Fair value measurement

3 Months Ended

Dec. 31, 2023

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes 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. The standard describes three levels of inputs that may be used to measure fair value:

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

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, 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 significant to the fair value of the assets or liabilities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk in its assessment of fair value.

The following table sets forth the cash and cash equivalents, short-term investments and equity securities as of December 31, 2023:


(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	266,269	$	—	$	—	$	266,269
Short-term investments:
Corporate bonds	5,974		—		(3)		5,971
U.S. government treasury bills	38,852		58		(6)		38,904
Non-current assets - investment in equity securities	3,711		—		—		3,711
Total	$	314,806	$	58	$	(9)	$	314,855

The following table sets forth the cash and cash equivalents, short-term investments and equity securities as of September 30, 2023:


(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Cash and cash equivalents	$	286,470	$	—	$	—	$	286,470
Short-term investments:
Corporate bonds	14,918		—		(29)		14,889
U.S. government treasury bills	35,111		—		(57)		35,054
Non-current assets - investment in equity securities	3,711		—		—		3,711
Total	$	340,210	$	—	$	(86)	$	340,124

As of December 31, 2023, financial assets and liabilities measured and recognized at fair value are as follows:


(in thousands)	Level 1		Level 2		Level 3		Fair value
Assets
Money market funds	$	234,679	$	—	$	—	$	234,679
Corporate bonds	—		5,971		—		5,971
U.S. government treasury bills	38,904		—		—		38,904
Non-current assets - investment in equity securities	—		—		3,711		3,711
Total	$	273,583	$	5,971	$	3,711	$	283,265

Total financial liabilities	$	—	$	—	$	—	$	—

As of September 30, 2023, financial assets and liabilities measured and recognized at fair value are as follows:


(in thousands)	Level 1		Level 2		Level 3		Fair value
Assets
Money market funds	$	245,654	$	—	$	—	$	245,654
Corporate bonds	—		14,889		—		14,889
U.S. government treasury bills	35,054		—		—		35,054
Non-current assets - investment in equity securities	—		—		3,711		3,711
Total financial assets	$	280,708	$	14,889	$	3,711	$	299,308

Total financial liabilities	$	—	$	—	$	—	$	—

Contractual maturities of all the investments, as of December 31, 2023, were less than 12 months. The Company does not intend to sell the money market funds and short-term investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The unrealized loss on short-term investments have been in a continuous unrealized loss position for less than 12 months. Accrued interest receivable balance included in the prepaid expenses and other current assets within consolidated balance sheets were $1.2 million and $1.2 million as of December 31, 2023 and September 30, 2023, respectively. As of December 31, 2023, the gross unrealized losses on short-term investments are related to market interest rate changes and not attributable to credit.

During 2021 and as amended in 2022, the Company entered into convertible promissory note agreements with a privately held company (“Borrower”) pursuant to which the Company agreed to loan to the Borrower $3.5 million in a series of loan installments, evidenced by a convertible promissory note having a maturity date of May 1, 2023 (“Convertible Note”). The Convertible Note included an option to convert the Convertible Note into the Borrower’s equity at the Borrower’s next round of equity financing, and accrued interest at a rate of 4% per annum. In April 2023, the Company exercised the option and the Borrower issued to the Company ordinary shares which represent a 15% equity interest. As of December 31, 2023, the Company’s equity investments were categorized as Level 3 within the fair value hierarchy.

The equity investment held by the Company is a VIE, but the Company is not the primary beneficiary. The Company does not have the power to direct the activities that most significantly impact the economic performance of the investee. The Company’s maximum exposure to loss from this VIE consist of an equity investment of $3.7 million. Equity investments held by the Company lack readily determinable fair values and therefore the securities are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar equity securities of the same issuer. The Company reviews the carrying value of its equity investments for impairment whenever events or changes in business circumstances indicate the carrying amount of such asset may not be fully recoverable. Impairments, if any, are based on the excess of the carrying amount over the recoverable amount of the asset. There were no such impairments during the three months ended December 31, 2023 and December 31, 2022.

As of December 31, 2023 and September 30, 2023, there were no financial liabilities categorized as level 3 within the fair value hierarchy. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

The following table provides a reconciliation of beginning and ending balances of the Level 3 financial assets during the three months ended December 31, 2023:


(in thousands)	Equity investments		Total
Balance as of September 30, 2023	$	3,711	$	3,711
Change in fair value	—		—
Additions during the year	—		—
Balance as of December 31, 2023	$	3,711	$	3,711

- 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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