Intchains Group Limited Reports First Quarter 2024 Unaudited Financial Results
Intchains Group (Nasdaq: ICG) reported its unaudited Q1 2024 financial results on May 17, 2024. ASIC chip sales remained stable at approximately 494,235 units. However, revenue decreased by 6.8% year-over-year to RMB24.3 million (US$3.4 million), primarily due to a one-off sale in Q1 2023. Net loss was RMB14.8 million (US$2.1 million), compared to a net income of RMB4.7 million the previous year.
The company saw a significant rise in operating expenses, mainly driven by a 357% increase in R&D costs. As of March 31, 2024, the fair value of their cryptocurrency assets was RMB23.6 million (US$3.3 million). Intchains has initiated a new cryptocurrency acquisition strategy aimed at strengthening its ETH-based asset reserves.
- ASIC chip sales stable at 494,235 units in Q1 2024.
- Fair value of cryptocurrency assets stands at RMB23.6 million (US$3.3 million).
- Revenue from ASIC chip products remained stable, excluding one-off sales.
- Interest income increased by 17.2% to RMB4.2 million (US$0.6 million).
- Gain on fair value of cryptocurrency added RMB5.4 million (US$0.7 million) to net income.
- Initiated a cryptocurrency acquisition strategy focusing on ETH-based assets.
- Revenue decreased by 6.8% to RMB24.3 million (US$3.4 million) year-over-year.
- Net loss of RMB14.8 million (US$2.1 million) compared to net income of RMB4.7 million in Q1 2023.
- Cost of revenue increased by 15.2% to RMB15.3 million (US$2.1 million).
- Operating expenses surged by 168.3% to RMB38.1 million (US$5.3 million).
- R&D expenses increased by 357% to RMB36.5 million (US$5.1 million).
- Other income, net, decreased by 96.6% to RMB0.1 million.
Insights
The financial results for Intchains Group Limited reveal several critical points that may concern investors. Firstly, the slight decrease in revenue by
The company's shift from a net income of RMB4.7 million to a net loss of RMB14.8 million is alarming. This shift is driven by substantially higher operating expenses, notably a 357% increase in R&D expenses to RMB36.5 million. While higher R&D spending can be positive for long-term growth, it must be balanced against current financial stability.
Moreover, the fair value adjustment of cryptocurrency assets has contributed to a gain, which somewhat offsets other losses. The focus on ETH-based cryptocurrencies as long-term reserves suggests a strategic pivot towards digital assets, although it adds volatility to financials due to fluctuating crypto prices.
In summary, while the continued investment in R&D and cryptocurrencies might position the company well for the future, the short-term financial outlook appears challenging due to increased costs and a net loss. Investors should monitor how these strategic investments translate into revenue growth and profitability moving forward.
Intchains Group Limited’s results reflect its evolving market strategies and the challenges in the semiconductor and blockchain sectors. The company's steady sales volume of ASIC chips indicates a stable demand for their core product, but the lack of significant growth raises questions about market expansion or competitive pressures.
The introduction of new Goldshell-branded Box series computing equipment and the emphasis on 12nm process node technology mark Intchains’ attempt to innovate and capture new market segments. However, the market reception and subsequent sales performance of these new products will be important to watch in upcoming quarters to validate this strategy.
The cryptocurrency acquisition strategy is another bold move. Holding ETH as a long-term reserve could be seen as a hedge against fiat currency volatility and a bet on the growth of the WEB3 industry. However, it also introduces higher risk due to the volatile nature of cryptocurrencies. The company’s approach of not setting a specific target for ETH holdings suggests flexibility in this strategy but also a lack of clear financial planning.
For retail investors, it’s essential to consider the dual aspects of Intchains’ approach: stabilizing core product sales while making high-risk high-reward investments in new technology and cryptocurrency. This strategy could pay off significantly if the WEB3 space grows as expected, but it also increases the company's exposure to market fluctuations.
SHANGHAI, China, May 17, 2024 (GLOBE NEWSWIRE) -- Intchains Group Limited (Nasdaq: ICG) (“we,” or the “Company”), a provider of integrated solutions consisting of high-performance computing ASIC chip-based solutions products and a corporate holder of cryptocurrencies based on Ethereum, or ETH, today announced its unaudited financial results for the first quarter ended March 31, 2024.
First Quarter 2024 Operating and Financial Highlights
- Sales volume of ASIC chips remained steady at 494,235 units for the first quarter of 2024, compared to 497,854 units for the same period of 2023. ASIC chip sales for the first quarter of 2024 consisted of 410,162 units sold directly to customers and 84,073 units embedded in computing equipment for blockchain applications that we began offering to customers in the fourth quarter of 2023.
- Revenue was RMB24.3 million (US
$3.4 million ) for the first quarter of 2024, representing a decrease of6.8% from RMB26.0 million for the same period of 2023. - Net loss was RMB14.8 million (US
$2.1 million ) for the first quarter of 2024, compared to net income of RMB4.7 million for the same period of 2023. - As of March 31, 2024, the fair value of our cryptocurrency assets was RMB23.6 million (US
$3.3 million ), primarily comprised of approximately 825 ETH, with a total fair value of RMB21.9 million (US$3.1 million ).
Mr. Qiang Ding, Chairman of the Board of Directors and Chief Executive Officer, commented, “During the first quarter of 2024, the industry demonstrated a clear upward trajectory. As a market leader, Intchains fully leveraged its resources and technological advantages to seize rising opportunities within the industry and along the value chain. While we remain committed to fostering growth and progress across our current business lines, we are actively exploring new products and business models. In the first quarter of 2024, we began trial production and sales of our newly introduced Goldshell-branded Box series computing equipment for blockchain applications. These devices feature the latest ASIC chips, designed and manufactured using a 12nm process node, which swiftly garnered widespread market acclaim and bolstered recognition of our cutting-edge technology and brand. As we progress through 2024, we will continue to enhance our R&D capabilities and develop additional ASIC chip products tailored for applications across the WEB3 industry.
Mr. Ding added, “We have begun implementing a pivotal cryptocurrency acquisition strategy in this quarter to expand our investment in cryptocurrencies with ETH-based cryptocurrencies serving as our primary long-term asset reserve. We believe that this initiative will fully unlock the value of our capital, while enhancing Intchains’ competitiveness and our role in the development of the WEB3 industry, propelling sustainable growth for both the Company and the industry.”
First Quarter 2024 Financial Results
Revenue
Revenue was RMB24.3 million (US
Cost of Revenue
Cost of revenue was RMB15.3 million (US
Operating Expenses
Total operating expenses were RMB38.1 million (US
- Research and development expenses increased by
357.0% to RMB36.5 million (US$5.1 million ) for the first quarter of 2024 from RMB8.0 million for the same period of 2023. The increase was primarily due to higher expenses related to mask costs for our research and development projects, as well as increased personnel-related expenses. - Sales and marketing expenses increased by
27.2% to RMB1.6 million (US$0.2 million ) for the first quarter of 2024 from RMB1.3 million for the same period of 2023, mainly driven by increased share-based incentive expenses. - General and administrative expenses increased by
9.5% to RMB5.4 million (US$0.7 million ) for the first quarter of 2024 from RMB4.9 million for the same period of 2023, mainly driven by increased share-based incentive expenses. - Gain on fair value of cryptocurrency, net, for the first quarter of 2024 was RMB5.4 million (US
$0.7 million ), compared to nil in the same period of 2023. We early-adopted the amendments required pursuant to ASU 2023-08 on January 1, 2024, using a modified retrospective transition method with a cumulative-effect adjustment recorded to the opening balance of retained earnings as of January 1, 2024. The cumulative-effect adjustment of RMB0.3 million was recorded as an increase to the opening balance of retained earnings as of January 1, 2024. We measured cryptocurrency at fair value and included the gains and losses from remeasurement in net income. The gain pertains to the change in cryptocurrency’s fair value from the adoption date, January 1, 2024, to March 31, 2024, which was mainly due to the increased price of ETH.
Interest Income
Interest income increased by
Other Income, Net
Other income, net, decreased by
Net Income/(Loss)
As a result of the foregoing, we recorded a net loss of RMB14.8 million (US
Basic and Diluted Net Earnings/(Loss) Per Ordinary Share
Basic and diluted net loss per ordinary share were RMB0.12 (US
Recent Developments
We have begun implementing a pivotal cryptocurrency acquisition strategy in this quarter to expand the Company’s investments in cryptocurrencies. Pursuant to this strategy, the Company plans to acquire ETH-based cryptocurrencies using cash flows generated from operations. We view our holdings of ETH-based cryptocurrencies as long-term holdings and expect to continue to accumulate ETH-based cryptocurrencies. We have not set any specific target for the amount of ETH-based cryptocurrencies we seek to hold, and we will continue to monitor market conditions in determining whether to purchase additional ETH-based cryptocurrencies. Going forward, ETH-based cryptocurrencies will serve as a crucial long-term asset reserve for us.
Conference Call Information
The Company’s management team will host an earnings conference call to discuss its financial results at 9:00 P.M. U.S. Eastern Time on May 16, 2024 (9:00 A.M. Beijing Time on May 17, 2024). Details for the conference call are as follows:
| Event Title: | Intchains Group Limited First Quarter 2024 Earnings Conference Call |
| Date: | May 16, 2024 |
| Time: | 9:00 P.M. U.S. Eastern Time |
| Registration Link: | https://register.vevent.com/register/BI6390b60244b94f14ae203c00c53a2f4e |
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 dial-in numbers and a personal access PIN, which will be used to join the conference call.
Additionally, a live and archived webcast of the conference call will also be available at the Company’s website at https://intchains.com/.
About Intchains Group Limited
Intchains Group Limited is a provider of integrated solutions consisting of high-performance computing ASIC chip products for blockchain applications and a corporate holder of cryptocurrencies based on ETH. The Company utilizes a fabless business model and specializes in the front-end and back-end of IC design, the two major components of the IC product development chain. The Company has established strong supply chain management with a leading foundry, which helps to ensure its product quality and stable production output. The Company’s products consist of high-performance computing ASIC chips with high computing power and superior power efficiency, computing equipment incorporating its ASIC chips, and ancillary software and hardware, all of which cater to the evolving needs of the blockchain industry. The Company has built a proprietary technology platform named “Xihe” to develop a wide range of ASIC chips with high efficiency and scalability. To support its WEB3 industry development initiatives, the Company acquires and holds ETH-based cryptocurrencies as its long-term asset reserve using liquid assets that exceed its working capital requirements. For more information, please visit the Company’s website at: https://intchains.com/.
Exchange Rate Information
The unaudited United States dollar (“US$”) amounts disclosed in the accompanying financial statements are presented solely for the convenience of the readers. Translations of amounts from RMB into US$ for the convenience of the reader were calculated at the noon buying rate of US
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about: (i) our goals and strategies; (ii) our future business development, formed condition and results of operations; (iii) expected changes in our revenue, costs or expenditures; (iv) growth of and competition trends in our industry; (v) our expectations regarding demand for, and market acceptance of, our products; (vi) general economic and business conditions in the markets in which we operate; (vii) relevant government policies and regulations relating to our business and industry; (viii) fluctuations in the market price of ETH-based cryptocurrencies; gains or losses from the sale of ETH-based cryptocurrencies; changes in accounting treatment for the Company’s ETH-based cryptocurrencies holdings; a decrease in liquidity in the markets in which ETH-based cryptocurrencies are traded; security breaches, cyberattacks, unauthorized access, loss of private keys, fraud, or other events leading to the loss of the Company’s ETH-based cryptocurrencies; impacts to the price and rate of adoption of ETH-based cryptocurrencies associated with financial difficulties and bankruptcies of various participants in the industry; and (viii) assumptions underlying or related to any of the foregoing. Investors can identify these forward-looking statements by words or phrases such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the SEC.
For investor and media inquiries, please contact:
Intchains Group Limited
Investor relations
Email: ir@intchains.com
Piacente Financial Communications
In China:
Helen Wu
Tel: +86-10-6508-0677
Email: intchains@tpg-ir.com
In the United States:
Brandi Piacente
Tel: +1-212-481-2050
Email: intchains@tpg-ir.com
| INTCHAINS GROUP LIMITED | |||||||
| 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 | ||||||
| RMB | RMB | US$ | |||||
| ASSETS | |||||||
| Current Assets： | |||||||
| Cash and cash equivalents | 694,750 | 665,803 | 92,213 | ||||
| Inventories, net | 41,767 | 30,760 | 4,260 | ||||
| Prepayments and other current assets, net | 47,403 | 37,174 | 5,148 | ||||
| Short-term investments | 13,596 | 5,068 | 702 | ||||
| Total current assets | 797,516 | 738,805 | 102,323 | ||||
| Non-current Assets: | |||||||
| Cryptocurrency | 645 | 23,634 | 3,273 | ||||
| Property, equipment, and software, net | 49,184 | 49,462 | 6,851 | ||||
| Intangible assets, net | 3,425 | 3,883 | 538 | ||||
| Right-of-use assets | 1,735 | 1,496 | 207 | ||||
| Deferred tax assets | 12,899 | 24,294 | 3,365 | ||||
| Prepayments on long-term assets | 113,425 | 112,853 | 15,630 | ||||
| Other non-current assets | 421 | 526 | 73 | ||||
| Total non-current assets | 181,734 | 216,148 | 29,937 | ||||
| Total assets | 979,250 | 954,953 | 132,260 | ||||
| LIABILITIES, AND SHAREHOLDERS’ EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable | 195 | 1,151 | 159 | ||||
| Contract liabilities | 9,828 | 236 | 33 | ||||
| Income tax payable | 1,634 | 1,321 | 183 | ||||
| Lease liabilities | 1,103 | 1,114 | 154 | ||||
| Provision for warranty | 40 | 52 | 7 | ||||
| Accrued liabilities and other current liabilities | 15,364 | 13,274 | 1,839 | ||||
| Total current liabilities | 28,164 | 17,148 | 2,375 | ||||
| Non-current Liabilities: | |||||||
| Lease liabilities | 761 | 382 | 53 | ||||
| Total non-current liabilities | 761 | 382 | 53 | ||||
| Total liabilities | 28,925 | 17,530 | 2,428 | ||||
| Shareholders' Equity: | |||||||
| Ordinary shares (US | 1 | 1 | - | ||||
| Subscriptions receivable from shareholders | (1 | ) | (1 | ) | - | ||
| Additional paid-in capital | 186,262 | 187,715 | 25,998 | ||||
| Statutory reserve | 48,265 | 48,592 | 6,730 | ||||
| Accumulated other comprehensive income | 1,838 | 1,946 | 269 | ||||
| Retained earnings | 713,960 | 699,170 | 96,835 | ||||
| Total equity | 950,325 | 937,423 | 129,832 | ||||
| Total liabilities and shareholders’ equity | 979,250 | 954,953 | 132,260 | ||||
| INTCHAINS GROUP LIMITED | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) | ||||||||
| (All amounts in thousands, except share and per share data, or as otherwise noted) | ||||||||
| For the Three Months ended March 31, | ||||||||
| 2023 | 2024 | |||||||
| RMB | RMB | US$ | ||||||
| Products revenue | 26,030 | 24,271 | 3,361 | |||||
| Cost of revenue | (13,244 | ) | (15,262 | ) | (2,114 | ) | ||
| Gross profit | 12,786 | 9,009 | 1,247 | |||||
| Operating expenses: | ||||||||
| Research and development expenses | (7,995 | ) | (36,540 | ) | (5,061 | ) | ||
| Sales and marketing expenses | (1,276 | ) | (1,623 | ) | (225 | ) | ||
| General and administrative expenses | (4,939 | ) | (5,410 | ) | (749 | ) | ||
| Gain on fair value of cryptocurrency, net | - | 5,442 | 754 | |||||
| Total operating expenses | (14,210 | ) | (38,131 | ) | (5,281 | ) | ||
| Loss from operations | (1,424 | ) | (29,122 | ) | (4,034 | ) | ||
| Interest income | 3,540 | 4,150 | 575 | |||||
| Foreign exchange gains/(loss), net | 61 | (254 | ) | (35 | ) | |||
| Other income, net | 4,098 | 139 | 19 | |||||
| Income/(loss) before income tax expenses | 6,275 | (25,087 | ) | (3,475 | ) | |||
| Income tax (expense)/benefit | (1,539 | ) | 10,292 | 1,425 | ||||
| Net Income/(loss) | 4,736 | (14,795 | ) | (2,050 | ) | |||
| Foreign currency translation adjustment, net of nil tax | (107 | ) | 108 | 15 | ||||
| Total comprehensive income/(loss) | 4,629 | (14,687 | ) | (2,035 | ) | |||
| Weighted average number of shares used in per share calculation | ||||||||
| — Basic | 117,921,301 | 119,888,044 | 119,888,044 | |||||
| — Diluted | 117,921,301 | 119,888,044 | 119,888,044 | |||||
| Net earnings/(loss) per share | ||||||||
| — Basic | 0.04 | (0.12 | ) | (0.02 | ) | |||
| — Diluted | 0.04 | (0.12 | ) | (0.02 | ) | |||
| INTCHAINS GROUP LIMITED | ||||||||||
| UNAUDITED CRYPTOCURRENCY-ADDITIONAL INFORMATION | ||||||||||
| As of Quarter Ended | Cryptocurrency | Approximate Number of Cryptocurrency Held at End of Quarter | Original Cost Basis | Approximate Average Purchase Price Per Unit of Cryptocurrency | Lowest Market Price Per Unit of Cryptocurrency During Quarter (a) | Market Value of Cryptocurrency Held at End of Quarter Using Lowest Market Price (b) | Highest Market Price Per Unit of Cryptocurrency During Quarter (c) | Market Value of Cryptocurrency Held at End of Quarter Using Highest Market Price (d) | Market Price Per Unit of Cryptocurrency at End of Quarter (e) | Market Value of Cryptocurrency Held at End of Quarter Using Ending Market Price (f) |
| Unit | USD | USD | USD | USD | USD | USD | USD | USD | ||
| March 31,2024 | ETH | 346 | 999,180 | 2,888 | 2,100 | 726,600 | 4,094 | 1,416,524 | 3,618 | 1,251,828 |
| ETH-Coinbase Staked | 479 | 1,297,687 | 2,709 | 2,236 | 1,071,044 | 4,341 | 2,079,339 | 3,842 | 1,840,318 | |
| Bitcoin | 0.67 | 44,995 | 67,157 | 38,501 | 25,796 | 73,836 | 49,470 | 70,407 | 47,173 | |
| USDT&USDC | 99,583 | 99,583 | 1 | 1 | 99,583 | 1 | 99,583 | 1 | 99,583 | |
| Others | Multiple * | 81,571 | Multiple * | Multiple * | 67,814 | Multiple * | 124,481 | Multiple * | 91,346 | |
| Total | 2,523,016 | 1,990,837 | 3,769,397 | 3,330,248 | ||||||
*The 'Others' category encompasses various cryptocurrencies that are not reported individually due to their lower significance. This category is labeled as 'Multiple' to indicate the presence of diverse prices associated with different type of cryptocurrency. Due to their immaterial nature, detailed price listings are not provided.
(a)The "Lowest Market Price Per Unit of Cryptocurrency During Quarter" represents the lowest market price for a single unit of cryptocurrency reported on the Coinbase exchange during the respective quarter, without regard to when we purchased any of the cryptocurrency.
(b)The "Market Value of Cryptocurrency Held at End of Quarter Using Lowest Market Price" represents a mathematical calculation consisting of the lowest market price for a single unit of cryptocurrency reported on the Coinbase exchange during the respective quarter multiplied by the number of cryptocurrency we held at the end of the applicable period.
(c)The "Highest Market Price Per Unit of Cryptocurrency During Quarter" represents the highest market price for a single unit of cryptocurrency reported on the Coinbase exchange during the respective quarter, without regard to when we purchased any of the cryptocurrency.
(d)The "Market Value of Cryptocurrency Held at End of Quarter Using Highest Market Price" represents a mathematical calculation consisting of the highest market price for a single unit of cryptocurrency reported on the Coinbase exchange during the respective quarter multiplied by the number of cryptocurrency we held at the end of the applicable period.
(e)The "Market Price Per Unit of Cryptocurrency at End of Quarter" represents the market price of a single unit of cryptocurrency on the Coinbase exchange at midnight UTC+8 time on the last day of the respective quarter, which aligns with the our revenue recognition cut-off.
(f)The "Market Value of Cryptocurrency Held at End of Quarter Using Ending Market Price" represents a mathematical calculation consisting of the market price of a single unit of cryptocurrency on the Coinbase exchange at midnight UTC+8 time on the last day of the respective quarter multiplied by the number of cryptocurrency we held at the end of the applicable period.
FAQ
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