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Leases
9 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases

5. Leases

Our leasing arrangements are reflected on the balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets.

Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, we determine an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. Our lease terms may include options to extend or terminate the lease. Currently, it is not reasonably certain that we will exercise those options and therefore, we utilize the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities for all our leases. We have certain insignificant short-term leases with an initial term of twelve months or less that are not recorded in our condensed consolidated balance sheets. Operating right-of-use lease assets are classified as operating lease assets on our condensed consolidated balance sheets. We determine whether an arrangement is a lease at inception and classify it as finance or operating. All of our existing material leases are classified as operating leases. Our leases do not contain any residual value guarantees.

Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We have applied the practical expedient to combine fixed payments for non-lease components with our lease payments for all of our leases and account for them together as a single lease component, which increases the amount of our lease assets and corresponding liabilities. Payments under our lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities.

As part of our response to the COVID-19 pandemic and ongoing cost reduction efforts, we vacated a portion of our Irvine office and the remainder of our San Diego office. In the three months ended December 31, 2020, we recorded impairments of $2,215 to our operating right-of-use assets and certain related fixed assets associated with the vacated locations based on projected sublease rental income and estimated sublease commencement dates.

As part of a business restructuring plan implemented in June 2019, we vacated portions of certain leased locations and recorded impairments of $1,948 and $4,353 in the three and nine months ended December 31, 2019 to our operating right-of-use assets and certain related fixed assets associated with the vacated locations, or portions thereof, in Horsham, St. Louis, Irvine, and Atlanta based on projected sublease rental income and estimated sublease commencement dates.

The above impairment analyses were performed at the asset group level and the impairment charges were estimated by comparing the fair value of each asset group based on the expected cash flows to its respective book value. We determined the discount rate for each asset group based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the impairment date. Significant judgment was required to estimate the fair value of each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded.

Operating lease costs are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the condensed consolidated statements of comprehensive income. Total operating lease costs were $2,568 and $2,624 for the three months ended December 31, 2020 and 2019, respectively. Total operating lease costs were $7,103 and $7,675 for the nine months ended December 31, 2020 and 2019, respectively.

Components of operating lease costs are summarized as follows:

 

 

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating lease costs

 

$

2,118

 

 

$

2,469

 

 

$

6,302

 

 

$

7,146

 

Short-term lease costs

 

 

6

 

 

 

17

 

 

 

19

 

 

 

110

 

Variable lease costs

 

 

568

 

 

 

181

 

 

 

1,154

 

 

 

518

 

Less: Sublease income

 

 

(124

)

 

 

(43

)

 

 

(372

)

 

 

(99

)

Total operating lease costs

 

$

2,568

 

 

$

2,624

 

 

$

7,103

 

 

$

7,675

 

 

Supplemental cash flow information related to operating leases is summarized as follows:

 

 

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

5,297

 

 

$

3,014

 

 

$

11,561

 

 

$

8,494

 

Operating lease assets obtained in exchange for operating lease liabilities

 

 

 

 

 

534

 

 

 

3,107

 

 

 

5,858

 

 

We have operating lease agreements for our offices in the United States and India with lease periods expiring between calendar 2020 and 2026. As of December 31, 2020, our operating leases had a weighted average remaining lease term of 3.9 years and a weighted average discount rate of 4.0%. Future minimum aggregate lease payments under operating leases as of December 31, 2020 are summarized as follows:

 

For the year ended March 31,

 

 

 

 

2021 (remaining three months)

 

$

5,044

 

2022

 

 

11,679

 

2023

 

 

11,063

 

2024

 

 

9,201

 

2025

 

 

6,807

 

Thereafter

 

 

1,257

 

Total future lease payments

 

 

45,051

 

Less interest

 

 

(3,362

)

Total lease liabilities

 

$

41,689