The accounting guidance defines fair value as the 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. When determining the fair value measurements for assets and liabilities recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

•Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.


	December 31, 2023						December 31, 2022

	(In thousands)
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents:
Money market funds	$	132,037	$	—	$	—	$	165,407	$	—	$	—
Certificates of deposit	—		750		—		—		—		—
Commercial paper	—		1,694		—		—		50,764		—
Corporate notes and bonds	—		462		—		—		—		—
U.S. Treasuries	—		—		—		—		4,094		—
Marketable securities:
Certificates of deposit	—		55,162		—		—		31,757		—
Commercial paper	—		69,743		—		—		97,907		—
Corporate notes and bonds	—		405,634		—		—		165,576		—
U.S. Treasuries	—		327,891		—		—		297,131		—
U.S. Government agency securities	—		547,856		—		—		547,228		—

Other assets
Investments in debt securities	—		—		79,855		—		—		56,777

Total assets measured at fair value	$	132,037	$	1,409,192	$	79,855	$	165,407	$	1,194,457	$	56,777

Liabilities:


Warranty obligations
Current	$	—	$	—	$	28,667	$	—	$	—	$	30,740
Non-current	—		—		133,126		—		—		75,749
Total warranty obligations measured at fair value	—		—		161,793		—		—		106,489
Total liabilities measured at fair value	$	—	$	—	$	161,793	$	—	$	—	$	106,489

The Company carries the Notes due 2028 and Notes due 2026 at face value less unamortized debt issuance costs on its consolidated balance sheets. The Company carries the Notes due 2025 at face value less unamortized debt discount and issuance costs on its consolidated balance sheets. As of December 31, 2023, the fair value of the Notes due 2028, Notes due 2026 and Notes due 2025 was $511.8 million, $568.8 million and $147.7 million, respectively. The fair value as of December 31, 2023 was determined based on the closing trading price per $100 principal amount as of the last day of trading for the period. The Company considers the fair value of the Notes due 2028, Notes due 2026 and Notes due 2025 to be a Level 2 measurement as they are not actively traded.

In January 2021, the Company invested approximately $25.0 million in a privately-held company. The Company concluded the investment qualifies as an investment in a debt security, as it accrues interest and principal plus accrued interest becomes payable back to the Company at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statement of operations for that period. Further, the Company has concluded that the Company’s investment in a debt security is considered to be a Level 3 measurement due to the use of significant unobservable inputs in the valuation model. The fair value was determined using discounted cash flow methodology and assumptions include implied yield and change in estimated term of investment being held-to-maturity.

In September 2021, the Company invested approximately $13.0 million in secured convertible promissory notes issued by the stockholders of a privately-held company. The investment qualifies as an investment in a debt security and will accrete interest and principal plus accrued interest that becomes payable at certain dates unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any change in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statement of operations for that period. Principal plus accrued interest receivable of the investment approximates the fair value.

In December 2022, the Company took a non-voting participating interest of approximately $15.0 million in a loan held by a privately-held company. The debt security qualifies as an investment in a debt security and interest will be payable on a monthly basis. The principal becomes repayable at a certain date when a qualified equity investment or a junior debt is raised, or as long as certain applicable payment conditions are satisfied. The accreted interest is recognized in “Other income (expense), net” in the Company’s consolidated statement of operations for that period. Principal plus unpaid accrued interest receivable of the investment approximates the fair value.

In July 2023, the Company invested approximately $15.0 million in a secured convertible promissory note issued by the stockholders of a privately-held company. The investment qualified as an investment in a debt security and will accrete interest. The principal plus accrued interest is payable upon maturity unless it is converted to equity at a pre-determined price. As the investment includes a conversion option, the Company has elected to account for this investment under the fair value option and any changes in fair value of the investment is recognized in “Other income (expense), net” in the Company’s consolidated statement of operations for that period. Principal plus accrued interest receivable of the investment approximates the fair value.

Investment in debt securities is recorded in “Other assets” on the accompanying consolidated balance sheet as of December 31, 2023 and December 31, 2022. The changes in the balance in investments in debt securities during the period were as follows:


	Years Ended December 31,
		2023		2022

		(In thousands)
Balance at beginning of period		$	56,777	$	41,042
Investment		15,000		15,000
Fair value adjustments included in other income (expense), net		8,078		735

Balance at end of period		$	79,855	$	56,777

The Company estimates the fair value of warranty obligations by calculating the warranty obligations in the same manner as for sales prior to January 1, 2014 and applying an expected present value technique to that result. The expected present value technique, an income approach, converts future amounts into a single current discounted amount. In addition to the key estimates of return rates and replacement costs, the Company used certain Level 3 inputs which are unobservable and significant to the overall fair value measurement. Such additional assumptions are based on the Company’s credit-adjusted risk-free rate (“discount rate”) and compensation comprised of a profit element and risk premium required of a market participant to assume the obligation.

The following table provides information regarding changes in nonfinancial liabilities related to the Company’s warranty obligations measured at fair value on a recurring basis using significant unobservable inputs designated as Level 3 for the periods indicated:


	Years Ended December 31,
		2023		2022

		(In thousands)
Balance at beginning of period		$	106,489	$	51,007
Accruals for warranties issued during period		51,716		46,342
Changes in estimates		(22,557)		23,910
Settlements		(26,022)		(20,824)
Increase due to accretion expense		13,821		9,632
Change in discount rate		44,422		(9,609)
Other		(6,076)		6,031
Balance at end of period		$	161,793	$	106,489

As of December 31, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurement of the Company’s liabilities designated as Level 3 were as follows, of which the monetary impact for change in discount rate is captured in “Change in discount rate” in the table above:

Percent Used

(Weighted Average)

Item Measured at Fair Value

Valuation Technique

Description of Significant Unobservable Input

December 31,
2023

December 31,
2022

Warranty obligations for products sold since January 1, 2014

Discounted cash flows

Profit element and risk premium

17%

16%

Credit-adjusted risk-free rate

13%

Each of the significant unobservable inputs is independent of the other. The profit element and risk premium are estimated based on the requirements of a third-party participant willing to assume the Company’s warranty obligations. The discount rate is determined by reference to the Company’s own credit standing at the fair value measurement date, which improved in the year ended December 31, 2023 contributing to the change in warranty expense captured in “Change in discount rate” in the table above. Under the expected present value technique, increasing the profit element and risk premium input by 100 basis points would result in a $1.2 million increase to the liability. Decreasing the profit element and risk premium by 100 basis points would result in a $1.2 million reduction of the liability. Increasing the discount rate by 100 basis points would result in a $10.1 million reduction of the liability. Decreasing the discount rate by 100 basis points would result in a $10.9 million increase to the liability.