Strategic Investments

12 Months Ended

Dec. 31, 2022

Strategic Investments

Strategic Investments

Note 8 – Strategic Investments

Strategic investments include investments in a number of non-public technology-driven companies. We account for strategic investments under the ASC Topic 321 measurement alternative for equity securities without readily determinable fair values, as there are no quoted market prices for the investments. The investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In conjunction with certain of our strategic investments, we have the ability to commit additional capital over time through warrants and call options; for some investments, the exercisability and exercise prices are conditional on the achievement of certain performance metrics.

The following tables provide a roll-forward of the balance of strategic investments (in thousands):

	Year Ended December 31, 2022								Year Ended December 31, 2021
	Strategic investments		Warrants			Call options	Total		Strategic investments		Warrants			Total
Balance, beginning of period	$	80,775	$	2,745	$	—	$	83,520	$	9,500	$	2,211	$	11,711
Investments		56,914		459		17,233		74,606		45,500		—		45,500
Observable price changes:
Realized gains		—		—		—		—		12,312		—		12,312
Unrealized gains		44,376		28,539		—		72,915		28,009		534		28,543
Unrealized losses		(1,108)		—		—		(1,108)		—		—		—
Exercises		96,719		(30,089)		—		66,630		—		—		—
Sales		—		—		—		—		(14,546)		—		(14,546)
Balance, end of period	$	277,676	$	1,654	$	17,233	$	296,563	$	80,775	$	2,745	$	83,520

	Inception to date
	Strategic investments		Warrants			Call options	Total
Investments	$	109,482	$	3,047	$	17,233	$	129,762
Observable price changes:
Realized gains		12,312		—		—		12,312
Unrealized gains		74,817		29,073		—		103,890
Unrealized losses		(1,108)		(377)		—		(1,485)
Exercises		96,719		(30,089)		—		66,630
Sales		(14,546)		—		—		(14,546)
Balance, end of period	$	277,676	$	1,654	$	17,233	$	296,563

As part of our strategy, we continuously evaluate opportunities for strategic investments that align with our mission. During the year ended December 31, 2022 our investment areas included real-time crime center software, drones and related software, biometric sensors, and weapon detection solutions.

In the year ended December 31, 2022, we exercised warrants in one of our strategic investees for a total exercise price of $6.6 million, resulting in an unrealized gain of $60.1 million that was recognized in earnings for the year ended December 31, 2022. The estimated fair value of the investments were calculated using valuation techniques that included both observable and unobservable inputs. This estimated fair value reflects a value that was lower than the issue per share of the new equity issued by the strategic investees because of different characteristics of the newly issued equity instruments compared to our existing investments. The valuation techniques included both Level 2 and Level 3 inputs as defined by ASC Topic 820.