Desktop Metal, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LEASES

LEASES

6 Months Ended

Jun. 30, 2023

LEASES

LEASES

16. LEASES

Lessee

At June 30, 2023, the Company recorded $28.0 million as a right of use asset and $29.1 million as a lease liability. At December 31, 2022, the Company recorded $22.1 million as a right of use asset and $23.6 million as a lease liability. The Company assesses its right of use asset and other lease-related assets for impairment. There were no impairments recorded related to these assets during the three and six months ended June 30, 2023 and the year ended December 31, 2022.

The Company reviews all supplier, vendor, and service provider contracts to determine whether any service arrangements contain a lease component. The Company identified two service agreements that contain an embedded lease. The agreements do not contain fixed or minimum payments, and the variable lease expense was immaterial during the three and six months ended June 30, 2023 and 2022.

Information about other lease-related balances is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Lease cost
Operating lease cost	$	1,570		$	1,319		$	3,071		$	2,779
Short‑term lease cost		39			—			94			70
Variable lease cost		36			61			70			122
Finance lease cost		23			23			46			42
Total lease cost	$	1,668		$	1,403		$	3,281		$	3,013
Other Information
Operating cash flows used in operating leases	$	1,741		$	1,631		$	3,471		$	3,095
Operating cash flows used in finance leases		21			19			42			40
Weighted‑average remaining lease term—operating leases (years)		5.1			5.4			5.1			5.4
Weighted‑average remaining lease term—finance leases (years)		6.8			7.7			6.8			7.7
Weighted‑average discount rate—operating leases		5.0	%		3.9	%		5.0	%		3.9	%
Weighted‑average discount rate—finance leases		3.1	%		3.1	%		3.1	%		3.1	%

The rate implicit in the lease is not readily determinable in most of the Company’s leases, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Future minimum lease payments under noncancelable operating leases, including immaterial future minimum lease payments under finance leases, at June 30, 2023, are as follows (in thousands):


	Operating Leases		Finance Leases
2023 (remaining 6 months)	$	3,728	$	41
2024		6,945		78
2025		6,559		77
2026		5,495		77
2027		5,008		77
2028 and after		5,082		317
Total lease payments		32,817		667
Less amount representing interest		(4,279)		(78)
Total lease liability		28,538		589
Less current portion of lease liability		(5,867)		(64)
Lease liability, net of current portion	$	22,671	$	525

In February 2022, the Company amended its existing facility lease for the ExOne European headquarters and operating facility in Gersthofen, Germany, extending the lease term set to expire in December 2022 through December 2027, with the option to extend for two additional five-year extension periods. The rent is fixed through December 31, 2024, for an aggregate annual rent totaling $1.7 million, plus applicable taxes and is subject to adjustment on an annual basis thereafter (in accordance with the consumer price index for Germany) through December 31, 2027.

In June 2023, the Company amended its existing facility lease for the headquarters and operating facility in Burlington, MA, extending the lease term set to expire in April 2024 through April 2029. The rent is not fixed and increases each year of the lease extension.