Leases

3 Months Ended

Mar. 31, 2024

The Company has entered into various long-term real estate leases primarily related to office, research and development and operating activities. The Company’s leases have remaining terms from under 1 to 9 years and some of those leases include options that provide Recursion with the ability to extend the lease term for five years. The options are included in the lease term when it is reasonably certain that the option will be exercised.

For the three months ended March 31, 2024 and 2023, Recursion entered into lease modifications resulting in a decrease to the right-of-use asset and lease liability of $3.1 million and an increase to the right-of-use asset and lease liability $3.5 million, respectively. The modifications had no impact to the Condensed Consolidated Statements of Operations.

In January 2024, the Company entered into a lease agreement for office space in London, England with approximately 6,792 square feet (the “London Lease”). The right of use began January 2024 when the control of the asset was obtained. The London Lease term is 5 years with a five-year renewal option. The London Lease includes provisions for escalating rent payments. Total fixed payments are expected to be approximately $7.9 million, additionally there will be variable expenses including building service charges related to the lease.

In February 2024, the Company entered into a lease agreement for the supercomputer for the exclusive use of physical space in a data center of approximately 1,851 square feet (the “Data Center Lease”). The right of use is expected to begin in the second quarter of 2024 and the Data Center Lease term is 5 years with a five-year renewal option. The lease includes provisions for escalating rent payments. Total fixed lease payments are expected to be approximately $13.0 million with additional variable expenses, including utilities and tax expenses. The Company did not control the space or any of the assets being constructed as of March 31, 2024 and therefore no right of use asset or lease liability was recorded on the Condensed Consolidated Balance Sheet as of March 31, 2024.

The components of the lease cost were:


	Three months ended March 31,
(in thousands)	2024		2023
Operating lease cost	$	2,472	$	1,998
Variable lease cost	538		657
Short-term lease cost	40		—
Lease cost	$	3,050	$	2,655

The remaining lease term and discount rate were:


(in thousands)	March 31, 2024
Operating leases
Weighted-average remaining lease term (years)	6.4
Weighted-average discount rate	7.7	%

Maturities of operating lease liabilities as of March 31, 2024 were:


(in thousands)	Operating leases
Remainder of 2024	$	7,300
2025	10,748
2026	10,882
2027	11,281
2028	8,850
Thereafter	16,948
Total lease payments	66,009
Less: imputed interest	(16,161)
Present value of lease liabilities	$	49,848