Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2023

Fair Value of Financial Assets and Liabilities

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values.

Financial Instruments Measured at Fair Value on the Condensed Consolidated Balance Sheets

Certain assets of the Company are carried at fair value under GAAP. Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

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

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial assets measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2023 and December 31, 2022 were as follows:


		Fair Value Measurement Using:
Balance Sheet Classification	Type of Instrument	Level 1		Level 2		Level 3		Total
June 30, 2023
Assets:
Cash and cash equivalents	Money market funds	$	44,443	$	—	$	—	$	44,443


Marketable securities	U.S. treasury bills	6,950		21,889		—		28,839
Marketable securities	U.S. corporate bonds	—		96,949		—		96,949
Marketable securities	U.S. agency bonds	—		27,310		—		27,310
Marketable securities	Foreign corporate bonds	—		34,405		—		34,405
Other non-current assets	Money market funds	1,851		—		—		1,851
Total assets		$	53,244	$	180,553	$	—	$	233,797







December 31, 2022
Assets:
Cash and cash equivalents	Money market funds	$	72,866	$	—	$	—	$	72,866
Cash and cash equivalents	U.S. treasury bills	—		39,948		—		39,948
Cash and cash equivalents	U.S. corporate bonds	—		9,948		—		9,948
Marketable securities	U.S. treasury bills	—		49,372		—		49,372
Marketable securities	U.S. corporate bonds	—		132,639		—		132,639
Marketable securities	U.S. agency bonds	—		41,710		—		41,710
Marketable securities	Foreign corporate bonds	—		36,743		—		36,743
Total assets		$	72,866	$	310,360	$	—	$	383,226

The Company had no financial liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2023 and December 31, 2022.

There were no securities transferred into or out of Level 3 during the three and six months ended June 30, 2023 or 2022.

The following is a description, including valuation methodology, of the financial assets and liabilities measured at fair value on a recurring basis:

Cash Equivalents

Cash equivalents at June 30, 2023 consisted of cash invested in short-term money market funds and debt securities with an original maturity of 90 days or less at the date of purchase. The carrying value of cash equivalents approximates fair value as maturities are less than three months. When quoted prices are available in an active market, cash equivalents are classified in Level 1 of the fair value hierarchy. Fair values of cash equivalent instruments that do not trade on a regular basis in active markets are classified as Level 2.

Marketable Securities

Quoted prices for identical assets in active markets are considered Level 1 and consist of on-the-run U.S. Treasuries and money market funds. The fair values of the Company’s Level 2 debt securities are obtained from quoted market prices of debt securities with similar characteristics, quoted prices from identical assets in inactive markets, or discounted cash flows to estimate fair value. On a quarterly basis, the Company compares the prices of its Level 2 debt

securities to prices provided by a secondary source. Variances over a specified threshold are identified and reviewed to confirm the price provided by the primary source represents an appropriate estimate of fair value. The Company did not adjust any of the prices at June 30, 2023.

- 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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