Fair Value of Financial Instruments

12 Months Ended

Jul. 31, 2022

Available-for-sale investments within cash equivalents and investments consist of the following (in thousands):


	July 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities	$	37,572	$	—	$	(586)	$	36,986
Commercial paper	197,998		—		—		197,998
Corporate bonds	320,474		8		(4,880)		315,602
U.S. Government bonds	47,014		—		(1,312)		45,702
Asset-backed securities	54,782		—		(611)		54,171
Foreign government bonds	15,109		—		(361)		14,748
Municipal bonds	205		—		—		205
Certificates of deposit	43,715		—		—		43,715
Money market funds	349,492		—		—		349,492

Total	$	1,066,361	$	8	$	(7,750)	$	1,058,619


	July 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities	$	85,165	$	15	$	—	$	85,180
Commercial paper	389,837		—		—		389,837
Corporate bonds	371,374		623		(37)		371,960
U.S. Government bonds	64,401		62		(1)		64,462
Asset-backed securities	47,925		29		(7)		47,947
Foreign government bonds	33,177		10		(2)		33,185
Municipal bonds	1,685		—		—		1,685
Certificates of deposit	82,250		—		—		82,250
Money market funds	125,118		—		—		125,118
Strategic convertible debt investment*	1,000		—		—		1,000
Total	$	1,201,932	$	739	$	(47)	$	1,202,624

*At original cost

The Company does not consider any portion of the unrealized losses at July 31, 2022 to be credit losses. The Company has recorded the securities at fair value in its consolidated balance sheets, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss). The amount of unrealized gains and losses reclassified into earnings are based on the specific identification of the securities sold. The realized gains and losses from sales of securities are presented in the consolidated statements of comprehensive income (loss).

The following table summarizes the contractual maturities of the Company’s available-for-sale investments measured at fair value (in thousands):


	July 31, 2022
	Less Than 12 Months		12 months or greater		Total
U.S. Government agency securities	$	36,986	$	—	$	36,986
Commercial paper	197,998		—		197,998
Corporate bonds	203,960		111,642		315,602
U.S. Government bonds	25,429		20,273		45,702
Asset-backed securities	8,627		45,544		54,171
Foreign government bonds	4,700		10,048		14,748
Municipal bonds	205		—		205
Certificates of deposit	43,715		—		43,715
Money market funds	349,492		—		349,492

Total	$	871,112	$	187,507	$	1,058,619

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability 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 must maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company applies the three-level valuation hierarchy when measuring the fair value of certain assets and liabilities:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

Level 3—Unobservable inputs that are supported by little or no market activity, which require the Company to develop its own assumptions.

Available-for-sale investments

The following tables summarize the Company’s available-for-sale investments measured at fair value, by level within the fair value hierarchy (in thousands):


	July 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
U.S. Government agency securities	$	—	$	10,000	$	—	$	10,000
Commercial paper	—		132,066		—		132,066

Certificates of deposit	—		9,689		—		9,689
Money market funds	349,492		—		—		349,492

Total cash equivalents	349,492		151,755		—		501,247
Short-term investments:
U.S. Government agency securities	—		26,986		—		26,986
Commercial paper	—		65,932		—		65,932
Corporate bonds	—		203,960		—		203,960
U.S. Government bonds	—		25,429		—		25,429
Asset-backed securities	—		8,627		—		8,627
Foreign government bonds	—		4,700		—		4,700
Municipal bonds	—		205		—		205
Certificates of deposit	—		34,026		—		34,026

Total short-term investments	—		369,865		—		369,865
Long-term investments:


Corporate bonds	—		111,642		—		111,642
U.S. Government bonds	—		20,273		—		20,273
Asset-backed securities	—		45,544		—		45,544
Foreign government bonds	—		10,048		—		10,048



Total long-term investments	—		187,507		—		187,507
Total	$	349,492	$	709,127	$	—	$	1,058,619


	July 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Commercial paper	$	—	$	115,825	$	—	$	115,825


Money market funds	125,118		—		—		125,118

Total cash equivalents	125,118		115,825		—		240,943
Short-term investments:
U.S. Government agency securities	—		69,183		—		69,183
Commercial paper	—		274,012		—		274,012
Corporate bonds	—		225,384		—		225,384
U.S. Government bonds	—		45,320		—		45,320
Asset-backed securities	—		9,036		—		9,036
Foreign government bonds	—		28,353		—		28,353
Municipal bonds	—		1,480		—		1,480
Certificates of deposit	—		80,750		—		80,750
Strategic convertible debt investment	—		—		1,000		1,000
Total short-term investments	—		733,518		1,000		734,518
Long-term investments:
U.S. Government agency securities	—		15,997		—		15,997

Corporate bonds	—		146,576		—		146,576
U.S. Government bonds	—		19,142		—		19,142
Asset-backed securities	—		38,911		—		38,911
Foreign government bonds	—		4,832		—		4,832
Municipal bonds	—		205		—		205
Certificates of deposit	—		1,500		—		1,500


Total long-term investments	—		227,163		—		227,163
Total	$	125,118	$	1,076,506	$	1,000	$	1,202,624

Convertible Senior Notes

The fair value of the Convertible Senior Notes was $387.6 million and $452.0 million at July 31, 2022 and 2021, respectively. The Company estimates the fair value of the Convertible Senior Notes using commonly accepted valuation methodologies and market-based risk measurements that are directly observable, such as unadjusted quoted prices in markets that are not active (Level 2). The Company carries the Convertible Senior Notes at initial fair value less unamortized debt discount and issuance costs on its consolidated balance sheets. For further information on the Convertible Senior Notes, see Note 7.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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