Marketable Securities and Fair Value Measurements

As of September 30, 2017 and December 31, 2016, the estimated fair value of our short-term and long-term marketable securities, classified as available for sale, are as follows (in thousands):

Short-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	62,348	$	—	$	—		$	62,348
Corporate bonds	164,661		31		(61		)	164,631
U.S. government agency bonds	7,769		—		(8		)	7,761
U.S. government treasury bonds	78,370		2		(33		)	78,339
Certificates of deposit	3,375		—		—			3,375
Total marketable securities, short-term	$	316,523	$	33	$	(102	)	$	316,454

Long-term



September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	7,990	$	3	$	—		$	7,993
Corporate bonds	45,815		40		(18		)	45,837
U.S. government treasury bonds	5,025		—		(13		)	5,012
Total marketable securities, long-term	$	58,830	$	43	$	(31	)	$	58,842

Short-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	42,397	$	—	$	(6	)	$	42,391
Corporate bonds	122,788		22		(121		)	122,689
Municipal securities	5,852		—		(5		)	5,847
U.S. government agency bonds	28,903		9		(4		)	28,908
U.S. government treasury bonds	45,146		7		(7		)	45,146
Certificates of deposit	6,000		—		—			6,000
Total marketable securities, short-term	$	251,086	$	38	$	(143	)	$	250,981

Long-term



December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	6,805	$	—	$	(16	)	$	6,789
Corporate bonds	40,889		8		(85		)	40,812
U.S. government treasury bonds	12,016		5		(16		)	12,005
Asset-backed securities	177		—		—			177
Total marketable securities, long-term	$	59,887	$	13	$	(117	)	$	59,783

Cash equivalents are not included in the table above as the gross unrealized gains and losses are not material. We have no short-term or long-term investments that have been in a continuous material unrealized loss position for greater than twelve months as of September 30, 2017 and December 31, 2016. Amounts reclassified to earnings from accumulated other comprehensive income (loss), net related to unrealized gains or losses were not material for the three and nine months ended September 30, 2017 and 2016. For the three and nine months ended September 30, 2017 and 2016, realized gains or losses were not material.

Our fixed-income securities investment portfolio consists of investments that have a maximum effective maturity of 27 months. The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. The unrealized losses are due primarily to changes in credit spreads and interest rates. We expect to realize the full value of all these investments upon maturity or sale. The weighted average remaining duration of these securities was approximately 7 months for both September 30, 2017 and December 31, 2016.

As the carrying value approximates the fair value for our short-term and long-term marketable securities shown in the tables above, the following table summarizes the fair value of our short-term and long-term marketable securities classified by maturity as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017		December 31, 2016
One year or less	$	316,454	$	250,981
Due in greater than one year	58,842		59,783
Total available for sale short-term and long-term marketable securities	$	375,296	$	310,764

Fair Value Measurements

We measure the fair value of financial assets as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Our Level 1 assets consist of money market funds and U.S. government treasury bonds. We did not hold any Level 1 liabilities as of September 30, 2017 and December 31, 2016.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities 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 asset or liability.

Our Level 2 assets consist of commercial paper, corporate bonds, certificates of deposit, U.S. government agency bonds and our Israeli funds that are mainly invested in insurance policies. We obtain fair values for our Level 2 investments. Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates. We did not hold any Level 2 liabilities as of September 30, 2017 and December 31, 2016.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. Certain investments in private companies contain embedded derivatives, which do not require bifurcation as we elected to measure these investments at fair value. Our Level 3 assets consist of long-term notes receivable. We did not hold any Level 3 liabilities as of September 30, 2017 and December 31, 2016.

The following table summarizes the reconciliation of assets measured and recorded at fair value on a recurring basis using significant unobservable inputs Level 3 (in thousands):



	Long-term Notes Receivable
Balance as of December 31, 2016	$	2,047
Additional notes receivable issued	2,000
Accrued interest receivable	54
Change in fair value recognized in earnings	56
Balance as of September 30, 2017	$	4,157

Refer to Note 9 "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for more information on our investment with a privately held company.

The following tables summarize our financial assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands):



Description	Balance as of September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	177,486	$	177,486	$	—	$	—
Commercial paper	13,295		—		13,295		—
Short-term investments:
Commercial paper	62,348		—		62,348		—
Corporate bonds	164,631		—		164,631		—
U.S. government agency bonds	7,761		—		7,761		—
U.S. government treasury bonds	78,339		78,339		—		—
Certificates of deposit	3,375		—		3,375		—
Long-term investments:
U.S. government agency bonds	7,993		—		7,993		—
Corporate bonds	45,837		—		45,837		—
U.S. government treasury bonds	5,012		5,012		—		—
Prepaid expenses and other current assets:
Israeli funds	3,310		—		3,310		—
Other assets:
Long-term notes receivable	4,157		—		—		4,157
	$	573,544	$	260,837	$	308,550	$	4,157



Description	Balance as of December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Observable Inputs (Level 3)
Cash equivalents:
Money market funds	$	87,179	$	87,179	$	—	$	—
Commercial paper	2,499		—		2,499		—
Corporate bonds	750		—		750		—
Short-term investments:
Commercial paper	42,391		—		42,391		—
Corporate bonds	122,689		—		122,689		—
Municipal securities	5,847		—		5,847		—
U.S. government agency bonds	28,908		—		28,908		—
U.S. government treasury bonds	45,146		45,146		—		—
Certificates of deposit	6,000		—		6,000		—
Long-term investments:
U.S. government agency bonds	6,789		—		6,789		—
Corporate bonds	40,812		—		40,812		—
U.S. government treasury bonds	12,005		12,005		—		—
Asset-backed securities	177		—		177		—
Prepaid expenses and other current assets:
Israeli funds	2,956		—		2,956		—
Other assets:
Long-term notes receivable	2,047		—		—		2,047
	$	406,195	$	144,330	$	259,818	$	2,047

Derivative Financial Instruments

We have in the past and may in the future enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations associated with certain assets and liabilities. We had no foreign exchange forward contracts outstanding as of September 30, 2017 and no net gain or loss from the settlement of foreign currency forward contracts during the three and nine months ended September 30, 2017. The net gain or loss on forward contracts was not material during the three and nine months ended September 30, 2016.