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Fair Value Measurements and Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements and Fair Value of Financial Instruments

3. Fair Value Measurements and Fair Value of Financial Instruments

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.

Level 1 securities consist of highly liquid money market funds for which the carrying amounts approximate their fair values due to their short maturities. U.S. Treasury securities are valued using Level 1 inputs based on unadjusted, quoted prices in active markets that are observable at the measurement date for identical assets or liabilities. Level 2 securities, consisting of corporate debt, commercial paper, U.S. government agency securities and asset-backed securities, are measured based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, we rely on non-binding quotes from our investment managers, which are based on proprietary valuation models of

independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments or historical pricing trends of securities relative to our peers. To validate the fair value determinations provided by our investment managers, we review the pricing movement in the context of overall market trends and trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy. We had no Level 3 securities either as of December 31, 2022 or 2021.

 

There were no transfers within the hierarchies during the years ended December 31, 2022 or 2021.

We invested in money market funds as of December 31, 2020. In January 2021, we started to invest some of our funds in corporate debt, commercial paper, U.S. Treasury securities, U.S. government agency securities and asset-backed securities. The following tables set forth our financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy at December 31, 2022 and 2021:

 

 

 

 

December 31, 2022

 

 

Fair Value
Hierarchy Level

 

Amortized
Cost

 

 

Gross
Unrealized Gains

 

 

Gross
Unrealized Losses

 

 

Fair
Value

 

Assets

 

 

(in thousands)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

Level 1

 

$

56,198

 

 

$

—

 

 

$

—

 

 

$

56,198

 

Money market funds

Level 1

 

 

680,934

 

 

 

—

 

 

 

—

 

 

 

680,934

 

Commercial paper

Level 2

 

 

92,581

 

 

 

—

 

 

 

(34

)

 

 

92,547

 

U.S. government agency securities

Level 2

 

 

4,978

 

 

 

—

 

 

 

—

 

 

 

4,978

 

Total cash and cash equivalents

 

 

 

834,691

 

 

 

—

 

 

 

(34

)

 

 

834,657

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

Level 1

 

 

37,651

 

 

 

—

 

 

 

(70

)

 

 

37,581

 

Commercial paper

Level 2

 

 

28,161

 

 

 

—

 

 

 

(17

)

 

 

28,144

 

Corporate debt

Level 2

 

 

25,402

 

 

 

—

 

 

 

(131

)

 

 

25,271

 

Asset backed securities

Level 2

 

 

6,954

 

 

 

20

 

 

 

—

 

 

 

6,974

 

U.S. government agency securities

Level 2

 

 

25,427

 

 

 

19

 

 

 

(148

)

 

 

25,298

 

Total investments

 

 

 

123,595

 

 

 

39

 

 

 

(366

)

 

 

123,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets measured at fair value

 

 

$

958,286

 

 

$

39

 

 

$

(400

)

 

$

957,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

Fair Value
Hierarchy Level

 

Amortized
Cost

 

 

Gross
Unrealized Gains

 

 

Gross
Unrealized Losses

 

 

Fair
Value

 

Assets

 

 

(in thousands)

 

Cash

Level 1

 

$

27,834

 

 

$

—

 

 

$

—

 

 

$

27,834

 

Money market funds

Level 1

 

 

17,555

 

 

 

—

 

 

 

—

 

 

 

17,555

 

Commercial paper

Level 2

 

 

23,597

 

 

 

—

 

 

 

(1

)

 

 

23,596

 

Total cash and cash equivalents

 

 

 

68,986

 

 

 

-

 

 

 

(1

)

 

 

68,985

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

Level 1

 

 

45,290

 

 

 

—

 

 

 

(73

)

 

 

45,217

 

Commercial paper

Level 2

 

 

61,941

 

 

 

—

 

 

 

(22

)

 

 

61,919

 

Corporate debt

Level 2

 

 

58,498

 

 

 

—

 

 

 

(74

)

 

 

58,424

 

Asset backed securities

Level 2

 

 

13,899

 

 

 

 

 

 

(25

)

 

 

13,874

 

U.S. government agency securities

Level 2

 

 

24,714

 

 

 

—

 

 

 

(46

)

 

 

24,668

 

Total investments

 

 

 

204,342

 

 

 

—

 

 

 

(240

)

 

 

204,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets measured at fair value

 

 

$

273,328

 

 

$

-

 

 

$

(241

)

 

$

273,087

 

 

 

The following table presents the contractual maturities of our investments as of December 31, 2022 (in thousands):

 

 

 

December 31, 2022

 

 

 

Fair Value

 

Due in less than one year

 

$

96,719

 

Due in one to five years

 

 

26,549

 

Total

 

$

123,268