Leases

6 Months Ended

Jun. 30, 2023

NOTE 13 – LEASES

The Company leases office and research facilities, data centers and office equipment under operating leases with various expiration dates through 2030. Certain leases offer the option to renew for up to ten years and to terminate before the expiration date. Leases with an initial term of 12 months or less are not recorded on the balance sheets; expense for these leases is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred and are not included within the lease liability and right-of-use assets calculation.

The Company subleases certain real estate to third parties. The sublease portfolio consists of operating leases for previously exited office space. Certain subleases include variable payments for operating costs. The subleases are generally co-terminus

with the head lease, or shorter. Subleases do not include any residual value guarantees or restrictions or covenants imposed by the leases. Income from subleases is recognized as a reduction to selling, general and administrative expenses.

As a result of consolidating our global real estate footprint and decisions to vacate and sublease certain offices following the Spin-Off, the Company recorded impairment charges of $1.1 million to reduce the carrying amount of certain operating lease right-of-use (“ROU”) assets and property and equipment, including leasehold improvements, during the six months ended June 30, 2023. The Company determined that it may not be able to fully recover the carrying amount of the leased offices due to a change in the manner in which the offices are being used, a significant decrease in the expected market price of the leased asset, and expected delays in subleasing the space based on the current real estate leasing market. The Company estimated the fair value using a discounted cash flows approach with assumptions such as expectations of cash flows from projected sublease income, occupancy estimates and its outlook for the local real estate market.

The components of operating lease costs were as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Fixed lease cost (1)	$	5,325		$	4,901		$	10,483		$	9,924
Variable lease cost		1,457			1,418			2,944			2,483
Less: sublease income		(2,593	)		(2,705	)		(5,273	)		(4,811	)
Total operating lease cost	$	4,189		$	3,614		$	8,154		$	7,596

(1) Includes short-term leases expensed on a straight-line basis.

The following table presents supplemental cash flow information arising from lease transactions (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cash payments included in the measurement of operating lease liabilities	$	5,000	$	4,865	$	10,208	$	9,900
Operating ROU assets obtained in exchange for lease obligations	$	4,013	$	1,195	$	4,013	$	1,779

The weighted-average remaining term of the Company’s operating leases and the weighted-average discount rate used to measure the present value of the operating lease liabilities are as follows:


	June 30, 2023			December 31, 2022
Weighted-average remaining lease term (in years)		3.65			3.69
Weighted-average discount rate		5.2	%		5.1	%

Future minimum lease payments and related lease liabilities as of June 30, 2023 were as follows (in thousands):


Year Ending December 31:	Operating Lease Payments (1)			Sublease Income			Net Operating Lease Payments
2023 (remaining 6 months)	$	8,782		$	(3,867	)	$	4,915
2024		18,079			(7,849	)		10,230
2025		16,442			(7,671	)		8,771
2026		8,582			(1,055	)		7,527
2027		3,818			—			3,818
Thereafter		3,405			—			3,405
Total lease payments		59,108		$	(20,442	)	$	38,666
Less: imputed interest		(5,695	)
Present value of operating lease liabilities	$	53,413

Less: operating lease liabilities, current portion		(15,592	)
Noncurrent operating lease liabilities	$	37,821

(1) Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes.