Leases Leases (Notes)

3 Months Ended

Sep. 30, 2020

LEASES

The Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the Company’s leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based upon the information available at commencement date. The determination of the incremental borrowing rate requires judgment and is determined by using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease.

The Company leases certain office space, data centers and equipment with remaining terms of 1 to 13 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. Variable lease costs are recognized as a variable lease expense when incurred.

At September 30, 2020 and June 30, 2020, the Company had operating lease assets of $65,242 and $63,948 and financing lease assets of $356 and $355, respectively. At September 30, 2020, total operating lease liabilities of $69,913 were comprised of current operating lease liabilities of $13,012 and noncurrent operating lease liabilities of $56,901, and total financing lease liabilities of $295 were comprised of current financing lease liabilities of $126 and noncurrent financing lease liabilities of $169. At June 30, 2020, total operating lease liabilities of $68,309 were comprised of current operating lease liabilities of $11,712 and noncurrent operating lease liabilities of $56,597, and total financing lease liabilities of $323 were comprised of current financing lease liabilities of $115 and noncurrent financing lease liabilities of $208.

Operating lease assets are included within other non-current assets and operating lease liabilities are included within accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s condensed consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of $16,911 and $13,719 as of September 30, 2020 and June 30, 2020, respectively. Financing lease assets are included within property and equipment, net and financing lease liabilities are included within notes payable (current portion) and long-term debt (noncurrent portion) in the Company’s condensed consolidated balance sheet. Financing lease assets were recorded net of accumulated amortization of $67 and $38 as of September 30, 2020 and June 30, 2020, respectively.

Operating lease costs for the three months ended September 30, 2020 and 2019 were $3,909 and $4,007, respectively. Financing lease costs for the three months ended September 30, 2020 and 2019 were $31 and $0, respectively. Total operating and financing lease costs for the respective quarters included variable lease costs of approximately $1,380 and $879. Operating and financing lease expense are included within cost of services, research and development, and selling, general & administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of income.

For the three months ended September 30, 2020 and 2019, the Company had operating cash flows for payments on operating leases of $3,298 and $3,927, and right-of-use assets obtained in exchange for operating lease liabilities of $4,485 and $1,370, respectively. Operating cash flows for interest paid on financing leases for the three months ended September 30, 2020 and 2019 were $2 and $0, respectively.

As of September 30, 2020 and June 30, 2020, the weighted-average remaining lease term for the Company's operating leases was 86 months and 88 months and the weighted-average discount rate was 2.66% and 2.76%, respectively. As of September 30, 2020 and June 30, 2020 the weighted-average remaining lease term for the Company's financing leases was 30 months and 33 months, respectively. The weighted-average discount rate for the Company's financing leases was 2.42% as of September 30, 2020 and June 30, 2020.

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at September 30, 2020*:


Due Dates (fiscal year)	Future Minimum Rental Payments

2021 (remaining period)	$	10,174
2022	13,233
2023	11,772
2024	9,640
2025	6,899
Thereafter	25,164
Total lease payments	$	76,882
Less: interest	(6,969)
Present value of lease liabilities	$	69,913

*Financing leases were immaterial to the quarter, so a maturity of lease liabilities table has only been included for operating leases.

Lease payments include $10,078 related to options to extend lease terms that are reasonably certain of being exercised. At September 30, 2020 and 2019, there were no legally binding lease payments for leases signed but not yet commenced.