LEASES

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

LEASES

5. LEASES

The Company has entered into non-cancellable operating and finance leases for office, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with lease periods expiring through 2035. In addition, certain leases contain bargain renewal options extending through 2051. The Company recognizes lease expense for these leases on a straight-line basis over the lease term, which includes any bargain renewal options. The Company recognizes lease expense on a straight-line basis over the lease period. In addition to minimum rent, certain leases require payment of real estate taxes, insurance, common area maintenance charges, and other executory costs. Differences between lease expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the Company’s Consolidated Balance Sheets. For certain leases, the Company receives lease incentives, such as tenant improvement allowances, and records those as adjustments to operating lease right-of-use assets and operating lease liabilities on the Company’s Consolidated Balance Sheets and amortizes the lease incentives on a straight-line basis over the lease term as an adjustment to lease expense.

The components of operating and finance leases are presented on the Company’s Consolidated Balance Sheets as follows (in thousands):

	Financial statement line item	March 31, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	77,766	$	7,844
Finance lease right-of-use assets	Property, plant and equipment, net	$	9,374	$	16,268
Liabilities:
Operating lease liabilities,    current portion	Operating lease liabilities,    current portion	$	2,619	$	77
Operating lease liabilities, net    of current portion	Operating lease liabilities, net    of current portion	$	69,022	$	1,512
Finance lease liabilities, current portion	Finance lease liabilities, current portion	$	3,018	$	19,771
Finance lease liabilities, net of    current portion	Finance lease liabilities, net of current portion	$	1,170	$	35,745

Supplemental disclosure of noncash investing and financing activities in the Company’s Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the quarter ended March 31, 2024.

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

		Three Months Ended March 31,
	Financial statement line item	2024		2023
Operating lease expense	General and administrative expenses	$	1,419	$	390
Short-term lease expense	General and administrative expenses	—		365
Finance lease expense:
Amortization of right-of-use assets	Cost of revenue	334		3,857
Interest on lease liabilities	Interest expense, net	1,037		309
Total finance lease expense		1,371		4,166
Total lease expense		$	2,790	$	4,921

In determining the discount rate used to initially measure the present value of the right-of-use asset and lease liability, we use rates implicit in the lease, or if not readily available, we use our estimated incremental borrowing rate. Our incremental borrowing rate is based on an estimated secured rate with reference to recent borrowings of similar collateral and tenure, when available. If there are insufficient recent borrowings near the time of lease commencement, we utilize a rate based on published index rates of credit quality similar to ours adjusted for similar collateral and tenure. Estimating an incremental borrowing rate may require significant judgment.

Information relating to the lease term and discount rate is as follows:

	March 31, 2024		March 31, 2023
Weighted Average Remaining Lease Term (Years)
Operating leases	7.1		10.7
Finance leases	1.3		2.1
Weighted Average Discount Rate
Operating leases	9.3	%	6.5	%
Finance leases	12.3	%	12.4	%

Information relating to lease payments is as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Lease Payments
Operating lease payments	$	69	$	337
Finance lease payments1	$	4,628	$	1,080

1 Approximately $4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $4.6 million of finance lease payments made during the three months ended March 31, 2024, $3.6 million related to cure payments from emergence on the Effective Date.

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at March 31, 2024, and thereafter (in thousands):

	Operating leases		Finance leases
Remaining 2024	$	6,094	$	2,781
2025	13,568		1,862
2026	14,365		3
2027	14,721		—
2028	15,143		—
Thereafter	35,997		—
Total lease payments	99,888		4,646
Less: imputed interest	28,247		458
Total	$	71,641	$	4,188

LEASES

5. LEASES

The Company has entered into non-cancellable operating and finance leases for office, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with lease periods expiring through 2035. In addition, certain leases contain bargain renewal options extending through 2051. The Company recognizes lease expense for these leases on a straight-line basis over the lease term, which includes any bargain renewal options. The Company recognizes lease expense on a straight-line basis over the lease period. In addition to minimum rent, certain leases require payment of real estate taxes, insurance, common area maintenance charges, and other executory costs. Differences between lease expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the Company’s Consolidated Balance Sheets. For certain leases, the Company receives lease incentives, such as tenant improvement allowances, and records those as adjustments to operating lease right-of-use assets and operating lease liabilities on the Company’s Consolidated Balance Sheets and amortizes the lease incentives on a straight-line basis over the lease term as an adjustment to lease expense.

The components of operating and finance leases are presented on the Company’s Consolidated Balance Sheets as follows (in thousands):

	Financial statement line item	March 31, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	77,766	$	7,844
Finance lease right-of-use assets	Property, plant and equipment, net	$	9,374	$	16,268
Liabilities:
Operating lease liabilities,    current portion	Operating lease liabilities,    current portion	$	2,619	$	77
Operating lease liabilities, net    of current portion	Operating lease liabilities, net    of current portion	$	69,022	$	1,512
Finance lease liabilities, current portion	Finance lease liabilities, current portion	$	3,018	$	19,771
Finance lease liabilities, net of    current portion	Finance lease liabilities, net of current portion	$	1,170	$	35,745

Supplemental disclosure of noncash investing and financing activities in the Company’s Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the quarter ended March 31, 2024.

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

		Three Months Ended March 31,
	Financial statement line item	2024		2023
Operating lease expense	General and administrative expenses	$	1,419	$	390
Short-term lease expense	General and administrative expenses	—		365
Finance lease expense:
Amortization of right-of-use assets	Cost of revenue	334		3,857
Interest on lease liabilities	Interest expense, net	1,037		309
Total finance lease expense		1,371		4,166
Total lease expense		$	2,790	$	4,921

In determining the discount rate used to initially measure the present value of the right-of-use asset and lease liability, we use rates implicit in the lease, or if not readily available, we use our estimated incremental borrowing rate. Our incremental borrowing rate is based on an estimated secured rate with reference to recent borrowings of similar collateral and tenure, when available. If there are insufficient recent borrowings near the time of lease commencement, we utilize a rate based on published index rates of credit quality similar to ours adjusted for similar collateral and tenure. Estimating an incremental borrowing rate may require significant judgment.

Information relating to the lease term and discount rate is as follows:

	March 31, 2024		March 31, 2023
Weighted Average Remaining Lease Term (Years)
Operating leases	7.1		10.7
Finance leases	1.3		2.1
Weighted Average Discount Rate
Operating leases	9.3	%	6.5	%
Finance leases	12.3	%	12.4	%

Information relating to lease payments is as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Lease Payments
Operating lease payments	$	69	$	337
Finance lease payments1	$	4,628	$	1,080

1 Approximately $4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $4.6 million of finance lease payments made during the three months ended March 31, 2024, $3.6 million related to cure payments from emergence on the Effective Date.

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at March 31, 2024, and thereafter (in thousands):

	Operating leases		Finance leases
Remaining 2024	$	6,094	$	2,781
2025	13,568		1,862
2026	14,365		3
2027	14,721		—
2028	15,143		—
Thereafter	35,997		—
Total lease payments	99,888		4,646
Less: imputed interest	28,247		458
Total	$	71,641	$	4,188