Canaan Inc. Reports Unaudited First Quarter 2024 Financial Results
Canaan (NASDAQ: CAN) reported its unaudited Q1 2024 financial results. Highlights include revenues of $35.1M, exceeding the $33M guidance by 6%. Mining revenue surged 182.1% sequentially to $10.5M. The company held a record 1,057 Bitcoins. Net loss narrowed 71.7% sequentially to $39.4M. Despite a traditionally slow quarter, 3.4M Thash/s of computing power was sold. The introduction of A1566 mining machines and continued demand for A14 series bolstered performance. The company also noted positive industry developments, such as Bitcoin ETF approvals and the Bitcoin halving. Expenses were managed tightly, aiding financial performance.
- Revenue exceeded guidance, reaching $35.1M.
- Sequential mining revenue increase of 182.1% to $10.5M.
- Net loss narrowed significantly by 71.7% sequentially.
- Record high holding of 1,057 Bitcoins.
- Strategic investment in locking wafer supply capacities.
- Reduced overall operating expenses from $39.2M in Q4 2023 to $30.7M.
- Increased contract liabilities, suggesting future revenue growth.
- Positive industry developments: Bitcoin ETF approvals and record high Bitcoin prices.
- Revenue decreased from $49.1M in Q4 2023 and $55.2M in Q1 2023.
- Product revenue fell to $23.4M from $44.9M in Q4 2023.
- Continued gross loss of $37.3M.
- Increased mining costs to $12.2M, driven by higher electricity costs.
- Inventory write-downs of $47.5M.
- Foreign exchange losses of $1.8M.
- Decrease in cash reserves to $54.7M from $96.2M as of December 31, 2023.
Insights
The first quarter financial results reported by Canaan Inc. reveal several noteworthy trends and shifts. The company achieved revenues of
However, despite the positive topline performance in mining revenue, the net loss of
The company's move to hold over 1,000 Bitcoins is noteworthy, but the valuation of these assets is highly dependent on the volatile crypto market. Investors should keep an eye on Bitcoin price trends as they significantly impact the company's balance sheet and financial outcomes. The expected revenue guidance of
In summary, the financial results show progress in revenue optimization and cost control but highlight the enduring challenges of operating in a highly volatile market.
The introduction of Canaan's new A1566 mining machines and the continued demand for the A14 series are pivotal for the company's future growth. These products need to consistently deliver high performance and energy efficiency to remain competitive in the evolving mining industry. The Bitcoin halving event has historically led to increased demand for more efficient mining hardware and Canaan's strategic timing in launching these models could position them well to capture market share.
The technological advancements and innovations in the A14 series and A1566 models are crucial. The increased demand post-halving suggests that these products are meeting the market's expectations in terms of performance. However, the production costs and the ability to scale manufacturing while maintaining quality will be critical factors to watch. Any disruption in the supply chain, particularly in securing wafer capacities, could impact their ability to meet customer demand, a scenario that could negatively affect their revenue projections.
Investors should monitor the adoption rates of these new models and feedback from the market regarding their performance and reliability. A strong market response could affirm Canaan's position in the competitive landscape of high-performance computing solutions.
Canaan's performance amid the backdrop of significant industry developments, such as the approval of Bitcoin spot ETFs and a record high Bitcoin price, suggests they are well-positioned to leverage new market opportunities. The company's proactive approach in securing customer advances and optimizing operational efficiencies reflects a keen understanding of market dynamics.
The strategic re-energization of mining machines and the expansion of mining operations globally are steps aimed at capitalizing on the anticipated surge in demand for mining solutions. The mass deliveries of the A14 series and the launch of the A1566 are timely, given the increased interest in mining hardware upgrades post-halving.
However, the market remains volatile and the demand for high-performance computing solutions can fluctuate with Bitcoin's price. The company's ability to maintain a strong market position will depend on sustained innovation, strategic partnerships and effective cost management amidst this volatility. Retail investors should consider the company's strategic measures in response to market changes and ongoing developments within the crypto industry.
First Quarter 2024 Operating and Financial Highlights
Revenues were
Mining revenue was
The number of Bitcoins held by the Company surpassed 1,000 for the first time to reach record-high 1,057 Bitcoins.
Net loss was
Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, "As we navigate through the last full quarter before the Bitcoin halving, Canaan has demonstrated resilience and strategic foresight. Despite the traditional slow season in the first quarter of 2024, we successfully delivered 3.4 million Thash/s of computing power sold while driving our mining revenue to an impressive
"The industry has witnessed several positive developments early this year, such as the approval of Bitcoin spot ETFs in the
Mr. James Jin Cheng, Chief Financial Officer of Canaan, stated, "In the first quarter of 2024, we anticipated a quiet season but were proactive in propelling our market approach to meet various computing power needs. This strategy enabled us to exceed our revenue expectations and nearly double our customer advances from the end of 2023. These advances are poised to translate into future revenues in Q2 and Q3 this year as we ramp up the mass delivery of our A14 series products since April. Additionally, our balance sheet has been fortified with a record holding of 1,057 bitcoins, benefiting from our resumed self-mining operations. With the adoption of new accounting standards in 2024, we now reflect the fair value of our crypto assets, enhancing our financial transparency and balance sheet strength under increased bitcoin prices."
"Financially, we have strategically invested in locking wafer supply capacities for mass production, which is reflected by the substantial increase in our prepayments to our foundry partner. Furthermore, our stringent expense control measures continued to yield financial benefits in the first quarter. In spite of inventory write-downs as a result of the continued destocking campaign, our net loss prominently narrowed year over year and sequentially during the first quarter. With the Bitcoin halving now behind us, we anticipate a renewed interest in mining hardware upgrades and expansions. We are well-prepared to meet this upcoming demand surge, having strategically strengthened our supply chain to fulfill our customers' success in the mining landscape."
First Quarter 2024 Financial Results
Revenues in the first quarter of 2024 were
Products revenue in the first quarter of 2024 was
Mining revenue in the first quarter of 2024 was
Cost of revenues in the first quarter of 2024 was
Products costs in the first quarter of 2024 were
Mining costs in the first quarter of 2024 were
Gross loss in the first quarter of 2024 was
Total operating expenses in the first quarter of 2024 were
Research and development expenses in the first quarter of 2024 were
Sales and marketing expenses in the first quarter of 2024 were
General and administrative expenses in the first quarter of 2024 were
Impairment on property, equipment and software in the first quarter of 2024 was nil, compared to
Loss from operations in the first quarter of 2024 was
Excess of fair value of Series A Convertible Preferred Shares in the first quarter of 2024 was
Change in fair value of cryptocurrency in the first quarter of 2024 was an unrealized gain of
Foreign exchange losses, net in the first quarter of 2024 were
Net loss in the first quarter of 2024 was
Non-GAAP adjusted EBITDA in the first quarter of 2024 was a loss of
Foreign currency translation adjustment, net of nil tax, in the first quarter of 2024 was a loss of
Basic and diluted net loss per American depositary share ("ADS") in the first quarter of 2024 were
As of March 31, 2024, the Company held cryptocurrency assets that primarily comprised 1,271.7 bitcoins with a total fair value of
As of March 31, 2024, the Company had cash of
Accounts receivable, net as of March 31, 2024 was
Contract liability as of March 31, 2024 was
Shares Outstanding
As of March 31, 2024, the Company had a total of 263,746,289 ADSs outstanding, each representing 15 of the Company's Class A ordinary shares.
Recent Developments
Proposed Share Purchase by Management
On April 22, 2024, the Company announced that Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, and Mr. James Jin Cheng, Chief Financial Officer of Canaan, informed the Company of their intention to use their personal funds to jointly purchase no less than
Bitcoin Mining Operations
As of May 16, 2024, the Company had 11 active mining projects globally, with a total of 4.0 Exahash/s installed and 3.0 Exahash/s energized computing power. The energized computing power has increased by
Preferred Shares Financing
On November 27, 2023, the Company entered into a Securities Purchase Agreement with an institutional investor (the "Buyer"), pursuant to which the Company shall issue and sell to the Buyer up to 125,000 Series A Convertible Preferred Shares (the "Preferred Shares") at the price of
On December 11, 2023, the Company closed the first tranche of the preferred shares financing (the "First Tranche Preferred Shares Financing") and is obligate to issue the second tranche of the preferred shares financing (the "Forward Purchase Liabilities"), raising total net proceeds of
In connection with the issuance of the Preferred Shares, the Company caused The Bank of New York Mellon to deliver 8,000,000 ADSs collectively as pre-delivery shares (the "Pre-delivery Shares"), each representing fifteen Class A ordinary shares of the Company, at the price of
On January 22, 2024, the Company closed the second tranche of the preferred shares financing (the "Second Tranche Preferred Shares Financing"), raising total net proceeds of
The Company intends to use the net proceeds from the sale of the securities for expansion of wafer procurement, R&D activities, and other general corporate purposes.
According to the Securities Purchase Agreement, the closing of the third tranche of preferred shares financing (the "Third Tranche"), would be contingent upon mutual agreement between the Company and the Buyer. As of the date of this announcement, neither the Company is obliged to sell nor the Buyer is obliged to purchase for the Third Tranche.
As of the date of the Company's first quarter 2024 earnings release, the Company has 4,223,697,753 Class A ordinary shares, 311,624,444 Class B ordinary shares, and 1,000 Series A Preferred Shares issued and outstanding. The increase in the outstanding Class A ordinary shares compared to the end of 2023 was due to the conversion from part of the Series A Preferred Shares to Class A ordinary shares by the Buyer and the issuance of the Pre-delivery Shares.
Early Adoption of FASB's New Accounting Rules for Crypto Assets Since January 1, 2024
Effective January 1, 2024, the Company early adopted ASU 2023-08, which requires all entities holding cryptocurrency assets that meet certain requirements to subsequently measure those in-scope cryptocurrency assets at fair value. As of December 31, 2023, the Company held cryptocurrency assets that primarily comprised 1,078.5 bitcoins with the carrying value amounted to
Business Outlook
The Company maintains its guidance for the second quarter of 2024 and provides an outlook for the third quarter of 2024. For the second quarter of 2024, the Company expects total revenues to be approximately
Conference Call Information
The Company's management team will hold a conference call at 8:00 A.M. U.S. Eastern Time on May 17, 2024 (or 8:00 P.M. Singapore Time on the same day) to discuss the financial results. Details for the conference call are as follows:
Event Title: Canaan Inc. First Quarter 2024 Earnings Conference Call
Registration
Link: https://register.vevent.com/register/BI3b4b421451434636a61d7e8044eff306
All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of participant dial-in numbers and a unique access PIN, which can be used to join the conference call.
A live and archived webcast of the conference call will be available at the Company's investor relations website at investor.canaan-creative.com.
About Canaan Inc.
Established in 2013, Canaan Inc. (NASDAQ: CAN), is a technology company focusing on ASIC high-performance computing chip design, chip research and development, computing equipment production, and software services. Canaan has extensive experience in chip design and streamlined production in the ASIC field. In 2013, under the leadership of Mr. Nangeng Zhang, founder and CEO, Canaan's founding team shipped to its customers the world's first batch of mining machines incorporating ASIC technology in bitcoin's history under the brand name Avalon. In 2019, Canaan completed its initial public offering on the Nasdaq Global Market. To learn more about Canaan, please visit https://www.canaan.io/.
Safe Harbor Statement
This announcement contains forward−looking statements. These statements are made under the "safe harbor" provisions of the
Use of Non-GAAP Financial Measures
In evaluating Canaan's business, the Company uses non-GAAP measures, such as adjusted EBITDA, as supplemental measures to review and assess its operating performance. The Company defines adjusted EBITDA as net loss excluding income tax expenses (benefit), interest income, depreciation and amortization expenses, share based compensation expenses, impairment on property, equipment and software, change in fair value of financial instruments and excess of fair value of Series A Convertible Preferred Shares. The Company believes that the non-GAAP financial measures provide useful information about the Company's results of operations, enhance the overall understanding of the Company's past performance and future prospects and allow for greater visibility with respect to key metrics used by the Company's management in its financial and operational decision-making.
The non-GAAP financial measures are not defined under
Investor Relations Contact
Canaan Inc.
Ms. Xi Zhang
Email: IR@canaan-creative.com
ICR, LLC.
Robin Yang
Tel: +1 (347) 396-3281
Email: canaan.ir@icrinc.com
CANAAN INC. | ||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(all amounts in thousands, except share and per share data, or as otherwise noted) | ||
As of December 31, | As of March 31, | |
2023 | 2024 | |
USD | USD | |
ASSETS | ||
Current assets: | ||
Cash | 96,154 | 54,739 |
Accounts receivable, net | 2,997 | 1,636 |
Inventories | 142,287 | 99,152 |
Prepayments and other current assets | 122,242 | 165,435 |
Total current assets | 363,680 | 320,962 |
Non-current assets: | ||
Cryptocurrency | 28,342 | 90,162 |
Property, equipment and software, net | 29,466 | 47,076 |
Intangible asset | - | 1,060 |
Operating lease right-of-use assets | 1,690 | 4,217 |
Deferred tax assets | 66,809 | 67,334 |
Other non-current assets | 486 | 485 |
Non-current financial investment | 2,824 | 2,819 |
Total non-current assets | 129,617 | 213,153 |
Total assets | 493,297 | 534,115 |
LIABILITIES, AND | ||
Current liabilities | ||
Accounts payable | 6,245 | 16,698 |
Contract liabilities | 19,614 | 38,863 |
Income tax payable | 3,534 | 3,512 |
Accrued liabilities and other current | 64,240 | 42,719 |
Operating lease liabilities, current | 1,216 | 1,609 |
Preferred Shares forward contract | 40,344 | - |
Series A Convertible Preferred Shares | - | 7,116 |
Total current liabilities | 135,193 | 110,517 |
Non-current liabilities: | ||
Lease liabilities, non-current | 210 | 2,136 |
Deferred tax liability | - | 180 |
Other non-current liabilities | 9,707 | 9,547 |
Total liabilities | 145,110 | 122,380 |
Shareholders' equity: | ||
Ordinary shares ( | - | - |
Treasury stocks ( | (57,055) | (57,055) |
Additional paid-in capital | 653,860 | 742,895 |
Statutory reserves | 14,892 | 14,892 |
Accumulated other comprehensive loss | (43,879) | (48,866) |
Accumulated deficit | (219,631) | (240,131) |
Total shareholders' equity | 348,187 | 411,735 |
Total liabilities and shareholders' | 493,297 | 534,115 |
CANAAN INC. | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||
(all amounts in thousands of USD, except share and per share data, or as otherwise noted) | |||
For the Three Months Ended | |||
March 31, | December 31, | March 31, | |
USD | USD | USD | |
Revenues | |||
Products revenue | 44,114 | 44,907 | 23,446 |
Mining revenue | 11,089 | 3,708 | 10,460 |
Other revenues | 29 | 458 | 1,185 |
Total revenues | 55,232 | 49,073 | 35,091 |
Cost of revenues | |||
Product cost | (75,390) | (95,764) | (59,757) |
Mining cost | (27,338) | (6,001) | (12,152) |
Other cost | (50) | (1,377) | (509) |
Total cost of revenues | (102,778) | (103,142) | (72,418) |
Gross loss | (47,546) | (54,069) | (37,327) |
Operating expenses: | |||
Research and development expenses | (19,058) | (10,778) | (15,342) |
Sales and marketing expenses | (1,485) | (1,762) | (1,073) |
General and administrative expenses | (17,577) | (20,191) | (14,304) |
Impairment on property, equipment and software | - | (6,324) | - |
Impairment on cryptocurrency | - | (144) | - |
Total operating expenses | (38,120) | (39,199) | (30,719) |
Loss from operations | (85,666) | (93,268) | (68,046) |
Interest income | 440 | 229 | 205 |
Change in fair value of cryptocurrency | - | - | 33,583 |
Change in fair value of financial | - | (10,918) | 2,340 |
Excess of fair value of Series A | - | (59,199) | (376) |
Foreign exchange gains (losses), net | (2,559) | 1,404 | (1,843) |
Other income (expense), net | 1,078 | (363) | (4,454) |
Loss before income tax expenses | (86,707) | (162,115) | (38,591) |
Income tax (expense) benefit | 2,341 | 23,100 | (802) |
Net loss | (84,366) | (139,015) | (39,393) |
Foreign currency translation | 9,158 | (268) | (4,987) |
Total comprehensive loss | (75,208) | (139,283) | (44,380) |
Weighted average number of | |||
— Basic | 2,502,558,388 | 2,706,024,111 | 3,719,629,615 |
— Diluted | 2,502,558,388 | 2,706,024,111 | 3,719,629,615 |
Net loss per class A and Class B | |||
— Basic | (3.37) | (5.14) | (1.06) |
— Diluted | (3.37) | (5.14) | (1.06) |
Share-based compensation were included in: | |||
Cost of revenues | 66 | 14 | 57 |
Research and development | 2,324 | 1,911 | 1,865 |
Sales and marketing expenses | (164) | 79 | 43 |
General and administrative | 10,387 | 6,649 | 5,946 |
The table below sets forth a reconciliation of net loss to Non-GAAP adjusted EBITDA for the | |||
For the Three Months Ended | |||
March 31, | December 31, | March 31, | |
USD | USD | USD | |
Net loss | (84,366) | (139,015) | (39,393) |
Income tax (expense) benefit | (2,341) | (23,100) | 802 |
Interest income | (440) | (229) | (205) |
EBIT | (87,147) | (162,344) | (38,796) |
Depreciation and amortization | 17,058 | 7,807 | 6,873 |
EBITDA | (70,089) | (154,537) | (31,923) |
Share-based compensation expenses | 12,613 | 8,653 | 7,911 |
Impairment on property, equipment | - | 6,324 | - |
Change in fair value of financial | - | 10,918 | (2,340) |
Excess of fair value of Series A | - | 59,199 | 376 |
Non-GAAP adjusted EBITDA | (57,476) | (69,443) | (25,976) |
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SOURCE Canaan Inc.
FAQ
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