Q2 2021 Canaan Inc Earnings Call
[music].
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to China, Inc. Second quarter 2021 on these conference calls.
All participants in a listen only mode. After the management's prepared remarks Eagles have a question and answer session. Please note. This event is being recorded.
Now I would like to hand, the conference over to your speaker today, Ms Jee Jang Investor Relations manager of the company. Please go ahead I'm shocked.
Thank you Hello, everyone.
Calls to our earnings conference call the company's financial and operating results were released to file in Europe.
Newswire services earlier today and are currently available all life joining us today are chairman and CEO Mr. Logan John.
All our CFO, Mr Chin told G.
This is Mr. Tell me a little our S E T.
Mr shall clearly, although the secretary of the board will also be available during the question and I'll also social history.
Mr. John will start the call by providing an overview of the company.
Our performance highlights for the quarter, Tony will then provide the detail on the company's operating and financial results.
Before we open the call up for your questions.
Before we continue I would like to refer you to our safe Harbor statement.
In our earliest perfect in our earnings press release.
Which also applies to this call as.
We will be making forward looking forward looking statements.
Please also note that we will discuss non-GAAP measures today.
Which are more authority at play at all where we called out to the most comparable measures reported under the generally accepted accounting principles in our earnings press release and filings with the SEC.
With that I will now turn the call over to our chairman and CEO. Mr. Zhang. Please go ahead Sir.
[noise] alcohol.
As shown on slide 10.
Don Engle.
Oh My God, that's your goal.
Yeah.
Oh gosh.
Gotcha.
Hello, everyone. This is me for this is not going down China feel of kind of I will now provide a brief overview of our programming in the second quarter of 2021.
Switching gears.
You can do about that.
Yes.
Timberland Greenfield contract.
You can do what we can learn to read a cello sandy if a turbocharge when are you going to yourself. Thank.
Thank you.
How about you.
With that back to any tier one contract with mobile.
In fact, Dr Qi to one buyer.
You don't see my guidance.
You're cheating from mobile.
Thank you.
Sure Yeah. Thank you.
Maybe.
Drug quality, we tend to have a useful one megawatt.
Save me Wolfcamp quiet room zone shallow Saint Vincent. Thank you should have seen in Europe, Sandy or you got it.
Sure so tend to have our Chicago Mega, we should actually get either anti <unk> two in Europe.
Since may of this year, the promulgation of a fuel regulatory policies don't this coal mining.
<unk> had a sort of in house, although total computing power of the Big call network did call prices.
Nevertheless, we have developed our overseas business in otherwise secured purchase contracts with multiple large scale mining companies.
Such we were able to reach record high revenue of RMB 1081.8 million.
That is a 167.5 million U S dollars during the second quarter.
While our gross profit, which RMB $428.0 million.
Which is 66.2.
2 million U S dollar.
Our non-GAAP net income reached RMB 321 million, which is U S $55.0 million.
The last dollar, making our marking a historical high since our IPO.
And she's a woman TV downtown cool foundry from trauma corridor when didn't travel vouchers.
But you're saying, it's you've come down.
Since you're not.
Michael will now help answer your question.
In the second quarter, we continue to strengthen our collaborations with Schlumberger contrary to stabilize our production capabilities.
We're upgrading our technology and.
Each group all were a product yield.
These improvements have been well recognized by our customers who have placed some more new and renewal orders as a result.
Our people work.
Shimon.
Are.
GTO triage, even more barracuda cohort that you get a new evening run their usual path, we will miss talking to you I'm kidding, what's your kind of sometimes people want you're really forecast you don't want me, you'll now know you called out yet.
As you can get half years old.
Oh Gee do assumed all of social media and we're doing that.
People more Europe, auditing and thoughtful about and talked about.
Although we closed a registered direct offering.
$117 million in the second quarter as of June 30, 'twenty, one nuance, we had a $163.0 million in U S dollar in advances from customers.
Which has allowed us to secure a wafer supply from our foundry partners and better support all of our chip production.
At the same time, our strong cash position has enabled us to other salaries, our R&D team expansion.
Lots of months of new product.
During the second quarter of 2021 we attracted 45, new technology talent to join our team representing 28% of our total RMB team asphalt the quarter ends.
Oh, Dear Oh, My God, Shiva will mesh with shallow too Keith.
So I need a chockfull telephonics with balance sheet will be for Cingal bulk.
Baltimore.
Yeah.
T J J on buy backs income Shikoku shortfall Jones, you form part of our culture.
In terms of our mining machine itself, we delivered overall, Boston five 9 million powerhouse of computing power to our clients in the second quarter of Plum anytime you want <unk>.
<unk> historical new high for sales performance lock.
<unk> orders included tens of thousands of high performance mining machines from also the infrastructure group and the Genesis digital assets.
Thanks, you know them they get from us on the extra truth, Apple do things out future already at Union until we are sure Mutual Fund me your thought on October <unk>.
I was hoping that you can tie that already are in Indonesia.
Meanwhile, our please feel computing power has continued to increase significantly I felt September tons plenty plenty one hour. Please feel computing power reached a nine point 11 million power hash out.
Orders are now scheduled huge learned plenty plenty too.
Mutual fund me with Apple.
Yes.
So your fourth quarter applicant future agile more neutral upon thought all about speed and maybe truck OEM new emitter.
Ginger or the army yeah yeah.
Yeah. Thank you got it and be thoughtful about allo 500, <unk>. So she didn't actually.
Therefore for.
A quarter ago continues should help crunching harmful.
Sure well you saw quite a busy trying to teach and things kind of tailed off John too crazy people passionate and parallel UK ballgame, so looking here I'm sorry.
The significant increase in our presale computing power has led to a user.
A potential increase in our advances from customers.
As of June 32021, our advances from customers have flourished.
161, 2 million U S dollars, representing an increase of 141, 8% at the end of 2020.
Throughout our client's collaboration we will adjust the volume I'll presell order and the proportion of advances from customers. According to the market conditions and our expectations.
This help us partially offset the impact of market volatility and <unk>.
Better secure our supply chain.
So you walk in you will tell me I know you're dripping.
Well <unk>, yes, sorry, she's got portal, so that when people social GTT is a newer factory anything one time in fact.
There wasn't kind of a plant contract Virginia.
When you compare them to deal with Europe, Houston, Shaban Tucson, Neither T T achieved two cheesecake trough our tools.
Well thanks.
Sure.
Generally you will create without going through dose tissues alcohol, hopefully that June can teach out without seeing a longtime agreement.
Regarding our self operated in mining we have been hearing to the business philosophy of operating in a compliant with the law and regulations.
The first batch of mining machines deployed will pocket Uh huh.
By hour by hour fully all the subsidy in Singapore has been in operation since early choice.
And the bitcoin.
So bitcoin production is stable.
We expect to ship all of the second batch of mining machines with the computing power of.
Quint.
85 million tallahatchie.
For a second.
So ourself.
Operating mining business continues to be one of our strategic focuses in the future. We will continue to expand the scale of our self operated mining business, while also adhering to the law and regulation.
Yes.
Yes.
No it tends to be drilled <unk> freedom ago can be found on our passenger you buyers. We are soon okay.
Total to prevent that up for me is what do you put out an Italian.
If you can indulge you can bring on several what we all see as people wanted me I'd say that I'm not sure what you actually hold actually Chuck Robbins.
Our R&D expenses reached about.
Exceed 4 million RMB, which is.
$18.0 million U S dollars in the second quarter increase.
Increasing by 145, 4% year over year.
With the increased investments in the R&D.
We have also.
Steadily expand our R&D team by attracting more talent to join us.
Previously mentioned, we have newly hired 45, new technology talent, who are mainly responsible for technology and management IC Franck design IC backgrounds design and all the rest of the block.
Got it.
Did you cool.
See that you can take out.
Jonathan you framed by the industry with our.
We also expect with Paypal Paypal the next generation chip in the fourth quarter and anticipate to have the overall pro forma inclusive of 15% to 20%.
Yeah Okay.
Sure sure capital a downward bias.
So you can kind of reloading.
Treasury contingent Colbert Chicago, Zhaokui income, reaching care and we are doing in Santa Clara, which under a time consuming one housekeeping on assembly.
So you can crash a total can do.
Adding does that soon will have seen that I actually can't tell us anything on the peso.
In terms of yeah displays we released the tundra, Hey, let's see one zero in try to address the demand of high end application scenarios.
Typically in times of mutual on local processing.
Great Hey, 51 zero its computing power is.
Approximately three times higher than that of previous chipped in our region.
Uh huh.
We also started our R&D efforts for the <unk>.
Plenty of three zero. This is the next generation AI chips that will outperform our current pay plenty want the old products.
When we actually have 20 itself all year shutdowns you can go shopping.
George in your 10-Q.
All right.
Okay cool.
We have a sheet exponential growth in our overall AI should sales.
<unk> increased by 335% in the first half of the 20th only one from the same period last year.
Oh, the army here into Russia EMEA.
The Union Junior charter to Jan <unk>, who talk to you.
Although I'm sure that we get.
T mobile should do again, the Obama era.
Sure sure.
I apologize.
Between September plenty.
'twenty 'twenty on September 12, plus anytime you want the company have cumulatively deployed approximately $12.0 million U S dollars to repurchase approximately two points from Q1 million under the company's share repurchase program.
Further demonstrating our coffee those in kind of growth potential.
Junior I'm not sure that it shouldn't have hung in Toronto, and then keeps our top two thanks to the team of Paragon Huntington himself.
From the HIFU there as you do better commercial offer a whole issuers seek out anti infrastructure.
So now what's in February on the <unk>.
Gotcha.
Cohort four closer to in the future opportunity.
Despite the impact to our business operations from industry wide chip supply is stability in the second quarter, we still achieved successful quarterly revenue since our IPO on behalf of kind of I would like to take this opportunity to express our sincere gratitude to our.
Partners customers and investors for their support and trust.
You should make sure know EMEA seeing what's your posture, you think Virginia pushup hold true on a cold ones out with our full suite of Guanajuato.
So the quantity of opportunities coming out.
You mentioned, how political quantity from kind of culture.
So in the meantime, we have further closer and our senior management team.
Viking professionals with global vision profound experience on the expenses with forces, who joined kind of such efforts have enabled us to optimize our management and operations.
Well also achieving more.
Fish's process management and collaboration among different departments.
I know Mr. Shuang Ya industry as shown by the Doctor at home vague on that program that I couldn't do Oklahoma payoffs yeah.
Hum.
Are they are you know since you do 4 million true junk argued with Samsung drop our fingers should also ashworth.
Total bullshit country from which I'm not sure you're too young to Concord cheap.
Shanghai commercial people.
Going forward, we will continue to build on our successes in the first half of this year to create increasing value for all of our <expletive> shareholders.
We expect that our revenue in the first quarter was lumpy lumpy, one will increase by 10% to 30%, although a sequential basis.
Please note that this forecast reflects our current and preliminary review on the market and operational conditions, which are subject to change.
Well, it's just hard to figure that out, which I know you're attuned to Apple Josh.
This concludes my prepared remarks, I will now turn the call work our CFO Jim.
Thank you Mr. Dong Hello, everyone. This is James.
Mccann in early August as is.
CFO.
And I'm happy to communicate with you on our earnings call.
We delivered a remarkable set of Dakota I wish I will here to witness the progress of reaching the achievements.
We realized a record high in multiple financial metrics in the quarter.
But typically we generated a robust revenue of RMB 1081, 8 million, which is the $172.0 million in U S dollars.
The highest sales record in our history two things.
The improved impressive top line performance for the quarter setting a solid foundation for our profitability.
As such we achieved a non-GAAP net profit of RMB 245 zero million.
49 six.
Million U S dollar.
Once again demonstrate our historical new heights since our IPO.
Additionally, our larger motto preorders have brought abundance advances from customers.
Which further generates strong and the continuous cash inflows.
This enabled us to secure future wafer supply grow our research and development team and carry out.
Strategic investments.
On top of our encouraging performance.
We are also fully aware of some industry wide challenges.
These include a bitcoin price fluctuation wafer supply stability, rather luxury uncertainties in different countries et cetera.
Despite these dynamics, we remain confident in the long term prospects of the industry.
With our tech knowledge equally otherwise.
Precise management of cash flows so all any of the business operating capability and the efficient execution of strategies.
We are ready to zoom, along our growth trajectory.
No.
For the quarter.
Total net revenue increased by 500.073 percent year over year and increased by 168, 6% quarter over quarter to RMB $1082.8
8 million, mainly due to the substantial increase in total computing power sold.
Cost of revenues increased to RMB $660.0 million.
Year over year and sequential increases were in line with the increases in the company's parent Hush sales volume and of course, the Terra Hush.
Gross profit was RMB $428.0 million.
887% year over year, and up $119, 9% quarter over quarter.
Total operating expenses were RMB, $267.0 million compared to RMB $64.0 million in the same period of the old 'twenty 'twenty.
And RMB 200 of zero $16.0 million in the first quarter of 2021.
As the company has.
Investments in R&D effort, and our sales bonus spending during the quarter.
Research and development expenses were RMB 64.0 million, increasing by 145, 4% year over year, and increasing by 10% quarter over quarter.
The increase was primarily.
Actually beautiful Tula increase the headcount in technology related departments.
Income from operations was RMB $170.0 million compared to operating loss in the same period of 2020, and then in the first quarter 2021.
Net income attributed attributable to ordinary shareholders reached a new high since the company's IPO to RMB $245 zero million.
Compared to a net loss of RMB $24.0 million in the same period of 2020.
And a net income of RMB $3.0 million in the first quarter of 2021.
Non-GAAP adjusted net income was RMB $321 million compared it to our non-GAAP adjusted net loss of RMB 16.0 million units than purely though 2020 and a non-GAAP adjusted net income of RMB $145.0 million.
In the first quarter of 2021.
Non-GAAP adjusted net income excludes share based compensation expenses.
The change in fair value of warrant liability.
Basic and diluted net earnings per ads for the quarter were RMB 146, and RMB 140 of Zillow, respectively.
As of June 32021.
The company had a cash and cash equivalents of RMB $1222.0 million.
211, 8% compared to RMB $394.0 million as of December 31, 70.20.
This concludes our prepared remarks.
We are now open for questions.
Thank you Steve.
The question and answer session.
All participants on today's call.
And to management in Chinese.
We immediately the Ctrip question that English.
To ask a question you want me to start.
Telephone.
Question. Please.
Nissan.
Right.
Okay.
Please press star one.
That's my first question comes from the line.
Jim.
Okay.
Please go ahead.
Hey, Glenn anytime I'll come to you Tom.
Okay.
Oh.
When we come out.
Jim.
One small one type of Bobby back.
Your income.
Okay.
Doug.
No you're waiting to go tongue into chocolate, that's what I'm talking about.
A chocolate bar.
Yeah.
With me.
Got it.
Uh huh.
We have seen no tenant and signed the long term.
Yeah.
Any changes in the market.
When you apply it.
Oh my goodness.
Oh there.
Oh, they're lower than.
For one type of purchase.
What went up and not having one.
R&R Union.
Hi, Bryan Caronia, you're calling them to you should be at least 300 quota.
So you end up hanging from grocery.
Collins equaled $4 from each of them comes out.
It's just that you're gonna runoff sanyo.
We found him to 10 grandchildren.
Grandson of teaching.
No phonological SCHUNK.
Hum.
Hum in the phone call.
Q to.
The coupon that would hold conduct.
I'll take the teco cohorts, you're going to tell them in Angola quadrant hung human during Q1 from Q T R.
Jayson and she said she was a woman.
You don't we don't Congo, Chile comes out of it.
Yes.
So there's plenty plenty one we have also served to increase the recognition of crypto currencies growth potential by overseas professional institutions and a substantial increase the number of institutional players in the cryptocurrency mining business.
In general this institutional players usually set up special funds for their operational close for a period of three years or longer.
Around the construction and operation of their mining farms stage by stage, only a quarterly or monthly basis.
As such these mining companies I'm more inclined to cooperate with mining mushroom players a supplier such such as kind of what kind of issue or a longer term.
That is supply.
This is the primary reason of this is the primary reason for the increase in our long her order for mining machines.
And this guidance.
Sure.
Uh huh, she wants them backwards, how horsing around their childhood, how do you see for fever.
So onto a critical path.
The cartoon on T shirts, but I'm.
Mr Archer, Cleveland quicker easier to a whole.
When I called upon and what should I forgot to now EMEA Huntington are contributing to the consortium of DCM, Oakland Manhattan turned on 4 million yourself.
Do you mind.
Sure.
Sure you won't know that for at home a chunk.
That's your own Oh I've tried to.
Okay.
Thank you drew.
Can we go to two countries.
What I'm trying to I'm not sure Paul Hi, one cohort to the.
Trunks either.
Hi, Omar.
The housing lock on the J curve coupon the BD and I'm sure. If we don't have to take into account all.
According to the latest SEC situations, where you set the prices for our spot sales on preorder, referring to market trends.
Generally the price gap between 10% to 20%.
We will also extend solid discounts to our clients.
From the company's perspective, well, we need to try our best.
The negative impact of market uncertainties on the company's operation and supply chain.
At the same time, we will like to glass, whereas the upside momentum when the market is for Sperry.
As such we have been dynamically adjusting our mining machine allocation among future contract sales spot sales and self operated mining according to market situations, our production capabilities and our clients demand.
Is it.
No.
Yeah, when we canceled.
Hum.
Hum.
No no.
Uh huh.
Okay.
Do we have.
No.
Or.
Sure.
Oh yeah.
I don't want to put out to everyone.
Sure.
When I talk with your top country.
Oh sure.
Kudos to an autobiography, a true change in law.
Yeah, Judah swimming in sheet of Deutsche Bank.
Coming now to come on that.
Australia and China.
That's helpful.
So you were Jewish and signed off on it.
And what you said Covid real quick.
On a reported a bulk Rodrigo cultural done a ton on mobile me as high school of thought of you pay a corner at all.
Sure.
I was going to more countries in eastern Europe trend training going on in China.
Sure Jim.
And there wasn't a whole suite of channels.
For example, China.
A woman a junior anchor.
Okay.
Hey, Joe.
I know how on a woman.
Oh sure policy victims unfold.
Cycle time, with Humana I turned them clean production G box.
Nail them you need to have control of material.
That's a general trend.
Okay.
Sure it should be done with Europe.
So we are under negotiation with our foundry partners regarding wafer production for the actually next a nine to 18 months, namely.
Namely till the second half of next year.
Especially we are also taking measures to secure factory capabilities for the packaging and testing phases of IC manufacturing.
Which investors typically pay less attention to.
In light of the overall instability or production capabilities throughout the entire IC industrial chain.
We believe our production capability and supply chain are well managed.
Our production capability allocation full wafer packaging and testing is also reasonable.
Which enabled us to keep the high and low production cycle from wafer to mining machines available for sales.
To be around 120 days average.
So this is not being prolonged.
So far our wafer supply is also relatively stable.
Okay.
Okay.
Sometimes it's Sean.
Let's see.
So if you went out to bid.
Can you go to your Intel.
Don.
It has been.
Sounds like you didn't cut two ways.
Thank you.
None of them not all kinds of incidents and it would be buying a home.
Yeah.
Can eat at home.
We tend to attendance based on corn.
Thanks, Paul.
Hum.
We have here at all.
Hmm.
We had a chance to get.
Oh yeah.
And the deal.
Foundry.
And.
All right.
And then speaking here.
No.
Could you elaborate on Europe man.
Innovation.
Foundry capacity from TSMC, Samsung and F N b.
Uh huh.
Should your channels.
Denver trigger chunks sugar sure Shawn and Donna.
The technical work and work stream.
Until where you won't you don't trigger you would have known people, calling us to mobile.
Sure.
Hum.
That's.
Patrick we're dealing with Covid.
Sure.
Relevant to the awards the chartering rates, which are 10 two for a woman.
And not to go from here and also show the kind of deal.
How many are Freaky man Buda.
Sure well, Michelle you've caught our turnaround from a change in control.
Sure.
So it will include all of the EBITA.
So he says we're showing a woman Oakland Hong Kong them.
Reported income.
Charter owner of it.
If youre not going to get hung up on Huawei, Virginia.
You want to find out a general shrunk tunnel.
That should not trigger.
I'm not sure how to treat or if you're not sure sure.
To a cyclical turn around until final maturity.
Yes, absolutely.
Sure.
So for me I think it shows you to Sean.
So you know on the country in general.
Fujifilm and open the floor.
Good evening.
Do you know what you do.
Which have more mature male and they don't do it all and so we're hoping for that.
<unk> founder Don.
Hopefully for me on the jump off from that.
Sure No harvest Shuang and Ya for Europe, <unk> not always sure.
Power outage at triangle.
Yes.
So TSMC is a foundry partner with large manufacturing capability.
And also a large number of customers.
There will be excess capacity from time to time concept by occasionally only expected changes to its capacity allocation.
This will be an opportunity for us to leverage is excellent.
The capacity, if we have to patch property an hour, but the funding.
Here I would like to reiterate what I previously mentioned.
We need to be well prepared to graph to grasp all spot of supplying capability from foundry partners.
This holds true for the entire industry for a long period of time.
Because we rely on the excess capacity of fungal upon earth cutting edge fabrication fabrication production lines.
In the Meanwhile, this long term market situation requires a substantial allocation of personnel our personnel resources to do a large amount of product design work.
Consequently requires.
Substantial investments in the R&D.
As a result, we have to evaluate the four phone calls and through Treehouse to form our operational costs.
We have sustained our offers all of this over the past several years.
Although we haven't received any verbal or written down to from our upstream partners.
We are trying our best to secure additional capacity from phone group Honduras.
Me too.
Okay.
What's really when do you see them.
Blame them.
Uh huh.
Hum.
Yeah, it would be possible at some point.
So Paul how are you.
No.
One woman constant Oh, excuse me pretty bad.
Sure.
Oh, sorry.
My next question you've been involved in the gross margin.
Model one.
It's being Mexico bathroom for half a year.
Yeah, all right.
Right.
And you're going to find that an improvement in.
And one.
It's Martin.
Uh huh.
Thank you called off our furniture treat trauma.
So you don't you can go down either coming from digital now.
Uh huh.
Well known to everyone.
Uhm.
I know all of our jobs Shandong.
I'm also pleased to have 100 pisano woman to accumulate what are you trying to from a doctor at all either transform.
China chocolate.
Yeah.
So carty hour of yellow red hat.
But for over 90%.
With the improving Gil rate our product cost has been reduced.
However, the overall material price increase across the industry.
Partially offset the gross profit increase.
So that's the current situation.
Sure.
Right.
Each of them.
Thank you.
The next question comes from the line of.
I'll.
Okay.
Please go ahead.
Okay.
Sure.
Sure.
Yeah.
Hmm.
Yeah.
Okay.
Or something like that.
Oh, okay.
Yeah.
Uh huh.
Oh yeah.
Hum.
Mhm.
Yeah.
Okay.
Due to Covid.
Yes.
Thank you.
That's one.
Yes.
Uh huh.
Tucson, Florida woman troops in two major weird, which.
T J.
She began her trumps equal too soon.
No trigger Chengdu autonomy rumanian jewel for Europe, and trying to get to.
Tito upon the switch out upon the woman to an empty facility that went through for your machines are that you intend to drill the tool kit.
Torturing the autonomy that we teach them about the mutual dosher.
Woman she decided upon a TCR chagrin, Jude J E T soon to generate shooting to harvest.
I don't know if you've kind of traditional countries that won't come back to Linda.
So even though they are arguing for a closer look at the general upon a whole meal.
General country bar.
Let's go to the money foundry that brought it.
Telling them.
So we generally have a product iteration every nine months.
According to the pace, we anticipate to release.
One to two new products in the next year.
And also we expect to Paypal Paypal, our new iterations of cheap in the fourth quarter.
Which is estimated to have a overall performance increasing by 15% to 20%.
We now define a product model according to its computing performance.
I would also note and.
That's a D factories.
Additionally, we will speak to our phone Green partnership strategy.
Yeah.
Hum.
Hum.
Mhm.
Hum.
Yeah.
Hum.
Hum.
Yeah.
Hum.
Hum.
Okay.
Yeah.
[noise] oxygen.
Sure Peter upon a woman she cannot afford who's going to do it.
So the teacher.
Neither.
Hong Kong kind of freeing them up.
The convertible offering on that deal.
Guarantee its still not sure box of lunch Houston, neither teach you.
Chita was born out of a hospital.
From a NAND the Puget sound.
So for now we don't know.
Oh, I'm sure Youll Schoenhof, Okay cool pool.
<unk> seen the.
People, who don't tissue corridor.
Go ahead Hugh.
Our pharma food travel agent bookings from the terminal.
So I'm not too sure women lineup with Apple hospitals will achieve a chimney, China to put out they can walk home if we want to you probably won't.
So the first batch of finding machines deployed who okay. Upon by our Singapore subsidiary.
Been in operations since early June.
He called a bitcoin production is very stable.
The second batch of mining machines with computing power off.
Hungary 50000 parent cash is expected to be shipped out from the factory very soon.
The challenge for the first half of this year.
Mainly resulted from the large sales one of our machines.
We need to we actually did prioritize and fulfill our customers' order first.
There is not much left over for our self operated mining.
As we just mentioned in our prepared remarks.
The self operated mining business.
I mean, one of our strategic business units.
We will continue to expand the scale of our self operated operated computing power, while also adhering to the relevant laws and regulations.
Yeah.
Hum.
Hum.
Hum.
Hum.
Okay.
Yes.
Sure.
Yes.
Can you elaborate more on camel.
Mhm.
Uh huh.
She loved them.
They contribute.
Maybe what's on hold for your job for a few quarters.
Permanent.
I think we really Europe.
Shareholder Chief of C diff.
Tangela town homes.
Certainly Joe countries like China.
Penalties and interest on what kind of a plant in Chile.
And then I realised Hong Kong's huh.
Not a whole lot cheaper.
Oh, we believe pixel work is an outstanding company that is currently undervalued.
They have very strong technology accumulation on the extensive experience in the areas of.
Visual processing.
We believe with kind of otherwise no offense experienced India I see us field.
That's a great collaboration opportunities in the edge AI product.
Mhm.
Thanks.
Hum.
Hmm.
Susan.
Mhm.
I'm also changes.
So that's all true.
Awesome.
Sure.
Hmm.
Well it turns out of things what T shirt.
Welcome to try it on your Biopharma cargo Toyota.
Hmm switches sham completed in prior quarters.
Downtown neighborhood of Seattle.
No.
Hum.
Coffee 200, and grow through cold or hot Haroun assortment from introduction Linda.
I'm, sorry, I didn't hear that.
You're only going to Oklahoma, Tennessee, and freedom to do so.
Two from 'twenty one.
Our tenants I mean, I'll put up your own champion interesting Patrick.
Yes, we have a power from our endeavor to secure production capabilities are the most important thing in my current job or to attract more talent to the company and to improve our internal synergies.
I firmly believe that the current strategy is the correct strategy.
High level sufficient R&D investment.
The necessary conditions for the success of our product.
So therefore, we have set up an equity incentive plan for the selection and retention of talent.
We'll continue to implement data firmly in the future.
Yeah.
Oh yeah.
Oh cool.
Yourself.
Yeah.
Hum.
That's helpful.
Yes.
Yeah.
The Walmart.
Hum.
So that's one.
Okay.
Uh huh.
Okay.
Yeah to name a few the Sudan.
Mobile grew to be sure.
Coming out of China, where all the tricky.
Sure women during the two months you name it time will tell.
Okay.
That will garner.
In April.
Hum.
They were too high in terms of real quality soon though.
Former chromebook future balance if you're a woman sorry in Florida, Florida golf with you for holding.
Yes.
So even though.
Do you have a comment I think what you got.
Tayo Okusanya.
These are $2.
Paragon antifreeze and look kind of interesting.
Interest income.
I've taken a while.
Do you want to answer for what you do.
And then if you are I'm sure a woman.
The videos for GAAP or Franco.
I don't know what's your thought there are countless into central hardball shrink or listen to your home or your screen all I'm, saying.
One Queen Guy about dream.
However, if you recall attuned to it we're going to carefully on what well there you go.
You got to talk to them.
Thanks, you for investors.
So there is even talk to you.
Dropbox in season.
All of these issues are going on.
Okay.
So achieving them.
The number one market share position in the mining industry.
It's absolutely one of our important strategic goals in the short and sweet.
Medium term.
In order to achieve these strategic goals, we have set up some goals internally.
In terms of industry, leading performance of mining machines.
Competitive manufacturing cost.
Sure.
So consequently, we have continued to invest significantly in India.
And our R&D and the supply chain.
We have made encouraging progress all of this problem.
And ultimately we believe.
It's really important for us to adhere to our own pace and strengthen ourselves.
And we believe we will achieve more over the time.
Okay.
Thank you.
Thank you.
There are no further questions now I would like.
Back to you.
Yeah.
Okay.
Oh. Thank you once again for joining US today. If you have further questions. Please feel free to reach us through the contact information provided on our website.
Thank you.
Okay.
Thank you for your participation you may now disconnect.
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to China's second quarter 2021 on these conference calls.
All participants in a listen only mode. After the management's prepared remarks, you guys have a question and answer session.
You want to see you caught it.
Now I would like to turn the conference over to your speaker today Mr.
G Zhang Investor Relations manager of the company. Please go ahead Jack.
Thank you Hello, everyone.
Welcome to our earnings conference call the company's financial and operating results were released mobile Aneel slowly newswire services earlier today and.
Currently available online.
Today, our chairman and CEO, Mr Logan and John <unk>, our CFO, Mr. It's Intel chip.
In addition, Mr <unk> our SVP.
Mr. Sean Connolly, our secretary of the Board will also be available during the question and I'll also session.
John will start the call by providing an overview of the company.
Our performance highlights for the quarter, Tony will then provide the detail on the company's operating and financial results for the <unk>.
Before we open the call up for your questions.
Before we continue I would like to refer you to our safe Harbor statement.
In our earliest park in our earnings press release.
It's also applies to this call.
We will be making forward Cmos for forward looking statements.
Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained at all where we called out to the most comparable measures reported under the generally are subject accounting principles in our earnings press release and filings with the SEC.
With that I will now turn the call over to our chairman and CEO. Mr. Logan. Please go ahead Sir.
Uh huh.
Shannon. Thank you everyone for dialing density Hogan angle.
Antonio Niton didactic all around Europe.
Union.
And NPR C to travel with the team and Rocco.
Hello, everyone. This is Smith for this is not going down China feel of kind of I will now provide a brief overview of our progressing in the second quarter of 2021.
So senior weird.
You can do about that.
Yes.
Timberland Greenfield from <unk>.
You can do what you do with your life.
Suddenly you could kind of what traction are you doing it yourself. Thank.
Daniel you also tend to have Uh huh.
P J well towards that.
Okay.
Your line haul type of Uh huh.
In fact, Dr. Qi Lu one for Bayou and remember you draw for you don't see my guidance.
<unk> mobile.
That'd be assurances that empty showroom.
Yeah. Thank you you may begin.
Drunk audio Chattanooga useful one megawatt.
Save me, what can quiet room, Don Chappel.
These redundancies.
Sandy are you, adding MBS door, so tend to lag in Chicago Mega Michel I figured I had three volt and sequencing hero.
Since may of this year.
Foundation of our fuel regulatory policies on the coal mining.
Have had a sort of impact on the total computing power of the big call network.
This call prices. Nevertheless, we have developed our overseas business in otherwise.
Secured purchase contracts with multiple large scale mining companies.
As such we were able to reach record high revenue of RMB 1081.8 million.
That is a 167.5 million U S dollars during the second quarter.
Meanwhile, our Ross profit, which RMB $428.0 million.
Which is 66 points.
2 million U S dollar.
Our non-GAAP net income reached RMB $321 million, which is U S $55.0 million.
U S dollar, making our marketing at a historical high since our IPO.
<unk> downtown core foundry from Canaccord.
The new term loan B and vault <unk>.
<unk>, Canada.
Since you had your daughter call knock off will now help answer your question Andrew.
In the second quarter, we continued to strengthen our collaborations with fourth quarter to stabilize our production capabilities.
Further upgrade our technology.
And improve our product yields.
The improvements have been well recognized by our customers.
We'll have placed some more new and renewal order as a result.
Yes.
This isn't a hunger to learn.
Again, she may rethink things on paper.
Two more <unk> cohort that you've got new EMEA you profile, we will Miss working syndrome Canyon, which sometimes equally really forecast you don't want me.
What are your thoughts on the debt.
Prior to IPO.
<unk>.
You too.
What's even more Europe auditing until affordable enough about.
We closed a registered direct offering.
$117 million in the second quarter as of June 32021, we had a $163.0 million in U S dollar in advances from customers.
Which has allowed us to secure a wafer supply from our foundry partners and better support our chip production.
At the same time, our strong cash position has enabled us to accelerate our R&D team expansion.
Development of new products.
During the second quarter of 2021.
We attracted 45, new technology talent to join our team representing 28% of our total R&D team asphalt the corner it has.
On a year on year, Yeah Chi the wall national shallow required to prevent teeth on Sunday, that's helpful. Telephonics with banks it will be for Cingal.
<unk> you.
TDA jamba batting Hornsea cohort shortfall Jones.
The bottom line.
In terms of our mining machine sales, we delivered a robust $14.0 million powerhouse of computing power to our clients in the second quarter of 2021, marking a historical new high for sales performance locked.
<unk> orders included tens of thousands of high performance mining machines from also infrastructure group and the Genesis digital assets.
Thanks, Noah Thank you for insomnia, Thanks, Richard with Apple to linger.
Ginger Rd, our union to reassure Mutual fund me your thought on October <unk> key Western European Bank and compare that already are in EMEA.
Meanwhile, our please sale computing power has continued to increase significantly as of September 10, 2021 hour. Please feel computing power reached a nine point 11 million power hash our preorder now scheduled till June 2022.
You transparently without putting <unk> on the back of income.
As you do more essentially neutral found that all of us.
Speed and maybe to avoid a new EMEA.
Ginger already earning more of the SRU Adnan be thoughtful about that about <unk> <unk>.
And so therefore copel quarter over quarter on <unk>.
So where are you from quantity shortage maintained hotel das <unk>.
Two please.
For the entire furniture UK ballgame also looking now Andrea.
The significant increase in our presale computing power has led to.
A substantial increase in our advances from customers as well.
<unk> 2021 our advances from customers has flourished.
$163.0 million, representing an increase of 141, 8% at the end of 2020 throughout our client's collaboration we will adjust the volatile our presale order and the proportion of advances from customers. According to the market conditions.
And our expectations.
This help us partially offset the impact of market volatility and better secure our supply chain.
So in La Jolla will call me Ono, absolutely Dripping Kong.
Inquiries are generally near parity that core food product with advanced neutral GTT is a newer countries inbound contacts.
Hong Kong heterogeneous.
And from your comparable peer Houston Shaban Tucson in the TCE achieved she has maintained hoff our tools.
Sure Jonathan.
So the timing of the year.
Regarding slowdowns tissues alcohol concluded June 10, T cell products in loss on equipment.
Regarding our self operated mining we have been hearing to the business philosophy of operating in compliance with the law and regulation.
The first one batch of mining machines deployed will pocket hub to stand by our.
By our fully owned subsidiary in Singapore has been in operation since early two months.
And the big comp.
So bitcoin production is stable.
We expect to ship out the second batch of mining machines with the computing power of.
Point.
$85 million powerhouse.
For a second as ourself.
Operating in mining business continues to be one of our strategic focuses in the future. We will continue to expand the scale of our self operated mining business, while also adhering to the law and regulation.
And due to <unk>, new tests to about 100 MB drove <unk> <unk> can be found on all of our <unk>. Since we are soon okay.
Total equivalent Java EMEA, what even.
To put our anti <unk> car T, which is our Q3 earnings central where we all see as usual wildly Azure agenda uninsured you actually hold actual sharp oven.
Our R&D expenses reached about.
64 million RMB, which is.
$18.0 million in the second quarter, increasing by 145, 4% year over year.
The increase the investments in the R&D.
We have also.
Steadily expand our R&D team by attracting more talent to join us.
Previously mentioned, we have newly hired 45, new technology talent, who are mainly responsible for technology and management ICF Bronco and design IC background design and all the risks of development developments.
<unk> seen that you can take out you don't.
Our term loan guarantee from above industry.
We also expect with Paypal Paypal, a next generation chip in the fourth quarter and anticipate to have on overall performance improvement of 15% to 20%.
Yeah.
<unk>, so you can kind of eroding.
<unk> founder of <unk>, and we are doing in San Antonio Jenna attempting sooner happy from a fan base, okay and hopefully.
So you can crash a total of 10 days.
Thus the soon to have seen that I actually can't tell us anything on the cutoff.
In terms of AI business, we released the 250.
One zero in July to address this demand of high end application scenarios.
Specifically in terms of visual on Oracle processing.
100, K 51 computing power is.
Approximately three times higher than that of its previous chip generations.
We have.
We also started our R&D efforts for the <unk> 'twenty three zero. This is the next generation of AI chip that will outperform our current <unk> product.
Linearity has won't itself all year trajectory or do you think about international Bonanza, our generic <unk>.
Sure.
Some of our SEC rule.
We have achieved exponential growth in our overall AI should sales, which increased by 335% in the first half of 2021 from the same period of last year.
<unk> EMEA.
Our Union Julia Schroeder, Tidjane <unk>, we bought <unk>.
<unk>, we call <unk>.
T mobile <unk>.
So I'm sure you'll continue to rely upon to ascension.
Between September <unk> 2020 on September 12, 2021, the company has cumulatively deployed approximately $12.0 million to repurchase approximately $261 million under the company's share repurchase program.
Further.
Illustrating our confidence in kind of growth potential.
Yes.
Yeah, no sure Chimera of <unk>.
To obtain a paragon <unk> income.
From the highest of our argued all large collection shortfall issue <unk> got here.
So now what's <unk> mobile cohort for closer in the future of Virginia.
Despite the impact to our business operations from industry wide chip supply is stability in the second quarter with new achieved successful quarterly revenue since our IPO on behalf of kind of I would like to take this opportunity to express our sincere gratitude to our.
Partners customers and investors for their support and trust.
You should make sure know EMEA <unk>, what's your posture, you think with senior portion of Australia on a cold ones out with a full suite of volatile from peninsula quantity continue I'm going to ophthalmologists, who mentioned half of Europe quantity from Janet wholesale.
So in the meantime, we have further strengthened our senior management team by inviting professionals with global vision profound experience on the <unk>.
This was forces who are drilling kind of such efforts have enabled us to optimize our management and operations, while also achieving a more efficient process management and collaboration among different departments.
Deterrent to sue on your industry as shown by NAND, Yes, you pruned ruptured hall.
That program that I can book a holiday shift.
Julian <unk> from UBS.
Scott already arguing SMT four 4 million from Intel and shown to argue to Samsung drop our fingers should also azure territories for both fluke and <unk>, which I'm not sure <unk> Concord fleet achieved.
Should you have Shinhan financial control.
Going forward, we will continue to build on our successes in the front half of this year to create increasing value for all of our shareholders.
Our revenue in the first quarter of <unk> will increase by 10% to 30% all a sequential basis.
Please note that this forecast reflects our current and preliminary review on the market and operational conditions, which are subject to change.
We will let you talk about senior that scenario tuning CFO Josh.
This concludes my prepared remarks, I will now turn the call over to our CFO.
Yes.
Thank you Mr. Dong Hello, everyone. This is Jane.
I joined <unk> in early August as the CFO.
Im happy to communicate with you on our earnings call.
We delivered a remarkable second quarter I wish I will here to witness the progress of reaching the achievements.
We realized a record high in multiple financial metrics in the quarter.
Typically we generated a robust revenue of RMB 1081, 8 million, which is 167.5 million U S dollars.
The highest sales record in our history to date.
The improved impressive top line performance for the quarter set a solid foundation for our profitability.
As such we achieved a non-GAAP net profit of RMB 245 zero million $55.0 million.
U S dollar once again demonstrate our historical new heights since our IPO.
Additionally, our larger motto preorders have brought abundance advances from customers.
Which further generated strong and continuous cash inflow. This enabled us to secure future wafer supply grow our research and the development team and carry out.
<unk> investments.
On top of our encouraging performance we.
We are also fully aware of some industry wide challenges.
These include a bitcoin price fluctuation.
Wafer supply stability regulatory uncertainties and different countries et cetera.
Despite these dynamics, we remain confident in the long term prospects of the industry.
With our technology colli otherwise.
Precise management of cash flows.
Many of the business operating capability and the efficient execution of strategies.
We are ready to zoom, along our growth trajectory.
No.
For the quarter.
Total net revenue increased by 500.073 percent year over year and increased by 168, 6% quarter on quarter to RMB 1081 eight.
8 million, mainly due to the substantial increase in total computing power sold.
Cost of revenue increased to RMB $660.0 million.
Year over year and sequential increases were in line with the increases in the company's Taro flash sales volume and the cost the Taro Hush.
Gross profit was RMB $428.0 million.
887% year over year, and up 119, 9% quarter over quarter.
Total operating expenses were RMB, $267.0 million compared to RMB $64.0 million in the same period of 2020.
And RMB 200 zero $16.0 million in the first quarter of 2021.
As the company.
Investments in R&D efforts and our sales bonus spending during the quarter.
Research and development expenses were RMB 64 zero million, increasing by 145, 4% year over year, and increasing by 10% quarter over quarter.
The increase was primarily.
<unk> actually beautiful Tula increase the headcount in technology related departments.
Income from operations was RMB 165, 5 million compared to operating loss in the same period of 2020, and then in the first quarter of 2021.
Net income attributed attributable to ordinary shareholders reached a new high since the Companys IPO to RMB $245 zero million.
Compared to a net loss of RMB $24.0 million in the same period of 2020 and a net income of RMB, one 2 million in the first quarter of 2021.
Non-GAAP adjusted net income was RMB $321 million compared to a non-GAAP adjusted net loss of RMB 16.0 million in the same period of 2020, and our non-GAAP adjusted net income of RMB $145.0 million.
In the first quarter of 2021.
Non-GAAP adjusted net income excludes share based compensation expenses and a change in fair value of warrant liability.
Basic and diluted net earnings per ADR.
For the quarter were RMB, 146, and RMB 140 zero respectively.
As of June 32021, the company had cash and cash equivalents of RMB $1222.0 million up 211, 8% compared to RMB $394.0 million as of December 31.
2020.
This concludes our prepared remarks.
We are now open for questions.
Thank you Steve.
We will now begin the question and answer session.
Benefit of all participants on today's call HDD shocked me a question to management in Chinese EMEA.
Please proceed your question I think you're right.
To ask a question you will need to address and.
Telephone did withdraw your question.
Question. Please.
Nissan by mobile.
Thank you.
Once the economy.
Please press star one.
Your first question comes from the line of.
Cheng.
Okay.
Please go ahead.
Hey, Glenn.
Hey, Tom.
<unk>.
Well Michael Foods channel.
<unk> got one just bought one type of dialing back.
To your income totaled $10.
Doug.
Why does it go tongue into Jackie that's what I'm talking about Jack.
Exactly yeah.
1000 <unk>.
Google Microsoft.
Yes.
We have seen like Hana and sign the long term.
Yes.
Any changes from the market.
When you apply it.
Of mining machine for a long term holder.
Average client.
Lower than mining machine for onetime purchase.
We're also not having one.
Tirasemtiv R&R EMEA ivano.
You called out to you should look for visa.
We ended the quarter.
<unk> high income countries.
<unk> equaled $4 for maintenance of Mcdonald's.
Just as you all know to compound our sanya for the E <unk>.
How much OEM groupon alone to Jan <unk> <unk>.
Phonological under the shop portion of art Harmon upon her journey.
<unk> for the year to the key highlights would hold Honda.
Given that you sold total woman.
You don't we don't Congo, Chile comes out of input regarding guidance.
For 2021, we have observed increased regulation of crypto currencies growth potential by Aurora.
These professional institutions and a substantial increase the number of institutional players in the crypto currency mining business.
In general these institutional players usually set up special funds for their operational plans for a period of three years or longer.
They are around the construction and operation of their mining farms stage by stage on a quarterly or monthly basis.
As such.
These mining companies are more inclined to cooperate with mining machine player.
Suppliers, such such as kind of who can ensure a longer term answer.
That is supply.
This is the primary reason of this is the primary reason for the increase in our longer order for mining machines.
And this time <unk> <unk> Jefferies.
A recent wall Honda <unk> Horton brand their childhood hydrogen for fever.
Sure thing Paul.
The cartoon on tissue, sorry, but I missed shar sure.
We will move quickly to a halt.
Some of our shorter Carnival Judah I first got to know EMEA shook out long term opportunity with the consortium of DCA and Laguardia and turned on for John.
Oh sure.
Sure <unk>.
At home.
Sure hold on student I've started poop.
Thank you drew.
Can we be important going onto <unk>.
And I'm not sure Paul Hydro cohort <unk>, which you do if.
We don't consider the high on the shareholding the houses in longhorn as each year.
<unk> will materially with hydrogen.
Hello.
According to the latest SEC situations, we assess our prices for our salt sales on preorder, referring to market trends.
Generally the price gap is between 10% to 20%.
We will also extend solid discounts to our clients.
The Companys perspective, well, we need to try our best Huawei negative impact of market uncertainty on the company's operations and supply chain.
At the same time, we will like to glass glass the upside momentum when the market is cross selling.
As such we have been dynamically adjusting our mining machine allocation among future contract sales.
Sales and self operated mining according to market situations.
<unk> capabilities and our clients demand.
Yes.
No you're fine.
Yeah, when we canceled jumped on feedback.
If you watch element snowfall.
I mean, she's going to go to England.
I don't think that's perfect.
Yes.
We enhance our balance sheet.
No waver from our Unrecovered costs.
Oh yeah.
I don't want authorized revenue.
Sure Tim.
Thanks Sundar.
Our country.
Turning to our full Sheila <unk> true change in law.
To reforming and sheet of Deutsche Bank.
Near term our net interest revenue.
In Central Europe.
Yes.
So you will Jason touched upon on what are the kind of environment.
What's your shareholder growth.
On a reported a bulk ordering a functional done a ton on mobile.
Yes, sure Todd EBIT quarter at all.
I was going to do more.
The panel is temporary trend triangular channel.
Sure Jim.
So now we're going home sooner challenging horizontal <unk>.
Examples for us.
Women are too young for footwear channel antenna <unk>.
Hmm.
China hormones.
Asher policy veterans intracellular unfold luxury bar several comments you made 100 octane production gave ultimate oil.
Naomi champion trial material shortfall.
So Jim which are not monitored tier, including when you're sure you should be done one deal.
So we are under negotiation with our funding partners regarding wafer production for the actually next a nine to 18 months, namely till the second half of next year.
Especially we are also taking measures to secure factory capabilities for the packaging and testing phases of IC manufacturing.
Which investors typically pay less attention to.
In light of the overall instability of production capability.
The entire IC industrial chain.
We believe our production capability and supply chain are well managed.
Our production capability allocation for wafer packaging and testing is also reasonable.
This enabled us to keep the time production cycle from wafer through mining machines available for sales to be around 120 days in average.
So this is not been prolonged so far our wafer supply is also relatively stable.
Susan.
Hey, Julien.
Sure.
Chop onions senior fantasy.
So if you went out to Medina.
Congrats on your income.
The old man routine.
That argument.
Sean said you can't cut guidance.
Who wins.
Wade.
Not all kinds of incidents and it will be down the hall.
Yeah, Yeah yeah.
Thank you Keith.
Tenants based on corn.
Paul.
Yeah.
We have here all the information from that.
Hum.
Oh, the chance to learn from.
And the deal.
Martin Your foundry partners.
Paul.
All of our long term goal for it and then.
You'd rather than two.
Could you elaborate on Europe man.
The integration of the.
Foundry capacity from TSMC, Samsung and F N b.
Paul.
Should your channels.
Agenda Jumbotron insurance insurers.
Technical <unk>.
Until <unk> trigger you would have known <unk> polymer launch of Ultrashape.
Okay.
However.
Thanks.
Similar to Europe petrol credulity ultra visitor.
The short term.
The relevant to reward the shortfall here Intel.
10.
Sure.
Performance in Azure hung international shareholder Dr. Trang.
<unk> data.
Sure well, Michelle you called out sooner and Commerce engine control.
So it will include all of the EBITA.
So Lisa to reform a woman opened Hong Kong shrimp.
Reporting to them.
From charter owners.
<unk> already Virginia income number.
What he wanted on Truvada shown good handle.
That should not trigger.
<unk> sure.
Sure sure.
To a cyclical turnaround for Danone in surety.
Absolutely.
Sure.
344 million charge to show.
Fortunately we're in general.
200 <unk>.
Good evening gentlemen.
Shaft will mature male hanging on to it.
Welcome aboard Andre gunshot wound from them.
For sure we are neutral bottle.
Sure no more hydrogen Huron Nino for Europe, <unk> not always here.
Turning to Colorado channel.
Al.
So TSMC is a foundry partner with large manufacturing capability and also a large number of customers.
There will be excess capacity from time to time concept by occasionally only expected changes to lease capacity allocation.
This will be an opportunity for us to leverage is excellent.
Besides capacity, if we have prepared properly in our business planning.
Here I would like to reiterate what I agree with inflation.
We need to be well prepared to graph to grasp all spot of supplying capability from foundry partners.
This holds true for the entire industry for a long period of time.
Because we rely on the excess capacity of <unk> hundred cutting edge Fabio patients a fabrication production lines.
In the Meanwhile, this long term market situation requires a substantial allocation of personnel personnel resources to do a large amount of product design work.
Consequently requires.
Substantial investments in the R&D.
As a result, we have to reevaluate the four phone calls and to treat half to form our operational plans.
We have sustained our efforts on this over the past several years.
Although we haven't received any verbal or written guarantees from our upstream partners.
We are trying our best to secure additional capacity from <unk> 102022.
What's really.
Hum.
Neil.
Because I guess it would be possible at some point profit.
Have you been malave CFO.
Okay.
Yeah.
He did that.
I won't because to Thompson.
Oh, sorry.
My next question and you can follow the gross margin.
Model one.
Being in Mexico, Washington, Paul Yes. Thank you.
Seeing the yellow right.
Right.
And you're going to fund that improvement.
And what room for.
Gross margin.
Sandra Lee.
Or do you think you got all of our financial free trauma.
<unk> no stranger to go down either transform digital now congrats agenda.
During <unk>.
Ditto for <unk> in China, all of our jobs.
For months or years.
100, Pisano mentioned, the two new modality, youre transferring or bounce a little more lead azure transform.
San Antonio.
For clarity, our yellow red has been consistent for our 90%.
With the improving Yale right our product cost has been.
Reduced.
However, the overall material price increase across the industry.
Partially offsetting the gross profit increase so that's the current situation.
Okay.
Each of them.
Thank you.
The next question comes from the line of.
China.
Please go ahead.
Thank you. Thank you.
Sure.
Thank you.
Yes.
Yeah.
Yes.
Yes.
Mobile page views.
I don't know if that is you can go shopping.
That's cool.
They are assuming.
Can you please.
Yes.
Okay.
Great.
Okay.
Please proceed.
Thank you.
<unk>.
Mobile one.
Thanks.
Okay.
Hum.
Sure Danielle.
Florida will mature from two major liquidity events.
The team here and the company continues.
No trigger Chengdu, Takanobu rumanian joule for Europe lung function target twofold.
So as John upon all women to an empty facility that went through for you won't see guidance intend to inappropriate.
Thorsten autonomy that <unk> offshore.
I will mention that upon our <unk> GT soon launch <unk> two harder.
We're trying to as you kind of Attritional quadriga Youll Nagel commonality in children.
No manager for quarterly return upon our EMEA.
General electric.
TD inventory going through every foundry that brought it down.
So we generally have a product.
Iteration every nine months.
According to this pace, we anticipate to release.
One to two new products in the next year.
So we expect to Paypal Paypal, our new iterations of cheap in the fourth quarter.
Which is estimated to have a overall performance increasing by 15% to 20%.
We now define a product model according to its computing performance.
Is that also note and.
The factories.
Factory.
Additionally, we will seek to our foundry partnership strategy.
Okay.
Yes.
Thank you.
Yes.
Okay.
Yeah.
Yes.
Yes.
Yes.
Maybe just one.
Please.
Okay.
Thanks.
Yes.
Sure.
<unk> Pinot upon enrollment.
Our core tools.
So the <unk> neither challenge Canadians.
Hong Kong Shanghai.
Gross profit on lending.
Europe, so not sure of actual lunch <unk>.
So Joe Kido with some form of a hospital.
From a NAND solution, our delivery of our strategic sourcing.
For now we don't know when.
Im sure Youll Shanghai appropriate cohort.
<unk> seen less chip.
Simple one for Don future Woodward.
Let's see in La Palma truly Jacob returned to a year ago.
Three non future EMEA lineup with Apple households will achieve.
In China Q4 down the platform, we want to your problem.
So the first professional mining machines deployed.
Okay tons by our Singapore subsidiary.
<unk> been in operations since early June and become a bitcoin production is very stable.
The second batch of mining machines with computing power of 850000 para hash is expected to be shipped out from actually very soon.
The challenge for the first half of this year.
Mainly resulted from the large sales volume of our flushes.
We need to we actually did prioritize and fulfilled our customers order first.
And there is not much left over for our self operated mining.
We just mentioned in our prepared remarks.
Self operated mining business is.
One of our strategic business units.
We will continue to expand the scale of our self operated operated computing power, while also adhering to the relevant laws and regulations.
Yeah.
Sure.
Thanks.
Thank you Jason.
Smith.
Inflation will be.
Can you elaborate more on camels.
Thank you.
Thank you.
Thank you.
Nishu.
What's on hold for your GAAP is equally.
Terminal.
Regarding Europe frictional shareholder chief with GBM.
Turning to G&A.
Certain geopolitical agenda.
<unk> introduced electronic brands Chile.
<unk>.
And I'll turn it off for Europe.
Not a whole lot cheaper.
We believe pixel work is an outstanding company that is currently undervalued.
They have very strong technology accumulation on the extensive experience in the areas of.
Visual processing.
We believe with kind of advanced nodes.
Cereals in the IC us field.
That's a great collaboration opportunities in the AI product.
Thanks.
Hello.
Thank you Paul.
Yes.
Sure.
Also changes.
Thank you this is Scott.
Sure.
False.
To ensure a stable market.
Okay.
Youll Europe.
What's the amount of mobile and T shirt.
Welcome to China, your Biopharma cargo $20 per tonne.
Very consistent.
<unk>, which is <unk> <unk> higher.
From a downtown Naples CFO.
No.
Turning to Louisiana covering 200.
Two quarter, yet thoughtful rule assortment from introduction Linda Garcia.
<unk> you want me to do.
How much kind of freedom.
<unk>.
Our tenants operate.
Interest income stream.
Yes, we have a power from our endeavor to secure production capability.
Most important thing in my current job or to attract more talent to the company and to improve our internal synergies.
I firmly believe that the current strategy is the correct strategy.
High level Halons sufficient R&D investment are the necessary conditions for the success of our product.
So therefore, we have set up an equity incentive plan.
Selection and retention of talent.
And we'll continue to implement data firmly in the future.
Oh Wow.
Oh My God.
Thank you Shlomo.
Hello, Josh.
Question from telephone.
Well, thank you Bob.
T mobile Walmart.
Thompson.
Self performing.
Okay.
Lindsay Lohan I apologize.
Peter.
<unk> NAND factory should Andrea.
The Bulldogs.
Sure.
We're pulling all the talent we are true.
I sure will enter the tuna Sea Ray Mcdonald with us.
We had a panel with Europe.
Thank you that's all I will garner that name.
Cool.
Javier Intel networks to the high end independent real quality Shlomo.
Former Chromebook pictured launched if you who oftentimes inflow influences on golf with you for holding.
For mobile.
Cellular Hokkaido electric power comments, so kudos for roof tiles.
<unk> energy for $2.
If I could add on to treatment.
Interest income.
Thank you for that.
On the 202 for awards.
Can you if you I'm sure are women.
The radio show GAAP with Banca <unk>.
Countless into Central Hall, Sugar Drinkable, Susan <unk>.
Hello.
We can drive opportunity.
To Repower, if youre referring to.
Carefully.
Are you going to vehicles.
Thank you Michelle and thank you for your measure and so on.
Gotcha.
Hydro proxy season.
Sure Danielle.
Okay.
So achieving and sustaining the number one market share position in the mining machine industry.
He is absolutely one of our important strategic goals in the short and medium term.
In order to achieve this strategic goal, we have set up some goals internally.
Terms of industry, leading performance of mining machines.
Competitive manufacturing cost them more.
So consequently, we have continued to invest significantly in Europe.
In our R&D and the supply chain.
And we have made encouraging progress on this front.
And ultimately we believe.
Really important for us to adhere to our own pace strengthen our itself.
We believe we will achieve more over time.
Susan.
Yes.
Thank you.
Thank you.
There are no further question I would like to caution that.
The company for any closing remarks.
Please go ahead.
Okay.
Thank you once again for joining US today. If you have further questions. Please feel free to reach us through the contact information provided on our website.
Thank you.
And what's your conference for today. Thank you for your participation you may now disconnect.