Fair Value Measurements
The following tables present information about financial instruments measured at fair value on a recurring basis (in thousands):
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| December 31, 2025 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash equivalents | $ | 183,423 | | | $ | 183,423 | | | $ | — | | | $ | — | |
| Total | $ | 183,423 | | | $ | 183,423 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash equivalents | $ | 346,070 | | | $ | 346,070 | | | $ | — | | | $ | — | |
| Total | $ | 346,070 | | | $ | 346,070 | | | $ | — | | | $ | — | |
The Company’s cash equivalents are held in money market funds, which are measured using quoted prices for identical assets in active markets and are therefore classified as Level 1 in the fair value hierarchy.
Equity Investment
On July 2, 2019, the Company acquired 628,930 shares of the Series A Preferred Stock of a privately-held software company in exchange for cash consideration of $0.8 million. The investment represents a minority interest, and the Company has determined that it does not have significant influence over the company. The preferred shares comprising the investment are illiquid, and the fair value is not readily determinable. The Company has elected the measurement alternative to measure this
investment at cost, less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.
During the years ended December 31, 2025, 2024, and 2023, the Company recorded no adjustments to the equity investment. Since inception, the Company has recorded positive cumulative adjustments in the equity investment of $8.3 million and negative cumulative adjustments of $4.5 million.
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.