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Leases

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Leases

Leases

See Note 10.

Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification 842. The Company has operating leases for its corporate offices, including the Campus Lease, its former Manhattan Beach Project Innovation Center, its manufacturing facilities, warehouses and vehicles, and to a lesser extent, certain equipment and finance leases. Such leases generally have original lease terms between 2 years and 12 years, and often include one or more options to renew. Some leases also include early termination options, which can be exercised under specific conditions. The Company includes options to extend the lease term if the options are reasonably certain of being exercised. The Company does not have residual value guarantees or material restrictive covenants associated with its leases.

On January 14, 2021, the Company entered into the Campus Lease, a 12-year lease with two 5-year renewal options to house its corporate headquarters, lab and innovation space (the “Campus Headquarters”) in El Segundo, California. Although the Company is involved in the design of the tenant improvements of the Campus Headquarters, the Company does not have title or possession of the assets during construction. In addition, the Company does not have the ability to control the leased Campus Headquarters until each phase of the tenant improvements is complete. The Company contributed $3.3 million and $55.1 million in payments towards the construction of the Campus Headquarters in the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. These payments are initially recorded in “Prepaid lease costs, non-current” in the Company’s condensed consolidated balance sheets and will ultimately be reclassified as a component of a right-of-use asset upon lease commencement for each phase of the lease. On June 1, 2023, the tenant improvements

associated with Phase 1-B were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-B, the Company recognized a $64.9 million right-of-use asset, which included the reclassification of $29.3 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $35.6 million lease liability. In 2022, the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-A, the Company recognized a $64.1 million right-of-use asset, which included the reclassification of $27.7 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $36.6 million lease liability.

Upon completion of the tenant improvements associated with Phase 1-B, the Company moved its headquarters, sales and marketing operations into the newly constructed Campus Headquarters where its innovation center is also located. On June 30, 2023, the Company terminated the lease of its former headquarters, also in El Segundo, California. As a result of this termination, during the second quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $1.9 million, $0.5 million and $1.4 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to selling, general and administrative expenses and are reflected in the tables below. On February 14, 2023, the Company terminated the lease of its Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $11.3 million, $0.8 million and $10.5 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to research and development expenses and are reflected in the tables below.

Lease costs for operating and finance leases were as follows:

												Three Months Ended
(in thousands)						Statement of Operations Location						September 30, 2023						October 1, 2022
Operating lease cost:
Lease cost						Cost of goods sold						$	399					$	413
Lease cost						Research and development expenses						2,507						806
Lease cost						Selling, general and administrative expenses						820						407
Variable lease cost(1)						Cost of goods sold						54						51
Variable lease cost(1)						Research and development expenses						21						75
Variable lease cost(1)						Selling, general and administrative expenses						632						304
Operating lease cost												$	4,433					$	2,056
Short-term lease cost:
Short-term lease cost						Cost of goods sold						$	21					$	—
Short-term lease cost						Research and development expenses						37						—
Short-term lease cost						Selling, general and administrative expenses						51						147
Short-term lease cost												$	109					$	147
Finance lease cost:
Amortization of right-of use assets						Cost of goods sold						$	49					$	54
Amortization of right-of use assets						Research and development expenses						4						—
Interest on lease liabilities						Interest expense						5						3
Variable lease cost(1)						Cost of goods sold						3						—
Finance lease cost												$	61					$	57
Total lease cost												$	4,603					$	2,260

____________

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.            

												Nine Months Ended
(in thousands)						Statement of Operations Location						September 30, 2023						October 1, 2022
Operating lease cost:
Lease cost						Cost of goods sold						$	1,210					$	1,175
Lease cost						Research and development expenses						6,979						1,871
Lease cost						Selling, general and administrative expenses						1,937						2,270
Variable lease cost(1)						Cost of goods sold						177						213
Variable lease cost(1)						Research and development expenses						104						75
Variable lease cost(1)						Selling, general and administrative expenses						1,800						304
Operating lease cost												$	12,207					$	5,908
Short-term lease cost:
Short-term lease cost						Cost of goods sold						$	63					$	—
Short-term lease cost						Research and development expenses						121						—
Short-term lease cost						Selling, general and administrative expenses						148						446
Short-term lease cost												$	332					$	446
Finance lease cost:
Amortization of right-of use assets						Cost of goods sold						$	154					$	144
Amortization of right-of use assets						Research and development expenses						11						—
Interest on lease liabilities						Interest expense						16						15
Variable lease cost(1)						Cost of goods sold						8						—
Finance lease cost												$	189					$	159
Total lease cost												$	12,728					$	6,513

____________

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.

Supplemental balance sheet information as of September 30, 2023 and December 31, 2022 related to leases are as follows:

(in thousands)						Balance Sheet Location						September 30, 2023						December 31, 2022
Assets
Operating leases						Operating lease right-of-use assets						$	132,671					$	87,595
Finance leases, net						Property, plant and equipment, net						515						688
Total lease assets												$	133,186					$	88,283
Liabilities
Current:
Operating lease liabilities						Current portion of operating lease liabilities						$	3,083					$	3,812
Finance lease liabilities						Accrued expenses and other current liabilities						209						224
Long-term:
Operating lease liabilities						Operating lease liabilities, net of current portion						76,382						55,854
Finance lease liabilities						Finance lease obligations and other long-term liabilities						316						469
Total lease liabilities												$	79,990					$	60,359

The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of September 30, 2023:

						September 30, 2023
(in thousands)						Operating Leases						Finance Leases
Remainder of 2023						$	2,178					$	59
2024						8,366						209
2025						8,048						178
2026						8,029						72
2027						8,179						37
Thereafter						96,195						—
Total undiscounted future minimum lease payments						130,995						555
Less imputed interest						(51,530)						(30)
Total discounted future minimum lease payments						$	79,465					$	525

Weighted average remaining lease terms and weighted average discount rates were:

						September 30, 2023
						Operating Leases						Finance Leases
Weighted average remaining lease term (years)						14.3						2.9
Weighted average discount rate						6.9		%				3.7		%

Leases

Leases

See Note 10.

Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification 842. The Company has operating leases for its corporate offices, including the Campus Lease, its former Manhattan Beach Project Innovation Center, its manufacturing facilities, warehouses and vehicles, and to a lesser extent, certain equipment and finance leases. Such leases generally have original lease terms between 2 years and 12 years, and often include one or more options to renew. Some leases also include early termination options, which can be exercised under specific conditions. The Company includes options to extend the lease term if the options are reasonably certain of being exercised. The Company does not have residual value guarantees or material restrictive covenants associated with its leases.

On January 14, 2021, the Company entered into the Campus Lease, a 12-year lease with two 5-year renewal options to house its corporate headquarters, lab and innovation space (the “Campus Headquarters”) in El Segundo, California. Although the Company is involved in the design of the tenant improvements of the Campus Headquarters, the Company does not have title or possession of the assets during construction. In addition, the Company does not have the ability to control the leased Campus Headquarters until each phase of the tenant improvements is complete. The Company contributed $3.3 million and $55.1 million in payments towards the construction of the Campus Headquarters in the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. These payments are initially recorded in “Prepaid lease costs, non-current” in the Company’s condensed consolidated balance sheets and will ultimately be reclassified as a component of a right-of-use asset upon lease commencement for each phase of the lease. On June 1, 2023, the tenant improvements

associated with Phase 1-B were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-B, the Company recognized a $64.9 million right-of-use asset, which included the reclassification of $29.3 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $35.6 million lease liability. In 2022, the tenant improvements associated with Phase 1-A were completed, and the underlying asset was delivered to the Company. As such, upon commencement of Phase 1-A, the Company recognized a $64.1 million right-of-use asset, which included the reclassification of $27.7 million of the construction payments previously included in “Prepaid lease costs, non-current,” and a $36.6 million lease liability.

Upon completion of the tenant improvements associated with Phase 1-B, the Company moved its headquarters, sales and marketing operations into the newly constructed Campus Headquarters where its innovation center is also located. On June 30, 2023, the Company terminated the lease of its former headquarters, also in El Segundo, California. As a result of this termination, during the second quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $1.9 million, $0.5 million and $1.4 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to selling, general and administrative expenses and are reflected in the tables below. On February 14, 2023, the Company terminated the lease of its Commerce, California commercialization center. As a result of this termination, during the first quarter of 2023, the balances in “Operating lease right-of use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, net of current portion” were reduced by $11.3 million, $0.8 million and $10.5 million, respectively. Costs associated with this lease through its termination date, including termination costs, are included in operating lease costs related to research and development expenses and are reflected in the tables below.

Lease costs for operating and finance leases were as follows:

												Three Months Ended
(in thousands)						Statement of Operations Location						September 30, 2023						October 1, 2022
Operating lease cost:
Lease cost						Cost of goods sold						$	399					$	413
Lease cost						Research and development expenses						2,507						806
Lease cost						Selling, general and administrative expenses						820						407
Variable lease cost(1)						Cost of goods sold						54						51
Variable lease cost(1)						Research and development expenses						21						75
Variable lease cost(1)						Selling, general and administrative expenses						632						304
Operating lease cost												$	4,433					$	2,056
Short-term lease cost:
Short-term lease cost						Cost of goods sold						$	21					$	—
Short-term lease cost						Research and development expenses						37						—
Short-term lease cost						Selling, general and administrative expenses						51						147
Short-term lease cost												$	109					$	147
Finance lease cost:
Amortization of right-of use assets						Cost of goods sold						$	49					$	54
Amortization of right-of use assets						Research and development expenses						4						—
Interest on lease liabilities						Interest expense						5						3
Variable lease cost(1)						Cost of goods sold						3						—
Finance lease cost												$	61					$	57
Total lease cost												$	4,603					$	2,260

____________

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.            

												Nine Months Ended
(in thousands)						Statement of Operations Location						September 30, 2023						October 1, 2022
Operating lease cost:
Lease cost						Cost of goods sold						$	1,210					$	1,175
Lease cost						Research and development expenses						6,979						1,871
Lease cost						Selling, general and administrative expenses						1,937						2,270
Variable lease cost(1)						Cost of goods sold						177						213
Variable lease cost(1)						Research and development expenses						104						75
Variable lease cost(1)						Selling, general and administrative expenses						1,800						304
Operating lease cost												$	12,207					$	5,908
Short-term lease cost:
Short-term lease cost						Cost of goods sold						$	63					$	—
Short-term lease cost						Research and development expenses						121						—
Short-term lease cost						Selling, general and administrative expenses						148						446
Short-term lease cost												$	332					$	446
Finance lease cost:
Amortization of right-of use assets						Cost of goods sold						$	154					$	144
Amortization of right-of use assets						Research and development expenses						11						—
Interest on lease liabilities						Interest expense						16						15
Variable lease cost(1)						Cost of goods sold						8						—
Finance lease cost												$	189					$	159
Total lease cost												$	12,728					$	6,513

____________

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.

Supplemental balance sheet information as of September 30, 2023 and December 31, 2022 related to leases are as follows:

(in thousands)						Balance Sheet Location						September 30, 2023						December 31, 2022
Assets
Operating leases						Operating lease right-of-use assets						$	132,671					$	87,595
Finance leases, net						Property, plant and equipment, net						515						688
Total lease assets												$	133,186					$	88,283
Liabilities
Current:
Operating lease liabilities						Current portion of operating lease liabilities						$	3,083					$	3,812
Finance lease liabilities						Accrued expenses and other current liabilities						209						224
Long-term:
Operating lease liabilities						Operating lease liabilities, net of current portion						76,382						55,854
Finance lease liabilities						Finance lease obligations and other long-term liabilities						316						469
Total lease liabilities												$	79,990					$	60,359

The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of September 30, 2023:

						September 30, 2023
(in thousands)						Operating Leases						Finance Leases
Remainder of 2023						$	2,178					$	59
2024						8,366						209
2025						8,048						178
2026						8,029						72
2027						8,179						37
Thereafter						96,195						—
Total undiscounted future minimum lease payments						130,995						555
Less imputed interest						(51,530)						(30)
Total discounted future minimum lease payments						$	79,465					$	525

Weighted average remaining lease terms and weighted average discount rates were:

						September 30, 2023
						Operating Leases						Finance Leases
Weighted average remaining lease term (years)						14.3						2.9
Weighted average discount rate						6.9		%				3.7		%

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No definition available.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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