Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

Leases

San Diego, California

The Company has three properties in San Diego, California, under sale and leaseback agreements. The terms of these leases contain a purchase option and stipulate annual increases in monthly lease payments of 2.5%. The Company accounts for its sale and leaseback transactions using the financing method. Under the financing method, the book value of the properties and related accumulated depreciation remain on the Company’s balance sheet and no sale is recognized. The sales price of the properties is recorded as a financing obligation, and a portion of each lease payment is recorded as interest expense. For the years ended December 31, 2021, 2020, and 2019, the Company recorded interest expense of $4.1 million, $4.5 million, and $4.8 million respectively, related to these leases. The Company expects interest expense related to its facilities to total $12.6 million from December 31, 2021, through the remaining terms of the leases in fiscal year 2027. At December 31, 2021, the total financing obligation associated with these sale and leaseback agreements was $41.2 million. The aggregate residual value of the facilities at the end of the lease terms is $5.0 million.

The Company leases an additional property in San Diego, California under an operating lease, which expires in May 2027, contains a purchase option and stipulates annual increases in monthly lease payments of 2.5%. Upon adoption of ASC 842, the Company recorded an operating lease liability of $6.3 million based on the present value of the remaining minimum lease payments under the terms of its existing operating lease with a corresponding right-of-use asset of $5.9 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at the effective date of adoption in determining the present value of the remaining minimum lease payments. The weighted-average discount rate used was 7.25%.

Boston, Massachusetts

In the third quarter of 2019, the Company entered into a lease agreement for approximately 12,755 square feet of office space in Boston, Massachusetts with a lease inception date of September 1, 2019. This lease is classified as an operating lease and expires in December 2026. The lease stipulates annual increases in monthly lease payments of 2.0%. At the lease inception date, the Company recorded an operating lease liability of $5.2 million based on the present value of the remaining minimum lease payments under the terms of this lease with a corresponding right-of-use asset of $5.2 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at the effective date of adoption in determining the present value of remaining minimum lease payments. The weighted-average discount rate used was 7.25%.

Zug, Switzerland

In the second quarter of 2019, the Company entered into a lease in Zug, Switzerland, for approximately 10,500 square feet of office space with a lease inception date of June 1, 2019. This lease expires in May 2024. At the lease inception, the Company recorded an operating lease liability of $1.4 million based on the present value of the remaining minimum lease payments under the terms of this operating lease with a corresponding right-of-use asset of $1.5 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available as of the lease inception in determining the present value of remaining minimum lease payments. The weighted-average discount rate used was 7.25%. In the third quarter of 2019, the Company entered into an addendum to this lease for approximately 4,050 square feet of additional office space in the same location with the same landlord and a lease inception date of January 1, 2020.

As of December 31, 2021, the balance of the right-of-use assets associated with the leases described above was $9.1 million and is included in other non-current assets in the accompanying consolidated balance sheets. As of December 31, 2021, the current portion of the corresponding lease liabilities of $1.8 million is included in accounts payable

and other accrued liabilities and the non-current portion of the lease liabilities of $8.3 million is included in other long-term liabilities in the accompanying consolidated balance sheets. The operating lease costs and cash paid for the amounts included in the measurement of lease liabilities are classified as operating activities in the accompanying consolidated statements of cash flows. The Company recognizes rent expense on a straight-line basis over the term of each lease. Rent expense of $2.4 million, $2.4 million and $1.9 million was recognized for the years ended December 31, 2021, 2020, and 2019, respectively. The weighted-average remaining lease term for all operating leases as of December 31, 2021 was 4.8 years.

At December 31, 2021, the future lease payments under the Company’s existing financing and non-cancellable operating leases were as follows, in thousands:

Year ending December 31,	Financing Obligations		Operating Leases
2022	$	7,960	$	2,416
2023	8,889		2,620
2024	9,111		2,295
2025	9,339		2,077
2026	9,572		2,124
Thereafter	4,029		466
Total minimum lease payments	48,900		$	11,998
Less amounts representing interest	(12,639)
Add amounts representing residual value	4,950
Lease financing obligations	41,211
Less current portion	(5,052)
	$	36,159

The Company has other leases primarily for office space that it enters into from time to time. These leases have terms of 12 months or less from lease commencement date and are considered short-term leases and not recorded on the consolidated balance sheets; however, the lease expenditures recognized are captured and reported as incurred.

Subleases

In 2016 and 2018, the Company entered into agreements to sublease several of its California properties. All the Company’s subleases expire in May 2027. The terms of the subleases stipulate annual increases in monthly rental payments. The Company recognized rent income from its subleases of $3.0 million for each of the years ended December 31, 2021, 2020 and 2019.

The Company recognizes rent income on a straight-line basis over the term of the subleases.

Expected minimum rental payments to be received under the sublease are as follows, in thousands:

Year ending December 31,
2022	$	3,487
2023	3,794
2024	3,896
2025	4,000
2026	4,106
Thereafter	1,734
Total	$	21,017

Leases

Leases

San Diego, California

The Company has three properties in San Diego, California, under sale and leaseback agreements. The terms of these leases contain a purchase option and stipulate annual increases in monthly lease payments of 2.5%. The Company accounts for its sale and leaseback transactions using the financing method. Under the financing method, the book value of the properties and related accumulated depreciation remain on the Company’s balance sheet and no sale is recognized. The sales price of the properties is recorded as a financing obligation, and a portion of each lease payment is recorded as interest expense. For the years ended December 31, 2021, 2020, and 2019, the Company recorded interest expense of $4.1 million, $4.5 million, and $4.8 million respectively, related to these leases. The Company expects interest expense related to its facilities to total $12.6 million from December 31, 2021, through the remaining terms of the leases in fiscal year 2027. At December 31, 2021, the total financing obligation associated with these sale and leaseback agreements was $41.2 million. The aggregate residual value of the facilities at the end of the lease terms is $5.0 million.

The Company leases an additional property in San Diego, California under an operating lease, which expires in May 2027, contains a purchase option and stipulates annual increases in monthly lease payments of 2.5%. Upon adoption of ASC 842, the Company recorded an operating lease liability of $6.3 million based on the present value of the remaining minimum lease payments under the terms of its existing operating lease with a corresponding right-of-use asset of $5.9 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at the effective date of adoption in determining the present value of the remaining minimum lease payments. The weighted-average discount rate used was 7.25%.

Boston, Massachusetts

In the third quarter of 2019, the Company entered into a lease agreement for approximately 12,755 square feet of office space in Boston, Massachusetts with a lease inception date of September 1, 2019. This lease is classified as an operating lease and expires in December 2026. The lease stipulates annual increases in monthly lease payments of 2.0%. At the lease inception date, the Company recorded an operating lease liability of $5.2 million based on the present value of the remaining minimum lease payments under the terms of this lease with a corresponding right-of-use asset of $5.2 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at the effective date of adoption in determining the present value of remaining minimum lease payments. The weighted-average discount rate used was 7.25%.

Zug, Switzerland

In the second quarter of 2019, the Company entered into a lease in Zug, Switzerland, for approximately 10,500 square feet of office space with a lease inception date of June 1, 2019. This lease expires in May 2024. At the lease inception, the Company recorded an operating lease liability of $1.4 million based on the present value of the remaining minimum lease payments under the terms of this operating lease with a corresponding right-of-use asset of $1.5 million. As this lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available as of the lease inception in determining the present value of remaining minimum lease payments. The weighted-average discount rate used was 7.25%. In the third quarter of 2019, the Company entered into an addendum to this lease for approximately 4,050 square feet of additional office space in the same location with the same landlord and a lease inception date of January 1, 2020.

As of December 31, 2021, the balance of the right-of-use assets associated with the leases described above was $9.1 million and is included in other non-current assets in the accompanying consolidated balance sheets. As of December 31, 2021, the current portion of the corresponding lease liabilities of $1.8 million is included in accounts payable

and other accrued liabilities and the non-current portion of the lease liabilities of $8.3 million is included in other long-term liabilities in the accompanying consolidated balance sheets. The operating lease costs and cash paid for the amounts included in the measurement of lease liabilities are classified as operating activities in the accompanying consolidated statements of cash flows. The Company recognizes rent expense on a straight-line basis over the term of each lease. Rent expense of $2.4 million, $2.4 million and $1.9 million was recognized for the years ended December 31, 2021, 2020, and 2019, respectively. The weighted-average remaining lease term for all operating leases as of December 31, 2021 was 4.8 years.

At December 31, 2021, the future lease payments under the Company’s existing financing and non-cancellable operating leases were as follows, in thousands:

Year ending December 31,	Financing Obligations		Operating Leases
2022	$	7,960	$	2,416
2023	8,889		2,620
2024	9,111		2,295
2025	9,339		2,077
2026	9,572		2,124
Thereafter	4,029		466
Total minimum lease payments	48,900		$	11,998
Less amounts representing interest	(12,639)
Add amounts representing residual value	4,950
Lease financing obligations	41,211
Less current portion	(5,052)
	$	36,159

The Company has other leases primarily for office space that it enters into from time to time. These leases have terms of 12 months or less from lease commencement date and are considered short-term leases and not recorded on the consolidated balance sheets; however, the lease expenditures recognized are captured and reported as incurred.

Subleases

In 2016 and 2018, the Company entered into agreements to sublease several of its California properties. All the Company’s subleases expire in May 2027. The terms of the subleases stipulate annual increases in monthly rental payments. The Company recognized rent income from its subleases of $3.0 million for each of the years ended December 31, 2021, 2020 and 2019.

The Company recognizes rent income on a straight-line basis over the term of the subleases.

Expected minimum rental payments to be received under the sublease are as follows, in thousands:

Year ending December 31,
2022	$	3,487
2023	3,794
2024	3,896
2025	4,000
2026	4,106
Thereafter	1,734
Total	$	21,017