Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Assets measured at fair values on a recurring basis

We measure and report our cash equivalents, restricted cash, marketable equity securities and available-for-sale debt securities at fair value on a recurring basis. The following tables summarize the fair value of these financial assets by significant investment category and their levels within the fair value hierarchy (in thousands):


	June 30, 2023								December 31, 2022
	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
Financial Assets:
Cash Equivalents:
Money market funds	$	574,779	$	—	$	—	$	574,779	$	322,294	$	—	$	—	$	322,294
Commercial paper	—		—		—		—		—		5,422		—		5,422

U.S. government notes	99,898		—		—		99,898		51,986		—		—		51,986
Agency securities	—		14,986		—		14,986		—		17,559		—		17,559
	674,677		14,986		—		689,663		374,280		22,981		—		397,261
Marketable Securities:
Commercial paper	—		88,960		—		88,960		—		—		—		—
Certificates of deposits(1)	—		6,998		—		6,998		—		10,492		—		10,492
U.S. government notes	783,513		—		—		783,513		993,955		—		—		993,955
Corporate bonds	—		1,051,495		—		1,051,495		—		1,113,134		—		1,113,134
Agency securities	—		523,491		—		523,491		—		215,380		—		215,380

Marketable equity securities(2)	24,833		—		—		24,833		19,061		—		—		19,061
	808,346		1,670,944		—		2,479,290		1,013,016		1,339,006		—		2,352,022
Other Assets:
Money market funds - restricted	856		—		—		856		4,271		—		—		4,271
Total Financial Assets	$	1,483,879	$	1,685,930	$	—	$	3,169,809	$	1,391,567	$	1,361,987	$	—	$	2,753,554

______________________________________

(1) As of June 30, 2023 and December 31, 2022, all of our certificates of deposits were domestic deposits.

(2) The $24.8 million represents the fair value of marketable equity securities as of June 30, 2023. This publicly-traded equity investment generated an unrealized gain of $5.8 million for the six months ended June 30, 2023, and an unrealized gain of $11.3 million for the three months ended June 30, 2023. Total initial cost for this investment was $3.0 million with no changes since our initial investment. The unrealized gains and losses are included in Other income (expense), net on the unaudited Condensed Consolidated Statements of Operations. Refer to Note 3. Financial Statements Details.

During the three and six months ended June 30, 2023, the Company did not make any transfers between the levels of the fair value hierarchy.

Marketable debt securities

The following table summarizes the amortized cost, unrealized gains and losses, and fair value of our debt securities measured at fair value on a recurring basis (in thousands):


	June 30, 2023								December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	88,960	$	—	$	—	$	88,960	$	—	$	—	$	—	$	—
U.S. government	790,970		34		(7,491)		783,513		1,007,175		3		(13,223)		993,955
Corporate bonds	1,059,915		111		(8,531)		1,051,495		1,125,920		271		(13,057)		1,113,134
Agency securities	527,766		8		(4,283)		523,491		217,893		83		(2,596)		215,380

Total	$	2,467,611	$	153	$	(20,305)	$	2,447,459	$	2,350,988	$	357	$	(28,876)	$	2,322,469

For debt securities in unrealized loss positions, it is not likely that we will be required to sell such securities before recovery of their amortized cost basis nor do we have the intent to sell such securities before maturity. We invest in debt securities that have maximum maturities of two years and are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these marketable securities, the more susceptible they are to changes in market interest rates and bond yields. Given the short-term and conservative nature of our portfolio, our debt securities are generally not subject to credit risk; therefore, we did not recognize any credit losses or non-credit-related impairments related to such securities for the three and six months ended June 30, 2023. All unrealized losses were recognized in other comprehensive income (loss). Realized losses were immaterial for the three and six months ended June 30, 2023.

The following table is an analysis of our marketable debt securities in unrealized loss positions (in thousands):


	June 30, 2023
	Unrealized Losses within 12 months				Unrealized Losses 12 months or greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government notes	$	457,325	$	(3,346)	$	291,908	$	(4,145)	$	749,233	$	(7,491)
Corporate bonds	743,043		(4,714)		256,414		(3,817)		999,457		(8,531)
Agency securities	432,179		(3,063)		61,730		(1,220)		493,909		(4,283)
Total	$	1,632,547	$	(11,123)	$	610,052	$	(9,182)	$	2,242,599	$	(20,305)

As of June 30, 2023, we had no marketable debt securities with contractual maturities that exceed 24 months. The fair values of marketable debt securities, by remaining contractual maturities, are as follows (in thousands):


	June 30, 2023
	Fair Value
Due in 1 year or less	$	1,494,804
Due in 1 to 2 years	952,655
Total debt securities	$	2,447,459

The weighted-average remaining duration of our marketable debt securities is approximately 0.9 years as of June 30, 2023. As we view these marketable debt securities as available to support current operations, we classify marketable debt securities with maturities beyond 12 months as current assets under the caption "Marketable securities" on the condensed consolidated balance sheets.

Assets measured at fair value on a non-recurring basis

Non-Marketable Equity Securities

We have non-marketable equity securities in privately-held companies that do not have readily-determinable fair values. These equity securities are included in Investments on the condensed consolidated balance sheets. Their initial cost is adjusted to fair value on a non-recurring basis based on observable price changes from orderly transactions of identical or similar securities of the same issuer, or for impairment. These investments are classified within Level III of the fair value hierarchy as we estimate the value based on valuation methods using the observable transaction price at the transaction date and other significant unobservable inputs, such as volatility, rights, and obligations related to these securities. In addition, the valuation requires management judgment due to the absence of market price and lack of liquidity.

We did not record any realized gains for our non-marketable equity securities during the three and six months ended June 30, 2023 and June 30, 2022, and we recorded an immaterial amount of realized and unrealized losses for the three and six months ended June 30, 2023 and June 30, 2022. Unrealized gains for our non-marketable equity securities are summarized below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Unrealized gains on non-marketable equity securities (1)	$	13,401	$	—	$	13,401	$	15,000

(1) These unrealized gains were recorded on investments that were re-measured to fair value as of the date observable transactions occurred.

We evaluate our non-marketable equity securities for impairment at each reporting period via a qualitative assessment with various potential impairment indicators, including, but not limited to, an assessment of a significant adverse change in the economic environment, significant adverse changes in the general market condition of the geographies and industries in which our investees operate, and other publicly-available information that affected the value of the non-marketable equity securities.

The following table summarizes the activity related to our non-marketable equity securities as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Cost of investments(1)	$	31,656	$	23,625
Cumulative impairment and downward adjustment	—		(888)
Cumulative upward adjustment	30,132		16,731
Carrying amount of investments	$	61,788	$	39,468

(1) During the three months ended June 30, 2023, we had an $8.0 million convertible note previously included in other assets, plus accrued interest of $0.6 million, that was converted to an equity investment and included in cost of investments.

- 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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