Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.23.1
Leases
 3 Months Ended
Mar. 31, 2023
Leases [Abstract]  
Leases LeasesThe 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 months ended March 31, 2023 and 2022 (in thousands, except terms and rates):
Three Months Ended March 31, 2023 Three Months Ended March 31, 2022
Lease expense
Finance lease expense:
Amortization of right-of-use assets $ 1,939  $ 2,233 
Interest on lease liabilities 273  204 
Operating lease expense 1,423  1,417 
Short-term lease expense 6  9 
Total lease expense $ 3,641  $ 3,863 
Supplemental cash flow information
Finance leases:
Operating cash outflow from finance leases $ 273  $ 204 
Financing cash outflow from finance leases $ 1,960  $ 2,176 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 1,928  $ 2,027 
Operating leases:
Operating cash outflow from operating leases $ 1,385  $ 841 
Operating lease liabilities arising from obtaining operating lease right-of-use assets $ 154  $ — 
Other information as of March 31, 2023
Finance leases:
Weighted-average remaining lease term (years) 2.0
Weighted-average discount rate lease term 9.1  %
Operating leases:
Weighted-average remaining lease term (years) 9.8
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 January 2024 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 March 31, 2023. 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 March 31, 2023 and 2022, respectively.
Future maturities of remaining lease payments included in the measurement of operating lease as of March 31, 2023 are as follows (in thousands):
Years ending December 31,
Remaining 2023 $ 4,188 
2024 5,574 
2025 5,701 
2026 5,843 
2027 5,989 
Thereafter 32,834 
Total 60,129 
Less imputed interest (10,414)
Present value of operating lease obligations $ 49,715 
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 March 31, 2023 and 2022, the Company recorded lease revenues associated with phone hardware of $1.1 million and $1.1 million, respectively.
Finance leases
The Company is the lessee in all of its finance lease arrangements. The Company finances its purchases of phone hardware through lease agreements classified as finance leases. As of March 31, 2023 the Company had 104 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $64 to $21,975 and have maturity dates ranging from April 2023 to February 2026. As of March 31, 2023, the gross value of phone hardware acquired under these capital leases approximated $22.3 million. Amortization expense on finance-leased phone hardware was $1.9 million and $2.2 million for the three months ended March 31, 2023 and 2022, respectively, which is included in the depreciation expense referenced in Note 5.
Future minimum lease payments for the Company’s finance leases as of March 31, 2023 were as follows (in thousands):
Years ending December 31,
Remaining 2023 $ 6,132 
2024 5,228 
2025 2,718 
2026 292 
2027 — 
Thereafter — 
Total 14,370 
Less amounts representing interest (1,413)
Present value of finance lease obligations $ 12,957 
Leases LeasesThe 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 months ended March 31, 2023 and 2022 (in thousands, except terms and rates):
Three Months Ended March 31, 2023 Three Months Ended March 31, 2022
Lease expense
Finance lease expense:
Amortization of right-of-use assets $ 1,939  $ 2,233 
Interest on lease liabilities 273  204 
Operating lease expense 1,423  1,417 
Short-term lease expense 6  9 
Total lease expense $ 3,641  $ 3,863 
Supplemental cash flow information
Finance leases:
Operating cash outflow from finance leases $ 273  $ 204 
Financing cash outflow from finance leases $ 1,960  $ 2,176 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 1,928  $ 2,027 
Operating leases:
Operating cash outflow from operating leases $ 1,385  $ 841 
Operating lease liabilities arising from obtaining operating lease right-of-use assets $ 154  $ — 
Other information as of March 31, 2023
Finance leases:
Weighted-average remaining lease term (years) 2.0
Weighted-average discount rate lease term 9.1  %
Operating leases:
Weighted-average remaining lease term (years) 9.8
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 January 2024 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 March 31, 2023. 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 March 31, 2023 and 2022, respectively.
Future maturities of remaining lease payments included in the measurement of operating lease as of March 31, 2023 are as follows (in thousands):
Years ending December 31,
Remaining 2023 $ 4,188 
2024 5,574 
2025 5,701 
2026 5,843 
2027 5,989 
Thereafter 32,834 
Total 60,129 
Less imputed interest (10,414)
Present value of operating lease obligations $ 49,715 
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 March 31, 2023 and 2022, the Company recorded lease revenues associated with phone hardware of $1.1 million and $1.1 million, respectively.
Finance leases
The Company is the lessee in all of its finance lease arrangements. The Company finances its purchases of phone hardware through lease agreements classified as finance leases. As of March 31, 2023 the Company had 104 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $64 to $21,975 and have maturity dates ranging from April 2023 to February 2026. As of March 31, 2023, the gross value of phone hardware acquired under these capital leases approximated $22.3 million. Amortization expense on finance-leased phone hardware was $1.9 million and $2.2 million for the three months ended March 31, 2023 and 2022, respectively, which is included in the depreciation expense referenced in Note 5.
Future minimum lease payments for the Company’s finance leases as of March 31, 2023 were as follows (in thousands):
Years ending December 31,
Remaining 2023 $ 6,132 
2024 5,228 
2025 2,718 
2026 292 
2027 — 
Thereafter — 
Total 14,370 
Less amounts representing interest (1,413)
Present value of finance lease obligations $ 12,957