7. LEASES

Leases are classified as either finance or operating leases based on criteria in ASC 842. The Company has finance leases for its vehicle and equipment leases and operating leases for its real estate space and office equipment leases. The Company’s operating and finance leases generally have original lease terms between 1 year and 15 years, and in some instances include one or more options to renew. The Company includes options to extend the lease term if the options are reasonably certain of being exercised. The Company currently considers some of its renewal options to be reasonably certain to be exercised. Some leases also include early termination options, which can be exercised under specific conditions. The Company does not have material residual value guarantees or restrictive covenants associated with its leases.

Finance and operating lease assets represent the right to use an underlying asset for the lease term, and finance and operating lease liabilities represent the obligation to make lease payments arising from the lease.

The Company calculates the present value of its finance and operating leases using an estimated incremental borrowing rate (IBR), which requires judgment. For real estate operating leases, the Company estimates the IBR based on prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and

maturity dates commensurate with the terms of the lease. For all other leases, the Company estimates the IBR based on the stated interest rate on the contract. Since many of the inputs used to calculate the rate implicit in the leases are not readily determinable from the lessee’s perspective, the Company does not use the implicit interest rate.

Certain leases contain variable payments, these payments are expensed as incurred and not included in the Company’s operating lease right-of-use (ROU) assets and operating lease liabilities. These amounts primarily include payments for maintenance, utilities, taxes, and insurance and are excluded from the present value of the Company’s lease obligations.

The Company does not record operating lease right-of-use assets or operating lease liabilities for leases with an initial term of 12 months or less. The Company also combines lease and non-lease components on all new or modified operating leases into a single lease component for all classes of assets.

When a lease is terminated before the expiration of the lease term, irrespective of whether the lease is classified as a finance lease or an operating lease, the lessee would derecognize the ROU asset and corresponding lease liability. Any difference would be recognized as a gain or loss related to the termination of the lease. Similarly, if a lessee is required to make any payments or receives any consideration when terminating the lease, it would include such amounts in the determination of the gain or loss upon termination.

The components of lease expense were as follows:

 

 

 

 

 

For the Twelve Months Ended December 31,

 

 

 

Statement of Operations Location

 

2024

 

 

2023

 

Operating lease cost

 

 

 

 

 

 

 

 

Lease cost

 

Selling, general and administrative expense

 

$

13,667

 

 

$

11,663

 

Variable lease cost

 

Selling, general and administrative expense

 

 

2,217

 

 

 

1,313

 

Lease termination gain-net(1)

 

Selling, general and administrative expense

 

 

 

 

 

(737

)

Total operating lease cost

 

 

 

$

15,884

 

 

$

12,239

 

 

 

 

 

 

 

 

 

Finance lease cost

 

 

 

 

 

 

 

 

Amortization of ROU assets

 

Depreciation and amortization

 

$

5,814

 

 

$

5,351

 

Interest on lease liabilities

 

Interest expense, net

 

 

611

 

 

 

655

 

Total finance lease cost

 

 

 

$

6,425

 

 

$

6,006

 

Total lease cost

 

 

 

$

22,309

 

 

$

18,245

 

 

(1)
During the year ended December 31, 2023, the Company became responsible for a lease surrender liability of $8.3 million as a result of terminating one of its newly acquired businesses' lease agreements. The lease surrender fee is payable in equal installments beginning on February 28, 2024, through December 31, 2031. The present value of the current and long term portion of the surrender fee liability of $0.5 million and $5.4 million, on a discounted basis, is included in accounts payable and other accrued liabilities and other non-current liabilities, respectively, on the consolidated statements of financial position. Upon the termination of the lease, the Company wrote off the related $2.3 million and $8.9 million, ROU asset and lease liability, respectively, and recorded a gain of $0.7 million, net of the surrender fee, within selling, general and administrative expense on the consolidated statements of operations. The outstanding lease surrender liability balance as of December 31, 2024 is $4.8 million.

Supplemental cash flows information related to leases was as follows:

 

 

 

For the Twelve Months Ended December 31,

 

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows used in operating leases

 

$

13,202

 

 

$

11,931

 

Operating cash flows used for interest related to finance leases

 

 

661

 

 

 

655

 

Financing cash flows used in finance leases

 

 

5,489

 

 

 

5,797

 

Lease liabilities arising from new ROU assets:

 

 

 

 

 

 

Operating leases

 

 

20,951

 

 

 

31,459

 

Finance leases

 

 

8,841

 

 

 

7,636

 

Weighted average remaining lease terms and weighted average discount rates were:

 

 

 

December 31, 2024

 

 

 

Operating Leases

 

 

Finance Leases

 

Weighted average remaining lease term (years)

 

 

4.6

 

 

 

3.7

 

Weighted average discount rate

 

 

4.8

%

 

 

6.7

%

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Operating Leases

 

 

Finance Leases

 

Weighted average remaining lease term (years)

 

 

4.4

 

 

 

3.5

 

Weighted average discount rate

 

 

4.2

%

 

 

6.3

%

The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year:

 

 

Operating Leases

 

 

Finance Leases

 

2025

 

$

13,067

 

 

$

5,736

 

2026

 

 

10,827

 

 

 

4,823

 

2027

 

 

7,843

 

 

 

3,801

 

2028

 

 

6,239

 

 

 

2,525

 

2029

 

 

4,889

 

 

 

1,265

 

2030 and thereafter

 

 

4,397

 

 

 

 

Total undiscounted future minimum lease payments

 

$

47,262

 

 

$

18,150

 

Less imputed interest

 

 

(5,037

)

 

 

(2,063

)

Total discounted future minimum lease payments

 

$

42,225

 

 

$

16,087

 

Historical Timeline

Fiscal YearFiled
2024Mar 3, 2025Showing above
2023Feb 29, 2024
2022Mar 1, 2023
2021Mar 1, 2022

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.