Q1 2022 Canaan Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Canon, Inc. First quarter. It could help them 22 earnings conference call.
At this time all that it spends are in a listen only mode asset managements prepared remarks, we will have a question and answer session.
Please note that this event is being recorded.
Now I'd like to hand, the conference over to your Speaker hosted eight Ms. Zhang Investor Relations manager of the company. Please go ahead Ms. Zhang.
Well, thank you operator.
Hello, everyone and welcome to our earnings conference call.
The company's financial and operating results were released by our Newswire services earlier today and are currently a little ally join US today, our chairman and CEO , Mr Dunckel, Joe and our CFO Jim Ginger.
In addition, our Mr Shlomi.
Our SVP, Mr. Leo Wong IR Senior director, Mr. O' clock Susie IR director will also be available during the person answer session.
John will start the call by providing an overview of the company and performance highlights for the quarter. Mr. Charlie will then provide details on the company's operating and financial results for the appeal before we open the call up for your questions.
Before we continue I would like to refer you to our safe Harbor statement.
Our earnings press release.
Today's call will include forward looking statements. These statements include but are not limited to our outlook for the company and statements that I see my or project future results of operations or the performance of the company.
These statements speak only as of the date hereof and the company assumes a assume no obligation to revise any forward looking statements that may be made in today's press release or webcast, except as required by law. The seamless do not guarantee future performance and are subject to risks.
He and assumptions.
Please refer to the press release and the risk factors and documents, we file with the SEC, including our most recent annual report on form 20-F.
Voice before information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements.
In addition, during today's call and webcast, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance.
This non-GAAP measure should be considered in addition to and not as a substitute for or in isolation from GAAP measures.
As a result, you can find additional disclosure regarding these non-GAAP measures, including reconciliations with comparable GAAP measures are getting.
GAAP results in our earnings press release, which is posted on the company's website.
With that I will now turn the call over to our chairman and CEO . Mr. <unk>. Zhang. Please go ahead Sir.
Hi.
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Against the backdrop of the expected improved U S interests.
The first quarter of 2022 so it continued trends for both lower and more volatile prices.
Again in late 2021.
At the same time in the context of an increase in the Bitcoin network total computing power and relatively sharp energy price increases, resulting from geopolitical conflicts.
I put her hassle computing power decreased to a certain extent.
In addition, the resurgence of the COVID-19 pandemic in multiple cities across China, along with the implementation of corresponding pandemic prevention and escalating control measure negatively impacted our supply chain production and logistic.
Despite these challenges our team achieved encouraging results on multiple fronts.
We are Russell resolutely committed to our globalization strategy deepening customer relationships and services, maintaining a steady operation of our supply chain and pushing forward, our research and development work for Newport up.
This quarter, we in total so a $4 3 million. However, our cash flow second in computing power and achieved revenues of RMB. One point 30, 36 billion and a net income of RMB $442 million.
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Our revenues of RMB 136 billion for the first quarter of 2022 were mainly driven by the $4 3 million Terra Hustle second of computing power were delivered.
As mentioned in our earlier press release, the local governments implemented immunity three with locked out for all residents and businesses in the city, where our mining wishing to South Korea warehouses are located we were therefore, not able to deliver at or doing this deal at all.
This created a backlog running into the second quarter.
Second logistical disruptions resolve it in revenues for the quarter underperforming already expectations.
Nevertheless, we still made positive strides in sale of so Paulo mining machines.
We also continued to win international orders and demand for energy.
Such as Central Asia, North America, and Australia remained solid.
During the quarter of 2022 for the first quarter we obtained.
What kind of customer order from lower fallout.
Well, we kept engaging new clients. We also achieved a large portion of orders from existing clients two.
To optimize all of our Oh, Oh optimize our marquee market.
Operation and better serve our customers.
We have established an international headquarter in Singapore, which has recently earned recognition of support from the Singapore Economic development Board.
This sets and milestones for our globalization strategy as we evolve into an increasingly globalized and culturally diverse the technology company over the long run.
Furthermore, we are building a team of local talent to drive our business expansion in Singapore and Southeast Asia.
As we gradually build up our after sales services and overseas.
We're getting closer to our customers and making headway into our globalization push.
In addition, we recently broadened our sales channel.
By launching all lifestyle, well overseas retail customers, providing them convenient access to our Florida.
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So turning to our police they'll contribute computing power due to delivery delays during the first quarter 'twenty 'twenty. Two we have a total of $9 96 million powerhouse of computing power to be delivered and RMB 177 billion of advances from customers.
I felt the first full quarter of that.
Our production and logistics have gradually we will reveal throughout the second quarter of <unk> to date.
Flooring is a local couple of months of the adjustment.
And our lives for resumption of production.
As of today, we have delivered most of the orders our backlog from the first quarter of this year.
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You should assume from Lasalle.
During the first quarter I'll tell them you don't need two hours. These mining operations were impacted by the COVID-19 pandemic.
Logistics congestion and inadequate power surplus.
By the end of the first quarter, our deployed computing power in Kazakhstan exceeded exceeded $2 4 million in Tallahassee close second.
But there was.
Volatility in the number of active machines, which resulted in mining capacity during the period.
Bearing between zero and 0.8 million pair of half a second.
In the quarter, we mined a total of $113 94 P. Qantas.
By the end of the first quarter, we held a total of 166 96 viewpoint.
In addition to closely monitoring the status of local energy supply.
We are also proactively leasing with our partners to evaluate alternatives in order to optimize resource allocations.
Full year with EBITDA.
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Go Hawks.
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Our New York office, even water instead of woman Genesis attention got a product for you.
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It's fine, but how as mentioned above.
<unk> mining is still a significant component of our business development strategy.
The settlement allows us to balance computing power allocation, Inc.
Engaged more deeply in the mining industry value chain and helps us better understand customers' needs.
Overall, we believe that the long term development of our mining business will diversify our revenue sources and optimize our operations.
Therefore, we will continue executing on our strategy and will be more prudent and agile in developing our mining business.
Ah well mitigating risk by deploying machines to multiple localities.
These people want to buy yet.
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Also contributing to the juncture Jos on the East Coast. If you will that help with GPU quantitative hydro will be in currency neutral.
In terms of research and development.
You may have noticed already we.
We launched our new mining listen model, the Avalon tell 656.
With probe with process optimizations based on all of our existing fabrication node.
This new model also for previous models and has the computing power of 100 Tyler has protected.
Meanwhile, our research and development for the next generation of it.
Our mining machines is progressing smoothly, we have completed the design work for some of the programs and we are in the critical stage of progressing towards mass production.
Due to various uncertainties throughout the research and development.
Production probe progress.
We will disclose the specific performance parameters of our new generation of mining machines, and the comp and commerce pre sales only after we complete the food testing process for the machine.
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Copel platform Pangaea.
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Turning to our AI chips business we.
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All our teams in Shanghai and email.
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As we overcame challenges and endeavor to expand our business and propel our research and development new product.
We are also aware that uncertainties rising from re occurrence of the COVID-19 pandemic and macro how was it in the capital market have had an adverse impact on our stock price.
Given our solid fundamentals and cash position, we recently announced another share repurchase program under which we may repurchase up to $100 million worth of our outstanding Idiots over the next 24 months.
The share repurchase program will almost execution in the coming window period.
As previously announced we completed the share repurchase plan authorized in September of 2020 one ahead of schedule.
This new share repurchase program demonstrates our confidence in the company's long term outlook, we will provide updates on the program in our future earnings release.
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By the end of the first quarter the company had cash and cash equivalents of RMB 264 billion, demonstrating sufficient cash liquidity for operations.
Considering the inherent needs for capital in our business operations, we have been exploring access to long term financing to mitigate our potential operating risk.
As such we entered into an aftermarket offering agreement providing for an ATM equity offering program with H C. Wainwright. The program is yet to be executed, but we have set up the relevant financial instruments that they send us the flexibility to raise capital was relatively.
Lower cost in the open market when market conditions improve in the future.
We will provide updates on it.
<unk> in our future earnings release.
The company will also prioritize shareholder interests and the general market when considering the execution of financing for our financing facilities.
We'll make proactive adjustments to accommodate market conditions.
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Keith Bachman.
<unk> with Citigroup and geopolitical concerns.
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Taking a wider appeal, we have been monitoring the challenges that Chinese ADR companies are facing under the holding foreign companies are comparable act.
All the money pool as of this year, we were provisionally.
75 under the holding foreign companies accountable Act.
Likely to be conclusively identified some hudson the future.
This was with the phone has with the song shareholder concern over the possible de listing of our company.
We have proactively responded to our inclusion in all of the athletes at least on the flooring date, and we will continue to comply with all relevant laws and regulations in both China and the United States. We have seen progress in discussion between the Chinese and U S government and we have.
That the two parties can reach an agreement in the near future regarding inspections and investigations of auditors' work.
As a company generating the majority of revenues overseas, we will maintain and improve our strong corporate governance and compliance with local laws and regulations.
We will continue to communicate with the capital markets and actively explore possible solutions to protect the interests of all our shareholders stakeholders.
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You should always hear properly yet.
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To conclude we overcame many unexpected challenges and the volatility is still in the first quarter, all plenty don't need to.
Despite our topline results being negatively impacted due to pandemic related delivery delays.
Our business performed steadily achieved promising results.
This were achieved as we implemented initiatives to support our business long term development and continued to expand our market our strengths in collaboration with our customers.
Leasing foreseeable highways or all expected challenges in the future. We will continue to execute on our agile and flexible operating strategy and endeavor to maintain a sustainable supplier, who responds to market fluctuations and pinpoint volatility.
We will aim to maximize shareholder return by maintaining it.
Healthy operational cash flows prudently allocating our mining machines between ourselves and our mining business and actively promoting the development of our AI chips business.
Meanwhile, we will continue to advance our business globalization, well better serving our customers by fostering a more client centric after sales service system.
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Tradition Hoffman wheel solvable.
Looking forward to the second quarter of 'twenty, two we see that significant uncertainties in the market environment still remains.
Based on our current view, we expect our total net revenue in the second quarter of plenty, though they too will be in the range of RMB, one 6 billion to RMB, one 8 billion, representing an increase of 48% to 67% compared to the second quarter of 2020.
Please.
Please note that this forecast reflects our Collins on the preliminary view on the market and operational conditions, which are subject to change.
If I think about that.
<unk> central time.
This concludes my prepared remarks.
I will now kind of the call over to our CFO Jim.
Thank you John and good day, everyone. This is James.
As John mentioned, the first quarter of 2022 was a challenging one for our company and are facing virus unexpected obstacles, we still managed to deliver solid results for our investors.
In the first quarter of 2022, we recorded a $4 3 million tariff rushes in total computing power sold representing a year over year increase of over 119% our revenue for RMB 1350 6 million.
Creased by 237% compared with the same period of last year as.
We expect our top line results were not able to meet the previous guidance, we projected in our fourth quarter financial reports due to the postponement of all the deliveries from our warehouses. This is the close of the unfortunately.
A resurgence of COVID-19 pandemic.
The March and the subsequent to overall lockdown measures in the city, where our mining machine factory in the warehouses are located.
Since the end of March although we see swiftly prepare to resume production and delivery under the guidelines of the local governments our delivery schedule for the fourth quarter has being materially.
Due to the nearly three weeks of how T. The operations amount.
I'm also the backdrop of this difficulties, we maintained our international business development and a dynamic pricing strategy.
Therefore, we continue that we engage new and existing clients and the managed to sustain a relatively high average selling price in the first quarter of 2022.
With our relentless efforts to resume normal operations today.
To date, we have delivered the most of the delay the machine orders from the first quarter.
Our mining business is gradually ramping up but still facing how do we from the power supply shortage. This will result in a considerable portion of <unk>.
Our deploy the mining machine.
Being online in the first quarter or <unk> 22.
During the quarter, our mining computing power online battery that in a rough range from zero to 0.8 million type of Hershey's.
During the first quarter of 2022, we generated $113 94, bitcoins and held a 166 96 bitcoin as the over the quarters and.
As the winter has ended the power shortage situation is improving.
The second quarter of this year more than them all machines are gradually coming online.
Our gross profit for the quarter grew 327% year over year to RMB $830 million as mentioned in previous quarters due to the continued wafer shortage across the semiconductor industry the inevitable increase in wafer price further.
Laid on our profit margin, which narrowed to $2, 61% in the first quarter of 2022 zero.
Still higher than the average level of 57% in the full year 2021, but declining from 68 to put them in the fourth quarter of 2021.
To further strengthen our supply chain, we have made prepayments to our foundry partners to secure their production capacity throughout the year 2022.
We are also grateful for all of our foundry testing and packaging partners great efforts as they strive to continue to supply for us. Despite the series the resurgence of COVID-19 in their cities during the first quarter of 2022.
The face of challenging supply environment and the recent bitcoin price downward fluctuations, we expect our gross margin may further come under pressure in the coming quarters.
We reported net income of RMB $442 million in the first quarter of 2022 a healthy bottom line result, considering the impact to the top line performance and increase the production costs. Please.
Please also note that we have utilized the pothole differed tax assets as of the first quarter of 2022 we incurred a higher income tax expenses. We also expect an increasing tax burden for our profitable quarters going forward.
I would now like to comment briefly on our share repurchase program.
During the first quarter of 2022, we repurchased a total of $2 1 million ABS is with an aggregate value of $10 3 million U S dollars.
Representing our average purchase price of $4 eight one U S dollar per avs.
Earlier on March 16th we announced in up to 100 million U S dollars a share repurchase program effective over the next 24 months.
This new program follows on the heels of our recently completed a 20 million U S. Dollar buyback that we authorize authorized to use September over 2021 and the completed ahead of schedule.
Recently in the capital markets, we have been under pressure from both creep it'll currency price fluctuations and as he leads to suspicions we consider a good timing to focus on repurchasing shares which helps to protect value for our shareholders. We are committed to.
Delivering value to our investors and this enhance the buyback program indicates the confidence that both the management team and the board of directors have in the company over the long run.
Lots of Mount who we also enter into and that's the market offering agreement providing for an at the market equity offering program to access to capital in the public market with H C. Wainwright.
Please note that as of now we do not currently expect to sell any atheist under the ATM program at this point in time.
I told the recent industry fluctuations and a negative market sentiment. We are focused on executing our aforementioned the buyback program to drive value for our shareholders.
As of the end of the first quarter, we had a cash and cash equivalents for RMB 2640 $3 million.
Stretching our solid cash position that enables us to sustain our operations and the business resilience.
We will be cautious and prudent with any use of the ATM facility.
In Asia sales.
<unk> the by the ATM facility will be disclosed in future quarterly earnings reports regularly.
While Mr. John has already discussed the potential delisting issue, we've seen Sealy hope depend will be reached on the audit matter by the respective regulatory authority.
Please be assured that we are carefully monitoring the situation and exploring potential practical measures to protect the interests of our investors.
Now I would like to briefly walk you through our financial results for the quarter.
Revenues were RMB $1356 1 million equal to U S. Dollar 213.9 million, representing an increase of 236, 7% from RMB 400 zero $2 8 million in the same period of 2021.
Gross profit was RMB $829 8 million.
Which equals to $139 million, representing an increase of over 327, 2% from RMB $194 2 million in the same period of 2021.
Total operating expenses in the first quarter of 2022 were RMB, $251 5 million, which equals to $39 7 million U S dollars, representing an increase of 21.0% from RMB 200 of zero $7 9 million in the same period all the countries.
'twenty one.
Income from operations in the first quarter of 2022 was RMB $578 3 million, which equals to $91 2 million U S dollars compared to a loss from operations of RMB 13, 7 million in the same period of 2021.
Net income attributable to ordinary shareholders in the first quarter of 2022 was RMB $441 6 million, which equals to 69 7 million U S dollars compared to a net income of RMB, one 2 million in the same period over 2021 now.
Adjusted net income in the fourth quarter of 2022 was RMB $543 4 million, which equals to $85 7 million U S dollars, representing an increase of 279, 5% from RMB $143 2 million in the center.
<unk> 2021.
And diluted net earnings per ABS.
For the quarter, while RMB 257, which equals $2.41 in the U S dollar.
Contract liabilities as of March 31st 2022, or RMB, $1769, 9 million, which equals to $279 2 million U S dollars, increasing from RMB $1340 7 million.
As of December 31st.
$90 91.
This concludes our prepared remarks, we'll now open for questions.
Thank you we will now begin the question and answer session if.
If you wish to ask a question.
Perhaps the star one on your telephone and wait for your name to be announced.
If you wish to withdraw your request please press the pound or hash key.
Once again Thats star one for questions.
Our first question comes from Hans Chung from D. A Davidson. Please ask your question.
Yeah.
Hi.
Thank you for taking my question, so I have several questions.
We think it's the first and the outcomes of that too.
Men never even by myself.
So first.
What would be revenue have been there were no impact from COVID-19.
Control measure for the March quarter.
And.
You have the production or to be very fully recovered at this moment.
And going forward, given China Europe .
Our policy on Kobe.
Does the company have any breakout.
Backup plans to mitigate the related risk from a similar lockdown or supply disruption.
So.
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Thank you Bob.
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Well, let me translate.
Since the beginning of March this year, the pandemic has researched in multiple cities across China.
In response local governments have taken pandemic prevention uncontrolled measures.
March 14th of this year, we received notice from the local government all the area we are actually located.
It will take implementing a five day quarantine lockdown for all residents and businesses in the city.
We fully expect that our business performance will be affected.
Later, the quarantine policy was extended until the end of March.
And upon him here at local logistics and our deliveries were suspended.
This delay has two inventory delivery.
Negatively impacted our revenue recognition in the first quarter of 2022.
Since the end of March the local government has switched to defer any level of controlled measures based on the severity of the COVID-19 outbreak.
While encouraging business has returned to normal operations.
During this period, we have been closely communicating with the local government.
<unk> tried our best to resume normal production and inventory delivery. So.
So far we have basically completed the deliveries that have been delayed from the first quarter of 2022.
Thanks, Tom.
Tom Caputo.
Uh huh.
Of course as you know.
Sure sure that's helpful.
Yes.
Tim over to you.
Yes.
Telemetered foolish or note, which intraverbal uniquely.
Fisher and sort of what's your thoughts on that.
Okay.
Okay.
Sure.
Thats helpful.
Okay.
<unk>.
You've got to go.
Either you until you get until you got the development guidance.
Got it okay. Okay, let me first translate them.
We are also making new offers so many operational fronts, such as we're in house logistics and supply chain.
For example, we have.
Establishing an international headquarter headquarters as well as warehouses in Singapore, so handle parts of our global businesses.
Which is also beneficial for the stability of our supply chain.
This not only acts as a countermeasure to the uncertainty brought by the COVID-19 pandemic, but is also an important step forward in our globalization strategy.
As we also mentioned.
Uh huh.
I think.
Excluding the impact of the COVID-19 controlling measures I think we can meet our guidance previously.
Production in the fourth quarter.
Yes.
Yes.
Thank you okay. Thank you.
Its helpful and my second question.
Keith can you provide color on.
The mix and pricing trends.
Okay.
Humans versus the future contract.
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We may have higher.
On the spot Shimon.
Given the gross margins I think.
It was better than expected.
<unk>.
And how is that.
Going forward in second.
Quarter, how did that trend.
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Beverage environment.
The coin market and.
And longer what won't be there trend upward trend in terms of that mix.
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Cause I still hold that view.
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Q4 of last fall.
Thanks Allison.
That should again show he does at all.
Due to our dynamic flexible operating model.
Proportion of bulk sale of some future contract sales vary from quarter to quarter.
Because of the energy supply in the northern Hemisphere winter and the number of holidays. So first quarter is typically a traditionally low season.
In addition, considering the recent market volatility, we expect a smaller proportion of spot sales in the second quarter of Plum you don't need to.
If the big point price continues to be under pressure.
They allocate more of our computing power to our own mining business.
As we have thought in previous quarters, we are not trying to fix the proportion of spot sales and future contract sales.
Instead, we will maximize shareholder return by dynamically adjusting the proportion of mining wishes allocated towards Pottsville future contract sales in our mining business based on the bitcoin prices and market volatility.
Thank you. Thank you.
Okay.
Okay.
Yes.
Just.
We went down in Chattanooga, Tennessee constant how are you seeing COVID-19.
I mean, it's a bay maintenance the woman.
<unk> Chen.
Yes.
So we're not yet.
We are constantly on top.
No.
Okay.
On behalf of John .
Hum.
When more think of.
Yeah.
So can you can share with us your oversea market development, particularly.
The business in North America.
What have you been down hoping to achieve.
And what what challenge have you seen so far and then one way back then.
Meaningful.
Our ramp up in the <unk>.
Thank you.
No.
Goldman for sensors on them.
Unfortunately that Hasnt pool.
Yes, our comfort with local units and where are you.
For.
Q4, youll quicker quicker.
As we have mentioned before we set up our international headquarters in Singapore.
No operations, such as research and development warehousing as supply chain. This has been approved by the Singapore.
Singapore It cannot make the most money for which has supported us with prefer a peripheral policies.
Hello again.
In 200 countries and cities that have been made.
All right.
What you don't know who you fulfill them.
Sure.
The company will be fine people do they make you choose until next year.
Because the problem hopefully central Hong Kong.
Cancer It turns out of Miami juice in the R&R, because you cannot wait.
And then it will go Hawks, GCU political election, with John or with any of these types.
Thanks, Jeff.
It should be.
Central.
Biopharma cool Eagle.
<unk>, who began to traject comfortable with it.
We've got to using cohort two.
Meanwhile of our overseas businesses, we pay especially high attention to our development in North America.
We have seen that abundant energy supply.
Especially the rapid development of clean energy and the wide acceptance of crypto currencies in the region are attracting more and more miners to invest in and.
And develop mine.
In early April this year, we participated in <unk> 2022.
Conference held in Miami, and how is that dialogue and establish connections with mining with many mining companies and industry partners.
We are building our local teams in North America, as well and already have some team members on board.
They are helping to expand our business in a number of ways.
For example, in the field of cell and developing partnership for mining business.
More importantly, we are improving our after sale services to provide continuous service is closer to our customers.
Tom and I, just want to make sure they're not coming from there you go.
Well, we had a teacher doesn't believe it's impactful H&R tutor should tell you the.
So trying to give you.
You should also constantly putting off for a while.
A woman she won't from what <unk> done.
Oh, it's actually neutral.
Okay over there and our people agenda.
Overall, we attach great importance to the North American market.
Not proactively expanding our businesses.
Yes, we expect to encounter many different kinds of challenges during the second startup.
Hopefully our continuous efforts will deliver a solid result.
We will disclose more details about our progress flower shareholders where appropriate.
Thank you.
Okay. Thank you a pop here and jump back to Covid.
Yeah.
Thank you. Thank you. Our next question comes from Mike Lake from the Benchmark Company. Please ask your question.
Yeah.
Thank you.
With bitcoin being weak here in the second quarter could you talk about how that impacts your mining machine sales and the average selling price.
Okay, let.
Let me translate for Mr Dong.
And then kind of CRT to be Josh Chan.
So you won't be able to quantify those shown albertsons actually moves out how much I'm kind of cheaper don't get the same hold itself.
Thanks, and good luck for you when we would see R&R and MTR.
But I couldn't be sure do it off Shabaniyah cheese yet.
Can you just want us to come to you.
They do more China shop with J&J colleagues.
<unk> Shah who are contributing to you guys talked about.
Yep.
As we have mentioned earlier, we expect our total net revenues for the second quarter of 2022 to be between RMB, One 6 billion to RMB, one 8 billion.
This forecast reflects our current and preliminary view on the market and operational conditions, considering that there are still significant uncertainty in the market environment.
This forecast is subject to change.
It'll be choppy.
So if you look over to Tricia to another kind of dealt with it.
Each other payables, Colorado, which are 10 years old.
When you look at himself.
The quantity.
Got it.
That's helpful.
You will know cocoanuts, you're thinking that you guys have done.
Got it.
What's that central Chicago, Florida.
Cohort human collateral pool.
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He has a whole year.
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$200, each even more on the double cohort usual, but I thought that maybe you should see our tioga.
Sure.
They each have a doctor to EQT extra Buffalo things up.
Yes sure.
So a woman named Dr. She's looking for.
We have built here, it's about the pizza prices continue to fluctuate a fall from its previous high in.
In particular since we entered may the big point prior testing further affected by macroeconomic factors such as those fine increasing rates.
We have dynamically adjusting our mining machine pricing to shareholder pressure created by downward bitcoin prices with all customers.
By expanding our businesses in the global markets and providing better after sales services. We continue to strengthen our current customer relationships fortify our mining machines sales business and attract new customers orders.
So at the end of the first quarter of 2022 our advances from Cosmos had reached RMB 177 billion well.
Even excluding the orders that are delayed due to the effects due to the effects of the COVID-19 pandemic.
Once this from customers I still at a relatively high level setting a solid foundation for our second quarter revenue. This.
This year.
Tweet your bonds have a handle on the Hong Kong show you a policy that's useful volcker showed off you've got growing EBITDA.
I want you to chocolate English football.
Two different woman.
Hollywood Hogan.
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But tissue for you to go from here do you when you look.
Goodwill.
Two possible.
Based on past experience mining revenues.
The amount for mining machines, and mining machine price Oh affected by bitcoin price volatility.
This has always been a challenge we have faced within the industry.
With over nine years of operations and the management, we have accumulated experience.
Experience to deal with this challenge.
We will continue to react to market volatility and unexpected situations throughout agile through our agile.
Prudent operations and are stable for pipe.
Its actually the proceeds.
Because we didn't have a heavier.
A little.
And could be called CTO Gwenda told you saw any accounting changes.
Yes.
We expect that in the that the trend of the corn price volatility will continue within this fed interest rate hike cycle for U S. Dollar.
We remain optimistic on the long term post box will be point and its associated supercomputing technology.
Hope that answers your question. Thank you.
Yes, that's great. Thank you and then just one follow up you mentioned the supply chain was impacted multiple Chinese cities can you talk I know you also setups warehouses and stop the logistics can you talk about your expectations for future supplies.
Okay. Thank you let me translate.
Hershey shelter deferral.
So dollars of your telephone.
Yeah.
Alright, I forgot a woman.
Sometimes the other two and hospital food wrongful to top tier for local on them.
She went into an adult.
England.
Yeah.
Got it.
And we're looking kind of chips.
Oh, it's actually quite interesting.
Our partners are including foundry type thing and packaging partners located in the greater Yahoo waiver and Pearl River Delta, we're fully prepared on hot backup plans for the resurgence of the COVID-19 pandemic they did not suspended their business operation.
And continue to supply for us.
I would like to express our gratitude for their great support for our partners.
And so when we tell you can't.
So we're dealing with.
No.
J.
It's even more youthful.
Eric.
Yes.
Probably every single.
She went into your engine that you point out, we'll know where you're going to veto. Okay. You get several crucial.
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No particular plans onto the ice you know sure before traffic.
J, Paul <unk>, which I'm not sure if you look one of that.
Trisha <unk> Tianjin the consented.
Consented traditional leather goods from China.
Okay.
On the other hand, we have secured production capacity this year's upfront prepayments to our foundry partners.
As announced in our earnings press release, our prepayments were RMB 189 billion I felt the end of the first full quarter.
Here are reaching a new historical high in.
In the severe market environment brought by the COVID-19 pandemic, we on our supply chain partners are supporting each other to 90 days through the top pie Oh, we have a stable and solid relationships with our suppliers and we remain cautiously optimistic optimistic for maintaining a stable supply.
We are also in progress towards exploring and applying the technology and production capacity for more advanced nodes.
Hum answers your question. Thank you.
Yes, yes, thank you very much.
Yes.
Thank you. Our next question comes from shrunk spin from <unk> Securities. Please ask your question.
Can you hear me.
Oh, yes.
Okay.
So my question most of the gold coast.
Was institutional barriers. So why have known fields have you online start talking to retail customers.
Central all kudos should seek one cohort associated short duration law. It was Suzanne allergic mentality unusual cohort I can't touch on I'm trying not to go with you.
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<unk>.
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Telco T C L.
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To ensure we can cohorts you on the Los Angeles beautiful.
It shows that book for you to get that share count.
At that point.
That's a high ratio each finger.
Traditionally what we do.
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Yeah.
<unk> total should all etc.
Sure <unk>.
You will find a need at all.
Did you hold a reinsurance alcohol.
But what's the actual dollar share of all of it.
As a matter of fact, our customers can always buy mining machines brought regardless of the quantity even just the one machine.
Putting customers.
Our priority on reducing friction in the transaction process and related costs is a very important aspect of our fuel system now small and micro scale customers and those who would like to purchase a simple machine can make a purchase.
Sure.
Moving to settle with <unk> in the original whereas such set of monday's legally permitted.
Employing a quick and very convenient experience.
In addition, our online store is important for raising the transparency of machine models in prices for our customers.
Going forward, we will further develop our sales channel and gradually improve after sales services in the global market.
Whether our customers are small or micro scale or meet a large scale. They can only enjoying an upgrade to every aspect of our service.
Well hold on and start your question. Thank you.
Here's yet or the gang women's yourself going through that sort of true problem or a change of harlequin.
Yeah, I don't know Jim Collins.
According to the law you would see as I mentioned, we're showing them going down a chunk on social or not.
Lance you launched a new generation of mush mining machines the Avalon.
Tal I think do you think.
The.
So we're really sad.
Mass production and sales.
Yeah.
Uh huh.
Just a quick on.
Contractual in the sequence of Yahoo.
You are not sure woman schedule, a surety of closure to your point of view.
All of that stuff out.
Yes.
I think on the hobby, where do we see.
Sure.
Here's one.
Well monopoly Trisha <unk> point that Youll Farquhar showed here with.
Jackpot.
Yes.
Sure not that I couldn't tell me that's fine.
We presented a new my English and model the Avalon health 66 to minus doing the bitcoin plenty plenty to Miami conference.
Our model helped 66 is an upgrade on the current design and fabrication node with about 10% improvement in the power efficiency and performance.
As a result, this new mining machine producers overall computing power 100 higher harsh per second.
Additionally, we will keep preparing for it.
The upgrade in our processing and design and excited at the progress they'll be introducing more advanced nodes, thus, bringing more of a competitive product to the market.
If I answered your question. Thank you.
Okay interesting.
Through the call. Thank you alright. Thank you very much but that is all the time, we have for questions I will now turn the call back to the management for closing remarks.
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. This concludes the call today. Thank you everyone for attending you may now disconnect.
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Okay.
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Okay.
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