XML 22 R11.htm IDEA: XBRL DOCUMENT

Fair value of financial instruments

3 Months Ended

Sep. 30, 2020

Cash equivalents and short-term investments

We measure certain financial instruments at fair value on a recurring basis. We utilize a hierarchy, which consists of three levels, for disclosure of the inputs used to determine the fair value of our financial instruments.

Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.

Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, 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 assets or liabilities.

Level 3 valuations are based upon information that is unobservable and significant to the overall fair value measurement.

Where applicable, we use quoted prices in active markets for similar assets to determine fair value of Level 2 short-term investments. If quoted prices in active markets for identical assets are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. If quoted prices for identical or similar assets are not available, we use third-party valuations utilizing underlying assets assumptions.

All of our cash equivalents and short-term investments are classified within Level 1 or Level 2. As of September 30, 2020 and June 30, 2020, we did not have any short-term investments that require Level 3 valuations. The fair values of these financial instruments were determined using the following inputs at September 30, 2020 (in thousands):


	Fair Value Measurements at September 30, 2020 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market mutual funds	$	5,303	$	5,303	$	—	$	—





Total cash equivalents	5,303		5,303		—		—
Short-term investments:
U.S. treasury securities	1,559		1,559		—		—
U.S. agency securities	3,232		—		3,232		—
Asset-backed securities	16,951		—		16,951		—
Municipal securities	6,363		—		6,363		—


Corporate bonds	42,400		—		42,400		—
Total short-term investments	70,505		1,559		68,946		—
Cash equivalents and short-term investments	$	75,808	$	6,862	$	68,946	$	—

The fair values of our financial instruments were determined using the following inputs at June 30, 2020 (in thousands):


	Fair Value Measurements at June 30, 2020 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market mutual funds	$	195	$	195	$	—	$	—


Total cash equivalents	195		195		—		—
Short-term investments:
U.S. treasury securities	3,753		3,753		—		—
U.S. agency securities	5,058		—		5,058		—
Asset-backed securities	20,826		—		20,826		—

Municipal securities	9,542		—		9,542		—


Corporate bonds	51,136		—		51,136		—


Total short-term investments	90,315		3,753		86,562		—
Cash equivalents and short-term investments	$	90,510	$	3,948	$	86,562	$	—

Accretion of net premium on short-term investments totaled $85,000 and $12,000 in the three months ended September 30, 2020 and 2019, respectively.

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

We did not have any financial liabilities measured at fair value on a recurring basis as of September 30, 2020 or June 30, 2020.

Non-marketable equity investments

Our non-marketable equity securities are investments in privately held companies without readily determinable market values.

The carrying value of our non-marketable equity securities is measured at cost and adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in other income, net. Non-marketable equity securities that we remeasure are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold.

In September 2020, a company in which we held a $200,000 non-marketable equity investment was acquired in an all cash transaction, resulting in a realized gain to us of $247,000. As of September 30, 2020, the transaction proceeds were in process of being transmitted to us and accordingly, the total of $447,000 was included in prepaid expenses and other current assets in our condensed consolidated balance sheet.

In July 2020, we invested $2.5 million in exchange for Series A-3 redeemable convertible preferred shares representing a less than 20% equity ownership interest in a privately held company.

In January 2020, we completed the sale of certain intellectual property and workforce associated with the OpenTerra Platform in exchange for consideration that included a non-marketable equity interest in Grab Holdings, Inc. ordinary shares valued at $6.2 million. See Note 12.

We had no net unrealized gains from non-marketable equity securities in the three months ended September 30, 2020 and 2019.

The carrying value of our non-marketable equity securities carried at cost and adjusted under the measurement alternative, none of which required remeasurement to fair value, was $9.0 million and $6.7 million at September 30, 2020 and June 30, 2020, respectively.

Non-marketable equity investments accounted for under the equity method

In August 2019, we completed the disposition of our Ads Business in exchange for a non-marketable equity investment in inMarket Media, LLC, or inMarket, valued at $15.6 million. See Note 11. In assessing the fair value of our investment in inMarket, we made assumptions regarding estimated future cash flows, weighted average cost of capital and timing over which the cash flows will occur, amongst other factors.

An investment in a limited liability company such as inMarket that maintains a specific ownership account for each investor is deemed to be similar to an investment in a limited partnership. Accordingly, because we hold more than a 3% to 5% ownership interest in inMarket, we are required to account for our inMarket investment under the equity method of accounting and record our proportionate share of investee earnings each period.

In January 2020, we invested $4.0 million in exchange for Series B preferred units and a warrant to purchase additional preferred units in a privately held limited liability company. The warrant expires on the earlier of (i) July 5, 2021, (ii) acceptance of a purchase offer from another entity, or (iii) an initial public offering of the issuer’s common stock. The exercise price of the warrant is variable depending on the achievement of certain performance conditions by the issuer.

The warrant meets the definition of a derivative financial instrument. Accordingly, we allocated the $4.0 million cost of the investment first to the fair value of the warrant, with the residual allocated to the preferred units. The fair value of the warrant at issuance was determined to be $448,000, with the remaining $3.6 million allocated to the preferred units. In assessing the fair value of the warrant within Level 3, we utilized a Black-Scholes option pricing model incorporating assumptions regarding probability of achievement of performance conditions, underlying equity value, expected term and risk free rate. The underlying equity used in the option pricing model was determined primarily based on revenue and earnings multiples for comparable companies, amongst other factors. The warrant is accounted for separately and marked to market each reporting period, with any gain or loss reported in other income, net in our condensed consolidated statement of operations. Similar to the inMarket investment, we account for the $3.6 million investment in preferred units under the equity method of accounting because we hold more than a 3% to 5% ownership interest in the investee.

We recognized income of $616,000 and zero related to our proportionate share of investments accounted for under the equity method for the three months ended September 30, 2020 and 2019, respectively. The carrying value of our non-marketable equity investments accounted for under the equity method was $20.6 million and $20.0 million at September 30, 2020 and June 30, 2020, respectively.

The warrant mark-to-market adjustment at September 30, 2020 was a gain of $104,000. The carrying value of the warrant was $817,000 and $713,000 at September 30, 2020 and June 30, 2020, respectively.

Non-marketable debt investments

In fiscal 2020, we invested $1.5 million in the form of a convertible note receivable in a privately held company without a readily determinable market value. The note receivable matures on October 31, 2021 or upon request for payment by a majority of note holders, or otherwise upon a change of control, qualified financing event or event of default involving the privately held company. The note converts to preferred stock or common stock upon certain events as defined, including a qualified preferred stock financing round or a change in control of ownership. Interest accrues annually at 6.5% and is due in full upon maturity.

In fiscal 2020, we invested $4.0 million and in July 2020 we invested an additional $3.0 million for a total of $7.0 million in the form of convertible notes receivable in a privately held company without a readily determinable market value. The notes receivable mature upon request for payment by a majority of note holders on or after August 23, 2021, or otherwise upon a change of control, qualified financing event or event of default involving the privately held company. The notes convert to preferred stock or common stock upon certain events as defined, including a qualified preferred stock financing round or a change in control of ownership. Interest accrues annually at 6% and is due in full upon maturity.

In fiscal 2020, we invested $417,000 and in July 2020 we invested an additional $90,000 for a total of $507,000 in the form of a convertible note receivable in a privately held company without a readily determinable market value, pursuant to which we agreed to loan up to a total of $710,000. The note receivable matures on March 24, 2021 and is convertible into equity at our discretion. Interest accrues annually at 6% and is due in full upon maturity.

The convertible notes are classified as available for sale and are carried at fair value within Level 3, with any unrealized gains and losses, net of tax, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized and reported in other income, net in our condensed consolidated statement of operations. We did not have any unrealized or realized gains or losses in the three months ended September 30, 2020 and 2019. The carrying value of our non-marketable debt investments was $9.0 million and $5.9 million at September 30, 2020 and June 30, 2020, respectively.

- 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.

+ References + Details