Leases Leases (Notes)

6 Months Ended

Dec. 31, 2023

LEASES

The Company determines if an arrangement is a lease, or contains a lease, at inception. The lease term begins on the commencement date, which is the date the Company takes possession of the property and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease agreements with lease and non-lease components are accounted for as a single lease component for all asset classes, which are comprised of real estate leases and equipment leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the Company’s leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based upon the information available at commencement date. The determination of the incremental borrowing rate requires judgment and is determined by using the Company’s current unsecured borrowing rate, adjusted for various factors such as collateralization and term to align with the terms of the lease.

The Company leases certain office space, data centers, and equipment with remaining terms of 1 month to 10 years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s ROU assets and lease liabilities. Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature. Variable lease costs are recognized as a variable lease expense when incurred.

At December 31, 2023, and June 30, 2023, the Company had operating lease assets of $58,480 and $43,662, respectively. At December 31, 2023, total operating lease liabilities of $63,797 were comprised of current operating lease liabilities of $9,268 and noncurrent operating lease liabilities of $54,529. At June 30, 2023, total operating

lease liabilities of $50,269 were comprised of current operating lease liabilities of $9,776 and noncurrent operating lease liabilities of $40,493.

Operating lease assets are included within other non-current assets, and operating lease liabilities are included within accrued expenses (current portion) and other long-term liabilities (noncurrent portion) in the Company’s condensed consolidated balance sheet. Operating lease assets were recorded net of accumulated amortization of $29,984 and $34,973 as of December 31, 2023, and June 30, 2023, respectively.

Operating lease costs for the three months ended December 31, 2023, and 2022, were $2,229 and $3,029, respectively. Total operating lease costs for the respective quarters included variable lease costs of $1,709 and $957, respectively. Operating lease costs for the six months ended December 31, 2023, and 2022, were $4,698 and $6,088, respectively. Total operating lease costs for the respective fiscal year-to-date periods included variable lease costs of $2,253 and $1,881, respectively. Operating lease expense is included within cost of services, research and development, and selling, general and administrative expense, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statements of income.

For the six months ended December 31, 2023, and 2022, the Company had operating cash flows for payments on operating leases of $4,422 and $6,202, and ROU assets obtained in exchange for operating lease liabilities of $18,935 and $2,282, respectively.

As of December 31, 2023, and June 30, 2023, the weighted-average remaining lease term for the Company's operating leases was 82 months and 78 months, and the weighted-average discount rate was 2.68% and 2.14%, respectively.

Maturity of Lease Liabilities under ASC 842

Future minimum rental payments on operating leases with initial non-cancellable lease terms in excess of one year were due as follows at December 31, 2023:


Due Dates (fiscal year)	Future Minimum Rental Payments

2024 (remaining period)	$	4,813
2025	10,160
2026	10,747
2027	10,271
2028	9,979
Thereafter	25,001
Total lease payments	$	70,971
Less: interest	(7,174)
Present value of lease liabilities	$	63,797

Future lease payments include $5,464 related to options to extend lease terms that are reasonably certain of being exercised. At December 31, 2023, there were no legally binding lease payments for leases signed but not yet commenced.

Lessor, Operating Leases

On September 30, 2023, the Company entered into an agreement with a third party to sublease a portion of its Elizabethtown, Kentucky facility. The commencement date of the sublease was October 1, 2023, and has a term of 57 months. Sublease income for the three and six months ended December 31, 2023 was $132 and is included within revenue on the Company's condensed consolidated statements of income. There have been no indications of impairment related to the underlying right-of-use asset.

Minimum Sublease Payments

At December 31, 2023, the future total minimum sublease payments to be received were as follows:


Due Dates (fiscal year)	Future Minimum Sublease Receipts

2024 (remaining period)	$	395
2025	807
2026	831
2027	856
2028	882
Total sublease receipts	$	3,771