Leases

12 Months Ended

Jun. 30, 2021

LEASES

The Company adopted ASU 2016-02 and its related amendments (collectively known as “ASC 842”) on July 1, 2019 using the optional transition method in ASU 2018-11. Therefore, the reported results for the fiscal year ended June 30, 2021 and 2020 reflect the application of ASC 842 while the reported results for the year ended June 30, 2019 were not adjusted and continue to be reported under the accounting guidance, ASC 840, Leases (“ASC 840”), in effect for that fiscal year.

The Company determines if an arrangement is a lease, or contains 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. The lease term is used to determine lease classification as an operating or finance lease and is used to calculate straight-line expense for operating leases. The Company elected the package of practical expedients permitted under the

transition guidance within ASU 2016-02 to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs.

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. As a practical expedient, 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. ROU assets also include prepaid lease payments and exclude lease incentives received. The Company estimates contingent lease incentives when it is probable that the Company is entitled to the incentive at lease commencement. 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 for both real estate and equipment leases. The determination of the incremental borrowing rate requires judgment. The Company determines the incremental borrowing rate 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 elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term.

The Company leases certain office space, data centers and equipment. The Company’s leases have remaining terms of 1 to 12 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. These variable lease costs are recognized as a variable lease expense when incurred. Certain leases include options to purchase the leased asset at the end of the lease term, which is assessed as a part of the Company’s lease classification determination. The depreciable life of the ROU asset and leasehold improvements are limited by the expected lease term unless the Company is reasonably certain of a transfer of title or purchase option.

At June 30, 2021 and 2020, the Company had operating lease assets of $55,977 and $63,948 and financing lease assets of $188 and $318, respectively. At June 30, 2021, total operating lease liabilities of $60,828 were comprised of current operating lease liabilities of $11,460 and noncurrent operating lease liabilities of $49,368, and total financing lease liabilities of $193 were comprised of current financing lease liabilities of $110 and noncurrent financing lease liabilities of $83. 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 with accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of $23,813 and $13,719 as of June 30, 2021 and 2020. 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 consolidated balance sheet. Financing lease assets were recorded net of accumulated amortization of $153 and $38 as of June 30, 2021 and 2020.

Operating lease costs for the fiscal year ended June 30, 2021 and 2020 were $14,676 and $16,029, respectively. Financing lease costs for the fiscal year ended June 30, 2021 and 2020 were $121 and $41, respectively. Total operating and financing lease costs for the fiscal year ended June 30, 2021 and 2020 included variable lease costs of approximately $3,831 and $4,017, respectively. Operating and financing lease expense are included within cost of services, research and development, and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s consolidated statement of income.

For the fiscal year ended June 30, 2021 and 2020, operating cash flows for payments on operating leases were $13,672 and $14,348 and ROU assets obtained in exchange for operating lease liabilities were $4,691 and $4,212, respectively. Financing cash flows for payments on financing leases for the fiscal year ended June 30, 2021 and 2020 were $117 and $33, respectively.

As of June 30, 2021 and 2020, the weighted-average remaining lease terms for the Company's operating leases were 81 months and 88 months and the weighted-average discount rates were 2.67% and 2.76%, respectively. As of June 30, 2021 and 2020, the weighted-average remaining lease terms for the Company's financing leases were 21 months and 33 months and the weighted-average discount rates were 2.39% and 2.42%, respectively.

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 June 30, 2021*:


Due dates	Future Minimum Rental Payments

2022	12,942
2023	11,862
2024	9,686
2025	6,899
2026	5,979
Thereafter	19,185
Total lease payments	$	66,553
Less: interest	(5,725)
Present value of lease liabilities	$	60,828

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

Lease payments include $5,464 related to options to extend lease terms that are reasonably certain of being exercised. At June 30, 2021, there were $501 in legally binding lease payments for a lease signed but not yet commenced. The commencement date of the lease is July 1, 2021 and has a term of 68 months.

Rent expense for all operating leases was $15,196 during the year ended June 30, 2019.