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Fair Value Measurements
 12 Months Ended
Jul. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 3. FAIR VALUE MEASUREMENTS

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value as follows:

•
Level I — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
•
Level II — Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted 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 related assets or liabilities; and
•
Level III — Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Assets Measured at Fair Value on a Recurring Basis

Cash equivalents and short-term investments

Our money market funds are classified within Level I due to the highly liquid nature of these assets and have unadjusted inputs, quoted prices in active markets for these assets at the measurement date from the financial institution that carries these investment securities. Our investments in available-for-sale debt securities such as commercial paper, corporate bonds and U.S. government securities are classified within Level II. The fair value of these securities is priced by using inputs based on non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques.

Convertible note receivable

In May 2023, we sold our Frame Desktop-as-a-Service business. As part of the consideration for the sale, we received a $5.0 million interest-bearing convertible note. We have elected the fair value option for the convertible note and will record the changes in its fair value at each reporting period. As of July 31, 2024, the fair value of the convertible note was determined to be approximately $5.2 million. We consider this convertible note to be classified within Level III. The fair value is determined by considering the convertible note’s principal and accrued interest, as well as the convertible note’s option to convert into equity securities, using inputs including debt yields, volatility data, and the value of the underlying equity into which the convertible note could be converted.

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

 

 

 

As of July 31, 2023

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

 

 

(in thousands)

 

Financial Assets, Current:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

211,319

 

 

$

—

 

 

$

—

 

 

$

211,319

 

U.S. Government securities

 

 

—

 

 

 

6,999

 

 

 

—

 

 

 

6,999

 

Commercial paper

 

 

—

 

 

 

34,830

 

 

 

—

 

 

 

34,830

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

—

 

 

 

452,703

 

 

 

—

 

 

 

452,703

 

Commercial paper

 

 

—

 

 

 

215,219

 

 

 

—

 

 

 

215,219

 

U.S. Government securities

 

 

—

 

 

 

256,544

 

 

 

—

 

 

 

256,544

 

Total measured at fair value

 

$

211,319

 

 

$

966,295

 

 

$

—

 

 

$

1,177,614

 

Cash

 

 

 

 

 

 

 

 

 

 

 

259,781

 

Total cash, cash equivalents and short-term investments

 

 

 

 

 

 

 

 

 

 

$

1,437,395

 

Financial Assets, Non-Current:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note receivable

 

$

—

 

 

$

—

 

 

$

5,700

 

 

$

5,700

 

 

 

 

As of July 31, 2024

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

 

 

(in thousands)

 

Financial Assets, Current:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

352,295

 

 

$

—

 

 

$

—

 

 

$

352,295

 

U.S. Government securities

 

 

—

 

 

 

99

 

 

 

—

 

 

 

99

 

Commercial paper

 

 

—

 

 

 

1,747

 

 

 

—

 

 

 

1,747

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

—

 

 

 

233,065

 

 

 

—

 

 

 

233,065

 

Commercial paper

 

 

—

 

 

 

33,770

 

 

 

—

 

 

 

33,770

 

U.S. Government securities

 

 

—

 

 

 

72,237

 

 

 

—

 

 

 

72,237

 

Total measured at fair value

 

$

352,295

 

 

$

340,918

 

 

$

—

 

 

$

693,213

 

Cash

 

 

 

 

 

 

 

 

 

 

 

301,129

 

Total cash, cash equivalents and short-term investments

 

 

 

 

 

 

 

 

 

 

$

994,342

 

Financial Assets, Non-Current:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note receivable

 

$

—

 

 

$

—

 

 

$

5,150

 

 

$

5,150

 

 

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value, with the exception of the previously outstanding 2026 Notes and the 2027 Notes. Financial instruments that are not recorded at fair value on a recurring basis 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, 2023

 

 

As of July 31, 2024

 

 

 

Carrying
Value

 

 

Estimated
Fair
Value

 

 

Carrying
Value

 

 

Estimated
Fair
Value

 

 

 

(in thousands)

 

2026 Notes

 

$

649,630

 

 

$

1,043,889

 

 

$

—

 

 

$

—

 

2027 Notes

 

 

568,535

 

 

 

497,410

 

 

 

570,073

 

 

 

631,178

 

Total

 

$

1,218,165

 

 

$

1,541,299

 

 

$

570,073

 

 

$

631,178

 

 

The carrying value of the 2026 Notes as of July 31, 2023 included $47.6 million of non-cash interest expense that was added to the principal balance, net of unamortized debt discounts of $132.8 million and unamortized debt issuance costs of $15.2 million.

The carrying value of the 2027 Notes as of July 31, 2023 and 2024 was net of unamortized debt issuance costs of $6.5 million and $4.9 million, respectively.

The total estimated fair value of the 2026 Notes was based on a binomial model. We considered the fair value of the 2026 Notes to be a Level III valuation, as the 2026 Notes were not publicly traded. The Level III inputs used to determine the estimated fair value of the 2026 Notes included the conversion rate, risk-free interest rate, discount rate, volatility, and the price of our Class A common stock.

The total estimated fair value of the 2027 Notes was determined based on the closing trading price per $100 of the 2027 Notes as of the last day of trading for the period. We consider the fair value of the 2027 Notes to be a Level II valuation due to the limited trading activity.