Fair Value Measurements

3 Months Ended

Mar. 31, 2020

The following table sets forth the fair value of our financial assets and liabilities by level within the fair value hierarchy:



	March 31, 2020
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	105,566	$	—	$	—	$	105,566
Short-term investment:
Certificate of deposit	150,000				—		150,000
Total assets at fair value	$	255,566	$	—	$	—	$	255,566
Liabilities
Other current liabilities—contingent consideration	$	—	$	—	$	2,915	$	2,915
Total liabilities at fair value	$	—	$	—	$	2,915	$	2,915



	December 31, 2019
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	130,640	$	—	$	—	$	130,640
Short-term investment:
Certificate of deposit	$	150,000	$	—	$	—	$	150,000
Total assets at fair value	$	280,640	$	—	$	—	$	280,640
Liabilities
Other current liabilities—contingent consideration	$	—	$	—	$	3,004	$	3,004
Other noncurrent liabilities—contingent consideration	—		—		2,411		2,411
Total liabilities at fair value	$	—	$	—	$	5,415	$	5,415

Cash, Cash Equivalents and Short-Term Investments

Our valuation techniques used to measure the fair value of money market funds are derived from quoted prices in active markets for identical assets or liabilities. Short-term investments, which consist of certificates of deposit with a maturity of 12 months or less, are classified as Level 2 financial assets because they are valued using quoted market price and other observable inputs in active markets for identical securities.

Cash, cash equivalents and short-term investments were as follows (in thousands):



	March 31, 2020
	Adjusted Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Cash	$	112,662	$	—	$	—	$	112,662
Money market funds	105,566		—		$	—	105,566
Total cash, and cash equivalents	218,228		—		—		218,228
Certificate of deposit	150,000		—		—		150,000
Total short-term investments	150,000		—		—		150,000
Total cash, cash equivalents and short-term investments	$	368,228	$	—	$	—	$	368,228



	December 31, 2019
	Adjusted Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Cash	$	111,098	$	—	$	—	$	111,098
Money market funds	130,640		—		—		130,640
Total cash, and cash equivalents	241,738		—		—		241,738
Certificate of deposit	150,000				—		150,000
Total short-term investments	150,000		—		—		150,000
Total cash, cash equivalents and short-term investments	$	391,738	$	—	$	—	$	391,738

Contingent Consideration Liability

In connection with the Retrofit Acquisition in April 2018, we recorded a contingent consideration liability, which is payable subject to the achievement of certain targets for 2018, 2019, and 2020. In connection with the myStrength Acquisition in February 2019, we recorded a contingent liability, which was payable subject to the achievement of certain targets for 2019 and was paid in February 2020. The fair values of these contingent consideration liabilities were estimated with a Monte Carlo simulation model using Level 3 inputs to assess the probability of us achieving the targets, and any subsequent changes in fair value are recorded in the condensed consolidated statements of operations until settlement. As of March 31, 2020, the significant inputs for the fair value of the remaining contingent liability included projected qualifying members for fiscal year 2020, weighted-average revenue volatility of 3.82%, weighted-average revenue discount rate of 0.6%, and weighted-average discount rate of 0.17%. See Note 4 for further discussion.

As of March 31, 2020 and December 31, 2019, total contingent consideration liabilities were $2.9 million and $5.4 million, respectively. The following table sets forth the changes in our Level 3 financial liabilities for the periods presented:



	Three Months Ended March 31,
	2020			2019
	(in thousands)
Beginning balance	$	5,415		$	5,004
Contingent consideration recorded upon acquisition (Note 4)	—			3,300
Change in fair value of contingent consideration (Note 4)	84			674
Payment related to myStrength contingent consideration (Note 4)	(2,584		)	—
Ending balance	$	2,915		$	8,978

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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