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Fair Value Measurements

12 Months Ended

Aug. 03, 2019

We disclose and recognize the fair value of our assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes three levels of the fair value hierarchy as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2: 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 3: 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.

Our financial instruments consist of cash and cash equivalents, short-term and long-term investments, accounts payable, accrued liabilities, and, prior to our IPO, the preferred stock warrant liability. At August 3, 2019, and July 28, 2018, the carrying values of cash and cash equivalents, accounts payable, and accrued liabilities approximated fair value due to their short-term maturities. In November 2017, in connection with our IPO, all outstanding preferred stock warrants were automatically exercised into shares of Class B common stock. As a result, we remeasured and reclassified the preferred stock warrant liability to additional paid-in capital upon the closing of our IPO.

The following table sets forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of our short-term and long-term investments accounted for as available-for-sale securities as of August 3, 2019:



	August 3, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Financial Assets:
Investments:
U.S. Treasury securities	$	49,807	$	100	$	—	$	49,907
Commercial paper	29,761		—		—		29,761
Asset-backed securities	42,587		145		—		42,732
Corporate bonds	73,969		279		—		74,248
Total	$	196,124	$	524	$	—	$	196,648

The following table sets forth the fair value of available-for-sale securities by contractual maturity as of August 3, 2019:



	August 3, 2019
(in thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Financial Assets:
Investments:
U.S. Treasury securities	$	44,772	$	5,135	$	—	$	49,907
Commercial paper	29,761		—		—		29,761
Asset-backed securities	5,412		37,320		—		42,732
Corporate bonds	63,331		10,917		—		74,248
Total	$	143,276	$	53,372	$	—	$	196,648

The following table sets forth our cash equivalents, and short-term and long-term investments accounted for as available-for-sale securities that were measured at fair value on a recurring basis based on the fair value hierarchy as of August 3, 2019:



	August 3, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	6,427	$	—	$	—	$	6,427
Commercial paper	—		11,970		—		11,970
Investments:
U.S. Treasury securities	49,907		—		—		49,907
Commercial paper	—		29,761		—		29,761
Asset-backed securities	—		42,732		—		42,732
Corporate bonds	—		74,248		—		74,248
Total	$	56,334	$	158,711	$	—	$	215,045

As of July 28, 2018, the Company did not have any financial instruments measured at fair value.

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2, or Level 3 for the fiscal years ended August 3, 2019, and July 28, 2018.

The following table sets forth a summary of the changes in the fair value of the preferred stock warrant liability for the fiscal year ended July 28, 2018:



(in thousands)	For the Fiscal Year Ended July 28, 2018
Balance at July 29, 2017	$	26,679
Change in fair value	(10,685		)
Reclassification of warrant liability to additional paid-in capital upon the initial public offering	(15,994		)
Balance at July 28, 2018	$	—

The key assumptions used in the Black-Scholes option-pricing model for the valuation of the preferred stock warrant liability upon remeasurement were as follows:



	July 29, 2017
Expected term (in years)	2.0
Fair value of underlying shares	$	25.09
Volatility	43.8		%
Risk free interest rate	1.3		%
Dividend yield	—		%

Generally, increases or decreases in the fair value of the underlying convertible preferred stock would result in a directionally similar impact in the fair value measurement of the associated warrant liability.

See Note 6, Preferred Stock Warrant Liability, for more details on our preferred stock warrants.

- 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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