Nano Labs Ltd Q2 FY2023 earnings call

• The first half of 2023 was challenging due to the cryptocurrency sector dip, but priority remains delivering high-quality products.
• Leadership traveled extensively to connect with industry leaders and explore global partnerships, leading to uptick in overseas sales.
• Updates on iPollo: advancements in AI reasoning, real-time 3D metaverse rendering, ramping up iPollo nodes, expanding model training, enabling Stable Diffusion model inference, developing digital humans and Web 3 AI training platform, and pairing with 3D printing for metaverse applications.

Net revenue for the first half of 2023 was RMB52.3 million (or $7.2 million), a decrease from RMB380.1 million in the same period of 2022. The decrease in net revenue was primarily due to the decrease in sales volume of Z and B series, plus a dip in service revenue. Cost of revenue for H1 2023 was RMB115.2 million (or $15.9 million) compared to RMB203.8 million in H1 2022. Total operating expenses for H1 2023 were RMB73.5 million (or $10.2 million) vs RMB68.7 million in H1 2022. Selling and marketing expenses decreased by 6.5% to RMB9.5 million (or $1.3 million). General and administrative expenses increased by 83.8% to RMB31 million (or $4.3 million). Research and development expenses decreased by 21% to RMB33 million (or $4.6 million). Loss from operations was RMB136.4 million (or $18.9 million) in H1 2023 vs profit from operations of RMB107.6 million in H1 2022. Net loss was RMB134.3 million (or $18.6 million) in H1 2023 vs net income of RMB111.4 million in H1 2022.

• Anticipate maintaining sales of existing V and B series in the second half of 2023 and contribution from new product lineup.
• Expect noticeable uptick in sales from new product offerings next year.
• Developing Cuckoo 3 product for substantial performance boost over predecessor.

• Challenges in the cryptocurrency sector affecting revenue.
• Market shifts and uncertainties impacting financial results.
• Forward-looking statements may differ from actual results due to known or unknown risks, uncertainties, and factors beyond control.

Q: The financial result decreased from December 2022 to June 2023. Could you please explain the main reason behind the drop in revenue?

A: The main reasons were the transition to proof-of-stake (POS) in the latter half of last year and the continuous downturn of cryptocurrency prices during the first half of this year.

Q: We've noticed the company is currently exploring various new developments, which seems to have less association with B and V series product. Could you explain the rationale behind this development?

A: In the Web 3 space, there are various segments including infrastructure, human computer interaction, decentralization, etc. Past computational devices supported high-level Web 3 applications, and as infrastructure evolves, there are opportunities to cater to multiple facets of Web 3 evolution.

Q: What are the company's expectations for the market and the financial results in the second half of this year and next year?

A: We anticipate maintaining sales of existing V and B series in the second half of 2023 and start seeing contribution from new product lineup. Looking ahead to next year, expect a noticeable uptick in sales from new product offerings.

Q: Are there any new plans for the existing products or plans for the product iterations?

A: We've got products like iPollo.ai and iPollo 3D printing for the metaverse partnering with major IPs and exhibition centers. Also developing Cuckoo 3 product for substantial performance boost.

Q: The performance for the first half of this year was not impressive. So does the company's management team have any solutions to drive business development?

A: Apart from upgrading existing product line and waiting for market recovery, we're positioning across the entire value chain of Web 3, venturing into higher-level applications like AIGC, VK computation, AR gadgets, and peripherals for 3D printing to diversify products and cater to Web 3 demand.