LEASES

3 Months Ended

Mar. 31, 2023

Effective at the start of fiscal 2020, the Company adopted the provisions and expanded disclosure requirements described in Accounting Standards Codification (ASC) Topic 842, Leases. The Company adopted the standard using the prospective method. The Company has operating leases for real estate and equipment with an option to renew the leases for up to one month to five years. Some of the leases include the option to terminate the leases upon 30-days’ notice with a penalty. The Company’s leases have various remaining lease terms ranging from April 2023 to January 2027. The Company’s lease agreements may include renewal or termination options for varying periods that are generally at the Company's discretion. The Company’s lease terms only include those periods related to renewal options the Company believes are reasonably certain to exercise. The Company generally does not include these renewal options as it is not reasonably certain to renew at the lease commencement date. This determination is based on consideration of certain economic, strategic and other factors that the Company evaluates at lease commencement date and reevaluates throughout the lease term. Some leases also include options to terminate the leases and the Company only includes those periods beyond the termination date if it is reasonably certain not to exercise the termination option.

The Company uses a discount rate to calculate the right of use (“ROU”) asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. The variable portion of lease payments is not included in the Company’s ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

The Company has lease agreements with both lease and non-lease components that are treated as a single lease component for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

The Company has elected to apply the short-term lease exception for all underlying asset classes. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. The Company’s leases do not include significant restrictions or covenants, and residual value guarantees are generally not included within its operating leases. As of March 31, 2023, the Company did not have any material additional operating leases that have not yet commenced.

The components of lease expense and supplemental balance sheet information were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating lease expense related to ROU assets and liabilities	$	1,147	$	1,403
Other lease expense	48		193
Total lease expense	$	1,195	$	1,596

Other information related to leases was as follows (in thousands):


Supplemental Balance Sheet Information	March 31, 2023		December 31, 2022
Operating lease right-of-use assets, noncurrent	$	6,325	$	7,142

	March 31, 2023		December 31, 2022
Operating lease liabilities, current	$	4,047	$	4,223
Operating lease liabilities, noncurrent	8,093		9,094
Total operating lease liabilities	$	12,140	$	13,317


Weighted Average Remaining Lease Term	Years
Operating leases	3.08
Weighted Average Discount Rate
Operating leases	10.3	%

Maturities of operating lease liabilities as of March 31, 2023 were as follows (in thousands):


Year ending March 31
2024	$	3,831
2025	4,647
2026	3,055
2027	2,445
2028	208
Thereafter	—
Total future undiscounted lease payments	14,186
Less imputed interest	(2,046)
Total	$	12,140

For the three months ended March 31, 2023 and 2022, the Company paid $1.1 million and $1.4 million, respectively, for operating lease liabilities.