Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Measurements

Fair Value Measurements

3.  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.  The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.  The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value.  If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.  The three-tiers are defined as follows:

· Level 1.Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

· Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

· Level 3. Unobservable inputs for which there is little or no market data requiring the Company to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

	December 31, 2016					December 31, 2015
	Level 1		Level 2	Level 3	Total	Level 1		Level 2		Level 3		Total
Assets:
Money market funds(1)	$	33,710			33,710	$	41,584	$	—	$	—	$	41,584
Total assets	$	33,710			33,710	$	41,584	$	—	$	—	$	41,584
Liabilities:
Contingent consideration on acquisition liability(2)	$			2,483	2,483	$	—	$	—	$	1,430	$	1,430
Total liabilities	$			2,483	2,483	$	—	$	—	$	1,430	$	1,430

(1) Money market funds are included within cash and cash equivalents in the Company’s consolidated balance sheets.  As short-term, highly liquid investments readily convertible to known amounts of cash, the Company’s money market funds have carrying values that approximates its fair value.  Amounts above do not include $9,450 and $18,303 of operating cash balances as of December 31, 2016 and 2015, respectively.

(2) On the Acquisition Date, the Company acquired all of the outstanding shares of TVN.  In connection with the acquisition, the former stockholders of TVN (“TVN Sellers”) are eligible to receive future cash payments over a term of two years contingent on the operating performance of TVN in reaching certain financial milestones in each of the periods from July 1, 2015 to June 30, 2016 (the “Year 1 Earn-Out Period”) and the period from July 1, 2016 to June 30, 2017 (the “Year 2 Earn-Out Period”), a portion of which is also contingent on continued employment of certain TVN Sellers (the “TVN Employee Sellers”) by the Company. In estimating the fair value of the contingent consideration, the Company used a Monte-Carlo valuation model based on future expectations on reaching financial milestones, other management assumptions (including operating results, business plans, anticipated future cash flows, and marketplace data), and the weighted-probabilities of possible payments. These assumptions were based on significant inputs not observed in the market and, therefore, represent a Level 3 measurement. Subsequent to the date of acquisition, the Company re-measured the estimated fair value of the contingent consideration at each reporting date with any changes in fair value recorded in the Company’s statements of operations. Any changes in the unobservable inputs could significantly impact the estimated fair value of the contingent consideration.

Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following table represents the changes in the Company’s Level 3 instruments measured at fair value on a recurring basis for the year ended December 31, 2016:

	2016
Beginning balance at January 1, 2016	$	1,430
Compensation expense(1)	3,568
Mark-to-market expense(2)	1,263
Contingent consideration payments(3)	(3,837		)
Foreign currency translation adjustment	59
Ending balance at December 31, 2016	$	2,483

(1) Represents contingent consideration attributable to the TVN Employee Sellers that has been recorded during the twelve months ended December 31, 2016. Refer to the table above regarding assumptions used for Level 3 instruments, and note 6 for further discussion of contingent consideration payments owed in connection with the Company’s acquisition of TVN.

(2) Reflects expense incurred based on the Company’s re-measurement, at December 31, 2016, of the estimated fair value of the contingent consideration relating to the TVN Sellers that are not required to remain employed with the Company as a condition to earning such contingent consideration. Amounts recorded as mark-to-market expense relating to Level 3 instruments are recorded in operating expense.  Refer to the table above regarding assumptions used for Level 3 instruments, and note 6 for further discussion of contingent consideration payments owed in connection with the Company’s acquisition of TVN.

(3) During the three months ended September 30, 2016, the Company paid the TVN Employee Sellers and TVN Sellers, $2,741 and $1,096, respectively, based on the performance of TVN during the Year 1 Earn-Out Period.