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FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2024
Investments, All Other Investments [Abstract] |
FINANCIAL INSTRUMENTS | FINANCIAL INSTRUMENTS Fair Value of Financial Instruments Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy established under GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: •Level 1: quoted prices in active markets for identical assets or liabilities; •Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, 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 assets or liabilities; and •Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider an active market as one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, we view an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our non-performance risk, or that of our counterparty, is considered in determining the fair values of liabilities and assets, respectively. We classify our cash deposits and money market funds within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted market prices. We classify our investments as Level 2 instruments based on market pricing and other observable inputs. We did not classify any of our investments within Level 3 of the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The carrying amount of our accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses and other liabilities, current, approximate fair value due to their short maturities. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table sets forth the fair value of our financial assets and liabilities that were measured on a recurring basis:
| September 30, 2024 |  | December 31, 2023
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 58,703 |  |  | $ | 19,279 |  |  | $ | — |  |  | $ | 77,982 |  |  | $ | 70,172 |  |  | $ | 109,739 |  |  | $ | — |  |  | $ | 179,911 |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial paper | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,947 |  |  | — |  |  | 9,947 |
Corporate debt securities | — |  |  | 68,178 |  |  | — |  |  | 68,178 |  |  | — |  |  | 88,579 |  |  | — |  |  | 88,579 |
U.S. government & agency securities | — |  |  | 324,987 |  |  | — |  |  | 324,987 |  |  | — |  |  | 352,979 |  |  | — |  |  | 352,979 |
Total investments | — |  |  | 393,165 |  |  | — |  |  | 393,165 |  |  | — |  |  | 451,505 |  |  | — |  |  | 451,505 |
Short-term restricted cash | 690 |  |  | — |  |  | — |  |  | 690 |  |  | 300 |  |  | — |  |  | — |  |  | 300 |
Long-term restricted cash | 1,532 |  |  | — |  |  | — |  |  | 1,532 |  |  | 2,422 |  |  | — |  |  | — |  |  | 2,422 |
Total assets measured at fair value | $ | 60,925 |  |  | $ | 412,444 |  |  | $ | — |  |  | $ | 473,369 |  |  | $ | 72,894 |  |  | $ | 561,244 |  |  | $ | — |  |  | $ | 634,138 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration | $ | — |  |  | $ | — |  |  | $ | 20,650 |  |  | $ | 20,650 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,550 |  |  | $ | 19,550 |
Total liabilities measured at fair value | $ | — |  |  | $ | — |  |  | $ | 20,650 |  |  | $ | 20,650 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,550 |  |  | $ | 19,550 |
We classify contingent consideration, which was incurred in connection with the acquisition of Apton, within Level 3, as factors used to develop the estimate of fair value include unobservable inputs that are not supported by market activity and are significant to the fair value. Estimates and assumptions used in the Monte Carlo simulation include risk-adjusted forecasted revenues for products and services leveraging Apton's technology and an estimated credit spread. We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the five-year anniversary of the closing date of the acquisition. As of September 30, 2024, the key input used in the determination of the fair value included projected revenues of the high-throughput short-read products and services leveraging Apton's technology. A decrease in the projected revenues would result in a decrease in the fair value of the liability. The discount rates used are the sum of the U.S. risk-free rate and the estimated subordinated credit spread for B- credit rating, which ranges from 6.7% to 7.1%. Changes in our estimated subordinated credit spread can result in changes in the fair value of the contingent consideration liability, where a lower credit spread may result in an increased liability valuation. Changes in the estimated fair value of the contingent consideration liability for the nine months ended September 30, 2024 were as follows:
(in thousands) | Level 3
Beginning balance as of December 31, 2023 | $ | 19,550 |
Change in estimated fair value | 1,100 |
Ending balance as of September 30, 2024 | $ | 20,650 |
Changes to the fair value are recorded as change in fair value of contingent consideration in the Condensed Consolidated Statement of Operations and Comprehensive Loss. For the nine months ended September 30, 2024, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year. The following tables summarize our cash, cash equivalents, restricted cash, and investments:
| As of September 30, 2024
(in thousands) | Amortized Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair Value
Cash and cash equivalents | $ | 77,980 |  |  | $ | 2 |  |  | $ | — |  |  | $ | 77,982 |
Investments: |  |  |  |  |  |  |
Corporate debt securities | 67,563 |  |  | 620 |  |  | (5) |  |  | 68,178 |
U.S. government & agency securities | 324,052 |  |  | 962 |  |  | (27) |  |  | 324,987 |
Total investments | 391,615 |  |  | 1,582 |  |  | (32) |  |  | 393,165 |
Total cash, cash equivalents and investments | $ | 469,595 |  |  | $ | 1,584 |  |  | $ | (32) |  |  | $ | 471,147 |
Short-term restricted cash | $ | 690 |  |  | $ | — |  |  | $ | — |  |  | $ | 690 |
Long-term restricted cash | $ | 1,532 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,532 |
| As of December 31, 2023
(in thousands) | Amortized Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair Value
Cash and cash equivalents | $ | 179,958 |  |  | $ | 13 |  |  | $ | (60) |  |  | $ | 179,911 |
Investments: |  |  |  |  |  |  |
Commercial paper | 9,947 |  |  | — |  |  | — |  |  | 9,947 |
Corporate debt securities | 88,263 |  |  | 373 |  |  | (57) |  |  | 88,579 |
U.S. government & agency securities | 353,029 |  |  | 478 |  |  | (528) |  |  | 352,979 |
Total investments | 451,239 |  |  | 851 |  |  | (585) |  |  | 451,505 |
Total cash, cash equivalents and investments | $ | 631,197 |  |  | $ | 864 |  |  | $ | (645) |  |  | $ | 631,416 |
Short-term restricted cash | $ | 300 |  |  | $ | — |  |  | $ | — |  |  | $ | 300 |
Long-term restricted cash | $ | 2,422 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,422 |
The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of September 30, 2024:
(in thousands) | Fair Value
Due in one year or less | $ | 321,789 |
Due after one year through five years | 90,655 |
Total | $ | 412,444 |
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Investment income included in other income, net on the Condensed Consolidated Statement of Operations and Comprehensive Loss was $6.0 million and $19.8 million for the three and nine months ended September 30, 2024, respectively, and $9.2 million and $25.0 million for the three and nine months ended September 30, 2023, respectively.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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