Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2022

The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its cash equivalents and marketable securities by the below pricing levels as of September 30, 2022 and December 31, 2021:


	As of September 30, 2022
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	16,159	$	16,159	$	—	$	—
U.S. Government bonds and notes	66,680		—		66,680		—
Corporate notes, bonds and commercial paper	63,449		—		63,449		—
Total available-for-sale securities	$	146,288	$	16,159	$	130,129	$	—


	As of December 31, 2021
(In thousands)	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	7,402	$	7,402	$	—	$	—
U.S. Government bonds and notes	102,812		—		102,812		—
Corporate notes, bonds and commercial paper	287,905		—		287,905		—
Total available-for-sale securities	$	398,119	$	7,402	$	390,717	$	—

The Company monitors its investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The Company monitors its investments for other-than-temporary losses by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other-than-temporary loss is reported under “Interest and other income (expense), net” on the unaudited condensed consolidated statement of operations.

During the second half of 2018, the Company made an investment in a non-marketable equity security of a private company. This equity investment is accounted for under the equity method of accounting, and the Company accounts for its equity method share of the income (loss) on a quarterly basis. As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s 25.0% ownership percentage was $0.9 million and $1.8 million, respectively, which were included in other assets on the accompanying unaudited condensed consolidated balance sheets. The Company recorded immaterial amounts on its condensed consolidated statements of operations representing its share of the investee’s loss for the nine months ended September 30, 2022 and 2021.

During the third quarter of 2022, the Company recorded a gain on fair value of approximately $3.5 million related to the sale of an equity security with an immaterial carrying value on its condensed consolidated statement of operations.

The Company has a liability related to the contingent earn-out consideration from the PLDA acquisition, which is classified within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs. During the three and nine months ended September 30, 2022, the changes in this liability were related to fair value measurements resulting in an increase of approximately $2.4 million and a decrease of $1.9 million, respectively. No fair value measurements were recognized during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2022 and 2021, there were no transfers of financial instruments between different categories of fair value.

The following table presents the financial instruments that are not carried at fair value but require fair value disclosure as of September 30, 2022 and December 31, 2021:


	As of September 30, 2022						As of December 31, 2021
(In thousands)	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
1.375% Convertible Senior Notes due 2023 (the “2023 Notes”)	$	10,381	$	10,368	$	14,048	$	172,500	$	163,687	$	254,103

The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level 2 measurement. As discussed in Note 10, “Convertible Notes,” as of September 30, 2022, the convertible notes were carried at their face value of $10.4 million, less any unamortized debt issuance costs. The carrying value of other financial instruments, including accounts receivable, accounts payable and other liabilities, approximated fair value due to their short maturities.

- 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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