Leases

We lease our headquarters facility under a 15-year lease agreement which was entered into in October 2008, and has two five-year renewal options. The current annual base rent of the lease is $5.0 million, payable in equal monthly installments. The base rent escalates annually at a rate equal to the change in the consumer price index, as defined in the agreement, but not to exceed 5.5% in any year.

We have a lease for office space in Austin, Texas which terminates on September 30, 2023, and has two five-year renewal options. Under the terms of the lease, we will increase our leased space by approximately 20,000 square feet on July 31, 2016. The current annual base rent of the lease is $2.3 million. The base rent escalates annually between 2% and 4% based on the terms of the agreement. The rent expense is recorded on a straight-line basis over the length of the lease term. At September 30, 2015, we had a standby letter of credit of $2.0 million for a security deposit for this lease.

We have provisions in our leases that entitle us to aggregate remaining leasehold improvement allowances of $5.1 million. These amounts are being recorded as a reduction to rent expense ratably over the terms of the leases. The reductions in rent expense related to these lease provisions during the three months ended September 30, 2015 and 2014 were insignificant. The reductions in rent expense related to these lease provisions during the nine months ended September 30, 2015 and 2014, were $0.6 million and $0.5 million, respectively. The leasehold improvement allowances have been included in the table of operating lease commitments below as a reduction in our lease commitments ratably over the then remaining terms of the leases. The timing of the reimbursements for the actual leasehold improvements may vary from the amounts reflected in the table below.

We have also received, and expect to receive through 2016, quarterly South Carolina state incentive payments as a result of locating our headquarters facility in Berkeley County, South Carolina. These amounts are recorded as a reduction of rent expense upon receipt and were $0.6 million and $0.5 million for the three months ended September 30, 2015 and 2014, respectively, and $1.8 million and $1.7 million for the nine months ended September 30, 2015 and 2014, respectively.

Total rent expense was $2.5 million and $2.3 million for the three months ended September 30, 2015 and 2014, respectively, and $7.4 million and $6.9 million for the nine months ended September 30, 2015 and 2014, respectively.

As of September 30, 2015, the future minimum lease commitments related to lease agreements, net of related lease incentives, were as follows:



Year ending December 31,	Operating
(in thousands)	leases
2015 – remaining	$	3,157
2016	13,015
2017	11,625
2018	11,464
2019	11,216
Thereafter	38,561
Total minimum lease payments	$	89,038

Other commitments

As discussed in Note 8 to these consolidated financial statements, the term loans under the 2014 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2014 Credit Facility in February 2019.

We utilize third-party technology in conjunction with our solutions and services, with contractual arrangements varying in length from one to five years. In certain cases, these arrangements require a minimum annual purchase commitment. As of September 30, 2015, the remaining aggregate minimum purchase commitment under these arrangements was approximately $6.7 million through 2018.

Product and service indemnifications

In the ordinary course of business, we provide certain indemnifications of varying scope to clients against claims of intellectual property infringement made by third parties arising from the use of our products or services. If we determine that it is probable that a loss has been incurred related to product or service indemnifications, any such loss that could be reasonably estimated would be recognized. We have not identified any losses and, accordingly, we have not recorded a liability related to these indemnifications.

Legal contingencies

We are subject to legal proceedings and claims that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of September 30, 2015, in our opinion, there was not at least a reasonable possibility that these actions arising in the ordinary course of business will have a material adverse effect upon our consolidated financial position, results of operations or cash flows and, therefore, no material loss contingencies were recorded.