Investments & Fair Value Measurements

9 Months Ended

Jun. 30, 2023

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Investments and Fair Value Measurements

We use cash holdings to purchase investment-grade securities diversified among security types, industries, and issuers. All of our investments in debt securities are measured at fair value, and are recorded within cash equivalents and both short-term and long-term investments in our unaudited interim condensed consolidated balance sheets. With the exception of our mutual fund investments held in our SERP and classified as trading securities and our other long-term investments, all of our investments are classified as AFS securities. Derivative contracts are used to hedge currency risk, and these are carried at fair value and classified as other assets and other liabilities.

Our investments in debt securities consist of government bonds, corporate bonds, municipal debt securities, certificates of deposit, commercial paper, and U.S. agency securities. In addition, our cash and cash equivalents also consist of highly-liquid money market funds and U.S. agency securities. Consistent with our investment policy, none of our municipal debt investments are supported by letters of credit or standby purchase agreements. Our cash and investment portfolio consisted of the following (in thousands):


	June 30, 2023
	Cost		Unrealized						Estimated Fair Value
			Gains		Losses		Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	693,427	$	—	$	—	$	693,427	$	693,427	$	—	$	—
Cash equivalents:



Money market funds	71,651		1		—		71,652		71,652		—		—



Cash and cash equivalents	765,078		1		—		765,079		765,079		—		—

Short-term investments:
Certificate of deposit	12,476		1		(12)		12,465		—		12,465		—
U.S. agency securities	5,891		2		(18)		5,875		—		5,875		—

Government bonds	43,337		1		(624)		42,714		40,026		2,688		—
Commercial paper	5,580		—		(4)		5,576		—		5,576		—
Corporate bonds	37,386		—		(396)		36,990		—		36,990		—
Municipal debt securities	20,730		1		(141)		20,590		—		20,590		—
Short-term investments	125,400		5		(1,195)		124,210		40,026		84,184		—

Long-term investments:




Government bonds	33,419		—		(1,150)		32,269		31,390		879		—

Corporate bonds	35,929		2		(707)		35,224		—		35,224		—
Municipal debt securities	21,633		32		(232)		21,433		—		21,433		—
Other investments (1)	9,177		—		—		9,177		—		—		—
Long-term investments	100,158		34		(2,089)		98,103		31,390		57,536		—

Total cash, cash equivalents, and investments	$	990,636	$	40	$	(3,284)	$	987,392	$	836,495	$	141,720	$	—

Investments held in supplemental retirement plan:
Assets	$	4,186	$	—	$	—	$	4,186	$	4,186	$	—	$	—
Included in prepaid expenses and other current assets and other non-current assets
Liabilities	$	4,186	$	—	$	—	$	4,186	$	4,186	$	—	$	—
Included in accrued liabilities and other non-current liabilities





Currency derivatives as hedge instruments:
Assets: Included in other current assets	$	—	$	597	$	—	$	597	$	—	$	597	$	—

Liabilities: Included in other accrued liabilities	$	—	$	—	$	(572)	$	(572)	$	—	$	(572)	$	—

(1)Other investments as of June 30, 2023 is primarily comprised of an equity method investment of $3.9 million and an equity security without a readily determinable fair value, valued at $5.0 million. The equity method investment is measured at cost minus impairment, if any, adjusted for our proportionate share of the investee's net income or loss. Our share of the equity method investee's net income or loss is included in other income/(expense), net on the unaudited interim condensed consolidated statements of operations. Our share of the equity method investee's net income was not material in the third quarter of fiscal 2023 and was $3.1 million in the third quarter of fiscal 2022. Our share of the equity method investee's net income was $2.4 million and $3.5 million in fiscal year-to-date periods ended June 30, 2023 and July 1, 2022, respectively.


	September 30, 2022
	Cost		Unrealized						Estimated Fair Value
			Gains		Losses		Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	474,813	$	—	$	—	$	474,813	$	474,813	$	—	$	—
Cash equivalents:


Money market funds	134,987		—		—		134,987		134,987		—		—


U.S. agency securities	10,328		—		(1)		10,327		—		10,327		—
Cash and cash equivalents	620,128		—		(1)		620,127		609,800		10,327		—

Short-term investments:
Certificate of deposit	23,033		8		(47)		22,994		—		22,994		—
U.S. agency securities	3,412		—		(21)		3,391		—		3,391		—
Government bonds	57,417		—		(705)		56,712		52,833		3,879		—
Commercial paper	8,786		1		(15)		8,772		—		8,772		—
Corporate bonds	72,730		—		(734)		71,996		—		71,996		—
Municipal debt securities	25,589		—		(241)		25,348		—		25,348		—
Short-term investments	190,967		9		(1,763)		189,213		52,833		136,380		—

Long-term investments:


U.S. agency securities	861		—		(39)		822		—		822		—
Government bonds	43,816		—		(2,222)		41,594		38,055		3,539		—

Corporate bonds	29,684		4		(1,349)		28,339		—		28,339		—
Municipal debt securities	21,483		—		(626)		20,857		—		20,857		—
Other investments (1)	10,902		—		—		10,902		—		—		—
Long-term investments	106,746		4		(4,236)		102,514		38,055		53,557		—

Total cash, cash equivalents, and investments	$	917,841	$	13	$	(6,000)	$	911,854	$	700,688	$	200,264	$	—

Investments held in supplemental retirement plan:
Assets	$	4,225	$	—	$	—	$	4,225	$	4,225	$	—	$	—
Included in prepaid expenses and other current assets and other non-current assets
Liabilities	$	4,225	$	—	$	—	$	4,225	$	4,225	$	—	$	—
Included in accrued liabilities and other non-current liabilities





Currency derivatives as hedge instruments:


Liabilities: Included in other accrued liabilities	$	—	$	—	$	(4,882)	$	(4,882)	$	—	$	(4,882)	$	—
Liabilities: Included in other non-current liabilities	—		—		(420)		(420)		—		(420)		—

(1)Other investments as of September 30, 2022 is comprised of an equity method investment of $5.9 million and an equity security without a readily determinable fair value, valued at $5.0 million.

Fair Value Hierarchy. Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. We minimize the use of unobservable inputs and use observable market data, if available, when determining fair value. We classify our inputs to measure fair value using the following three-level hierarchy:

Level 1: Quoted prices in active markets at the measurement date for identical assets and liabilities. We base the fair value of our Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

Level 2: Prices may be based upon quoted prices in active markets or inputs not quoted on active markets but are corroborated by market data. We obtain the fair value of our Level 2 financial instruments from a professional pricing service, which may use quoted market prices for identical or comparable instruments, or model driven valuations using observable market data or inputs corroborated by observable market data. To validate the fair value determination provided by our primary pricing service, we perform quality controls over values received which include comparing our pricing service provider’s assessment of the fair values of our investment securities against the fair values of our investment securities obtained from another independent source, reviewing the pricing movement in the context of overall market trends, and reviewing trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities

in the fair value hierarchy. The fair value of the currency derivatives are calculated from market spot rates, forward rates, interest rates, and credit ratings at the end of the period.

Level 3: Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

Securities In Gross Unrealized Loss Position. We periodically evaluate our investments for impairment by comparing the fair value with the cost basis for each of our investment securities. The unrealized losses on our AFS securities were primarily the result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. The following table presents the gross unrealized losses and fair value for those AFS securities that were in an unrealized loss position for less than twelve months and for greater than twelve months as of June 30, 2023 and September 30, 2022 (in thousands):


	June 30, 2023								September 30, 2022
	Less Than 12 Months				Greater Than 12 Months				Less Than 12 Months				Greater Than 12 Months
Investment Type	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Certificate of deposit	$	9,916	$	(12)	$	—	$	—	$	10,352	$	(47)	$	—	$	—
U.S. agency securities	842		(18)		—		—		13,144		(5)		1,395		(55)
Government bonds	33,190		(332)		38,862		(1,443)		89,741		(2,593)		8,566		(332)
Commercial paper	5,576		(4)		—		—		5,770		(15)		—		—
Corporate bonds	58,578		(602)		9,746		(500)		81,044		(1,523)		18,306		(561)
Municipal debt securities	20,315		(182)		8,271		(191)		40,119		(712)		3,336		(156)
Total	$	128,417	$	(1,150)	$	56,879	$	(2,134)	$	240,170	$	(4,895)	$	31,603	$	(1,104)

Although we had certain securities that were in an unrealized loss position as of June 30, 2023 and September 30, 2022, we expect to recover the full carrying value of these securities.

Investment Maturities. The following table summarizes the amortized cost and estimated fair value of the AFS securities within our investment portfolio based on stated maturities as of June 30, 2023 and September 30, 2022, which are recorded within cash equivalents and both short and long-term investments in our unaudited interim condensed consolidated balance sheets (in thousands):


	June 30, 2023				September 30, 2022
Range of maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	197,051	$	195,862	$	336,291	$	334,537
Due in 1 to 2 years	60,640		58,964		53,721		51,332
Due in 2 to 5 years	30,341		29,962		42,122		40,280
Total	$	288,032	$	284,788	$	432,134	$	426,149