Leases

9 Months Ended

Sep. 30, 2019

We lease certain office facilities and equipment primarily under various operating leases. Our leases have remaining contractual terms up to seven years, some of which include options to extend the leases for up to seven years. Our lease agreements do not contain any material residual value guarantees, material restrictive covenants, or material termination options. Our operating lease costs are primarily related to facility leases for administration offices and research and development facilities, and our finance leases are immaterial.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

In addition to base rent, certain of our operating leases require variable payments, such as insurance and common area maintenance. These variable lease costs, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Operating Lease Assets and Liabilities (in thousands):


	September 30, 2019		Balance Sheet Classification
Lease assets	$	10,280	Operating lease right-of-use assets

Current lease liabilities	$	(926)	Accrued liabilities
Non-current lease liabilities	(9,932)		Long-term operating lease liabilities
Total lease liabilities	$	(10,858)

During the nine months ended September 30, 2019, we entered into several new lease agreements including our San Diego headquarter expansion and a new UK office lease, which resulted an increase in lease assets and liabilities of $6.1 million and $6.0 million, respectively.

Maturity of Operating Lease Liabilities (in thousands):


Maturity Dates	September 30, 2019
Remaining three months ending December 31, 2019	$	251
2020	1,857
2021	2,142
2022	2,180
2023	1,905
Thereafter	5,257
Total lease payments	13,592
Less imputed interest	(2,734)
Present value of lease liabilities	$	10,858

As of September 30, 2019, our operating leases have a weighted-average remaining lease term of 7 years and a weighted-average discount rate of 6%. Cash paid for amounts included in the measurement of operating lease liabilities was $0.5 million and $1.6 million, for the three and nine months ended September 30, 2019, respectively. Operating lease expense was $0.5 million (net of sublease income of $0.02 million) and $1.6 million (net of sublease income of $0.7 million) , for the three and nine months ended September 30, 2019, respectively.