Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

Leases

We lease certain office spaces, warehouses, vehicles and equipment. Leases with an initial term of 12-months or less have not been capitalized on the balance sheet. We recognize lease expense associated with these short-term leases on a straight-line basis over the lease term. For lease agreements entered into after the adoption of ASC Topic 842, we combine lease and non-lease fixed components for real estate, vehicles and equipment leases. We do not combine lease and non-lease components for information technology leases. Variable lease costs are not included within the measurement of the lease liability as they are

entirely variable or the difference between the portion captured within the lease liability and the actual cost will be expensed as incurred. Variable costs are contractually obligated and relate primarily to common area maintenance and taxes, which are not material to the financial statements.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward the historical lease classification, not reassess if existing contracts are or contain leases, and not reassess indirect costs for existing leases.

We have elected not to recast the comparable periods and rather used the effective adoption date of the standard as the date of initial application.

Leases which contain a renewal option to extend an existing lease term, or a termination option to end a lease early are exercisable at our sole discretion. We evaluate such leases to determine if we are reasonably certain to exercise the option. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any material residual value guarantees.

In determining the present value of lease payments, we use the implicit borrowing rate in the lease, if available. In cases where a lease does not provide an implicit borrowing rate, we use the incremental borrowing rate based on available information at the commencement date. As of December  31, 2019, none of our existing leases provided an implicit borrowing rate. We give consideration to our debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Additionally, we perform an entity-level financial assessment along with risk assessment by country or jurisdiction in the determination of our incremental borrowing rate. We update our financial and risk assessments periodically. We reassess lease classification and / or remeasure the lease liability in the event of the following: changes in assessment of renewal, termination or purchase option based on triggering events within our control, change in amounts probable of being owed under a residual guarantee, or contingency resolution.

The consolidated balance sheet impact at December 31, 2019 is as follows (in thousands):

Assets	Operating			Finance
Gross ROU Assets (1)	$	21,116		$	3,527
Less: Accumulated Amortization	(3,492		)	(338		)
Net ROU Assets	$	17,624		$	3,189
Liabilities	Operating			Finance
Current (2)	$	3,042		$	504
Non-current (3)	14,317			2,744
Total Lease Liabilities	$	17,359		$	3,248
(1) Operating and finance ROU assets are included within other assets on the balance sheet.
(2) The current portion of operating and finance lease liabilities are recorded within accrued expenses and other current liabilities on the balance sheet.
(3) The non-current portion of operating and finance lease liabilities are recorded within other non-current liabilities on the balance sheet.

The components of lease costs are as follows (in thousands):

	Twelve Months Ended
Lease Costs	December 31, 2019
Operating lease cost (1)	$	5,071
Finance lease cost
Amortization of leased assets (2)	251
Interest on lease liabilities (3)	40
Total finance lease costs	291
Total lease cost	$	5,362
(1) Operating lease costs are recorded within selling, general and administrative expenses or cost of revenue within the consolidated statements of (loss) income depending upon the nature of the underlying lease.
(2) Finance lease amortization costs are recorded in selling, general and administrative expenses within the consolidated statements of (loss) income.
(3) Finance lease interest costs are recorded in interest expense, net within the consolidated statements of (loss) income.

Short-term lease expense and variable lease cost for the twelve months ended December 31, 2019 were not significant.

The estimated future minimum lease payments only include obligations for which we are reasonably certain to exercise our renewal option. Such future payments are as follows (in thousands):

Maturity of Lease Liabilities	Operating			Finance			Total
2020	$	3,994		$	526		$	4,520
2021	3,338			526			3,864
2022	2,994			515			3,509
2023	2,272			515			2,787
2024	1,761			499			2,260
After 2024	6,834			942			7,776
Less: Interest	(3,834		)	(275		)	(4,109		)
Present value of lease liabilities	$	17,359		$	3,248		$	20,607

The weighted average remaining lease term and discount rates are as follows:

Lease Term and Discount Rate	December 31, 2019
Weighted average remaining lease term (years)
Operating leases	6.7
Finance leases	6.8
Weighted average discount rate (percentage)
Operating leases	4.6	%
Finance leases	2.0	%

Supplemental cash flow information related to leases are as follows (in thousands):

	Twelve Months Ended
Other Information	December 31, 2019
Operating Activities
Noncash lease expense on operating ROU assets	$	(17,625	)
Amortization expense on finance ROU assets	251
Change in total operating lease liabilities	17,359
Principal paid on operating lease liabilities	(4,301		)
Total Operating Activities	$	(4,316	)
Financing Activities
Principal paid on finance lease liabilities	$	(281	)
Supplemental
Interest Paid on finance lease liabilities	$	40

As of December 31, 2019, the Company has not entered into any lease agreements with related parties.

Lessee, Finance Leases [Text Block]

Leases

We lease certain office spaces, warehouses, vehicles and equipment. Leases with an initial term of 12-months or less have not been capitalized on the balance sheet. We recognize lease expense associated with these short-term leases on a straight-line basis over the lease term. For lease agreements entered into after the adoption of ASC Topic 842, we combine lease and non-lease fixed components for real estate, vehicles and equipment leases. We do not combine lease and non-lease components for information technology leases. Variable lease costs are not included within the measurement of the lease liability as they are

entirely variable or the difference between the portion captured within the lease liability and the actual cost will be expensed as incurred. Variable costs are contractually obligated and relate primarily to common area maintenance and taxes, which are not material to the financial statements.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward the historical lease classification, not reassess if existing contracts are or contain leases, and not reassess indirect costs for existing leases.

We have elected not to recast the comparable periods and rather used the effective adoption date of the standard as the date of initial application.

Leases which contain a renewal option to extend an existing lease term, or a termination option to end a lease early are exercisable at our sole discretion. We evaluate such leases to determine if we are reasonably certain to exercise the option. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any material residual value guarantees.

In determining the present value of lease payments, we use the implicit borrowing rate in the lease, if available. In cases where a lease does not provide an implicit borrowing rate, we use the incremental borrowing rate based on available information at the commencement date. As of December  31, 2019, none of our existing leases provided an implicit borrowing rate. We give consideration to our debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Additionally, we perform an entity-level financial assessment along with risk assessment by country or jurisdiction in the determination of our incremental borrowing rate. We update our financial and risk assessments periodically. We reassess lease classification and / or remeasure the lease liability in the event of the following: changes in assessment of renewal, termination or purchase option based on triggering events within our control, change in amounts probable of being owed under a residual guarantee, or contingency resolution.

The consolidated balance sheet impact at December 31, 2019 is as follows (in thousands):

Assets	Operating			Finance
Gross ROU Assets (1)	$	21,116		$	3,527
Less: Accumulated Amortization	(3,492		)	(338		)
Net ROU Assets	$	17,624		$	3,189
Liabilities	Operating			Finance
Current (2)	$	3,042		$	504
Non-current (3)	14,317			2,744
Total Lease Liabilities	$	17,359		$	3,248
(1) Operating and finance ROU assets are included within other assets on the balance sheet.
(2) The current portion of operating and finance lease liabilities are recorded within accrued expenses and other current liabilities on the balance sheet.
(3) The non-current portion of operating and finance lease liabilities are recorded within other non-current liabilities on the balance sheet.

The components of lease costs are as follows (in thousands):

	Twelve Months Ended
Lease Costs	December 31, 2019
Operating lease cost (1)	$	5,071
Finance lease cost
Amortization of leased assets (2)	251
Interest on lease liabilities (3)	40
Total finance lease costs	291
Total lease cost	$	5,362
(1) Operating lease costs are recorded within selling, general and administrative expenses or cost of revenue within the consolidated statements of (loss) income depending upon the nature of the underlying lease.
(2) Finance lease amortization costs are recorded in selling, general and administrative expenses within the consolidated statements of (loss) income.
(3) Finance lease interest costs are recorded in interest expense, net within the consolidated statements of (loss) income.

Short-term lease expense and variable lease cost for the twelve months ended December 31, 2019 were not significant.

The estimated future minimum lease payments only include obligations for which we are reasonably certain to exercise our renewal option. Such future payments are as follows (in thousands):

Maturity of Lease Liabilities	Operating			Finance			Total
2020	$	3,994		$	526		$	4,520
2021	3,338			526			3,864
2022	2,994			515			3,509
2023	2,272			515			2,787
2024	1,761			499			2,260
After 2024	6,834			942			7,776
Less: Interest	(3,834		)	(275		)	(4,109		)
Present value of lease liabilities	$	17,359		$	3,248		$	20,607

The weighted average remaining lease term and discount rates are as follows:

Lease Term and Discount Rate	December 31, 2019
Weighted average remaining lease term (years)
Operating leases	6.7
Finance leases	6.8
Weighted average discount rate (percentage)
Operating leases	4.6	%
Finance leases	2.0	%

Supplemental cash flow information related to leases are as follows (in thousands):

	Twelve Months Ended
Other Information	December 31, 2019
Operating Activities
Noncash lease expense on operating ROU assets	$	(17,625	)
Amortization expense on finance ROU assets	251
Change in total operating lease liabilities	17,359
Principal paid on operating lease liabilities	(4,301		)
Total Operating Activities	$	(4,316	)
Financing Activities
Principal paid on finance lease liabilities	$	(281	)
Supplemental
Interest Paid on finance lease liabilities	$	40

As of December 31, 2019, the Company has not entered into any lease agreements with related parties.