NETSCOUT SYSTEMS INCNTCT

NETSCOUT SYSTEMS INC Fair Value Disclosure

10-KFiled May 15, 20252 min read
FAIR VALUE MEASUREMENTS
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant unobservable inputs. The following tables present the Company's financial assets and liabilities measured on a recurring basis using the fair value hierarchy at March 31, 2025 and 2024 (in thousands):
 Fair Value Measurements at
March 31, 2025
 Level 1Level 2Level 3Total
ASSETS:
Cash and cash equivalents$434,121 $23,294 $— $457,415 
U.S. government and municipal obligations3,008 2,410 — 5,418 
Commercial paper— 17,358 — 17,358 
Certificates of deposit— 505 — 505 
Equity investment in Napatech11,781 — — 11,781 
Derivative financial instruments— 197 — 197 
$448,910 $43,764 $— $492,674 
LIABILITIES:
Derivative financial instruments$— $(55)$— $(55)
$— $(55)$— $(55)
 
 Fair Value Measurements at
March 31, 2024
 Level 1Level 2Level 3Total
ASSETS:
Cash and cash equivalents$381,829 $7,845 $— $389,674 
U.S. government and municipal obligations8,985 2,506 — 11,491 
Commercial paper— 8,648 — 8,648 
Certificates of deposit— 2,807 — 2,807 
Equity investment in Napatech11,507 — — 11,507 
Derivative financial instruments— 11 — 11 
$402,321 $21,817 $— $424,138 
LIABILITIES:
Derivative financial instruments$— $(74)$— $(74)
$— $(74)$— $(74)
 
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments.
The Company's Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency.
The Company's Level 2 investments are classified as such because they are valued using observable inputs other than Level 1 quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active.
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About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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