v3.25.1
Fair Value
 12 Months Ended
Feb. 28, 2025
Fair Value Disclosures [Abstract]  
Fair Value
Note 14 - Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. These inputs are classified into the following hierarchy:

Level 1:Quoted prices for identical assets or liabilities in active markets;

Level 2:Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and

Level 3:Unobservable inputs that reflect the reporting entity’s own assumptions.

When circumstances dictate the transfer of an asset or liability to a different level, we report the transfer at the beginning of the reporting period in which the facts and circumstances resulting in the transfer occurred. There were no transfers between the fair value hierarchy levels during the periods presented.
Recurring Fair Value Measurements

All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills and our contingent consideration liability, are classified as Level 2 because their valuation is dependent on observable inputs and other quoted prices for similar assets or liabilities, or model-derived valuations whose significant value drivers are observable. Our investments in U.S. Treasury Bills are classified as Level 1 because their value is based on quoted prices in active markets for identical assets. Our contingent consideration liability is classified as Level 3 because its valuation is primarily based on a significant input unobservable in the market, specifically, projected adjusted EBITDA derived from internal forecasts. The following table presents the fair value of our financial assets and liabilities:

Fair Value
(in thousands)February 28, 2025February 29, 2024
Assets: 
Cash equivalents (money market accounts)$3,852 $462 
U.S. Treasury Bills
11,268 8,948 
Interest rate swaps1,065 2,504 
Foreign currency derivatives2,163 592 
Total assets$18,348 $12,506 
Liabilities: 
Interest rate swaps$221 $— 
Contingent consideration
4,100 — 
Foreign currency derivatives119 386 
Total liabilities$4,440 $386 

All of our financial assets and liabilities, except for our investments in U.S. Treasury Bills, are measured and recorded at fair value on a recurring basis. Our investments in U.S. Treasury Bills are recorded at amortized cost. As of both February 28, 2025 and February 29, 2024, the current carrying amounts of our U.S. Treasury Bills were $2.5 million and were included within Prepaid expenses and other current assets in our consolidated balance sheets. As of February 28, 2025 and February 29, 2024, the non-current carrying amounts of our U.S. Treasury bills were $8.7 million and $6.6 million, respectively, and were included within Other assets in our consolidated balance sheets.

The carrying amounts of cash, accounts payable, accrued expenses and other current liabilities and income taxes payable approximate fair value because of the short maturity of these items. The carrying amounts of receivables approximate fair value due to the effect of the related allowance for credit losses. The carrying amount of our floating rate long-term debt approximates its fair value.

Our investments in U.S. Treasury Bills are classified as held-to-maturity because we have the positive intent and ability to hold the securities to maturity. We invest in U.S. Treasury Bills with maturities ranging from less than one to five years. Gross unrealized gains were $0.1 million and losses were not material as of February 28, 2025. Gross unrealized gains and losses were not material as of February 29, 2024. During both fiscal 2025 and 2024, we recognized interest income on these investments of $0.3 million, which is included in “Non-operating income, net” in our consolidated statements of income.

In connection with the acquisition of Olive & June, we recognized contingent consideration, as a result of the total purchase consideration including contingent cash consideration of up to $15.0 million payable annually in three equal installments subject to Olive & June achieving certain adjusted EBITDA targets during calendar years 2025, 2026 and 2027. As of the acquisition date, we recorded a liability for the estimated fair value of the contingent consideration of $4.1 million, of which $1.8 million and $2.3 million was included within accrued expenses and other current liabilities and other liabilities, non-current, respectively, in our consolidated balance sheet. This contingent consideration liability will be remeasured at fair value each reporting period until the contingency is resolved, with changes in fair value recognized
in SG&A. If the annual adjusted EBITDA target is not met, no payment is required. There was no change to the estimated fair value of the contingent consideration liability since the acquisition date of December 16, 2024 through the end of fiscal 2025. The fair value of the contingent consideration liability was determined using a Monte Carlo simulation model, which utilizes projected adjusted EBITDA and corresponding volatility and discount rates to estimate the probability of the adjusted EBITDA targets being achieved. The projected adjusted EBITDA during the earn-out period was derived from internal forecasts and represents a Level 3 input, and was discounted to the acquisition date and current reporting period using an estimated discount rate of 13%. Adjusted EBITDA volatility was calculated based upon peer companies, and the third quartile of 33% was selected as a key input into the Monte Carlo simulation model. In the simulated scenarios where a payment is earned, the projected contingent payments were discounted to the acquisition date and current reporting period using an estimated credit risk discount rate of 6.5%. Changes in these inputs may result in a significant increase or decrease in the fair value of the contingent consideration liability with a corresponding impact to SG&A.

We use foreign currency forward contracts to manage our exposure to changes in foreign currency exchange rates. In addition, we use interest rate swaps to manage our exposure to changes in interest rates. All of our derivative assets and liabilities are recorded at fair value. See Notes 1, 15 and 16 for more information on our derivatives.

Non-Recurring Fair Value Measurements

Assets remeasured to fair value on a non-recurring basis during fiscal 2025 represent the goodwill of our Drybar reporting unit and our Drybar definite-lived trade name intangible assets, both of which were impaired. We did not remeasure any assets to fair value on a non-recurring basis during fiscal 2024.

The following table presents the remaining carrying value of the assets that were remeasured to fair value on a nonrecurring basis:

Fair Value Measurements
Fiscal 2025 Asset Impairment Charges
(in thousands)February 28, 2025Level 1Level 2Level 3
Goodwill
$1,182,899 $— $— $1,182,899 $38,670 
Definite-lived trade names
75,335 — — 75,335 12,785 
Total$1,258,234 $— $— $1,258,234 $51,455 

During the fourth quarter of fiscal 2025, our impairment testing resulted in asset impairment charges of $38.7 million and $12.8 million to reduce the Drybar reporting unit goodwill and trade name, respectively, to fair values of $134.3 million and $7.0 million, respectively.

We estimate the fair value of our reporting units using an income approach based upon projected future
discounted cash flows (“DCF Model”). Under the DCF Model, the fair value of each reporting unit is
determined based on the present value of estimated future cash flows, discounted at a risk-adjusted rate
of return. We use internal forecasts and strategic long-term plans to estimate future cash flows, including
net sales revenue, gross profit margin, and earnings before interest and taxes margins. Other key estimates used in the DCF Model include, but are not limited to, discount rates, statutory tax rates, terminal growth rates, as well as working capital and capital expenditures needs. The discount rates are based on a weighted-average cost of capital utilizing industry market data of our peer group companies. Accordingly, this fair value measurement is classified as Level 3 since it is based primarily upon unobservable inputs that reflect management's assumptions.

We estimate the fair value of our trade names and trademark licenses using the relief from royalty
method income approach which is based upon a DCF Model. The relief-from-royalty method estimates
the fair value of a trade name or trademark license by discounting the hypothetical avoided royalty
payments to their present value over the economic life of the asset. The determination of fair
value using this method entails a significant number of estimates and assumptions which include net sales revenue growth rates, discount rates, royalty rates, and residual growth rates (as applicable). We use internal forecasts and strategic long-term plans to estimate net sales revenue growth rates and royalty rates. We utilize a constant growth model to determine the residual growth rates which are based upon long-term industry growth expectations and long-term expected inflation. Accordingly, this fair value measurement is classified as Level 3 since it is based primarily upon unobservable inputs that reflect management's assumptions. The most significant unobservable input (Level 3) used to estimate the fair value of the Drybar definite-lived trade name was a royalty rate of 1.6%.
For additional information regarding the testing and analysis performed, refer to Note 7 and Item 7., “Management's Discussion and Analysis of Financial Condition and Results of Operations,” including “Critical Accounting Policies and Estimates” included within this Annual Report.