Canaan, Inc. Q3 FY2024 earnings call

• Innovation is central: Ongoing R&D investments enable the company to continuously deliver high-performance products. The A15 series began small-scale delivery, with the A15 Pro boasting 215 tera hash per second computing power and 16.8 joules per terahash power efficiency. • Global sales progress: Secured orders from North American firms like CleanSpark and HIVE for A15 series miners. Delivered over 10,814 miners to Middle East customers. • Mining operations: Mined 147 Bitcoins in Q3, generating $9 million in mining revenue with a 22% gross margin. Expanded mining operations in Africa, with self-mining hash rates reaching around 4.6 exahash per second. • Operational cost control: Maintained R&D investments and kept operating expenses streamlined, with non-GAAP EBITDA loss narrowing 46% year-over-year.

In the third quarter of 2024, Canaan Inc. achieved total revenue of $73.6 million. Revenue from machine sales was $64.58 million, with the A14 series contributing significantly, accounting for nearly 80% of machine sales revenue. Mining revenue for the quarter was $9 million. The inventory balance saw a significant decline, with the inventory value of the A13 series making up less than 20% of the total inventory value.

• Anticipates fourth quarter revenue to be approximately $80 million. • Aims to reach 10 exahash per second deployed computing power in North America by the first half of 2025. • Expects continued growth in demand for high-performance mining machines like the A15 series as Bitcoin price stabilizes and rises.

• Bitcoin price volatility: Puts pressure on miners' profits due to fluctuations in hash price. • Network hash rate growth: Leads to hash price hitting historical lows, squeezing miners' margins. • Market competition: Requires continuous innovation to stay competitive in the mining machine market.

Q: How does the current demand compare to the 2020 halving event and outlook for 2025?

A: Nangeng Zhang stated that patterns are similar to the 2020 halving, but differences exist in timing, Bitcoin price trends, and industry inventory levels. For 2025, capacity and geographic factors will influence demand.

Q: What systems are in place to meet demand for ASICs?

A: Nangeng Zhang mentioned developing new products, securing production capacity by placing advanced orders with foundries, and close collaboration with partners to improve yield rates and shorten production cycles.

Q: Expand on growth efforts in the North American market?

A: Nangeng Zhang said rising Bitcoin price triggered demand recovery, with large orders from North American publicly traded mining companies like CleanSpark and HIVE for A15 series miners, and the company is adjusting pricing and upfront payments for contract sales orders.

Q: Break down A14 vs A15 series demand?

A: Nangeng Zhang noted that A15 has more advantages in power efficiency, with increasing demand for liquid cooling models for various uses such as generating heat in winter.

Q: How to use Bitcoin holdings?

A: James Cheng said the company balances methods like preferred shares, at-the-market offerings, and using Bitcoins for liquidity, while considering counterparty risk and balancing different fundraising methods.