FAIR VALUE

The following table summarizes, as of September 30, 2017 and December 31, 2016, the Company's financial assets and liabilities that are measured at fair value on a recurring basis, according to the fair value hierarchy described in the significant accounting policies included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (in thousands):



	As of September 30, 2017								As of December 31, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	127,672	$	—	$	—	$	127,672	$	93,384	$	—	$	—	$	93,384
Money market funds	763		—		—		763		135		—		—		135
Total cash and cash equivalents	128,435		—		—		128,435		93,519		—		—		93,519
Commercial paper and corporate bonds	—		387,603		—		387,603		—		388,636		—		388,636
U.S. government agency debt securities	—		37,574		—		37,574		—		33,067		—		33,067
Total marketable securities	—		425,177		—		425,177		—		421,703		—		421,703
Total financial assets measured at fair value on a recurring basis	$	128,435	$	425,177	$	—	$	553,612	$	93,519	$	421,703	$	—	$	515,222

Contingent consideration – short-term	$	—	$	—	$	3,985	$	3,985	$	—	$	—	$	—	$	—
Contingent consideration – long-term	—		—		1,867		1,867		—		—		—		—
Total financial liabilities measured at fair value on a recurring basis	$	—	$	—	$	5,852	$	5,852	$	—	$	—	$	—	$	—

Investments in commercial paper, corporate bonds, and U.S. government agency debt securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of corporate bonds and U.S. government agency debt securities were derived from a consensus or weighted-average price based on input of market prices from multiple sources at each reporting period. With regard to commercial paper, all of the securities had high credit ratings and one year or less to maturity; therefore, fair value was derived from accretion of purchase price to face value over the term of maturity or quoted market prices for similar instruments if available. During the nine months ended September 30, 2017 and 2016, there were no transfers of financial assets between Level 1 and Level 2.

Contingent consideration liabilities associated with acquisition-related earn-out payments are classified as Level 3 in the fair value hierarchy because they rely significantly on inputs that are unobservable in the market. The fair value of short-term contingent consideration, which is related to the achievement of a technical milestone, has been estimated using situation-based modeling, which considers the probability-weighted present value of the expected payout amount. Significant assumptions include the Company's expectations with regard to the likelihood and timing of achievement of the related technical milestone and a discount rate of 2.9%. The fair value of long-term contingent consideration, which is related to achievement of revenue targets, has been estimated using a Monte Carlo simulation to simulate future performance of the acquired business under a risk-neutral framework; significant assumptions include a risk-adjusted discount rate of 10.2% and revenue volatility of 8.0%. Short-term and long-term contingent consideration are recorded in accrued expenses and other and other long-term liabilities, respectively, on the Company's consolidated balance sheet as of September 30, 2017.

The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities during the nine months ended September 30, 2017 (in thousands):



Balance as of January 1, 2017	$	—
Contingent consideration — acquisition	5,697
Due to sellers	(5		)
Fair value adjustment (included in general and administrative expenses)	160
Balance as of September 30, 2017	$	5,852

The carrying amounts of all other current financial assets and current financial liabilities reflected in the consolidated balance sheets approximate fair value due to their short-term nature.