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Leases

6 Months Ended

Jun. 30, 2024

8. Leases

The Company leases its manufacturing and distribution facilities, corporate offices, Purple showrooms and certain equipment under non-cancelable operating leases with various expiration dates through 2036. The Company’s office and manufacturing leases provide for initial lease terms up to 16 years, while Purple showrooms have initial lease terms of up to 10 years. Certain leases may contain options to extend the term of the original lease. The exercise of lease renewal options is at the Company’s discretion. Any lease renewal options are included in the lease term if exercise is reasonably certain at lease commencement. The Company also leases vehicles and other equipment under both operating and finance leases with initial lease terms of three to five years. The right-of-use asset (“ROU”) for finance leases totaled $0.6 million and $0.7 million at June 30, 2024 and December 31, 2023, respectively.

The following table presents the Company’s lease costs (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease costs	$	5,178	$	4,620	$	9,964	$	9,505
Variable lease costs		1,173		1,204		2,042		2,177
Total lease costs	$	6,351	$	5,824	$	12,006	$	11,682

The table below reconciles the undiscounted cash flows for each of the first five years and total remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet at June 30, 2024 (in thousands):

2024 (excluding the six months ended June 30, 2023)^(a)	$	10,093
2025		21,274
2026		19,926
2027		19,688
2028		19,666
Thereafter		54,681
Total operating lease payments		145,328
Less – lease payments representing interest		(27,989	)
Present value of operating lease payments	$	117,339

(a)	Amount consists of $10.8 million of undiscounted cash flows offset by $0.7 million of tenant improvement allowances which are expected to be fully utilized in fiscal 2024.

As of June 30, 2024 and December 31, 2023, the weighted-average remaining term of operating leases was 7.7 years and 8.0 years, respectively, and the weighted-average discount rate of operating leases was 5.81% and 5.77%, respectively.

The following table provides supplemental information related to the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

	Six Months Ended June 30,
	2024		2023
Cash paid for amounts included in present value of operating lease liabilities ^(b)	$	8,388	$	6,691
Right-of-use assets obtained in exchange for operating lease liabilities		2,981		3,518

(b)

Operating cash flows paid for operating leases are included within the change in operating leases, net within the condensed consolidated statement of cash flows offset by non-cash ROU asset amortization and lease liability accretion.