Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2022

The Company measures certain financial assets and liabilities at fair value. Fair value is determined based on the exit price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Financial assets measured at fair value on a recurring basis using the above input categories were as follows (in thousands):


	Pricing Category	Fair Value at
		March 31, 2022		December 31, 2021
Assets:
Cash equivalents and marketable securities:
Money market funds	Level 1	$	36,380	$	102,978
U.S. Treasury securities	Level 1	—		49,996
Short-term investments:
U.S. Treasury securities	Level 1	465,370		330,053
Corporate debt securities	Level 2	85,951		160,914
Total		$	587,701	$	643,941

The Company’s short-term investments were primarily comprised of U.S. Treasury and corporate debt securities, and classified as available-for-sale at the time of purchase because it is intended that these investments are available for current operations. Investments are reported at fair value and are subject to periodic impairment review. Unrealized gains and losses related to changes in the fair value of these securities are recognized in accumulated other comprehensive loss. The ultimate value realized on these securities is subject to market price volatility until they are sold. Realized gains or losses from short-term investments are recorded in other expense (income), net.

The following is a summary of cash equivalents and marketable securities as of March 31, 2022 (in thousands):


	Amortized Cost		Unrealized Losses		Estimated Fair Value
Cash equivalents:
Money market funds	$	36,380	$	—	$	36,380

Short-term investments:
U.S. Treasury securities	467,564		(2,194)		$	465,370
Corporate debt securities	85,986		(35)		$	85,951
Total	$	589,930	$	(2,229)	$	587,701

The following is a summary of cash equivalents and marketable securities as of December 31, 2021 (in thousands):


	Amortized Cost		Unrealized Losses		Estimated Fair Value
Cash equivalents:
Money market funds	$	102,978	$	—	$	102,978
U.S. Treasury securities	49,996		—		49,996
Short-term investments:
U.S. Treasury securities	330,618		(565)		$	330,053
Corporate debt securities	160,937		(23)		$	160,914
Total	$	644,529	$	(588)	$	643,941

The unrealized losses as of March 31, 2022 and December 31, 2021 were primarily related to U.S. Treasury securities with maturities longer than one year due to recent changes in interest rates and are considered temporary in nature.

The contractual maturities of short-term investments are as follows (in thousands):


	March 31, 2022		December 31, 2021
Due within one year	$	353,333	$	291,525
Due after one year to two years	197,987		199,442
Total	$	551,320	$	490,967

The fair value of the Convertible Notes was $258.5 million as of March 31, 2022. The carrying value of the Convertible Notes of $106.1 million, net of $59.0 million unamortized debt discount and issuance costs, as of March 31, 2022, was recorded in Debt, non-current on the balance sheets.

- 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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