RECURSION PHARMACEUTICALS, INC. 10-K

Item 8. Financial Statements and Supplementary Data. 179 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Recursion Pharmaceuticals, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Recursion Pharmaceuticals, Inc. and its subsidiaries (the "Company") as of December 31, 2024, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to the Company not designing and maintaining effective controls over the estimated costs and time to completion and controls to validate the completeness and accuracy of data used to calculate revenue and unearned revenue related to its license agreement. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. 180 Table of Contents As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded Exscientia plc from its assessment of internal control over financial reporting as of December 31, 2024 because it was acquired by the Company in a purchase business combination during 2024. We have also excluded Exscientia plc from our audit of internal control over financial reporting. Exscientia plc is a wholly-owned subsidiary whose total assets and total net loss excluded from management’s assessment and our audit of internal control over financial reporting represent 27% and 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Acquisition of Exscientia plc – Valuation of Platform Technology and In-Process Research and Development As described in Note 4 to the consolidated financial statements, on November 20, 2024, the Company acquired all of the equity interests of Exscientia plc for $630.1 million. Of the acquired intangible assets, $182.0 million of platform technology and $129.0 million of in-process research and development (IPR&D) were recorded. The fair value of each intangible asset was based on the present value of future discounted cash flows prepared under the multi-period excess earnings method, with the significant inputs being the estimates of future revenues, future expenses, discount rate, and probabilities of technological and regulatory success. The principal considerations for our determination that performing procedures relating to the valuation of platform technology and IPR&D acquired in the acquisition of Exscientia plc is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of platform technology and IPR&D acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to (a) future revenues, future expenses, and discount rate for platform technology and (b) future revenues, future expenses, discount rate, and probabilities of technological and regulatory success for IPR&D; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of platform technology and IPR&D acquired. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of platform technology and 181 Table of Contents IPR&D acquired; (iii) evaluating the appropriateness of the multi-period excess earnings methods used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings methods; and (v) evaluating the reasonableness of the significant assumptions used by management related to (a) future revenues, future expenses, and discount rate for platform technology and (b) future revenues, future expenses, discount rate, and probabilities of technological and regulatory success for IPR&D. Evaluating management’s assumptions related to (a) future revenues and future expenses for platform technology and (b) future revenues, future expenses, and probabilities of technological and regulatory success for IPR&D involved considering (i) the current and past performance of the Exscientia plc business; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings methods and (ii) the reasonableness of the discount rate assumptions for platform technology and IPR&D. /s/ PricewaterhouseCoopers LLP Seattle, Washington February 28, 2025 We have served as the Company’s auditor since 2024. 182 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Recursion Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Recursion Pharmaceuticals, Inc. (the Company) as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2017 to 2024. Salt Lake City, Utah February 29, 2024 except for Note 15, as to which the date is February 28, 2025 183 Table of Contents Recursion Pharmaceuticals, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2024 2023 Assets Current assets Cash and cash equivalents $ 594,350 $ 391,565 Restricted cash 3,045 3,231 Other receivables 49,166 3,094 Other current assets 67,708 40,247 Total current assets 714,269 438,137 Restricted cash, non-current 5,629 6,629 Property and equipment, net 141,063 86,510 Operating lease right-of-use assets 65,877 33,663 Financing lease right-of-use assets 26,273 — Intangible assets, net 335,855 36,443 Goodwill 148,873 52,056 Deferred tax assets 1,934 — Other assets, non-current 8,825 261 Total assets $ 1,448,598 $ 653,699 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 21,613 $ 3,953 Accrued expenses and other liabilities 81,872 46,635 Unearned revenue 61,767 36,426 Operating lease liabilities 13,795 6,116 Notes payable and financing lease liabilities 8,425 41 Total current liabilities 187,472 93,171 Unearned revenue, non-current 118,765 51,238 Operating lease liabilities, non-current 67,250 43,414 Notes payable and financing lease liabilities, non-current 19,022 1,101 Deferred tax liabilities 16,575 1,339 Other liabilities, non-current 4,732 — Total liabilities 413,816 190,263 Commitments and contingencies (Note 7) Stockholders’ equity Common stock, $ 0.00001 par value; 2,000,000,000 shares (Class A 1,989,032,117 and Class B 10,967,883 ) authorized as of December 31, 2024 and December 31, 2023; 396,802,394 shares (Class A 389,547,223 , Class B 6,958,575 and Exchangeable 296,596 ) and 234,270,384 (Class A 226,264,764 and Class B 7,544,871 and Exchangeable 460,749 ) issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 4 2 Additional paid-in capital 2,473,698 1,431,056 Accumulated deficit ( 1,431,283 ) ( 967,622 ) Accumulated other comprehensive loss ( 7,637 ) — Total stockholders’ equity 1,034,782 463,436 Total liabilities and stockholders’ equity $ 1,448,598 $ 653,699 See the accompanying notes to these consolidated financial statements. 184 Table of Contents Recursion Pharmaceuticals, Inc. Consolidated Statements of Operations (in thousands, except share and per share amounts) Years ended December 31, 2024 2023 2022 Revenue Operating revenue $ 58,488 $ 43,876 $ 39,681 Grant revenue 351 699 162 Total revenue 58,839 44,575 39,843 Operating costs and expenses Cost of revenue 45,238 42,587 48,275 Research and development 314,421 241,226 155,696 General and administrative 178,184 110,822 81,599 Total operating costs and expenses 537,843 394,635 285,570 Loss from operations ( 479,004 ) ( 350,060 ) ( 245,727 ) Other income, net 14,216 17,932 6,251 Loss before income tax benefit ( 464,788 ) ( 332,128 ) ( 239,476 ) Income tax benefit 1,127 4,062 — Net loss $ ( 463,661 ) $ ( 328,066 ) $ ( 239,476 ) Per share data Net loss per share of Class A, B and Exchangeable common stock, basic and diluted $ ( 1.69 ) $ ( 1.58 ) $ ( 1.36 ) Weighted-average shares (Class A, B and Exchangeable) outstanding, basic and diluted 274,207,146 207,853,702 175,537,487 See the accompanying notes to these consolidated financial statements. 185 Table of Contents Recursion Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Loss (in thousands) Years ended December 31, 2024 2023 2022 Net loss $ ( 463,661 ) $ ( 328,066 ) $ ( 239,476 ) Other comprehensive loss: Currency translation adjustments ( 7,637 ) — — Unrealized gain on investments — — 87 Net realized loss on investments reclassified into net loss — — 39 Other comprehensive income (loss) ( 7,637 ) — 126 Comprehensive loss $ ( 471,298 ) $ ( 328,066 ) $ ( 239,350 ) See the accompanying notes to these consolidated financial statements. 186 Table of Contents Recursion Pharmaceuticals, Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) Common Stock (Class A, B and Exchangeable) Additional Paid-in-Capital Accumulated Deficit Accumulated other comprehensive loss Stockholders’ Equity Shares Amount Balance as of December 31, 2021 170,272,462 2 $ 943,142 $ ( 400,080 ) $ ( 126 ) 542,938 Net loss — — — ( 239,476 ) — ( 239,476 ) Other comprehensive income — — — — 126 126 Common stock issuance for private placement, net of issuance costs 15,336,734 — 143,711 — — 143,711 Stock option exercises and other 5,413,668 — 10,598 — — 10,598 Stock based compensation 27,909 — — 27,909 Balance as of December 31, 2022 191,022,864 2 1,125,360 ( 639,556 ) — 485,806 Net loss — — — ( 328,066 ) — ( 328,066 ) Stock option exercises and other 9,058,817 — 12,831 — — 12,831 Stock-based compensation 53,503 — — 53,503 Common stock sales issuances, net of issuance costs 19,658,963 — 128,093 — — 128,093 Class A shares and stock options issued for acquisitions 11,303,838 — 89,269 — — 89,269 Common stock issued for Tempus agreement 3,225,902 — 22,000 — — 22,000 Balance as of December 31, 2023 234,270,384 2 1,431,056 ( 967,622 ) — 463,436 Net loss — — — ( 463,661 ) — ( 463,661 ) Other comprehensive loss — — — — ( 7,637 ) ( 7,637 ) Stock option exercises and other 11,359,808 — 8,299 — — 8,299 Stock-based compensation — — 81,688 — — 81,688 Common stock sales issuances, net of issuance costs 45,535,390 1 300,532 — — 300,533 Class A shares and stock compensation issued for acquisitions 102,138,419 1 630,123 — — 630,124 Common stock issued for Tempus agreement 3,498,393 — 22,000 — — 22,000 Balance as of December 31, 2024 396,802,394 4 $ 2,473,698 $ ( 1,431,283 ) $ ( 7,637 ) $ 1,034,782 See the accompanying notes to these consolidated financial statements. 187 Table of Contents Recursion Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (in thousands) Years ended December 31, 2024 2023 2022 Cash flows from operating activities Net loss $ ( 463,661 ) $ ( 328,066 ) $ ( 239,476 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 36,494 24,402 11,756 Stock-based compensation 81,688 53,503 27,909 Asset impairment 108 1,188 2,806 Lease expense 16,616 8,063 7,730 Other, net 7,582 3,387 830 Changes in operating assets and liabilities: Other receivables and assets ( 6,071 ) ( 7,756 ) ( 2 ) Unearned revenue ( 28,038 ) ( 41,076 ) 110,320 Accounts payable 6,435 ( 987 ) 1,767 Accrued development expense ( 264 ) 2,705 522 Accrued expenses and other current liabilities 5,519 6,719 ( 576 ) Lease liabilities ( 15,582 ) ( 9,862 ) ( 7,110 ) Net cash used in operating activities ( 359,174 ) ( 287,780 ) ( 83,524 ) Cash flows from investing activities Net cash acquired in the acquisition of a business 277,104 1,844 — Purchases of property and equipment ( 13,695 ) ( 11,955 ) ( 37,059 ) Purchases of intangible assets ( 3,350 ) ( 597 ) ( 300 ) Sales and maturities of investments — 480 230,608 Net cash provided by (used in) investing activities 260,059 ( 10,228 ) 193,249 Cash flows from financing activities Proceeds from issuance of common shares, net of issuance costs 300,417 128,093 143,711 Proceeds from equity incentive plans 8,143 12,806 10,724 Repayment of long-term debt and finance lease liabilities ( 4,440 ) ( 766 ) ( 90 ) Net cash provided by financing activities 304,120 140,133 154,345 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3,406 ) 188 ( 307 ) Net change in cash, cash equivalents and restricted cash 201,599 ( 157,687 ) 263,763 Cash, cash equivalents and restricted cash, beginning of period 401,425 559,112 295,349 Cash, cash equivalents and restricted cash, end of period $ 603,024 $ 401,425 $ 559,112 Supplemental disclosure of non-cash investing and financing information Issuance of shares for the acquisitions of businesses $ 630,124 $ 89,269 $ — Issuance of shares for Tempus agreement 22,000 22,000 — Accrued property and equipment 439 2,439 591 Purchase of an intangible asset 6,000 — — See the accompanying notes to these consolidated financial statements. 188 Table of Contents Recursion Pharmaceuticals, Inc. Notes to Consolidated Financial Statements Note 1. Description of the Business Recursion Pharmaceutical, Inc. (Recursion, the Company, we or our) is a clinical stage TechBio company decoding biology and chemistry to industrialize drug discovery. The Recursion Operating System (OS), a platform built across diverse technologies, enables the Company to map and navigate trillions of biological and chemical relationships within the Recursion Data Universe, one of the world’s largest proprietary biological and chemical datasets. The Company integrates physical and digital components as iterative loops of atoms and bits scaling wet lab biology and chemistry data organized into virtuous cycles with computational tools to rapidly translate in silico hypotheses into validated insights and novel chemistry. As of December 31, 2024, the Company had an accumulated deficit of $ 1.4 billion. The Company expects to incur substantial operating losses in future periods and will require additional capital to advance its drug candidates. The Company does not expect to generate significant revenue until the Company successfully completes significant drug development milestones or in collaboration with third parties, which the Company expects will take a number of years. In order to commercialize its drug candidates, the Company or its partners need to complete clinical development and comply with comprehensive regulatory requirements. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biotechnology industry, such as the uncertainty of clinical trial outcomes, uncertainty of additional funding and a history of operating losses. The Company has funded its operations to date primarily through the issuance of Class A common stock (see Note 8, “Common Stock” for additional details). Additionally, the Company has received payments from its strategic partnerships (see Note 9, “Collaborative Development Contracts” for additional details). Recursion will likely be required to raise additional capital. As of December 31, 2024, the Company did not have any unconditional outstanding commitments for additional funding. If the Company is unable to access additional funds when needed, it may not be able to continue the development of its products or the Company could be required to delay, scale back or abandon some or all of its development programs and other operations. The Company’s ability to access capital when needed is not assured and, if not achieved on a timely basis, could materially harm its business, financial condition and results of operations. Recursion believes that the Company’s existing cash and cash equivalents will be sufficient to fund the Company’s operating expenses and capital expenditures for at least the next 12 months. Note 2. Summary of Significant Accounting Policies Use of Estimates The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires the Company to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those amounts. Significant estimates and assumptions include the estimated progress towards the satisfaction of performance obligations to record revenue, the valuation of goodwill and intangible assets, accrued research and development expenses and the fair value of stock-based awards issued. Basis of Presentation The consolidated financial statements include the accounts of Recursion and its wholly-owned subsidiaries that the Company controls. Intercompany balances and transactions have been eliminated in consolidation. 189 Table of Contents Segment Information Recursion operates and is managed as a single operating segment. The Company’s chief operating decision maker is its Chief Executive Officer, who allocates resources and assesses performance at the consolidated level. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. These financial instruments are primarily held at several financial institutions that management believes are of high credit quality. Recursion’s primary bank accounts significantly exceed the federally insured limits. The Company is dependent on third-party suppliers for certain research and development activities including preclinical and clinical testing. In particular, the Company relies on and expects to continue to rely on a small number of these suppliers. These activities could be adversely affected by a significant interruption to Recursion’s third-party suppliers including a delay in the Company’s preclinical and clinical testing and the supply of certain consumable products and compounds. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents includes bank deposits held in checking accounts and money market funds. Short-term highly liquid investments with maturities of three months or less at the time of purchase are classified as cash and cash equivalents. The Company is required to maintain a cash balance in a collateralized account to secure the Company’s credit cards. Additionally, the Company holds restricted cash related to an outstanding letter of credit issued by J.P. Morgan, which was obtained to secure certain Company obligations relating to tenant improvements. Recursion also holds restricted cash as required by a lease agreement. Property and Equipment Property and equipment is carried at acquisition cost less accumulated depreciation. The cost of normal, recurring or periodic repairs and maintenance activities related to property and equipment are expensed as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. The estimated useful lives by asset classification are generally as follows: Computer and Office Equipment 5 years Lab Equipment 7 years Leasehold Improvements Lesser of 15 years or the remainder of the lease Property and equipment are reviewed for impairment as discussed below under Long-Lived Assets Impairment. Long-Lived Assets Impairment The Compa ny reviews the carrying amounts of long-lived assets, including property and equipment, intangible assets and right-of-use leased assets for potential impairment when events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. In evaluating recoverability, Recursion groups assets and liabilities at the lowest level such that the identifiable cash flows relating to the group are largely independent of the cash flows of other assets and liabilities. The Company then compares the carrying amount of the asset group with the projected undiscounted future cash flows to be generated by the asset group. If the undiscounted cash flows of the asset group is lower than its respective carrying value, an impairment charge is recorded as the amount by which the carrying amount of the asset group exceeds the fair value. Goodwill and Indefinite Intangible Assets Impairment Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Indefinite-lived intangible assets 190 Table of Contents primarily include in-process research and development (IPR&D) acquired in business combinations with indefinite lives. The Company performs its annual goodwill and indefinite-lived intangible assets impairment test in the fourth quarter, or more frequently if an interim triggering event occurs that may indicate potential impairment. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. Some of the factors considered in the qualitative assessment include general macro-economic conditions, conditions specific to the industry and market, cost factors, the overall financial performance and whether there have been sustained declines in the Company's share price. If the Company concludes it is more likely than not that the fair value of the reporting unit or IPR&D is less than its carrying amount, a quantitative impairment test is performed. For its quantitative impairment tests, the Company uses an estimated future cash flow approach that requires significant judgment with respect to future volume, revenue and expense growth rates, changes in working capital use, the selection of an appropriate discount rate and other assumptions and estimates. The estimates and assumptions used are consistent with the Company's business plans and a market participant's views. The use of alternative estimates and assumptions could increase or decrease projected cash flows and the estimated fair value. Business Combinations Results of operations of acquired companies are included in the Recursion results of operations as of the respective acquisition dates. The purchase price of each acquisition is allocated to the net assets acquired based on estimates of their fair values at the date of acquisition. Any purchase price in excess of these net assets is recorded as goodwill. The allocation of purchase price in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred. Accruals for Research and Development Expenses and Clinical Trials As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from obligations under contracts with vendors and clinical research organizations. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided for under such contracts. The Company’s policy is to record these expenses during the period in which services are performed and efforts are expended. The Company determines accrual estimates by taking into account discussions with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each Consolidated Balance Sheet date based on the facts and circumstances known to it at that time. The actual expenses could be different from the amounts accrued. Leases The Company rents facilities under operating lease agreements and recognizes rent expense on a straight-line basis over the term of the lease. Certain lease agreements contain tenant improvement allowances, rent holidays, scheduled rent increases and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense. Certain leases also include provisions for variable lease payments which are based on, but not limited to, maintenance, insurance, taxes and usage-based amounts. Recursion recognizes these costs as they are incurred. Right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Present value is determined using an incremental borrowing rate when the rate implicit in the lease is not readily determinable. The incremental borrowing rate is equal to the rate of interest that Recursion would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. Renewals are not included in the determination of the lease term unless they are determined to be reasonably certain to be exercised at the commencement date of the 191 Table of Contents lease. The Company recognizes rent expense beginning on the date the Company obtains the legal right to use and control the leased space. Recursion classifies leases as operating or finance at the lease commencement date. The Co mpany has elected to apply the practical expedient for short-term leases whereby Recursion does not recognize a lease liability and right-of-use asset for leases with a term of less than 12 months. The Company has also elected to not separate consideration in the contract between lease and non-lease components of a contract that contains a lease. Right-of-use assets and lease liabilities are remeasured upon certain remeasurement events using the present value of remaining lease payments and estimated incremental borrowing rate upon lease modification. For operating leases that commenced prior to the Company’s adoption of Topic 842, Recursion measured the lease liabilities and right-of-use assets using the incremental borrowing rate as of January 1, 2022. Revenue Recognition Operating revenue has primarily been generated through research and development agreements (see Note 9, “Collaborative Development Contracts” for additional details). Revenue for research and development agreements is recognized as the Company satisfies a performance obligation by transferring the promised services to the customer. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the services promised to the customer. This method of recognizing revenue requires the Company to make estimates of the work required to complete the performance obligation in order to determine the progress towards completion. A significant change in these estimates could have a material effect on the timing and amount of revenue recognized in future periods. The Company may also provide options in its agreements under which a partner could request that Recursion provide additional services in the future. Recursion evaluates whether these options are material rights at the inception of the agreement. If the Company determines an option is a material right, Recursion will consider the option a separate performance obligation. Cost of Revenue Cost of revenue consists of the Company’s costs to provide services for drug discovery required under performance obligations with partnership customers. These primarily include materials costs, service hours performed by the Company’s employees, costs from third party contract research organizations and depreciation of property and equipment. Consumables purchased to be used in the future to satisfy performance obligations are recognized on the Consolidated Balance Sheet until consumed. Research and Development Research and development expenses comprise of costs incurred in performing research and development activities other than those performed pursuant to contracts with customers, including drug discovery and development studies, external research and the purchase of laboratory supplies. The Company recognizes expenses associated with third-party contracted services based on the completion of activities as specified in the applicable contracts. Upon the termination of contracts with third-parties, the Company’s financial obligations are generally limited to costs incurred or committed to date. Any advance payments for goods or services to be used or rendered in future research and product development activities are classified as prepaid expenses until the goods or services are rendered. Stock-Based Compensation The Company issues stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units (RSUs). Most of the Company’s stock-based awards have been made to employees. Recursion measures compensation expense for equity awards at their grant-date fair value and recognizes compensation expense over the requisite service period, generally on a straight-line basis. For stock-based awards with a performance condition , Recursion recognizes stock-based compensation expense based on the probable outcome of the performance condition. Awards generally vest over four years for employees. Recursion recognizes the impact of forfeitures on stock-based compensation expense as they occur. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model, which requires inputs for the expected term, stock price volatility, dividend yield and the risk-free interest rate of the options. The 192 Table of Contents expected term is based on the simplified method since the Company does not have sufficient historical exercise data to estimate the expected term. The volatility is based on an average peer historical volatility over the expected term of the option. The expected dividend yield is assumed to be zero as Recursion has never paid dividends and does not have current plans to pay dividends. The risk-free interest rate is based on the rates available at the time of the grant for zero-coupon U.S. government issues with a remaining term equal to the option's expected term. The grant date fair value of RSUs is determined using the market price of the Company’s common stock at grant date. For stock-based awards with a market condition, the grant date fair value is determined using a Monte Carlo simulation and stock-based compensation expense is recognized using the accelerated attribution method over the implied service period. When a market condition is satisfied in a period before the end of the implied service period, any remaining unrecognized compensation cost is recognized. Stock-based compensation is recorded in cost of revenue, research and development expense and general and administrative expense based on the role of the employee. Income Taxes Income taxes are accounted for under the asset and liability method. Provisions for federal, state and foreign income taxes are calculated on reported pretax losses based on current tax laws. Deferred taxes are recognized using enacted tax rates on the future tax consequences of temporary differences, which are the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and the tax benefits of carryforwards. A valuation allowance is established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. For uncertain tax positions, Recursion determines whether the position is more-likely-than-not to be sustained upon examination based on the technical merits of the position. Any tax position that meets the more-likely-than-not recognition threshold is measured and recognized in the Consolidated Financial Statements at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. Recursion receives certain cash refundable research and development tax credits including the research and development expenditure credit (RDEC) in the United Kingdom. The Company records these as “Research and Development” in the Consolidated Statements of Operations as the credit is earned. The amount included in the Consolidated Statements of Operations for the year ended December 31, 2024 was insignificant. The Company records the amount receivable in “Other receivables” on the Consolidated Balance Sheet. Foreign Currency The functional currency for several of Recursion’s foreign subsidiaries is the applicable local currency. Revenues and expenses for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency exchange rates for the period. Assets and liabilities for such entities are translated using exchange rates at the balance sheet date. Foreign currency translation adjustments are reflected in stockholders’ equity as a component of other comprehensive loss. Foreign currency transaction gains and losses on transactions not denominated in functional currency are recorded in “Other income, net” in the Consolidated Statements of Operations. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-7, Segment Reporting (Topic 280) . The standard requires new disclosures related to ASC 280 including: disclosing significant segment expenses by category, requiring all the ASC 280 disclosures for companies with a single reportable segment and requiring ASC 280 disclosures for interim financial statements. Recursion adopted the standard for the annual period ending December 31, 2024. Recursion applied the amendments retrospectively to each prior reporting period presented. The adoption of this standard did not impact Recursion’s consolidated balance sheet and statement of operations. Recent Accounting Pronouncements Not Yet Adopted In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Disaggregation of Income Statement Expenses (Topic 220) . The standard requires new disclosures in 193 Table of Contents the notes to the financial statements about certain caption expenses presented on the face of the Income Statement including information on: purchases of inventory; employee compensation; depreciation and intangible asset amortization. Recursion must also disclose a qualitative description of the amounts remaining in expense captions that are not separately disaggregated. This standard will be effective for Recursion starting the annual period ending December 31, 2027. Early adoption is permitted. The amendments can be applied on a prospective or retrospective basis. Recursion is currently assessing the impact of adopting this guidance on its consolidated financial statements. In March 2024, the SEC issued rule 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors . The new rule requires Recursion to provide certain disclosures in the footnotes to the financial statements of climate-related information. These disclosures include the impact of severe weather and other natural conditions on the Company’s consolidated balance sheet and statement of operations, to the extent they are material. Recursion will also need to disclose a rollforward of the beginning and ending balances of its carbon offsets and renewable energy credits or certificates (RECs), if they are a material component of meeting the Company’s climate-related targets and goals. Additionally, the Company will need to disclose whether and, if so, how severe weather events and other natural conditions and disclosed climate-related targets or transition plans materially affected estimates and assumptions in the financial statements. The final rule’s effective dates, if adopted, will be phased in depending on the disclosure requirement starting the annual period ending December 31, 2025. In April 2024, the SEC voluntarily stayed implementation of the new climate-related disclosure requirements pending judicial review. The Company is currently evaluating the impact this rule will have on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No. 2023-9, Income Taxes (Topic 740) . The new standard updates disclosure requirements for Accounting Standards Codification (ASC) 740 primarily by requiring additional information in the income tax rate reconciliation and additional disclosures about income taxes paid. This standard will be effective for Recursion starting the annual period ending December 31, 2025. The amendments can be applied on a prospective or retrospective basis. The adoption of this standard will not impact Recursion’s consolidated balance sheet and statement of operations. Note 3. Supplemental Financial Information Tempus agreement In November 2023, Recursion entered into a five-year agreement (the Tempus Agreement) with Tempus Labs, Inc. (“Tempus”) to purchase access to their records of patient-centric multimodal oncology data and use rights for therapeutic development purposes. This data will be used to improve the training of Recursion’s artificial intelligence and machine learning models and is expected to accelerate Recursion’s drug discovery process. Recursion is making annual payments, ranging between $ 22.0 million and $ 42.0 million, up to $ 160.0 million in aggregate, to Tempus in cash or equity at the Company’s option. The equity value is determined by using the seven -trading day period dollar volume-weighted average price (VWAP) for Recursion Class A common stock ending on the day immediately preceding the date that is five business days prior to the payment date. Recursion is expensing the record purchases based on a contractually agreed price as “Research and Development” expenses in the Consolidated Statements of Operations as the records are downloaded. To the extent that the Recursion payments to Tempus are greater than or less than the records purchased amount, Recursion records the applicable amount to “Other Current Assets” or “Accrued Expenses and Other Liabilities” on the Consolidated Balance Sheet, respectively. As of December 31, 2024, Recursion had recorded $ 29.6 million within “Other Current Assets” on the Consolidated Balance Sheet related to the Tempus agreement. 194 Table of Contents Property and Equipment, net December 31, (in thousands) 2024 2023 Lab equipment $ 100,928 $ 60,096 Leasehold improvements 72,727 45,929 Computer and Office equipment 27,365 22,126 Construction in progress 2,714 3,231 Property and equipment, gross 203,734 131,382 Less: Accumulated depreciation ( 62,671 ) ( 44,872 ) Property and equipment, net $ 141,063 $ 86,510 Depreciation expense on property and equipment was $ 18.3 million, $ 15.9 million and $ 11.4 million during the years ended December 31, 2024 , 2023 and 2022, respectively. The Company recorded an impairment of $ 1.2 million during the year ended December 31, 2023 , related to construction projects for leasehold improvements as the Company no longer intended to use them. The impairments were recorded in “General and Administrative” in the Consolidated Statements of Operations. The increase in each category of property and equipment from the prior year was primarily driven by the Exscientia acquisition. See Note 4, “Acquisitions” for additional information. Accrued Expenses and Other Liabilities December 31, (in thousands) 2024 2023 Accrued compensation $ 50,853 $ 22,888 Accrued development expenses 5,812 6,077 Accrued early discovery expenses 3,095 2,570 Accrued professional fees 787 1,582 Accrued construction — 2,439 Materials received not invoiced 1,590 2,432 Accrued Helix fee 3,000 — Accrued other expenses 16,735 8,647 Accrued expense and other liabilities $ 81,872 $ 46,635 For the year ended December 31, 2024, the increase in accrued compensation from the prior year was driven by the Company’s acquisition of Exscientia. See Note 4, “Acquisitions” for additional information on the acquisition. Interest Income, net Years ended December 31, (in thousands) 2024 2023 2022 Interest income $ 15,758 $ 19,116 $ 6,254 Interest expense ( 1,572 ) ( 97 ) ( 55 ) Interest income, net $ 14,186 $ 19,019 $ 6,199 For the years ended December 31, 2024, 2023 and 2022, interest income primarily related to earnings on cash and cash equivalents in money market funds. Interest expense primarily related to the Company’s supercomputer 195 Table of Contents financing lease. Interest income, net was included in “Other income, net” on the Consolidated Statements of Operations. Note 4. Acquisitions Exscientia plc On November 20, 2024, Recursion acquired all of the outstanding equity interests of Exscientia plc (“Exscientia”), a United Kingdom based public company that was registered on the Nasdaq Global Select Market. Exscientia is a drug design company utilizing its artificial intelligence platform to efficiently design and develop differentiated medicines for diseases with high unmet patient needs. Their focus is on utilizing their platform to develop best in class molecules with improvements to known or likely points of failure to improve the probability of developmental success. The Company believes the combination of the Recursion and Exscientia platforms and pipelines will position it to be a leader of the AI-enabled drug discovery and development space. The acquisition of Exscientia was accounted for as a business combination using the acquisition method of accounting. The consideration transferred of approximately $ 630.1 million consisted of $ 616.9 million in Recursion Class A shares and $ 13.2 million related to the portion of Exscientia share based awards that were replaced with Recursion share based awards that is attributable to pre-combination service. Approximately 102.1 million Recursion Class A shares were issued in exchange for Exscientia ordinary shares using a fixed exchange ratio of one Exscientia ordinary share converts to 0.7729 Recursion Class A shares (the “Exchange Ratio”). In addition, Recursion replaced all outstanding Exscientia share based awards with Recursion share based awards wherein the vesting schedule and other applicable terms were carried over except for the exercise price of share options which were adjusted using the 0.7729 exchange ratio. This included Exscientia’s stock options and restricted stock units. Recursion used $ 6.04 , the Company’s share price on November 20, 2024 to calculate the consideration transferred. See Note 10, “Stock-Based Compensation” for additional information on the Exscientia share based awards. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: (in thousands) Cash and cash equivalents $ 277,104 Other receivables 48,408 Other current assets 12,843 Property and equipment 61,961 Operating lease right-of-use assets 20,271 Intangible assets, technology 182,000 Intangible assets, indefinite-lived 129,000 Deferred tax assets 1,934 Other assets, non-current 930 Accounts payable and accrued liabilities ( 40,780 ) Lease liabilities ( 21,679 ) Deferred Revenue ( 120,905 ) Other liabilities ( 18,698 ) Total identifiable net assets $ 532,389 Goodwill 97,735 Total assets acquired and liabilities assumed $ 630,124 Acquired contract liabilities in the scope of ASC 606 are an exception to the ASC 805 fair value measurement principle and were measured as if Recursion had originated the acquired contract. Two acquired customer contracts had contract liabilities and for each contract Recursion reassessed the identification of performance obligations, determination of transaction price, allocation of transaction price, and measure of progress for each performance 196 Table of Contents obligation as if Recursion has been party to the original contract and recognized the resulting contract liability as a liability assumed. No contract assets in the scope of ASC 606 were acquired. The intangible assets of Exscientia consist of the Exscientia artificial intelligence platform and four clinical stage oncology in process research and development (IPR&D) assets. The operating system is a critical tool used for both designing molecules for fulfilling collaboration agreements and Exscientia’s own research and development projects. The fair value of each intangible asset was valued based on the present value of future discounted cash flows prepared under the multi-period excess earnings method with the significant inputs being the estimates of future revenues, future expenses, the discount rate of 10.5 % and probabilities of technological and regulatory success. The platform asset is being amortized on a straight line basis ove r a six year useful life. The IPR&D assets have been assigned an indefinite useful life and will be tested for impairme nt prospectively and, if regulatory approval is achieved, will be assigned a useful life and amortization will commence. Goodwill was calculated based on the excess of the consideration transferred over net assets acquired. The goodwill recognized represents the assembled workforce, future research and development projects enabled by the platform that do not yet have sufficient substance to meet the definition of in-process research and development assets and expected synergies such as the integration of Recursion and Exscientia platforms. The goodwill is not deductible for tax purposes. As the business combination occurred in November 2024, Recursion is still finalizing the allocation of the purchase price to assets acquired and liabilities assumed. The preliminary purchase price allocation reflected in the December 31, 2024 balance sheet is based on the current best estimate of management and subject to change. The Company will finalize the amounts recognized as the information necessary to complete the analysis is obtained and management estimates are further refined. The primary areas subject to finalization are the valuation of intangible assets, right-of-use assets, property and equipment and the valuation of tax assets and liabilities. The Company expects to finalize the purchase price allocation soon but will do so no later than one year from the acquisition date. External specialists have been engaged to assist with certain elements of applying the acquisition method of accounting. Recursion’s consolidated statement of operations for the year ended December 31, 2024 includes $ 1.1 million of revenue and $ 29.3 million of operating loss from Exscientia operations. The following unaudited pro forma summary presents consolidated revenue and earnings of Recursion as if the Exscientia business combination had occurred on January 1, 2023. Year ended December 31, (in thousands) 2024 2023 Revenue $ 82,643 $ 72,504 Operating loss 678,717 548,716 The unaudited pro forma amounts have been calculated after converting the Exscientia financial information to U.S. GAAP, applying Recursion accounting policies, and applying the acquisition method of accounting at January 1, 2023. Recursion incurred approximately $ 20.5 million of transaction costs which are presented in general and administrative expenses in the statement of operations for the year ended December 31, 2024 and are reflected in the pro forma operating loss for the year ended December 31, 2023. Recursion did not have any material, nonrecurring pro forma adjustments directly attributable to the Exscientia business combination that are included in the pro forma information. Valence Discovery Inc. On May 16, 2023, Recursion acquired all of the outstanding equity interests in Valence Discovery Inc. (Valence), a privately-held machine learning (ML) / artificial intelligence (AI) digital chemistry company. The integration of Valence’s AI-based chemistry engine into Recursion’s operating system will allow Recursion to expand its technology-enabled drug discovery process. This will accelerate Recursion’s digital chemistry capabilities and its drug discovery process. 197 Table of Contents The acquisition of Valence was accounted for as a business combination using the acquisition method of accounting. The aggregate upfront consideration for the acquisition of Valence consisted of 2.2 million shares of Recursion Class A common stock, 4.4 million shares of a subsidiary of Recursion, exchangeable for shares of Recursion’s Class A common stock, 792 thousand shares issuable upon exercise of stock options held by Valence equity award holders and deferred liabilities for additional consideration. The following table summarizes total consideration: (in thousands) Fair value of Recursion Class A common stock $ 11,096 Fair value of Exchangeable stock 22,473 Fair value of equity awards issued to Valance equity award holders 1,933 Deferred liabilities for additional consideration 396 Total consideration $ 35,898 The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: (in thousands) Cash $ 4,235 Other receivables 536 Intangible asset - technology 15,000 Accounts payable and accrued liabilities ( 872 ) Deferred income taxes ( 3,265 ) Total identifiable net assets $ 15,634 Goodwill 20,264 Total assets acquired and liabilities assumed $ 35,898 The intangible asset is related to Valence’s ML and AI digital chemistry platform. The estimated fair value of the intangible asset was determined using a cost approach. This valuation technique provides the fair value of an asset based on estimates of the total costs to develop the technology. Significant inputs used to determine the total cost includes the length of time required and service hours performed by Company employees. The technology intangible asset is being amortized on a straight-line basis over its four year useful life. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized. The goodwill recognized represents the assembled workforce and expected synergies, including the ability to: (i) leverage Valence’s digital chemistry platform across Recursion’s business; (ii) leverage Valence’s ML and AI capabilities; (iii) integrate Recursion’s data and operating system into Valence’s platform; and (iv) accelerate Recursion’s pipeline. Goodwill was also impacted by the establishment of a deferred tax liability for the acquired identifiable intangible assets which have no tax basis. The goodwill is not deductible for tax purposes. Recursion’s consolidated statement of operations does no t include significant revenue generated from Valence’s operations for the years ended December 31, 2024 and 2023. Operating losses associated with Valence’s operations were $ 12.4 million and $ 6.8 million for the years ended December 31, 2024 and 2023, respectively. The Company has finalized the amounts recognized disclosed in the above tables. Cyclica Inc . On May 25, 2023, Recursion acquired all of the outstanding equity interests in Cyclica Inc. (Cyclica), a privately-held Company that has built a digital chemistry software suite which enables mechanism of action deconvolution and generative chemistry suggestions based on desired targets. Cyclica’s platform is expected to enhance the optimization of Recursion’s compounds for efficacy while minimizing liabilities through generative machine learning approaches. 198 Table of Contents The acquisition of Cyclica was accounted for as a business combination using the acquisition method of accounting. The aggregate upfront consideration for the acquisition of Cyclica consisted of 5.8 million shares of Recursion Class A common stock, cash payments, 1.0 million shares issuable upon exercise of stock options held by Cyclica equity award holders and deferred liabilities for additional consideration. Approximately 167 thousand of the aforementioned shares of Class A common stock consideration had not yet been issued as of December 31, 2024. The following table summarizes total consideration: (in thousands) Fair value of Recursion Class A common stock $ 49,915 Cash 6,505 Fair value of equity awards issued to Cyclica equity award holders 3,852 Deferred liabilities for additional consideration 345 Total consideration $ 60,617 The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: (in thousands) Cash $ 2,429 Restricted cash 1,685 Other receivables 741 Investments 1,000 Other current assets 385 Intangible assets - technology 28,000 Accounts payable and accrued liabilities ( 579 ) Unearned revenue ( 1,754 ) Deferred income taxes ( 2,075 ) Other liabilities, current ( 66 ) Other liabilities, non-current ( 139 ) Total identifiable net assets $ 29,627 Goodwill 30,990 Total assets acquired and liabilities assumed $ 60,617 The intangible assets are related to Cyclica’s digital chemistry platforms. The estimated fair value of the intangible assets was determined using a cost approach. This valuation technique provides the fair value of an asset based on estimates of the total costs to develop the technology. Significant inputs used to determine the total cost includes the length of time required and service hours performed by Company employees. The technology intangible assets are being amortized on a straight-line basis over their three-year useful lives. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized. The goodwill recognized represents the assembled workforce and expected synergies, including the ability to: (i) leverage Cyclica’s digital chemistry platform across Recursion’s business; (ii) leverage Cyclica’s ML and AI capabilities; (iii) integrate Recursion’s data and operating system into Cyclica’s platform; and (iv) accelerate Recursion’s pipeline. Goodwill was also impacted by the establishment of a deferred tax liability for the acquired identifiable intangible assets. The goodwill is not deductible for tax purposes. Recursion’s consolidated statement of operations included $ 0.3 million net revenue and $ 14.7 million operating losses associated with Cyclica’s operations for the year ended December 31, 2024. Recursion’s consolidated statement of operations included immaterial net revenue and $ 9.6 million operating losses for the year ended December 31, 2023. The Company has finalized the amounts recognized disclosed in the above tables. 199 Table of Contents Pro forma financial information The following table presents the unaudited pro forma combined results of operations of Recursion, Valence and Cyclica as if the acquisitions had occurred on January 1, 2022: Years ended December 31, (in thousands) 2023 2022 Net revenue $ 44,861 $ 40,517 Net loss ( 336,603 ) ( 273,889 ) The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of Recursion, Valence and Cyclica. In order to reflect the occurrence of the acquisitions on January 1, 2022 as required, the unaudited pro forma financial information includes adjustments to reflect the incremental amortization expense to be incurred based on the fair values of the identifiable intangible assets acquired and the additional stock compensation expense associated with the issuance of equity compensation related to the acquisitions. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisitions been completed on January 1, 2022. In addition, the unaudited pro forma financial information is not a projection of the future results of operations of the combined company nor does it reflect the expected realization of any cost savings or synergies associated with the acquisitions. Note 5. Leases The Company has entered into various long-term real estate operating leases primarily related to office, research and development, operating activities and an equipment financing lease related to the supercomputer. The Company’s leases have remaining terms from under one year to eight years and some of those leases include options that provide Recursion with the ability to extend the lease term, generally for five years . The options are included in the lease term when it is reasonably certain that the option will be exercised. For the year ended December 31, 2024, Recursion entered into lease modifications resulting in a decrease to the right-of-use asset and lease liability of $ 3.1 million. The modifications had no impact to the Consolidated Statements of Operations. For the year ended December 31, 2023, Recursion entered into lease modifications resulting in a decrease to the right-of-use assets and lease liabilities of $ 3.4 million. The modifications resulted in an insignificant impact to the Consolidated Statements of Operations. Exscientia Acquisition In November 2024, Recursion acquired Exscientia as part of a business combination. As part of that transaction Recursion obtained several new leases as discussed below. Each lease was recognized and measured at fair value on the acquisition date as if the acquired leases were new leases by applying ASC 842 - Leases. See Note 4, “Acquisitions” for additional information on the acquisition. The Company has an operating lease agreement for lab space at Milton Park in Oxfordshire, England with approximately 20,151 square feet (the “Milton Park Lease”). The right of use began in November 2024, when control of the asset was obtained. The Milton Park Lease remaining term is seven years with a five year renewal option. Total fixed payments are expected to be approximately $ 3.8 million with additional variable expenses including building service charges. The Company has an operating lease agreement for lab and office space at The Schrödinger Building in Oxford, England with approximately 36,632 square feet (the “Schrödinger Building Lease”). The right of use began in November 2024, when control of the asset was obtained. The Schrödinger Building lease was separated into multiple leases. For some of those components the remaining term is three years . For the other components, the remaining term is four years . Total fixed payments are expected to be approximately $ 6.3 million with additional variable expenses including building service charges. 200 Table of Contents The Company has an operating lease agreement for lab and office space in Vienna, Austria with approximately 54,992 square feet (the “Vienna Lease”). The right of use began in November 2024, when control of the asset was obtained. The Vienna lease remaining term is five years . Total fixed payments are expected to be approximately $ 6.3 million with additional variable expenses including building service charges. The Company has an operating lease agreement for office space in Dundee, Scotland with approximately 8,876 square feet (the “Dundee Lease”). The right of use began in November 2024, when control of the asset was obtained. The Dundee lease remaining term is two years . Total fixed payments are expected to be approximately $ 0.3 million with additional variable expenses including building service charges. The Company has an operating lease agreement for office space in Boston, Massachusetts with approximately 9,662 square feet (the “Boston Lease”). The right of use began in November 2024, when control of the asset was obtained. The Boston lease remaining term is five years with a five year renewal option. Total fixed payments are expected to be approximately $ 4.0 million with additional variable expenses including building service charges. The Company has an operating lease agreement for office space in Miami, Florida with approximately 7,680 square feet (the “Strata Miami Lease”). The right of use began in November 2024, when control of the asset was obtained. The Strata Miami lease remaining term is seven years with two five year renewal options. Total fixed payments are expected to be approximately $ 3.6 million with additional variable expenses including building service charges. The Company has an operating lease agreement for office space in Miami, Florida with approximately 2,707 square feet (the “Biscayne Miami Lease”). The right of use began in November 2024, when control of the asset was obtained. The Biscayne Miami lease remaining term is four years with two five year renewal options. Total fixed payments are expected to be approximately $ 0.7 million with additional variable expenses including building service charges. New Leases In September 2024 , the Company entered into an operating lease agreement for office space in New York, New York with approximately 11,655 square feet (the “New York Lease”). The right of use began in September 2024, when control of the asset was obtained. The New York Lease term is four years with a potential for a three or six year renewal option. Total fixed payments are expected to be approximately $ 6.9 million with additional variable expenses, including building expenses. In May 2024, the Company entered into a financing lease agreement for the supercomputer equipment (the “Supercomputer Lease”). The right of use began in May 2024, when control of the asset was obtained and the lease term is three years with two additional renewal options for a one or two year period. Total fixed payments are expected to be approximately $ 34.0 million. In February 2024, the Company entered into an operating lease agreement related to the supercomputer for the exclusive use of physical space in a data center of approximately 1,851 square feet ( the “Data Center Lease”). The right of use began in April 2024 and the lease term is five years with a five year renewal option. The lease includes provisions for escalating rent payments. Total fixed lease payments are expected to be approximately $ 13.0 million with additional variable expenses, including utilities and tax expenses. In January 2024, the Company entered into an operating lease agreement for office space in London, England with approximately 6,792 square feet (the “London Lease”). The right of use began in January 2024, when control of the asset was obtained. The London Lease term is five years with a five year renewal option. The London Lease includes provisions for escalating rent payments. Total fixed payments are expected to be approximately $ 7.9 million, additionally there will be variable expenses including building service charges related to the lease. 201 Table of Contents The components of the lease cost were as follows: Years ended December 31, (in thousands) 2024 2023 2022 Operating lease cost $ 12,078 $ 8,144 $ 7,793 Finance lease cost: Amortization of leased assets 4,042 — — Interest on lease liabilities 1,487 — — Variable lease cost 3,330 2,116 1,070 Short-term lease cost 208 139 — Total lease cost $ 21,145 $ 10,399 $ 8,863 Supplemental balance sheet information related to leases were: (in thousands) December 31, 2024 December 31, 2023 Assets Operating lease right-of-use assets $ 65,877 $ 33,663 Financing lease right-of-use assets 26,273 — Total lease right-of-use assets $ 92,150 $ 33,663 Liabilities Current liabilities Financing lease liabilities $ 8,311 $ — Operating lease liabilities 13,795 6,116 Total current lease liabilities 22,106 6,116 Non-current liabilities Financing lease liabilities, non-current 18,338 — Operating lease liabilities, non-current 67,250 43,414 Total non-current lease liabilities 85,588 43,414 Total lease liabilities $ 107,694 $ 49,530 Supplemental cash flow information related to leases were: Years ended December 31, (in thousands) 2024 2023 2022 Cash paid for amount included in the measurement of lease liabilities: Operating cash flows from operating leases $ 14,095 $ 9,862 $ 7,110 Operating cash flows from financing leases 1,487 — — Financing cash flows from financing leases 3,666 — — Right-of-use assets additions and modifications: Operating leases $ 19,455 $ 4,968 $ 3,950 Financing leases 30,315 — — 202 Table of Contents Lease term and discount rates were: Years ended December 31, (in thousands) 2024 2023 Operating leases Weighted-average remaining lease term (years) 5.3 6.7 Weighted-average discount rate 7.7 % 7.8 % Finance leases Weighted-average remaining lease term (years) 2.6 0.0 Weighted-average discount rate 7.6 % — % Maturities of operating lease liabilities as of December 31, 2024 were: (in thousands) Operating leases Finance leases 2025 $ 19,389 $ 10,055 2026 20,450 10,055 2027 20,810 9,707 2028 16,790 — 2029 9,254 — Thereafter 14,501 — Total lease payments 101,194 29,817 Less: imputed interest ( 20,149 ) ( 3,168 ) Present value of lease liabilities $ 81,045 $ 26,649 Note 6. Goodwill and Intangible Assets Goodwill The following table summarizes the changes in the carrying amount of goodwill: (in thousands) Balance as of December 31, 2022 $ 801 Additions from acquisitions 51,255 Balance as of December 31, 2023 52,056 Additions from acquisitions 97,735 Foreign currency translation adjustments ( 918 ) Balance as of December 31, 2024 $ 148,873 The addition to goodwill relates to the acquisition of Exscientia during the year ended December 31, 2024. The additions to goodwill relate to the acquisitions of Cyclica and Valence during the year ended December 31, 2023. See Note 4, “Acquisitions” for additional details. No goodwill impairment was recorded during the years ended December 31, 2024, 2023 and 2022. 203 Table of Contents Intangible Assets, Net The following table summarizes intangible assets: December 31, 2024 December 31, 2023 (in thousands) Gross carrying amount Accumulated Amortization Net carrying amount Gross carrying amount Accumulated Amortization Net carrying amount Definite-lived technology intangible assets $ 224,362 $ ( 24,544 ) $ 199,818 $ 44,076 $ ( 8,882 ) $ 35,194 Definite-lived licensed intangible assets 9,350 ( 2,088 ) 7,262 350 ( 87 ) 263 Indefinite-lived intangible assets 128,775 — 128,775 986 — 986 Total intangible assets $ 362,487 $ ( 26,632 ) $ 335,855 $ 45,412 $ ( 8,969 ) $ 36,443 The definite-lived intangible assets balance primarily increased during the year ended December 31, 2024 due to the Company’s acquisition. See Note 4, “Acquisitions” for additional details on the intangible assets acquired. For the year ended December 31, 2024, the Company entered into a three year licensing agreement with Helix for access to their patient data and use rights for therapeutics development purposes. This data will be used to improve the training of Recursion’s artificial intelligence and machine learning models and is expected to accelerate Recursion’s drug discovery process. Recursion is making annual payments of $ 3.0 million for a total of $ 9.0 million, which was recorded in “Intangible Assets, net” on the Consolidated Balance Sheet and included as a licensed intangible asset in the above table. Recursion made the first payment during the year ended December 31, 2024 and recorded the two remaining $ 3.0 million payments in “Accrued expenses and other liabilities” and “Other liabilities, non-current” on the Consolidated Balance Sheet, respectively. The licensed intangible asset is being amortized on a straight-line basis over its three year useful life. Amortization expense was $ 18.8 million, $ 8.5 million and $ 379 thousand during the years ended December 31, 2024, 2023 and 2022, respectively. Amortization expense was primarily included in “Research and Development” in the Consolidated Statements of Operations. Amortization expense for the definite-lived intangible assets will be recognized over approximately the next five years . The estimated annual amortization expense for the definite-lived intangible assets recorded as of December 31, 2024 is as follows: (in thousands) 2025 2026 2027 2028 2029 Estimated annual amortization expense $ 46,712 $ 41,005 $ 32,616 $ 30,340 $ 30,333 The indefinite-lived intangible assets primarily represent in-process research and development (IPR&D) intangible projects acquired in business combinations. See Note 4, “Acquisitions” for additional details on the intangible assets acquired. No indefinite-lived intangible asset impairment charges were recorded during the years ended December 31, 2024, 2023 and 2022. Note 7. Commitments and Contingencies Indemnification The Company has agreed to indemnify its officers and directors for certain events or occurrences, while the officer or director is or was serving at the Company’s request in such capacity. The Company purchases directors and officers liability insurance coverage that provides for reimbursement to the Company for covered obligations and this is intended to limit the Company’s exposure and enable it to recover a portion of any amounts it pays under its indemnification obligations. The Company had no liabilities recorded for these agreements as of December 31, 2024 and December 31, 2023, as no amounts were probable. 204 Table of Contents Employee Agreements The Company has signed employment agreements with certain key employees pursuant to which, if their employment is terminated following a change of control of the Company, the employees are entitled to receive certain benefits, including accelerated vesting of equity incentives. Legal Matters The Company may, from time to time, be involved in various legal proceedings arising in the normal course of business. An unfavorable resolution of any such matter could materially affect the Company’s future financial position, results of operations or cash flows. In April 2024, a putative class action complaint was filed in the U.S. District Court for the District of New Jersey against Exscientia plc, Andrew Hopkins, Ben R. Taylor and David Nicholson ( Campanile v. Exscientia plc, Case No. 1:24-cv-05692). In June 2024, a separate complaint was filed against the same defendants in the U.S. District Court for the District of New Jersey (Case 1:24-cv-07181). Both complaints allege that the defendants violated federal securities laws by, among other things, making materially false and misleading statements regarding Exscientia’s business, operations, and prospects. The complaints seek unspecified compensatory damages, as well as an award of reasonable attorneys’ fees and other costs, on behalf of persons and/or entities which purchased Exscientia securities between March 2022 and February 2024. The cases were consolidated and plaintiffs filed an amended complaint on November 11, 2024 against Exscientia plc, Andrew Hopkins, and David Nicholson, and the Company moved to dismiss on January 21, 2025. That motion remains pending. As of December 31, 2024 , the Company had no liability recorded for these events as an unfavorable outcome was not probable. In February 2021, the Company entered into a lease agreement for laboratory and office space (the Industry Lease) with Industry Office SLC, LLC (the landlord). In March 2023, the Company sent a letter to the landlord detailing numerous construction delays and irregularities, deficiencies and deviations from applicable structural drawings and/or non-conforming conditions with applicable building codes. On June 23, 2023, the landlord filed a lawsuit against the Company ( Industry Office SLC, LLC v. Recursion Pharmaceuticals, Inc. , Case No. 230904627), amended in October 2023, in the Third District Court for Salt Lake County, State of Utah (the Court), alleging anticipatory repudiation, breach of contract, and breach of the implied covenant of good faith and fair dealing, and seeks monetary damages and attorney’s fees. As of December 31, 2024 , the Company had no liability recorded for these events as an unfavorable outcome was not probable. In connection with the Industry Lease, in September 2023, the Company filed claims in the Court against the landlord alleging, among other things, breach of contract and fraudulent misrepresentation (the Counterclaims). In October 2023, the landlord filed an answer and denied the Company’s allegations asserted in the Counterclaims. The Company and the landlord are currently engaged in discovery. The Company is unable to estimate the possible amount or range of amounts associated with the Counterclaims. Pledged Assets As of December 31, 2024 , assets pledged as collateral against finance leases totaled $ 24.1 million. Assets pledged as collateral are Lab Equipment reported in “Property and Equipment, net” on the Consolidated Balance Sheet. As of December 31, 2024 , the liabilities associated with collateral pledged were solely comprised of a finance lease and had a carrying value of $ 26.6 million. The collateral pledged under the lease agreement may only be operated by the Company within the continental United States and must maintain a good title. The assets cannot be sold, disposed of or repledged by the Company. Note 8. Common Stock Each share of Class A common stock entitles the holder to one vote per share and each share of Class B common stock entitles the holder to 10 votes per share on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s Board of Directors. As of December 31, 2024 and December 31, 2023, no dividends had been declared. 205 Table of Contents Public Offering of Common Stock In June 2024, the Company closed its public offering of Class A common stock and issued 35.4 million shares at a price of $ 6.50 per share for net proceeds of approximately $ 216.4 million, after deducting transaction costs of $ 13.6 million. In connection with the public offering of Class A common stock, the Company entered into an underwriting agreement for the offering and sale of 30.8 million shares. The Company also granted the Underwriters a 30 day option from the date of the underwriting agreement to purchase up to an additional 4.6 million shares of Class A Common Stock, which was exercised in full. The public offering was made pursuant to the Company's effective registration statement on Form S-3 (File No. 333-264845) and a related prospectus supplement and accompanying prospectus dated June 26, 2024. At-The-Market Offering In August 2023 , the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC (the “Sales Agent”), to provide for the offering, issuance and sale of up to an aggregate amount of $ 300.0 million of its Class A common stock from time to time in “at-the-market (ATM)” offerings. As of December 31, 2024, an amount of $ 132.8 million remained available for future sales under the Sales Agreement. For the year ended December 31, 2024, the Company has sold 9.9 million shares and received net proceeds of $ 84.0 million under the agreement. Recursion is not required to sell additional shares under the Sales Agreement. The Company pays the Sales Agent a commission of up to 3 % of the aggregate gross proceeds received from all sales of Class A common stock. The Sales Agreement continues until the earlier of selling all shares available under the Sales Agreement or terminated by written notice from either of the parties. The ATM Offering is being made under a prospectus supplement dated August 8, 2023, and related prospectus filed with the Securities and Exchange Commission pursuant to the Company’s automatically effective shelf registration statement on Form S-3ASR (Registration No. 333-264845). NVIDIA Private Placement In July 2023, Recursion entered into a Stock Purchase Agreement for a private placement with NVIDIA Corporation (2023 Private Placement), pursuant to which the Company sold an aggregate of 7.7 million shares of the Company’s Class A common stock at a price of $ 6.49 per share for net proceeds of approximately $ 49.9 million . Valence Acquisition Exchangeable Shares In May 2023, in connection with the acquisition of Valence, the Company entered into an agreement to issue up to 5.9 million shares of Class A common stock (the “Exchangeable Shares”), that may be issued upon exchange, retraction or redemption of exchangeable shares of a subsidiary of Recursion. Each exchangeable share of the subsidiary of Recursion entitles the holder to exchange those shares on a one -for-one basis for Recursion’s Class A common stock. The shares are entitled to receive dividends economically equivalent to dividends declared by Recursion, are non-voting and are subject to customary adjustments for stock splits or other reorganizations. In addition, the Company may require all outstanding exchangeable shares to be exchanged into an equal number of Class A common stock upon the occurrence of certain events and at any time following the seventh anniversary of the closing of the Valence acquisition. The exchangeable shares are substantially the economic equivalent of the Class A shares and classified as common stock within the Company’s stockholders’ equity. The Company’s calculation of weighted-average shares outstanding includes the exchangeable shares. As of December 31, 2024, 4.9 million Exchangeable shares have been redeemed for Class A shares. 2022 Private Placement In October 2022, Recursion issued 15.3 million shares of the Company’s Class A common stock at a purchase price of $ 9.80 per share in a private placement (the 2022 Private Placement) to qualified institutional buyers and institutional accredited investors (the Purchasers) for net proceeds of $ 143.7 million, after deducting fees and offering costs of $ 6.6 million. 206 Table of Contents Registration Rights Agreements Tempus agreement In November 2023, in connection with the Tempus Agreement, the Company agreed to prepare and file a registration statement (or a prospectus supplement to an effective registration statement on Form S-3ASR that will become automatically effective upon filing with the SEC pursuant to Rule 462(e)) with the SEC, for resale of the shares of Class A common stock issued or issuable under the Tempus Agreement. A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed in December 2023 to register shares issued to Tempus for the initial license fee under the Tempus Agreement for resale. In December 2024 , a prospectus supplement to a registration statement (File No. 333-264845) was filed to register shares issued to Tempus in payment for the 2024 annual fee. After registration of any shares issued to Tempus under the Tempus Agreement, the Company has agreed to use commercially reasonable efforts to keep such registration statement effective until such date that all shares issued to Tempus covered by such registration statement have been sold or are able to be publicly sold by relying on Rule 144 of the Securities Act without registration. NVIDIA Private Placement In July 2023 , in connection with the 2023 Private Placement with NVIDIA, the Company entered into a Registration Rights Agreement providing for the registration for resale of the shares of Class A common stock issued in such transaction. A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed in August 2023 to register the resale of the shares of Class A common stock issued to NVIDIA. The Company has agreed to use commercially reasonable efforts to keep the registration statement continuously effective until such date that all registrable securities under the agreement have been sold. In the event the holders cannot sell their shares due to certain circumstances causing the registration statement to be ineffective, the Company must pay each holder of shares outstanding on the date and each month thereafter 1 % of the aggregate purchase price with the maximum payable amount of 5 % of the aggregate purchase price. As of December 31, 2024, there was no accrued liability related to this agreement, as it was not probable that a payment would be required. Acquisitions In November 2024, in connection with the acquisition of Exscientia, the Company entered into a Registration Agreement providing for the registration for resale of the shares of Class A common stock issued for Recursion stock options and RSUs under the assumed Exscientia plans and the Inducement awards. A registration statement on Form S-8 (File No. 333-283347) was filed to register the shares for resale by the holders. The registration statement must remain effective as long as such Recursion stock options and RSUs remain outstanding. In May 2023 , in connection with the acquisition of Valence, the Company entered into a Registration Agreement providing for the registration for resale of the shares of Class A common stock and Exchange Shares issued or issuable in such transaction. A registration statement on Form S-3ASR (File No. 333-272281) was filed to register the shares for resale by the holders. The registration statement must remain effective for a period of not less than three years . In May 2023 , in connection with the acquisition of Cyclica, the Company entered into a Registration Agreement providing for the registration for resale of the shares of Class A common stock issued in such transaction. A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed in June 2023 to register the shares for resale by the holders. The registration statement must be continuously effective until the earlier of the date that all shares have been sold thereunder or are able to be publicly sold by relying on Rule 144 of the Securities Act without registration. 2022 Private Placement In October 2022, i n connection with the 2022 Private Placement, the Company entered into a Registration Rights Agreement providing for the registration for resale of the shares of Class A common stock issued in such transaction. A prospectus supplement to a registration statement (File No. 333-264845) was subsequently filed in October 2022 to register the resale of the shares of Class A common stock by the Purchasers. The agreement must remain effective until registrable securities covered by the agreement have been publicly sold by the holders or all shares cease to be registrable securities. In the event the holders cannot sell their shares due to certain circumstances causing the agreement to be ineffective, the Company must pay each holder of shares outstanding on the date and each month thereafter 1 % of the aggregate purchase price paid by the holder without limit until the 207 Table of Contents agreement is cured. As of December 31, 2024, there was no accrued liability related to this agreement, as it was not probable that a payment would be required. Class A and B Common Shares Authorization In April 2021 , the Company’s Board of Directors authorized two classes of common stock, Class A and Class B. The rights of the holders of Class A and B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share and is convertible at any time into one share of Class A common stock. All Class B common stock is held by Christopher Gibson, Ph.D., the Company’s Chief Executive Officer (CEO), or his affiliates. As of December 31, 2024, Dr. Gibson and his affiliates held outstanding shares of Class B common stock representing approximately 15 % of the voting power of the Company’s outstanding shares. This voting power may increase over time as Dr. Gibson vests in and exercises equity awards outstanding. If all the exchangeable equity awards held by Dr. Gibson had been fully vested, exercised and exchanged for shares of Class B common stock as of December 31, 2024, Dr. Gibson and his affiliates would hold approximately 16 % of the voting power of the Company’s outstanding shares. As a result, Dr. Gibson will be able to significantly influence any action requiring the approval of Recursion stockholders, including the election of the Board of Directors; the adoption of amendments to the Company’s certificate of incorporation and bylaws; and the approval of any merger, consolidation, sale of all or substantially all of the Company’s assets, or other major corporate transaction. Note 9. Collaborative Development Contracts Sanofi Description In January 2022, the Company and Sanofi entered into a collaboration agreement to develop an AI-driven pipeline of precision-engineered medicines. The research is focused on up to 15 novel small molecule candidates across oncology and immunology and utilizes the Company’s AI platform. The Company is leading small molecule drug design and lead optimization activities with Sanofi assuming responsibility for preclinical and clinical development, manufacturing and commercialization. Pricing The Company received a $ 100.0 million non-refundable upfront payment. The Company has also received multiple milestone payments related to this agreement of approximately $ 23.0 million. These related to the advancement of several of the discovery programs within the collaboration and the addition of an existing Company program into the collaboration. Recursion is eligible for additional milestone payments based on performance progress of the collaboration and tiered royalties ranging from high-single-digits to mid-teens. Recursion could earn a maximum of $ 555.0 million from all research milestones and $ 1.8 billion from all development and regulatory milestones. Accounting In November 2024, Recursion acquired Exscientia as part of an acquisition. See Note 4, “Acquisitions” for additional information. As such, the initial Recursion accounting analysis for this transaction was done as of the business combination date as if Recursion had originated the contract. This agreement represents a transaction with a customer and therefore is accounted for in accordance with ASC 606. Recursion has determined that it has at least eight performance obligations related to the small molecule projects. These performance obligations are for performing research and development services for Sanofi to design small molecules and perform lead optimization activities. The performance obligations also include potential licenses related to the intellectual property. The Company concluded that licenses within the contract are not distinct from the research and development services as they are interrelated due to the fact that the research and development services significantly impact the potential licenses. Any additional services are considered customer options and will be considered as separate contracts for accounting purposes. The Company has determined the transaction price to be $ 137.0 million, for the initial performance obligations, comprised of the upfront payment, several milestones that have been achieved and estimated additional target exercises. Recursion will fully constrain the amounts of remaining variable consideration to be received from potential milestones considering the stage of development and the risks associated with the remaining development required to achieve each milestone. Recursion will re-evaluate the transaction price each reporting period. 208 Table of Contents The transaction price was generally allocated to the performance obligations based on the estimated relative stand-alone selling price of each performance obligation as determined using an expected cost plus margin approach. The milestone fees were allocated to related performance obligation as the terms of the variable consideration related specifically to Recursion’s efforts to satisfy the related performance obligation. The Company recognizes revenue over time based on costs incurred relative to total expected costs to perform the research and development services. Recursion determined that this method provides a faithful depiction of the transfer of control to the customer. This method of recognizing revenue requires the Company to make estimates of total costs to provide the services required under the performance obligations. Significant inputs used to determine the total costs included the number of projects to be performed, the number of substitutions related to those projects, length of time required, service hours performed by Company employees and materials costs. A significant change in these estimates could have a material effect on the timing and amount of revenue recognized in future periods. Recursion is unable to estimate the completion date of the performance obligations due to the current stage of work. Merck KGaA (Merck) Description In September 2023, the Company and Merck entered into a collaboration agreement to discover novel small molecule drug candidates across oncology, neuroinflammation and immunology. The collaboration utilizes the Company’s AI platform and the Company is performing drug design and discovery while Merck will be assuming responsibility for the preclinical and clinical development. Pricing The Company received a $ 20.1 million non-refundable upfront payment. Recursion is eligible for additional milestone payments based on performance progress of the collaboration and tiered royalties from the mid-single-digits to low-double-digits. The Company could earn a maximum of $ 73.0 million for discovery, development and sales milestones per product. Accounting In November 2024, Recursion acquired Exscientia as part of an acquisition. See Note 4, “Acquisitions” for additional information. As such, the initial Recursion accounting analysis for this transaction was done as of the business combination date as if Recursion had originated the contract. This agreement represents a transaction with a customer and therefore is accounted for in accordance with ASC 606. Recursion has determined that it has three performance obligations related to each project in the partnership. These performance obligations are for performing research and development services for Merck to design small molecules and perform lead optimization activities. The performance obligations also include potential licenses related to the intellectual property. The Company concluded that licenses within the contract are not distinct from the research and development services as they are interrelated due to the fact that the research and development services significantly impact the potential licenses. Any additional services are considered customer options and will be considered as separate contracts for accounting purposes. The Company has determined the transaction price to be $ 20.1 million, for the initial performance obligations, comprised of the upfront payment. Recursion will fully constrain the amounts of remaining variable consideration to be received from potential milestones considering the stage of development and the risks associated with the remaining development required to achieve each milestone. Recursion will re-evaluate the transaction price each reporting period. The transaction price was allocated to the performance obligations based on the estimated relative stand-alone selling price of each performance obligation as determined using an expected cost plus margin approach. The Company recognizes revenue over time based on costs incurred relative to total expected costs to perform the research and development services. Recursion determined that this method provides a faithful depiction of the transfer of control to the customer. This method of recognizing revenue requires the Company to make estimates of total costs to provide the services required under the performance obligations. Significant inputs used to determine the total costs included the number of projects to be performed, the number of substitutions related to those projects, length of time required, service hours performed by Company employees and materials costs. A significant change in these estimates could have a material effect on the timing and amount of revenue recognized in future periods. Recursion was unable to estimate the completion date of the performance obligations due to the current stage of work. 209 Table of Contents Roche and Genentech Description In December 2021, Recursion entered into a collaboration and license agreement with Roche and Genentech (collectively referred to as Roche). Recursion is constructing, using the Company’s imaging technology and proprietary machine-learning algorithms, unique maps of the inferred relationships amongst perturbation phenotypes in a given cellular context with the goal to discover and develop therapeutic small molecule programs in a gastrointestinal cancer indication and in key areas of neuroscience. Roche and Recursion will collaborate to select certain novel inferences with respect to small molecules or targets generated from the Phenomaps for further validation and optimization as collaboration programs. Roche and Recursion may also combine sequencing datasets from Roche with Recursion’s Phenomaps and collaborate to generate new algorithms to produce multi-modal maps from which additional collaboration programs may be initiated. For every collaboration program that successfully identifies potential therapeutic small molecules or validates a target, Roche will have an option to obtain an exclusive license to develop and commercialize such potential therapeutic small molecules or to exploit such target in the applicable exclusive field. Pricing In January 2022, Recursion received a $ 150.0 million non-refundable upfront payment from the Company’s collaboration with Roche. In September 2024, Recursion received a $ 30.0 million milestone payment (the “acceptance fee”), which was an acceptance fee related to the first accepted neuroscience Phenomap. Recursion is eligible for additional milestone payments based on performance progress of the collaboration. Each of the Phenomaps requested by Roche and created by Recursion may be subject to either an initiation fee, acceptance fee or both. Such fees could exceed $ 250.0 million for 16 accepted Phenomaps. In addition, for a period of time after Roche’s acceptance of certain Phenomaps, Roche will have the option to obtain, subject to payment of an exercise fee, rights to use outside the collaboration the raw images generated in the course of creating those Phenomaps. If Roche exercises its external use option for all 12 eligible Phenomaps, Roche’s associated exercise fee payments to Recursion could exceed $ 250.0 million. Under the collaboration, Roche may initiate up to 40 programs, each of which, if successfully developed and commercialized, could yield more than $ 300.0 million in development, commercialization and net revenue milestones for Recursion, as well as tiered royalties on net revenue. Accounting This agreement represents a transaction with a customer and therefore is accounted for in accordance with ASC 606. Recursion has determined that it has three performance obligations, one related to gastrointestinal cancer and two in neuroscience. These performance obligations are for performing research and development services for Roche to identify targets and medicines. The performance obligations also include potential licenses related to the intellectual property. The Company concluded that licenses within the contract are not distinct from the research and development services as they are interrelated due to the fact that the research and development services significantly impact the potential licenses. Any additional services are considered customer options and will be considered as separate contracts for accounting purposes. The Company has determined the transaction price to be $ 180.0 million, comprised of the upfront payment and the acceptance fee. Prior to the three months ended September 30, 2024, Recursion had fully constrained the $ 30.0 million variable consideration acceptance fee. As a result of Roche’s acceptance of the neuroscience Phenomap, Recursion is now recognizing the acceptance fee as part of the transaction price over the completion period of one of the neuroscience performance obligations. Recursion has fully constrained the remaining amounts of variable consideration to be received from potential milestones considering the stage of development and the risks associated with the remaining development required to achieve each milestone. Recursion will re-evaluate the transaction price each reporting period. The transaction price was generally allocated to the performance obligations based on the estimated relative stand-alone selling price of each performance obligation as determined using an expected cost plus margin approach. The acceptance fee was allocated to one of the neuroscience performance obligations as the terms of the variable consideration related specifically to Recursion’s efforts to satisfy this performance obligation. The Company recognizes revenue over time based on costs incurred relative to total expected costs to perform the research and development services. Recursion determined that this method provides a faithful depiction of the transfer of control to the customer. This method of recognizing revenue requires the Company to make estimates of total costs to 210 Table of Contents provide the services required under the performance obligations. Significant inputs used to determine the total costs included the length of time required, service hours performed by Company employees and materials costs. A significant change in these estimates could have a material effect on the timing and amount of revenue recognized in future periods. Recursion has estimated the completion of the performance obligations by 2026. Bayer AG Description In August 2020, the Company entered into a Research Collaboration and Option Agreement (the Bayer Agreement) with Bayer AG (Bayer) pursuant to which the Company and Bayer initiated research projects related to fibrosis across multiple organ systems, including the lung, liver and heart. Under the agreement, the Company contributed compounds from its proprietary library and Bayer contributed compounds from its proprietary library and contributed scientific expertise throughout the collaboration. The Company worked with Bayer to identify potential candidates for development. Under the agreement, Bayer had the first option for licenses to potential candidates. Pricing In October 2020, the Company received a $ 30.0 million non-refundable upfront payment. Each such license potentially could have resulted in option exercise fees and development and commercial milestone payments payable to the Company, with an aggregate value of up to approximately $ 100.0 million (for an option on a lead series) or up to approximately $ 120.0 million (for an option on a development candidate), as well as tiered royalties for each such license, ranging from low- to mid-single digit percentages of sales, depending on commercial success. Accounting The Company determined that it had one performance obligation under the agreement, which was to perform research and development services for Bayer. Recursion determined the transaction price to be $ 30.0 million, comprised of the upfront payment. The Company allocated the amount to the single performance obligation. The Company recognized revenue over time by measuring progress towards completion of the performance obligation. This method of recognizing revenue required the Company to make estimates of the total time to provide the services required under the performance obligation. Recursion completed its performance obligation services in 2023. Additional Revenue Disclosures Revenue from one customer exceeded 10% of total revenue, and that one customer represented primarily all of Recursion’s operating revenue during the year ended December 31, 2024. For the years ended December 31, 2023 and 2022, revenue from two customers exceeded 10% of total revenues and those two customers represented primarily all of Recursion’s operating revenue. Of the revenue recognized during the year ended December 31, 2024, $ 32.5 million was included in the unearned revenue balance as of December 31, 2023, and was related to the upfront payments received by the Company for the Roche agreement. Of the revenue recognized during the year ended December 31, 2023, primarily all of it was included in the unearned revenue balance as of December 31, 2022. Revenue recognized during the year ended December 31, 2024 was primarily from the upfront payments and acceptance fee received for the Roche agreement. The recognition of a portion of the upfront payment and acceptance fee decreased the unearned revenue recognized. As of December 31, 2024, the Company had $ 7.9 million of costs incurred to fulfill a contract on its Consolidated Balance Sheet within “Other Current Assets.” Unearned revenue was classified as short-term and long-term on the Consolidated Balance Sheets based on the Company’s estimate of revenue that will be recognized during the next twelve months. Note 10. Stock-Based Compensation In April 2021, the Board of Directors and the stockholders of the Company adopted the 2021 Equity Incentive Plan (the 2021 Plan). The Company may grant stock options, restricted stock units (RSUs), stock appreciation rights, restricted stock awards and other forms of stock-based compensation. As of December 31, 2024, 8.9 million shares of Class A common stock were available for grant in the 2021 plan. In 2024, the Board of Directors and the 211 Table of Contents stockholders of the Company adopted the 2024 Inducement Equity Incentive Plan (the 2024 Plan) as part of the Exscientia acquisition. See Note 4, “Acquisitions” for additional information. As of December 31, 2024, 9.5 million shares of Class A common stock were available for grant in the 2024 plan. The following table presents the classification of stock-based compensation expense for employees and non-employees within the Consolidated Statements of Operations: Years ended December 31, (in thousands) 2024 2023 2022 Cost of revenue $ 3,636 $ 5,326 $ 2,755 Research and development 36,184 21,992 10,065 General and administrative 39,681 24,361 14,052 Total $ 79,501 $ 51,679 $ 26,872 As part of the Exscientia acquisition, Recursion issued replacement grants for the Exscientia legacy awards. Recursion recorded $ 8.5 million of additional one-time stock compensation expense during the year ended December 31, 2024. See Note 4, “Acquisitions” for additional information on the Exscientia acquisition. Stock Options Stock options are primarily granted to executive leaders at the Company, generally vest over four years and expire no later than 10 years from the date of grant. Stock option activity during the year ended December 31, 2024 was as follows: (in thousands except share and per share amounts) Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding as of December 31, 2023 14,957,617 $ 6.13 7.0 $ 72,416 Granted 11,996,483 3.91 Cancelled ( 1,129,239 ) 11.05 Exercised ( 3,883,366 ) 2.30 25,194 Outstanding as of December 31, 2024 21,941,495 $ 5.40 7.9 $ 62,685 Exercisable as of December 31, 2024 12,016,358 $ 4.97 6.8 $ 44,298 As part of the Exscientia acquisition, Recursion granted 5.8 million stock option awards related to the Exscientia legacy awards. The fair value of options granted to employees is calculated on the grant date using the Black-Scholes option valuation model. The weighted-average grant-date fair values of stock options granted during the years ended December 31, 2024, 2023 and 2022 were $ 5.64 , $ 5.64 and $ 6.57 , respectively. The following weighted-average assumptions were used to calculate the grant-date fair value of stock options: Years ended December 31, 2024 2023 2022 Expected term (in years) 4.0 5.8 6.2 Expected volatility 65 % 66 % 63 % Expected dividend yield — — — Risk-free interest rate 4.3 % 3.6 % 1.9 % As of December 31, 2024, $ 59.2 million of unrecognized compensation cost related to stock options is expected to be recognized as expense over approximately the next two years . 212 Table of Contents RSUs Equity awards granted to employees primarily consist of RSUs and generally vest over four years . The weighted-average grant-date fair value of RSUs generally is determined based on the number of units granted and the quoted price of Recursion’s common stock on the date of grant. The following table summarizes Recursion’s RSU activity during the year ended December 31, 2024: Stock units Weighted-average grant date fair value Outstanding as of December 31, 2023 15,223,764 $ 8.39 Granted 21,392,796 7.18 Vested ( 6,262,525 ) 8.31 Forfeited ( 3,049,806 ) 8.30 Outstanding as of December 31, 2024 27,304,229 $ 7.47 As part of the Exscientia acquisition, Recursion granted 1.6 million RSU awards related to the Exscientia legacy awards. Additionally, Recursion granted 8.0 million RSU awards as part of a retention program for Exscientia employees. The fair market value of RSUs vested was $ 52.2 million during the year ended December 31, 2024. As of December 31, 2024, $ 196.1 million of unrecognized compensation cost related to RSUs is expected to be recognized as expense over approximately the next three years . Note 11. Employee benefit plans The Company maintains defined contribution benefit plans for its eligible employees. The plans generally allows employees to make contributions up to a specified percentage of their compensation. The Company generally contributes up to 4 % of employee base salary, by matching 100 % of the first 4 % of annual base salary contributed by each employee. Additionally, the Company generally contributes a certain amount to the defined contribution plans for employees that worked at the Company during the year. Employer expenses were $ 5.3 million, $ 3.8 million and $ 3.6 million during the years ended December 31, 2024, 2023 and 2022, respectively. 213 Table of Contents Note 12. Income Taxes The provision for income taxes consisted of the following components : Years ended December 31, (in thousands) 2024 2023 2022 Current Federal $ 24 $ — $ — State 6 — — Foreign 474 — — Total Current Tax Expense (Benefit) $ 504 $ — $ — Deferred Federal $ ( 80,109 ) $ ( 82,707 ) $ ( 61,225 ) State ( 11,918 ) ( 54,634 ) ( 3,188 ) Foreign ( 9,921 ) ( 4,564 ) ( 471 ) Change in valuation allowance 100,318 137,843 64,884 Total Deferred Expense (Benefit) $ ( 1,630 ) $ ( 4,062 ) $ — Total Income tax expense $ ( 1,127 ) $ ( 4,062 ) $ — The Company’s effective tax rate of 0.2 % during the year ended December 31, 2024, 1.2 % during the year ended December 31, 2023 and 0 % during the year ended December 31, 2022 differs from the statutory U.S. federal rate as follows: Years ended December 31, 2024 2023 2022 Statutory tax rate 21.0 % 21.0 % 21.0 % R&D credit generation 1.5 % 3.1 % 3.7 % Orphan drug credit generation 1.5 % 2.1 % 1.1 % State taxes 4.6 % 16.4 % — % Stock based compensation — % ( 0.1 ) % 0.8 % Uncertain tax positions ( 0.3 ) % ( 0.8 ) % ( 0.3 ) % Other ( 2.1 ) % 1.0 % ( 0.8 ) % Change in valuation allowance ( 21.6 ) % ( 41.5 ) % ( 25.5 ) % State impact of rate change ( 4.4 ) % — % — % Effective tax rate 0.2 % 1.2 % — % 214 Table of Contents Significant components of deferred tax assets and liabilities were as follows: December 31, (in thousands) 2024 2023 Deferred tax assets Net operating loss carryforwards $ 274,421 $ 117,877 Research and development capitalization 134,363 105,503 Tax credit carryforwards 68,811 50,293 Unearned revenue 19,219 23,007 Lease liabilities 23,510 13,208 Reserves and accruals 5,133 4,744 Stock-based compensation 14,730 5,080 Other 1,175 485 Gross deferred tax assets 541,362 320,197 Valuation allowance ( 466,147 ) ( 304,618 ) Net deferred tax asset 75,215 15,579 Deferred tax liabilities Right-of-use assets ( 19,183 ) ( 8,942 ) Definite lived intangibles ( 67,140 ) ( 5,272 ) Depreciable assets ( 5,358 ) ( 2,704 ) Deferred tax liabilities ( 91,681 ) ( 16,918 ) Net deferred tax liability $ ( 16,466 ) $ ( 1,339 ) Significant judgment is required in determining the Company’s provision for income taxes, recording valuation allowances against deferred tax assets and evaluating the Company’s uncertain tax positions. Due to net losses since inception and the uncertainty of realizing the deferred tax assets, the Company has a full valuation allowance against all entities in a net deferred tax asset position. To the extent that the Company generates positive income and expects, with reasonable certainty, to continue to generate positive income, the Company may release all, or a portion of, the valuation allowance in a future period. This release would result in the recognition of all, or a portion of, the Company’s deferred tax assets, resulting in a decrease to income tax expense for the period such release is made. As of December 31, 2024 and 2023 the Company’s valuation allowance was $ 466.1 million and $ 304.6 million, respectively, which increased by approximately $ 161.5 million and $ 137.8 million during the years ended December 31, 2024 and 2023, respectively. Net operating losses (NOLs) and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and may become subject to annual limitation due to ownership changes that occur under Section 382 of the Internal Revenue Code, as amended and similar state provisions. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. As of December 31, 2024, the Company was not limited on its NOLs and tax credit carry-forwards. The Company will continue to monitor future ownership changes for potential Section 382 limitations As of December 31, 2024 and 2023, the Company had federal NOL carryforwards of $ 553.2 million and $ 412.0 million, respectively, available to reduce taxable income, of which $ 16.3 million expire beginning 2036 and $ 536.9 million do not expire. The Company had state NOL carryforwards of $ 1,499.3 million and $ 398.6 million as of December 31, 2024 and 2023, respectively, available to reduce future state taxable income, of which $ 1,042.2 million expire beginning 2031 and $ 457.1 million do not expire. The Company had foreign NOL carryforwards of $ 439.5 million as of December 31, 2024, available to reduce future foreign taxable income, of which $ 18.7 million expire beginning 2032 and $ 420.8 million do not expire. As of December 31, 2024, the Company also had federal, state and foreign research and development credit carryforwards of $ 35.1 million, $ 10.2 million and $ 7.1 million respectively. As of December 31, 2023, the Company had federal, state and research and development credit carryforwards of $ 30.3 million, $ 6.9 million. The federal 215 Table of Contents research and development credit carryforwards expire beginning in 2036, the state credit carryforwards expire beginning in 2030 and the foreign credit carryforwards do not expire. The Company also had federal Orphan Drug credits of $ 24.7 million and $ 17.9 million as of December 31, 2024 and 2023, respectively, which will begin expiring in 2026. Reserves for uncertain tax positions against the credit carryforwards were as follows: December 31, (in thousands) 2024 2023 Balance at the beginning of the period $ 5,417 $ 2,762 Increases for positions taken in current year 1,535 1,726 Increase (decrease) for positions taken in prior year ( 203 ) 929 Balance at the end of the period $ 6,749 $ 5,417 The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of Other income (loss), net as necessary. The Company files income tax returns in the United States, Canada, United Kingdom, Austria. The Company files state income tax returns in multiple states in the United States among others Utah, California and Massachusetts. The Company is not currently under examination in any of these jurisdictions. The Company is subject to income tax examinations on all federal returns since the 2016 tax return. Note 13. Net Loss Per Share For the years ended December 31, 2024, 2023 and 2022, Recursion calculated net loss per share of Class A, Class B and Exchangeable common stock using the two-class method. Basic net loss per share is computed using the weighted-average number of shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of stock options and other contingently issuable shares. For periods presented in which the Company reports a net loss, all potentially dilutive shares are anti-dilutive and as such are excluded from the calculation. For the years ended December 31, 2024, 2023 and 2022, the Company reported a net loss and therefore basic and diluted loss per share were the same. The rights, including the liquidation and dividend rights, of the holders of the Company’s Class A, Class B and the Exchangeable common stock are identical, except with respect to voting. As a result, the undistributed earnings for each period are allocated based on the contractual participation rights of the Class A, Class B common stock and the Exchangeable common stock as if the earnings for the period had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis and the resulting amount per share for Class A, Class B and Exchangeable common stock was the same during the years ended December 31, 2024, 2023 and 2022. The following tables set forth the computation of basic and diluted net loss per share of Class A, Class B and Exchangeable common stock during 2024, 2023 and 2022: Years ended December 31, (in thousands, except share amounts ) 2024 2023 2022 Numerator: Net loss ( 463,661 ) ( 328,066 ) ( 239,476 ) Denominator: Weighted average common shares outstanding 274,207,146 207,853,702 175,537,487 Net loss per share, basic and diluted $ ( 1.69 ) $ ( 1.58 ) $ ( 1.36 ) 216 Table of Contents The Company excluded the following potential common shares from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Years ended December 31, 2024 2023 2022 Stock based compensation 9,021,895 9,848,141 10,966,651 Tempus agreement 7,802,744 1,073,834 — Total 16,824,639 10,921,975 10,966,651 Note 14. Fair Value Measurements The fair value hierarchy consists of the following three levels: • Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets that the company has the ability to access; • Level 2 — Valuations based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations in which all significant inputs are observable in the market; and • Level 3 — Valuations using significant inputs that are unobservable in the market and include the use of judgment by the company's management about the assumptions market participants would use in pricing the asset or liability. The following tables summarize the Company’s assets and liabilities that are measured at fair value on a recurring basis: Basis of fair value measurement (in thousands) December 31, 2024 Level 1 Level 2 Level 3 Assets Cash equivalents: Money market funds $ 235,812 $ 235,812 $ — $ — Bank deposits 160,487 160,487 Restricted cash 8,675 8,675 — — Total assets $ 404,974 $ 404,974 $ — $ — Basis of fair value measurement (in thousands) December 31, 2023 Level 1 Level 2 Level 3 Assets Cash equivalents: Money market funds $ 322,653 $ 322,653 $ — $ — Restricted cash 9,860 9,860 — — Total assets $ 332,513 $ 332,513 $ — $ — In addition to the financial instruments that are recognized at fair value on the Consolidated Balance Sheet, the Company has certain financial instruments that are recognized at amortized cost or some basis other than fair value. The carrying amount of these instruments are considered to be representative of their approximate fair values. 217 Table of Contents The following tables summarize the Company’s financial instruments that are not measured at fair value: Book values Fair values (in thousands) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Liabilities Notes payable and financing lease liabilities, current $ 8,425 $ 41 $ 8,425 $ 41 Notes payable and financing lease liabilities, non-current 19,022 1,101 19,022 1,101 Total liabilities $ 27,447 $ 1,142 $ 27,447 $ 1,142 Note 15. Segment Information Segment loss Recursion operates as a single operating segment that is managed on a consolidated basis. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s chief operating decision maker uses segment net loss to evaluate the performance of its segment, analyze financial trends, compare the budget to the actual operating results, and make resource allocation decisions. Segment net loss represents the Company’s consolidated net loss. All corporate costs, global function support costs, overhead costs and other shared costs are included within this segment. Other segment items primarily include general and administrative expenses including facilities, information technology, professional fees (including auditing, tax and legal) and insurance. The following table presents Recursion’s segment net loss: Years ended December 31, (In thousands) 2024 2023 2022 Revenue $ 58,839 $ 44,575 $ 39,843 Significant segment expenses Salaries 242,795 183,643 139,671 Consumables 77,543 65,688 35,107 Platform 15,876 6,353 4,822 Discovery 30,480 19,231 19,765 Clinical development 43,713 39,881 32,929 Depreciation and amortization 36,494 24,402 11,756 Other segment items 90,942 55,437 41,520 Loss from operations 479,004 350,060 245,727 Other non-operating income, net 14,216 17,932 6,251 Income tax benefit 1,127 4,062 — Total segment loss $ 463,661 $ 328,066 $ 239,476 Supplemental asset information Total expenditures for additions to long-lived assets $ 14,134 $ 14,393 $ 37,650 218 Table of Contents Additional Segment Disclosures Recursion’s long-lived assets are attributed to the following geographic areas based on their location: Years ended December 31, (In thousands) 2024 2023 2022 United States $ 78,471 $ 84,056 $ 87,985 Canada 2,631 2,454 207 United Kingdom 56,332 — — Other 3,629 — — Recursion generates revenue primarily from a single service, research and development services and from a single geographic area, the United States, therefore, the Company does not report additional information on revenue from external customers. Note 16. Subsequent Events In February 2025, the Company terminated the Sales Agreement and entered into a Sales Agreement (the Citi Sales Agreement) with Citigroup Capital Markets Inc. (the Citi Sales Agent), to provide for the offering, issuance and sale of up to an aggregate amount of $ 500.0 million of its Class A common stock from time to time in “at-the-market” offerings (the Citi ATM Offering). Recursion has not yet sold any shares and is not required to sell additional shares under the Citi Sales Agreement. The Company pays the Citi Sales Agent a commission of up to 3 % of the aggregate gross proceeds received from all sales of Class A common stock less certain agreed credits and reimbursements. The Citi Sales Agreement continues until the earlier of selling all shares available under the Citi Sales Agreement or terminated by written notice from either of the parties. 219 Table of Contents Item 9. Changes in and Disagreements with Accountants. None.