Financial Instruments

3 Months Ended

Apr. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1-Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2-Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3-Valuations based on unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

Cash equivalents are carried at cost, which approximates fair value and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

Marketable securities are carried at fair value and are classified within Level 1 because they are valued using quoted market prices. Specific to marketable fixed income securities, the Company did not record any gross unrealized gains and losses as fair value approximates amortized cost. The Company did not record any credit losses during the thirteen weeks ended April 30, 2023. Further, as of April 30, 2023, the Company did not record an allowance for credit losses related to its fixed income securities.

Equity investments in public companies that have readily determinable fair values are carried at fair value and are classified within Level 1 because they are valued using quoted market prices.

Equity warrants are classified within Level 3 of the fair value hierarchy as they are valued based on observable and unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. The Company utilized certain valuation techniques such as the Black-Scholes option-pricing model and the Monte Carlo simulation model to determine the fair value of equity warrants. The application of these models requires the use of a number of complex assumptions based on unobservable inputs, including the expected term, expected equity volatility, discounts for lack of marketability, cash flow projections, and probability with respect to vesting requirements.

The following table includes a summary of financial instruments measured at fair value as of April 30, 2023 (in thousands):


	Level 1		Level 2		Level 3
Cash	$	225,837	$	—	$	—
Money market funds	163,040		—		—
Commercial paper	19,808		—		—
Cash and cash equivalents	408,685		—		—
U.S. Treasury securities	394,461		—		—
Equity investments	26		—		—
Marketable securities	394,487		—		—
Equity warrants	—		—		22,688
Total financial instruments	$	803,172	$	—	$	22,688

The following table includes a summary of financial instruments measured at fair value as of January 29, 2023 (in thousands):


	Level 1		Level 2		Level 3
Cash	$	300,441	$	—	$	—
Money market funds	30,000		—		—
Cash and cash equivalents	330,441		—		—
U.S. Treasury securities	346,926		—		—
Equity investments	18		—		—
Marketable securities	346,944		—		—
Equity warrants	—		—		31,622
Total financial instruments	$	677,385	$	—	$	31,622

The following table summarizes the change in fair value for financial instruments using unobservable Level 3 inputs (in thousands):


	13 Weeks Ended
	April 30, 2023		May 1, 2022
Beginning balance	$	31,622	$	—

Change in fair value of equity warrants	(8,934)		—
Ending balance	$	22,688	$	—

As of April 30, 2023 and January 29, 2023, the deferred credit subject to vesting requirements recognized within other long-term liabilities in exchange for the equity warrants was $45.0 million, respectively.

The following table presents quantitative information about Level 3 significant unobservable inputs used in the fair value measurement of the equity warrants as of April 30, 2023 (in thousands):

Range

Fair Value

Valuation Techniques

Unobservable Input

Min

Max

Weighted Average

Equity warrants

$22,688

Black-Scholes and Monte Carlo

Probability of vesting

30%

99%

87%

Equity volatility

35%

80%

76%