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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

4. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents and investments. 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 should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

•Level 1 – quoted prices in active markets are identical assets and liabilities;

•Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities;

•Level 3 – unobservable inputs.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company’s investments are classified within Level 1 of the fair value hierarchy include money market funds valued using quoted market prices and U.S. treasury bills valued using broker or dealer quotations with reasonable levels of price transparency. Investments classified within Level 2 include commercial paper, which are valued using model-based valuation techniques, and corporate bonds/notes, U.S. government securities and agency bonds/notes, which are valued based upon quoted market prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

The following tables set forth by level within the fair value hierarchy the Company’s assets that are reported at fair value as of September 30, 2023 and December 31, 2022, using the inputs defined above (in thousands):



	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	29,156	$	—	$	—	$	29,156
U.S. treasury bills		7,844		—		—		7,844
Commercial paper		—		38,689		—		38,689
Corporate bonds/notes		—		34,017		—		34,017
U.S. government securities		—		7,990		—		7,990
Agency bonds/notes		—		79,481		—		79,481
	$	37,000	$	160,177	$	—	$	197,177



	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	55,158	$	—	$	—	$	55,158
U.S. treasury bills		19,776		—		—		19,776
Commercial paper		—		48,875		—		48,875
Corporate bonds/notes		—		1,515		—		1,515
U.S. government securities		—		83,270		—		83,270
Asset-backed securities		—		1,996		—		1,996
Agency notes		—		2,884		—		2,884
	$	74,934	$	138,540	$	—	$	213,474

There were no transfers between fair value hierarchy levels during the three and nine months ended September 30, 2023 and 2022.

- 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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