InnovAge Holding Corp.INNV
InnovAge Holding Corp. Leases Disclosure
Leases
Leasing Arrangements as Lessee
The Company leases certain property and equipment under various third-party operating and finance lease agreements. The Company determines if an arrangement is or contains a lease at the lease inception date by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. The leases are noncancelable and expire on various terms from 2025 through 2034. We determine if an arrangement is a lease upon commencement of the contract. If an arrangement is determined to be a long-term lease (greater than 12 months), we recognize a right-of-use ("ROU") asset and lease liability based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may also include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We have elected to apply the short-term lease exception for contracts that have a lease term of twelve months or less and do not include an option to purchase the underlying asset. Therefore, we do not recognize a ROU asset or lease liability for such contracts. We recognize short-term lease payments as expense on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or rate are recognized as expense. Certain leases include escalations based on inflation indexes and fair market value adjustments. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement for such leases.
The following table presents the components of our ROU assets and their classification in our Balance Sheet as of June 30.
| Component of Lease Balances | Balance Sheet Line Items | 2025 | 2024 | ||||||||||||||
| in thousands | |||||||||||||||||
| Assets: | |||||||||||||||||
| Operating lease assets | Operating lease assets | $ | 26,901 | $ | 28,416 | ||||||||||||
| Finance lease assets | 13,403 | 15,908 | |||||||||||||||
| Total leased assets | $ | 40,304 | $ | 44,324 | |||||||||||||
The Company recorded a $1.4 million impairment of operating lease ROU assets during the year ended June 30, 2025. See Note 2, “Summary of Significant Accounting Policies.” There were no impairments during the fiscal year ended June 30, 2024.
The following table presents the components of our lease cost and the classification of such costs in our Statements of Operations for the years ended June 30.
| Component of Lease Cost | Statements of Operations Line Items | 2025 | 2024 | ||||||||||||||
| in thousands | |||||||||||||||||
| Operating lease cost | Cost of care excluding depreciation and amortization and Corporate, general and administrative | $ | 6,223 | $ | 5,402 | ||||||||||||
| Finance lease expense: | |||||||||||||||||
| Amortization of leased assets | Depreciation and amortization | 5,567 | 1,984 | ||||||||||||||
| Interest on lease liabilities | Interest expense, net | 1,167 | — | ||||||||||||||
| Variable lease cost | Cost of care excluding depreciation and amortization and Corporate, general and administrative | 4 | 93 | ||||||||||||||
| Short-term lease cost | Cost of care excluding depreciation and amortization and Corporate, general and administrative | 168 | 172 | ||||||||||||||
| Total lease expense: | $ | 13,129 | $ | 7,651 | |||||||||||||
The following table includes the weighted-average lease terms and discount rates for operating and finance leases as of June 30.
| Weighted average remaining lease term: | 2025 | 2024 | |||||||||
| Operating leases | 7.5 years | 7.7 years | |||||||||
| Finance leases | 3.0 years | 3.5 years | |||||||||
| Weighted average discount rate | 2025 | 2024 | |||||||||
| Operating leases | 7.00 | % | 6.86 | % | |||||||
| Finance leases | 7.68 | % | 7.80 | % | |||||||
The following table includes the future maturities of lease payments for operating leases and finance leases for periods subsequent to June 30, 2025.
| in thousands | Operating Lease | Finance Lease | Total | ||||||||||||||
| 2025 | $ | 6,272 | $ | 6,927 | $ | 13,199 | |||||||||||
| 2026 | 6,263 | 6,125 | 12,388 | ||||||||||||||
| 2027 | 5,999 | 5,128 | 11,127 | ||||||||||||||
| 2028 | 5,218 | 3,004 | 8,222 | ||||||||||||||
| 2029 | 4,362 | 954 | 5,316 | ||||||||||||||
| Thereafter | 14,543 | 231 | 14,774 | ||||||||||||||
| Total lease payments | 42,657 | 22,369 | 65,026 | ||||||||||||||
| Less liability accretion / imputed interest | (14,057) | (9,600) | (23,657) | ||||||||||||||
| Total lease liabilities | 28,600 | 12,769 | 41,369 | ||||||||||||||
| Less: Current lease liabilities | 4,682 | 5,234 | 9,916 | ||||||||||||||
| Total long-term lease liabilities | $ | 23,918 | $ | 7,535 | $ | 31,453 | |||||||||||
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.