Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases

On July 8, 2019, the Company entered into a definitive triple net space lease agreement with 237 North First Street Holdings, LLC (the “Landlord”), whereby the Company will lease approximately 90,000 square feet of office space located at 4453 North First Street in San Jose, California (the “Lease”). The office space will serve as the Company’s corporate headquarters and include engineering, marketing and administrative functions. The Company expects to move to the new premises during the summer of 2020. The Lease has a term of 128 months from the commencement date in October 2019. The starting rent of the Lease is approximately $3.26 per square foot on a triple net basis. The annual base rent increases each year to certain fixed amounts over the course of the term as set forth in the Lease and will be $4.38 per square foot in the eleventh year. In addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes, and a management fee. The Lease also allows for an option to expand, wherein the Company has the right of first refusal to rent additional space in the building. The Company has a one-time option to extend the Lease for a period of 60 months and may elect to terminate the Lease, via written notice to the Landlord, in the event the office space is damaged or destroyed. Total future required payments under the Lease are approximately $41 million. Pursuant to the terms of the lease, the landlord agreed to reimburse the Company up to $8.9 million, related to a tenant improvement allowance. The lease of the Company’s current Sunnyvale, California headquarters expires on June 30, 2020.

Refer to Note 13, “Commitments and Contingencies,” for additional information regarding the Company’s leases.

The Company used its incremental borrowing rate to measure the lease liabilities at the adoption date for its existing operating leases that commenced prior to January 1, 2019 which was based on the remaining lease term and remaining lease payments for such leases. On an ongoing basis, as most of the Company’s leases do not provide an implicit rate, the Company will use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company will use the implicit rate when readily determinable. Refer to Note 3, “Recent Accounting Pronouncements” for additional information regarding the adoption of the New Leasing Standard on January 1, 2019.

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2019 (in thousands):



Years ending December 31,	Amount
2020	$	7,926
2021	8,602
2022	7,381
2023	4,618
2024	3,977
Thereafter	23,314
Total minimum lease payments	55,818
Less: amount of lease payments representing interest	(9,572		)
Present value of future minimum lease payments	46,246
Less: current obligations under leases	(6,357		)
Long-term lease obligations	$	39,889

As of December 31, 2019, the weighted-average remaining lease term for the Company’s operating leases was 7.9 years, and the weighted-average discount rate used to determine the present value of the Company’s operating leases was 4.2%.

Operating lease costs included in research and development and selling, general and administrative costs on the statement of operations were $9.6 million for the year ended December 31, 2019. Rent expense, recorded under accounting guidance in

effect prior to January 1, 2019 when the New Leasing Standard became effective for the Company, was approximately $5.2 million and $4.4 million for the years ended December 31, 2018 and 2017, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities was $10.4 million for the year ended December 31, 2019.