• Filing Date: 2020-06-24
  • Form Type: 10-K
  • Description: Annual report
12 Months Ended
Mar. 31, 2020
Leases [Abstract]  
The Company adopted ASU No. 2016-02, Leases (“ASC 842”) effective April 1, 2019 using the optional transition method in ASU 2018-11, Targeted Improvements. Therefore, the consolidated balance sheet and consolidated statements of operations as of and for the fiscal year ended March 31, 2020 reflect the application of Topic 842, while the consolidated balance sheet as of March 31, 2019 and consolidated statements of operations for the fiscal years ended March 31, 2019 and 2018 were not adjusted and continue to be reported under ASC 840, Leases, the accounting guidance in effect for the prior periods. The adoption of ASC 842 resulted in the recording of right of use assets and corresponding lease liabilities of $13.5 million and $12.7 million, respectively, as of April 1, 2019, which include the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheet as of April 1, 2019.

Under ASC 842, the Company determines if an arrangement is a lease at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The lease terms are used to determine lease classification as an operating or finance lease and is used to calculate straight-line lease expense for operating leases. The Company elected the package of practical expedients permitted under the transition guidance within the standard, allowing it to carry forward the historical lease classification, carry forward the conclusions on whether current or expired contracts contain leases and carry forward the accounting for initial direct costs for existing leases. Additionally, the Company elected the practical expedient for use of hindsight to determine the lease term for existing leases whereby the Company evaluated the performance of existing leases in relation to the Company's leasing strategy and determined that most renewal options would not be reasonably certain to be exercised. This resulted in the shortening of lease terms for the existing leases.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets also include prepaid lease payments and exclude lease incentives received. As the Company’s leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date for its leases. The Company determines the incremental borrowing rate using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease. The determination of the incremental borrowing rate requires judgment. The Company elected the short-term lease recognition exemption for all leases that qualify. Therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, lease payments are recognized as lease expense on a straight-line basis over the lease term.

The Company has operating leases for facilities, vehicles, computers, and other office equipment with various expiration dates. The leases have remaining terms of 1 to 8 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. The Company did not use hindsight when determining lease term, therefore, the Company carried forward the lease term as determined prior to the adoption of ASC 842. For new leases with renewal or termination options, such option periods will be included in the determination of the Company’s ROU assets and lease liabilities if the Company is reasonably certain to exercise the option. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred.

Supplemental balance sheet information related to leases is as follows (in thousands):

Operating leases
March 31, 2020
Operating lease right-of-use asset

Other current liabilities

Operating lease liability

   Total operating lease liabilities

The components of lease expense were as follows (in thousands):
Lease expense
Year Ended March 31, 2020
Operating lease expense

Variable lease expense

Short-term lease expense

   Total lease expense

Maturity of Lease Liabilities
Operating Leases






Total lease payments

Less: Imputed interest
Present value of lease liabilities

Lease Term and Discount Rate
March 31, 2020
Weighted average remaining operating lease term (years)

Weighted average discount rate for operating leases

Operating cash outflows related to operating leases totaled $4.5 million for the twelve months ended March 31, 2020.