Fair Value Measurements and Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements and Fair Value of Financial Instruments

3. Fair Value Measurements and Fair Value of Financial Instruments

Assets and liabilities recorded at fair value on a recurring basis in the condensed balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, 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 other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs based on our own data or other assumptions that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

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. Our 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. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.

Level 1 securities consist of highly liquid money market funds for which the carrying amounts approximate their fair values due to their short maturities. U.S. Treasury securities are valued using Level 1 inputs based on unadjusted, quoted prices in active markets that are observable at the measurement date for identical assets or liabilities. Level 2 securities, consisting of corporate debt, commercial paper, U.S. government agency securities and asset-backed securities, are measured based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, we rely on non-binding quotes from our investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for

similar instruments or historical pricing trends of securities relative to our peers. To validate the fair value determinations provided by our investment managers, we review the pricing movement in the context of overall market trends and trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy. We had no Level 3 securities as of June 30, 2022 or December 31, 2021.

There were no transfers within the hierarchies during the three and six months ended June 30, 2022 or the year ended December 31, 2021.

The following tables set forth our financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy at June 30, 2022 and December 31, 2021:

		June 30, 2022
	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Assets		(in thousands)
Cash and cash equivalents:
Cash	Level 1	$	164,147	$	—	$	—		$	164,147
Money market funds	Level 1		20,107		—		—			20,107
U.S. Treasury securities	Level 1		—		—		—			—
Commercial paper	Level 2		47,441		—		(11	)		47,430
U.S. government agency securities	Level 2		6,490		—		(1	)		6,489
Total cash and cash equivalents			238,185		—		(12	)		238,173
Investments:
U.S. Treasury securities	Level 1		45,090		—		(278	)		44,812
Commercial paper	Level 2		31,874		—		(43	)		31,831
Corporate debt	Level 2		21,183		—		(317	)		20,866
Asset-backed securities	Level 2		10,280		—		(34	)		10,246
U.S. government agency securities	Level 2		15,653		—		(220	)		15,433
Total investments			124,080		—		(892	)		123,188
Total assets measured at fair value		$	362,265	$	—	$	(904	)	$	361,361
		December 31, 2021
	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Assets		(in thousands)
Cash and cash equivalents:
Cash	Level 1	$	27,834	$	—	$	—		$	27,834
Money market funds	Level 1		17,555		—		—			17,555
Commercial paper	Level 2		23,597		—		(1	)		23,596
Total cash and cash equivalents			68,986		—		(1	)		68,985
Investments:
U.S. Treasury securities	Level 1		45,290		—		(73	)		45,217
Commercial paper	Level 2		61,941		—		(22	)		61,919
Corporate debt	Level 2		58,498		—		(74	)		58,424
Asset-backed securities	Level 2		13,899		—		(25	)		13,874
U.S. government agency securities	Level 2		24,714		—		(46	)		24,668
Total investments			204,342		—		(240	)		204,102
Total assets measured at fair value		$	273,328	$	—	$	(241	)	$	273,087

The following table presents the contractual maturities of our investments as of June 30, 2022 (in thousands):

	June 30, 2022
	Fair Value
Due in less than one year	$	116,326
Due in one to five years		6,862
Total	$	123,188