Leases

3 Months Ended

Mar. 31, 2025

The Company enters into finance lease arrangements to obtain hard drives and related equipment for its data center operations. The terms of these agreements generally 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 2029. Financing lease right-of-use assets are included in property and equipment, net on the Company’s condensed consolidated balance sheets.

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 in 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 restrictive covenants. The Company's leases have original lease periods expiring between 2025 and 2031. The Company had no short-term leases as of March 31, 2025.

The weighted average remaining lease terms and discount rates as of March 31, 2025 and December 31, 2024 were as follows:


	March 31, 2025				December 31, 2024
	Operating leases		Finance Leases		Operating leases		Finance Leases
Remaining lease term	4.2 years		2.0 years		4.4 years		1.9 years
Discount rate	7.0	%	11.7	%	7.2	%	11.9	%

The following table presents the components of lease expense (in thousands):


	Three Months Ended March 31,
	2025		2024(1)
Finance lease costs
Depreciation expense(2)	$	2,840	$	3,564
Interest expense	755		593
Lease financing obligation costs(3)
Depreciation expense(2)	$	609	$	667
Interest expense	98		212

Operating lease costs
Rental expense related to lease components	$	1,186	$	691
Rental expense related to non-lease components(4)	1,100		1,292
Variable lease costs	1,092		1,000
Total operating lease costs	$	3,378	$	2,983
Total included in cost of revenue	$	3,186	$	2,688
Total included in general and administrative expense	$	192	$	295

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(1) The presentation of prior period data has been revised to conform to current year presentation. There have been no changes to the reported amounts, rather certain amounts have been disaggregated to further improve clarity and transparency.

(2) Substantially all of the depreciation expense on assets acquired through the Company’s finance leases and lease financing obligations is included in cost of revenue in its condensed consolidated statements of operations and comprehensive loss.

(3) Lease financing obligations pertain to agreements involving failed sale-leaseback transactions.

(4) 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.

The following table presents supplemental cash flow information relating to the Company’s leases:


	Three Months Ended March 31,
	2025		2024
Operating cash flows
Cash paid for interest on finance lease and lease financing obligations	$	829	$	805
Cash paid for operating lease liabilities	1,241		621
Non-cash items
Equipment acquired through finance leases	7,513		2,216

The future minimum commitments for finance leases and lease financing obligations as of March 31, 2025 were as follows (in thousands):


Year Ending December 31,	Finance leases		Lease financing obligations		Total
Remainder of 2025	$	13,024	$	2,251	$	15,275
2026	12,123		—		12,123
2027	8,021		—		8,021
2028	927		—		927
2029	120		—		120

Total future minimum lease and financing commitments	34,215		2,251		36,466
Less imputed interest	(3,893)		(113)		(4,006)
Total finance lease and lease financing obligation liabilities	$	30,322	$	2,138	$	32,460

There have been no material changes to the Company’s operating lease commitments during the three months ended March 31, 2025.