Q2 2022 Canaan Inc Earnings Call

August 18, 2022

Ladies and gentlemen, thank you for standing by and welcome to Canaan Inc's second quarter 2022 earnings Conference call.

This time all participants are in listen only mode. After the management's perpetua marks who 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 you'll speak a host today, Mr. Clarke Susi Investor Relations director of the company. Please go ahead clock.

Thank you 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 available online.

Joining us today are our chairman and CEO , Mr. Nan Gung, Zhang and our CFO Mr. Jin Cheung James In addition, Mr. Edward Lu our SVP, Mr. Leo Wong IR Senior director and Mr. <unk>, Zhang IR manager will also be available during the question and <unk>.

Answer session.

Mr. John will start the call by providing an overview of the company and performance highlights for the quarter.

Mr. Cheung will then provide details on the Companys operating and financial results for the period before we open up the call for your questions.

Before we continue I would like to refer you to our safe Harbor statement in our earnings press release todays call will include forward looking statements. These statements include but are not limited to our outlook for the company and statements that estimate 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 no obligation to revise any forward looking statements that may be made in today's press release call or webcast, except as required by law.

These statements do not guarantee future performance and are subject to risks uncertainties and assumptions. Please refer to the press release and the risk factors and documents, we file with the Securities and Exchange Commission, including our most recent annual report on form 20-F for 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. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, which is posted on the Companys website with that I will now turn the call over to our chairman and CEO . Mr. <unk>. Zhang. Please go ahead.

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<unk> San Diego.

For the year.

During the second quarter of 2022 under the combined influence of two rounds of interest hikes by the Federal reserve the bitcoin price continued its downward trajectory.

Declining to about 20000 U S dollars from 45000 U S dollars.

And energy prices caused by geopolitical conflicts further impacted both mining income and demand for mining machines. The situations. Thus led the bitcoin network's total computing power to decline slightly.

At the same time the cities, where our main offices are located experienced a resurgence of the COVID-19 pandemic with accompanying large scale lockdowns and pandemic control measures. This combination of factors negatively impacted our operations during the quarter.

Despite this unfavorable backdrop, our team successfully navigated through the difficulties posed by the challenging environment as.

As well as ensuring that our employees remain healthy and were supplied with daily necessities. We continue to fulfill our clients' orders achieving $5 5 million <unk> per second in total computing power sold coupled with the contribution from our steadily developing mining business. We generated total revenues of one six.

<unk> 5 billion RMB for the quarter meeting our previous expectations, notably we achieved a net profit of 609 million RMB in the second quarter.

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In regard to the sale of mining machines, we continue to work closely with our customers during the quarter.

We delivered a total of $5 5 million <unk> per second computing power generating revenues of RMB. One 6 billion sales of mining machines continue to drive the growth of total revenues, which grew 48, 6% year over year and up 21% quarter over quarter, we strove.

Diligently to fill the demands of all of our customers.

Following the launch of our online store for overseas retail customers in late May we have received orders from all over the world.

As our customer base shifts to overseas markets, we worked tirelessly to build and expand supporting systems are overseas headquarters in Singapore has already established R&D finance and other operational teams and launched and launched a supply chain system that encompasses assembly warehousing and <unk>.

Logistics and this quarter.

With comprehensive operational functions are Singapore headquarters has become a second general office and will provide valuable support for our overseas operations.

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As of the end of the second quarter of 2022, we had a total of $4 75 million <unk> per second of computing power to be delivered and customer advances of 1.0 to RMB 1 billion on hand, although contract sales orders set a considerable foundation.

For our upcoming short term revenue. We are also fully aware that the bitcoin price remains under pressure while energy prices are increasing.

As such mining companies revenues and financials are expected to come under significant pressure.

Considering these factors.

We expect that demand for computing power will weaken over the next one to two quarters, which will negatively affect our sales revenue in the second half of 2022.

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Although our industry is experiencing a challenging period, we still retain our confidence in the long term prospect of bitcoin and its underlying blockchain and supercomputing technology.

We continue to invest in research and development improve our supply chain capability and work diligently to deliver superior products with high quality and advanced performance to the market and our customers our research and development for the next generation of mining machines is progressing smoothly.

Currently we have reached a critical stage of progressing towards mass production.

Due to various uncertainties throughout the research and development and mass production process. It is necessary for us to wait until we have the testing results before we disclose the specific performance parameters of our new generation of mining machines.

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In retrospect, no matter the upside or the downside cycle of the bitcoin price, we have always insisted on investing in research and development although.

Although the bitcoin price is currently experiencing turbulence, we still believe that bitcoin will present more value in the future at the current stage launching the next generation of mining machines and delivering through mass production are paramount for our innovation and R&D efforts, our new products will help clients further enhanced mining.

Efficiency better prepare future challenges and obtain more returns.

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Given the current environment characterized by downward fluctuations in the bitcoin price, it's particularly important to insist on flexibility.

And nimbly developing our business our mining business overseas during the quarter. Thanks to our improved electricity supply. We mined 245 point 11, bitcoins and we have a total of 340 684 bitcoins on hold by the end of the quarter.

Although the bitcoin price continued to decline during the quarter, we still generated mining revenue of $52 1 million RMB representing quarter over quarter growth of 69%.

Faced with such an unfavorable market environment. We are currently exploring more opportunities for regional diversification of our mining business. We are forging partnerships and North America Southeast Asia and other regions, so as to expand our business scale and lower costs.

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Yes.

Let's now turn to our AI chip business.

As a result of the COVID-19 control measures implemented in major cities during the quarter downstream manufacturers had slower inventory turnover for consumer products, which negatively impacted our AI chips business revenue in the second quarter.

As the pandemic control measures are gradually ease in the third quarter downstream clients have enjoyed better sales and started to build up their inventories again.

Simultaneously, we have further strengthened the sales efforts for our AI chips and our sales have now begun to recover recently R. K <unk> CRB customer reference Board development kit obtained Amazon's AWS Iot course certification.

Through our technology referenced support it became easier for our clients to integrate AWS Iot service software on the K five chip platform and develop products based on our AWS Iot service.

At the same time, obtaining this certification allowed our products to be displayed on the AWS website further increasing our brand recognition.

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This quarter. We also made decisive progress on our share buyback program approved in March under which we may repurchase up to $100 million worth of our outstanding.

DFS over the next 24 months as of August 12, 2022, we have repurchased over $2 million for a total of $10 3 million U S dollars with an average price of $3 63 U S dollars per share, which is lower than the current stock price or <unk>.

<unk> of this repurchase program demonstrates our strong determination to continually to continually increase shareholder value and our confidence in the company's long term outlook.

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Hello, John .

After that.

On June 23, 2022, we announced the repurchase agreement with certain warrant holders to repurchase all outstanding warrants for an aggregate price of approximately $6 six 1 million U S. Dollars. We have made the payments in full upon the completion of warrant certificate cancellation.

Our outstanding Aes will be reduced by $4 $72 million, we will discuss in due time when the cancellation process completes.

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We didn't execute any financing activity during the quarter, considering the current market environment and our stock price that is under pressure, we will be focusing on the repurchase program is the core of our capital market operations.

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I would also like to acknowledge that investors have raised concerns over the delisting risk of our company under the holding foreign companies accountable Act, we have been actively exploring possible solutions to protect the interest of our shareholders and other stakeholders. We are taking every step to maintain our list.

<unk> status and the advantage in compliance as a listed company.

To promote the long term development of our firm as a public company with the majority of revenues generated overseas. We will further strengthen our government governance and operations capabilities to comply with applicable laws and regulations in different locations and maintain active communications with capital markets.

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During the second quarter, our business faced several concurrent headwinds, including further outbreaks of COVID-19, a volatile geopolitical and economic environment and a downward trend in the bitcoin price.

Against this uncertain backdrop, we relentlessly maintained our communication and collaboration with upstream and downstream partners and performed steadily. Despite these challenges. However, we are aware of that macro adversities.

Particularly the decline of the bitcoin price and rising energy costs have pressured the entire bitcoin mining industry seriously impacting miners demand for computing power for some time in the future.

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Therefore, we expect our performance to come under further pressure during the upcoming one to two quarters based on our current view, we expect our total revenues in the third quarter of 2022 to be in the range of 900 million RMB, two $1 1 billion RMB.

<unk>, a decrease of 17% to 32% compared with the third quarter of 2021.

Please note that this forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

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In Q2.

It has been nine years since our inception and during that time, we have been through multiple bitcoin price cycles. Our management team has a good amount of experience operating in market environments, where the bitcoin price is declining.

As a responsible company, we always keep respect in the market.

Even in bullish times, we didn't expand at the expense of balance sheet health as such now we do not have interest bearing debt and our mining machines in crypto currencies are not collateralized. These financial advantages along with our current cash cash cash position allow us to steadily push forward our mining our business.

Strategies excuse me business strategies, despite unfavorable market environments, and protect our employees and partners, while continuously improving our products and services.

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When the market enters a downswing. It also provides a good time for us to sharpen our new products steadily develop our markets and grow and optimize our supply chain and logistics at the same time, we continue to expand our business internationally and strengthen our after sales service system to better <unk>.

Of our customers.

Furthermore, we will retain the agile and flexible operating strategy when prudently developing our mining business, while enhancing synergies between our machine sales and mining business.

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This concludes my prepared remarks, I will now turn the call over to our CFO James.

Thank you John and good day, everyone. This is James.

In the second quarter of <unk>.

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The total revenues of RMB, $1652 7 million, representing 21, 9% quarter over quarter increase.

52, 8% year over year growth meeting our guidance range during the quarter. The bitcoin price further thanks to below $20000 from about $45000 in late March despite the soft market sentiment we strive.

To achieve this top line performance, primarily due to the delivery of $5 5 million total cash <unk> computing power for our clients.

A relatively high average selling price will be cured with contract sales in previous quarter also contributed to the top line results.

All AI chips business recorded a revenue of RMB, one 6 million for the quarter due to softer demand from integrated a product provider EG our customers.

This is because they stopped to offer electronic product inventory.

In that our chipset during the quarter when the pandemic related lockdowns negatively impacted their supply chain and the consumption of this retail electronic products.

As the pandemic.

Current <unk> control measures gradually ease and retail started to recover we are having more progress.

AI chips sales in July and early August .

Our mining business.

And improve the power supply generated a $245 11 this points in the second quarter, which contributed $52 1 million RMB in revenue, representing a sequential revenue increase of 69%.

We had 346 84 basis points on hold as the quarters and <unk> was up 166 96. This points as of March 31 292.

Due to the ongoing energy instability, a portion of our deploy the mining machine.

Not being consistently online and then we are facing increasing energy costs for our.

Operations.

Although the evolving market environment, we are prudently exploring other geographical regions with favorable mining conditions to diversify our operations.

Above all our gross profit for the quarter increased by 12% sequentially and 117, 3% year over year to RMB $929 7 million.

As a result of the complex.

<unk>, a slightly decreased average selling price and the increase the product cost due to wafer price right. Our gross margin for the quarter narrowed to 56, 3% from 61, 2% in the first quarter of 2022.

In the second quarter, we continued our efficient expense management with consistent investments in research and development.

Notably we have built an R&D team at our Singapore overseas headquarters by leveraging the advantage of local talent.

From profit and the law.

Becky will have several material non operating items related to accounting treatment for the quarter.

First we incurred a 30 million RMB impairment for our critical currency assets in the quarter due to the bitcoin price decrease compared with the first quarter at the end.

I would like to reiterate that Pip claims initially recorded at the price while we generate.

Our digital assets are recorded on our balance sheet net of any impairment losses incurred since the initial recognition.

Dense enough recorded until realized upon disposal of such digital assets.

Secondly, the owning this quarter due to the depreciation of RMB against the U S. Dollars. We also recorded a foreign exchange gain of.

RMB $114 3 million.

As almost all of our revenues were generated from overseas market in U S dollars.

Should the RMB appreciation against the US dollar in the future we expected to incur only foreign exchange losses.

Last but not least the change in fair value.

He appreciates against the US dollar in the future, we expected to incur only foreign exchange losses.

Last but not least the change in fair value of warrant liability brought us again of 25 million RMB in the second quarter as we completed the repurchase of all outstanding loans in late June spending warrants in late June we.

Don't expect any gains or losses from such fair value change in the foreseeable future.

As a result of foregoing, we realized a solid net income of $608 9 million RMB for the second quarter, achieving 37, 9% increase quarter over quarter, and 148, 6% growth year over year.

Turning to our balance sheet as of the end of the second quarter, we have customer advances of $1017 5 million RMB together with our cash generated from product sales, we have an aggregate of two <unk>.

<unk> hundred $48 7 million RMB in cash and cash equivalents as of June 32000 attended to maintaining relatively flat compared with the end of the first quarter.

Our cash level provides us with a solid position to navigate challenging market environments enables us to carry out proven exploration expanding our global presence and continued our share repurchase program.

As all of the hotels 2022, we have repurchased a total of $2 8 million ABS. It with an aggregate value of $10 3 million U S. Dollar and then aggregate average repurchase price.

363 U S.

Under our current stock repurchase program approved in March 2022.

This stock buyback demonstrates our firm confidence in the company's long term growth prospects.

Moreover, as mentioned earlier, we reached an agreement with our Encoders to repurchase all 472 million outstanding warrants in late June for an aggregate of $6 61 million U S. Dollar.

The repurchase of outstanding warrants enables us to capitalize on the current valuation and the graph us more financing flexibility in the capital market in the future.

Under the current market environment, we will continue our conservative approach in the capital market and to prioritize the share repurchase program to drive value for our shareholders.

Looking forward, we see that to continue with a lower this coil price level, coupled with increasing energy costs and the logistics expenses has significantly dropped.

Our clients demand ended their cash flow.

We expect a considerable decrease in both products orders and the average selling price.

Taking into account the relatively high level of production cost, we expect inevitable gross margin decreased in the second half of this year subsea.

Subsequently, we expect our bottom line performance to experience, a substantial decrease or even loss, making in certain scenarios.

Coil price continues to fluctuate at a low price level.

Maintaining respect for the market, we will continue our prudent and agile operating strategy to navigate the current market dynamic and has strengthened our supply chains and develop our advanced new products for future opportunity.

Now I would like to briefly walk you through our financial results for the quarter.

Revenues in the second quarter of 2022, RMB $1662 7 million.

240.

$7 million, representing an increase of 21, 9%.

Compared to the first quarter, and then increase of 52, 8% from RMB $1081 8 million in this NPL readout 2021.

Gross profit in the second quarter of 2022 was RMB.

$929 7 million.

What you mean is U S dollar $138 8 million, representing an increase of 12%.

$829 8 million in the first quarter of 2022, and an increase of 117, 3% from RMB $497 9 million in its end period of 2021.

Total operating expenses in the second quarter of 2022, or 275 million RMB, which means that $44 million, representing an increase of seven 7% from $261 2 million RMB in the first quarter of 2020.

And the increase of three 1% from 262.

Two 4 million RMB in the <unk> period of 2021.

Income from operations in the second quarter of 2022.

$659 3 million RMB, which is the 98 $4 million, representing an increase of 13, 9% from 578.

6 million RMB in the third quarter of 2022.

An increase of 298, 4% from $165 5 million RMB in the <unk> period of 2021.

Net income attributable to ordinary shareholders in the second quarter of 2022 was $608 9 million RMB.

Which means the $99 million, representing an increase of 37, 9% from 441 six minute million RMB in the first quarter of 2022, and an increase of 148, 6% from 245.

RMB within periods of 2021.

non-GAAP adjusted net income in the second quarter of 2022 was 688 2 million RMB U S dollar 100.

$2 7 million, representing an increase of 26, 6% from 543 4 million RMB in the first quarter and an increase of 115% from 310 to $8 1 million RMB in this NPL ratio 2021.

Basic and diluted net earnings per ads for the quarter were RMB 353.

Which since the <unk>.

Zero point 50 suite.

U S dollars.

Current liabilities as of June 32022.

<unk> thousand $17 5 million RMB.

151, 9 million U S dollars.

Decreasing from a solid and the 347 million RMB as of December 31, 2021.

This concludes our prepared remarks, we are now open for questions.

We will now begin the question and answer session as a courtesy to other investors and analysts who may wish to ask a question. Please limit yourself to one question at a time.

For the benefit of all participants on today's call. If you wish to ask a question to management in Chinese. Please immediately repeat your question in English.

To ask a question you will need to press star one one on your kind of fine until late this year.

Your name to be announced please standby, while we compile the Q&A queue.

We will now take our first question.

Standby.

Yeah.

Okay.

Your line is now it's Conor.

Yes, Jeff Chen from China Renaissance Securities. Please go ahead.

Thank you.

When we cannot take pizza.

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In Chile.

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Yes sure Marty.

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Highlights.

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A significant decline in the compliance journey first quarter this year and I want to know are there any large customers Bill task orders and.

Impact on that.

After demand gross margin gross profit margin and ASP for the second half of this.

This year and how do we react to this cycle and further expand our OSB market. Thank you.

Okay.

Also our CFO .

As usual pilots and crew.

Roughly 10 chips to recover so.

Okay.

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Thank you Felicia.

Melissa.

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Particularly occur cohort growth.

You can try and water.

Peter.

We really like.

Attributes into a company itself.

Our future contract sales require our clients to prepay at least 50% of the total payment to secure mining machines by.

By the end of the second quarter, our customer advances reached.

One point.

$1 7 billion RMB. So far we have seen very limited cases of payment defaults future contract sales have always been a part of our business model, we negotiate contract sales with clients to lock in prices for orders to be delivered in the future the business model.

<unk> been acknowledged by both our clients and us even when the bitcoin price source, we will still deliver mining machines at predetermined prices.

And central that are mutual client alert, the centurion, which products are you doing CFO .

Industrial Mil cannot control because that's our EMEA geography.

We won't do you suddenly pool is useful.

You guys have.

Thanks, Jason and sound hotel GAAP kind of accounting.

Accounting for this.

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Yes sure.

Sure.

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One is cumulative.

R&D is done people are going to control that and maybe the two or three.

Okay.

Our current prepaid prepaid orders on hand set a considerable foundation for our third quarter revenue. However, we have noticed a significant decrease in demand for miners deployment of computing power due to factors such as the declining oil price and surge in energy prices.

We have adjusted our prices in response as you may have seen on our online shop. The average selling price for retail has been adjusted down to $30 per Taro has therefore, we expect a downward trend in sales and price of computing power in the second half of this year.

As disclosed in the earnings release, we estimate a third quarter's revenues to be between 900 million RMB and $1 1 billion RMB.

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The detailed points either.

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So of course, we cannot GE is universal.

Let me kind of a comparable increase from crude oil.

I'm not sure I am not sure Sean Zhang with how detailed because I don't know what the hazard.

Vehicles.

Sure.

So Meanwhile, we have observed that for some of our experienced clients their businesses haven't been particularly impacted in terms of.

Operations and cash they have the intention to deploy more computing power at the low point of the bitcoin and mining machine prices.

We are currently in active communication with these clients.

We'll also continue to closely monitor market conditions.

And prudently explore opportunities for mining collaborations at the appropriate time.

We will also flexibly adjust our operations in response to bitcoin price and market changes.

Computing power will be dynamically adjusted and its allocation of spot sales future contract sales in our mining business. During the past few years, we've experienced multiple dramatic fluctuations of the bitcoin price as well as bear market cycles.

So the markets not in an ideal condition right now we have faced in our long term growth.

Hi, Susan.

She is also well.

Please go.

I'm sure that you're saying.

Sounds like Youre going to give us your talent <unk> Atlantis is currently quite poor.

Dean.

Okay.

Now if we have.

We plan to expand our OSB market.

Self mining business.

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Last quick one of opportunity for mutual growth.

And on top of that.

Patrick will be on the tundra CFO .

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<unk> and <unk>.

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Sure.

Tom.

We've appointed an operator.

T J accounts.

But look we're fine.

If you go down to $72.

So to answer your question.

Continue to closely communicate and collaborate with.

Overseas clients as energy prices Soar globally, we have seen stronger demand in places where energy resources are abundant and have price advantages.

Our team are also actively participating in bitcoin mining industry conferences held in North America, and other regions to enhanced communication and product promotion with business partners and clients in the industry.

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For the highlights for me gentlemen.

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With our own.

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In short our lives.

So I'll go ultimately.

Okay.

Thank you Tim.

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Youre welcome our CFO .

We just put.

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Okay.

So.

During the quarter, our overseas headquarters in Singapore has already established.

R&D finance and other operational teams and launched a supply chain system that encompasses.

Assembly warehousing logistics.

It is expected to provide more support and convenience for the development of our business overseas.

Our online store that targets overseas retail markets has already received on any orders and prepayments from North America Europe , Australia.

Okay.

Other regions since its launch more than a month ago.

Even though total sales volume is still very small we have seen interest in bitcoin mining from clients globally.

The online store also opens up a channel for us to extend our reach to customers and expand our brand promotion.

Yes.

Thank you that's very clear.

Thank you we will now take our next question.

Please standby.

Just from the line of Michael <unk> from the Benchmark Company. Please go ahead.

Thanks, and congratulations on whether in this tough environment can you talk a little bit about your build out in the U S and how that's going please.

Okay.

Well most of the countries.

Frankly, Andrew instruments.

Andre.

You too.

Sure.

No peripheral products.

Terry you can pull on a digital door.

<unk> scheduled ashish.

Okay.

Our boutique at Gopro com.

I know many of Tcf has gone up what's your bottleneck.

It could be higher.

Yes.

Upon the political will to Sherwood facility Syngenta.

Since I don't know.

Sure.

Got you.

Popular social biopharmaceutical torsional will meet targeted found either for sure. It <unk> that's helpful.

<unk> for the year with the product.

We took over from Dupont that Regal CRO for the tissue daily payment Attorney General intuitive.

Okay got it.

Great.

Appreciate it.

Thank you for your question, so we highly value the north American market and notice the increasing demand for investing in and building mining farms by Bitcoin miners in North America. This is due to the wide acceptance of crypto currency and the <unk>.

London Energy resources there.

Especially the rapid development of clean energy.

So this year, we actively participated in many industry conferences in the United States We had.

Dialogues and build connections with mining companies and business partners in North America. We now colleagues based in North America to expand our business, including sales and exploring mining business opportunities. We are also building local warehousing and logistics there to support our business development. We also set a prepare.

Centers and provided continuous and improved <unk>.

Local and after sales services for clients.

Hey, Matt.

Zero.

So that's kind of the growth.

<unk>.

Yes, actually negotiated quota essentially captured.

Cash it upfront.

Units.

You deal with that.

E Mail.

I'm up on yield.

I think when they order the tendency to culture.

So on your cell phone here Lee.

Sure.

Can you start to walk with Sean Lockdown equals about.

Welcome to Genesis.

Yes.

Jonathan.

Equally measure tender before we go to that.

So currently in North America, we're in dialogue with multiple binding farm partners maintaining a.

Prudent strategy, we have initially both to mining site resources that can host 5000 units of mining machines.

Through typical deposit prepayment to explore mining operations and this new region in the future.

The mining business, serving as the critical supplement for our mining machine sales enables us to dynamically allocate our mining machine inventories amongst sales in mining operations, so as to maximize our returns through our agile operations.

Great. Thank you very much appreciate it.

Thank you, we'll now take our next question.

Please standby.

So it's from the line of Kevin Dede from H C. Wainwright. Please go ahead.

Sure sure.

I would I understand a strong interest in continuing to develop.

No machines, and new technology would be.

Continued spending on R&D.

What I would like to understand.

As how you see semiconductor development and machine technology improving.

Such that efficiency improves.

In your opinion on the inclusion of immersion capability.

Thank you.

Okay.

Could you just kind of on a photo on February the.

Okay.

Yeah.

Good either drop overall talking about the overall.

Peter.

2000 per growth.

Yes.

Sure Ken.

Thats good.

Tenants that you put on for Ken.

And to show them at all.

With your four three.

<unk> will elaborate on coupon or should we look at that.

<unk> entered into that again, the global economy.

Yes.

Wonder if you could clarify that.

So you don't CTO cost of sale for us.

Perhaps become truncated.

Davidson.

<unk> seen the liquids handling that.

Thanks for that.

But if you look on the talent.

Sure.

So for us in the mining machine business and important task in the future is to integrate products and solutions vertically penetrating the whole product system from chips to site.

Mining computing power throughout the industry value chain.

Currently in this process the product front only includes mining machine hardware.

There is limited penetration in to providing solutions for mining site deployment operations and maintenance of mining machines.

Based on our recent observations the entire industry is still lacks standardized products.

Simplified deployment for improved operations, and lower costs and better use of waste and clean energy for us products and services will continue to be integrated and developed vertically.

Our balance sheet too much.

So an interesting anecdotes inside a hotel to GAA approach nano excuse me later.

<unk>.

Welcome to the <unk> sure.

Sure.

The JV.

Thank you Sidney and controller for testing.

We will do the.

Sounds good.

So semiconductor technology is at the crossroads of transitioning from Finfet to GAA or nano sheet types of <unk> technology.

This application.

For mining machines, it's still the vanguard of Hell.

<unk> stabilized advanced fabrication technology.

Actually our industry is.

Currently doing this.

Thank you.

Thank you very much.

Thank you.

That's all the time, we have for questions I will now turn the call back over to management for closing remarks.

So thank you everyone very much for attending our earnings conference call. Today. This thus combustion is please feel free to reach out to our questions. Please feel free to reach out to our IR team. Thank you.

Thank you that concludes our call today. Thank you everyone for attending you may now disconnect.

The conference will begin shortly to raise Johan during Q&A, you can dial star one one.

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Yes.

Ladies and gentlemen, thank you for standing by and welcome to Canaan Inc's second quarter.

2022 earnings conference call.

At this time, all participants are in listen only mode.

After the 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 host today, Mr. Clarke Cc Investor Relations director of the company. Please go ahead clock.

Joining us today are our chairman and CEO , Mr. Nan Gung, John and our CFO Mr. Jin Cheung James In addition, Mr. Edward Lu our SVP, Mr. Leo Wong.

ER senior director and Mr. <unk>, Zhang IR manager will also be available during the question and answer session.

Yes.

Mr. John will start the call by providing an overview of the company and performance highlights for the quarter.

Mr. Cheung will then provide details on the Companys operating and financial results for the period before we open up the call for your questions.

Actual results to differ materially from those set forth in such statements.

Hi, Danielle.

You will note that downward without production.

No.

BT Italia, Sheila tenants happened in future.

Also there one maybe an extra few shutdowns.

Okay.

Hey, Jeff.

With doctor to them.

It's all of them.

You have your current window of our control.

Fusion will achieve will put out a.

Charles.

Yes.

We are the <unk>.

Sure.

We want a full four quarters.

Total enrollment that Qdoba again, we'll deal with them about that.

Yes.

That's helpful. Tom.

100 Hooper.

We've all gone away.

Tim.

Hello <unk>.

So Nathan cellphone well Keith.

Jonathan do you have enough on yield.

But it's even Windows for example, can we April India assure that well yet.

I know you Qi <unk>.

For the year.

Yes.

During the second quarter of 2022 under the combined influence of two rounds of interest hikes by the Federal reserve the bitcoin price continued its downward trajectory.

Aligning to about 20000 U S dollars from 45000 U S dollars.

A surge in energy prices caused by geopolitical conflicts further impacted both mining income and demand for mining machines. The situations. Thus led the bitcoin network's total computing power to decline slightly.

Despite this unfavorable backdrop, our team successfully navigated through the difficulties posed by the challenging environment as.

As well as ensuring that our employees remained healthy and were supplied with daily necessities. We continue to fulfill our clients' orders achieving $5 5 million <unk> per second in total computing power sold coupled with the contribution from our steadily developing mining business, we generated total revenues of $1 <unk>.

<unk> 5 billion RMB for the quarter meeting our previous expectations, notably we achieved a net profit of 609 million RMB in the second quarter.

Second one you talked about you have a formula and authentic Tricia box.

Hello, Doug.

Suddenly local.

Keith.

Yes.

Or will it be shooting at.

Maybe just maybe you talked about by the new funding you've shown a number for you guys.

Well Michel Demar domain co political my CTO.

Highlighting for a couple of <unk>.

We are sharpening the.

Thank you.

Tax rate further.

So the change liquidity working that.

Sure.

And what will be in need of tissue setting in the future for sure.

You should have an LTE chips.

Yes EBIT.

Yes.

Great.

<unk> had some growth.

Look without.

Political also geography within the bubble.

So I think that's a good business.

With that I would tell me that youre drilling.

In regard to the sale of mining machines, we continue to work closely with our customers during the quarter. We delivered a total of $5 5 million <unk> per second computing power generating revenues of RMB, one 6 billion.

Sales of mining machines continue to drive the growth of total revenues, which grew 48, 6% year over year and up 21% quarter over quarter.

This drove diligently to fill the demands of all of our customers.

Following the launch of our online store for overseas retail customers in late May we have received orders from all over the world.

Logistics and this quarter.

With comprehensive operational functions are Singapore headquarters has become a second general office and will provide valuable support for our overseas operations.

Yes.

Yes, you do more wholesale type uplift on ebay is one key.

Mutual fund.

Are you there.

<unk> why don't you show it inbound laywoman. Additionally, outlines generic neutral about a deferral will be I'll call. It I'll have Doug shoot at half year.

Yes.

Once out.

Yes.

And we feel that were delayed.

Oh really.

But you can be proud of given the colder if suddenly the format future zone <unk>.

So the so called level 2 million.

For our upcoming short term revenue. We are also fully aware that the bitcoin price remains under pressure while energy prices are increasing.

As such mining companies revenues and financials are expected to come under significant pressure.

Considering these factors.

We expect that demand for computing power will weaken over the next one to two quarters, which will negatively affect our sales revenue in the second half of 2022.

Yes.

Leisure.

They hold us CFO co digitized kita accounts.

Yes.

This is Cynthia <unk>.

Yes.

They should help us working with physical Haas in the global economy.

Seeing none.

Yes.

Alright.

Sidney.

Mr Hagan Carla.

Good luck.

Yes.

Adjusted <unk> for sure.

Italy, Holland desktop with Puget.

Although.

Though our industry is experiencing a challenging period, we still retain our confidence in the long term prospect of bitcoin and its underlying blockchain and supercomputing technology.

<unk> are progressing towards mass production.

Well if that is your comment.

We've got good top deal in gaucher treating central courtyard.

Two of them, which I know, we said we'd be ductile nominal chunky Ww lineup, which he said we're going to attack.

Certainly it will be an adult with <unk> two coming out.

Tina <unk> Banca <unk>.

Clinical oncology into the hedge that political upheaval.

In retrospect, no matter the upside or the downside cycle of the bitcoin price, we have always insisted on investing in research and development.

Deficiency, better prepare future challenges and obtain more returns.

We're not going to deal with.

Hey, guys Scot Woodall, our biggest seller.

<unk>.

So that.

Yields in the vertical well with <unk>, Indiana, So long you T J.

This will be.

Sure.

And Vasily.

It won't be kind of a timeframe <unk> lost volume.

Which number each one will be funded some callbacks renewal strategy.

Sure.

We have handful of often you're able to do that.

And then soon abate lay out of each of vehicles.

Yes.

Got it.

Given the current environment characterized by downward fluctuations in the bitcoin price, it's particularly important to insist on flexibility.

And nimbly developing our business our mining business overseas during the quarter. Thanks to our improved electricity supply we mined $245.

11, bitcoin and.

And we have a total of 340 684 bitcoins on hold by the end of the quarter.

Although the bitcoin price continued to decline during the quarter, we still generated mining revenue of $52 1 million RMB representing quarter over quarter growth of 69%.

Okay.

I think thats helpful to you to when they will conclude.

<unk>.

Because it sounds different from the circulation.

To help you offline.

On a guarantee to the AIC painful.

<unk> recently.

Each important.

Therefore.

A woman.

Hey, so called leave without Accountability, Tom Jonathan Collins, the Oklahoma.

The only therapy.

Im not sure.

I'll ask you to cartersville.

Smaller woman.

<unk> handheld future Coppola local funding the balance.

Alex Sheila.

Hidden that.

You're quite yet.

Well, it's Henry.

I'm wondering if the caller talked about.

Can I ask about the <unk> CFO of Stifel.

Competitive at all.

Let's now turn to our AI chip business.

As a.

Cult of the COVID-19 control measures implemented in major cities during the quarter downstream manufacturers had slower inventory turnover for consumer products, which negatively impacted our AI chips business revenue in the second quarter.

As the pandemic control measures are gradually ease in the third quarter downstream clients have enjoyed better sales and starting to build up their inventories again.

Simultaneously, we have further strengthened the sales efforts for our AI chips and our sales have now begun to recover recently R. K $5 10, CRB customer reference Board development kit obtained Amazon's AWS Iot course certification.

Through our technology referenced support it became easier for our clients to integrate AWS Iot service software on the K five chip platform and develop products based on the AWS Iot service.

At the same time, obtaining this certification allowed our products to be displayed on the AWS website further increasing our brand recognition.

But in general now most valuable electricity sales.

HRS.

Okay.

<unk>.

Our corporate revolver couple of other banks.

Yes.

<unk> is now live.

Maybe that changes quicker turns out listen if there was anything yet.

What's your thoughts on interesting John .

Got.

You did.

Housing product.

This quarter. We also made decisive progress on our share buyback program approved in March under which we may repurchase up to $100 million worth of our outstanding.

<unk> of this repurchase program demonstrates our strong determination to continually to continually increase shareholder value and our confidence in the company's long term outlook.

I also know you already already underway.

Yeah, sure and check look we're going to do about it.

For your money.

Two solar Chunghwa.

Which echo.

Absolutely channel attributable to Tampa, Oh shoot question I'll check the push out of the quarter.

If I can make assets were down $2 two aircrafts so that you follow.

Additionally, we have Jonathan.

Talk with you.

On June 23rd 2022, we announced the repurchase agreement with certain warrant holders to repurchase all outstanding warrants for an aggregate price of approximately $6 six 1 million U S. Dollars. We have made the payments in full upon the completion of warrant certificate.

<unk> are outstanding Aes will be reduced by $4 $72 million, we will discuss in due time when the cancellation process completes.

But it's even local celebrities.

Industrial fine David equal reduction.

Actual woman.

Politically.

We didn't execute any financing activity during the quarter, considering the current market environment and our stock price that is under pressure will be focusing on the repurchase program is the core of our capital market operations.

So there are no will include all the drugs.

Thank you Bob.

Tissue inkjet Daniel.

Similar to the CTO dosage, Oklahoma to Dubai <unk>.

We don't have an entity.

<unk> seen the bulk are stronger than ever.

Within.

They don't want to occupy.

So he's out in the trough of that highlight a trough of the year.

Hey don't ship, all attributed keeping that won't will adapt with EG.

Literally Lee.

Can you give alternatives to the cycle.

<unk> status and the advantage in compliance as a listed company.

Yes.

So there are two to <unk>.

The cys in platform.

For the children Zynga fine yes.

Let me start with Taco all material.

That's very helpful.

Over to Lee Schram Italia, local but Walker <unk> <unk> CFO .

Electrical either.

No when we excluded all you guys have you guys talked about.

<unk> got quite a dilemma.

Okay.

Based on what we had put out.

Yes.

Yes, it definitely does.

Again, Angola, you probably saw that the format as usual.

Against this uncertain backdrop, we relentlessly maintained our communication and collaboration with upstream and downstream partners and performed steadily despite these challenges.

We are aware of that macro adversity.

Well it is phenomenal.

I know you don't have the tubular.

Jonathan.

As you can see China.

Sure.

Alright. Thank.

Thank you.

Certainly in the solar tons out in <unk> yet.

Turning to our EPS benefited from a number of initiatives.

Thanks, Rob.

And you're still not sure.

Sure Scott.

<unk>, obviously chi.

See one of those.

Presenting a decrease of 17% to 32% compared with the third quarter of 2021.

Please note that this forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.

John Tony and Christina.

Sandy <unk>.

Got it.

EBITDA type of format.

A few of the gains in yet.

That's really helpful.

How can we look for.

It should help opportune way.

We had about $4 CFO .

Yes.

Insulin.

That's correct.

<unk>.

I agree with Genesis and Mercury hit all relevant is that uhm, who.

Davita first offline.

T J.

While COVID-19 political that ronco the timetable.

Susan.

As a responsible company, we always keep respect in the market.

Even in bullish times, we didn't expand at the expense of balance sheet health.

As such now we do not have interest bearing debt and our mining machines in crypto currencies are not collateralized.

These financial advantages along with our current cash cash.

<unk> cash position allow us to steadily push forward our mining our business strategies.

Excuse me business strategies, despite unfavorable market environments, and protect our employees and partners, while continuously improving our products and services.

So on a pro forma pension multi tenant reported <unk> program.

Okay.

Tim.

Our teams to attack.

That's helpful.

Yes.

So hardware banner oncology.

Mr <unk>.

Yes.

<unk> on your cell phone.

<unk>.

When the market enters a downswing. It also provides a good time for us to sharpen our new products steadily develop our markets and grow and optimize our supply chain and logistics.

At the same time, we continue to expand our business internationally and strengthen our after sales service system to better serve our customers.

Tomorrow, we will retain the agile and flexible operating strategy when prudently developing our mining business, while enhancing synergies between our machine sales and mining business.

Well, it's kind.

Low teens okay.

This concludes my prepared remarks, I will now turn the call over to our CFO James.

Thank you John and good day, everyone. This is Jane.

Second quarter of 2802, we reported total revenues of RMB, $1652 7 million, representing 21, 9% quarter over quarter increase.

To achieve this top line performance, primarily due to the delivery of $5 5 million total cash <unk> computing power for our clients.

The relatively high average selling price with be cured with contract sales in previous quarter also contributed to the top line result.

Our AI chips business recorded a revenue of RMB, one 6 million for the quarter due to softer demand from integrated products provide us <unk> our customers.

This is because they stopped to offer electronic product inventory that can embed our chipset during the quarter when the pandemic related lockdowns negatively impacted their supply chains and the consumption of this retail electronic products.

As the pandemic.

Current <unk> control measures gradually eased and retail started to recover we are having more progress.

AI chip sales in July and early August .

Our mining business with and improve the power supply generated a 245 11 this points in the second quarter, which contributed $52 1 million RMB in revenue, representing a sequential revenue increase of 69%.

346.

84 basis points on hold as the quarters and Comdata was up 166 96 this points as of March 31, two.

Funded R&D to do.

Due to the ongoing energy instability, a portion of our deploy the mining machine has not been consistently online. Although we are facing increasing energy costs for our operations.

The evolving market environment, we are prudently exploring other geographical regions with favorable mining conditions to diversify our operations.

Above all our gross profit for the quarter increased by 12% sequentially and 117, 3% year over year to RMB $929 7 million.

As a result of the complex effect of slightly decreased the average selling price and the increased product cost due to wafer price right. Our gross margin for the quarter narrowed to 56, 3% from 61, 2% in the first quarter of <unk>.

On Youtube.

In the second quarter, we continue with our efficient expense management with consistent investments.

Research and development.

Ultimately, we have built an R&D team at our Singapore overseas headquarters by leveraging the advantage of local talent.

From profit and loss.

We have several material non operating items related to accounting treatment for the quarter FERC.

We incurred a 30 million RMB impairment for our critical currency assets in the quarter due to the bitcoin price decrease compared with the first quarter's end.

I would like to reiterate that Pip claims initially recorded at the price while we generate.

Our digital assets are recorded on our balance sheet net of any impairment losses incurred since the initial recognition.

Dense enough recorded until realized upon disposal of such digital assets.

Secondly, the owning this quarter due to the depreciation of RMB against the US dollar. We also recorded a foreign exchange gain of RMB $114 3 million.

As almost all of our revenues were generated from overseas market in U S dollars.

Sure does the RMB appreciation against the US dollar in the future, we expect to incur only foreign exchange losses.

Last but not least the change in fair value.

He appreciates against the US dollar in the future, we expect to incur only foreign exchange losses.

Last but not least the change in fair value of warrant liability brought us a gain of 25 million RMB in the second quarter as we completed the repurchase of all outstanding loans in late June spending wounds in late June we.

Don't expect any gains or losses from such fair value change in the foreseeable future.

As a result of foregoing, we realized a solid net income of $608 9 million RMB for the second quarter, achieving 37, 9% increase quarter over quarter, and 148, 6% growth year over year.

Turning to our balance sheet as of the end of the second quarter, we have customer advances of $1017 5 million RMB together with our cash generated from product sales, we have an aggregate of tools.

<unk> hundred $40 7 million RMB in cash and cash equivalents as of June 3800, 92, maintaining relatively flat compared with the end of the first quarter.

Our cash level provides us with a solid position to navigate a challenging market environment enables us to carry out prudent exploration expanding our global presence and the continued our share repurchase program.

As all of the hotels 2022, we have repurchased a total of $2 8 million ABS. It with an aggregate value of $10 3 million U S. Dollar and then aggregate average repurchase price.

363 U S.

Under our current stock repurchase program approved in March 2022.

This stock buyback demonstrates our firm confidence in the company's long term growth prospect.

Moreover, as mentioned earlier, we reached an agreement with our Encoders to repurchase all 472 million outstanding warrants in late June for an aggregate of $6 $61 million.

The repurchase of outstanding warrants enables us to capitalize on our current valuation and the graph as more financing flexibility in the capital market in the future.

Under the current market environment, we will continue our conservative approach in the capital market and to prioritize the share repurchase program to drive value for our shareholders.

Looking forward, we see that to continue with a lower this coil price level, coupled with the with the increasing energy costs and the logistics expenses.

It has significantly dropped.

Our clients demand ended their cash flow.

We expect a considerable decrease in both products orders and the average selling price.

Taking into account the relatively high level of production costs, we expect an inevitable gross margin decreased in the second half of this year subsea.

Subsequently, we expect our bottom line performance to experience a substantial decrease or even loss, making in certain scenarios. If the bitcoin price continues to fluctuate at a low price level.

Maintaining respect for the market, we will continue our prudent and agile operating strategy to navigate the current market dynamics and the strength of our supply chains and develop our advanced new products for future opportunity.

Now I would like to briefly walk you through our financial results for the quarter.

Revenues in the second quarter of 2000 tended to RMB $1662 7 million.

240.

$7 million, representing an increase of 21, 9%.

Compared to the first quarter, and then increase of 52, 8% from RMB $1081 8 million in this NPL ratio over 2021.

Gross profit in the second quarter of 2022 was RMB.

$929 7 million.

Which means U S dollars $138 8 million, representing an increase of 12%.

$829 8 million in the first quarter of 2022.

The increase of 117, 3% from RMB $497 9 million in this NPL rate of 2021.

Total operating expenses in the second quarter of 2022, or 275 million RMB, which means that $44 million, representing an increase of seven 7% from $261 2 million RMB in the first quarter of 2000 attended.

And the increase of three 1% from 262.

Two 4 million RMB in the period of 2021.

Income from operations in the second quarter of 2022 was $659 3 million RMB, which is the $98 $4 million, representing an increase of 13, 9% from 578 six.

RMB in the FERC quarter of 2022, and an increase of 298, 4%.

$165 5 million RMB in the <unk> period of 2021.

Net income attributable to ordinary shareholders in the second quarter of 2022 was 608.

$8 9 million RMB.

Which means the $99 million, representing an increase of 37, 9% from 441 six minute million RMB in the first quarter of 2022, and an increase of 148, 6% from 245.

RMB and period of 2021.

non-GAAP adjusted net income in the second quarter of 2022 was 688 2 million RMB U S 100 zero two.

$2 7 million, representing an increase of 26, 6% from 543 4 million RMB in the first quarter and an increase of 115% from 310 to $8 1 million RMB in the period of 2021.

Basic and diluted net earnings per ads for the quarter were RMB 353.

Which vince.

Zero.

Sweet.

Dollars.

Contra liability as of June 32022.

Our solvent.

<unk> thousand $17 5 million RMB.

151, 9 million U S dollars.

Decreasing from Sullivan, the 347 million RMB as of December 31, 2021.

This concludes our prepared remarks, we are now open for questions.

We will now begin the question and answer session.

Z to other investors and analysts who may wish to ask a question. Please limit yourself to one question at a time for.

For the benefit of all participants on today's call. If you wish to ask a question to management in Chinese. Please immediately repeat your question in English.

To ask a question you will need to press star one one on your telephone and wait for your name to be announced please standby, while we compile the Q&A queue.

Thank you, we'll now take our first question.

Please standby.

Okay last one.

From the line of Alex Comer.

Yes, Jeff Chen from China Renaissance Securities. Please go ahead.

Thank you.

Sure.

PCI or even itself out we'll do that Scott.

Ladies out.

Julian interim CEO clay <unk>.

<unk> 14 in the darker photons.

Alright.

Yeah.

Doug.

In Chile.

Thank you.

Okay.

Yes, So let me answer.

On the Yankee genius on Youtube.

Yes, Neil Ashish Marika.

<unk> cautions.

Yes.

<unk>.

Sure.

<unk> team.

Project highlights.

We see a significant decline in therapy compliance journey first quarter this year and I want to know.

Are there any large customers spill task orders and.

The impact on that.

A lot of the demand gross margin gross profit margin and ASP quarter second half of this.

This year and how do we react to this down cycle and further expand our OSB market. Thank you.

Okay.

Also at <unk>.

As usual pilots and crew.

Roughly 10 ships report, which should have a new partner.

Okay.

So and that just is arguably more neutral articulated in Michigan.

We tend to want to be male.

Coca Cola supermarket.

Sequence automakers want me with one other.

Sure.

A corner triggered an account with us we're being litter itself where do that.

We can only occur cohort grow liquidity.

Hugo DNA that you can try on water.

Hi, Peter.

Sure.

We really like tableau attribution to accompany its awful.

Our future contract sales require our clients to prepay at least 50% of the total payment to secure mining machines.

By the end of the second quarter, our customer advances reached.

1.0, $1 7 billion RMB.

So far we have seen very limited cases of payment defaults future contract sales have always been a part of our business model, we negotiate contract sales with clients to lock in prices for orders to be delivered in the future. The business model has been acknowledged by both our clients and us even.

The bitcoin price source, we will still deliver mining machines at predetermined prices.

In Central Europe .

<unk> products are doing CFO .

We cannot control.

Got it Okay, I won't do you suddenly equal food as useful a sugar who's going to move.

Well he's infusion in San Antonio.

China, while counting.

Dan This is Kurt.

Yes.

97 years suddenly here, because I don't know what's going on Capitol Hill.

Yes, you guys have Alex Fischer.

Thank you.

Excuse me.

We've done people are going to control. It was actually that are maybe the two or three year. Okay.

Okay.

Adjusted our prices in response as you may have seen on our online shop. The average selling price for retail has been adjusted down to 30 U S dollars per Taro has therefore, we expect a downward trend in sales and price of computing power in the second half of this year as disclosed in the earn.

In the release, we estimate the third quarter's revenues to be between 900 million RMB and $1 1 billion RMB.

Thanks.

Okay.

A quick one until we see differently.

From a per medallion.

Eastern IOU EBIT tableau data server <unk> chips for controllers funding.

<unk> will be a quick one to Hungary the signature.

Given that pencil are fewer.

Well sure.

With alcohol.

Tissue.

<unk>.

Yes.

Selling and Patrick our CFO to four quarter to walk on for Dennis.

So of course, we cannot assure you Julien.

So let me kind of a comparable increase in crude oil.

Sure, Sean Zhang with how detailed because I don't know what the hazard.

Vehicles us on agriculture.

So Meanwhile, we have observed that for some of our experienced clients their businesses haven't been particularly impacted in terms of.

Operations and cash they have the intention to deploy more computing power at the low point of the bitcoin mining machine pricing.

We are currently in active communication with these clients.

We will also continue to closely monitor market conditions.

And prudently explore opportunities for mining collaborations at the appropriate time.

We will also flexibly adjust our operations in response to bitcoin price and market changes.

Computing power will be dynamically adjusted and its allocation of spot sales future contract sales in our mining business. During the past few years, we've experienced multiple dramatic fluctuations the bitcoin price as well as bear market cycles, although the markets not in an ideal condition right now.

We have faced in our long term growth.

Hi, Susan.

It is also helpful.

Sure.

I'm sure that you are saying.

Did I Miss a dose.

Thank you Mr talent trillion outlook is quite poor.

Dean.

Sure.

Now if we have.

Further plan to expand our OSB market.

The mining business.

So John through enrollment.

Sure.

And last quick one of opportunity for mutual growth.

And on top of Windows Azure growth will be on the tundra CFO .

Yes.

And it sounds it won't work with <unk>.

Julien Coppola Comex U S onshore.

What are you telling me Ronald <unk>.

Neutral.

Hey, Jay.

John .

We've appointed an operator.

Jack Counsel.

Well look we're going to let it go John .

Hugo.

Sure.

So to answer your question, we continue to closely communicate and collaborate with.

Overseas clients as energy prices Soar globally, we have seen stronger demand in places where energy resources are abundant.

And half price advantages.

Our team are also actively participating in bitcoin and mining industry conferences held in North America, and other regions to enhance communications and product promotion with business partners and clients in the industry.

But you don't know.

Good morning, gentlemen.

Southern region.

Okay.

Thank you Tom.

Tom.

But with Apple.

Yes.

On a year once we work through the product.

Okay.

In this regard.

Yes, let me I'll tell you.

Sure.

In short our lives.

So although ultimately.

Okay.

Thank you Tim.

I don't know will be handled.

For the quarter.

Youre welcome our CTO.

Yes.

Without a woman.

Sure.

Okay.

So during the quarter.

Our overseas headquarters in Singapore has already established R&D finance and other operational teams and launched a supply chain system that encompasses.

Assembly warehousing logistics.

It is expected to provide more support and convenience for the development of our business overseas.

Our online store that targets overseas retail markets has already received many orders and prepayments.

North America Europe , Australia.

Okay.

Other regions since its launch more than a month ago.

Even though total sales volume is still very small we have seen interest in bitcoin mining from clients globally.

The online store also opens up a channel for us to extend our reach to customers and expand our brand promotion.

Yes.

Thank you that's very clear.

Thank you we will now take our next question.

Please standby.

Just from the line of Michael <unk> from the Benchmark Company. Please go ahead.

Thanks, and congratulations on whether in this tough environment can you talk a little bit about your build out in the U S and how that's going please.

Okay.

Well Mr <unk>.

Okay.

Permit.

You too.

Sure.

No.

Thank you.

Tommy.

On a just reward.

For this year.

Okay.

Upon leaving with whole boutique at Gopro com.

<unk> Pangalos who's your bottleneck.

It could be higher.

Yes, Laura punchy geopolitical going to share with total liquidity since then.

Sure.

Got you.

Our social.

One of them.

<unk> will meet Doctor inbound Ddos Fischer <unk> that's helpful.

<unk> for the year with the <unk>.

Hi.

We took over from Dupont that hurdle for the tissue daily payment.

You did a little bit.

Tcf broken down at Kittila.

Sure.

People to appreciate it.

Abundant energy resources there.

Especially the rapid development of clean energy.

So this year, we actually participated in many bitcoin industry conferences in the United States We had.

Dialogues and build connections with mining companies and business partners in North America, We now colleague base in North America to expand our business, including sales and exploring mining business opportunities. We are also building local warehousing and logistics there to support our business development. We also set a prepare.

Centers and provided continuous and improved <unk>.

Local and after sales services for clients.

Sure.

Okay.

But what I'm trying to kind of the growth.

Yes, actually negotiate gentlemen, Chris quota, essentially 90, Shandong and Shanxi Datong Center.

Units.

Political but.

We deal with that.

Hello.

Hi, guys.

So I think when they order the tendency to drop ship.

So a woman on your cell phone.

Sure.

Can you start to push on the general points equal to another show mat, allowing you to Genesis.

Jonathan.

Equally measure tender the show either teed up.

So currently in North America, we're in dialogue with multiple binding farm partners maintaining a crew.

<unk> strategy, we have initially both to mining site resources that can host 5000 units of mining machines.

Through typical deposit prepayment to explore mining operations and this new region in the future the mining business, serving as the critical supplement for our mining machine sales enables us to dynamically allocate our mining machine inventories amongst sales in mining operations. So.

To maximize our returns through our agile operations.

Great. Thank you very much appreciate it.

Thank you, we'll now take our next question.

Please standby.

Just from the line of Kevin Dede from H C. Wainwright. Please go ahead.

Sure sure.

I would I understand.

A strong interest in continuing to develop.

No machines, and new technology would be.

Continued spending on R&D.

I would like to understand is how you see semiconductor development and machine technology improving.

Such that efficiency improve.

In your opinion on the inclusion of immersion capability.

Thank you.

Okay.

Could you just kind of on a photo upon on February the <unk>.

Okay.

Neither drug onboard because youre talking about overall.

<unk> 2000 <unk>.

Yes.

Okay.

Thank you.

Tenants are to put on for Ken.

And to show them at all.

Then with your core.

Switch from diesel to urinate on coupon of sure Luca.

Thank you Jim Congrats again on the global economy.

Yes.

I Wonder if you can clarify.

So you don't CTO office now.

Perhaps you can guarantee that.

Jonathan.

<unk>.

Chile curtailing that.

Thanks for that short upon a timetable.

But if you look on the talent.

Sure.

So for us in the mining machine business and important task in the future is to integrate products and solutions vertically penetrating the whole product system from chips to site.

Mining computing power throughout the industry value chain.

Currently in this process the product front only includes mining machine hardware.

There is limited penetration in to providing solutions for mining site deployment operations and maintenance of mining machine base.

Based on our recent observations the entire industry is still lacks standardized products.

Simplified deployment for improved operations, and lower costs and better use of waste and clean energy for us products and services will continue to be integrated and developed vertically.

Our balance sheet too much.

Sure Chris.

Okay.

Two G&A of Roche and Novo excuse me later.

<unk>.

Welcome to the <unk>.

Sure tolerated with Davy.

Banco Silicon controller for example.

Well I'm going to show some.

Hello.

So semiconductor technology is at the crossroads of transitioning from Finfet to GAA or nano sheet types of <unk> technology.

This application.

For mining machines, it's still the vanguard of helping stabilize advanced fabrication technology.

Actually our industry is.

Currently doing this.

Thank you.

Thank you very much.

Thank you.

That's all the time, we have for questions I will now turn the call back over to management for closing remarks.

So thank you everyone very much for attending our earnings conference call. Today. This thus combustion please feel free to reach out to our questions. Please feel free to reach out to our IR team. Thank you.

Thank you that concludes our call today. Thank you everyone for attending you may now disconnect.

Q2 2022 Canaan Inc Earnings Call

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