LEASES

12 Months Ended

Dec. 31, 2024

Leases [Abstract]

LEASES

8. LEASES

Lessee Accounting

In February 2024, the Company entered into a lease agreement for a data center in Austin, Texas with a current operating capacity of 20 MW (the “Austin Lease”). The Austin Lease term is eight years. As of December 31, 2024, total future lease payments were expected to be approximately $91.2 million.

In September 2024, the Company entered into a lease agreement by and between the Company and Aubix, LLC (the "Aubix Lease") for approximately 5.7 acres of land, including a 40,000 square foot building that the Company intends to use for its HPC hosting operations. The Aubix Lease commenced in November 2024 when the Company began occupancy of the leased space. The term of the Aubix Lease is 10 years from the commencement date. The Company has the right to extend the term of the Aubix Lease up to an additional 15 years in 5 year increments. At lease inception, total future minimum lease payments related to the Aubix Lease were approximately $43.5 million.

In November 2024, the Company entered into a lease amendment with The City of Denton (the "Denton Lease Amendment") for additional land and access to power. The Denton Lease Amendment created an additional right-of-use asset and was recorded as a new operating lease. The term of the Denton Lease Amendment is 25 years. At lease inception, total future minimum lease payments related to the Denton Lease Amendment were $17.6 million.

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

	Financial statement line item	December 31, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	114,472	$	7,844
Finance lease right-of-use assets	Property, plant and equipment, net	$	5,873	$	16,268
Liabilities:
Operating lease liabilities,    current portion	Operating lease liabilities,    current portion	$	9,974	$	77
Operating lease liabilities, net    of current portion	Operating lease liabilities, net    of current portion	$	97,843	$	1,512
Finance lease liabilities, current portion	Finance lease liabilities, current portion	$	1,669	$	19,771
Finance lease liabilities, net of    current portion	Finance lease liabilities, net of current portion	$	3	$	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 year ended December 31, 2024.

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

		Year Ended December 31,
	Financial statement line item	2024		2023		2022
Operating lease expense	Cost of HPC hosting services	$	10,274	$	—	$	—
Operating lease expense	Cost of digital asset self-mining	413		—		—
Operating lease expense	Cost of digital asset hosted mining services	87		—		—
Operating lease expense	General and administrative expenses	2,129		1,024		1,937
Short-term lease expense	General and administrative expenses	383		—		24
Variable lease expense	Cost of HPC hosting services	1,455		—		—
Finance lease expense:
Amortization of right-of-use assets	Cost of digital asset self-mining	1,106		11,424		31,372
Interest on lease liabilities	Interest expense, net	1,200		1,787		7,080
Total finance lease expense		2,306		13,211		38,452
Total lease expense		$	17,047	$	14,235	$	40,413

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

	December 31, 2024		December 31, 2023
Weighted Average Remaining Lease Term (Years)
Operating leases	8.5		16.7
Finance leases	0.7		2.2
Weighted Average Discount Rate
Operating leases	8.5	%	11.7	%
Finance leases	12.5	%	12.9	%

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

	Year Ended December 31,
	2024		2023		2022
Lease Payments
Operating cash flows from operating leases	$	16,328	$	956	$	726
Operating cash flows from finance leases	$	1,856	$	964	$	8,873
Financing cash flows from finance leases	$	6,038	$	3,495	$	27,868

1 Approximately $4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $7.9 million of finance lease payments made during the year ended December 31, 2024, $4.4 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 December 31, 2024, and thereafter (in thousands):

	Operating leases		Finance leases
2025	$	18,589	$	1,750
2026	19,000		3
2027	19,423		—
2028	19,859		—
2029	20,358		—
Thereafter	54,309		—
Total lease payments	151,538		1,753
Less: imputed interest	43,721		81
Total	$	107,817	$	1,672

Lessor Accounting

We generate revenue by leasing property to a customer under licensing agreements. The manner in which we recognize these transactions in our financial statements is described in Note 2 — Summary of Significant Accounting Policies, Revenue Recognition — HPC Hosting Segment. There was no lease revenue during the years ended December 31, 2023 and 2022.

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

	Year Ended December 31, 2024
Lease Revenue
Operating lease revenue	$	17,498
Variable lease revenue	6,880
Total lease revenue	$	24,378

The following table represents the maturity analysis of operating lease payments expected to be received at December 31, 2024, and thereafter (in thousands):

	Operating leases
2025	$	23,254
2026	23,952
2027	24,670
2028	25,410
2029	26,173
Thereafter	33,747
Total	$	157,206

LEASES

8. LEASES

Lessee Accounting

In February 2024, the Company entered into a lease agreement for a data center in Austin, Texas with a current operating capacity of 20 MW (the “Austin Lease”). The Austin Lease term is eight years. As of December 31, 2024, total future lease payments were expected to be approximately $91.2 million.

In September 2024, the Company entered into a lease agreement by and between the Company and Aubix, LLC (the "Aubix Lease") for approximately 5.7 acres of land, including a 40,000 square foot building that the Company intends to use for its HPC hosting operations. The Aubix Lease commenced in November 2024 when the Company began occupancy of the leased space. The term of the Aubix Lease is 10 years from the commencement date. The Company has the right to extend the term of the Aubix Lease up to an additional 15 years in 5 year increments. At lease inception, total future minimum lease payments related to the Aubix Lease were approximately $43.5 million.

In November 2024, the Company entered into a lease amendment with The City of Denton (the "Denton Lease Amendment") for additional land and access to power. The Denton Lease Amendment created an additional right-of-use asset and was recorded as a new operating lease. The term of the Denton Lease Amendment is 25 years. At lease inception, total future minimum lease payments related to the Denton Lease Amendment were $17.6 million.

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

	Financial statement line item	December 31, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	114,472	$	7,844
Finance lease right-of-use assets	Property, plant and equipment, net	$	5,873	$	16,268
Liabilities:
Operating lease liabilities,    current portion	Operating lease liabilities,    current portion	$	9,974	$	77
Operating lease liabilities, net    of current portion	Operating lease liabilities, net    of current portion	$	97,843	$	1,512
Finance lease liabilities, current portion	Finance lease liabilities, current portion	$	1,669	$	19,771
Finance lease liabilities, net of    current portion	Finance lease liabilities, net of current portion	$	3	$	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 year ended December 31, 2024.

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

		Year Ended December 31,
	Financial statement line item	2024		2023		2022
Operating lease expense	Cost of HPC hosting services	$	10,274	$	—	$	—
Operating lease expense	Cost of digital asset self-mining	413		—		—
Operating lease expense	Cost of digital asset hosted mining services	87		—		—
Operating lease expense	General and administrative expenses	2,129		1,024		1,937
Short-term lease expense	General and administrative expenses	383		—		24
Variable lease expense	Cost of HPC hosting services	1,455		—		—
Finance lease expense:
Amortization of right-of-use assets	Cost of digital asset self-mining	1,106		11,424		31,372
Interest on lease liabilities	Interest expense, net	1,200		1,787		7,080
Total finance lease expense		2,306		13,211		38,452
Total lease expense		$	17,047	$	14,235	$	40,413

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

	December 31, 2024		December 31, 2023
Weighted Average Remaining Lease Term (Years)
Operating leases	8.5		16.7
Finance leases	0.7		2.2
Weighted Average Discount Rate
Operating leases	8.5	%	11.7	%
Finance leases	12.5	%	12.9	%

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

	Year Ended December 31,
	2024		2023		2022
Lease Payments
Operating cash flows from operating leases	$	16,328	$	956	$	726
Operating cash flows from finance leases	$	1,856	$	964	$	8,873
Financing cash flows from finance leases	$	6,038	$	3,495	$	27,868

1 Approximately $4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $7.9 million of finance lease payments made during the year ended December 31, 2024, $4.4 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 December 31, 2024, and thereafter (in thousands):

	Operating leases		Finance leases
2025	$	18,589	$	1,750
2026	19,000		3
2027	19,423		—
2028	19,859		—
2029	20,358		—
Thereafter	54,309		—
Total lease payments	151,538		1,753
Less: imputed interest	43,721		81
Total	$	107,817	$	1,672

Lessor Accounting

We generate revenue by leasing property to a customer under licensing agreements. The manner in which we recognize these transactions in our financial statements is described in Note 2 — Summary of Significant Accounting Policies, Revenue Recognition — HPC Hosting Segment. There was no lease revenue during the years ended December 31, 2023 and 2022.

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

	Year Ended December 31, 2024
Lease Revenue
Operating lease revenue	$	17,498
Variable lease revenue	6,880
Total lease revenue	$	24,378

The following table represents the maturity analysis of operating lease payments expected to be received at December 31, 2024, and thereafter (in thousands):

	Operating leases
2025	$	23,254
2026	23,952
2027	24,670
2028	25,410
2029	26,173
Thereafter	33,747
Total	$	157,206