Contract Assets

3 Months Ended

Mar. 31, 2024

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):

	Three months ended March 31,
	2024		2023
Revenue:
Products (1)	$	39,106	$	46,767
Services	1,268		1,240
	$	40,374	$	48,007

(1) Product revenue includes sales to related parties as described in Note 16, “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):

	Three months ended March 31,
	2024		2023
Cost of sales:
Tangible goods sold	$	27,025	$	41,529
Services	94		141
Other	4,434		4,457
	$	31,553	$	46,127

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

	Three months ended March 31,
	2024		2023
Cost of sales:
Cost of sales for external customers	$	12,952	$	11,196
Cost of sales for related parties	18,601		34,931
	$	31,553	$	46,127

Contract Assets

Contract assets are as follows (in thousands):

	March 31, 2024		December 31, 2023
Contract assets	$	83,060	$	83,060
Less accumulated amortization	(9,672)		(8,405)
Contract assets, net	73,388		74,655
Less current contract assets	(7,019)		(5,836)
Contract assets, long term	$	66,369	$	68,820

In connection with entering into the Initial ProFrac Agreement and Amended ProFrac Agreement on February 2, 2022 and May 17, 2022, respectively, as discussed in Note 9, “Debt and Convertible Notes Payable” and Note 16, “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 March 31, 2024 and December 31, 2023, $66.4 million and $68.8 million, respectively, of the contract assets were 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. The Company’s estimate of the timing of the future contract revenues is evaluated on a quarterly basis.

During the three months ended March 31, 2024 and 2023, the Company recognized $1.3 million and $1.3 million, respectively, 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
2024 (excluding the three months ended March 31, 2024)	$	5,029
2025	8,749
2026	9,538
2027	9,538
2028	9,538
Thereafter through May 2032	30,996
Total contract assets	$	73,388

Based on our tests of recoverability, we did not recognize any impairment of such contract assets as of March 31, 2024.