FAIR VALUE MEASUREMENTS

9 Months Ended

Apr. 30, 2019

The fair value of our financial assets and liabilities measured on a recurring basis is as follows:



	As of July 31, 2018
	Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash equivalents:
Money market funds	$	41,763	$	—	$	—	$	41,763
Commercial paper	—		77,818		—		77,818
U.S. government securities	—		4,985		—		4,985
Short-term investments:
Corporate bonds	—		448,458		—		448,458
Commercial paper	—		120,772		—		120,772
U.S. government securities	—		59,098		—		59,098
Total measured at fair value	$	41,763	$	711,131	$	—	$	752,894
Cash							181,409
Total cash, cash equivalents and short-term investments							$	934,303
Financial Liabilities:
Contingent consideration	$	—	$	—	$	1,872	$	1,872



	As of April 30, 2019
	Level I		Level II		Level III		Total
	(in thousands)
Financial Assets:
Cash equivalents:
Money market funds	$	61,373	$	—	$	—	$	61,373
Commercial paper	—		118,773		—		118,773
Short-term investments:
Corporate bonds	—		355,259		—		355,259
Commercial paper	—		96,214		—		96,214
U.S. government securities	—		44,160		—		44,160
Total measured at fair value	$	61,373	$	614,406	$	—	$	675,779
Cash							264,973
Total cash, cash equivalents and short-term investments							$	940,752

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value, with the exception of the 0% Convertible Senior Notes, due in 2023 (the "Notes"). Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes. The carrying values and estimated fair values of financial instruments not recorded at fair value are as follows:



	As of July 31, 2018				As of April 30, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(in thousands)
Convertible senior notes, net	$	429,598	$	685,527	$	451,399	$	657,921

The carrying value of the Notes as of April 30, 2019 was net of the unamortized debt discount of $117.1 million and unamortized debt issuance costs of $6.5 million.

The total estimated fair value of the Notes was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. We consider the fair value of the Notes to be a Level 2 measurement due to the limited trading activity.

A summary of the changes in the fair value of our contingent consideration, characterized as Level 3 in the fair value hierarchy, is as follows:



	Nine Months Ended April 30,
	2018			2019
	(in thousands)
Contingent consideration—beginning balance	$	4,295		$	1,872
Change in fair value ⁽¹⁾	(3,371		)	(832		)
Payment	—			(1,040		)
Contingent consideration—ending balance	$	924		$	—


(1)	Recognized in the condensed consolidated statements of operations within general and administrative expenses.

We remeasured the fair value of our Level 3 contingent consideration liability using a Monte Carlo simulation on projected future payments. The fair value was determined by calculating the net present value of the expected payments using significant inputs that were not observable in the market, including the probability of achieving the milestone, estimated bookings and discount rates. The change in fair value of the contingent consideration was due to the movement of the inputs. During the quarter ended April 30, 2019, the contingent consideration was paid out in full.

- 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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