SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2022

Schedule of Revenue and Gross Profit by Reporting Segment

The following table presents revenue and gross (loss) profit by reportable segment for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Equipment Sales and Hosting Segment
Revenue:
Hosting revenue	$	44,916	$	20,488	$	117,066	$	51,742
Equipment sales	37,161		35,533		78,660		113,435
Total revenue	$	82,077	$	56,021	$	195,726	$	165,177
Cost of revenue:
Cost of hosting services	$	44,975	$	19,577	$	119,850	$	48,956
Cost of equipment sales	27,917		24,997		63,993		82,328
Total cost of revenue	$	72,892	$	44,574	$	183,843	$	131,284
Gross profit	$	9,185	$	11,447	$	11,883	$	33,893
Mining Segment
Revenue:
Digital asset mining income	$	80,495	$	57,118	$	323,337	$	77,511
Total revenue	$	80,495	$	57,118	$	323,337	$	77,511
Cost of revenue:
Cost of digital asset mining	$	116,756	$	10,141	$	279,576	$	13,909
Total cost of revenue	116,756		10,141		279,576		13,909
Gross (loss) profit	$	(36,261)	$	46,977	$	43,761	$	63,602
Consolidated
Consolidated total revenue	$	162,572	$	113,139	$	519,063	$	242,688
Consolidated cost of revenue	$	189,648	$	54,715	$	463,419	$	145,193
Consolidated gross (loss) profit	$	(27,076)	$	58,424	$	55,644	$	97,495

Schedules of Customer Concentration Risk

For the three and nine months ended September 30, 2022, one hosting and equipment customer accounted for 10% or more of the Company’s total revenue. For the three and nine months ended September 30, 2022 and 2021, the concentration of hosting and equipment customers comprising 10% or more of the Company’s total revenue and Equipment Sales and Hosting segment revenue was as follows:


	Three Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
	Percent of total revenue:				Percent of Equipment Sales and Hosting segment revenue:
Customer
A (related party)	23	%	8	%	46	%	16	%
B	N/A		24	%	19	%	48	%
C	N/A		N/A		N/A		11	%


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	Percent of total revenue:				Percent of Equipment Sales and Hosting segment revenue:
Customer
A (related party)	16	%	N/A		42	%	N/A
B	N/A		23	%	20	%	34	%
C	N/A		14	%	N/A		21	%
Blockcap1	N/A		12	%	N/A		18	%

1 Blockcap was a related party prior to July 30, 2021. Subsequent to the Blockcap acquisition on July 30, 2021, Blockcap became a consolidated subsidiary. Refer to Note 3 for further information on the Blockcap acquisition.

Reconciliation of Reportable Segment Gross Profit to Loss Before Income Taxes

A reconciliation of the reportable segment gross (loss) profit to loss before income taxes included in the Company’s Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reportable segment gross (loss) profit	$	(27,076)	$	58,424	$	55,644	$	97,495
Loss on legal settlement	—		(2,603)		—		(2,603)
Gain from sales of digital assets	11,036		391		25,007		405
Impairment of digital assets	(7,986)		(12,552)		(212,184)		(12,552)
Impairment of goodwill and other intangibles	(268,512)		—		(1,059,265)		—
Impairment of property, plant and equipment	(59,259)		—		(59,259)		—
Losses on exchange or disposal of property, plant and equipment	—		—		(13,057)		(17)
Operating expenses:
Research and development	6,192		1,586		24,305		4,231
Sales and marketing	39		932		11,675		2,186
General and administrative	43,346		36,358		174,380		46,975
Total operating expenses	49,577		38,876		210,360		53,392
Operating (loss) income	(401,374)		4,784		(1,473,474)		29,336
Non-operating expenses, net:
Loss on debt extinguishment	—		—		—		8,016
Interest expense, net	25,942		13,569		74,734		26,550
Fair value adjustment on convertible notes	(4,123)		8,663		186,853		8,663
Fair value adjustment on derivative warrant liabilities	(521)		—		(32,985)		—
Other non-operating expenses (income), net	1,478		(4)		4,997		(2)
Total non-operating expenses, net	22,776		22,228		233,599		43,227
Loss before income taxes	(424,150)		(17,444)		(1,707,073)		(13,891)
Income tax expense (benefit)	10,642		(815)		4,398		(697)
Net loss	$	(434,792)	$	(16,629)	$	(1,711,471)	$	(13,194)