Leases

6 Months Ended

Jun. 30, 2019

Leases

J2 Global leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2026. Office and equipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years. Some of the Company’s leases include options to terminate within one year.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

The Company has adopted the new lease standard and related amendments as of January 1, 2019 using the optional transitional method. Results for reporting periods beginning after the adoption date are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840. Finance leases are not material to the Company’s condensed consolidated financial statements and are therefore not included in the disclosures. Upon adoption of ASU 2016-02 and its related Updates, the Company recorded approximately $72.0 million of right-of-use assets and approximately $75.0 million of operating lease liabilities.

The components of lease expense were as follows for the six months ended (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019

Operating lease cost	$	5,806	$	12,059

Supplemental balance sheet information related to leases was as follows (in thousands):



	June 30, 2019
Operating leases
Operating lease right-of-use assets	$	66,922
Total operating lease right-of-use assets	$	66,922

Operating lease liability, current	$	18,066
Operating lease liabilities, noncurrent	53,079
Total operating lease liabilities	$	71,145

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



	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,489
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	4,954

Other supplemental operating lease information consists of the following:



Weighted average remaining lease term	4.7 years
Weighted average discount rate	4.25	%

Maturities of operating lease liabilities as of June 30, 2019 were as follows (in thousands):



	Operating Leases
Fiscal Year:
2019	$	9,997
2020	17,923
2021	15,936
2022	13,961
2023	11,993
Thereafter	9,242
Total lease payments	$	79,052
Less: Imputed interest	7,907
Present value of operating lease liabilities	$	71,145

Rental expense for operating leases classified under ASC 840 for the three and six months ended June 30, 2018 was $5.0 million and $10.3 million, respectively, and was predominantly recorded within general and administrative expenses. As of December 31, 2018, future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows (in thousands):



	Lease Payments
Fiscal Year:
2019	$	19,267
2020	16,196
2021	13,881
2022	12,654
2023	10,977
Thereafter	5,456
Total minimum lease payments	$	78,431

Sublease

Total sublease income for the three months ended June 30, 2019 and 2018 was $0.6 million and $0.6 million, respectively, and was $1.5 million and $1.1 million for the six months ended June 30, 2019 and 2018, respectively. Total estimated aggregate sublease income to be received in the future is $7.1 million.

Significant Judgments

Discount Rate

The majority of the J2 Global’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Options

The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Practical Expedients

As a practical expedient, the Company has not separated lease components from nonlease components for its real property operating leases. Certain of the Company’s leases contain nonlease components such as maintenance and certain utility costs.

In addition, the Company elected and applied the available transition practical expedients upon adoption. By electing these practical expedients, the Company did:


•	not reassess whether expired or existing contracts contain leases under the new definition of a lease;


•	not reassess lease classification for expired or existing leases; and

•

not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.