Leases

9 Months Ended

Nov. 03, 2024

We lease office and data center 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.

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 that we expect to exercise at the end of the respective lease term.

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


	Third Quarter of Fiscal				First Three Quarters of Fiscal
	2024		2025		2024		2025
Fixed operating lease cost	$	10,685	$	12,930	$	37,338	$	35,467

Variable lease cost (1)	2,328		3,905		8,002		10,699
Short-term lease cost (12 months or less)	1,081		1,160		3,214		3,014

Finance lease cost:
Amortization of finance lease right-of-use assets	1,100		1,100		3,300		3,300
Interest on finance lease liabilities	81		16		338		141
Total finance lease cost	$	1,181	$	1,116	$	3,638	$	3,441

Total lease cost	$	15,275	$	19,111	$	52,192	$	52,621

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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 2024			Third Quarter of Fiscal 2025
Operating leases:
Weighted-average remaining lease term (in years)	5.0			5.0
Weighted-average discount rate	7.1		%	7.4		%

Finance leases:
Finance lease right-of-use assets, gross	$	17,596		$	17,596
Accumulated amortization	(7,812)			(11,112)
Finance lease right-of-use assets, net (1)	$	9,784		$	6,484
Finance lease liabilities, current (2)	4,204			691
Finance lease liabilities, non-current (3)	180			—
Total finance lease liabilities	$	4,384		$	691
Weighted-average remaining lease term (in years)	2.4			1.1
Weighted-average discount rate	5.4		%	3.0		%

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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 Three Quarters of Fiscal
	2024		2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases	$	29,591	$	37,380
Financing cash outflows for finance leases	$	5,969	$	4,818
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	11,966	$	56,813

Future lease payments under our non-cancelable leases at the end of the third quarter of fiscal 2025 were as follows (in thousands):


Fiscal Years Ending	Operating Leases		Finance Leases
The remainder of 2025	$	18,426	$	514
2026	53,078		183
2027	37,100		—
2028	39,986		—
2029	32,263		—
Thereafter	53,696		—
Total future lease payments	234,549		697
Less: imputed interest	(40,218)		(6)
Present value of total lease liabilities	$	194,331	$	691

Lessor Arrangement

During the fourth quarter of fiscal 2024, we, as a lessor, entered into a non-cancelable arrangement with a customer (lessee) to lease our data storage solutions and subscription services. The arrangement includes three seven-year leases that commence in the first, second and fourth quarters of fiscal 2025 with total net consideration of $76.6 million, and provides the lessee with an end-of-term option to purchase the leased assets for a pre-determined price.

We determined, at inception of the arrangement, that each of the three seven-year leases included multiple components. These components include sales-type leases, an operating lease, and non-lease components. The total net consideration for each lease was allocated to these components based on relative standalone selling price. The amounts allocated to the lease and non-lease components are accounted for in accordance with ASC 842 and ASC 606, respectively. Lease income associated with sales-type leases are classified as product revenue and lease income associated with operating leases and non-lease components are classified primarily as subscription services revenue on our condensed consolidated statements of operations.

The total net consideration for two of the seven-year leases that commenced in the first and second quarters of fiscal 2025 (First Two Leases) was $50.6 million. We recognized $15.2 million in product revenue related to the sales-type lease components during the first three quarters of fiscal 2025. The associated profit was $11.4 million, based on the product revenue recognized less certain costs, during the first three quarters of fiscal 2025. Subscription services revenue related to the operating lease and non-lease components recognized during the third quarter and first three quarters of fiscal 2025 were $2.7 million and $4.8 million.

Future minimum gross lease payments for the two seven-year leases allocated to the sales-type leases and operating lease components were as follows (in thousands). The remaining lease payments of $35.9 million allocated to the non-lease components, are excluded from the table below.


Fiscal Years Ending	Sales-Type Leases		Operating Lease
The remainder of 2025	$	727	$	549
2026	2,908		2,192
2027	2,908		2,192
2028	4,713		386
2029	5,100		—
Thereafter	10,966		—


Total future lease payments to be received	$	27,322	$	5,319