Leases

12 Months Ended

Dec. 31, 2022

Effective January 1, 2022, the Company adopted ASC 842, which requires the recognition of all leases, including operating leases on the consolidated balance sheets by recording a ROU asset and related liability, and elected to exclude short-term leases from adoption. The lease liability and ROU asset will be remeasured when there is a change in the lease term (or upon the occurrence of another reassessment trigger). The Company elected to adopt ASC 842 using the effective date method, which required the Company to recognize and measure all leases that exist at the effective date using a modified transition approach. Under this approach, the Company did not restate financial information for any periods prior to January 1, 2022. ASC 842 includes certain practical expedients intended to ease the burden of adoption. Upon adoption, the Company elected the following package of practical expedients:

•No change to the classification of existing operating leases under previous lease guidance;

•All existing leases classified as capital leases under previous lease guidance are classified as financing leases under ASC 842; and

•All existing lessor leases classified as operating leases under previous lease guidance are classified as operating leases under ASC 842.

By electing this package of practical expedients, the Company was not required to reassess whether an existing contract is or contains a lease, reassess lease classification, nor was the Company required to reassess the accounting treatment for initial direct costs. These elections applied to all leases, as lessee and sublessor.

The Company did not elect to use hindsight in determining its lease terms or whether a renewal, termination, or purchase option is reasonably certain to be exercised. Therefore, the lease term at transition for all leases was determined to be the remaining lease term as determined under previous lease guidance.

In addition, the Company derecognized its intangible favorable and unfavorable lease balances at the transition date with a corresponding entry to the ROU asset, with no impact to the consolidated statements of operations and comprehensive (loss) income and the Company’s accumulated deficit.

Upon adoption on January 1, 2022, the Company recognized a ROU asset of $23.5 million and a lease liability of $23.8 million.

The Company determines if a contract is a lease or contains a lease at inception. Operating lease liabilities are measured, on each reporting date, based on the present value of the future minimum lease payments over the remaining lease term. The Company’s leases generally do not provide an implicit rate and, therefore, the Company used the incremental borrowing rate of the former first lien term loan credit agreement of 4.50% for leases entered into for the period prior to November 29, 2022. Operating lease assets are measured by adjusting the lease liability for lease incentives, initial direct costs incurred and asset impairments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with the operating lease asset reduced by the amount of the expense. Lease terms may include options to extend or terminate a lease when they are reasonably certain to occur.

The Company leases real estate and equipment for use in its operations. The Company has 19 operating leases with remaining lease terms ranging from 4 months to 73 months.

The components of lease expense for the periods presented are as follows:


	Year Ended December 31,
(in thousands)	2020		2021		2022
Components of total lease costs
Operating lease expense	$	6,931	$	4,002	$	5,224
Sublease income	—		—		(726)
Total net lease costs	$	6,931	$	4,002	$	4,498

Information related to the Company’s ROU assets and lease liabilities is as follows:


(dollar amounts in thousands)	December 31, 2022
Operating leases

Operating leases ROU asset - long-term	20,084
Operating leases ROU asset, net	$	20,084

Operating leases liability - current	$	3,717
Operating leases liability - long-term	16,835
Total operating leases liability	$	20,552


Weighted average remaining lease term in years - operating leases	4.8
Weighted average discount rate - operating leases	4.50	%

Total remaining lease payments under the Company’s operating leases are as follows:


(in thousands)	December 31, 2022
2023	5,267
2024	4,671
2025	4,603
2026	3,794
2027	3,468
Thereafter	$	1,158
Total future minimum lease payments	$	22,961
Less: imputed interest	(2,409)
Total	$	20,552