Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Note 11—Leases

As the lessee, the Company currently leases 225,135 square feet of real estate space for its corporate headquarters located in Brooklyn, New York, under a noncancelable lease that expires in 2026. The Company uses these facilities for its principal administration, technology and development, and engineering activities. The Company also leases office space for its offices in San Francisco, Hudson (New York), Chicago, Dublin, and London. Additionally, the Company has short-term leases in other locations around the world that meet short-term lease criteria and are not recognized on the Consolidated Balance Sheets. Most leases include one or more options to renew, and the exercise of these options is at the Company’s sole discretion. The Company determined that its options to break or renew would not be reasonably certain in determining the expected lease term, and therefore are not included as part of its ROU assets and lease liabilities.

The Company entered into financing lease agreements with Dell Financial Services, LLC. (“DFS”) and ePlus Group, Inc. (“ePlus”) for hosting and computer equipment leases. The leases through DFS have a 36-month term, zero interest, and are payable in equal monthly installments with a buy-out option of $1 at the end of the lease term. The leases through ePlus have a 36-month term, interest rate of 3.71%-6.94%, and are payable in equal monthly installments with a fair market value or a $1 buy-out option at the end of the lease term depending on the equipment.

In calculating the present value of the lease payments, the Company has elected to utilize its estimated incremental borrowing rate based on the remaining lease term and not the original lease term. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

The elements of lease expense were as follows (in thousands): 

	Year Ended December 31, 2019
Operating lease cost	$	5,405
Finance lease cost:
Amortization of right-of-use assets	13,124
Interest on lease liabilities	3,205
Total finance lease cost	16,329
Other lease cost, net (1)	1,149
Total lease cost	$	22,883

(1) Other lease cost, net includes short-term sublease income, short-term lease costs, and variable lease costs, which are immaterial.

The following table presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheet (in thousands):

	As of December 31, 2019
Operating leases:
Other assets	$	24,362
Other current liabilities	$	4,134
Other liabilities	22,322
Total operating lease liabilities	$	26,456
Finance leases:
Property and equipment, net	$	59,696
Finance lease obligations—current	$	8,275
Finance lease obligations—net of current portion	53,611
Total finance lease liabilities	$	61,886

The following table summarizes the weighted average remaining lease term and weighted average discount rate as of December 31, 2019:

	As of December 31, 2019
Weighted average remaining lease term:
Operating leases	5.94 years
Finance leases	6.37 years
Weighted average discount rate:
Operating leases	4.26	%
Finance leases	4.31	%

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

	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	(4,889	)
Operating cash flows used in finance leases	(3,181		)
Finance cash flows used in finance leases	(10,833		)

Future minimum lease payments under non-cancelable leases for the years ending December 31, 2020, 2021, 2022, 2023, 2024 and thereafter are as follows (in thousands):

	Operating Leases		Finance Leases
2020	$	5,152	$	10,805
2021	4,928		11,152
2022	4,942		10,677
2023	4,981		10,599
2024	4,298		10,678
Thereafter	5,688		17,037
Total future minimum lease payments	29,989		70,948
Less imputed interest	3,533		9,062
Total	$	26,456	$	61,886

The following table represents the Company’s commitments under its previous presentation of its capital, operating, and build-to-suit lease agreements as of December 31, 2018 (in thousands):

	Capital Lease Obligations		Operating Leases		Build-to-Suit Lease
Periods ending
2019	$	4,392	$	4,904	$	9,451
2020	1,754		4,783		9,522
2021	481		4,185		10,354
2022	—		4,180		10,520
2023	—		4,205		10,599
Thereafter	—		9,760		27,715
Total minimum payments required	$	6,627	$	32,017	$	78,161
Amounts representing interest	648
Present value of net minimum payments	5,979
Current maturities	3,884
Long-term payment obligations	$	2,095

Leases

Note 11—Leases

As the lessee, the Company currently leases 225,135 square feet of real estate space for its corporate headquarters located in Brooklyn, New York, under a noncancelable lease that expires in 2026. The Company uses these facilities for its principal administration, technology and development, and engineering activities. The Company also leases office space for its offices in San Francisco, Hudson (New York), Chicago, Dublin, and London. Additionally, the Company has short-term leases in other locations around the world that meet short-term lease criteria and are not recognized on the Consolidated Balance Sheets. Most leases include one or more options to renew, and the exercise of these options is at the Company’s sole discretion. The Company determined that its options to break or renew would not be reasonably certain in determining the expected lease term, and therefore are not included as part of its ROU assets and lease liabilities.

The Company entered into financing lease agreements with Dell Financial Services, LLC. (“DFS”) and ePlus Group, Inc. (“ePlus”) for hosting and computer equipment leases. The leases through DFS have a 36-month term, zero interest, and are payable in equal monthly installments with a buy-out option of $1 at the end of the lease term. The leases through ePlus have a 36-month term, interest rate of 3.71%-6.94%, and are payable in equal monthly installments with a fair market value or a $1 buy-out option at the end of the lease term depending on the equipment.

In calculating the present value of the lease payments, the Company has elected to utilize its estimated incremental borrowing rate based on the remaining lease term and not the original lease term. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

The elements of lease expense were as follows (in thousands): 

	Year Ended December 31, 2019
Operating lease cost	$	5,405
Finance lease cost:
Amortization of right-of-use assets	13,124
Interest on lease liabilities	3,205
Total finance lease cost	16,329
Other lease cost, net (1)	1,149
Total lease cost	$	22,883

(1) Other lease cost, net includes short-term sublease income, short-term lease costs, and variable lease costs, which are immaterial.

The following table presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheet (in thousands):

	As of December 31, 2019
Operating leases:
Other assets	$	24,362
Other current liabilities	$	4,134
Other liabilities	22,322
Total operating lease liabilities	$	26,456
Finance leases:
Property and equipment, net	$	59,696
Finance lease obligations—current	$	8,275
Finance lease obligations—net of current portion	53,611
Total finance lease liabilities	$	61,886

The following table summarizes the weighted average remaining lease term and weighted average discount rate as of December 31, 2019:

	As of December 31, 2019
Weighted average remaining lease term:
Operating leases	5.94 years
Finance leases	6.37 years
Weighted average discount rate:
Operating leases	4.26	%
Finance leases	4.31	%

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

	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	(4,889	)
Operating cash flows used in finance leases	(3,181		)
Finance cash flows used in finance leases	(10,833		)

Future minimum lease payments under non-cancelable leases for the years ending December 31, 2020, 2021, 2022, 2023, 2024 and thereafter are as follows (in thousands):

	Operating Leases		Finance Leases
2020	$	5,152	$	10,805
2021	4,928		11,152
2022	4,942		10,677
2023	4,981		10,599
2024	4,298		10,678
Thereafter	5,688		17,037
Total future minimum lease payments	29,989		70,948
Less imputed interest	3,533		9,062
Total	$	26,456	$	61,886

The following table represents the Company’s commitments under its previous presentation of its capital, operating, and build-to-suit lease agreements as of December 31, 2018 (in thousands):

	Capital Lease Obligations		Operating Leases		Build-to-Suit Lease
Periods ending
2019	$	4,392	$	4,904	$	9,451
2020	1,754		4,783		9,522
2021	481		4,185		10,354
2022	—		4,180		10,520
2023	—		4,205		10,599
Thereafter	—		9,760		27,715
Total minimum payments required	$	6,627	$	32,017	$	78,161
Amounts representing interest	648
Present value of net minimum payments	5,979
Current maturities	3,884
Long-term payment obligations	$	2,095