Annual report pursuant to Section 13 and 15(d)

Leases

v3.24.0.1
Leases
 12 Months Ended
Dec. 31, 2023
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 (in thousands, except terms and rates):
Year Ended December 31,
2023 2022
Lease expense
Finance lease expense:
Amortization of right-of-use assets $ 7,421  $ 8,486 
Interest on lease liabilities 1,165  923 
Operating lease expense 5,690  5,671 
Short-term lease expense 18  27 
Total lease expense $ 14,295  $ 15,107 
Supplemental cash flow information
Finance leases:
Operating cash outflow from finance leases $ 1,165  $ 923 
Financing cash outflow from finance leases $ 7,530  $ 8,709 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 7,183  $ 6,655 
Operating leases:
Operating cash outflow from operating leases $ 5,574  $ 4,556 
Operating lease liabilities arising from obtaining operating lease right-of-use assets $ 154  $ 309 
Other information
Finance leases:
Weighted-average remaining lease term (years) 1.8
Weighted-average discount rate 10.3  %
Operating leases:
Weighted-average remaining lease term (years) 9.1
Weighted-average discount rate 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 December 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 December 31, 2023. The rates implicit in the Company’s operating leases are not readily determinable. Thus, the Company uses its incremental borrowing rate to discount lease payments to present value. 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 $5.5 million, $5.6 million, and $5.3 million for the years ended December 31, 2023, 2022, and 2021, respectively, and is reported gross of sublease income received. 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 December 31, 2023 are as follows (in thousands):
Years ending December 31,
2024 $ 5,562 
2025 5,701 
2026 5,843 
2027 5,989 
2028 6,139 
Thereafter 26,695 
Total 55,929 
Less: imputed interest (9,028)
Present value of operating lease obligations $ 46,901 
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 years ended December 31, 2023, 2022, and 2021, the Company recorded lease revenues associated with phone hardware of $4.5 million, $4.2 million, and $3.3 million, respectively.
In April 2023, the Company entered into a Sublease Agreement for the fourth floor of the office space currently occupied by the Company in Lehi, Utah. During the Year Ended December 31, 2023, the Company recorded sublease revenues associated with this agreement of $0.7 million. These revenues are included in other income (expense) on the Consolidated Statement of Operations.
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 December 31, 2023 the Company had 101 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $55 to $21,473 and have maturity dates ranging from January 2024 to November 2026. As of December 31, 2023, the gross value of phone hardware acquired under these capital leases approximated $20.8 million. Amortization expense on finance-leased phone hardware was $7.4 million, $8.5 million, and $8.6 million for the years ended December 31, 2023, 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 December 31, 2023 were as follows (in thousands):
Years ending December 31,
2024 $ 7,482 
2025 4,519 
2026 2,153 
2027 — 
2028 — 
Thereafter — 
Total 14,154 
Less amounts representing interest (1,512)
Present value of finance lease obligations $ 12,642 
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 (in thousands, except terms and rates):
Year Ended December 31,
2023 2022
Lease expense
Finance lease expense:
Amortization of right-of-use assets $ 7,421  $ 8,486 
Interest on lease liabilities 1,165  923 
Operating lease expense 5,690  5,671 
Short-term lease expense 18  27 
Total lease expense $ 14,295  $ 15,107 
Supplemental cash flow information
Finance leases:
Operating cash outflow from finance leases $ 1,165  $ 923 
Financing cash outflow from finance leases $ 7,530  $ 8,709 
Finance lease liabilities arising from obtaining finance lease right-of-use assets $ 7,183  $ 6,655 
Operating leases:
Operating cash outflow from operating leases $ 5,574  $ 4,556 
Operating lease liabilities arising from obtaining operating lease right-of-use assets $ 154  $ 309 
Other information
Finance leases:
Weighted-average remaining lease term (years) 1.8
Weighted-average discount rate 10.3  %
Operating leases:
Weighted-average remaining lease term (years) 9.1
Weighted-average discount rate 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 December 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 December 31, 2023. The rates implicit in the Company’s operating leases are not readily determinable. Thus, the Company uses its incremental borrowing rate to discount lease payments to present value. 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 $5.5 million, $5.6 million, and $5.3 million for the years ended December 31, 2023, 2022, and 2021, respectively, and is reported gross of sublease income received. 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 December 31, 2023 are as follows (in thousands):
Years ending December 31,
2024 $ 5,562 
2025 5,701 
2026 5,843 
2027 5,989 
2028 6,139 
Thereafter 26,695 
Total 55,929 
Less: imputed interest (9,028)
Present value of operating lease obligations $ 46,901 
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 years ended December 31, 2023, 2022, and 2021, the Company recorded lease revenues associated with phone hardware of $4.5 million, $4.2 million, and $3.3 million, respectively.
In April 2023, the Company entered into a Sublease Agreement for the fourth floor of the office space currently occupied by the Company in Lehi, Utah. During the Year Ended December 31, 2023, the Company recorded sublease revenues associated with this agreement of $0.7 million. These revenues are included in other income (expense) on the Consolidated Statement of Operations.
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 December 31, 2023 the Company had 101 executed and active lease agreements, respectively, for phone hardware. These agreements require monthly payments ranging from approximately $55 to $21,473 and have maturity dates ranging from January 2024 to November 2026. As of December 31, 2023, the gross value of phone hardware acquired under these capital leases approximated $20.8 million. Amortization expense on finance-leased phone hardware was $7.4 million, $8.5 million, and $8.6 million for the years ended December 31, 2023, 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 December 31, 2023 were as follows (in thousands):
Years ending December 31,
2024 $ 7,482 
2025 4,519 
2026 2,153 
2027 — 
2028 — 
Thereafter — 
Total 14,154 
Less amounts representing interest (1,512)
Present value of finance lease obligations $ 12,642