Fair Value Disclosure

3 Months Ended

Sep. 30, 2020

Fair Value Disclosure The financial instruments of the Company measured at fair value on a recurring basis are included in cash equivalents, other assets and accrued liabilities. The Company classifies its financial instruments, except for its investment in an auction rate security, within Level 1 or Level 2 in the fair value hierarchy because the Company uses quoted prices in active markets or alternative pricing sources and models using market observable inputs to determine their fair value.

The Company’s investment in an auction rate security is classified within Level 3 of the fair value hierarchy as the determination of its fair value was not based on observable inputs as of September 30, 2020 and June 30, 2020. The Company is using the discounted cash flow method to estimate the fair value of the auction rate security at each period end and the following assumptions: (i) the expected yield based on observable market rate of similar securities, (ii) the security coupon rate that is reset monthly, (iii) the estimated holding period and (iv) a liquidity discount. The liquidity discount assumption is based on the management estimate of lack of marketability discount of similar securities and is determined based on the analysis of financial market trends over time, recent redemptions of securities and other market activities. The Company performed a sensitivity analysis and applying a change of either plus or minus 100 basis points in the liquidity discount does not result in a significantly higher or lower fair value measurement of the auction rate security as of September 30, 2020.

Financial Assets and Liabilities Measured on a Recurring Basis

The following table sets forth the Company’s financial instruments as of September 30, 2020 and June 30, 2020, which are measured at fair value on a recurring basis by level within the fair value hierarchy. These are classified based on the lowest level of input that is significant to the fair value measurement (in thousands):


September 30, 2020	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	841	$	—	$	—	$	841
Certificates of deposit (2)	—		845		—		845
Auction rate security	—		—		1,571		1,571
Total assets measured at fair value	$	841	$	845	$	1,571	$	3,256

Liabilities
Performance awards liability (3)	$	—	$	2,196	$	—	$	2,196
Total liabilities measured at fair value	$	—	$	2,196	$	—	$	2,196

June 30, 2020	Level 1		Level 2		Level 3		Asset at Fair Value
Assets
Money market funds (1)	$	1,163	$	—	$	—	$	1,163
Certificates of deposit (2)	—		836		—		836
Auction rate security	—		—		1,571		1,571
Total assets measured at fair value	$	1,163	$	836	$	1,571	$	3,570

Liabilities
Performance awards liability (3)	$	—	$	2,100	$	—	$	2,100
Total liabilities measured at fair value	$	—	$	2,100	$	—	$	2,100

__________________________

(1) $0.0 million and $0.4 million in money market funds are included in cash and cash equivalents and $0.8 million and $0.8 million in money market funds are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of September 30, 2020 and June 30, 2020, respectively.

(2) $0.2 million and $0.2 million in certificates of deposit are included in cash and cash equivalents, $0.3 million and $0.3 million in certificates of deposit are included in prepaid expenses and other assets, and $0.3 million and $0.3 million in certificates of deposit are included in restricted cash, non-current in other assets in the condensed consolidated balance sheets as of September 30, 2020 and June 30, 2020, respectively.

(3) As of September 30, 2020 and June 30, 2020, the current portion of the performance awards liability of $2.2 million and $1.5 million, respectively, is included in accrued liabilities and the noncurrent portion of $0.0 million and $0.6 million, respectively, is included in other long-term liabilities in the condensed consolidated balance sheets.

On a quarterly basis, the Company also evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. For the three months ended September 30, 2020, the credit losses related to the Company’s investments was not significant.

The Company estimated the fair value of performance awards using the Monte-Carlo simulation model and classified them within Level 2 of the fair value hierarchy as estimates are based on the observable inputs. The significant inputs used in estimating the fair value of the awards as of September 30, 2020 and June 30, 2020 are as follows:

September 30, 2020

Stock Price as of Period End

Performance Period

Risk-free Rate

Volatility

Dividend Yield

$26.4

1.0 - 1.75 years

0.13%

53.58%

—%

June 30, 2020

Stock Price as of Period End

Performance Period

Risk-free Rate

Volatility

Dividend Yield

$28.39

1.25 - 2.0 years

0.16%

53.75%

—%

There was no movement in the balances of the Company's financial assets measured at fair value on a recurring basis, consisting of investment in an auction rate security, using significant unobservable inputs (Level 3) for the three months ended September 30, 2020 and 2019.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three months ended September 30, 2020 and 2019.

The following is a summary of the Company’s investment in an auction rate security as of September 30, 2020 and June 30, 2020 (in thousands):


	September 30, 2020 and June 30, 2020
	Cost Basis		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Auction rate security	$	1,750	$	—	$	(179)	$	1,571

No gain or loss was recognized in other comprehensive income for the auction rate security for the three months ended September 30, 2020 and 2019.

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of September 30, 2020 and June 30, 2020, total debt of $36.0 million and $29.4 million, respectively, is reported at amortized cost. This outstanding debt is classified as Level 2 as it is not actively traded. The amortized cost of the outstanding debt approximates the fair value.

- 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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