Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.20.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
  
The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, based on the three-tier fair value hierarchy: 
 
 
March 31, 2020
 
 
Fair Value
 
Level I
 
Level II
 
Level III
Assets:
 
 
 
 
 
 
 
 
Money market funds
 
$
29,076

 
$
29,076

 
$

 
$

Assets to fund deferred compensation liability
 
7,173

 

 

 
7,173

Total assets
 
$
36,249

 
$
29,076

 
$

 
$
7,173

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
14,791

 
$

 
$

 
$
14,791

Deferred compensation liability
 
6,911

 
6,911

 

 

Total liabilities
 
$
21,702

 
$
6,911

 
$

 
$
14,791


 
 
December 31, 2019
 
 
Fair Value
 
Level I
 
Level II
 
Level III
Assets:
 
 
 
 
 
 
 
 
Money market funds
 
$
37,730

 
$
37,730

 
$

 
$

Assets to fund deferred compensation liability
 
8,390

 

 

 
8,390

Total assets
 
$
46,120


$
37,730

 
$

 
$
8,390

Liabilities:
 
 

 
 

 
 

 
 

Contingent consideration
 
$
9,045

 
$

 
$

 
$
9,045

Deferred compensation liability
 
8,208

 
8,208

 

 

Total liabilities
 
$
17,253


$
8,208

 
$

 
$
9,045


 
The fair value of the contingent consideration liabilities related to certain of the Company's acquisitions were estimated using a discounted cash flow method with significant inputs that are not observable in the market and thus represents a Level III fair value measurement as defined in ASC 820, “Fair Value Measurements and Disclosures.” The significant inputs in the Company's Level III fair value measurement not supported by market activity included its assessments of expected future cash flows related to these acquisitions and their ability to meet the target performance objectives during the subsequent periods from the date of acquisition, which management believes are appropriately discounted considering the uncertainties associated with these obligations, and are calculated in accordance with the terms of their respective agreements.

The Company will continue to reassess the fair values of the contingent consideration liabilities at each reporting date until settlement. Changes to these estimated fair values will be recognized in the Company's earnings and included in general and administrative expenses in the condensed consolidated statements of operations.

The table below presents a reconciliation of the Company's contingent consideration liabilities, which were measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2019 to March 31, 2020
 
 
Fair Value of Contingent Consideration Liabilities
Balance at December 31, 2019
 
$
9,045

Private technology company acquisition
 
5,239

Accretion on contingent consideration
 
507

Balance at March 31, 2020
 
$
14,791



The table below presents a reconciliation of the assets used to fund deferred the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2019 to March 31, 2020:
 
 
Fair Value of Assets to Fund Deferred Compensation Liability
Balance at December 31, 2019
 
$
8,390

Fair value adjustments
 
(1,217
)
Balance at March 31, 2020
 
$
7,173


 
The fair market value of the assets used to fund the Company's deferred compensation liability is based upon the cash surrender value of the Company's life insurance premiums. The value of the assets used to fund the Company's deferred compensation liability, which are included in other non-current assets in the condensed consolidated balance sheets, decreased due to losses on the underlying investment vehicles. These losses are recognized in the Company's earnings and included in general and administrative expenses in the condensed consolidated statements of operations.
 
The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances caused the transfer, in
accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the three months ended March 31, 2020.
 
As of March 31, 2020 and December 31, 2019, the carrying value of the Convertible Notes due 2023 equaled $308,262 and $305,513, respectively, and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of March 31, 2020 and December 31, 2019, the estimated fair value of the Convertible Notes due 2023 was $369,074 and $414,852, respectively. The Company considered the Convertible Notes due 2023 to be a Level II liability at March 31, 2020 and used a market approach to calculate the fair value. The estimated fair value was determined based on the estimated or actual bids and offers of the Convertible Notes due 2023 in an over-the-counter market on March 31, 2020 (See “Note 9—Debt”).

As of March 31, 2020 and December 31, 2019, there was $290,000 and $260,000, respectively, outstanding on the revolving credit facility under the Amended Credit Agreement. As of March 31, 2020, the outstanding balance on the revolving credit facility approximated fair value as borrowings under the revolving credit facility bore interest at variable rates and the Company believes its credit risk quality was consistent with when the debt originated. The Company considered the revolving credit facility to be a Level I liability as of March 31, 2020 and December 31, 2019 (See “Note 9—Debt”).

The Company considered the recorded value of our other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at March 31, 2020 based upon the short-term nature of these assets and liabilities.