Canaan(CAN) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 reached $100.2 million, up 40% year over year, marking the first time it surpassed $100 million [7][22] - Gross profit rose to $9.3 million, a significant increase from $0.6 million in Q1 [7][25] - Operating loss narrowed to $27.1 million, while EBITDA turned profitable at $1.68 million, and adjusted EBITDA reached $25.3 million, both hitting record highs since Q1 2024 [7][25] - Basic and diluted net loss per ADS narrowed to $0.03, representing the lowest loss in the past ten quarters [25] Business Line Data and Key Metrics Changes - Product sales reached approximately $72 million, an increase of 23% quarter over quarter and up 17% year over year [22][23] - Mining revenue surged 202% year over year to $28 million, with $2.84 bitcoins mined in the quarter, up 101% year over year [24] - The Avalon Home product line generated $5.7 million in revenue, with a gross margin of 39%, a sharp increase of 359% from the previous quarter [11][23] Market Data and Key Metrics Changes - The average selling price (ASP) increased to $11.1 per terahash, reaching a new quarterly high [22][23] - The hash price in Q2 moved up overall from about $48 to a peak of $58 per petahash per day [8][92] - The total installed mining capacity worldwide reached 8.15 exahash per second, with 6.57 exahash per second already in operation [12] Company Strategy and Development Direction - The company aims to rapidly expand the home use market, particularly in heating-related applications [12] - A focus on vertical integration is emphasized, with the company designing and manufacturing its own ASIC chips and mining machines [15][21] - The company plans to strengthen its presence in North America, which is seen as a core expansion region [19][44] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for Q3 2025, with revenue expected to be in the range of $125 million to $145 million [19][31] - The company is adapting to tariff policy changes and is seeing a gradual return of customer demand in the U.S. market [40][51] - Management highlighted the importance of maintaining flexibility in capital allocation and responding to geopolitical shifts [88] Other Important Information - The company has a Bitcoin treasury that reached $15.11 bitcoins, with a market value of approximately $160 million at the end of Q2 [26][30] - Operating expenses remained flat at approximately $36 million, with plans to exit the AI business to reduce costs [27] - The company has secured orders from Cypher and CleanSpark, indicating strong customer recognition [46] Q&A Session Summary Question: Current market dynamics and pricing strategy for A15s - Management noted that the ASP for Q2 rose to $11.1 per terahash, with U.S. customers gradually adapting to tariff changes [36][38] Question: Strategy for penetrating the North American market - Management emphasized the importance of performance advantages and high service quality to gain market share in the U.S. [41][44] Question: Changes in customer demand since May - Management observed positive changes in market demand, particularly in Asia, while U.S. demand is still recovering [51][52] Question: Impact of AI and HPC co-location on demand for Bitcoin mining rigs - Management indicated that AI HPC projects are complementary to Bitcoin mining, with no direct competition for energy resources [56][58] Question: Update on next-gen ASICs and cooling systems - Management confirmed that the A16 series is in the chip assembly and testing stage, with growing demand for liquid-cooled systems [65][66] Question: Bitcoin treasury strategy and potential for generating yield - Management outlined a conservative approach to Bitcoin treasury management, including collateralized financing and interest-bearing accounts [69][72] Question: Capital deployment priorities and share buybacks - Management stated that share buybacks are prioritized due to undervaluation, with a focus on maintaining flexibility in capital allocation [86][89]