Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 4. Fair Value Measurements.

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3. Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.

Financial assets measured at fair value on a recurring basis were as follows:

	Fair Value Measurement at Reporting Date Using
			Significant
	Quoted Prices in		Other		Significant
	Active Markets		Observable		Unobservable
	for Identical		Inputs		Inputs
	Assets (Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
As of March 31, 2020
Assets:
Money market funds	$	504	$	—	$	—	$	504
U.S. government securities		300		—		—		300
	$	804	$	—	$	—	$	804
Liabilities:
Earn-out liability	$	—	$	—	$	2,000	$	2,000
As of December 31, 2019
Assets:
Money market funds	$	460	$	—	$	—	$	460
U.S. government securities		300		—		—		300
	$	760	$	—	$	—	$	760
Liabilities:
Earn-out liability	$	—	$	—	$	2,911	$	2,911

As of March 31, 2020, we had an earn-out liability of $2.0 million, all of which related to the acquisition of S3 Semiconductors, which was completed in May 2018 (see Note 2). The earn-out liability was calculated using the present value of a probability weighted income approach.  During the three months ended March 31, 2020 we reached a settlement on the final amount of the earn-out liability and reduced the balance to $2.0 million.

Changes in the earn-out liability during 2020 was as follows (in thousands):

Balance as of January 1, 2020	$	2,911
Acquisitions		—
Change in fair value		(911)
Change in foreign currency exchange rate		—
Balance as of March 31, 2020	$	2,000

The Company’s cash equivalents include U.S. government securities with a minimum and weighted average credit rating of A-1+. The Company values these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. As of March 31, 2020 the Company classified all of its fixed income securities as having Level 1 inputs. The Company's procedures include controls to ensure that appropriate fair values are recorded by comparing prices obtained from a third party independent source.