Leases

9 Months Ended

Sep. 30, 2019

LEASES

The Company leases certain office space and equipment under various leases. In addition to rent, the leases require the Company to pay for taxes, insurance, maintenance and other operating expenses. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, accrued expenses and other current liabilities, and operating lease liabilities in the Company’s condensed consolidated balance sheets. Finance leases are included in property and equipment, net, accrued expenses and other current liabilities and other long-term liabilities in the Company’s condensed consolidated balance sheets. Finance leases were not material to the condensed consolidated financial statements as of September 30, 2019.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the later of the adoption date of the new standard or the commencement date. The lease liability is based on the present value of lease payments over the lease term (or the remaining term in the case of existing leases at time the Company adopted ASC 842). The Company uses the implicit rate when readily determinable. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset is based on the lease liability, subject to adjustment, such as for initial direct costs, and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. For most operating leases, expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The Company has lease agreements with lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs), which are generally accounted for as a single lease component, such as for real estate leases. For certain equipment leases, such as colocation facilities, the Company accounts for the lease and non-lease components separately.

The components of lease expense were as follows (in thousands):



		Three Months Ended			Nine Months Ended
		September 30, 2019
	Classification
Operating lease cost	Operating expenses	$	12,599		$	37,376
Variable lease cost	Operating expenses	2,748			7,566
Sublease income	Other income (expense), net	(236		)	(667		)
Net lease cost		$	15,111		$	44,275

Supplemental cash flow information related to leases was as follows (in thousands):



	Nine Months Ended
	September 30,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	41,199
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	52,179

Lease Term and Discount Rate



	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases	6.2
Weighted-average discount rate
Operating leases	5.00	%

Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):



Year ending December 31,	Operating Leases
2019 (remaining three months)	$	11,907
2020	61,054
2021	52,483
2022	44,406
2023	40,931
After 2023	102,716
Total lease payments	$	313,497
Less: imputed interest	(45,136		)
Present value of lease liabilities	$	268,361

Supplemental balance sheet information related to leases was as follows (in thousands):



Operating Leases	September 30, 2019
Operating lease right-of-use assets	$	218,625

Accrued expenses and other current liabilities	$	47,329
Operating lease liabilities	221,032
Total operating lease liabilities	$	268,361