Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Operating Leases

The Company leases its facilities for data centers and office space under non-cancelable operating leases with various expiration dates. Certain lease agreements include renewal options to extend the lease term at a price to be determined upon exercise. These options are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments. Contingent rental payments are generally not included in the Company’s lease agreements. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company's leases have original lease periods expiring between 2024 and 2031. The Company did not have any short-term leases as of March 31, 2024.

As of March 31, 2024, the weighted average remaining lease term for operating leases was approximately 5.4 years and the weighted average discount rate for operating leases was approximately 7.2%. As of December 31, 2023, the weighted average remaining lease term for operating leases was 5.5 years and the weighted average discount rate for operating leases was approximately 7.1%. There have been no material changes to the Company’s operating lease commitments, which

excludes amounts allocated to services under operating lease agreements that are considered non-lease components during the three months ended March 31, 2024.

Non-lease components included in the Company’s colocation lease agreements are related to non-tangible utilities and services used in its data center operations, which are not recorded on the Company’s condensed consolidated balance sheets. The Company used judgment and third-party data in determining the stand-alone price for allocating consideration to lease and non-lease components under these colocation lease agreements, such as, the price of utilities as compared to its tangible data center footprint within each colocation facility. There have been no material changes to the Company’s non-cancellable contractual obligations for non-lease components during the three months ended March 31, 2024.

The following table presents information regarding the Company’s operating leases (in thousands). Total operating lease cost does not include costs related to services.


	Three Months Ended March 31,
	2024		2023

Rental expense for both lease and non-lease components	$	1,983	$	1,986
Rental expense for both lease and non-lease components included in cost of revenue	$	1,690	$	1,490
Rental expense related to lease components	$	691	$	919
Total operating lease cost	$	2,983	$	2,749

Other Contractual Commitments

Other non-cancellable commitments relate mainly to service agreements used to facilitate the Company’s infrastructure operations. As of March 31, 2024, the Company had non-cancelable purchase commitments of $0.8 million and $0.5 million payable during the remainder of the year ending December 31, 2024 and the year ending December 31, 2025, respectively.

During the three months ended March 31, 2024, the Company made payments of $0.1 million to a related party, Meaningful Works, for marketing services per terms of an agreement. An executive officer of Meaningful Works is an immediate family member of the Company’s CEO. As of March 31, 2024, the scope of services has not been completed per terms of the agreement.

401(k) Plan

The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company contributed $0.5 million to the 401(k) plan during each of the three months ended March 31, 2024 and 2023, respectively.

Legal Matters

The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that there are not any current legal proceedings that are likely to have a material adverse effect on its financial position, results of operations or cash flows. However, the results of legal proceedings are inherently unpredictable and litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Accrued VAT Liability

The Company has calculated a liability for uncollected and unpaid VAT, which is generally assessed by various taxing authorities on services the Company provides to its customers. The Company accrues an amount that it considers probable to be collected and can be reasonably estimated. Based on the Company’s analysis, its total accrual for VAT payable was $1.1 million and $1.3 million as of March 31, 2024 and December 31, 2023, respectively.

Indemnification

The Company enters into indemnification provisions under agreements with other parties from time to time in the ordinary course of business. The Company has agreed in certain circumstances to indemnify and defend the indemnified party for claims and related losses suffered or incurred by the indemnified party from third-party claims due to the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. No losses have been recorded in the condensed consolidated statements of operations in connection with the indemnification provisions.