FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The Company’s cash equivalents consist of money market funds and highly liquid investments with original maturities of 90 days or less from the date of purchase. The Company classifies cash equivalents and short-term investments within Level 1 or Level 2 of the fair value hierarchy.
The following tables present the Company’s cash equivalents and short-term investments by significant investment category and fair value level as of December 31, 2025 and 2024 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2025 |
| Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| Level 1: | | | | | | | |
| Money market funds | $ | 35,710 | | | $ | — | | | $ | — | | | $ | 35,710 | |
| U.S. government securities | 136,310 | | | 125 | | | — | | | 136,435 | |
| Level 2: | | | | | | | |
| Corporate paper | 90,701 | | | 43 | | | (10) | | | 90,734 | |
| Total | $ | 262,721 | | | $ | 168 | | | $ | (10) | | | $ | 262,879 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| Level 1: | | | | | | | |
| Money market funds | $ | 34,267 | | | $ | — | | | $ | — | | | $ | 34,267 | |
| U.S. government securities | 98,716 | | | 81 | | | (2) | | | 98,795 | |
| Level 2: | | | | | | | |
| Corporate paper | 60,669 | | | 16 | | | (11) | | | 60,674 | |
| Total | $ | 193,652 | | | $ | 97 | | | $ | (13) | | | $ | 193,736 | |
There have been no transfers of assets between fair value levels during the periods presented. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
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.