Leases

3 Months Ended

Mar. 31, 2019

The Company has operating leases for corporate offices and datacenters, and finance leases for infrastructure equipment. The Company’s leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 5 years.

The Company also has subleases of former corporate offices. Subleases have remaining lease terms of 3 to 4 years. Sublease income, which is recorded as a reduction of rental expense, was $1.9 million and $3.5 million for the three months ended March 31, 2019 and 2018, respectively.

The components of single lease cost were as follows:



	Three months ended
	March 31, 2019		March 31, 2018
Operating lease cost ⁽¹⁾	$	22.1	$	21.9
Finance lease cost:
Amortization of assets under finance lease	21.7		21.7
Interest	2.2		1.9
Total finance lease cost	$	23.9	$	23.6

⁽¹⁾ Is presented gross of sublease income and includes short-term leases, which are immaterial

Other information related to leases was as follows:



	Three months ended
	March 31, 2019
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases included in cash from operating activities	$	23.0
Payments for finance leases included in cash from operating activities	$	2.2
Payments for finance leases included in cash from financing activities	$	26.2
Assets obtained in exchange for lease obligations:
Operating leases	$	14.5
Finance leases	$	39.9

Weighted Average Remaining Lease Term (in years)
Operating leases	9.7
Finance leases	2.8

Weighted Average Discount Rate
Operating leases	4.4		%
Finance leases	5.1		%

Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as follows:



Year ending December 31,	Operating leases⁽¹⁾			Finance leases
2019 (excluding the three months ended March 31, 2019)	$	64.8		$	64.2
2020	84.6			56.2
2021	77.6			41.1
2022	70.3			27.4
2023	53.4			2.2
Thereafter	357.0			—
Total future minimum lease payments	707.7			191.1
Less imputed interest	(163.6		)	(13.7		)
Less tenant improvement receivables	(28.5		)	—
Total liability	$	515.6		$	177.4

⁽¹⁾ Consists of future non-cancelable minimum rental payments under operating leases for the Company’s corporate offices and datacenters where the Company has possession, excluding rent payments from the Company’s sub-tenants and variable operating expenses. As of March 31, 2019, the Company is entitled to non-cancelable rent payments from its sub-tenants of $40.6 million, which will be collected over the next 4 years.

In 2017, the Company entered into a lease agreement for office space in San Francisco, California, to serve as its new corporate headquarters. The Company took initial possession of the first phase of its new corporate headquarters in June 2018, and began to recognize single lease cost. In that same period, the Company recorded a lease incentive obligation related to tenant improvement reimbursements associated with the first phase. The lease incentive obligation is recorded net against the Company's operating right-of-use asset and was $42.6 million as of March 31, 2019. The Company expects to start making recurring rental payments under the lease in the third quarter of 2019. The Company's total expected minimum obligations for all three phases of the lease are $843.1 million, which exclude expected tenant improvement reimbursements from the landlord of approximately $75.0 million and variable operating expenses. The Company’s obligations under the lease are supported by a $34.2 million letter of credit, which reduced the borrowing capacity under the revolving credit facility. In the three months ended March 31, 2019, the Company collected tenant improvement reimbursements from the landlord totaling $13.8 million.

As of March 31, 2019, the Company had commitments of $408.3 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use asset or operating lease liability. These operating leases will commence between 2019 and 2021 with lease terms of 4 years to 15 years.

Leases

The components of single lease cost were as follows:



	Three months ended
	March 31, 2019		March 31, 2018
Operating lease cost ⁽¹⁾	$	22.1	$	21.9
Finance lease cost:
Amortization of assets under finance lease	21.7		21.7
Interest	2.2		1.9
Total finance lease cost	$	23.9	$	23.6

⁽¹⁾ Is presented gross of sublease income and includes short-term leases, which are immaterial

Other information related to leases was as follows:



	Three months ended
	March 31, 2019
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases included in cash from operating activities	$	23.0
Payments for finance leases included in cash from operating activities	$	2.2
Payments for finance leases included in cash from financing activities	$	26.2
Assets obtained in exchange for lease obligations:
Operating leases	$	14.5
Finance leases	$	39.9

Weighted Average Remaining Lease Term (in years)
Operating leases	9.7
Finance leases	2.8

Weighted Average Discount Rate
Operating leases	4.4		%
Finance leases	5.1		%

Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as follows:



Year ending December 31,	Operating leases⁽¹⁾			Finance leases
2019 (excluding the three months ended March 31, 2019)	$	64.8		$	64.2
2020	84.6			56.2
2021	77.6			41.1
2022	70.3			27.4
2023	53.4			2.2
Thereafter	357.0			—
Total future minimum lease payments	707.7			191.1
Less imputed interest	(163.6		)	(13.7		)
Less tenant improvement receivables	(28.5		)	—
Total liability	$	515.6		$	177.4