What changed in this filing

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Item 1. Financial Statements

2020-12-09 compared with 2020-09-09 · 89 added, 79 removed, 377 unchanged (31% of the section changed)

3 unchanged sentences

Condensed consolidated balance sheets

(in thousands, except par value) July 31, 2020 January 31, 2020

(in thousands, except par value) October 31, 2020 January 31, 2020

Current assets

Cash and cash equivalents $ 299,356 $ 191,726

Accounts receivable, net of allowance for doubtful accounts of $ 1,954 and $ 1,216 as of July 31, 2020 and January 31, 2020, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 3,458 and $ 1,216 as of October 31, 2020 and January 31, 2020, respectively

64,291 70,863

25 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 76,872 and 71,051 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 76,951 and 71,051 shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively

Additional paid-in capital 1,140,268 818,774

7 unchanged sentences

comprehensive income (loss) (unaudited)

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands, except per share data) 2020 2019 2020 2019

17 unchanged sentences

Income from operations 11,502 9,922 35,601 62,464

Other income (expense)

Other expense

Interest expense ( 6,952 ) ( 10,225 ) ( 28,110 ) ( 10,355 )

Other income (expense), net ( 824 ) ( 1,061 ) ( 1,588 ) 22,602

Total other income (expense) ( 9,719 ) ( 1,128 ) ( 22,746 ) 22,472

Other expense, net ( 421 ) ( 30,949 ) ( 2,009 ) ( 8,347 )

Total other expense ( 7,373 ) ( 41,174 ) ( 30,119 ) ( 18,702 )

Income (loss) before income taxes 4,129 ( 31,252 ) 5,482 43,762

1 unchanged sentence

Net income (loss) and comprehensive income (loss) $ 1,789 $ ( 21,334 ) $ 3,467 $ 39,854

Net income per share:

Net income (loss) per share:

Basic $ 0.02 $ ( 0.30 ) $ 0.05 $ 0.61

Diluted $ 0.02 $ ( 0.30 ) $ 0.05 $ 0.59

Weighted-average number of shares used in computing net income per share:

Weighted-average number of shares used in computing net income (loss) per share:

Basic 76,701 70,524 73,358 65,727

4 unchanged sentences

Condensed consolidated statements of stockholders’ equity (unaudited)

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2020 2019 2020 2019

20 unchanged sentences

Condensed consolidated statements of cash flows (unaudited)

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2020 2019

12 unchanged sentences

Operating lease right-of-use assets 8,344 3,340

Accounts payable 6,047 ( 1,083 )

Accrued compensation ( 15,251 ) ( 8,012 )

Accrued liabilities and other current liabilities ( 6,017 ) 4,942

Accounts payable, accrued liabilities, and other current liabilities ( 7,936 ) 14,179

Operating lease liabilities, non-current ( 8,361 ) ( 2,859 )

6 unchanged sentences

Purchases of marketable securities — ( 53,845 )

Acquisitions, net of cash acquired — ( 1,630,066 )

Net cash used in investing activities ( 76,730 ) ( 1,715,393 )

4 unchanged sentences

Proceeds from exercise of common stock options 4,491 7,342

Proceeds from long-term debt — 1,250,000

Payment of debt issuance costs — ( 30,504 )

Net cash provided by financing activities 63,643 1,454,405

Increase in cash and cash equivalents 77,184 453,685

Increase (decrease) in cash and cash equivalents 107,630 ( 186,918 )

Beginning cash and cash equivalents 191,726 361,475

4 unchanged sentences

Condensed consolidated statements of cash flows (unaudited) (continued)

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2020 2019

3 unchanged sentences

Supplemental disclosures of non-cash investing and financing activities:

Purchases of property and equipment included in accounts payable or accrued liabilities $ 1,104 $ 3

Purchases of software and capitalized software development costs included in accounts payable, accrued liabilities, or accrued compensation 1,262 487

Purchases of intangible member assets 58 6,500

Additions to goodwill due to measurement period adjustments 1,177 —

Property and equipment included in accounts payable or accrued liabilities $ 167 $ 168

Software and capitalized software development costs included in accounts payable, accrued liabilities, or accrued compensation 1,346 316

Intangible member assets included in accounts payable or accrued liabilities 289 ( 151 )

Decrease in goodwill due to measurement period adjustments, net 5,838 —

Exercise of common stock options receivable 89 21

Follow-on equity offering costs accrued during the period 540 386

Debt issuance costs accrued during the period — 345

Equity-based acquisition consideration — 3,776

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

Basis of presentation

The accompanying condensed consolidated financial statements as of July 31, 2020 and for the three and six months ended July 31, 2020 and 2019 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting.

The accompanying condensed consolidated financial statements as of October 31, 2020 and for the three and nine months ended October 31, 2020 and 2019 are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting.

In the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods.

5 unchanged sentences

In July 2020, the Company closed a follow-on public offering of 5,290,000 shares of common stock at a public offering price of $ 56.00 per share, less the underwriters' discount.

The Company received net proceeds of approximately $ 286.8 million after deducting underwriting discounts and commissions of approximately $ 8.9 million and other offering expenses payable by the Company of approximately $ 0.6 million.

The Company used $ 200.0 million of such proceeds to repay debt under its term loan facility.

16 unchanged sentences

The adoption of this standard did not have a material effect on the Company’s current- or prior-period condensed consolidated financial statements.

Net income per share

The following table sets forth the computation of basic and diluted net income per share:

Three months ended July 31, Six months ended July 31,

Net income (loss) per share

The following table sets forth the computation of basic and diluted net income (loss) per share:

Three months ended October 31, Nine months ended October 31,

(in thousands, except per share data) 2020 2019 2020 2019

7 unchanged sentences

Diluted weighted-average common shares outstanding 77,845 70,524 74,665 67,150

Net income per share:

Net income (loss) per share:

Basic $ 0.02 $ ( 0.30 ) $ 0.05 $ 0.61

Diluted $ 0.02 $ ( 0.30 ) $ 0.05 $ 0.59

For the three months ended July 31, 2020 and 2019, approximately 2.1 million and 0.3 million shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

For the six months ended July 31, 2020 and 2019, approximately 0.6 million and 0.3 million shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

For the three months ended October 31, 2020 and 2019, approximately 1.0 million and 3.2 million shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

For the nine months ended October 31, 2020 and 2019, approximately 0.6 million and 0.3 million shares, respectively, attributable to stock options and restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

Business combination

5 unchanged sentences

Consideration paid was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the Acquisition date.

The initial allocation of the consideration paid was based on a preliminary valuation and is subject to potential adjustment during the measurement period (up to one year from the Acquisition date).

Balances subject to adjustment primarily include the valuations of acquired assets (tangible and intangible) and liabilities assumed, as well as tax-related matters.

The Company expects the allocation of the consideration transferred to be finalized within the measurement period.

The following table summarizes the Company's current allocation of the consideration paid in the Acquisition:

The initial allocation of the consideration paid was based on a preliminary valuation and was subject to adjustment during the measurement period (up to one year from the Acquisition date).

The purchase price allocation was finalized in the third quarter of fiscal 2021.

The following table summarizes the Company's allocation of the consideration paid in the Acquisition:

(in millions) Initial Allocation Adjustments Updated Allocation

11 unchanged sentences

Total consideration paid $ 2,122.1 $ — $ 2,122.1

Adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired, liabilities assumed, and tax-related matters.

Adjustments to the initial allocation were based on more detailed information obtained about the specific assets acquired, liabilities assumed, and tax-related matters.

Pro forma information

The unaudited pro forma results presented below include the effects of the Acquisition as if it had been consummated as of February 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the Acquisition, which include adjustments related to the amortization of acquired intangible assets, interest income and expense, and depreciation.

The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings from the integration of WageWorks.

Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

The estimated pro forma revenue and net income (loss) include the alignment of accounting policies, the effect of fair value adjustments related to the Acquisition, associated tax effects and the impact of the borrowings to finance the Acquisition and related expenses.

(in thousands) Three months ended October 31, 2019 Nine months ended October 31, 2019

Revenue $ 194,450 $ 598,815

Net income (loss) $ ( 3,286 ) $ 34,559

Supplemental financial statement information

1 unchanged sentence

Property and equipment

Property and equipment consisted of the following as of July 31, 2020 and January 31, 2020:

(in thousands) July 31, 2020 January 31, 2020

Property and equipment consisted of the following as of October 31, 2020 and January 31, 2020:

(in thousands) October 31, 2020 January 31, 2020

Leasehold improvements $ 22,310 $ 19,240

4 unchanged sentences

Property and equipment, net $ 31,774 $ 33,486

Depreciation expense for the three months ended July 31, 2020 and 2019 was $ 4.1 million and $ 1.0 million, respectively, and $ 8.0 million and $ 1.8 million for the six months ended July 31, 2020 and 2019, respectively.

Depreciation expense for the three months ended October 31, 2020 and 2019 was $ 4.0 million and $ 3.6 million, respectively, and $ 12.0 million and $ 5.4 million for the nine months ended October 31, 2020 and 2019, respectively.

Contract balances

2 unchanged sentences

Alternatively, when payment precedes the related services, the Company records a contract liability, or deferred revenue, until its performance obligations are satisfied.

As of July 31, 2020 and January 31, 2020, the balance of deferred revenue was $ 11.5 million and $ 3.7 million, respectively.

As of October 31, 2020 and January 31, 2020, the balance of deferred revenue was $ 7.0 million and $ 3.7 million, respectively.

The balances are related to cash received in advance for an interchange revenue arrangement, other up-front fees and other commuter deferred revenue, and are generally recognized within twelve months, with the exception of the interchange arrangement, which is recognized over a term of approximately ten years .

During the three and six months ended July 31, 2020, approximately $ 0.6 million and $ 1.4 million of revenue, respectively, was recognized that was included in the balance of deferred revenue as of January 31, 2020.

During the three and nine months ended October 31, 2020, approximately $ 0.4 million and $ 2.2 million of revenue, respectively, was recognized that was included in the balance of deferred revenue as of January 31, 2020.

The components of operating lease costs were as follows:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2020 2019 2020 2019

3 unchanged sentences

Supplemental cash flow information related to the Company's operating leases was as follows:

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2020 2019

2 unchanged sentences

Operating lease right-of-use assets obtained in exchange for new operating lease obligations $ 17,480 $ 34,394

Other income (expense), net

Other income (expense), net, consisted of the following:

Three months ended July 31, Six months ended July 31,

Other expense, net

Other expense, net, consisted of the following:

Three months ended October 31, Nine months ended October 31,

(in thousands) 2020 2019 2020 2019

1 unchanged sentence

Gain on equity securities — 285 — 27,570

Acquisition gains (costs) 28 ( 6,596 ) ( 66 ) ( 7,780 )

Acquisition costs ( 13 ) ( 32,932 ) ( 79 ) ( 40,712 )

Other expense ( 582 ) ( 348 ) ( 2,780 ) ( 478 )

Total other income (expense), net $ ( 824 ) $ ( 1,061 ) $ ( 1,588 ) $ 22,602

Total other expense, net $ ( 421 ) $ ( 30,949 ) $ ( 2,009 ) $ ( 8,347 )

Intangible assets and goodwill

Intangible assets

The gross carrying amount and associated accumulated amortization of intangible assets were as follows as of July 31, 2020 and January 31, 2020:

(in thousands) July 31, 2020 January 31, 2020

The gross carrying amount and associated accumulated amortization of intangible assets were as follows as of October 31, 2020 and January 31, 2020:

(in thousands) October 31, 2020 January 31, 2020

Amortizable intangible assets:

9 unchanged sentences

Total intangible assets, net $ 776,311 $ 783,279

During the three months ended July 31, 2020 and 2019, the Company expensed a total of $ 10.3 million and $ 3.8 million, respectively, and $ 20.6 million and $ 7.7 million for the six months ended July 31, 2020 and 2019, respectively, in software development costs primarily related to the post-implementation and operation stages of its proprietary software.

Amortization expense for the three months ended July 31, 2020 and 2019 was $ 24.5 million and $ 4.0 million, respectively, and $ 48.1 million and $ 7.9 million for the six months ended July 31, 2020 and 2019, respectively.

During the three months ended July 31, 2020, goodwill increased by $ 1.2 million due to measurement period adjustments.

There were no additional changes to the goodwill carrying value during the three and six months ended July 31, 2020 and 2019.

During the three months ended October 31, 2020 and 2019, the Company expensed a total of $ 10.5 million and $ 6.2 million, respectively, and $ 31.1 million and $ 13.8 million for the nine months ended October 31, 2020 and 2019, respectively, in software development costs primarily related to the post-implementation and operation stages of its proprietary software.

Amortization expense for the three months ended October 31, 2020 and 2019 was $ 25.3 million and $ 15.7 million, respectively, and $ 73.5 million and $ 23.6 million for the nine months ended October 31, 2020 and 2019, respectively.

During the three and nine months ended October 31, 2020, goodwill decreased by $ 7.0 million and $ 5.8 million, respectively, due to measurement period adjustments related to the Acquisition of WageWorks.

Commitments and contingencies

The Company’s principal commitments consist of a term loan facility, operating lease obligations for office space, data storage facilities, and other leases, a processing services agreement with a vendor, and contractual commitments related to network infrastructure, equipment, and certain maintenance agreements under long-term, non-cancelable commitments.

Except for the $ 200 million principal prepayment on our term loan facility, there were no material changes during the three and six months ended July 31, 2020, outside of the ordinary course of business, in our commitments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020.

Except for the $ 200 million principal prepayment on our term loan facility, there were no material changes during the three and nine months ended October 31, 2020, outside of the ordinary course of business, in our commitments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020.

Contingencies

23 unchanged sentences

Attorney’s Office for the Northern District of California also opened an investigation.

WageWorks has

provided documents and information to the U.S.

WageWorks has provided documents and information to the U.S.

Attorney’s Office and continues to cooperate with any inquiries by the U.S.

11 unchanged sentences

Accordingly, management estimated the effective annual tax rate and applied this rate to the year-to-date pre-tax book income to determine the interim benefit or provision for income taxes.

For the three and six months ended July 31, 2020, the Company recorded an income tax benefit of $ 0.5 million and $ 0.3 million, respectively.

This resulted in an effective income tax benefit rate of 78.6 % and 24.0 % for the three and six months ended July 31, 2020, respectively, compared with an effective income tax expense rate of 18.4 % for each of the three and six months ended July 31, 2019.

For the three and six months ended July 31, 2020 and 2019, the net impact of discrete tax items caused a 62.9 and 57.4 percentage point benefit and a 4.8 and 4.6 percentage point benefit, respectively, to the effective income tax rate primarily due to the excess tax benefit on stock-based compensation expense recognized in the provision for income taxes relative to pre-tax book income.

Due to significantly lower pre-tax book income during the six months ended July 31, 2020, such excess tax benefit had a greater impact on the effective income tax rate.

As of July 31, 2020 and January 31, 2020, the Company’s total gross unrecognized tax benefit was $ 9.8 million and $ 9.4 million, respectively.

As of July 31, 2020 and January 31, 2020, a net unrecognized tax benefit of $ 0.6 million and $ 0.5 million, respectively, was recorded in the condensed consolidated balance sheets.

If recognized, $ 9.0 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of July 31, 2020.

For the three and nine months ended October 31, 2020, the Company recorded income tax expense of $ 2.3 million and $ 2.0 million, respectively.

This resulted in an effective income tax expense rate of 56.7 % and 36.8 % for the three and nine months ended October 31, 2020, respectively, compared with an effective income tax benefit rate of 31.7 % and an effective income tax expense rate of 8.9 % for the three and nine months ended October 31, 2019, respectively.

For the three and nine months ended October 31, 2020 and 2019, the net

impact of discrete tax items caused a 6.0 percentage point expense and a 9.6 percentage point benefit and a 1.1 and 8.7 percentage point benefit, respectively, to the effective income tax rate primarily due to the excess tax benefit on stock-based compensation expense and return-to-provision adjustments, which were partially offset by state apportionment changes recognized in the provision for income taxes relative to pre-tax book income.

Due to significantly lower pre-tax book income during the nine months ended October 31, 2020, discrete items had a greater impact on the effective income tax rate than during the nine months ended October 31, 2019.

As of October 31, 2020 and January 31, 2020, the Company’s total gross unrecognized tax benefit was $ 10.0 million and $ 9.4 million, respectively.

As of October 31, 2020 and January 31, 2020, a net unrecognized tax benefit of $ 0.5 million was recorded in the condensed consolidated balance sheets.

If recognized, $ 9.2 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of October 31, 2020.

The Company files income tax returns with U.S.

federal and state taxing jurisdictions and is not currently under examination with any jurisdiction.

federal and state taxing jurisdictions and is currently under examination with the state of Texas.

As a result of the Company's net operating loss carryforwards and tax credit carryforwards, the Company remains subject to examination by one or more jurisdictions for tax years after 2000.

As of July 31, 2020, long-term debt consisted of the following:

(in millions) July 31, 2020

As of October 31, 2020, long-term debt consisted of the following:

(in millions) October 31, 2020

Term loan facility $ 1,018.8

1 unchanged sentence

Long-term debt, net of issuance costs $ 1,001.1

(1) In addition to the $ 19.0 million of unamortized issuance costs related to the term loan facility, $ 5.7 million of unamortized issuance costs related to our revolving credit facility are included within other assets on the July 31, 2020 condensed consolidated balance sheet.

(1) In addition to the $ 17.7 million of unamortized issuance costs related to the term loan facility, $ 5.3 million of unamortized issuance costs related to our revolving credit facility are included within other assets on the October 31, 2020 condensed consolidated balance sheet.

In connection with the closing of the Acquisition, on August 30, 2019, the Company entered into a credit facility (the "Credit Agreement”) that provided for:

1 unchanged sentence

(ii) a five-year senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”), in an aggregate principal amount of up to $ 350.0 million, which may be used for working capital and general corporate purposes, including acquisitions and other investments.

No amounts were drawn under the Revolving Credit Facility as of July 31, 2020.

No amounts were drawn under the Revolving Credit Facility as of October 31, 2020.

Borrowings under the Credit Facilities bear interest at an annual rate equal to, at the option of HealthEquity, either (i) LIBOR (adjusted for reserves) plus a margin ranging from 1.25 % to 2.25 % or (ii) an alternate base rate plus a margin ranging from 0.25 % to 1.25 %, with the applicable margin determined by reference to a leverage-based pricing grid set forth in the Credit Agreement.

As of July 31, 2020, the stated interest rate was 2.16 % and the effective interest rate was 2.70 %.

As of October 31, 2020, the stated interest rate was 1.65 % and the effective interest rate was 2.18 %.

The Company is also required to pay certain fees to the lenders, including, among others, a quarterly commitment fee on the average unused amount of the Revolving Credit Facility at a rate ranging from 0.20 % to 0.40 %, with the applicable rate also determined by reference to a leverage-based pricing grid set forth in the Credit Agreement.

5 unchanged sentences

(1) The amount required to be repaid in 2025 reflects the $ 200.0 million prepayment made in July 2020 with proceeds from the follow-on offering.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that limit, among other things, the ability of the Company to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, in each case, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains financial performance covenants, which require the Company to maintain (i) a maximum total net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 5.00 to 1.00, which steps down to 4.50 to 1.00 beginning with the fiscal quarter ending July 31, 2021 (subject to a customary “acquisition holiday” provision that allows the maximum total net leverage ratio to increase to 5.00 to 1.00 for the four fiscal quarter period ending on or following the date of a permitted acquisition by the Company in excess of $ 100.0 million), and (ii) a minimum interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 3.00 to 1.00.

The Company was in compliance with all covenants under the Credit Agreement as of July 31, 2020, and for the period then ended.

make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, in each case, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains financial performance covenants, which require the Company to maintain (i) a maximum total net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 5.00 to 1.00, which steps down to 4.50 to 1.00 beginning with the fiscal quarter ending July 31, 2021 (subject to a customary “acquisition holiday” provision that allows the maximum total net leverage ratio to increase to 5.00 to 1.00 for the four fiscal quarter period ending on or following the date of a permitted acquisition by the Company in excess of $ 100.0 million), and (ii) a minimum interest coverage ratio, measured as of the last day of each fiscal quarter, of no less than 3.00 to 1.00.

The Company was in compliance with all covenants under the Credit Agreement as of October 31, 2020, and for the period then ended.

The obligations of HealthEquity under the Credit Agreement are required to be unconditionally guaranteed by WageWorks and each of the Company's subsequently acquired or organized direct and indirect domestic subsidiaries and are secured by security interests in substantially all assets of HealthEquity and the guarantors, in each case, subject to certain customary exceptions.

1 unchanged sentence

The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive income (loss) during the periods presented:

Three months ended July 31, Six months ended July 31,

Three months ended October 31, Nine months ended October 31,

(in thousands) 2020 2019 2020 2019

3 unchanged sentences

General and administrative 4,594 3,332 11,715 9,486

Merger Integration — 1,220 — 1,220

Other expense, net — 13,714 — 13,714

Total stock-based compensation expense $ 11,479 $ 23,156 $ 30,313 $ 36,774

4 unchanged sentences

In addition, under the Incentive Plan, the number of shares of common stock reserved for issuance under the Incentive Plan automatically increases on February 1 of each year, beginning as of February 1, 2015 and continuing through and including February 1, 2024, by 3 % of the total number of shares of the Company’s capital stock outstanding on January 31 of the preceding fiscal year, or a lesser number of shares determined by the board of directors.

As of July 31, 2020, 6.4 million shares were available for grant under the Incentive Plan.

As of October 31, 2020, 6.4 million shares were available for grant under the Incentive Plan.

WageWorks Incentive Plan.

15 unchanged sentences

Forfeited ( 10 ) $ 25.45 - 44.53

Outstanding as of July 31, 2020 1,933 $ 0.10 - 82.39

Outstanding as of October 31, 2020 1,863 $ 1.25 - 82.39

$ 31.23 5.10 $ 42,046

Vested and expected to vest as of July 31, 2020 1,933 $ 31.04 5.40 $ 43,958

Exercisable as of July 31, 2020 1,596 $ 26.12 5.00 $ 41,916

Vested and expected to vest as of October 31, 2020 1,863 $ 31.23 5.10 $ 42,046

Exercisable as of October 31, 2020 1,584 $ 26.55 4.70 $ 41,025

Restricted stock units and restricted stock awards

6 unchanged sentences

Forfeited ( 262 ) 66.77 ( 32 ) 62.41

Outstanding as of July 31, 2020 1,908 $ 60.95 207 $ 62.66

Outstanding as of October 31, 2020 1,892 $ 60.51 207 $ 62.66

Performance restricted stock units and awards.

16 unchanged sentences

The modified performance conditions for the two-thirds tranche allow for a range of vesting from 0 % to 200 % based on the level of achievement of the new performance conditions, and the Company believes it is probable that the PRSUs will vest at least in part.

During the six months ended July 31, 2020, the Company awarded 277,950 PRSUs subject to a market condition based on the Company’s total shareholder return ("TSR") relative to the Russell 2000 index as measured on January 31, 2023.

During the first and second quarters of fiscal 2021, the Company awarded 277,950 PRSUs subject to a market condition based on the Company’s total shareholder return ("TSR") relative to the Russell 2000 index as measured on January 31, 2023.

The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was approximately $ 20.8 million.

12 unchanged sentences

Level 1 instruments consist primarily of cash and cash equivalents.

The carrying value of cash and cash equivalents approximate fair values as of July 31, 2020 due to the short-term nature of these instruments.

The carrying value of cash and cash equivalents approximate fair values as of October 31, 2020 due to the short-term nature of these instruments.

Our long-term debt is considered a Level 2 instrument and is recorded at book value in our condensed consolidated financial statements.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements