Leases

6 Months Ended

Jun. 30, 2023

The Company has entered into various operating lease agreements and a finance lease agreement for certain office space, manufacturing and warehouse facilities, retail and customer services locations, equipment, and vehicles. We determine whether a contractual arrangement is or contains a lease, including embedded leases, at inception and record the lease when the underlying assets is made available for us by the lessor, or the date of commencement. At lease commencement, the Company measures the lease liability at the present value of lease payments not yet paid. For purposes of calculating lease liabilities, lease terms include options to extend or renew the lease when it is reasonably certain that we will exercise such options. Certain operating leases provide for annual increases to lease payments based on an index or rate. Lease expense for finance lease payments is recognized as amortization expense of the finance lease right-of-use asset over the lease term.

Operating leases

During the six-months ended June 30, 2023 and year ended December 31, 2022, the Company recorded non-cash lease right-of-use assets of $21.4 million and $33.4 million and non-cash lease liabilities of $19.1 million and $35.0 million, respectively, on its consolidated balance sheet.

The tables below present information regarding the Company's lease assets and liabilities (in thousands):


	As of June 30, 2023		As of December 31, 2022
Assets:
Operating lease right-of-use assets	$	53,037	$	33,424
Liabilities:
Operating lease — current	$	9,251	$	7,085
Operating lease — long-term	$	42,655	$	27,884

The components of lease related expense are as follows (in thousands):


	Three months ended June 30,
	2023		2022
Lease costs
Operating lease expense	$	2,128	$	1,153
Short-term lease expense	20		61
Total lease costs	$	2,148	$	1,214


	Six-months ended June 30,
	2023		2022
Lease costs
Operating lease expense	$	4,958	$	2,525
Short-term lease expense	$	179	117
Total lease costs	$	5,137	$	2,642

Operating and short-term lease related expenses are included in selling, general and administrative expense on the Condensed Consolidated Statement of Operations.

Other information related to operating leases is as follows:


	June 30, 2023		December 31, 2022
Weighted average remaining lease term (in years)	4.4		3.6
Weighted average discount rate	7.99	%	5.27	%

The components of supplemental cash flow information related to leases are as follows (in thousands):


	Six months ended June 30,
	2023		2022
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	4,050	$	2,353
Non-cash activity:
ROU asset obtained in exchange for operating lease obligations	$	21,432	$	11,065

As of June 30, 2023, future minimum payments of our operating lease liabilities during the next five years and thereafter are as follows (in thousands):


	Operating Leases
Year ending December 31, 2023	$	6,309
Year ending December 31, 2024	$	12,945
Year ending December 31, 2025	$	11,710
Year ending December 31, 2026	$	10,750
Year ending December 31, 2027	$	6,653
Thereafter	$	16,072
Total	$	64,439
Less: present value discount	(12,533)
Total lease costs	$	51,906

The Company’s lease agreements do not provide an implicit rate, so the Company used an estimated incremental borrowing rate, which was derived from third-party information available at lease inception, in determining the present value of lease payments. The rate used is for a secured borrowing of a similar term as the lease.

Finance leases

During 2023 the Company recorded embedded finance lease right-of-use assets of $24.6 million on its consolidated balance sheet, related to certain equipment and tooling that is controlled and used by the Company for vehicle manufacturing. The Company paid for a majority of the costs during 2022 with a remaining liability of $12.7 million as of June 30, 2023 to be paid in 2023. Amortization of right-of-use assets totaled $0.4 million for the six-months ended June 30, 2023 and future amortization of embedded finance lease right-of-use assets will be recognized over a lease term of approximately 8 years. The Company did not have any finance leases during 2022. As of June 30, 2023, the embedded finance lease right-of-use assets, totaling $26.0 million and lease liabilities from finance leases are included in other non-current assets and accrued expenses on the balance sheet.