Leases
We have operating and finance lease obligations resulting from the lease of land and buildings that comprise our corporate headquarters and various manufacturing facilities; leases related to additional manufacturing, office, and warehouse space; leases on company vehicles; and leases on a variety of office and other equipment.
In December 2025 we purchased two office buildings in Austin, Texas that were previously leased by us. These buildings serve as the basis for our On-X manufacturing operation. The related operating lease right-of-use asset and lease liabilities were derecognized, and the acquired properties were recorded as property, plant and equipment. See Note 1 - Property and Equipment, net - for further discussion of the purchase.
Balance sheet information related to leases consists of the following (in thousands, except lease term and discount rate):
| | | | | | | | | | | |
| December 31, |
| Operating leases: | 2025 | | 2024 |
| Operating lease right-of-use assets, net | $ | 34,701 | | | $ | 39,726 | |
| | | |
| Current maturities of operating leases | $ | 4,649 | | | $ | 4,489 | |
| Non-current maturities of operating leases | 34,427 | | | 39,988 | |
| Total operating lease liabilities | $ | 39,076 | | | $ | 44,477 | |
| | | |
| Finance leases: | | | |
| Property and equipment, at cost | $ | 7,678 | | | $ | 6,746 | |
| Accumulated depreciation | (4,553) | | | (3,557) | |
| Property and equipment, net | $ | 3,125 | | | $ | 3,189 | |
| | | |
| Current portion of finance lease obligations | $ | 726 | | | $ | 601 | |
| Non-current finance lease obligations | 2,698 | | | 2,833 | |
| Total finance lease liabilities | $ | 3,424 | | | $ | 3,434 | |
| | | |
| Weighted average remaining lease term (in years): | | | |
| Operating leases | 9.1 | | 9.6 |
| Finance leases | 4.7 | | 5.7 |
| | | |
| Weighted average discount rate: | | | |
| Operating leases | 5.9% | | 6.3% |
| Finance leases | 2.4% | | 2.3% |
The components of lease expense included in General, administrative, and marketing expenses in our Consolidated Statements of Operations and Comprehensive Income (Loss) consists of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Depreciation of property and equipment | $ | 752 | | | $ | 627 | | | $ | 542 | |
| Interest expense on finance leases | 94 | | | 89 | | | 84 | |
| Total finance lease expense | 846 | | | 716 | | | 626 | |
| Operating lease expense | 7,872 | | | 7,822 | | | 7,354 | |
| Sublease income | (354) | | | (465) | | | (278) | |
| Total lease expense | $ | 8,364 | | | $ | 8,073 | | | $ | 7,702 | |
Supplemental cash flow information related to leases consists of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| Cash paid for amounts included in the measurement of lease liabilities: | 2025 | | 2024 | | 2023 |
| Operating cash flows for operating leases | $ | 7,957 | | | $ | 6,627 | | | $ | 7,263 | |
| Financing cash flows for finance leases | 699 | | | 623 | | | 539 | |
| Operating cash flows for finance leases | 94 | | | 89 | | | 84 | |
Future maturities of lease liabilities are as follows (in thousands):
| | | | | | | | | | | |
| Finance
Leases | | Operating
Leases |
| 2026 | $ | 792 | | | $ | 6,798 | |
| 2027 | 791 | | | 6,271 | |
| 2028 | 749 | | | 5,405 | |
| 2029 | 685 | | | 4,980 | |
| 2030 | 601 | | | 4,896 | |
| Thereafter | — | | | 23,056 | |
| Total lease payments | $ | 3,618 | | | $ | 51,406 | |
| Less: Amount representing interest | (194) | | | (12,330) | |
| Present value of lease liabilities | 3,424 | | | 39,076 | |
| Less: Current maturities of lease liabilities | (726) | | | (4,649) | |
| Lease liabilities, less current maturities | $ | 2,698 | | | $ | 34,427 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.