5.   Finance and Operating Leases

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Finance Leases

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The Company is a lessee under finance leases for student computers and peripherals under agreements with Banc of America Leasing & Capital, LLC (“BALC”) and CSI Leasing, Inc. (“CSI Leasing”). As of September 30, 2024 and June 30, 2024, the finance lease liability was $90.1 million and $55.6 million, respectively, with lease interest rates ranging from 2.25% to 6.72%. As of September 30, 2024 and June 30, 2024, the balance of the associated right-of-use assets was $73.7 million and $39.8 million, respectively. The right-of-use asset is recorded within property and equipment, net on the condensed consolidated balance sheets. Lease amortization expense associated with the Company’s finance leases is recorded within instructional costs and services on the condensed consolidated statements of operations.

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The Company entered into an agreement with BALC in April 2020 for $25.0 million (increased to $41.0 million in July 2020) to provide financing for its leases through March 2021 at varying rates. The Company entered into additional agreements during fiscal year 2021 to provide financing of $54.0 million for its student computers and peripherals leases through October 2022 at varying rates. Individual leases with BALC include 36-month payment terms, fixed rates ranging from 2.25% to 6.72%, and a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases.

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The Company entered into an agreement with CSI Leasing in August 2022 to provide financing for its leases. Individual leases under the agreement with CSI Leasing include 36-month payment terms, but do not include a stated interest rate. The Company uses its incremental borrowing rate as the implied interest rate and the total lease payments to calculate its lease liability.

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The following is a summary, as of September 30, 2024 and June 30, 2024, respectively, of the present value of the net minimum lease payments under the Company’s finance leases:

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Operating Leases

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The Company is a lessee under operating leases for various facilities to support the Company’s operations. As of September 30, 2024 and June 30, 2024, the operating lease liability was $55.0 million and $57.9 million, respectively. As of September 30, 2024 and June 30, 2024, the balance of the associated right-of-use assets was $51.6 million and $54.5 million, respectively. Lease expense associated with the Company’s operating leases is recorded within both instructional costs and services and selling, general, and administrative expenses on the condensed consolidated statements of operations.

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Individual operating leases range in terms of 1 to 9 years and expire on various dates through fiscal year 2034 and the minimum lease payments are discounted using the Company’s incremental borrowing rate.

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The following is a summary as of September 30, 2024 and June 30, 2024, respectively, of the present value of the minimum lease payments under the Company’s operating leases:

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The Company is subleasing one of its facilities through November 2024 and one through December 2025. Sublease income is recorded as an offset to the related lease expense within both instructional costs and services and selling, general, and administrative expenses on the condensed consolidated statements of operations. The following is a summary as of September 30, 2024 and June 30, 2024, respectively, of the expected sublease income:

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The following is a summary of the Company’s lease cost, weighted-average remaining lease term, weighted-average discount rate and certain other cash flows as it relates to its operating and finance leases for the three months ended September 30, 2024 and 2023:

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