Leases

3 Months Ended

Mar. 31, 2020

The Company leases office space, domestically and internationally, under operating leases. The Company’s leases have remaining lease terms generally between one year and ten years. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and long-term operating lease liabilities in the Company’s unaudited condensed consolidated balance sheets. The Company does not have any finance 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, sales, marketing and administrative functions. The Company expects to move to the new premises during the second half 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.

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 unaudited condensed consolidated balance sheet as of March 31, 2020 (in thousands):



Years ending December 31,	Amount
2020 (remaining nine months)	$	4,685
2021	8,486
2022	7,332
2023	4,611
2024	3,977
Thereafter	23,314
Total minimum lease payments	52,405
Less: amount of lease payments representing interest	(9,137		)
Present value of future minimum lease payments	43,268
Less: current obligations under leases	(5,194		)
Long-term lease obligations	$	38,074

As of March 31, 2020, 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 the condensed consolidated statements of operations were $2.9 million and $2.2 million for the three months ended March 31, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities were $2.3 million and $2.6 million for the three months ended March 31, 2020 and 2019, respectively.