Leases

9 Months Ended

May 31, 2023

LEASES

Our lease portfolio is primarily related to our office space, under various operating lease agreements. We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. Our lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments at lease commencement (which includes fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, leveraging an estimated IBR. Certain adjustments to calculate our lease ROU assets may be required due to prepayments, lease incentives received and initial direct costs incurred. We account for lease and non-lease components as a single lease component, which we recognize over the expected term on a straight-line expense basis in occupancy costs (a component of SG&A expense) in our Consolidated Statements of Income.

As of May 31, 2023, we recognized $156.8 million of Lease ROU assets, net and $230.3 million of combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets. Such leases have a remaining lease term ranging from less than one year to just under 13 years and did not include any renewal or termination options that were not yet reasonably certain to be exercised.

The following table reconciles our future undiscounted cash flows related to our operating leases and the reconciliation to the combined Current lease liabilities and Long-term lease liabilities in the Consolidated Balance Sheets as of May 31, 2023:


(in thousands)	Minimum Lease Payments
Fiscal Years Ended August 31,
2023 (remaining three months)	$	9,991
2024	38,343
2025	36,303
2026	35,489
2027	34,233
Thereafter	119,137
Total	$	273,496
Less: Imputed interest	43,156
Present value	$	230,340

The following table includes the components of our occupancy costs in our Consolidated Statements of Income:


	Three Months Ended				Nine Months Ended
	May 31,				May 31,
(in thousands)	2023		2022		2023		2022
Operating lease cost(1)	$	8,170	$	9,767	$	24,403	$	30,466
Variable lease cost(2)	$	4,645	$	3,185	$	12,699	$	8,933

(1) Operating lease costs include costs associated with fixed lease payments and index-based variable payments that qualified for lease accounting under ASC 842, Leases and complied with the practical expedients and exceptions elected by us.

(2) Variable lease costs include costs that were not fixed at the lease commencement date and are not dependent on an index or rate. These costs were not included in the measurement of lease liabilities and primarily include variable non-lease costs, such as utilities, real estate taxes, insurance and maintenance, as well as lease costs for those leases that qualified for the short-term lease exception.

The following table summarizes our lease term and discount rate assumptions related to the operating leases recorded on the Consolidated Balance Sheets:


	As of May 31, 2023		As of August 31, 2022
Weighted average remaining lease term (in years)	8.0		8.6
Weighted average discount rate (IBR)	4.5	%	4.4	%

The following table summarizes supplemental cash flow information related to our operating leases:


	Nine Months Ended
	May 31,
(in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities	$	29,245	$	32,936
Lease ROU assets obtained in exchange for lease liabilities(1)	$	13,872	$	9,348
Reductions to ROU assets resulting from reductions to lease liabilities(2)	$	—	$	(11,661)

(1)Primarily includes new lease arrangements entered into during the period and contract modifications that extend our lease terms and/or provide additional rights.

(2)Primarily relates to lease term reassessments based on contractual options to early terminate, resulting in a reduction to the lease liability and the corresponding lease ROU asset.

During the three and nine months ended May 31, 2022, we incurred an impairment charge of $24.2 million and $31.5 million, respectively, related to our lease ROU assets associated with vacating certain leased office space. Refer to Note 4, Fair Value Measures for more information on the lease ROU assets impairment methodology. The were no similar lease ROU asset impairments recorded during the three and nine months ended May 31, 2023.