Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.22.2.2
Leases
 9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
Leases Leases
The Company has lease arrangements, both as a lessor and a lessee, and makes assumptions and judgments when assessing contracts for lease components, determining lease classifications and calculating right-of-use asset and lease liability values. These assumptions and judgements may include the useful lives and fair values of the leased assets, the implicit rate underlying the Company’s leases, the Company’s incremental borrowing rate or the Company’s intent to exercise or not exercise options available in lease contracts.
Lease expense and other information consisted of the following for the three and nine months ended September 30, 2022 (in thousands, except terms and rates):
Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Lease Expense
Finance lease expense:
Amortization of right-of-use assets $ 2,048  $ 6,467 
Interest on lease liabilities 237  667 
Operating lease expense 1,417  4,252 
Short-term lease expense 3  21 
Total lease expense $ 3,705  $ 11,407 
Other information
Finance leases:
Operating cash outflow from finance leases $ 237  $ 667 
Financing cash outflow from finance leases $ 2,234  $ 6,694 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 1,335  $ 4,659 
Operating leases:
Operating cash outflow from operating leases $ 1,214  $ 3,197 
Other information as of September 30, 2022
Finance leases:
Weighted-average remaining lease term (years) 1.7
Weighted-average discount rate lease term 7.7  %
Operating leases:
Weighted-average remaining lease term (years) 10.3
Weighted-average discount rate lease term 3.9  %
Operating leases
The Company as the Lessee
The Company leases office space for its headquarters and advertising space under non-cancelable operating lease agreements. These leases have expirations ranging from November 2022 to January 2033. Though the Company is considering renewal options on its leases nearing expiration, the Company has not recognized any renewal options as part of the current lease term as it is not reasonably certain that it will exercise its option as of September 30, 2022. The rates implicit in the Company’s operating leases are not readily determinable thus the Company uses its incremental borrowing rate to calculate the present value of the lease liabilities. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis, and is based on the Company’s secured line of credit, which may be adjusted for the specific terms and collateral of the lease. The operating lease agreements do not contain any residual value guarantees or other restrictions or covenants that would cause the Company to incur additional significant financial obligations. These office space lease agreements contain non-lease components, which represent charges for common area maintenance, taxes and utilities. The Company has elected the practical expedient on not separating lease components from non-lease components.
The Company has other leases for office space with terms less than twelve months from contract inception and no options to purchase the underlying asset. These agreements are accounted for as short-term leases in accordance with ASC 842-20-25-2.
Total rent expense for office space leases was $1.4 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $4.2 million and $3.9 million for the nine months ended September 30, 2022 and 2021, respectively. Note that rent expense amounts for periods prior to 2022 are reported under ASC 840.
Future maturities of remaining lease payments included in the measurement of operating lease as of September 30, 2022 are as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 1,345 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,667 
Total 62,451 
Less imputed interest (11,338)
Present value of operating lease obligations $ 51,113 
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the following table summarizes the future minimum lease payments related to operating leases as of December 31, 2021 under ASC 840 (in thousands):
Years ending December 31,
2022 $ 4,407 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,666 
Total $ 65,512 
The Company as the Lessor
As discussed in the Revenue Recognition accounting policy, the Company provides varying quantities of phone hardware to customers without adjustments to the base subscription price. The Company is deemed a lessor in these arrangements. For the three months ended September 30, 2022 and September 30, 2021, the Company recorded lease revenues associated with phone hardware of $1.0 million and $0.9 million, respectively, and $3.1 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.
Finance leases
The Company is the lessee in all of its finance lease arrangements. In June 2016, the Company began financing its purchases of phone hardware through lease agreements classified as finance leases. As of September 30, 2022 the Company had 98 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $121 to $21,975 and have maturity dates ranging from July 2022 to May 2025. As of September 30, 2022, the gross value of phone hardware acquired under these capital leases approximated $23.6 million. Amortization expense on finance-leased phone hardware was $2.0 million and $2.2 million for the three months ended September 30, 2022 and 2021, respectively, and $6.5 million and $6.3 million for the nine months ended September 30, 2022 and 2021, respectively, which is included in the depreciation expense referenced in Note 5.
Future minimum lease payments for the Company’s finance leases as of September 30, 2022 were as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 2,478 
2023 6,717 
2024 3,749 
2025 1,158 
2026 — 
Thereafter — 
Total 14,102 
Less amounts representing interest (1,094)
Present value of finance lease obligations $ 13,008 
Leases Leases
The Company has lease arrangements, both as a lessor and a lessee, and makes assumptions and judgments when assessing contracts for lease components, determining lease classifications and calculating right-of-use asset and lease liability values. These assumptions and judgements may include the useful lives and fair values of the leased assets, the implicit rate underlying the Company’s leases, the Company’s incremental borrowing rate or the Company’s intent to exercise or not exercise options available in lease contracts.
Lease expense and other information consisted of the following for the three and nine months ended September 30, 2022 (in thousands, except terms and rates):
Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Lease Expense
Finance lease expense:
Amortization of right-of-use assets $ 2,048  $ 6,467 
Interest on lease liabilities 237  667 
Operating lease expense 1,417  4,252 
Short-term lease expense 3  21 
Total lease expense $ 3,705  $ 11,407 
Other information
Finance leases:
Operating cash outflow from finance leases $ 237  $ 667 
Financing cash outflow from finance leases $ 2,234  $ 6,694 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 1,335  $ 4,659 
Operating leases:
Operating cash outflow from operating leases $ 1,214  $ 3,197 
Other information as of September 30, 2022
Finance leases:
Weighted-average remaining lease term (years) 1.7
Weighted-average discount rate lease term 7.7  %
Operating leases:
Weighted-average remaining lease term (years) 10.3
Weighted-average discount rate lease term 3.9  %
Operating leases
The Company as the Lessee
The Company leases office space for its headquarters and advertising space under non-cancelable operating lease agreements. These leases have expirations ranging from November 2022 to January 2033. Though the Company is considering renewal options on its leases nearing expiration, the Company has not recognized any renewal options as part of the current lease term as it is not reasonably certain that it will exercise its option as of September 30, 2022. The rates implicit in the Company’s operating leases are not readily determinable thus the Company uses its incremental borrowing rate to calculate the present value of the lease liabilities. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis, and is based on the Company’s secured line of credit, which may be adjusted for the specific terms and collateral of the lease. The operating lease agreements do not contain any residual value guarantees or other restrictions or covenants that would cause the Company to incur additional significant financial obligations. These office space lease agreements contain non-lease components, which represent charges for common area maintenance, taxes and utilities. The Company has elected the practical expedient on not separating lease components from non-lease components.
The Company has other leases for office space with terms less than twelve months from contract inception and no options to purchase the underlying asset. These agreements are accounted for as short-term leases in accordance with ASC 842-20-25-2.
Total rent expense for office space leases was $1.4 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $4.2 million and $3.9 million for the nine months ended September 30, 2022 and 2021, respectively. Note that rent expense amounts for periods prior to 2022 are reported under ASC 840.
Future maturities of remaining lease payments included in the measurement of operating lease as of September 30, 2022 are as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 1,345 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,667 
Total 62,451 
Less imputed interest (11,338)
Present value of operating lease obligations $ 51,113 
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the following table summarizes the future minimum lease payments related to operating leases as of December 31, 2021 under ASC 840 (in thousands):
Years ending December 31,
2022 $ 4,407 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,666 
Total $ 65,512 
The Company as the Lessor
As discussed in the Revenue Recognition accounting policy, the Company provides varying quantities of phone hardware to customers without adjustments to the base subscription price. The Company is deemed a lessor in these arrangements. For the three months ended September 30, 2022 and September 30, 2021, the Company recorded lease revenues associated with phone hardware of $1.0 million and $0.9 million, respectively, and $3.1 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.
Finance leases
The Company is the lessee in all of its finance lease arrangements. In June 2016, the Company began financing its purchases of phone hardware through lease agreements classified as finance leases. As of September 30, 2022 the Company had 98 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $121 to $21,975 and have maturity dates ranging from July 2022 to May 2025. As of September 30, 2022, the gross value of phone hardware acquired under these capital leases approximated $23.6 million. Amortization expense on finance-leased phone hardware was $2.0 million and $2.2 million for the three months ended September 30, 2022 and 2021, respectively, and $6.5 million and $6.3 million for the nine months ended September 30, 2022 and 2021, respectively, which is included in the depreciation expense referenced in Note 5.
Future minimum lease payments for the Company’s finance leases as of September 30, 2022 were as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 2,478 
2023 6,717 
2024 3,749 
2025 1,158 
2026 — 
Thereafter — 
Total 14,102 
Less amounts representing interest (1,094)
Present value of finance lease obligations $ 13,008 
Leases Leases
The Company has lease arrangements, both as a lessor and a lessee, and makes assumptions and judgments when assessing contracts for lease components, determining lease classifications and calculating right-of-use asset and lease liability values. These assumptions and judgements may include the useful lives and fair values of the leased assets, the implicit rate underlying the Company’s leases, the Company’s incremental borrowing rate or the Company’s intent to exercise or not exercise options available in lease contracts.
Lease expense and other information consisted of the following for the three and nine months ended September 30, 2022 (in thousands, except terms and rates):
Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Lease Expense
Finance lease expense:
Amortization of right-of-use assets $ 2,048  $ 6,467 
Interest on lease liabilities 237  667 
Operating lease expense 1,417  4,252 
Short-term lease expense 3  21 
Total lease expense $ 3,705  $ 11,407 
Other information
Finance leases:
Operating cash outflow from finance leases $ 237  $ 667 
Financing cash outflow from finance leases $ 2,234  $ 6,694 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 1,335  $ 4,659 
Operating leases:
Operating cash outflow from operating leases $ 1,214  $ 3,197 
Other information as of September 30, 2022
Finance leases:
Weighted-average remaining lease term (years) 1.7
Weighted-average discount rate lease term 7.7  %
Operating leases:
Weighted-average remaining lease term (years) 10.3
Weighted-average discount rate lease term 3.9  %
Operating leases
The Company as the Lessee
The Company leases office space for its headquarters and advertising space under non-cancelable operating lease agreements. These leases have expirations ranging from November 2022 to January 2033. Though the Company is considering renewal options on its leases nearing expiration, the Company has not recognized any renewal options as part of the current lease term as it is not reasonably certain that it will exercise its option as of September 30, 2022. The rates implicit in the Company’s operating leases are not readily determinable thus the Company uses its incremental borrowing rate to calculate the present value of the lease liabilities. The incremental borrowing rate is the rate incurred to borrow on a collateralized basis, and is based on the Company’s secured line of credit, which may be adjusted for the specific terms and collateral of the lease. The operating lease agreements do not contain any residual value guarantees or other restrictions or covenants that would cause the Company to incur additional significant financial obligations. These office space lease agreements contain non-lease components, which represent charges for common area maintenance, taxes and utilities. The Company has elected the practical expedient on not separating lease components from non-lease components.
The Company has other leases for office space with terms less than twelve months from contract inception and no options to purchase the underlying asset. These agreements are accounted for as short-term leases in accordance with ASC 842-20-25-2.
Total rent expense for office space leases was $1.4 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $4.2 million and $3.9 million for the nine months ended September 30, 2022 and 2021, respectively. Note that rent expense amounts for periods prior to 2022 are reported under ASC 840.
Future maturities of remaining lease payments included in the measurement of operating lease as of September 30, 2022 are as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 1,345 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,667 
Total 62,451 
Less imputed interest (11,338)
Present value of operating lease obligations $ 51,113 
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the following table summarizes the future minimum lease payments related to operating leases as of December 31, 2021 under ASC 840 (in thousands):
Years ending December 31,
2022 $ 4,407 
2023 5,404 
2024 5,539 
2025 5,677 
2026 5,819 
Thereafter 38,666 
Total $ 65,512 
The Company as the Lessor
As discussed in the Revenue Recognition accounting policy, the Company provides varying quantities of phone hardware to customers without adjustments to the base subscription price. The Company is deemed a lessor in these arrangements. For the three months ended September 30, 2022 and September 30, 2021, the Company recorded lease revenues associated with phone hardware of $1.0 million and $0.9 million, respectively, and $3.1 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.
Finance leases
The Company is the lessee in all of its finance lease arrangements. In June 2016, the Company began financing its purchases of phone hardware through lease agreements classified as finance leases. As of September 30, 2022 the Company had 98 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $121 to $21,975 and have maturity dates ranging from July 2022 to May 2025. As of September 30, 2022, the gross value of phone hardware acquired under these capital leases approximated $23.6 million. Amortization expense on finance-leased phone hardware was $2.0 million and $2.2 million for the three months ended September 30, 2022 and 2021, respectively, and $6.5 million and $6.3 million for the nine months ended September 30, 2022 and 2021, respectively, which is included in the depreciation expense referenced in Note 5.
Future minimum lease payments for the Company’s finance leases as of September 30, 2022 were as follows (in thousands):
Years ending December 31,
Remaining 2022 $ 2,478 
2023 6,717 
2024 3,749 
2025 1,158 
2026 — 
Thereafter — 
Total 14,102 
Less amounts representing interest (1,094)
Present value of finance lease obligations $ 13,008