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Leases | 9 Months Ended
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Sep. 28, 2024
Leases [Abstract] |
Leases | Leases See Note 9. Leases are classified as either finance leases or operating leases based on criteria in ASC 842 “Leases.” The Company has operating leases for its corporate offices, including the Campus Headquarters (as defined below), 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 a 12-year lease with two 5-year renewal options (“Campus Lease”) to house its corporate headquarters, lab and innovation space (“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 paid $4.9 million and $4.2 million in rent prepayments and payments towards construction costs of the Campus Headquarters in the nine months ended September 28, 2024 and the year ended December 31, 2023, respectively. The rent prepayments and payments towards construction costs 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. 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-A, the Company moved its innovation team from its former Manhattan Beach Innovation Center to the Campus Headquarters. In 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. Upon completion of the tenant improvements associated with Phase 1-B, the Company moved its headquarters, sales and marketing operations to the Campus Headquarters. On September 17, 2024, the Company entered into an amendment to the Campus Lease, which amendment: (i) revised the square footage of the premises, building and project to: (a) increase the Company’s base rent by approximately $851,000 over the initial lease term; (b) adjust the Company’s percentage share of direct expenses; and (c) increase the tenant improvement allowance to reflect a reduction in the scope of landlord’s work; (ii) specify which improvements must be removed by the Company from the premises if the premises are not occupied in their entirety throughout the initial lease term and first extension term; and (iii) address other ministerial matters concerning the Campus Lease. Costs associated with this amendment are included in operating lease costs related to research and development expenses and SG&A expenses and are reflected in the tables below. The lease on the Company’s Manhattan Beach Project Innovation Center expired on January 31, 2024. Costs associated with this lease through its expiration date are included in operating lease costs related to research and development expenses and are reflected in the tables below. Given the Company’s intention to reduce its overall operating expenses and cash expenditures, on February 2, 2024, the Company terminated the agreement to purchase a property in Enschede, the Netherlands (the “Enschede Property”) and the security deposit was returned to the Company, which was subsequently paid to the purchaser of the property to be applied towards the deposit and future lease payments. The Company entered into a lease agreement with the purchaser of the property to lease the approximately 114,000 square foot property for an initial period of five years with an option to renew for an additional five years at an annual rent of approximately €1.0 million. The lease is classified as a finance lease in the Company’s condensed consolidated balance sheet as of September 28, 2024. Costs associated with this lease are included in finance lease costs related to cost of goods sold 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 28, 2024 |  | September 30, 2023
Operating lease cost: |  |  |  |  |  |
Lease cost |  | Cost of goods sold |  | $ | 424 |  |  | $ | 399 |
Lease cost |  | Research and development expenses |  | 2,383 |  |  | 2,507 |
Lease cost |  | Selling, general and administrative expenses |  | 612 |  |  | 820 |
Variable lease cost(1) |  | Cost of goods sold |  | 65 |  |  | 54 |
Variable lease cost(1) |  | Research and development expenses |  | — |  |  | 21 |
Variable lease cost(1) |  | Selling, general and administrative expenses |  | 1,099 |  |  | 632 |
Operating lease cost |  |  |  | $ | 4,583 |  |  | $ | 4,433 |
Short-term lease cost: |  |  |  |  |  |
Short-term lease cost |  | Cost of goods sold |  | $ | 23 |  |  | $ | 21 |
Short-term lease cost |  | Research and development expenses |  | 26 |  |  | 37 |
Short-term lease cost |  | Selling, general and administrative expenses |  | 144 |  |  | 51 |
Short-term lease cost |  |  |  | $ | 193 |  |  | $ | 109 |
Finance lease cost: |  |  |  |  |  |
Amortization of right-of use assets |  | Cost of goods sold |  | $ | 267 |  |  | $ | 49 |
Amortization of right-of use assets |  | Research and development expenses |  | 4 |  |  | 4 |
Interest on lease liabilities |  | Interest expense |  | 45 |  |  | 5 |
Variable lease cost(1) |  | Cost of goods sold |  | 3 |  |  | 3 |
Finance lease cost |  |  |  | $ | 319 |  |  | $ | 61 |
Total lease cost |  |  |  | $ | 5,095 |  |  | $ | 4,603 |
____________ (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 28, 2024 |  | September 30, 2023
Operating lease cost: |  |  |  |  |  |
Lease cost |  | Cost of goods sold |  | $ | 1,246 |  |  | $ | 1,210 |
Lease cost |  | Research and development expenses |  | 7,151 |  |  | 6,979 |
Lease cost |  | Selling, general and administrative expenses |  | 1,890 |  |  | 1,937 |
Variable lease cost(1) |  | Cost of goods sold |  | 181 |  |  | 177 |
Variable lease cost(1) |  | Research and development expenses |  | 6 |  |  | 104 |
Variable lease cost(1) |  | Selling, general and administrative expenses |  | 3,059 |  |  | 1,800 |
Operating lease cost |  |  |  | $ | 13,533 |  |  | $ | 12,207 |
Short-term lease cost: |  |  |  |  |  |
Short-term lease cost |  | Cost of goods sold |  | $ | 67 |  |  | $ | 63 |
Short-term lease cost |  | Research and development expenses |  | 80 |  |  | 121 |
Short-term lease cost |  | Selling, general and administrative expenses |  | 252 |  |  | 148 |
Short-term lease cost |  |  |  | $ | 399 |  |  | $ | 332 |
Finance lease cost: |  |  |  |  |  |
Amortization of right-of use assets |  | Cost of goods sold |  | $ | 733 |  |  | $ | 154 |
Amortization of right-of use assets |  | Research and development expenses |  | 11 |  |  | 11 |
Interest on lease liabilities |  | Interest expense |  | 122 |  |  | 16 |
Variable lease cost(1) |  | Cost of goods sold |  | 9 |  |  | 8 |
Variable lease cost(1) |  | Research and development expenses |  | 1 |  |  | — |
Finance lease cost |  |  |  | $ | 876 |  |  | $ | 189 |
Total lease cost |  |  |  | $ | 14,808 |  |  | $ | 12,728 |
____________ (1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs. Supplemental balance sheet information as of September 28, 2024 and December 31, 2023 related to leases are:
(in thousands) |  | Balance Sheet Location |  | September 28, 2024 |  | December 31, 2023
Assets |  |  |  |  |  |
Operating leases |  | Operating lease right-of-use assets |  | $ | 126,092 |  |  | $ | 130,460 |
Finance leases, net |  | Property, plant and equipment, net |  | 4,343 |  |  | 461 |
Total lease assets |  |  |  | $ | 130,435 |  |  | $ | 130,921 |
Liabilities |  |  |  |  |  |
Current: |  |  |  |  |  |
Operating lease liabilities |  | Current portion of operating lease liabilities |  | $ | 4,103 |  |  | 3,677 |
Finance lease liabilities |  | Accrued expenses and other current liabilities |  | 1,140 |  |  | 196 |
Long-term: |  |  |  |  |  |
Operating lease liabilities |  | Operating lease liabilities, net of current portion |  | 74,506 |  |  | 75,648 |
Finance lease liabilities |  | Finance lease obligations and other long-term liabilities |  | 3,273 |  |  | 274 |
Total lease liabilities |  |  |  | $ | 83,022 |  |  | $ | 79,795 |
The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of September 28, 2024:
|  | September 28, 2024
(in thousands) |  | Operating Leases |  | Finance Leases
Remainder of 2024 |  | $ | 2,210 |  |  | $ | 397 |
2025 |  | 8,653 |  |  | 1,201 |
2026 |  | 8,507 |  |  | 1,096 |
2027 |  | 8,330 |  |  | 1,064 |
2028 |  | 8,381 |  |  | 1,024 |
Thereafter |  | 89,018 |  |  | 9 |
Total undiscounted future minimum lease payments |  | 125,099 |  |  | 4,791 |
Less imputed interest |  | (46,490) |  |  | (378) |
Total discounted future minimum lease payments |  | $ | 78,609 |  |  | $ | 4,413 |
Weighted average remaining lease terms and weighted average discount rates were:
|  | September 28, 2024
|  | Operating Leases |  | Finance Leases
Weighted average remaining lease term (years) |  | 13.4 |  | 4.2
Weighted average discount rate |  | 6.9 | % |  | 4.2 | %
Supplemental cash flow information:
| Three Months Ended |  | Nine Months Ended
(in thousands) | September 28, 2024 |  | September 30, 2023 |  | September 28, 2024 |  | September 30, 2023
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,160 |  |  | $ | 1,763 |  |  | $ | 6,491 |  |  | $ | 5,207 |
Operating lease right-of-use assets obtained in exchange for lease liabilities | 366 |  |  | — |  |  | $ | 1,755 |  |  | $ | 36,400 |
Leases | Leases See Note 9. Leases are classified as either finance leases or operating leases based on criteria in ASC 842 “Leases.” The Company has operating leases for its corporate offices, including the Campus Headquarters (as defined below), 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 a 12-year lease with two 5-year renewal options (“Campus Lease”) to house its corporate headquarters, lab and innovation space (“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 paid $4.9 million and $4.2 million in rent prepayments and payments towards construction costs of the Campus Headquarters in the nine months ended September 28, 2024 and the year ended December 31, 2023, respectively. The rent prepayments and payments towards construction costs 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. 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-A, the Company moved its innovation team from its former Manhattan Beach Innovation Center to the Campus Headquarters. In 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. Upon completion of the tenant improvements associated with Phase 1-B, the Company moved its headquarters, sales and marketing operations to the Campus Headquarters. On September 17, 2024, the Company entered into an amendment to the Campus Lease, which amendment: (i) revised the square footage of the premises, building and project to: (a) increase the Company’s base rent by approximately $851,000 over the initial lease term; (b) adjust the Company’s percentage share of direct expenses; and (c) increase the tenant improvement allowance to reflect a reduction in the scope of landlord’s work; (ii) specify which improvements must be removed by the Company from the premises if the premises are not occupied in their entirety throughout the initial lease term and first extension term; and (iii) address other ministerial matters concerning the Campus Lease. Costs associated with this amendment are included in operating lease costs related to research and development expenses and SG&A expenses and are reflected in the tables below. The lease on the Company’s Manhattan Beach Project Innovation Center expired on January 31, 2024. Costs associated with this lease through its expiration date are included in operating lease costs related to research and development expenses and are reflected in the tables below. Given the Company’s intention to reduce its overall operating expenses and cash expenditures, on February 2, 2024, the Company terminated the agreement to purchase a property in Enschede, the Netherlands (the “Enschede Property”) and the security deposit was returned to the Company, which was subsequently paid to the purchaser of the property to be applied towards the deposit and future lease payments. The Company entered into a lease agreement with the purchaser of the property to lease the approximately 114,000 square foot property for an initial period of five years with an option to renew for an additional five years at an annual rent of approximately €1.0 million. The lease is classified as a finance lease in the Company’s condensed consolidated balance sheet as of September 28, 2024. Costs associated with this lease are included in finance lease costs related to cost of goods sold 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 28, 2024 |  | September 30, 2023
Operating lease cost: |  |  |  |  |  |
Lease cost |  | Cost of goods sold |  | $ | 424 |  |  | $ | 399 |
Lease cost |  | Research and development expenses |  | 2,383 |  |  | 2,507 |
Lease cost |  | Selling, general and administrative expenses |  | 612 |  |  | 820 |
Variable lease cost(1) |  | Cost of goods sold |  | 65 |  |  | 54 |
Variable lease cost(1) |  | Research and development expenses |  | — |  |  | 21 |
Variable lease cost(1) |  | Selling, general and administrative expenses |  | 1,099 |  |  | 632 |
Operating lease cost |  |  |  | $ | 4,583 |  |  | $ | 4,433 |
Short-term lease cost: |  |  |  |  |  |
Short-term lease cost |  | Cost of goods sold |  | $ | 23 |  |  | $ | 21 |
Short-term lease cost |  | Research and development expenses |  | 26 |  |  | 37 |
Short-term lease cost |  | Selling, general and administrative expenses |  | 144 |  |  | 51 |
Short-term lease cost |  |  |  | $ | 193 |  |  | $ | 109 |
Finance lease cost: |  |  |  |  |  |
Amortization of right-of use assets |  | Cost of goods sold |  | $ | 267 |  |  | $ | 49 |
Amortization of right-of use assets |  | Research and development expenses |  | 4 |  |  | 4 |
Interest on lease liabilities |  | Interest expense |  | 45 |  |  | 5 |
Variable lease cost(1) |  | Cost of goods sold |  | 3 |  |  | 3 |
Finance lease cost |  |  |  | $ | 319 |  |  | $ | 61 |
Total lease cost |  |  |  | $ | 5,095 |  |  | $ | 4,603 |
____________ (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 28, 2024 |  | September 30, 2023
Operating lease cost: |  |  |  |  |  |
Lease cost |  | Cost of goods sold |  | $ | 1,246 |  |  | $ | 1,210 |
Lease cost |  | Research and development expenses |  | 7,151 |  |  | 6,979 |
Lease cost |  | Selling, general and administrative expenses |  | 1,890 |  |  | 1,937 |
Variable lease cost(1) |  | Cost of goods sold |  | 181 |  |  | 177 |
Variable lease cost(1) |  | Research and development expenses |  | 6 |  |  | 104 |
Variable lease cost(1) |  | Selling, general and administrative expenses |  | 3,059 |  |  | 1,800 |
Operating lease cost |  |  |  | $ | 13,533 |  |  | $ | 12,207 |
Short-term lease cost: |  |  |  |  |  |
Short-term lease cost |  | Cost of goods sold |  | $ | 67 |  |  | $ | 63 |
Short-term lease cost |  | Research and development expenses |  | 80 |  |  | 121 |
Short-term lease cost |  | Selling, general and administrative expenses |  | 252 |  |  | 148 |
Short-term lease cost |  |  |  | $ | 399 |  |  | $ | 332 |
Finance lease cost: |  |  |  |  |  |
Amortization of right-of use assets |  | Cost of goods sold |  | $ | 733 |  |  | $ | 154 |
Amortization of right-of use assets |  | Research and development expenses |  | 11 |  |  | 11 |
Interest on lease liabilities |  | Interest expense |  | 122 |  |  | 16 |
Variable lease cost(1) |  | Cost of goods sold |  | 9 |  |  | 8 |
Variable lease cost(1) |  | Research and development expenses |  | 1 |  |  | — |
Finance lease cost |  |  |  | $ | 876 |  |  | $ | 189 |
Total lease cost |  |  |  | $ | 14,808 |  |  | $ | 12,728 |
____________ (1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs. Supplemental balance sheet information as of September 28, 2024 and December 31, 2023 related to leases are:
(in thousands) |  | Balance Sheet Location |  | September 28, 2024 |  | December 31, 2023
Assets |  |  |  |  |  |
Operating leases |  | Operating lease right-of-use assets |  | $ | 126,092 |  |  | $ | 130,460 |
Finance leases, net |  | Property, plant and equipment, net |  | 4,343 |  |  | 461 |
Total lease assets |  |  |  | $ | 130,435 |  |  | $ | 130,921 |
Liabilities |  |  |  |  |  |
Current: |  |  |  |  |  |
Operating lease liabilities |  | Current portion of operating lease liabilities |  | $ | 4,103 |  |  | 3,677 |
Finance lease liabilities |  | Accrued expenses and other current liabilities |  | 1,140 |  |  | 196 |
Long-term: |  |  |  |  |  |
Operating lease liabilities |  | Operating lease liabilities, net of current portion |  | 74,506 |  |  | 75,648 |
Finance lease liabilities |  | Finance lease obligations and other long-term liabilities |  | 3,273 |  |  | 274 |
Total lease liabilities |  |  |  | $ | 83,022 |  |  | $ | 79,795 |
The following is a schedule by year of the maturities of lease liabilities with original terms in excess of one year, as of September 28, 2024:
|  | September 28, 2024
(in thousands) |  | Operating Leases |  | Finance Leases
Remainder of 2024 |  | $ | 2,210 |  |  | $ | 397 |
2025 |  | 8,653 |  |  | 1,201 |
2026 |  | 8,507 |  |  | 1,096 |
2027 |  | 8,330 |  |  | 1,064 |
2028 |  | 8,381 |  |  | 1,024 |
Thereafter |  | 89,018 |  |  | 9 |
Total undiscounted future minimum lease payments |  | 125,099 |  |  | 4,791 |
Less imputed interest |  | (46,490) |  |  | (378) |
Total discounted future minimum lease payments |  | $ | 78,609 |  |  | $ | 4,413 |
Weighted average remaining lease terms and weighted average discount rates were:
|  | September 28, 2024
|  | Operating Leases |  | Finance Leases
Weighted average remaining lease term (years) |  | 13.4 |  | 4.2
Weighted average discount rate |  | 6.9 | % |  | 4.2 | %
Supplemental cash flow information:
| Three Months Ended |  | Nine Months Ended
(in thousands) | September 28, 2024 |  | September 30, 2023 |  | September 28, 2024 |  | September 30, 2023
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,160 |  |  | $ | 1,763 |  |  | $ | 6,491 |  |  | $ | 5,207 |
Operating lease right-of-use assets obtained in exchange for lease liabilities | 366 |  |  | — |  |  | $ | 1,755 |  |  | $ | 36,400 |

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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 + Details
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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 + Details
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