Cover Page
Cover Page - USD ($) $ in Billions | 12 Months Ended | ||
Jan. 31, 2020 | Mar. 24, 2020 | Jul. 31, 2019 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Jan. 31, 2020 | ||
Document Transition Report | false | ||
Entity File Number | 001-36568 | ||
Entity Registrant Name | HEALTHEQUITY, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 52-2383166 | ||
Entity Address, Address Line One | 15 West Scenic Pointe Drive | ||
Entity Address, Address Line Two | Suite 100 | ||
Entity Address, City or Town | Draper | ||
Entity Address, State or Province | UT | ||
Entity Address, Postal Zip Code | 84020 | ||
City Area Code | 801 | ||
Local Phone Number | 727-1000 | ||
Title of 12(b) Security | Common stock, par value $0.0001 per share | ||
Trading Symbol | HQY | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 5.7 | ||
Entity Common Stock, Shares Outstanding | 71,082,306 | ||
Documents Incorporated by Reference | Portions of the Registrant's definitive proxy statement related to its 2020 annual meeting of stockholders (the "2020 Proxy Statement") are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2020 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. | ||
Entity Central Index Key | 0001428336 | ||
Current Fiscal Year End Date | --01-31 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jan. 31, 2020 | Jan. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 191,726 | $ 361,475 |
Accounts receivable, net of allowance for doubtful accounts of $1,216 and $125 as of January 31, 2020 and 2019, respectively | 70,863 | 25,668 |
Other current assets | 34,711 | 7,534 |
Total current assets | 297,300 | 394,677 |
Property and equipment, net | 33,486 | 8,223 |
Operating lease right-of-use assets | 83,178 | |
Intangible assets, net | 783,279 | 79,666 |
Goodwill | 1,332,631 | 4,651 |
Deferred tax asset | 18 | 1,677 |
Other assets | 35,089 | 21,122 |
Total assets | 2,564,981 | 510,016 |
Current liabilities | ||
Accounts payable | 3,980 | 3,520 |
Accrued compensation | 50,121 | 16,981 |
Accrued liabilities | 46,372 | 8,552 |
Current portion of long-term debt | 39,063 | 0 |
Operating lease liabilities | 12,401 | |
Total current liabilities | 151,937 | 29,053 |
Long-term liabilities | ||
Long-term debt, net of issuance costs | 1,181,615 | 0 |
Operating lease liabilities, non-current | 68,017 | |
Other long-term liabilities | 2,625 | 2,968 |
Deferred tax liability | 130,492 | 916 |
Total long-term liabilities | 1,382,749 | 3,884 |
Total liabilities | 1,534,686 | 32,937 |
Commitments and contingencies (see Note 7) | ||
Stockholders’ equity | ||
Preferred stock, $0.0001 par value, 100,000 shares authorized, no shares issued and outstanding as of January 31, 2020 and 2019 | 0 | 0 |
Common stock, $0.0001 par value, 900,000 shares authorized, 71,051 and 62,446 shares issued and outstanding as of January 31, 2020 and 2019, respectively | 7 | 6 |
Additional paid-in capital | 818,774 | 305,223 |
Accumulated earnings | 211,514 | 171,850 |
Total stockholders’ equity | 1,030,295 | 477,079 |
Total liabilities and stockholders’ equity | $ 2,564,981 | $ 510,016 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jan. 31, 2020 | Jan. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 1,216 | $ 125 |
Preferred stock par value (dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value per share (dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (shares) | 900,000,000 | 900,000,000 |
Common stock, shares issued (shares) | 71,051,000 | 62,446,000 |
Common stock, shares outstanding (shares) | 71,051,000 | 62,446,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Total revenue | $ 531,993 | $ 287,243 | $ 229,525 |
Total cost of revenue | 206,084 | 106,050 | 94,609 |
Gross profit | 325,909 | 181,193 | 134,916 |
Operating expenses | |||
Sales and marketing | 43,951 | 29,498 | 23,139 |
Technology and development | 77,576 | 35,057 | 27,385 |
General and administrative | 60,561 | 33,039 | 25,111 |
Amortization of acquired intangible assets | 34,704 | 5,929 | 4,863 |
Merger integration | 32,111 | 0 | 0 |
Total operating expenses | 248,903 | 103,523 | 80,498 |
Income from operations | 77,006 | 77,670 | 54,418 |
Other expense | |||
Interest expense | (24,772) | (270) | (274) |
Other expense, net | (9,079) | (1,582) | (1,955) |
Total other expense | (33,851) | (1,852) | (2,229) |
Income before income taxes | 43,155 | 75,818 | 52,189 |
Income tax provision | 3,491 | 1,919 | 4,827 |
Net income (loss) | $ 39,664 | $ 73,899 | $ 47,362 |
Net income per share: | |||
Basic (usd per share) | $ 0.59 | $ 1.20 | $ 0.79 |
Diluted (usd per share) | $ 0.58 | $ 1.17 | $ 0.77 |
Weighted-average number of shares used in computing net income per share: | |||
Basic (shares) | 67,026 | 61,836 | 60,304 |
Diluted (shares) | 68,453 | 63,370 | 61,854 |
Comprehensive income: | |||
Net income | $ 39,664 | $ 73,899 | $ 47,362 |
Other comprehensive loss: | |||
Unrealized loss on available-for-sale marketable securities, net of tax | 0 | 0 | (59) |
Comprehensive income | 39,664 | 73,899 | 47,303 |
Service revenue | |||
Total revenue | 262,868 | 100,564 | 91,619 |
Total cost of revenue | 170,863 | 76,858 | 70,426 |
Custodial revenue | |||
Total revenue | 181,892 | 126,178 | 87,160 |
Total cost of revenue | 17,563 | 14,124 | 11,400 |
Interchange revenue | |||
Total revenue | 87,233 | 60,501 | 50,746 |
Total cost of revenue | $ 17,658 | $ 15,068 | $ 12,783 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common stock | Additional paid-in capital | Accumulated compre- hensive loss | Accumulated earnings |
Opening balance (shares) at Jan. 31, 2017 | 59,538 | ||||
Opening balance at Jan. 31, 2017 | $ 261,940 | $ 6 | $ 232,114 | $ (165) | $ 29,985 |
Stockholders’ equity | |||||
Issuance of common stock upon exercise of options, and for restricted stock units (in shares) | 1,287 | ||||
Issuance of common stock upon exercise of options and for restricted stock units | 14,564 | 14,564 | |||
Stock-based compensation | 14,310 | 14,310 | |||
Other comprehensive loss, net of tax | (59) | (59) | |||
Net income | 47,362 | 47,362 | |||
Ending balance (shares) at Jan. 31, 2018 | 60,825 | ||||
Ending balance at Jan. 31, 2018 | 346,274 | $ 6 | 261,237 | (269) | 85,300 |
Stockholders’ equity | |||||
Issuance of common stock upon exercise of options, and for restricted stock units (in shares) | 1,621 | ||||
Issuance of common stock upon exercise of options and for restricted stock units | 22,929 | 22,929 | |||
Stock-based compensation | 21,057 | 21,057 | |||
Net income | 73,899 | 73,899 | |||
Ending balance (shares) at Jan. 31, 2019 | 62,446 | ||||
Ending balance at Jan. 31, 2019 | 477,079 | $ 6 | 305,223 | 0 | 171,850 |
Stockholders’ equity | |||||
Issuance of common stock upon exercise of options, and for restricted stock units (in shares) | 842 | ||||
Issuance of common stock upon exercise of options and for restricted stock units | 11,438 | 11,438 | |||
Other issuance of common stock (in shares) | 7,763 | ||||
Other issuance of common stock | 462,270 | $ 1 | 462,269 | ||
Stock-based compensation | 39,844 | 39,844 | |||
Net income | 39,664 | 39,664 | |||
Ending balance (shares) at Jan. 31, 2020 | 71,051 | ||||
Ending balance at Jan. 31, 2020 | $ 1,030,295 | $ 7 | $ 818,774 | $ 0 | $ 211,514 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Cash flows from operating activities: | |||
Net income | $ 39,664 | $ 73,899 | $ 47,362 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 55,352 | 18,185 | 15,952 |
Stock-based compensation | 39,844 | 21,057 | 14,310 |
(Gains) losses on marketable equity securities and other | (23,151) | 1,173 | 597 |
Deferred taxes | 3,665 | 408 | 4,306 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (5,009) | (4,306) | (4,734) |
Other assets | (12,577) | (5,893) | (760) |
Operating lease right-of-use assets | 6,218 | ||
Accounts payable | (3,839) | 863 | (581) |
Accrued compensation | 4,550 | 4,432 | 3,827 |
Accrued liabilities and other current liabilities | 5,759 | 3,031 | 484 |
Operating lease liabilities, non-current | (5,383) | ||
Other long-term liabilities | (83) | 573 | 939 |
Net cash provided by operating activities | 105,010 | 113,422 | 81,702 |
Cash flows from investing activities: | |||
Acquisitions, net of cash acquired | (1,644,575) | 0 | (2,882) |
Purchases of marketable securities | (53,845) | (728) | (483) |
Purchases of property and equipment | (7,286) | (3,869) | (5,458) |
Purchases of software and capitalized software development costs | (25,654) | (9,978) | (10,380) |
Acquisition of intangible member assets | (9,134) | (1,195) | (17,545) |
Proceeds from sale of marketable securities | 0 | 41,422 | 0 |
Net cash provided by (used in) investing activities | (1,740,494) | 25,652 | (36,748) |
Cash flows from financing activities: | |||
Proceeds from long-term debt | 1,250,000 | 0 | 0 |
Payment of debt issuance costs | (30,504) | 0 | 0 |
Principal payments on long-term debt | (7,813) | 0 | 0 |
Settlement of client-held funds obligation | (215,790) | 0 | 0 |
Proceeds from follow-on offering, net of payments for offering costs | 458,495 | 0 | 0 |
Proceeds from exercise of common stock options | 11,347 | 22,929 | 14,564 |
Net cash provided by financing activities | 1,465,735 | 22,929 | 14,564 |
Increase (decrease) in cash and cash equivalents | (169,749) | 162,003 | 59,518 |
Beginning cash and cash equivalents | 361,475 | 199,472 | 139,954 |
Ending cash and cash equivalents | 191,726 | 361,475 | 199,472 |
Supplemental cash flow data: | |||
Interest expense paid in cash | 21,806 | 203 | 203 |
Income taxes paid in cash, net of refunds received | 9,277 | 587 | 27 |
Supplemental disclosures of non-cash investing and financing activities: | |||
Equity-based acquisition consideration | 3,776 | 0 | 0 |
Purchases of property and equipment included in accounts payable or accrued liabilities at period end | 487 | 37 | 0 |
Customer relationships | |||
Supplemental disclosures of non-cash investing and financing activities: | |||
Purchases of intangible assets | 0 | 0 | 1,409 |
Software | |||
Supplemental disclosures of non-cash investing and financing activities: | |||
Purchases of intangible assets | $ 1,742 | $ 200 | $ 3 |
Summary of business and signifi
Summary of business and significant accounting policies | 12 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of business and significant accounting policies | Summary of business and significant accounting policies Business HealthEquity, Inc. was incorporated in the state of Delaware on September 18, 2002. HealthEquity, Inc. is a leader in administering health savings accounts (“HSAs”) and complementary consumer-directed benefits (“CDBs”), which empower consumers to access tax-advantaged healthcare savings while also providing corporate tax advantages for employers. In February 2006, HealthEquity, Inc. received designation by the U.S. Department of Treasury to act as a passive non-bank custodian, which allows HealthEquity, Inc. to hold custodial assets for individual account holders. On July 24, 2017, HealthEquity, Inc. received designation by the U.S. Department of Treasury to act as both a passive and non-passive non-bank custodian, which allows HealthEquity, Inc. to hold custodial assets for individual account holders and use discretion to direct investment of such assets held. As a passive and non-passive non-bank custodian according to Treasury Regulations section 1.408-2(e)(5)(ii)(B), the Company must maintain net worth (assets minus liabilities) greater than the sum of 2% of passive custodial funds held at each calendar year-end and 4% of the non-passive custodial funds held at each calendar year-end in order to take on additional custodial assets. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the consolidated financial statements, except for the new accounting pronouncements adopted during the year ended January 31, 2020, as described below. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Acquisition of WageWorks, Inc. On August 30, 2019, HealthEquity, Inc. closed the acquisition of WageWorks, Inc. (“WageWorks”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), for $51.35 per share in cash, or approximately $2.0 billion to WageWorks stockholders (the “Acquisition”). As a result of the Acquisition, HealthEquity, Inc. gained access to more of the HSA market by expanding its direct distribution to employers and benefits advisors as a single source provider of HSAs and other CDBs, including flexible spending accounts, health reimbursement arrangements, COBRA administration, commuter and other benefits. Principles of consolidation The consolidated financial statements include the accounts of HealthEquity, Inc., and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Segments The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. All long-lived assets are maintained in the United States of America. Cash and cash equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company’s cash and cash equivalents were held in institutions in the U.S. and include deposits in a money market account that was unrestricted as to withdrawal or use. Client-held funds Many of the Company's client services agreements with employers (referred to as "Clients") provide that Clients remit funds to the Company to pre-fund Client and employee participant contributions related to flexible spending accounts and health reimbursement arrangements (“FSAs” and “HRAs”, respectively) and commuter accounts. These Client-held funds remitted to the Company do not represent cash assets of the Company to the extent that they are not combined with corporate cash, and accordingly are not included in cash and cash equivalents on the Company's consolidated balance sheets. Prior to the closing of the Acquisition, Wageworks included all Client-held funds with its corporate cash assets on its balance sheet, with an offsetting Client-held funds obligation. As of the closing of the Acquisition on August 30, 2019, WageWorks held approximately $682 million of Client-held funds, of which $220 million was combined with its corporate cash within WageWorks' corporate bank accounts; therefore, the Company determined that this $220 million of Client-held funds were assets of the Company, while the approximately $462 million of remaining Client-held funds were not assets of the Company. As of January 31, 2020, $4 million of Client-held funds remained combined within the Company's corporate bank accounts and therefore remained on the Company's consolidated balance sheets in cash and cash equivalents, with an offsetting liability included in accrued liabilities. Accounts receivable Accounts receivable represent monies due to the Company for monthly service revenue, custodial revenue and interchange revenue. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivable amounts. In evaluating the Company’s ability to collect outstanding receivable balances, the Company considers various factors including the age of the balance, the creditworthiness of the customer, which is assessed based on ongoing credit evaluations and payment history, and the customer’s current financial condition. As of January 31, 2020 and 2019, the Company had allowance for doubtful accounts of $1.2 million and $0.1 million, respectively. During the years ended January 31, 2020 and 2019, the Company recorded credit losses from trade receivables of $1.0 million and $0.2 million, respectively. Investments Marketable equity securities are strategic equity investments with readily determinable fair values for which the Company does not have the ability to exercise significant influence. These securities are accounted for at fair value and were classified as investments on the consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net in the consolidated statements of operations and comprehensive income. As a result of the Acquisition on August 30, 2019, the Company's marketable equity security investment in WageWorks was canceled. Non-marketable equity securities are strategic equity investments without readily determinable fair values for which the Company does not have the ability to exercise significant influence. These securities are accounted for using the measurement alternative and are classified as other assets on the consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net on the consolidated statements of operations and comprehensive income. Equity method investments are equity securities in investees the Company does not control but over which the Company has the ability to exercise significant influence. Equity method investments are included in other assets on the consolidated balance sheets. The Company's share of the earnings or losses as reported by equity method investees, amortization of basis differences, and related gains or losses, if any, are recognized in other expense, net on the consolidated statements of operations and comprehensive income. The Company assesses whether an other-than-temporary impairment loss on equity method investments and an impairment loss on non-marketable equity securities has occurred due to declines in fair value or other market conditions. If any impairment is considered other than temporary for equity method investments or impairment is identified for non-marketable equity securities, the Company will write down the investment to its fair value and record the corresponding charge through other expense, net in the consolidated statements of operations and comprehensive income. Other assets Other assets consist primarily of contract costs, debt issuance costs, prepaid expenditures, income tax receivables, inventories, and various other assets. Amounts expected to be recouped or recognized over a period of twelve months or less have been classified as current in the accompanying consolidated balance sheets. Leases The Company determines if a contract contains a lease at inception or any modification of the contract. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a specified period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Leases with an expected term of 12 months or less at commencement are not accounted for on the balance sheet. All operating lease expense is recognized on a straight-line basis over the expected lease term. Certain leases also include obligations to pay for non-lease services, such as utilities and common area maintenance. The services are accounted for separately from lease components, and the Company allocates payments to the lease and other services components based on estimated stand-alone prices. Operating lease right-of-use ("ROU") assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the rate implicit in each lease is not readily determinable, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company used its incremental borrowing rate on February 1, 2019 for all leases that commenced prior to that date. Operating leases are included in operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current on the consolidated balance sheets beginning February 1, 2019. Property and equipment Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of individual assets. The useful life for leasehold improvements is the shorter of the estimated useful life or the term of the lease ranging from 3-5 years. The useful life used for computing depreciation for all other asset classes is described below: Computer equipment 3-5 years Furniture and fixtures 5 years Maintenance and repairs are expensed when incurred, and improvements that extend the economic useful life of an asset are capitalized. Gains and losses on the disposal of property and equipment are reflected in operating expenses. Intangible assets, net Intangible assets are carried at cost and amortized, typically, on a straight-line basis over their estimated useful lives. The useful life used for computing amortization for all intangible asset classes is described below: Software and software development costs 3 years Acquired customer relationships 10-15 years Acquired developed technology 2-5 years Acquired trade names and trademarks 3 years Acquired HSA portfolios 15 years We account for the costs of computer software developed or obtained for internal use in accordance with Accounting Standards Codification (“ASC”) 350-40, “Internal-Use Software.” Costs incurred during operation and post-implementation stages are charged to expense. Costs incurred during the application development stage that are directly attributable to developing or obtaining software for internal use are capitalized. Management’s judgment is required in determining the point when various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. Acquired customer relationships, developed technology, and trade names and trade marks are valued utilizing the discounted cash flow method, a form of the income approach. The useful lives of acquired customer relationships were estimated based on future revenue growth and attrition. The useful lives of developed technology and trade names were estimated based on expected obsolescence. The Company expenses the assets straight-line over the useful lives, and determined that this amortization method is appropriate to reflect the pattern over which the economic benefits of these acquired assets are realized. Acquired HSA portfolios consist of the contractual rights to administer the activities related to the individual HSAs acquired. The Company used its HSA customer relationship period assumption and the historical attrition rates of member accounts to determine that an average useful life of 15 years and the use of a straight-line amortization method are appropriate to reflect the pattern over which the economic benefits of existing member assets are realized. The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. During the year ended January 31, 2019, the Company incurred a loss on disposal of approximately $0.7 million of previously capitalized software development costs. No impairment charges were recorded during the years ended January 31, 2020 or 2018. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually on January 31 or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company’s impairment tests are based on a single operating segment and reporting unit structure. The goodwill impairment test involves a qualitative assessment to compare a reporting unit's fair value to its carrying value. If it is determined that it is more likely than not that a reporting unit's fair value is less than its carrying value, a quantitative comparison is made between the Company's market capitalization and the carrying value of the reporting unit, including goodwill. If the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value. The Company’s annual goodwill impairment test resulted in no impairment charges in any of the periods presented in the accompanying consolidated financial statements. Self-insurance The Company is self-insured for medical insurance up to certain annual stop-loss limits. The Company establishes a liability as of the balance sheet date for claims, both reported and incurred but not reported, using currently available information as well as historical claims experience, and as determined by an independent third party. Other long-term liabilities Other long-term liabilities consists of long-term deferred revenue and other liabilities that the Company does not expect to settle within one year. Revenue recognition The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation. Disaggregation of revenue. The Company's primary sources of revenue are service, custodial, and interchange revenue and are disclosed in the consolidated statements of operations and comprehensive income. All of the Company's sources of revenue are deemed to be revenue contracts with customers. Each revenue source is affected differently by economic factors as it relates to the nature, amount, timing and uncertainty. Costs to obtain a contract. ASC 606 requires capitalizing the costs of obtaining a contract when those costs are expected to be recovered. As of January 31, 2020, the net amount capitalized as contract costs was $21.8 million, which is included in other current assets and other assets. Amortization of capitalized contract costs during the year ended January 31, 2020 was $1.9 million. In order to determine the amortization period for sales commissions contract costs, the Company applied the portfolio approach. Accordingly, the amortization period of the assets has been determined to be the average economic life of an HSA or CDB relationship, which is estimated to be 15 years and 7 years, respectively. Amortization of capitalized sales commission contract costs is included in sales and marketing expenses in the consolidated statements of operations and comprehensive income. Performance obligations. ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as permitted by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Amounts excluded are not significant to the Company's consolidated statements of operations and comprehensive income. Service revenue. The Company hosts its platforms, prepares statements, provides a mechanism for spending funds, and provides customer support services. All of these services are consumed as they are received. The Company will continue to recognize service revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for those services, on a monthly basis as it satisfies its performance obligations. Custodial revenue. The Company deposits HSA assets at federally insured custodial depository partners, which we refer to as our Depository Partners, and investment assets with an investment partner. The deposit of funds represents a service that is simultaneously received and consumed by our Depository Partners and investment partner. The Company will continue to recognize custodial revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for the service, each month based on the amount received by its custodial partners and investment partners. Interchange revenue. The Company satisfies its interchange performance obligation each time payments are made with its cards via payment networks. The Company will continue to recognize interchange revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for the service, in the month the payment transaction occurs. Contract balances. The Company does not recognize revenue in advance of invoicing its customers and therefore has no related contract assets. The Company records a receivable when revenue is recognized prior to payment and the Company has unconditional right to payment. Alternatively, when payment precedes the related services, the Company records a contract liability, or deferred revenue, until its performance obligations are satisfied. The Company's deferred revenue increased from $0.4 million as of January 31, 2019 to $3.7 million as of January 31, 2020, primarily due to the Acquisition. The balances are related to cash received in advance for a certain 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 generally recognized over a five Significant judgments. The Company makes no significant judgments in determining the amount or timing of revenue recognition. The Company has estimated the average economic life of an HSA or CDB member relationship, which which has been determined to be the amortization period for the capitalized sales commissions contract costs. Practical expedients. The Company has applied the practical expedient which allows an entity to account for incremental costs of obtaining a contract at a portfolio level. The Company has also applied the practical expedient to recognize incremental costs of obtaining contracts as an expense when incurred if the amortization period would have been one year or less. Cost of revenue The Company incurs cost of revenue related to servicing member accounts, managing customer and partner relationships, and processing reimbursement claims. Expenditures include personnel-related costs, depreciation, amortization, stock-based compensation, common expense allocations, new member and participant supplies and other operating costs of the Company’s related member account servicing departments. Other components of the Company’s cost of revenue sold include interest retained by members on custodial assets held and interchange costs incurred in connection with processing card transactions initiated by members. Stock-based compensation The Company grants stock-based awards, which consist of stock options, restricted stock units ("RSUs") and restricted stock awards ("RSAs"), to certain team members, executive officers, and directors. The Company recognizes compensation expense for stock-based awards based on the grant date estimated fair value. Expense for stock-based awards is generally recognized on a straight-line basis over the requisite service period, and is reversed as pre-vesting forfeitures occur. The fair value of stock options is determined using the Black-Scholes option pricing model. The determination of fair value for stock options on the date of grant using an option pricing model requires management to make certain assumptions regarding a number of complex and subjective variables. The fair value of RSUs and RSAs is based on the current value of the Company's closing stock price on the date of grant less the present value of future expected dividends discounted at the risk-free interest rate. At the closing of the Acquisition, and in accordance with the Merger Agreement, certain service-based RSUs with respect to WageWorks common stock were replaced by the Company and converted into RSUs with respect to common stock of the Company. Certain other WageWorks equity awards were exchanged for cash. The fair value of awards that were replaced or exchanged for cash was measured as of the Acquisition date, and a portion of the fair value, which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. The remaining fair value represents post-Acquisition share-based compensation expense. For stock-based awards with performance conditions, the Company evaluates the probability of achieving the performance criteria and of the number of shares that are expected to vest, and compensation expense is then adjusted to reflect the number of shares expected to vest and the requisite service period. For awards with performance conditions, compensation expense is recognized using the graded-vesting attribution method in accordance with the provisions of FASB ASC Topic 718, Compensation—Stock Compensation ("Topic 718") . Upon the exercise of a stock option or release of an RSU/RSA, common shares are issued from authorized, but not outstanding, common stock. Interest Expense Interest expense consists of accrued interest expense and amortization of deferred financing costs associated with our credit agreement. Income tax provision The Company accounts for income taxes and the related accounts under the liability method as set forth in the authoritative guidance for accounting for income taxes. Under this method, current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current fiscal year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, for net operating losses, and for tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for when it is more likely than not that some or all of the deferred tax assets may not be realized in future years. After weighing both the positive and negative evidence, the Company has recorded a valuation allowance with respect to realized capital losses for which the Company does not expect to generate capital gains in order to utilize the capital losses in the future and with respect to certain insignificant state credits which are not expected to be utilized before they expire. The Company believes that it is more likely than not that all other deferred tax assets will be realized as of January 31, 2020. The Company uses the tax law ordering approach of intraperiod allocation in determining when excess tax benefits have been realized for provisions of the tax law that identify the sequence in which those amounts are utilized for tax purposes. The Company has also elected to exclude the indirect tax effects of share-based compensation deductions in computing the income tax provision recorded within the consolidated statement of operations and comprehensive income. Also, the Company uses the portfolio approach in releasing income tax effects from accumulated other comprehensive income. The Company recognizes the tax benefit from an uncertain tax position taken or expected to be taken in a tax return using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities, based on the technical merits of the position. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit in the financial statements as the largest benefit that has a greater than 50% likelihood of being sustained upon settlement. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of other expense in the Consolidated Statements of Operations and Comprehensive Income. Changes in facts and circumstances could have a material impact on the Company’s effective tax rate and results of operations. Comprehensive income Comprehensive income is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources, including unrealized gains and losses on marketable securities prior to the February 1, 2018 adoption of ASU 2016-01. Asset acquisitions The Company routinely acquires rights to be the custodian of HSA portfolios, in which substantially all of the fair value of the gross portfolio assets acquired is concentrated in a group of similar HSA assets and therefore the acquisitions do not constitute a business. Accordingly, the acquisitions are accounted for under the asset acquisition method of accounting in accordance with ASC 805-50, Business Combinations—Related Issues. Under the asset acquisition method of accounting, the Company is required to fair value the assets transferred. The cost of the assets acquired, including transaction costs incurred in conjunction with an asset acquisition, is allocated to the individual assets acquired based on their relative fair values and does not give rise to goodwill. Business combination Consideration paid for the acquisition of a business as defined by ASC 805-10 is allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the acquisition date. Acquisition-related expenses incurred in conjunction with the acquisition of a business are recognized in earnings in the period in which they are incurred and are included in other expense, net on the consolidated statement of operations. During the years ended January 31, 2020, 2019 and 2018, the Company incurred expenses of $40.8 million, $2.1 million, and $2.2 million, respectively, for acquisition-related activity. Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management has made estimates for the allowance for doubtful accounts, capitalized software development costs, evaluating goodwill and long-lived assets for impairment, useful lives of property and equipment and intangible assets, accrued compensation, accrued liabilities, grant date fair value of stock options, and income taxes. Actual results could differ from those estimates. Recently adopted accounting pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (codified as "ASC 842"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. ASC 842 requires that a lessee recognize a liability to make lease payments (the lease liability) and a ROU asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASC 842 on February 1, 2019 using the modified retrospective transition method with the adoption date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The adoption of ASC 842 on February 1, 2019 resulted in the recognition on the Company's consolidated balance sheet of both operating lease liabilities of $40.6 million and ROU assets of $38.0 million, which equals the lease liabilities net of accrued rent previously recorded on its consolidated balance sheet under previous guidance. The adoption of ASC 842 did not have an impact on the Company's consolidated statement of operations, stockholders’ equity and cash flows for the year ended January 31, 2020. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. This ASU should be applied prospectively. We adopted the standard effective February 1, 2019, which had no impact on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU permits the capitalization of implementation costs incurred in a software hosting arrangement. This ASU is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the new standard as of October 31, 2019 using the prospective transition method. The adoption of this standard did not have a mater |
Net income per share
Net income per share | 12 Months Ended |
Jan. 31, 2020 | |
Earnings Per Share [Abstract] | |
Net income per share | Net income per share The following table sets forth the computation of basic and diluted net income per share: Year ended January 31, (in thousands, except per share data) 2020 2019 2018 Numerator (basic and diluted): Net income $ 39,664 $ 73,899 $ 47,362 Denominator (basic): Weighted-average common shares outstanding 67,026 61,836 60,304 Denominator (diluted): Weighted-average common shares outstanding 67,026 61,836 60,304 Weighted-average dilutive effect of stock options and restricted stock units 1,427 1,534 1,550 Diluted weighted-average common shares outstanding 68,453 63,370 61,854 Net income per share: Basic $ 0.59 $ 1.20 $ 0.79 Diluted $ 0.58 $ 1.17 $ 0.77 |
Business combination
Business combination | 12 Months Ended |
Jan. 31, 2020 | |
Business Combinations [Abstract] | |
Business combination | Business combination Acquisition of WageWorks Overview and total consideration paid On August 30, 2019, the Company closed the Acquisition of WageWorks for $51.35 per share in cash, or approximately $2.0 billion to WageWorks stockholders. The Company financed the transaction through a combination of $816.9 million cash on hand plus net borrowings of approximately $1.22 billion, after deducting lender fees of approximately $30.5 million, under a term loan facility (see Note 8—Indebtedness). Pursuant to the Merger Agreement, the Company replaced certain outstanding restricted stock units originally granted by WageWorks with the Company’s equivalent awards. The outstanding WageWorks vested and unvested stock options, and certain unvested restricted stock units, were settled in cash as specified in the Merger Agreement. The portion of the fair value of partially vested awards associated with pre-acquisition service of WageWorks award recipients represented a component of the total consideration, as presented below. The Acquisition was accounted for under the acquisition method of accounting for business combinations. Under this accounting method, the total consideration paid was: (in millions) Aggregate fair value of WageWorks stock acquired $ 2,018.8 Fair value of previously owned investment in WageWorks stock 81.4 Fair value of equity awards exchanged for cash attributable to pre-Acquisition service 18.1 Fair value of equity awards replaced attributable to pre-Acquisition service 3.8 Total consideration paid $ 2,122.1 Consideration paid was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the Acquisition date. Management estimated the fair value of tangible and intangible assets and liabilities in accordance with the applicable accounting guidance for business combinations and utilized the services of third-party valuation consultants to value acquired intangible assets. 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 millions) Initial Allocation Adjustments Updated Allocation Cash and cash equivalents $ 406.8 $ (14.5) $ 392.3 Other current assets 56.5 1.0 57.5 Property, plant, and equipment 26.6 26.6 Operating lease right-of-use assets 42.5 42.5 Intangible assets 715.3 715.3 Goodwill 1,330.5 (2.5) 1,328.0 Other assets 5.9 5.9 Client-held funds obligation (237.5) 17.8 (219.7) Other current liabilities (69.1) (2.9) (72.0) Other long-term liabilities (26.7) (26.7) Deferred tax liability (128.7) 1.1 (127.6) Total consideration paid $ 2,122.1 $ — $ 2,122.1 The Acquisition resulted in $1.33 billion of goodwill, which is attributable to several strategic, operational and financial benefits expected from the Acquisition, including custodial and interchange revenue synergies based on current contractual relationships, as well as operational cost synergies resulting from increased scale in service delivery and elimination of duplicative management functions and other back-office operational efficiencies. The adjustments to the initial allocation are based on more detailed information obtained about the specific assets acquired, liabilities assumed, and tax-related matters. The goodwill created in the Acquisition is not expected to be deductible for tax purposes. The preliminary allocation of consideration exchanged to acquired identified intangible assets is as follows: (in millions) Fair value Weighted-average remaining amortization period (years) Customer relationships $ 598.5 15.0 Developed technology 96.9 4.5 Trade names & trademarks 12.3 3.0 Identified intangible assets subject to amortization 707.7 13.4 In-process software development costs 3.8 n/a Total acquired intangible assets $ 711.5 The Company preliminary valued the acquired assets utilizing the discounted cash flow method, a form of the income approach. The significant assumptions used in the discounted cash flow analyses include future revenue growth and attrition rates, projected margins, royalty rates, technological obsolescence, discount rates used to present value future cash flows, and the amount of revenue and cost synergies expected from the Acquisition. In connection with the transaction, for the year ended January 31, 2020, the Company incurred approximately $40.8 million of acquisition costs, which are recorded as other expense, net. For the year ended January 31, 2020, WageWorks contributed revenue of approximately $184.7 million 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 that may result 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 includes 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. Year ended January 31, (in thousands) 2020 2019 Revenue $ 798,253 $ 765,801 Net income $ 23,101 $ 6,419 |
Supplemental financial statemen
Supplemental financial statement information | 12 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental financial statement information | Supplemental financial statement information Selected consolidated balance sheet and consolidated statement of operations and comprehensive income components consist of the following: Property and equipment Property and equipment consisted of the following as of January 31, 2020 and 2019: (in thousands) January 31, 2020 January 31, 2019 Leasehold improvements $ 19,240 $ 3,583 Furniture and fixtures 7,929 4,476 Computer equipment 22,074 9,242 Property and equipment, gross 49,243 17,301 Accumulated depreciation (15,757) (9,078) Property and equipment, net $ 33,486 $ 8,223 Depreciation expense for the years ended January 31, 2020, 2019 and 2018 was $8.9 million, $3.5 million and $2.8 million, respectively. Other expense, net Other expense, net, consisted of the following: Year ended January 31, (in thousands) 2020 2019 Interest income $ 5,905 $ 1,946 Gain (loss) on equity securities 27,760 (102) Acquisition costs (40,810) (2,121) Other expense (1,934) (1,305) Total other expense, net $ (9,079) $ (1,582) |
Leases
Leases | 12 Months Ended |
Jan. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company has entered into various non-cancelable operating lease agreements for office space, data storage facilities, and other leases with remaining lease terms of less than 1 year to approximately 11 years, often with one or more Company options to renew. These renewal terms can extend the lease term from 3 to 10 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. Amortization and interest expense related to finance leases were not material during the years ended January 31, 2020 and 2019. The components of operating lease costs are as follows: Year ended January 31, (in thousands, except for term and percentages) 2020 Operating lease expense $ 9,059 Sublease income (750) Net operating lease cost $ 8,309 Weighted average lease term and discount rate are as follows: As of January 31, 2020 Weighted average remaining lease term 9.41 years Weighted average discount rate 4.35 % Maturities of operating lease liabilities as of January 31, 2020 were as follows: Fiscal year ending January 31, (in thousands) Operating leases 2021 $ 12,695 2022 12,245 2023 9,942 2024 8,282 2025 8,280 Thereafter 47,108 Total lease payments 98,552 Less imputed interest (18,134) Present value of lease liabilities $ 80,418 Current $ 12,401 Non-current 68,017 Total lease liabilities $ 80,418 As of January 31, 2020, the Company had additional operating leases for office space that have not yet commenced with aggregate undiscounted lease payments of $81.5 million. These operating leases will commence in fiscal year 2021 with leases terms ranging from 3 to 11 years. Supplemental cash flow information related to the Company's operating leases was as follows: Year ended January 31, (in thousands, except for term and percentages) 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,361 ROU assets obtained in exchange for new operating lease obligations $ 34,196 |
Intangible assets and goodwill
Intangible assets and goodwill | 12 Months Ended |
Jan. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets and goodwill | Intangible assets and goodwill Intangible assets During the year ended January 31, 2020, the Company recorded $711.5 million of acquired identified intangible assets as a result of the Acquisition of WageWorks. For further information about these acquired identified intangible assets, see Note 3—Business Combination. During the years ended January 31, 2020 and 2019, the Company capitalized the following amounts to acquire the rights to act as a custodian of HSA portfolios: (in thousands) January 31, 2020 January 31, 2019 Acquired HSA portfolios $ 7,659 $ 1,195 The Company has determined the acquired HSA portfolios to have a useful life of 15 years. The assets are being amortized using the straight-line amortization method, which has been determined to be appropriate to reflect the pattern over which the economic benefits of existing assets are realized. During the years ended January 31, 2020, 2019 and 2018, the Company capitalized software development costs of $24.1 million, $9.3 million and $8.1 million, respectively, related to significant enhancements and upgrades to its technology-enabled services platforms. The gross carrying amount and associated accumulated amortization of intangible assets is as follows as of January 31, 2020 and January 31, 2019: (in thousands) January 31, 2020 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 76,221 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,381 2,882 Acquired developed technology 96,925 — Acquired trade names 12,300 — Amortizable intangible assets, gross 879,597 132,827 Accumulated amortization (98,851) (53,161) Total amortizable intangible assets, net 780,746 79,666 Acquired in process software development costs 2,533 — Total intangible assets, net $ 783,279 $ 79,666 During the years ended January 31, 2020, 2019 and 2018, the Company expensed a total of $23.8 million, $13.7 million and $12.2 million, respectively, in software development costs primarily related to the post-implementation and operation stages of its proprietary software. Amortization expense for the years ended January 31, 2020, 2019, and 2018 was $46.5 million, $14.7 million and $13.2 million, respectively. Estimated amortization expense for the years ending January 31 is as follows: Year ending January 31, (in thousands) 2021 $ 90,868 2022 83,476 2023 71,804 2024 62,622 2025 55,810 Thereafter 416,166 Total $ 780,746 Goodwill During the year ended January 31, 2020, the Company recorded $1.33 billion of goodwill from the Acquisition of WageWorks. For further information about the resulting goodwill, see Note 3—Business Combination. There were no other changes to the goodwill carrying value during the years ended January 31, 2020, 2019, and 2018. |
Commitments and contingencies
Commitments and contingencies | 12 Months Ended |
Jan. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Commitments In addition to the indebtedness described in Note 8 below, the Company’s principal commitments consist of 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. Future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $5.5 million, which is expected to be received through February 2023, and other agreements, are as follows: Year ending January 31, (in thousands) Office leases Other agreements(1) Total 2021 $ 13,064 $ 21,912 $ 34,976 2022 17,610 14,628 32,238 2023 17,846 12,001 29,847 2024 15,973 1,245 17,218 2025 16,050 403 16,453 Thereafter 99,530 — 99,530 Total $ 180,073 $ 50,189 $ 230,262 (1) Other agreements does not include payments required under the Company's term loan facility. Refer to Note 8—Indebtedness. Subsequent to the Acquisition of WageWorks, the Company entered into non-cancelable agreements to acquire the rights to administer WageWorks HSAs currently administered by third-party custodians. The amounts due under these agreements are primarily variable in nature based on the number of HSAs transferred. The fixed amounts due have been included in the schedule above. Lease expense was $9.1 million, $5.5 million, $4.3 million for the years ended January 31, 2020, 2019, and 2018, respectively. Sublease income was $0.8 million for the year ended January 31, 2020. Contingencies In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Legal matters WageWorks is pursuing an affirmative claim against the Office of Personnel Management ("OPM") to obtain payment for services provided by WageWorks between March 1, 2016 and August 31, 2016 pursuant to its contract with OPM. In connection with WageWorks' claims against OPM, OPM has brought a claim against WageWorks contending that it was not entitled to any payments until WageWorks replaced the prior administrator and started processing claims on September 1, 2016. Both WageWorks and OPM have filed opposing for summary judgment with the Civilian Board of Contract Appeals, which motions remain pending. On March 9, 2018, a putative class action was filed in the U.S. District Court for the Northern District of California (the “Securities Class Action”). On May 16, 2019, a consolidated amended complaint was filed by the lead plaintiffs asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, against WageWorks, its former Chief Executive Officer and its former Chief Financial Officer on behalf of purchasers of WageWorks common stock between May 6, 2016 and March 1, 2018. The complaint also alleges claims under the Securities Act of 1933, as amended, arising from WageWorks’ June 19, 2017 common stock offering against those same defendants, as well as the members of its board of directors at the time of that offering. 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 allegations in the Derivative Suits relate to substantially the same facts as those underlying the Securities Class Action described above. The plaintiffs seek unspecified damages and fees and costs. Plaintiffs in the Superior Court action filed an amended consolidated complaint on October 28, 2019, naming as defendants certain former officers and directors of WageWorks and alleging a direct claim of "inseparable fraud/breach of fiduciary duty" on behalf of a class. WageWorks was not named as a party in that complaint. WageWorks voluntarily contacted the San Francisco office of the SEC Division of Enforcement regarding the restatement of WageWorks' financial statements and related independent investigation. WageWorks is providing information and documents to the SEC and continues to cooperate with the SEC’s investigation into these matters. The U.S. Attorney’s Office for the Northern District of California also opened an investigation. WageWorks has provided documents and information to the U.S. Attorney’s Office and continues to cooperate with any inquiries by the U.S. Attorney’s Office regarding the matter. Beginning on July 30, 2019, putative class action suits were filed in the U.S. District Court Courts for the Southern District of New York, the District of Delaware, and the Northern District of California asserting claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, against WageWorks and the former members of its board of directors. The complaints generally allege disclosure violations in the proxy statement issued by WageWorks in connection with the stockholder vote on the proposed merger with the Company. After WageWorks issued certain supplemental disclosures, these actions were voluntarily dismissed, but WageWorks may still be required to pay attorneys fees to the plaintiffs' lawyers. WageWorks previously entered into indemnification agreements with its former directors and officers and, pursuant to these indemnification agreements, is covering the defense of its former directors and officers in the legal proceedings described above. 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. While it is not possible to determine the ultimate outcome or the duration of such litigation, governmental proceedings or claims, the Company believes, based on current knowledge, that such litigation, proceedings and claims will not have a material impact on the Company’s financial position, results of operations and cash flows for the period. The Company maintains liability insurance coverage that is intended to cover the legal matters described above; however, it is possible that claims may be denied by our insurance carriers or could exceed the amount of our applicable insurance coverage, we may be required by our insurance carriers to contribute to the payment of claims, and our insurance coverage may not continue to be available to us on acceptable terms or in sufficient amounts. As required under GAAP, the Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information, the Company does not believe that any liabilities relating to these matters are probable or that the amount of any resulting loss is estimable. However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. 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. |
Indebtedness
Indebtedness | 12 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness As of January 31, 2020, long-term debt consisted of the following: (in millions) January 31, 2020 Term loan facility $ 1,242.2 Less: unamortized loan issuance costs (1) 21.5 Long-term debt, net of issuance costs $ 1,220.7 (1) In addition to the $21.5 million of unamortized issuance costs related to the term loan facility, $6.4 million of unamortized issuance costs related to our revolving credit facility are included within other assets on the January 31, 2020 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: (i) a five (ii) a five 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 January 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 January 31, 2020, the stated interest rate was 3.65% and the effective interest rate was 4.10%. 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. The loans made under the Term Loan Facility are required to be repaid as described in the following table: Fiscal year ending January 31, (in millions) Principal payments 2021 $ 39.1 2022 62.5 2023 70.3 2024 101.6 2025 968.7 Total principal payments $ 1,242.2 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 5.25 to 1.00, which steps down to (x) 5.00 to 1.00 beginning with the fiscal quarter ending July 31, 2020 and (y) 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 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 January 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. |
Income taxes
Income taxes | 12 Months Ended |
Jan. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes The income tax provision consisted of the following: Year ended January 31, (in thousands) 2020 2019 2018 Current: Federal $ (448) $ 1,095 $ 392 State 274 416 130 Total current tax provision (benefit) $ (174) $ 1,511 $ 522 Deferred: Federal $ 3,538 $ 1,258 $ 4,068 State 127 (850) 237 Total deferred tax provision $ 3,665 $ 408 $ 4,305 Total income tax provision $ 3,491 $ 1,919 $ 4,827 Total income tax provision differed from the amounts computed by applying the U.S. federal statutory income tax rate to income before income taxes as a result of the following: Year ended January 31, (in thousands) 2020 2019 2018 Federal income tax expense at the statutory rate $ 9,063 $ 15,922 $ 17,744 State income tax expense, net of federal tax benefit 960 1,518 1,241 Other non-deductible or non-taxable items, net 798 251 143 Excessive employee remuneration 2,117 160 — Excess tax benefits on stock-based compensation expense, net (4,815) (14,255) (14,136) Federal research and development credits (2,296) (2,252) (729) Change in uncertain tax position reserves, net of indirect benefits 491 450 191 Non-deductible acquisition-related costs 3,032 — — Non-taxable gain on investment in subsidiary (5,790) — — Deferred tax rate adjustment due to tax reform — — 458 Current statutory rate differential due to tax reform — — (308) Other items, net (69) 125 223 Total income tax provision $ 3,491 $ 1,919 $ 4,827 The Company’s effective income tax rate for the years ended January 31, 2020, 2019 and 2018 was 8.1%, 2.5%, and 9.2%, respectively. The difference between the effective income tax rate and the U.S. federal statutory income tax rate each period is impacted by a number of factors, including the relative mix of earnings among state jurisdictions, credits, excess tax benefits or shortfalls on stock-based compensation expense due to the adoption of ASU 2016-09, and other discrete items. The increase in the effective tax rate for the year ended January 31, 2020 over the year ended January 31, 2019 was primarily due to a decrease in excess tax benefits on stock-based compensation expense recognized in the provision for income taxes relative to pre-tax income and an increase in non-deductible expenses, which were offset by exclusion of the gain in connection with our equity investment in WageWorks that will not be realized for income tax purposes. The decrease in the effective tax rate for the year ended January 31, 2019 compared to the year ended January 31, 2018 was primarily due to the reduction in the US federal corporate income tax rate from 35% to 21% as a result of legislative changes effective January 1, 2018 and an increase in federal and state research and development tax credits over prior periods. The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, included a reduction of the statutory corporate income tax rate from a top rate of 35% to 21% effective January 1, 2018. The Company is subject to federal and state income taxes in the United States based on a calendar year which differs from its January fiscal year-end for financial reporting purposes. For purposes of reconciling the total income tax provision for the fiscal year ended January 31, 2018, the Company applied a federal statutory rate of 34% for the entire fiscal year as this was the rate that applies for the tax year ended December 31, 2017 which comprised 11 months of the fiscal year. Because a 21% federal statutory rate applied for the one month ending January 31, 2018, a reconciling item was included in the tax rate reconciliation table above to adjust for the statutory rate reduction that applied to this one-month period. This resulted in a reduction to the income tax provision of $0.3 million. Deferred tax assets and liabilities consisted of the following: (in thousands) January 31, 2020 January 31, 2019 Deferred tax assets: Net operating loss carryforward $ 1,147 $ 68 Stock compensation 10,764 6,987 Research and development credits 4,693 2,323 Lease liabilities 20,232 — Deferred rent — 626 Accruals and reserves 6,854 1,503 Other, net 2,154 224 Total gross deferred tax assets $ 45,844 $ 11,731 Less valuation allowance (203) (97) Deferred tax assets, net of valuation allowance 45,641 11,634 Deferred tax liabilities: Fixed assets (4,875) (1,294) Intangible assets (142,673) (4,798) Incremental contract costs (5,474) (4,654) Right-of-use assets (21,068) — Goodwill (1,831) — Other, net (194) (127) Total gross deferred tax liabilities (176,115) (10,873) Net deferred tax asset (liability) $ (130,474) $ 761 Management considered whether it is more likely than not that some portion or all of the deferred tax assets would be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment and determined that based on the weight of all available evidence, it is more likely than not (a likelihood of more than 50%) that the Company will be able to realize most of its deferred tax assets. However, the Company recorded a valuation allowance of $0.2 million and $0.1 million as of January 31, 2020 and January 31, 2019, respectively. The increase in valuation allowance recorded is primarily the result of state tax credits that are not expected to be utilized before they expire. As of January 31, 2020, the Company had recorded gross state net operating loss carryforwards of $20.5 million which begin to expire at various intervals following the tax year ending December 31, 2024. As of January 31, 2020, the Company also had federal and state research and development carryforwards of $3.6 million and $7.8 million, respectively, which begin to expire following the tax years ending December 31, 2038 and 2022, respectively. As of January 31, 2020 and 2019, the gross unrecognized tax benefit was $9.4 million and $1.7 million, respectively. If recognized, $8.6 million and $1.5 million of the total unrecognized tax benefits would affect the Company's effective tax rate as of January 31, 2020 and 2019, respectively. Total gross unrecognized tax benefits increased by $7.7 million in the period from January 31, 2019 to January 31, 2020. A tabular reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including the impact of purchase accounting from the Acquisition, is as follows: (in thousands) January 31, 2020 January 31, 2019 Gross unrecognized tax benefits at beginning of year $ 1,693 $ 889 Gross amounts of increases and decreases: Increases as a result of tax positions taken during a prior period 6,888 — Decreases as a result of tax positions taken during a prior period (1) (1) Increases as a result of tax positions taken during the current period 790 805 Decreases as a result of tax positions taken during the current period — — Decreases resulting from the lapse of the applicable statute of limitations — — Gross unrecognized tax benefits at end of year $ 9,370 $ 1,693 Certain unrecognized tax benefits are required to be netted against their related deferred tax assets as a result of Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Other unrecognized tax benefits have been netted against existing tax receivable balances where significant overpayments have resulted. The resulting unrecognized tax benefit recorded within the Company's consolidated balance sheet excludes the following amounts that have been netted against the related deferred tax assets or tax receivables accordingly: (in thousands) January 31, 2020 January 31, 2019 Total gross unrecognized tax benefits $ 9,370 $ 1,693 Amounts netted against related deferred tax assets (8,914) (1,693) Unrecognized tax benefits recorded on the consolidated balance sheet $ 456 $ — The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of other expense in the statement of operations and comprehensive income. During the year ended January 31, 2020, the Company recorded penalties and interest of $0.1 million related to unrecognized tax benefits. There were no interest and penalties recorded related to unrecognized tax benefits during the years ended January 31, 2019 and 2018 in the statement of operations and comprehensive income. As of January 31, 2020, accrued interest and penalties of $0.6 million were recorded, of which $0.5 million related to existing balances from the Acquisition recorded through purchase accounting. As of January 31, 2019, no accrued interest and penalties were recorded. The Company files income tax returns with U.S. federal and state taxing jurisdictions and is not currently under examination with any jurisdiction. 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. |
Stock-based compensation
Stock-based compensation | 12 Months Ended |
Jan. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-based compensation | Stock-based compensation The following table shows a summary of stock-based compensation in the Company's consolidated statements of operations and comprehensive income during the years presented: Year ended January 31, (in thousands) 2020 2019 2018 Cost of revenue $ 4,792 $ 2,837 $ 2,594 Sales and marketing 4,694 3,536 2,030 Technology and development 7,649 5,117 3,318 General and administrative 12,972 9,567 6,368 Merger integration 1,603 — — Other expense, net 13,714 — — Total stock-based compensation expense $ 45,424 $ 21,057 $ 14,310 The following table shows stock-based compensation by award type: Year ended January 31, (in thousands) 2020 2019 2018 Stock options $ 6,612 $ 7,581 $ 7,826 Performance stock options — 681 1,378 Restricted stock units 25,781 7,657 3,224 Performance restricted stock units 4,862 2,419 1,882 Restricted stock awards 655 570 — Performance restricted stock awards 1,934 2,149 — Total non-cash stock-based compensation expense 39,844 21,057 14,310 Acquisition awards exchanged for cash 5,580 — — Total stock-based compensation expense $ 45,424 $ 21,057 $ 14,310 Stock award plans Incentive Plan. The Company grants stock options, restricted stock units ("RSUs"), and restricted stock awards ("RSAs") under the HealthEquity, Inc. 2014 Equity Incentive Plan (as amended and restated, the "Incentive Plan"), which provided for the issuance of stock awards to the directors and team members of the Company to purchase up to an aggregate of 2.6 million shares of common stock. As described below, in connection with the Acquisition, the shares of common stock available for issuance under the Incentive Plan were increased by 5.3 million shares. 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 January 31, 2020, 4.8 million shares were available for grant under the Incentive Plan. WageWorks Incentive Plan. At the closing of the Acquisition, and in accordance with the Merger Agreement, certain RSUs with respect to WageWorks common stock, granted under WageWorks, Inc. 2010 Equity Incentive Plan (the "WageWorks Incentive Plan"), were replaced by the Company and converted into RSUs with respect to 523,318 shares of common stock of the Company. In connection with the Acquisition, an additional 5,255,027 shares of the Company, representing the remaining number of shares of common stock of WageWorks that were available for issuance under the WageWorks Incentive Plan immediately prior to the Acquisition, became available for issuance under the Incentive Plan. The additional shares may be utilized for equity-based awards to be granted under the Incentive Plan, provided that (i) the period during which such shares are available under the Incentive Plan may not be extended beyond the period during which they would have been available under the WageWorks Incentive Plan, absent the Acquisition, and (ii) such equity-based awards may not be granted to individuals who were employees, directors or consultants of HealthEquity or its affiliates at the time the Acquisition was consummated. Stock options Under the terms of the Incentive Plan, the Company has the ability to grant incentive and nonqualified stock options. Incentive stock options may be granted only to Company team members. Nonqualified stock options may be granted to Company executive officers, other team members, directors and consultants. Such options are to be exercisable at prices, as determined by the board of directors, which must be equal to no less than the fair value of the Company's common stock at the date of the grant. Stock options granted under the Incentive Plan generally expire 10 years from the date of issuance, or are forfeited 90 days after termination of employment. Shares of common stock underlying stock options that are forfeited or that expire are returned to the Incentive Plan. Valuation assumptions. The Company has adopted the provisions of Topic 718, which requires the measurement and recognition of compensation for all stock-based awards made to team members and directors, based on estimated fair values. Under Topic 718, the Company uses the Black-Scholes option pricing model as the method of valuation for stock options. The determination of the fair value of stock-based awards on the date of grant is affected by the fair value of the stock as well as assumptions regarding a number of complex and subjective variables. The variables include, but are not limited to, 1) the expected life of the option, 2) the expected volatility of the fair value of the Company's common stock over the term of the award estimated by averaging the Company's historical volatility in addition to published volatilities of a relative peer group, 3) risk-free interest rate, and 4) expected dividends. The weighted-average fair value of options granted during the years ended January 31, 2020, 2019 and 2018 was $25.97, $26.40 and $17.16 per share, respectively. The key input assumptions that were utilized in the valuation of the stock options granted during the years ended January 31, 2020, 2019 and 2018 are as follows: Year ended January 31, 2020 2019 2018 Expected dividend yield —% —% —% Expected stock price volatility 35.98% - 36.53% 36.53% - 37.84% 37.79% - 38.01% Risk-free interest rate 2.21% - 2.43% 2.52% - 2.79% 1.18% - 2.07% Expected life of options 4.95 - 5.09 years 5.17 - 6.25 years 4.50 - 6.25 years The Company historically used the "simplified" method to estimate the expected term of an option as determined under Staff Accounting Bulletin No. 110 due to limited option exercise history as a public company. Commencing February 1, 2019, the Company began estimating the expected life of an option using its own historical option exercise and termination data. Expected volatility is determined using weighted average volatility of publicly traded peer companies. During the year ended January 31, 2019, the Company began using its own historical volatility in addition to the volatility of publicly traded peer companies, as its share price history grows over time. The risk-free interest rate is determined by using published zero coupon rates on treasury notes for each grant date given the expected term on the options. The dividend yield of zero is based on the fact that the Company expects to invest cash in operations. A summary of stock option activity is as follows: Outstanding stock options (in thousands, except for exercise prices and term) Number of Range of Weighted- Weighted- Aggregate Outstanding as of January 31, 2019 2,444 $0.10 - 82.39 $ 27.37 6.74 $ 85,971 Granted 108 $63.64 - 73.61 $ 73.27 Exercised (465) $0.10 - 59.63 $ 24.58 Forfeited (47) $24.36 - 44.53 $ 31.09 Outstanding as of January 31, 2020 2,040 $0.10 - 82.39 $ 30.35 5.90 $ 74,009 Vested and expected to vest as of January 31, 2020 2,040 $ 30.35 5.90 $ 74,009 Exercisable as of January 31, 2020 1,426 $ 23.53 5.30 $ 60,744 The aggregate intrinsic value in the table above represents the difference between the estimated fair value of common stock and the exercise price of outstanding, in-the-money stock options. The total intrinsic value of options exercised during the years ended January 31, 2020, 2019 and 2018 was $22.5 million, $65.5 million, and $44.8 million, respectively. As of January 31, 2020, the weighted-average vesting period of non-vested awards expected to vest is approximately 1.4 years; the amount of compensation expense the Company expects to recognize for stock options vesting in future periods is approximately $7.2 million. Restricted stock units and restricted stock awards The Company grants RSUs and RSAs to certain team members, officers, and directors under the Incentive Plan. RSUs and RSAs vest upon service-based criteria and performance-based criteria. Generally, service-based RSUs and RSAs vest over a four Acquisition of WageWorks. As described above, at the closing of the Acquisition, and in accordance with the Merger Agreement, 523,318 service-based RSUs with respect to WageWorks common stock were replaced by the Company and converted into RSUs with respect to common stock of the Company. These replaced awards are included in the granted amounts in the summary of RSU and RSA activity below. The awards replaced by the Company in the Acquisition were measured at the Acquisition date based on the estimated fair value of $29.7 million. A portion of that fair value, $3.8 million, which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. As of the closing of the Acquisition, the remaining portion of the fair value of those awards was $25.9 million, representing post-Acquisition share-based compensation expense, $8.1 million of which was recognized during the year ended January 31, 2020 as acquisition-related costs, and the remainder of which will be recognized in the ordinary course as these team members provide service over the remaining vesting periods. Additionally, at the closing of the Acquisition, and in accordance with the Merger Agreement, the Company exchanged for cash certain WageWorks equity awards measured at the Acquisition date based on the estimated fair value of $23.6 million. A portion of that fair value, $18.1 million, which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. As of the closing of the Acquisition, the remaining portion of the fair value of the awards exchanged for cash was $5.6 million, representing post-Acquisition share-based compensation expense that was recognized during the year ended January 31, 2020. Performance restricted stock units and awards. In March 2017, the Company awarded 146,964 performance-based RSUs ("PRSUs"). The Company records stock-based compensation related to PRSUs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurs upon approval by the Compensation Committee of the board of directors, based on the level of achievement of the performance goal as measured on January 31, 2020. The performance conditions allow for a range of vesting from 0% to 150%. In March 2018, the Company awarded 227,760 performance-based RSAs ("PRSAs"). Vesting of the PRSAs is dependent upon the achievement of certain financial criteria measured on January 31, 2021, and cliff vest upon approval by the Compensation Committee. The Company records stock-based compensation related to PRSAs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurred at the grant date. The Company believes it is probable that the PRSAs will vest at least in part. The vesting of the PRSAs will ultimately range from 0% to 200% based on the level of achievement of the performance goals. The PRSAs were issued at the 200% level of achievement. As the underlying shares were issued at grant date, they are subject to clawback based on actual Company performance. In March 2019, the Company awarded 129,963 PRSUs. Vesting of the PRSUs is dependent upon the achievement of certain financial criteria measured on January 31, 2022. The PRSUs cliff vest and are issued upon approval by the Compensation Committee. The Company records stock-based compensation related to PRSUs when it is considered probable that the performance conditions will be met. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 200% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals. As a result of the Acquisition, the Compensation Committee is considering revisions to existing PRSU and PRSA performance goals, including those measured as of January 31, 2020. A summary of the RSU and RSA activity is as follows: RSUs and PRSUs RSAs and PRSAs (in thousands, except weighted-average grant date fair value) Shares Weighted-average grant date fair value Shares Weighted-average grant date fair value Outstanding as of January 31, 2019 647 $ 55.18 256 $ 61.93 Granted 1,306 65.20 — — Vested (387) 58.40 (11) 62.75 Forfeited (186) 58.39 (10) 61.72 Outstanding as of January 31, 2020 1,380 $ 63.33 235 $ 61.91 During the years ended January 31, 2020, 2019 and 2018 the aggregate intrinsic value of RSUs and RSAs vested was $25.0 million, $6.4 million, and $0.7 million, respectively. Total unrecorded stock-based compensation expense as of January 31, 2020 associated with RSUs and PRSUs was $65.9 million, which is expected to be recognized over a weighted-average period of 2.6 years. Total unrecorded stock-based compensation expense as of January 31, 2020 associated with RSAs and PRSAs was $3.6 million, which is expected to be recognized over a weighted-average period of 1.3 years. |
Fair value
Fair value | 12 Months Ended |
Jan. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair value | Fair value Fair value measurements are made at a specific point in time, based on relevant market information. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1—quoted prices in active markets for identical assets or liabilities; • Level 2—inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and • Level 3—unobservable inputs based on the Company’s own assumptions. Level 1 instruments are valued based on publicly available daily net asset values. Level 1 instruments consist primarily of cash and cash equivalents. The carrying value of cash and cash equivalents approximate fair values as of January 31, 2020 due to the short-term nature of these instruments. |
Employee benefits
Employee benefits | 12 Months Ended |
Jan. 31, 2020 | |
Retirement Benefits [Abstract] | |
Employee benefits | Employee benefitsThe Company has established a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the IRS Code. All non-seasonal team members over the age of 18 are eligible to participate in the plan. The plan provides for Company matching of employee contributions up to 3.5% of eligible earnings. Employer matching contribution expense was $3.7 million, $1.8 million and $1.4 million for the years ended January 31, 2020, 2019 and 2018, respectively.The Company is self-insured for medical and dental benefits for all qualifying employees. The medical plan carries a stop-loss policy which will protect from individual claims during the plan year exceeding $200,000. The Company records estimates of costs of claims incurred based on an analysis of historical data and independent estimates. The Company's liability for self-insured medical claims is included in accrued compensation in its consolidated balance sheet and was $3.7 million and $1.4 million as of January 31, 2020 and 2019, respectively. |
Supplementary quarterly financi
Supplementary quarterly financial data (unaudited) | 12 Months Ended |
Jan. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Supplementary quarterly financial data (unaudited) | Supplementary quarterly financial data (unaudited) Three months ended (in thousands, except for per share amounts) January 31, 2020 October 31, 2019 July 31, 2019 April 30, 2019 Total revenue $ 201,200 $ 157,118 $ 86,623 $ 87,052 Total cost of revenue 87,519 61,083 28,183 29,299 Gross profit 113,681 96,035 58,440 57,753 Total operating expenses 99,139 86,113 33,576 30,075 Total other income (expense) (15,149) (41,174) (1,128) 23,600 Income tax provision (benefit) (417) (9,918) 4,370 9,456 Net income (loss) $ (190) $ (21,334) $ 19,366 $ 41,822 Net income (loss) per share (1): Basic $ — $ (0.30) $ 0.30 $ 0.67 Diluted $ — $ (0.30) $ 0.30 $ 0.65 Three months ended (in thousands, except for per share amounts) January 31, 2019 October 31, 2018 July 31, 2018 April 30, 2018 Total revenue $ 75,777 $ 70,495 $ 71,067 $ 69,904 Total cost of revenue 31,332 24,678 24,492 25,548 Gross profit 44,445 45,817 46,575 44,356 Total operating expenses 27,864 26,831 25,012 23,816 Total other income (expense) (221) (1,555) (75) (1) Income tax provision (benefit) 3,241 1,745 (1,029) (2,038) Net income $ 13,119 $ 15,686 $ 22,517 $ 22,577 Net income per share (1): Basic $ 0.21 $ 0.25 $ 0.36 $ 0.37 Diluted $ 0.21 $ 0.25 $ 0.36 $ 0.36 (1) Net income (loss) per share amounts may not sum to equal the full year total due to changes in the number of shares outstanding during the periods and rounding. |
Summary of business and signi_2
Summary of business and significant accounting policies (Policies) | 12 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Segments | Segments The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. All long-lived assets are maintained in the United States of America. |
Cash and cash equivalents | Cash and cash equivalentsThe Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company’s cash and cash equivalents were held in institutions in the U.S. and include deposits in a money market account that was unrestricted as to withdrawal or use. |
Client held funds | Client-held funds Many of the Company's client services agreements with employers (referred to as "Clients") provide that Clients remit funds to the Company to pre-fund Client and employee participant contributions related to flexible spending accounts and health reimbursement arrangements (“FSAs” and “HRAs”, respectively) and commuter accounts. These Client-held funds remitted to the Company do not represent cash assets of the Company to the extent that |
Accounts receivable | Accounts receivableAccounts receivable represent monies due to the Company for monthly service revenue, custodial revenue and interchange revenue. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivable amounts. |
Investments | Investments Marketable equity securities are strategic equity investments with readily determinable fair values for which the Company does not have the ability to exercise significant influence. These securities are accounted for at fair value and were classified as investments on the consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net in the consolidated statements of operations and comprehensive income. As a result of the Acquisition on August 30, 2019, the Company's marketable equity security investment in WageWorks was canceled. Non-marketable equity securities are strategic equity investments without readily determinable fair values for which the Company does not have the ability to exercise significant influence. These securities are accounted for using the measurement alternative and are classified as other assets on the consolidated balance sheets. All gains and losses on these investments, realized and unrealized, are recognized in other expense, net on the consolidated statements of operations and comprehensive income. Equity method investments are equity securities in investees the Company does not control but over which the Company has the ability to exercise significant influence. Equity method investments are included in other assets on the consolidated balance sheets. The Company's share of the earnings or losses as reported by equity method investees, amortization of basis differences, and related gains or losses, if any, are recognized in other expense, net on the consolidated statements of operations and comprehensive income. The Company assesses whether an other-than-temporary impairment loss on equity method investments and an impairment loss on non-marketable equity securities has occurred due to declines in fair value or other market conditions. If any impairment is considered other than temporary for equity method investments or impairment is identified for non-marketable equity securities, the Company will write down the investment to its fair value and record the corresponding charge through other expense, net in the consolidated statements of operations and comprehensive income. |
Other assets | Other assetsOther assets consist primarily of contract costs, debt issuance costs, prepaid expenditures, income tax receivables, inventories, and various other assets. Amounts expected to be recouped or recognized over a period of twelve months or less have been classified as current in the accompanying consolidated balance sheets. |
Leases | Leases The Company determines if a contract contains a lease at inception or any modification of the contract. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a specified period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Leases with an expected term of 12 months or less at commencement are not accounted for on the balance sheet. All operating lease expense is recognized on a straight-line basis over the expected lease term. Certain leases also include obligations to pay for non-lease services, such as utilities and common area maintenance. The services are accounted for separately from lease components, and the Company allocates payments to the lease and other services components based on estimated stand-alone prices. Operating lease right-of-use ("ROU") assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the rate implicit in each lease is not readily determinable, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company used its incremental borrowing rate on February 1, 2019 for all leases that commenced prior to that date. |
Property and equipment | Property and equipment Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of individual assets. The useful life for leasehold improvements is the shorter of the estimated useful life or the term of the lease ranging from 3-5 years. The useful life used for computing depreciation for all other asset classes is described below: Computer equipment 3-5 years Furniture and fixtures 5 years Maintenance and repairs are expensed when incurred, and improvements that extend the economic useful life of an asset are capitalized. Gains and losses on the disposal of property and equipment are reflected in operating expenses. |
Intangible assets, net | Intangible assets, net Intangible assets are carried at cost and amortized, typically, on a straight-line basis over their estimated useful lives. The useful life used for computing amortization for all intangible asset classes is described below: Software and software development costs 3 years Acquired customer relationships 10-15 years Acquired developed technology 2-5 years Acquired trade names and trademarks 3 years Acquired HSA portfolios 15 years We account for the costs of computer software developed or obtained for internal use in accordance with Accounting Standards Codification (“ASC”) 350-40, “Internal-Use Software.” Costs incurred during operation and post-implementation stages are charged to expense. Costs incurred during the application development stage that are directly attributable to developing or obtaining software for internal use are capitalized. Management’s judgment is required in determining the point when various projects enter the stages at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. Acquired customer relationships, developed technology, and trade names and trade marks are valued utilizing the discounted cash flow method, a form of the income approach. The useful lives of acquired customer relationships were estimated based on future revenue growth and attrition. The useful lives of developed technology and trade names were estimated based on expected obsolescence. The Company expenses the assets straight-line over the useful lives, and determined that this amortization method is appropriate to reflect the pattern over which the economic benefits of these acquired assets are realized. Acquired HSA portfolios consist of the contractual rights to administer the activities related to the individual HSAs acquired. The Company used its HSA customer relationship period assumption and the historical attrition rates of member accounts to determine that an average useful life of 15 years and the use of a straight-line amortization method are appropriate to reflect the pattern over which the economic benefits of existing member assets are realized. The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually on January 31 or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company’s impairment tests are based on a single operating segment and reporting unit structure. The goodwill impairment test involves a qualitative assessment to compare a reporting unit's fair value to its carrying value. If it is determined that it is more likely than not that a reporting unit's fair value is less than its carrying value, a quantitative comparison is made between the Company's market capitalization and the carrying value of the reporting unit, including goodwill. If the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value. |
Self insurance | Self-insuranceThe Company is self-insured for medical insurance up to certain annual stop-loss limits. The Company establishes a liability as of the balance sheet date for claims, both reported and incurred but not reported, using currently available information as well as historical claims experience, and as determined by an independent third party. |
Other long-term liabilities | Other long-term liabilitiesOther long-term liabilities consists of long-term deferred revenue and other liabilities that the Company does not expect to settle within one year. |
Revenue recognition | Revenue recognition The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation. Disaggregation of revenue. The Company's primary sources of revenue are service, custodial, and interchange revenue and are disclosed in the consolidated statements of operations and comprehensive income. All of the Company's sources of revenue are deemed to be revenue contracts with customers. Each revenue source is affected differently by economic factors as it relates to the nature, amount, timing and uncertainty. Costs to obtain a contract. ASC 606 requires capitalizing the costs of obtaining a contract when those costs are expected to be recovered. As of January 31, 2020, the net amount capitalized as contract costs was $21.8 million, which is included in other current assets and other assets. Amortization of capitalized contract costs during the year ended January 31, 2020 was $1.9 million. In order to determine the amortization period for sales commissions contract costs, the Company applied the portfolio approach. Accordingly, the amortization period of the assets has been determined to be the average economic life of an HSA or CDB relationship, which is estimated to be 15 years and 7 years, respectively. Amortization of capitalized sales commission contract costs is included in sales and marketing expenses in the consolidated statements of operations and comprehensive income. Performance obligations. ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as permitted by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Amounts excluded are not significant to the Company's consolidated statements of operations and comprehensive income. Service revenue. The Company hosts its platforms, prepares statements, provides a mechanism for spending funds, and provides customer support services. All of these services are consumed as they are received. The Company will continue to recognize service revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for those services, on a monthly basis as it satisfies its performance obligations. Custodial revenue. The Company deposits HSA assets at federally insured custodial depository partners, which we refer to as our Depository Partners, and investment assets with an investment partner. The deposit of funds represents a service that is simultaneously received and consumed by our Depository Partners and investment partner. The Company will continue to recognize custodial revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for the service, each month based on the amount received by its custodial partners and investment partners. Interchange revenue. The Company satisfies its interchange performance obligation each time payments are made with its cards via payment networks. The Company will continue to recognize interchange revenue, in an amount that reflects the consideration it expects to be entitled to in exchange for the service, in the month the payment transaction occurs. Contract balances. The Company does not recognize revenue in advance of invoicing its customers and therefore has no related contract assets. The Company records a receivable when revenue is recognized prior to payment and the Company has unconditional right to payment. Alternatively, when payment precedes the related services, the Company records a contract liability, or deferred revenue, until its performance obligations are satisfied. The Company's deferred revenue increased from $0.4 million as of January 31, 2019 to $3.7 million as of January 31, 2020, primarily due to the Acquisition. The balances are related to cash received in advance for a certain 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 generally recognized over a five Significant judgments. The Company makes no significant judgments in determining the amount or timing of revenue recognition. The Company has estimated the average economic life of an HSA or CDB member relationship, which which has been determined to be the amortization period for the capitalized sales commissions contract costs. Practical expedients. The Company has applied the practical expedient which allows an entity to account for incremental costs of obtaining a contract at a portfolio level. The Company has also applied the practical expedient to recognize incremental costs of obtaining contracts as an expense when incurred if the amortization period would have been one year or less. Cost of revenue The Company incurs cost of revenue related to servicing member accounts, managing customer and partner relationships, and processing reimbursement claims. Expenditures include personnel-related costs, depreciation, amortization, stock-based compensation, common expense allocations, new member and participant supplies and other operating costs of the Company’s related member account servicing departments. Other components of the Company’s cost of revenue sold include interest retained by members on custodial assets held and interchange costs incurred in connection with processing card transactions initiated by members. |
Stock-based compensation | Stock-based compensation The Company grants stock-based awards, which consist of stock options, restricted stock units ("RSUs") and restricted stock awards ("RSAs"), to certain team members, executive officers, and directors. The Company recognizes compensation expense for stock-based awards based on the grant date estimated fair value. Expense for stock-based awards is generally recognized on a straight-line basis over the requisite service period, and is reversed as pre-vesting forfeitures occur. The fair value of stock options is determined using the Black-Scholes option pricing model. The determination of fair value for stock options on the date of grant using an option pricing model requires management to make certain assumptions regarding a number of complex and subjective variables. The fair value of RSUs and RSAs is based on the current value of the Company's closing stock price on the date of grant less the present value of future expected dividends discounted at the risk-free interest rate. At the closing of the Acquisition, and in accordance with the Merger Agreement, certain service-based RSUs with respect to WageWorks common stock were replaced by the Company and converted into RSUs with respect to common stock of the Company. Certain other WageWorks equity awards were exchanged for cash. The fair value of awards that were replaced or exchanged for cash was measured as of the Acquisition date, and a portion of the fair value, which represented the pre-Acquisition service provided by team members to WageWorks, was included in the total consideration paid as part of the Acquisition. The remaining fair value represents post-Acquisition share-based compensation expense. For stock-based awards with performance conditions, the Company evaluates the probability of achieving the performance criteria and of the number of shares that are expected to vest, and compensation expense is then adjusted to reflect the number of shares expected to vest and the requisite service period. For awards with performance conditions, compensation expense is recognized using the graded-vesting attribution method in accordance with the provisions of FASB ASC Topic 718, Compensation—Stock Compensation ("Topic 718") . Upon the exercise of a stock option or release of an RSU/RSA, common shares are issued from authorized, but not outstanding, common stock. |
Interest Expense | Interest Expense Interest expense consists of accrued interest expense and amortization of deferred financing costs associated with our credit agreement. |
Income tax provision | Income tax provision The Company accounts for income taxes and the related accounts under the liability method as set forth in the authoritative guidance for accounting for income taxes. Under this method, current tax liabilities and assets are recognized for the estimated taxes payable or refundable on the tax returns for the current fiscal year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, for net operating losses, and for tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for when it is more likely than not that some or all of the deferred tax assets may not be realized in future years. After weighing both the positive and negative evidence, the Company has recorded a valuation allowance with respect to realized capital losses for which the Company does not expect to generate capital gains in order to utilize the capital losses in the future and with respect to certain insignificant state credits which are not expected to be utilized before they expire. The Company believes that it is more likely than not that all other deferred tax assets will be realized as of January 31, 2020. The Company uses the tax law ordering approach of intraperiod allocation in determining when excess tax benefits have been realized for provisions of the tax law that identify the sequence in which those amounts are utilized for tax purposes. The Company has also elected to exclude the indirect tax effects of share-based compensation deductions in computing the income tax provision recorded within the consolidated statement of operations and comprehensive income. Also, the Company uses the portfolio approach in releasing income tax effects from accumulated other comprehensive income. The Company recognizes the tax benefit from an uncertain tax position taken or expected to be taken in a tax return using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities, based on the technical merits of the position. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit in the financial statements as the largest benefit that has a greater than 50% likelihood of being sustained upon settlement. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of other expense in the Consolidated Statements of Operations and Comprehensive Income. Changes in facts and circumstances could have a material impact on the Company’s effective tax rate and results of operations. |
Comprehensive income | Comprehensive incomeComprehensive income is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources, including unrealized gains and losses on marketable securities prior to the February 1, 2018 adoption of ASU 2016-01. |
Asset acquisitions and Business combination | Asset acquisitions The Company routinely acquires rights to be the custodian of HSA portfolios, in which substantially all of the fair value of the gross portfolio assets acquired is concentrated in a group of similar HSA assets and therefore the acquisitions do not constitute a business. Accordingly, the acquisitions are accounted for under the asset acquisition method of accounting in accordance with ASC 805-50, Business Combinations—Related Issues. Under the asset acquisition method of accounting, the Company is required to fair value the assets transferred. The cost of the assets acquired, including transaction costs incurred in conjunction with an asset acquisition, is allocated to the individual assets acquired based on their relative fair values and does not give rise to goodwill. Business combination Consideration paid for the acquisition of a business as defined by ASC 805-10 is allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the acquisition date. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management has made estimates for the allowance for doubtful accounts, capitalized software development costs, evaluating goodwill and long-lived assets for impairment, useful lives of property and equipment and intangible assets, accrued compensation, accrued liabilities, grant date fair value of stock options, and income taxes. Actual results could differ from those estimates. |
Recent adopted and issued accounting pronouncements | Recently adopted accounting pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (codified as "ASC 842"), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. ASC 842 requires that a lessee recognize a liability to make lease payments (the lease liability) and a ROU asset representing its right to use the underlying asset for the lease term on the balance sheet. The Company adopted ASC 842 on February 1, 2019 using the modified retrospective transition method with the adoption date as the date of initial application. Consequently, prior period balances and disclosures have not been restated. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The adoption of ASC 842 on February 1, 2019 resulted in the recognition on the Company's consolidated balance sheet of both operating lease liabilities of $40.6 million and ROU assets of $38.0 million, which equals the lease liabilities net of accrued rent previously recorded on its consolidated balance sheet under previous guidance. The adoption of ASC 842 did not have an impact on the Company's consolidated statement of operations, stockholders’ equity and cash flows for the year ended January 31, 2020. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. This ASU should be applied prospectively. We adopted the standard effective February 1, 2019, which had no impact on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU permits the capitalization of implementation costs incurred in a software hosting arrangement. This ASU is effective for fiscal years beginning after December 15, 2019. The Company elected to early adopt the new standard as of October 31, 2019 using the prospective transition method. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements. Recently issued accounting pronouncements In June 2016, the FASB issued ASU 2016-13 , Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires financial assets measured at amortized cost be presented at the net amount expected to be collected. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company does not plan to early adopt this ASU. The Company believes the adoption of this ASU will not have a material impact on its consolidated financial statements. In August 2018, FASB issued ASU 2018-13 , Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which amends ASC 820, "Fair Value Measurement." ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. As this relates to disclosure only, the Company believes the adoption of this ASU will not have a material impact on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes. This guidance will be effective for fiscal periods beginning after December 15, 2020, and early adoption is permitted. The Company does not plan to early adopt this ASU, and is currently evaluating the impact of the new guidance on its consolidated financial statements. |
Summary of business and signi_3
Summary of business and significant accounting policies (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Estimated Useful Life of Property and Equipment | The useful life used for computing depreciation for all other asset classes is described below: Computer equipment 3-5 years Furniture and fixtures 5 years Property and equipment consisted of the following as of January 31, 2020 and 2019: (in thousands) January 31, 2020 January 31, 2019 Leasehold improvements $ 19,240 $ 3,583 Furniture and fixtures 7,929 4,476 Computer equipment 22,074 9,242 Property and equipment, gross 49,243 17,301 Accumulated depreciation (15,757) (9,078) Property and equipment, net $ 33,486 $ 8,223 |
Schedule of Useful Lives of Intangible Assets | The useful life used for computing amortization for all intangible asset classes is described below: Software and software development costs 3 years Acquired customer relationships 10-15 years Acquired developed technology 2-5 years Acquired trade names and trademarks 3 years Acquired HSA portfolios 15 years During the years ended January 31, 2020 and 2019, the Company capitalized the following amounts to acquire the rights to act as a custodian of HSA portfolios: (in thousands) January 31, 2020 January 31, 2019 Acquired HSA portfolios $ 7,659 $ 1,195 The gross carrying amount and associated accumulated amortization of intangible assets is as follows as of January 31, 2020 and January 31, 2019: (in thousands) January 31, 2020 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 76,221 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,381 2,882 Acquired developed technology 96,925 — Acquired trade names 12,300 — Amortizable intangible assets, gross 879,597 132,827 Accumulated amortization (98,851) (53,161) Total amortizable intangible assets, net 780,746 79,666 Acquired in process software development costs 2,533 — Total intangible assets, net $ 783,279 $ 79,666 |
Net income per share (Tables)
Net income per share (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the computation of basic and diluted net income per share: Year ended January 31, (in thousands, except per share data) 2020 2019 2018 Numerator (basic and diluted): Net income $ 39,664 $ 73,899 $ 47,362 Denominator (basic): Weighted-average common shares outstanding 67,026 61,836 60,304 Denominator (diluted): Weighted-average common shares outstanding 67,026 61,836 60,304 Weighted-average dilutive effect of stock options and restricted stock units 1,427 1,534 1,550 Diluted weighted-average common shares outstanding 68,453 63,370 61,854 Net income per share: Basic $ 0.59 $ 1.20 $ 0.79 Diluted $ 0.58 $ 1.17 $ 0.77 |
Business combination (Tables)
Business combination (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Total Consideration Paid | The Acquisition was accounted for under the acquisition method of accounting for business combinations. Under this accounting method, the total consideration paid was: (in millions) Aggregate fair value of WageWorks stock acquired $ 2,018.8 Fair value of previously owned investment in WageWorks stock 81.4 Fair value of equity awards exchanged for cash attributable to pre-Acquisition service 18.1 Fair value of equity awards replaced attributable to pre-Acquisition service 3.8 Total consideration paid $ 2,122.1 |
Schedule of Allocation of Consideration | The following table summarizes the Company's current allocation of the consideration paid: (in millions) Initial Allocation Adjustments Updated Allocation Cash and cash equivalents $ 406.8 $ (14.5) $ 392.3 Other current assets 56.5 1.0 57.5 Property, plant, and equipment 26.6 26.6 Operating lease right-of-use assets 42.5 42.5 Intangible assets 715.3 715.3 Goodwill 1,330.5 (2.5) 1,328.0 Other assets 5.9 5.9 Client-held funds obligation (237.5) 17.8 (219.7) Other current liabilities (69.1) (2.9) (72.0) Other long-term liabilities (26.7) (26.7) Deferred tax liability (128.7) 1.1 (127.6) Total consideration paid $ 2,122.1 $ — $ 2,122.1 |
Schedule of Allocation of Consideration Paid to Acquire Intangible Assets | The preliminary allocation of consideration exchanged to acquired identified intangible assets is as follows: (in millions) Fair value Weighted-average remaining amortization period (years) Customer relationships $ 598.5 15.0 Developed technology 96.9 4.5 Trade names & trademarks 12.3 3.0 Identified intangible assets subject to amortization 707.7 13.4 In-process software development costs 3.8 n/a Total acquired intangible assets $ 711.5 |
Schedule of Pro Forma Information | The estimated pro forma revenue and net income includes 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. Year ended January 31, (in thousands) 2020 2019 Revenue $ 798,253 $ 765,801 Net income $ 23,101 $ 6,419 |
Supplemental financial statem_2
Supplemental financial statement information (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Property and Equipment | The useful life used for computing depreciation for all other asset classes is described below: Computer equipment 3-5 years Furniture and fixtures 5 years Property and equipment consisted of the following as of January 31, 2020 and 2019: (in thousands) January 31, 2020 January 31, 2019 Leasehold improvements $ 19,240 $ 3,583 Furniture and fixtures 7,929 4,476 Computer equipment 22,074 9,242 Property and equipment, gross 49,243 17,301 Accumulated depreciation (15,757) (9,078) Property and equipment, net $ 33,486 $ 8,223 |
Schedule of Other Expense, Net | Other expense, net, consisted of the following: Year ended January 31, (in thousands) 2020 2019 Interest income $ 5,905 $ 1,946 Gain (loss) on equity securities 27,760 (102) Acquisition costs (40,810) (2,121) Other expense (1,934) (1,305) Total other expense, net $ (9,079) $ (1,582) |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Leases [Abstract] | |
Schedule of Lease Cost | The components of operating lease costs are as follows: Year ended January 31, (in thousands, except for term and percentages) 2020 Operating lease expense $ 9,059 Sublease income (750) Net operating lease cost $ 8,309 Weighted average lease term and discount rate are as follows: As of January 31, 2020 Weighted average remaining lease term 9.41 years Weighted average discount rate 4.35 % Supplemental cash flow information related to the Company's operating leases was as follows: Year ended January 31, (in thousands, except for term and percentages) 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,361 ROU assets obtained in exchange for new operating lease obligations $ 34,196 |
Schedule of Maturities of Operating Leases | Maturities of operating lease liabilities as of January 31, 2020 were as follows: Fiscal year ending January 31, (in thousands) Operating leases 2021 $ 12,695 2022 12,245 2023 9,942 2024 8,282 2025 8,280 Thereafter 47,108 Total lease payments 98,552 Less imputed interest (18,134) Present value of lease liabilities $ 80,418 Current $ 12,401 Non-current 68,017 Total lease liabilities $ 80,418 |
Intangible assets and goodwill
Intangible assets and goodwill (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | The useful life used for computing amortization for all intangible asset classes is described below: Software and software development costs 3 years Acquired customer relationships 10-15 years Acquired developed technology 2-5 years Acquired trade names and trademarks 3 years Acquired HSA portfolios 15 years During the years ended January 31, 2020 and 2019, the Company capitalized the following amounts to acquire the rights to act as a custodian of HSA portfolios: (in thousands) January 31, 2020 January 31, 2019 Acquired HSA portfolios $ 7,659 $ 1,195 The gross carrying amount and associated accumulated amortization of intangible assets is as follows as of January 31, 2020 and January 31, 2019: (in thousands) January 31, 2020 January 31, 2019 Amortizable intangible assets: Software and software development costs $ 76,221 $ 44,835 Acquired HSA portfolios 92,770 85,110 Acquired customer relationships 601,381 2,882 Acquired developed technology 96,925 — Acquired trade names 12,300 — Amortizable intangible assets, gross 879,597 132,827 Accumulated amortization (98,851) (53,161) Total amortizable intangible assets, net 780,746 79,666 Acquired in process software development costs 2,533 — Total intangible assets, net $ 783,279 $ 79,666 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for the years ending January 31 is as follows: Year ending January 31, (in thousands) 2021 $ 90,868 2022 83,476 2023 71,804 2024 62,622 2025 55,810 Thereafter 416,166 Total $ 780,746 |
Commitments and contingencies (
Commitments and contingencies (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease payments under non-cancelable operating leases, excluding the contractual sublease income of $5.5 million, which is expected to be received through February 2023, and other agreements, are as follows: Year ending January 31, (in thousands) Office leases Other agreements(1) Total 2021 $ 13,064 $ 21,912 $ 34,976 2022 17,610 14,628 32,238 2023 17,846 12,001 29,847 2024 15,973 1,245 17,218 2025 16,050 403 16,453 Thereafter 99,530 — 99,530 Total $ 180,073 $ 50,189 $ 230,262 (1) Other agreements does not include payments required under the Company's term loan facility. Refer to Note 8—Indebtedness. |
Indebtedness (Tables)
Indebtedness (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | As of January 31, 2020, long-term debt consisted of the following: (in millions) January 31, 2020 Term loan facility $ 1,242.2 Less: unamortized loan issuance costs (1) 21.5 Long-term debt, net of issuance costs $ 1,220.7 |
Schedule of Maturities of Long-term Debt | The loans made under the Term Loan Facility are required to be repaid as described in the following table: Fiscal year ending January 31, (in millions) Principal payments 2021 $ 39.1 2022 62.5 2023 70.3 2024 101.6 2025 968.7 Total principal payments $ 1,242.2 |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | The income tax provision consisted of the following: Year ended January 31, (in thousands) 2020 2019 2018 Current: Federal $ (448) $ 1,095 $ 392 State 274 416 130 Total current tax provision (benefit) $ (174) $ 1,511 $ 522 Deferred: Federal $ 3,538 $ 1,258 $ 4,068 State 127 (850) 237 Total deferred tax provision $ 3,665 $ 408 $ 4,305 Total income tax provision $ 3,491 $ 1,919 $ 4,827 |
Schedule of Effective Income Tax Rate Reconciliation | Total income tax provision differed from the amounts computed by applying the U.S. federal statutory income tax rate to income before income taxes as a result of the following: Year ended January 31, (in thousands) 2020 2019 2018 Federal income tax expense at the statutory rate $ 9,063 $ 15,922 $ 17,744 State income tax expense, net of federal tax benefit 960 1,518 1,241 Other non-deductible or non-taxable items, net 798 251 143 Excessive employee remuneration 2,117 160 — Excess tax benefits on stock-based compensation expense, net (4,815) (14,255) (14,136) Federal research and development credits (2,296) (2,252) (729) Change in uncertain tax position reserves, net of indirect benefits 491 450 191 Non-deductible acquisition-related costs 3,032 — — Non-taxable gain on investment in subsidiary (5,790) — — Deferred tax rate adjustment due to tax reform — — 458 Current statutory rate differential due to tax reform — — (308) Other items, net (69) 125 223 Total income tax provision $ 3,491 $ 1,919 $ 4,827 |
Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets and liabilities consisted of the following: (in thousands) January 31, 2020 January 31, 2019 Deferred tax assets: Net operating loss carryforward $ 1,147 $ 68 Stock compensation 10,764 6,987 Research and development credits 4,693 2,323 Lease liabilities 20,232 — Deferred rent — 626 Accruals and reserves 6,854 1,503 Other, net 2,154 224 Total gross deferred tax assets $ 45,844 $ 11,731 Less valuation allowance (203) (97) Deferred tax assets, net of valuation allowance 45,641 11,634 Deferred tax liabilities: Fixed assets (4,875) (1,294) Intangible assets (142,673) (4,798) Incremental contract costs (5,474) (4,654) Right-of-use assets (21,068) — Goodwill (1,831) — Other, net (194) (127) Total gross deferred tax liabilities (176,115) (10,873) Net deferred tax asset (liability) $ (130,474) $ 761 |
Schedule of Unrecognized Tax Benefits Roll Forward | A tabular reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including the impact of purchase accounting from the Acquisition, is as follows: (in thousands) January 31, 2020 January 31, 2019 Gross unrecognized tax benefits at beginning of year $ 1,693 $ 889 Gross amounts of increases and decreases: Increases as a result of tax positions taken during a prior period 6,888 — Decreases as a result of tax positions taken during a prior period (1) (1) Increases as a result of tax positions taken during the current period 790 805 Decreases as a result of tax positions taken during the current period — — Decreases resulting from the lapse of the applicable statute of limitations — — Gross unrecognized tax benefits at end of year $ 9,370 $ 1,693 |
Schedule of Unrecognized Tax Benefit Netted Against Deferred Tax Asset | The resulting unrecognized tax benefit recorded within the Company's consolidated balance sheet excludes the following amounts that have been netted against the related deferred tax assets or tax receivables accordingly: (in thousands) January 31, 2020 January 31, 2019 Total gross unrecognized tax benefits $ 9,370 $ 1,693 Amounts netted against related deferred tax assets (8,914) (1,693) Unrecognized tax benefits recorded on the consolidated balance sheet $ 456 $ — |
Stock-based compensation (Table
Stock-based compensation (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summary of share based compensation recognized | The following table shows a summary of stock-based compensation in the Company's consolidated statements of operations and comprehensive income during the years presented: Year ended January 31, (in thousands) 2020 2019 2018 Cost of revenue $ 4,792 $ 2,837 $ 2,594 Sales and marketing 4,694 3,536 2,030 Technology and development 7,649 5,117 3,318 General and administrative 12,972 9,567 6,368 Merger integration 1,603 — — Other expense, net 13,714 — — Total stock-based compensation expense $ 45,424 $ 21,057 $ 14,310 The following table shows stock-based compensation by award type: Year ended January 31, (in thousands) 2020 2019 2018 Stock options $ 6,612 $ 7,581 $ 7,826 Performance stock options — 681 1,378 Restricted stock units 25,781 7,657 3,224 Performance restricted stock units 4,862 2,419 1,882 Restricted stock awards 655 570 — Performance restricted stock awards 1,934 2,149 — Total non-cash stock-based compensation expense 39,844 21,057 14,310 Acquisition awards exchanged for cash 5,580 — — Total stock-based compensation expense $ 45,424 $ 21,057 $ 14,310 |
Summary of assumptions | The key input assumptions that were utilized in the valuation of the stock options granted during the years ended January 31, 2020, 2019 and 2018 are as follows: Year ended January 31, 2020 2019 2018 Expected dividend yield —% —% —% Expected stock price volatility 35.98% - 36.53% 36.53% - 37.84% 37.79% - 38.01% Risk-free interest rate 2.21% - 2.43% 2.52% - 2.79% 1.18% - 2.07% Expected life of options 4.95 - 5.09 years 5.17 - 6.25 years 4.50 - 6.25 years |
Summary of stock options | A summary of stock option activity is as follows: Outstanding stock options (in thousands, except for exercise prices and term) Number of Range of Weighted- Weighted- Aggregate Outstanding as of January 31, 2019 2,444 $0.10 - 82.39 $ 27.37 6.74 $ 85,971 Granted 108 $63.64 - 73.61 $ 73.27 Exercised (465) $0.10 - 59.63 $ 24.58 Forfeited (47) $24.36 - 44.53 $ 31.09 Outstanding as of January 31, 2020 2,040 $0.10 - 82.39 $ 30.35 5.90 $ 74,009 Vested and expected to vest as of January 31, 2020 2,040 $ 30.35 5.90 $ 74,009 Exercisable as of January 31, 2020 1,426 $ 23.53 5.30 $ 60,744 |
Summary of restricted stock activity | A summary of the RSU and RSA activity is as follows: RSUs and PRSUs RSAs and PRSAs (in thousands, except weighted-average grant date fair value) Shares Weighted-average grant date fair value Shares Weighted-average grant date fair value Outstanding as of January 31, 2019 647 $ 55.18 256 $ 61.93 Granted 1,306 65.20 — — Vested (387) 58.40 (11) 62.75 Forfeited (186) 58.39 (10) 61.72 Outstanding as of January 31, 2020 1,380 $ 63.33 235 $ 61.91 |
Supplementary quarterly finan_2
Supplementary quarterly financial data (unaudited) (Tables) | 12 Months Ended |
Jan. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | Three months ended (in thousands, except for per share amounts) January 31, 2020 October 31, 2019 July 31, 2019 April 30, 2019 Total revenue $ 201,200 $ 157,118 $ 86,623 $ 87,052 Total cost of revenue 87,519 61,083 28,183 29,299 Gross profit 113,681 96,035 58,440 57,753 Total operating expenses 99,139 86,113 33,576 30,075 Total other income (expense) (15,149) (41,174) (1,128) 23,600 Income tax provision (benefit) (417) (9,918) 4,370 9,456 Net income (loss) $ (190) $ (21,334) $ 19,366 $ 41,822 Net income (loss) per share (1): Basic $ — $ (0.30) $ 0.30 $ 0.67 Diluted $ — $ (0.30) $ 0.30 $ 0.65 Three months ended (in thousands, except for per share amounts) January 31, 2019 October 31, 2018 July 31, 2018 April 30, 2018 Total revenue $ 75,777 $ 70,495 $ 71,067 $ 69,904 Total cost of revenue 31,332 24,678 24,492 25,548 Gross profit 44,445 45,817 46,575 44,356 Total operating expenses 27,864 26,831 25,012 23,816 Total other income (expense) (221) (1,555) (75) (1) Income tax provision (benefit) 3,241 1,745 (1,029) (2,038) Net income $ 13,119 $ 15,686 $ 22,517 $ 22,577 Net income per share (1): Basic $ 0.21 $ 0.25 $ 0.36 $ 0.37 Diluted $ 0.21 $ 0.25 $ 0.36 $ 0.36 (1) Net income (loss) per share amounts may not sum to equal the full year total due to changes in the number of shares outstanding during the periods and rounding. |
Summary of business and signi_4
Summary of business and significant accounting policies - Narrative (Details) | Aug. 30, 2019USD ($)$ / shares | Jan. 31, 2020USD ($)segment | Jan. 31, 2019USD ($) | Jan. 31, 2018USD ($) | Feb. 01, 2019USD ($) |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Number of segments | segment | 1 | ||||
Client held funds, included in corporate cash | $ 4,000,000 | ||||
Allowance for credit loss | 1,200,000 | $ 100,000 | |||
Credit losses from trade receivables | 1,000,000 | 200,000 | |||
Loss on disposition of intangible assets | 700,000 | ||||
Impairment of intangible assets | 0 | 0 | |||
Goodwill impairment | 0 | 0 | |||
Capitalized contract cost | 21,800,000 | ||||
Amortization of capitalized contract costs | 1,900,000 | ||||
Remaining performance obligation | $ 3,700,000 | 400,000 | |||
Deferred revenue recognition term | 12 months | ||||
Deferred revenue interchange arrangement recognition term | 5 years | ||||
Revenue recognized | $ 400,000 | ||||
Acquisition costs | 40,810,000 | 2,121,000 | |||
Operating lease liabilities | 80,418,000 | ||||
Operating lease right-of-use assets | $ 83,178,000 | ||||
Acquired HSA Intangible Assets | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Useful life of intangible assets | 15 years | ||||
HSA Member | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Capitalized contract cost, amortization period | 15 years | ||||
RA Customer Relationship | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Capitalized contract cost, amortization period | 7 years | ||||
Other Expense | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Acquisition costs | $ 40,800,000 | $ 2,100,000 | $ 2,200,000 | ||
Accounting Standards Update 2016-02 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Operating lease liabilities | $ 40,600,000 | ||||
Operating lease right-of-use assets | $ 38,000,000 | ||||
Passive custodial funds | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Minimum net worth above custodial assets | 2.00% | ||||
Non-passive custodial fund | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Minimum net worth above custodial assets | 4.00% | ||||
Minimum | Leasehold improvements | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Useful life of property, plant and equipment (in years) | 3 years | ||||
Maximum | Leasehold improvements | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Useful life of property, plant and equipment (in years) | 5 years | ||||
WageWorks, Inc. | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Merger related costs, price per share | $ / shares | $ 51.35 | ||||
Aggregate fair value of WageWorks stock acquired | $ 2,000,000,000 | $ 2,122,100,000 | |||
Client-held funds, non-assets | 462,000,000 | ||||
Acquisition costs | 40,800,000 | ||||
WageWorks, Inc. | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Client held funds, total | 682,000,000 | ||||
Client held funds, included in corporate cash | $ 220,000,000 |
Summary of business and signi_5
Summary of business and significant accounting policies - Property and Equipment (Details) | 12 Months Ended |
Jan. 31, 2020 | |
Furniture and fixtures | |
Property, Plant and Equipment [Line Items] | |
Useful life of property, plant and equipment (in years) | 5 years |
Minimum | Computer equipment | |
Property, Plant and Equipment [Line Items] | |
Useful life of property, plant and equipment (in years) | 3 years |
Maximum | Computer equipment | |
Property, Plant and Equipment [Line Items] | |
Useful life of property, plant and equipment (in years) | 5 years |
Summary of business and signi_6
Summary of business and significant accounting policies - Intangible Assets (Details) | 12 Months Ended |
Jan. 31, 2020 | |
Computer Software And Capitalized Software Development Costs | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 3 years |
Developed technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 3 years |
Acquired HSA Intangible Assets | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 15 years |
Minimum | 401(k) Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 10 years |
Minimum | Developed technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 2 years |
Maximum | 401(k) Customer Relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 15 years |
Maximum | Developed technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Useful life of intangible assets | 5 years |
Net income per share (Details)
Net income per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jan. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Numerator (basic and diluted): | |||||||||||
Net income | $ (190) | $ (21,334) | $ 19,366 | $ 41,822 | $ 13,119 | $ 15,686 | $ 22,517 | $ 22,577 | $ 39,664 | $ 73,899 | $ 47,362 |
Denominator (basic): | |||||||||||
Weighted-average common shares outstanding (shares) | 67,026 | 61,836 | 60,304 | ||||||||
Denominator (diluted): | |||||||||||
Weighted-average common shares outstanding (shares) | 67,026 | 61,836 | 60,304 | ||||||||
Weighted-average dilutive effect of stock options and restricted stock units | 1,427 | 1,534 | 1,550 | ||||||||
Diluted weighted-average common shares outstanding | 68,453 | 63,370 | 61,854 | ||||||||
Net income per share: | |||||||||||
Basic (usd per share) | $ 0 | $ (0.30) | $ 0.30 | $ 0.67 | $ 0.21 | $ 0.25 | $ 0.36 | $ 0.37 | $ 0.59 | $ 1.20 | $ 0.79 |
Diluted (usd per share) | $ 0 | $ (0.30) | $ 0.30 | $ 0.65 | $ 0.21 | $ 0.25 | $ 0.36 | $ 0.36 | $ 0.58 | $ 1.17 | $ 0.77 |
Antidilutive securities excluded from computation of earnings per share (shares) | 300 | 100 | 600 |
Business combination - Narrativ
Business combination - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 30, 2019 | Jan. 31, 2020 | Jan. 31, 2019 |
Business Acquisition [Line Items] | |||
Acquisition costs | $ 40,810 | $ 2,121 | |
WageWorks, Inc. | |||
Business Combinations [Abstract] | |||
Merger related costs, price per share | $ 51.35 | ||
Business Acquisition [Line Items] | |||
Merger related costs, price per share | $ 51.35 | ||
Aggregate fair value of WageWorks stock acquired | $ 2,000,000 | 2,122,100 | |
Cash paid | 816,900 | ||
Borrowing pursuant to term loan facility | 1,220,000 | ||
Goodwill | 1,330,000 | ||
Acquisition costs | 40,800 | ||
Contribution of revenue | $ 184,700 | ||
WageWorks, Inc. | Term Loan Facility | Line of Credit | |||
Business Acquisition [Line Items] | |||
Cash paid | $ 30,500 |
Business combination - Consider
Business combination - Consideration Transferred (Details) - WageWorks, Inc. - USD ($) $ in Millions | Aug. 30, 2019 | Jan. 31, 2020 |
Business Acquisition [Line Items] | ||
Fair value of previously owned investment in WageWorks stock | $ 81.4 | |
Total consideration paid | $ 2,000 | 2,122.1 |
Common stock | ||
Business Acquisition [Line Items] | ||
Aggregate fair value of WageWorks stock acquired | 2,018.8 | |
Pre-acquisition Equity Awards | ||
Business Acquisition [Line Items] | ||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 18.1 | |
Fair value of equity awards replaced attributable to pre-Acquisition service | 18.1 | |
Equity Awards Assumed Attributable To Pre Acquisition Service | ||
Business Acquisition [Line Items] | ||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 3.8 | |
Fair value of equity awards replaced attributable to pre-Acquisition service | $ 3.8 |
Business combination - Prelimin
Business combination - Preliminary Allocation of Consideration (Details) - USD ($) $ in Thousands | 5 Months Ended | ||
Jan. 31, 2020 | Aug. 30, 2019 | Jan. 31, 2019 | |
Business Acquisition [Line Items] | |||
Goodwill | $ 1,332,631 | $ 4,651 | |
WageWorks Inc. | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | 392,300 | $ 406,800 | |
Cash and cash equivalents, adjustments | (14,500) | ||
Other current assets | 57,500 | 56,500 | |
Other current assets, adjustments | 1,000 | ||
Property, plant, and equipment | 26,600 | 26,600 | |
Operating lease right-of-use assets | 42,500 | 42,500 | |
Intangible assets | 715,300 | 715,300 | |
Goodwill | 1,328,000 | 1,330,500 | |
Goodwill, adjustments | (2,500) | ||
Other assets | 5,900 | 5,900 | |
Client-held funds obligation | (219,700) | (237,500) | |
Client-held funds obligation, adjustments | 17,800 | ||
Other current liabilities | (72,000) | (69,100) | |
Other current liabilities, adjustments | 2,900 | ||
Other long-term liabilities | (26,700) | (26,700) | |
Deferred tax liability | (127,600) | (128,700) | |
Deferred tax liability, adjustments | 1,100 | ||
Total consideration paid | 2,122,100 | $ 2,122,100 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Consideration Transferred | $ 0 |
Business combination - Acquired
Business combination - Acquired Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 7,659 | $ 1,195 |
In-process software development costs | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
In-process software development costs | 3,800 | |
Customer relationships | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 598,500 | |
Weighted-average remaining amortization period (years) | 15 years | |
Developed technology | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 96,900 | |
Weighted-average remaining amortization period (years) | 4 years 6 months | |
Trade names & trademarks | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 12,300 | |
Weighted-average remaining amortization period (years) | 3 years | |
Identified intangible assets subject to amortization | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Fair value | $ 707,700 | |
Weighted-average remaining amortization period (years) | 13 years 4 months 24 days | |
WageWorks, Inc. | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Total acquired intangible assets | $ 711,500 |
Business combination - Pro Form
Business combination - Pro Forma Results (Details) - WageWorks Inc. - USD ($) $ in Thousands | 12 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Business Acquisition [Line Items] | ||
Revenue | $ 798,253 | $ 765,801 |
Net income | $ 23,101 | $ 6,419 |
Supplemental financial statem_3
Supplemental financial statement information (Property and equipment) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 49,243 | $ 17,301 | |
Accumulated depreciation | (15,757) | (9,078) | |
Property and equipment, net | 33,486 | 8,223 | |
Depreciation expense | 8,900 | 3,500 | $ 2,800 |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 19,240 | 3,583 | |
Furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 7,929 | 4,476 | |
Computer equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 22,074 | $ 9,242 |
Supplemental financial statem_4
Supplemental financial statement information (Other expense, net) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Interest income | $ 5,905 | $ 1,946 | |
Gain (loss) on equity securities | 27,760 | (102) | |
Acquisition costs | (40,810) | (2,121) | |
Other expense | (1,934) | (1,305) | |
Total other expense, net | $ (9,079) | $ (1,582) | $ (1,955) |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 12 Months Ended |
Jan. 31, 2020USD ($) | |
Lessee, Lease, Description [Line Items] | |
Operating lease not yet commenced undiscontinued amount | $ 81.5 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining operating lease terms | 1 year |
Lease renewal terms extension | 3 years |
Operating lease not yet commenced term of contract | 3 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining operating lease terms | 11 years |
Lease renewal terms extension | 10 years |
Operating lease not yet commenced term of contract | 11 years |
Leases - Lease Cost (Details)
Leases - Lease Cost (Details) $ in Thousands | 12 Months Ended |
Jan. 31, 2020USD ($) | |
Leases [Abstract] | |
Operating lease expense | $ 9,059 |
Sublease income | (750) |
Net operating lease cost | $ 8,309 |
Weighted average remaining lease term | 9 years 4 months 28 days |
Weighted average discount rate | 4.35% |
Leases - Maturities of Operatin
Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands | Jan. 31, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 12,695 |
2022 | 12,245 |
2023 | 9,942 |
2024 | 8,282 |
2025 | 8,280 |
Thereafter | 47,108 |
Total lease payments | 98,552 |
Less imputed interest | (18,134) |
Current | 12,401 |
Operating lease liabilities, non-current | 68,017 |
Total lease liabilities | $ 80,418 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) $ in Thousands | 12 Months Ended |
Jan. 31, 2020USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 6,361 |
ROU assets obtained in exchange for new operating lease obligations | $ 34,196 |
Intangible assets and goodwil_2
Intangible assets and goodwill - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | |||
Fair value | $ 7,659 | $ 1,195 | |
Capitalized software development costs | 24,100 | 9,300 | $ 8,100 |
Software development costs incurred and expensed | 23,800 | 13,700 | 12,200 |
Amortization expense | $ 46,500 | $ 14,700 | $ 13,200 |
Acquired HSA Intangible Assets | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted-average remaining amortization period (years) | 15 years | ||
WageWorks, Inc. | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total acquired intangible assets | $ 711,500 | ||
Goodwill | $ 1,330,000 |
Intangible assets and goodwil_3
Intangible assets and goodwill - Schedule of finite-lived intangible assets (Details) - USD ($) $ in Thousands | Jan. 31, 2020 | Jan. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | $ 879,597 | $ 132,827 |
Accumulated amortization | (98,851) | (53,161) |
Total amortizable intangible assets, net | 780,746 | 79,666 |
Total intangible assets, net | 783,279 | 79,666 |
Software and software development costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 76,221 | 44,835 |
Acquired HSA portfolios | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 92,770 | 85,110 |
Acquired customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 601,381 | 2,882 |
Acquired developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 96,925 | 0 |
Acquired trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortizable intangible assets, gross | 12,300 | 0 |
In-process software development costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired in process software development costs | $ 2,533 | $ 0 |
Intangible assets and goodwil_4
Intangible assets and goodwill - Schedule for future amortization expense (Details) - USD ($) $ in Thousands | Jan. 31, 2020 | Jan. 31, 2019 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2021 | $ 90,868 | |
2022 | 83,476 | |
2023 | 71,804 | |
2024 | 62,622 | |
2025 | 55,810 | |
Thereafter | 416,166 | |
Total amortizable intangible assets, net | $ 780,746 | $ 79,666 |
Commitments and contingencies -
Commitments and contingencies - Future Minimum Rentals (Details) $ in Thousands | Jan. 31, 2020USD ($) |
Future minimum lease payments | |
2021 | $ 34,976 |
2022 | 32,238 |
2023 | 29,847 |
2024 | 17,218 |
2025 | 16,453 |
Thereafter | 99,530 |
Total | 230,262 |
Office leases | |
Future minimum lease payments | |
2021 | 13,064 |
2022 | 17,610 |
2023 | 17,846 |
2024 | 15,973 |
2025 | 16,050 |
Thereafter | 99,530 |
Total | 180,073 |
Other agreements | |
Future minimum lease payments | |
2021 | 21,912 |
2022 | 14,628 |
2023 | 12,001 |
2024 | 1,245 |
2025 | 403 |
Thereafter | 0 |
Total | $ 50,189 |
Commitments and contingencies_2
Commitments and contingencies - Narrative (Details) $ in Thousands | Sep. 06, 2018lawsuit | Jun. 22, 2018lawsuit | Jan. 31, 2020USD ($) | Jan. 31, 2019USD ($) | Jan. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |||||
Sublease income | $ 5,500 | ||||
Operating Lease, Expense | 9,100 | ||||
Lease expense for office space | $ 5,500 | $ 4,300 | |||
Sublease income | $ 750 | ||||
Number of derivative lawsuits | lawsuit | 2 | 2 |
Indebtedness - Schedule of Long
Indebtedness - Schedule of Long-term Debt (Details) $ in Millions | Jan. 31, 2020USD ($) |
Debt Instrument [Line Items] | |
Term loan facility | $ 1,242.2 |
Less: unamortized loan issuance costs | 21.5 |
Long-term debt, net of issuance costs | 1,220.7 |
Term Loan Facility | |
Debt Instrument [Line Items] | |
Less: unamortized loan issuance costs | 21.5 |
Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Less: unamortized loan issuance costs | $ 6.4 |
Indebtedness - Narrative (Detai
Indebtedness - Narrative (Details) - Line of Credit | Aug. 30, 2019USD ($) | Jan. 31, 2020USD ($) |
Minimum | London Interbank Offered Rate (LIBOR) | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 1.25% | |
Minimum | Customary Base Rate | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 0.25% | |
Maximum | London Interbank Offered Rate (LIBOR) | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 2.25% | |
Maximum | Customary Base Rate | ||
Debt Instrument [Line Items] | ||
Variable rate borrowing spread | 1.25% | |
Credit Agreement | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 3.65% | |
Effective interest rate | 4.10% | |
Acquisition threshold for maximum total net leverage ratio | $ 100,000,000 | |
Maximum interest coverage ratio | 3 | |
Credit Agreement | Debt Covenant, beginning August 30, 2019 | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 5.25 | |
Credit Agreement | Debt covenant, beginning July 31, 2020 | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 5 | |
Credit Agreement | Debt covenant, beginning July 31, 2021 | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 4.50 | |
Credit Agreement | Debt covenant, acquisition holiday provision | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 5 | |
Credit Agreement | Term Loan Facility | ||
Debt Instrument [Line Items] | ||
Credit facilities | $ 1,250,000,000 | |
Debt term | 5 years | |
Credit Agreement | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Credit facilities | $ 350,000,000 | |
Debt term | 5 years | |
Credit Agreement | Revolving Credit Facility | Minimum | ||
Debt Instrument [Line Items] | ||
Commitment fee percentage | 0.20% | |
Credit Agreement | Revolving Credit Facility | Maximum | ||
Debt Instrument [Line Items] | ||
Commitment fee percentage | 0.40% | |
Credit Agreement Prior to Acquisition | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Amounts drawn under Credit Agreement | $ 0 |
Indebtedness - Schedule of Matu
Indebtedness - Schedule of Maturities of Long-term Debt (Details) $ in Millions | Jan. 31, 2020USD ($) |
Debt Disclosure [Abstract] | |
2021 | $ 39.1 |
2022 | 62.5 |
2023 | 70.3 |
2024 | 101.6 |
2025 | 968.7 |
Total principal payments | $ 1,242.2 |
Income taxes - Components of In
Income taxes - Components of Income tax (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jan. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Current: | |||||||||||
Federal | $ (448) | $ 1,095 | $ 392 | ||||||||
State | 274 | 416 | 130 | ||||||||
Total current tax provision (benefit) | (174) | 1,511 | 522 | ||||||||
Deferred: | |||||||||||
Federal | 3,538 | 1,258 | 4,068 | ||||||||
State | 127 | (850) | 237 | ||||||||
Total deferred tax provision | 3,665 | 408 | 4,305 | ||||||||
Total income tax provision | $ (417) | $ (9,918) | $ 4,370 | $ 9,456 | $ 3,241 | $ 1,745 | $ (1,029) | $ (2,038) | $ 3,491 | $ 1,919 | $ 4,827 |
Income taxes - Reconciliation o
Income taxes - Reconciliation of Income tax (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jan. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||||||||||
Federal income tax expense at the statutory rate | $ 9,063 | $ 15,922 | $ 17,744 | ||||||||
State income tax expense, net of federal tax benefit | 960 | 1,518 | 1,241 | ||||||||
Other non-deductible or non-taxable items, net | 798 | 251 | 143 | ||||||||
Excessive employee remuneration | 2,117 | 160 | 0 | ||||||||
Excess tax benefits on stock-based compensation expense, net | (4,815) | (14,255) | (14,136) | ||||||||
Federal research and development credits | (2,296) | (2,252) | (729) | ||||||||
Change in uncertain tax position reserves, net of indirect benefits | 491 | 450 | 191 | ||||||||
Non-deductible acquisition-related costs | 3,032 | 0 | 0 | ||||||||
Non-taxable gain on investment in subsidiary | (5,790) | 0 | 0 | ||||||||
Deferred tax rate adjustment due to tax reform | 0 | 0 | 458 | ||||||||
Current statutory rate differential due to tax reform | 0 | 0 | 308 | ||||||||
Other items, net | (69) | 125 | 223 | ||||||||
Total income tax provision | $ (417) | $ (9,918) | $ 4,370 | $ 9,456 | $ 3,241 | $ 1,745 | $ (1,029) | $ (2,038) | $ 3,491 | $ 1,919 | $ 4,827 |
Income taxes - Narrative (Detai
Income taxes - Narrative (Details) - USD ($) | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Operating Loss Carryforwards [Line Items] | |||
Effective income tax rate | 8.10% | 2.50% | 9.20% |
Current statutory rate differential due to tax reform | $ 0 | $ 0 | $ 308,000 |
Deferred tax asset, valuation allowance | 203,000 | 97,000 | |
Total gross unrecognized tax benefits | 9,370,000 | 1,693,000 | $ 889,000 |
Anticipated decrease in total gross unrecognized tax benefits within 12 months | 8,600,000 | 1,500,000 | |
Period increase (decrease) in unrecognized tax benefit | 7,700,000 | ||
Unrecognized tax benefits, income tax penalties and interest expense | 100,000 | 0 | |
Unrecognized tax benefits, income tax penalties and interest accrued | 600,000 | 0 | |
Accrued interest, increase resulting from acquisition | 500,000 | ||
December 31, 2025 Through 2036 | State | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforwards | 20,500,000 | ||
December 31, 2019 | Research | Federal | |||
Operating Loss Carryforwards [Line Items] | |||
Credit carryforward | $ 3,600,000 | ||
December 31, 2024 | Research | State | |||
Operating Loss Carryforwards [Line Items] | |||
Credit carryforward | $ 7,800,000 |
Income taxes - Deferred Tax Ass
Income taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Jan. 31, 2020 | Jan. 31, 2019 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 1,147 | $ 68 |
Stock compensation | 10,764 | 6,987 |
Research and development credits | 4,693 | 2,323 |
Lease liabilities | 20,232 | 0 |
Deferred rent | 0 | 626 |
Accruals and reserves | 6,854 | 1,503 |
Other, net | 2,154 | 224 |
Total gross deferred tax assets | 45,844 | 11,731 |
Less valuation allowance | (203) | (97) |
Deferred tax assets, net of valuation allowance | 45,641 | 11,634 |
Deferred tax liabilities: | ||
Fixed assets | (4,875) | (1,294) |
Intangible assets | (142,673) | (4,798) |
Incremental contract costs | (5,474) | (4,654) |
Right-of-use assets | (21,068) | 0 |
Goodwill | (1,831) | 0 |
Other, net | (194) | (127) |
Total gross deferred tax liabilities | (176,115) | (10,873) |
Net deferred tax (liability) | $ (130,474) | |
Net deferred tax asset | $ 761 |
Income taxes - Unrecognized Tax
Income taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||
Gross unrecognized tax benefits at beginning of year | $ 1,693 | $ 889 | ||
Increases as a result of tax positions taken during a prior period | 6,888 | 0 | ||
Decreases as a result of tax positions taken during a prior period | (1) | (1) | ||
Increases as a result of tax positions taken during the current period | 790 | 805 | ||
Decreases as a result of tax positions taken during the current period | 0 | 0 | ||
Decreases resulting from the lapse of the applicable statute of limitations | 0 | 0 | ||
Gross unrecognized tax benefits at end of year | 9,370 | 1,693 | ||
Total gross unrecognized tax benefits | $ 9,370 | $ 889 | $ 9,370 | $ 1,693 |
Amounts netted against related deferred tax assets | (8,914) | (1,693) | ||
Unrecognized tax benefits recorded on the consolidated balance sheet | $ 456 | $ 0 |
Stock-based compensation - Summ
Stock-based compensation - Summary of Share Based Compensation recognized (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | $ 45,424 | $ 21,057 | $ 14,310 |
Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 6,612 | 7,581 | 7,826 |
Performance stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 0 | 681 | 1,378 |
Restricted stock units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 25,781 | 7,657 | 3,224 |
Performance restricted stock units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 4,862 | 2,419 | 1,882 |
Restricted stock awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 655 | 570 | 0 |
Performance restricted stock awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 1,934 | 2,149 | 0 |
Total non-cash stock-based compensation expense | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 39,844 | 21,057 | 14,310 |
Acquisition awards exchanged for cash | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 5,580 | 0 | 0 |
Cost of revenue | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 4,792 | 2,837 | 2,594 |
Sales and marketing | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 4,694 | 3,536 | 2,030 |
Technology and development | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 7,649 | 5,117 | 3,318 |
General and administrative | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 12,972 | 9,567 | 6,368 |
Merger integration | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | 1,603 | 0 | 0 |
Other expense, net | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share based compensation | $ 13,714 | $ 0 | $ 0 |
Stock-based compensation - Narr
Stock-based compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | Aug. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Weighted-average fair value at date of grant (usd per share) | $ 25.97 | $ 26.40 | $ 17.16 | ||||
Expected dividend yield | 0.00% | 0.00% | 0.00% | ||||
Share based compensation | $ 45,424 | $ 21,057 | $ 14,310 | ||||
WageWorks, Inc. | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share based compensation | $ 8,100 | ||||||
WageWorks, Inc. | Restricted stock units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of service-based common stock (in shares) | 523,318 | ||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | $ 29,700 | ||||||
WageWorks, Inc. | Pre Acquisition Restricted Stock Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 3,800 | ||||||
WageWorks, Inc. | Post Acquisition Restricted Stock Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 25,900 | ||||||
WageWorks, Inc. | Pre-acquisition Equity Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 18,100 | ||||||
WageWorks, Inc. | Equity Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | 23,600 | ||||||
WageWorks, Inc. | Post-acquisition Equity Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value of equity awards exchanged for cash attributable to pre-Acquisition service | $ 5,600 | ||||||
Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of share authorized (in shares) | 2,600,000 | ||||||
Additional shares available for grants as percentage of capital stock outstanding | 3.00% | ||||||
Shares available for grant (shares) | 4,800,000 | ||||||
WageWorks Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of common stock issuable (in shares) | 5,255,027 | ||||||
Stock options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Expiration period after termination | 10 years | ||||||
Expiration period from termination of employment | 90 days | ||||||
Recognition period for stock-based compensation | 1 year 4 months 24 days | ||||||
Unrecognized stock compensation expense to be recognized in future | $ 7,200 | ||||||
Share based compensation | 6,612 | 7,581 | 7,826 | ||||
Restricted stock units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Aggregate intrinsic value | $ 22,500 | $ 65,500 | $ 44,800 | ||||
Recognition period for stock-based compensation | 2 years 7 months 6 days | ||||||
Award vesting period | 4 years | ||||||
Weighted-average grant date fair value (usd per share) | $ 65.20 | $ 67.69 | $ 44.61 | ||||
Share based compensation | $ 25,781 | $ 7,657 | $ 3,224 | ||||
Granted (in shares) | 1,306,000 | ||||||
Compensation not yet recognized, other than options | $ 65,900 | ||||||
Aggregate intrinsic value | 25,000 | 6,400 | 700 | ||||
Performance restricted stock units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share based compensation | 4,862 | 2,419 | 1,882 | ||||
Granted (in shares) | 129,963 | 146,964 | |||||
Performance restricted stock units | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of options vested | 0.00% | ||||||
Performance restricted stock units | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of options vested | 150.00% | ||||||
Performance stock options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share based compensation | $ 0 | 681 | 1,378 | ||||
Restricted stock awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Recognition period for stock-based compensation | 1 year 3 months 18 days | ||||||
Award vesting period | 4 years | ||||||
Weighted-average grant date fair value (usd per share) | $ 0 | ||||||
Share based compensation | $ 655 | 570 | 0 | ||||
Granted (in shares) | 0 | ||||||
Compensation not yet recognized, other than options | $ 3,600 | ||||||
Performance restricted stock awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share based compensation | $ 1,934 | $ 2,149 | $ 0 | ||||
Granted (in shares) | 227,760 | ||||||
Performance restricted stock awards | Minimum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of options vested | 0.00% | 0.00% | |||||
Performance restricted stock awards | Maximum | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of options vested | 200.00% | 200.00% |
Stock-based compensation - Assu
Stock-based compensation - Assumptions (Details) | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected stock price volatility | 35.98% | 36.53% | 37.79% |
Risk-free interest rate | 2.21% | 2.52% | 1.18% |
Expected life of options | 4 years 11 months 12 days | 5 years 2 months 1 day | 4 years 6 months |
Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected stock price volatility | 36.53% | 37.84% | 38.01% |
Risk-free interest rate | 2.43% | 2.79% | 2.07% |
Expected life of options | 5 years 1 month 2 days | 6 years 3 months | 6 years 3 months |
Stock-based compensation - Stoc
Stock-based compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Number of options | ||
Opening balance (shares) | 2,444 | |
Granted (shares) | 108 | |
Number of shares exercised (shares) | (465) | |
Forfeited (shares) | (47) | |
Ending balance (shares) | 2,040 | 2,444 |
Vested and expected to vest as of year end (shares) | 2,040 | |
Exercisable as of year end (shares) | 1,426 | |
Range of exercise prices (usd per share) | ||
Beginning balance, minimum (usd per share) | $ 0.10 | |
Beginning balance, maximum (usd per share) | 82.39 | |
Granted, minimum (usd per share) | 63.64 | |
Granted, maximum (usd per share) | 73.61 | |
Exercised, minimum (usd per share) | 0.10 | |
Exercised, maximum (usd per share) | 59.63 | |
Forfeited, minimum (usd per share) | 24.36 | |
Forfeited, maximum (usd per share) | 44.53 | |
Ending balance, minimum (usd per share) | 0.10 | $ 0.10 |
Ending balance, maximum (usd per share) | 82.39 | 82.39 |
Weighted- average exercise price (usd per share) | ||
Opening balance (usd per share) | 27.37 | |
Granted (usd per share) | 73.27 | |
Exercised (dollars per share) | 24.58 | |
Forfeited (usd per share) | 31.09 | |
Ending balance (usd per share) | 30.35 | $ 27.37 |
Vested and expected to vest as of year end, weighted average exercise price (usd per share) | 30.35 | |
Exercisable as of year end (usd per share) | $ 23.53 | |
Weighted- average contractual term (in years) | 5 years 10 months 24 days | 6 years 8 months 26 days |
Vested and expected to vest as of year end, weighted- average contractual term (in years) | 5 years 10 months 24 days | |
Exercisable as of year end, weighted-average contractual term (in years) | 5 years 3 months 18 days | |
Aggregate intrinsic value | $ 74,009 | $ 85,971 |
Vested and expected to vest as of year end, aggregate intrinsic value | 74,009 | |
Exercisable as of year end, aggregate intrinsic value | $ 60,744 |
Stock-based compensation - Rest
Stock-based compensation - Restricted Stock Activity (Details) - $ / shares shares in Thousands | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Restricted stock units | |||
Shares | |||
Outstanding, beginning balance (in shares) | 647 | ||
Granted (in shares) | 1,306 | ||
Vested (in shares) | (387) | ||
Forfeited (in shares) | (186) | ||
Outstanding, ending balance (in shares) | 1,380 | 647 | |
Weighted-average grant date fair value | |||
Unvested, beginning balance (usd per share) | $ 55.18 | ||
Granted (usd per share) | 65.20 | $ 67.69 | $ 44.61 |
Vested (usd per share) | 58.40 | ||
Forfeited (usd per share) | 58.39 | ||
Unvested, ending balance (usd per share) | $ 63.33 | $ 55.18 | |
Restricted stock awards | |||
Shares | |||
Outstanding, beginning balance (in shares) | 256 | ||
Granted (in shares) | 0 | ||
Vested (in shares) | (11) | ||
Forfeited (in shares) | (10) | ||
Outstanding, ending balance (in shares) | 235 | 256 | |
Weighted-average grant date fair value | |||
Unvested, beginning balance (usd per share) | $ 61.93 | ||
Granted (usd per share) | 0 | ||
Vested (usd per share) | 62.75 | ||
Forfeited (usd per share) | 61.72 | ||
Unvested, ending balance (usd per share) | $ 61.91 | $ 61.93 |
Employee benefits (Details)
Employee benefits (Details) - USD ($) | 12 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Defined Contribution Plan Disclosure [Line Items] | |||
Maximum coverage per incident under self-insurance | $ 200,000 | ||
Accrued compensation | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Liability for self-insured medical claims | $ 3,700,000 | $ 1,400,000 | |
Supplemental Employee Retirement Plan | 401(k) | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Percent of employees eligible earnings | 3.50% | ||
Employer matching contribution expense | $ 3,700,000 | $ 1,800,000 | $ 1,400,000 |
Supplementary quarterly finan_3
Supplementary quarterly financial data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jan. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2018 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Total revenue | $ 201,200 | $ 157,118 | $ 86,623 | $ 87,052 | $ 75,777 | $ 70,495 | $ 71,067 | $ 69,904 | $ 531,993 | $ 287,243 | $ 229,525 |
Total cost of revenue | 87,519 | 61,083 | 28,183 | 29,299 | 31,332 | 24,678 | 24,492 | 25,548 | 206,084 | 106,050 | 94,609 |
Gross profit | 113,681 | 96,035 | 58,440 | 57,753 | 44,445 | 45,817 | 46,575 | 44,356 | 325,909 | 181,193 | 134,916 |
Total other income (expense) | 99,139 | 86,113 | 33,576 | 30,075 | 27,864 | 26,831 | 25,012 | 23,816 | 248,903 | 103,523 | 80,498 |
Total other income (expense) | (15,149) | (41,174) | (1,128) | 23,600 | (221) | (1,555) | (75) | (1) | (33,851) | (1,852) | (2,229) |
Income tax provision (benefit) | (417) | (9,918) | 4,370 | 9,456 | 3,241 | 1,745 | (1,029) | (2,038) | 3,491 | 1,919 | 4,827 |
Net income (loss) | $ (190) | $ (21,334) | $ 19,366 | $ 41,822 | $ 13,119 | $ 15,686 | $ 22,517 | $ 22,577 | $ 39,664 | $ 73,899 | $ 47,362 |
Net income (loss) per share: | |||||||||||
Basic (usd per share) | $ 0 | $ (0.30) | $ 0.30 | $ 0.67 | $ 0.21 | $ 0.25 | $ 0.36 | $ 0.37 | $ 0.59 | $ 1.20 | $ 0.79 |
Diluted (usd per share) | $ 0 | $ (0.30) | $ 0.30 | $ 0.65 | $ 0.21 | $ 0.25 | $ 0.36 | $ 0.36 | $ 0.58 | $ 1.17 | $ 0.77 |
Uncategorized Items - hqy-20200
Label | Element | Value |
Accounting Standards Update 2016-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 8,157,000 |
Accounting Standards Update 2016-09 [Member] | Additional Paid-in Capital [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 249,000 |
Accounting Standards Update 2016-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 7,908,000 |
Accounting Standards Update 2014-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 13,007,000 |
Accounting Standards Update 2014-09 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 0 |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 13,007,000 |
Accounting Standards Update 2016-01 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (87,000) |
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 269,000 |
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (356,000) |
Accounting Standards Update 2018-02 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 0 |
Accounting Standards Update 2018-02 [Member] | AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (45,000) |
Accounting Standards Update 2018-02 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 45,000 |