v3.24.2.u1
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

The Company measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at June 30, 2024 and December 31, 2023:
 

 

 

June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Cash equivalents and investments:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

10,553

 

 

$

—

 

 

$

—

 

 

$

10,553

 

Commercial paper

 

 

—

 

 

 

24,099

 

 

 

—

 

 

 

24,099

 

Corporate bonds

 

 

—

 

 

 

243,346

 

 

 

—

 

 

 

243,346

 

U.S. Government agency securities

 

 

—

 

 

 

132,948

 

 

 

—

 

 

 

132,948

 

U.S. Treasury securities

 

 

—

 

 

 

1,157,787

 

 

 

—

 

 

 

1,157,787

 

Strategic investments

 

 

—

 

 

 

—

 

 

 

31,625

 

 

 

31,625

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

—

 

 

 

4,053

 

 

 

—

 

 

 

4,053

 

Total assets

 

$

10,553

 

 

$

1,562,233

 

 

$

31,625

 

 

$

1,604,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency derivative liabilities

 

$

—

 

 

$

390

 

 

$

—

 

 

$

390

 

Total liabilities

 

$

—

 

 

$

390

 

 

$

—

 

 

$

390

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Cash equivalents and investments:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

20,003

 

 

$

—

 

 

$

—

 

 

$

20,003

 

Commercial paper

 

 

—

 

 

 

13,504

 

 

 

—

 

 

 

13,504

 

Corporate bonds

 

 

—

 

 

 

237,406

 

 

 

—

 

 

 

237,406

 

U.S. Government agency securities

 

 

—

 

 

 

122,758

 

 

 

—

 

 

 

122,758

 

U.S. Treasury securities

 

 

—

 

 

 

960,763

 

 

 

—

 

 

 

960,763

 

Strategic investments

 

 

—

 

 

 

—

 

 

 

13,159

 

 

 

13,159

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

—

 

 

 

4,053

 

 

 

—

 

 

 

4,053

 

Total

 

$

20,003

 

 

$

1,338,484

 

 

$

13,159

 

 

$

1,371,646

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At June 30, 2024 and December 31, 2023, Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities. Certain non-marketable investments measured at fair value on a

non-recurring basis are classified as Level 3 as their fair value measurements may include a combination of observable and unobservable inputs.

Foreign currency derivative assets and liabilities are classified as Level 2 and are valued using observable inputs, such as quotations on forward and spot rates for currencies, interest rates and credit derivative market rates.

As of June 30, 2024, the fair value of the 2025 Notes was $963.9 million. The fair value was determined based on the quoted price of the 2025 Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 within the fair value hierarchy.

For certain other financial instruments, including accounts receivable, accounts payable, and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Restricted cash is comprised of money market funds related to landlord guarantees for leased facilities. These restricted cash balances have been excluded from our cash and cash equivalents balance on our consolidated balance sheets.

Strategic investments that consist of non-controlling equity investments without readily determinable fair values in privately held companies for which the Company does not have the ability to exercise significant influence are measured under the measurement alternative method. These investments are accounted for under the cost method of accounting. Under the cost method of accounting, the non-marketable equity securities are carried at cost less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the statement of operations. The Company holds $40.7 million of strategic investments without readily determinable fair values at June 30, 2024 and $41.1 million of strategic investments without readily determinable fair values at December 31, 2023. These investments are included in other assets on the consolidated balance sheets.

In the three months ended June 30, 2024, the Company adjusted the fair value of its strategic investments and recognized a gain of $2.1 million and also recorded an impairment of the carrying value of its strategic investments of $0.5 million, resulting in a net gain of $1.6 million. In six months ended June 30, 2024, the Company adjusted the fair value of its strategic investments and recognized a gain of $18.5 million and also recorded an impairment of the carrying value of its strategic investments of $4.1 million, resulting in a net gain of $14.4 million, which is reported in the consolidated statements of operations as other income.

The following tables summarize the composition of our short- and long-term investments at June 30, 2024 and December 31, 2023.
 

 

 

June 30, 2024

 

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Aggregate
Fair Value

 

 

 

(in thousands)

 

Commercial paper

 

$

21,612

 

 

$

—

 

 

$

—

 

 

$

21,612

 

Corporate bonds

 

 

244,160

 

 

 

8

 

 

 

(822

)

 

 

243,346

 

U.S. Government agency securities

 

 

133,399

 

 

 

5

 

 

 

(456

)

 

 

132,948

 

U.S. Treasury securities

 

 

751,132

 

 

 

—

 

 

 

(1,216

)

 

 

749,916

 

Total

 

$

1,150,303

 

 

$

13

 

 

$

(2,494

)

 

$

1,147,822

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Aggregate
Fair Value

 

 

 

(in thousands)

 

Commercial paper

 

$

11,513

 

 

$

—

 

 

$

—

 

 

$

11,513

 

Corporate bonds

 

 

237,662

 

 

 

422

 

 

 

(678

)

 

 

237,406

 

U.S. Government agency securities

 

 

122,414

 

 

 

520

 

 

 

(176

)

 

 

122,758

 

U.S. Treasury securities

 

 

953,457

 

 

 

1,087

 

 

 

(273

)

 

 

954,271

 

Total

 

$

1,325,046

 

 

$

2,029

 

 

$

(1,127

)

 

$

1,325,948

 

For all of our securities for which the amortized cost basis was greater than the fair value at June 30, 2024, the Company has concluded that there is no plan to sell the security nor is it more likely than not that the Company would be required to sell the security before its anticipated recovery. The Company further assesses whether the decline in fair value below amortized cost is due to credit or non-credit related factors by considering the extent to which fair value is less than amortized cost, credit ratings, the financial health of the industry and sector of the issuer, the overall risk profile of the securities, overall macroeconomic conditions, and more. As of June 30, 2024, no allowance for credit losses in investments was recorded.

Contractual Maturities

The contractual maturities of short-term and long-term investments held at June 30, 2024 and December 31, 2023 are as follows:

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Amortized
Cost Basis

 

 

Aggregate
Fair Value

 

 

Amortized
Cost Basis

 

 

Aggregate
Fair Value

 

 

 

(in thousands)

 

 

(in thousands)

 

Due within one year

 

$

939,531

 

 

$

937,830

 

 

$

1,000,447

 

 

$

1,000,245

 

Due after 1 year through 2 years

 

 

210,772

 

 

 

209,992

 

 

 

324,599

 

 

 

325,703

 

Total

 

$

1,150,303

 

 

$

1,147,822

 

 

$

1,325,046

 

 

$

1,325,948