Leases

3 Months Ended

Mar. 31, 2020

The Company enters into various office space, data center, and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised or not at the inception of the lease. In addition, some leases contain escalation clauses. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the term of the lease. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets.

The Company also enters into sublease agreements for some of its leased office space. Rental income attributable to subleases is offset against rent expense over the terms of the respective leases.

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2031. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032. Certain leases acquired as part of the Valence Health transaction included existing sublease agreements for office locations in Chicago, Illinois.

In connection with various lease agreements, the Company is required to maintain $3.6 million in letters of credit. As of March 31, 2020 and December 31, 2019, the Company held $3.6 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

The following table summarizes our primary office leases as of March 31, 2020 (in thousands):



Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	11.8	$	40,832	$	1,579
Riverside, IL	11.0	41,179		232
Louisville, KY ⁽¹⁾	6.3	—		—
Pune, India	3.5	2,883		—
Brea, CA	2.2	2,328		—

⁽¹⁾Lease payments of $4.1 million for Louisville, KY have been prepaid as of March 31, 2020.

The following table summarizes the components of our lease cost for the three months ended March 31, 2020 and 2019 (in thousands):



	For the Three Months Ended March 31,
	2020		2019
Operating lease cost	$	3,056	$	3,281
Amortization of right-of-use assets	149		—
Interest expense	2		—
Variable lease cost	1,052		1,455
Total lease cost	$	4,259	$	4,736

Maturity of lease liabilities (in thousands) as of March 31, 2020, is as follows:



	Operating lease expense⁽¹⁾
2020	7,396
2021	9,368
2022	8,254
2023	7,720
2024	7,116
Thereafter	52,385
Total lease payments	92,239
Less:
Interest	25,493
Present value of lease liabilities	$	66,746

⁽¹⁾ We have additional operating lease agreements for office space that have not yet commenced as of March 31, 2020. The minimum lease payments for those leases are $5.7 million and the leases will commence during 2020.

Our weighted-average discount rate and our weighted remaining lease terms (in years) are as follows:



	March 31, 2020
Weighted average discount rate	6.25	%
Weighted average remaining lease term	10.2