Note 12 - Fair Value Measurements

9 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

12. Fair Value Measurements

See Note 2, Summary of Significant Accounting Policies in the notes to the audited consolidated financial statements included in the section titled “Financial Statements and Supplementary Data” in Part II, Item 8 of the 2023 Annual Report on Form 10-K for information on the fair value hierarchy and the level of inputs used by the Company in determining fair value.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize assets and liabilities measured and recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets as of June 30, 2024 and  September 30, 2023 (in thousands):

	As of June 30, 2024
Description	Total Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	147,502	$	147,253	$	249	$	—
Available-for-sale securities		405,382		112,633		292,749		—
Convertible debt securities		2,000		—		—		2,000
Foreign exchange contracts		201		—		201		—
Net investment hedge		834		—		834		—
Total assets	$	555,919	$	259,886	$	294,033	$	2,000

	As of September 30, 2023
Description	Total Fair Value		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	525,952	$	525,952	$	—	$	—
Available-for-sale securities		450,211		85,949		364,262		—
Foreign exchange contracts		44		—		44		—
Net investment hedge		13,036		—		13,036		—
Total assets	$	989,243	$	611,901	$	377,342	$	—
Liabilities:
Foreign exchange contracts		421	$	—	$	421	$	—
Total liabilities	$	421	$	—	$	421	$	—

Cash Equivalents

The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents primarily consist of money market funds and U.S. government backed securities with a maturity of three months or less. They are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The fair values of these investments approximate their carrying values. Investments classified as Level 2 consist of debt securities that are valued using matrix pricing benchmarking because they are not actively traded and bank certificates of deposit with a maturity of three months or less. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.

Available-For-Sale Securities

Available-for-sale securities primarily consist of highly rated corporate debt securities, and U.S. government backed securities, which are classified as Level 1. Investments classified as Level 2 consist of debt securities that are valued using matrix pricing and benchmarking because they are not actively traded, and bank certificates of deposit. 

Convertible Debt Securities

In the third quarter of fiscal year 2024, the Company purchased $2.0 million principal amount of convertible notes issued by a private company. The convertible notes are loans to convert to an equity stake in the private company upon a predetermined conversion event. The Company has elected the fair value option in accordance with ASC 825, Financial Instruments ("ASC 825") to record the convertible notes. The fair value option under ASC 825 allows an entity to account for the entire financial instrument at fair value with subsequent changes in fair value recognized in earnings through the condensed consolidated statements of operations at each reporting date. The Company elected the fair value option methodology to account for the convertible notes because the Company believes it accurately reflects the value of the securities and embedded features in the financial statements. As of June 30, 2024, the fair value of the convertible notes was $2.0 million and is included in short-term marketable securities on the condensed consolidated balance sheets. The fair value determination is based on unobservable inputs (Level 3 on the fair value hierarchy) which were based on the best information available in the circumstance, including transaction pricing, recent acquisition, and market participant assumptions. The unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of the assets as of the reporting date.

Foreign Exchange Contracts & Net Investment Hedge

The Company’s foreign exchange contract assets and liabilities, and its net investment hedge assets are measured and reported at fair value using the market method valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by third-party leading financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In addition to assets and liabilities that are recorded at fair value on a recurring basis, impairment indicators may subject goodwill and long-lived assets to fair value measurement on a nonrecurring basis. As described in Note 6, Goodwill and Intangible Assets, as of June 30, 2024 the Company estimated the fair value of its reporting units using a DCF model. Because the inputs to the valuation model are largely unobservable and reflect the Company’s own assumptions, goodwill and long-lived assets are classified as Level 3.