Lease Obligations

9 Months Ended

Sep. 30, 2025

From time to time, the Company enters into non-cancelable leases for some of our facility, vehicle and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities, vehicles and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from less than one to twelve years, some of which may include options to extend the leases for up to ten years, and some of which may include options to terminate the leases within one year. Currently, all the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. Additionally, all of the Company's month-to-month leases are cancelable, by the Company or the lessor, at any time and are not included in our right-of-use asset or liability. At September 30, 2025, the Company had several leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company may exercise some of these purchase options when the need for equipment is ongoing and the purchase option price is attractive. Leases are accounted for as operating or finance leases, depending on the terms of the lease.

The following is a summary of the lease-related assets and liabilities recorded:


		September 30, 2025		December 31, 2024
(in thousands)	Classification on the Consolidated Balance Sheet
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	44,789	$	42,648
Finance lease right-of-use assets	Property and equipment, net of accumulated depreciation	2,321		3,215
Total right-of-use lease assets		$	47,110	$	45,863

Liabilities
Current
Operating lease obligations	Current portion of operating lease obligations	$	13,140	$	12,141
Finance lease obligations	Current portion of finance lease obligations	824		1,046
Total current obligations		13,964		13,187
Non-current
Operating lease obligations	Operating lease obligations, net of current maturities	31,623		30,496
Finance lease obligations	Finance lease obligations, net of current maturities	1,402		1,930
Total non-current obligations		33,025		32,426
Total lease obligations		$	46,989	$	45,613

The following is a summary of the lease terms and discount rates:


	September 30, 2025		December 31, 2024
Weighted-average remaining lease term - finance leases	2.7 years		3.3 years
Weighted-average remaining lease term - operating leases	3.8 years		3.7 years
Weighted-average discount rate - finance leases	3.9	%	3.9	%
Weighted-average discount rate - operating leases	4.0	%	4.0	%

The following is a summary of certain information related to the lease costs for finance and operating leases:


(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024
Lease cost:
Finance lease cost:
Amortization of right-of-use assets	$	242	$	335	$	736	$	653
Interest on lease liabilities	23		30		77		69
Operating lease cost	4,776		3,956		13,750		11,446

Variable lease costs	109		95		332		279
Total lease cost	$	5,150	$	4,416	$	14,895	$	12,447

The following is a summary of other information and supplemental cash flow information related to finance and operating leases:


	Nine months ended September 30,
(in thousands)	2025		2024
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	13,673	$	10,969
Right-of-use asset obtained in exchange for new operating lease obligations	$	14,123	$	13,458
Right-of-use asset obtained in exchange for new finance lease obligations	$	—	$	3,595

The future undiscounted minimum lease payments, as reconciled to the discounted minimum lease obligation indicated on the Company’s consolidated balance sheets, under financial leases, less interest, and under operating leases, less imputed interest, as of September 30, 2025 were as follows:


(in thousands)	Finance Lease Obligations		Operating Lease Obligations		Total Lease Obligations
Remainder of 2025	$	254	$	4,852	$	5,106
2026	856		16,682		17,538
2027	855		11,286		12,141
2028	382		9,089		9,471
2029	—		5,984		5,984
2030	—		2,185		2,185
Thereafter	—		1,914		1,914
Total minimum lease payments	2,347		51,992		54,339
Financing component	(121)		(7,229)		(7,350)
Net present value of minimum lease payments	2,226		44,763		46,989
Less: current portion of finance and operating lease obligations	(824)		(13,140)		(13,964)
Long-term finance and operating lease obligations	$	1,402	$	31,623	$	33,025

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.

Certain subsidiaries of the Company have ongoing operating leases for facilities that were entered into or extended with third-party companies that, are or were, owned in whole or part, by employees of the subsidiaries. The terms and rental rates of these leases are at or below market rental rates. Lease expense associated with these leases was $0.7 million and $1.9 million for the three and nine months ended September 30, 2025 and $0.6 million and $1.9 million for the three and nine months ended September 30, 2024. As of September 30, 2025, the minimum lease payments required under these leases totaled $7.9 million, which are due over the next 3.9 years.

Lease Obligations

The following is a summary of the lease-related assets and liabilities recorded:


		September 30, 2025		December 31, 2024
(in thousands)	Classification on the Consolidated Balance Sheet
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	44,789	$	42,648
Finance lease right-of-use assets	Property and equipment, net of accumulated depreciation	2,321		3,215
Total right-of-use lease assets		$	47,110	$	45,863

Liabilities
Current
Operating lease obligations	Current portion of operating lease obligations	$	13,140	$	12,141
Finance lease obligations	Current portion of finance lease obligations	824		1,046
Total current obligations		13,964		13,187
Non-current
Operating lease obligations	Operating lease obligations, net of current maturities	31,623		30,496
Finance lease obligations	Finance lease obligations, net of current maturities	1,402		1,930
Total non-current obligations		33,025		32,426
Total lease obligations		$	46,989	$	45,613

The following is a summary of the lease terms and discount rates:


	September 30, 2025		December 31, 2024
Weighted-average remaining lease term - finance leases	2.7 years		3.3 years
Weighted-average remaining lease term - operating leases	3.8 years		3.7 years
Weighted-average discount rate - finance leases	3.9	%	3.9	%
Weighted-average discount rate - operating leases	4.0	%	4.0	%

The following is a summary of certain information related to the lease costs for finance and operating leases:


(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024
Lease cost:
Finance lease cost:
Amortization of right-of-use assets	$	242	$	335	$	736	$	653
Interest on lease liabilities	23		30		77		69
Operating lease cost	4,776		3,956		13,750		11,446

Variable lease costs	109		95		332		279
Total lease cost	$	5,150	$	4,416	$	14,895	$	12,447

The following is a summary of other information and supplemental cash flow information related to finance and operating leases:


	Nine months ended September 30,
(in thousands)	2025		2024
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	13,673	$	10,969
Right-of-use asset obtained in exchange for new operating lease obligations	$	14,123	$	13,458
Right-of-use asset obtained in exchange for new finance lease obligations	$	—	$	3,595


(in thousands)	Finance Lease Obligations		Operating Lease Obligations		Total Lease Obligations
Remainder of 2025	$	254	$	4,852	$	5,106
2026	856		16,682		17,538
2027	855		11,286		12,141
2028	382		9,089		9,471
2029	—		5,984		5,984
2030	—		2,185		2,185
Thereafter	—		1,914		1,914
Total minimum lease payments	2,347		51,992		54,339
Financing component	(121)		(7,229)		(7,350)
Net present value of minimum lease payments	2,226		44,763		46,989
Less: current portion of finance and operating lease obligations	(824)		(13,140)		(13,964)
Long-term finance and operating lease obligations	$	1,402	$	31,623	$	33,025

MYR GROUP INC. 10-Q