Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
 6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases Leases
Our leasing operations consist of various arrangements, where we act either (i) as the lessee (primarily related to our corporate and regional offices, teleport co-location arrangements and a commitment for satellite bandwidth capacity), or (ii) as the lessor (for our owned equipment rented to connectivity customers). The following describes the nature of our various leasing arrangements and the impact to our statement of operations for the three and six months ended June 30, 2020:


Real Estate Operating Leases (as a Lessee)
The Company has operating leases for office facilities throughout the United States and around the world. Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases include both a right-of-use asset and a lease liability. The right-of-use asset represents the Company’s right to use the underlying asset in the lease, and it also includes prepaid lease payments. The lease liability represents the present value of the remaining lease payments discounted using the incremental borrowing rate (“IBR”). Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. The Company has elected to combine lease and non-lease components, if applicable.

The Company records lease expense on a straight-line basis over the lease term in general and administrative expense. Total lease expense for the three months ended June 30, 2020 and 2019, was $1.4 million and $1.6 million, respectively and for the six months ended June 30, 2020 and 2019, was $2.8 million and $3.2 million, respectively.

The Company’s leases have remaining lease terms of one year to 10.0 years. Lease terms include renewal or termination options that the Company is reasonably certain to exercise. For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.

Teleport Co-Location Operating Leases (as a Lessee)
The Company engages certain bandwidth providers for teleport co-location services to deliver bandwidth to our network. These co-location service agreements typically include provisions for physical rack space at a third-party teleport facility. We have determined that the space provided for our equipment constitutes an operating lease.

These leases have remaining lease terms of one year to 8.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of cost of sales -- licensing and services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.5 million and $0.4 million, respectively, and $1.0 million and $0.4 million for six months ended June 30, 2020 and 2019, respectively.

Satellite Bandwidth Finance Lease (as a Lessee)
The Company maintains agreements with satellite service providers to provide for satellite bandwidth capacity. The Company evaluates these arrangements for embedded leases when the Company has the right to control the use of a significant portion of the identified asset. The Company has elected to separate the lease and non-lease components.

Bandwidth Operating Leases
The Company records right-of-use assets and lease liabilities for certain bandwidth capacity arrangements meeting the operating lease classification. These leases have remaining lease terms of one year to 2.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of Cost of Sales - Licensing and Services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.3 million and $0, respectively, and for the six months ended June 30, 2020 and 2019, was $0.6 million and $0.6 million, respectively.

For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.
Bandwidth Finance Lease
During the six months ended June 30, 2019, the Company modified an existing arrangement for bandwidth capacity that provided us with the right to control a significant portion of the identified asset. The modified agreement met the criteria of finance lease classification.

This finance lease has a remaining lease term of 6.25 years as of June 30, 2020. The Company records amortization of right-of-use assets and interest accretion on finance lease liabilities as part of cost of sales - licensing and services and interest expense, net, respectively. The following table provides the components of the finance lease cost for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Amortization of right-of-use asset, net of lease incentive and contract liability credits $ 420    $ 675    $ 840    $ 675   
Interest accretion on finance lease liabilities 371    470    754    470   
Total finance lease cost $ 791    $ 1,145    $ 1,594    $ 1,145   

Other Arrangements (as a Lessee)
The Company leases certain computer software, equipment and co-location facilities under finance leases that expire on various dates through 2022, for which the outstanding lease liability balance was assessed as not material as of June 30, 2020.

The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

Equipment Held by Customers (as a Lessor)
The Company either sells or leases certain equipment (including antennas, modems and routers, among others) as part of the bandwidth service to our Maritime and Land Connectivity customers. We account for existing equipment lease transactions as operating leases. We recognize lease payments for operating leases as licensing and services revenue in its condensed consolidated statement of operations on a straight-line basis over the lease term.

We assess new equipment lease arrangements or modifications to existing equipment lease arrangements for operating or sales-type lease classification. We recognize investments in leases for sales-type leases when the risk and rewards of ownership are not fully transferred to the customer due to our continued involvement with the equipment. We allocate the total consideration in a contract assessed with a sales-type lease using the expected cost-plus margin and residual methods for the lease and non-lease components, respectively.

The service revenues (with embedded operating equipment leases) and recognized revenues on sales-type equipment leases in which the Company acts as the lessor for the three and six months ended June 30, 2020 and 2019, is presented in the following table (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Bandwidth service and equipment revenues(1)
$ 20,281    $ 36,154    $ 46,304    $ 70,261   
Earned revenues on sales-type leases at commencement(2)
812    977    915    1,310   
Total Licensing and Service Revenues -- Maritime and Land Connectivity $ 21,093    $ 37,131    $ 47,219    $ 71,571   
(1) This is presented as part of Revenues -- Licensing and services in our condensed consolidated statement of operations, and includes the equipment lease component that is embedded in the overall bandwidth service arrangement. Since we adopted the practical expedient to not separate the lease and non-lease components as allowed with the ASC 842 implementation as of January 1, 2019, we will continue to classify existing embedded equipment arrangements as operating leases, to the extent unmodified.
(2) This includes the equipment lease revenues recognized at commencement date of the customer equipment arrangements classified as sales-type leases. As equipment leasing is a standard component in our connectivity business model, we present equipment revenues relating to these sales-type leases on a gross basis, and recognize a corresponding cost of sales equal to the net book value of the leased equipment. Interest income component is considered immaterial.

Supplemental Cash Flow Information, Weighted-Average Remaining Lease Term and Discount Rate
Because the rate implicit in each lease is not readily determinable, the Company uses its IBR to determine the present value of the lease payments. The following table discloses the weighted-average remaining lease term and IBR, as well as supplemental cash flow information (in thousands):
Six Months Ended June 30, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of operating lease liabilities $ 3,800   
Cash paid for amounts included in the measurement of finance lease liabilities $ 1,800   
Right-of-use-assets obtained in exchange for operating lease obligations $ 194,000   
Right-of-use-assets obtained in exchange for finance lease obligations $ —   
Weighted average remaining lease term -- real estate operating leases
6.77 years
Weighted average remaining lease term -- teleport co-location operating leases
4.43 years
Weighted average remaining lease term -- satellite capacity operating leases
0.50 years
Weighted average remaining lease term -- finance lease
6.00 years
Weighted average IBR -- real estate operating leases
9.91  %
Weighted average IBR -- teleport co-location operating leases
8.92  %
Weighted average IBR -- teleport satellite capacity operating leases
7.24  %
Weighted average IBR -- finance lease
8.30  %

Annual Future Minimum Lease Payments
The following table reflects a summary of Annual future minimum lease payments and the Company’s lease assets as of June 30, 2020 (in thousands):
As a Lessee As a Lessor
Real Estate Satellite Capacity Satellite Capacity Teleport
Co-Location		 Total Equipment Held by Customers
Lease Classification Operating Finance Operating Operating Sales-Type
2020 (remaining six months) $ 2,975    $ 1,879    $ 689    $ 937    $ 6,480    $ 472   
2021 5,270    3,758    —    1,777    10,805    940   
2022 4,574    3,758    —    1,452    9,784    585   
2023 3,620    3,758    —    561    7,939    261   
2024 3,625    3,758    —    550    7,933    180   
Thereafter 10,896    5,638    —    1,013    17,547    43   
Total Future Lease Payments $ 30,960    $ 22,549    $ 689    $ 6,290    $ 60,488    $ 2,481   
Less: Imputed interest (8,699)   (4,712)   (10)   (1,110)   (14,531)   (298)  
Present Value of Lease Liabilities $ 22,261    $ 17,837    $ 679    $ 5,180    $ 45,957   
Net Investment in Sales-Type Leases $ 2,183   

In response to the COVID-19 pandemic and related government restrictions negatively impacting our operations, subsequent to March 31, 2020, we began renegotiating certain lease agreements to obtain rent relief in the near term, in order to help offset the negative financial impacts of COVID-19. On April 10, 2020, the Financial Accounting Standards Board ("FASB") staff issued a question-and-answer document providing guidance for lease concessions provided to lessees in response to the effects of COVID-19. Such guidance allows lessees to make an election not to evaluate whether a lease concession provided by a lessor
should be accounted for as a lease modification in the event the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We elected to adopt the practical expedient for all lease concessions provided for our real estate lease agreements. As of the six months ended June 30, 2020, rent concession received was $0.7 million.

The book value of the equipment held by customers under operating leases, which are classified as “Equipment” in Note 5- Property & Equipment, is as follows:
June 30, 2020 December 31, 2019
Equipment
Gross balance $ 53,884    $ 57,369   
Accumulated depreciation (33,623)   (30,692)  
Net Book Value $ 20,261    $ 26,677   
Leases Leases
Our leasing operations consist of various arrangements, where we act either (i) as the lessee (primarily related to our corporate and regional offices, teleport co-location arrangements and a commitment for satellite bandwidth capacity), or (ii) as the lessor (for our owned equipment rented to connectivity customers). The following describes the nature of our various leasing arrangements and the impact to our statement of operations for the three and six months ended June 30, 2020:


Real Estate Operating Leases (as a Lessee)
The Company has operating leases for office facilities throughout the United States and around the world. Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases include both a right-of-use asset and a lease liability. The right-of-use asset represents the Company’s right to use the underlying asset in the lease, and it also includes prepaid lease payments. The lease liability represents the present value of the remaining lease payments discounted using the incremental borrowing rate (“IBR”). Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. The Company has elected to combine lease and non-lease components, if applicable.

The Company records lease expense on a straight-line basis over the lease term in general and administrative expense. Total lease expense for the three months ended June 30, 2020 and 2019, was $1.4 million and $1.6 million, respectively and for the six months ended June 30, 2020 and 2019, was $2.8 million and $3.2 million, respectively.

The Company’s leases have remaining lease terms of one year to 10.0 years. Lease terms include renewal or termination options that the Company is reasonably certain to exercise. For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.

Teleport Co-Location Operating Leases (as a Lessee)
The Company engages certain bandwidth providers for teleport co-location services to deliver bandwidth to our network. These co-location service agreements typically include provisions for physical rack space at a third-party teleport facility. We have determined that the space provided for our equipment constitutes an operating lease.

These leases have remaining lease terms of one year to 8.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of cost of sales -- licensing and services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.5 million and $0.4 million, respectively, and $1.0 million and $0.4 million for six months ended June 30, 2020 and 2019, respectively.

Satellite Bandwidth Finance Lease (as a Lessee)
The Company maintains agreements with satellite service providers to provide for satellite bandwidth capacity. The Company evaluates these arrangements for embedded leases when the Company has the right to control the use of a significant portion of the identified asset. The Company has elected to separate the lease and non-lease components.

Bandwidth Operating Leases
The Company records right-of-use assets and lease liabilities for certain bandwidth capacity arrangements meeting the operating lease classification. These leases have remaining lease terms of one year to 2.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of Cost of Sales - Licensing and Services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.3 million and $0, respectively, and for the six months ended June 30, 2020 and 2019, was $0.6 million and $0.6 million, respectively.

For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.
Bandwidth Finance Lease
During the six months ended June 30, 2019, the Company modified an existing arrangement for bandwidth capacity that provided us with the right to control a significant portion of the identified asset. The modified agreement met the criteria of finance lease classification.

This finance lease has a remaining lease term of 6.25 years as of June 30, 2020. The Company records amortization of right-of-use assets and interest accretion on finance lease liabilities as part of cost of sales - licensing and services and interest expense, net, respectively. The following table provides the components of the finance lease cost for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Amortization of right-of-use asset, net of lease incentive and contract liability credits $ 420    $ 675    $ 840    $ 675   
Interest accretion on finance lease liabilities 371    470    754    470   
Total finance lease cost $ 791    $ 1,145    $ 1,594    $ 1,145   

Other Arrangements (as a Lessee)
The Company leases certain computer software, equipment and co-location facilities under finance leases that expire on various dates through 2022, for which the outstanding lease liability balance was assessed as not material as of June 30, 2020.

The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

Equipment Held by Customers (as a Lessor)
The Company either sells or leases certain equipment (including antennas, modems and routers, among others) as part of the bandwidth service to our Maritime and Land Connectivity customers. We account for existing equipment lease transactions as operating leases. We recognize lease payments for operating leases as licensing and services revenue in its condensed consolidated statement of operations on a straight-line basis over the lease term.

We assess new equipment lease arrangements or modifications to existing equipment lease arrangements for operating or sales-type lease classification. We recognize investments in leases for sales-type leases when the risk and rewards of ownership are not fully transferred to the customer due to our continued involvement with the equipment. We allocate the total consideration in a contract assessed with a sales-type lease using the expected cost-plus margin and residual methods for the lease and non-lease components, respectively.

The service revenues (with embedded operating equipment leases) and recognized revenues on sales-type equipment leases in which the Company acts as the lessor for the three and six months ended June 30, 2020 and 2019, is presented in the following table (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Bandwidth service and equipment revenues(1)
$ 20,281    $ 36,154    $ 46,304    $ 70,261   
Earned revenues on sales-type leases at commencement(2)
812    977    915    1,310   
Total Licensing and Service Revenues -- Maritime and Land Connectivity $ 21,093    $ 37,131    $ 47,219    $ 71,571   
(1) This is presented as part of Revenues -- Licensing and services in our condensed consolidated statement of operations, and includes the equipment lease component that is embedded in the overall bandwidth service arrangement. Since we adopted the practical expedient to not separate the lease and non-lease components as allowed with the ASC 842 implementation as of January 1, 2019, we will continue to classify existing embedded equipment arrangements as operating leases, to the extent unmodified.
(2) This includes the equipment lease revenues recognized at commencement date of the customer equipment arrangements classified as sales-type leases. As equipment leasing is a standard component in our connectivity business model, we present equipment revenues relating to these sales-type leases on a gross basis, and recognize a corresponding cost of sales equal to the net book value of the leased equipment. Interest income component is considered immaterial.

Supplemental Cash Flow Information, Weighted-Average Remaining Lease Term and Discount Rate
Because the rate implicit in each lease is not readily determinable, the Company uses its IBR to determine the present value of the lease payments. The following table discloses the weighted-average remaining lease term and IBR, as well as supplemental cash flow information (in thousands):
Six Months Ended June 30, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of operating lease liabilities $ 3,800   
Cash paid for amounts included in the measurement of finance lease liabilities $ 1,800   
Right-of-use-assets obtained in exchange for operating lease obligations $ 194,000   
Right-of-use-assets obtained in exchange for finance lease obligations $ —   
Weighted average remaining lease term -- real estate operating leases
6.77 years
Weighted average remaining lease term -- teleport co-location operating leases
4.43 years
Weighted average remaining lease term -- satellite capacity operating leases
0.50 years
Weighted average remaining lease term -- finance lease
6.00 years
Weighted average IBR -- real estate operating leases
9.91  %
Weighted average IBR -- teleport co-location operating leases
8.92  %
Weighted average IBR -- teleport satellite capacity operating leases
7.24  %
Weighted average IBR -- finance lease
8.30  %

Annual Future Minimum Lease Payments
The following table reflects a summary of Annual future minimum lease payments and the Company’s lease assets as of June 30, 2020 (in thousands):
As a Lessee As a Lessor
Real Estate Satellite Capacity Satellite Capacity Teleport
Co-Location		 Total Equipment Held by Customers
Lease Classification Operating Finance Operating Operating Sales-Type
2020 (remaining six months) $ 2,975    $ 1,879    $ 689    $ 937    $ 6,480    $ 472   
2021 5,270    3,758    —    1,777    10,805    940   
2022 4,574    3,758    —    1,452    9,784    585   
2023 3,620    3,758    —    561    7,939    261   
2024 3,625    3,758    —    550    7,933    180   
Thereafter 10,896    5,638    —    1,013    17,547    43   
Total Future Lease Payments $ 30,960    $ 22,549    $ 689    $ 6,290    $ 60,488    $ 2,481   
Less: Imputed interest (8,699)   (4,712)   (10)   (1,110)   (14,531)   (298)  
Present Value of Lease Liabilities $ 22,261    $ 17,837    $ 679    $ 5,180    $ 45,957   
Net Investment in Sales-Type Leases $ 2,183   

In response to the COVID-19 pandemic and related government restrictions negatively impacting our operations, subsequent to March 31, 2020, we began renegotiating certain lease agreements to obtain rent relief in the near term, in order to help offset the negative financial impacts of COVID-19. On April 10, 2020, the Financial Accounting Standards Board ("FASB") staff issued a question-and-answer document providing guidance for lease concessions provided to lessees in response to the effects of COVID-19. Such guidance allows lessees to make an election not to evaluate whether a lease concession provided by a lessor
should be accounted for as a lease modification in the event the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We elected to adopt the practical expedient for all lease concessions provided for our real estate lease agreements. As of the six months ended June 30, 2020, rent concession received was $0.7 million.

The book value of the equipment held by customers under operating leases, which are classified as “Equipment” in Note 5- Property & Equipment, is as follows:
June 30, 2020 December 31, 2019
Equipment
Gross balance $ 53,884    $ 57,369   
Accumulated depreciation (33,623)   (30,692)  
Net Book Value $ 20,261    $ 26,677   
Leases Leases
Our leasing operations consist of various arrangements, where we act either (i) as the lessee (primarily related to our corporate and regional offices, teleport co-location arrangements and a commitment for satellite bandwidth capacity), or (ii) as the lessor (for our owned equipment rented to connectivity customers). The following describes the nature of our various leasing arrangements and the impact to our statement of operations for the three and six months ended June 30, 2020:


Real Estate Operating Leases (as a Lessee)
The Company has operating leases for office facilities throughout the United States and around the world. Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases include both a right-of-use asset and a lease liability. The right-of-use asset represents the Company’s right to use the underlying asset in the lease, and it also includes prepaid lease payments. The lease liability represents the present value of the remaining lease payments discounted using the incremental borrowing rate (“IBR”). Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. The Company has elected to combine lease and non-lease components, if applicable.

The Company records lease expense on a straight-line basis over the lease term in general and administrative expense. Total lease expense for the three months ended June 30, 2020 and 2019, was $1.4 million and $1.6 million, respectively and for the six months ended June 30, 2020 and 2019, was $2.8 million and $3.2 million, respectively.

The Company’s leases have remaining lease terms of one year to 10.0 years. Lease terms include renewal or termination options that the Company is reasonably certain to exercise. For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.

Teleport Co-Location Operating Leases (as a Lessee)
The Company engages certain bandwidth providers for teleport co-location services to deliver bandwidth to our network. These co-location service agreements typically include provisions for physical rack space at a third-party teleport facility. We have determined that the space provided for our equipment constitutes an operating lease.

These leases have remaining lease terms of one year to 8.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of cost of sales -- licensing and services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.5 million and $0.4 million, respectively, and $1.0 million and $0.4 million for six months ended June 30, 2020 and 2019, respectively.

Satellite Bandwidth Finance Lease (as a Lessee)
The Company maintains agreements with satellite service providers to provide for satellite bandwidth capacity. The Company evaluates these arrangements for embedded leases when the Company has the right to control the use of a significant portion of the identified asset. The Company has elected to separate the lease and non-lease components.

Bandwidth Operating Leases
The Company records right-of-use assets and lease liabilities for certain bandwidth capacity arrangements meeting the operating lease classification. These leases have remaining lease terms of one year to 2.0 years as of June 30, 2020. The Company records lease expense on a straight-line basis over the lease term as part of Cost of Sales - Licensing and Services. Total lease expense for the three months ended June 30, 2020 and 2019, was $0.3 million and $0, respectively, and for the six months ended June 30, 2020 and 2019, was $0.6 million and $0.6 million, respectively.

For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a right-of-use asset and associated lease liability on its condensed consolidated balance sheet.
Bandwidth Finance Lease
During the six months ended June 30, 2019, the Company modified an existing arrangement for bandwidth capacity that provided us with the right to control a significant portion of the identified asset. The modified agreement met the criteria of finance lease classification.

This finance lease has a remaining lease term of 6.25 years as of June 30, 2020. The Company records amortization of right-of-use assets and interest accretion on finance lease liabilities as part of cost of sales - licensing and services and interest expense, net, respectively. The following table provides the components of the finance lease cost for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Amortization of right-of-use asset, net of lease incentive and contract liability credits $ 420    $ 675    $ 840    $ 675   
Interest accretion on finance lease liabilities 371    470    754    470   
Total finance lease cost $ 791    $ 1,145    $ 1,594    $ 1,145   

Other Arrangements (as a Lessee)
The Company leases certain computer software, equipment and co-location facilities under finance leases that expire on various dates through 2022, for which the outstanding lease liability balance was assessed as not material as of June 30, 2020.

The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

Equipment Held by Customers (as a Lessor)
The Company either sells or leases certain equipment (including antennas, modems and routers, among others) as part of the bandwidth service to our Maritime and Land Connectivity customers. We account for existing equipment lease transactions as operating leases. We recognize lease payments for operating leases as licensing and services revenue in its condensed consolidated statement of operations on a straight-line basis over the lease term.

We assess new equipment lease arrangements or modifications to existing equipment lease arrangements for operating or sales-type lease classification. We recognize investments in leases for sales-type leases when the risk and rewards of ownership are not fully transferred to the customer due to our continued involvement with the equipment. We allocate the total consideration in a contract assessed with a sales-type lease using the expected cost-plus margin and residual methods for the lease and non-lease components, respectively.

The service revenues (with embedded operating equipment leases) and recognized revenues on sales-type equipment leases in which the Company acts as the lessor for the three and six months ended June 30, 2020 and 2019, is presented in the following table (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Bandwidth service and equipment revenues(1)
$ 20,281    $ 36,154    $ 46,304    $ 70,261   
Earned revenues on sales-type leases at commencement(2)
812    977    915    1,310   
Total Licensing and Service Revenues -- Maritime and Land Connectivity $ 21,093    $ 37,131    $ 47,219    $ 71,571   
(1) This is presented as part of Revenues -- Licensing and services in our condensed consolidated statement of operations, and includes the equipment lease component that is embedded in the overall bandwidth service arrangement. Since we adopted the practical expedient to not separate the lease and non-lease components as allowed with the ASC 842 implementation as of January 1, 2019, we will continue to classify existing embedded equipment arrangements as operating leases, to the extent unmodified.
(2) This includes the equipment lease revenues recognized at commencement date of the customer equipment arrangements classified as sales-type leases. As equipment leasing is a standard component in our connectivity business model, we present equipment revenues relating to these sales-type leases on a gross basis, and recognize a corresponding cost of sales equal to the net book value of the leased equipment. Interest income component is considered immaterial.

Supplemental Cash Flow Information, Weighted-Average Remaining Lease Term and Discount Rate
Because the rate implicit in each lease is not readily determinable, the Company uses its IBR to determine the present value of the lease payments. The following table discloses the weighted-average remaining lease term and IBR, as well as supplemental cash flow information (in thousands):
Six Months Ended June 30, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of operating lease liabilities $ 3,800   
Cash paid for amounts included in the measurement of finance lease liabilities $ 1,800   
Right-of-use-assets obtained in exchange for operating lease obligations $ 194,000   
Right-of-use-assets obtained in exchange for finance lease obligations $ —   
Weighted average remaining lease term -- real estate operating leases
6.77 years
Weighted average remaining lease term -- teleport co-location operating leases
4.43 years
Weighted average remaining lease term -- satellite capacity operating leases
0.50 years
Weighted average remaining lease term -- finance lease
6.00 years
Weighted average IBR -- real estate operating leases
9.91  %
Weighted average IBR -- teleport co-location operating leases
8.92  %
Weighted average IBR -- teleport satellite capacity operating leases
7.24  %
Weighted average IBR -- finance lease
8.30  %

Annual Future Minimum Lease Payments
The following table reflects a summary of Annual future minimum lease payments and the Company’s lease assets as of June 30, 2020 (in thousands):
As a Lessee As a Lessor
Real Estate Satellite Capacity Satellite Capacity Teleport
Co-Location		 Total Equipment Held by Customers
Lease Classification Operating Finance Operating Operating Sales-Type
2020 (remaining six months) $ 2,975    $ 1,879    $ 689    $ 937    $ 6,480    $ 472   
2021 5,270    3,758    —    1,777    10,805    940   
2022 4,574    3,758    —    1,452    9,784    585   
2023 3,620    3,758    —    561    7,939    261   
2024 3,625    3,758    —    550    7,933    180   
Thereafter 10,896    5,638    —    1,013    17,547    43   
Total Future Lease Payments $ 30,960    $ 22,549    $ 689    $ 6,290    $ 60,488    $ 2,481   
Less: Imputed interest (8,699)   (4,712)   (10)   (1,110)   (14,531)   (298)  
Present Value of Lease Liabilities $ 22,261    $ 17,837    $ 679    $ 5,180    $ 45,957   
Net Investment in Sales-Type Leases $ 2,183   

In response to the COVID-19 pandemic and related government restrictions negatively impacting our operations, subsequent to March 31, 2020, we began renegotiating certain lease agreements to obtain rent relief in the near term, in order to help offset the negative financial impacts of COVID-19. On April 10, 2020, the Financial Accounting Standards Board ("FASB") staff issued a question-and-answer document providing guidance for lease concessions provided to lessees in response to the effects of COVID-19. Such guidance allows lessees to make an election not to evaluate whether a lease concession provided by a lessor
should be accounted for as a lease modification in the event the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We elected to adopt the practical expedient for all lease concessions provided for our real estate lease agreements. As of the six months ended June 30, 2020, rent concession received was $0.7 million.

The book value of the equipment held by customers under operating leases, which are classified as “Equipment” in Note 5- Property & Equipment, is as follows:
June 30, 2020 December 31, 2019
Equipment
Gross balance $ 53,884    $ 57,369   
Accumulated depreciation (33,623)   (30,692)  
Net Book Value $ 20,261    $ 26,677