Leases

6 Months Ended

Jun. 30, 2023

The Company enters into various office space, data center, and equipment lease agreements in conducting its normal business operations. At the inception of any contract, the Company evaluates the agreement to determine whether the contract contains a lease. If the contract contains a lease, the Company then evaluates the term and whether the lease is an operating or finance lease. Most leases include one or more options to renew or may have a termination option. The Company determines whether these options are reasonably certain to be exercised or not at the inception of the lease. In addition, some leases contain escalation clauses. The rent expense is recognized on a straight-line basis in the consolidated statements of operations and comprehensive income (loss) over the term of the lease. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Further, the Company treats all lease and non-lease components as a single combined lease component for all classes of underlying assets. The Company also enters into sublease agreements for some of its leased office space. Immaterial rental income attributable to subleases is offset against rent expense over the terms of the respective leases.

The Company leases office space and computer and other equipment under operating lease agreements expiring at various dates through 2032. Under the lease agreements, in addition to base rent, the Company is generally responsible for operating and maintenance costs and related fees. Several of these agreements include tenant improvement allowances, rent holidays or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our consolidated balance sheets equal to the difference between rent expense and future minimum lease payments due. The rent expense related to these items is recognized on a straight-line basis over the terms of the leases. The Company’s primary office location is in Arlington, Virginia, which has served as its corporate headquarters since 2013. The Arlington, Virginia office lease expires in January 2032.

In connection with various lease agreements, the Company is required to maintain $2.1 million and $2.3 million in letters of credit as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, the Company held $2.1 million and $2.3 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

Right-of-Use Asset Impairment

During the three months ended June 30, 2023, the Company decommissioned its Chicago, IL lease and wrote off the associated right-of-use asset, recognizing an impairment charge of $24.1 million in right-of-use assets impairment on the consolidated statements of operations.

The following table summarizes our primary office leases as of June 30, 2023 (in thousands, other than term):


Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA	8.6	$	28,960	$	1,579

Edison, NJ	2.8	1,495		222
Makati City, Philippines	4.9	3,397		—
Alpharetta, GA	2.3	1,066		—
Pune, India	4.8	2,765		—
Brea, CA	3.9	3,777		—

The following table summarizes the components of our lease expense (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	(1,727)	$	2,231	$	213	$	4,505


Variable lease cost	1,565		1,171		3,121		2,497
Total lease cost	$	(162)	$	3,402	$	3,334	$	7,002

Maturity of lease liabilities (in thousands) as of June 30, 2023, is as follows:


	Operating lease expense
2023	$	4,444
2024	11,610
2025	11,285
2026	10,291
2027	10,044
Thereafter	32,161
Total lease payments	79,835
Less:
Interest	17,041
Present value of lease liabilities	$	62,794

Our weighted-average discount rate and our weighted remaining lease terms (in years) are as follows:



	June 30, 2023
Weighted average discount rate	6.71	%
Weighted average remaining lease term	7.5