Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Measurements

Fair Value Measurements

Note 3. Fair Value Measurements

The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires it 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—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active

markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activity.

The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly in active markets.

The Company measures its short-term investments at fair value on a recurring basis and classifies such as Level 2. They are valued using observable inputs that reflect quoted prices directly or indirectly in active markets. The short-term investments amortized cost approximates fair value.

The Company measures its contingent consideration at fair value on a recurring basis and classifies such as Level 3. The Company estimates the fair value of contingent consideration as the present value of the expected contingent payments, determined using the weighted probability of the possible payments.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	50,015	$	—	$	—	$	50,015
Short-term investments	$	—	$	15,793	$	—	$	15,793
Contingent liability (included in other liabilities)	$	—	$	—	$	3,678	$	3,678

	December 31, 2015
		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	55,066	$	—	$	—	$	55,066
Short-term investments	$	—	$	82,282	$	—	$	82,282
Contingent liability (included in accrued expenses and other current liabilities and other liabilities)	$	—	$	—	$	3,408	$	3,408

There were no transfers between fair value measurement levels during the years ended December 31, 2016 and 2015.

The change in fair value of the Company’s contingent liability is recorded in general and administrative expenses in the consolidated statements of operations. The following table reconciles the beginning and ending balance of the Company’s Level 3 contingent liability (in thousands):

Balance at December 31, 2015	$	3,408
Change in fair value		270
Fair value at December 31, 2016	$	3,678