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Investments
 9 Months Ended
Jun. 30, 2021
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS
4. INVESTMENTS
The following tables summarize investments by type of security as of June 30, 2021 and September 30, 2020, respectively (amounts shown in thousands):
June 30, 2021:Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
Available-for-sale securities:    
U.S. Treasury, short-term$5,240 $1 $— $5,241 
Asset-backed securities, short-term6,051 1 — 6,052 
Corporate debt securities, short-term127,025 7 (23)127,009 
U.S. Treasury, long-term4,999 — (2)4,997 
Foreign government and agency securities, long-term2,921 — (2)2,919 
Corporate debt securities, long-term28,775 — (48)28,727 
Total$175,011 $9 $(75)$174,945 
September 30, 2020:
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
Available-for-sale securities:
U.S. Treasury, short-term$10,245 $38 $— $10,283 
Asset-backed securities, short-term4,723 36 — 4,759 
Corporate debt securities, short-term24,956 37 — 24,993 
Corporate debt securities, long-term1,966 — (3)1,963 
Total$41,890 $111 $(3)$41,998 

The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income, net in the consolidated statements of operations and other comprehensive income.
The Company determines the appropriate designation of investments at the time of purchase and reevaluates such designation as of each balance sheet date. All of the Company’s investments are designated as available-for-sale debt securities. As of June 30, 2021 and September 30, 2020, the Company’s short-term investments have maturity dates of less than one year from the balance sheet date and the Company’s long-term investments have maturity dates of greater than one year from the balance sheet date.
Available-for-sale marketable securities are carried at fair value as determined by quoted market prices for identical or similar assets, with unrealized gains and losses, net of taxes, and reported as a separate component of stockholders’ equity. Management reviews the fair value of the portfolio at least monthly and evaluates individual securities with fair value below amortized cost at the balance sheet date. For debt securities, in order to determine whether impairment is other-than-temporary, management must conclude whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. If management intends to sell an impaired debt security or it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of an other-than-temporary impairment on debt securities related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an other-than-temporary impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of stockholders’ equity in other comprehensive income. No other-than-temporary impairment charges were recognized in the three and nine months ended June 30, 2021 and 2020. There were no realized gains or losses from the sale of available-for-sale securities during the three and nine months ended June 30, 2021 and 2020.
Fair Value Measurements and Disclosures
FASB ASC Topic 820, Fair Value Measurements (“ASC 820”) defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 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 under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy 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:
•Level 1—Quoted prices in active markets for identical assets or liabilities;
•Level 2—Inputs other than Level 1 inputs that are observable, either directly or indirectly, 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—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, convertible senior notes hedge, acquisition-related contingent consideration, and embedded conversion derivative as of June 30, 2021 and September 30, 2020, respectively (amounts shown in thousands):
June 30, 2021:BalanceQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
    
Short-term investments:    
U.S. Treasury$5,241 $5,241 $— $— 
Asset-backed securities6,052 — 6,052 — 
Corporate debt securities61,394 — 61,394 — 
Commercial paper65,615 — 65,615 — 
Total short-term investments at fair value138,302 5,241 133,061 — 
Long-term investments:
U.S. Treasury4,997 4,997 — — 
Foreign government and agency securities2,919 — 2,919 — 
Asset-backed securities— — — — 
Corporate debt securities28,727 — 28,727 — 
Total long-term investments at fair value36,643 4,997 31,646 — 
Convertible senior notes hedge54,334 — 54,334 — 
Total assets at fair value$229,279 $10,238 $219,041 $— 
Liabilities:
Current liabilities:
Acquisition-related contingent consideration$9,950 $— $— $9,950 
Non-current liabilities:
Acquisition-related contingent consideration5,330 — — 5,330 
Embedded conversion derivative54,334 — 54,334 — 
Total liabilities at fair value$69,614 $— $54,334 $15,280 
September 30, 2020:BalanceQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
    
Short-term investments:    
U.S. Treasury$10,283 $10,283 $— $— 
Asset-backed securities, short-term4,759 — 4,759 — 
Corporate debt securities9,619 — 9,619 — 
Commercial paper15,374 — 15,374 — 
Total short-term investments at fair value40,035 10,283 29,752 — 
Long-term investments:
U.S. Treasury— — — — 
Corporate debt securities1,963 — 1,963 — 
Total long-term investments at fair value1,963 — 1,963 — 
Total assets at fair value$41,998 $10,283 $31,715 $— 
Liabilities:
Acquisition-related contingent consideration$753 $— $— $753 
Total liabilities at fair value$753 $— $— $753 
•Level 1: Includes investments in U.S. Government and agency securities, which are valued based on recently executed transactions in the same or similar securities.
•Level 2: Convertible Senior Notes. On February 5, 2021, the Company issued $155.3 million aggregate principal amount of 0.75% 2026 Notes as further described in Note 8. “Convertible Senior Notes.” Concurrently with the issuance of the 2026 Notes, the Company entered into the Notes Hedge and Warrant Transactions which in combination are intended to reduce the potential dilution from the conversion of the 2026 Notes. Initially, conversion of the 2026 Notes will be settled solely in cash; however, following satisfaction of certain share reservation conditions, conversion of the 2026 Notes may be settled in cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election. The embedded conversion derivative associated with the 2026 Notes currently meets the criteria for an embedded derivative liability which required bifurcation and separate accounting. The Notes Hedge and Warrant Transactions are also currently classified as a derivative asset and as an increase to additional paid-in capital, respectively, on the Company’s consolidated balance sheet. On the date the Company increases its authorized shares of Common Stock and satisfies the share reservation condition, the Notes Hedge and embedded conversion derivative will be reclassified to additional paid-in capital as the equity classification criteria is met. Changes in the fair value of these derivatives prior to being classified in equity are reflected in Other income, net, in the Company’s consolidated statement of operations and other comprehensive income.
The fair value of the Notes Hedge and the embedded conversion derivative are estimated using a Black-Scholes model. Based on the fair value hierarchy, the Company classified the Notes Hedge and the embedded conversion derivative as Level 2 as significant inputs are observable, either directly or indirectly. The significant inputs and assumptions used in the models to calculate the fair value of the derivatives include the Common Stock price, exercise price of the derivatives, risk-free interest rate, volatility, annual coupon rate and remaining contractual term.
The Company carries the 2026 Notes at face value less unamortized discount and issuance costs on its consolidated balance sheets. Based on the fair value hierarchy, the Company classified the 2026 Notes as Level 2 as they are not actively traded.
•Level 3: As of June 30, 2021, total acquisition-related contingent consideration of $10.0 million and $5.3 million is recorded in acquisition-related contingent consideration and other non-current liabilities, respectively, in the consolidated balance sheets. The following table includes a summary of the contingent consideration measured at fair value using significant unobservable inputs (Level 3) during the nine months ended June 30, 2021 (amounts shown in thousands):
Balance at September 30, 2020$753 
Contingent consideration associated with ID R&D Acquisition15,280 
Foreign currency effect on contingent consideration29 
Payment of contingent consideration(782)
Balance at June 30, 2021$15,280