Q3 2021 Canaan Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome it to that Ken I N G third quarter 2021 earnings conference call. At this time all participants are in listen only mode. After the management's prepared remarks, we will have question and answer session. Please note that.
This event is being recorded now I would like to hand, the conference or what your speaker host today, Ms Chi Zhang Investor Relations manager of the company. Please go ahead Ms Shang.
Thank you Hello, everyone and welcome to our earnings Conference call.
These financial and operating results were released by our Newswire services earlier today and are currently available online.
They are a channel and CEO, Mr <unk>, Zhang and our CFO, Mr. King told Jay.
Additionally, we still.
Our SVP, Mr. Hersh, I'll clearly our thinking at all.
Of the board Mr. Leo Wong IR senior director will be available during the question answer session. Mr. John will start the call by providing an overview of the company.
And performance highlights for the quarter Mr. Tony will then provide detail on the company's operating and financial results for the period before we open the call out for your questions. Before we continue I would like to refer you to our Safe Harbor statement No earnings press release, which also applies to this call as well.
We will be making forward looking statements.
Please also note that we will discuss non-GAAP measures today, which are more authority fly ash recalled most comparable in lesser reported under generally accepted accounting principles.
Our earnings release, our findings.
D C with that I will now turn the call over to our chairman and CEO. Mr. Zhang. Please go ahead.
Thank you.
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Let me translate.
Third quarter.
Powered by our team's effort.
How about sheep studies naturally results on multiple fronts.
Generated once all the 317 6 million RMB in total net revenues of 700.
822% year over year, and up 21, 8% over a quarter or a quarter over quarter.
<unk> historical high.
I'm talking all of our profitability further improved with our gross margin expanding to 66, 3% during the quarter.
Net revenue totaled RMB 400, 660 centers.
67 minute to minute setting.
And even though it starts with our I T O.
This performance, both our business and observations have overhauls like Olympics and challenges.
So really related regulatory and policy changes negatively impacted the mining machines sales market.
Besides the market sectors, we actually build our accomplishing accomplish loan against the China against the challenge it.
Missionary honestly emptied strategies that our management team have been implementing.
Following our IPO in late 2019, we have been continuously expanding our business.
Billy.
Diversifying the geographic presence of our business.
Well holding our business philosophy of operating in compliance.
Moreover, we have deepened our collaboration with some of our key client from purely mining machine sales will drive my.
Well, they're expanding the breadth of for most of our cooperation.
On the supply front, we maintain a healthy relationship with our supplier yeah housing our discussions on communication.
Securing capacity from our wafer production to packaging and testing so as to ensure the supply to our own production.
As such we were able to overcome the semiconductor supply instability.
Well I still constraints on electricity and international logistic work at the end of the quarter.
Importantly.
We remain satisfied as well.
Bolstering our R&D effort.
Shocking EBIT pattern to build on our product development team.
Thereby strengthening our technological capability and consequently, our growth.
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What would be some drop off in their short agile.
Do you intend to or you will know ponzi doing traditional about renewable chocolate beetroot.
How do we get to do it on a path.
I guess, you can call them anymore.
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Welcome to T mobile's higher hung and talking to you.
In terms of our all of our mining machine itself, we believe our $6 7 million pounds or so second of computing power for our clients during the third quarter of plenty of them. You want this was an increase of 128, 4% year over year, and 12, 9% quarter over quarter.
Marking a new historic high.
Historical highs for quarterly sales performance.
The first one nine miles of plenty of only one week the LIBOR at all of our mining machines, roughly 226 countries and regions well. We are building a geographically diversified business. We also strengthened our foothold in several overseas markets where market demand is more of a cost.
Hey, David.
Such as the U S and Pakistan.
We have received repeat orders from several large scale mining companies.
This overseas market and establish a long term cooperation with them in the first quarter.
Proof point.
Thank you for a million <unk> per second of computing power sold was honored by repeat customers.
Demonstrating their continued recognition of our product portfolio.
<unk> capabilities and service quality.
The same time, we are in discussion with this client regarding potential partnerships.
Deeper into the industry value chain.
Mining operations and the Apple taking for renewable energy and mining in overseas market.
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David.
The average selling price or E. S. P of all computing power quality in the third quarter, although improved from previous quarter.
We currently.
We expect all of our of our Asps to continue to serve us a false forever.
Our topline performance in the fourth quarter, just as they see it in the fourth quarter.
I don't want to call them tissue junior and contract almost all control what people find the volcker you didn't have anything.
So coal quality shell useful call useful.
Can you just can't do.
Only one question from Cogs people aren't you worried about that.
In terms of all of our supply chain, we continue to strengthen our cooperation with songbird popular.
Sure there are capacities through upfront payments, our adequate cash position, which was a result of the Clos as future sales of our mining machine.
That's enabled us to secure a sufficient supply of labor and production capacity for chips.
Oh I'll call you, Yeah, I'm flipping from Oklahoma with Athena.
Central time zone will be or should be there for that to work.
Cool.
Okay.
Oh sure.
I'm trying to work with local banks.
Yeah.
So couldn't you shouldn't forget about several points vehicle ball real problems.
As you know we don't have.
You bet.
I don't think it will even so far that are totally fine.
Our big haul mining business we are.
Upheld our business philosophy of operating in a compliant with level of with relevant laws and regulations and chose to work with large scale compliance I saw that it's part of nerves in overseas markets well.
We're able to leverage our other bunch of chips in the supply chain.
Okay, let's shift to the facility itself as strategic partners with lower electricity cost.
Given the industry dynamics, we will adjust our business operations from time to time. So you can pretty much the most suitable devoted one strategy.
These market opportunities.
To do so we will constantly adjust the allocation of mining machines between yourselves and the mining business.
And some of the changes that are really in the Balkans Sunnyvale, Santa on key hydro possible, one keeping our global going forward.
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She is trying to even tell you cannot hold or you mean.
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So a lot of things with them that travel on the walk on some more clarity on it.
I'm not at all.
The piracy. We are currently operating in Miami Luscious with a total computing power of approximately 32 southern power has for a second.
We have also delivered mining unless she is with 850000 powerhouse of surface computing power to our pillar mining farms and gradually put into operation.
In addition, we have signed a contract with partners well approximating 1 million tower cash flow second of additional computing power.
And we are preparing to XI talk this well she has to the mining farm by a generous as in 'twenty to 'twenty two.
Furthermore, we are negotiating with a number of those ponderous withdrawing mining project with a total capacity of about 200 megawatts.
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Yeah. That's all she has done so you can talk about and this is about.
Well look there are things in Canada, I wouldn't believe vectren concrete yet.
Our hope is that we have seen a rapid growth momentum in terms of hold ourselves all AI chips.
Which includes the 451% in the first nine months of 2021 on the same period of last year.
<unk> also made solid progress in our research and development of all of our key to a 230 AI chips.
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2017.
People were more feeling good about this what about initial deal.
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I will tell you didn't rule.
Our R&D expenses was RMB 92, seven T six minutes in the third quarter.
Leasing by 188, 8% year over year.
We have continued to expand our R&D team by recruiting more elite talent flora in the two hour through our initiatives to enhance our important employer branding efforts in Rockford as it feel it says how does encompass higher.
During the third quarter, we reported 33 technical staff.
Counting for 19% of the total headcount in our R&D team as of September 30th plenty of time you want.
Our total number of RMB saw I felt the end of the third quarter increased by 70% from a year ago.
But at the same time, we have made steady progress in our research on the last two months of the new generation of people mining machines.
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Hey, guys.
You will find that much is pretty good.
Look we're going from a doctor.
After the completion of our previous announced a share repurchase program in September of 2021 our board of directors approved a new share repurchase program of up to.
One 2 million U S dollar.
Today, we have lots of stuff out there.
One 6 million and a D S in a total amount of them over.
$4 6 million U S dollars.
We have strong faith in chinas growth potential and will remain committed to creating value for our shareholders.
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Gotcha.
So what's our guidance John Thank you I wanted it to.
So it's all about.
But hopefully in the future.
Got it.
During the quarter, we feel is there a regulatory trended.
With supply constraints in the global semiconductor industry and other challenges posted by the market environment.
However, despite these challenges we leveraged our team's collective efforts as well as our effective network of customers and our supply partners to navigate the difficult market dynamics.
As such we deliver a historically bad the quarterly performance in the third quarter based on the foundation of our success in the previous quarter.
So I would like to take this opportunity to express my gratitude towards.
And a lot of pain and for their hard work and dedication.
As well as our partners clients and investors for their continued support on the board of Coffey does.
Sure.
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How do you push or across the country Chicago teach them, okay, whether you'd see traditional bump it up overall.
Oh in floor through our best endeavors, we aim to sustain our growth trajectory, so crazy increasing value for all of our shareholders.
Now expect that our revenues in the fourth quarter all plugged in 'twenty, one will increase by 35 to 51st of all a sequential basis.
Please note that this forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.
Well listen I talked about earlier.
Coming into the sample counts.
This concludes my prepared remarks, I will now turn the call over to our CFO Jay.
Thank you Mr. Dong Hello, everyone. This is Jim speaking Q.
Q3 was not an easy quarter. However, we still delivered a solid performance in this quarter with record highs in multiple operating and financial metrics.
I'm glad to share the results to all of you.
In the third quarter, we achieved another record high top line result, and further expanded our profit level.
Typically we deliver the total net revenues of RMB $1317 6 million and a yelled at a gross profit of RMB $741 7 million with a gross margin of 56, 3%.
We also reached a new high.
Awesome line with non-GAAP adjusted net income of RMB 587 5 million.
From a top line perspective, we delivered a record high computing power sold $6 7 million Taro Hudson.
While at the same time, our average selling price per parent cash improved by 7% sequentially, both volume and price increased which drove revenue to a new level.
Looking out to ourself pipeline, our preorders have retained the power contract liability at a high level of RMB $1026 7 million as of the quarter and compatible with the RMB $438 4 million as of December 31, 2020.
Gross profit was RMB $741 7 million compared to a gross loss in the same period of 2020, representing a sequential growth of 73, 3%.
Yeah I do also notes that the demand for S. P O our computing power a meaningfully influenced by the bitcoin price and its trend outlook, which are difficult to project.
On the other pen we also sense that the pressure from wafer cost the increase from our suppliers, which could affect our margins to a certain extent.
As such our gross margin rate is always subject to a combined effect of the volatile that too.
As we previously disclosed we have kicked off our mining business and now we have 32000 Terra harsh it's in the mining operation.
So that's the third quarters, and we will hold a <unk> three point 86 bitcoin. Please.
Please be advised that our mining income and the critical currencies initially recorded after the price when we generate through our mining operation.
Our digital assets are recorded on the balance sheet metal any impairments or losses incurred since the initial recognition.
Gangs not to record isn't until realized upon disposal of such did digital assets there.
Therefore, the digital asset value on our balance sheet does not reflect its value appreciation in case opened increase oh, good corn price.
Regarding the planned all of our mining business as Mr. Jonathan just to shed. We now have also have 850000 tallahatchie computing power under deployment that he put out at the time.
We are under discussion with a few partners to secure additional power and trading capacity looking forward, we will continue to allocate to bitcoin mining machines to our mining business sector, and we will continuously disclosed the progress.
Research and development expenses were RMB 92, 8 million, increasing by 188, 8% year over year. The increase was primarily attributable to the increase the staff Cogs in pathology related it departments as well as.
The incremental development cost for new products.
We will continue to invest in R&D.
With respect to our expense management, we will closely monitor the I O I O.
Fluids projects.
We have incurred a minimum minimal income tax expense in the third quarter.
I'd like to note things, we are going to use up the deferred tax assets generated by our accumulated operating losses from previous quarters, we expect to incur substantial income tax expenses for our profitable quarters going forward.
Overall, while we delivered a solid result for the quarter, we are not resting on laurels. We do note the risks and the volatility is our normal lives.
This rapidly developing industry.
We endeavor to proactively manage the risk with our agile operating strategy.
Now I would like to briefly walk you through our financial results for the quarter.
Total net revenues increased by 700 082 percent year over year and increased by 21, 8% quarter over quarter to RMB $1317 6 million.
Gross profit was RMB $741 7 million up 73, 3% sequentially.
Total operating expenses in the third quarter were RMB $278 4 million compared to RMB $75 9 million in the same period of 'twenty 'twenty and the RMB $262 4 million in the second quarter of 2021.
Income from operations was RMB $463 3 million up 179, 9% sequentially net.
Net income attributable to ordinary shareholders was RMB $467 2 million up 179, 3% sequentially.
Non-GAAP adjusted net income was RMB 587, 5 million up 83 six.
6% sequentially.
Non-GAAP adjusted net income or loss excludes the share based compensation expenses.
Basic and diluted net earnings per ads for the quarter were RMB 268, and RMB 264, respectively.
As of September 30, 2021 the company had a cash and cash equivalents of RMB $1698 5 million up 334% compared to RMB $391 3 million as of December 31, 2020.
This concludes our prepared remarks.
We are now open for questions.
[noise] differently.
Participants who wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
Cancel your request please press the pound or hash key.
Followed by wanted to ask your question.
Your first question comes from the line of Martin Chin from Genesis. Please go ahead.
And quite chunky Jim.
Right right.
Uh huh.
Noncompete Youre counting the coupon you these excuses.
Which alan can send the ways that sounds on guidance I'm not that good.
Thank you Tom for name because of quarantine or not and so that will be all.
Our centers.
Now we can start to come with him.
So you said, it's like a 20 threep in the system.
Thanks, Jonathan.
So without kind of woman pick up you would hope we're named servicer.
13, vantage on Dawn will Mcguire cohort right.
Fine.
For instance, Congress I congratulate him for a very strong Q3 earnings and the Q4 guidance.
The CEO already mentioned that Chinese government tightened their regulation and the fallout of shutdown of mining operation in mainland China in your view.
Pat on the cryptocurrency mining industry and how it impacted tenant sales in Q3 and.
Oh, there it can be transferred to the oversea customers.
Charles funded Congo.
Did you lose your foolish.
Good morning, <unk> and shouts out.
Oh, Hello, sorry, I P O.
Hello upon the approval of <unk> one alone.
Two quick ones from us.
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Thanks for dinner mutual knock on a pillow.
I think the chart Sunday Neil Woodall.
Nishu I'll take all three.
Well, if we look at the computing power so it hits the statistics of the Big phone network.
By the end of the fourth quarter basically all the computing power from mining for mainland China.
Removed.
Most of the continuous mining farm along with their computing power has relocated to overseas markets. However, as of now the Bitcoin network total computing power.
Has not recovered to its highest level in the industry.
Just your farnell.
It could be about 200, and we've talked about are you going to give yourself.
It'll be in we're going to talk about our Cogs upon the zinc EBIT trough chocolate.
So as this market evolves, but without any short term volatility in the prior four six points.
However, we can see that our bitcoin with Kratos has fully recovered from the.
Production from the temporary losses.
No.
Cheeky at our Florida.
Scott.
Uh huh.
But it's also a kicker to talk about.
Thank you and our Chicago site.
So if you found that people who are buying a hotel room.
So neither to highlight ground EEP chips.
Promotion on Ashish you can look at.
Yeah.
When we have one how long the highlights.
T J.
Hong Kong.
Hi, Rod pump timberlands are fine Julia that gotcha.
Distributor distributional amount yet.
Sure.
So specifically although reasons.
Later, we attended created a further level of negative impact.
Sale of mining machine in the short term.
The market had already reacted and adjusted in a timely manner during the quarter.
Our industry player reallocated, there is continuous computing power to the overseas market.
The overall global demand for mining was ship resumed its upward trajectory.
But we have also observed that the financing environment for minor in overseas market is improving.
A lot of large scale overseas as well.
We are actively investing in line with ours.
Overall, the demand for the computing power is relatively stable.
Thank you.
Sure.
EC to smooth the funded loan book on the hydrocodone call chips.
I'm not too sure bookings for teacher and seasonal.
Such examples wound quota each all of us here.
Drilling spotlighting, telling us real budget.
This is it.
Additionally, our financial portfolio maintained robust momentum in the quarter as you can see.
We anticipate even higher sequential growth in the fourth quarter.
We believe our P&C lashes to expand our business footprint in the overseas market.
Enabled us to offset the impact of the elastic regulation we attended.
Hope I answered your question. Thank you.
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When you talk to some new young women think of it contains some pump system younger just.
Because they are almost on top of Q4.
And they're not 10 button pushed a woman badly now it goes about the idea of minion has that sheen acknowledged you $18 90.
Just as a comment then country had to go.
You've got in Duncan of Dol.
Cause the country, telling you the truth.
<unk> C, but element to be honest to God temper and tying me I'm in college.
Well thank you.
You already mentioned that.
Cannot already locked some weapons.
Could you elaborate more on euro collaboration with your foundry partner in 'twenty, two and in terms of the Cogs collaboration.
It is not and yep.
Yep.
Part of the increase of the price of raw wafers.
Next year you too.
Hence supply comp trend.
EBIT Lino woman.
No.
Perfect.
It might be foundry I don't call it book without doing so.
Sure.
Yes.
Well go to you on that front.
You handle.
Handoff between materials and some of them went below.
No Josh.
Sure.
Could you talk I'll agree, but you should assume I'm sure you can tell us to go there.
Well, we said that <unk> been talking to the strategic issues are going to do it.
I'm on solutions.
Well done some drop but as usual.
Sometimes up to Youtube.
The EBIT.
With all of R&R.
Well, we have 18 months at our multifamily strategy.
There is a long term partnership with multiple major foundries.
Our close cooperation with the following upon the entire has secured a stable there for supply of flower production.
That's all real lift continue to improve in plumbing you want.
We are able to ensure the performance of our mining machines are well.
While improving our production capacity.
We have also been approximately speaking of additional production capacity to meet increasing demand from our clients.
Well with one of our foundry partners for example.
We have secured a wafer supply little prepayments Q2 in front of them too.
Related to our quota share.
Opinions on what you saw.
Paul.
EBIT.
Youll see issue or not a good.
Central undertakes a homegrown G box closer to unequivocally.
Total itself will do with a lot of your background.
Yes, Hello, and industrial sectors that will come through but can we get that below EBIT.
So I'll hop off that we continue to be fine fabrication process, and then flip them.
All right.
Has been encouraging.
So normally we have achieved slightly higher build rates in all processes all processes, while the fabrication line.
Such as packaging a circuit board in testing.
As a result, we were able to improve the overall product yields and that our gross margin in the third quarter.
Hum.
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Covid from events and go do it.
Yeah trying to let you in Florida.
When you go in.
Useful Dave a manufactured home.
So you in the future.
Sure.
No.
No.
So this rule of thumb.
Are you doing with Australia.
Typically it's call it.
Moving on to our tissue portfolio.
Donald <unk>.
Accordingly, our bulk water.
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If you enter on casual functional that ballroom.
Political goodbye Nokia hung here does it with your own.
Got it.
They're generally equal lets shoot for Sean Wieland.
Hello.
What are your fine with it.
He has been with Jacksonville.
The restaurant quality food.
Yeah, no look with tissue from the home and local needs and Telefonica UK, Craig Hallum assumed milk with you shortly.
Meanwhile, we have to recognize that but continue indefinitely why supply is supply constraint is creating a seller market.
Consequently, inclusive wafer price.
Christmas is a FERC clients a lateral in the applicable.
Some of the partners Oh, a position of course clean up the industry rather chain.
So against the backdrop of almost stable wafer supply. We are discussing is theory of flexible strategy with our foundry partners to secure our wafer supply.
All of these strategies.
Also include us up to twice Infosys under such a condition. So yeah sure all the supply.
As the price of Playfirst inclusive throw the semiconductor industry, we will continue to negotiate future wafer prices with foundry partners.
We believe that's a reasonable range of price increases.
Further solidified our operating corporation.
You want me to we will continue to upgrade our fabrication process.
Sure.
Performance and cost efficiency of our products.
So hope I answered your question.
Thank you.
Okay.
With our work on the no.
No woman to be in your control, how that Constantin and seal.
Since her to Kim Watkins.
Consistently on the Isle team for example on the calendar.
Click on corporate and you'll be all comes out you can do them when a welcome to you.
No we have here there.
He's planning to reduce regulations on cryptocurrency mining.
Are you expecting material impact on your mining business.
Canola.
So that's what got us into Cogs.
They don't call you reviewed Tidewater Krupp on Hollywood.
Fine.
Couldn't be treated if he's on the phone accruals, they're going to work.
Have a good approach.
In the wholesale book anything in the crucial.
So as you know in fact that Alcoa Linda.
They want it.
So between Schofield Li Shufu suggest should either.
Okay.
She started with you.
No I'm sorry.
Oh Street corridor.
Yes.
Yeah.
Challenging volatile world travel products.
So when we write an appointment to the cone cost.
Perfect.
And as usual.
Oh do you soon.
Electric.
It.
We're really in the yesterday, you John I'm sorry.
She can help auto.
Oh, Yes, we did.
Policy and cut off was fine.
We believe these policies will promote the sustainable development of the.
Cryptocurrency mining in the country.
Under the new guidelines.
Mining companies need to obtain approval from the Colorado cause status.
Yeah.
In order to secure it.
Just with your supplier.
We have learned that we have learned fall or winter communications with our customers.
The country.
Large companies.
With.
Technology capabilities and sufficient funding will benefit this policy benefit from this policy.
Our current top street customers cut back overtime.
Also a large scale companies.
We'll have obtained the necessary tools for the.
Kavakos Ministry of energy.
Come back to the mining business.
Therefore, assuming ensue, ensuring all thickness.
In the country.
From another perspective.
The co location of this policy will talk to me.
On qualified small mining companies from conducting speculated that the market is terming activities.
In turn benefits our.
One of the months in the cut off of that market.
Sure No woman electric transport drill Congress time, English as well.
I'm not sure on the hunger for right.
Okay.
Hopefully you will see a crescendo at the matrix on J D.
However, the central Ohio accounts here.
Maybe a quick one if I wonder homes.
You referred to last.
Hi, Sam.
Sure.
So I would like to point out that our global Felicia, which far beyond how 'bout firsthand as we have already established a foothold in.
Central Asia, Southeast Asia, Europe, and North America.
Both the multiple locally North America accounting for approximately 30% of our overseas markets.
With the majority of the long term customers being publicly traded companies.
This company.
More than I was.
Energy and highest blockchain.
Yeah.
Hope that answers your question. Thank you.
And she said no no Brazil plays out how all of them will tend to go to work on this so you talked about.
Think of it 10 times on them and so you can make the Baldwin.
There's a whole woman, which then kind of I think that's it.
Sounds like you know what sell Pete I know when I would think so.
Joe you'd think would play a woman cigarettes, how old nature of them somebody else I'm kidding.
And could you elaborate more on your income.
Your mining business and how are your holding in the trading bitcoin.
Strategy to influence your financial statements in the future.
So I think hopefully that do you still intend to Vietnam.
Include a change in our Huntsville, Mark Palmer.
Sure.
So you could get on a panel with the southern Union, which was sundar on Pete.
NAND Upfronts will fluctuate.
Hudson alone due to the year with me on the EU.
I'm going to end up on the box.
Apologies.
Okay.
So it's not a natural dilution that shrunk down so I'm trying to say lots of them.
Nevada, Colorado, you pile on key Toyota was funded in Chengdu.
Sure.
Can you detail a few follow ups.
Do you want <unk>.
Charlie from Honda.
Hum chattel loans that shortly the T&D.
Oh, no I should go back home.
So it is worth reiterating that comp.
Clients with level of laws and regulations is the foundation on which we exploit our mining business, where if this market.
With extreme caution at the early stage.
We are currently operating mining machines with a total computing power.
Approximately 32 southern power has for a second.
After the initial trial and testing process for six months.
And now he's back effectively execute the money aspect.
Yes.
Such as legal tax and operations.
In addition, we have de Levered mining machines with 850 settlement, how harsh computing power to our Congress mine in Florida.
All of which are being setup for operation.
We have also signed contracts with my partners.
Approximately one minute powerhouse the second.
Additional computing power and scheduled shipments of this my English is by the end of January of next year.
Furthermore, we are negotiating with a number of north American business ponder for a mining project with them.
America.
With a total electricity consumption capacity.
200 megawatts.
Different geographies Central Hall include surety Felicia, how concerned are fine with me.
Kimpton quota on assured to trail because he.
We go to the protium that her thoughts.
Relative to Q1.
As of September 30, we hold 23 points.
86 bitcoin.
All of our kind of strategy is to hold our plant and we will not put them in the short term.
However, we now go out the possibility of treating them in the future.
Thank you someone of creditors. So on our notes that have put out there already been true because we cannot turn a short and sweet crude shoe to assure that these documents.
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The challenge Judge fiduciary rules with <unk> with <unk>.
Will that be helpful.
Q.
Chartered jet <unk> sure.
Ruble, Okay, who should it be down and that's all true those sales were from whom upon.
I'm here.
With charterers belief drilling needs.
Copies of additional type <unk>.
Absolutely.
So according to the accounting of Sandler.
The holidays are recognized at the historical cost of where we acquired the asset.
Let's see.
Subsequent evaluation.
Wasn't alive impairment losses.
The effect of value is lower than the initial call.
If the volume goes up in the fall assessments.
We do not report any scale on our balance sheet.
This points out so well, we recognize the actual phase realized.
Thanks Jacob.
Thank you.
Philippe <unk>.
So I don't think women tend to walk something back next door.
Thank you.
And my last question is about the tenants mining costs.
Good question.
Home loan.
Deciding to you towards the compound fracture your center deal flow control.
Uh huh.
We'll call you on Shanghai Hangzhou.
With that I'll highlight.
Sure.
Ooh.
Marty real quick.
A lot of the feedstock as well on hospital punctures.
Okay.
Well the cost of mining in the pilot stage in the third quarter was about 39% of mining revenues.
Gross margin was 51%.
Which is slightly higher than the gross margin on lower sales of mining machines.
However, going forward.
Different collaborations so gross margin will continue to be subject to a change in the price of bitcoin It is harvest.
Electricity changes and this different way as well.
We're working with blaming on Earth.
Yes.
Okay.
Sure.
Thank you.
Once again, if you wish to ask a question. Please press star one on your telephone.
Thank you as there are no further questions I would now like to turn the call back to management for any closing remarks.
Yes.
Okay. Thank you once again for joining us today.
If you have further questions. Please feel free to reach out through the contact information provided on our website.
Thank you.
Yes.
That concludes the call today, Thank you everyone for attending.
You may not disconnect. Thank you ward.
Okay.
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