IMPAIRMENT AND RESTRUCTURING CHARGES

12 Months Ended

Dec. 31, 2022

Restructuring and Related Activities [Abstract]

In February 2022, the Company's board of directors (the “Board”) approved a restructuring plan ("Restructuring Plan") to allow it to effectively and efficiently scale its business, which resulted in severance and other employment related costs of $3.4 million during the year ended December 31, 2022. Also in February 2022, the Board approved reducing the Company's leased space for its headquarters in San Francisco, California, by a total amount of leased square footage of approximately 50%. As a result, the Company recognized an impairment of its ROU asset and related leasehold improvements and furniture and fixtures in the amount of $23.2 million during the year ended December 31, 2022. The Company's restructuring and impairment charges are described below (in thousands):


	Year Ended December 31, 2022
Restructuring charges	$	3,444
Impairment charges	23,164
Total	$	26,608

Restructuring

The following table provides a summary of changes in the restructuring liabilities associated with the Restructuring Plan (in thousands):


	December 31, 2021		Charges		Cash Payments		December 31, 2022
Employee severance	$	—	$	3,444	$	(3,050)	$	394
Total	$	—	$	3,444	$	(3,050)	$	394

Impairment

On February 15, 2022, the Board agreed to pursue a sublease of one floor (approximately 50%) of the San Francisco Lease. The Company recorded $20.5 million in impairment charges on its ROU asset during the year ended December 31, 2022 and $2.7 million for the impairment of related leasehold improvements and furniture and fixtures. The impairment was recorded to restructuring and impairment expenses within the consolidated statement of operations.

The Company accounts for the impairment of long-lived assets in accordance with ASC 360, Impairment or Disposal of Long-Lived Assets. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying value. If an asset is determined to be impaired, the impairment is measured by the amount that the carrying value of the asset exceeds its fair value.

The Company estimated undiscounted future cash flows from its vacant office lease based on the Company’s intent and ability to sub-lease the vacant office space, based on the facts and circumstances discussed below, which it had ceased using and estimated future sub-lease income considering the local real estate market conditions. The Company also factored into its estimate the amount of time to identify a tenant and to enter into an agreement. The Company estimated the fair value of the ROU asset related to the vacant office lease by discounting the estimated undiscounted future cash flows using the average lease capitalization rate, plus average inflation rate, for other lease transactions in the local area during the year.

The Company has engaged a leasing broker and has formalized a marketing plan for the San Francisco office market. The sublease market for commercial office space is currently very challenging in the San Francisco area due to lower demand for leased office space as most companies have adjusted to allowing their employees to work from home during and after the COVID-19 pandemic that persisted throughout 2020 and 2021. The Company believes that it is likely to be able to sublease a portion of its existing office space, but at a rate below the amount that it is currently paying.

Significant judgment and estimates are required in assessing impairment of ROU assets, including identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, and determining appropriate discount rates.

The following table presents impairment charges recorded during the year ended December 31, 2022:


	Year Ended December 31, 2022
ROU asset	$	20,451
Leasehold improvements	2,211
Furniture and fixtures	502
Total	$	23,164

For further details on the Company's leases, refer to Note 8. Commitments and Contingencies.