Leases

12 Months Ended

Dec. 31, 2019

The Company adopted ASC 842 as of January 1, 2019. As part of the implementation, the Company recognized its lease liabilities, including the current and non-current portions, within its consolidated balance sheet as of the adoption date, which represents the present value of the Company’s obligation related to the estimated future lease payments. The Company also recognized a right-of-use asset, or ROU asset, which represents the right to use the leased asset over the period of the lease. The ROU asset was calculated as the lease liability less any asset or liability balances that existed at the time of adoption.

The lease term is generally specified in the lease agreement, however certain agreements provide for lease term extensions or early termination options. To determine the period for the estimated future lease payments, the Company evaluates whether it is reasonably certain that it will exercise the option at the commencement date and periodically thereafter. Certain data center lease agreements include one year extension options or month-to-month extension options, and one or more of these extensions have been assumed for each lease that the Company believes to be an integral part of the business in the near term. The lease terms of the Company’s operating leases generally range from 1.0 year to 10.5 years, and the weighted average remaining lease term of leases included in the lease liability is 6.3 years as of December 31, 2019.

To determine the estimated future lease payments, the Company reviews each of its lease agreements to identify the various payment components. For real estate and equipment leases, the Company includes only the actual lease components in its determination of future lease payments, and for its data center leases, includes both the fixed lease and non-lease components in the estimated future lease payments. This typically includes a fixed minimum power commitment that is included in the data center agreements, but it does not include any variable or usage-based additional charges. Once the estimated future lease payments are determined, the Company uses a discount rate to calculate the present value of the future lease payments. Because most of the Company's leases do not provide an implicit rate of return, the Company uses the incremental borrowing rate it would be subject to on borrowings from its available revolving debt agreement based on the information available at the lease commencement date in determining the present value of lease payments. As of December 31, 2019, a weighted average discount rate of 4.65% has been applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheet.

For the year ended December 31, 2019, the Company recognized $7.8 million of lease expense under ASC 842, which included operating lease expenses associated with leases included in the lease liability and ROU asset on the consolidated balance sheet. In addition, for the year ended December 31, 2019, the Company recognized expenses of $10.0 million of cloud-based services related to data centers and $1.2 million of lease expense related to short-term leases that are not included in the ROU asset or lease liability balances.

For the year ended December 31, 2018, the Company recognized rental expenses of $19.7 million under ASC 840, which included expenses related to short-term leases, and also included certain non-lease components including variable capacity related expenses for cloud-based services related to data centers of $7.1 million.

The maturity of the Company's lease liabilities associated with leases included in the lease liability and ROU asset were as follows as of December 31, 2019 (in thousands):



Fiscal Year
2020	$	8,167
2021	4,570
2022	2,429
2023	2,065
2024	1,611
Thereafter	6,880
Total lease payments (undiscounted)	25,722
Less: imputed interest	(3,209		)
Lease liabilities—total (discounted)	$	22,513

The following table summarizes the Company's future minimum lease payments under non-cancelable operating leases and related sublease income at December 31, 2018 based on the lease accounting guidance prior to the adoption of ASC 842:



	2019			2020			2021			2022			2023			Total
	(in thousands)
Operating lease expense	$	6,773		$	3,880		$	1,734		$	1,019		$	597		$	14,003
Operating sublease income	(285		)	(194		)	(194		)	(194		)	(145		)	(1,012		)
Total	$	6,488		$	3,686		$	1,540		$	825		$	452		$	12,991

The Company also received rental income of $0.3 million and $0.8 million for real estate leases for which it subleases the property to a third party during the year ended December 31, 2019 and 2018, respectively.