Leases

6 Months Ended

Aug. 06, 2023

We lease office facilities under non-cancelable operating lease agreements expiring through July 2032. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

In June 2022, we entered into an eight-year sublease through July 2030 for a new headquarters facility in Santa Clara, California with total lease payments of $100.2 million that include rent escalation and abatement clauses. The sublease of space with total lease payments of $89.4 million commenced in August 2022. Additional space with lease payments of $10.8 million will commence in May 2024 and end in July 2030, and are excluded from our future lease payments disclosure below.

During the second quarter of fiscal 2024, we ceased use of our former corporate headquarters and recorded an impairment charge to operating lease right-of-use assets of $15.9 million and an abandonment charge of $0.9 million related to these leases, which are presented in Impairment and Other in the condensed consolidated statement of operations. The impairment charge represents the amount that the carrying value of the assets exceeded their estimated fair values, which were determined by utilizing an undiscounted cash flow approach that incorporated a sublease assumption.

We also lease certain engineering test equipment under financing agreements. These finance leases have a lease term of three years and contain a bargain purchase option at the end of the respective lease term. It is reasonably certain that the bargain purchase option will be exercised.

The components of lease costs during the periods presented were as follows (in thousands):


	Second Quarter of Fiscal				First Two Quarters of Fiscal
	2023		2024		2023		2024
Fixed operating lease cost	$	10,753	$	12,652	$	21,071	$	26,653

Variable lease cost (1)	1,932		3,590		3,822		5,674
Short-term lease cost (12 months or less)	764		1,075		1,616		2,133

Finance lease cost:
Amortization of finance lease right-of-use assets	535		1,100		1,003		2,200
Interest on finance lease liabilities	59		128		99		257
Total finance lease cost	$	594	$	1,228	$	1,102	$	2,457

Total lease cost	$	14,043	$	18,545	$	27,611	$	36,917

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(1) Variable lease cost predominantly included common area maintenance charges.

Supplemental information related to leases is as follows (in thousands):


	At the End of
	Fiscal 2023			Second Quarter of Fiscal 2024
Operating leases:
Weighted-average remaining lease term (in years)	5.2			5.2
Weighted-average discount rate	6.1		%	6.9		%

Finance leases:
Finance lease right-of-use assets, gross (1)	$	17,596		$	17,596
Accumulated amortization (1)	(3,412)			(5,612)
Finance lease right-of-use assets, net (1)	$	14,184		$	11,984
Finance lease liabilities, current (2)	5,432			7,223
Finance lease liabilities, non-current (3)	4,765			2,869
Total finance lease liabilities	$	10,197		$	10,092
Weighted-average remaining lease term (in years)	3.3			2.8
Weighted-average discount rate	5.1		%	5.1		%

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(1) Included in the condensed consolidated balance sheets within property and equipment, net.

(2) Included in the condensed consolidated balance sheets within accrued expenses and other liabilities.

(3) Included in the condensed consolidated balance sheets within other liabilities, non-current.

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


	First Two Quarters of Fiscal
	2023		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases	$	27,150	$	18,643
Financing cash outflows for finance leases	$	1,124	$	1,540
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	77,449	$	10,840
Finance leases	$	7,737	$	—

Future lease payments under our non-cancelable leases at the end of the second quarter of fiscal 2024 were as follows (in thousands):


Fiscal Years Ending	Operating Leases		Finance Leases
The remainder of 2024	$	26,350	$	5,459
2025	50,579		4,728
2026	38,891		183
2027	21,654		—
2028	24,020		—
Thereafter	47,688		—
Total future lease payments	209,182		10,370
Less: imputed interest	(35,294)		(278)
Present value of total lease liabilities	$	173,888	$	10,092