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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2023

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, the Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

In situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis. These assets, including fixed assets and operating lease right-of-use asset, are subject to fair value adjustments whenever events or circumstances indicate

the carrying value of the assets may not be recoverable and are subsequently written down to fair value when impaired. During the years ended December 31, 2023, 2022 and 2021, the Company had no impairment charges related to its fixed assets or operating lease right-of-use asset.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s financial assets measured at fair value on a recurring basis were as follows (in thousands):


	Total		Fair value measurement as of December 31, 2023
			Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents:
Money market funds	$	12,671	$	12,671	$	—	$	—
U.S. Treasury securities	199,121		199,121		—		—
Total	$	211,792	$	211,792	$	—	$	—


	Total		Fair value measurement as of December 31, 2022
			Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents:
Money market funds	$	35,915	$	35,915	$	—	$	—
U.S. Treasury securities	151,511		151,511		—		—
Total	$	187,426	$	187,426	$	—	$	—

The amounts reported in the Consolidated Balance Sheets as current assets or current liabilities, including Cash, Restricted cash, Accounts receivable, net, Current contract assets, net, Other current assets, Accounts payable and Accrued expenses, each approximate their fair value due to the short-term maturities of the instruments.

Financial Instruments Not Carried at Fair Value

The following table provides the fair value of financial assets that are not measured at fair value:


	December 31, 2023				December 31, 2022
	Carrying value		Fair value		Carrying value		Fair value
Liabilities:
Debt	$	144,045	$	144,045	$	147,433	$	147,433
Total	$	144,045	$	144,045	$	147,433	$	147,433

The carrying amount of the Company’s debt approximates its fair value due to its variable interest rate. The fair value was determined using the Adjusted SOFR as of December 31, 2023, and 2022, plus an applicable spread, a Level 2 classification in the fair value hierarchy.

The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers in or out of any level for the years ended December 31, 2023 and 2022.

- 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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