The Company leases certain equipment and facilities under operating leases which expire at various dates through 2028. The Company’s operating lease costs (gross lease expense) was $3.2 million and $9.3 million during the three and nine months ended September 30, 2019, respectively, and $1.2 million and $3.0 million during the three and nine months ended September 30, 2018, respectively, and the Company’s short-term lease costs were nominal. The Company’s variable lease costs amounted to $1.5 million and $5.0 million during the three and nine months ended September 30, 2019, respectively. The Company recognized sublease income (including reimbursed expenses) of $1.9 million and $5.6 million during the three and nine months ended September 30, 2019, respectively.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2019, the weighted average remaining operating lease term was 8.67 years.

As of September 30, 2019, the weighted average discount rate used to estimate operating lease liabilities was 7.4%.

In July 2015, the Company entered into a lease agreement for office space in San Mateo, California with a lease term until December 2028 (“San Mateo facility”). The Company uses the San Mateo facility for corporate headquarter functions, as well as product and engineering, sales and marketing, and administrative operations. The space rented is for the total office space available in the building, which was in the process of being constructed at the time the lease agreement was executed. Prior to the adoption of ASC 842, because of the Company’s involvement during the construction period, the Company was considered for accounting purposes to be the owner of the construction project pursuant to ASC 840. Accordingly, the building under construction was accounted for as owned real estate and was capitalized in the Company’s condensed consolidated balance sheets as property and equipment-building with a corresponding non-current financing obligation on leased facility. Construction was completed in 2016 and the Company capitalized $71.8 million of construction costs for the building (see Note 5 for additional information). Additionally, the Company incurred additional leasehold improvement costs of which $14.3 million was reimbursed by the landlord. As of December 31, 2018, the corresponding liability related to the construction costs incurred by the landlord totaled $92.0 million and is reflected in the condensed consolidated balance sheets as financing obligations on leased facility. As discussed in Notes 1 and 2 above, the Company adopted the requirements of ASC 842 as of January 1, 2019 using the modified retrospective transition method through a cumulative-effect adjustment to the opening accumulated deficit balance at the adoption date. At adoption, the ROU asset and operating lease liabilities also include amounts related to the Company’s San Mateo building as the amounts previously recorded in its condensed consolidated financial statements were derecognized.

As of September 30, 2019, maturities of operating lease liabilities and sublease income, by year are as follows:


(in thousands)	Operating Lease Payments		Sublease Income
Remainder of 2019	$	3,645	$	(1,172	)
2020		14,434		(2,889	)
2021		14,162		(2,535	)
2022		13,989		(336	)
2023		13,468		—
Thereafter		68,990		—
Gross lease payments (income)	$	128,688	$	(6,932	)
Less: Imputed interest		35,823
Total operating lease liabilities	$	92,865