Q1 2025 Canaan Inc Earnings Call
Gwyn Lauber. I, Gwyn and Nangeng Zhang ... ... ...
and so on.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to Canaan's Inc's first quarter to the 2025 earnings conference call.
Speaker Change: Hello, everyone and welcome to our earnings conference call.
Speaker Change: Joining us today are chairman and CEO Jin Kang and our CFO, Jim James Chang.
Speaker Change: Leo Huang Vice President of capital markets, and corporate development and she Chang senior IR manager will also be available during the question and answer session.
Our CEO will start the call by providing an overview of the company and performance highlights for the quarter.
Speaker Change: Our CFO will then provide details on the company's operating and financial results for the period before you open up the call for your questions.
Speaker Change: Before I begin I would like to refer you to our safe Harbor statement in our earnings press release.
Speaker Change: Today's 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 operating results and the performance of the company.
Speaker Change: These statements speak only as of today and the company assumes no obligation to revise any forward looking statements that may be made in today's press release.
Speaker Change: Call or webcast, except as required by law.
The statements do not guarantee future performance and are subject to risks uncertainties and assumptions. Please.
Speaker Change: Please refer to the press release and the risk factors and documents, we file with the Securities and Exchange Commission.
Speaker Change: Including our most recent report on form 20-F for information on risks uncertainties and assumptions.
Speaker Change: Cause actual results to differ materially from those set forth in such statements.
Speaker Change: In addition, during today's call, 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.
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: 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's website.
Speaker Change: And finally, please note that during the call all dollar amounts refer to U S dollars.
Speaker Change: With that I will now turn the call over to our chairman and CEO Angie Chang. Please go ahead.
Speaker Change: A second quick.
Speaker Change: Hello, everyone.
Speaker Change: <unk> the CEO of tenure.
Speaker Change: Thank you for joining our conference call, our CFO, James and I are pleased to share our first quarter 2025 results and recent developments from our headquarters here in Singapore.
Speaker Change: In the first quarter of 2025.
Speaker Change: The global.
Speaker Change: Mommy industry faced a serious macroeconomic challenges.
Speaker Change: In February the first.
Speaker Change: The U S project and signed.
Older and their their international emergency Economic Power Act I E P. A.
Speaker Change: And posting a 10% tariff on.
Speaker Change: Goods imported from China.
Speaker Change: This tariff what's right to 20% in early March.
Speaker Change: Thank you April.
Speaker Change:
Speaker Change: A 10% a universal tariff.
Speaker Change: Imports from all countries.
Speaker Change: Along with higher.
Speaker Change: We report reciprocal therapist.
Speaker Change: Poverty selective nations.
Speaker Change: Oh tariffs.
Speaker Change: Chinese schools, reaching as high as 145%.
Speaker Change: Give you a spot China impulse up to 125% tariffs.
Speaker Change: Our schools and introduced a non tariff measures, including export controls.
Speaker Change: These developments costs major what I'm penalty in global markets.
Speaker Change: As a result.
Speaker Change: <unk> quite a price dropped sharply.
Speaker Change: All about.
Speaker Change: While hundreds.
Speaker Change: I look for solid in U S dollars at the end of January.
Speaker Change: 276, all in U S dollars you already much.
Speaker Change: Before Chuck that.
Speaker Change: You'd rebounding to a wronged.
Speaker Change: You saw that you asked on us in late March.
Speaker Change: That's part a sharp price swings that total that's what cap rates rose from 795, <unk> <unk> two.
Speaker Change: So 856 extra hash or second.
Speaker Change: This combination of 40 with one price in a rising rate certainty.
Speaker Change: Compressed.
Speaker Change: Perfect models.
Speaker Change: Entering the second quarter.
Speaker Change: <unk> dropped again to 74 solid in U S dollars in April.
Speaker Change: But quickly recovered.
Speaker Change: The base of our.
Earnings Conference.
Speaker Change: It has tried to back above our waterlase all of them.
Speaker Change: Gradually reflecting be quite value as a safe habit.
Speaker Change: We have seen clear spinal suffer recovery in <unk>.
Speaker Change: Bogeyman for mining machines.
Speaker Change: In U S market do.
Speaker Change: Due to the 10% tariffs.
Speaker Change: Impart imposed by the U S and importantly in part of course.
Speaker Change: Even a higher risk.
Restate profile therapist.
Speaker Change: Countries.
Speaker Change: Both Cana and our competitors now face at at least 10% extra duty.
Speaker Change: Shipping mining machines made in southeast Asia to the U S T shirt.
Speaker Change: Faster changing policies Uh huh.
Speaker Change: <unk> created a great deal of uncertainty and confusion in actual cost of operations.
Speaker Change: Cases in fact to tariffs right.
Speaker Change: It's been even higher density goes up.
Speaker Change: Customs enforcement standards and clear as times have been costed.
Speaker Change: Since the value of the quantities globally unified.
Speaker Change: This has led to higher mining costs and greater uncertainty of for American minus.
Speaker Change: <unk> to minus and the other regions.
Speaker Change: Which has a significantly.
Speaker Change: So pop a.
Speaker Change: Mining machines demand.
Speaker Change: We have observed that many U S listed mining companies.
Speaker Change: Adjusting their business models and are accelerating their transformation.
Speaker Change: Towards AI and high performance computing businesses.
Speaker Change: Aimed a complex and rapidly changing market environment our team still.
Speaker Change: Solid operational performance in.
Speaker Change: In the first quarter, we achieved total revenues.
Speaker Change:
Speaker Change: $82 8 million U S dollars.
Speaker Change: <unk> our previous guidance.
Speaker Change: 75 million.
Speaker Change: U S dollars.
Speaker Change: This represents a 136% year over year increase.
Speaker Change: And demonstrates our strong execution.
Speaker Change: Yes.
Speaker Change: Across global markets.
Speaker Change: Yeah.
The first quarter of 'twenty target farm is traditionally a slow season.
Speaker Change: However, thanks to the continued large scale delivery of our 815 serious mining machines.
Speaker Change: We achieved five five <unk> per second.
Speaker Change: In total computing power so during the quarter.
Speaker Change: After 6% to 62.6% year over year.
Speaker Change: We established revenue exceeding.
Speaker Change: 58 million U S dollars.
Speaker Change: This includes ongoing kidney Bruce a flush.
Speaker Change: Now others to a public mining companies such as higher.
Speaker Change: With the new generation High performance 15 models are becoming the main driver of shipments.
Speaker Change: Average selling price per ton of hach.
Speaker Change: If at any inquiries that you churn quite far U S dollars.
Speaker Change: But higher ash.
Speaker Change: Representing a 30% sequential growth.
Speaker Change: In overseas markets outside of North America, we are seeing continued growth in demand from regions such as Asia.
Speaker Change: South America and Africa.
Speaker Change: We have made.
Speaker Change: Tangible sales progress in these areas.
Speaker Change: Our average home serious of mining machines for individual consumers also achieved encouraging progress in Q1.
Speaker Change: Following the launch of several new models in this quarter, we generated $1 3 million U S dollars sales revenue.
Speaker Change: And D D var raw steak saw them units.
Speaker Change: In spite of some are approaching you.
Speaker Change: The northern hemisphere are leading to.
Speaker Change: Gradual decline in door heating demand, our Idaho home, Sirius, which fish eaters.
Speaker Change: Heaters.
Speaker Change: <unk> functionality of mining and the home keeping steel Southwell.
Speaker Change: This well beyond our expectations.
Speaker Change: How racking up production to ensure timely delivery of last may.
Speaker Change: The 18, 18th 2025, we have sold a total of.
Speaker Change: Or.
Speaker Change: 17.
Speaker Change: While six saw the units.
Speaker Change: Year to date.
Total older variable, reaching over six 6 million in U S dollars.
Speaker Change: Our <unk> business delivered strong results this quarter.
Speaker Change: A total of 215 19 clients mind.
Speaker Change: 39% quarter over quarter. This was mainly driven by the continued growth of our energized hash rate.
Speaker Change: The optimization of several projects.
Speaker Change: Partnerships.
Speaker Change: Our operational computing power increased from four point.
Speaker Change: 75 cash second at the end of 2024 to 5.97 hyper second bite.
Speaker Change: March 2025.
Speaker Change: Coupled with higher average based on price during the quarter, our mining revenue reached a record high of over 24 million U S dollars.
Speaker Change: Marking a 15, 9% sequential increase.
Speaker Change: Thanks to our competitive electricity cost.
Speaker Change: For part two that U S cents per kilowatt hour.
Speaker Change: We maintained a solid modeling gross margin.
Speaker Change: 31% in Q1 by the end of the quarter the number of bitcoin on by the company reached 1408.
Speaker Change: Setting.
Speaker Change: New record.
Speaker Change: We continue to steadily deploy more heart rate and by the end of April our total deployed computing power reached eight points wildfire Hatchway second politically you asked we fully deployed <unk> cash.
Speaker Change: Second across four cortex.
Speaker Change: I'll I'll start mass production and delivery of our <unk> Sirius we have continued to work close Davis, our foundry partners.
Speaker Change: Technical optimization.
Speaker Change: As a result chip yield now is this 90%.
Compared to the initial launch last year overall machine performance of eight <unk> series has improved by 15%.
Speaker Change: While power consumption has been reduced by 10%.
Speaker Change: Effectively lowering the cost per unit of binding power computing power.
Speaker Change: We have also introduced more other wireless products.
Speaker Change: Cross, whereas calling technologies, including hydro and <unk> accordingly.
Speaker Change: One recent example is our new <unk> 66, H, eight hydro putting model, which delivers.
Speaker Change: <unk>, two 500, <unk> per unit and better energy energy efficiency.
Speaker Change: Airport machine.
Speaker Change: And outstanding product in the industry.
Speaker Change: Looking ahead, our next generation <unk> theories has successfully complete a tape out in the first quarter.
The corresponding products will be officially launched after a full machine testing and.
Speaker Change: They are expected to PD were.
Speaker Change: Significant performance upgrades.
Speaker Change: On the production and the logistic front.
Speaker Change: Our work you've diversified geographic deployment over the past few years specialties.
Speaker Change: It's tablet shipments of mine manufacturing capacity installed East Asia has half.
Speaker Change: <unk>.
Speaker Change: <unk> reached at U S tariff adjustments.
Speaker Change: Starting at the end of Q1, we set up a pilot production line.
Speaker Change: The United States and successfully completed trial production.
Speaker Change: This means our U S based manufacturing progress is now essentially up and running.
Speaker Change: While the current production cost in U S is relatively high we believe taking this that whole strategy strategy value.
Speaker Change: Allows us to be closer to U S market and our partners.
Speaker Change: We are also reducing supply chain risks, we are now actively exploring the possibility of building a larger scale manufacturing facility in the U S.
Speaker Change: Index volume ways to skin.
Speaker Change: Significantly lower <unk>.
Speaker Change: Production costs aiming to make U S based manufacturing commercially viable.
Speaker Change: This quarter, we mentioned.
Speaker Change: We maintained.
Speaker Change: Stable stability in our operations.
Speaker Change: It was key.
Speaker Change: <unk> controls showing.
Speaker Change: Further improvement.
Speaker Change: Pocket by higher ASP and a continued growth.
Speaker Change: Our mining operations.
Speaker Change: We achieved positive growth for our approach.
Speaker Change: Great.
Speaker Change: For the first time since the.
Speaker Change: Bear market.
Speaker Change: Nearly two years ago.
Speaker Change: While focusing on R&D investment, we also continue to enforce.
Speaker Change: Sure.
Speaker Change: Is.
Speaker Change: This client expense control in our daily operations.
Speaker Change: As a result, our general and.
Speaker Change: And then the ministry to expenses decreased by 39% quarter over quarter.
Speaker Change: <unk> have a lot of our operation and operate our operating loss by 32% quarter over quarter and by <unk>.
Speaker Change: 45% year over year.
Speaker Change: 237, 6 million U S dollars.
Speaker Change: Although it price declined by.
Speaker Change: Approximately 12% from the end of <unk>.
Speaker Change: First quarter EBIT.
Speaker Change: To a fair value loss in currency assets of $16 3 million U S dollars.
Speaker Change: We remain committed to our pinpoint holding strategy.
Speaker Change: As we strongly believe in the long term.
Speaker Change: Appreciation potential asset. We are also pleased to see that as of today decline has returned to above.
Speaker Change: $100000 level.
Speaker Change: On the balance sheet side.
Speaker Change: Large scale production of our <unk> Sirius underway, we have started to build up some inventory up new products to ensure.
Speaker Change: Interrupted deliveries.
Speaker Change: For the end of March the company maintained a healthy.
Speaker Change: Cash balance of approximately 100 million in U S dollars.
Speaker Change: Sure we took advantage of the price pullback in acquired during the first quarter.
Speaker Change: To further strengthen our Pepco holdings, we purchased.
Speaker Change: <unk> 7.46.
Speaker Change: Twice.
Speaker Change: Average price of <unk>.
Speaker Change: <unk> III parts.
Speaker Change: In the U S market climate.
Speaker Change: At the end of April 2025.
Speaker Change: A number of good clients hold by the company reached 1434.
Speaker Change: Looking ahead to the coming quarter of 2025.
Speaker Change: Activity adjusting our focus across key markets.
Speaker Change: And stacking up our self.
Speaker Change: Paul.
Speaker Change: But now we have secured a solid pipeline of a 15 orders.
Speaker Change: August delivery booked in June into July.
Speaker Change: We are also continuously.
Speaker Change: Corrugated.
Speaker Change: Our production capacity, which in itself money.
Speaker Change: Fulfilling customer orders based on evolving market demand.
Speaker Change: That's that.
Speaker Change: The new series.
Speaker Change: U S tariffs.
Speaker Change: Metro is introducing the first quarter.
Speaker Change: And it's still ongoing.
Speaker Change: How broad considerable.
As future risk and uncertainty.
Speaker Change: So far demand from North American customers remains under pressure with no clear sign of a recovery.
Speaker Change: And the Mark capital markets.
Speaker Change: Certainty has also impact it.
Speaker Change: Stock performance.
Speaker Change: And.
Speaker Change: From the rising activities for many U S States mining companies as a result customers in U S has generally adopt a wait and see attitude.
Speaker Change: Towards.
Speaker Change: Holders, we have observed delays and adjustments in some older is currently under negotiation and delivery schedules.
Speaker Change: Additionally, certain drop in mining products have faced increased.
Speaker Change: Costs due to import tariffs.
Speaker Change: Which could delay pay.
Speaker Change: Pace of hatch rates deployment.
Speaker Change: Given the ongoing or entitled teens, Global political and economic landscape. The company has decided to withdraw its previously issued full year revenue guidance as.
Speaker Change: As well.
Martin: Martin you hash rate deployment targets for the first half of 2025.
Martin: Until there is greater clarity in the overall environment, we will focus on <unk>.
We're working to.
Martin: Respond to market fluctuations.
Martin: So further.
Martin: Our business.
Martin: From the current uncertainty, we ought to be still getting ourself mining strategy too.
Martin: Pure <unk>.
Martin: Global expansion opportunities.
That align with our long term growth objectives, we are confident in our ability to identify and collaborate with our experienced partners both within and beyond North America.
Martin: And enabling our us to scale efficiently effectively and maintain operational.
Martin: Excellent.
Martin: Across diverse diverse markets.
Martin: Our track record of success outside the U S. United States include our operations each OEM.
Martin: Where we recently reported an impressive average uptime.
Martin: 98%.
Martin: In the first quarter and 95 uptime appetite in April.
Martin: Despite minor power.
Martin: Disrupts early in this month.
Martin: These results reflect our team's ability to navigate local.
Martin: <unk>, while maintaining high performance and.
Martin: Yes.
Martin: The near term.
Martin: Company is adopting a more confidence.
Martin: Our approach to expectations for the second quarter of 2025, we currently anticipate revenues.
Martin: Approximately 100 million U S dollars for Q2.
Martin: This forecast is based on the current <unk>.
Martin: Market and operational conditions.
Martin: However, given recent policy uncertainties in the market or authority actual results may differ from.
Martin: These expectations.
Martin: In response to recent market developments, including the U S tariff.
Martin: Metrics on our share price.
Martin: We believe that our current stock our valuation is significantly below.
Martin: The company's intrinsic value in the long term growth potential.
Martin: To address this disconnect and enhance shareholder value, we are actively evaluating a range of stress tek.
Martin: Interactive in including a potential share repurchase program.
Martin: This interactive.
Martin: Currently under review and May be subject to approval by our board of directors.
Martin: Any implementation will be.
Martin: Conducted.
Martin: <unk> compliance.
Martin: Oh.
Martin: Predictable laws and regulations.
Martin: We will keep the marketing for.
Martin: Any material.
Martin: Developments subsequent announcements.
Martin: <unk> are complex and rapidly evolving macro and industry environment, we remain focused on technology and.
Martin: Product innovation.
Martin: Returning customer service and advancing our global strategy.
Martin: We prepared to.
Address more opportunities and the challenges ahead.
Martin: This concludes my prepared remarks.
Martin: Hello, everyone.
Martin: We will now turn the call is our CFO James Thank you.
Jane: Thank you Angie and good day, everyone. This is Jane CFO, Cana I'm very glad to share our quarter, one financial results with you today.
Jane: As <unk> stated at the start of the call in quarter, one, especially in February and March the bitcoin mining industry sales challenges as miners profit margins were squeezed by the bitcoin price volatility and has a higher total network hash rate.
Jane: Volatile market conditions, we delivered a solid performance results, let me give a quick summary of our financial performance.
Jane: First driven by the growth in the computing power sold and average selling price total revenue reached $82 8 million exceeding our $75 million revenue guidance and up 136% year over year.
Jane: Our mining operations grew steadily.
Jane: By the combined growth in the deploy the mining capacity and average bitcoin price in the first quarter, our managed revenue reached $24 million.
Jane: Up 132% year over year was 259, bitcoin mined up 33% year over year.
Jane: Next due to product iteration and the March delivery of the <unk>, our average selling price rose to $10 $5 <unk> 70 in the quarter, resulting in a return to gross profit.
Jane: It's the first time in two years amid the bear market.
Jane: Last but not least our cash balance remained flat sequentially. We continued to manage cash in a prudent way and streamline our expenses to make sure strategic items are prioritized.
Jane: Turning to our profit and loss for the quarter total revenue was $82 8 million, beating the guidance by $8 million.
Jane: <unk> revenue contributed $24 million, increasing 132% year over year.
Jane: We mined 259 clients in the quarter or year over year increase of 33%. This increase was primarily or primarily driven by more computing power in soda at our mining sites, which reached six six extra hospital settled after the end of the quarter increasing 22.
Jane: 2% from the end of last year.
Jane: Now turning to product revenue revenue from machine sales was $58 3 million, an increase of 149% year over year.
Jane: We delivered a total computing power sold of $5 5 million Taro has seven representing a year over year increase of 63%.
Jane: The first quarter of each year is typically our seasonally lower quarter due to the impact of the new year and the lunar new year holidays. However, the mass delivery of <unk> series in this quarter drove the major year over year growth in both mining machine sales revenue and <unk>.
Jane: Computing power.
Jane: More than 19815 mining rates or delivered in quarter, one contributing $45 million to the mining machine sales revenue and a $3 9 million Taro has presented to the computing power.
Jane: In addition, driven by the March delivery of our 815 series the average selling price all recall ASP rose to $10 $5 per Taro has per second up 53% from $6 $9 per Taro has presented in the same quarter of 2024.
Jane: Turning to the revenue from our Avalon home service in quarter. One we delivered approximately 6000 units of our Avalon home products contributing revenue of $1 $3 million from the beginning of 2025 to date.
Jane: We have already received orders for more than $17 600.
Jane: 6000 units of Avalon home products was the total amount of $6 $6 million.
Jane: As I mentioned earlier due to the product iteration upgrades and the higher <unk> deliveries volume gross profit turned positive.
Jane: Reaching at zero point $6 million in the quarter was the first time since the start of market downturn two years ago.
Jane: Turning to the expenses, our operating expenses totaled approximately $38 million compared to $31 million in the same period of last year. Please.
Jane: Please note $2 $4 million of disposal again, our sales minor rates was recorded in the first quarter of last year, which correspondingly offset the overall operating expenses.
Jane: Excluding this non routine impact operating expenses increased $5 $7 million year over year, mainly due to the increased staff cost and R&D expense managers, including the staff. We added for the development of our consumer level mining products and the mining solutions.
Jane: By the end of this quarter the price of Bitcoin decreased the tour around the $83000 versus around $95000 by the end of 2019 for the <unk>.
Jane: Decrease the bitcoin price on the last day of the quarter resulted in an aggregate our realized fair value loss on critical assets of $16 million.
Jane: Encouragingly the recent appreciation of this corn price has reversed this unrealized losses.
Jane: In total we recognized an adjusted EBIT loss of $38 million narrowed a 47% year over year.
Jane: In March 2025, we issued.
Jane: 101000, the CRE ate.
Jane: Slash one preferred shares with gross proceeds of $100 million additional.
Jane: Ali the third tranche of the theory of series a preferred shares issued in quarter. Three 2019, Paul was still recognized as a convertible liability at fair value by the quarter end.
Jane: This financing incurred in excess of fair value over proceeds received and a fair value changes.
Jane: This noncash accounting treatments hit our Q1 bottom line for a total of $33 million.
Jane: In order to represent the outperformance more accurately and more comparable if we excluded that impact of this accounting treatments from our non-GAAP measures.
Jane: Turning to our balance sheet and cash flow at the end of quarter. One we held cash of $97 million on our balance sheet remains stable compared to the end of quarter four.
Jane: In quarter, one we generated $51 million of cash inflow from cell.
Jane: The $21 million from secured loans and $18 million from export Vit response.
Jane: And we paid $88 million for production operation, We also paid $144 million to secure our wafer supply primarily funded by the proceeds of $100 million from preferred shares financing and $42 million from the ATM.
Jane: Financing.
Jane: Now turning to our bitcoin assets bitcoin held at our own holding assets increased in the quarter, reaching a record high of 1400 zero eight bitcoins as of March 31.
Jane: This is a 115 points more than a 1293.
Jane: At the end of last quarter on March 31, 2025, the fair market value of our own the big clients totaled around $117 million and our hotel again was approximately $49 million.
Jane: Higher than the original value of the big clients that weekend from mining or other operations.
Jane: With a bitcoin prices rebounding to over 100000, the current market value of this critical assets stands at approximately $147 million.
Jane: As of April 30, our total Bitcoin holdings increased to 1424 as already disclosed.
Jane: Turning to founded racing.
Jane: As mentioned earlier in March 2025, we closed our series a flash one preferred shares financing with gross proceeds of $100 million.
Jane: From the end of 'twenty 'twenty four till February 19, 2025, we.
Jane: Right.
Jane: For fund raising with net proceeds of $42 5 million.
Jane: This financing is have been recorded in the previous quarterly release after that so we have not done any fund raising we have also mutually agreed with the investor to terminate the agreement for the second tranche of series a flash of one preferred shares.
Jane: Another $100 million.
Jane: Fact is April 32095.
Jane: As Angie mentioned that the recent market dynamics, including U S tariff hikes have crts plates are impacted.
Jane: Impacted our stock price, we believe our current stock price is undervalued and disconnect from the long term growth potential we are actively evaluating strategic initiatives, including a potential share repurchase program to enhance our shareholder value.
Jane: We will promote sleep disclosed relevant material divestments.
Jane: In subsequent announcements.
Jane: By the end of quarter, one 900 clients of our pledge to quarter secured loans with an aggregate carrying value of $45 million, which we believe creating a reasonable interest level and 100 clients or transporting them to fix the term product with it.
Jane: Guaranteed minimum annual return.
Jane: The secured loans enable additional liquidity, which we were used to fund our production expansion and operations in the future as part of our Holdco strategy.
Jane: We'll explore more ways to increase capital liquidity through our own <unk> assets. Please note that the big clients pledged our chance 30 until six term products.
Jane: The nice SaaS pivotal currency receivables in our balance sheet.
Jane: And as a classification between current and non current assets is consistent with the periods of corresponding secured loans or fix the term products.
Jane: Given the prevailing wait and see sentiment among north American customers and postponements in our mining project deployment caused by the significant uncertainties around surrounding tariffs, we cautiously expect the revenue for the second quarter to be a proxy.
Jane: Italy $100 million.
Jane: This concludes our prepared remarks, we are now open for questions.
Jane: Thank you we will now begin the question and answer session.
Jane: As a courtesy to other investors and analysts who may wish to ask a question. Please limit yourself to one question and one follow up.
Jane: If you have questions after the Q&A session.
Jane: Investor Relations team will be available after the call.
Jane: 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.
Jane: If you wish to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Jane: To withdraw your question. Please press star one one again.
Jane: We will take our first question.
Kevin Cassidy: And the first question comes from Kevin Cassidy from license that Securities. Please go ahead.
Kevin Cassidy: Yes, Thanks for taking my question and congratulations on the good results considering the market.
Kevin Cassidy: So I'm wondering considering the market.
Kevin Cassidy: If you could give a description of what happened with your Asps.
Kevin Cassidy: The equipment pricing trends were through the quarter as bitcoin prices went down to your Asps per carat has come down with that.
Kevin Cassidy: Did they hold up in it.
Kevin Cassidy: If you can can you give an idea of what to expect in the second quarter.
Kevin Cassidy: Nishu.
Kevin Cassidy: Yes.
Kevin Cassidy: Yeah. Thank you Kevin Thank you Kevin.
Kevin Cassidy: From an ASP perspective in quarter, one we have already seen that.
Kevin Cassidy: ASP climbed up to $10 $5.
Kevin Cassidy: I think there are several reasons behind that to support that one thing is the market sentiment in early quarter, one, especially January and early February was quite good the demand was very strong and the second reason behind that is our <unk> got a very good feedback.
Kevin Cassidy: From the early stage customers in quarter four than a lot of customers ordered in quarter, one and we have to identify the orders urgency.
Kevin Cassidy: Doing some.
Kevin Cassidy: Price rating during that time, so I think that.
Kevin Cassidy: That's in the early stage of quarter, one and also we still have some clearance on the older generation, perhaps like a 14 in quarter, one that makes the quarter. What's the average price is still lower than the $11, which gave us some room in quarter two two to further develop a hour.
Kevin Cassidy: Average selling price even I think in April the market sentiment was not good but our locked a contract sales price in.
Kevin Cassidy: In April and May still higher than.
Kevin Cassidy: Previous selling price of 815 theaters and we don't have much a 14 inventory in quarter two that makes the average selling price continue to have challenge to improve in quarter. Two until now I have no final numbers for quarter, two but I'm very optimistic about the core.
Kevin Cassidy: Two.
Kevin Cassidy: Selling price development.
Kevin Cassidy: But from long term perspective, you know looking at quarter, three and quarter four.
Kevin Cassidy: Now if the U S market demand is.
Kevin Cassidy: So under pressure because people are still way tend to see that.
Kevin Cassidy: Forest surrounding all kinds of policies I don't think we have a clear answer about quarter, three and a quarter fourth market demand, especially for United States the leading country.
Kevin Cassidy: So with that assumption I I could only be.
Kevin Cassidy: Russia is about the future development of average selling price I should say it or could it be flat last quarter too.
Kevin Cassidy: Even you know.
Kevin Cassidy: A little bit lower if the bitcoin price not higher in <unk>.
Kevin Cassidy: Quarter, three but currently I think the quarter two's average selling price could it be better that's something we have already have some confidence.
Kevin Cassidy: Does that answer your question Kevin.
Kevin Cassidy: Yes, I made it very clear.
Kevin Cassidy: Thank you James.
Thank you.
Maybe just a follow up to that.
Kevin Cassidy: A lot of bitcoin miners have employed.
Kevin Cassidy: Our strategy to.
Kevin Cassidy: Use their access to power for H, B C or AI hosting it how is this changing your Tam for your equipment.
Kevin Cassidy: Yes.
Kevin Cassidy: Yeah.
Kevin Cassidy:
Kevin Cassidy: Hi, Kevin this is ESG.
Kevin Cassidy: I think I can.
Kevin Cassidy: I will answer this question shot.
I believe you are correct.
Kevin Cassidy: Some customers have redirected their power.
Kevin Cassidy: The emerging AI and HTC.
<unk>.
Kevin Cassidy:
Kevin Cassidy: However in my view.
Kevin Cassidy: These efforts appear more like.
Kevin Cassidy: Experimental quick fix.
Kevin Cassidy: And then stretch tech solutions.
Kevin Cassidy: Two the underlying changes.
Kevin Cassidy: Challenges sorry. This is my personal.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: We will take our next question.
Speaker Change: Your next question comes from the line of Michael <unk> from H C. W. Please go ahead.
Michael Diabolic: Hi, Hi, Andy and James Thank you for taking my question. This is Michael Diabolic call for Kevin BD.
Speaker Change: I understand you're not offering guidance for the full year for 2025, but cannot more clarity about expansion plans for self mining.
Speaker Change: Goodbye.
Speaker Change: Yes.
Speaker Change:
Speaker Change: Yep.
Speaker Change: Sure.
Speaker Change: I think before the U S.
Speaker Change: Tariff policies was implemented.
Speaker Change: We have already shipped.
Speaker Change: A batch of mining machines to UX four hour stop whining.
Speaker Change: So our North America soft mining products.
Speaker Change: Viewing is still moving forward in quarter one two.
Speaker Change: In April alone, we add over $1 five X hash up new installed capacity.
Speaker Change: Through our partnerships.
Speaker Change: Do not square and the Boston hosting in Pennsylvania, and Texas.
Speaker Change: With this our total deployed global heart rate reached eight point Wi Fi attached.
Speaker Change: <unk> six <unk>.
Secondly activity running.
Speaker Change: We manage it to maintain.
Speaker Change: Competitive all in power cost.
Speaker Change: Just for quite a fourth U S cents per kilowatt hour.
Speaker Change: Across our operations.
Speaker Change: Which shows the effectiveness of our pockets of high quality partnerships and we're a long term global.
Speaker Change: Deployment strategy.
Speaker Change: Because the situation in the U S I think.
Speaker Change: Right.
Speaker Change: North America our projects.
Speaker Change: Our products are outside North America, Shell's strategic value.
Speaker Change: EES Avia, we our client mining.
Speaker Change: Appreciate the help us avoid.
Speaker Change: Joe protein factors regulatory uncertainty.
Speaker Change: While extending the equipment's lifecycle and leveraging our cost.
Speaker Change: Efficient local power in Q1 local project achieved strong now.
Speaker Change: 98% and machine uptime.
Speaker Change: Even though.
Speaker Change: There is a small scale power.
Speaker Change: Struction in April our partner responded quickly and uptime for the for the months still reached 95%.
Speaker Change: <unk>.
Speaker Change: Industrial average.
Speaker Change: Looking ahead I think we will continue to stay.
Speaker Change: At AGL globally.
Speaker Change: Our partnership models.
Speaker Change: Technical <unk>.
Speaker Change: Months of deployment.
Speaker Change: We are actively reviewing our options for scale up.
Speaker Change: <unk> projects.
Speaker Change: Talking.
Speaker Change: These new sites.
Speaker Change: The government sector.
Speaker Change: Thank you that's helpful and one follow up.
Speaker Change: It may be too early to tell but has the 90 day care truth resulted an increase in rig orders for May versus April.
Speaker Change:
Speaker Change: Please.
Speaker Change: Yeah, I think for the.
Speaker Change: Tariff staff.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Thanks.
Speaker Change: You know the U S.
Speaker Change: Right.
Speaker Change: Import tariffs by at least 10%.
Speaker Change: Across most major economics.
Speaker Change: Sure.
Speaker Change: This affects you asked monitors I think.
Speaker Change: In the two key ways.
Speaker Change: Our first.
Speaker Change: The tariff at least 10% to the cost of parts part of mining machines.
Speaker Change: This applies not just to us.
But at all of our peers and industry.
Speaker Change: Second is.
Speaker Change: That's also at tariffs.
Speaker Change: Our two power related infrastructure and other equipment needed for building mining pumps.
Speaker Change: Four for US there are two impacts firstly, the higher import cost is growing.
Speaker Change: Tom purchased from U S customers secondly is some of our own planned it.
Speaker Change: Mining deployments in the us have been delayed due to the increased cost.
Speaker Change: You know.
Speaker Change: Because bitcoin pattern the carry.
Speaker Change: In labels, so with before price, whilst again breakthrough U S.
Speaker Change: 100 solve the U S dollar efficiently.
Speaker Change: And it's lower.
Speaker Change: <unk> progress in U S.
Speaker Change: Mobile have rate growth has been more moderate in Q2.
Speaker Change: So that.
Speaker Change: Create opportunities for madness outside the U S.
Speaker Change: Especially in regions with energy cost advantages.
Speaker Change: <unk> expanded our more many rewards.
Speaker Change: So what we are doing it.
Speaker Change: To actively using our global SaaS that walk.
Speaker Change: Capture these kind of opportunities.
Speaker Change: Close more deals.
Speaker Change: At the same time.
Speaker Change: We have already built a solid money.
Speaker Change:
Speaker Change: Pre sales outside the U S and we are now evaluating.
Speaker Change: Expansion and exporting Newport grass partnerships outside the U S.
Speaker Change: So this allow us to flexibility to allocate money machines between cells and our own lines of products depending on the market.
Speaker Change: Conditions.
Speaker Change: Yes.
Speaker Change: Yeah, My two cents here Michael.
Speaker Change: April.
Speaker Change: Sentiment was very bad from the market from the customers.
Speaker Change: In Maine, when they claim price climbed back people's sentiment will be better, but the reality perspective, it's all 10%. This 10% that will be a kind of solid included.
Speaker Change: Extra cost no matter from the infrastructure perspective or machine perspective.
Speaker Change: Third by the miners, which makes the U S miners are little bit less competitive compared to rest of the world. So that's something.
Speaker Change: Sure.
Speaker Change: We cannot.
Speaker Change: Cannot eat.
Speaker Change: Ignore inherent stage, but let's see how it goes after 90 days.
Speaker Change: Closed then we can know answer after that what kind of.
Speaker Change: Terrorists on southeast Asia, including Malaysia, Thailand and <unk>.
Speaker Change: So in certain cases other countries in South East Asia, just my two cents.
Speaker Change: I think that's another another at all on this question.
Speaker Change: From current operating data.
Speaker Change: You know we are roughly in the middle of Q2 right.
Speaker Change: Number of orders, we have locked in non U S regions.
Speaker Change: Basically equal to the audio.
Speaker Change: The entire Q1 non U S regions authors.
Speaker Change: So.
Speaker Change: Practical point of view.
Speaker Change: Our sales in other regions are either de linked to the recovery of the bill comprise.
Speaker Change: However.
Speaker Change: U S regions, we have not seen any improvements.
Speaker Change: Yourself.
Soccer efforts. Thank you. Thank you.
Speaker Change: Sure Michael.
Speaker Change: Thank you.
Speaker Change: We will take our next question.
Speaker Change: Your next question comes from the line of Mike Grondahl from Nielsen. Please go ahead.
Mike Grondahl: Hey, guys. Thanks, a lot.
Mike Grondahl: Could you give us some insight into what you would need to see how much lead time you need for orders.
Mike Grondahl: For three Q4 for Q could be better than two Q.
Mike Grondahl: Sorry, you are asking about the machine the times or.
Mike Grondahl: But she is outside of OPEC.
Speaker Change: Yeah I think.
Mike Grondahl: I think it's.
Mike Grondahl: We start.
Mike Grondahl: Mass production of our <unk>.
Mike Grondahl: Second half last year.
Mike Grondahl: And.
Mike Grondahl: During that time I think most of the customers.
Mike Grondahl: Has.
Mike Grondahl: It's a little bit suffering is operating I think it's about three to four months for the for the time.
Mike Grondahl: But currently we are building up some inventories.
Mike Grondahl: So if you order today.
Mike Grondahl: I think our pipeline is.
Bobby: It's Bobby it's about U S.
Speaker Change: Expect it to Katherine with shifts in June.
Bobby: So that's about six to eight.
Bobby: Weeks.
Bobby: It's much better.
Bobby: And we.
Bobby: I think for the time issue it's about.
Bobby: Demand.
Bobby: Supply.
Bobby: If everything goes well I think we can.
Bobby: Expect that early time is between one two months.
Bobby: Got it.
Bobby: And.
In terms of.
Bobby: Capex the rest of the year.
Bobby: What's a good range for your committed Capex.
Bobby: Or even growth capex the rest of the year.
Okay.
Bobby: Ah.
Mike Grondahl: Mike I can answer this question by by two ways.
Mike Grondahl: Our spendings. The first way is we have to build up our.
Mike Grondahl: Wafer supply part this can be considered also as a kind of the inventory and also can be considered as a kind of capex in machine sales business.
Mike Grondahl: The other side, we also to our self mining operation in that side. The only capex, we invest in current business model is the machine. So overall speaking all of the Capex is related to machine wafer supply wafer preparing putting there.
Mike Grondahl: This together I think we have already built a kind of.
Mike Grondahl: Inventory for quarter, two and quarter three we just mentioned the cash spending in quarter, one was like $144 million for wafer and I can I can tell you in quarter two we continuously invest in this part so for the full year.
Mike Grondahl: Air perspective.
Mike Grondahl: It will be adjusted according to the demand and supply.
Mike Grondahl: We're rolling forecast process for every six months we have to.
Mike Grondahl: Monitor the market demand and then place orders from the wafer.
Mike Grondahl: Supplier and also.
Mike Grondahl: Manage our cash flow. So in terms of the full year now I don't have a quicker answer to you but.
Mike Grondahl: What I can say for overall wafer supply perspective, it can be like that.
Mike Grondahl: Between 400 beyond the $400 million something even above that.
Mike Grondahl: It's not only capex for self mining, but also the wafer prepare ration for the.
Machine sales part and.
Mike Grondahl: To be very honest it is closely linked to the full year revenue because the all the wafers can turn into machine sales revenue or self mining revenue eventually so.
Mike Grondahl: We didnt provide in our full year guidance, we still need to monitor the status of the tariff and other policies so with that assumption.
Mike Grondahl: Currently I don't have that takes to answer for this total capex spending but.
Mike Grondahl: To be very honest stay towards the higher than 400.
Mike Grondahl: <unk> hundred five that's something in my mind I.
Speaker Change: I don't know if I answer your question Mike.
Speaker Change: Michael Smith.
Speaker Change: Thank you we will take our next question.
Speaker Change: Your next question comes from the line of Bill Popper NASO from <unk>. Please go ahead.
Bill Popper: Good morning, and thanks for taking my questions. Just a quick one for me and apologies if it was already touched upon.
Bill Popper: Acknowledging that the tariff landscape is broad.
Speaker Change: Significant uncertainty.
Speaker Change: Just curious as part of your evaluations.
Speaker Change: With respect to Asia manufacturing is there any capacity the shift a portion of your manufacturing to the United States.
Speaker Change: To limit the impact of heightened tariffs.
Speaker Change: What what does management think the best option this year.
Speaker Change: Wow.
Speaker Change: Thank you for yeah.
Speaker Change: That's a difficult question.
Legacy.
Speaker Change: Yes, yes, I think we have.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Yes, I think we just mentioned.
Speaker Change: We already.
Speaker Change: Lloyd.
Speaker Change: Good luck.
Speaker Change: For Q1.
Speaker Change: We have started a small.
Speaker Change: Our scale trial production.
In the U S.
Speaker Change: The process.
Speaker Change: First of all the works, but manufacturing in the U S.
Speaker Change: That doesn't amiss.
Speaker Change: We see from slide from refinery standards.
Speaker Change: <unk>.
Speaker Change: Aluminum to heat sinks and Orange Orange.
Speaker Change: Machine cheeses.
Speaker Change: <unk> U S in practice is.
Speaker Change: Extremely.
Speaker Change: I think doing our operation we found out that extremely is extremely complicated.
Speaker Change: To do appropriate tariff planning for all imported materials.
Speaker Change: I think we already manufacture the pcbs.
Speaker Change: S&P sorting you saw U S.
Speaker Change: And also you know the policy environment is changing almost every day.
Speaker Change: It's very.
Speaker Change: Cost base.
Speaker Change: Our internal goal.
Speaker Change: I think the number today, we got is have no sense.
Speaker Change: Yes. It is.
Speaker Change: Absolutely not us, but our economical ways to limit.
Speaker Change: Overall cost increase.
Speaker Change: Increase of U S based production.
Speaker Change: To no more than.
Speaker Change: Around like 15%, 20%.
Speaker Change: Compared to but maybe Malaysia, yes.
Speaker Change: We are working harder to reach that target.
Speaker Change: Pink.
Speaker Change: The schedule.
Speaker Change: Not 30 of them.
Speaker Change: So tariffs cough.
Speaker Change: At a stabilized.
Speaker Change: Adding adding some color to this question is it's all about cost reductions and it's all about economics.
Speaker Change: Testing.
Speaker Change: The demand is not going up from the United States than it will be a painful process. If we build up a factory there and our customers. They didn't to order a lot then to create problems for us I think.
Speaker Change: On the other hand, if the tariff thing has been solved.
Speaker Change: With some.
Speaker Change: Good results from Southeast Asia, now, we don't necessarily need to build up the factory manufacturing in the United States. So it's a kind of dilemma, it's all about demand and supply so if our customers who would like to have us.
Speaker Change: <unk> made in USA for this machine and also our cost structure can cover like as Angie said less than 15% to 20%.
Speaker Change: Higher M&A Shea than we we should consider doing manufacturing in the United States.
Speaker Change: U S.
Speaker Change: Market demand is not that high.
For us it's difficult to amortize the cost into every single unit sales machine that we don't do that so it's kind of that.
Quite uncertain, yet, but our supply chain is the best team inside the company that would like to do some pilot to wrong, which is very successful.
Speaker Change: But I think in.
Speaker Change: Future it still depends on the economics calculated together inside of the company.
Bill Popper: Bill I don't know if we answered your questions.
Speaker Change: Yes, I think so.
Speaker Change: Thank you Bill.
Bill Popper: Okay.
Speaker Change: Thank you before we move to the next question as a reminder, please limit yourself to one question.
Speaker Change: And the next question comes from the line of Nick Joseph from <unk> Securities. Please go ahead.
Okay.
Speaker Change: Thank you operator, hi, Aegean James just wanted to go back to how Youre thinking about site acquisitions, where they're not.
Speaker Change: Tariff landscape is really increasing your desire to add more sites in the U S and whether it's increasing your desire to pursue.
Speaker Change: H P C or AI kind of where do you stand there. Thank you very much.
Speaker Change: Sure.
Nick: Thank you Nick.
Speaker Change: Okay.
Speaker Change: Hi, Mike.
Speaker Change: So far I think.
Speaker Change: Other sites as fast as we are involved in.
Speaker Change: Haven't see major.
Speaker Change: Hinges in energy prices.
Speaker Change: Since have remained quite stable.
Looking ahead.
Speaker Change: I am quite optimistic.
Speaker Change: Policy changes in U S.
Speaker Change: A knock more energy to price in the future.
Speaker Change: Which could improve the outlook for <unk>.
Speaker Change: Power.
Speaker Change: A very low availability over the long term.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you.
Speaker Change: We will take our next question.
Speaker Change: Your next question comes from the line of Joe Flynn from Compass Point Research I'm trying again. Please go ahead.
Speaker Change: Hi, just based on that on that comment regarding capex spend over 400 million for ultimately just kind of wafer costs.
Speaker Change: No.
Speaker Change: Like what.
Speaker Change: With the uncertainty kind of macro environment, and the Florida, you mentioned U S customers.
Speaker Change: We're receiving strong pricing ultimately exchange for.
Speaker Change: The ability to secure higher volumes of wafers.
Speaker Change: Have you.
Speaker Change: How do you I guess.
Speaker Change: Think about those relative to each other going forward because it seems like youre still at Woodbine.
Speaker Change: What bad debt like more period, it would be the take or pay or already paid the deposit.
Speaker Change: Color that would be helpful.
Speaker Change: Oh.
Speaker Change: You're asking about.
Speaker Change: The wafer above the wafers.
Speaker Change: Our supply chain side.
Speaker Change:
Speaker Change: Yes, so yes.
Speaker Change: How do you how can you guys just continuing to spend $4 billion of wafers.
Speaker Change: But your strategy going into this year was.
Speaker Change: To increase or to add in the U S.
David: Great David.
Speaker Change: Yes.
Yes, I understand.
Speaker Change: I think.
Speaker Change: We you know we continue to maintain strong long term partnerships with our wafer foundry partners.
Speaker Change: At present.
Speaker Change: The SaaS capacity it is still manageable.
Speaker Change: And we are locking in production capacity through.
Speaker Change: Prepayments.
Speaker Change: I think as I mentioned earlier, our current wafer.
Speaker Change: Before you progress.
Speaker Change: It's sufficient to support support.
Speaker Change: Our production through Q3.
Speaker Change: Given the recent sales slowdown.
Speaker Change: Then <unk>.
Speaker Change: Expected in the beginning of this year.
Speaker Change: I think the inventory crudes actually carry offs.
Speaker Change: Two Q4.
Speaker Change: This is also helped by.
Speaker Change: Half of our <unk>.
Speaker Change: <unk> optimization efforts sentiments that we can't get more accurate.
Speaker Change: From a certain number of <unk>.
Speaker Change: Wafers.
Speaker Change: We are watching the market verticals closely.
Speaker Change: In my view, if the U S tariff process.
Speaker Change: Not not goes away.
Speaker Change: Everyone believed it is stabilized.
Speaker Change: Then the market expectations become clear.
Speaker Change: I think the U S market will recover.
Speaker Change: <unk>.
Speaker Change: The market comes back.
Speaker Change: To build comprise.
Speaker Change: Is another historical high Arctic Hospital in Ethiopia took a few months I think.
Speaker Change: I think the type of market financing channels, we will be open to our customers.
Speaker Change: There is a real trends.
Speaker Change: Mining machines products, which quickly fall short of demand and we can.
Speaker Change: We observed that conduct.
Speaker Change: Smell we will.
Speaker Change: Put more orders to our foundry partners and I think they have still have capacities.
Speaker Change: For the end of this year. Thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: There are no further questions I'd like to turn the call back to Gwyn lauber for any closing remarks.
Gwyn Lauber: Thanks, everyone for joining us today, if you have any further questions.
Gwyn Lauber: Please feel free to retail cash through the contact information on our website. Thanks very much everyone.
Gwyn Lauber: Thank you. Thank you. Please call today. Thank you everyone for attending you may now disconnect.
Gwyn Lauber: Okay.
Gwyn Lauber: Hum.
Gwyn Lauber: [music].
Gwyn Lauber: Yes.