Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Note 2. Fair Value Measurements

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

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Level 1 — Quoted prices in active markets for identical assets or liabilities.

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Level 2 — Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.

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Level 3 — Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

We applied the following methods and assumptions in estimating our fair value measurements:

Cash Equivalents — Cash equivalents consist of highly liquid investments, including money market funds with original maturities of less than three months at the acquisition date. We record the fair value measurement of these assets based on quoted market prices in active markets.

Investments — Our investments comprise fixed income securities, which include U.S. government agency securities, corporate notes and bonds, commercial paper, treasury bills and asset-backed securities. The fair value measurement of these assets is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Long-term Debt — See Note 6 for the carrying amount and estimated fair value of the Notes.

The following table presents the balances of assets measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):


	September 30, 2022						December 31, 2021
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash equivalents:
Money market funds	$	27,430	$	—	$	27,430	$	113,058	$	—	$	113,058
Total cash equivalents		27,430		—		27,430		113,058		—		113,058
Short-term investments:
U.S. government agency securities		—		75,681		75,681		—		4,066		4,066
Corporate notes and bonds		—		35,995		35,995		—		36,966		36,966
Commercial paper		—		18,291		18,291		—		16,489		16,489
Treasury bill		—		4,490		4,490		—		4,490		4,490
Yankee bonds				1,918		1,918		—		—		—
Asset-backed securities		—		6,166		6,166		—		7,432		7,432
Total short-term investments		—		142,541		142,541		—		69,443		69,443
Long-term investments:
U.S. government agency securities		—		17,346		17,346		—		14,225		14,225
Asset-backed securities		—		1,854		1,854		—		—		—
Total long-term investments		—		19,200		19,200		—		14,225		14,225
Total	$	27,430	$	161,741	$	189,171	$	113,058	$	83,668	$	196,726

We did not have any Level 3 assets nor did we measure any liabilities at fair value as of September 30, 2022 or December 31, 2021. Short-term investments are expected to mature within 1 year from the reporting date. Long-term investments are expected to mature between 1 and 2 years from the reporting date. See Note 6 for the carrying amount and estimated fair value of the Notes.

The following tables present the cost or amortized cost, gross unrealized gains, gross unrealized losses and total estimated fair value of our financial assets as of the dates presented (in thousands):


	September 30, 2022
	Cost or		Gross		Gross			Total Estimated
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Description:
Money market funds	$	27,430	$	—	$	—		$	27,430
U.S. government agency securities		94,276		—		(1,249	)		93,027
Corporate notes and bonds		36,374		—		(379	)		35,995
Yankee bonds		1,920		—		(2	)		1,918
Commercial paper		18,291		—		—			18,291
Treasury bill		4,500		—		(10	)		4,490
Asset-backed securities		8,110		—		(90	)		8,020
Total	$	190,901	$	—	$	(1,730	)	$	189,171


	December 31, 2021
	Cost or		Gross		Gross			Total Estimated
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Description:
Money market funds	$	113,058	$	—	$	—		$	113,058
U.S. government agency securities		18,314		—		(23	)		18,291
Corporate notes and bonds		36,975		3		(12	)		36,966
Commercial paper		16,489		—		—			16,489
Treasury bill		4,494		—		(4	)		4,490
Asset-backed securities		7,435		—		(3	)		7,432
Total	$	196,765	$	3	$	(42	)	$	196,726

Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $143.5 million and unrealized losses of $1.7 million as of September 30, 2022. Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $61.0 million and unrealized losses of $42,000 as of December 31, 2021. As of September 30, 2022, and December 31, 2021, there were no marketable securities in a continuous loss position for greater than 12 months.

In making the determination as to whether the unrealized loss is other-than-temporary, for the periods presented, we have concluded that there is no plan to sell the securities nor is it more likely than not that we would be required to sell the securities before their anticipated recovery.

- 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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