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SEGMENT REPORTING
 6 Months Ended
Jun. 30, 2023
Segment Reporting [Abstract]  
SEGMENT REPORTING
12. SEGMENT REPORTING
The Company’s operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics and have similar business activities.
The Company has two operating segments: “Hosting” which consists primarily of its blockchain infrastructure and third-party hosting business; and “Mining” consisting of digital asset mining for its own account. The blockchain hosting business generates revenue through the sale of consumption-based contracts for its hosting services which are recurring in nature. During 2022, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”. The Mining segment generates revenue from operating owned computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks. In exchange for these services, the Company receives digital assets.
The primary financial measures used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources are revenue and gross profit. The CODM does not evaluate performance or allocate resources based on segment asset or liability information; accordingly, the Company has not presented a measure of assets by segment. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company excludes certain operating expenses and other expense from the allocations to operating segments.
The following table presents revenue and gross profit by reportable segment for the periods presented (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Hosting Segment
Revenue:
Hosting revenue$29,830 $38,936 $52,459 $72,150 
Equipment sales— 15,194 — 41,499 
Total revenue29,830 54,130 52,459 113,649 
Cost of revenue:
Cost of hosting services23,107 43,644 39,305 74,875 
Cost of equipment sales— 13,541 — 36,076 
Total cost of revenue23,107 57,185 39,305 110,951 
Gross profit (loss)
$6,723 $(3,055)$13,154 $2,698 
Mining Segment
Revenue:
Digital asset mining income$97,082 $109,842 $195,108 $242,842 
Total revenue
97,082 109,842 195,108 242,842 
Cost of revenue:
Cost of digital asset mining66,846 94,070 139,522 162,820 
Total cost of revenue66,846 94,070 139,522 162,820 
Gross profit
$30,236 $15,772 $55,586 $80,022 
Consolidated
Consolidated total revenue
$126,912 $163,972 $247,567 $356,491 
Consolidated cost of revenue
$89,953 $151,255 $178,827 $273,771 
Consolidated gross profit
$36,959 $12,717 $68,740 $82,720 
For the three months ended June 30, 2023 and 2022, cost of revenue included depreciation expense of $1.5 million and $2.6 million, respectively for the Hosting segment. For the three months ended June 30, 2023 and 2022, cost of revenue included depreciation expense of $18.8 million and $46.5 million, respectively for the Mining segment.
For the six months ended June 30, 2023 and 2022, cost of revenue included depreciation expense of $1.8 million and $4.8 million, respectively for the Hosting segment. For the six months ended June 30, 2023 and 2022, cost of revenue included depreciation expense of $38.8 million and $85.9 million, respectively for the Mining segment.
Concentrations of Revenue and Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Credit risk with respect to accounts receivable is concentrated with a small number of customers. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, in order to limit the exposure to credit risk. As of June 30, 2023 and December 31, 2022, all of the Company’s fixed assets were located in the United States. For the three and six months ended June 30, 2023 and 2022, all of the Company’s revenue was generated in the United States. For the three and six months ended June 30, 2023, 76% and 79%, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin, which is subject to extreme price volatility. As of June 30, 2023, substantially all of our digital assets were held by one third-party digital asset service. As of December 31, 2022, substantially all of our digital assets were held by two third-party digital asset services.
For the three and six months ended June 30, 2023 and June 30, 2022, the concentration of customers comprising 10% or more of the Company’s total revenue are as follows:

Three Months Ended June 30,Three Months Ended June 30,
2023202220232022
Percent of total revenue:Percent of Hosting segment revenue:
Customer
D11 %N/A49 %N/A

Six Months Ended June 30,Six Months Ended June 30,
2023202220232022
Percent of total revenue:Percent of Hosting segment revenue:
Customer
D10 %N/A49 %N/A
A reconciliation of the reportable segment gross profit to loss before income taxes included in the Company’s Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022, is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Reportable segment gross profit
$36,959 $12,717 $68,740 $82,720 
Loss on legal settlement
(85)— (85)— 
Gain from sales of digital assets
931 11,808 1,995 13,971 
Impairment of digital assets(1,127)(150,213)(2,183)(204,198)
Impairment of goodwill and other intangibles— (790,753)— (790,753)
Losses on exchange or disposal of property, plant and equipment(174)(13,057)(174)(13,057)
Operating expenses:
Research and development
1,640 14,773 3,055 18,113 
Sales and marketing
1,084 10,238 2,092 11,636 
General and administrative
24,396 90,874 46,160 131,034 
Total operating expenses
27,120 115,885 51,307 160,783 
Operating income (loss)
9,384 (1,045,383)16,986 (1,072,100)
Non-operating expenses (income), net:
Gain on debt extinguishment
— — (20,761)— 
Interest (income) expense, net
(36)27,116 121 48,792 
Fair value adjustment on convertible notes— (195,061)— 190,976 
Fair value adjustment on derivative warrant liabilities— (22,189)— (32,464)
Reorganization items, net18,370 — 49,929 — 
Other non-operating expenses (income), net181 3,876 (2,888)3,519 
Total non-operating expenses (income), net
18,515 (186,258)26,401 210,823 
Loss before income taxes
$(9,131)$(859,125)$(9,415)$(1,282,923)