Xponential Fitness, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

3 Months Ended

Mar. 31, 2022

Note 9 – Leases

The Company leases office space, company-owned transition studios, warehouse, training centers and video recording studio. Certain real estate leases include one or more options to renew. The exercise of lease renewal options is at the Company's sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and lease payment obligation, respectively. The depreciable life of assets and leasehold improvements are limited by the expected lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the rate implicit in the lease contract in determining the present value of lease payments. If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company lease terms may include options to extend or terminate the lease. Currently, it is not reasonably certain that the Company will exercise those options and therefore, the Company utilized the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities for all leases. The Company has certain insignificant short-term leases with an initial term of twelve months or less that are not recorded in the condensed consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, for which variable non-lease components are accounted for separately.

Supplemental balance sheet information related to leases is as follows:


Operating leases	Balance Sheet Location	March 31, 2022
ROU assets, net	Right-of-use assets	$	16,179
Lease liabilities, short-term	Other current liabilities	$	1,917
Lease liabilities, long-term	Lease liability	$	18,472

The components of lease expense during the three months ended March 31, 2022, are as follows:


	Related-party lease		Third-party leases		Total
Operating lease costs	$	80	$	813	$	893
Variable lease costs		—		191		191
Short-term lease costs		—		107		107
Total	$	80	$	1,111	$	1,191

Other information related to leases for the three months ended March 31, 2022, was as follows:


Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows used in operating leases	$	908


Weighted average remaining lease term (years)	8.80
Weighted average discount rate	8	%

Maturities of lease liabilities as of March 31, 2022, were as follows:


	Related-party lease		Third-party leases		Total
Remainder of 2022	$	242	$	2,363	$	2,605
2023		331		3,131		3,462
2024		225		3,145		3,370
2025		—		2,978		2,978
2026		—		2,876		2,876
Thereafter		—		13,274		13,274
Total future lease payments		798		27,767		28,565
Less: imputed interest		66		8,110		8,176
Total	$	732	$	19,657	$	20,389