Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Note 14—Commitments and Contingencies

Lease Commitments

Finance Leases

The Company adopted ASU 2016-02—Leases (Topic 842) in the first quarter of 2019. Prior to the adoption of this standard, the Company applied build-to-suit accounting treatment to its headquarters lease in Brooklyn, New York and accounted for leased computer equipment as capital leases. The Company now accounts for these as finance leases under the requirements of the standard. For more information on the adoption of ASU 2016-02—Leases see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies.”

In May 2014, the Company entered into a 10-year lease agreement for approximately 199,000 rentable square feet of office space in Brooklyn, New York for the Company’s headquarters, which commenced in 2015. For the year ended December 31, 2019, approximately 172,000 rentable square feet was accounted for as a finance lease and approximately 53,000 rentable square feet located in an adjacent building was accounted for as an operating lease. In connection with the lease agreement, the Company established a $5.3 million collateral account, reflected in the restricted cash balance on the Consolidated Balance Sheets.

The Company entered into a credit agreement with Dell Financial Services, LLC. (“DFS”) on February 17, 2016, which provided the Company with a credit line of up to $6.0 million for hosting equipment leases (the “DFS Line”), which was increased to $9.0 million during 2017. This credit line was reduced to $6.0 million in 2019. The DFS Line allows the Company to lease hosting equipment from DFS. The leases 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. As of December 31, 2019, the Company has lease obligations of approximately $0.8 million related to leased hosting equipment using the previously active DFS Line.

The Company entered into a credit agreement with ePlus Group, Inc. (“ePlus”) on January 3, 2014, which provided the Company with a credit line of up to $8.0 million for computer equipment leases (the “ePlus Line”), which was increased to $18.0 million during 2015. The ePlus Line allows the Company to order equipment from any approved vendor. ePlus purchases the equipment on behalf of the Company and leases it back to the Company. The leases 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. As of December 31, 2019, the Company has lease obligations of approximately $2.0 million related to leased computer equipment using the ePlus Line.

For the years ended December 31, 2019, 2018, and 2017, the accompanying Consolidated Statement of Operations includes charges of approximately $0.5 million, $1.0 million, and $1.6 million for interest expense, respectively, related to the equipment leased using the DFS and ePlus Lines.

Operating Leases

The Company did not enter into any material operating leases or extensions in 2019, 2018, or 2017. Rent expense for the Company’s operating leases is recognized over the term of each respective lease on a straight-line basis. In addition, the Company leases other office facilities under shorter terms and cancelable leases.

Total rent expense for the years ended December 31, 2019, 2018, and 2017 was $5.4 million, $3.8 million, and $4.1 million, respectively.

Purchase Obligations

The Company has $97.7 million of non-cancelable contractual commitments as of December 31, 2019, primarily related to cloud computing, as well as other support services. These commitments are due within four years. The following table represents the Company’s commitments under its purchase obligations as of December 31, 2019 (in thousands):



	Purchase Obligations
Periods ending
2020	$	34,153
2021	30,735
2022	32,122
2023	700
2024	—
Thereafter	—
Total purchase obligations	$	97,710

Long-Term Debt

In September 2019, the Company issued the 2019 Notes in a private placement to qualified institutional buyers pursuant to the Securities Act. The 2019 Notes will mature on October 1, 2026, unless earlier converted or repurchased. In March 2018, the Company issued the 2018 Notes in a private placement to qualified institutional buyers pursuant to the Securities Act. The 2018 Notes will mature on March 1, 2023, unless earlier converted or repurchased, and there are no contractual payments required until maturity. For more information on the 2019 and 2018 Notes, see “Note 13—Debt.”

Non-Income Tax Contingencies

The Company had reserves of $7.2 million and $0.9 million at December 31, 2019 and 2018, respectively, for certain non-income tax obligations, representing management’s best estimate of its potential liability. The 2019 reserve includes $4.8 million due to the acquisition of Reverb, which is wholly offset by an indemnification asset of $3.7 million and a deferred tax asset of $1.1 million. The Company could also be subject to examination in various jurisdictions related to income tax and non-income tax matters. The resolution of these types of matters, if in excess of the recorded reserve, could have an adverse impact on the Company’s business.

Legal Proceedings

From time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability for damages. Any claims or litigation, regardless of their success, could have an adverse effect on the Company’s Consolidated Results of Operations or Cash Flows in the period the claims or litigation are resolved. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business.