COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Operating and Finance Leases

The Company’s operating leases are primarily comprised of office facilities, with the most significant leases relating to corporate headquarters in San Francisco, and offices in Oakland, St. Louis and New York. The Company's leases have remaining lease terms of 1 year to 16 years, some of which include options to extend for 5-year terms, or include options to terminate the leases within 1 year. None of the options to extend the leases have been included in the measurement of the right-of-use asset or the associated lease liability. The Company elected to apply the short-term lease measurement and recognition exemption to its leases where applicable. Generally, operating lease right-of-use assets and operating lease liabilities are recognized at the present value of the future lease payments, generally for the base non-cancellable lease term on the lease commencement date of each lease. The interest rate used to determine the present value of the future lease payments is the Company's incremental borrowing rate because the interest rate implicit in most of the Company's leases is not readily determinable. The Company's incremental borrowing rate is estimated to approximate the interest rate that the Company would pay to borrow on a collateralized basis with similar terms and payments as the lease, and in economic environments where the leased asset is located. Operating lease right-of-use assets also include any prepaid lease payments and lease incentives. The Company's lease agreements generally contain lease and non-lease components. Non-lease components, which primarily include payments for maintenance and utilities, are combined with lease payments and accounted for as a single lease component. The Company includes the fixed non-lease components in the determination of the right-of-use assets and operating lease liabilities. The Company records the amortization of the right-of-use asset and the accretion of lease liability as a component of rent expense in the condensed consolidated statement of operations.

In July 2019, the Company entered into a lease arrangement for 226,185 square feet of office space in St Louis, Missouri, with an affiliate of one of the Company’s co-founders, Mr. Jim McKelvey, who is also a Company stockholder and a member of its board of directors, for a term of 15.5 years with options to extend the lease term for two 5 year terms. The Company also has an option to terminate the lease for up to 50% of the leased space any time between January 1, 2024 and December 31, 2026, as well as an option to terminate the lease for the entire property on January 1, 2034. Termination penalties specified in the lease agreement will apply if the Company exercises any of the options to terminate the lease. The lease commencement date varies by floor beginning in May 2020 with total future minimum lease payments over the term of approximately $42.7 million. Refer to Note 15, Related Party Transactions for further details.

There were no finance lease obligations as of March 31, 2021.

The components of lease expense for the periods presented were as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Fixed operating lease costs	$	20,432	$	15,125
Variable operating lease costs	3,508		5,724
Short term lease costs	388		1,856
Sublease income	(2,625)		(1,437)

Amortization of finance lease right-of-use assets	—		1,054

Total lease costs	$	21,703	$	22,322

Other information related to leases were as follows:


	March 31, 2021
Weighted Average Remaining Lease Term:
Operating leases	8.5 years

Weighted Average Discount Rate:
Operating leases	4	%

Cash flows related to leases were as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Payments for operating lease liabilities	$	(18,250)	$	(9,570)
Cash flows from financing activities:
Principal payments on finance lease obligation	$	—	$	(1,054)
Supplemental Cash Flow Data:
Right-of-use assets obtained in exchange for operating lease obligations	$	22,715	$	255,553

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of March 31, 2021 are as follows (in thousands):


	Operating
Year:
Remainder of 2021	$	53,124
2022	79,498
2023	73,060
2024	54,291
2025	49,424
Thereafter	241,098
Total	$	550,495
Less: amount representing interest	80,806

Less: lease incentives	13,835
Total	$	455,854

Litigation

The Company is currently subject to, and may in the future be involved in, various litigation matters, legal claims, and investigations. The Company is subject to various legal matters and disputes arising in the ordinary course of business. The Company cannot at this time fairly estimate a reasonable range of exposure, if any, of the potential liability with respect to these matters. Although occasional adverse decisions or settlements may occur, the Company does not believe that the final disposition of any of these matters will have a material adverse effect on its results of operations, financial position, or liquidity. The Company cannot give any assurance regarding the ultimate outcome of these other matters, and their resolution could be material to the Company's operating results for any particular period.

Other contingencies

On June 15, 2020, the Texas Comptroller’s Office (the “Comptroller”) informed the Company that it had completed its sales and use tax audit for the period from January 1, 2015 through April 30, 2018, and that it would issue a written tax assessment to the Company seeking $38 million, including interest and penalties for this tax audit period. To date, such a written assessment has not been received. The Comptroller indicated that it believes the services that the Company has deemed to be nontaxable should be subject to sales tax. The Company believes the Comptroller’s position is without merit. Should the Company not prevail, the Company could be obligated to pay additional taxes together with associated penalties and interest for the audited tax period, as well as additional taxes for periods subsequent to the tax audit period, including penalties and interest, that could be material.

We are under examination, or may be subject to tax examination, by several tax authorities. These examinations, including the matter discussed above, may lead to proposed adjustments to our taxes or net operating losses with respect to years under examination, as well as subsequent periods. We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our provision for direct and indirect taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, on our provision for direct and indirect taxes.

We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with the Company’s expectations, we could be required to adjust our provision for direct and indirect taxes in the period such resolution occurs.