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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The following tables present information about financial instruments measured at fair value on a recurring basis (in thousands):
September 30, 2024
TotalLevel 1Level 2Level 3
Assets:
Cash equivalents$338,948 $338,948 $— $— 
Total assets$338,948 $338,948 $— $— 
December 31, 2023
TotalLevel 1Level 2Level 3
Assets:
Cash equivalents$57,890 $57,890 $— $— 
Total assets$57,890 $57,890 $— $— 
Liabilities:
Convertible notes derivative liability$25,400 $— $— $25,400 
Total liabilities$25,400 $— $— $25,400 
The Company’s cash equivalents are held in money market funds, which are measured using quoted prices for identical assets in active markets and are therefore classified as Level 1 in the fair value hierarchy.
As of December 31, 2023, the estimated fair value of the Company’s convertible notes was $95.4 million. Long-term debt is recorded at its carrying value in the condensed balance sheets, which may differ from its fair value. The fair value was estimated using Level 3 inputs in a Monte Carlo simulation.
Convertible Notes Derivative Liability
The convertible notes contained certain embedded features that were required to be bifurcated and recorded separately from the debt host as a derivative liability at fair value. Refer to Note 5 – Long-Term Debt for further information.
The fair value of the derivative liability was determined using a Monte Carlo simulation and a “with-and-without” valuation methodology. The inputs used to estimate the fair value of the derivative instrument include the probability of potential settlement scenarios, the expected timing of such settlement, and an expected volatility determined with reference to historical stock volatilities of
comparable guideline public companies. The derivative liability is classified as Level 3 in the fair value hierarchy.
The following table summarizes the activity related to the fair value of the convertible notes derivative liability (in thousands):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Fair value at beginning of period$— $22,100 $25,400 $20,400 
Change in fair value— 1,500 3,085 3,200 
Settlement of derivative liability— — (28,485)— 
Fair value at end of period$— $23,600 $— $23,600 
Concurrently upon closing of the IPO, the $75.1 million of convertible notes automatically converted into 1,177,087 shares of the Company’s Class A common stock, and the conversion was accounted for as a debt extinguishment. Immediately prior to the extinguishment, a $1.4 million loss was recognized from the change in fair value of the embedded derivative liability.
Equity Investment
On July 2, 2019, the Company acquired 628,930 shares of the Series A Preferred Stock of a privately held software company in exchange for cash consideration of $0.8 million. The investment represents a minority interest, and the Company has determined that it does not have significant influence over the company. The preferred shares comprising the investment are illiquid, and the fair value is not readily determinable. The Company has elected the measurement alternative to measure this investment at cost, less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.
During the three and nine months ended September 30, 2024 and 2023, the Company recorded no adjustments to the equity investment. Since inception, the Company has recorded positive cumulative adjustments in the equity investment of $8.3 million and negative cumulative adjustments of $4.5 million.