Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, the Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.
In situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would
use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis. These assets, including property and equipment, capitalized software development costs and operating lease right-of-use assets, are subject to fair value adjustments whenever events or circumstances indicate the carrying value of the assets may not be recoverable and are subsequently written down to fair value when impaired. During the years ended December 31, 2024, 2023 and 2022, the Company had no significant impairment charges related to its property and equipment, capitalized software development costs or operating lease right-of-use assets.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company’s financial assets measured at fair value on a recurring basis were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total | | Fair value measurement as of December 31, 2024 |
| | Level 1 | | Level 2 | | Level 3 |
| | (in thousands) |
| Cash equivalents: | | | | | | | | |
| Money market funds | | $ | 238,198 | | | $ | 238,198 | | | $ | — | | | $ | — | |
| | | | | | | | |
| Total | | $ | 238,198 | | | $ | 238,198 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total | | Fair value measurement as of December 31, 2023 |
| | Level 1 | | Level 2 | | Level 3 |
| | (in thousands) |
| Cash equivalents: | | | | | | | | |
| Money market funds | | $ | 12,671 | | | $ | 12,671 | | | $ | — | | | $ | — | |
| U.S. Treasury securities | | 199,121 | | | 199,121 | | | — | | | — | |
| Total | | $ | 211,792 | | | $ | 211,792 | | | $ | — | | | $ | — | |
The amounts reported in the Consolidated Balance Sheets as current assets or current liabilities, including Cash, Restricted cash, Accounts receivable, net, Current contract assets, net, Other current assets, Accounts payable and Accrued expenses, each approximate their fair value due to the short-term maturities of the instruments.
The carrying amount of the Company’s debt approximates its fair value due to its variable interest rate. The fair value is determined using the Adjusted SOFR, plus an applicable spread, a Level 2 classification in the fair value hierarchy. Refer to Note 5 - Long-term Debt for the carrying amount of the Company’s debt.
The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers in or out of any level for the years ended December 31, 2024 and 2023.