Leases

12 Months Ended

Dec. 31, 2021

The Company has operating leases for office space and campus facilities. Some leases include options to terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

Operating lease assets are ROU assets, which represent the right to use an underlying asset for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term on the Consolidated Balance Sheets as of December 31, 2020 and 2021. These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments. The ROU asset includes all lease payments and excludes lease incentives.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. There are no variable lease payments. Lease expense for the years ended December 31, 2019, 2020, and 2021 was approximately $2.6 million, $2.9 million, and $7.5 million, respectively. These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material. Cash paid for amounts included in the present value of operating lease liabilities during the years ended December 31, 2020 and 2021 was $2.9 million and $7.2 million, respectively, and is included in operating cash flows.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating leases as of December 31, 2021 (dollars in thousands):


Maturity of Lease Liabilities	Lease Payments
2022	$	16,036
2023	13,087
2024	11,377
2025	10,150
2026	9,631
2027 and beyond	33,156
Total future minimum lease payments	$	93,437
Less imputed interest	(10,244)
Present value of operating lease liabilities	$	83,193


Balance Sheet Classification
Operating lease liabilities, current	$	13,705
Operating lease liabilities, long-term	69,488
Total operating lease liabilities	$	83,193


Other Information
Weighted average remaining lease term (in years)	7.58
Weighted average discount rate	3.1	%

The Company leases corporate office space in Maryland under an operating lease that expires in May 2022, and until May 2021, the APUS Segment leased administrative office space in Virginia. The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 23 campuses located in six states under operating

leases that expire through October 2033. The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases six campuses located in Ohio and one campus in Indianapolis, Indiana, under operating leases that expire through June 2029.