Fair Value Measurements

12 Months Ended

Dec. 31, 2019

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, 2019														December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds⁽¹⁾	$	27,235	—		—		$	27,235	$	28,671	$	—	$	—	$	28,671
Total assets	$	27,235	—		—		$	27,235	$	28,671	$	—	$	—	$	28,671
Liabilities:
Contingent consideration on acquisition liability⁽²⁾	$	—	$	—	$	—	$	—	$	—	$	—	$	1,500	$	1,500
Total liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	1,500	$	1,500

(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 approximate their fair value. Amounts above do not include $26,929 and $18,988 of operating cash balances as of December 31, 2019 and 2018, respectively.

(2) On June 8 2018, the Company acquired all of the outstanding shares of Slimcut. In connection with the acquisition, the former stockholders of SlimCut were eligible to receive future cash payments up to $1,500 contingent on the operating performance of SlimCut in reaching certain financial milestones for the year ended December 31, 2018. In estimating the fair value of the contingent consideration on the date of acquisition, 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. Based on the operating results as of December 31, 2018, contingent consideration of $1,500 was fully earned and paid out to former stockholders of SlimCut in 2019.

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 years ended December 31, 2019 and December 31, 2018:


	2019		2018
Beginning balance at January 1,	$	1,500	$	—
Contingent consideration on acquisition⁽¹⁾	—		1,443
Contingent consideration paid, SlimCut acquisition	(1,500)		—
Mark-to-market expense⁽²⁾	—		57


Ending balance at December 31,	$	—	$	1,500

(1) Represents contingent consideration attributable to the SlimCut acquisition (as defined below see Note 7) that has been recorded during the years ended 2019 and 2018, respectively. Refer to note 7 for further discussion of contingent consideration payments paid in connection with the Company’s acquisitions of SlimCut.

(2) Reflects expense incurred based on the Company’s re-measurement at December 31, 2018, of the estimated fair value of the contingent consideration relating to the SlimCut acquisition (as defined below, see Note 7). 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 7 for further discussion of contingent consideration payments paid in connection with the Company’s acquisition of SlimCut.

- 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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