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Fair Value Measurement

9 Months Ended

Sep. 30, 2022

Note 4. Fair Value Measurement

The Company’s financial assets subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (amounts in thousands):


	Fair Value Measured as of September 30, 2022
	Level 1		Level 2		Total
Assets included in:
Money market funds(1)	$	231,866	$	—	$	231,866
Commercial paper(2)		—		107,198		107,198
U.S. government securities(2)		—		616,489		616,489
Corporate notes and bonds(2)		—		196,575		196,575
Total fair value	$	231,866	$	920,262	$	1,152,128


	Fair Value Measured as of December 31, 2021
	Level 1		Level 2		Total
Assets included in:
Money market funds(1)	$	227,826	$	—	$	227,826
Commercial paper(2)		—		233,400		233,400
U.S. government securities(2)		—		722,310		722,310
Corporate notes and bonds(2)		—		257,384		257,384
Total fair value	$	227,826	$	1,213,094	$	1,440,920

(1)

Money market funds are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

(2)

As of September 30, 2022 and December 31, 2021, marketable securities with original maturities of three months or less of $62.9 million and $86.1 million, respectively, are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

Level 1 assets: Money market funds are classified as Level 1 within the fair value hierarchy, as fair value is based on unadjusted quoted prices in active markets for identical assets.

Level 2 assets: Investments in commercial paper, U.S. government securities and corporate notes and bonds are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

The Company had no financial liabilities subject to fair value measurements on a recurring basis as of September 30, 2022 and December 31, 2021.

There have been no changes to the valuation methods utilized during the nine months ended September 30, 2022. As of September 30, 2022 and December 31, 2021, the carrying values of cash and cash equivalents, accounts payable and accrued liabilities approximate their respective fair values due to their short-term nature.

Marketable Securities

The following table summarizes, by major security type, the Company’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. Amortized cost net of unrealized gain (loss) is equal to fair value as of September 30, 2022 and December 31, 2021. The fair value as of September 30, 2022 and December 31, 2021 are as follows (amounts in thousands):


	September 30, 2022
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Level 1 securities
Money market funds	$	231,866	$	—	$	—		$	231,866
Level 2 securities
Commercial paper		107,198		—		—			107,198
U.S. government securities		629,591		7		(13,109	)		616,489
Corporate notes and bonds		205,551		—		(8,976	)		196,575
Total	$	1,174,206	$	7	$	(22,085	)	$	1,152,128

	December 31, 2021
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Level 1 securities
Money market funds	$	227,826	$	—	$	—		$	227,826
Level 2 securities
Commercial paper		233,400		—		—			233,400
U.S. government securities		724,554		—		(2,244	)		722,310
Corporate notes and bonds		259,348		—		(1,964	)		257,384
Total	$	1,445,128	$	—	$	(4,208	)	$	1,440,920

Realized gains and losses and interest income are included in interest income.

The Company regularly reviews its available-for-sale marketable securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. The following tables display additional information regarding gross unrealized losses and fair value by major security type for the 100 and 118 marketable securities in an unrealized loss position as of September 30, 2022 and December 31, 2021, respectively (amounts in thousands):


	September 30, 2022
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value
U.S. government securities	$	(7,873	)	$	497,088	$	(5,236	)	$	107,960	$	(13,109	)	$	605,048
Corporate notes and bonds		(1,395	)		48,643		(7,581	)		147,932		(8,976	)		196,575
Total	$	(9,268	)	$	545,731	$	(12,817	)	$	255,892	$	(22,085	)	$	801,623

	December 31, 2021
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value
U.S. government securities	$	(2,239	)	$	700,318	$	(5	)	$	17,011	$	(2,244	)	$	717,329
Corporate notes and bonds		(1,964	)		257,384		—			—		(1,964	)		257,384
Total	$	(4,203	)	$	957,702	$	(5	)	$	17,011	$	(4,208	)	$	974,713

The unrealized losses were attributable to changes in interest rates that impacted the value of the investments, and not increased credit risk. During the nine months ended September 30, 2022, the Company received proceeds of $15.2 million, including interest, from the sale of available-for-sale marketable securities. There were no sales during the three months ended September 30, 2022. During the three and nine months ended September 30, 2021, the Company received proceeds of $51.0 million and $173.3 million, including interest, from the sale of available-for-sale marketable securities. The Company realized immaterial gains and losses as a result of such sales for the three and nine months ended September 30, 2022 and 2021. The Company does not intend to sell the investments that are in an unrealized loss position, nor is it more likely than not that the Company will be required to sell the investments before the recovery of the amortized cost basis, which may be its maturity. Accordingly, the Company did not record an allowance for credit losses associated with these investments.

The estimated amortized cost and fair value of available-for-sale securities by contractual maturity as of September 30, 2022 are as follows (amounts in thousands):


	September 30, 2022
	Amortized Cost		Fair Value
Due within one year	$	900,414	$	893,149
Due after one year and through five years		273,792		258,979
Total	$	1,174,206	$	1,152,128

- 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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