LEASES

9 Months Ended

Sep. 30, 2024

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 November 2024 to February 2030. 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 September 30, 2024, the Company has one additional operating lease with a net present value of $1.7 million that will commence in October 2024.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease expense related to ROU assets and liabilities	$	1,137	$	1,109	$	3,359	$	3,347
Other lease expense	206		318		500		491
Total lease expense	$	1,343	$	1,427	$	3,859	$	3,838

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


Supplemental Balance Sheet Information	September 30, 2024		December 31, 2023
Operating lease right-of-use assets, noncurrent	$	6,895	$	5,941

	September 30, 2024		December 31, 2023
Operating lease liabilities, current	$	4,384	$	4,321
Operating lease liabilities, noncurrent	6,806		6,841
Total operating lease liabilities	$	11,190	$	11,162


Weighted Average Remaining Lease Term	Years
Operating leases	2.96
Weighted Average Discount Rate
Operating leases	8.7	%

Maturities of operating lease liabilities as of September 30, 2024 were as follows (in thousands):


Year Ending September 30,
2025	$	1,473
2026	4,616
2027	3,797
2028	1,231
2029	950
Thereafter	522
Total future undiscounted lease payments	12,589
Less imputed interest	(1,399)
Total	$	11,190

For the three months ended September 30, 2024 and 2023, the Company paid $1.4 million and $1.3 million, respectively, for operating lease liabilities. For both the nine months ended September 30, 2024 and 2023, the Company paid $4.2 million, respectively, for operating lease liabilities.