Q3 2025 Canaan Inc Earnings Call

After managements prepared remarks, we will have a question and answer session. Please.

Please note that this event is being recorded now I'd like to hand, the comprehensive what to your speaker today Queen LABA Investor Relations for the company. Please go ahead Quinn.

Thank you operator, Hello, everyone and welcome to our earnings conference call joining us today are chairman and CEO Nangle, Zhang and our CFO, Jim James Chen.

A long vice president of capital markets, and corporate development and Qi Jong 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.

Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions.

Before we begin I would like to refer you to our safe Harbor statement in our earnings press release.

Today's call will include forward looking statements.

These statements include but are not limited to our outlook for the company and statements that estimate or project future operating results and the performance of the company. These.

Nangeng Zhang: Our gross profit showed consistent growth, with the average selling price climbing again, and our reserves of cash and digital assets increased significantly in our ending balance sheet of September. Let me give a quick summary of our financial performance. First, we delivered a total revenue reaching $150.5 million, exceeding our guidance and representing a 104% year-over-year increase. This was primarily driven by growth in our product sales of $118.6 million, surpassing the $100 million milestone for the first time in the past three years. This growth was achieved while we set a new record of 10 exahash of quarterly computing power sold. Average selling price continued rising to $11.8 per terahash per second, a new high for the past two years. After a very quiet Q2, our clients from the United States started actively placing sizable and repeating orders for the A15 series.

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 call or webcast.

Except as required by law.

These statements do not guarantee future performance and are subject to risks uncertainties and assumptions.

Please refer to the press release and the risk factors and documents, we file with the Securities and Exchange Commission, including our most recent annual report on form 20-F for information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such.

Statements.

In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance.

These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

Nangeng Zhang: Sales of North American customers contributed 31% of our total revenue in Q3. We are happy to witness the strong demand recovery of the North American market. Also, our sales of Avalon Home series generated $12.2 million in revenue during the quarter, representing a 115% quarter-over-quarter increase. This is the first time Avalon Home products have contributed over 10% of total product revenue since the launch just over a year ago. As NG said, we are cultivating the consumer market and establishing our leadership position in the newly defined household mining category. Second, our mining business also delivered another record result this quarter. Mining revenue reached $30.6 million, an all-time high, and a 241% year-over-year increase. We mined 267 Bitcoins during the quarter, representing 82% year-over-year growth.

You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, which is posted on the company's website.

With that I will now turn the call over to our chairman and CEO Mangala Jenny please.

Please go ahead.

Separately.

Hello, everyone. This SMG CLO Kenneth.

Welcome to our warnings call together with our CFO James we are calling from our Singapore headquarters to discuss our Q3 'twenty 'twenty four business results.

Let us start this with you.

Julian this third quarter, the global macro environment remains highly uncertain in particular the U S.

Yes.

This April so tariff policy increased mining costs.

In North America. However, we also saw risk.

With serious so lots of MRO market.

Well was there was a bit more clarity demand has started to recover a clear ratio ended up this quarter.

Nangeng Zhang: During the quarter, we deployed over 8,000 mining machines across our projects in the United States and other countries, expanding our total deployed hash rate by 14% from 8.15 exahash per second at the end of Q2 to 9.3 exahash per second at the end of Q3. Our installed computing power in the United States also grew by 20% from 3.66 exahash per second at the end of Q2 to 4.4 exahash per second at the end of Q3. We also strategically closed our mining operations in Kazakhstan and initiated a small-scale project in Malaysia. Next, our profitability continued to improve this quarter. Gross profit reached $16.6 million, up 78.6% quarter-over-quarter, marking a significant turnaround from a gross loss of $21.5 million in the same period last year. Product gross margin reached 17% this quarter.

With corn prices increased from approximately 107 southern as of end of June and about 114th Sullivan at end of September.

This show a record increase in total global half rate, which rose from 846 ex hedge per second at the end of Q2 to a solid 41 extra head for a second.

End of Q3.

Uh huh.

Accompanied by.

In the third quarter, the global macro environment remains highly uncertain in particular. The US are receiving so tariffs policy, increased money cost in North America. However, we also sold the resilience of North

Market.

Significant rise in mind with difficulty.

It's growing.

Okay.

Globally, the mining industry is facing higher operational challenges.

Uh, once there was a bit more uh Clarity demand started to recover clearly during the this quarter,

Despite the complex external environment, we delivered results that exceeded expectations.

Bitcoin price increased from approximately $107,000 at the end of June to about $114,000 at the end of September.

Total revenue for the quarter exceeded.

150 million U S dollars.

52% quarter over quarter under the 104.

Four 4%.

Year over year.

Uh, this show a rapid increase in total Global heart rate, which shows from 8462 at the end of Q2 to 1,041 exhaust per second. And at the end of Q3,

Nangeng Zhang: Both gross profit and margin continued their growth in Q3, extending the upward trajectory and reinforcing the positive trend. Our Avalon Home series generated nearly $4 million in gross profit, with a gross margin of approximately 33%. The Avalon Home series accounted for around 10.3% of product revenue, and it contributed 20% of the product's gross profit. The Home series has already become a stable revenue pillar, and a recognized gross profit contributor. Last but not least, our total cryptocurrency treasury reached approximately 1,582 Bitcoin and 2,803 Ethereum, with an estimated market value of approximately $189 million at the end of Q3. Our unrealized holdover gain was approximately $87 million, reflecting the appreciation in value of the digital assets accumulated from mining and other operations. As of 31 October 2023, our total Bitcoin treasury increased to 1,610, as previously disclosed in our monthly report.

The piece of our guidance range of <unk>.

uh,

125 million too.

$145 million gross profit reached.

16, one six.

Media U S dollars.

Higher than nine $3 million reported in Q2.

Accompanied by a significant rise. In mining difficulty, we scrolling energy, uh, competition globally. The money industry is facing higher. Operational challenges,

This improvement in the revenue and gross profit reflect our rapid response to the market.

despite the complex external environments, we deliver the results that exceeded expectations

Demand and ongoing optimization of global mining operations.

Total revenue for the quarter exceeded $150 million.

Supported by a strong sales and revenue momentum our cash balance at the end of the quarter increased to $119 million.

Uh, up 50.2% quarter-over-quarter and 1,004.4%.

Uh, year over year.

Representing an 80.9.

9% sequential increase.

And we beat our guidance range of $125 million to $145 million.

In mining machines House, we delivered a record high of 10 extra head protection of computing power in Q3.

Gross profit reached, uh, 16.6.

55, 6% sequentially and 37, 7% year over year.

Uh, million U.S. dollars, much higher than the 9.3%.

Our average selling price increased 33.8% year over year to 11.8 U S dollars per taro hedge.

In the revenue and profit reflect our rapid response to the market, uh, demand and ongoing optimization of global money operations.

That's part a.

Slightly a slight rise in cost.

Due to the changes in international trade policies during.

Supported by strong sales and revenue, our cash balance at the end of the quarter increased to $119 million.

Nangeng Zhang: In early November, we further strengthened our digital asset portfolio by purchasing another 100 Bitcoin. Turning to expenses, our operating expenses totaled approximately $40.5 million. We recorded $1.5 million in one-time expenses relating to the operational efficiency initiatives, including organizational optimization, travel control measures, and other related items. In addition, we recorded $1.2 million in impairments related to mining machines deployed in Kazakhstan. By the end of Q3, the price of Bitcoin increased to around $113,000 versus around $107,000 at the end of Q2. The price of Ethereum increased to around $4,100 at the end of Q3 versus around $2,500 at the end of Q2. These price appreciations resulted in an aggregate unrealized fair value gain of $5.7 million on our digital asset holdings.

During this quarter, we achieved product gross margin of approximately 17%.

9% screenshot increase.

We continue to serve a strong heartbeat demand in Asia and also captured a recovering demand in North America.

in money machine sales, we delivered a record high of

Consequently during this quarter, we secured large orders from well known customers in the region.

10x hypers of computing power. In Q3, 55.6% secretly and the 37.7% year-over-year.

Including with Fury Stockbrokers spark and Luxor in early October we signed a purchase agreement for over 50000, a 15 pro models with U S based monitor client.

Average selling price increased 33.8% year-over-year to $11.80 per 10 hashes.

This highlights growing.

The explanation our product performance quality and the service by North America institutional customers.

Uh, despite a slight rise in cost per terahash due to the changes in international trade policies.

During this quarter, we achieved a product growth margin of approximately 17%.

In the consumer grade mining machine market, our out of home series continue to lead in this emerging space.

We continue to serve a strong heart rate demand in Asia and also captured the recurring demand in North America.

In additional to our regular marketing and promotional activities.

We have also included home servicing our open source code.

Notably during this quarter. We secure large orders from well-known customers in the region.

Program, we are actively growing our user and developer community and expanding our brand influence.

At the same time, we are exploring new applications of <unk>.

Nangeng Zhang: A non-cash change in fair value of preferred shares impacted our Q3 bottom line by $9.5 million. This included $5.4 million from the Series A-1 preferred shares, which were fully converted during the quarter, and another $4.0 million from Series A preferred shares, which were fully converted in early October. To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures. With all preferred shares now fully converted, we expect Q4 to include a final impact related to the change in fair value of these instruments. Benefiting from strong top-line growth, improved margins, and firm cost discipline, we delivered a positive adjusted EBITDA of $2.8 million in Q3.

Uh, including bit Fury, Cyborg and Spark and the loser in early October, we signed a purchase agreement for over 50,000. A15 Pro Models with a us-based minor client.

Home series in smartphone scenarios currently.

Developing software to make our <unk>.

<unk> compatible with.

This highlights the growing definition of our product performance, quality, and service by our American institutional customers.

Matter the Ministry in protocol.

<unk> standard for a smart home devices.

In terms of consumer growth product sales, we TD words 40 installed in units.

In the consumer-grade mining machine market, our home series continues to lead in this emerging space.

<unk> home service in Q3 generating over tour.

Meaning U S. Dollar in revenue a sequential increase of 116, 3% to Avalon Q model was a top performer this quarter.

In addition to regular marketing and promotional activities, we have also included the Home Series in our open-source code program. We are actively growing our user and developer community and expanding our brand influencer.

By supporting scale of cells.

Through channel partners.

The home service achieved nearly $4 million in gross profit with a solid gross margin of around 33%.

At the same time, we are exploring new locations of the uh Home Series in Smart Home scenarios. Currently. We are developing software to make our products uh, compatible with uh,

Overall, our total product revenue reached.

Matter is the mainstream protocol standard for smart home devices.

<unk> hundred $18 $6 million these gross profit close to.

Nangeng Zhang: Our net loss per ADS narrowed to just $0.05 versus $0.27 in the same period last year, demonstrating continued momentum toward profitability. Turning to our balance sheet and cash flow, we generated a net cash inflow of $53 million in Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past two years, and supplemented by approximately $10 million in export VAT refunds. These inflows fully converted the quarter's major cash outflows, including $56 million in waiver prepayments and $90 million for production and operations. As a result, our cash balance increased to $119 million at quarter end. Now, moving to our contract liability, the balance of contract advances reached nearly $87 million as of this quarter end, over 85% contributed by North American clients.

$20 million in Q3, the Avalon home serious contributed 10 three.

In term of consumer grade product sales. We delivered, uh, 14,000 units of the a home Series in Q3 generating over uh 12.

3% of total product revenue and about 20% product gross profit based on what you are seeing.

Competition.

Meeting US dollar in revenue, a screen showed an increase of 115.3%. The Avalon Q model was the top performer this quarter by supporting scale sales through channel partners.

Consumer money market remains relatively healthy we plan to maintain solid gross margins, which.

Launching.

Our new products and expanding channel coverage to drive scale.

Uh the Home Series achieved nearly uh 4 million US Dollars uh in gross profit with a solid growth margin of around 33%.

Turning to mining operations testified logical increase in mining difficulty during this quarter our disciplined.

Simpson allow us to steadily advance.

Patrick development.

In addition, an overall mining efficiency.

As a result, we generated another quarterly record of <unk>.

Overall, our total product Revenue reached, uh 118.6 million US dollars with Scrolls profit close to, um, 20 million US dollars in. Q3 the iPhone home series contributed, um, 10.3% of total product revenue and about 20% of the product growth profit.

<unk> 505.

And in U S dollars in mining revenue.

While maintaining.

Competitive.

Based on what you are seeing, the competition in the consumer money market remains relatively healthy. We plan to maintain solid gross margins, which are large.

Power costs.

In the third quarter, we added approximately one ex hedge process enough new deployed.

Uh, new products and expanding channel coverage to drive scale.

Nangeng Zhang: As of the end of Q3, we recorded account receivables of $7 million, all from the customers using Bitcoin as collateral for installment payments. We will continuously evaluate market demand and adopt corresponding credit policies with caution. Now, turning to our recent fundraising. In early November, we closed a strategic investment totaling $72 million with three top-tier institutional investors: Brevan Howard, Galaxy Digital, and Weiss Asset Management. The proceeds are intended to fund the acquisition and deployment of North American data center sites, as well as the expansion of our Bitcoin mining machine production capacity. In late October, we renewed the ATM program to broaden banking relationships and enhance our financial flexibility for future growth initiatives. Following the renewal, we sold approximately 4.8 million ADSs, raising gross proceeds of about $7.8 million, as previously reported in the monthly report.

We have capacity in North America.

Our total deployed <unk> to non <unk> III <unk> for second and third.

Turning into money operations. Uh, despite a notable increase in mining difficulty in this quarter,

Quarter, and approximately $7 eight ex hedges for second energized.

Our discipline, uh, uh, execution, uh, allows us to study the

Demand 206 T seven PTC.

Ones, uh, hash rate development, uh, analyzation, and overall money efficiency.

During this quarter.

Further contributing to our crypto assets balanced our fifth call holding reached an all time high while solid at 582.

As a result, we generated another quarterly record of uh, 30.55 uh, meaning US dollars in money Revenue, while maintaining competitive, uh, competitive, uh, Power costs.

PTC by the end of quarter, providing solid sports support for our balance sheet.

We are also actively exploring innovative mining projects this quarter.

Potter partnered with solar to deploy the machines at 20 megawatts wind power to mining facility in Texas.

Uh, in the third quarter, we added approximately 1. X was happen of newly deployed uh capacity in North America. Bringing our total deployed hash rate to 9.3 X hash per second by the end of the quarter and approximately 7.8 X, highest is per second energized.

In Canada, we worked with our local energy infrastructure partner.

Uh, we might uh, 20067 BTC during this quarter.

Pilots.

That sets converse standard stranded has trended.

Natural gas into computing power, we also supply the mining equipment for project designed to support local grid.

Nangeng Zhang: We have selected to pause further sales under the ATM for the remainder of 2025. As of the date of the earnings, we have cumulatively repurchased approximately 5.1 million ADSs for approximately $3.4 million under our share repurchase program. In the future, we plan to execute on our repurchase plan as market conditions allow us. Moving forward, as our CEO just mentioned, strategically, we will continue our technology-driven efforts with the goal of improving the efficiency of society. These efforts include the development of energy-efficient chips and systems similar to what we did in the past decade. This includes an extension of our energy operations, which leverages computing technologies. Also, on the consumer side, these efforts include Bitcoin computing and heat reuse. To better utilize our resources, we set up additional internal controls to oversee the operation of our business.

Stability.

These product Mark our first step into the energy infrastructure space.

282 hour, crypto asset balance, our Bitcoin holding reached an all-time high of 1,500, uh, 82, uh, BTC by the end of quarter, providing solid support, uh, support for our balance sheet.

Bringing with the utilization of stranded energy our long term vision is to integrate high density interruptible bitcoin mining levels.

We are also actively exploring innovative mining projects this quarter. We

Uh partner uh partnered with uh Salona to deploy machines, at a 20 megawatt. Wind powered Mining facility in Texas.

With the energy intensive AI and <unk> will close.

Building, a future, where our computing and energy infrastructure grow together.

Uh, in Canada, we worked with a local energy infrastructure partner on a pilot project that converts stranded, uh, stranded.

Entering an era in which.

<unk> AI software in the data centers will profoundly shaped daily life.

At the same time, we believe that public awareness and the demand for sustainable energy will continue to grow.

Uh, natural gas into computing power. We also, Supply, the mining equipment for, uh, project design to support local grid, uh, stability,

Uh, these projects, uh, mark our first step into the energy infrastructure space.

Throughout <unk> history.

We have had.

Cost consistent believe technology should make society more efficient today, we are seeing that vision become to mature right.

Bringing with the utilization of, uh, stranded energy. Our long-term region is to integrate high-density, interruptible Bitcoin mining loads, uh, with the energy uh, intensive AI and HPC workloads.

We have unique advantages in this transformation.

With more than a decade developing technologies that make chips in our system more energy efficient.

Uh, building a future where Computing and energy infrastructure grow together.

Nangeng Zhang: These priorities of the strategic importance will help to provide us with additional revenue visibility. We will increase the expansion of our consumer products and energy operations, at the same time, streamline existing R&D and administration cost structure. In cash flow management, we will continue to invest in R&D on new products and waivers in the supply chain, and we will also seek opportunities that will increase our energy operations around the world, as well as help our digital asset treasury to accumulate more digital assets on our balance sheet. All this will happen in a very dynamic environment. We remain cautiously optimistic as we execute on our strategy while focusing on protecting and increasing our shareholder value. We expect revenue for the fourth quarter to be in the range of $175 million to 205 million. This forecast reflects current market conditions.

Now extending these capabilities to both home use and traditional energy sector energy operators can use our computer system to ballast upgrade.

We are entering an, uh, era in which AI software and the data centers will, uh, profoundly uh, shape daily life.

Uh, at the same time, we believe that public awareness and demand for sustainable energy will continue to grow.

Improve.

Transmission efficiency and generate new revenue.

On the consumer side utilizing.

Excess heat.

From homeland, it's only the beginning overtime.

Uh, throughout Kenan's history, we have held a consistent belief that technology should make society more efficient.

Envisions his contacts expanding into broader home computing applications.

Today, we are seeing that vision begin to materialize.

For R&D, we continue to innovate and upgrade our products.

At the end of October we officially launched our next generation our <unk> service.

We have unique advantages in this transformation uh with more than a decade of developing technologies that make chips and system more energy efficient.

Eric quote a 16 ex fee model delivers 300, arrowhead perception of hash rate per unit with an industry, leading power efficiency of Torre <unk> potash. This marks the first time our.

We are now extending this capability to both home use and the traditional energy sector. Energy operators can use our computing system to balance the greatly improved transmission efficiency and generate new revenue.

And there have reached 300 terahertz level.

Clearly showcasing our strong leadership in bitcoin ASIC design.

We see improvements to production and supply chain, our global delivery system is now more flexible and resilient today, we have a manufacturing comorbidities layoffs in mainland, China, Malaysia, and the U S.

On the consumer side, uh, utilizing, uh, uh, access heat. Uh, from home mining is only the beginning over time. Uh, we envision these Concepts expanding into broader home Computing applications,

Nangeng Zhang: Actual results may vary given policy uncertainties and market volatility. This concludes our prepared remarks. We are now open for questions. Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question and one follow-up. If you have any additional questions after the Q&A session, the investor relations team will be available after the call. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your questions in English. To ask a question, please press star 11 and wait for a name to be announced. One moment for the first question. Your first question comes from the line of Mike Rondell from Northland. Please go ahead. Hey, guys.

Um, for Andy, we continue to innovate and upgrade our products.

King stimulus day, together to support delivery and after sales service for consumers worldwide.

Well it is hanson, our product and supply chain capabilities.

We have also sharpened our focus on core operations.

At the end of October, we officially launched our next generation, the Our 86 series, the Air Hood. A 16 XP model delivers 300 TH/s of hash rate per unit with an industry-leading power efficiency of 12.8 J/TH. This marks the first time our error code miner has reached the 300 TH level.

Starting this quarter, we realigned our R&D team and around.

Clearly showcasing our strong leadership in Bitcoin ASC design.

Him around projects that offer a clear revenue visibility in the strategic value.

<unk> also streamlined head count to support this forecast.

Uh, with improvements to production and supply chain, our global delivery system is now more flexible and, uh, resilient.

In addition to organizational and cost optimizations. We have we are also allocating additional resources to expand our business footprint, we have established dedicated.

Nangeng Zhang: The 50,000 machine order on the A15 Pros, can you talk a little bit about delivery timing there and gross margin on those sales? Hi. Good morning. Yeah. This order for more than 50,000 A15 Pro units is one of our most important deals this year. Under the contract, we expect to complete all deliveries by the end of 2025. So far, we have shipped a part of the orders and are progressing in the remaining production and logistics upfront. Given the size and the tight timeline of this order, and the fact that Q4 is generally a peak period for supply chain and logistics constraints, our production and operations team are working at full strength to ensure on-time delivery while maintaining product quality. At the same time, we are expecting deliveries for other customers in parallel to avoid any impact on our other long-term partners.

Today, we have manufacturing capabilities and layouts in mainland China, Malaysia, and the U.S., working seamlessly together to support delivery and after-sale service.

For consumers, worldwide.

Consumer product team to optimize product quality and accelerate product integration.

While enhancing our product and supply chain commodities, we have also sharpened our focus on core operations.

Additional.

We also are taking more resources to our halfway to finance and energy energy infrastructure in in tactics.

We see new power related opportunities in many regions from home users and small business to power.

Uh, starting this quarter, we uh, realigned our R&D team and around, uh, uh, him around the projects that offer, clear Revenue visibility and the Strategic value. We have also streamlined headcounts to support this Focus.

Utilities in Europe, and Asia customers exploring asset based grid balancing applications in North America.

<unk> energy opportunities continue to grow and with similar products now emerging globally, including the middle East.

In our digital assets test <unk> measurement, we continue to execute in our flexible strategy.

And as the third quarter, we held was solid up by 182 declines and 2008.

Energy. Energy infrastructure, um, interactives.

We see new power-related opportunities in many regions from home users and small businesses.

<unk> hundred 30 <unk>.

Sure.

In early November during a market pullback.

We stripped strategically.

<unk> acquired an additional $100 and clients as a part of crypto asset management strategy.

It's enhancing our asset allocation and the potential.

Accretively.

Yes.

To sum up Q3 was a highlight as strategy quarter.

To power uh, utility uh Utilities in Europe and Asia. Uh, customers are exploring as6 based. Great balancing applications in North America. Uh, stranded energy opportunities continue to grow with and with, uh, similar projects, uh, emerging in globally, including the Middle East.

Nangeng Zhang: This is a key task of our delivery management capabilities. It's a really hard job. Yeah. For the gross margin, yes, we have a—I think we have a positive gross margin. Yeah. Maybe I cannot tell the exact numbers. Yes, we have gross margin. Yeah. Got it. Just maybe a follow-up. Your home mining sales have done really well lately. What are the margins on that business line versus the industrial mining equipment? I think for our home mining series, in Q3, we get 33% of gross margin. By the end of this year, I think we should maintain about 30% gross margin. It is significantly higher than industrial miners. Yeah. I think the competition—yeah. Yeah. Right. I think for the home miners roadmap, we plan to launch several new products over the next 12 months.

In Kenya's development January.

We achieved strong revenue growth and improved gross profit.

We're also optimizing our business structure and organization at.

In our digital asset trustee measurement. We continue to, uh, executing our flexible strategy at the end of the short quarter, we held uh, 1,500 uh, 82 Bitcoins and uh 2,000.

At the same time, we made encouraging progress in several new areas.

830, uh, Eastern.

Looking ahead, we are fully focused on driving Q4 cells fulfilling large customer orders and working preorders for our new <unk> series at the same time, we are accelerating.

Uh, in early November during a market pullback. Uh, we stretch uh, strategically Acquired and additional 100 Bitcoins are the part of crypto assets management strategy further and enhancing our asset allocation and the potential uh liquidity.

Deployment of new lease signed.

In Norwich mining projects to further expand our mining Patrick we.

We are closely.

Warranty and the impact of U S tariff policy Mark Hood.

Uh, to Sama, uh, Q3 was a highly strategic quarter. Uh, in Kenya's development, January we achieved strong revenue growth and, uh, improved gross profit.

Liquidity conditions and the potential changes in global mining and energy regulations.

Uh, while also optimizing our business structure and the organization. Uh, at the same time we made an encouraging progress in several new areas.

All of these factors together, we remain cautiously optimistic for the fourth quarter and expect total revenue to be in the range of $175 million to $205 million. This outlook is based on.

Current market and operation operating conditions.

Actual results may vary with policy, uncertainties and market volatility.

This concludes my prepared remarks, essentially everyone now.

Nangeng Zhang: Further, about 2C, the 2C product portfolio, always consumer products need a refresh every year. We need to refresh almost all existing models in the coming year. Still, for 2026, our most important KPI for the home series is still go mainstream and break out of the crypto niche. Please give us some more time. Yeah. Thank you. Got it. Okay. Thank you. Thank you, Mike. Thank you for the questions. One moment for the next question. Next question comes from the line of Nick Chiles from B. Riley. Please go ahead. Thank you, operator. Good morning or good evening, everyone. This is Henry Hurl on for Nick Chiles. For my first question, when is the earliest you guys could ship your new A16 models, and at what scale, and what are your expectations on price and margin, respectively? Thanks. Yeah.

Ill hand, it over to our CFO James.

Looking ahead we are fully focused on drawing uh Q4 sells fulfilling, large customer orders and uh converting pre-orders for our new A6 series. At the same time, we are accelerating the uh, deployments of newly sound. Yeah, you know, uh, innovate mining products to further, expand our money. Hash rate, we are closely, uh, monitoring the impact of us. Terrorists policy marker, uh, liquidity conditions and the potential changes in global Mining and energy, uh, regulations.

Teresa.

Thank you Angie and good day, everyone. This is James CFO, Cana and very glad to share our Q3 financial results with you. Even today, we are witnessing bitcoin prices under big pressure.

Taking all of these factors together, we remain cautiously optimistic for the fourth quarter and expect total revenue to be in the range of $175 million.

As <unk> stated at the start of the call the macroeconomic environment in Q3 was highly uncertain.

To $205 million. This outlook is based on current market and operating conditions.

Reciprocal tariff policies from the United States, adding the mining costs in North America.

And the actual results May Vary with policy and cities and markets, uh, voluntarily.

Global network hash rate growth continuously outpaced declines price appreciation. This all led to increased mining difficulty and intensified operational challenges across the industry.

Uh, this concludes my prepared remarks. Uh, thank you, everyone. Uh, now I will hand it over to our several games.

Despite market volatility we delivered strong results this quarter, our revenue exceeded our own expectations. Our gross profit showed a consistent growth with the average selling price climbing.

Thank you, G, and good day, everyone. This is James Cheng, CFO of Canaan. I'm very glad to share our Q3 financial results with you. Even today, we are witnessing Bitcoin prices under significant pressure.

Again in our reserves of cash and digital assets increased significantly ending balance sheet of September let.

As NG stated at the start of the call, the macroeconomic environment in Q3 was highly uncertain.

Nangeng Zhang: The A16 series was officially launched at the end of October. Now we are at the first batch sample production, and we finished the testing stage. According to our plan, we will start shipping samples to selected customers by the end of this month for their testing and evaluation. This is consistent with our Euro launch strategy. We expect to begin our volume shipments in the fourth quarter of 2026, and we will adjust production and delivery pace dynamically based on the presale and customer feedback. For pricing, we will adhere to market-driven principles, taking into supply-demand account, the competitive demand dynamics, and the customer needs. At first, I think as a new flagship product, A16 delivers major performance. The air-cooled A16 XP can offer over 300 terahash at 12.8 joules per terahash, which is really industry-leading.

Receive protocol tariff policies from the United States added mining costs in North America.

Let me give a quick summary of our financial performance.

First we delivered a total revenue, reaching $155 million exceeding our guidance and representing 100 zero, 4% year over year increase this was primarily driven by growth in our product sales of 118 6 million.

Global network hash rate growth continuously outpaced Bitcoin's price appreciation.

This all led to increased mining difficulty and intensified operational challenges across the industry.

Yes.

Surpassing the $100 million milestone for the first time in the past three years.

Despite market volatility, we delivered strong results. This quarter, our revenue exceeded our own expectations, our gross profit showed consistent growth, and the average selling price climbed.

This growth was achieved while we set a new record of 10 X the Hush of quarterly computing power sold.

And average selling price continuing to rising to 11 $8 per <unk>, a new high for the past two years.

Uh, again, our reserves of cash and digital assets increased significantly in our ending balance sheet of September.

Let me give a quick summary of our financial performance.

After their required Q2, our clients from the United States, starting to actively placing sizeable and repeating orders for the <unk> service.

Sales of North American customers contributed 31% of our total revenue in quarter. Three we are happy to witness the strong demand recovery of the North American market.

First, we delivered a total revenue of $150.5 million, exceeding our guidance and representing a 100,044 percent year-over-year increase. This was primarily driven by growth in our product sales of $118.6 million, surpassing the $100 million milestone for the first time in the past three years.

Also our sales of Avenova Holmes Cra's generated a $12 $2 million in revenue during the quarter, representing a 115% quarter over quarter increase. This is the first time Avalon home products have contributed over 10% of total <unk>.

Of quarterly computing, power sold.

An average.

Nangeng Zhang: I think it will provide higher returns per unit. Also, we can share these benefits with our customers. Yeah. About margins, based on the current wafer material and the manufacturing cost, the per terahash cost for A16 is under control, and it is in our expectations. Also, the yield is acceptable. I think the product's pricing power will help us to offset some cost pressures. Sure, the A16 cost per hash is higher than A15. Yeah. Let's see. Thank you. Yeah. For my follow-up, I wanted to get your guys' thoughts on the fact that several public Bitcoin miners have been very vocal about winding down their mining operations in the medium term, and at the same time, supply of ASICs appears to be increasing.

Product revenue since the launch just over a year ago as.

As Angie said, we are cultivating the consumer market and establishing our leadership position in a newly defined household mining category.

After a very required Q2, our clients from the United States started actively placing sizable and repeating orders for the A15 series.

Sales of North American, customers contributed 31% of our total revenue in quarter 3.

Second our mining business also delivered another record result, this quarter mining revenue reached $36 million.

We are happy to witness the strong demand recovery of the North American Market.

All time high and our 241% year over year increase we mined 267 clients during the quarter, representing 82% year over year growth during the quarter, we deployed over 8000 mining machines across our projects in the United States and other.

Our sales of Avalon Home products generated $12.2 million in revenue during the quarter, representing a 115% quarter-over-quarter increase. This is the first time Avalon Home products have contributed over 10% of total product revenue since the launch just over a year ago.

Countries, expanding our total deploy the hash rates by 14% from $8. One five <unk> per second at the end of quarter 2293 extra harsh per second at the end of quarter three our in store the computing power in the United States also grew by 20%.

As NG said, we are cultivating the consumer market and establishing our leadership position in the newly. Defined household mining categories.

From $3 66, <unk> per second at the end of quarter 2244, <unk> per second at the end of quarter three.

Nangeng Zhang: What do you guys think the market impact will be, and then how is Canaan responding to this trend? Yeah. I think for this question, yes, we observe that some listed miners, maybe they are facing balance sheet pressure, share price performance issues, and a desire to pivot towards AI HPC, have publicly started their intention to reduce Bitcoin mining over the medium term. Yeah. From my perspective, firstly, I think the slowdown, I do not think the global hash rate will slow down in the near term. Also, the AI HPC deployment still needs some time. By our investigation into the energy market in the US, the AI HPC applications need high-quality energy, electricity, which is the high quality always means higher cost. I think fundamentally, in the next one or two years, the power that is suitable for mining is not.

We also strategically closed our mining operations in Kazakhstan, and initiated a small scale project in Malaysia.

Next our profitability continued to improve this quarter gross profit reached $16 $6 million up 78, 6% quarter over quarter, marking a significant turnaround from a gross loss of $21 5 million in the same period.

Last year.

Product gross margin reached 17% this quarter, both gross profit and margin continued their growth in quarter, three extending the upward trajectory and reinforcing the positive trend.

Second, our mining business also delivered, another record result, this quarter mining Revenue reached 30.6 million an all-time high and a 241% year-over-year increase. We mined 267 Bitcoins during the quarter representing 82% year-over-year growth during the quarter we deployed over 8,000 mining machines, across our projects in the United States and other countries expanding our total deployed. Hash rate by 14% from 8.15 extra hash per second, at the end of quarter 2 to 9.3 X hash per second, at the end of quarter 3, our installed, the computing power in the United States. Also, grew by 20% from 3.66, X, a hash, per second. At the end of quarter 2 to 4.4 X, hash per second, at the end of quarter 3,

Our Avenova Holmes Cra's generated nearly $4 million in gross profit with a gross margin of approximately 33%.

We also strategically closed our mining operations in Kazakhstan and initiated a small-scale project in Malaysia.

The Avalon home theories accounted for around 10, 3% of product revenue and it contributed 20% of the product gross profit.

<unk> has already become a stable revenue pillar and I recognize that gross profit contributor.

Next, our profitability continued to improve this quarter gross profits reached 16.6 million up 78.6% quarter over quarter marking a significant turnaround from a gross loss of 21.5 million in the same period last year.

Last but not least our total crypto currency term reached approximately 1580 to get coins and 2800 <unk> three is a rems.

Product gross margin reached 17% this quarter. Both gross profit and margin continued their growth in Q3, extending the upward trajectory and reinforcing the positive trend.

With an estimated market value.

Approximately $189 million at the end of Q3, our I realize the wholesale again was approximately $87 million.

Our Avalon Home Series generated nearly $4 million in gross profit, with a gross margin of approximately 33%.

Nangeng Zhang: The competition with the energy used for AI HPC is not the same electricity. I know our customer, including ourselves, is thinking about how can build AI-ready mining facilities for the future. At this stage, deploying more Bitcoin miners is still the best way to allocate energy today and generate revenues from this date, not waiting for another one or two or three years. I think still the things are hard to foresee for long term. We focus on, yeah, because there's no answer for three or five years later, now we are focused on cooperating with our partners to fulfill their requirements. Also, we are trying to find more energy resources in the US and building our own mining sites today. Maybe we should have potential possibilities to transfer to the AI infrastructure in the future.

Reflecting the appreciation in value of the digital assets accumulated from mining and other operations.

As of October 31, our total paid contrary increased to 1610.

The Avalon Home Series accounted for around 10.3% of product revenue and contributed 20% of the product's gross profit. The Home Series has already become a stable revenue pillar and a recognized gross profit contributor.

As previously disclosed in our monthly report.

In early November we further strengthened our digital assets portfolio by purchasing another 100 a bit coin.

Last but not least, our total cryptocurrency Cherry reached approximately 1,582 Bitcoins and 2,800 O3 Israel's.

Turning to expenses operating expenses totaled approximately $45 million, we recorded a $1 5 million in one time expenses relating to the operational efficiency initiatives, including organizational optimization travel.

With an estimated market value of approximately $189 million at the end of Q3, our unrealized hold gain was approximately $87 million.

Reflecting the appreciation in value of the digital assets accumulated from Mining and other operations.

<unk> measures and other related items in.

In addition, we recorded a $1 $2 million the impairment related to mining machines deployed in covenants Tam.

As of October 31st, our total Bitcoin cherry increased to 1,610, as previously disclosed in our monthly report.

By the end of quarter three the price of bitcoin increased to around $113000 versus around 100 zero 7000 at the end of quarter two the price of the salary.

In early November, we further strengthened our digital assets portfolio by purchasing another 100 Bitcoin.

Increased to around the 4100 at the end of quarter three versus around 2500 at the end of quarter. Two this price appreciations resulted in an aggregate our realized fair value gain of $5 $7 million on our digital asset holdings.

Turning to expenses, our operating expenses totaled approximately $40.5 million.

We recorded a 1.5 million in 1 time expenses relating to the operational efficiency initiatives.

Including organizational optimization, travel control measures, and other related items.

Nangeng Zhang: This is what I personally observed in the past maybe six months. Thank you. Great. Thank you, and continued best of luck. Thank you. Thank you for the questions. Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead. Thank you, and congratulations on the strong results. Your guidance for $190 million for the fourth quarter is impressive. Do you have orders also scheduled out into the first quarter? I guess, what kind of visibility are your customers giving you? Thank you, Kevin. I think quarter four is a peak quarter in terms of seasonality. We provided the guidance in a very optimistic way, and also, we have already collected some of the orders. We try our best to deliver in quarter four.

A noncash change in fair value of preferred shares impacted our Q3 bottom line by $9 $5 million. This.

Related to mining machines deployed in Kazakhstan.

This included a $5 $4 million from the series a minus one preferred shares which will fully converted during the quarter.

And another $4.0 million from zero.

Eight refer to shares which were fully converted in early October.

To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures with all preferred shares now fully converted we expect Q4 to include a final impact related to the <unk>.

By the end of quarter 3, the price of Bitcoin increased to around 11300 versus around, 100 07000 at the end of quarter 2, the price of a sehring, uh, increased to around 4,100 at the end of quarter, 3 versus around, 2,500 at the end of quarter 2. This price appreciation is resulted in an aggregate unrealized fair value gain of 5.7 million on our digital asset Holdings.

<unk> in fair value of these instruments.

A non-cash change in the fair value of preferred shares impacted our Q3 bottom line by $9.5 million.

Benefiting from strong top line growth improved margins and affirmed cost discipline, we delivered a positive adjusted EBITDA of $2 $8 million in quarter three.

This included the 5.4 million from the series, A minus 1 preferred shares which were fully converted during the quarter.

Nangeng Zhang: Looks to me, Q1 traditionally is the low season because there is New Year and the Chinese New Year together in the western part of the world and the eastern part of the world, both having all kinds of holidays. The global logistics supply chain is not in the normal shape. I do not personally see another peak time for Q1. I think the revenue could go down a little bit. We will try our best to deliver Q4 first, and then we predict Q1 later when we have a clear understanding about the demand. Also, recently, the Bitcoin price is not in a good shape. It is under turbulence. Some of the customers, especially the smaller ones, tend to be more cautious and hesitate to make up their decisions immediately.

Our net loss per avs narrowed to just <unk>.

And another $4.0 million from the zero series, a preferred shares which were fully converted in early October.

U S dollar versus 2007.

In the same period last year, demonstrating continued momentum toward profitability.

To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures.

Turning to our balance sheet and cash flow, we generated a net cash inflow of $53 million. In Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past two years and assembly.

With all preferred shares now fully converted, we expect Q4 to include our final impact related to the change in fair value of this instrument.

<unk> by approximately $10 million in export.

<unk>.

These inflows are fully converted to the quarter's major cash outflows, including $56 million in wafer prepayments and a $19 million for production and operations.

As a result, our cash balance increased to $119 million at quarter end.

Benefiting from strong Topline, growth improved margins and the first cost discipline. We delivered a positive, adjusted ebit of 2.8 million in quarter 3, our net loss per ads, narrowed to just 5 cents US dollar versus 27 cents in the same period last year demonstrating continued momentum toward the profitability.

Nangeng Zhang: That will also have a kind of impact on Q1 orders. We will try to make a flexible supply. Anyway, currently, I think the demand is still higher than supply. We're just focusing on Q4 delivery first. Let's see how it goes in Q1. Maybe we can balance between the sales and also the self-mining side. If we do have some inventory, we can allocate to self-mining in the United States. That will also be a long-term strategical goal for us. Yeah. I think that's my two cents, Kevin. Thank you, James. That's very good detail. Thanks. Maybe you did note that there's a rebound in demand in the US. Is the US market, would you say, less sensitive to the price of Bitcoin? Sorry. Kevin, again? You mean the—Oh, okay. Yeah.

Now moving to our contra liability the balance of contract advances reached nearly $87 million as of this quarter and over 85%.

Turning to our balance sheet and cash flow, we generated a net cash inflow of $53 million in Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past 2 years.

Contributed by North American clients.

As of the end of quarter, three we recorded account receivables of $7 million or from the customers using big clients as collateral for installment payments.

and supplemented by approximately $10 million in export VAT refunds.

This inflow was fully converted. The quarter's major cash outflows include $56 million in wafer prepayments.

We will continuously evaluate and market demand and adopt corresponding credit policies with caution.

And $90 million for production and operations.

Now turning to our recent fund raising in early November we closed our strategic investments totaling $72 million with three top tier institutional investors Brevan, Howard Galaxy digital and waste asset management. The proceeds are intended to fund.

As a result, our cash balance increased to $119 million at quarter-end.

Now, moving to our country liability, the balance of contra advances reached nearly $87 million as of this quarter end, over 85%, contributed by North American clients.

The acquisition and deployment.

<unk>.

North American data center sites as well as the expansion of our bitcoin mining machine production capacity in.

As of the end of quarter 3, we recorded a account receivables of 7 million or from the customers using Bitcoins as collateral for installment payments.

In late October we renewed at the ATM program to broaden banking relationships and enhanced our financial flexibility for future growth initiatives.

Nangeng Zhang: You had mentioned that with the price of Bitcoin being down in just very recent times, last few days, and you'd mentioned that would be sensitive to the demand for mining machines. I was just wondering if the rebound we've seen in the US, I think you said it was 31% of revenue in the third quarter, whether that continues even with, I guess, is it less sensitive in North America to prices of Bitcoin versus the rest of the world? Yeah. Kevin, looks to me, in my observation, North America is now the leading area for the global mining industry. The whole total hash rate in North America is some percentage between 35% to 40% globally. There are around 20 listed companies in North America doing mining. They are kind of institutional players.

We will continuously evaluate market demand and adopt corresponding credit policies with caution.

Following the renewal we sold approximately $4 8 million of assets raising gross proceeds of about seven $8 million as previously reported in our monthly report.

We have selected to pause further sales under the ATM for the remainder of 2025.

Now, turning to our recent founder, raising in early November, we closed a Strategic investment totaling, 72 million with 3 top tier, institutional investors bribing Howard Galaxy digital and waste Asset Management. The proceeds are intended to fund the acquisition and deployment.

As of the date of the earnings we have cumulatively repurchased approximately $5 1 million.

Of our North American data center sites, as well as the expansion of our Bitcoin mining machine production capacity.

Assets for approximately $3 $4 million under our share repurchase program in the future we plan to execute on our repurchase plan as market conditions allow us.

In late October, we renewed the ATM program to broaden banking relationships and enhance our financial flexibility for future growth initiatives.

Moving forward as our CEO just mentioned strategically we will continue our technology driven efforts with the goal of <unk>.

Following the renewal, we sold approximately 4.8 million ADSs, raising gross proceeds of about $7.8 million, as previously reported in the monthly report.

We have selected 2.

The efficiency of society.

These efforts include the development of energy efficient chips and the systems similar to what we did in the past decade.

Posts further, uh, sales under the ATM. For the remainder of 2025.

Nangeng Zhang: They are more professional building up the sites, the electricity facilities, and eventually becoming mining sites. They have their schedule. It's not easy for them to stop their own schedule even when Bitcoin price has some short-term turbulence. For them, they look at long-term goals. That's why they are not very price-sensitive in very short-term time. We observed the tariff did have a kind of impact on their cost structure. That increased their mining cost. That means some of the miners, especially the smaller ones, even if they are sitting in the United States with a consistent policy advantage, they could still withdraw from Bitcoin mining to other activities. They may want to change their miners' purchase plan in Q4. I should say US customers are most important customers for us. We observed their worries in short term, but we also respect their long-term strategic goals.

This includes an expansion of our energy operations, which Leverages computing technologies also on the consumer side. These efforts include a bitcoin computing and heat reuse.

As of the date of the earnings, we have accumulated approximately 5.1 million ADSs, repurchased for approximately $3.4 million.

Well.

To better utilize our resources, we setup additional internal controls to oversee the operation of our business.

In the future, we plan to execute on our repurchase plan as market conditions allow us.

This priority is of the strategically important and it will help to provide us with additional revenue visibility we.

Moving forward, as our CEO just mentioned strategically, we will continue our technology-driven efforts with the goal of improving the efficiency of society.

We'll increase the expansion of our consumer products and energy operation.

These efforts include the development of energy-efficient chips and systems, similar to what we did in the past decade.

But at the same time streamline existing R&D and administration cost structure.

This includes an extension of our energy operations, which leverages Computing Technologies.

In cash flow management, we will continue to invest in R&D on new products and wafers in the supply chain and we will also seek opportunities that will increase our energy operations around the world as well as help our digital assets ferry to accumulate more.

Also, on the consumer side, this efforts include a Bitcoin Computing and heat reuse.

To better utilize our resources, we set up additional internal controls to oversee the operation of our business.

Digital assets on our balance sheet.

All of this will happen in a very dynamic environment, we remain cautiously optimistic as we execute on our strategy, while focusing on protecting and increasing our shareholder value.

These priorities are of strategic importance and will help to provide us with additional revenue visibility.

Nangeng Zhang: We try our best to support their strategic goals to get realized. That's something we do together with them. Yeah. I think for looking at this year, especially for the market, initial expected is the demand will flow rapidly into North America. However, changes in tariff policy led to a significant contraction in North America demand from late Q1 to Q2. At that time, I think everyone is very nervous. HR demand ramped up quickly and partly offset the weakness in North America. In Q3 and Q4, North America customers showed very strong resilience. Together, we adapted to the new trade environment, and the demand there has recovered quickly since Q3. In fact, for the potential already delivered in Q4, North America has again accounted for more than 50%. Bitcoin price volatility is constant.

We will increase the expansion of our consumer products and energy operation.

We expect revenue for the fourth quarter to be in the range of $175 million to 200 zero $5 million. This forecast to reflect current market conditions actual results may vary given policy uncertainties and market volatility.

But at the same time, streamline existing R&D and administration cost structure.

This concludes our prepared remarks, we are now open for questions. Thank you. We will now begin the question and answer session as a courtesy to other investor and analysts who may wish to ask a question. Please limit yourself to one question and one follow up.

In cash flow management. We will continue to invest in R&D or new products and wafers in the supply chain. And we will also seek opportunities that will increase our energy operations around the world. As well as help our digital assets, try to accumulate more digital assets on our balance sheet,

Any additional questions. After the Q&A session the Investor relations team will be available after the call.

All this will happen in a very dynamic environment. We remain cautiously optimistic as we execute on our strategy while focusing on protecting and increasing our shareholder value.

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

To ask a question. Please press star one one and wait for a name to be announced.

One moment for the first question.

We expect revenue for the fourth quarter to be in the range of $175 million to $200 million. This forecast reflects current market conditions. Actual results may vary given policy uncertainties and market volatility.

Our first question comes from the line of Mike Grondahl from Northland. Please go ahead.

This concludes our prepared remarks.

Hey, guys.

The 50000.

Seen order on that.

<unk> pros can you talk a little bit about delivery timing, there and gross margin on those sales.

Nangeng Zhang: Sharp moves over a few days or weeks do cause some customers, especially small customers, to pause and reassess. Over multi-year timeframes, I think the impact on underlying demand trend is limited. I highly disagree with running a business by counting numbers day by day. This is my personal opinion. Thank you. Thank you very much. Thank you for the question. Thank you, Kevin. Thank you. Our next question comes from the line of Michael Donovan from Compass Point. Please go ahead. Thank you, operator. Hi, NG and James. How much inventory do you have left for the A15 series? For 2025 guidance, what mix do you expect between A15 orders and pre-orders for A16s? Thank you for the question, Michael.

We are now open for questions. Thank you. We will now begin the question and answer session as a courtesy to other investor and analysts who may wish to ask a question. Please leave me yourself to 1 questions and 1 follow-up. If you have any additional questions after the Q&A session, the investor relations team will be available after the call.

Hi.

Good morning.

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.

Yeah.

This order for.

To ask a question. Please press star, 1 1 and wait for a name to be announced.

More than 50 about.

1 moment for the first question.

It's important and this is one of our most important deals.

Your first question comes from the line of my rondelle from Northland. Please go ahead.

Year.

So under the contract we expect to complete OTT winners by the end of 2000.

Hey guys. Um

<unk>.

So far we have shipped a part of the odors and progressing in the remaining production.

We're on the A15 Pros. Can you talk a little bit about delivery timing there and gross margin on those sales?

And logistics.

Pat.

Given the size and the part time lot of these older.

uh, hi, uh, good morning uh,

And the fact that Q4 is.

Generally our peak period for supply and logistics.

Cost trends.

Our production group.

<unk> team working at full strength to ensure on time delivery.

Nangeng Zhang: I think our inventory at the end of Q3 is like $200 million, including some of the raw materials like wafers, like other components. It mainly reflects the strong demand in Q4. You have already known we got the big order, around 50,000 units to the United States. We have to prepare the inventory. Other than that, if we digest the inventory in Q4, I don't think our inventory level will be that high. In Q1, we will see a lower inventory level for A15. That's because we are expecting the uncertainties of the market demand in Q1. For A16, I think it's mainly Q3 to be the mass delivery. I think the early delivery could be late Q2. In the transition, we will continue to produce A15 and make it better and better.

Yeah. Um, you know, this order for, uh, more than 50,000 A154 units, uh, is one of our most important deals, uh, this year. Uh, so under the contract, we expect to, uh, complete all delivery.

While maintaining product quality.

<unk>.

Also at the same time, we are.

Expecting deliveries for Adler.

By the end of, uh, 2025. Uh, so far, we have shipped a part of the orders and, uh, progressing in the remaining, uh, production,

Customers.

Paolo.

To avoid any impact on.

Uh, and uh, logistics, uh, as planned.

um,

Our long term other long term partners.

This is a key task for us.

Our delivery management capabilities, so really hard rock.

Yes, so for the.

Gross margin, yes, we have.

I think we have.

Positive gross margin yes.

Cannot have the exact numbers.

We have broken ground.

Yes.

Got it and then just maybe a follow up.

Your whole mining sales.

Have done really well lately.

What are the margins on that business line versus the industrial mining equipment.

Our think you'll know.

For our.

Uh, this is the, a key test of uh, our delivery management Commodities as a really hard job.

uh,

Home.

Homerun serious.

In quarter three we get.

33% of gross margin.

Nangeng Zhang: I think that's the plan. Did I answer your question, Michael? Yeah, you did, James. I appreciate that. I guess for my next question, can you expand a bit more on the pilot projects that you have, the 2.5 megawatts in Alberta, Canada, and 4.5 megawatts in Japan? What are the growth opportunities in those two countries? Yeah. I think we are running several similar pilot projects globally. I think this includes Japan, Canada, US, as well as some small projects ongoing in Europe and other Asian countries. Since these are pilots, our primary goal is to validate the technical approach and the business model rather than maximize the early-stage financial returns. Yes, it's thanks to the use of transgas and energy. The power cost for these pilot projects is relatively low, and the project-level gross margins are decent. Like most mining operations, meaningful economic benefits ultimately require scale.

And by the end of this year I think we should.

Yeah. So, uh, for the uh gross margin. Yes. We have a uh, I think we have a, a positive gross margin. Yeah. But uh, maybe I can cannot tell the exact numbers. Uh, yes. We have close to 1.

Yeah.

To maintain.

30% about 30% gross margin.

Got it. And then just maybe a follow-up.

Your home mining sales.

It is significantly higher than industrial monitors.

Uh, I have done really well lately.

Sure.

Yes.

The competition.

What are the margins on that business line versus the industrial mining equipment?

Yes.

So.

Yes so.

For I think for the home.

uh, I I think, you know, uh, for our, um,

Others.

Home. Uh,

Road map, we plan to launch several new products over the next 12 months.

Home. Uh, series. Uh,

And.

Further.

It's about to see exclusive product portfolio always pursue.

<unk> products, neither refresh every year, so we need to refresh almost always boosting models.

In Q3, we get, uh, 33%, of course, margin and, uh, by the end of this year, I think we should, uh, uh maintain, uh, about 30% gross margin.

uh,

The.

It is significantly higher than industrial standards.

Coming year so.

But steel for 2020 states, our most important kpis for the <unk> deal.

Yeah. Uh, yes. I think the competition... Yeah, yeah, right. So, uh,

It's still co ministry and breakout of the crypto in each niche. So please give us some some somewhat higher yes.

yeah, so uh, for I think for the home, uh, miners, uh,

Roadmap: We plan to launch several new products over the next 12 months.

Got it okay. Thank you. Thank you Mike.

and, uh, you know, further uh, compete, uh,

Thank you for the question one moment for the next question.

Next question comes from the line on Nick Charles from B Riley. Please go ahead.

About 2C. You know the 2C products portfolio uh always uh consumer products. Uh need a refresh every year.

Thank you operator, and good morning, or good evening, everyone. This is Henry to curl on for Nick Childs.

so, uh, we need to refresh almost all existing models, uh, in the

So for my first question when is the earliest you guys could ship your new <unk> models and at what scale.

Nangeng Zhang: Yeah. Based on the current results, we believe these pilots all have the potential for scale-up. It is very important to remember that power and gas infrastructure are very, very traditional, long-cycle industries. Building trust and proving out a new model takes time and patience. Our strategy is to run the pilots in a stable way, cement the partnerships, and then look at scaling to larger megawatt levels at the right time. For example, the Canada stranded gas project, there are very high possibilities to scale up to 20 megawatts in the middle of next year. Also, we can do more, like I just mentioned, the AI-ready mining sites, mining farms in the US with our partner also. Yeah. I think still there is a pre-scale, give us some time. Thank you. Thank you, NJ and James. Thank you, Michael. One moment for the last question.

What are your expectations on price and margin respectively.

Yeah, So <unk> officially launched.

End of October and.

Coming year. So, uh, but still, uh for 2026, our most important KPI for the home series is still, uh, it's still go mainstream and brings out, uh, of the crypto niche. So, uh, please give us some, some, some more time. Yeah. Thank you.

Now we are as a first batch simple production.

Got it. Okay, thank you. Thank you so much.

Sure.

Thank you for the questions. 1 moment for the next question.

Yes, and we finished the testing stage.

Next question comes from the line on Nick. Jaws from B Riley, please go ahead.

According to our plan, we will start shipping samples to selected customers by the end of this month.

For they are testing and evaluation.

Yes. This is constant with our euro.

<unk> and we expect to begin our volume shipments in the first quarter of 2026.

Thank you, operator, and good morning or good evening, everyone. This is Henry Hurl on for Nick Giles. Um, for my first question, when is the earliest you guys could ship your new A6T models, and at what scale? And then, what are your expectations on price and margin, respectively? Thanks.

um,

And.

Yes, and we will adjust our production and delivery pace dynamically based on the pre sell and cuts.

Yeah. Uh, so it's 6, uh, was officially launched at the end of October. And, uh, now, we are at the first, uh, batch simple production. And uh,

uh,

No feedback.

For pricing, even though we are we will adhere to market driven.

I suppose.

Taking into.

Yeah, and we finished the testing stage. According to our plan, we will start shipping samples to selected customers by the end of this month.

Supply demand account.

Uh, for their, uh, testing and evaluation, um,

And.

The competitive demand dynamics and the customer.

Mix.

So.

Export I think our as our new flagship product <unk>.

<unk> delivers a major performance.

Yeah, this is uh constant with our Euro large strategy and uh we expect to begin our volume shipments uh in the first quarter of 2026.

and uh,

Our accrued 2016 ex fee over three over 300 Tera ash at <unk>.

Nangeng Zhang: Our last question comes from the line of Kevin Dede of H.C. Wainwright. Please go ahead. Gentlemen, thanks very much for having me on the call. I appreciate it. NG, I'm wondering about your self-mining objectives. Can you refresh us on where you plan to take self-mining, in particular Ethiopia, which remains the largest contributor of your exahash? We're hearing that power tariff rates have increased there, and we're wondering how you might rethink hash deployment. Thank you. I think for our strategy now, in the short term, there's some pullback in Bitcoin price. Many people are asking the question about our strategy of self-mining. Yeah. I think in the near term, maybe over a few months, our attention will be on delivering large mining orders, and we start to slow the pace at which we add our self-mining hash rate. Please remember, there's still other customers.

<unk> for the half.

Yeah. And we will, uh, adjust the production and the delivery pace, uh, dynamically based on the pre-sale and, uh, customer feedback.

Which is really industry, leading so I think it will provide higher.

<unk> <unk> per unit.

And also we can share with us.

Benefits with our customers.

um, for pricing, even though we we, we, uh, we will adhere to Market driven, uh, principles, uh, taking into, uh,

So our bank.

Our margins.

Based on the currently wafer material and.

Manufacturing cost.

To prepare our hedge cost for 2016 is under control.

Supply and demand, uh, account, uh, and the uh, the competitive demand dynamics, and the customer, uh, mix. So, uh, for at first, I think as a new flagship product, uh, 86, uh, delivers a major performance.

In our expectation I expect initial expectations and also the yield.

It's acceptable.

So.

I think the products.

Rising power.

Help us to offset.

Some cost pressures surely asics in.

Cost per passenger is that higher than <unk>. So.

Uh, the error code, uh, A16 XP can offer over 300 TH/s at uh, 4.8 J/TH for the hash, so, which is really industry leading. So I think it will provide higher uh, returns per unit. Uh, and also we can share this uh, uh benefits with our uh, customers.

Yes, so let's see.

Yeah, so, uh, about Mark margins. Um,

Thank you.

Yeah, and then for my follow up I wanted to get your guys thoughts on the fact that several public quite miners have been very vocal about winding down their mining operations in the medium term and then at the same time supply of Asics appears to be increasing.

Man, manufacturing cost.

So where do you guys think of the market impact will be and then how is Canada responding to this trend.

Nangeng Zhang: We cannot lose our long-term partners at this time. Because of lack of machines, at the same time, we are actively developing more power resources, including potential greenfield sites. These projects have longer construction cycles, but relatively controllable cash outlays, and they offer better long-term value and operation flexibility. The gas-to-compute pilot in Canada with AREA Energy and the 20 MW data center projects in Texas with Soluna are only examples. For what we see in the market, I think there are indeed more attractively priced mining assets now. The pullback for Bitcoin price gave us benefits to get more energy resources, especially in the US. Yeah. I think particularly projects with solid resources, but short-term funding pressure. This offers us better entry points. We are continuously screening such opportunities and their strict return and risk control.

Yes.

Sure.

I think for this question.

Yes, we all observe that some listed manners.

Maybe they are facing and balance sheet pressure.

Um, to protect cost for a 16 is under control. Uh, and this in our expectation, I expect expectations. And also, the yield uh, is, uh, acceptable. So, um, I think the products, uh, pricing power will help us to, uh, offset, uh, some cost pressures. Sure. You know, the 86 in, uh, cost protection say higher than at 15. So, uh, yeah, so uh, let's see. Uh, thank you.

Sure for us performance issues and our desire to.

<unk> towards AI.

<unk> has publicly started their intention to reduce with quite mining.

Over the medium term.

Yeah, and then for my follow-up, I wanted to get your guys' thoughts on the fact that several public Bitcoin miners have been very vocal about winding down their mining operations in the medium term. At the same time, the supply of A6 appears to be increasing.

Yes, but.

Four.

Yeah.

So, what do you guys think the market impact will be? And then how is Canon responding to this trend?

Octave.

Firstly I think the slowdown.

um,

The.

yeah, for

I don't think the global hardware it will slow down in the near near term.

And also the SPC <unk> deployment is still.

In some time.

By our investigation to the energy market in the U S.

Aia's PC applications.

Uh, I think for this question, uh yes, we observe that uh, some listed manners uh maybe the facing balance sheet pressure, uh, share price, performance issues and a desire to, uh, to vote towards AI. HPC have publicly started their, uh,

Applications needs high quality.

To reduce Bitcoin money, uh, over the medium term.

And as energy electricity.

Uh,

And which is the high quality always means higher cost so.

Yeah, but, uh, from my, uh, perspective.

um,

Nothing fundamentally.

yeah. Firstly, I think the Slowdown uh, the

At the next two years the mining the powers to the Gulf of mining is not.

The competition with.

Sure.

Energy.

Use case for <unk>.

Nangeng Zhang: We aim to expand our self-mining footprint in a more prudent, value-attractive way. Yeah, in short, I think we are still keeping the expansion in the US, and we are moving to the more fundamental sites, like the sites like the energy infrastructure in the long term. Yeah, I think the big order and Bitcoin pullback gave us some time to redirect our direction to find a better way to expansion in the US. Thank you. James, I was wondering if you could offer a little more color on the $56 million wafer purchase and the $90 million in processing. Would that include pretty much everything that you need for the 15 and 16 XP, at least as you see orders initially? How much of it, yeah, how much of it do you think translates to the Avalon Home series?

It's not.

Selling electricity.

So the.

You know, I don't, I don't think the global hash rate will slow down here. Um, and also the HPC AI HPC deployments, uh, is still uh, needs some time. Uh, by our uh, investigation to the energy Market in EU us.

Our customer including ourselves.

Thinking about how can field.

Uh, our HPC applications need high quality. Uh.

uh, uh, energy electricity, uh,

Mining AI ready mining facilities.

For the fuel for the future.

And which is, uh, the high quality always means, uh, higher cost. So, uh,

In this stage.

Deploy more ASIC.

<unk> is still the best way to allocate.

I think fundamentally uh, uh, at the next while 2 years, uh, the mining. Uh, the power is suitable for commanding is uh not uh,

Energy today and generate revenues.

In.

From a product from the state not reaching for another while 12 three years.

So since they are the scenes.

Harvest will be foresee.

For long term.

So we're focused on yes, so because theres. The auditor 4405 years later, so we know we are focused on.

The competition with, uh, the uh, energy, uh, you use for AI HPC. Uh, it's not the same electricity. Uh, so the, uh, I know our uh, customer including ourselves, uh, is thinking uh, about, uh, how can build, uh,

Cooperating with our partners.

Money uh AI ready, uh mining facilities uh for the for the future. Uh, but in this stage uh,

To fulfill their requirements also we also.

Yes.

Trying to find more energy sources in the us and build an hour.

Deploying more Bitcoin miners is still the best way to allocate our resources.

Owen.

Mining sites to date and maybe.

We should have our potential.

Energy, uh, today and generate, uh, revenues, uh, uh, in in, uh, from from this day. Not waiting for another 1 or 2 or 3 years.

Possibilities to transfer to the AI.

Nangeng Zhang: Well, Kevin, I don't think $56 million is all the wafer supply we can get for Q1. It's actually some payments happen to be in the phase of payments just in Q3. The $56 million is some prepayments and also some close payments for the previous contracts. I think in Q4, we'll pay more. It's just a kind of pacing difference. For the Home series, I think currently it's wintertime. We observed the demand from North America is actually getting stronger compared to Q3 and Q2. It seems like we will allocate more chips to Home series. Of course, we don't want to generate a lot of inventory. We will still produce according to the orders. To be very honest, currently, we have already noticed the Home series will occupy a higher percentage in Q4.

Infrastructure in the future.

This is what we.

Personnel observed.

The past maybe six months thank.

Thank you.

Great. Thank you and continued best of luck.

Thank you Nick.

Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead.

Okay.

Thank you and congrats.

Congratulations on the strong results.

Uh, so uh, since still the the things uh, uh, is uh, hard to be foresee, uh, for long term. Uh, so we focus on. Yeah. So, because there's no answer for for 3 or 5 years later. So, we now we are focused on, uh, cooperate with our partners, uh, to fulfill their requirements. Uh, also we, uh, also, uh, we as uh, uh, trying to find uh, more energy resources in us and building our, uh, own uh, manual sites today. And

And your guidance for $190 million.

Our quarter is impressive as this.

Orders also scheduled out.

The first quarter I guess, what kind of visibility are your customers, giving you.

Yeah.

Thank you, Kevin I think quarter four.

Thank you.

Page called her in terms of seasonality and we provided the guidance.

Great. Thank you and continued best of luck.

Questions.

In a very optimistic away and also we have already collected some of the orders we try our best to deliver in quarter four.

Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead.

Looks to me quarter, one traditionally is the low season.

Thank you, and congratulations on the strong results.

There is a new year and Chinese new year together.

Nangeng Zhang: While the total revenue is so big, we are expecting the sales for Q4 of Home series. Actually, a lot of buyers, a lot of consumers, they posted in their social media talking about Avalon Q. They like it because it's quiet, and it can generate Bitcoins. Using the same kind of energy they, in the past, they buy a heater can do. Actually, we can feel the passion from the consumers asking more for the supply side. That's why when we do allocate the chips, I think internally we have some discussions, and sometimes even very fierce competition between the consumer sector and the industrial sector. Of course, NG will try his best to balance different product lines and different categories, try to satisfy most of the customers and consumers. Yeah.

In the Western part of the award and the eastern part of the World.

Both having all kinds of holidays and the global logistics supply chain is not in the normal shape. So I don't personally.

Also scheduled out into the first quarter, I guess, what kind of visibility are your customers giving you?

Thank you. Kevin.

Seeing another peak time for quarter, one I think that revenue quarter going down a little bit.

But we will try our best to deliver quarter, Paul first and then we predict.

Quarter. One later when we have a clear.

Clear understanding about the demand although recently the big coil price is not.

In a good shape.

So it's on the turbulence and some of the customers, especially the smaller ones.

They tend to be more cautious and hesitate to makeup of their decisions immediately that will also have the kind of impact on quarter one orders.

So we will try to make a flexible supply anyway. Currently I think the demand is still higher than supply. We just are focusing on quarter four delivery first and then let.

Nangeng Zhang: Currently, the macro environment is indeed very complex and changing very fast, especially for the semiconductor sector. Like, the DRAMs price is maybe doubled in the past few months. It's only indicated that how the types of the global capacity for the semiconductor industry. Currently, I think we have the demand because of the demand of advanced chip growth, especially for the AI-related applications and many other stuff. The foundry capacity today is very tighten, and also the price is trending up significantly. I think this could impact both our manufacturing costs and mining CapEx. This is influencing the whole industry, not only us. That said, well, we cannot share the exact figures, but we already have secured meaningful wafer allocation for next year at favorable pricing and payment terms, thanks to our strong relationships with our key suppliers.

Uh, uh, pick quarter, uh, in terms of seasonality and we provided the guidance. Um, uh, in a very optimistic way. And also, we have already collected some of the orders. We try our best to deliver in quarter 4, um, uh, looks to me quarter 1. Traditional a is the low season, uh, because there is a new year and the Chinese New Year together, uh, in the west part of the world, and the East part of the world. Um, both having, uh, all kinds of holidays, and the global, uh, Logistics supply chain, uh, is not in the normal shape. So, uh, I don't personally, um, seeing another peak time for, uh, quarter 1. I think the revenue could going down a little bit. Um, but, but we will try our best to deliver quarter 4 first. And then we predict, uh, quarter 1 later.

Let's see how it goes in quarter one.

Maybe we can balance between the.

Demand.

Sales and also the self mining side, if we do have some inventory, we can allocate to self mining United States.

So the long term.

Strategical.

<unk> for us.

Yes, I think Thats my two sense Kevin.

Thank you James.

Good detail.

Maybe.

Did note that there is a re.

Bound in demand in the U S.

Is the U S market with six less sensitive to the <unk>.

This a bitcoin.

Sorry.

Hello again.

You may now okay, yes.

Uh, when we have a, a clear understanding about the, uh, demand also recently, the Bitcoin price is not uh, in a good shape, uh, uh. So it's under turbulence and some of the customers especially the smaller ones, uh, they tend to be more cautious and, uh, hesitate to make up their decisions immediately that will also have a kind of impact on quarter 1 orders. Um, so we will try to, uh, make a flexible, uh, Supply anyway, currently. I think the demand is still higher than Supply. We just focusing on on quarter 4 delivery first and then, uh, let's see how it goes in quarter 1. Uh, maybe we can balance between the, uh, demands of, uh, the sales and also the self mining side. Uh, if we do have some inventory, we can allocate to, uh, self mining in United.

Mentioned that with the price of bitcoin being down.

Yes.

Times last few days.

States, that will also be uh long-term uh strategical uh goal for us.

And you had mentioned that would be sensitive to be.

Yeah, I think that's my two cents. Kevin.

<unk> four mining machines.

Just wondering if the rebound we've seen in the U S. I think you said it was 31% of.

Revenue in the third quarter now whether that continues even.

We are.

Is it less sensitive in the in North America too.

Thank you, James. It's very good. Uh, good detail, thank you. Um, and maybe you did note that there's a rebound in demand in the US. Um, it is the US market which is less sensitive to the price of Bitcoin.

Prices of bitcoin.

The rest of the world.

Yeah, Kevin It looks to me.

Nangeng Zhang: The volume is built on a very cautious number. I think this will definitely give us a good cost position heading into 2026. Yeah. This is my consent. Thank you. James, you did not touch on the $90 million processing. Can you just give us a feel for that and what the implications are for future cash use? $90 million. I think it is too much. I think you mean that $72 million we found raised from the strategic investors and also $7.8 million from the ATM program. I think putting this together is like $80 million. Yeah. Yeah. Okay. No, I thought that when you were discussing cash use in the third quarter, you mentioned $90 million. I apologize. I probably have the number wrong, but. Yeah. You mean the operational and the supply chain together, the expenses? Right. Okay. Yeah.

Uh, so sorry. Um,

In my observation North America is now the leading area for global mining industry.

can I again?

The whole total hash rate in North America is some percentage of between 35% to 40% globally and they are.

Around 20 listed companies.

North America doing mining they are kind of institutional players. They are more professional building up the sites the electricity facilities and eventually becoming mining sites. So they have their schedule, it's not easy for them to stop their own schedule, even wham bitcoin.

You mean, oh, okay, yeah, it's just you, you, you had mentioned that with the price of Bitcoin being down in the just very recent times, in the last few days. And you mentioned that it would be sensitive to the demand for mining machines. I was just wondering if you know the rebound we've seen in the U.S., that I think you said it was 31% of revenue in the third quarter, whether that continues, even with, you know, I guess, is it less sensitive in North America to...?

Prices of Bitcoin versus the rest of the world.

<unk> has some.

Short term turbulence for them.

Look at long term goals.

Why they are not very price sensitive.

Very short term time.

But we observe that the.

The tariff did have kind of the impact on our cost structure.

That increased.

Theyre mining cost that means some of the miners, especially the smaller ones, even that city United States with a.

Consistent policy advantage, they could still withdrawal from bitcoin mining to other.

Nangeng Zhang: I think that outflow is for some payments of the supply chain, like components, like all kinds of production and logistics to shift the components from here and there. A lot of things, including some of the expenses related to that. I think that's a major part of the supply chain expenses. I think there is the R&D, GIA, and also sales and marketing fees inside this. I think the round rate is still like $28 to 29 million. Even the P&L shows it's like $40 million, but that includes a lot of non-cash items like share-related salaries. The rest goes to like $28 to 29 million for the normal operation. We have expenses related to the operation, like travel, like marketing, especially for the consumer product. We started to have some marketing try in Q3, but not much expenses.

Activities they may.

One two.

Change there.

Minors purchase plan.

In quarter four so.

I should say U S customers' most important customers for us and we all observed.

Yeah. Uh, Kevin, uh, it looks to me, uh, in my observation, North America is now the leading area, uh, for the global mining industry. Um, the total hash rate in North America is some percentage between 35% to 40% globally. And, uh, there are, uh, you know, around 20 listed companies, uh, in North America doing mining. They are kind of institutional, uh, players. They are more professional, building up the sites, the electricity facilities, and eventually becoming, uh, mining sites. So, they have their schedule; it's not easy for them to stop their own schedule, uh, even when Bitcoin price has some short-term turbulence for them. They, um, they look at, you know, long-term goals, uh, that's why they are not very price sensitive, uh, in very short-term time. Uh,

Lay out Huawei is in short term, but we also respect their long term strategic.

Kohls and we try our best to support their strategic goals two to get realized so thats something we do together with them.

Yeah, and also I think for looking at this year.

Special fully.

The markets.

Initial expected is.

Demand will flow rapidly into North America. However.

However changes in tariff policy led to a significant.

Contraction in North America demand from late Q1 to Q2 and.

Is that timing wise.

But asia demand wrapped up quickly.

Partially offset the weakness in North America, and in Q3, and Q4 North America customers shows very strong resilience.

The, you know, consistent policy advantage, they could still withdraw, uh, from Bitcoin mining to other, you know, activities. They may, um, you know, want to, uh, change their, uh, minor purchase, uh, plan, uh, in Q4. So, um, uh, I should say us. Customers are the most important customers for us, and we observed, uh, their worries in the short term, but we also respect their long-term strategic, uh, goals, and we try our best to support their strategic goals to, uh, get realized. So that's something we do together with them.

Nangeng Zhang: That is something we try to do in the transition from a pure machine company to a kind of operational company with energy, and also with the two consumer products. We will also increase our marketing expenses in future. I don't know if I answered your question. Yeah. Yeah. Just one more little nuance. I'm just wondering if those payments include prepayments for supply chains, securing supply chain components through the December quarter and into the March quarter. That's a wonderful question, Kevin. Usually, we only do prepayment for wafer. Most of the components, we usually get the components first, and then we pay them a little bit later in different kind of terms. For example, like 15 days, 30 days, something like that. It's usually not advanced payment. Well, congratulations on that 50,000 unit order. Congratulations on the sharp pop in revenue and gross margin.

Together, we have adapted to the new.

Your environment and.

The demand there has recovered quickly.

Since data closely.

In effect.

The potential already TD works.

In Q4.

North America has begun.

Has again accounted for more than 50% so.

Yeah. Yeah. And also, uh, I think for looking at this year, uh, especially for the markets, uh, initially the expectation is, uh, the demand will flow rapidly into North America. However, changes in Terra policy could lead to a significant, uh, contraction in North America demand from late Q1 to Q2 and, uh, uh.

Juno.

<unk> proprietary comprise our ontology is constant.

Stock moves or a few days or weeks to cost some.

Customers such as specialty.

Small customers to pulse.

Yes.

<unk>.

But over multi years timeframe assessing the impact is underlying demand trend is limited.

And.

I highly disagree with.

To run your business Bye bye control numbers they've either so.

It's my personal opinion, thank you.

Okay. Thank you very much.

As at the time I think everyone is very, very nervous, but HR demand wrapped up quickly. And uh, partly of fact, the weakness in, uh, North America and in Q3 and Q4, uh, North America, customers shows very strong, uh, resilience uh, together. We adapted to the new, uh, trade environment and uh, the demand there has recovered quickly. Uh, since data kills 3, uh, in effect, uh, for the potential, uh, already delivered, uh, in Q4, uh, North America has begun, uh, has again accounted for more than 50%,

Thank you for that.

Our next question comes from the line of Michael Donovan from complex point. Please go ahead.

So, uh, you know, uh, beautiful crime, Bitcoin price, uh, volatility is, uh, constant.

Thank you, operator, hi, and J&J.

Nangeng Zhang: Thank you very much for taking my questions. Thank you, Kevin. Thank you. Thank you for the question. As there are no further questions now, I would like to turn the call back over to the company for any closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to reach out to us, and we look forward to speaking with you throughout the quarter. Thanks. Thank you. That does conclude today's conference call. Thank you, everyone, for attending. You may now disconnect.

How much inventory do you have left for the <unk> series and then four for Q2 five guidance what.

What makes you expect between <unk> orders and pre orders for <unk>.

Thank you for the question Michael I think.

Uh, sharp moves over a few days or weeks, uh, do cost, uh, some uh, customers especially, uh, small customers to, to pause and, uh, re re re re receive, uh, but our Market years time frames, I think, the, the impact is, uh, underlying demand trend is is limited. And, uh, I, I highly, uh, disagree with, uh, like running a business by by country numbers, day by day.

I think our inventory.

Uh, this is my personal opinion. Thank you.

In the end of quarter, three is like $201 million, including some of the raw materials like wafers like.

Okay, thank you very much.

Thank you for that. Thank you.

Other components and.

It mainly reflects the strong demand.

Our next question comes from the line of Michael Donovan. From compass point. Please go ahead.

In quarter, four and <unk>.

Thank you, operator. Hi NG and James. Um,

You have already know and we got the big order.

Around 15000 units to United States. So we have to prepare the inventory.

Other than that if.

If we digest the inventory in quarter four I don't think our inventory level will be that high.

How much inventory do you have left for the A15 series? And then for 4225 guidance, what mix do you expect between 815 orders and pre-orders for the A16s?

In quarter, one we will see a lower inventory level for <unk> and <unk>.

That that that's because we are.

Expecting the uncertainties of the market demand in quarter one.

And for <unk>, I think it's mainly like a quarter three to be.

The mass mass delivery I think the early delivery could be late.

Late quarter, two but in the transition we will continue to produce a 15 and make it better and better.

That's the plan.

Uh, thank you for the question, Michael. I think, uh, uh, I think our inventory, uh, in in the end of quarter 3 is like 200 million, uh, dollars, including some of the, uh, raw materials like Wafers, like, uh, uh, you know, other components and, uh, uh, it mainly, uh, reflects the strong demand, uh, in quarter 4. And it, uh, you, you, you have already know when we got the, uh, big order, uh, uh, around the 50 thousand units, uh, to United States. So, we have to prepare the inventory. Uh, other than that,

Did I answer your question Michael.

Yeah, James I appreciate that.

And then I guess for my next question.

Can you expand a bit more on the pilot projects that you have the two five megawatts in Alberta, Canada, and four five megawatts in Japan.

What are the growth opportunities in those two countries.

Yeah.

Are things for.

We are running several similar pilots.

<unk> globally.

Actually see include Japan.

If, if we digest the inventory in quarter 4, I don't think our inventory level will be that High. Um, in the in quarter 1, we will see a lower inventory level for a 15 and, uh, um, that that. That's because, uh, we uh, you know, expecting the uncertainties of the market demand in quarter 1. Uh, and for a 16th think, uh, it's mainly like a quarter 3 um to to be the mass mass delivery. I think uh, the early delivery could be uh late quarter 2. Uh but in the transition we will continue to produce a15 and make it better and better. Uh I think uh that's the plan.

Canada U S and as well as.

Um, did I answer your question, Michael?

Some are.

Small product is ongoing in Europe and.

No, you did, James. I appreciate that. Um,

Asia Other Asia countries.

Since these higher us our primary goal is to.

Validates the technical approach and business model.

Can you expand a bit more on the pilot projects that you have? Uh, the 2.5 megawatts in Alberta, Canada, and 4.5 megawatts in Japan. Uh, what are the growth opportunities in those two countries?

Rather than maximum bullish.

Early stage financial returns.

Uh, yeah. Um

Yes.

Thanks to the use of trends gas and energy.

The power cost for these pilots products.

It is relatively low.

And the project level gross margins are decent.

Mark most mining operations are meaningful economic benefits ultimately.

Uh, I think we are running several similar pilot projects globally. I think this includes Japan, Canada, the U.S., and as well as uh,

Require scale.

Yes.

But based on the current results.

We believe these pilots or have the potential for scale up.

This strategy, particularly is very important to remember that power and.

SaaS infrastructure are very very traditional long cycle industries.

Building Trust and.

Proving out a new model takes time on the patients.

Our strategy is to run the pilots.

<unk> way.

Cement.

Partnerships and then we'll pass going larger megawatt levels at the right time.

Uh, some some small projects, its ongoing in Europe and uh uh Asia. How do Asia countries? Uh, since these are pilots, our, uh, primary goal is to, uh, validate the tech technical coach and the business model, uh, rather than maximize the early stage Financial returns. Um, uh, yes, it's, uh, thanks to the, the use of Trends, uh, Gas and energy. Uh, the power cost for these, uh, Pilots, uh, projects, uh, is, uh, is relatively low. Uh, and the project level, uh, growth margin are decent but uh, you know, like most money operations, uh, meaningful economic benefits. Ultimately,

For example.

Canada.

Strength.

This trend gas product there is a very.

Highly possibilities to scale up to 30 megawatts in the middle of next year.

Uh, request Gail. Uh, yeah. Uh, but, uh, based on the current results, uh, we believe these pilots all have the potential for scale-up.

And also we can do more.

Our adjusted mentioned AI ready.

Sites.

Yes.

In U S with our.

Uh, this this is very important, uh, to remember that, uh, power and uh, gas infrastructure are very, very, uh, traditional, long-cycle industries. Building trust and, uh, proving out a new model takes time and patience.

Partner Rox or so.

Yes so.

Uh, our strategy is to run the pilots in a stable way.

I think still holds true.

uh,

They will give us some time.

Thank you and James James.

Yeah.

One moment for the last question.

Okay.

Yes.

Our last question comes from the line of caffeine DB of hitch.

CW. Please go ahead.

Uh, cement the, the Partnerships and then look at store in the larger m. Watch levels, uh, at the right time, uh for example, uh the Canada uh uh strength uh the strength uh gas product. There's a very uh highly uh possibility to scale up to 20 20 megawatts in the middle of next year.

Gentlemen, thanks, very much for having me on the call I appreciate it.

Hey.

Im wondering about your self mining objectives can you refresh us on where you plan to take self mining in particular.

uh, and also, uh, we can do more, uh, like I just mentioned the AI ready, uh, mining

<unk>.

<unk> remains the largest contributor of your extra ash, we're hearing that power tariff rates of increase there and were wondering how you might rethink.

Sites, uh, many farms, uh, in the U.S., uh, with our uh, partner Locker. So, um, yeah. So I, uh, I think, uh, still there's, uh, please give us some time. Yeah. Thank you.

Thank you, Jane and James.

Cash deployment.

1 moment for the last question.

Okay.

Sure.

Thank you and.

Sure.

I think for.

For our strategy.

Our last question comes from the line of Kevin DDI of HCW. Please go ahead.

Now in short term there are some pullback in price.

Gentlemen, thanks very much for having me on the call. I appreciate it.

Price.

Mg.

<unk>.

Many people are asking.

The question about our strategy of mining.

Yes, I think in the near term.

Over the.

Maybe for a few months.

Sure.

Our attention, we will be delivering larchmont shareholders.

I'm I'm wondering about your self mining objectives. Can you refresh us on on where you plan to take self mining in particular Ethiopia which Remains the largest contributor of your ex to Hash? We're hearing that power. Tariff rates have increased their and we're wondering how you might rethink.

And we reached a slow slow the pace at which we add our south Miami hybrid.

Uh, hash deployment.

Uh,

Okay. Uh,

Please remember that since two other customers.

uh, thank you and, uh,

We cannot last hour.

Our long term partners at this time.

So are.

Because of lack of machines at the same time, we are actively.

Uh, I I think for, uh, for our strategy. Uh, you know, now uh in short term, there's some pullback in bitcoin price, uh, and, uh,

Developing more power resources.

Including potential Greenfield site.

uh, many device asking the, uh, the question about our strategy of self money, uh,

These products have a longer.

Uh, yeah. I think the nearest term, uh, over the

And cycles, but relatively controllable cash outlays.

Uh, maybe over a few months, uh,

And they offer better long term value.

And operation flexibility.

So gas to compute pilots in Canada.

Our Ria.

<unk> and <unk>.

So 20 megawatts datacenter products in Texas with Salon hours only an example, only examples.

For what we see in.

<unk> market I think this is a new dealers.

Lack of uh, machines. Uh, at the same time we are actively. Uh,

More attractively priced mining assets now.

The pullback focus on price.

Okay.

Benefits to to get more energy resources, especially to us.

Uh, developing more powers of this, uh, including potential, uh, Greenfield sites. Uh, these projects have a longer, uh, construction cycle, uh, but relatively controllable, uh, cash outlays.

Yeah, So I think <unk>.

<unk> projects with solid resources plus short term.

And uh, they offer better long-term value. Uh,

Funding pressure. So this offers us better entry points, we are continuously screening activities.

And.

The strict strict return on the roof.

And uh, operation, uh flexibility. Uh, the gas to compute pilots in Canada with, uh, area, uh, energy and, uh, the 20 megawatts data center projects in Texas. With Sona, is the only example, only examples,

Control and we aim to expand our mining footprint.

Yes.

More prudent value.

Uh, for what we see in the markets, I think this is indeed, uh,

Attractive rate so.

So in short I think we are still keeping.

The expansion in U S and we are moving to the more fundamental sidetracked.

More, uh, attractively priced uh, mining assets. Now uh the pullback for bitcoin price uh give us for us benefits to uh to get more uh energy resources uh especially in US.

Size right.

Energy infrastructure.

And the long term.

Yes.

I think the big odor and been quite a pullback.

Yeah.

Time to.

<unk>.

To.

Direct hour.

Um, yeah, so, uh, I think particularly, uh, projects with solid resources, but short-term, uh, funding pressure. So this offers us better entry points. We are continuously screening special activities, uh, and uh, uh, strict strict return and the risk, uh,

Direction too.

To find out more.

Control and we aim to expand our self- money footprint. Uh, in

What better way to expansion in U S.

Uh uh more prudent uh value uh, attractive way.

Sure.

James I was wondering if you could offer a little more color on the 56 million wafer.

So, uh, yeah. So, in short, I think we are still keeping, uh,

Purchase a $90 million in processing, nor that include pretty much everything that you need for the <unk>.

And.

16, XP at least as you see orders and nationally.

Uh, the expansion in us and we are moving uh to the more fundamental uh sites, like the the size like the uh, energy infrastructure, uh, and long term. Uh

And then how much of how.

How much of it do you think translates to the Avalon home series.

Well Kevin.

yeah, uh and uh the I think the big order and uh, Bitcoin pullback give us some uh time to uh re uh to to redirect our uh

uh,

I don't think a $56 million.

Is the are the wafer supply we can get for quarter, one is actually some payments happen.

Direction to to to to uh, to find the more uh uh uh for a better way to expansion in US.

Two to be in the face of payments just in quarter three.

Thank you.

The $56 million is some prepayments and also some.

Uh, James. I was wondering if you could offer a little more color on the 56 million wafer.

Some clothes payments for the previous contracts and I think in quarter four we will pay more.

Uh, purchase in the $90 million processing, and would that include pretty much everything that you need for the $1.5?

It's just kind of paid pacing difference.

and um, 16 XP at least as you see orders initially

<unk>.

For the home service I think currently it's wintertime, we observed that the demand from North America is actually getting stronger compared to.

Uh, and and how much?

Yeah, how much of it do you think translates to the Avalon Home Series?

Quarter, three and quarter two so it seems like we will allocate more chips.

Home service.

But of course, we don't want to.

Generates a lot of the inventory we will still.

Produce according to the orders.

But to be very honest currently we have already noticed.

<unk> will occupy.

Higher percentage in quarter four.

And while the total revenue is so big so we're expecting the sales for quarter four of home service.

And actually a lot of.

Buyers a lot of consumers their policies and their social media talking about Avalon Q.

I can't because it's quiet and it can't generate a bit coins and.

Uh well Kevin I don't think uh 56 million uh is the all the Wafers Supply we can get for quarter. 1 is actually uh some payments happen uh to to be uh in the face of payments just in quarter 3. So the 56 million is some prepayments and also some uh you know some clothes payments for the previous contracts and I think in quarter 4, we will pay more. Uh, it's just a kind of pay pacing difference and uh um for the home series, I think uh, currently it's winter time. We observed the demand from uh North America is actually getting stronger compared to uh quarter 3 and a quarter 2. So seems like uh we will allocate more chips uh, to Home Series.

Using the same kind of energy.

um, but uh, of course we we don't want to um,

In the past.

They buy a heater can do so actually we can feel the passion from the consumers asking more.

For the supply side.

It's why when we do allocate the chips I think internally, we have some discussions and sometimes even.

Barry.

Fierce competition between the consumer sector and the industrial sector.

But of course, <unk> his best to balance different product lines and different categories.

Try to satisfy most of the customers and consumers.

And also you'll know.

Currently the marketing environment is indeed, very complex and the changing very fast.

Especially for the semiconductor sector.

You know the blogger drams.

Price is maybe doubled in the past few months.

Suddenly.

It's indicate that how the types of.

Global capacity for the semiconductor.

Industry.

So currently I think we have.

Sure.

Demand because of the demand of the vast chief growth, especially for the AI.

We can feel the passion from the consumers asking for more, uh, for the supply side. Uh, that's why when we do allocate the chips, uh, I think, uh, internally, we have some uh, discussions and sometimes even, uh, very uh, fierce competition between the consumer sector and the industrial sector. Uh, but uh, of course Nangeng Zhang will try his best to balance uh, different product lines and uh, different categories. Uh, try to satisfy most of the customers and consumers.

Its locations and many other stuff.

The foundry capacity today is very tightened and also the price is.

2017.

Significantly.

Yeah. And also uh, you know uh currently the the market environment is uh indeed very complex and changing very fast. Uh and especially for the semiconductor sector.

I think this could impact both our.

Our manufacturing cost and mining Capex.

Um, you know, the, like, the BMS, uh,

But this is equally.

For us.

Our industry not only us.

Desktop.

We cannot share the exact exact fevers.

Price is uh, maybe doubled in the past few months. Uh, it's only uh, you know, in the it's indicate that the how the types of the uh Global uh capacity for the semiconductor uh industry.

We have already have secured meaningful.

For allocation for next year.

At favorable pricing on the payments.

Terms.

Uh, so, uh, currently I think we have, you know, uh, the demand because the demand of, uh, advanced chip growth, uh, especially for the AI, uh, related, uh, applications and many other stuff.

Thanks to our strong relationships with our key suppliers.

The volume is.

Bill.

Copper cultures number.

But this will I think this will definitely give us a good cost position.

Uh, the foundry capacity today is very tight, and also the price, uh, is, uh, trending up, uh, significantly. Uh, I think this could impact both our, uh,

Heading into <unk>.

2026.

Uh our manufacturing costs and uh mining uh capex uh in this. But this is uh uh influenced the the the whole industry not only us.

Yes.

Yes.

My two cents.

Thank you James if you didn't touch on the $90 million processing.

Can you just give us a feel for that and what the implications are for future cash use.

Uh, that's that, uh, well, we cannot share the exact, uh, exact figures. Uh, but we, uh, have already have, uh, secured, uh meaningful.

Okay.

Okay.

We are allocating for next year at favorable pricing and payment terms.

990 million I think it's just too much.

Uh, thanks to our strong relationships with our key suppliers.

Yeah.

Yes.

You mean that 72 million.

We found a raised from this strategic.

Strategic investors and also seven 8 million from.

The ATM program I think of putting this together, it's like $80 million.

Um, the volume is, uh, built on, uh, very cultures number. Um, but uh, this will, I think this will definitely give us a good uh, cost position uh heading into uh 20 uh 2026.

um,

Okay.

That when you were discussing cash used in the third quarter, you mentioned 90 million I apologize I, probably have the number wrong, but.

Yeah. Uh this is uh, my uh, my 2 cents.

Yes, you mean, the operational and the supply chain together.

The expenses.

Thank you, J. James. You, uh, you didn't touch on the $90 million processing. Can you just give us a feel for that and what the implications are for future cashews?

Right, Okay, I think of that.

Yes, that's outflow is that for some payment solve that.

No 90 million. Uh, I think

Supply chain like components like all kinds of production and logistics.

Yeah, uh, I think it's, uh,

<unk> to ship the components from here and there.

A lot of things, including some of the some of the expenses related to that I think that that's a major part of the supply chain expenses and also I think that is.

Uh, you may mean that $72 million, uh, we found a raise from the strategic, uh, strategic investors and also $7.8 million from the ATM program. I think of putting this together, it's like $80 million. Yeah, yeah. Yeah.

R&D G&A and also sales and marketing fees inside of this I think of that run rate is still like $28 million to $29 million.

Okay, no, I I I thought that when you were discussing, uh, cash use in the third quarter, you mentioned 90 million. I apologize. I probably have the number wrong but

uh yeah, you make the operational and the supply chain together.

The expenses.

Even the P&L shows.

Like a $40 million.

That includes a lot of noncash items like share.

<unk>.

Sure related salaries, but the rest goes to like a $10 $98 million to $29 million to for the normal operation and also we have.

Right, okay, yeah, I think that. Yeah, that outflow is for some payments of the, uh, you know, supply chain, like components, like all kinds of production and logistics, uh, to ship the components from here and there, uh, you know, a lot of things including, uh, some of the, uh, some of.

You know.

Expenses related to the to the operation that can travel.

Marketing, especially for the consumer product, we started to have some marketing trial.

In the in quarter three.

But not not much expenses, but that that.

That is something we try to do in the transition from a pure machine company to kind of operational company with energy and also with the two consumer product.

Of the expenses related to that. I think that's, that's a major part of the supply chain expenses. And also uh, I think uh, there is the, you know, uh, R&D GA and also sales and marketing fees inside this. Uh, I think the Run rate is still like, uh, 28 to 29 million. Uh, even the p&l shows, uh, it's like a 40 million. But the that includes a lot of uh non cash items like uh share. Uh,

We will also increase our marketing.

Expenses in future.

I don't know if I answer your question, Yes, yes, just one one more little nuance I'm just wondering if.

If though if those payments include prepayment for supply chain.

Securing supply chain component.

Through.

Through the December quarter, and then into the March quarter.

That's a wonderful question, Kevin usually we only two prepayment for wafer most of the components, we usually get the components first and then we pay them a little bit later.

Indifferent kind of.

Terms for example, like the 15.

I could travel, uh, like a marketing, uh, especially for the consumer product. Uh, we start to have some marketing try, uh, in the in quarter 3. Uh, but not uh, not much expenses but uh, that that uh, that is something. Uh, we try to do uh, in the transition, uh, from a pure uh, machine company to a kind of operational company with energy. And also, uh, with the 2 cons product, uh, we will we will also increase our marketing, uh, expenses in future.

<unk> 15 days 30 days something like that is not usually not advanced payment.

I I don't know if I answer your question. Yeah, yeah, just 1, 1 more little Nuance. I'm just wondering if

Well congratulations on that 50000 unit order congratulations on the sharp pop in and revenue and gross margin. Thank you very much for taking my questions.

If those payments include prepayments for supply chains, you know, securing supply chain components.

Through, you know, through the December quarter and then into the March quarter.

Thank you Kevin. Thank you. Thank you for the question.

No further questions now I would like to turn the call back over to the company for any closing remarks.

Thank you once again for joining US today. If you have further questions. Please feel free to reach out to us and we look forward to speaking with you throughout the quarter.

Uh, that's a wonderful question, Kevin. Uh, usually we only do prepayments for wafers. Most of the components, we usually get first, and then we pay them a little bit later.

Thanks.

Thank you that does conclude today's conference call. Thank you for everyone for attending you may now disconnect.

In different kind of uh terms for example like uh uh 15 days, 30 days, something like that, it's not uh, usually not Advanced payment.

Well congratulations on that 50,000 unit order. Congratulations on the sharp pop in in revenue and gross margin. Thank you very much for taking my questions.

Thank you, Kevin. Thank you, thank you for the question. As there are no further questions, I would like to turn the call back over to the company for any closing remarks.

Thank you, once again for joining us today. If you have further questions, please feel free to reach out to us.

And we look forward to speaking with you throughout the quarter.

Thanks.

Thank you that does conclude today's conference call. Thank you for everyone for attending. You may now disconnect