Leases
The Company has operating leases for real estate related to manufacturing operations. The following table summarizes the balances as it relates to leases at the end of the period (in thousands):
| | | | | | | | | | | | | | | | | |
| | | December 31, |
| Location on the Consolidated Balance Sheets | | 2025 | | 2024 |
| Right-of-use asset | Right-of-use operating lease assets | | $ | 46,044 | | | $ | 1,786 | |
| | | | | |
| Lease liability, current portion | Accrued expenses and other | | $ | 3,217 | | | $ | 881 | |
| Lease liability, net current portion | Right-of-use operating lease liabilities | | 38,661 | | | 1,235 | |
| Total lease liability | | | $ | 41,878 | | | $ | 2,116 | |
The Company entered into a lease agreement for a new manufacturing facility in order to expand the operational footprint of the Portland, Tennessee manufacturing facilities. The accounting commencement date for the lease of this new and expanded facility was September 1, 2025.
The Company determines if an arrangement is a lease at its inception. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the Company’s leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight-line basis over the lease term.
Operating lease arrangements are comprised primarily of real estate and equipment agreements. The Company elected to apply the practical expedient to consider non-lease components as a part of the lease. The Company’s leases contain certain non-lease components for common area maintenance which are variable on a month to month basis and as such recorded as a variable lease expense as incurred.
The details of the Company’s operating leases are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Operating lease expense | $ | 2,884 | | | $ | 1,085 | | | $ | 1,189 | |
| Variable lease expense | 233 | | | 227 | | | 168 | |
| Short-term lease expense | 111 | | | 45 | | | 61 | |
| Total lease expense | $ | 3,228 | | | $ | 1,357 | | | $ | 1,418 | |
The following table presents the maturities of lease liabilities as of December 31, 2025 (in thousands):
| | | | | |
| For the Year Ended December 31, | Operating Leases |
| 2026 | 6,070 | |
| 2027 | 5,597 | |
| 2028 | 5,431 | |
| 2029 | 5,596 | |
| 2030 | 5,762 | |
| Thereafter | 30,388 | |
| Total lease payments | 58,844 | |
| Less: Imputed lease interest | (16,966) | |
| Total lease liabilities | $ | 41,878 | |
The Company’s weighted average remaining lease-term and weighted average discount rate are as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Weighted average remaining lease-term | 9.58 years | | 2.33 years |
| Weighted average discount rate | 7.1% | | 4.5% |
Supplemental cash flow and other information related to operating leases are as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Operating cash flows from operating leases | $ | 6,275 | | | $ | 1,610 | |
| Non-cash investing activities: | | | |
| Right of use operating lease assets obtained in exchange for lease obligations | $ | 46,168 | | | $ | — | |
| Right of use operating lease liabilities obtained in exchange for lease assets | $ | 41,336 | | | $ | — | |
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.