Q4 2022 Canaan Inc Earnings Call

Speaker 2: quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, we will have a question-and-answer session.

Speaker 2: Please note that this event is being recorded.

Speaker 2: Now I'd like to hand the conference over to your speaker host today, Mr. Claude Sousa, Investor Relations Director of the company. Please go ahead, Clark.

Speaker 3: 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.

Speaker 3: Joining us today are our Chairman and CEO , Mr. Engie Zhang, and our CFO , Mr. Jin Chung-James.

Speaker 3: In addition, Mr. Shao Minglu, our FBP, Mr. Leo Wang, IR Senior Director, and Ms. Xi Zhang, IR Manager, will also be available during the question and answer session. Mr. Zhang will start the call by providing an overview of the company and performance.

Speaker 3: our earnings press release.

Speaker 3: Today's call will include forward-looking statements.

Speaker 3: 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.

Speaker 3: These statements speak.

Speaker 3: 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.

Speaker 3: are subject to risks, uncertainties, and assumptions.

Speaker 3: 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 20F for information on risks, uncertainties and assumptions that may cause actual results.

Speaker 3: to differ materially from those set forth in such statements.

Speaker 3: 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 GAAP.

Speaker 3: or in isolation from GAP results. You can find additional disclosures regarding these non- GAAP measures , including reconciliation with comparable GAP results in our earnings press release, which is posted on the company's website.

Speaker 3: With that, I will now turn the call over to our Chairman and CEO , Mr. Engy John . Please go ahead.

Speaker 4: Hello everyone, this is Engy, CEO and founder of Tenant.

Speaker 4: Our CFO James and I are delighted to share our quarterly results from the company.

Speaker 4: Singapore headquarters.

Speaker 4: The market environment in the fourth quarter of 2022 became even tougher and probably reached the darkest moment.

Speaker 4: The Fed's right interest rate by 75%

Speaker 4: in November and the 60 bits in December to fight affliction

Speaker 4: As such, the recent macro environment has been quite difficult for the Bitcoin mining industry.

Speaker 4: Also, in November 2022, the Prepto Exchange FTX and the Prepto Lander Block 5 both filed for bankruptcy.

Speaker 4: These unfortunate events further hurt creditors' and investors' confidence.

Speaker 4: in the whole cryptocurrency industry.

Speaker 4: Due to this series of adverse events,

Speaker 4: The Bitcoin price decreased towards 52 weeks low of $16,500 at the end of the year.

Speaker 4: At the same time, energy prices stayed high because of the regional conflicts.

Speaker 4: while Bitcoin total network hash rate has increased by more than 20% from the last quarter.

Speaker 4: as new money farms began operations and new machines went online around the world.

Speaker 4: This has made mining more difficult with decreased mining rewards, and has even resulted in select mining farms to stop operating. In North America, where mining has increased mining rewards, mining has increased the number of mines in the world.

Speaker 4: been relatively concentrated since 2021.

Speaker 4: Many miners and hosts have high tax ratios and financing costs.

Speaker 4: These borders have further impacted the cash flows.

Speaker 4: and some miners and hosts have gone bankrupt or had to re-organize their business.

Speaker 4: These problems have vastly affected miners operations, income, and demand from purchasing mining machines.

Speaker 4: We have mixed feelings about this industry downturn.

Speaker 4: During the fourth quarter of 2022, together with our Manly Media team, I visited investors, clients and partners in North America, the Middle East and Southeast Asia.

Speaker 4: I want you to understand their business and financial positions and to start to weather this hard time with them.

Speaker 4: Faced with the current industry challenges and thanks to the execution of our flexible sales strategy as well as our mining business, which we have been expanding for some time now, we generated total revenues.

Speaker 4: 392 mRMB this quarter, exceeding our guidance of 310 mRMB.

Speaker 4: Today I want to take this opportunity to discuss three key topics.

Speaker 4: this opportunity to discuss three key topics. First,

Speaker 4: our continuous investment in R&D and the production capacity.

Speaker 4: Second, so ongoing developments and the progress of our mining business.

Speaker 4: Finally, our understanding of and thoughts on the downturn in the Bitcoin price and the general public currency industry.

Speaker 4: First, we made substantial investments in R&D and continued to secure filter production capacity in the fourth quarter. Our CFO will share more details on this later. I would like to address that during an industry downturn, it is a tough decision to maintain these investments. Material and meaning- homemade.

Speaker 4: This decision showcased our long-term competence in global Bitcoin adoption.

Speaker 4: In late October of last year, we launched the new generation A7

Speaker 4: We enlarged the new generation A13 mining machines after the tape out.

Speaker 4: on the Advanced Process node.

Speaker 4: The A13 achieves new highlights in computing power and energy efficiency.

Speaker 4: After the release of our new generation mining machine, we have been strengthening our cooperation with Foundry Partners.

Speaker 4: This will help us to secure the limited supers.

Speaker 4: production capacity of wafers on the most advanced nodes.

Speaker 4: Accordingly, we are moving on to mass production and upgrading our products to the new generation is better computing power and energy efficiency.

Speaker 4: Second, our mining business is Bergen Fruit.

Speaker 4: Our manual briefings about computing power in Central Asia and North America increased slightly to 3.3 x HPS in the fourth quarter from 3.2 x HPS in Q3 of 2022. The power supply in Kazakhstan has been improving.

Speaker 4: but it is still unstable. Under these conditions, we generated money revenue of

Speaker 4: 72.2 mRMB in the fourth quarter, up 16.3% sequentially.

Speaker 4: Despite the Bitcoin price decreasing,

Speaker 4: during Q4.

Speaker 4: At the 2022 year end, we have 757 bitcoins in total.

Speaker 4: At the 2022 year end, we have 757 bitcoins in total. Going into the first session, we have 757 bitcoins in total.

Speaker 4: quarter of 2023. The Bitcoin price is showing upward trend.

Speaker 4: and we are making further strides in our mining business.

Speaker 4: As the end of February , our total install mind-in-computing power reached 3.8xhp.

Speaker 4: This additional hashrate continues being installed. We expect our installed hashrate to reach 5 x hash per second to 5.5 x hash per second by the end of Q1 of 2023.

Speaker 4: Our nearly 10-year industry experience enables us to explore the worst ways to collaborate with our partners.

Speaker 4: under world business conditions.

Speaker 4: We are proud to have become an international and AJO Bitcoin miner in our mining business.

Speaker 4: We expect to deploy more mining projects in multiple regions in the future.

Speaker 4: Finally, Asa Otrin went through 4 major Bitcoin bear markets.

Speaker 4: I want to share my view on the low point of this Bitcoin cycle. The fourth quarter of 2022, in my view, was the darkest time for Bitcoin and the entire cryptocurrency industry during the past two years. When Bitcoin price dropped down to a cycle bottom, Bitcoin price dropped down to a cycle bottom.

Speaker 4: Some unexpected events also happen in the industry.

Speaker 4: This fraud seriously hurt the confidence of industry players and caught regulators' attention.

Speaker 4: But I don't believe this should make us lose face.

Speaker 4: We should see this as an opportunity for the industry to separate good companies from cheaters.

Speaker 4: This process will drive the industry to become more sustainable in the future.

Speaker 4: There's having a lot of negative headlines recently, but I want to point out the positive.

Speaker 4: Looking back at the 14 years since the birth of Bitcoin, we can see that today is quite different from the past, even if we only look over the last two years.

Speaker 4: there were great developments. Now, the number of Bitcoin miners and the total computing power of the network are at a much higher level compared to the low point of the 2020 crypto cycle.

Speaker 4: In addition, because Manu now happens all over the world.

Speaker 4: This situation formed a highly decentralized treating network.

Speaker 4: We can see that many miners are seeking and adopting low-cost, sustainable energy across the globe.

Speaker 4: These miners have monetized many

Speaker 4: monetized many power plants.

Speaker 4: and have many undevelopment regions develop their new, their green power infrastructure.

Speaker 4: Bitcoin has emerged as an outsider from traditional finance.

Speaker 4: It is now facing increasing regulatory focus in many places around the world.

Speaker 4: We should be aware that the trend will well show the growing user base.

Speaker 4: of Bitcoin and other cryptocurrencies have formed a strong consensus and have a significant influence.

Speaker 4: and other cryptocurrencies have formed a strong consensus and have a significant influence that cannot be ignored.

Speaker 4: Bitcoin has gone from a niche asset that few people understood to having tens of millions of users.

Speaker 4: We could even say that it becomes mainstream.

Speaker 4: A new industry that has been around for only 14 years will observably go through cycles.

Speaker 4: of enthusiasm and despair to achieve progressive evolution.

Speaker 4: and desire to achieve progressive evolution. During the industry's development,

Speaker 4: We want illegal and unethical behaviors to be exposed.

Speaker 4: Industry players are learning, improving, and matching.

Speaker 4: So companies, we comply with, who comply with regulations and act responsibly will stand out.

Speaker 4: This takes us back to our original aspiration to form the company 10 years ago.

Speaker 4: At the time, our goal was to create a compliant company that supports the landmark invention of the Bitcoin system.

Speaker 4: At the time, our goal was to create a compliant company that supports the landmark invention of the Bitcoin system with superior computing technology.

Speaker 4: To meet this goal and along with the global decentralization of Bitcoin, we are continuing to globalize our company. By the end of 2022, we have already established an overseas supply chain that can quickly spill orders from international markets.

Speaker 4: and expand our service's capabilities with certain office sales service stations worldwide.

Speaker 4: We also developed a head quarters with a multifunctional team in Singapore.

Speaker 4: insisting on producing best-of-class products.

Speaker 4: We have continuously integrated our technology and improved chip fabrication.

Speaker 4: By maximizing our products' computing power and energy efficiency, we aim to provide a superior experience of Bitcoin miners and work with them to build a stronger Bitcoin network.

Speaker 4: Since the second half of 2021, we have started to explore the mining

Speaker 4: and how further involved our business model.

Speaker 4: With the growing experience of our team and the carry-out of our mining operations, we installed mining hash rates at a shown and emerging scale as of today. With that, we successfully expanded our business to the industry downstream.

Speaker 4: which helps us better understand our customers' needs and understand Bitcoin itself.

Speaker 4: Overall, we remain bullish on the future of Bitcoin and the super computing technology behind it. Moving into the first quarter of 2023, with Bitcoin price showing some improvement, we believe.

Speaker 4: The most difficult part of Bitcoin's cycle is approaching the end.

Speaker 4: Now we are looking forward to the market recovery. We have recently received many orders and portraits.

Speaker 4: At the same time, we have also noticed that many miners are unable to place orders due to financial problems.

Speaker 4: Generally, computing power demand is gradually recovering, but recovery has just started.

Speaker 4: Therefore, we expect our total revenue in the first quarter of 2023 to be approximately $2.5 billion. We expect our total revenue in the first quarter of 2023 to be approximately $2.5 billion.

Speaker 4: 450 mRMB or

Speaker 4: 550 mRMB or 65 mUSD.

Speaker 4: We accept our total install.

Speaker 4: hash rate for mining to be 5 to 400.5 x hash per second by the end of the first quarter of 2023.

Speaker 4: With our dual strategy of building our proprietary mining machine in conjunction with our mining operations.

Speaker 4: We already have two reinforced business segments focusing on Bitcoin. Going forward, we will continue to iterate...

Speaker 4: iterate our products and provide great services to our mining clients as we support the growth of Bitcoin ecosystem.

Speaker 4: along with mentors around the world.

Speaker 4: We will draw in and contribute to Bitcoin's globalization.

Speaker 4: We will continue to adapt ourselves to researching and funding variable mining sites.

Speaker 4: With agile operation and efficient

Speaker 4: and efficient excitation.

Speaker 4: we endeavor to explore and cite opportunities during the age of discovery of global Bitcoin mining.

Speaker 4: to explore and cite opportunities during the age of discovery of global Bitcoin mining. This concludes my prepared remarks.

Speaker 4: Thanks everyone. I will now turn the call towards LCFO James.

Speaker 5: Thank you, Mr. Zhang, and good day everyone. This is James. I'm with our CEO in our Singapore office.

Speaker 5: Broadly speaking, in the both corners, as our CEO has already stated, the market situation was very tough for both Cainan and our customers, as well as the whole industry.

Speaker 5: At the same time, we also faced our own challenges in executing on our product upgrade from the A12 series to the A13 series. As a result, we must make upfront payments for new wafers while sales are impacted due to the low Bitcoin price.

Speaker 5: However, we did make some good progress in developing the scale of our mining operations in quarter four and it contributed more revenue than ever. Despite all the difficulties for total revenues, we are not able to make any progress in the

Speaker 5: We achieved the 392 million RMB, beating our previous guidance by more than 80 million RMB.

Speaker 5: regarding machine cells.

Speaker 5: In this challenging time, we endured the marked conditions and continued to decisively execute on our strategy.

Speaker 5: Considering a very limited demand, we further lowered the selling price for our legacy A12 series models to spur ourselves.

Speaker 5: As a result, we delivered 1.9 million THH per second in a quarter, contributing to approximately 318 million RMB in mining machine sales, which is better than we expected.

Speaker 5: I would like to share a few points about our mining business. During the market downturn, we have been actively exploring and developing our mining business.

Speaker 5: Because these mining resource assets are undervalued in the current bear market, we believe it is the ideal time for us to invest and deploy valuable assets for the long run.

Speaker 5: At the same time, it is also a method to allocate our machines in inventory to generate bitcoins.

Speaker 5: With further improved power supply, our revenue from the mining business reached 72 million RMB up 16.3% sequentially.

Speaker 5: The growth is impressive given the decrease in Bitcoin prices during the quarter. This marks the first time our mining revenue made a USD 10 million milestone in a single quarter. Please note revenue from mining is recorded according to the Bitcoin price where a Bitcoin is generated from mining.

Speaker 5: After paying a certain power fee using pitch coins, we had 757 pitch coins as of the end of 2022. This pitch coin balance was up 41% quarter over quarter compared with 535 in the third quarter reaching a new historical price. By the end of 2022,

Speaker 5: we had installed a mining hash rate of 3.3 extra hash per second collectively in Central Asia and North America. By the end of February , we had a total installed hash rate of 3.8 extra hash per second.

Speaker 5: With these positive developments in our mining collaborations recently,

Speaker 5: The company's total online mining machines are expected to reach a harsh rate of 5 to 5.5 extra-hash per second by the end of the first quarter of 2023. Please note that the instalments progress may be subject to unexpected issues.

Speaker 5: and that may influence the final installed hash rate by the end of the first quarter of 2023.

Speaker 5: The total energized hashrate is also subject to the local power supply. Let's talk more about the profit and loss.

Speaker 5: We incurred a gross loss of 230.9 million RMB for the fourth quarter of 2022 due to the lower top line revenue, amongst an unfavorable market and higher cost.

Speaker 5: Specifically, for our mining machine sales, the gross loss of 136.7 million RMB for the quarter was mainly due to an inventory write-down of RMB 205.3 million.

Speaker 5: This write-down was a result of lower-than-cost average selling price for the previous generation machines, which suffered from the declining Bitcoin price.

Speaker 5: The inventory write-down decreased by 7% sequentially as we strived to sell out our inventory to the market during the fourth quarter.

Speaker 5: If the UNT write down were excluded, we would have a gross profit for our mining machine sales of 68.7 million RMB. The decreased ASP of selling machines also narrowed the profit compared to the third quarter of 2022.

Speaker 5: Regarding our mining business, we recorded a gross loss of 77.0 million RMB during the quarter. Our costs of energy and hosting amounted to 74.2 million RMB, which was mainly due to increased energy prices.

Speaker 5: In addition, we incurred depreciation costs of 74.9 million RMB in the fourth quarter from our growing number of deployed mining machines.

Speaker 5: Excluding depreciation, our mining profit or loss defined as mining revenues deducting costs for energy and hosting was a loss of RMB 2.1 million for the fourth quarter. The loss was primarily due to the lower revenue per Bitcoin mined.

Speaker 5: resulting from the decreased Bitcoin crisis during the fourth quarter. We recorded a

Speaker 5: 223.5 million RMB for R&D expenses during the quarter. This includes about 96 million RMB for a one-off expenditure for our new generation chips.

Speaker 5: The remaining 127.5 million RMB resulted from our ongoing research and development input.

Speaker 5: which grew steadily sequentially and year over year. As most of our sales contracts were denominated in US dollars, we recorded a foreign exchange gain of 26.6 million RMB in the fourth quarter.

Speaker 5: due to the depreciation of the RMB against the US dollar.

Speaker 5: As the company continues to internationalize and drive global sales, we are considering adjusting our reporting currency, which may impact our foreign exchange gains going forward. As a result of higher depreciation, inventory write-down and relatively higher expenses in R&D, we recorded a net loss of $2.5 billion in 2018.

Speaker 5: of 438.3 million RMB. As our growing mining scale will continue to record higher depreciation and considering the modest selling price in the near term and the potential inventory write-downs as a result, we are not expecting substantial profits in the next one or two quarters.

Speaker 5: But from a longer-term perspective, the depreciation will not last longer than the useful life of the machine.

Speaker 5: And the selling price of the machines could be readjusted upward along with the multi-demand once the Bitcoin price increases.

Speaker 5: Despite these near-term headwinds, we are still optimistic about our capacity to generate substantial profits in the longer term.

Speaker 5: Turning to our balance sheet.

Speaker 5: First, let's discuss our cash status. As our CEO stated, we invested a lot during quarter four of 2022 to secure our supply capacity as well as R&D and our mining business.

Speaker 5: As of December 31, 2022, our cash and cash equivalent decreased to RMB 707 million. The decrease in cash amounted to 1,295 million RMB.

Speaker 5: Many including 848 million RMB for prepayment to secure wafer supply and production.

Speaker 5: as well as a 205 million RMB for payment of value-added tax and income tax expenses. Our operating expenditures used 149 million RMB in cash.

Speaker 5: We also paid upfront deposits of 21 million RMB to secure mining farm resources for expanding our mining business.

Speaker 5: Our investments in the supply front have prepared us with adequate production resources to manufacture our next generation mining machine and allocate increased computing power for mining.

Speaker 5: We made such strategic investments during this bear market, preparing us with adequate inventory for sales and capitalizing on the coming bull market. When the Bitcoin price increases, we have confidence that aforementioned investments will bring us notable returns.

Speaker 5: Also, cash is used to deliver value to our shareholders.

Speaker 5: During the fourth quarter of 2022, we used approximately 72 million RMB, which is equivalent to 10.5 million US dollars to repurchase 3.5 million ADS's under our current stock repurchase program approved in March 2022.

Speaker 5: with an average repurchase price of $3 per AES. In late November , we filed a prospectors' supplement on form 424p5 to officially set up the ATM facility for future financing. We have not comments to using the ATM as of today.

Speaker 5: and we'll continue to consider appropriate financing opportunities to fuel our future business growth.

Speaker 5: We continue to believe in the resilience of Bitcoin in its most challenging time, and have seen a silver lining as the Bitcoin price moderately improved since the beginning of 2023, which was consistent with our outlook.

Speaker 5: I am pleased to report that in February , we obtained more than 200 orders from customers.

Speaker 5: Although the average contract amount is not particularly sizable, we can sense the customers are in a more positive mood compared to quarter four of 2022.

Speaker 5: In this recovery cycle, we will utilize our cache on the most critical aspects.

Speaker 5: such as the wafer supply to seize market opportunities and deploy ahead of time so as to expand the scale when the market picks up.

Speaker 5: Now I would like to briefly walk you through our financial results for the quarter.

Speaker 5: Total revenues in the fourth quarter were 391.9 million RMB compared to 2,184.6 million RMB in the same period of 2021 and the 978.2 million RMB in the third quarter of 2022. Growth loss was RMB 230.9 million.

Speaker 5: Total operating expenses in the fourth quarter of 2022 were 393.5 million RMB, compared to 273.7 million RMB in the same period of 2021 and the 275 million RMB in the third quarter of 2022.

Speaker 5: Loss from operations was 624.4 million RMB.

Speaker 5: NetLost Attribute Board to Audien-Armage Airholders was 438.3 million RMB.

Speaker 5: Nanggap adjusted the net loss was 341.8 million RMB.

Speaker 5: Basic and diluted net loss per ABS for the quarter or 2.61 RMB.

Speaker 5: As of December 31, 2022, the company had cash and cash equivalents of 707.3 million RMB. This concludes our prepared remarks. We are now open for questions.

Speaker 6: We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question.

Speaker 6: Please limit yourself to two questions at a time.

Speaker 6: If you have any follow-up questions after the Q&A session, the Investor Relations team will be available after the call.

Speaker 6: For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. To ask a question, please press star 1-1 on your telephone and wait for your name to be dialed.

Speaker 6: To withdraw your question, please press star 1-1 again.

Speaker 6: Alfred's question comes from the line of Michael Donovan from HC Wainwright. Please go ahead Michael. Gansha and Jay Hajenjes. So Kevin is on the road right now traveling so I'm filling in for him. And first question.

Speaker 6: What is machine demand like with the depressed pricing and how is Kanan balancing between developing self-mining versus selling machines? Hello, thank you. For this question on the positive side...

Speaker 4: This comprise has started to increase slightly since the beginning of this year.

Speaker 4: So the overall demand of computing power has shown some recovery. We have received more purchases in queries and small orders.

Speaker 4: For instance, in the past month, we received over 200 new orders with total amount of about $35 million. Most of the situation has just started to improve.

Speaker 4: the total amount isn't that large. So far, demand from Asia has recovered most quickly. We haven't seen much recovery from North America yet.

Speaker 4: On the negative side, inventory in the market has still not...

Speaker 4: been completely rejected. Because of this, the selling price of the machines didn't increase in line with the rise in the Bitcoin price and the number of mining machine orders delivered.

Speaker 4: So our selling price is still limited by the state of the industry.

Speaker 4: And for quite a month time, we have been preparing for a low, big, comprised and Lordly men.

Speaker 4: Our current strategy is to grow our mining skills by enhancing partnerships with mining farms.

and the reasonable power prices. This will allow us to utilize our mining machines inventories for mining rewards.

I think by investing when Bitcoin price is low, we will see good returns when the price rep démar Swift.

We expected Bitcoin price will not be continuously restricted in the next 1-2 years.

and we will probably experience increase. So we are willing to invest in RMB and lock in visual production complexity in advance. This will ensure we have enough machines with higher performance for both sales and sales money.

Thank you, NG. And for my second question, it's specifically about Bitcoin price.

So you've been quite good at predicting the price of Bitcoin from your perspective. How do you see...

Bitcoin price correlation with risk on assets.

And do you see there being a decoupling from risk on asset prices? I think now the big surprise is...

mostly linked with high risk assets. This is my opinion.

So I think when the risk access goes up, the Bitcoin price will be recurring. This is my personal view. Thank you.

Okay, thank you so much.

Great. Thank you so much. Thank you.

Our next question comes from the line of Jiaer Zhu from China Renaissance. Please ask your question Jiaer. Hi, hi Andrea. My first question is about the pricing strategy and inventory digesting status.

And how much computing power do you plan to allocate for self-mining business?

Thank you. Maybe I'll check this one. I think it's about pricing strategy. We are seeing that the Bitcoin price has only slightly recovered and the whole mining demand is gradually requiring. So it looks like there is still a lot of more inventory in the machines.

monitor the market demand and implement flexible price strategies to quickly sell inventory and collect the cash back. And we will also take advantage of market opportunities when they arrive.

In terms of the human tree, as of the end of February , we have sold most of the limited amounts of 18 new models that were in stock.

And we are currently producing a new batch. We also shift the many old generation models in the fourth quarter of 2022, and recently in quarter-1, 2020 history.

Currently, our overall inventory level is sufficient. In an environment of slow market recovery, I think that we will actively explore mining projects and use monumentary for our mining business to generate Bitcoin rewards.

And we expect our installed computing power to be in the range of 5 to 5.5 extra hash per second by the end of the first quarter of 2023. So we are also actively exploring market demands for mining machine sales and negotiating with large customers to save sales opportunities.

the Bitcoin price recovers

So overall speaking, we expect a Bitcoin price will not continuously be restricted in coming one to two years.

So we'll probably experience an increase in ongoing quarters, so leading to an increase in demand for computing power and mining equipment. Therefore, we have already locked in waver production capacity in preparation for the upcoming possible bull market.

Thank you. Thanks, June . And my second question is that do you have any stock incentive plan and dividend distribution plan?

Thank you for the question. Before the company went public, we established a program to incentivize our employees with our stock.

This program has been operating smoothly since going public and is one of our key strategies to attract the tail and tea employees and the research teams, especially research teams.

We will keep discussing and planning together with our board of directors regarding the employee of ES.

For dividends, currently we do not have a plan to distribute dividends to shareholders. Instead, we aim to invest more in research and development as well as production deployment in order to create a long-term shareholder value.

As the company continues to grow and accumulate assets, we will keep focusing on research and development operations.

in order to expand our business.

We will discuss the possibility of distributing dividends when the timing is more appropriate. Thank you.

Okay, got it. Thank you. Thank you. Next question comes from the live of Mike Lake from the Benchmark Company. Please ask your question, Mike.

Thank you. Good morning. You mentioned that you have 200 new orders for up to 35 million US dollars on the books Can you talk with Bitcoin moving up to 22,000 currently? What you're seeing with the forwarded demand, how it's changed from the fourth quarter it can cause threats.

and the related margin pressure on that, and then you'll mention whether the new entrance inquiring about the machines or if it's just the traditional players increasing upgrading their fleets.

and mention whether the new entrants inquiring about the machines or if it's just the traditional players increasing upgrading their fleets. Thanks.

I will take this one. I think regarding the sales path, we have collected a number of small orders recently, but the overall demand has just started to recover, and the total volume is not that significant yet.

Some traditional miners are unable to place orders due to their financial control. And the high industry, even tree levels have also limited our sales volume and prices.

I think that recently we are prioritizing some of our efforts on dispensing our inventory of older models and parts to quickly collect the cash back.

If the fluctuations in Bitcoin price lead to slower sales of older model in human tree, we may need to further adjust prices to make concession. If under such conditions our growth profit will probably be undermined.

Regarding our mining business, we expect our mining revenue in the first quarter to further grow, assuming we increase the number of mining machines installed and online quarter-over-quarter while the Bitcoin price rebounds during the first quarter.

However, as energy prices remain high, we expect the growth profits of our mining business to improve only slightly in the first quarter. Additionally, as we deploy more computing power, mining machine depreciation, we also increase in line with the deployment.

So this will also have an impact on the gross profit. Thank you. Thanks. And then just one more question. Can you talk a little bit about how the operating environment in China is right now, and then also discuss the build-out in Singapore and the U.S. please? Thanks.

currently it seems that control measures in transportation and logistics have largely returned to the level before the pandemic.

Our employees are now able to work more efficiently in areas, special operations.

finance and R&D, similar as forms of online and in-person collaboration.

At the same time, we can go global business.

So we can impress immediately with our overseas customers. The size of our teams in our headquarters in Singapore, including R&D operations and the CNAS, has been steadily increasing and is playing and decreasing the important rule.

role in our overall operations. We have also formed teams in North America for manufacturing, growth and sales, where housing, logistics, and other sales companies.

providing more support for local market development and other sales services.

Additionally, we have set up 13 NAPA sales services that are worldwide and able enough to provide fast and clean and operational and maintenance service for our overseas customers.

set up 13 after-sales service centers worldwide, enabling us to provide fast and convenient operational and maintenance services for our overseas customers. cya

Great, thank you.

Great, thank you. Thank you.

Our next question comes from the line of Shuang Sun from Guo Shen Securities. Please ask your question. Shuang? Yeah, yeah, yeah. My first question is will you have additional inventory right down in the next quarter? Thank you for this question.

In response to the continuous decrease in Bitcoin price in the fourth quarter, we lowered the selling price of some older models some, which led to the expected cash inflow from selling these models below cost. As a result, we have reported a provision for human tree write-down.

of over 200 million RMB, which is recognized as a course for this course.

In addition, the depreciation cost of mining machines has increased due to the increase in our equipment deployed for mining. These factors have led to a negative growth profit of this quarter. In 2023, We resentment of the structural impact of natural gas ore stock feel that we might be poss amplify this struggle far, It's seen to a from timberHa!' Give a better haircut

The Bitcoin price has only moderately rebounded and recently declined. If we further adjust down the price for the higher hash rate, 8.0 model, then we will incur additional inventory right down in the first quarter of 2003. However, if we are able to sell this inventory,

at a price higher than the cost, the provision for inventory write down that we have recorded can be used to offset the sales cost, thereby increasing our gross profit margin. I think I have tried to answer your question, Shoung.

Okay, okay, thank you. So the next question is what's the recent development in the Audi's RISC?

I think you are talking about the previous PTLV issue. Regarding the old issue, yeah, first by the Chinese stocks and the concept consumer risk of deleting, I think we have happily noticed that China and the US are working towards values of independence.

and there has been positive progress recently. On December 15, 2022, the PCAOB announced that it was able to fully inspect, investigate PCAOB registered public accounting firms.

had quarterly management in China and Hong Kong. So given the solid progress so far, the market is more optimistic towards reaching a solution for all the issues.

From a company perspective, we have been actively exploring possible solutions.

since the emergence of the delisting risk caused by auditing issues. Our goal is to protect the interests of stakeholders, especially our shareholders, and maintain the status and compliance advantages as a listed company. And as you know, to develop the longer term of Canaan.

In the process of our globalization, we have also extended our operations and supply chain overseas.

As a listed company, our majority of revenues are generated overseas. So we will continue to maintain and strengthen our government's capabilities for compliance and legal operations in different countries and different regions.

and maintain active communication with the capital markets. I think that's my answer.

Thank you. Our next question comes from the line of Chris Brantler from DA-Davison. Please ask your question, Chris.

Hi, thanks, Timorian. Thanks for taking my questions. My first question is just give it all the excitement around CATTPG and AI. Can you give us an update on your AI business? Thanks.

Thank you for your question. Our current lineup of our AI chips primarily focused on CV or like analyzing and processing images like saw, sort of machine vision and machine hearing.

I think it's different from the currently chat GPT slag, along with the models. But you know, we are amazed and excited by the progress of technology. The remarkable advancements in AI technology have given

I hope in addressing some of the

problems that have in the industry such as like a machine before you use their experience and the underwearing.

that have a prop in the industry, such as like a machine before you use your experience and the underwielding intelligence levels.

We believe that this is the direction we should go. So of course, these new AI technologies have completely different hardware requirements compared to the past. And we need some time to explore and research in these areas.

iterate and improve our products.

These products are still valuable and can provide users with better experience. But I think we have benefits because we have access to the

high-end technology. So I hope in the long term we will evolve this kind of

Yeah, yeah, yeah. Okay, great. And then a different question, maybe this is more for James, is this help me think about the share buyback and then I'll start with the ATM. Is the ATM more for growth initiatives where the share buyback is more for near term use of excess cash? Help me balance those two things.

Yeah, I think just now we have mentioned that we did an attitude based on our shared research program in Coder 4 and we have not commented using our ATM facility yet. In late November we filed this 424-BG5 and completed the setup of this ATM facility.

I think that this will enable us to quickly execute financing activities when the timing is appropriate in the future. We will consider our own performance and wait for the market conditions to improve. I think currently the valuation needs to recover to a certain...

So due to the specific financial needs of our industry, it is necessary for us to have a long-term plan in the capital market. I think this will help us mitigate potential operational risks and the fleeting business opportunities. Thank you. That's great. Thanks so much.

needs of all industry, it is necessary for us to have a long-term plan in the capital market. I think this will help us mitigate potential operational risks and the free-to-free fleeting business opportunities. Thank you. That's great. Thanks so much.

Our next question comes from the line of Andrew born from a Rosy-Blaz security. Please ask a question, Andrew.

Thanks, Eddy. Could you guys discuss your growing focus and plans for business growth in the U.S. and how that market's progressing?

Thank you. We highly value the North American market because it has a large concentration of miners. So we have established a multifunctional team in the local area that handles warehousing logics.

sales and after-sales services. We also set up several maintenance service centers or spare parts warehouses to provide more convenient after-sales support for our customers in North and even South America.

I think even through the current inventory level, in the US it's especially for used machines, manual machines.

remains high, the inventory remains high. We believe that buying our new machines is valuable for customers. They can enjoy one year of warranty services, which are very valuable for miners, and can provide them with a better mining experience.

This is that used money machines cannot compete with. This is designed to……

The natural environment and the resources in North America mining sites varies a lot. These sites are often located in different places.

to graph the areas such as the cost or high latitude regions with extreme cold temperatures or extreme high temperatures. So this environment of conditions is very challenging.

We work with our customers to provide customized cooling and the minus solutions based on the conditions of their minus side.

At the same time, our mining business in North America keeps expanding.

As of now, we already have multiple projects under contact or already in operation. We expect our mining scale in North America to be over 40% of our total computing power will be stopped by the end of the first quarter of 2020.

Thank you. Great. Thank you.

Thank you. There are no further questions now. I'd like to turn the call back to the people at the closing remarks.

Hi everyone, we really appreciate you all taking the time to join the call with us today. If you have any further questions, please feel free to reach out to our team through the contact information on our website and we look forward to further discussion with you next time. Thank you.

Thank you. That concludes the call today. Thank you for attending everyone. You may now disconnect.

The P.

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Ladies and gentlemen, thank you for standing by and welcome to Canon Inc. 4th quarter of the year 2022 earnings conference call.

At this time, all participants are now listening only mode. After mentioned, prepare remarks, we will have a question in answer session.

Please note that this event is being recorded. Now I'll like to hand a conference over to your speaker host today, Mr. Clark Suzy, and Dr. Sir Relations Director of the Company. Please go ahead, Clark.

Thank you. Hello everyone and welcome to our earnings conference call. The company's financial and operating results will release by our newswire services earlier today and are currently available online. Joining us today are our Chairman and CEO .

Mr. N. G. John and our CFO , Mr. Jin Cheng-Jing. In addition, Mr. Xiaoming Liu, our SBP, Mr. Leo Wang, IR Senior Director, and Mr. Xi John , IR Manager, will also be available during the question and answer session.

Mr. Zhang will start the call by providing an overview of the company and performance highlights for the court. Mr. Chong will then provide details on the company's operating and financial results for the period before we open the call up for your questions.

Before we continue, I would like to refer you to our State Harbor Statement in 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 estimate or project future results of operations or the performance of the company.

These statements speak only as of the date heroes 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 20F for information on risks, uncertainties and assumptions that may cause actual results to differ materially.

from those that are 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 GAP results. You can find additional disclosures regarding these non- GAAP measures , including reconciliation with comparable GAP 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. NG John . Please go ahead. Hello everyone. This is NG, CEO and the founder of PINN.

Our several gems and I are delighted to share our quarterly results from the companies Singapore headquarters. The market environment in the fourth quarter of 2022 become even tougher.

and properly reached the eighth darkest moment. The FAAD-RIP increased rates by 75 pips in November and the 50 pips in December to fight inflection. As such, the recent macro environment

has been quite difficult for the Bitcoin mining industry. Also, in November 2022, the Prophtal Exchange FKX and the Propel Lender Block 5 both filed for bankruptcy.

These unfortunate events further hurt creditors and the investors' confidence.

in the whole public currency industry, due to this series of adverse events.

The Bitcoin price decreased towards 52 weeks low of $16,500 at the end of the year.

At the same time, energy prices stayed high because of the regional conflicts. While Bitcoin's total network of hash rate has increased by more than 20% from the last quarter, our new money farms began operations.

and new machines went online around the world. This has made money more difficult with decreased money rewards and has even resulted in select mining farms to stop operations.

In North America, where mining has been relatively concentrated since 2021, many miners and hosts have high debt ratios and a renouncing cost. These borders have further impacted the cash flows.

and the STEM miners and hosts have gone bankrupt or had to reorganize their business. These problems have badly affected miners' operations, income, and demands from functioning

We have mixed feelings about this industry downturn. During the fourth quarter of 2022, the weather is our man-to-middle team. I visited the investors, clients, and partners in North America, the Middle East, and the South-East Asia.

I want you to understand their business and financial positions and start to weather this hard time with them. Faced with the current industry challenges and thanks to the expulsion of our flexible sales strategy as well as our mining business, which we have been expanding for some time now, we generated the total revenues of the company.

392 mini-RMB this quarter exceeding our guidance of 310 mini-RMB. Today I want to take this opportunity to discuss three key topics.

First, our continuous investment in R&D and the production capacity. Second, the ongoing development and the progress of our mining business.

Finally, our understanding of and the thoughts on the downturn in the Bitcoin price and the general public currency industry. First, we made substantial investments in R&D and the continued tool.

secure future production capacity in the first quarter. Our CFO will share more details on this later. I would like to address that during an industry downturn, it is a tough decision to maintain these investments.

This decision showcase our long-term confidence in global Bitcoin adoption. In late October of last year, we lost the new generation 8.7. We lost the new generation 8.13.

money machines after the tape out on the advanced process note. The A13 achieves new highlights in computing power and energy efficiency.

After the release of our new generation mining machine, we have been strengthening our cooperation with Foundry Partners.

This will help us to secure the limit change suplus production capacity of vapors on the most advanced nodes.

Accordingly, we are moving on to mass production and upgrading our products to the new generation with better computing power and energy efficiency.

3 x HSS in the fourth quarter from 3.2 x HSS in Q3 of 2022.

The power supply in Kazakhstan has been improving, but it is still unstable. Under these conditions, we generated mining revenue of

72.2 million RMB in the fourth quarter, up 16.3% sequentially. Despite the Bitcoin price decreasing during Q4, at the 2022 year-end, we have...

757 billion coins in total. Going into the first quarter of 2023, the Bitcoin price is showing showing a fortune. Back to ?? has been being useless to a conservative Church in 2019 and now it's not a prize if

and we are making further strides in our mining business. As the end of February , our total install mining computing power reached 3.8xhp. This additional hatch rate continues being installed.

We expect our install half-rate to reach 5x2x2 to 5.5x2x2 by the end of Q1 of 2023. I want nearly 10 year industry experience and I want to explore the world's ways to cooperate with our partners under rather business conditions.

We are proud to have become international and agile Bitcoin miners in our mining business. This has to deploy more mining projects in much provisions in the future. Finally, as a veteran, went through four major Bitcoin bear markets. I want to share my view on the low plant of this Bitcoin cycle.

The fourth quarter of 2022, in my view, was the darkest time for Bitcoin and the entire cryptocurrency industry during the past two years.

When Bitcoin price dropped down to a cycle bottom, some unexpected events also happened in the industry. This flaw seriously hurt the confidence of industry players and caught regulators' attention. But I don't believe this should make us lose face.

We should see this as an opportunity for the industry to separate good companies from cheaters. This process will drive the industry to become more sustainable in the future.

There have been a lot of negative headlines recently, but I want to point out the positive. Looking back at the 14 years since the birth of Bitcoin, we can see that today is quite different from the past, even if we only look over the last two years.

There were great developments. Now, the number of Bitcoin miners and a total computing power of the network are at a much higher level compared to the low cost of the 2020 crypto cycle. In addition, Bitcoin mining now happens all over the world. This situation.

form the highly decentralized trading network. We can see that many miners are seeking and adopting low-cost sustainable energy across the globe. These miners have monetized many...

Power plants, stranded companies and have many antivlogm and regions developed, they are new, they are green power infrastructure.

Bitcoin has emerged as an outsider from traditional finance. It is now facing increasing

regulatory focus in many places around the world. We should be aware that the trend will well show the growing user base of Bitcoin and other cryptocurrencies have formed a strong consensus and have a significant influence that cannot be ignored.

Bitcoin has gone from a niche asset that few people understood to having tens of millions of users. We could even say that it's become mainstream.

A new industry that has been around for only 14 years will undoubtedly go through cycles of intercept and despair to achieve progressive evolution.

during the industry's development, we want illegal and ethical behaviors to be exposed.

industry players are learning, improving, and measuring. So companies, we comply with, who comply with regulations and act responsibility will stand out. This takes us back to our original aspiration to form the company 10 years ago. At the time, our goals

was to create a compliance company that supports the landmark invention of Bitcoin system with super computing technology. To meet this goal and along with global decentralization of Bitcoin, we are continuing to globalize our company by the end of 2022.

We have already established an overseas lightchain that can quickly fulfill others from international markets and expand our services' capabilities with certain other sales, service stations worldwide.

We also developed a headquarters with a multi-functional team in Singapore, insisting on producing best-of-class products. We have continuously integrated our technology and improved chip fabrication by maximizing our product's computing power and energy efficiency.

We aim to provide a superior experience of Bitcoin miners and work with them to build a stronger Bitcoin network.

Since the second half of 2021, we have started to explore the money, business, and how further involved our business model.

With the growing experience of our team and the carry out of our mining operations, we installed mining hatcheries as shown and emerging scale as of today. With that, we successfully expanded our business to the industry downstream, which helped us better understand our customers' needs and understand Bitcoin itself.

Overall, we will remember this on the filter of bitcoin and the super-conclusion technology behind it. Moving into the first quarter of 2023, with bitcoin price showing some improvement, we believe the most difficult part of bitcoin cycle is approaching the end.

Now we are looking forward to the market recovery. We have recently received many orders and the purchase in Korea. At the same time, we have also noticed that many manners are unable to place orders due to financial problems. Generally, computing power demand is gradually recovering.

but recovery has just started. Therefore, we expect our total revenue in the first quarter of 2023 to be approximately...

450 million RMB or 65 million US dollars. We accept our total install hatch rate from mining to be 5 to 4.5XHP by the end of the first quarter of 2023.

focusing on Bitcoin. Going forward, we will continue to iterate our products and provide great services to our mining clients as we support the growth of the Bitcoin ecosystem. Along with miners around the world.

We will join in and contribute to IT Coins globalization. We will continue to adopt ourselves to researching and funding for the global mining sites.

With agile operation and efficient expectation, we endure to explore and the size of the activities during the age of discovery of global incolemagne.

This concludes my prepared remarks. Thanks, everyone. I will now attend the call towards our CEO , James. Thank you, Mr. John , and a good day, everyone. This is James. I'm with our CEO in our Singapore office.

in quarter four and it contributed more revenue than ever. Despite all the difficulties, for total revenues, we achieved the 392 million RMB, beating our previous guidance by more than 80 million RMB.

Regarding machine sales, in this challenging time, we endured the marked conditions and continued to decisively execute on our strategy. Considering a very limited demand, we further lowered the selling price for our legacy A12 series models to spur our sales.

As a result, we delivered 1.9 million TeraHash per second in a quarter, contributing to approximately 318 million RMB in mining machine cells, which is better than we expected.

I would like to share a few points about our mining business. During the market downturn, we have been actively exploring and developing our mining business.

because this mining resource assets are undervalued in the current fair market. We believe it is the ideal time for us to invest and deploy valuable assets for the long run.

At the same time, it is also a method to allocate our machines in humanry to generate bitcoins.

With further improved power supply, our revenue from the mining business reached 72 million RMB up 16.3 percent sequentially. The growth is impressive given the decreasing Bitcoin prices during the quarter. This marks the first time our mining revenue made a $10 million USD milestone in a single quarter.

Please note revenue from mining is recorded according to the Bitcoin price where a Bitcoin is generated from mining. After paying a certain power fee using Bitcoin, we have 757 Bitcoin as of the end of 2022. This Bitcoin balance was up 41% quarter over quarter compared with 535 in the third quarter. The Bitcoin price was up 41% quarter over quarter compared with 535 in the third quarter.

and North America. By the end of February we had a total install the hash rate of 3.8 extra hash per second.

With these positive developments in our mining collaborations recently, the company's total online mining machines are expected to reach a harsh rate of 5 to 5.5 extra-hash per second by the end of the first quarter of 2023. Please note that the instalments...

Progress may be subject to unexpected issues, and thus may influence the final installed hash rate by the end of the first quarter of 2023. The total energyized hash rate is also subject to the low cost power supply. Let's talk more about the profit and loss. We incurred a gross loss of 230.9 million RMB for the fourth quarter of 2022 due to the lower top line revenue.

amongst an unfavorable market and higher costs. Specifically, for our mining machine sales, the growth loss of 136.7 million RMB for the quarter was mainly due to an inventory write-down of RMB 200.05.3 million. This write-down was a result of lower than cost average selling price for the previous generation machines, which suffered from the declining Bitcoin price.

The inventory write down decreased by 7% sequentially as we strived to sell out our inventory to the market during the fourth quarter. If the inventory write down were excluded, we would have a gross profit for our mining machine sales of $68.7 million RMB. The decreased ASP of selling machines also narrowed the profit.

compared to the third quarter of 2022. Regarding our mining business, we recorded a gross loss of 77.0 million RMB during the quarter. Our cost of energy and hosting amounted to 74.2 million RMB, which was mainly due to increased energy prices. In addition, we incurred depreciation costs of.

74.9 million RMB in the fourth quarter from our growing number of deployed mining machines. Excluding depreciation, our mining profits or loss defined as mining revenues deducting costs for energy and hosting was a loss of RMB 2.1 million for the fourth quarter. The loss was primarily due to the lower revenue per Bitcoin mine, resulting from the decreased Bitcoin prices during the fourth quarter. We recorded 223.5 million RMB for R&D expenses during the quarter.

This includes about 96 million RMB for one-off expenditure for our new generation chips. The remaining 127.5 million RMB resulted from our ongoing research and development input, which grew steadily sequentially and year over year.

As most of our sales contracts were denominated in US dollars, we recorded a foreign exchange grant of 26.6 million RMB in the fourth quarter due to the depreciation of the RMB against the US dollars. As the company continues to internationalize and drive global sales,

We are considering adjusting our reporting currency, which may impact our foreign exchange gains going forward. As a result of higher depreciation, inventory write-down and relatively higher expenses in R&D, we recorded a net loss of 438.3 million RMB.

As our growing mining scale will continue to record higher defreuation and considering the modest selling price in the near term and the potential imagery write down as a result, we are not expecting substantial profits in the next one or two quarters. But from a longer perspective.

the depreciation will not last longer than the useful life of the machines. And the selling price of the machines could be readjusted upward along with the market demand once the Bitcoin price increases.

Despite this near-term headwind, we are still optimistic about our capacity to generate substantial profits in the longer term.

Despite these near-term headwinds, we are still optimistic about our capacity to generate substantial profits in the longer term. Thanks for listening to our balance sheet.

First, let's discuss our cash status. As our CEO stated, we invested a lot during quarter four of 2022 to secure our supply capacity as well as R&D and our mining business. As of December 31, 2022, our cash and cash equivalent decreased to RMB 707 million. The decrease in cash amounted to 1,295 million RMB, mainly including 848 million RMB.

for prepayment to secure wafer supply and production. As well as the 200.05 million R&B for payment of value added attacks and income tax expenses.

Our operating expenditures used 149 million RMB in cash. We also paid up from the deposits of 21 million RMB to secure mining farmer resources for expanding our mining business. Our investments in the supply front...

have prepared us with adequate production resources to manufacture our next generation mining machine and allocate increased computing power for mining. We made such strategic investments during this fair market, preparing us with adequate inventory for sales and capitalizing on the coming poor market.

When the Bitcoin price increases, we have confidence the aforementioned investments will bring us notable returns.

Also, cash is used to deliver value to our shareholders. During the fourth quarter of 2022, we used approximately 72 million RMB, which is equivalent to 10.5 million USD, to repurchase 3.5 million ADSs under our current stock repurchase program approved in March 2022.

with an average repurchase price of $3 per AES. In late November , we filed a prospectors' supplement on form 424p5 to officially set up the ATM facility for future financing. We have not comments using the ATM as of today, and we will continue to consider appropriate financing opportunities.

to fuel our future business growth. We continue to believe in the resilience of Bitcoin in its most challenging time, and have seen a civil lining as the Bitcoin price moderately improved since the beginning of 2023, which was consistent with our outlook. I am pleased to report that in February ,

we obtain more than 200 orders from customers. Although the average contract amount is not particularly sizable, we can sense the customers are in a more positive mood compared to quarter four of 2022. In this recovery cycle, we will utilize our cash on the most critical aspects, such as the wafer supply to seize marking opportunities and deploy ahead of time.

So as to expand the scale when the market picks up. Now I would like to briefly walk you through our financial results for the quarter. Total revenues in the fourth quarter were 391.9 million RMB compared to 2184.6 million RMB in the same period of 2021. And the 978.2 million RMB in the third quarter.

the third quarter of 2022.

Laws from operations was 624.4 million RMB. Net law attributes both to ordinary shareholders was 438.3 million RMB.

Now, Gap adjusted net loss was 341.8 million RMB. Basic and diluted net loss per ADS for the quarter or 2.61 RMB. As of December 31, 2022, the company had cash and cash equivalents.

of 7007.3 million RMB. This concludes our prepared remarks. We are now open for questions. Thank you. We will now begin the question and answer session.

As a courtesy to other investors and analysts who may wish you ask a question, please limit yourself to two questions at a time. If you have any follow-up questions after the Q&A session, the investor relations team will be available after the call. For the benefit of all participants on today's call, if you wish you ask a question to chairman in Chinese.

Please immediately repeat your question in English. To ask a question, please press the 1-1 on your telephone and write for your name to be now. To withdraw your question, please press the 1-1 again. Alphith's question comes from the line of Michael Donovan from H.C. Will he be voting right? Please go ahead Michael.

Ganjie, MJ, James. Kevin is on the road right now traveling, so I'm filling in for him. And first question, what is machine demand like with the depressed pricing and how is Kanan balancing between developing self-mining versus selling machines? Hello, thank you.

For this question on the political side, this comprised had started to increase slightly in the beginning of this year.

So the overall demand of the computing power has shown some recovery. We have received more protests in the countries and the small others.

For instance, in the past month, we received over 200 new orders with total amounts of about 35 million US dollars.

Because the situation has just started to improve the total amount even that last. So far demand from Asia has recovered the most quickly. We haven't seen much recovery from North America yet. On the next few slides, even during the market has still not.

been completely rejected. Because of this, the selling price of the machines didn't increase in line with the rights in the Bitcoin price and the number of money machine-owners to be worth. So our selling price is still limited by the...

state of the industry. And for quite a long time we have been preparing for a low people comprised and the Lordly Man.

Our current strategy is to grow our mining skills by enhancing partnerships with mining farms and reasonable power practices.

This will allow us to utilize our mining machines, inventories, or mining rewards. I think by investing when Bitcoin price is low, we will see good returns when the price repars. We expected Bitcoin price will not be continuously restricted in the next time, but not within the time class.

and we will probably experience increase. So we are willing to invest in R&B and not in visual production capacity and the rest.

This will ensure we have enough machines with higher performance.

for both staff and the staff money. And for my second question, it's specifically about Bitcoin price. So you've been quite good at predicting the price of Bitcoin from your perspective.

How do you see Bitcoin price correlation with risk on assets? And do you see there being a decoupling from risk on asset prices?

I think now the big surprise is

I think that the risk at that goes up, the big price will be recurring. This is my personal view. Thank you.

linked with high risk assets. Yeah, this is my opinion. And so I think when the risk assets goes up, the big price will be recovery. This is my personal view. Thank you. Okay. Thank you so much.

Thank you. Our next question comes from the line of JAR, Drew from China Renaissance. Please ask your question, JAR. Hi, I'm J.M. My first question is about the Appalising, Strategy, and Inventory, Digesting Stata. And how much computing power do you plan to allocate for self-mining business? Thank you. Maybe I'll check this one. I think it's about pricing strategy. We are thinking

I think we will closely monitor the market demand and implement flexible price strategies to quickly sell inventory and collect the cash back. And we will also take advantage of market opportunities when they arrive.

In terms of the human tree, as of the end of February , we have sold most of the limited amount of new models that were in stock.

And we are currently producing a new batch. We also shift the many old generation models in the fourth quarter of 2022, and recently in quarter-1, 2020 history.

Currently, our overall inventory level is sufficient. In an environmental flow market recovery, I think we will actively explore mining projects and use more inventory for our mining business to generate its coin rewards.

And we expect our installed computing power to be in the range of 5.5 extra harsher per second by the end of the first quarter of 2023. So we are also actively exploring market demands for mining machine sales and negotiating with large customers to see sales opportunities.

as the Bitcoin price recovers. So overall speaking, we expect the Bitcoin price will not continuously be restricted in the coming one to two years.

So we are probably experienced a increase in ongoing quarters, so leading to increase the demand for computing power and mining equipment. Therefore we have already locked the waiver production capacity in preparation for the upcoming possible forward market.

thankue thanks, junes. And my second question is that do you have any stock incentive plan and dividend distribution plan?

Thank you for the question. Before the company went public, we established a program to incentivize our employees with our stock. This program has been operating smoothly, things going public, and it is one of our key strategies to attract the talent in employees and research.

especially research teams. We will keep discussing and planning together with our board of directors regarding the employee incentive plan. For dividends, currently we do not have a plan to distribute dividends to shareholders. Instead, we aim to invest more in research and development.

as well as production deployments in order to create a long-term shareholder value. As the company continues to grow and accumulate assets,

We will keep focusing on research and development operations in order to expand our business. We will discuss the possibility of distributing dividends when the timing is more appropriate. Thank you.

Okay, got it. Thank you. Next question comes from the live of Mike Lake from the Benchmark Company. Please ask your question, Mike.

Thank you, good morning. You mentioned that you have 200 new orders for up to 35 million US dollars on the books Can you talk with Bitcoin moving up to 22,000 currently? What you're seeing, what the forward demand, how it's changed from the fourth quarter to current, and the related margin pressure on that, and then you know, mention whether the new entrance can inquiring about

not that the significance is yet.

Some traditional miners are unable to place orders due to their financial control. And high industry inventory levels have also limited our sales volume and prices.

I think that recently we are prioritizing some of our efforts on dispensing our inventory of older models and parts to quickly collect cash back. If the fluctuations in Bitcoin price lead to slower sales of older model in the inventory, we may need to further adjust prices to make concession.

If under such conditions our growth profit will probably be undermined. Regarding our mining business, we expect our mining revenue in the first quarter to further grow. Assuming we increase the number of mining machines stored and online quarter over quarter while the Bitcoin price rebounds.

during the first quarter. However, as energy prices remain high, we expect the growth profit of our mining business to improve only slightly in the first quarter. Additionally, as we deploy more computing power, mining machine depreciation, we also increase in line with the deployment progress. So this will also have an impact on the...

for our profit. Thank you. Thanks. And then just one more question. Can you talk a little bit about how the operating environment in China is right now? And then also discuss the build-out in Singapore in the U.S. please? Thanks. Thanks. Okay. Thank you. At the end of 2022,

China has been in control policies currently. It seems that control measures in transportation and logistics have largely returned to the level before the pandemic. Our employees are now able to work more efficient in the EU in areas.

and you press the meeting with our overseas customers.

The size of our teams in our headquarters in Singapore, including R&D operations and the CNAS, has been steadily increasing and is playing and decreasing the important rule in our over-rope operations.

We have also formed teams in North America for manufacturing sales, warehousing, logistics, and after-sales maintenance, providing more support for local market development and after-sale services. Additionally, we have set up 13 after-sales service centers worldwide.

able to provide fast and clean and operational and immediate service for our overseas customers.

Thank you. Next question comes from the line of strong, from Gorshin Securities. Please ask your question, strong? Yeah, yeah, yeah. My first question is that we have a digital inventory right down in the next quarter. Thank you for this question. In response to the continuous decrease, a Bitcoin price.

course for this quarter. In addition, the depreciation course of mining machine has increased due to the increase in our equipment deployed for mining. These factors have led to a negative growth profit of this quarter. In 2023.

The Bitcoin price has only moderately rebounded and recently declined. If we further adjust down the price for the higher hash rate, 8.12 models, then we would incur additional inventory right down in the first quarter of 2023. However, if we are able to sell this inventory at a price higher than a cost, the provision for inventory right down that we have recorded.

can be used to offset the sales cost thereby increasing our growth benefits margin. I think I have tried to answer your question from. Okay, okay, thank you. So the next question is what's the recent development in the Audi Leask.

I think you are talking about the previous PCAOB issue. Regarding the audit issue faced by the Chinese stocks and the consequence risk of de-listing, I think we have happily noticed that China and the US are working towards a solution and there has been quality progress recently.

On December 15, 2022, the PCLB announced that it was able to fully inspect and investigate the PCLB-richist public funding firms had quarterly management in China and Hong Kong. So given the solid progress so far, the market is more optimistic towards reaching a solution for all these issues. And from company perspective, we have been actively...

exploring possible solutions since the emergence of the delisting risk caused by auditing issues. Our goal is to protect the interests of stakeholders, especially our shareholders, and maintain the status and compliance advantages as a listed company.

and the, you know, to develop the longer term of Canaan. In the process of our globalization, we have also extended our operations and supply chains overseas. As a listed company, our majority of revenues are generated overseas.

So we will continue to maintain and strengthen our government's capabilities for compliance and legal operations in different countries and different regions and maintain active communications with the capital market.

I think that that's my answer. Thank you. Thank you. I'll next question. Kelbs from the line of Chris Brantler from D8 Davidson. Please ask your question, Chris. Hi, thanks. Good morning. Thanks for hearing my questions. My first question is.

just given all the excitement around chat TPG and AI. Can you give us an update on your AI business? Thanks. Thank you for your question. Our current line up of our AI chips primarily focused on CV or like analyzing and the processing images and like sounds through the machine, vision and machine hearing. I think it's different from the currently chat GPT is large, along with the models.

But we are amazed and excited by the progress of technology. The remarkable advancements in AI technology have given us a hope in addressing some of the problems that have happened in the industry, such as like I mentioned before, user experience and underwilling intelligence levels.

We believe that this is the direction we should go. So of course, these new AI technologies have completely different hardware requirements compared to the past.

and we need some time to explore and research in this area. So I think in the short term to the midterm, we will continue to work in the area of HAI chips that we are familiar with and we have, and the, you know, and the continuous C. continuous Nah.

and improve our products. These products are still valuable and can provide users with better experience. But I think we have benefits because we have access to the...

and the technology. So, hoping the long term, we will evolve this kind of, yeah, and shifts. Okay, great. And then, different questions maybe. This is more for James. Just help me think about the shared buyback and then I'll start with the ATM. Is the ATM war for growth initiatives where the shared buyback is more for your term used to the next cash? Is it something that helped me balance those two things?

Yeah, I think just now we have mentioned that we did execute based on our share of research program in Codafor and we have not commented using our ATM facility yet. In late November we filed this 424B5 and completed the setup of this ATM facility. I think that this will enable us to quickly execute a financing activities when the timing is appropriate in the future.

We will consider our own performance and wait for the market conditions to improve. I think currently the valuation needs to recover to a certain extent. After fully considering the interest of our shareholders, I think that we will flexibly and continuously carry out financing activities.

So due to the specific financial needs of all industry, it is necessary for us to have a long-term plan in the capital market. I think this will help us mitigate potential operational risks and see fleeting business opportunities. Thank you. That's great. Thanks so much. Here. Elnick's caution comes from the line of...

Andrew Bohn from Rosenblatt Securities. Please ask your question, Andrew. Thanks. Can you guys discuss your growing focus and plans for business growth in the U.S. and how that market's progressing?

Thank you. We highly value the North American market because it has a large concentration of miners. So we have established a multifunctional team in the local area that handles warehousing, logics, sales and after-sales services. We also set up several maintenance service centers or square-cross warehouses to provide more convenience.

after sales support for our customers in North and even South America. I think even so, even through the current inventory level, the U.S. is especially for used machine, man-made machines.

remains high, as even trades remain high. We believe that finding our new machines is valuable for customers. They can enjoy one year of reward services, and we shall have every available for miners and can provide them with a better mining experience. This is that use the money machines cannot come.

latitude regions with extreme cold temperatures or extreme high temperatures. So this environment conditions is very challenging. We work with our customers to provide customized cooling and mining solutions based on the conditions of their mining site. At the same time, our mining business in North America keeps expanding.

As of now, we already have multiple projects under contract or already in operation. We expect our mining scale in North America to be over 40% of our total computing power will be stopped by the end of the first quarter of 2020. Thank you. Great. Thank you.

All right, thank you. There are no further questions now. I'd like to turn the call back to the company for Eddie Coving remarks. Yeah, hi everyone. We really appreciate you all taking the time to join the call with us today. If you have any further questions, please feel free to reach out to our team through the contact information. Thank you.

on our website and we look forward to further discussion with you next time. Thank you. Thank you. That concludes the call today. Thank you for chatting, everyone. You may now disconnect.