Leases

3 Months Ended

Mar. 31, 2024

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 the lease 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. 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 such items in right-of-use assets and operating lease liabilities 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. Effective January 1, 2024, the Company’s primary office location is in Arlington, Virginia with a lease that expires in December 2030.

In connection with various lease agreements, the Company is required to maintain $2.2 million and $2.1 million in letters of credit as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, the Company held $2.2 million and $2.1 million in restricted cash and restricted investments on the consolidated balance sheet as collateral for the letters of credit, respectively.

The Company terminated a portion of its previous headquarters lease in Arlington, VA effective December 31, 2023 and recognized the impact of a $6.5 million termination penalty in its operating lease liability - current on its consolidated balance sheet. The termination payment consisted of two payments of $3.25 million that were paid on October 1, 2023 and April 1, 2024. In addition, the Company terminated the remainder of its previous headquarters lease in Arlington, VA effective March 27, 2024 and recognized the impact of a $3.5 million termination penalty in its operating lease liability - current on its consolidated balance sheet. The termination payment of $3.5 million was paid on April 1, 2024.

The following table summarizes our primary office leases as of March 31, 2024 (in thousands, other than term):


Location	Lease Termination Term (in years)	Future Minimum Lease Commitments		Letter of Credit Amount Required
Arlington, VA (1)	6.8	$	3,258	$	1,579


Edison, NJ	2.1	1,104		222
Makati City, Philippines	4.2	2,825		—
Alpharetta, GA	1.5	716		—
Pune, India	4.0	2,334		—
Brea, CA	3.2	3,083		—

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(1) Amounts required under the letter of credit for our previous headquarters’ lease in Arlington, VA until December 2024.

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


	For the Three Months Ended March 31,
		2024		2023
Operating lease cost		$	103	$	1,940


Variable lease cost		1,425		1,556
Total lease cost		$	1,528	$	3,496

Maturity of lease liabilities (in thousands) is as follows:


	Operating lease expense
2024	$	13,024
2025	8,338
2026	7,566
2027	6,955
2028	5,808
Thereafter	12,428
Total lease payments	54,119
Less:
Interest	8,954
Present value of lease liabilities	$	45,165

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


	March 31, 2024

Weighted average discount rate	7.07	%
Weighted average remaining lease term	5.1