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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

4. Fair Value Measurements

Cash Equivalents and Short-Term Investments

The Company’s cash equivalents are comprised of investments in money market funds that are classified as Level 1 of the fair value hierarchy. The Company’s money market funds are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. The Company’s short-term investments are comprised of agency bonds, commercial paper, corporate notes and treasury bonds. All short-term investments have been classified within Level 1 or Level 2 of the fair value hierarchy because of the sufficient observable inputs for revaluation. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Balance as of March 31, 2022	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (i)	$	28,796	$	—	$	—	$	28,796
Agency bonds (ii)		—		32,514		—		32,514
Corporate notes (ii)		—		20,196		—		20,196
Treasury bonds (ii)		221,461		—		—		221,461
Total assets	$	250,257	$	52,710	$	—	$	302,967

Balance as of December 31, 2021	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (i)	$	9,562	$	—	$	—	$	9,562
Agency bonds (ii)		—		42,538		—		42,538
Commercial paper (ii)		—		61,884		—		61,884
Corporate notes (iii)		—		30,351		—		30,351
Treasury bonds (ii)		197,552		—		—		197,552
Total assets	$	207,114	$	134,773	$	—	$	341,887

(i)	Included in cash and cash equivalents on the condensed consolidated balance sheets.

(ii)	Included in short-term investments on the condensed consolidated balance sheets.

(iii)

Included in cash and cash equivalents or short-term investments on the condensed consolidated balance sheets.

Convertible Senior Notes

As of March 31, 2022 and December 31, 2021, the fair value of the 2.75% convertible senior notes due 2025 was $204.0 million and $212.0 million, respectively. The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (See Note 7).

- 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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