fair value of earnout liabilities for business combinations using probability-weighted discounted cash flows and Monte Carlo simulations.  As of March 31, 2020, the earnout liability associated with the 2019 acquisition of Portway International Inc. (“Portway”) was valued utilizing a discount rate of 8.0%. The Portway discount rate was calculated using the build-up method with a risk-free rate commensurate with the term of the earnout. The earnout periods for the 2019 acquisitions of Compli, Inc. (“Compli”) and Indix Corporation (“Indix”) ended as of January 31, 2020 and February 6, 2020, respectively. Additional information regarding payments of earnout liabilities that occurred during the quarter ended March 31, 2020 is included in Note 5.

A reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable (Level 3) inputs, is as follows (in thousands):

	Three Months Ended March 31,
	2020			2019
Earnout liabilities:
Balance beginning of period	$	13,808		$	—
Fair value recorded at acquisition		—			5,952
Payments of earnout liabilities		(7,700	)		—
Total unrealized (gains) losses included in other (income) expense, net		(2,509	)		—
Balance end of period	$	3,599		$	5,952

Assets and liabilities measured at fair value on a non-recurring basis

The Company’s non-financial assets and liabilities, which include goodwill, intangible assets, and long-lived assets, are not required to be measured at fair value on a recurring basis. There were no fair value measurements of these assets during the first quarter of 2020.