LEASES

6 Months Ended

Jun. 30, 2022

The Company determines if an arrangement is a lease at inception. The Company considers any contract where there is an identified asset as to which the Company has the right to control its use in determining whether the contract contains a lease. An operating lease right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are to be recognized at the commencement date based on the present value of lease payments over the lease term. As all of the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. We estimate the incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived from the fair value analysis of our credit facility and adjusting it for factors that appropriately reflect the profile of secured borrowing over the expected term of the lease. The operating lease ROU assets include any lease payments made prior to the rent commencement date and exclude lease incentives. Our leases have remaining lease terms of one year to 20 years. Lease terms may include options to extend the lease term used in determining the lease obligation when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term for operating leases.

See Note 13 which discusses the sale leaseback transaction relating to the Company’s Denver and Grand Prairie campuses which closed on October 29, 2021.

On June 30, 2022, the Company executed a lease for approximately 55,000 square feet of space that will be used as a new school, located in Atlanta, Georgia. The lease is expected to commence in the third quarter of this year with the total payments due over the lease term on an undiscounted basis being $12.2 million over the 12-year lease term. There was no involvement in the construction or design of the underlying asset on behalf of the landlord and we are not deemed to be in control of the asset prior to the lease commencement date.

Our operating lease cost for the three months ended June 30, 2022 and 2021 was $4.7 million and $3.8 million, respectively. Our operating lease cost for the six months ended June 30, 2022 and 2021 was $9.3 million and $7.6 million, respectively. Our variable lease cost for the three and six months ended June 30, 2022 was less than $0.1 million. The net change in ROU asset and operating lease liability is included in other assets in the condensed consolidated cash flows for the six months ended June 30, 2022 and 2021.

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,665	$	3,829	$	9,320	$	7,037
Non-cash activity:
Lease liabilities arising from obtaining right-of-use assets	$	73	$	3,152	$	6,717	$	3,202

As of June 30, 2022, there was 1 new lease and 1 lease modification that resulted in noncash re-measurement of the related ROU asset and operating lease liability of $6.7 million relating to one of our campuses. This remeasurement does not include the Atlanta, Georgia location since the lease commencement will occur in the third quarter of 2022.

Weighted-average remaining lease term and discount rate for our operating leases is as follows:

	As of June 30,
	2022			2021
Weighted-average remaining lease term	11.35 years			5.71 years
Weighted-average discount rate		7.36	%		10.93	%

Maturities of lease liabilities by fiscal year for our operating leases as of June 30, 2022 are as follows:

Year ending December 31,
2022 (excluding the six months ended June 30, 2022)	$	9,123
2023		18,237
2024		15,868
2025		13,901
2026		11,448
2027		5,285
Thereafter		69,750
Total lease payments		143,612
Less: imputed interest		(44,595	)
Present value of lease liabilities	$	99,017