Fair Value Measurements

9 Months Ended

Oct. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 3. Fair Value Measurements

We define fair value as the exchange price that would be received from selling 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 on the measurement date. We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

• Level 1—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

• Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

Investments

Financial assets subject to the fair value disclosure requirements were as follows (in thousands):    

	October 31, 2019
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	32,388	$	—	$	—	$	32,388
Certificates of deposit		—		20,000		—		20,000
Total cash equivalents	$	32,388	$	20,000	$	—	$	52,388
	January 31, 2019
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Certificates of deposit	$	—	$	50,056	$	—	$	50,056
Restricted cash:
Certificates of deposit	$	—	$	238	$	—	$	238

Derivative Instruments and Hedging

In association with our debt described in Note 7, we are required to make variable rate interest payments based on a contractually specified interest rate index (e.g., LIBOR). The variable rate interest payments create interest rate risk as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the loan. To minimize our risk exposure due to the volatility of the interest rate index, we entered into an interest rate swap agreement with Wells Fargo Bank, National Association, effective as of September 5, 2019 (“Swap Agreement”). This agreement, which is designated as a cash flow hedge, has a maturity of five years. Under the Swap Agreement, we have hedged a portion of the variable interest payments by effectively fixing our interest payments over the term of the agreement. As of October 31, 2019, our interest rate swap had a notional value of $30.0 million.

We classify our interest rate swap hedge agreement within Level 2. As of October 31, 2019, the fair value of the interest rate swap, which is included in accrued expenses and other current liabilities in our condensed consolidated balance sheet, was not material. For the three and nine months ended October 31, 2019, changes in the fair value of the derivative financial instrument, which are recorded in other comprehensive loss, were not material.