Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]



NOTE 7.	Commitments and Contingencies

Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the current period adjustment method with an effective date of January 1, 2019. Prior year financial statements were not restated under the new standard and, therefore, those amounts are not presented below. For both operating and finance leases, the Company recognizes a right-of-use asset, which represents its right to use the underlying asset for the lease term, and a lease liability, which represents the present value of its obligation to make payments arising over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases. The incremental borrowing rate is determined using a portfolio approach based on the rate 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.

Where the Company is the lessee, the Company elected to account for non-lease components associated with its leases (e.g., common area maintenance costs) and lease components separately for substantially all of the asset classes. In arrangements where the Company is the lessor, the Company applies the lease and non-lease component practical expedient and the Company accounts for lease components (e.g., customer premise equipment) and non-lease components (e.g., service revenue) as combined components and account for the combined components under the revenue recognition guidance in Topic 606 as the service revenues are the predominant components in the arrangements.

The Company leases property and equipment under finance and operating leases. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Many of its leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate an incremental borrowing rate to discount the lease payments based on information available at lease commencement.

The table below presents the lease-related assets and liabilities recorded on the balance sheet.



		December 31
(in thousands)	Classification on the Balance Sheet	2019
Assets
Operating lease assets	Operating lease - right of use asset	$	40,551
Finance lease assets	Property and equipment, net	1,299
Total lease assets		$	41,850

Liabilities
Current
Operating	Operating lease liabilities, current	$	7,663
Finance	Accrued liabilities	124
Noncurrent
Operating	Operating lease liabilities, noncurrent	44,015
Finance	Other noncurrent liabilities	54
Total lease liabilities		$	51,856

The Company leases certain offices, computer equipment and its data center facilities under non-cancelable operating leases for varying periods through 2028. In January 2018, the Company entered into a $3.5 million financing arrangement for data center storage equipment, accounted for as a finance lease, with an implied interest rate of 5%.

During the fourth quarter ended December 31, 2019, the Company entered into a new lease agreement (included in the table above) for a total of approximately 282,000 square feet of office space in Pune, India. On the lease inception date of October 1, 2019, the Company recognized $14.7 million of lease liability and ROU assets, which will be amortized over the non-cancellable lease term through February 2025.

The following are the minimum annual lease payments due under operating leases at December 31, 2019 (in thousands):



	Operating Leases			Finance Leases
	(in thousands)
2020	$	10,603		$	130
2021	9,859			54
2022	8,539			—
2023	8,652			—
2024	8,866			—
2025 and thereafter	15,583			—
Total minimum lease payments	62,102			184
Less: amount representing interest	(10,424		)	(6		)
Present value of minimum payments	51,678			178
Less: lease obligations, current	(7,663		)	(124		)
Lease obligations, noncurrent	$	44,015		$	54

Rent expense was $13.9 million, $9.9 million and $9.6 million for 2019, 2018 and 2017, respectively.

The weighted average remaining lease term and the weighted average discount rate of the Company's leases were as follows:



	December 31, 2019
Weighted average remaining lease term (years)
Operating leases	6.5
Finance leases	1.25
Weighted average discount rates
Operating leases	5.0	%
Finance leases	5.0	%

Purchase Obligation

The Company has entered into agreements to purchase goods and services in the ordinary course of business, primarily through the next 12 months. As of December 31, 2019, these remaining commitments were $25.3 million.

Indemnifications

The Company from time to time enters into certain types of contracts that contingently require it to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company's by-laws, under which it must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship, (ii) contracts under which the Company must indemnify directors and certain officers for liabilities arising out of their relationship, and (iii) contracts under which the Company may be required to indemnify customers or resellers from certain liabilities arising from potential infringement of intellectual property rights, as well as potential damages caused by limited product defects. To date, the Company has not incurred and has not recorded any liability in connection with such indemnifications.

The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors.