The Company measures its in-scope Digital assets at fair value under ASC 350-60 with fair value determined in accordance with ASC 820. Bitcoin is initially recorded at cost, and subsequently remeasured using unadjusted quoted prices in the principal market that we have identified for Bitcoin (currently, the Coinbase exchange), which we consider an active market. Because the fair value is derived from quoted prices for an identical asset in an active market, Bitcoin is classified within Level 1 of the fair value hierarchy. Unrealized gains and losses from changes in Bitcoin's fair value are recognized in the condensed consolidated statements of operations as Gain on digital assets and related receivables, and are presented as nonoperating activity.

During the fourth quarter of fiscal 2025, the Company entered into an agreement (the "Collateral Agreement") with Coinbase Credit, Inc. ("Coinbase"), under which the Company sold covered call options on a portion of the Bitcoin it owns. The options are accounted for as derivatives under ASC 815 and are not designated as hedging instruments.

Our covered-call contracts are over-the-counter ("OTC") derivatives entered into with Coinbase and are typically short-dated. Under the agreements, Bitcoin is pledged as collateral and can be rehypothecated, re-pledged, or otherwise deployed by Coinbase. As of August 1, 2026, we had outstanding covered-call option contracts referencing approximately 2,000 Bitcoin, with a strike price of $70,000 and a maturity extending through September 25, 2026. These contracts resulted in a derivative liability on digital assets and related receivables of $2.0 million as of August 1, 2026, which is presented within Accrued liabilities and other current liabilities. During the first half of fiscal 2026, changes in the fair value of covered-call option contracts, including contracts that matured prior to August 1, 2026, resulted in a gain of approximately $13.8 million. No derivative assets were recognized as of the reporting date related to covered-call options. Premiums received at inception are initially recorded on the condensed consolidated balance sheets and subsequently reflected in earnings consistent with the subsequent fair value changes of the related options.

The fair value of these written options is measured using standard option-pricing models incorporating observable market inputs, including Bitcoin spot prices, implied volatility, and time to expiration. As such, the options are classified as Level 2 within the fair value hierarchy. Changes in the fair value of the options are recognized in earnings within Other income, net, classified as nonoperating activity. This presentation is consistent with the treatment of fair value changes related to our Digital assets and related receivables, which are recognized in earnings within "Gain (loss) on digital assets and related receivables," also classified as nonoperating activity.

In connection with the covered-call strategy, the Company pledged 4,709 Bitcoin (the "Pledged Bitcoin") as collateral. Under the terms of the Collateral Agreement, Coinbase maintains the right to rehypothecate, commingle, or unilaterally sell the Pledged Bitcoin, and the Company concluded that control of the Pledged Bitcoin transferred to Coinbase. Accordingly, during the fourth quarter of fiscal 2025, the Company derecognized the Pledged Bitcoin and recognized a Digital assets receivable representing the fair value of its contractual right to receive equivalent Bitcoin in the future. The Digital assets receivable is presented within Digital assets and related receivables on the condensed consolidated balance sheets as of both August 1, 2026 and January 31, 2026, and remains subject to the Collateral Agreement. The receivable is due within the next 12 months and accordingly is classified as a current asset.

The Digital assets receivable is remeasured at fair value at each reporting date in accordance with ASC 820. The receivable's fair value is determined using Level 2 inputs, specifically the unadjusted quoted prices in active markets for the underlying crypto asset (Bitcoin). While the value of the receivable is directly derived from the market price of Bitcoin, the receivable itself is not a traded instrument; therefore, it is classified within Level 2 of the fair value hierarchy. Changes in the fair value of the Digital assets receivable are recognized within Gain on digital assets and related receivables in the condensed consolidated statements of operations and are presented as nonoperating activity.

The Company recorded a loss of $75.0 million and $73.9 million, respectively, on Digital assets and related receivables during the three and six months ended August 1, 2026. The Company did not purchase or sell any Bitcoin during the first half of fiscal 2026.