Note 3. Financial Instruments

Investments

The following tables present information about our cash equivalents and marketable securities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 based on the three-tier fair value hierarchy (in thousands):



	Fair Value Measurement at June 30, 2016
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	88,441	$	88,441
Commercial paper	—		36,732		36,732
Agency securities	—		20,397		20,397
Asset-backed securities	—		19,032		19,032
U.S. treasury securities	—		14,748		14,748
Money market funds	$	14,025	—		14,025
Total	$	14,025	$	179,350	$	193,375
Included in cash and cash equivalents					$	35,620
Included in marketable securities					$	157,755



	Fair Value Measurement at December 31, 2015
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	31,761	$	31,761
Money market funds	21,338		—		21,338
Asset-backed securities	—		7,998		7,998
Commercial paper	—		5,992		5,992
U.S. treasury securities	—		4,001		4,001
Agency securities	—		1,998		1,998
Total	$	21,338	$	51,750	$	73,088
Included in cash and cash equivalents					$	21,338
Included in marketable securities					$	51,750

As of June 30, 2016 and December 31, 2015, there were no securities within Level 3 of the fair value hierarchy. There were no transfers between fair value measurement levels during the three and six months ended June 30, 2016. Gross unrealized gains and losses for cash equivalents and marketable securities as of June 30, 2016 and December 31, 2015 were not material. As of June 30, 2016 and December 31, 2015, there were no securities that were in an unrealized loss position for more than 12 months.

The following table classifies our marketable securities by contractual maturity as of June 30, 2016 and December 31, 2015 (in thousands):



	June 30, 2016		December 31, 2015
Due in one year or less	$	106,130	$	29,414
Due after one year	51,625		22,336
Total	$	157,755	$	51,750

For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Derivative Instruments and Hedging

Our foreign currency exposures typically arise from foreign operations and sales in foreign currencies for subscriptions to our customer service platform. In September 2015, we implemented a hedging program to mitigate the impact of foreign currency fluctuations on our future cash flows and earnings. We enter into foreign currency forward contracts with certain financial institutions and designate those hedges as cash flow hedges. Our foreign currency forward contracts generally have maturities ranging from 3 to 18 months. As of June 30, 2016, the balance of accumulated other comprehensive loss included an unrealized loss of $1.0 million related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. We expect to reclassify $0.6 million from accumulated other comprehensive loss into earnings over the next 12 months associated with our cash flow hedges.

The following tables present information about derivative instruments on our consolidated balance sheets as of June 30, 2016 and December 31, 2015 (in thousands):



	June 30, 2016
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	963	Accrued liabilities	$	1,624
Foreign currency forward contracts	Other assets	34		Other liabilities	505
Total		$	997		$	2,129



	December 31, 2015
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	408	Accrued liabilities	$	1,081
Total		$	408		$	1,081

Our foreign currency forward contracts had a total notional value of $93.3 million and $60.8 million as of June 30, 2016 and December 31, 2015, respectively. We have a master netting agreement with certain counterparties, which permits net settlement of multiple, separate derivative contracts with a single payment. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. We may also be required to exchange cash collateral with certain of our counterparties on a regular basis. We have not exchanged cash collateral with any counterparties as of June 30, 2016 and December 31, 2015, respectively.

The following table presents information about our derivative instruments on the statement of operations for the three and six months ended June 30, 2016 (in thousands):



		Three Months Ended June 30, 2016					Six Months Ended June 30, 2016
Hedging Instrument	Location of Gain (Loss) Reclassified into Earnings	Loss Recognized in AOCI			Gain Reclassified from AOCI into Earnings		Loss Recognized in AOCI			Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts	Revenue, cost of revenue, operating expenses	$	(2,772	)	$	114	$	(425	)	$	(148	)
Total		$	(2,772	)	$	114	$	(425	)	$	(148	)

There were no gains or losses on derivative instruments for the three and six months ended June 30, 2015.

All derivatives have been designated as hedging instruments. Amounts recognized in earnings related to excluded time value and hedge ineffectiveness for the three and six months ended June 30, 2016 were not material.