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Leases

6 Months Ended

Jun. 30, 2022

Note 9 - Leases

The components of lease expense were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Finance lease assets amortization	$	80	$	58	$	152	$	121
Finance lease interest expense	4		2		8		6
Total finance lease cost	84		60		160		127
Operating lease cost	1,158		1,097		2,351		2,184
Short-term lease cost	30		24		61		73
Variable lease cost	61		201		249		438
Sublease income	(82)		(80)		(165)		(160)
Total lease cost	$	1,251	$	1,302	$	2,656	$	2,662

The weighted-average remaining lease term and discount rate for operating and finance leases as of June 30, 2022 are as follows:


	Operating Leases		Finance Leases
Weighted-average remaining lease term	9.8 years		2.1 years
Weighted-average discount rate	5.4	%	3.6	%

The following table indicates the financial statement lines where the Company's operating and finance lease assets and liabilities are included on the Condensed Consolidated Balance Sheets (in thousands):


	As of June 30, 2022		Balance Sheet Classification
Assets:
Operating lease right-of-use assets	$	19,261	Operating lease right-of-use assets
Finance lease assets	419		Property and equipment, net
Total lease assets	$	19,680

Liabilities:
Current operating lease liabilities	$	3,495	Accrued expenses and other current liabilities
Current finance lease liabilities	224		Accrued expenses and other current liabilities
Non-current operating lease liabilities	32,412		Operating lease liabilities, net of current portion
Non-current finance lease liabilities	241		Other non-current liabilities
Total lease liabilities	$	36,372

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


	Six Months Ended June 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows from operating leases	$	2,580
Operating cash flows from finance leases	$	8
Finance cash flows from finance leases	$	145
ROU assets obtained in exchange for new operating lease liabilities:	$	1,896
Assets obtained in exchange for new finance lease liabilities:	$	307

Future minimum lease payments under non-cancellable operating and finance leases as of June 30, 2022 are as follows (in thousands):


	Operating Leases		Finance Leases
2022 (remainder)	$	2,649	$	139
2023	5,404		215
2024	5,030		97
2025	4,609		26
2026	4,342		4
Thereafter	24,668		—
Total minimum lease payments	46,702		481
Less: Amounts representing interest	(10,795)		(16)
Present value of lease payments	$	35,907	$	465

Amounts listed in the future minimum lease payments table above do not include sublease income.

Impairment of Right-of-Use ("ROU") Assets and Restructuring Charges

During the first quarter of 2022, the Company approved a strategic plan to optimize its structure and costs related to its leased facilities and print operations. As part of the plan, the Company approved a formal work from anywhere policy due to high interest in allowing employees to work remotely and investments in the Company's operating environments and technology enabling seamless day-to-day execution and increased productivity across a distributed workforce. Additionally, the Company closed one of its print locations due to the continued decline in customer print volumes and efficiencies gained through streamlining its print operations. The overall plan included vacating some or all of several of the Company's leased office facilities and one of its leased print operations facilities and making them available for sublease. The Company ceased using all of the leased facility space outlined in the plan by March 31, 2022.

As a result, during the three months ended March 31, 2022, the Company incurred $10.0 million of ROU asset impairments and $3.6 million of leasehold improvement and fixed asset impairments, which were recorded in impairment and restructuring on the Condensed Consolidated Statements of Operations. In calculating the impairment amount, the fair value of each asset was determined using an income approach based on the present value of future cash flows from estimated sublease income. This approach required the use of certain estimates, including a discount rate, sublease rental rates, period of vacancy, and sublease incentives, which were based in part by local real estate industry data. As these are subjective estimates based on unobservable inputs, the fair value of the assets have been classified in Level 3 of the fair value hierarchy (refer to Note 13 - Fair Value Measurements).

Additionally, in accordance with ASC 420, Exit or Disposal Cost Obligations, the Company recognized exit obligation costs related to closing the print operations facility, including one-time employee severance benefits, contract termination costs, and other costs associated with exiting the facility. These costs were recorded in impairment and restructuring on the Condensed Consolidated Statements of Operations, and were allocated to the Company's Print segment. Total costs recognized during six months ended June 30, 2022, which included estimates of future costs to be incurred under the plan, were not material.

During the second quarter of 2022, the Company approved an expansion of the strategic plan to further vacate an additional portion of its leased office space. As the space had not been vacated by June 30, 2022, no further impairments were required or recognized during the three months ended June 30, 2022. Upon the cease-use date of this additional space, which is expected to occur in the third or fourth quarter of 2022, the Company will evaluate if an additional impairment charge is required.

In the future if the Company determines it no longer intends to utilize some or all of its other remaining leased facility spaces, the Company may be required to record additional impairment or restructuring charges.

Leases