Leases

6 Months Ended

Jun. 30, 2023

5. Leases

The Company primarily leases facilities for office space under non-cancelable operating leases for its U.S. and international locations. As of June 30, 2023, non-cancelable leases expire on various dates between 2023 and 2028, some of which include options to extend the leases for up to 5 years.

The components of lease expense recorded in the condensed consolidated statements of operations were as follows:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

	(In thousands)
Operating lease cost	$	1,755	$	2,090	$	3,487	$	4,228





Sublease income	—		(96)		—		(193)
Total net lease cost	$	1,755	$	1,994	$	3,487	$	4,035

Supplemental cash flow and other information related to operating leases were as follows:


	Six months ended June 30,
		2023			2022

		(In thousands)

Cash paid for amounts included in the measurement of operating lease liabilities		$	3,919		$	3,944
Right-of-use assets obtained in exchange for new operating lease liabilities		297			3,404





Weighted average remaining lease term (in years)		2.00			2.48



Weighted average discount rate		4.82		%	4.61		%

Maturities of operating lease liabilities were as follows:


	As of June 30,
	2023


	(In thousands)

2023 (remaining)	$	3,687
2024	2,694
2025	1,668
2026	736
2027	73

Thereafter	18
Total lease payments	8,876
Less: imputed interest	(329)

Total lease obligations	8,547
Less: current obligations	(5,090)
Long-term lease obligations	$	3,457

Future Corporate Headquarters

On June 4, 2021, the Company purchased approximately 40 acres of undeveloped land (the “Property”) in Raleigh, North Carolina, from the State of North Carolina (the “State”) for $30.0 million. Additionally, as consideration for the Property, the Company agreed to construct, at its expense, a parking lot and related improvements (the “Parking Improvements”) on land owned by the State adjacent to the Property. Subsequent to the purchase of the Property, the Company sold a portion of the Property constituting approximately 23.76 acres (the “Conveyed Parcel”) to USEF Edwards Mill Owner, LLC (the “Developer”) for $17.5 million. The Company retained approximately 17.06 acres of the Property, which was recorded at cost and is included in the Company’s condensed consolidated balance sheets as a component of property, plant and equipment, net. A lease incentive was recognized for the difference between the consideration received from the Developer for the Conveyed Parcel and the cost basis of the Conveyed Parcel. Additional lease incentives were recognized during project development for land and other leasehold improvements funded by the Developer on behalf of the Company. As of June 30, 2023, the balance of the lease incentive, including such additional incentives obtained during project development, was $63.6 million and is included as a component of other liabilities on the condensed consolidated balance sheets.

On May 27, 2021, the Company entered into a Lease Agreement (the “Lease”) with the Developer for the Conveyed Parcel, together with improvements for office and related infrastructure to be constructed thereon, collectively constituting approximately 534,000 gross square feet (the “Project”). The lease became effective upon closing of the sale of the Conveyed Parcel to the Developer. Upon the effective date, the Company deposited $2.5 million with the Developer as security on the lease. Additionally, the Company made deposits of $21.7 million to fund certain improvements expected to be constructed as part of the development of the Project. $20.0 million of deposits were used to purchase fixed assets during the three months ended June 30, 2023 and have been recorded in property, plant and equipment, net on the Company’s condensed consolidated balance sheet. The remaining $1.7 million of deposits are reported in other long-term assets. The lease term will commence upon substantial completion of the final building to be delivered, as evidenced by a certificate of occupancy issued by the City of Raleigh (the “Commencement Date”), and continue for a period of twenty (20) years (the “Initial Term”). The Company has the option to renew the Initial Term for two ten-year periods at a rental rate equal to 100% of the

then-prevailing market rental rate for comparable buildings in the Raleigh, North Carolina, market. The Company intends to relocate its corporate headquarters to the Project during the third quarter of 2023.

No ROU assets or lease liabilities have been recognized in connection with the Lease as of June 30, 2023. Future lease payments are included in Note 12, “Commitments and Contingencies.”

The Company expects the Lease to commence in the third quarter of 2023. Additionally, the Company expects the right of use asset and lease liability to be material to the financial statements.