Finance Leases and Lease Financing Obligations

12 Months Ended

Dec. 31, 2024

Finance Leases and Lease Financing Obligations

The Company enters into finance lease arrangements to obtain hard drives and related equipment for its data center operations. The term of these agreements primarily range from two-to-four years and certain of these arrangements have optional renewals to extend the term of the lease generally at a fixed price. Contingent rental payments are generally not included in the Company’s finance lease agreements. Finance leases are generally secured by the underlying leased equipment. The Company’s finance leases have original lease periods expiring between 2025 and 2027. Finance leases are included in property and equipment, net on the Company’s consolidated balance sheets.

As of December 31, 2024, the weighted average remaining lease term for finance lease and lease financing obligation agreements was approximately 1.9 years and the weighted average discount rate for finance leases was 11.9%. As of

December 31, 2023, the weighted average remaining lease term for finance lease and lease financing obligation agreements was approximately 1.7 years and the weighted average discount rate for finance leases was 11.0%.

The following table presents information regarding assets acquired through finance lease and lease financing obligation agreements, which are related to sale-leaseback agreements (in thousands):


	For the Years Ended December 31,
	2024		2023

Depreciation expense	$	15,338	$	15,425
Total finance lease costs	$	15,118	$	16,886
Total interest expense included in finance lease costs	$	2,444	$	2,827
Total lease financing obligation costs	$	3,339	$	1,775
Total interest expense included in lease financing obligation costs	$	675	$	409
Cash paid on interest on finance lease and lease financing obligations	$	3,119	$	3,236

Depreciation expense on assets acquired through the Company’s finance leases and lease financing obligations is included in cost of revenue in its consolidated statements of operations and comprehensive loss.

During the year ended December 31, 2023, the Company entered into two sale-leaseback arrangements with vendors to provide an aggregate of $4.5 million in cash proceeds for previously purchased hard drives and related equipment. The Company concluded the related lease arrangements would be classified as a lease financing obligation as the Company was reasonably certain to exercise the purchase option within the arrangement. Therefore, the transaction was deemed a failed sale-leaseback and was accounted for as a financing arrangement. The assets continue to be depreciated over their useful lives, and payments are allocated between interest expense and repayment of the financing liability. The Company did not enter into any sale-leaseback arrangements during the year ended December 31, 2024.

The future minimum commitments for these finance leases and lease financing obligations as of December 31, 2024 were as follows (in thousands):


Year Ending December 31,	Finance leases		Lease financing obligations		Total
2025	$	15,728	$	2,921	$	18,649
2026	9,303		—		9,303
2027	5,227		—		5,227



Total future minimum lease and financing commitments	30,258		2,921		33,179
Less imputed interest	(3,500)		(210)		(3,710)
Total finance lease and lease financing obligation	$	26,758	$	2,711	$	29,469