Quarterly report pursuant to Section 13 or 15(d)

Revenue from Contracts with Customers

v3.21.2
Revenue from Contracts with Customers
6 Months Ended
Jun. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers

Note 5. Revenue from Contracts with Customers

We recognize revenue when we transfer promised services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those services.

Disaggregated revenue

The following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues (in thousands):

Schedule of Disaggregated Revenue

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2021

2020

2021

2020

Cryptocurrency Mining

$

31,450

$

1,918

$

54,623

$

4,280

Data Center Hosting

2,874

-

2,874

-

Other

24

24

48

48

Total revenue

$

34,348

$

1,942

$

57,545

$

4,328

Cryptocurrency Mining

Providing computing power to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators, its customers. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at the contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the quoted price on the Company’s primary exchange of the related cryptocurrency at the time of receipt.

20


Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

Data Center Hosting

The Company provides energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at its Rockdale, Texas facility. The Company accounts for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, the Company recognizes revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which the Company has the right to invoice because the Company elected the “right to invoice” practical expedient.

Hosting contracts typically require payment in advance of the service delivery. The Company recognizes such payments as deferred revenue until its performance obligations are met, at which time the Company recognizes the revenue. The Company does not have any significant warranty obligations. We have determined that the contracts contain a significant financing component because of the expected length of time between the transfer of services and receipt of consideration and the prevailing market interest rates. Because the customer makes a payment in advance for the hosting services, the promised amount of consideration is adjusted (increased) over the financing term. Until services have been transferred, the Company adjusts the promised amount of consideration and accretes the contract liability (deferred revenue) by recognizing interest expense. The discount rate applied is that which would be reflected in a separate financing transaction between us and the customer at contract inception. This rate reflects the credit characteristics of the customer.

Revenue from the provision of installation services of certain hosted customers’ mining equipment is also included in data center hosting revenue. We bill the customer at a fixed fee per piece of equipment or at an hourly rate. The Company applies the “right to invoice” practical expedient to fees billed at an hourly rate. Revenue is recognized upon completion of the installation.

We generate engineering and construction services revenue from the fabrication and deployment of immersion cooling technology for Bitcoin mining customers. We bill the customer a total fixed fee or at an hourly rate, which is billed monthly as the project is completed. For the construction of customer-owned equipment, revenue is recognized upon completion of each phase of the construction project, as defined in each contract. For construction of assets owned by Whinstone but used by the customer during the term of their hosting contract, revenue is recognized on a straight-line basis over the remaining life of the contract.

Maintenance services include cleaning, cabling and other services to maintain the customers’ equipment. We bill the customer at a fixed monthly fee or at an hourly rate. The Company applies the “right to invoice” practical expedient to fees billed at an hourly rate. Revenue is recognized as these services are provided.

Other revenue

Other revenue is revenue recognized from an upfront license fee generated from our legacy animal health business. The upfront fee was recorded as deferred revenue and is being amortized into revenue over the term of the License Agreement.

Contract balances

For the six months ended June 30, 2021 and 2020, the Company did not recognize material bad-debt expense and there were no material contract assets recorded on the accompanying condensed interim consolidated balance sheets as of June 30, 2021 and December 31, 2020.

21


Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

The Company’s contract liabilities primarily relate to upfront payments and consideration received from customers for data center hosting and the upfront license fee generated from our legacy animal health business. The table below presents changes in the total deferred revenue liability, for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2021

2020

2021

2020

Beginning balance

$

752

$

849

$

776

$

873

Acquisition, net of revenue recognized

22,785

-

22,785

-

Revenue recognized that was included in the beginning balance

(24)

(24)

(48)

(48)

Ending balance

$

23,513

$

825

$

23,513

$

825

Transaction price allocated to remaining performance obligations

Remaining performance obligations represent the transaction price of contracts for work that has not yet been performed. Amounts related to cryptocurrency mining are not included because the Company elected the practical expedient to not disclose amounts related to contracts with a duration of one year or less.

Data center revenue – remaining performance obligation

The table below presents estimated data center hosting revenue expected to be recognized in the future related to the unsatisfied portion of the performance obligation at June 30, 2021:

Six months ended June 30, 2021

(in thousands)

Remainder of 2021

2022

2023

2024

2025

Thereafter

Total

Data center hosting (1)(2)

$

1,531

$

2,362

$

2,362

$

2,362

$

2,362

$

11,806

$

22,785

(1)

Data center hosting revenue primarily includes upfront payments which the Company generally recognizes as services are provided.

(2)

The Company elected the following practical expedients and therefore does not include amounts related to (1) the satisfaction of performance obligations recognized in the amount invoiced, and (2) variable consideration related to future services.

Other revenue – remaining performance obligation

As of June 30, 2021 and 2020, the aggregate amount remaining of the upfront license fee, for the right to access certain intellectual property relating to the Company’s Animal Health assets, was approximately $0.7 million and $0.8 million, respectively. The fee is being recognized ratably over the license term, which ends in 2028.

Additionally, we have elected to use the practical expedient to not adjust the transaction price for the existence of a significant financing component if the timing difference between a customer’s payment and our performance is one year or less.