Financial Instruments

6 Months Ended

Jul. 28, 2024

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 and twenty-six weeks ended July 28, 2024. Further, as of July 28, 2024, the Company did not record an allowance for credit losses related to its fixed income securities.

Vested equity warrants and equity investments in public companies that have readily determinable fair values are carried at fair value and are classified as marketable securities within Level 1 because they are valued using quoted market prices.

Unvested 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 unvested 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. Equity warrants are transferred from Level 3 to Level 1 of the fair value hierarchy upon vesting as they are no longer valued based on unobservable inputs.

The following table includes a summary of financial instruments measured at fair value as of July 28, 2024 (in thousands):


	Level 1		Level 2		Level 3
Cash	$	694,460	$	—	$	—
U.S. Treasury securities	—		—		—

Cash and cash equivalents	694,460		—		—

Vested equity warrants	—		—		—
Equity investments	490		—		—
Marketable securities	490		—		—
Unvested equity warrants	—		—		2,968
Total financial instruments	$	694,950	$	—	$	2,968

The following table includes a summary of financial instruments measured at fair value as of January 28, 2024 (in thousands):


	Level 1		Level 2		Level 3
Cash	$	602,232	$	—	$	—
Money market funds	—		—		—
Cash and cash equivalents	602,232		—		—
U.S. Treasury securities	531,592		—		—
Equity investments	193		—		—
Marketable securities	531,785		—		—
Unvested equity warrants	—		—		2,219
Total financial instruments	$	1,134,017	$	—	$	2,219

As of July 28, 2024 and January 28, 2024, the deferred credit subject to vesting and performance requirements recognized within other long-term liabilities in exchange for the equity warrants was $4.9 million and $1.9 million, respectively.

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


	26 Weeks Ended
	July 28, 2024		July 30, 2023
Beginning balance	$	2,219	$	31,622

Change in fair value of unvested equity warrants	4,000		10,618

Equity warrants vested	(3,251)		—
Ending balance	$	2,968	$	42,240

The following table presents quantitative information about Level 3 significant unobservable inputs used in the fair value measurement of the unvested equity warrants as of July 28, 2024 (in thousands):

Range

Fair Value

Valuation Techniques

Unobservable Input

Min

Max

Weighted Average

Equity warrants

$2,968

Black-Scholes and Monte Carlo

Probability of vesting

25%

17%

Equity volatility

35%

80%

73%

- 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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