Fair Value Measurements
Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type are presented in the following table (in thousands):
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| | December 31, 2025 | |
| | Level 1 | | Level 2 | | Level 3 | | Total | |
| Financial assets: | | | | | | | | |
| Money market funds | $ | 254,376 | | | $ | — | | | $ | — | | | $ | 254,376 | | |
| Corporate debt securities | — | | | 72,277 | | | — | | | 72,277 | | |
| U.S. government bonds | — | | | 17,016 | | | — | | | 17,016 | | |
| Commercial paper | — | | | 5,456 | | | — | | | 5,456 | | |
| Total financial assets | $ | 254,376 | | | $ | 94,749 | | | $ | — | | | $ | 349,125 | | |
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| | December 31, 2024 | |
| | Level 1 | | Level 2 | | Level 3 | | Total | |
| Financial assets: | | | | | | | | |
| Money market funds | $ | 202,965 | | | $ | — | | | $ | — | | | $ | 202,965 | | |
| U.S. treasury bills | $ | 2,964 | | | $ | — | | | $ | — | | | $ | 2,964 | | |
| Corporate debt securities | $ | — | | | $ | 37,978 | | | $ | — | | | $ | 37,978 | | |
| U.S. government bonds | $ | — | | | $ | 26,904 | | | $ | — | | | $ | 26,904 | | |
| Agency bonds | $ | — | | | $ | 2,492 | | | $ | — | | | $ | 2,492 | | |
| Total financial assets | $ | 205,929 | | | $ | 67,374 | | | $ | — | | | $ | 273,303 | | |
The carrying amounts of certain financial instruments such as cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses as of December 31, 2025 and 2024 approximate their related fair values due to their short-term nature.
Money market funds and U.S. treasury bills are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.
Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The Company reviews trading activity and pricing for these investments as of each measurement date.
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.