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Right-of-Use Asset and Lease Liabilities

12 Months Ended

Dec. 31, 2019

Right-of-Use Asset and Lease Liabilities

The Company determines if an arrangement is a lease at inception. The Company presents the operating leases in long-term assets and current and long-term liabilities. Finance lease assets are included in property and equipment, net, and finance lease liabilities are presented in current and long-term liabilities in the accompanying consolidated balance sheet as of December 31, 2019.

Right-of-use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not generally provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease agreements may have lease and non-lease components, which the Company accounts for as a single lease component. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term and variable payments are recognized in the period they are incurred. The Company’s lease agreements do not contain any residual value guarantees. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company has entered into various operating lease agreements for data centers and office space, and various financing leases agreements for data center and office equipment and furniture.

As of December 31, 2019, the Company had 22 leased properties with remaining lease terms of 0.2 years to 9.0 years, some of which include options to extend the leases for up to 5.0 years.

The components of the lease expense recorded in the consolidated statement of operations were as follows:



	Year Ended December 31, 2019
	(In thousands)
Operating lease cost	$	32,558
Finance lease cost:
Amortization of assets	6,090
Interest on lease liabilities	708
Short-term lease cost	6,342
Variable lease cost	3,792
Total net lease cost	$	49,490

Supplemental balance sheet information related to leases was as follows:



Leases	Classification	As of December 31, 2019
Assets:		(In thousands)
Operating lease assets	Operating right-of-use asset, net of accumulated amortization ⁽¹⁾	$	156,741
Finance lease assets	Property and equipment, net of accumulated depreciation ⁽²⁾	14,770
Total leased assets		$	171,511

Liabilities:
Current
Operating	Operating lease liability, current	$	27,156
Finance	Financing lease liability, current	6,924
Noncurrent
Operating	Operating lease liability, noncurrent	139,200
Finance	Finance lease liability, noncurrent	8,746
Total lease liabilities		$	182,026

__________

(1)Operating lease assets are recorded net of accumulated amortization of $23.2 million as of December 31, 2019.

(2) Finance lease assets are recorded net of accumulated depreciation of $6.0 million as of December 31, 2019.

Supplemental cash flow and other information related to leases was as follows:



	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)
Operating cash flows from operating leases	$	28,291
Operating cash flows from finance leases (interest)	$	687
Financing cash flows from finance leases	$	5,646

Weighted average remaining lease term (in years):
Operating leases	6.1
Finance leases	3.0

Weighted average discount rate:
Operating leases	5.5		%
Finance leases	5.3		%

Maturities of lease liabilities were as follows:



	As of December 31, 2019
	Operating Leases			Finance Leases
Year Ended December 31,	(In thousands)
2020	$	35,997		$	7,586
2021	34,762			4,659
2022	33,214			2,333
2023	27,859			1,581
2024	25,400			315
Thereafter	43,125			581
Total lease payments	200,357			17,055
Less: imputed interest	(34,001		)	(1,385		)
Total lease obligations	166,356			15,670
Less: current obligations	(27,156		)	(6,924		)
Long-term lease obligations	$	139,200		$	8,746

As of December 31, 2019, the Company had additional operating lease obligations totaling $54.1 million related to leases that will commence in the first and second quarters of 2020 with lease terms ranging from 3.0 years to 6.8 years. The Company had an additional finance lease obligation of $0.7 million related to a lease that will commence in the second quarter of 2020 with a lease term of 6.8 years.

Disclosures related to periods prior to adoption of the New Lease Standard

Rent expense was $10.3 million and $8.1 million for the years ended December 31, 2018 and 2017, respectively.

Future minimum lease payment obligations under noncancelable operating and finance leases were as follows:



	As of December 31, 2019
	Operating Leases		Financing Leases
Year Ended December 31,	(In thousands)
2019	$	24,128	$	306
2020	29,527		512
2021	30,898		573
2022	30,492		590
2023	30,122		608
Thereafter	81,316		1,939
Total minimum lease payments	$	226,483	$	4,528