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Fair Value Measurements and Available for Sale Investments

9 Months Ended

Sep. 30, 2022

Fair Value Measurements and Available for Sale Investments

Fair Value Measurements

Our financial instruments consist principally of cash, cash equivalents, short-term and long-term investments, receivables, and accounts payable. Certain of our financial assets and liabilities have been recorded at fair value in the consolidated balance sheet in accordance with the accounting standards for fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

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 supported by little or no market activities, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes our assets and liabilities that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy:


	Fair Value Measurements at End of Period Using:
(in thousands)	Fair Value		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At September 30, 2022
Money market funds(1)	$	46,030	$	46,030	$	—	$	—
Mutual funds(1)	12,610		12,610		—		—
U.S. Treasury securities(2)	414,774		414,774		—		—
Certificates of deposit(2)	2,845		—		2,845		—
Agency securities(2)	59,223		—		59,223		—
Commercial and corporate obligations(1)(2)	55,088		—		55,088		—

At December 31, 2021
Money market funds(1)	$	445,647	$	445,647	$	—	$	—
Mutual funds(1)	50,326		50,326		—		—
U.S. Treasury securities(2)	87,831		87,831		—		—
Certificates of deposit(2)	3,766		—		3,766		—
Agency securities(2)	5,814		—		5,814		—
Commercial and corporate obligations(2)	22,054		—		22,054		—

(1) Included in cash and cash equivalents in the accompanying consolidated balance sheets.

(2) Included in short-term or long-term investments in the accompanying consolidated balance sheets depending on the respective maturity date.

The following methods and assumptions were used to estimate the fair value of our financial instruments for which it is practicable to estimate that value:

Marketable Securities. For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. For fair values determined by Level 2 inputs, which utilize quoted prices in less active markets for similar assets, the level of judgment required to estimate fair value is also considered relatively low.

Fair Value of Other Financial Instruments

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses approximate fair value due to their short-term nature.

Available for Sale Investments

We invest our excess cash in agency securities, debt instruments of financial institutions and corporations, commercial obligations, and U.S. Treasury securities, which we classify as available for sale investments. These investments are carried at fair value and are included in the tables above. The aggregate market value, cost basis, and gross unrealized gains and losses of available for sale investments by security type, classified in cash equivalents, short-term and long-term investments as of September 30, 2022 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	60,174	$	4	$	(955)	$	59,223

Certificates of deposit(2)	2,920		—		(75)		2,845
Commercial and corporate obligations(3)	56,140		—		(1,052)		55,088
U.S. Treasury securities(4)	418,496		1		(3,723)		414,774
Total available for sale investments	$	537,730	$	5	$	(5,805)	$	531,930

(1) Of our outstanding agency securities, $40.3 million have maturity dates of less than one year and $18.9 million have maturity dates between one to two years as of September 30, 2022.

(2) Of our outstanding certificates of deposit, $2.1 million have maturity dates of less than one year and $0.7 million have a maturity date of between one to two years as of September 30, 2022.

(3) Of our outstanding commercial and corporate obligations, $30.7 million have maturity dates of less than one year and $24.4 million have a maturity date of between one to two years as of September 30, 2022.

(4) Of our outstanding U.S. Treasury securities, $311.3 million have maturity dates of less than one year and $103.5 million have a maturity date of between one to two years as of September 30, 2022.

The aggregate market value, cost basis, and gross unrealized gains and losses of available for sale investments by security type, classified in short-term and long-term investments as of December 31, 2021 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	5,821	$	—	$	(7)	$	5,814
Certificates of deposit(2)	3,770		—		(4)		3,766
Commercial and corporate obligations(3)	22,094		2		(42)		22,054
US Treasury securities(4)	87,995		—		(164)		87,831
Total available for sale investments	$	119,680	$	2	$	(217)	$	119,465

(1) Of our outstanding agency securities, $1.0 million have maturity dates of less than one year and $4.8 million have a maturity date of between one to two years as of December 31, 2021.

(2) Of our outstanding certificates of deposit, $1.3 million have a maturity date of less than one year and $2.5 million have a maturity date of between one to two years as of December 31, 2021.

(3) Of our outstanding commercial and corporate obligations, $4.8 million have maturity dates of less than one year and $17.3 million have a maturity date of between one to two years as of December 31, 2021.

(4) Of our outstanding U.S. Treasury securities, $45.3 million have maturity dates of less than one year and $42.5 million have a maturity date of between one to two years as of December 31, 2021.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 30, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	September 30, 2022
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	54,218	$	(955)	$	—	$	—	$	54,218	$	(955)
Commercial and corporate obligations	51,400		(982)		3,688		(70)		55,088		(1,052)
Certificates of deposit	2,146		(56)		699		(19)		2,845		(75)
US Treasury Securities	389,766		(3,723)		—		—		389,766		(3,723)
Total	$	497,530	$	(5,716)	$	4,387	$	(89)	$	501,917	$	(5,805)


	December 31, 2021
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	4,477	$	(7)	$	—	$	—	$	4,477	$	(7)
Certificates of Deposit	2,870		(4)		—		—		2,870		(4)
Commercial and corporate obligations	18,524		(42)		—		—		18,524		(42)
US Treasury Securities	82,823		(164)		—		—		82,823		(164)
Total	$	108,694	$	(217)	$	—	$	—	$	108,694	$	(217)

As of September 30, 2022 and December 31, 2021, unrealized losses on available for sale investments were $5.8 million and $0.2 million, respectively. Unrealized losses of $0.1 million, on available for sale investments that were in an unrealized loss position for greater than 12 months as of September 30, 2022, were considered immaterial. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, accordingly, no allowance for credit losses were recorded.

- 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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