Fair Value Measurements

6 Months Ended

Jun. 30, 2022

As of June 30, 2022, the Company carried cash equivalents, marketable investments and Private Warrants. The Company had previously carried Public Warrants which were exercised and redeemed in March 2021.

Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Observable inputs, which include unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices 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.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.

The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations, alternative pricing sources or U.S. Government Treasury yield of appropriate term. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.

Given that the transfer of Private Warrants to anyone outside of a small group of individuals constituting the sponsors of Gores Metropoulos, Inc. would result in the Private Warrants having substantially the same terms as the Public Warrants, management determined that the fair value of each Private Warrant is the same as that of a Public Warrant, with an insignificant adjustment for short-term marketability restrictions, as of December 31, 2021. As of June 30, 2022, management determined the fair value of the Private Warrants using observable inputs in the Black-Scholes valuation model, which used the remaining term of warrants of 3.43 years, volatility of 84.2% and a risk-free rate of 2.99%. Accordingly, the Private Warrants are classified as Level 3 financial instruments.

The following table presents changes in Level 3 liabilities relating to Private Warrants measured at fair value (in thousands):


	Private Warrants
Balance as of December 31, 2021	$	31,230
Change in fair value prior to exercises	4,713
Reduction in liability due to exercises	(19,003)
Change in fair value of outstanding warrants	(12,589)
Balance as of June 30, 2022	$	4,351

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):


	Fair Value (in thousands) Measured as of June 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	28,107	$	—	$	—	$	28,107

Commercial paper	—		7,498		—		7,498
Total cash equivalents	$	28,107	$	7,498	$	—	$	35,605
Marketable investments:
U.S. treasury securities	$	237,757	$	—	$	—	$	237,757
U.S. agency and government sponsored securities	—		4,881		—		4,881
Commercial paper	—		74,514		—		74,514
Corporate bonds	—		145,882		—		145,882
Asset-backed securities	—		31,395		—		31,395
Equity investments	34,119		—		—		34,119
Total marketable investments	$	271,876	$	256,672	$	—	$	528,548
Liabilities:

Private Warrants	$	—	$	—	$	4,351	$	4,351
Total warrant liabilities	$	—	$	—	$	4,351	$	4,351


	Fair Value (in thousands) Measured as of December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	25,654	$	—	$	—	$	25,654


Commercial paper	—		950		—		950

Total cash equivalents	$	25,654	$	950	$	—	$	26,604
Marketable investments:
U.S. treasury securities	$	161,465	$	—	$	—	$	161,465
U.S. agency and government sponsored securities	—		4,970		—		4,970
Commercial paper	—		39,834		—		39,834
Corporate bonds	—		165,190		—		165,190
Asset-backed securities	—		46,466		—		46,466
Marketable equity investments	44,216		—		—		44,216
Total marketable investments	$	205,681	$	256,460	$	—	$	462,141
Liabilities:

Private Warrants	—		—		31,230		31,230
Total warrant liabilities	$	—	$	—	$	31,230	$	31,230

As of June 30, 2022 and December 31, 2021, the estimated fair value of the Company’s outstanding Convertible Senior Notes was $353.8 million and $669.4 million, respectively. The fair value was determined based on the quoted price of the Convertible Senior Notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 in the fair value hierarchy. See Note 7 for further information on the Company’s Convertible Senior Notes.

The Company’s other financial instruments’ fair value, including accounts receivable, accounts payable and other current liabilities, approximate its carrying value due to the relatively short maturity of those instruments. The carrying amounts of the Company’s finance leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.

- 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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