Investments and Fair Value Measurements

Marketable Investments

The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of June 30, 2018 were as follows (in thousands):



	June 30, 2018
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	4,156	$	1	$	0		$	4,157
U.S. treasury	989		—		—			989
U.S. agency securities and government sponsored securities	94,879		7		(16		)	94,870
Commercial paper	3,131		—		—			3,131
Corporate bonds	4,994		—		(1		)	4,993
Total	$	108,149	$	8	$	(17	)	$	108,140

The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position as of June 30, 2018 (in thousands):



	June 30, 2018
	Less than 12 months
	Gross Unrealized Losses			Fair Value
Certificates of deposit	$	0		$	249
U.S. agency securities and government sponsored securities	(16		)	32,767
Corporate bonds	(1		)	4,993
Total	$	(17	)	$	38,009

The contractual maturities of the Company’s marketable investments as of June 30, 2018 were less than one year.

Fair Value Measurements

The Company carries cash equivalents and marketable investments at fair value. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Observable inputs which include unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.

The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):



	June 30, 2018
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Commercial paper	$	—	$	500	$	—	$	500
Money market funds	75,765		—		—		75,765
Certificates of deposit	—		498		—		498
U.S. agency securities	—		35,157		—		35,157
Total cash equivalents	$	75,765	$	36,155	$	—	$	111,920
Marketable investments
Certificates of deposit	—		4,157		—		4,157
U.S. treasury	989		—		—		989
U.S. agency securities and government sponsored securities	—		94,870		—		94,870
Commercial paper	—		3,131		—		3,131
Corporate bonds	—		4,993		—		4,993
Total marketable investments	$	989	$	107,151	$	—	$	108,140

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	20,092	$	—	$	—	$	20,092
Other Assets
Embedded conversion option held for investment	—		—		984		984

In March 2018, the Company received proceeds of $1.9 million from the conversion and sale of a convertible note with a carrying value of $1.6 million. Proceeds from the sale of the investment totaled $2.1 million. The Company expects to receive the remainder of the proceeds in 2019.

As of June 30, 2018, the estimated fair value of the Company’s outstanding 0.125% convertible senior notes due 2023 was $269.7 million. The fair value was determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 6 for further information on the Company’s 0.125% convertible senior notes due 2023.

There were no assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2018.