Leases

6 Months Ended

Jun. 30, 2023

The Company, acting as a lessee, has operating leases and finance leases primarily relating to office space, data centers and office equipment. The leases have remaining lease terms of 0.4 years to 16.1 years, some of which include options to extend the leases in 1 to 10 year increments for up to 15 years. Renewal periods are included in the lease term only when renewal is reasonably certain, which is a high threshold and requires management to apply judgment to determine the appropriate lease term. Certain leases also include periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the termination option. The Company measures its lease payments by including fixed rental payments and, where relevant, variable rental payments tied to an index, such as the Consumer Price Index. Payments for leases in place before the date of adoption of ASC 842, Leases were determined based on previous leases guidance. The Company recognizes lease expense for its operating leases on a straight-line basis over the lease term, and variable lease expense not included in the lease payment measurement is recognized as incurred.

Pursuant to the accounting policy election, leases with an initial term of twelve months or less are not recognized on the balance sheet. The short-term lease expense over the period reasonably reflects the Company’s short-term lease commitments.

ASC 842, Leases requires the Company to make certain assumptions and judgments in applying the guidance, including determining whether an arrangement includes a lease, determining the term of a lease when the contract has renewal or cancelation provisions, and determining the discount rate.

The Company determines whether an arrangement is a lease or includes a lease at the contract inception by evaluating whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the Company has the right to obtain substantially all of the economic benefits from, and can direct the use of, the identified asset for a period of time, the Company accounts for the identified asset as a lease. The Company has elected the practical expedient to not separate lease and non-lease components for all leases other than real estate leases. The primary non-lease component that is combined with a lease component represents operating expenses, such as utilities, maintenance or management fees.

As the rate implicit in the lease is not usually available, the Company used an incremental borrowing rate based on the information available at the adoption date of the new Leases standard in determining the present value of lease payments for existing leases. The Company has elected to use a portfolio approach for the incremental borrowing rate, applying corporate bond rates to the leases. The Company calculated the appropriate rates with reference to the lease term and lease currency. The Company uses information available at the lease commencement date to determine the discount rate for any new leases.

As of June 30, 2023, the Company did not have any leases that have not yet commenced but that create significant rights and obligations.

Supplemental information related to the Company’s operating and financing leases are as follows (in thousands):


	Classification in Unaudited Condensed Consolidated Statements of Financial Condition	June 30, 2023		December 31, 2022
Assets
Operating lease ROU assets	Other assets	$	117,320	$	129,786
Finance lease ROU assets	Fixed assets, net	$	5,078	$	5,685
Liabilities
Operating lease liabilities	Accounts payable, accrued and other liabilities	$	143,206	$	156,105
Finance lease liabilities	Accounts payable, accrued and other liabilities	$	5,141	$	6,039


	June 30, 2023		December 31, 2022
Weighted-average remaining lease term
Operating leases (years)	7.8		7.7
Finance leases (years)	3.9		4.1
Weighted-average discount rate
Operating leases	4.8	%	4.5	%
Finance leases	4.3	%	4.3	%

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


	Classification in Unaudited Condensed Consolidated Statements of Operations	Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Operating lease cost1	Occupancy and equipment	$	7,993	$	9,137	$	16,846	$	16,460
Finance lease cost
Amortization on ROU assets	Occupancy and equipment	$	326	$	152	$	653	$	304
Interest on lease liabilities	Interest expense	$	56	$	21	$	116	$	43

__________________________

1Short-term lease expense was not material for the three and six months ended June 30, 2023 and 2022.

The following table shows the Company’s maturity analysis of its operating lease liabilities (in thousands):


	June 30, 2023
	Operating leases		Finance leases
2023 (excluding the six months ended June 30, 2023)	$	16,388	$	787
2024	28,078		1,448
2025	23,563		1,448
2026	20,278		1,290
2027	17,793		627
Thereafter	153,826		—
Total	$	259,926	$	5,600
Interest	(116,720)		(459)
Total	$	143,206	$	5,141

The following table shows cash flow information related to lease liabilities (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Cash paid for amounts included in the measurement of lease liabilities	2023		2022		2023		2022
Operating cash flows from operating lease liabilities	$	8,485	$	9,647	$	18,089	$	17,564
Operating cash flows from finance lease liabilities	$	56	$	22	$	116	$	44
Financing cash flows from finance lease liabilities	$	305	$	142	$	608	$	284