Fair Value Measurements

3 Months Ended

Mar. 31, 2023

8. Fair Value Measurements

Fair value is defined 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. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. GAAP prescribes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

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Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

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Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as 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; or

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Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Time deposits and corporate notes/bonds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

The principal market in which we execute our foreign currency derivatives is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large financial institutions. Our foreign currency derivatives’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

Our significant financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and September 30, 2022 were as follows:


(in thousands)	March 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash equivalents(1)	$	97,293	$	—	$	—	$	97,293
Convertible note		—		—		2,000		2,000
Forward contracts		—		1,038		—		1,038
Options		—		780		—		780
	$	97,293	$	1,818	$	2,000	$	101,111
Financial liabilities:
Forward contracts		—		3,190		—		3,190
	$	—	$	3,190	$	—	$	3,190


(in thousands)	September 30, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash equivalents(1)	$	102,313	$	—	$	—	$	102,313
Convertible note		—		—		2,000		2,000
Forward contracts		—		9,058		—		9,058
	$	102,313	$	9,058	$	2,000	$	113,371
Financial liabilities:
Forward contracts		—		2,908		—		2,908
	$	—	$	2,908	$	—	$	2,908

(1)

Money market funds and time deposits.

Level 3 Investments

Convertible Note

In the fourth quarter of 2021, we invested $2.0 million in a non-marketable convertible note. This debt security is classified as available-for-sale and is included in Other assets on the Consolidated Balance Sheet. There were no changes in the fair value of this level 3 investment in the three and six months ended March 31, 2023.

Non-Marketable Equity Investments

The carrying value of our non-marketable equity investments is recorded in Other assets on the Consolidated Balance Sheets and totaled $6.0 million as of March 31, 2023 and $1.0 million as of September 30, 2022.

Equity Securities

During the second quarter and first six months of 2022, we recognized a loss of $44.6 million and $34.8 million, respectively, in Other income (expense), net related to fluctuations in the value of equity securities we held in Matterport, Inc. All shares owned in Matterport were sold in the second quarter of 2022 for an aggregate price of $42.7 million. We did not hold any equity securities as of March 31, 2023 or September 30, 2022.

- 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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