Leases

12 Months Ended

Dec. 31, 2021

LEASESThe Company leases certain office spaces and research and development laboratory facilities, vehicles, and office equipment with remaining lease terms ranging from one to fourteen years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options which allows the Company to, at its election, renew or extend the lease for a fixed or indefinite period of time. These optional periods have not been considered in the determination of the right-of-use-assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.

On July 1, 2019, the Company adopted ASU 2016-02 under the modified retrospective approach by initially applying ASU 2016-02 at the adoption date, rather than at the beginning of the earliest comparative period presented. Results for the year ended December 31, 2021, the six-month transition period ended December 31, 2020 and the year ended June 30, 2020 are presented under ASU 2016-02. Prior period amounts were not adjusted and continue to be reported under previous lease accounting guidance. As part of the adoption, the Company elected the package of practical expedients to avoid reassessing prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the practical expedient allowing the use of hindsight in determining the lease term and assessing impairment of right-of-use assets based on all facts and circumstances through the effective date of the new standard. The Company has elected the recognition exemption for short-term leases for all leases that qualify. Under this exemption, the Company will not recognize right-of-use assets or lease liabilities for those leases that qualify as a short-term lease (leases with lease terms of 12 months or less), which includes not recognizing right-of-use assets or lease liabilities for existing short-term leases in transition. The Company also has elected the practical expedient to avoid separating lease and non-lease components for any of its leases within its existing classes of assets. We recognize each new lease within right-of-use assets and lease liabilities once the lease commences.

The Company performed evaluations of its contracts and determined each of its identified leases are operating leases. For the year ended December 31, 2021, the Company incurred $20.7 million in lease costs which are included in operating expenses in the Consolidated Statements of Operations in relation to these operating leases. Of such lease costs, $3.2 million was variable lease expense, which was not included in the measurement of the Company's operating right-of-use assets and lease liabilities. The variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components. For the transition period ended December 31, 2020, the Company incurred $9.9 million in lease costs which are included in operating expenses in the Consolidated Statements of Operations in relation to these operating leases. Of such lease costs, $1.8 million was variable lease expense and $0.1 million was short-term lease expense, neither of which were included in the measurement of the Company's operating right-of-use assets and lease liabilities. For the year ended June 30, 2020, the Company incurred $18.4 million in lease costs, of which $2.6 million was variable lease expense and $0.2 million was short-term lease expense. Prior to the adoption of the lease guidance in ASU 2016-02, the Company's total rent expense for the year ended June 30, 2019 was $19.7 million.

In December 2021, the Company entered into a non-cancelable operating lease for approximately 63,000 square feet in South San Francisco, California, which will expire in 2033. The lease will commence in April 2023.

As of December 31, 2021, the maturities of the Company’s operating lease liabilities were as follows (in millions):


Year Ended:
2022	$	17.4
2023	19.8
2024	22.4
2025	16.6
2026	14.7
Thereafter	88.1
Total future lease payments	179.0
Less: amounts representing interest	(27.9)
Present value of future lease payments	151.1
Less: leases not yet commenced	(58.8)
Less: current maturities of operating lease liabilities	(13.0)
Noncurrent operating lease liabilities	$	79.3

As of December 31, 2021, the weighted average remaining lease term is 8.7 years and the weighted average discount rate used to determine the operating lease liability was 5.10%.

As the implicit rate in the Company's leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. When calculating the Company’s incremental borrowing rates, the Company gives consideration to its credit risk, term of the lease, total lease payments and adjusts for the impacts of collateral, as necessary. The lease term used may reflect any option to extend or terminate the lease when it is reasonably certain the Company will exercise such options. Lease expenses for the Company's operating leases are recognized on a straight-line basis over the lease term.