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Fair Value Measurements
 3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements
4.
Fair Value Measurements
The Company accounts for certain financial assets at fair value, defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or liability. A three-level hierarchy is used to show the extent and level of judgment used to estimate fair value measurements.
Assets and liabilities measured at fair value on a recurring basis included the following as of March 31, 2021 (in thousands):
 
     Using         
     Quoted Prices
in Active
Markets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		      Total Fair
Value as of
March 31, 2021		  
Cash equivalents:
                                    
Money market funds
    $ 43,728      $ —        $ —        $ 43,728  
Short-term investments:
                                    
U.S. Treasury Obligations
      95,719        —          —          95,719  
Long-term investment:
                                    
Failed Auction Security
      —          —          2,541        2,541  
Liabilities:
                                    
Contingent consideration obligations
      —          —          (181 )       (181 ) 
Assets and liabilities measured at fair value on a recurring basis included the following as of December 31, 2020 (in thousands):
 
     Using         
     Quoted Prices
in Active
Markets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		      Total Fair
Value as of
December 31, 2020		  
Cash equivalents:
                                    
Money market funds
    $ 69,493      $ —        $ —        $ 69,493  
U.S. Treasury Obligations
      19,998        —          —          19,998  
Short-term investments:
                                    
U.S. Treasury Obligations
      50,166        —          —          50,166  
Long-term investment:
                                    
Failed Auction Security
      —          —          2,517        2,517  
Liabilities:
                                     
Contingent consideration obligations
      —          —          (227 )       (227 ) 
As of March 31, 2021, there was insufficient observable auction rate security market information available to determine the fair value of the Failed Auction Security using Level 1 or Level 2 inputs. As such, the Company’s investment in the Failed Auction Security was deemed to require valuation using Level 3 inputs. Management, after consulting with advisors, valued the Failed Auction Security using analyses and pricing models similar to those used by market participants (i.e., buyers, sellers, and the broker-dealers responsible for execution of the Dutch auction pricing mechanism by which each issue’s interest rate was set). Management utilized a probability weighted discounted cash flow (“DCF”) model to determine the estimated fair value of this security as of March 31, 2021. The major assumptions used in preparing the DCF model were similar to those described in Note 5 - Fair Value Measurements in the Notes to the Consolidated Financial Statements contained in the Company’s 2020 Form
10-K.
Quantitative information about Level 3 fair value measurements as of March 31, 2021 is as follows (dollars in thousands):
 
     Fair Value      Valuation
Technique		     
Unobservable
Input
    Weighted
Average		  
Failed Auction Security
    $ 2,541        Discounted cash flow      Cumulative probability of earning the maximum rate until maturity      0.14 % 
                       Cumulative probability of principal return prior to maturity      93.95 % 
                       Cumulative probability of default      5.91 % 
                       Liquidity risk premium      5.00 % 
                       Recovery rate in default      40.00 % 
The change in the estimated fair value calculated for the investment valued on a recurring basis utilizing Level 3 inputs (i.e., the Failed Auction Security) for the three months ended March 31, 2021 was as follows (in thousands):
 
Balance at the beginning of the period
    $ 2,517  
Credit gain on
available-for-sale
security included in Other income (expense), net
      1  
Gain included in Other comprehensive income
      23  
    
 
 
  
Balance at the end of the period
    $ 2,541  
    
 
 
  
The Company has classified its contingent consideration obligations as Level 3 because the fair value for these liabilities was determined using unobservable inputs. The liabilities were based on estimated sales of legacy products over the period of royalty payments at the royalty rate, discounted using the Company’s estimated cost of capital.
The change in the estimated fair value calculated for the liabilities valued on a recurring basis utilizing Level 3 inputs (i.e., the Contingent consideration obligations) for the three months ended March 31, 2021 was as follows (in thousands):
 
Balance at the beginning of the period
    $ 227  
Payments
      (46 ) 
    
 
 
  
Balance at the end of the period
    $ 181  
    
 
 
  
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2021.