Leases

6 Months Ended

Jun. 30, 2022

5. Leases

On January 1, 2022, the Company adopted ASU 2016-02, using the modified retrospective transition method. The Company has elected to adopt the package of practical expedients which apply to leases that commenced before the adoption date. By electing the package of practical expedients, the Company did not reassess: whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and the initial direct costs for any existing leases. The Company has also elected to combine lease and non-lease components when calculating minimum lease payments on new leases for all asset classes.

The Company has elected an accounting policy to forgo the recognition of lease assets or liabilities for short-term leases. Short-term leases are defined, in accordance with the standard, as those with terms of one year or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The Company determines if an arrangement is or contains a lease at contract inception. The Company accounts for a contract as a lease when it has the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of right-of-use ("ROU") assets and lease liabilities at the lease commencement date and thereafter at the modification date, if modified.

ROU assets represent the Company's right to control the underlying assets under lease, and the lease liability is the Company's obligation to make the lease payments related to the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future minimum fixed lease payments to be made over the lease term. The Company uses the non-cancellable lease term unless it is reasonably certain that a renewal or termination option will be exercised. When available, the Company will use the rate implicit in the lease to discount lease payments to present value. As most leases do not provide an implicit rate, the Company will estimate the incremental borrowing rate to discount the lease payments. The Company estimates the incremental borrowing rate based on the rates of interest that the Company would have to pay to borrow an amount

equal to the lease payments on a collateralized basis, over a similar term, and in a similar economic environment. The ROU asset also includes any lease prepayments and initial direct costs, offset by lease incentives.

Certain lease agreements contain variable lease payments which are not included in the measurement of the lease liability. Variable lease payments relate to taxes, insurance, utilities, and common area maintenance ("CAM"). These variable lease payments are recognized in the condensed consolidated statements of operations and comprehensive income (loss) in the period in which the obligation for those payments is incurred.

The Company has operating leases for office space to support business operations. The Company's office leases expire at varying dates from 2022 through 2030. The Company's leases do not contain any material residual value guarantees or restrictive covenants. Operating leases are recognized on the condensed consolidated balance sheets as operating lease right-of-use assets, operating lease liabilities and long-term operating lease liabilities. Operating lease expense is recognized on a straight-line basis over the lease term within the Company’s condensed consolidated statements of operations and comprehensive income (loss).

Lease Costs and Other Information

The following table summarizes the components of operating lease expense (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Operating lease cost	$	1,184	$	2,365
Variable lease cost		54		145
Total	$	1,238	$	2,510

The weighted average remaining lease term (in years) and discount rate were as follows:


	As of June 30,
	2022
Weighted-average remaining lease term	7.2
Weighted-average discount rate		2.26	%

Supplemental Cash Flow Information

The following table presents supplemental information relating to cash flows arising from lease transactions. Cash payments made for variable lease cost and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below (in thousands):


	Six Months Ended
	June 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,813
Right of use assets obtained in exchange for new operating lease liabilities	$	31,392

Maturity of Lease Liabilities

The following table presents the future minimum lease payments under the Company's operating leases liabilities as of June 30, 2022 (in thousands):


Remainder of 2022	$	2,392
2023		5,723
2024		5,750
2025		4,489
2026		4,079
Thereafter		14,810
Total lease payments	$	37,243
Less: imputed interest		(3,011	)
Lease liabilities	$	34,232

The Company has subleased certain office space for which incoming sublease amounts will offset the future lease payments in the table above. Under the executed sublease agreement, the Company expects to receive future sublease payments of $0.3 million over the remainder of 2022 and $1.5 million thereafter.

ASC 840 Disclosures

Under the previous lease accounting standard, ASC 840, Leases, (“ASC 840”), as previously disclosed in the 2021 Form 10-K for the year ended December 31, 2021, the total future minimum payments under non-cancellable operating leases as of December 31, 2021 were as follows (in thousands):


2022	$	5,674
2023		5,716
2024		5,743
2025		4,481
2026		4,071
Thereafter		14,766
Total	$	40,451

Rent expense was $1.1 million and $2.3 million for the three and six months ended June 30, 2021, respectively. As of December 31, 2021, the Company had total deferred rent of $4.5 million, which was included in accrued expenses and other current liabilities and other long-term liabilities on the Company’s condensed consolidated balance sheets