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Fair Value Measurement

12 Months Ended

Dec. 31, 2019

9. Fair Value Measurement

Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2019 (in thousands):


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	December 31,		Assets/Liabilities		Inputs		Inputs
	2019		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	30,693	$	30,693	$	—	$	—
Marketable securities:
Corporate debt securities		42,709		—		42,709		—
Tax-exempt municipal securities		23,198		—		23,198		—
Variable rate demand notes		5,600		—		5,600		—
Total assets at fair value on a recurring basis	$	102,200	$	30,693	$	71,507	$	—

Liabilities:
Deferred payments	$	3,257	$	—	$	—	$	3,257

Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2018 (in thousands):


			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	December 31,		Assets/Liabilities		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	1,791	$	1,791	$	—	$	—
Marketable securities:
Corporate debt securities		48,430		—		48,430		—
Tax-exempt municipal securities		22,869		—		22,869		—
Variable rate demand notes		4,000		—		4,000		—
Total assets at fair value on a recurring basis	$	77,090	$	1,791	$	75,299	$	—

Liabilities:
Deferred payments	$	4,120	$	—	$	—	$	4,120

The Company measures the above items on a recurring basis at fair value as follows:

●

Money market funds — Classified in Level 1 is excess cash the Company holds in both taxable and tax-exempt money market funds, which are included in cash and cash equivalents in the accompanying consolidated balance sheets. The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income in stockholders’ equity. The Company’s cash and cash equivalents held at December 31, 2018 and 2019, approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

●

Marketable securities – Classified in Level 2 and valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets. The Company does not hold securities in inactive markets.

●

Deferred payments — The Company acquired certain assets and entered into deferred payment arrangements with the sellers in transactions that occurred in 2011 and 2016. The deferred payments are classified within Level 3 as there is no liquid market for similarly priced instruments and are valued using discounted cash flow models that encompass significant unobservable inputs. The assumptions used to prepare the discounted cash flows include estimates for interest rates, enrollment growth, retention rates, and pricing strategies. These assumptions are subject to change as the underlying data sources evolve and the programs mature. The short-term portion of deferred payments was $1.6 million as of December 31, 2019 and is included in accounts payable and accrued expense.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the years ended December 31, 2018 or 2019.

Changes in the fair value of the Company’s Level 3 liabilities during the years ended December 31, 2018 and 2019 are as follows (in thousands):


	December 31,		December 31,
	2018		2019
Balance as of the beginning of period	$	4,514	$	4,120
Amounts paid		(1,412)		(1,579)
Other adjustments to fair value		1,018		716
Balance at end of period	$	4,120	$	3,257

- 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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