LEASES

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

LEASES

LEASES

The Company adopted ASU 2016-02 as of January 1, 2019. Leases held on or after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840. The Company recorded a right-of-use asset of $34.8 million and a lease liability of $40.5 million. Additionally, the Company recorded a reclassification of $2.1 million from current liabilities and $3.6 million from non-current liabilities, related to deferred rent, cease-use lease liabilities, and tenant improvement liabilities related to the implementation of ASC 842.

The Company elected the following practical expedients under ASC 842-10-65-1 including (1) the package of transition provisions related to expired and existing leases that allows an entity to use the historical assessment of whether contracts are or contain leases, lease classification, and initial direct costs, and (2) the practical expedient that allows for the use of hindsight in determining the lease term.

The Company determines whether a contract is or contains a lease at inception. At the lease commencement date, the Company records a liability for the lease obligation and a corresponding asset representing the right to use the underlying asset over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and are recognized in expense using a straight-line basis for all asset classes. Variable lease payments are expensed as incurred, which primarily include maintenance costs, services provided by the lessor, and other charges reimbursed to the lessor. 

The Company leases office space, data center facilities, printers, and equipment with remaining lease terms ranging from one year to twelve years, some of which contain renewal or purchase options. The exercise of these options is at the Company’s sole discretion. The Company has entered into sublease agreements for unoccupied leased office space and records sublease income netted against rent expense. Additionally, the Company is required to maintain a standby letter of credit in the amount of $1.0 million to satisfy the requirements of a certain lease agreement.

Certain of the Company’s leases contain lease and non-lease components. For leases held on or after January 1, 2019, the Company has elected the practical expedient under ASC 842-10-15-37 for all asset classes which allows companies to account for lease and non-lease components as a single lease component.

The Company’s leases do not contain an implicit rate of return, therefore an incremental borrowing rate was determined. The Company assessed which rate would be most reflective of a reasonable rate the Company would be able to borrow based on asset class and lease term.

Finance lease right-of-use assets of $15.4 million are included in property, equipment, and capitalized software, net on the consolidated balance sheet.

The following table presents components of lease expense for the three and six months ended June 30, 2019 (in thousands):

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	491		$	1,041
Interest on lease liabilities	127			261
Operating lease cost	3,502			5,613
Variable lease cost	469			963
Sublease income	(317		)	(634		)
Total lease cost	$	4,272		$	7,244

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

	Operating Leases			Finance Leases
2019	$	2,411		$	1,361
2020	3,921			2,937
2021	8,730			2,381
2022	8,288			1,185
2023	6,835			1,275
Thereafter	37,585			8,816
Total future minimum lease payments	67,770			17,955
Less: Interest	(15,775		)	(2,024		)
Total	$	51,995		$	15,931

Future non-cancellable lease payments as of December 31, 2018 are as follows (in thousands):

	Operating Leases		Finance Leases
Year ending December 31,
2019	$	11,250	$	3,509
2020	7,059		2,567
2021	5,898		2,017
2022	5,303		1,181
2023	3,821		1,275
Thereafter	15,599		8,831
Total future minimum lease payments	48,930		19,380
Less: Interest	—		(2,548		)
Total	$	48,930	$	16,832

Supplemental cash flow information related to leases for the three and six months ended June 30, 2019 are as follows (in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,416	$	6,989
Operating cash flows for financing leases	127		260
Financing cash flows for financing leases	679		1,262
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	17,810	$	20,800
Finance leases	20		20

Supplemental balance sheet information related to leases as of June 30, 2019 are as follows:

	June 30, 2019
Weighted average remaining lease term:
Operating leases	5 years
Financing leases	8 years
Weighted average discount rate:
Operating leases	4.7	%
Financing leases	3.1	%

LEASES

LEASES

The Company adopted ASU 2016-02 as of January 1, 2019. Leases held on or after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840. The Company recorded a right-of-use asset of $34.8 million and a lease liability of $40.5 million. Additionally, the Company recorded a reclassification of $2.1 million from current liabilities and $3.6 million from non-current liabilities, related to deferred rent, cease-use lease liabilities, and tenant improvement liabilities related to the implementation of ASC 842.

The Company elected the following practical expedients under ASC 842-10-65-1 including (1) the package of transition provisions related to expired and existing leases that allows an entity to use the historical assessment of whether contracts are or contain leases, lease classification, and initial direct costs, and (2) the practical expedient that allows for the use of hindsight in determining the lease term.

The Company determines whether a contract is or contains a lease at inception. At the lease commencement date, the Company records a liability for the lease obligation and a corresponding asset representing the right to use the underlying asset over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and are recognized in expense using a straight-line basis for all asset classes. Variable lease payments are expensed as incurred, which primarily include maintenance costs, services provided by the lessor, and other charges reimbursed to the lessor. 

The Company leases office space, data center facilities, printers, and equipment with remaining lease terms ranging from one year to twelve years, some of which contain renewal or purchase options. The exercise of these options is at the Company’s sole discretion. The Company has entered into sublease agreements for unoccupied leased office space and records sublease income netted against rent expense. Additionally, the Company is required to maintain a standby letter of credit in the amount of $1.0 million to satisfy the requirements of a certain lease agreement.

Certain of the Company’s leases contain lease and non-lease components. For leases held on or after January 1, 2019, the Company has elected the practical expedient under ASC 842-10-15-37 for all asset classes which allows companies to account for lease and non-lease components as a single lease component.

The Company’s leases do not contain an implicit rate of return, therefore an incremental borrowing rate was determined. The Company assessed which rate would be most reflective of a reasonable rate the Company would be able to borrow based on asset class and lease term.

Finance lease right-of-use assets of $15.4 million are included in property, equipment, and capitalized software, net on the consolidated balance sheet.

The following table presents components of lease expense for the three and six months ended June 30, 2019 (in thousands):

	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	491		$	1,041
Interest on lease liabilities	127			261
Operating lease cost	3,502			5,613
Variable lease cost	469			963
Sublease income	(317		)	(634		)
Total lease cost	$	4,272		$	7,244

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

	Operating Leases			Finance Leases
2019	$	2,411		$	1,361
2020	3,921			2,937
2021	8,730			2,381
2022	8,288			1,185
2023	6,835			1,275
Thereafter	37,585			8,816
Total future minimum lease payments	67,770			17,955
Less: Interest	(15,775		)	(2,024		)
Total	$	51,995		$	15,931

Future non-cancellable lease payments as of December 31, 2018 are as follows (in thousands):

	Operating Leases		Finance Leases
Year ending December 31,
2019	$	11,250	$	3,509
2020	7,059		2,567
2021	5,898		2,017
2022	5,303		1,181
2023	3,821		1,275
Thereafter	15,599		8,831
Total future minimum lease payments	48,930		19,380
Less: Interest	—		(2,548		)
Total	$	48,930	$	16,832

Supplemental cash flow information related to leases for the three and six months ended June 30, 2019 are as follows (in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,416	$	6,989
Operating cash flows for financing leases	127		260
Financing cash flows for financing leases	679		1,262
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	17,810	$	20,800
Finance leases	20		20

Supplemental balance sheet information related to leases as of June 30, 2019 are as follows:

	June 30, 2019
Weighted average remaining lease term:
Operating leases	5 years
Financing leases	8 years
Weighted average discount rate:
Operating leases	4.7	%
Financing leases	3.1	%