Q2 2023 Canaan Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to Canaan, Inc. Second quarter 2023 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.
Please note that this event is being recorded.
I'd like to hand, the conference I put your speaker host today, Mr. Clarke says she 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 for the second quarter were released by our Newswire services earlier today and are currently available online.
Joining us today are our chairman and CEO , Mr. Non Gong, Zhang and our CFO , Mr. James Jane Chime in.
In addition, Mr. Leo Wong IR senior director and MS. Qi Jong IR manager will also be available during the question and answer session. Mr.
Mr. John will start the call by providing an overview of the company and performance highlights for the quarter Mitch.
Mr. Cheung will then provide details on the company's 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 thereof, and the company assumes no obligation to revise any forward looking statements that may be.
He made in todays 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 reached.
<unk> 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.
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 company website with that I will now turn the call over to our chairman and CEO . Mr. <unk>. Please go ahead.
Oh Hello, everyone. This is <unk>.
Okay.
Thank you for joining our conference call, Jamie and I are at.
Company's headquarters in Singapore and to share our quarterly results with you.
During the second quarter of 2023.
This stuff with client demand.
<unk> H K to certainly pay U S dollars at the beginning and the end of the quarter.
However for most of the quarter experienced a downward trend while the overall network hash rate continue to steadily increased by about 16%.
The Rocky mountain of data quality, coupled is sluggish based on price. It has certain adverse impact of also a reminder for profitability.
Our willingness to make purchases.
Mr Industrious inventory level remaining.
<unk> relatively high.
Having a porsche and the pressure of product updates.
Mining machine providers eager to clear their inventory.
As a result.
Rotation into Miami machine market.
It has intensified.
And the process computing power continues to be enterprise share in.
In summary, the mining machine market remains Paramount.
Bear market.
Given this situation our efforts are twofold.
On the other hands, we are dedicated to upholding our financial resilience and stable operations.
On the other hand, we are also actively allocating resources towards future growth opportunities I would like to take this opportunity to discuss several strategic clients that we are focusing at all.
For us we are committed to long term investments in R&D and the production capacity to continuously upgrade.
And to integrate our products.
As we mentioned earlier, our <unk> series products achieved stable supply and again customer resignation towards our performance leading to a rapid increase in shipment volume in the first quarter of this year.
The second of course are competing for ourselves of asos in Syria, Secondly, if it indeed a surprise.
Debt up to a tourist areas.
We are constantly investing in R&D to enhance product computing power Inc.
Increased power efficiency.
And they reduce costs in the first half of this year our products reached a power efficiency of 25 to 30 jobs potash.
In the second half of the year.
Further of.
The bias.
Our efficiency range of new products to 20 to 35 gross potash.
Fulfilling our broker carriers commitments.
Currently.
This is a retail products.
CMT buggy and the small scale trial production stages.
And we have started to take.
Custom customer preorders, even in the current challenging market environment continuous <unk> supply chain, it's squirrels loss long term Steve estimates.
Furthermore, yeah alignment.
Our plan our strategy, we are diversifying our product portfolio beyond myeloma shares.
Following extensive period of R&D and testing we are about to launch our proprietary integrated Arab court and a liquid cooled stack solutions.
This solution is effectively a safe miners a rapid deployment.
Back to my room operations, whereas cash nature.
While conditions.
Our integrated 40 foot and turn to your foot.
Miami container products and a four day, so difficult I would've box mining container product.
Bleeds.
<unk> product development.
Type testing.
They have already received odors and expected to be delivered to customer.
The second half of this year.
Second.
We continue to develop and refine our south system to connect and supports our customers' worldwide last quarter, we highlighted our work on building developing and optimizing our comprehensive international SaaS system.
We engage with large clients channels and retail customers to enhance our global reach and more effectively convert customers.
This quarter.
Desktop market still being bearish face or ourselves significantly improved quote.
The basis.
Our total computing power sales reached six 1 million terahertz for a second.
Up 45% sequentially.
Contributing to product sales revenue about.
57 pardon me into U S dollars.
With that brief search in gift card transaction fees you already made there was a small upturn to demand.
<unk> power.
Savings opportunity.
Responded.
Deceptivity by rapidly expanding into North American market.
Engaging key clients such as cyber a stronghold.
Specificity, we received a significant older from safran mining, resulting in one to one meeting terahertz process and more computing.
Computing power sales in July we also secured 220000 terahertz second itself over there for all the stronghold of digital miner.
This marks a significant milestone our entry into the U S market. Meanwhile, in the southeast.
Asia, our distribution channels are steadily expanding.
In the second quarter $3 9 million of revenues was contributed by distributor sales.
This fever further growing.
Third quarter.
Our online retail store.
Turning to overseas customers.
To expand.
Global customer base in the second quarter, reaching customers from Brazil UAE hungry.
Hungary, Sepharose a lot TV for the first time.
It's worth nothing that the award is that and establishing a global SaaS system. It takes time.
Working diligently and we will share with you a further positive updates.
Third we remain committed our mining strategy and we'll continue speaks for myeloma projects during the second quarter, our vinyl business successfully initiated several new projects.
Through our partnership with the public listed companies.
Also we have started initial batch.
For extra hyper <unk> computer power recently, we.
<unk> reached an agreement with shareholders.
To future expand our partnership adding partners to exit hydrous exited appropriate empower which is expected to be deployed and operational during the third quarter. Since the second quarter. We have also used our small scale computing power.
Testing.
The OPI and put up great.
Martina.
First expansion of our mining business into these regions, although the total housework network.
Okay power will continue to rise in the second quarter, our mining operations achieved remarkable results. This was thanks to our increased uptime.
Industry events, such as <unk>.
Industry events, such as <unk>.
Which boosted bitcoin rewards for Mani activities.
This quarter, we produced 569 clients.
The beauty of mining revenue.
15, 9 million in U S dollars.
Sequential growth four phase III <unk> III.
Percent.
Ask Chris as Chris seriously.
Our mining business has been affected by recent policy changes in Kodak's time.
Leading to the temporary shutdown.
Approximately two extra heads us accent.
S dollar miner power since early July .
Furthermore, due to a default by a partner U S project.
13 miner with shares 30 installed in vending machines that we.
The fact that we're already installed.
With the remaining completed power to be installed and will be affected.
These two yes it is.
Expected to impact the operation up close to three extra hash process in the ear staff considering empower starting in the third quarter.
At present, we.
Yeah.
Actively working with local partners, Inc. Cutoff time to apply.
Four.
Relevant site census, and adjusting our collaborative approach to resume.
Regular operations at the mine site.
At the same time, we are working diligently to address.
<unk> issue.
With our partners in the U S project through legal means.
Safeguarding the rights and interests.
Company and I worry about price.
It's important to note that we believe active global business expansion.
Teresa Bali, Carlos Tavares, you could call it a set of challenges.
And the setbacks.
Normal part.
This journey.
Key part is that our fundamental direction remains unchanged.
We continue to leverage our advantages in computing power supply.
Recently.
The holding miner as a key development strategy.
At credit.
We are taking proactive steps to minimize the losses also.
I assure you that the lessons learned on multi <unk>.
We are absorbing <unk> and four.
Proceeding cautiously expanding and exploring new mining project opportunities and accumulating high quality.
You've called assets.
Finally.
We will.
Pre summary.
Through challenges strived to maintain cash flows and sure.
Yes.
After train operations.
Growth potential while.
Stretch dutifully allocating resources to be fully prepared.
For the upcoming full market following.
Next week like hobby.
This remains.
Or are we reading strategies overall.
Market environment was weak in the second quarter yet.
Yet our operational performance remained positive however continued selling price decline has create serious for material noncash.
Gross or provisions, resulting in substantial losses.
Sure.
Finance financial statement up this quarter.
In this challenging market environment, our focus on cash.
Separation.
Intensified during.
During the quarter, we didn't we.
We didn't.
Utilize our ATM facility.
Or conduct financing activities.
Our cash flow level expressed only a slightly sequential decline and was.
Prudently manage it overall.
As we move further into the second half of 2023.
U S interest rate hikes have not come to a complete stop and.
The global economic outlook remains.
Increasingly uncertain.
They may still this uncertainty as well.
See rents.
Still have potential too.
Cause significant.
Fluctuations in the.
Price, we believe that rotor market lacks.
Sufficient upward Walmart.
All right.
In addition, large scale miner financing capabilities remain constrained here.
Recent harsher its growth curve also indicates multiple declined overall industries, Inc.
Incremental hatch rate investment.
Alignment during the first three quarters of this year.
This trend alliance with our market assessment.
Furthermore, policy changes concerning.
Corporate currencies and mining here their eyes countries introduced.
Further uncertainty to both Inc.
Austria and our operations in some cases these charges changes.
Prudent for <unk> to our actual operations.
Given all the factors I have just outlined we have.
Highly cautious outlook for the <unk>.
Third quarter Uptight Hittite history.
We expect that revenues from <unk> for the quarter were approximately.
13 meeting in U S dollars.
This forecast reflects our current or deals on the market and operational conditions and actually results may be subject to change.
Overall as you might already be a wire we have navigated several declared cycles since our inception in 2013.
Our task is to confront in the result.
<unk>, we have contract much like fee declined itself.
We are everyday we create new history.
Each new day, we become more expressed and the stronger the day before we remain fully committed to performing ahead of the market of course.
Next months or so.
Timber.
We plan to celebrate the company's tests anniversary in Singapore.
<unk> industrial.
Probably host.
Distinction of being the first NASDAQ listed company in our industry.
For the past decade.
Our evolution from a project group into multi nation.
A nation a company with the leading chip design Comorbidities has been remarkable.
We established into the next decade development potential.
Potential achievements in the coming decade are exciting to consider.
This concludes my prepared remarks. Thank you everyone I will now turn the call over to our CFO James Thank you.
Thank you Angie and good day, everyone. This is Jamie speaking Atala, Singapore headquarters.
As <unk> started to the colleagues I would like to say the second quarter of 2023 was still a very dynamic there market period for the bitcoin mining machine industry with a complicated range of influences and a mix of factors.
First as we observed in this period of interest rate hikes. There was no significant upside for the price of bitcoin in quarter two the bitcoin price settled into a range between 20 8-K U S dollars to 30 K U S dollars.
Compared to the rapid growth from $16 $5 to 28, five K U S dollars in quarter one.
Secondly in May there was the BRC 'twenty incident healthy miners enjoy higher transaction fees secondly, the possibility of increase the future mining revenue from these fees.
Thirdly, the total bitcoin cash rate continued its climb increasing by 15% over the quarter.
Total demand for mining machines increased compared to quarter one.
Moreover, we have observed intensify the competition.
Mining machine manufacturers inventory levels remained high and selling prices continued to decline in quarter, two compared to quarter one.
All of the above factors should be considered when analyzing our Q2 numbers.
Of course, we also did our best to deliver the numbers and to keep our operation resilient.
Let's start with profit and loss.
Overall speaking in quarter, two total revenue generated was $73 9 million U S dollars.
Which beat our guidance of 72 million U S dollar and it represents an increase of 33, 7% quarter over quarter.
Additionally, our mining revenue reached a record high of $15 9 million U S dollars and contributed to more than 20% to our total revenue in this quarter.
Regarding our machine sales our revenue from mining machine sales was 57 8 million U S dollars in this quarter 32, 2% higher than $43 7 million U S dollars in the last quarter.
We delivered a total computing power is sold of $6 1 million <unk>, representing a sequential growth of 44, 2% and a year over year growth of 11, 7%.
However, the average selling price still declined slightly from $10 <unk> per second in quarter 1295 U S dollars patera harsh, but certainty in quarter, two which resulted from fierce competition.
Specifically for our mining machine sales, we accrued a $45 $9 million for inventory write down prepayment write down and a provision for reserve for inventory purchase commitments in this quarter.
And then you mentioned right.
$17 4 million U S dollars was recorded based on the most recent subsequent selling price when we offered a further price concessions in August .
This inventory write down decreased by 50% sequentially.
Another 28 $5 million was mainly a result of <unk>.
One off inventory write down and a provision for commitment to reserve for previous generation wafers.
Which we no longer plan to produce into mining machines.
Those write offs and provisions are made under U S GAAP rules.
Jeopardizing, our gross profit and to making the quarterly loss bigger.
But do not impact our cash status.
If the above write offs and provisions were excluded we would have a gross profit for our mining machine sales of 0.4 million U S dollars and a gross margin of 0.6%.
Turning to our mining business because of the bitcoin price recovery and increased the bitcoin rewards Julian from PRC 20 across the network. During this quarter. Our mining revenue reached a record high of $15 9 million U S dollars.
Representing a sequential growth of 43, 3% and a year over year growth of 100 051 percent.
As of the second quarters, and our total deployed a hash rate remained at more than five extra cash and all we install the hash rates reached more than $4 nine extra harsh consistent.
We mined 569 pit coins in this quarter and achieved a 54, which coins for mining profit.
Gross profit margin was nine 5% for our mining business in this quarter.
Note here that mining profit or loss is defined as the proportion of mining revenues deducting cost for energy and hosting in terms of mining revenues without consideration of depreciation.
Now, let us take a look at expenses.
Our R&D expenses were $17 9 million U S dollars in this quarter.
<unk> to $19 $1 million in the last quarter, and a $15 6 million U S dollars in the prior year period.
The slight quarter over quarter decrease was due to the decreases in materials used for research and development purposes.
The steady year over year growth reflected our continuing commitment to building a talented R&D team.
Our sales and marketing expenses or $2 $4 million.
Compared to $1 5 million U S dollars in the last quarter, and a $3 $2 million in the prior year period.
Sales commissions increased quarter over quarter because of revenue upsizing from quarter, one two quarter tools.
Our general and administrative expenses in this quarter were $26 $4 million.
<unk> was $17 6 million U S dollars in the last quarter, and a $22 1 million U S dollars in the prior year period.
Year over year and sequential increases were mainly due to $8 8 million U S dollars.
An impairment of property and equipment.
As we announced on August 18, we temporarily shut down two extra hush of our mining computing power in <unk> since July 2023 in order to ensure legal compliance.
And then we initiated the dispute resolution process with our partner at a U S based a mining project.
These challenges are anticipated to substantially affect our operational mining computing power starting in the third quarter of 2023.
Therefore, we recorded a 0.6 million U S dollars and $8 2 million U S dollars the impairment for the related of machines deployed in Kazakhstan, and the United States respectively.
This is also necessary action under U S GAAP <unk> profit and loss, while having no immediate impact on Q2 cash status.
The net result of the foregoing was an operating loss of $119 1 million U S dollars for this quarter.
Compared to $85 $7 million in the last quarter.
The net loss was $110 7 million U S dollars compared to $84 4 million U S dollars in the last quarter.
Loss included a series of necessary write downs of inventory, one off reduction of holding prepayments and a P. P impairment totaling $54 7 million U S dollar.
Turning to our balance sheet first of all let us keep eyes on the cash stayed home.
We held a cash and cash equivalents of $66 million as of June 30.
With a $6 million decrease compared to $272 million at the end of March.
And in quarter, two we spent $76 million to sustain the wafer supply and the machine production.
Other cash payments included a $21 million for operations and a $3 million in tax expenses.
The cash out totaling 101 million U S dollars was net off by inflows of $93 million from cells.
And accumulated a value added tax refund for exporting sales.
As previously mentioned I'd like to reemphasize that we have recorded a series of material noncash accruals or provisions in this quarter, including inventory write down one off provision for commitment reserve and the PPE impairment this noncash accounting.
Treatments or based on U S GAAP requirements and are resulting in expanded current losses.
However, this noncash accruals in the provisions did not materially influence our cash flow.
As of the end of this quarter, we recorded account receivable of $10 1 million U S dollars.
In order to strengthen collaborations with key clients, we have implemented our installment policy for certain key account customers who meet certain conditions.
<unk> account receivable at the end of this quarter.
In the future, we will continuously evaluate the market demand and customer credit prudently and adopt corresponding credit policies.
Now turning our attention to our big calling assets.
We held a 747 bitcoin as our AUM holding assets as of June 30.
Which is 124 more than 623 at the end of March 31st.
For the first time, we also have the 378 clients received as customer deposits.
Which is new to our balance sheet.
From May 25.
123, the data we reported our financial results for the fourth quarter of 2023 to August 29 2023.
We neither utilized the ATM nor purchased any idiots.
In the future with a prioritize shareholders' value carefully monitor cash flows and our stock prices and flexibly execute any potential ATM sales or stock repurchases.
Yes.
In quarter, three we anticipate anticipate a revenue of $13 million.
In the second half of 2023, the price of Bitcoin is still facing a challenging environment and the price competition remains intense.
Policy changes regarding Caribbean currencies and the mining in different countries. We are also add uncertainties to industry operations when.
We might face unforeseen obstacles.
Based on the above comprehensive situation, we gave a cautious expectation for the third quarter of 2023.
Now I would like to briefly walk you through our financial results for the quarter.
Revenues in the second quarter of 2023 was $73 $9 million as compared to $55 2 million U S dollars in the first quarter of 2023 and $245 $9 million in the same period of 2022.
Gross loss in the second quarter of 2023 was $70 1 million U S dollars.
<unk> to gross loss of $47 5 million U S dollars in the first quarter of 2023.
Gross profit of $138 3 million U S dollars in the same period of 2022.
Total operating expenses in the second quarter of 2023, or 49.0 million U S dollars compared to $38 1 million U S dollars in the first quarter of 2023.
And a $45 4 million U S dollars in the same period of 2022.
Loss from operations in the second quarter of 2023 was $119 1 million U S dollars compared to a loss from operations of $85 7 million U S dollars in the first quarter of 2023, and our income from operations of 93.
Zero million U S dollar in the same period of 2022.
Net loss in the second quarter of 2023 was $110 $7 million compared to a net loss of $84 $4 million in the first quarter of 2023, and a net income of $19 1 million U S dollars in the same period of 2022.
Basic and diluted net loss per ads in the second quarter of 2023 or 65 U S dollar sense.
As of June 32023, the company had cash and cash equivalents of $66 1 million U S dollars.
This.
<unk> 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 three 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 to ask a question to management in Chinese. Please immediately repeat your question in English.
If you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again.
Thank you, we'll now take our first question.
And your first question today comes from the line of Mike leg from the Benchmark Company. Please go ahead.
Thanks, and good morning.
I'm curious about your focus on rig efficiency and how you view your product versus the competition, specifically burst what's miners and that's miners and then also wanted to understand your viewpoint on south mining versus hosting environments given the.
The release last week. Thanks.
Okay.
Hi.
Evening or good morning.
Yeah.
Yeah for the in terms of.
Power efficiency.
I think it is.
A critical factor for our customers.
Sure.
In the first half of this year.
Our products have already in territory and Joe.
25% 30 jaws for ash.
This is <unk>.
70% improvement compared to.
Last year.
Uh huh.
And by.
By the second half of this year.
Power efficiency.
The products.
We have a simple for customers.
It's already below Paddy power to us.
This.
Fulfill our commitment.
The progress.
Our products our efficiency program is on track.
And Plaid.
We are gradually narrowing that gap.
Our main competitors.
Yes.
I think the R&D.
Switch foundries takes some time.
Yes, well we're closing so.
I think beyond that.
<unk>.
Beyond power efficiency, a number of our products are balanced.
Term.
Our stability.
Erie mantle.
Our ability and cost effectiveness.
And our production product line.
They're ours.
So it's.
The mother's mother's return.
Army Bachmann and profitability influenced by both Opex and Capex.
And our goal is to have it.
Advantage in both of these.
Victors, making our products.
Is preferred.
Our preferred choice for customers.
Yes.
Uh huh.
About the.
About the money.
Regarding.
Policy environment.
Todd has issued new.
Regulatory process related to mining.
Since the detailed regulations.
Came into.
At our July .
The company.
Immediately.
Nishu.
The applications for licenses.
However, actual.
Process, we found that due to the early stage of a tire.
Our regulatory process their specific requirements.
Execution.
Which leads to the license voltage is taking longer than a day.
Initially anticipated.
Four years' trends.
We learned through.
Particular operations that we need to wait for our lending partners to open 10 type one Ics.
Before we can submit our applications for our type tool access.
As far as we know the progress of obtaining.
Type one lettuce for local mining facilities.
Generally they would be as low as it seems that the cost.
Sure.
A future for new revelations steering stages.
The specific execution.
The features we will take time to ramp up.
The.
The impact of the process.
Our.
Local mining projects.
It's a company.
Our local mining partners activity progressing with our required assets were also.
Explore more us ways to adjust our cooperation agreements to continue working with the local bottlers in compliance with laws and regulations.
Furthermore, we are.
As for your more valuable mining corporation opportunities globally.
Our business has reached an many.
Geographic regions.
We haven't said before.
That's a political and economic environments legal policies and infrastructure conditions in different places complex and subject to change.
Which presents challenges too.
Our.
Exploration and development.
We are there is business there is.
Associated risk.
<unk>.
We will closely monitor policy and the operational environment changes in the countries and regions.
Of our projects and to make operational adjustments as necessary.
As a public company we also.
Now important developments in time for <unk>.
You've asked us retrofits.
Regarding to the counterparty risk.
We have acknowledged that in.
And a business market there may be.
Someone did not act.
Could face.
We are.
So hopefully addressing issues com perfect new projects through vehicle.
Measures at the same time.
We are learning lessons from experiments being more cautious and selective partners.
Take taking.
Preventive measures that include risks and the rewards.
And <unk>.
Progressing projects.
Conservatory.
Thank you.
Okay. Thank you very much.
Okay.
Thank you.
But and I'll take our next question.
Please standby.
Okay.
This is from the line of Kevin Dede from H C. Wainwright. Please go ahead.
Hello, gentlemen, thank you so much for taking my questions.
And Angie you spoke you spoke a little bit to inventory I think soda James inventory levels worldwide could can you give us a little more color.
On what Youre seeing clearly there is lots of pressure on pricing.
But I was wondering if you could compare and when global inventory levels with the end of March would do you think they're still high do you think they've come down a little bit.
Clearly you're seeing you're you've sold more the 13 series.
So congratulations on that I'm, just kind of curious about.
About future price per care hash trends.
Thank you.
Good morning.
I think in the past few months.
The mining machine markets.
My focus has been.
Product upgrades.
Caribbean inventory.
As a result of the overall market inventory has Brexit a decrease.
However, it's important to note.
So market inventory still remain at a relatively.
Relatively higher levels.
Taking a global view of the market.
I think with the gradual recovery be comprised this year.
Both the company and some.
Our research clients worldwide have been efficient you themselves.
Four of the Max hobby and.
The mass market.
However, it is critical to understand that the priority market.
Sentiment is somewhat fragile.
Thanks Chuck.
Policy changes and corn price fluctuations.
So due to the.
Competitive reasons.
We cannot.
Disclose with respect to our clients.
Equipment class, but the overall trend of the second half of the year It is clear.
High quality.
Expanse expansion mandate clients, we will prepare for the next three or four years.
After.
Javier Bye.
We see James related to machine, though.
<unk> future.
Futures contracts.
While many.
Small and medium sized minors.
<unk>.
Operation for cost effective with traditional models.
To pass the <unk> term care.
This lower rate.
So due to the current instance competition with the mining machine market.
Computing power price is generally at.
Minimal office or even negative margin levels.
So I think from the.
Protective of money machine prices the current areas of progress.
Great.
Fortunately our mining machines.
Sure.
While bringing great value.
We hope that the customers, who asked the UK safer than they are purchased plasma will replace older.
It's possible.
Yes.
So and Jay you also spoke to.
Maybe holding back on your wafer orders from your foundry suppliers.
I'm curious on how you see.
Being able to resume those orders.
If and when the mining machine market returns to strength are you at all concerned that you will not be able to get our wafers that you need to build new inventory.
How concerned are you about your supply chain.
Tennessee.
I think company we are building.
The machines.
From where we have.
We signed a contract with our customers.
Recently I think the <unk>.
Semiconductor foundries.
Have a relatively poor production capacity.
So.
With.
Good.
Wafer price.
However.
Border since wafer for advanced the process.
<unk> have a higher cost due to the high technology ethanol supply.
So.
Yes so.
I think for the next.
Maybe two.
Two quarters.
Yes.
Hi, crush has not.
It's primarily.
Property for us.
Our we will focus on.
Our SaaS system.
And provides.
<unk> Suisse.
Past performance.
Great.
We'll continue to invest.
Yes.
Okay last question for me Angie.
I understand maybe two extra hash not running and Kazakhstan, and perhaps two extra hashing out running in the U S.
Given about five extra hash installed.
Can you talk to what you expect your.
Yourself mining hash rate to be.
Through the September quarter.
And what your investment thinking is regarding kirana self Pasha.
Cash rate for the balance of the year.
Therefore, the number of Sabine pass this question to Jeff Yeah, Kevin This is James.
We are talking about total.
$4 nine extra harsh of mining power and.
The loss from Kazakhstan.
It's about two extra harsh as you said, but the loss from the U S is the only one extra harsh if not two.
So the total loss here in <unk>.
Three extra harsh compared to the total $4 nine at the harsh.
And also in quarter, two we have already successfully deployed.
Zero four extra harsh with stronghold in United States.
And we have another 0.2 extra harsh.
To collaborate with stronghold as well.
In the United States.
And also in quarter three we start to.
Brought some pilot runs in the new core operating sites in Africa, South America, and in North America, but of course.
Get electricity is a slow progress it will take some time.
No.
In my estimation of quarter, three we definitely were loose.
A half at least half of our total capacity.
At this time.
As time machines could not recover quickly.
So.
That's also reflected in our total revenue estimation.
Quarter, three but you know.
Looking for different sites in different locations.
So we can recover this quickly in quarter four so from my part.
Imation in quarter, four we will have a bigger chance to.
Recall in the mining operation harshly and.
We continue to take the mining at one of our important strategies.
Execute to the strategy consistently.
Thank you Paul.
Well. Thank you James I really appreciate it. Thank you for chiming in there. Thank you so much LNG for offering additional color. Thanks.
Gentlemen.
Yes, okay.
Thank you, we'll now take our next question.
Okay.
This is from the line of shrunk some from <unk> Securities. Please go ahead.
Okay.
Alright.
Good morning.
It does free up Larissa shrinks and your line is not too clear could you. Please try asking your question again.
Okay.
My first question.
Ron do you expect to clear out the April I'm sorry.
Central Central front I think that we are actively working on clearing the inventory of <unk> models and.
The progress has been a little bit slower than we anticipated.
At this point.
We expect to complete with a clearance by the fourth quarter of this year.
For HR service.
Thank you.
Thank you.
Second trading how what's your progress on mining rate deployment in Ghana.
Now concerning which is now pushed into shoe.
Yeah.
Just now.
<unk> referred the too Kevin.
We have lost or the three extra cautious and Kazakhstan.
Also one sites in the United States.
We quickly installed another 0.4 extra cautious during quarter two with strong code one of our important mining partners in United States and we implemented another 0.2 extra cautious.
In quarter, three with strong hold and also we deployed.
Some new sites in Africa, South America, and in North America during quarter, three with pilots around those.
Those are small besides together I don't think we can recover 100% of the total harsh rates back to four nine extra harsh as quarter. Two that means we definitely will lose some of our capacity in quarter three.
But we will step by step and recover that in quarter four with all of the new sites ready and we have the shipments schedule too.
Our total capacity come back come back to the two of the bigger ones. So I think.
To your question I will still consistently say, we put a mining.
Our important strategy and we will consistently.
Investor and.
Deploy machines to support so that's the strategy.
Thank you Sandra.
Thank you and then last quick question is how do you expect.
Hum.
Vance impact computing power demand and price.
Okay.
I refer you.
Okay.
Yes.
Okay. Okay.
<unk>.
Good evening.
As previously mentioned.
We observe two trends.
<unk>.
Past half year.
On one hand high quality and expansion minded customers.
October two.
Procured late hit the machines models.
Stuart futures contracts.
Go ahead sorry.
Number of more to meet the size monitors.
Our housing.
Having a risk by purchasing older models at.
Lower prices.
So in general.
The market demand is recovering this fluctuation.
Due to the.
Reductively hi.
Market inventory and AR.
Intense competition to mining sector will continue to.
<unk> pressure.
Computer power practice.
Yes, okay. Okay.
Sure.
Thank you.
As there are no further questions now I'd like to turn the call back over to the company for any closing remarks.
Hi, everyone. This is Clark. Thank you so much again for joining US today. If you have any further questions. Please feel free to reach out to us through the contact information provided on our website and have a nice day.
Thank you that concludes the call today. Thank you everyone for attending you may now disconnect.
Hum.
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