Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.24.1.u1
Leases
3 Months Ended
Mar. 31, 2024
Leases [Abstract]  
Leases

Note 9 – Leases

The Company leases office space, company-owned transition studios, warehouse, training centers and a 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 applied the practical expedient as an accounting policy for classes of underlying assets that have fixed payments for non-lease components, to not separate non-lease components from lease components and instead to account for them together as a single lease component, which increases the amount of lease assets and corresponding liabilities.

ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, and are reviewed for impairment when indicators of impairment are present. ASC 360 requires three steps to identify, recognize and measure impairment. If indicators of impairment are present (Step 1), the Company performs a recoverability test (Step 2) comparing the sum of the estimated undiscounted cash flows attributable to the ROU asset in question to the carrying amount. If the undiscounted cash flows used in the recoverability test are less than the carrying amount, the Company estimates the fair value of the ROU asset and recognizes an impairment loss when the carrying amount exceeds the estimated fair value (Step 3). When determining the fair value of the ROU asset, the Company estimated what market participants would pay to lease the assets assuming the highest and best use in the assets' current forms. There were no ROU asset impairment charges during the three months ended March 31, 2024 and 2023.

Supplemental balance sheet information related to leases are summarized as follows:

 

Operating leases

 

Balance Sheet Location

 

March 31, 2024

 

 

December 31, 2023

 

ROU assets, net

 

 Right-of-use assets

 

$

55,623

 

 

$

71,413

 

Lease liabilities, short-term

 

Other current liabilities

 

$

6,461

 

 

$

9,109

 

Lease liabilities, long-term

 

 Lease liability

 

$

54,258

 

 

$

70,141

 

Components of lease expense during the three months ended March 31, 2024 and 2023, are summarized as follows:

 

 

 

For the three months ended March 31,

 

 

 

2024

 

 

2023

 

Operating lease costs

 

$

3,774

 

 

$

2,150

 

Variable lease costs

 

 

173

 

 

 

347

 

Total

 

$

3,947

 

 

$

2,497

 

 

Supplemental cash flow information related to operating leases during the three months ended March 31, 2024 and 2023, are summarized as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

1,741

 

 

$

1,963

 

Lease liabilities arising from new ROU assets

 

$

 

 

$

11,621

 

Other information related to leases is summarized as follows:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Weighted average remaining lease term (years)

 

 

6.7

 

 

 

6.7

 

Weighted average discount rate

 

 

9.5

%

 

 

8.4

%

 

Maturities of lease liabilities as of March 31, 2024 are summarized as follows:

 

 

 

Amount

 

 

Remainder of 2024

 

$

10,956

 

 

2025

 

 

13,224

 

 

2026

 

 

13,045

 

 

2027

 

 

12,453

 

 

2028

 

 

10,355

 

 

Thereafter

 

 

23,661

 

 

Total future lease payments

 

 

83,694

 

 

Less: imputed interest

 

 

22,975

 

 

Total

 

$

60,719