4. FAIR VALUE MEASUREMENT
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which consists of the following:
•Level 1: Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
•Level 2: Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•Level 3: Valuation is based on significant unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following tables represent the fair value hierarchy of the Company’s investments as of September 30, 2025 and 2024, respectively (amounts in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2025 | Balance | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets: | | | | | | | |
| Short-term investments: | | | | | | | |
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| U.S. Government and agency securities, short-term | $ | 998 | | | $ | — | | | $ | 998 | | | $ | — | |
| Commercial paper | 19,575 | | | — | | | 19,575 | | | — | |
| Corporate debt securities | 18,285 | | | — | | | 18,285 | | | — | |
| Total short-term investments at fair value | 38,858 | | | — | | | 38,858 | | | — | |
| Long-term investments: | | | | | | | |
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| Corporate debt securities | 3,464 | | | — | | | 3,464 | | | — | |
| Total long-term investments at fair value | 3,464 | | | — | | | 3,464 | | | — | |
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| Total assets at fair value | $ | 42,322 | | | $ | — | | | $ | 42,322 | | | $ | — | |
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| September 30, 2024 | Balance | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Assets: | | | | | | | |
| Short-term investments: | | | | | | | |
| U.S. Treasury | $ | 3,836 | | | $ | — | | | $ | 3,836 | | | $ | — | |
| Commercial paper | 15,984 | | | — | | | 15,984 | | | — | |
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| Corporate debt securities | 17,064 | | | — | | | 17,064 | | | — | |
| Total short-term investments at fair value | 36,884 | | | — | | | 36,884 | | | — | |
| Long-term investments: | | | | | | | |
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| Corporate debt securities | 11,410 | | | — | | | 11,410 | | | — | |
| Total long-term investments at fair value | 11,410 | | | — | | | 11,410 | | | — | |
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| Total assets at fair value | $ | 48,294 | | | $ | — | | | $ | 48,294 | | | $ | — | |
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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.