Penumbra IncPEN
Penumbra Inc Fair Value Disclosure
3. Investments and Fair Value of Financial Instruments
Marketable and Non-Marketable Investments
The Company’s marketable and non-marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable and non-marketable investments as of December 31, 2025 and 2024 were as follows (in thousands):
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Securities with net gains or losses in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Loss | Fair Value | ||||||||||||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||||||||
| Commercial paper | $ | 178,584 | $ | 30 | $ | (2) | $ | — | $ | 178,612 | ||||||||||||||||||||||
| Certificate of Deposit | 8,374 | 4 | — | — | 8,378 | |||||||||||||||||||||||||||
| U.S. treasury | 2,801 | — | (1) | — | 2,800 | |||||||||||||||||||||||||||
| Corporate bonds | 168,046 | 143 | (60) | — | 168,129 | |||||||||||||||||||||||||||
| Total | 357,805 | 177 | (63) | — | 357,919 | |||||||||||||||||||||||||||
| Non-marketable investments: | ||||||||||||||||||||||||||||||||
| Non-marketable debt securities | 10,000 | 3,761 | — | — | 13,761 | |||||||||||||||||||||||||||
| Total | 10,000 | 3,761 | — | — | 13,761 | |||||||||||||||||||||||||||
| Total | $ | 367,805 | $ | 3,938 | $ | (63) | $ | — | $ | 371,680 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| Securities with net gains or losses in accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Loss | Fair Value | ||||||||||||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||||||||
| U.S. treasury | $ | 15,744 | $ | 3 | $ | (20) | $ | — | $ | 15,727 | ||||||||||||||||||||||
| Total | 15,744 | 3 | (20) | — | 15,727 | |||||||||||||||||||||||||||
| Non-marketable investments: | ||||||||||||||||||||||||||||||||
| Non-marketable debt securities | 10,000 | 2,850 | — | — | 12,850 | |||||||||||||||||||||||||||
| Total | 10,000 | 2,850 | — | — | 12,850 | |||||||||||||||||||||||||||
| Total | $ | 25,744 | $ | 2,853 | $ | (20) | $ | — | $ | 28,577 | ||||||||||||||||||||||
As of December 31, 2025, the total amortized cost basis of the Company’s available-for-sale debt securities, excluding non-marketable debt securities, in an unrealized loss position exceeded its fair value by $0.1 million. The Company reviewed its available-for-sale securities in an unrealized loss position and concluded that the decline in fair value was not related to credit losses and is recoverable. During the year ended December 31, 2025, no allowance for credit losses was recorded and instead the unrealized losses are reported as a component of accumulated other comprehensive income.
The following tables present the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than and more than twelve months as of December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 months | More than 12 months | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||||||||||||||
| Commercial paper | $ | 37,855 | $ | (2) | $ | — | $ | — | $ | 37,855 | $ | (2) | ||||||||||||||||||||||||||
| Certificate of deposit | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| U.S. treasury | — | — | 1,400 | (1) | 1,400 | (1) | ||||||||||||||||||||||||||||||||
| Corporate bonds | 48,817 | (60) | — | — | 48,817 | (60) | ||||||||||||||||||||||||||||||||
| Total | $ | 86,672 | $ | (62) | $ | 1,400 | $ | (1) | $ | 88,072 | $ | (63) | ||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Less than 12 months | More than 12 months | Total | ||||||||||||||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||||||||||||||
| U.S. treasury | $ | 2,787 | $ | (19) | $ | 2,987 | $ | (1) | $ | 5,774 | $ | (20) | ||||||||||||||||||||||||||
| Total | $ | 2,787 | $ | (19) | $ | 2,987 | $ | (1) | $ | 5,774 | $ | (20) | ||||||||||||||||||||||||||
The contractual maturities of the Company’s marketable investments as of December 31, 2025 were as follows (in thousands):
| December 31, 2025 | ||||||||||||||
| Marketable Investments | Amortized Cost | Fair Value | ||||||||||||
| Due in one year | $ | 208,272 | $ | 208,315 | ||||||||||
| Due in one to five years | 149,533 | 149,604 | ||||||||||||
| Total | $ | 357,805 | $ | 357,919 | ||||||||||
Non-Marketable Investments
During the three months ended March 31, 2024, the Company completed a strategic investment in a privately held company. Under the terms of the investment, the Company paid $10.0 million in exchange for shares of Series B preferred stock which represented an immaterial investment in the outstanding equity securities of the privately held company. The Company determined that the investment did not meet the criteria to be accounted for as an equity method investment under ASC 323. The investment was accounted for as an available-for-sale debt security in accordance with ASC 320 as the preferred stock contains a contingent redemption feature at the Company’s option. The investment is included in other non-current assets on the consolidated balance sheet and changes in fair value are recorded in total other comprehensive income (loss), net of tax.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as 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.
Level 3 - 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 categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The Company classifies its cash equivalents and marketable investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs. The Company classifies its non-marketable investments in preferred stock in privately held companies within Level 3 due to the lack of observable inputs.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.
Non-marketable investments classified within Level 3 of the fair value hierarchy are valued based on unobservable inputs that are supported by little or no market activity. Current financial information of private companies may not be available and consequently the Company estimates the fair value using inputs that are based on the best available information at the measurement date. Key inputs may include the most recent financial information, financial projections, and financing transactions available for the investee and other quantitative and qualitative factors. Additionally, based on the timing, volume, and other characteristics of the available information, the Company may supplement this information by using one or more valuation techniques, including market and income approaches.
The following table summarizes the changes in fair value of our Level 3 non-marketable debt securities for the year ended December 31, 2025 and 2024 (in thousands):
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Balance, beginning of the period | $ | 12,850 | $ | — | ||||||||||
| Total gains included in other comprehensive income (loss) | 911 | 2,850 | ||||||||||||
| Purchases | — | 10,000 | ||||||||||||
| Balance, end of the period | $ | 13,761 | $ | 12,850 | ||||||||||
The Company did not hold any Level 3 marketable investments as of December 31, 2025 or December 31, 2024. During the year ended December 31, 2025 and 2024, the Company did not have any transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy for marketable or non-marketable investments. Additionally, the Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2025 and 2024.
The following tables set forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy (in thousands):
| As of December 31, 2025 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Money market funds | $ | 96,681 | $ | — | $ | — | $ | 96,681 | ||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||
| Commercial paper | — | 178,612 | — | 178,612 | ||||||||||||||||||||||
| Certificate of deposit | — | 8,378 | — | 8,378 | ||||||||||||||||||||||
| U.S. treasury | 2,800 | — | — | 2,800 | ||||||||||||||||||||||
| Corporate bonds | — | 168,129 | — | 168,129 | ||||||||||||||||||||||
| Non-marketable investments | ||||||||||||||||||||||||||
| Non-marketable investments | — | — | 13,761 | 13,761 | ||||||||||||||||||||||
| Total | $ | 99,481 | $ | 355,119 | $ | 13,761 | $ | 468,361 | ||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||
| Commercial paper | $ | — | $ | 139,271 | $ | — | $ | 139,271 | ||||||||||||||||||
| Certificate of deposit | — | 15,995 | — | 15,995 | ||||||||||||||||||||||
| U.S agency securities | — | 3,369 | — | 3,369 | ||||||||||||||||||||||
| Money market funds | 68,133 | — | — | 68,133 | ||||||||||||||||||||||
| U.S. treasury | 23,497 | — | — | 23,497 | ||||||||||||||||||||||
| Marketable investments: | ||||||||||||||||||||||||||
| U.S. treasury | 15,727 | — | — | 15,727 | ||||||||||||||||||||||
| Non-marketable investments | ||||||||||||||||||||||||||
| Non-marketable investments | — | — | 12,850 | 12,850 | ||||||||||||||||||||||
| Total | $ | 107,357 | $ | 158,635 | $ | 12,850 | $ | 278,842 | ||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2016 | Feb 28, 2017 | |
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.