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Fair Value Measurements
 6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
J2 Global complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
§Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
§Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, 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 which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s money market funds are classified within Level 1. The Company values these Level 1 investments using quoted market prices. The fair value of long-term debt is determined using recent quoted market prices or dealer quotes
for each of the Company’s instruments, which are Level 1 inputs. The fair value of the Company’s debt instruments at June 30, 2021 and December 31, 2020 was $2.3 billion and $2.0 billion, respectively (see Note 9 - Debt).

Certain of the Company’s debt securities are classified within Level 2. The Company values these Level 2 investments based on model-driven valuations using significant inputs derived from or corroborated by observable market data.

The Company classifies its contingent consideration liability in connection with acquisitions within Level 3 because factors used to develop the estimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity. For similar reasons, certain of the Company’s available-for-sale debt securities are classified within Level 3. The valuation approaches used to value the Level 3 investments consider unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints. Significant increases or decreases in either of the inputs in isolation would result in a significantly lower or higher fair value measurement.
 
The following table presents the fair values, valuation techniques, unobservable inputs, and ranges of the Company’s financial liabilities categorized within Level 3. The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of June 30, 2021.

Valuation TechniqueUnobservable InputRangeWeighted Average
Contingent ConsiderationOption-Based ModelRisk free rate
2.2%
2.2 %
Debt spread
0.0% - 74.7%
17.7 %
Probabilities
100.0%
100.0 %
Present value factor
2.2% - 3.9%
3.3 %
Discount rate
38.0%
38.0 %
The following tables present the fair values of the Company’s financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):
June 30, 2021Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
   Money market and other funds$10,407 $— $— $10,407 $10,407 
Corporate debt securities— — — — — 
Total assets measured at fair value$10,407 $— $— $10,407 $10,407 
Liabilities:
Contingent consideration$— $— $5,582 $5,582 $5,582 
Debt2,302,633 — — 2,302,633 1,591,861 
Total liabilities measured at fair value$2,302,633 $— $5,582 $2,308,215 $1,597,443 
December 31, 2020Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
   Money market and other funds$10,413 $— $— $10,413 $10,413 
Corporate debt securities— 663 — 663 663 
Total assets measured at fair value$10,413 $663 $— $11,076 $11,076 
Liabilities:
Contingent consideration$— $— $9,094 $9,094 $9,094 
Debt1,960,527 — — 1,960,527 1,579,021 
Total liabilities measured at fair value$1,960,527 $— $9,094 $1,969,621 $1,588,115 

The following table presents a reconciliation of the Company’s Level 3 financial liabilities related to contingent consideration that are measured at fair value on a recurring basis (in thousands):
Level 3Affected line item in the Statement of Operations
Balance as of January 1, 2021$9,094 
Contingent consideration1,754 
Total fair value adjustments reported in earnings562 General and administrative
Contingent consideration payments(5,828)Not applicable
Balance as of June 30, 2021$5,582 

In connection with the Company’s acquisition activity, contingent consideration of up to $5.8 million may be payable upon achieving certain revenue, and/or unique visitor thresholds and had a combined fair value of $5.6 million and $9.1 million at June 30, 2021 and December 31, 2020, respectively. Due to the achievement of certain thresholds, $5.8 million was paid in the first six months of 2021.

During the six months ended June 30, 2021, the Company recorded an increase in the fair value of the contingent consideration of $0.6 million and reported such increase in general and administrative expenses.