Canaan Inc. Reports Unaudited Third Quarter 2020 Financial Results
Canaan Inc. (NASDAQ: CAN) reported its unaudited financial results for Q3 2020, revealing significant challenges. Total net revenues were RMB163.0 million (US$24.0 million), down 75.7% year-over-year, with a gross loss of RMB17.0 million (US$2.5 million). The company faced a net loss of RMB86.4 million (US$12.7 million), compared to net income in Q3 2019. Despite a 13.4% quarter-over-quarter increase in computing power sold, the overall performance was driven down by decreased demand and pricing pressure. Canaan focused on R&D, launching new products while navigating pandemic-related disruptions.
- Launch of A1246 product series enhancing energy efficiency and computing power.
- Increase in pre-sale orders indicating potential recovery in demand.
- Total net revenues decreased by 75.7% year-over-year.
- Gross loss reported at RMB17.0 million compared to profit in prior periods.
- Net loss attributable to shareholders at RMB86.4 million, a reversal from previous year's profit.
HANGZHOU, China, Nov. 30, 2020 (GLOBE NEWSWIRE) -- Canaan Inc. (NASDAQ: CAN) ("Canaan" or the "Company"), a leading high-performance computing solutions provider, today announced its unaudited financial results for the three months ended September 30, 2020.
Third Quarter 2020 Operating and Financial Highlights
Total computing power sold in the third quarter of 2020 was 2.9 million Thash/s, representing a year-over-year decrease of
Total net revenues in the third quarter of 2020 was RMB163.0 million (US
Gross loss in the third quarter of 2020 was RMB17.0 million (US
Net loss in the third quarter of 2020 was RMB86.4 million (US
Non-GAAP adjusted net loss in the third quarter of 2020 was RMB84.8 million (US
Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, “During the third quarter of 2020, we remained undeterred by the pandemic to strengthen our research and development capabilities, expand our AI business, and execute new business initiatives. By leveraging our enhanced R&D capabilities in the third quarter, we launched our A1246 product series, which continues to lead the industry with its energy efficiency, computing power, and unit cost. In addition, we have also accelerated the monetization of our AI business through our partnerships with a number of companies in various industries, such as online education and smart city solutions. In the third quarter of 2020, for example, we implemented our K210 AI chips in hardware sensors from our partner to better ensure the proper execution of social distancing practices in response to the outbreak of COVID-19. With new generations of mining machines and AI chips in the pipeline, we are confident that the enhanced performance of our new products will continue to bolster our competitive advantages and solidify our market leadership going forward.”
Mr. Quanfu Hong, Chief Financial Officer of Canaan, stated, “The pandemic and resulting macroeconomic uncertainties continued to impact the production capacity of the global IC industry in the third quarter of 2020. However, the demand for mining machines in the market continued to rebound during the third quarter, and we have received a large number of pre-sale orders which are scheduled for delivery starting in the fourth quarter of 2020. Looking ahead, we remain committed to investing in areas that will further strengthen our collaboration with established IC manufacturers, enhance our inventory management, streamline our research and development initiatives, and generate lasting value for our shareholders.”
Third Quarter 2020 Financial Results
Total net revenues in the third quarter of 2020 was RMB163.0 million (US
Cost of revenues in the third quarter of 2020 was RMB180.0 million (US
Gross loss in the third quarter of 2020 was RMB17.0 million (US
Total operating expenses in the third quarter of 2020 was RMB75.9 million (US
Research and development expenses in the third quarter of 2020 were RMB32.1 million (US
Selling and marketing expenses in the third quarter of 2020 were RMB3.2 million (US
General and administrative expenses in the third quarter of 2020 were RMB40.6 million (US
Loss from operations in the third quarter of 2020 was RMB92.9 million (US
Net loss attributable to ordinary shareholders in the third quarter of 2020 was RMB86.4 million (US
Non-GAAP adjusted net loss in the third quarter of 2020 was RMB84.8 million (US
Basic and diluted net loss per ADS in the third quarter of 2020 were both RMB0.55 (US
As of September 30, 2020, the Company had cash and cash equivalents of RMB177.4 million (US
Business Outlook
Due to the continued uncertainty from the rapidly changing global environment related to the COVID-19 pandemic and the corresponding economic downturn, the Company will not issue any financial guidance in the near term.
Conference Call Information
The Company’s management team will hold a Direct Event conference call on Monday, November 30, 2020, at 7:00 A.M. Eastern Time (or 8:00 P.M. Beijing Time on the same day) to discuss the financial results. Details for the conference call are as follows:
| Event Title: | Canaan Inc. Third Quarter 2020 Earnings Conference Call |
| Registration Link: | http://apac.directeventreg.com/registration/event/3299694 |
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, the Direct Event passcode, and a unique access PIN, which can be used to join the conference call.
A replay of the conference call will be accessible through December 8, 2020, by dialing the following numbers:
| International: | +61-2-8199-0299 |
| United States: | +1-646-254-3697 |
| Hong Kong, China: | +852-3051-2780 |
| Replay PIN: | 3299694# |
A live and archived webcast of the conference call will also be available at the Company’s investor relations website at investor.canaan-creative.com.
About Canaan Inc.
Established in 2013, Canaan Inc. provides high-performance computing solutions to efficiently solve complex problems. In 2016, Canaan successfully initiated the production of its first 16nm chip and passed the test to receive China's national high-tech enterprise certification. In 2018, Canaan achieved major technological breakthroughs to launch the K210, the world's first-ever RISC-V-based edge artificial intelligence (AI) chip, which is now widely used for access control in situations such as smart door locks and more. Canaan Inc. is currently focused on the research and development of advanced technology, including such areas as AI chips, AI algorithms, AI architectures, system on a chip (SoC) integration and chip integration. Using the AI chip as its base, Canaan Inc. has established an intellectual value chain. Canaan Inc. also provides a suite of AI service solutions and is able to tailor these solutions to the needs of its partners. For more information, please visit: investor.canaan-creative.com.
Exchange Rate Information
This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.7896 to US
Safe Harbor Statement
This announcement contains forward−looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward−looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Canaan Inc.’s strategic and operational plans, contain forward−looking statements. Canaan Inc. may also make written or oral forward−looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”) on Forms 20−F and 6−K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Canaan Inc.’s beliefs and expectations, are forward−looking statements. Forward−looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward−looking statement, including but not limited to the following: the Company’s goals and strategies; the Company’s future business development, financial condition and results of operations; the expected growth of the Bitcoin industry and the price of Bitcoin; the Company’s expectations regarding demand for and market acceptance of its products, especially its Bitcoin mining machines; the Company’s expectations regarding maintaining and strengthening its relationships with production partners and customers; the Company’s investment plans and strategies, fluctuations in the Company’s quarterly operating results; competition in its industry in China; and relevant government policies and regulations relating to the Company and cryptocurrency. Further information regarding these and other risks is included in the Company’s filings with the SEC, including its registration statement on Form F−1, as amended, and its annual reports on Form 20−F. All information provided in this press release and in the attachments is as of the date of this press release, and Canaan Inc. does not undertake any obligation to update any forward−looking statement, except as required under applicable law.
Use of NonGAAP Financial Measures
In evaluating Canaan’s business, the Company considers and uses adjusted net income as a supplemental measure to review and assess its operating performance. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. GAAP. The Company defines adjusted net loss as net loss, excluding sharebased compensation expense.
Canaan believes that adjusted net income helps to identify underlying trends in the Company’s business that could otherwise be distorted by the effect of the expenses that the Company excludes in adjusted net income. The Company believes that adjusted net income provides useful information about our operating results, enhances the overall understanding of Canaan’s past performance and future prospects and allows 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 measure “adjusted net loss” is not defined under U.S. GAAP, is not presented in accordance with U.S. GAAP and has limitations as an analytical tool. One of the key limitations of using adjusted net loss is that it does not reflect all of the items of income and expense that affect the Company’s operations. Share-based compensation has been and may continue to be incurred in Canaan’s business and is not reflected in the presentation of adjusted net loss. Further, the non-GAAP financial measure “adjusted net loss” may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.
Investor Relations Contact
Canaan Inc.
Mr. Shaoke Li
Email: IR@canaan-creative.com
ICR Inc.
Jack Wang
Tel: +1 (347) 396-3281
Email: canaan.ir@icrinc.com
| CANAAN INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (all amounts in thousands of RMB, except share and per share data, or as otherwise noted) | ||||||||||||
| As of December 31, | As of September 30, | |||||||||||
| 2019 | 2020 | 2020 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | 516,607 | 177,363 | 26,123 | |||||||||
| Restricted cash | 8,239 | 4,479 | 660 | |||||||||
| Short-term investments | 11,005 | 204,570 | 30,130 | |||||||||
| Accounts receivable | 2,872 | 348 | 51 | |||||||||
| Inventories | 196,067 | 53,284 | 7,848 | |||||||||
| Prepayments and other current assets | 206,020 | 246,319 | 36,278 | |||||||||
| Total current assets | 940,810 | 686,363 | 101,090 | |||||||||
| Non-current assets: | ||||||||||||
| Property, equipment and software | 22,602 | 14,602 | 2,151 | |||||||||
| Right-of-use assets, net | 22,764 | 18,819 | 2,772 | |||||||||
| Non-current financial investments | — | 2,500 | 368 | |||||||||
| Other non-current assets | 5,250 | 2,520 | 371 | |||||||||
| Total non-current assets | 50,616 | 38,441 | 5,662 | |||||||||
| Total assets | 991,426 | 724,804 | 106,752 | |||||||||
| LIABILITIES, AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current liabilities | ||||||||||||
| Short-term debts | 99,903 | 34,656 | 5,104 | |||||||||
| Accounts payable | 99,050 | 10,555 | 1,555 | |||||||||
| Notes payable | 27,462 | 14,050 | 2,069 | |||||||||
| Contract liabilities | 8,288 | 75,612 | 11,136 | |||||||||
| Accrued liabilities and other current liabilities | 40,691 | 23,213 | 3,419 | |||||||||
| Lease liabilities, current | 9,838 | 8,110 | 1,195 | |||||||||
| Total current liabilities | 285,232 | 166,196 | 24,478 | |||||||||
| Non-current liabilities: | ||||||||||||
| Lease liabilities, non-current | 13,399 | 6,246 | 920 | |||||||||
| Other non-current liabilities | — | 8,913 | 1,313 | |||||||||
| Total non-current liabilities | 13,399 | 15,159 | 2,233 | |||||||||
| Total liabilities | 298,631 | 181,355 | 26,711 | |||||||||
| Shareholders’ equity: | ||||||||||||
| Ordinary shares (US authorized, 2,372,222,222 shares issued, 2,350,123,270 and 2,348,623,525 shares outstanding as of December 31, 2019 and September 30, 2020, respectively) | 1 | 1 | — | |||||||||
| Subscriptions receivable from shareholders | (1 | ) | (1 | ) | — | |||||||
| Treasury stocks (US shares as of December 31, 2019 and September 30, 2020, respectively) | — | (1,320 | ) | (194 | ) | |||||||
| Additional paid-in capital | 1,631,609 | 1,635,719 | 240,915 | |||||||||
| Statutory reserves | 97,307 | 97,307 | 14,332 | |||||||||
| Accumulated other comprehensive loss | (55,542 | ) | (64,541 | ) | (9,506 | ) | ||||||
| Accumulated deficit | (980,579 | ) | (1,123,716 | ) | (165,506 | ) | ||||||
| Total shareholders’ equity | 692,795 | 543,449 | 80,041 | |||||||||
| Total liabilities and shareholders’ equity | 991,426 | 724,804 | 106,752 | |||||||||
| CANAAN INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (all amounts in thousands of RMB, except share and per share data, or as otherwise noted) | |||||||||||||||||||
| For the Three Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||||||
| 2019 | 2020 | 2020 | 2020 | ||||||||||||||||
| RMB | RMB | RMB | US$ | ||||||||||||||||
| Net revenues | |||||||||||||||||||
| Products revenue | 656,930 | 162,925 | 159,727 | 23,525 | |||||||||||||||
| Leases revenue | 13,281 | 15,109 | 2,860 | 421 | |||||||||||||||
| Services revenue | 401 | 57 | 151 | 22 | |||||||||||||||
| Other revenue | — | 35 | 303 | 45 | |||||||||||||||
| Total net revenue | 670,612 | 178,126 | 163,041 | 24,013 | |||||||||||||||
| Cost of revenue | (524,402 | ) | (134,849 | ) | (180,033 | ) | (26,516 | ) | |||||||||||
| Gross profit (loss) | 146,210 | 43,277 | (16,992 | ) | (2,503 | ) | |||||||||||||
| Operating expense | |||||||||||||||||||
| Research and development expenses | (38,146 | ) | (26,073 | ) | (32,117 | ) | (4,730 | ) | |||||||||||
| Selling and marketing expenses | (6,285 | ) | (6,520 | ) | (3,181 | ) | (469 | ) | |||||||||||
| General and administrative expenses | (28,232 | ) | (29,587 | ) | (40,561 | ) | (5,974 | ) | |||||||||||
| Total operating expenses | (72,663 | ) | (62,180 | ) | (75,859 | ) | (11,173 | ) | |||||||||||
| Income (loss) from operations | 73,547 | (18,903 | ) | (92,851 | ) | (13,676 | ) | ||||||||||||
| Interest income | 1,197 | 873 | 283 | 42 | |||||||||||||||
| Investment income | 1,741 | 1,923 | 1,963 | 289 | |||||||||||||||
| Interest expense | (2,259 | ) | (1,519 | ) | (785 | ) | (116 | ) | |||||||||||
| Foreign exchange gain | 4,540 | 80 | 2,066 | 304 | |||||||||||||||
| Value added tax refunds | — | — | — | — | |||||||||||||||
| Others, net | 15,859 | 831 | 2,942 | 433 | |||||||||||||||
| Income (loss) before income tax expenses | 94,625 | (16,715 | ) | (86,382 | ) | (12,724 | ) | ||||||||||||
| Income tax expense | — | (72 | ) | (24 | ) | (3 | ) | ||||||||||||
| Net income (loss) | 94,625 | (16,787 | ) | (86,406 | ) | (12,727 | ) | ||||||||||||
| Foreign currency translation adjustment, net of nil tax | (3,486 | ) | (81 | ) | (15,402 | ) | (2,268 | ) | |||||||||||
| Total comprehensive income (loss) | 91,139 | (16,868 | ) | (101,808 | ) | (14,995 | ) | ||||||||||||
| Weighted average number of shares used in per share calculation: | |||||||||||||||||||
| — Basic | 2,170,195,065 | 2,350,123,270 | 2,350,115,118 | 2,350,115,118 | |||||||||||||||
| — Diluted | 2,185,428,631 | 2,350,123,270 | 2,350,115,118 | 2,350,115,118 | |||||||||||||||
| Net earnings (loss) per share (cent per share) | |||||||||||||||||||
| — Basic | 4.36 | (0.71 | ) | (3.68 | ) | (0.54 | ) | ||||||||||||
| — Diluted | 4.33 | (0.71 | ) | (3.68 | ) | (0.54 | ) | ||||||||||||
| Share-based compensation expenses were included in: | |||||||||||||||||||
| Research and development expenses | 9 | 132 | 1,025 | 151 | |||||||||||||||
| Sales and marketing expenses | 110 | 11 | 11 | 2 | |||||||||||||||
| General and administrative expenses | 1,422 | 600 | 600 | 88 | |||||||||||||||
The table below sets forth a reconciliation of net loss to non-GAAP adjusted net loss for the period indicated:
| For the Three Months Ended | |||||||||||||||
| September 30, | June 30, | September 30, | September 30, | ||||||||||||
| 2019 | 2020 | 2020 | 2020 | ||||||||||||
| RMB | RMB | RMB | US$ | ||||||||||||
| Net income (loss) | 94,625 | (16,787 | ) | (86,406 | ) | (12,727 | ) | ||||||||
| Add: Share-based compensation expense | 1,541 | 743 | 1,636 | 241 | |||||||||||
| Non-GAAP adjusted net income (loss) | 96,166 | (16,044 | ) | (84,770 | ) | (12,486 | ) | ||||||||
FAQ
What were Canaan's Q3 2020 revenues?
How much did Canaan lose in the third quarter of 2020?
What was the change in Canaan's computing power sold in Q3 2020?
Did Canaan provide financial guidance for the future?
