Outset Medical, Inc. Fair Value Disclosure
4. Fair Value Measurements
The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
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December 31, 2025 |
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Valuation |
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Amortized |
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Gross |
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Gross |
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Aggregate |
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Assets: |
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Cash equivalents: |
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Money market funds |
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Level 1 |
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$ |
24,253 |
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|
$ |
— |
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|
$ |
— |
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|
$ |
24,253 |
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Short-term investments: |
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U.S. Treasury securities |
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Level 1 |
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77,622 |
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|
|
109 |
|
|
|
— |
|
|
|
77,731 |
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Corporate debt |
|
Level 2 |
|
|
47,111 |
|
|
|
56 |
|
|
|
(1 |
) |
|
|
47,166 |
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Commercial paper |
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Level 2 |
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5,909 |
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4 |
|
|
|
— |
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|
|
5,913 |
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Foreign entity bond |
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Level 2 |
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3,126 |
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4 |
|
|
|
— |
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|
|
3,130 |
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Total cash equivalents and |
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|
|
$ |
158,021 |
|
|
$ |
173 |
|
|
$ |
(1 |
) |
|
$ |
158,193 |
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December 31, 2024 |
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Valuation |
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Amortized |
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Gross |
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Gross |
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Aggregate |
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Assets: |
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Cash equivalents: |
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|
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|
||||
Money market funds |
|
Level 1 |
|
$ |
110,979 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
110,979 |
|
Short-term investments: |
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|
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|
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Corporate debt |
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Level 2 |
|
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34,629 |
|
|
|
43 |
|
|
|
(1 |
) |
|
|
34,671 |
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Total cash equivalents and |
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|
|
$ |
145,608 |
|
|
$ |
43 |
|
|
$ |
(1 |
) |
|
$ |
145,650 |
|
The Company’s Level 2 debt securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs. The Company validates the prices provided by its third-party pricing services by understanding the models used, obtaining market values from other pricing sources and confirming those securities traded in active markets.
The unrealized losses for securities in an unrealized loss position for more than 12 months as of December 31, 2025 and 2024 were immaterial. For the years ended December 31, 2025, 2024, and 2023, the Company did not recognize credit loss related to available-for-sales debt securities.
As of December 31, 2025, the remaining contractual maturities for short-term investments were as follows (in thousands):
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Aggregate Fair Value |
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Due within one year |
|
$ |
124,373 |
|
After one but within five years |
|
|
9,567 |
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Total |
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$ |
133,940 |
|
The estimated fair value of the term loans as of December 31, 2025 and 2024 were $104.5 million and $212.1 million, respectively, and were determined using a discounted cash flow calculation with a discount rate at 11.7% and 9.5%, respectively.
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.