Leases

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Leases

Leases

The Company leases clinics, office buildings, and certain equipment under noncancellable financing and operating lease agreements that expire at various dates through November 2031. See Note 2 for a summary of the Company’s policies relating to leases.

The initial terms of operating leases range from 1 to 10 years and certain leases provide for free rent periods, periodic rent increases, and renewal options. Monthly payments for these leases range from $0 to $60. All lease agreements generally require the Company to pay maintenance, repairs, property taxes, and insurance costs, which are generally variable amounts based on actual costs incurred during each applicable period.

The Company has determined that periods covered by options to extend the Company's leases are excluded from the lease terms as it is not reasonably certain the Company will exercise such options.

Lease Expense

The components of lease expense were as follows for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Operating lease costs:	$	1,971	$	1,576	$	5,572	$	3,992
Finance lease costs:
Amortization of ROU asset	$	10	$	14	$	48	$	41
Interest expense	$	2	$	1	$	9	$	4
Other lease costs:
Short-term lease costs	$	3	$	94	$	37	$	306
Variable lease costs	$	308	$	263	$	891	$	690

Operating and other lease costs are presented as part of selling, general, and administrative expenses. The components of finance lease costs appear in depreciation and amortization and interest expense.

Maturity of Lease Liabilities

The aggregate future lease payments for the Company's leases in years subsequent to September 30, 2023 are as follows:

(in thousands)	Operating Leases		Finance Leases
2023 (remaining three months)	$	2,034	$	12
2024	7,730		47
2025	7,349		42
2026	6,731		39
2027	5,439		29
Thereafter	9,215		—
Total future lease payment	$	38,498	$	169
Less: amount representing interest	(6,405)		(20)
Present value of future lease payment (lease liabilities)	$	32,093	$	149
Reported as:
Lease liabilities, current	$	6,079	$	39
Lease liabilities, noncurrent	26,014		110
Total lease liabilities	$	32,093	$	149

The current portion of finance lease liabilities are presented as other liabilities of accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet (see FN 9). The non-current portion of finance lease liabilities are presented as other non-current liabilities in the accompanying Condensed Consolidated Balance Sheet.

Lease Term and Discount Rate

The following table provides the weighted average remaining lease terms and weighted average discount rates for the Company's leases as of September 30, 2023 and 2022:

	September 30, 2023		September 30, 2022
Weighted-average remaining lease term (in years)
Operating	5.43		5.37
Finance	3.75		3.92
Weighted-average discount rate
Operating	6.34	%	5.15	%
Finance	6.45	%	5.95	%

Supplemental Cash Flow Information

The following table provides certain cash flow and supplemental noncash information related to the Company's lease liabilities for the three and nine months ended September 30, 2023 and 2022.

	Nine Months Ended September 30,
(in thousands)	2023		2022
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash payment from operating leases	$	5,448	$	3,814
Financing cash payments for finance leases	91		39
Lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	9,011	$	29,468
Finance leases	3		203

Lease Modifications

During the three months ended September 30, 2023, the Company extended the lease terms of three clinics in California. The extensions constitute a lease modification that qualifies as a change of accounting for the original lease and not a separate contract. Accordingly, for the three months ended September 30, 2023, the Company recognized the difference of $1,274 as an increase to the operating lease liability; net of lease incentives of $1,274, as an increase to operating lease right-of-use asset.

During the nine months ended September 30, 2023, the Company expanded its lease space for one clinic in California and extended the lease terms of five clinics in California. The expansion and extension constitute a lease modification that qualifies as a change of accounting for the original lease and not a separate contract. Accordingly, for the nine months ended September 30, 2023, the Company recognized the difference of $3,018 as an increase to the operating lease liability; net of lease incentives of $3,021, as an increase to operating lease right-of-use asset, and $3 as an increase to rent expense.

Leases

Leases

The Company leases clinics, office buildings, and certain equipment under noncancellable financing and operating lease agreements that expire at various dates through November 2031. See Note 2 for a summary of the Company’s policies relating to leases.

The initial terms of operating leases range from 1 to 10 years and certain leases provide for free rent periods, periodic rent increases, and renewal options. Monthly payments for these leases range from $0 to $60. All lease agreements generally require the Company to pay maintenance, repairs, property taxes, and insurance costs, which are generally variable amounts based on actual costs incurred during each applicable period.

The Company has determined that periods covered by options to extend the Company's leases are excluded from the lease terms as it is not reasonably certain the Company will exercise such options.

Lease Expense

The components of lease expense were as follows for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Operating lease costs:	$	1,971	$	1,576	$	5,572	$	3,992
Finance lease costs:
Amortization of ROU asset	$	10	$	14	$	48	$	41
Interest expense	$	2	$	1	$	9	$	4
Other lease costs:
Short-term lease costs	$	3	$	94	$	37	$	306
Variable lease costs	$	308	$	263	$	891	$	690

Operating and other lease costs are presented as part of selling, general, and administrative expenses. The components of finance lease costs appear in depreciation and amortization and interest expense.

Maturity of Lease Liabilities

The aggregate future lease payments for the Company's leases in years subsequent to September 30, 2023 are as follows:

(in thousands)	Operating Leases		Finance Leases
2023 (remaining three months)	$	2,034	$	12
2024	7,730		47
2025	7,349		42
2026	6,731		39
2027	5,439		29
Thereafter	9,215		—
Total future lease payment	$	38,498	$	169
Less: amount representing interest	(6,405)		(20)
Present value of future lease payment (lease liabilities)	$	32,093	$	149
Reported as:
Lease liabilities, current	$	6,079	$	39
Lease liabilities, noncurrent	26,014		110
Total lease liabilities	$	32,093	$	149

The current portion of finance lease liabilities are presented as other liabilities of accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet (see FN 9). The non-current portion of finance lease liabilities are presented as other non-current liabilities in the accompanying Condensed Consolidated Balance Sheet.

Lease Term and Discount Rate

The following table provides the weighted average remaining lease terms and weighted average discount rates for the Company's leases as of September 30, 2023 and 2022:

	September 30, 2023		September 30, 2022
Weighted-average remaining lease term (in years)
Operating	5.43		5.37
Finance	3.75		3.92
Weighted-average discount rate
Operating	6.34	%	5.15	%
Finance	6.45	%	5.95	%

Supplemental Cash Flow Information

The following table provides certain cash flow and supplemental noncash information related to the Company's lease liabilities for the three and nine months ended September 30, 2023 and 2022.

	Nine Months Ended September 30,
(in thousands)	2023		2022
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash payment from operating leases	$	5,448	$	3,814
Financing cash payments for finance leases	91		39
Lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	9,011	$	29,468
Finance leases	3		203

Lease Modifications

During the three months ended September 30, 2023, the Company extended the lease terms of three clinics in California. The extensions constitute a lease modification that qualifies as a change of accounting for the original lease and not a separate contract. Accordingly, for the three months ended September 30, 2023, the Company recognized the difference of $1,274 as an increase to the operating lease liability; net of lease incentives of $1,274, as an increase to operating lease right-of-use asset.

During the nine months ended September 30, 2023, the Company expanded its lease space for one clinic in California and extended the lease terms of five clinics in California. The expansion and extension constitute a lease modification that qualifies as a change of accounting for the original lease and not a separate contract. Accordingly, for the nine months ended September 30, 2023, the Company recognized the difference of $3,018 as an increase to the operating lease liability; net of lease incentives of $3,021, as an increase to operating lease right-of-use asset, and $3 as an increase to rent expense.