Marketable Securities and Fair Value Measurements

As of March 31, 2018 and December 31, 2017, 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



March 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	20,447	$	—	$	(1	)	$	20,446
Corporate bonds	106,583		1		(333		)	106,251
U.S. government agency bonds	8,999		—		(52		)	8,947
U.S. government treasury bonds	28,146		—		(51		)	28,095
Certificates of deposit	1,001		—		—			1,001
Total marketable securities, short-term	$	165,176	$	1	$	(437	)	$	164,740

Long-term



March 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	7,032	$	—	$	(66	)	$	6,966
Corporate bonds	3,265		1		(20		)	3,246
Total marketable securities, long-term	$	10,297	$	1	$	(86	)	$	10,212

Short-term



December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	58,503	$	—	$	(1	)	$	58,502
Corporate bonds	145,728		3		(174		)	145,557
U.S. government agency bonds	3,013		—		(7		)	3,006
U.S. government treasury bonds	60,650		—		(70		)	60,580
Certificates of deposit	4,386		—		—			4,386
Total marketable securities, short-term	$	272,280	$	3	$	(252	)	$	272,031

Long-term



December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	15,023	$	—	$	(68	)	$	14,955
Corporate bonds	25,067		2		(76		)	24,993
Total marketable securities, long-term	$	40,090	$	2	$	(144	)	$	39,948

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 March 31, 2018 and December 31, 2017. Amounts reclassified to earnings from accumulated other comprehensive income (loss), net related to unrealized gains or losses were not material for the three months ended March 31, 2018 and 2017. For the three months ended March 31, 2018 and 2017, realized gains or losses were not material.

Our fixed-income securities investment portfolio consists of investments that have a maximum effective maturity of 40 months on any individual security. 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 five months and six months as of March 31, 2018 and December 31, 2017, respectively.

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 March 31, 2018 and December 31, 2017 (in thousands):



	March 31, 2018		December 31, 2017
One year or less	$	164,740	$	272,031
Due in greater than one year	10,212		39,948
Total available for sale short-term and long-term marketable securities	$	174,952	$	311,979

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 March 31, 2018 and December 31, 2017.

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, U.S. government agency bonds, certificates of deposit 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 March 31, 2018 and December 31, 2017.

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 convertible short-term notes receivable.

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):



	Notes Receivable
Balance as of December 31, 2017	$	4,476
Accrued interest receivable	25
Change in fair value recognized in earnings	358
Balance as of March 31, 2018	$	4,859

Subsequent to March 31, 2018, in April 2018, the convertible notes receivable issued to a privately held company was converted into equity shares as a result of qualified financing secured by the company. We did not hold any Level 3 liabilities as of March 31, 2018 and December 31, 2017.

The following tables summarize our financial assets measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017 (in thousands):



Description	Balance as of March 31, 2018		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	$	255,373	$	255,373	$	—	$	—
Short-term investments:
Commercial paper	20,446		—		20,446		—
Corporate bonds	106,251		—		106,251		—
U.S. government agency bonds	8,947		—		8,947		—
U.S. government treasury bonds	28,095		28,095		—		—
Certificates of deposit	1,001		—		1,001		—
Long-term investments:
U.S. government agency bonds	6,966		—		6,966		—
Corporate bonds	3,246		—		3,246		—
Prepaid expenses and other current assets:
Israeli funds	3,114		—		3,114		—
Short-term notes receivable	4,859		—		—		4,859
	$	438,298	$	283,468	$	149,971	$	4,859



Description	Balance as of December 31, 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	$	253,155	$	253,155	$	—	$	—
Commercial paper	7,246		—		7,246		—
Corporate bonds	2,016		—		2,016		—
Short-term investments:
Commercial paper	58,502		—		58,502		—
Corporate bonds	145,557		—		145,557		—
U.S. government agency bonds	3,006		—		3,006		—
U.S. government treasury bonds	60,580		60,580		—		—
Certificates of deposit	4,386		—		4,386		—
Long-term investments:
U.S. government agency bonds	14,955		—		14,955		—
Corporate bonds	24,993		—		24,993		—
Prepaid expenses and other current assets:
Israeli funds	3,075		—		3,075		—
Short-term notes receivable	4,476		—		—		4,476
	$	581,947	$	313,735	$	263,736	$	4,476

Derivative Financial Instruments

In March 2018, we began entering into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables. These forward contracts are classified within level 2 of the fair value hierarchy. There was no net gain or loss from the settlement of foreign currency forward contracts during the three months ended March 31, 2018. As of March 31, 2018, the fair value of foreign exchange forward contracts outstanding was not material.

The following table presents the gross notional value of all our foreign exchange forward contracts outstanding as of March 31, 2018 (in thousands):



	March 31, 2018
	Local Currency Amount	Notional Contract Amount (USD)
Euro	€40,000	$	49,244
British Pound	£9,000	12,615
		$	61,859