Leases

12 Months Ended

Dec. 31, 2022

Leases

Leases

Note 9. Leases

We have operating leases for manufacturing, office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease in relation to the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. We review all agreements to determine if the agreement contains a lease component. An agreement contains a lease component if it provides the use of a specific physical space or a specific physical item.

We recognize operating lease obligations under Accounting Standards Codification Leases (Topic 842). The guidance in Topic 842 requires recognition of lease assets and related liabilities on a discounted basis using the explicit or implicit discount rate stated within the agreement. We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any. For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate. The value of the right-of-use asset is initially determined based on the net present value of the associated liability, and is adjusted for deferred costs and possible impairments, if any. We have made the following policy elections: (i) operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; (ii) we recognize lease expense for operating leases on a straight-line basis over the lease term; and (iii) we account for lease

components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 1 to 3 years. The exercise of lease renewal options is at our sole discretion. For lease extensions that are reasonably certain to occur, we have included the renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:

		December 31,		December 31,
Leases	Classification	2022		2021
Assets		(in thousands)
Operating leases	Operating lease assets	$	12,146	$	9,242
Finance lease	Finance lease assets *		17,942		19,238
Total leased assets		$	30,088	$	28,480
Liabilities
Current
Operating	Other current liabilities	$	5,367	$	4,716
Finance	Current portion of finance lease obligation		1,229		979
Noncurrent
Operating	Other long-term liabilities		6,931		4,357
Finance	Finance lease obligation		45,185		46,415
Total lease liabilities		$	58,712	$	56,467
*Finance lease assets are recorded net of accumulated depreciation of $45.9 million and includes $0.6 million of prepaid financing costs as of December 31, 2022. Finance lease assets are recorded net of accumulated depreciation of $48.6 million and includes $0.7 million of prepaid financing costs as of December 31, 2021. ​

All of our office locations support selling and servicing functions. We also have a manufacturing facility in South Korea. Lease expense, depreciation expense relating to finance leased assets and interest expense relating to our finance lease obligation recognized within our consolidated statement of operations for the twelve-month periods ended December

31, 2022, 2021 and 2020 are as follows:

		Year ended
		December 31,
Lease cost	Classification	2022		2021		2020
Operating lease cost		(in thousands)
Product / Services*	Cost of revenue	$	5,427	$	2,978	$	2,402
Research and development	Operating expenses		322		430		491
Sales and marketing*	Operating expenses		1,526		1,605		1,389
General and administrative*	Operating expenses		1,065		996		877
Total operating lease cost		$	8,340	$	6,009	$	5,159
Finance lease cost
Depreciation of leased assets	Cost of revenue, R&D, Sales and marketing and G&A	$	1,296	$	1,306	$	1,336
Interest on lease liabilities	Interest expense		4,992		5,086		5,211
Total finance lease cost		$	6,288	$	6,392	$	6,547
Total lease cost		$	14,628	$	12,401	$	11,706
* Product / services, sales and marketing and general and administrative expense also includes short-term lease and variable lease costs of approximately $1.8 million, $1.9 million and $1.2 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Our corporate headquarters, shown below under finance leases, has an original lease term of 22 years. All other locations are treated as operating leases, with lease terms ranging from 1 to 10 years. The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets:

	Finance		Operating		Total
Maturity of Lease Liabilities	Leases		Leases		Leases
	(in thousands)
2023	$	6,114	$	6,588	$	12,702
2024		6,252		3,292		9,544
2025		5,930		2,172		8,102
2026		6,008		1,602		7,610
2027		6,128		799		6,927
Thereafter		61,586		13		61,599
Total lease payments	$	92,018	$	14,466	$	106,484
Less interest portion*		(45,604)		(2,168)		(47,772)
Finance lease and operating lease obligations	$	46,414	$	12,298	$	58,712
* Finance lease interest calculated using the implied interest rate; operating lease interest calculated using estimated corporate borrowing rate.

The table above does not include options to renew lease terms that are not reasonably certain of being exercised, nor leases signed but not yet commenced as of December 31, 2022. As of December 31, 2022, total estimated future minimum lease payments for leases signed but not yet commenced, which consists only of the lease of property in Beverly, Massachusetts, on which a state-of-the-art logistics and flex manufacturing center with 98,000 square feet is being built to our specifications and has an expected commencement date in 2023, is estimated to be $32.5 million.

	December 31,
Lease term and discount rate	2022
Weighted-average remaining lease term (years):
Operating leases		3.1
Finance leases		14.1
Weighted-average discount rate:
Operating leases		4.5%
Finance leases		10.5%

Our cash outflows from our operating leases include rent expense and other charges associated with these leases. These cash flows are included within the operating section of our statement of cash flows. Our cash flows from our finance lease include an interest and payment of principal component. The table below shows our cash outflows, by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets:

	Year ended December 31,
Cash paid for amounts included in the measurement of lease liabilities	2022		2021		2020
	(in thousands)
Operating cash outflows from operating leases	$	8,340	$	6,009	$	5,159
Operating cash outflows from finance leases		4,992		5,086		5,321
Financing cash outflows from finance leases		987		763		399
Operating lease assets obtained in exchange for operating lease liabilities		6,173		8,670		2,369
Finance lease assets obtained in exchange for new finance lease liabilities		—		—		—