Fair Value Measurements
Fair value measurements may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.
Financial assets measured at fair value on a recurring basis as of December 31, 2025 and 2024 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2025 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 70,731 | | | $ | — | | | $ | — | | | $ | 70,731 | |
| Total cash equivalents | 70,731 | | | — | | | — | | | 70,731 | |
| Investment securities: | | | | | | | |
| U.S. government obligations | 370,512 | | | — | | | — | | | 370,512 | |
| Agency obligations | — | | | 43,969 | | | — | | | 43,969 | |
| Corporate debt securities | — | | | 511,872 | | | — | | | 511,872 | |
| Total investment securities | 370,512 | | | 555,841 | | | — | | | 926,353 | |
| Other non-current assets: | | | | | | | |
| Deferred compensation plan (1) | 3,249 | | | — | | | — | | | 3,249 | |
| Total assets measured at fair value | $ | 444,492 | | | $ | 555,841 | | | $ | — | | | $ | 1,000,333 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 249,116 | | | $ | — | | | $ | — | | | $ | 249,116 | |
| Corporate debt securities | — | | | 5,314 | | | — | | | 5,314 | |
| Total cash equivalents | 249,116 | | | 5,314 | | | — | | | 254,430 | |
| Investment securities: | | | | | | | |
| U.S. government obligations | 543,344 | | | — | | | — | | | 543,344 | |
| Agency obligations | — | | | 57,931 | | | — | | | 57,931 | |
| Corporate debt securities | — | | | 488,249 | | | — | | | 488,249 | |
| Total investment securities | 543,344 | | | 546,180 | | | — | | | 1,089,524 | |
| Other non-current assets: | | | | | | | |
| Deferred compensation plan (1) | 829 | | | — | | | — | | | 829 | |
| Total assets measured at fair value | $ | 793,289 | | | $ | 551,494 | | | $ | — | | | $ | 1,344,783 | |
(1) Consists of mutual fund investments held in the Rabbi Trust related to the Company's non-qualified deferred compensation plan.
There were no transfers into or out of Level 3 during the years ended December 31, 2025 and 2024.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.