CAN - Earnings call 4 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. After the management's prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. The company's financial and operating results were released by the Newswire services earlier today and are currently available online. prepared for also call. has company a today's presentation The

on through presentation on fourth You website. call the navigate quarter company's the earnings the may view for and slides IR page the XXXX the webcast

us Zhang; CFO, Nangeng Joining CEO; Jin and are Chairman Mr. Canaan and today Mr. Cheng. James Inc.'s

Mr. start IR overview Director; available session. question-and-answer before quarter. during the Xi for the will the Mr. the for then by IR an financial Zhang, on will providing call highlights performance addition, the In and Senior up details Manager, Cheng company's results Leo provide company of call questions. your the Mr. for Wang, Ms. will we be and Zhang operating also the period open

actual you differ or project our our hereof, forward-looking from not XX-F performance recent statements information and and statement or in for date to forth our assumptions Before assumptions. may and risk to may file except uncertainties refer Securities release the that we assumes Commission, results press continue, but the future statements and the call statements the materially the statements. report outlook we to annual company. revise to the required of today's and company safe for guarantee on with earnings will the estimate to in These Form the statements no release factors or on as and Please future include release. set only do subject company law. of refer be in Today's statements. Exchange cause most that uncertainties those risks, forward-looking not These webcast, press obligation such of statements speak and call by performance documents are These to, and risks, including that as any our are include, results I would made limited to press operations harbor like

discuss company's results. of both to considered certain for GAAP GAAP which webcast, isolation measures are measures be we non-GAAP financial and during These measures, believe call today's will we as the non-GAAP and performance. in from financial addition not or supplemental a substitute addition, In and in should measures as useful

regarding reconciliations GAAP You our is Please measures, go posted additional Chairman turn the with to press non-GAAP the With will our Nangeng Mr. these comparable release, and including earnings results that, now sir. disclosures can on in company's over website. call find CEO, I which ahead, Zhang.

Nangeng Zhang

is of for Thank NG, everyone. call. Hello, CEO Canaan. the you This our conference joining

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However, we of deal remain recognize not high must there cut rate upward uncertainty the sale about clients Bitcoins begun.Financing [indiscernible] has the and yet costs industry. posting challenges ongoing truly is also that the interest pace for miners movement, to cycle

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the For significant I by In participation. be a wide Wall investors by Bitcoin. with can XXXX, point. spread turning the the price cycle, that market will we be always Street, have next institutional one represented industry large public driven previous only XX,XXX boom [indiscernible] market said must per and

can ETF Year As next the the the the a market. starting serve point of is a begins, as New X for approval spot Bitcoin milestone and

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James Cheng

everyone. Singapore Thank speaking headquarter. This you, our and NG , day, good is at James

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Turning to our mining business.

in of cash end Africa, Bitcoins per second the a mining the Bitcoin Middle last in which East, the to here Please Exahash We note accumulated that points or of XX,XXX energy from mining to increased for mining in machines. price mining mined in quarter this quarter. X. was X.X this this XX,XXX revenue margin without energized quarter average business and XX% and a costs quarter-over-quarter. profit business which the South mining high mainly over and in our revenues profit achieved consideration total resulted our rate depreciation of increase expanded mining attributed for record USD America XX% about revenues quarter quarter, XX profit. of mining USD the deployed basis deducting in as to defined in Gross hosting terms is proportion loss our XXX in for We for reached Our

AI increase material be Exahash mining machines another This our we products. was in X, to of sales and CEO our expand second X.X And to the per and quarter to a AI we mentioned bank volume Additionally, harsh X.X XXXX per in from million of cold accounts. Shifting resetting X.XX That XXXX, quarter XX% X. expect areas. second up to makes a local which Kazakhstan to in successfully energized growth X in quarter-over-quarter. Exahash previously. bunch mining normal business power per primarily driven quarter in was went up through X.X quarter, continue enables compared our Exahash partners out deployed AI Exahash of X.X been quarter Kazakhstan by revenue revenue has to our in computing early in been USD have X X January. energized total cross-border to countries business. second with weather challenges as quarter this X, in reenergized increased and us to This our

to turning the Now expenses.

million, totaled Our decreasing respectively. quarter-over-quarter, XX% operating USD year-over-year XX% and XX.X expenses

believe quarter on in our Bitcoin for P&L decrease which which chips the XX% in expenditure the and income Besides, the by due the Bitcoin to efficiency and costs, XXXX, offset organization mainly decreased G&A machines sold. realized expenses from offsetting effects the new for decreased USD the compensation mainly The be impairment bonus. note decreased Excluding incurred revenue. our was gain business, share-based the optimization, to reflected the replaced and million will Please staff annual expenses generation secondhand decrease sequential year-over-year, improvements benefit data quarter, of realized one-off was mining a XXXX. accurately as pre-delivery the excess shares will preferred These a sell over secondhand one-off accounting value rather We the machines narrowed the loss share impairment. with X.X operating according of result the our The mining contributing we non-GAAP share our foregoing when recognition quarter-over-quarter, operating positive net on according operational million of by and our incurred in to was financial than this this our to and in liability our our rules, accounting XX% equity, excluded due narrowed quarter-over-quarter, year-over-year Bitcoin the we to the we expenditure quarter, operating performance-based the from quarter begin X net first we fair noncash non-GAAP from for more assets, measures. as loss convertible impact closing Please the of QX XX.X GAAP USD XX% XX% treatments fair bottom million, respectively. lending of was preferred of tax respectively. and U.S. to hit comparably, in as XX.X liability, from deferred and respectively. noncash non-GAAP is USD forward line Benefited was a order change. In for instruments and year-over-year total more of ADS XX note closing accounting XX% financing rules, These that recognized performance USD second value this incurred represent received proceeds million. to

excluded from basic and diluted ADSs In not addition, share. per considered although were issued that outstanding earnings legally pre-delivery the

utilizing financing fund Turning to from our to proceeds. we preferred the and share respectively. received and the In we paid raising XX million USD sheet And balance million ATM wafer supply million our facilities, $XX.X quarter flow. X, secure by cash USD XX.X from

proceeds also XXXX. in other utilized January the supply wafer for were prepayment The

offset advanced for by for by series Series. from of sales, was and contributed million payments mainly AXX During quarter, outflow cash production USD cash the XX of inflow sales this which USD AXX spot million XX was of

equivalents million. and and sheet, Consequently, USD of production balance withheld balance the XX of X at USD cash Now XXXX, USD So which as operations on of last ending X.Xx on positive cash XX.X year-end. of contract our turned moving us end to contributions market improved with not the increased than our to demand from to record million million cash X.X but XX? and helped at majority was The higher USD liability. XX advances flow million the our from It at The limited X.X balance from year-end XXXX the of contract of of last end. compared presales XX.Xxs to those million sales to to USD advances compared million This contract came included AXX. USD quarter big September clients.

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to As end during X, made X customers of been of account X receivable by we series as the declining end compared quarter X. of USD A quarter recorded XX% payments million, of quarter the have

adopt We demand corresponding policies credit continuously will evaluate with and market caution.

which our more Bitcoins our reached XX in turning our own XX. quarter quarter XXXXX Bitcoin to Bitcoin December is the Now of attention And assets assets. and kept at this X. of than as growing we holding The XXX which end held as

We XXX plan the as with FASB Bitcoins early our Bitcoins value. USD well increase also new and shareholders. with provide allow the fair as held held better to latest our you million cryptocurrency cryptocurrencies since of those accounting value of price. statements carried price market price assets January The that XX X, market January on USD the owned the XXXX, the our cryptocurrency believe balance rules booking on compared Bitcoins XXXX, some XX. almost million. which of at If adopted market rule the I XXXX based carrying will accuracy difference be We by the as the would XXXX, XX end X, customer of to declined that price we which to fair current this deposits, received adopt transparency want share approximately value September and at anticipate to and financial we clarity is investors enhance between to

wafer January December XXXX, financial ATM to fund second tranche we with million. QX XX.X we fundraising proceeds XX, XXXX, raising Turning million. to the preferred tranche early of raising XXXX, results the we of of reported preferred In financing, net closed XX, November total net net the proceeds our From total of first us first proceeds our XXXX, late precedes In we utilized financing, supply revenue secure closed and product share halving. date capacity USD generate more preparation machine our XX USD waiting after helped halving XXX about of XX.X million, many total to of on In anticipate of USD the quarter for future investments. out million The million. mining carry USD for of customers considering USD ROI raising to we XX.X new the R&D of are CapEx visibility fund raising. XXXX, share

countries computing preorder operations, above While revenue for under unforeseen different and half industry for quarter million, Series X add Based volume price XXXX. uncertainty AXX XXXX, we cautious Policy demand in USD may halving. will the a will mining situation, remain comprehensive force we of we the XX of a pressure. anticipate power of and expectation considering cryptocurrencies obstacles. to regarding also on the potential first upside after Consequently, selling changes the gave

XXXX. in quarter XX.X walk period USD of were the quarter quarter the and to XXXX. and in net third of briefly operating the was USD of of period period in basic same in million third of and XXXX loss quarter loss USD XXXX in Revenues in XX.X the compared the million USD quarter in fourth XXX Non-GAAP the from USD fourth in USD ADS our in Non-GAAP XX.X million to XX.X $XX.X in and per USD Total same USD loss third as the USD million compared through the quarter the you Non-GAAP quarter loss XXXX of in were XXXX was USD in quarter operations the fourth XX.X same the period XX.X expenses of fourth million quarter. XX.X in million XXXX was compared to quarter the million XX.X million same XX.X compared million fourth USD million in XXXX million of million of XXXX XXXX the third for would XXXX USD Gross USD I XXXX. to USD $XX.X of the XXXX results third same to of of XXXX of quarter million XX.X XXXX. diluted in the like fourth XXXX. financial the Now million quarter of million and compared of in to were XX.X the net of XX.X period X.XX. and

equivalents prepared XXXX, company As cash of had and remarks. cash December concludes the XX.X our This XX, of USD million.

open for now questions. are We

Operator

Instructions]. [Operator

first is question Sun from Securities. of from Our Guosheng Shuang the line

Sun Shuang

[Foreign customer mining more increased Language]. miners sales machines, stock, Did recent see How was halving? preparing your you order? the aggressive for [indiscernible] in

Nangeng Zhang

XXXX, in and exceeded maximize phenomenon may our Bitcoin the This on slightly XX% year, halving million And our year-over-year reached have price sales normal January existing our hash per QX. early expectations is sales a power orders. consolidation slowdown this of based X.X in mining the went this facilities miners, in in compared the deploy X a through QX increase from after the quarter, increased Total of both growth presales sequential In and XXX% quarter. computing Bitcoin a observations, phase ETFs past spot machines we second the and profits. who because quickly experienced to market orders experience and before a to months previous

for for halving mining when recover. and market the make wait-and-see market of will stance. upcoming However, Generally, indicators certainty. before the cycle miners plans of stabilized and miners Most X the before a a they more adopt to to prefer procurement quarter machines begin [Indiscernible] see month are mostly full deployment to about year the halving a tend

engaging including this, R&D We are products, next mass also ration and actively our in new the production the tape-outs constantly for and production securing capacity of product for preparing taken.

Sun Shuang

increased? contract to computing compared sales efficiency Has was was with power How higher How selling of Language]. price the ASP? [Foreign mining sales of sales in spot machines terms and volume sales? power

Nangeng Zhang

there power. accompanying action for this, at of to Entering been in correction market and following of the efforts intensive spot destock the Despite a spot QX the search. the XXXX, has of initial results mining in rise to the price manufacturers' approval computing ETF listing machines, an

of presale spot a future past the months. on on machines are AXX As basis AXX market. increase price that surpassing sold delivers a QX per machines offered spot anticipated sales contrast, are AXX third has computing with Terahash the But In It series power the the series where of second the series in over per gradual now, is concentrated X be being million reached in seen And mining X.XX of XXXX, second. will the second. million pre-sellers Terahash quarters. majority and X.X

gathered with the the this power approval. series market energy enhanced efficiency So and AXX has computing

spot nature, is we ready-to-use a purchase. still among markets. However, future due expect This preferred shown have a miners needs to many of the its sales facilities

Operator

Lucas The next Pipes is from the of question B. from line Riley.

Lucas Pipes

So bit my question is a level. higher little

post on potential halving. downside Given environment the want you ETF obviously, take to you in and resurgent in want extra this how guarded environment do you Do we're approval, the to and aggressive network really to interest Bitcoin a think to of risks to in the lot if and be chips with want about press be? capacity forward

in curious Just this between you and how fear navigate environment? green

Nangeng Zhang

only I the us, think our make and and And believe right the is best players booming. to is own there's we significant customized competitive efficiency power need field. targeted designs uncertainties in before many for to with X our Also, product pricing. that adjustments have this -- goal now And halving. there's AI we for

the of climate already think we signed our We So we with second need half to changing I myself, I strategy for some this to year. especially suppliers. And think are agreements secure for our the self-mining. refers

will flow. year, from cash But for to Our we we the growth. the strategy target this our is change

to means we to developed the and do country. will facilities products well-regulated put that target self-mining. So will use the majority Especially, our our best on and invest we at start

to few we we funds I least at sufficient will for us have the do But than before. the production capital aggressively timing and R&D. for last do to the the months, we expansion the more judgment think market, comes, that for the use make

a think and for and plus this bull cycles. So better best products I us will make the important score us, by market make more the mining sales capital strategy

I think make can some on this. add-on James on

James Cheng

balance bull do support raising support wafer for conservative. or We future I between our our always difficult fund market. R&D capacity to think aggressive it's challenging to and of and

we cycles. going through I a Nangeng lot decision experience the of together a has and made think pass-through always

to but mining, decide lot like generation then design. we new of always just different of about together of we challenges predict we in always past in bull machines, experience And market helped, phase. And are we going new the lot a So the like big face solve a just have the machine and to challenges R&D in market future. spend for the how bare we investment

operations, performance through aggressive do but And to try maximize we very So conservative. to together. the describe machine we not between all to always the think uncertainties. easy the we revenue balance a and courage and mining it's then sales the face to carry go And I of very

a we strategically, team do think NG all different trying but leaded company have areas, So to our best management to I the contribute the to do decision-making. in this,

that's think X my I cents.

Operator

Your of next Dede Kevin from H.C. Wainright. question line the is from

Kevin Dede

installed to by total. will strategic First the question, think maybe Lucas' of And at specifically, I'm hashrate balance of self-mining just through you Understand objectives. the X.X question self-mining you your you're that end the running running think about be year? quarter. more the and grow around tangential Exahash all March will and what of about if the wondering

Nangeng Zhang

the second of both to want self-mining projects. licenses. business again been half our have I And And in we mention we is experience I many started think XXXX. What and deploying in

Southeast tactics. our more per strategy, our specific Africa, But maintaining operating the like deployed energized on. have and and we XXXX, Exahash year, in power that's so So over America, computing Asia, adjust Exahash mining second East will than percent Middle and South while through X this upgrade we XX

such pay and stability, attention growth. enhanced system as risk we regulatory factors for more legal the Firstly,

inventories, interest target This the our self-mining. think on, only the inventories makes the our is to we mining flow to deployment do we that from What for in maybe flow is or take our company. will our from a I regions for slightly will shift it's time. the cash a have So bit the put though we business, the past, operations, generation. longer when will we to And the we little oriented self-mining meaning? even means not also, costly to grow expand cash and oriented. generate scale growth will change will major now we And flow cash

So do that to best means sale. we our will model use the

machines, the it will If operational you investor revenue your or and are better prolong as cannot spend reducing risks mining using reach such the the the power cost something.

past, your your also the last entire investments. with of number hosting And time companies. corporate we used So in

like are something. today, stable after I But so, learned value over or we We any doing have years, very and for the the think the construction is we facilities, really hold that sales power important industry. no facilities, sales X not of this result

exporting with deeper So we more to participate will operations and mining go corporations.

James Cheng

the rate one thing about to is Exahash And cash X.X Exahash. X now rate deployed mention the is whole here Kevin, is energized Exahash.

have still we Exahash implemented quarter quarter be and X. X.X So to in X

update for We progress our are the partners. waiting from

So it's it not or and happen believe in quarter yet quarter X. happening, we will X

sure So just understand us. to we the as same make

Kevin Dede

available incurred idea think the that on to X machine And may I'm mentioned going the you tape nanometers you if some full to you for I'm if AXX. the going process on could to give down NG, do now? are your next-generation machine. it's you sale? chip. that And costs us geometry, out when wondering include be the be we maybe assume an of

Nangeng Zhang

when We But machine, will just think test the deploy machine is details the machines. we the that have testing. I we finished the publish --

chips not to our we're selling the customers. So

mining chips by is important that very the determined the or know performance wafers. manufacturer to the So process not it's the of of machines the of

avoid a from public we among this main reason. There's do our customers, many long confusion but the the is specific time partners. reasons, other not So emphasize to the

focusing product. the performance that's actual on metrics So instead the of

it's upgrade generation. not valuable Less Our XX% new to improvement generation. plan is than a every performance very to about XX%, I think

think our work XX also, I the months So very hard And XX% to today, X past, in period. in And there's generations. target. the each we between is

that improvements. this towards least to XXX% maybe will every next year we or going our So generation generation like have the the in also right, something. means is another have everything Then have or we XX% at profit year one of generation maybe is

mass is Yes, year. another the production we next-generation So is target. publish variety This this as This target That possible. for have I year. it. the the we and will think Yes, revenues say this is now. side. new I growth generation need some debt maybe means the our have in put finance to what as we soon numbers, There's no will we numbers is want can

Kevin Dede

series? us Inventory Q-to-Q. is and that versus was now inventory that XX% that inventory. out on Last Maybe I little question of are insight the your expectations for about are AXX could you maybe a carrying. air-cooled AXX for completely me, if wondering the much down James. probably the what give Understand mix in is was you the best for liquid-cooled how

James Cheng

I Kevin, for but the I the inventory AXX between transition can calculation. to AXX, cannot profit in AXX after generate already in say think miners halving series. we our completed have are we of also series AXX clearance luckily,

AXX spots demand looks cell it the still we there, is lot So still quarter and of get a orders can like even X. in

will AXX X clearance quarter So and like looks X. inventory last in quarter the it

AXX, X, quarter in not happen small in we mass will the think and me, to completely batches cleared has been mass looks it like I ship will And AXX production quarter March So and shipments yet. X. in

of being sales So got the still is we number like It updated million day. lot And have still orders, day every a to mentioned, are NG contract looks orders customers already get X.X placing Terahash. this AXX. like

to operating like flow looks clear. better have like look is in looks progress the time, series very thinking a But to than it tends I quarter X. be cash it planned in AXX that's So I expected. what to better very will transition November. At than what be is have that And me. the was good positive The I difficult

Kevin Dede

Congratulations on the your team. gentlemen work and hard entire to you

Operator

Company. the take of from line now our next question Legg The from Benchmark We will Michael

Michael Legg

about talk to Can some We the about that? out the another the there. million talk the shares high. on pretty and ADS first It the outstanding for second along $XX.X with up closed share that second get ATM the ended just bit I Can you $XXX million. a we revenues? quarter your count. wanted little tranche quarter like tranches, and quarter We moving it's guidance you for expect the with looks

Nangeng Zhang

we we Michael, for end the stock USD at the institutional signed with million. announced sales agreement I November, think a last preferred U.S. investor of XXX

million shares is what going to and million of immediately And the a already upon third of can completed have means the stock settlement do parties. the financing $XX tranche. say that contingent the big how tranche. both we that's tranche it to number means will are common and That immediately That of be we mutual goes. we to but the financing. today, quarter currently, preferred we common you this I but have how think Due common little closing to another agreement, the see, not shares shares of the XX of see the As will the between have shares, already let's we in increase bit it's increased we terms of third execute increased, agreement completed, complicated not successfully preferred going X, are the converted. total don't

to investor. already have we the tranche second The delivered

us. Let's see to update are not to they currently to it common the how convert going shares, but yet preferred to shares

Michael Legg

that you explain terms of how Can And convert works? that the $XX and long-term million just then the liability.

Nangeng Zhang

found rules, the Then recognize fair we third stock shares fair both tranches the ADS on an auditor, as we on associated second to with first the our an preferred stock value value also they and recognize equity pre-delivery of an party stocks. preferred preferred based independent the the of basis. party. the evaluation accounting evaluate from a third From independent lending Through

segments X, tranche including lending the and so total lending So bottom impact line X quarter preferred of This the the accounting financing of of had $XX the these equity. certain and treatment million. shares, preferred a share first tranche second on also of about XXXX our

impact $XX So putting million our P&L. on about is together all this

Michael Legg

price price then sold? did average do the million your What average ATM. know was of the you And the you $XX.X

Nangeng Zhang

the put do we but we ATM is shares, is preferred known my in price the haven't already correct. have the preferred average if average memory there price know We $X.XX

James Cheng

add have thing to on is. I one

have at what XX funds company expansion. in X say. months, USD we for and for the shares will for the me and million January the next is after This I settled For enough least operation side, preferred also next our

Operator

to to now, call the questions like any back As for I'd there closing over the remarks. are company no further turn

Nangeng Zhang

once I for you joining today. think us thank again

If on questions, contact us please website. provided our any free reach further feel you through information the have to

Operator

Thank call everyone, That the today. attending. concludes you, for

You may disconnect. now

Canaan (CAN) 27 Feb 242023 Q4 Earnings call transcript