10. Leases

Lessor

The Company rents microturbine equipment to customers under lease agreements with terms ranging from a few months to ninety-six months. The majority of leases carry an initial term of thirty-six months and may include extension options, which are assessed at lease commencement to determine whether they are reasonably certain of exercise. Certain lease agreements provide the lessee with an option to purchase the underlying asset at the end of the lease term.

Monthly rental payments are fixed. Certain leases also include variable payment components for items such as fuel, excess labor, additional equipment, or technician labor and engineering support. Variable payments are not included in the measurement of the lease receivable and are recognized as revenue in the period earned.

Leases are classified at commencement as either sales-type leases or operating leases in accordance with ASC 842. In connection with its Energy-as-a-Service ("EaaS") business, the Company also enters into arrangements under which it rents certain microturbine equipment back from customers and subleases that equipment to end users, as further described in the Lessee section below.

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Lessor – Operating Leases

At March 31, 2026, the Company's minimum rental revenue expected to be received under operating leases was as follows (in thousands):

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Lessor – Sales-Type Leases

The profit recognized from sales-type leases at their commencement date was as follows (in thousands):

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At March 31, 2026, the Company’s future scheduled minimum lease payments to be received from its sales-type leases were as follows (in thousands):

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The Company recognized $0.2 million and $0.2 million of interest income related to lease receivables in Fiscal 2026 and Fiscal 2025, respectively.

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Lessee

The Company leases facilities and equipment under various non-cancellable operating and finance leases with expiration dates through fiscal 2037. All leases require the Company to pay maintenance, insurance, and property taxes. Lease agreements for the Company's primary office and manufacturing facilities include rent escalation provisions over the lease term and renewal options for successive five-year periods. Lease expense is recognized on a straight-line basis over the lease term, including any extension periods that are reasonably certain of exercise.

EaaS Sublease Arrangements

As part of its EaaS business, the Company rents used microturbine equipment from customers where that equipment would otherwise not be in use, and subleases that equipment to end users. During Fiscal 2026, the Company did not enter into any new rental agreements under this program, though it modified four existing lease agreements during the year ended March 31, 2026. The existing rental agreements provide the Company an option to extend the lease term; however, as exercise of these options is not considered reasonably certain, they are excluded from the determination of the lease term. There were no new rental agreements under this program in Fiscal 2025 either.

As of March 31, 2026, lease commitments under EaaS arrangements totaled approximately 18.4 megawatts of microturbine capacity, with an average remaining term of 37 months and a total remaining commitment value of approximately $8.5 million.

Lease Costs

The components of total lease expense were as follows (in thousands):

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Supplemental Balance Sheet Information

Right-of-use assets and lease liabilities consisted of the following (in thousands):

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Supplemental Cash Flow Information (in thousands):

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Lease Maturity Analysis

At March 31, 2026, the Company’s minimum commitments under non-cancelable operating and finance leases were as follows (in thousands):

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