Contract Assets

12 Months Ended

Dec. 31, 2022

Revenue Recognition [Abstract]

Contract Assets

Revenue from Contracts with Customers

Disaggregation of Revenue

The Company differentiates revenue based on whether the source of revenue is attributable to product sales or service revenue.

Total revenue disaggregated by revenue source is as follows (in thousands):

	Years ended December 31,
	2022		2021
Revenue:
Products (1)	$	132,521	$	40,265
Services	3,571		3,003
	$	136,092	$	43,268

(1) Product revenues include sales to related parties as described in Note 18, “Related Party Transactions.”

Disaggregation of Cost of Sales

The Company differentiates cost of sales based on whether the cost is attributable to tangible goods sold, cost of services sold or other costs which cannot be directly attributable to either tangible goods or services.

Total cost of sales disaggregated is as follows (in thousands):

	Years ended December 31,
	2022		2021
Cost of sales:
Tangible goods sold	$	126,914	$	24,083
Services	285		532
Other	$	15,593	$	15,397
	$	142,792	$	40,012

Other cost of sales represent costs directly associated with the generation of revenue but which cannot be attributed directly to tangible goods sold or services. Examples of other costs of sales are certain personnel costs and equipment rental and insurance costs. Cost of sales for the year ended December 31, 2021 included a one time credit of $7.6 million (shown in Other and below in cost of sales for external customers), related to the release of accrued costs subsequent to the ADM settlement (see Note 13, “Commitments and Contingencies”).

Cost of sales split between external and related party sales is as follows (in thousands):

	Years ended December 31,
	2022		2021
Cost of sales:
Cost of sales for external customers	$	56,844	$	36,646
Cost of sales for related parties	85,948		3,366
	$	142,792	$	40,012

Contract Assets

Contract assets are as follows (in thousands):

	December 31,
	2022		2021
Contract assets	$	83,060	$	—
Less accumulated amortization	(3,371)		—
Contract assets, net	79,689		—
Less current contract assets	(7,113)		—
Contract assets, long term	$	72,576	$	—

In connection with entering into the ProFrac Agreement on February 2, 2022 and May 17, 2022 as discussed in Note 10, “Debt and Convertible Notes Payable” and Note 18, “Related Party Transactions”, the Company recognized contract assets of $10.0 million and $69.5 million, respectively, and associated fees of $3.6 million. As of December 31, 2022, $72.6 million of the contract assets are classified as long term based upon our estimate of the forecasted revenues from the ProFrac Agreement which will not be realized within the next twelve months of the ProFrac Agreement.

During the year ended December 31, 2022 the Company recognized $3.4 million of contract assets amortization which is recorded as a reduction of the transaction price included in the related party revenue in the consolidated statement of operations. The below table reflects our estimated amortization per year (in thousands) based on the Company’s current forecasted revenues from the ProFrac Agreement.

Years ending December 31,	Amortization
2023	$	7,113
2024	8,456
2025	8,845
2026	8,845
2027	8,845
Thereafter through May 2032	37,585
Total contract assets	$	79,689