Investment Securities and Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Investment Securities and Fair Value Measurements

Investment Securities

Investment securities classified as available-for-sale consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):



	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Corporate bonds	$	1,597	$	2	$	—	$	1,599
Agency securities	2,649		40		—		2,689
Treasury securities	10,205		135		—		10,340
Total available-for-sale investment securities	$	14,451	$	177	$	—	$	14,628



	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate bonds	$	9,597	$	18	$	(1	)	$	9,614
Agency securities	11,101		17		—			11,118
Treasury securities	14,222		12		(1		)	14,233
Total available-for-sale investment securities	$	34,920	$	47	$	(2	)	$	34,965

For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through income. For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors. If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security. No allowance for credit losses for available-for-sale investment securities was recorded as of March 31, 2020.

At March 31, 2020 and December 31, 2019, the contractual maturities of our investments did not exceed 36 months. The fair values of available-for-sale investment securities, by remaining contractual maturity, are as follows (in thousands):



	March 31, 2020				December 31, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,897	$	7,952	$	22,846	$	22,876
Due after one year through three years	6,554		6,676		12,074		12,089
Total available-for-sale investment securities	$	14,451	$	14,628	$	34,920	$	34,965

During the three months ended March 31, 2020 and 2019, we had sales and maturities (which include calls) of investment securities, as follows (in thousands):



	Three Months Ended March 31, 2020
	Gross Realized Gains		Gross Realized Losses		Gross Proceeds from Sales		Gross Proceeds from Maturities
Corporate bonds	$	5	$	—	$	4,006	$	4,000
Agency securities	24		—		7,878		1,250
Treasury securities	4		—		2,058		2,000
Total	$	33	$	—	$	13,942	$	7,250



	Three Months Ended March 31, 2019
	Gross Realized Gains		Gross Realized Losses			Gross Proceeds from Sales		Gross Proceeds from Maturities
Corporate bonds	$	—	$	(1	)	$	1,750	$	2,250

Interest income, net of the amortization and accretion of the premium and discount, was $0.1 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.

Fair Value Measurements

Recurring Fair Value Measurements

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize our financial assets measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 by level within the fair value hierarchy (in thousands):



	March 31, 2020
	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	28,548	$	—	$	—	$	28,548
Available-for-sale investment securities:
Corporate bonds	—		1,599		—		1,599
Agency securities	—		2,689		—		2,689
Treasury securities	10,340		—		—		10,340
Total	$	38,888	$	4,288	$	—	$	43,176



	December 31, 2019
	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	337	$	—	$	—	$	337
Available-for-sale investment securities:
Corporate bonds	—		9,614		—		9,614
Agency securities	—		11,118		—		11,118
Treasury securities	14,233		—		—		14,233
Total	$	14,570	$	20,732	$	—	$	35,302

The carrying amounts of cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these items.

The estimated fair value of the $50.0 million term loan issued by Wells Fargo Bank, National Association ("Wells Fargo"), as administrative agent, and the lenders that are parties thereto ("Term Loan") and the $50.0 million revolving credit facility made available to us by Wells Fargo and the lenders that are parties thereto ("Revolving Facility," and together with the Term Loan, the "Credit Facility"), approximate their carrying values due to the variable interest rates. We consider the fair value of the Term Loan and the Revolving Facility to be Level 2 measurements as these debt instruments are not actively traded. We carry the Term Loan at face value less the unamortized discount. Refer to Note 8, Long-Term Debt, of our Condensed Consolidated Financial Statements for more information about our Term Loan and Revolving Facility.

There were no changes to our valuation techniques used to measure financial asset and financial liability fair values on a recurring basis during the three months ended March 31, 2020. The valuation techniques for the financial assets in the tables above are as follows:

Cash Equivalents

As of March 31, 2020 and December 31, 2019, cash equivalents include cash invested in money market funds with a maturity of three months or less. Fair value is based on market prices for identical assets.

Available-for-Sale Investment Securities

Our Level 2 securities were priced by a pricing vendor. The pricing vendor utilizes the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, other observable inputs like market transactions involving comparable securities are used.

Non-Recurring Fair Value Measurements

Certain assets, including goodwill, intangible assets and our note receivable with SecureDocs, Inc., are also subject to measurement at fair value on a non-recurring basis using Level 3 measurement, but only when they are deemed to be impaired. For the three months ended March 31, 2020 and 2019, no impairments were identified on those assets required to be measured at fair value on a non-recurring basis.