Leases

6 Months Ended

Jun. 30, 2022

The Company’s lease arrangements consist primarily of corporate and manufacturing facility agreements. The leases expire at various dates through 2028, some of which include options to extend the lease term. The options with the longest potential total lease term consist of options for extension of up to five years following expiration of the original lease term. All of the leases are operating leases. The Company is headquartered in Aliso Viejo, California and has various research and design centers, sales support offices, and manufacturing facilities throughout the world. The key lease terms for the principal locations are summarized below:

In July 2015, the Company entered into a five-year operating lease for its 14,881 square foot headquarters in Aliso Viejo, California, which is payable monthly with periodic rent adjustments over the lease term. The lease requires a security deposit of $30, which is recorded in other assets on the Company’s condensed consolidated balance sheets as well as a tiered, time-based letter of credit that has now reached its lowest tier of $200. Subsequently, the rentable area was expanded to 18,000 square feet and the lease was extended through the end of June 2023. Rent expense is approximately $38 per month.

In October 2015, the Company entered into a five-year operating lease for its Scotland Design Center in Edinburgh, Scotland, which is payable monthly with periodic rent adjustments over the lease term. The lease expired in October 2020. During 2019, the Company entered into a sub-lease agreement with a third party for the Scotland Design Center facility. Separately, effective January 2020, the Company entered into a lease for a property in Scotland. The lease agreement has a term through June 2024 and monthly rent of approximately $16 per month.

In October 2017, the Company entered into a 26-month operating lease for its Wuxi sales and design center. Rent for the associated office is payable monthly with periodic rent adjustments over the lease term. The lease was subsequently extended through December 2022. Rent expense is approximately $8 per month.

In May 2021, the Company entered into a seven-year operating lease for a location in Detroit, Michigan, which is payable monthly with periodic rent adjustments over the lease term. The lease will expire in 2028 with an initial monthly rent of approximately $22 per month.

In October 2021, the Company entered into a five-year operating lease for its design center in Austin, Texas. Rent for the associated office is payable monthly with periodic rent adjustments over the lease term, which expires in October 2026. Rent expense is approximately $13 per month.

In October 2021, the Company acquired TeraXion and assumed its existing operating lease for an office building and a warehouse in Quebec City, Canada. Rent for the associated office is payable at approximately $38 per month. The lease will expire on May 31, 2028. Rent for the associate warehouse is at approximately $3 per month. This lease will expire on November 30, 2023.

In February 2022, the Company entered into a two-year operating lease for its design center in Boston, Massachusetts, which is payable monthly with periodic rent adjustments over the lease term. The lease will expire March 31, 2024.

The total monthly rent for the remaining locations of the Company around the world is not material.

ASC 842 Adoption

The Company adopted ASC 842 using the modified retrospective method on January 1, 2022. The Company determines if an arrangement is a lease at its inception. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options. To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time. Lease expense for these leases is recognized on a straight-line basis over the lease term. The Company has elected the package of practical expedients permitted under the

transition guidance, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company also excluded short-term leases (term of 12 months or less) from the balance sheet presentation and accounted for non-lease and lease components in a contract as a single lease component for certain asset classes. Effective January 1, 2022, the Company recorded the impact on its condensed consolidated balance sheet from the recognition of ROU asset and lease liability of $10,344.

The Company’s facility leases have remaining lease terms ranging from less than one year to six years, some of which include options to extend the lease term for up to six years.

The table below represents lease-related assets and liabilities recorded on the condensed consolidated balance sheet:

Balance Sheet Classification

June 30, 2022

Assets

Operating lease right-of-use assets

10,345

Liabilities

Operating lease liabilities (current)

Other current liabilities

1,705

Operating lease liabilities (noncurrent)

Operating lease liabilities

8,725

Total lease liabilities

10,430

Lease Costs

The following lease costs were included in the condensed consolidated statements for the three and six months ended June 30, 2022:


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Operating lease cost	$	602	$	1,217
Short-term lease cost	29		103
Variable lease cost	45		97
Total lease cost	$	676	$	1,417

Supplemental Information

The table below presents supplemental information related to operating leases as of June 30, 2022:


Cash paid for amounts included in the measurement of operating lease liabilities	$	503
Right-of-use assets obtained in exchange for new operating lease liabilities	$	880
Weighted average remaining lease term	7.55 years
Weighted average discount rate	4.78		%

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as June 30, 2022:


2022 (remaining six months)	$	1,077
2023	1,991
2024	1,492
2025	1,361
2026	1,362
Thereafter	5,121
Total minimum lease payments	12,404
Less imputed interest	(1,974)
Present value of future minimum lease payments	10,430
Less current obligations under leases	(1,705)
Long-term lease obligations	$	8,725

Disclosures related to Periods Prior to Adoption of New Lease Standard

Minimum lease payments under operating leases with non-cancelable terms in excess of one year as of December 31, 2021, were as follows:


2022	$	1,869
2023	1,674
2024	1,303
2025	1,177
2026	1,201
Thereafter	1,686
Total minimum lease payments	$	8,910