What changed in this filing

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Item 1. Financial Statements

2022-12-08 compared with 2022-09-08 · 56 added, 57 removed, 400 unchanged (22% of the section changed)

3 unchanged sentences

Condensed consolidated balance sheets

(in thousands, except par value) July 31, 2022 January 31, 2022

(in thousands, except par value) October 31, 2022 January 31, 2022

Current assets

Cash and cash equivalents $ 210,197 $ 225,414

Accounts receivable, net of allowance for doubtful accounts of $ 6,215 and $ 6,228 as of July 31, 2022 and January 31, 2022, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 6,045 and $ 6,228 as of October 31, 2022 and January 31, 2022, respectively

87,716 87,428

24 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 84,526 and 83,780 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively

Preferred stock, $ 0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of October 31, 2022 and January 31, 2022, respectively

Common stock, $ 0.0001 par value, 900,000 shares authorized, 84,636 and 83,780 shares issued and outstanding as of October 31, 2022 and January 31, 2022, respectively

Additional paid-in capital 1,732,985 1,676,508

7 unchanged sentences

comprehensive 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) 2022 2021 2022 2021

34 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) 2022 2021 2022 2021

20 unchanged sentences

Condensed consolidated statements of cash flows (unaudited)

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2022 2021

5 unchanged sentences

Amortization of debt discount and issuance costs 2,454 3,616

Loss on extinguishment of debt — 4,044

Change in fair value of contingent consideration — ( 2,147 )

21 unchanged sentences

Proceeds from exercise of common stock options 6,616 7,728

Proceeds from issuance of long-term debt — 950,000

Payment of debt issuance costs — ( 11,846 )

Proceeds from follow-on equity offering, net of payments for offering costs — 456,642

7 unchanged sentences

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

Six months ended July 31,

Nine months ended October 31,

(in thousands) 2022 2021

8 unchanged sentences

Exercise of common stock options receivable 21 1

Increase in goodwill due to measurement period adjustments, net 163 —

Decrease in goodwill due to measurement period adjustments, net 77 19

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

Basis of presentation

The accompanying condensed consolidated financial statements as of July 31, 2022 and for the three and six months ended July 31, 2022 and 2021 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, 2022 and for the three and nine months ended October 31, 2022 and 2021 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.

2 unchanged sentences

The fiscal year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Significant accounting policies

4 unchanged sentences

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

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) 2022 2021 2022 2021

10 unchanged sentences

Diluted $ ( 0.02 ) $ ( 0.06 ) $ ( 0.31 ) $ ( 0.14 )

For the three months ended July 31, 2022 and 2021, approximately 3.3 million and 1.9 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

For the six months ended July 31, 2022 and 2021, approximately 2.6 million and 2.0 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

For the three months ended October 31, 2022 and 2021, approximately 2.0 million and 1.6 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

For the nine months ended October 31, 2022 and 2021, approximately 2.4 million and 1.9 million shares, respectively, attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

Business combinations

38 unchanged sentences

Property and equipment consisted of the following:

(in thousands) July 31, 2022 January 31, 2022

(in thousands) October 31, 2022 January 31, 2022

Leasehold improvements $ 18,269 $ 18,573

4 unchanged sentences

Property and equipment, net $ 15,620 $ 23,372

Depreciation expense for the three months ended July 31, 2022 and 2021 was $ 3.2 million and $ 3.5 million, respectively, and $ 6.4 million and $ 7.4 million for the six months ended July 31, 2022 and 2021, respectively.

Depreciation expense for the three months ended October 31, 2022 and 2021 was $ 2.9 million and $ 3.5 million, respectively, and $ 9.4 million and $ 10.9 million for the nine months ended October 31, 2022 and 2021, 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, 2022 and January 31, 2022, the balance of deferred revenue was $ 8.8 million and $ 10.5 million, respectively.

As of October 31, 2022 and January 31, 2022, the balance of deferred revenue was $ 7.4 million and $ 10.5 million, respectively.

The balances are related to cash received in advance for interchange and custodial revenue arrangements, other up-front fees and other commuter deferred revenue.

The Company expects to recognize approximately 49 % of its balance of deferred revenue as revenue over the next 12 months and the remainder thereafter.

During the three and six months ended July 31, 2022, approximately $ 2.0 million and $ 2.9 million, respectively, of revenue was recognized that was included in the balance of deferred revenue as of January 31, 2022.

During the three and nine months ended October 31, 2022, approximately $ 1.0 million and $ 4.2 million, respectively, of revenue was recognized that was included in the balance of deferred revenue as of January 31, 2022.

The Company expects to satisfy its remaining obligations for these arrangements.

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)

5 unchanged sentences

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

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

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

(in thousands) 2022 2021 2022 2021

Interest income $ 443 $ 478 $ 584 $ 1,419

Acquisition costs, net ( 47 ) ( 1,665 ) ( 53 ) ( 7,604 )

Gain on equity securities — — — 1,677

Acquisition gains (costs), net — 2,687 ( 53 ) ( 4,917 )

Other income (expense), net — ( 43 ) ( 357 ) 1,657

2 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) 2022 2021

5 unchanged sentences

The gross carrying amount and associated accumulated amortization of intangible assets were as follows:

As of July 31, 2022

October 31, 2022

(in thousands) Gross carrying amount Accumulated amortization Net carrying amount

6 unchanged sentences

Total amortizable intangible assets $ 1,391,385 $ ( 426,854 ) $ 964,531

As of January 31, 2022

January 31, 2022

(in thousands) Gross carrying amount Accumulated amortization Net carrying amount

6 unchanged sentences

Total amortizable intangible assets $ 1,289,854 $ ( 316,717 ) $ 973,137

Amortization expense for the three months ended July 31, 2022 and 2021 was $ 37.6 million and $ 29.5 million, respectively, and $ 73.8 million and $ 57.4 million for the six months ended July 31, 2022 and 2021, respectively.

During the six months ended July 31, 2022, goodwill increased by $ 0.2 million due to measurement period adjustments.

Amortization expense for the three months ended October 31, 2022 and 2021 was $ 37.6 million and $ 30.0 million, respectively, and $ 111.4 million and $ 87.5 million for the nine months ended October 31, 2022 and 2021, respectively.

During the three and nine months ended October 31, 2022, goodwill decreased by $ 0.2 million and $ 0.1 million, respectively, due to measurement period adjustments.

For further information, see Note 3—Business combinations.

There were no additional changes to the carrying value of goodwill during the six months ended July 31, 2022.

There were no additional changes to the carrying value of goodwill during the nine months ended October 31, 2022.

Commitments and contingencies

2 unchanged sentences

("HealthSavings") HSA portfolio for $ 60 million in cash.

There were no other material changes during the six months ended July 31, 2022, outside of the ordinary course of business, in the Company's commitments from those disclosed in its Annual Report on Form 10-K for the fiscal year ended January 31, 2022.

There were no other material changes during the nine months ended October 31, 2022, outside of the ordinary course of business, in the Company's commitments from those disclosed in its Annual Report on Form 10-K for the fiscal year ended January 31, 2022.

Contingencies

14 unchanged sentences

On May 19, 2022, Union Mesa filed an amended complaint and counterclaim seeking the same recourse.

On June 29, 2022, Union Mesa filed a second amended answer and counterclaim, which names the Company as a counter-defendant.

On June 29, 2022, Union Mesa filed a second amended answer and counterclaim, which names the Company as a

counter-defendant.

On July 21, 2022, WageWorks and the Company filed an answer to the counterclaims.

On June 22, 2018 and September 6, 2018, two derivative lawsuits were filed against certain of WageWorks’ former officers and directors and WageWorks (as nominal defendant) in the Superior Court of the State of California, County of San Mateo.

The actions were consolidated.

On July 23, 2018, a similar derivative lawsuit was filed against certain former WageWorks’ officers and directors and WageWorks (as nominal defendant) in the U.S.

District Court for the Northern District of California (together, the “Derivative Suits”).

The Derivative Suits have both been dismissed.

WageWorks previously entered into indemnification agreements with its former directors and officers and, pursuant to these indemnification agreements, is covering the defense fees and costs of its former directors and officers in the legal proceedings described above.

The parties are currently engaged in discovery.

The Company and its subsidiaries are involved in various other litigation, governmental proceedings and claims, not described above, that arise in the normal course of business.

4 unchanged sentences

Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations and cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods.

The Company follows Accounting Standards Codification ("ASC") 740-270, Income Taxes - Interim Reporting , for the computation and presentation of its interim period tax provision.

The Company follows Accounting Standards Codification 740-270, Income Taxes - Interim Reporting , for the computation and presentation of its interim period tax provision.

Accordingly, management estimated the effective annual tax rate and applied this rate to the pre-tax book loss through the end of the latest fiscal quarter to determine the interim income tax benefit.

For the three and six months ended July 31, 2022, the Company recorded an income tax benefit of $ 3.2 million and $ 7.6 million, respectively.

This resulted in an effective income tax benefit rate of 23.2 % and 23.9 % for the three and six months ended July 31, 2022, respectively, compared with an effective income tax benefit rate of 50.8 % and 53.6 % for the three and six months ended July 31, 2021, respectively.

For the three and six months ended July 31, 2022, discrete tax items had an effective tax rate benefit of 4.1 % and 4.2 %, respectively, compared with an effective tax rate benefit of 25.6 % and 28.9 % for the three and six months ended July 31, 2021, respectively, primarily due to excess tax benefits on stock-based compensation expense recognized in the provision for income taxes.

As of July 31, 2022 and January 31, 2022, the Company’s total gross unrecognized tax benefit was $ 12.0 million and $ 11.7 million, respectively.

If recognized, $ 8.6 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of July 31, 2022.

For the three and nine months ended October 31, 2022, the Company recorded an income tax benefit of $ 4.5 million and $ 12.2 million, respectively.

This resulted in an effective income tax benefit rate of 73.4 % and 31.9 % for the three and nine months ended October 31, 2022, respectively, compared with an effective income tax benefit rate of 44.8 % and 50.1 % for the three and nine months ended October 31, 2021, respectively.

For the three and nine months ended October 31, 2022, discrete tax items had an effective tax rate benefit of 66.2 % and 14.3 %, respectively, compared with an effective tax rate benefit of 7.7 % and 20.5 % for the three and nine months ended October 31, 2021, respectively, primarily due to a release of uncertain tax positions and a change in excess tax benefits on stock-based compensation expense recognized in the provision for income taxes.

As of October 31, 2022 and January 31, 2022, the Company’s total gross unrecognized tax benefit was $ 8.8 million and $ 11.7 million, respectively.

If recognized, $ 5.4 million of the total gross unrecognized tax benefits would affect the Company's effective tax rate as of October 31, 2022.

The Company files income tax returns with U.S.

3 unchanged sentences

Long-term debt consisted of the following:

(in thousands) July 31, 2022 January 31, 2022

(in thousands) October 31, 2022 January 31, 2022

4.50 % Senior Notes due 2029

6 unchanged sentences

Long-term debt, net $ 911,406 $ 922,077

(1) In addition to the $ 17.5 million and $ 19.2 million of unamortized discount and issuance costs related to long-term debt as of July 31, 2022 and January 31, 2022, respectively, $ 3.9 million and $ 4.4 million of unamortized issuance costs related to the Company's Revolving Credit Facility (as defined below) are included within other assets on the condensed consolidated balance sheets as of July 31, 2022 and January 31, 2022, respectively.

(1) In addition to the $ 16.7 million and $ 19.2 million of unamortized discount and issuance costs related to long-term debt as of October 31, 2022 and January 31, 2022, respectively, $ 3.7 million and $ 4.4 million of unamortized issuance costs related to the Company's Revolving Credit Facility (as defined below) are included within other assets on the condensed consolidated balance sheets as of October 31, 2022 and January 31, 2022, respectively.

4.50 % Senior Notes due 2029

4 unchanged sentences

Interest on the Notes is payable on April 1 and October 1 of each year.

As of July 31, 2022 and January 31, 2022, $ 9.0 million and $ 8.7 million, respectively, of accrued interest on the Notes is included within accrued liabilities on the Company's condensed consolidated balance sheets.

As of October 31, 2022 and January 31, 2022, $ 2.3 million and $ 8.7 million, respectively, of accrued interest on the Notes is included within accrued liabilities on the Company's condensed consolidated balance sheets.

The effective interest rate on the Notes is 4.72 %.

10 unchanged sentences

(i) a five-year senior secured term loan A facility (the “Term Loan Facility”), in an aggregate principal amount of $ 350 million;

(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 $ 1.0 billion (with a $ 25 million sub-limit for the issuance of letters of credit), the proceeds of which may be used for working capital and

general corporate purposes of the Company and its subsidiaries, including the financing of acquisitions and other investments.

Subject to the terms and conditions set forth in the Credit Agreement (including obtaining additional commitments from one or more new or existing lenders), the Company may in the future incur additional loans or commitments under the Credit Agreement in an aggregate principal amount of up to $ 300 million, plus an additional amount so long as the Company’s pro forma First Lien Net Leverage Ratio (as defined in the Credit Agreement) would not exceed 3.85 to 1.00 as of the date such loans or commitments are incurred.

Borrowings under the Credit Facilities bear interest at an annual rate equal to, at the option of the Company, 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, 2022, the stated interest rate was 4.13 % and the effective interest rate was 4.92 %.

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.

As of October 31, 2022, the stated interest rate was 5.56 % and the effective interest rate was 6.38 %.

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.

No amounts have been drawn under the Revolving Credit Facility.

7 unchanged sentences

The Credit Agreement contains significant customary affirmative and negative covenants, including covenants that limit, among other things, the ability of the Company and its subsidiaries 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 and (ii) a minimum consolidated 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, 2022, and for the period then ended.

The Company was in compliance with all covenants under the Credit Agreement as of October 31, 2022, and for the period then ended.

The repayment obligation under the Credit Agreement may be accelerated upon the occurrence of an event of default thereunder, including, among other things, failure to pay principal, interest or fees on a timely basis, material inaccuracy of any representation or warranty, failure to comply with covenants, cross-default to other material debt, material judgments, change of control and certain insolvency or bankruptcy-related events, in each case, subject to any certain grace and/or cure periods.

2 unchanged sentences

The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive 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) 2022 2021 2022 2021

11 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, 2022, 9.4 million shares were available for grant under the Incentive Plan.

As of October 31, 2022, 9.4 million shares were available for grant under the Incentive Plan.

Stock options

10 unchanged sentences

Forfeited ( 2 ) $ 25.45 - 28.69

Outstanding as of July 31, 2022 1,098 $ 14.00 - 82.39

Outstanding as of October 31, 2022 1,039 $ 14.00 - 82.39

$ 36.24 3.7 $ 43,426

Vested and expected to vest as of July 31, 2022 1,098 $ 35.84 3.9 $ 27,183

Exercisable as of July 31, 2022 1,059 $ 34.49 3.8 $ 27,183

Vested and expected to vest as of October 31, 2022 1,039 $ 36.24 3.7 $ 43,426

Exercisable as of October 31, 2022 1,007 $ 35.12 3.6 $ 43,196

Restricted stock units

6 unchanged sentences

Forfeited ( 399 ) 63.87

Outstanding as of July 31, 2022 3,275 $ 69.76

Outstanding as of October 31, 2022 3,270 $ 70.02

Performance restricted stock units.

During the three months ended April 30, 2022, the Company awarded 281,784 performance restricted stock units ("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, 2025.

used a Monte Carlo simulation to determine that the grant date fair value of the awards was $ 32.1 million.

The Company used a Monte Carlo simulation to determine that the grant date fair value of the awards was $ 32.1 million.

Compensation expense is recorded if the service condition is met regardless of whether the market condition is satisfied.

12 unchanged sentences

The Notes are valued based upon quoted market prices and are considered Level 2 instruments because the markets in which the Notes trade are not considered active markets.

As of July 31, 2022, the fair value of the Notes was $ 556.8 million.

As of October 31, 2022, the fair value of the Notes was $ 528.5 million.

The Term Loan Facility is considered a Level 2 instrument and recorded at book value in the Company's 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