FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2019

The Company carries certain assets and liabilities at fair value on a recurring basis on its consolidated balance sheets. The following tables present the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018:



	As of June 30, 2019
	Balance		Level 1		Level 2		Level 3
Foreign exchange derivative assets	$	2,689	$	—	$	2,689	$	—
Total assets measured at fair value on a recurring basis	$	2,689	$	—	$	2,689	$	—

Contingent consideration	$	7,720	$	—	$	—	$	7,720
Total liabilities measured at fair value on a recurring basis	$	7,720	$	—	$	—	$	7,720



	As of December 31, 2018
	Balance		Level 1		Level 2		Level 3
Foreign exchange derivative assets	$	181	$	—	$	181	$	—
Total assets measured at fair value on a recurring basis	$	181	$	—	$	181	$	—

Foreign exchange derivative liabilities	$	3,475	$	—	$	3,475	$	—
Contingent consideration	7,468		—		—		7,468
Total liabilities measured at fair value on a recurring basis	$	10,943	$	—	$	3,475	$	7,468

The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 5 “Derivative Financial Instruments” in the condensed consolidated interim financial statements for additional information regarding derivative financial instruments.

The fair value of the contingent consideration is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired business using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreement and adjusted those estimates to reflect the probability of their achievement. Those estimated future payments were then discounted to present value using a rate based on the weighted-average cost of capital of guideline companies. Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income, net in the Company’s consolidated statement of income and comprehensive income.

In connection with the Continuum acquisition, the Company committed to making a cash earnout payment subject to attainment of specified performance targets in the 12 months after the acquisition date. As of the acquisition date, the Company recorded a $2,400 contingent consideration liability related to this earnout payment and, subsequently, reduced this liability by $900 during the third quarter of 2018 and $396 during the second quarter of 2019 due to the change in its fair value. The Company extinguished the earnout obligation during the second quarter of 2019 by paying $1,104 in cash. In connection with the Think acquisition, the Company committed to making a cash earnout payment subject to attainment of specified performance targets in the 12 months after the acquisition date. As of the acquisition date, the Company recorded a $5,990 contingent consideration liability related to this earnout payment as contingent consideration and, subsequently, increased its fair value by $1,752 during the second quarter of 2019 due to the change in its fair value. See Note 2 “Acquisitions” in the condensed consolidated interim financial statements for additional information regarding business acquisitions.

A reconciliation of the beginning and ending balances of Level 3 acquisition-related contractual contingent liabilities using significant unobservable inputs for the six months ended June 30, 2019 is as follows:



	Amount
Contingent consideration liabilities as of January 1, 2019	$	7,468
Payment of contingent consideration	(1,104		)
Changes in fair value of contingent consideration included in Interest and other income, net	1,356
Contingent consideration liabilities as of June 30, 2019	$	7,720

Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

Estimates of fair value of financial instruments not carried at fair value on a recurring basis on the Company’s consolidated balance sheets are generally subjective in nature, and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The generally short maturities of certain assets and liabilities result in a number of assets and liabilities for which fair value equals or closely approximates the amount recorded on the Company’s consolidated balance sheets. The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
June 30, 2019
Financial Assets:
Cash and cash equivalents	$	777,365	$	777,365	$	777,365	$	—	$	—
Restricted cash	$	1,184	$	1,184	$	1,184	$	—	$	—
Employee loans	$	2,884	$	2,884	$	—	$	—	$	2,884
Financial Liabilities:
Borrowings under the 2017 Credit Facility	$	25,017	$	25,017	$	—	$	25,017	$	—



					Fair Value Hierarchy
	Balance		Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2018
Financial Assets:
Cash and cash equivalents	$	770,560	$	770,560	$	770,560	$	—	$	—
Restricted cash	$	1,151	$	1,151	$	1,151	$	—	$	—
Employee loans	$	3,525	$	3,525	$	—	$	—	$	3,525
Financial Liabilities:
Borrowings under the 2017 Credit Facility	$	25,020	$	25,020	$	—	$	25,020	$	—

The fair value amounts for Cash and cash equivalents approximate carrying amounts due to the short maturities of these instruments. The fair value of Borrowings under the 2017 Credit Facility was estimated based on the current rates offered to us for debt of similar maturities.

- 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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