Fair Value of Financial Instruments

9 Months Ended

Apr. 30, 2020

Available-for-sale investments within cash equivalents and investments consist of the following (in thousands):


	April 30, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities	$	133,556	$	171	$	(107)	$	133,620
Commercial paper	156,729		—		—		156,729
Corporate bonds	609,810		2,800		(561)		612,049
U.S. Government bonds	78,138		733		—		78,871
Asset-backed securities	60,450		292		(18)		60,724
Foreign government bonds	10,867		4		(1)		10,870
Certificates of deposit	37,645		—		—		37,645
Money market funds	182,258		—		—		182,258
Total	$	1,269,453	$	4,000	$	(687)	$	1,272,766


	July 31, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities	$	55,904	$	4	$	(29)	$	55,879
Commercial paper	239,333		—		—		239,333
Corporate bonds	666,087		1,612		(111)		667,588
U.S. Government bonds	130,530		94		(29)		130,595


Certificates of deposit	50,796		—		—		50,796
Money market funds	115,711		—		—		115,711
Total	$	1,258,361	$	1,710	$	(169)	$	1,259,902

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and the length of time that individual securities have been in an unrealized loss position (in thousands):


	April 30, 2020
	Less Than 12 Months						12 Months or Greater						Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Government agency securities	$	61,828	$	(107)	$	—	$	—	$	61,828	$	(107)

Corporate bonds	80,295		(561)		—		—		80,295		(561)

Asset-backed securities	1,478		(18)		—		—		1,478		(18)
Foreign government bonds	4,866		(1)		—		—		4,866		(1)

Total	$	148,467	$	(687)	$	—	$	—	$	148,467	$	(687)

As of April 30, 2020, the Company had 41 investments in a gross unrealized loss position. The unrealized losses on its available-for-sale securities were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. The Company does not intend to sell, nor does it believe it will need to sell, these securities before recovering the associated unrealized losses. The Company does not consider any portion of the unrealized losses at April 30, 2020 to be other-than-temporarily impaired, nor are any unrealized losses considered to be credit losses. The Company has recorded the securities at fair value in its condensed consolidated balance sheets, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss). The amount of realized gains and losses reclassified into earnings are based on the specific identification of the securities sold. The realized gains and losses from sales of securities in the periods presented were not material.

The following table summarizes the contractual maturities of the Company’s available-for-sale investments measured at fair value (in thousands):


	April 30, 2020
	Less Than 12 Months		12 Months or Greater		Total
U.S. Government agency securities	$	20,742	$	112,878	$	133,620
Commercial paper	156,729		—		156,729
Corporate bonds	495,082		116,967		612,049
U.S. Government bonds	55,806		23,065		78,871
Asset-backed securities	26,121		34,603		60,724
Foreign government bonds	10,870		—		10,870
Certificates of deposit	33,398		4,247		37,645
Money market funds	182,258		—		182,258
Total	$	981,006	$	291,760	$	1,272,766

Fair Value Measurement

Accounting guidance for fair value measurements defines a three-level valuation hierarchy for disclosures as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

Level 3—Unobservable inputs that are supported by little or no market activity, which require the Company to develop its own assumptions.

Available-for-sale investments

The following tables summarize the Company’s available-for-sale investments measured at fair value, by level within the fair value hierarchy (in thousands):


	April 30, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Commercial paper	$	—	$	55,084	$	—	$	55,084
Corporate bonds	—		3,278		—		3,278
Money market funds	182,258		—		—		182,258


Total cash equivalents	182,258		58,362		—		240,620
Short-term investments:
U.S. Government agency securities	—		20,742		—		20,742
Commercial paper	—		101,645		—		101,645
Corporate bonds	—		491,804		—		491,804
U.S. Government bonds	—		55,806		—		55,806
Asset-backed securities	—		26,121		—		26,121
Foreign government bonds	—		10,870		—		10,870
Certificates of deposit	—		33,398		—		33,398
Total short-term investments	—		740,386		—		740,386
Long-term investments:
U.S. Government agency securities	—		112,878		—		112,878

Corporate bonds	—		116,967		—		116,967
U.S. Government bonds	—		23,065		—		23,065
Asset-backed securities	—		34,603		—		34,603

Certificates of deposit	—		4,247		—		4,247
Total long-term investments	—		291,760		—		291,760
Total	$	182,258	$	1,090,508	$	—	$	1,272,766


	July 31, 2019
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Commercial paper	$	—	$	56,132	$	—	$	56,132
Corporate bonds	—		4,398		—		4,398

Money market funds	115,712		—		—		115,712

Total cash equivalents	115,712		60,530		—		176,242
Short-term investments:
U.S. Government agency securities	—		39,166		—		39,166
Commercial paper	—		183,201		—		183,201
Corporate bonds	—		477,169		—		477,169
U.S. Government bonds	—		123,600		—		123,600

Certificates of deposit	—		47,000		—		47,000
Total short-term investments	—		870,136		—		870,136
Long-term investments:
U.S. Government agency securities	—		16,713		—		16,713

Corporate bonds	—		186,021		—		186,021
U.S. Government bonds	—		6,994		—		6,994

Certificates of deposit	—		3,796		—		3,796
Total long-term investment	—		213,524		—		213,524
Total	$	115,712	$	1,144,190	$	—	$	1,259,902

Convertible Senior Notes

The fair value of the Convertible Senior Notes was $414.0 million at April 30, 2020 and $454.1 million at July 31, 2019. The Company estimates the fair value of the Convertible Senior Notes using commonly accepted valuation methodologies and market-based risk measurements that are directly observable, such as unadjusted quoted prices (Level 2). The Company carries the Convertible Senior Notes at initial fair value less unamortized debt discount and issuance costs on its condensed consolidated balance sheets. For further information on the Convertible Senior Notes, see Note 6.

- 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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