v3.26.1
Leases
 3 Months Ended
Mar. 31, 2026
Leases [Abstract]  
Leases Leases
The Company leases real estate, vehicles and other equipment. The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. Instead, the short-term leases are recognized in expense on a straight-line basis over the lease term.
The Company's arrangements include certain non-lease components such as common area and other maintenance for leased real estate, as well as mileage, fuel and maintenance costs related to leased vehicles. For all leased asset classes, the Company has elected to not separate non-lease components from lease components and will account for each separate lease component and non-lease component associated with the lease as a single lease component. The Company does not guarantee any residual value in its real estate lease agreements; however, certain vehicle lease arrangements may include residual value guarantees. There are no material restrictions or covenants imposed by lease arrangements. Real estate leases typically include one or more options to extend the lease. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For the Company's leased vehicles, the Company uses the interest rate implicit in its leases with the lessor to discount lease payments at the lease commencement date. When the implicit rate is not readily available, as is the case with the Company's real estate leases, the Company uses quoted borrowing rates on its secured debt.
Former Related Party Lease Agreements. Certain facility leases previously disclosed as related party arrangements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 are no longer considered related party transactions as the counterparties are no longer employees of the Company and otherwise do not meet the definition of related
parties. Accordingly, lease payments under these arrangements are reflected as ordinary course operating leases as of March 31, 2026.
Southern California Sublease. In June 2021, the Company entered into a sublease agreement with a third party for the entire ground floor of its leased space in Southern California, consisting of 71,787 square feet. Under the terms of the sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.6 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The initial lease term commenced in September 2021 and continues through April 30, 2027. As of March 31, 2026, the Company remains obligated under the original lease for such office space and, in the event the sublessee of such office space fails to satisfy its obligations under the sublease, the Company would be required to satisfy its obligations directly to the landlord under such original lease.
In addition, during the first quarter of 2022, the Company entered into an amendment to the aforementioned sublease agreement, which, among other things, expanded the sublease premises to include the entire second floor of its leased space in Southern California, consisting of 16,720 square feet. Under the terms of the amended sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.8 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The amended sublease term commenced in March 2022 and continues through April 30, 2027. For both the three months ended March 31, 2026 and 2025, the Company recorded approximately $0.3 million of income in selling, general and administrative expense related to this sublease agreement.
The following table summarizes the lease amounts included in the Company's condensed consolidated balance sheets:
(in thousands)Classification on the Condensed Consolidated Balance SheetsMarch 31, 2026December 31, 2025
Assets
Operating
Operating lease right-of-use assets(1)(2)
$19,252 $19,792 
Finance
Property and equipment, net(3)(4)
20,509 22,002 
Total lease assets$39,761 $41,794 
Liabilities
Current
   OperatingCurrent operating lease liabilities$4,598 $4,379 
   FinanceCurrent portion of long-term debt4,906 5,031 
Noncurrent
   OperatingLong-term operating lease liabilities15,224 15,925 
   Finance
Long-term debt(5)
19,713 20,890 
Total lease liabilities$44,441 $46,225 
(1)     Operating lease assets are recorded net of accumulated amortization of $19.0 million at March 31, 2026 and $17.9 million at December 31, 2025.
(2)    Includes approximately $0.7 million and $0.8 million at March 31, 2026 and December 31, 2025, respectively, related to a below-market lease recognized as a result of the Industrial Air acquisition, which was recorded as an increase to the Company’s operating lease right-of-use assets on its condensed consolidated balance sheet. The below-market lease will be amortized to amortization expense over the remaining lease term.
(3)    Finance lease vehicle assets are recorded net of accumulated amortization of $8.7 million at March 31, 2026 and $8.2 million at December 31, 2025.
(4)    Includes approximately $2.2 million of net property assets associated with the Company's Pontiac Facility at both March 31, 2026 and December 31, 2025.
(5)    Includes approximately $5.4 million associated with the Company's sale and leaseback financing transaction at both March 31, 2026 and December 31, 2025. See Note 6 for further detail.
The following table summarizes the lease costs included in the Company's condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025:
Three Months Ended
March 31,
(in thousands)Classification on the Condensed Consolidated Statement of Operations20262025
Operating lease cost
Cost of revenue(1)
$800 $858 
Operating lease cost
Selling, general and administrative(1)
601 447 
Finance lease cost
   Amortization
Cost of revenue(2)
1,424 929 
   Interest
Interest expense, net(2)
261 176 
Total lease cost$3,086 $2,410 
(1)    Operating lease costs recorded in cost of revenue included $0.1 million of variable lease costs for both the three months ended March 31, 2026 and 2025. In addition, $0.1 million of variable lease costs are included in selling, general and administrative for both the three months ended March 31, 2026 and 2025. These variable costs consist of the Company's proportionate share of operating expenses, real estate taxes and utilities.
(2)     Finance lease costs recorded in cost of revenue includes variable lease costs of $0.8 million and $1.1 million for the three months ended March 31, 2026 and 2025, respectively. These variable lease costs consist of fuel, maintenance, and sales tax charges.
The future undiscounted minimum finance lease payments, as reconciled to the discounted minimum lease obligation indicated on the Company’s condensed consolidated balance sheets within current and long-term debt, less interest, and under current and long-term operating leases, less imputed interest, as of March 31, 2026 were as follows (in thousands):
Year ending:VehiclesPontiac FacilityTotal
Finance Lease Obligations		Operating Lease Obligations
Sublease Receipts(1)
Remainder of 2026$4,356 $407 $4,763 $4,191 $854 
20275,171 555 5,726 5,024 495 
20284,491 569 5,060 4,205 14 
20294,659 583 5,242 3,506 — 
20302,700 597 3,297 2,224 — 
Thereafter2 12,552 12,554 3,972 — 
Total minimum lease payments21,379 15,263 36,642 23,122 $1,363 
Financing Component (2)
(2,111)(9,912)(12,023)(3,300)
Net present value of minimum lease payments19,268 5,351 24,619 19,822 
Less: current portion of finance and operating lease obligations(4,906)— (4,906)(4,598)
Long-term finance and operating lease obligations$14,362 $5,351 $19,713 $15,224 
(1)    Primarily associated with the aforementioned third-party sublease agreement.
(2)     The financing component for finance lease obligations represents the interest component of finance leases that will be recognized as interest expense in future periods. The financing component for operating lease obligations represents the effect of discounting the lease payments to their present value.
The following is a summary of the lease terms and discount rates as of:
March 31, 2026December 31, 2025
Weighted average lease term (in years):
   Operating5.255.43
   Finance (1)
3.763.95
Weighted average discount rate:
   Operating6.17 %6.18 %
   Finance (1)
5.38 %5.41 %
(1)     Excludes the weighted average lease term and weighted average discount rate associated with the aforementioned sale-leaseback financing transaction, which has a Primary Term of 25 years and utilized an implicit rate of 11.11%. See Note 6 for further detail.
The following is a summary of other information and supplemental cash flow information related to finance and operating leases:
Three months ended March 31,
(in thousands)20262025
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$1,368 $1,296 
   Operating cash flows from finance leases205 163 
   Financing cash flows from finance leases1,264 851 
Right-of-use assets exchanged for lease liabilities:
   Operating leases589 — 
   Finance leases— 1,318 
Right-of-use assets disposed or adjusted modifying operating leases liabilities— — 
Right-of-use assets disposed or adjusted modifying finance leases liabilities9 — 
Leases Leases
The Company leases real estate, vehicles and other equipment. The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. Instead, the short-term leases are recognized in expense on a straight-line basis over the lease term.
The Company's arrangements include certain non-lease components such as common area and other maintenance for leased real estate, as well as mileage, fuel and maintenance costs related to leased vehicles. For all leased asset classes, the Company has elected to not separate non-lease components from lease components and will account for each separate lease component and non-lease component associated with the lease as a single lease component. The Company does not guarantee any residual value in its real estate lease agreements; however, certain vehicle lease arrangements may include residual value guarantees. There are no material restrictions or covenants imposed by lease arrangements. Real estate leases typically include one or more options to extend the lease. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For the Company's leased vehicles, the Company uses the interest rate implicit in its leases with the lessor to discount lease payments at the lease commencement date. When the implicit rate is not readily available, as is the case with the Company's real estate leases, the Company uses quoted borrowing rates on its secured debt.
Former Related Party Lease Agreements. Certain facility leases previously disclosed as related party arrangements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 are no longer considered related party transactions as the counterparties are no longer employees of the Company and otherwise do not meet the definition of related
parties. Accordingly, lease payments under these arrangements are reflected as ordinary course operating leases as of March 31, 2026.
Southern California Sublease. In June 2021, the Company entered into a sublease agreement with a third party for the entire ground floor of its leased space in Southern California, consisting of 71,787 square feet. Under the terms of the sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.6 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The initial lease term commenced in September 2021 and continues through April 30, 2027. As of March 31, 2026, the Company remains obligated under the original lease for such office space and, in the event the sublessee of such office space fails to satisfy its obligations under the sublease, the Company would be required to satisfy its obligations directly to the landlord under such original lease.
In addition, during the first quarter of 2022, the Company entered into an amendment to the aforementioned sublease agreement, which, among other things, expanded the sublease premises to include the entire second floor of its leased space in Southern California, consisting of 16,720 square feet. Under the terms of the amended sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.8 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The amended sublease term commenced in March 2022 and continues through April 30, 2027. For both the three months ended March 31, 2026 and 2025, the Company recorded approximately $0.3 million of income in selling, general and administrative expense related to this sublease agreement.
The following table summarizes the lease amounts included in the Company's condensed consolidated balance sheets:
(in thousands)Classification on the Condensed Consolidated Balance SheetsMarch 31, 2026December 31, 2025
Assets
Operating
Operating lease right-of-use assets(1)(2)
$19,252 $19,792 
Finance
Property and equipment, net(3)(4)
20,509 22,002 
Total lease assets$39,761 $41,794 
Liabilities
Current
   OperatingCurrent operating lease liabilities$4,598 $4,379 
   FinanceCurrent portion of long-term debt4,906 5,031 
Noncurrent
   OperatingLong-term operating lease liabilities15,224 15,925 
   Finance
Long-term debt(5)
19,713 20,890 
Total lease liabilities$44,441 $46,225 
(1)     Operating lease assets are recorded net of accumulated amortization of $19.0 million at March 31, 2026 and $17.9 million at December 31, 2025.
(2)    Includes approximately $0.7 million and $0.8 million at March 31, 2026 and December 31, 2025, respectively, related to a below-market lease recognized as a result of the Industrial Air acquisition, which was recorded as an increase to the Company’s operating lease right-of-use assets on its condensed consolidated balance sheet. The below-market lease will be amortized to amortization expense over the remaining lease term.
(3)    Finance lease vehicle assets are recorded net of accumulated amortization of $8.7 million at March 31, 2026 and $8.2 million at December 31, 2025.
(4)    Includes approximately $2.2 million of net property assets associated with the Company's Pontiac Facility at both March 31, 2026 and December 31, 2025.
(5)    Includes approximately $5.4 million associated with the Company's sale and leaseback financing transaction at both March 31, 2026 and December 31, 2025. See Note 6 for further detail.
The following table summarizes the lease costs included in the Company's condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025:
Three Months Ended
March 31,
(in thousands)Classification on the Condensed Consolidated Statement of Operations20262025
Operating lease cost
Cost of revenue(1)
$800 $858 
Operating lease cost
Selling, general and administrative(1)
601 447 
Finance lease cost
   Amortization
Cost of revenue(2)
1,424 929 
   Interest
Interest expense, net(2)
261 176 
Total lease cost$3,086 $2,410 
(1)    Operating lease costs recorded in cost of revenue included $0.1 million of variable lease costs for both the three months ended March 31, 2026 and 2025. In addition, $0.1 million of variable lease costs are included in selling, general and administrative for both the three months ended March 31, 2026 and 2025. These variable costs consist of the Company's proportionate share of operating expenses, real estate taxes and utilities.
(2)     Finance lease costs recorded in cost of revenue includes variable lease costs of $0.8 million and $1.1 million for the three months ended March 31, 2026 and 2025, respectively. These variable lease costs consist of fuel, maintenance, and sales tax charges.
The future undiscounted minimum finance lease payments, as reconciled to the discounted minimum lease obligation indicated on the Company’s condensed consolidated balance sheets within current and long-term debt, less interest, and under current and long-term operating leases, less imputed interest, as of March 31, 2026 were as follows (in thousands):
Year ending:VehiclesPontiac FacilityTotal
Finance Lease Obligations		Operating Lease Obligations
Sublease Receipts(1)
Remainder of 2026$4,356 $407 $4,763 $4,191 $854 
20275,171 555 5,726 5,024 495 
20284,491 569 5,060 4,205 14 
20294,659 583 5,242 3,506 — 
20302,700 597 3,297 2,224 — 
Thereafter2 12,552 12,554 3,972 — 
Total minimum lease payments21,379 15,263 36,642 23,122 $1,363 
Financing Component (2)
(2,111)(9,912)(12,023)(3,300)
Net present value of minimum lease payments19,268 5,351 24,619 19,822 
Less: current portion of finance and operating lease obligations(4,906)— (4,906)(4,598)
Long-term finance and operating lease obligations$14,362 $5,351 $19,713 $15,224 
(1)    Primarily associated with the aforementioned third-party sublease agreement.
(2)     The financing component for finance lease obligations represents the interest component of finance leases that will be recognized as interest expense in future periods. The financing component for operating lease obligations represents the effect of discounting the lease payments to their present value.
The following is a summary of the lease terms and discount rates as of:
March 31, 2026December 31, 2025
Weighted average lease term (in years):
   Operating5.255.43
   Finance (1)
3.763.95
Weighted average discount rate:
   Operating6.17 %6.18 %
   Finance (1)
5.38 %5.41 %
(1)     Excludes the weighted average lease term and weighted average discount rate associated with the aforementioned sale-leaseback financing transaction, which has a Primary Term of 25 years and utilized an implicit rate of 11.11%. See Note 6 for further detail.
The following is a summary of other information and supplemental cash flow information related to finance and operating leases:
Three months ended March 31,
(in thousands)20262025
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$1,368 $1,296 
   Operating cash flows from finance leases205 163 
   Financing cash flows from finance leases1,264 851 
Right-of-use assets exchanged for lease liabilities:
   Operating leases589 — 
   Finance leases— 1,318 
Right-of-use assets disposed or adjusted modifying operating leases liabilities— — 
Right-of-use assets disposed or adjusted modifying finance leases liabilities9 —