Balance Sheet Information and Fair Value

Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and cash equivalents by category (in thousands):



	As of February 28/29,
	2017		2016
Cash and cash equivalents:
Cash	$	103,726	$	60,252
Money market funds	16,468		58,402
	$	120,194	$	118,654

The following table summarizes our marketable securities by category (in thousands):



	As of February 28, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Asset-backed securities	$	9,597	$	6	$	(28	)	$	9,575
Corporate debt securities	41,822		11		(140		)	41,693
Foreign government bonds	650		—		(1		)	649
Mortgage-backed securities	3,324		—		(22		)	3,302
U.S. government agency securities	12,707		1		(77		)	12,631
U.S. government notes	12,092		2		(29		)	12,065
	$	80,192	$	20	$	(297	)	$	79,915



	As of February 29, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Asset-backed securities	$	4,717	$	9	$	(3	)	$	4,723
Corporate debt securities	19,135		11		(22		)	19,124
Equity securities	3,095		380		—			3,475
Foreign government bonds	205		—		—			205
Mortgage-backed securities	2,341		—		(13		)	2,328
U.S. government agency securities	2,242		6		(14		)	2,234
U.S. government notes	4,279		26		—			4,305
	$	36,014	$	432	$	(52	)	$	36,394

We use the specific-identification method to determine any realized gains or losses from the sale of our marketable securities classified as available-for-sale. For fiscal 2017, we realized gross gains of $1.1 million. For fiscal 2016 and 2015, we realized insignificant amounts of gross gains. For all periods presented, we realized insignificant amounts of gross losses. We reflect these gains and losses as a component of other expense, net in our consolidated statements of operations.

The following table presents gross unrealized losses and fair values for those marketable securities that were in an unrealized loss position aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):



	As of February 28, 2017
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Asset-backed securities	$	6,086	$	(28	)	$	—	$	—		$	6,086	$	(28	)
Corporate debt securities	35,095		(140		)	—		—			35,095		(140		)
Foreign government bonds	650		(1		)	—		—			650		(1		)
Mortgage-backed securities	3,204		(22		)	—		—			3,204		(22		)
U.S. government agency securities	11,306		(65		)	731		(12		)	12,037		(77		)
U.S. government notes	7,265		(29		)	—		—			7,265		(29		)
	$	63,606	$	(285	)	$	731	$	(12	)	$	64,337	$	(297	)



	As of February 29, 2016
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Asset-backed securities	$	1,788	$	(3	)	$	—	$	—		$	1,788	$	(3	)
Corporate debt securities	12,088		(22		)	—		—			12,088		(22		)
Mortgage-backed securities	1,746		(8		)	385		(5		)	2,131		(13		)
U.S. government agency securities	887		(10		)	622		(4		)	1,509		(14		)
	$	16,509	$	(43	)	$	1,007	$	(9	)	$	17,516	$	(52	)

Unrealized losses related to these investments are due to interest rate fluctuations as opposed to changes in credit quality. We do not intend to sell and it is not more likely than not that we would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. As of February 28, 2017, we have recognized no other-than-temporary impairment loss. The following table classifies our marketable debt securities by contractual maturities (in thousands):



	As of February 28, 2017
Due in 1 year	$	21,501
Due in 1 year through 5 years	50,657
Due in 5 years through 10 years	3,583
Due after 10 years	4,174
	$	79,915

Fair Value Measurements

We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:


Level 1:	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.


Level 2:	Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.


Level 3:	Inputs are unobservable inputs based on our assumptions.

Cash equivalents and marketable equity securities are classified within Level 1 because they are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Marketable debt securities and derivative assets are classified within Level 2 if the investments are valued using model driven valuations which use observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Our marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.

We estimated the fair value of our Level 3 contingent consideration liabilities based on a weighted probability assessment of achieving the milestones related to certain of our acquisitions. Significant increases (decreases) in the probability assumptions in isolation would result in a significantly higher (lower) fair value measurement. In developing these estimates, we considered unobservable inputs that are supported by little or no market activity and reflect our own assumptions.

Financial assets measured at fair value on a recurring basis are summarized below (in thousands):



	As of February 28, 2017
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	16,468	$	—	$	—	$	16,468
Marketable securities:
Asset-backed securities	$	—	$	9,575	$	—	$	9,575
Corporate debt securities	$	—	$	41,693	$	—	$	41,693
Foreign government bonds	$	—	$	649	$	—	$	649
Mortgage-backed securities	$	—	$	3,302	$	—	$	3,302
U.S. government agency securities	$	—	$	12,631	$	—	$	12,631
U.S. government notes	$	—	$	12,065	$	—	$	12,065
Other accrued liabilities (current):
Contingent consideration liability	$	—	$	—	$	902	$	902



	As of February 29, 2016
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	58,402	$	—	$	—	$	58,402
Marketable securities:
Asset-backed securities	$	—	$	4,723	$	—	$	4,723
Corporate debt securities	$	—	$	19,124	$	—	$	19,124
Equity securities	$	3,475	$	—	$	—	$	3,475
Foreign government bonds	$	—	$	205	$	—	$	205
Mortgage-backed securities	$	—	$	2,328	$	—	$	2,328
U.S. government agency securities	$	—	$	2,234	$	—	$	2,234
U.S. government notes	$	—	$	4,305	$	—	$	4,305
Other accrued liabilities (current):
Contingent consideration liability	$	—	$	—	$	1,160	$	1,160
Other long-term liabilities:
Contingent consideration liability	$	—	$	—	$	161	$	161

The following table summarizes the change in fair value of our Level 3 contingent consideration amounts (in thousands):



Balance as of February 29, 2016	$	1,321
Total remeasurement recognized in earnings	(419		)
Balance as of February 28, 2017	$	902

The contingent consideration remeasurement for fiscal 2017 was recognized within research and development expense in the consolidated statements of operations. Refer to Note 3 to the Consolidated Financial Statements for additional information.

Assets Measured at Fair Value on a Non-Recurring Basis

We periodically review our intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. If not recoverable, an impairment loss would be calculated based on the excess of the carrying amount over the fair value.

We utilized an income approach to estimate the fair value and the inputs used are classified as Level 3 within the fair value hierarchy due to the significance of unobservable inputs using company-specific information. In fiscal 2016, we determined there was an impairment due to a decrease in the projected cash flows related to certain developed technologies and customer relationships. We recorded an impairment charge of $1.2 million associated with these assets, included as amortization expense within cost of revenue and sales and marketing expenses in the consolidated statements of operations. No impairment charges were recorded in fiscal 2017 and 2015.

Inventories, Net

Inventories, net consisted of the following (in thousands):



	As of February 28/29,
	2017			2016
Raw materials	$	3,479		$	2,459
Finished goods	2,878			3,659
Reserves	(510		)	(470		)
	$	5,847		$	5,648

Deferred Costs

Deferred costs consisted of the following (in thousands):



	As of February 28/29,
	2017		2016
Appliance	$	39,474	$	41,548
Commissions	20,409		17,414
	$	59,883	$	58,962

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):



	As of February 28/29,
	2017			2016
Land	$	9,849		$	9,578
Building	6,549			6,549
Computer hardware and software	32,850			26,450
Vehicles, machinery and equipment	4,797			4,711
Leasehold improvements	4,379			4,401
	58,424			51,689
Accumulated depreciation and amortization	(28,445		)	(19,779		)
	$	29,979		$	31,910

Depreciation and amortization expense related to property and equipment was $9.2 million, $7.7 million and $5.2 million for fiscal 2017, 2016 and 2015, respectively.

Other Investments

As of February 28, 2017 and February 29, 2016, we held approximately $1.8 million and $1.6 million, or approximately 23% and 24% ownership interest, respectively, in stock of a privately-held company that was accounted for under the equity method. We recognize our proportional share of earnings and losses of the investee in other expense, net in the statements of operations and adjust the carrying amount of our investment accordingly. For fiscal 2017 and 2016, our proportionate share of the investee’s losses was $0.3 million and $0.4 million, respectively. For fiscal 2015, our proportionate share of the investee’s earnings and losses was not material.

As of February 28, 2017 and February 29, 2016, we held approximately $2.3 million and $1.6 million, respectively, in stock of a privately-held company, which was accounted for under the cost method.

Other investments are classified in other non-current assets in the consolidated balance sheets and are reviewed periodically for impairment.

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, were as follows (in thousands):



	Foreign Currency Translation Adjustments			Unrealized Gain (Loss) on Available-for- Sale Investments			Total
Balance as of February 29, 2016	$	(4,894	)	$	385		$	(4,509	)
Other comprehensive income (loss) before reclassifications	(60		)	73			13
Amounts reclassified from accumulated other comprehensive income (loss)	—			(730		)	(730		)
Other comprehensive loss	(60		)	(657		)	(717		)
Balance as of February 28, 2017	$	(4,954	)	$	(272	)	$	(5,226	)