Leases

12 Months Ended

Dec. 31, 2023

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 ROU asset for finance leases was $0.7 million and $1.0 million as of December 31, 2023 and 2022, respectively.

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

	Years Ended December 31,
	2023		2022		2021
Operating lease costs	$	19,466	$	15,743	$	8,910
Variable lease costs		4,121		2,311		2,207
Short-term lease costs		—		11		224
Total lease costs	$	23,587	$	18,065	$	11,341

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 consolidated balance sheet at December 31, 2023 (in thousands):

Year ended December 31,
2024 ^(a)	$	20,437
2025		21,231
2026		19,847
2027		19,606
2028		19,577
Thereafter		54,259
Total operating lease payments		154,957
Less – lease payments representing interest		(31,020	)
Present value of operating lease payments	$	123,937

(a)	– Amount consists of $21.5 million of undiscounted cash flows offset by $1.1 million of tenant improvement allowances which are expected to be fully utilized in fiscal 2024.

As of December 31, 2023 and 2022, the weighted-average remaining term of operating leases was 8.0 years and 8.8 years, respectively, and the weighted-average discount rate was 5.77% and 5.51%, respectively, for operating leases recognized on the consolidated balance sheet.

The following table provides supplemental information related to the Company’s consolidated statement of cash flows (in thousands):

	Years Ended December 31,
	2023		2022		2021
Cash paid for amounts included in present value of operating lease liabilities ^(b)	$	13,696	$	9,003	$	2,779
ROU assets obtained in exchange for operating lease liabilities		8,435		38,599		31,567

(b)	– Operating cash flows paid for operating leases are included within the change in operating leases, net within the Consolidated Statements of Cash Flows offset by non-cash ROU asset amortization and lease liability accretion.

The Company initially recorded $1.7 million for the present value of asset retirement obligations (ARO) to cover costs associated with the future restoration of two leased properties. During the years ended December 31, 2023, 2022 and 2021, the Company recorded accretion of the ARO liabilities totaling $0.1 million, $0.4 million and $0.1 million, respectively. The outstanding ARO liabilities totaled $2.2 million and $2.1 million at December 31, 2023 and 2022, respectively and are presented as asset retirement obligations in the consolidated balance sheets.