Leases Leases (Notes)

3 Months Ended

Sep. 30, 2022

LEASES

The Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the Company’s leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based upon the information available at commencement date. The determination of the incremental borrowing rate requires judgment and is determined by using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease.

The Company leases certain office space, data centers, and equipment with remaining terms of 1 to 11 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. Variable lease costs are recognized as a variable lease expense when incurred.

At September 30, 2022, and June 30, 2022, the Company had operating lease assets of $46,452 and $46,869 and financing lease assets of $39 and $65, respectively. At September 30, 2022, total operating lease liabilities of $50,932 were comprised of current operating lease liabilities of $10,546 and noncurrent operating lease liabilities of $40,386, and total financing lease liabilities of $41 were all current liabilities. At June 30, 2022, total operating lease liabilities of $51,452 were comprised of current operating lease liabilities of $10,681 and noncurrent operating lease liabilities of $40,771, and total financing lease liabilities of $67 were all current financing lease liabilities.

Operating lease assets are included within other non-current assets and operating lease liabilities are included within accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s condensed consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of $33,478 and $31,006 as of September 30, 2022, and June 30, 2022, respectively. Financing lease assets are included within property and equipment, net and financing lease liabilities are included within notes payable (current portion) and long-term debt (noncurrent portion) is included in the Company’s condensed consolidated balance sheet. Financing lease assets were recorded net of accumulated amortization of $276 and $255 as of September 30, 2022, and June 30, 2022, respectively.

Operating lease costs for the three months ended September 30, 2022 and 2021, were $3,059 and $3,432, respectively. Financing lease costs for the three months ended September 30, 2022 and 2021, were $21 and $28, respectively. Total operating and financing lease costs for the respective quarters included variable lease costs of approximately $928 and $399, respectively. Operating and financing lease expense are included within cost of services, research and development, and selling, general & administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of income.

For the three months ended September 30, 2022 and 2021, the Company had operating cash flows for payments on operating leases of $3,110 and $3,031, and ROU assets obtained in exchange for operating lease liabilities of $2,296 and $272, respectively. Operating cash flows for interest paid on financing leases for the three months ended September 30, 2022 and 2021, were $22 and $29, respectively.

As of September 30, 2022, and June 30, 2022, the weighted-average remaining lease term for the Company's operating leases was 74 months and 76 months and the weighted-average discount rate was 2.60% and 2.58%, respectively. As of September 30, 2022, and June 30, 2022, the weighted-average remaining lease term for the Company's financing leases was 6 months and 9 months, respectively. The weighted-average discount rate for the Company's financing leases was 2.23% as of September 30, 2022, and 2.29% as of June 30, 2022.

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at September 30, 2022*:


Due Dates (fiscal year)	Future Minimum Rental Payments

2023 (remaining period)	$	9,019
2024	10,696
2025	7,952
2026	7,046
2027	6,265
Thereafter	14,296
Total lease payments	$	55,274
Less: interest	(4,342)
Present value of lease liabilities	$	50,932

*Financing leases were immaterial to the quarter, so a maturity of lease liabilities table has only been included for operating leases.

Lease payments include $5,464 related to options to extend lease terms that are reasonably certain of being exercised. At September 30, 2022, there were $6,128 of legally binding lease payments for leases signed but not yet commenced.