Investments and Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Marketable Securities and Fair Value Measurements

3. Investments and Fair Value Measurements

Investments

As of March 31, 2020 and December 31, 2019, the Company's investments consisted of corporate bonds and other government obligations priced at fair value. These investments were classified as available-for-sale and their estimated fair values were $266.5 million and $559.9 million, respectively.

To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss, however management considers the risk of credit loss to be minimized by the Company's policy of investing in financial instruments issued by highly-rated financial institutions. When assessing the risk of credit loss, management considers factors such as the severity and the reason of the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management's intended holding period and time horizon for selling. During the three months ended March 31, 2020 and 2019, the Company did not recognize any credit losses related to its available-for-sale debt securities. Further, as of March 31, 2020 and December 31, 2019, the Company did not record an allowance for credit losses related to its available-for-sale debt securities. During the three months ended March 31, 2020, the Company collected $161.3 million of proceeds from the sale of long-term investments and recognized a realized gain of $0.8 million. The Company did not recognize any realized gains or losses during the three months ended March 31, 2019.

The following tables present details of the Company’s investments as of March 31, 2020 and December 31, 2019:



	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	265,719	$	992	$	(214	)	$	266,497
Total	$	265,719	$	992	$	(214	)	$	266,497



	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	404,294	$	20	$	(62	)	$	404,252
Long-term:
Investment securities	155,616		92		(18		)	155,690
Total	$	559,910	$	112	$	(80	)	$	559,942

Fair Value Measurements

The Company's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:


▪	Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities


▪	Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability


▪	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company measures its cash equivalents and short-term and long-term investments at fair value. The Company classifies its cash equivalents and certificates of deposits within Level 1 because the Company values these investments using quoted market prices. The fair value of the Company's Level 1 financial assets is based on quoted market prices of the identical underlying security. The Company classifies short-term and long-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. The Company does not have any assets or liabilities classified as Level 3 financial assets.

The following tables set forth the fair value of the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 based on the three-tier value hierarchy:



	March 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash and cash equivalents:
Cash	$	85,816	$	—	$	—	$	85,816
Cash equivalents	$	538,665	$	—	$	—	$	538,665
Total cash and cash equivalents	$	624,481	$	—	$	—	$	624,481
Short-term investments:
Investment securities	—		266,497		—		266,497
Other non-current assets:
Certificate of deposit	5,200		—		—		5,200
Total	$	629,681	$	266,497	$	—	$	896,178



	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash and cash equivalents:
Cash	$	308,521	$	—	$	—	$	308,521
Cash equivalents	$	274,232	$	—	$	—	$	274,232
Total cash and cash equivalents	$	582,753	$	—	$	—	$	582,753
Short-term investments:
Investment securities	—		404,252		—		404,252
Other non-current assets:
Certificate of deposit	5,076		—		—		5,076
Long-term investments:
Investment securities	—		155,690		—		155,690
Total	$	587,829	$	559,942	$	—	$	1,147,771

- Definition

Disclosure of marketable securities and 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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