Leases

9 Months Ended

Sep. 30, 2022

Leases

Leases

15.Leases

The Company leases office space under non-cancelable operating leases with various expiration dates through 2029. The Company accounts for leases under ASC 842 by recording right-of-use assets and liabilities. The right-of-use asset represents the Company’s right to use underlying assets for the lease term and the lease liability represents the Company’s obligation to make lease payments under the lease. The Company determines if an arrangement is or contains a lease at contract inception and exercises judgment and applies certain assumptions when determining the discount rate, lease term and lease payments. ASC 842 requires a lessee to record a lease liability based on the discounted unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily determined, the incremental borrowing rate. Generally, the Company does not have knowledge of the rate implicit in the lease and, therefore, uses its incremental borrowing rate for a lease. The lease term includes the non-cancelable period of the lease plus any additional periods covered by an option to extend that the Company is reasonably certain to exercise. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. Certain of the Company’s lease agreements include escalating lease payments. Additionally, certain lease agreements contain renewal provisions and other provisions which require the Company to pay taxes, insurance, or maintenance costs.

The Company subleases certain leased office space to third parties when it determines there is excess leased capacity. On July 8, 2022, the Company entered into a sublease with Monday.com with respect to substantially all of the Company's existing corporate headquarters. The sublease commenced on August 26, 2022 and expires on May 30, 2026, unless terminated sooner in accordance with the provisions of the sublease. Pursuant to the terms of the sublease, Monday.com will pay a fixed monthly rent of $0.8 million, subject to periodic increases. See Note 21 for information regarding an impairment charge the Company recorded during the three months ended September 30, 2022 with respect to the original lease.

Sublease rent income is recognized as an offset to rent expense on a straight-line basis over the lease term. In addition to sublease rent, other costs such as common-area maintenance, utilities, and real estate taxes are charged to subtenants over the duration of the lease for their proportionate share of these costs.

The following illustrates the lease costs for the three and nine months ended September 30, 2022:

	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Operating lease cost	$	7,653	$	22,820
Sublease income		(2,680)		(6,350)
Total lease cost	$	4,973	$	16,470

All components of total lease cost are recorded within General and administrative expenses within the condensed consolidated statement of operations. The Company does not have material short-term or variable lease costs.

The following amounts were recorded in the Company’s condensed consolidated balance sheet related to operating leases:

	September 30, 2022
Assets
Right-of-use assets	$	61,303
Liabilities
Current lease liabilities		25,562
Noncurrent lease liabilities		52,490
Total lease liabilities	$	78,052

Other information related to leases was as follows:

	Nine Months Ended
	September 30, 2022
Supplemental cash flow information:
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows for operating lease liabilities		25,434

	September 30, 2022
Weighted average remaining lease term (years)	3.31
Weighted average discount rate	13.02	%

Maturities of lease liabilities as of September 30, 2022 were as follows:

Year	Operating Leases
Remainder of 2022	$	8,599
2023		32,031
2024		23,716
2025		20,979
2026		8,272
Thereafter		2,193
Total lease payments		95,790
Less: imputed interest		(17,738)
Total	$	78,052

Sublease receipts to be received in the future under noncancelable subleases as of September 30, 2022 were as follows:

Year	Amount
Remainder of 2022	$	4,027
2023		15,694
2024		15,538
2025		15,538
2026		4,886
Thereafter		178
Total	$	55,861

Future minimum lease payments under leases having initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2021 are as follows:

Year	Amount
2022	$	33,817
2023		31,910
2024		23,885
2025		21,148
2026		8,441
Thereafter		2,642
Total	$	121,843