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Debt
 9 Months Ended
Oct. 31, 2024
Debt Disclosure [Abstract]  
Debt

Note 6. Debt

Convertible Notes

2029 Convertible Notes

In September 2024, we issued $460.0 million aggregate principal amount of 1.50% convertible senior notes due September 15, 2029. The 2029 Convertible Notes are senior unsecured obligations and bear interest at a rate of 1.50% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. Each $1,000 principal amount of the 2029 Convertible Notes will be convertible into 23.0102 shares of our Class A common stock, which is equivalent to a conversion price of approximately $43.46 per share, subject to adjustment upon the occurrence of specified events.

The 2029 Convertible Notes are convertible at the option of the holders of the 2029 Convertible Notes at any time prior to the close of business on the business day immediately preceding June 15, 2029, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2025 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five-business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the 2029 Convertible Notes on each such trading day; (3) if we call the 2029 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

On or after June 15, 2029, holders of the 2029 Convertible Notes may convert all or any portion of the 2029 Convertible Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, we will satisfy our conversion obligation by paying cash up to the aggregate principal amount of the 2029 Convertible Notes to be converted and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at our election.

We may not redeem the 2029 Convertible Notes prior to September 20, 2027. We may redeem for cash all or any portion of the 2029 Convertible Notes, at our option, on or after September 20, 2027, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2029 Convertible Notes, which means we are not required to redeem or retire the 2029 Convertible Notes periodically.

Upon the occurrence of a fundamental change (as defined in the indenture governing the 2029 Convertible Notes) prior to the maturity date, subject to certain conditions, holders of the 2029 Convertible Notes may require us to repurchase all or a portion of the 2029 Convertible Notes for cash at a repurchase price equal to 100% of the principal amount of the 2029 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

2026 Convertible Notes

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The 2026 Convertible Notes are senior unsecured obligations and do not bear regular interest. Each $1,000 principal amount of the 2026 Convertible Notes will be convertible into 38.7962 shares of our Class A common stock, which is equivalent to a conversion price of approximately $25.78 per share.

There have been no changes to the conversion or redemption terms of the 2026 Convertible Notes during the nine months ended October 31, 2024 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2024.

In September 2024, using proceeds from the issuance of the 2029 Convertible Notes, we entered into separate and privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $140.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate amount of $191.7 million of cash. The repurchase was accounted for as an induced conversion. We recognized $10.1 million of induced conversion expense, representing the fair value of the consideration paid to certain holders of the 2026 Convertible Notes in excess of the value to which they were entitled to receive pursuant to the original conversion terms. This expense was recognized in interest and other (expense) income, net on our condensed consolidated statements of operations. The remaining consideration of $42.6 million, after accounting for the induced conversion expense and carrying value of the 2026 Convertible Notes on the date of repurchase, including unamortized debt issuance costs of $1.0 million, was recorded as a reduction to additional paid-in capital.

As of October 31, 2024, the conditions allowing holders of the Convertible Notes to convert were not met.

The net carrying amount of the Convertible Notes consisted of the following (in thousands):

 

 

 

October 31,

 

 

January 31,

 

 

 

2024

 

 

2024

 

 

 

2029 Convertible Notes

 

 

2026 Convertible Notes

 

 

2026 Convertible Notes

 

Principal

 

$

460,000

 

 

$

205,000

 

 

$

345,000

 

Unamortized issuance costs

 

 

(11,947

)

 

 

(1,378

)

 

 

(3,750

)

Net carrying amount

 

$

448,053

 

 

$

203,622

 

 

$

341,250

 

Issuance costs are being amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. The effective interest rate used to amortize the issuance costs of the 2029 Convertible Notes and 2026 Convertible Notes is 2.06% and 0.56%, respectively. For the three and nine months ended October 31, 2024 and 2023, interest expense recognized related to the 2029 Convertible Notes and 2026 Convertible Notes was not material.

Capped Calls

In connection with the pricing of the 2029 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2029 Capped Calls”). The 2029 Capped Calls each have a strike price of approximately $43.46 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2029 Convertible Notes. The 2029 Capped Calls have initial cap prices of $66.86 per share, subject to certain adjustments. The 2029 Capped Calls cover, subject to anti-dilution adjustments, approximately 10.6 million shares of our Class A common stock. The cost of $52.5 million incurred in connection with the 2029 Capped Calls was recorded as a reduction to additional paid-in capital.

In connection with the pricing of the 2026 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and together with the 2029 Capped Calls, the “Capped Calls”). The 2026 Capped Calls each have a strike price of approximately $25.80 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Convertible Notes. The 2026 Capped Calls have initial cap prices of $35.58 per share, subject to certain adjustments. The 2026 Capped Calls cover, subject to anti-dilution adjustments, approximately 13.4 million shares of our Class A common stock. The cost of $27.8 million incurred in connection with the 2026 Capped Calls was recorded as a reduction to additional paid-in capital. In September 2024, in connection with the repurchase of the 2026 Convertible Notes, we entered into agreements to unwind a portion of the 2026 Capped Calls and received approximately $30.3 million, which was recorded as an increase to additional paid-in capital. Apart from the partial unwind agreements, there have been no changes to the condition of the 2026 Capped Calls.

The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Convertible Notes (or, in the event a conversion of the Convertible Notes is settled in cash, to offset our cash payment obligation) with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Capped Calls are separate transactions, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ deficit and are not accounted for as derivatives.

Line of Credit

On June 30, 2023, we entered into an amended and restated secured credit agreement (the “June 2023 Facility”) to provide for a $150.0 million revolving loan facility with a $45.0 million sublimit for the issuance of letters of credit. There have been no changes to the terms and conditions of the June 2023 Facility during the nine months ended October 31, 2024 from those disclosed in Item 8. Financial Statements and Supplementary Data in our Form 10-K for the year ended January 31, 2024.

In September 2024, we paid down $30.0 million of our outstanding principal balance on the June 2023 Facility. As of October 31, 2024, we had no debt outstanding on the June 2023 Facility and were in compliance with all financial covenants.