Leases

9 Months Ended

Sep. 30, 2024

7. Leases

The Company leases office space in North America, Europe, Asia, South America, Africa, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 2024 through 2034. The Company’s finance leases are immaterial.

Lease costs are recognized in the Unaudited Consolidated Statements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset.

Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.

From time to time, the Company enters into sublease arrangements with unrelated third parties. These subleases are classified as operating leases and expire between years 2024 through 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America and Europe.

As of September 30, 2024, the Company had entered into one operating lease for which the commencement date had not yet occurred primarily because of the premises being prepared for occupancy by the landlord. Accordingly, this one lease

represents an obligation of the Company that is not reflected within the Unaudited Consolidated Balance Sheet as of September 30, 2024. The aggregate future liability related to this lease was $0.4 million.

The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Lease Cost:	(dollars in thousands)
Operating lease cost	$	18,589	$	19,029	$	58,237	$	57,557
Variable lease cost	6,528		5,517		18,354		15,735
Sublease rental income	(2,001)		(1,903)		(6,416)		(7,519)
Total lease cost	$	23,116	$	22,643	$	70,175	$	65,773
Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows	$	21,588	$	22,823	$	65,407	$	67,095

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments (1)	$	3,311	$	8,145	$	16,449	$	14,681

(1) Includes Right-of-use lease assets obtained in exchange for operating lease liabilities related to acquisitions.

As of September 30, 2024, the weighted average remaining lease term was 6.0 years and the weighted average discount rate was 5.7%.

Operating lease expense is included in Office and general expenses in the Unaudited Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.

In the nine months ended September 30, 2024, the Company ceased using certain office space and as such recognized a charge of $1.7 million to reduce the carrying value of two of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets and related leasehold improvements were related to an agency within the Integrated Agencies Network and to Corporate.

In the nine months ended September 30, 2023, the Company recorded a charge of $9.2 million to reduce the carrying value of two of its right-of-use assets and related leasehold improvements. The right-of-use lease assets were related to agencies within the Integrated Agencies Network.

With regard to the aforementioned impairments, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using sublease income to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value. The impairment charge is included in Impairment and other losses within the Unaudited Consolidated Statements of Operations.

The following table presents minimum future rental payments under the Company’s leases as of September 30, 2024 and their reconciliation to the corresponding lease liabilities:


	Maturity Analysis
	(dollars in thousands)
2024	$	17,305
2025	74,133
2026	61,421
2027	53,814
2028	49,962
Thereafter	115,014
Total	371,649
Less: Present value discount	(59,364)
Lease liability	$	312,285