Right-of-Use Asset and Lease Liabilities

3 Months Ended

Mar. 31, 2020

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 condensed consolidated balance sheets.

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. When estimating the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain such options will be exercised. 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 March 31, 2020, the Company had 23 leased properties with remaining lease terms from less than one year to slightly over nine 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 accompanying condensed consolidated statements of operations were as follows:


	Three Months Ended March 31,
	2020		2019

	(In thousands)
Operating lease cost	$	10,424	$	7,173
Finance lease cost:
Amortization of assets	1,904		1,163
Interest on lease liabilities	198		148
Short-term lease cost	1,412		1,435
Variable lease cost	1,296		487
Total net lease cost	$	15,234	$	10,406

Supplemental balance sheet information related to leases was as follows:


		As of		As of
		March 31,		December 31,
Leases	Classification	2020		2019

Assets:		(In thousands)
Operating lease assets	Operating right-of-use asset, net of accumulated amortization ⁽¹⁾	$	159,439	$	156,741
Finance lease assets	Property and equipment, net of accumulated depreciation ⁽²⁾	12,866		14,770
Total leased assets		$	172,305	$	171,511

Liabilities:
Current
Operating	Operating lease liability, current	$	29,949	$	27,156
Finance	Financing lease liability, current	6,539		6,924
Noncurrent
Operating	Operating lease liability, noncurrent	140,120		139,200
Finance	Finance lease liability, noncurrent	7,250		8,746
Total lease liabilities		$	183,858	$	182,026

____________________

⁽¹⁾ Operating lease assets are recorded net of accumulated amortization of $31.2 million and $23.2 million as of March 31, 2020 and December 31, 2019, respectively.

⁽²⁾ Finance lease assets are recorded net of accumulated depreciation of $7.9 million and $6.0 million as of March 31, 2020 and December 31, 2019, respectively.

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


	Three Months Ended March 31,
	2020			2019

Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)
Operating cash flows from operating leases	$	9,953		$	3,994
Operating cash flows from finance leases (interest)	$	198		$	148
Financing cash flows from finance leases	$	1,881		$	961

Weighted average remaining lease term (in years):
Operating leases	5.8			7.1
Finance leases	2.9			3.3

Weighted average discount rate:
Operating leases	5.7		%	5.8		%
Finance leases	5.3		%	5.2		%

Maturities of lease liabilities were as follows:


	As of March 31, 2020
	Operating Leases		Finance Leases

Year ended December 31,	(In thousands)
2020 (remaining nine months)	$	29,148	$	5,507
2021	38,190		4,659
2022	37,145		2,333
2023	29,378		1,581
2024	25,549		315
Thereafter	43,126		581
Total lease payments	202,536		14,976
Less: imputed interest	(32,467)		(1,187)
Total lease obligations	170,069		13,789
Less: current obligations	(29,949)		(6,539)
Long-term lease obligations	$	140,120	$	7,250

As of March 31, 2020, the Company had an additional operating lease obligation totaling $43.5 million related to a lease that will commence in the second quarter of 2020 with a lease term of 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.