LEASES

3 Months Ended

Mar. 31, 2024

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 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 21 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.

On October 31, 2023, the Company entered into a lease for approximately 100,000 square feet of space to serve as the Company’s new campus in Houston, Texas. The lease term commenced on January 2, 2024, with an initial lease term of 21 years and 6 months. The lease contains three five-year renewal options.

On October 18, 2023, the Company entered into a lease for approximately 120,000 square feet of space to serve as the Company’s new campus in Nashville, Tennessee. The lease term commenced on November 1, 2023, with an initial lease term of 15 years. The lease contains two five-year renewal options. See Note 12, “Real Estate Transactions”.

On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown, Pennsylvania for approximately $10.2 million and subsequently on January 30, 2024 entered into a sale-leaseback transaction for this property. See Note 12, “Real Estate Transactions”. As of December 31, 2023, this property was classified as held-for-sale on the Condensed Consolidated Balance Sheets. However, the sale was consummated in the first quarter of the current year.

The following table presents components of lease cost and classification on the Condensed Consolidated Statement of Operations:

		Three Months Ended March 31,
in thousands	Consolidated Statement of Operations Classification	2024		2023
Operating Lease Cost	Selling, general and administrative	$	4,800	$	4,872
Finance lease cost
Amortization of leased assets	Depreciation and amortization		369		-
Interest on lease Liabilities	Interest expense		487		-
Variable lease cost	Selling, general and administrative		88		66
		$	5,744	$	4,938

The net change in ROU asset and finance lease liability is split between principal payments, interest expense and amortization expense. Principal payments are classified in the financing section, interest expense and amortization expense are broken out separately in the operating section of the Condensed Consolidated Statements of Cash Flows.

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

	Three Months Ended March 31,
	2024		2023
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flows - operating leases	$	4,495	$	3,918
Operating Cash Flows - finance leases	$	487	$	-
Financing Cash Flows - finance leases	$	-	$	-

Non-cash activity:
Lease liabilities arising from obtaining right-of-use assets
Operating leases	$	15,714	$	2,142
Finance leases	$	12,570	$	-

During the three months ended March 31, 2024, the Company entered into one new lease that resulted in noncash re-measurement of the related ROU asset and operating lease liability of $15.7 million. In addition, during the three months ended March 31, 2024, the Company entered into one finance lease that resulted in a noncash re-measurement of the related ROU asset and finance lease liability of $12.6 million.

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

	As of March 31,
	2024			2023
Weighted-average remaining lease term
Operating leases	12.51 years			11.15 years
Finance leases	17.08 years				-

Weighted-average discount rate
Operating leases		6.84	%		6.99	%
Finance leases		7.71	%		-

Maturities of lease liabilities by fiscal year for our leases as of March 31, 2024, are as follows:

	Operating Leases			Finance Leases
Year ending December 31,
2024 (excluding the three months ended March 31, 2024)	$	13,558		$	1,216
2025		18,086			506
2026		15,567			2,817
2027		12,681			2,918
2028		12,512			3,023
2029		10,637			3,132
Thereafter		84,883			43,418
Total lease payments		167,924			57,030
Less: imputed interest		(54,155	)		(28,221	)
Present value of lease liabilities	$	113,769		$	28,809