Note 3. Leases

We have operating leases for office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. We review all contract agreements to determine if the agreement contains a lease component. An agreement contains a lease component if it provides the use of a specific physical space or a specific physical item. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. For those lease agreements that do not indicate the applicable discount rate, we use the corporate borrowing rate. The value of the right-of-use asset is initially determined based on the net present value of the associated liability, and is adjusted for deferred costs and possible impairments, if any. We have made certain policy elections. Operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for operating leases on a straight-line basis over the lease term. We account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 1 to 3 years. The exercise of lease renewal options are at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain 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 or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheet are as follows:


		March 31,
Leases	Classification	2019
Assets		(in thousands)
Operating lease	Operating lease assets	$	7,453
Finance lease	Finance lease assets *		22,895
Total leased assets		$	30,348
Liabilities
Current
Operating	Other current liabilities	$	3,646
Finance	Other current liabilities		—
Noncurrent
Operating	Other long-term liabilities		3,805
Finance	Finance lease obligation		48,549
Total lease liabilities		$	56,000

* Finance lease assets are recorded net of accumulated depreciation of $46.7 million and include $0.8 million of prepaid financing costs as of March 31, 2019.

All of our office locations support selling and servicing functions. Lease expense, depreciation expense relating to finance leased assets and interest expense relating to our finance lease obligation recognized within our consolidated statement of operations for the three months ended March 31, 2019 are as follows:


Lease cost	Classification	Three months ended
		March 31,
		2019
Operating lease cost		(in thousands)
Service	Cost of revenue	$	597
Research & development	Operating expenses		66
Selling*	Operating expenses		355
General & administrative*	Operating expenses		208
Total operating lease cost		$	1,226
Finance lease cost
Depreciation of leased assets	COGS, R&D, Selling and G&A	$	333
Interest on lease liabilities	Interest expense		1,230
Total finance lease cost		$	1,563

Total lease cost		$	2,789
* Selling, general and administrative expense includes short-term lease and variable lease costs of approximately $0.2 million.

Our corporate headquarters facility, shown below under finance leases, has an original lease term of 22 years. All other locations are treated as operating leases, with lease terms ranging from 1 to 10 years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used on our calculation of our lease obligations and right-of-use assets:


	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases
	(in thousands)
2019	$	4,203	$	2,859	$	7,062
2020		5,720		3,107		8,827
2021		5,848		1,447		7,295
2022		5,980		372		6,352
2023		6,114		43		6,157
Thereafter		85,905		21		85,926
Total lease payments	$	113,770	$	7,849	$	121,619
Less interest portion*		(65,221)		(398)		(65,619)
Finance lease and operating lease obligations	$	48,549	$	7,451	$	56,000
* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate


	March 31,
Lease term and discount rate	2019
Weighted-average remaining lease term (years)
Operating leases		2.4
Finance leases		17.8
Weighted-average discount rate
Operating leases		4.5%
Finance leases		10.5%

Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating section of our statement of cash flows. Our cash flows from our finance lease currently include an interest only component and starting in April 2020, both an interest and payment of principal component. The table below shows our cash outflows, by lease type and related section of our statement of cash flows as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets:


	Three months ended
	March 31,
	2019
Cash paid for amounts included in the measurement of lease liabilities	(in thousands)
Operating cash outflows from operating leases	$	1,226
Operating cash outflows from finance leases		1,391
Financing cash outflows from finance leases		—
Operating lease assets obtained in exchange for new operating lease liabilities		7,453
Finance lease assets obtained in exchange for new finance lease liabilities	$	—