Q2 2024 Canaan Inc Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Canaan, Inc.'s second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question and answer session.
Mitch: A review of the company and performance highlights for the quarter Mitch.
Mitch: Mr. Chen will then provide details on the company's operating and financial results for the period before we open up the call for your questions.
Speaker Change: Before we continue I would like to refer you to our safe Harbor in our earnings press release.
Speaker Change: This call will include forward looking statements.
Speaker Change: These statements include but are not limited to our outlook for the company and statements that estimate or project future results of operations or the performance of the company. These statements speak only as of the date hereof and the company assumes no obligation to revise any forward looking.
Speaker Change: Statements that may be made in today's press release call or webcast, except as required by law.
Speaker Change: These statements do not guarantee future performance and are subject to risks uncertainties and assumptions.
Speaker Change: Please refer to the press release and the risk factors and documents, we file with the Securities and Exchange Commission regarding our most recent annual report on form 20-F for information on risks uncertainties and assumptions that may cause actual results to differ materially from.
Speaker Change: Those set forth in such statements.
Speaker Change: In addition, during today's call and webcast, we will discuss GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance.
Speaker Change: These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
Speaker Change: You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings release, which is posted on the company's website.
Speaker Change: With that I will now turn the call over to our chairman and CEO.
Speaker Change: Mr. Zhang Please go ahead Sir.
Speaker Change: Okay.
Mr. Zhang: Hello, everyone.
Speaker Change: The CEO of Cantor.
Speaker Change: Thank you for joining our conference call.
Speaker Change: Okay I understand.
Speaker Change: The company's headquarters in Singapore, who share our quarterly results with you.
Speaker Change: The major events in Q2, 'twenty 'twenty four.
Speaker Change: False before August.
Speaker Change: So disciplined network, that's mostly without any issue.
Speaker Change: Hockey games.
Speaker Change: Games enhanced marketing fluctuations.
Speaker Change: Comprised of alright between.
About 71 installs in U S dollars at the beginning of the quarter and the low 56.
Speaker Change: Eventually closed at 61000 U S dollars by the end of the.
Speaker Change: Sure.
Speaker Change: The total natural tax rate remains relatively stable.
Speaker Change: Gross slow but not significantly.
Speaker Change: I mentioned it during the last earnings call the quarter before.
Speaker Change: Tends to be quiet.
David: But the market could David powers up for.
David: Our operations continue to steadily inventory reduction for CBS.
Speaker Change: And what are you serious products you cannot scale deliveries scheduled.
Speaker Change: Our new product.
Speaker Change: 1566 was allowed.
Speaker Change: This outstanding performance.
Speaker Change: Our global sales network continues to expand.
Speaker Change: Our money off ratios or optimized.
Speaker Change: Jacket successfully weathering the challenges of the hobby.
Speaker Change: This quarter, our revenues so significant sequential growth.
Speaker Change: Beating our expectations.
Let me now walk you through a few key areas.
Speaker Change: Yeah, R&D, we have continued to drive product innovation.
Speaker Change: The mass production and wrap up.
Speaker Change: For our <unk> products has to be successfully completed.
Speaker Change: Through close collaboration with our foundry partners, we have seen as most equivalents in the yielded rates and production capacity for April hit series.
Speaker Change: Improvements have enabled us to do even more computing power.
Speaker Change: We expect data from the lead for US we had older.
Speaker Change: You may ask the Bitcoin Asia, and particularly for your Hong Kong, we launched our airports.
Speaker Change: Sirius manners, pushing energy efficiency to approximately 18 drugs for Nash and the wrong 200 here harsh is single units competing power.
Speaker Change: Later at the end up.
Speaker Change: Doing the money disrupt comprehensive Miami.
Speaker Change: We introduced the liquid foods model.
Speaker Change: Alright.
Speaker Change: <unk> achieved a computing power.
So it's noncash.
Our unit.
Speaker Change: Okay.
Speaker Change: <unk> service.
Speaker Change: Which is a disciplined process node from a 14th is currently undergoing a similar mass production.
Speaker Change: Yield improvement and the capacity increase.
Speaker Change: Based on the current progress <unk> is advancing more smoothly than to a forwarding teeth at the same stage.
Speaker Change: We are complicated to compete.
Speaker Change: About that within the next few weeks.
Speaker Change: Baring Asia into mass production for large scale get over it.
Speaker Change: In addition, we have been working closely with our customers to provide customized integrated mining solutions.
Speaker Change: <unk> to their specific needs stock.
Speaker Change: Starting this quarter the middle East has entered an extremely hot EBIT.
Speaker Change: He is temporary.
Speaker Change: Around 50 degrees Celsius.
Speaker Change: Is it a quarter of an Oracle system.
Speaker Change: D deploy earlier have successfully withstood the hatch.
Speaker Change: Conditions.
Speaker Change: Regarding the next steps after the ACP Trs.
Speaker Change: Per our usual practice.
Speaker Change: We do not announce new more products before obtaining an extra half the results from these machines.
Speaker Change: What we can share at this stage is that the development of our <unk> thousand 16, CLS is progressing smoothly.
Speaker Change: Utilizing more glass per process nodes.
Speaker Change: Through process.
Speaker Change: Divestments.
Speaker Change: Gross collab.
Speaker Change: Collaboration with our wafer.
Speaker Change: Fabrication partners.
Speaker Change: We aimed to cost.
Speaker Change: However, he appreciates it may take up to a higher machine tool the tinted glass Jar Street.
Speaker Change: And that milestone we achieved the airports machines will be poised into two reached 300 greater hash threats.
Speaker Change: <unk> thresholds.
Speaker Change: <unk> power for a single unit.
Speaker Change: Although somewhat.
Speaker Change: Most of the lowest debt.
Speaker Change: This industry innovation is still far from reaching its limits.
Speaker Change: In terms of sales.
<unk> shipped a total computing power south of six plus two medium tier harsh per second this quarter make.
Speaker Change: King.
Speaker Change: 84% sequential growth.
Speaker Change: This was driven by it's not scale delivery of our <unk> service.
Speaker Change: Which has become our main product and then back to 33% sequential increase in the average selling price of our competing power.
Speaker Change: At the same time, we further cleared our inventory of our traditional models.
Speaker Change: Primary 816.
Speaker Change: Leading to an optimized inventory mixed by the end of Q2.
Speaker Change: Our one stop monitoring solutions.
Speaker Change: Great.
Speaker Change: Traction.
Speaker Change: Contributing $4 $6 million in revenue.
Speaker Change: We also launched.
Speaker Change: Political money heater out another three four individual.
Speaker Change: In CSS.
Speaker Change: <unk> launched in Q1 the product sets.
Speaker Change: See strong demand.
Speaker Change: So we're.
Speaker Change: We've installed the units per order by the end of Q2.
To date, we have shipped over 10000 units to 75 countries and regions worldwide.
Speaker Change: Receiving highly positive market feedback.
Speaker Change: This quarter, we made big progress in several key region markets.
Speaker Change: Which of the markets in North America.
Speaker Change: Sure <unk>.
Speaker Change: <unk> 6600 units of our new <unk>.
Speaker Change: 666 model for our cypher.
Speaker Change: Listed mining company.
Speaker Change: Additionally, we successfully completed deliveries.
Speaker Change: Previous owners from several.
Speaker Change: There are other listed mining companies.
Speaker Change: <unk> to collaborate with more.
Speaker Change: This led to 10 four sequential increase in recognized revenue from the region.
Speaker Change: Our product performance.
Speaker Change: Our ability.
Speaker Change: Professional.
Speaker Change: Of our deliberate progress.
Speaker Change: We're highly recognized by our customers.
Speaker Change: Establishing a strong reputation that we use for further business expansion in North America.
Speaker Change: In the Middle East our mining machines in a one stop mining solutions.
Speaker Change: It will be gaining traction.
Speaker Change: Our shares with superior heat resistance.
Speaker Change: Comprehensive solutions that enable quick deployment with <unk>.
Speaker Change: Have been very well received.
Speaker Change: By customers, resulting in five quarters of sequential increase in revenue from the region.
Speaker Change: Q2.
Speaker Change: In South Asia, our China partners continue to contribute stable orders, our traditional models nor for their costs.
Speaker Change: Back to nest and resistance to hit.
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: We've been very popular in this region.
Speaker Change: Our next door.
Speaker Change: Cutting into your video customers overseas, so 314% quarter over quarter increase.
<unk> users.
Speaker Change: Explosive increase orders since the launch of Avalon in Australia.
Speaker Change: The platform in Q2 demand has been especially strong in North America.
Speaker Change: Nearly 50%.
Speaker Change: Other.
Speaker Change: There is.
Speaker Change: Okay.
Speaker Change: Further boosting our brand recognition in the region through our market affected cells.
Speaker Change: Efforts and a more diverse product portfolio customer advances increased significantly by 30% quarter over quarter two.
Speaker Change: 51 million U S dollars by the end of Q2 by <unk> <unk>.
Speaker Change: Asia for our revenue growth in the second half of the year.
Speaker Change: This quarter, our Miami operations performed steadily.
Speaker Change: Successfully navigating the challenges brought on by the declining Harley <unk>.
Speaker Change: Reaching nominal U S dollars.
Speaker Change: Revenue.
Speaker Change: Best part impact of the hobby.
<unk> represented an 11% decrease compared compared to the first quarter.
Speaker Change: We continue to optimize our mining project matrix.
Speaker Change: Hatch rates deployment.
Speaker Change: New pilot products, while closing lately, you did pay for that debt.
Speaker Change: Were negatively impacted by policy changes.
Speaker Change: We also nears completion.
Speaker Change: Combination offer.
Speaker Change: Sure exit from operations in Codex time Parkway.
Speaker Change: After October.
Speaker Change: Certainly before our SaaS monthly operational tax rate has reached four five cash per segment.
Speaker Change: Exceeding our previous guidance of four class III at HEICO second nationally in the last earnings call.
Speaker Change: Right.
Speaker Change: We successfully maintained an average electricity cost.
Speaker Change: Variable level for part two cents per kilowatt hour.
Speaker Change: Our mining gross margin to remain steady.
Speaker Change: <unk>, 33%.
Speaker Change: To the first quarter.
Speaker Change: In Q2, we mined 141 active clients, bringing our total current holdings.
Speaker Change: Including flashed equates to 1114.
Speaker Change: And increased <unk>.
Speaker Change: <unk> 70 clients from the previous quarter.
Speaker Change: We will continue to strike a balance between policies.
Speaker Change: Stability in energy cost advantages.
Speaker Change: To strategically enhance our mining business.
Speaker Change: Our first quarter 2023 earnings call.
Speaker Change: Closed our plan to use more advanced mining machines models.
To Miami.
Speaker Change: Our mining based operations. We are also mentioned that.
Speaker Change: Additional in addition to.
Speaker Change: Incorporates minor models.
Speaker Change: Considering tissue is hosting and other approaches such as <unk>.
Speaker Change: House building or acquisitions to activity.
Speaker Change: Eight in mining operations.
Speaker Change: And explore more.
Speaker Change: Elaborate operation opportunities.
Speaker Change: We would like to reaffirm DS modelling strategies.
Speaker Change: Right.
Speaker Change: When evaluating our mining operations and the opportunities globally.
Have.
Speaker Change: <unk> concluded that North America host strictly deposit importance.
Speaker Change: This region offers strong legal protect.
Speaker Change: Protections.
Speaker Change: Variable infrastructure that apparel product.
Speaker Change: And our records developing.
Speaker Change: With current mining ecosystem.
Speaker Change: According to our calculations from the end of 2022 to the end.
Speaker Change: Q2 2024.
Speaker Change: Total cash rate growth of publicly listed mining companies in North America was 237%.
Speaker Change: Outpacing the global network of Patrick Scholes of 114%.
Speaker Change: Given that we view North America strategic opportunity, we are announcing our plan to focus on this region.
Speaker Change: We expect to increase our mining attach rate targets in North America from current zero client six five ex hyper segment for.
Speaker Change: With 10 extra hash affected by the first half of 2035.
Speaker Change: As a global provider of managed solutions, we are uniquely.
Speaker Change: Positioned to CD.
Speaker Change: Mining opportunities in North America.
Speaker Change: We have the flexibility to allocate money what shapes inventory worldwide.
Speaker Change: Miami investments returns and diversifying risk.
Speaker Change: Risks, where handsets industry insights, reaching from mining machine manufacturing supply chains to global mining markets, we can more effectively evaluate investment opportunities and quickly match mining machines with.
Speaker Change: Akamai or <unk> for short term and long term.
Speaker Change: Our success.
Speaker Change: Third our standing and the reputation in the.
Speaker Change: Industry further enhance our ability to tap a tabulation strategic partners.
Speaker Change: Partnerships with global mining community.
Speaker Change: Now study.
Speaker Change: Our advanced design and some of it is allow us to customize mining solutions.
Speaker Change: There are two different <unk>.
Speaker Change: Environmental and.
Speaker Change: Economic conditions.
Speaker Change: <unk> Suisse extreme weather or scenarios through quite flexible power management and response strategies.
Speaker Change: A same time, we hope these.
Speaker Change: Projects will serve as a showcase for potential customers around the world to learn about Canada.
Speaker Change: We are fully committed across multiple measures including capital.
Speaker Change: Struction operations and efficiency to make these products outstanding.
Speaker Change: Accumulating valuable experience, we aim to better serve our clients.
Speaker Change: In Q2, we continue to improve our operations.
Speaker Change: Significant delivery using total expense due to optimize G&A expenses.
Speaker Change: We have narrowed our operation operating loss by 61% year over year under 32% quarter over quarter.
Speaker Change: Although that.
Speaker Change: Volume.
Speaker Change: This comprised at the end of Q2 that to almost <unk>.
Speaker Change: <unk> made in U S dollars, a reduction of currency fair value.
Income statement, we still achieve.
Speaker Change: 62% year over year reduction in net loss.
Speaker Change: Revenue remaining stable on the balance sheet the successful delivery of a 14 products and a strong cash inflows from sales contributed to a 22% quarter over quarter increase.
Speaker Change: Our cash position.
Speaker Change: He needs to $67 million by the end of Q2.
Speaker Change: <unk> midstream.
Speaker Change: Save cash level, we also made strategic moves to secure the last four SaaS capacity.
Speaker Change: Our supply chain through prepayments.
Speaker Change: Possibly enters.
Speaker Change: Third quarter of 2024 hour <unk> mining machines are being packed delivered.
Speaker Change: On schedule and contributing to our revenue.
Speaker Change: Following the launch of a <unk> Sirius.
Speaker Change: We expect to complete its mass production and wrap up.
Speaker Change: Within this quarter.
Speaker Change: So many R&D work for a 16 theorists will also be completed.
Speaker Change: By the end of this year.
Speaker Change: Beyond chip development, we are rapidly expanding our product line and solutions to meet.
Speaker Change: Post Harvey and demand.
Speaker Change: For equipment upgrades at our mining site deployments from global miners.
Speaker Change: We believe the upcoming declined to market will be driven by broader.
Speaker Change: Public adoption in this regard we are developing consumer focused products lawn to make mining a part of everyday life and the bringing benefits to general public.
Speaker Change: At the same time.
Speaker Change: I recognize that global political and economic.
Speaker Change: Yes, there is.
Speaker Change: Increasing leading to more.
Speaker Change: Volatility EBIT comprises which continues to present challenges for the industry.
Speaker Change: Based on the overall.
Speaker Change: The situation described above.
Speaker Change: We maintain a cautiously optimistic outlook.
Speaker Change: Outlook for the third quarter of 2024.
Speaker Change: <unk> revenue for the third quarter to be approximately <unk>.
Speaker Change: $73 million.
Speaker Change: This forecast is based on the current market and negotiate operational conditions or the county.
Speaker Change: Company and.
Speaker Change: Actual results may vary.
Speaker Change: Bitcoin force hobby.
Speaker Change: Now completed in Q2.
Speaker Change: The global political and economic dynamics surrounding.
Speaker Change: The decline continuing to Apple.
Speaker Change: Bringing it to a wider audience.
Speaker Change: While the price up with clients.
Speaker Change: This significant fluctuations in.
Speaker Change: Validation during the process.
Speaker Change: It also helps the public to better understand the exact with clients.
Speaker Change: Our company now gateway to having quarter leads but stable.
Speaker Change: Continue to.
Speaker Change: Heavily in both product development and.
Speaker Change: Our capacity expansion.
Speaker Change: We remain confident in the long term.
Speaker Change: Prospects of Bitcoin and Whatsapp.
Speaker Change: Paul market.
Yes.
Speaker Change: And we are already back up.
Speaker Change: <unk> to gross.
Speaker Change: This concludes my prepared remarks, thank you everyone.
Speaker Change: I will now turn the call over to our CFO James Thank you.
James: Thank you Angie and good day, everyone. This is Jamie speaking at all cyclical headquarters.
Speaker Change: <unk> started at the top of the call quota tool for year 2024 was the particular quarter when we experienced a bitcoin having event, which takes place about every four years.
Speaker Change: This coil price fluctuated from $71000 $256000 and eventually landed at $61000 in the quarter and <unk>.
Speaker Change: Total opex forecast rates perform the considerable swings, but continuing the growth trend.
Speaker Change: As we expected customers, who are more activity in quarter. Two two operated their mining machines compared to quarter, one and we used a <unk> 14, and <unk> 13 sale is to satisfy our diverse demand from various customer groups.
Speaker Change: Let me give a quick summary of our financial performance in quarter two.
First with considerable upside of demand and a successful large scale deliveries of our new <unk> series, we achieved a total revenue of around $72 million, which beat our guidance by around $2 million, marking a sequential growth of around 100.
Speaker Change: 5%.
Speaker Change: Secondly, a 14 delivery enabled a higher average selling price, which contributed to a narrowed a gross loss of around $19 million, indicating a sequential improvement of around 49%.
Speaker Change: Thirdly cash balance increased to around 67 million U S dollars by around 22% sequentially.
Speaker Change: As of August 10, 2024 hour self mining harshly reached around $4 five extra hush, but second which helped our owned a bitcoin accumulates to a total of 1000 to 114, bitcoin, which is a new high.
Speaker Change: Last but not least with the $8 15 series announced we collected the orders and advanced payments from customers the balance of customer demand.
Speaker Change: Increased to $51 million by 30% sequentially, indicating a solid second half year revenue Foundation.
Speaker Change: Let's start should take a look at the profit and the loss.
Speaker Change: I've said in quarter two our total revenue was around $72 million revenue from machine sales. So was around the $57 million. We delivered a total controlling power sold of $6 two minutes powerhouse of a certain representing a quarter over quarter increase of around 84%.
Speaker Change: The average selling price increased by around 33% from six calling $9 per taro has per second in quarter 1291.
Speaker Change: <unk> second quarter two.
Speaker Change: Driven by the increase the computing power sold and average selling price revenue from machine itself increased by around 146% quarter over quarter.
Speaker Change: From the product side, our largest scale delivery of a 14th series contributed nearly 80% of machine sales revenue from the sell side. Our marches on this dimension of global sales systems made positive progress in several key regional markets during the quarter.
Speaker Change: In quarter, two our customers from North America, and the Middle East contributed 52% and 17%, although the machine sales revenue.
Speaker Change: Turning to the revenue of our integration of the mining solutions and Avalon that'll sweep minus heater, which diversified our product revenue streams.
Speaker Change: In quarter, two we recognized around the $4 $6 million revenue from the delivery of integrated mining solutions, primarily contributed by the customers in middle East and South Africa.
Speaker Change: We also recognized around half a million dollars revenue from the delivery of Avalon mammals suite, the accumulated orders for nano suite achieved a $1 $3 million by the end of quarter two.
Speaker Change: Primarily contributed by customers in North America and in Europe.
Speaker Change: For our mining machine itself, we accrued a $17 $3 million for inventory write down prepayments right off hand, the provision for inventory purchase commitments in the quarter, representing a quarter over quarter decrease of 64% and a year over year decrease of 62%.
Speaker Change: The decrease was.
Speaker Change: It's driven by ongoing stock clearance in this quarter.
Speaker Change: Both non cash write downs provisions on later on the U S. GAAP rules jeopardizing, our gross profit, but do not impact our cash statements.
Speaker Change: If the above write offs and provisions will exclude either we have we would have a gross profit of <unk> 7 million U S dollars for mining machine sales.
Speaker Change: Mining revenue was $9 million in quarter, two as the decreased 11% quarter over quarter, we mined 141 percentage points in this quarter, a decrease of 28% over the last quarter.
Speaker Change: This decrease was primarily driven by the good points, having events, which occurred in April and have resulted in a significant increase in our bitcoin mining difficulty.
Speaker Change: Our average revenue per bit coin in quarter, two increased 23% over the last quarter from almost <unk>.
Speaker Change: $54000 to almost $66000.
Speaker Change: We also further expanded our mining business in Africa.
Speaker Change: Our install the hash rates reached $2 seven extra hospital at the end of quarter two.
Speaker Change: That's the end of quarter, two we deployed harsh which total over four extra husky and as of August 10, 2024th our self mining Hush rates reached around four five extra Hudson.
Speaker Change: Quarter, two mining profit was 38 eight points.
Speaker Change: Gross profit margin was 33% remaining sequentially stable.
Speaker Change: Please note here that the mining profit or loss is defined as mining revenues net of costs, while energy and hosting but without consideration of depreciation for the deployed machine.
Speaker Change: Looking forward as a continuous strategic focus we expect to further grow our north American mining Hush rates today to 10 hits the Hush perception by the first half of 2025.
Speaker Change: Now turning to the expenses.
Speaker Change: Our operating expenses totaled.
Speaker Change: $27 million, decreasing 44% year over year, and 11% quarter over quarter, respectively stock.
Speaker Change: Staff costs, including share based compensation decreased to 36% year over year, and 11% quarter over quarter, mainly driven by organizational optimization performed that in quarter four last year.
Speaker Change: As mentioned in quarter, one we chose to early adopt to the FASB, new accounting rules on crypto currency assets since January one 2024, which allow Caribbean currencies to be carried at their fair market value.
Speaker Change: The price of bitcoin decreased to around $62000 on June 30 versus around $70000 or <unk>.
Speaker Change: 31 <unk>.
Speaker Change: <unk> and a loss on criminal assets of $10 million during the second quarter.
Speaker Change: I wanted to point out is that if.
Speaker Change: If we combine our $34 million gain on incremental assets fair value change in the first quarter with our 10 million loss in the second quarter, we are still up almost $24 million gain year to date.
Speaker Change: Benefiting from the large scale deliveries of a 14th service then.
Speaker Change: Darryl the gross loss and the ongoing expense control.
Speaker Change: Our quarter, two operating loss was $47 million.
Speaker Change: Narrowing and 61% year over year, and a 32% quarter over quarter.
Speaker Change: Despite a loss of $10 million on fair value of our critical assets are.
Speaker Change: Q2 net loss.
Speaker Change: Narrowed by 62% year over year to $42 million and adjusted EBITDA loss narrowed by 61% year over year to $31 million.
Speaker Change: Turning to our balance sheet and the cash flow in quarter, two we generated $74 million of cash inflow from Bell <unk>.
Speaker Change: We received a $19 million from secured loans and $7 million from exports of Vips Midtown.
Speaker Change: We paid $14 million to secure our wafer supply and a $48 million for production and operation wishes.
Speaker Change: Which is aimed at enabling the concentrated into delivery and in small cells all of our products in the following quarters.
Speaker Change: Consequently at the end of quarter, two withheld cash of $67 million or balance sheet, indicating a 22% increase compared to two <unk>.
Speaker Change: Now moving to our Contra liability our 14th theory has continued to be popular and then we also reach to some pre sell orders for a 15th theory from let's see the mining companies.
Speaker Change: Balance of contract advances reached $51 million.
Speaker Change: So this quarter and increasing 30% from $39 million actually last quarter then.
Speaker Change: As of the end of quarter. Two we recorded a current receivable of $8 million, which mainly consisted of the installments from North America public listing customers, we will continuously evaluate market demand and adopt corresponding credit policies with caution.
Speaker Change: Now turning our attention to our bitcoin assets that these clients when we held our own holding assets kept growing in this quarter and it reached a record high of 1114 basis points as of June 30, which is 67 more than 1057.
Speaker Change: At the end of last quarter on June 30, the fair market value of our own the pitch quality total to around $17 million.
Speaker Change: In this quarter the pledge at the 530 call. It for the long term secured loans with an aggregate carrying value of $19 million at a reasonable interest level.
Speaker Change: Secure the lowest enable additional liquidity for our production expansion and operation.
Speaker Change: In the future under the premium of adhering to hotel strategy.
Speaker Change: Well I'm always to increase capital liquidity through our own critical assets.
Speaker Change: We expect our Q3 revenues to be $73 million.
Speaker Change: We have successfully navigated through the hub and challenge and have continued to enhance investments in both product development and supply capacity.
Speaker Change: We will continue to cater to the diverse needs of our customers with an even more comprehensive and efficient selection of products.
Speaker Change: This concludes our prepared remarks, we are now open for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: As a courtesy to other investors and analysts who may wish to ask a question. Please limit yourself to three questions at a time.
Speaker Change: If you have any follow up questions. After the Q&A session. The Investor Relations team will be available after the call for.
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.
Speaker Change: To ask a question. Please press star one on your telephone away for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again please.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Your first question today comes from the line of <unk>.
Speaker Change: Kevin D D with.
Speaker Change: With H C. Wainwright. Please proceed.
Speaker Change: Good morning, Mg James I'll, it's afternoon over there.
Speaker Change: Thanks, Thanks, very much for having me on the call.
Speaker Change: I was wondering if you could give us your perspective.
Speaker Change: On the I know engie alluded to it a little bit, but just on the inventory situation throughout the industry.
Speaker Change: Okay.
Speaker Change: Yes.
Kevin: Thank you Kevin.
Speaker Change: Maybe I take this one I think.
Speaker Change: The inventory level.
Speaker Change: Quarter, two actually compared to quarter, one is a little bit.
Speaker Change: <unk>.
Speaker Change: Cause the customer demand after having actually pushed out.
Speaker Change: A lot of customers trying to operator that theyre mining machines.
Speaker Change: So we.
Speaker Change: Phase two of the first wave of the demand.
That means the customers the existing customer they would like to upgrade the machines.
Speaker Change: They place the orders for some full contract sales.
Speaker Change: And lastly year corner for quite a lot some of them place their orders in quarter two directly for that.
Speaker Change: Current sales, so I think that the inventory situation.
Speaker Change: <unk> changed it to a little bit more.
Speaker Change: All obtained at mystic situation, but.
Speaker Change: Still our competitor still.
Speaker Change: Still holding.
Speaker Change: A big amount of inventory, that's something we heard but its better than quarter, one and I think Uh huh.
Speaker Change: That's my answer to that okay.
Thank you James.
Speaker Change: I saw that your price per chair has stepped up very nicely from the from the March quarter, which I would expect was because you were selling more <unk> series.
Speaker Change: But I was just wondering if you could talk a little bit about the overall pricing trends.
Speaker Change: And how.
Speaker Change: How you see that affecting.
Speaker Change: Demand.
Speaker Change: Yeah I think.
Speaker Change: That's.
Speaker Change: Demand and the supply is always the most critical factor in our industry to decide that the market prices.
Speaker Change: Currently even though we had the one wave of demand of upgrading machines.
Speaker Change: The price is still in the bottom.
Speaker Change: Because.
Speaker Change: No major new products older products older generation products the <unk>.
Speaker Change: And pricing is still relatively low I would expect in the coming months Bitcoin price has some uh huh.
Rapid growth if that's the case then it will drive the demand goes up because there will be newcomers from energy industry to our industry to participate in the mining activity. If that's the case the demand is.
It will be.
Speaker Change: Huge and.
Speaker Change: And it will be.
Speaker Change: Far beyond the hour supply capacity, because we have to lock the wafer supply six months before shipment that means.
Speaker Change: Fly is either we are linear and limited by the demand side of if the bitcoin price quickly grow.
Speaker Change: And we will see a big upside if that's the case the market price will come back in let's say prohibited to way.
Speaker Change: Just like what happened in <unk>.
Speaker Change: 2020.
Speaker Change: We're still remember in that.
Speaker Change: November and December 'twenty turnkey in that particular year.
Speaker Change: The Milo machine price jumped from <unk>.
Speaker Change: Single digit to like a 20 something in the 30 and the end of the quarter for <unk>.
Speaker Change: I cannot say history will repeat absolutely same same way, but I do think if bitcoin has a big potential to grow faster in quarter four in late quarter three.
Speaker Change: We will see the demand coming back in.
Speaker Change: And at that time to growing growing way and at that time, our mining machine price will increase accordingly.
Speaker Change: Also a significant away so that's something.
Speaker Change: <unk> predictor.
Naturally happen not if lots of it this year early next year, that's something we believe will happen I just would like to share my two cents to you like this Kevin Thank you.
Speaker Change: Yes. Thank you very much James I really appreciate the optimism congratulations N G M. James for very nice quarter, and a strong improvement and all the hard work.
Patrick Scholes: Thank you Patrick.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Shuang soon with <unk> Securities.
Speaker Change: Please go ahead.
Okay.
Speaker Change: Crazy NOLA.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Paul I think you're going to share like how do you see a lifelong journey.
Paul: Oh wait wait.
Paul: Sean.
Sean: <unk> coal mine.
Speaker Change: Is the company considering are shaped in the power of yours for self mining to provide like Chris said before AI service providers.
Speaker Change: Oh.
Speaker Change: Hello, This is <unk>.
Speaker Change: I cannot permits we have enough depth to shift to the electricity use in our mining operations.
Speaker Change: Service providers.
Speaker Change: I think we know we are <unk>.
Our primary focus remains on optimizing our lines of business.
Speaker Change: Our many families steel.
Speaker Change: Relatively small.
Speaker Change: The repurchase from <unk>.
Speaker Change: Miami, and a more predictable and manageable for us.
So vacate worthwhile investments.
Speaker Change: However, I think we will continue to evaluate all potential opportunities and strategies always.
Speaker Change: Prior to power back to two.
Speaker Change: Yes, okay.
Speaker Change: Yes.
Speaker Change: Sure.
Dr. Goldman: Dr. Goldman Please sure.
Goldman Sachs: Finally, the bondholders Goldman Sachs are so badly.
Dr. Goldman: Great.
Dr. Goldman: Okay.
Speaker Change: Uh huh.
Cory: Hi, Cory I'm going to switch from <unk>. Once again, there are some hearings John.
Speaker Change #101: I'll go.
Speaker Change #101: H.
Speaker Change #101: No.
Speaker Change #101: The trends released Hillman Ollie's official website, showing the eight T proposing to modify its rules regarding pennies.
Speaker Change #101: Cool.
Phillip: Establish faster and stricter Phillip.
Speaker Change #101: Please.
Speaker Change #101: Procedures for our complaints with top class below one dollar per share. It does a companion piece that this quarters show policy change.
Speaker Change #101: The impact of the company.
Speaker Change #101: Yeah.
Speaker Change #103: Thank you.
Speaker Change #104: I think we saw the proposed regulation and I think I did it all relates to a lot of discussion and kind of lengthy process from proposal to final approvals and we will continue to closely monitor the dynamics.
Speaker Change #105: They've kind of.
Speaker Change #105: Proposals.
Speaker Change #105: I think that given the proposal is eventually passed.
Speaker Change #106: We believe it has little impact on our company at the close of the proposed amendments include I think are two key points. The first is if the company is stock price remains below $1 four 360 consecutive trading days.
Speaker Change #106: <unk> will be suspended.
Speaker Change #106: From trading on NASDAQ and a move to OTC market.
Speaker Change #106: Even the company is still in the process of appealing to a hearing panel.
Speaker Change #106: That's the first one of the second one is that if a company addresses the stock price through a reverse stock split.
Speaker Change #106: But the price falls below a one dollar within a year NASDAQ away immediately issue a delisting notice although the company can steal appeal and a continued trading for 180 days.
Speaker Change #106: I think even if these amendments.
Speaker Change #106: Approved.
Speaker Change #106: The company's stock can still stay below one one dollar for up to 360 trading days.
Speaker Change #106: Fall below $1 after the reverse split.
Speaker Change #107: Before <unk> I think it's quite a long time I think two weeks ago, our stock price was above $1.
Speaker Change #108: So from a company's perspective, I think that the recent stock price is mainly impacted by the overall decline.
Speaker Change #108: In the U S.
Speaker Change #108: Capital market in early August I think which is it is mainly due to the churn reaction caused by certain lower than expected.
Speaker Change #108: Economic indicators.
Speaker Change #108: And also I think a Japan interest rate hike.
Speaker Change #108: Also costa.
Speaker Change #108: Certain leverage is broken.
Speaker Change #109: So from our perspective, I think we will focus on our operation and try to make our financials are better and better I think are we in in quarter two I.
Speaker Change #109: I think the China operation is returning to growth there.
Speaker Change #109: <unk> revenue has doubled in the quarter, one and I think the Ah.
Speaker Change #109: Operating loss is narrow that down.
Speaker Change #109: Significantly so.
Speaker Change #109: So I believe the current stock price is in the range of Undervaluation and.
Speaker Change #109: I feel confident our stock price would be repaired.
Speaker Change #109: With.
Speaker Change #109: Our continuous.
Speaker Change #109: Stable.
Speaker Change #109: Increasing performance and I think that's my answer Sean Thank you.
Sean: Okay. Joseph Thank you.
Speaker Change #110: Thank you. Our next question comes from the line of Bill pop enough Stasio with Stifel. Please go ahead.
Speaker Change #111: Yeah. Good morning, gentlemen, thank you for taking my questions and congrats on the sequential growth this quarter.
Speaker Change #112: For my first question was just hoping you could provide an overview of the manufacturing landscape today, where market share currently sits and that's a quick overview of how keen on looks to gain market share in the near to medium term relative to some of your peers.
Speaker Change #112: Okay.
Speaker Change #113: Uh huh.
Speaker Change #112: Yes.
Speaker Change #112: Okay.
Speaker Change #112: <unk>.
Are things for.
Speaker Change #112: The key to increase the market share.
Speaker Change #112: Our products. So we continue to invest in R&D to PPG were a factor products.
Speaker Change #112: I think you can see compared to a year ago, our product portfolio is now more.
Speaker Change #112: Diverse.
Speaker Change #114: Our April cancerous.
Speaker Change #115: Progressive but deliberate secondary.
Speaker Change #115: So for US this year and you may now.
Speaker Change #115: The new <unk>.
Speaker Change #116: 666 machines.
Speaker Change #116: Ofer, <unk> and average computing power off or 185% hedged for the second.
Speaker Change #116: The power efficiency.
Speaker Change #116: Biogas for dash.
Speaker Change #116: And its.
Speaker Change #116: Its performance is a par with <unk>.
Speaker Change #116: <unk> products on the market.
Julian: Yeah Julian.
Julian: We introduced decreased with model.
Speaker Change #118: $850 $60 60.
Julian: Cheers.
Julian: Computing power of 249 drugs for.
Julian: Cash.
Julian: And also.
Speaker Change #119: I just mentioned we have comprehensive HR hour.
Speaker Change #120: R&D roadmap transparency with our customers and partners.
Speaker Change #120: Our 10 plus drawers.
Speaker Change #120: <unk> products are on track.
Speaker Change #120: We expect it to compete the desire to tape outs, but ended up this year.
Speaker Change #120: And you'll know.
Speaker Change #120: That is to mesh mass production.
Speaker Change #120: Sure.
Preparations.
Speaker Change #120: Maybe we will complete here in the first half.
Speaker Change #120: Last year. So we also meet our customer's needs for one stop one stop.
Speaker Change #120: Customized managed solutions.
Speaker Change #120: Through.
<unk> comprehensive product offerings.
Speaker Change #120: And also we had.
Speaker Change #120: Bob.
Speaker Change #120: Over the last three we entered into the consumer market.
Speaker Change #120: No.
Speaker Change #121: I think the second important factories.
Speaker Change #121: Building, a rehearsal yourself system to reshape that cover us.
Speaker Change #122: Various types of customers.
Speaker Change #122: Through our multichannel approach.
While placing a greater emphasis on the marketing and the promo share.
Speaker Change #123: For large clients, we have already parties always several.
Speaker Change #124: North American listed mining companies and discussion this morning.
Speaker Change #124: And the for the retail market.
Speaker Change #124: Sure.
Speaker Change #125: The computer power demand is high but the customers more scattered we have seen good results by combining our OLED.
Speaker Change #125:
Speaker Change #125: E Commerce.
Speaker Change #125: With distributors clients to reach these customers.
Speaker Change #125: Additionally, we have established mining demonstration products and regions.
Speaker Change #125: Hot.
Speaker Change #125: The east serving a showcase to attract potential local customers.
Speaker Change #125: Let's see our machines.
Speaker Change #125: The operations in real world conditions.
Speaker Change #126: However, I think we already recognize that our coverage of mid sized customer who is still accurate.
Speaker Change #126: No.
Speaker Change #126: This represents one of our key growth areas of moving forward.
Speaker Change #127: Finally, we adhere to our core value of integrity.
Integrity: Integrity believes strongly.
Integrity: The power of the.
Integrity: Patient.
Integrity: We are committed to doing the right thing even when it's difficult.
Integrity: We believe that up at all as we continue to <unk>.
Oprah: Oprah value.
Oprah: Presentations to the market and our customers.
Oprah: We will ultimately receive the markets recognition.
Oprah: <unk> rewards.
Speaker Change #130: Thank you I appreciate the clarity and overview with the question there.
Speaker Change #131: My second my last question.
Speaker Change #132: I was just hoping to get some some insight into the recent.
Speaker Change #133: Announcement by the Russian government to legalize crypto currency mining in the country.
Could we expect to see a similar move by China.
Speaker Change #133: What are your.
Speaker Change #134: Generic thoughts on this move by the government with Russia, just given your experience so far.
Speaker Change #134: Mining in the region.
Speaker Change #134: I'm just curious to hear your thoughts on the news. Thank you.
Speaker Change #134: Oh.
Speaker Change #134: Yes.
Speaker Change #135: U S listed company.
Speaker Change #136: We do not conduct business in Russia and have no plans to to consult so this is.
Speaker Change #137: Consideration of compliance and patient.
Speaker Change #138: Yes ill remind me operations.
Speaker Change #137: <unk>.
Speaker Change #137: We.
Speaker Change #137: Employee diversified appointment of strategy.
Speaker Change #137: Consistently and continuously to access.
Speaker Change #137: Returns are.
Speaker Change #139: Our us money calibers.
Speaker Change #140: Collaborations and <unk>.
Speaker Change #140: Justin.
Speaker Change #141: The products are project layoffs.
Accordingly.
Speaker Change #141: Yeah. So.
Speaker Change #141: We deployed.
Speaker Change #141: We.
Speaker Change #141: We were surprised.
Speaker Change #141: <unk> suites.
Speaker Change #142: Energy advantages.
Speaker Change #141: And.
Speaker Change #141: We're selecting <unk> facilities, we also pace.
Speaker Change #141: Today, we also place a greater emphasis.
Speaker Change #141: The vehicle.
Speaker Change #141: Great work in the policy.
Speaker Change #141: Stability of the region.
Speaker Change #141: Two.
Speaker Change #141: Right.
Speaker Change #141: Robust risk management.
Speaker Change #141: Our protect.
Speaker Change #141: Our company's assets okay.
Speaker Change #143: Okay I appreciate the color and look forward to another quarter of strong growth in Q3. Thank you.
Speaker Change #144: Thank you.
Speaker Change #145: As a reminder to ask a question at this time. Please press star one one are you touched on the telephone.
Speaker Change #144: Yeah.
Speaker Change #146: 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.
Speaker Change #147: I'm sorry, it looks like we do have a question from Kevin D D.
Speaker Change #148: With H C. Wainwright. Please go ahead.
Speaker Change #149: Thank you Hi, James Hi, Angie since we had a couple of more minutes.
Speaker Change #150: Maybe you could talk a little bit more about your plan to expand to 10 extra ash in the U S.
Speaker Change #150: Is that.
Speaker Change #152: Site acquisition.
Speaker Change #153: Or partnership how do you plan that.
Speaker Change #153: On building that.
Speaker Change #153: Yeah.
Speaker Change #153: I think we have.
Speaker Change #153: R&D location.
Speaker Change #153: Cooperates.
Speaker Change #153: Partners.
Speaker Change #153: U S and.
Speaker Change #153: Yes.
Speaker Change #153: Yes.
Speaker Change #153: So.
Speaker Change #153: I think we can.
Speaker Change #153: We'll announce the details where we are.
Scott: Scott the contracts yes.
Scott: Yeah, it's too early to.
Scott: So discuss about the details Kevin yes.
Scott: Alright.
Scott: Yes.
Speaker Change #156: Understood. Thank you gentlemen, I, just thought I'd throw that out there because it seems.
Speaker Change #156: It seems like an impressive goal so.
Speaker Change #156: Again, thank you very much and congratulations on the results.
Speaker Change #157: Thank you.
Speaker Change #157: Thank you.
Speaker Change #158: As there are no further questions now I'd like to turn the call back over to the company for any closing remarks.
Speaker Change #159: Thank you once again for joining US today. If you have further questions. Please feel free to reach out to us through the contact information provided on our website.
Speaker Change #160: Thank you that does conclude today's call. Thank you everyone for attending you may now disconnect.
Speaker Change #160: Yeah.
Speaker Change #160: [music].