Canaan Inc. Reports Unaudited Fourth Quarter and Full Year 2023 Financial Results

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SINGAPORE, Feb. 27, 2024 /PRNewswire/ — 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 and twelve months ended December 31, 2023.

Fourth Quarter 2023 Operating and Financial Highlights

Total computing power sold was 5.5 million Thash/s, representing an increase of 45.7% from 3.8 million Thash/s in the third quarter of 2023 and an increase of 191.9% from 1.9 million Thash/s in the same period of 2022.

Revenues were US$49.1 million, as compared to US$33.3 million in the third quarter of 2023 and US$58.3 million in the same period of 2022.

Mining revenue was US$3.7 million, representing an increase of 13.6% from US$3.3 million in the third quarter of 2023 and a decrease of 65.5% from US$10.7 million in the same period of 2022.

Full Year 2023 Operating and Financial Highlights

Total computing power sold was 19.6 million Thash/s, representing a year-over-year increase of 29.6% from 15.1 million Thash/s in 2022.

Revenues were US$211.5 million, compared to US$651.5 million in 2022.

Mining revenue was US$34.0 million, compared to US$32.5 million in 2022.

Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, “We capitalized on the opportunity presented by the Bitcoin price recovery in the fourth quarter of 2023, fortifying our operational and financial foundations for the year 2024. Leveraging our multifaceted sales system, we achieved 5.5 million Thash/s of total computing power sold, marking a 45.7% sequential increase. This encouraging sales performance translated into better-than-expected total revenues, reaching US$49.1 million, reflecting a remarkable 47.3% quarter-over-quarter growth. We also secured considerable contract sales, including bulk orders from esteemed public company clients, underscoring our product quality and delivery capabilities. Furthermore, our Bitcoin mining segment exhibited improvements in an evolving regulatory environment, with mining revenue up 13.6% sequentially. We also expanded our computing power deployment in Africa and tapped our footprint into the Middle East during the fourth quarter.”

“While we acknowledge the persisting challenges of the ongoing bearish market for mining machines, we draw inspiration from the recent approval and listing of spot Bitcoin ETFs. This milestone signals the potential for Bitcoin to attract a larger user base and foster a more concrete consensus in the long run. Our commitment remains unwavering as we stand shoulder-to-shoulder with the Bitcoin ecosystem and miner partners. We will continue to drive technological advancements in our product offerings, provide best-in-class services, and optimize our mining operations. These initiatives are poised to position us for long-term success alongside the evolving cryptocurrency landscape.”

Mr. James Jin Cheng, Chief Financial Officer of Canaan, stated, “With the bitcoin price experiencing a favorable recovery in December, we seized the opportunity of short-term upside machine demand, and delivered a 44% higher revenue by selling more machines on top of our previous-announced revenue guidance. At the same time, customers also paid more cash advances to secure their future-sales contracts on our new A14 series. This operation was a continuation of our strategy to optimize the inventory mix between product generations. It also effectively contributed as a positive factor to cash balance, which has an upside change from US$40 million as of September 30, 2023 to US$96 million as of December 31, 2023. On the other hand, despite the impact of regulatory changes in Central Asia, we achieved a sequential growth of 14% in our bitcoin mining revenue by leveraging the improved Bitcoin price. Our diversified mining deployment and enhanced uptime led to a record-setting 909 bitcoins in our cryptocurrency assets by the end of 2023. On the cost and expense fronts, we are taking more measures to streamline the spending, including optimizing our organization with fewer headcounts. Although we incurred a non-cash inventory write-down, prepayment write-down and provision for reserve for inventory purchase commitments totaling US$55.5 million, our operating performance improved both sequentially and year over year, shown as the narrowed operating loss, Non-GAAP operating loss and Non-GAAP net loss.”

“Other than operation, from late 2023 to the end of January 2024, we have seized the capital market windows to secure approximately US$136 million in financing from both ATM program and preferred shares. We continued to utilize cash to lock wafer supply capability, preparing for the potential booming market post the next bitcoin halving. Looking forward, the industry will go through halving for customers to have certainties on returns. And it will drive most of the capital expenditure investment decisions to post halving time, including machine procurements. We will pursue a proactive approach in investing in strategic directions like research and development of new products, supply capacity and self-mining, and remain prudent in operating expense spending.”

Fourth Quarter 2023 Financial Results

Revenues in the fourth quarter of 2023 were US$49.1 million, as compared to US$33.3 million in the third quarter of 2023 and US$58.3 million in the same period of 2022. Total revenues consisted of US$44.9 million in products revenue, US$3.7 million in mining revenue and US$0.5 million in other revenues.

Products revenue in the fourth quarter of 2023 was US$44.9 million, compared to US$29.9 million in the third quarter of 2023 and US$47.5 million in the same period of 2022. The increase compared to the third quarter of 2023 was mainly due to the growth in total computing power sold and average selling price led by the recovery of bitcoin price. The decrease compared to the fourth quarter of 2022 was mainly due to lower selling prices, which resulted from the stepping-up destocking efforts as the halving event approaches, despite a gradual recovery in the price of bitcoin and an increase in total computing power sold. AI product revenue was US$0.3 million in the fourth quarter of 2023, as compared to US$0.2 million in the third quarter of 2023 and US$0.2 million in the same period of 2022.

Mining revenue in the fourth quarter of 2023 was US$3.7 million, representing an increase of 13.6% from US$3.3 million in the third quarter of 2023 and a decrease of 65.5% from US$10.7 million in the same period of 2022. The sequential increase was mainly driven by the bitcoin price recovery. The year-over-year decrease was mainly attributable to the decrease of mining computing power which resulted from the temporary shutdown of approximately 2.0 Exahash/s computing power in Kazakhstan to ensure legal compliance.

Cost of revenues in the fourth quarter of 2023 was US$103.1 million, compared to US$102.4 million in the third quarter of 2023 and US$122.5 million in the same period of 2022.

Products costs in the fourth quarter of 2023 were US$95.8 million, compared to US$83.7 million in the third quarter of 2023 and US$98.9 million in the same period of 2022. The sequential and year-over-year increases were consistent with the increase of computing power sold. The inventory write-down, prepayment write-down and provision for reserve for inventory purchase commitments accrued for this quarter was US$55.5 million, compared to US$53.9 million for the third quarter of 2023 and US$60.3 million for the same period of 2022. Products costs consist of direct production costs of mining machines and AI products and indirect costs related to production, as well as inventory write-down, prepayment write-down and provision for reserve for inventory purchase commitments.

Mining costs in the fourth quarter of 2023 were US$6.0 million, compared to US$17.9 million in the third quarter of 2023 and US$23.6 million in the same period of 2022. Mining costs herein consist of direct production costs of mining operations, including electricity and hosting, as well as depreciation of deployed mining machines. The sequential and year-over-year decrease was mainly due to the decreased depreciation, which was driven by the end of the depreciation period of early deployed mining machines and the impairment of the currently deployed mining machines. The depreciation in this quarter for deployed mining machines was US$7.4 million, compared to US$10.8 million in the third quarter of 2023 and US$10.7 million in the same period of 2022.

Gross loss in the fourth quarter of 2023 was US$54.1 million, compared to a gross loss of US$69.1 million in the third quarter of 2023 and a gross loss of US$64.1 million in the same period of 2022.

Total operating expenses in the fourth quarter of 2023 were US$39.2 million, compared to US$43.8 million in the third quarter of 2023 and US$60.8 million in the same period of 2022.

Research and development expenses in the fourth quarter of 2023 were US$10.8 million, compared to US$17.2 million in the third quarter of 2023 and US$33.4 million in the same period of 2022. The sequential decrease was mainly due to a decrease of US$5.5 million in staff costs. The year-over-year decreases were mainly due to US$14.3 million one-off research and development expenditure for the A13 series products incurred in the fourth quarter of 2022, as well as a decrease of US$7.5 million in staff costs. Research and development expenses in the fourth quarter of 2023 also included share-based compensation expenses of US$1.9 million.

Sales and marketing expenses in the fourth quarter of 2023 were US$1.8 million, compared to US$2.5 million in the third quarter of 2023 and US$1.1 million in the same period of 2022. The sequential decrease was mainly due to a decrease of US$0.4 million in staff costs and a decrease of US$0.5 million in promotion expenses. The year-over-year increase was mainly due to an increase of US$0.9 million in staff cost, partially offset by a decrease of US$0.6 million in share-based compensation expenses. Sales and marketing expenses in the fourth quarter of 2023 also included share-based compensation expenses of US$79 thousand.

General and administrative expenses in the fourth quarter of 2023 were US$20.2 million, compared to US$16.2 million in the third quarter of 2023 and US$24.6 million in the same period of 2022. The sequential increase was mainly due to one-off staff costs of US$2.2 million for organization optimization. Excluding this one-off expenditure, the sequential increase was mainly due to an increase of US$4.1 million in staff cost, partially offset by an increase of US$3.3 million of realized gain on asset disposals. The year-over-year decreases were partially offset by one-off staff costs of US$2.2 million for organization optimization. Excluding this one-off expenditure, the year-over year decrease was mainly due to a decrease of US$5.4 million in share-based compensation expenses and an increase of US$4.0 million of realized gain on asset disposals, partially offset by an increase of US$2.5 million in staff cost. General and administrative expenses in the fourth quarter of 2023 also included share-based compensation expenses of US$6.6 million.

Impairment on property and equipment in the fourth quarter of 2023 was US$6.3 million, compared to US$5.7 million in the third quarter of 2023 and nil in the same period of 2022.

Impairment on cryptocurrency in the fourth quarter of 2023 was US$0.1 million, compared to US$2.2 million in the third quarter of 2023 and US$1.7 million in the same period of 2022.

Loss from operations in the fourth quarter of 2023 was US$93.3 million, compared to a loss from operations of US$112.8 million in the third quarter of 2023 and a loss from operations of US$125.0 million in the same period of 2022.

Non-GAAP loss from operations in the fourth quarter of 2023 was US$78.3 million, compared to a non-GAAP loss from operations of US$97.4 million in the third quarter of 2023 and a non-GAAP loss from operations of US$110.0 million in the same period of 2022. Non-GAAP loss from operations excludes share-based compensation expenses and impairment on property and equipment. For further information, please refer to “Use of Non-GAAP Financial Measures” in this press release.

Excess of fair value of Series A Convertible Preferred Shares in the fourth quarter of 2023 was US$59.2 million, compared to nil in the third quarter of 2023 and nil in the same period of 2022, due to the fair value of the Preferred Shares Financing exceeding the proceeds. For further information, please refer to “Preferred Shares Financing” in this press release.

Foreign exchange gains, net in the fourth quarter of 2023 were US$1.4 million, compared with a gain of US$10.9 million in the third quarter of 2023 and a gain of US$3.7 million in the same period of 2022, respectively. The foreign exchange gains were due to the US dollar appreciation against the Renminbi during the fourth quarter of 2023.

Net loss in the fourth quarter of 2023 was US$139.0 million, compared to a net loss of US$80.1 million in the third quarter of 2023 and a net loss of US$91.6 million in the same period of 2022.

Non-GAAP adjusted net loss in the fourth quarter of 2023 was US$53.9 million, as compared to a non-GAAP adjusted net loss of US$64.7 million in the third quarter of 2023 and a non-GAAP adjusted net loss of US$76.6 million in the same period of 2022. Non-GAAP adjusted net loss excludes share-based compensation expenses, impairment on property and equipments, change in fair value of financial instruments and excess of fair value of Series A Convertible Preferred Shares. For further information, please refer to “Use of Non-GAAP Financial Measures” in this press release.

Foreign currency translation adjustment, net of nil tax, in the fourth quarter of 2023 was a loss of US$0.3 million, compared with a gain of US$7.7 million in the third quarter of 2023 and a gain of US$8.7 million in the same period of 2022, respectively.

Basic and diluted net loss per American depositary share (“ADS”) in the fourth quarter of 2023 were US$0.77. In comparison, basic and diluted net loss per ADS in the third quarter of 2023 were US$0.47, while basic and diluted net loss per ADS in the same period of 2022 were US$0.55. Each ADS represents 15 of the Company’s Class A ordinary shares.

Non-GAAP adjusted basic and diluted net loss per American depositary share (“ADS”) in the fourth quarter of 2023 were US$0.30. In comparison, non-GAAP basic and diluted net loss per ADS in the third quarter of 2023 were US$0.38, while non-GAAP basic and diluted net loss per ADS in the same period of 2022 were US$0.46.

Full Year 2023 Financial Results

Revenues in the full year of 2023 decreased to US$211.5 million from US$651.5 million in 2022. The decrease was mainly due to the lower selling price which resulted from overall soft purchasing power from the market demand front.

Products revenue in the full year of 2023 decreased to US$176.9 million from US$618.9 million in 2022. Mining equipment product sales revenue in the full year of 2023 decreased to US$175.9 million from US$617.5 million in 2022, and AI product revenue in the full year of 2023 decreased to US$1.0 million from US$1.4 million in 2022.

Mining revenue in the full year of 2023 increased to US$34.0 million from US$32.5 million in 2022. The increase was mainly due to the increased computing power energized for mining and bitcoin price recovery.

Cost of revenues in the full year of 2023 increased to US$452.3 million from US$421.2 million in the full year of 2022.

Products costs in the full year of 2023 were US$368.1 million, compared to US$366.5 million in the full year of 2022. The increase was mainly due to US$190.2 million of inventories write-down, prepayment write-down and provision for reserve for inventory purchase commitments accrued, partially offset by US$127.2 million of transfer of inventories write-down and prepayment write-down.

Mining costs in the full year of 2023 were US$81.8 million, compared to US$54.5 million in the full year of 2022. Mining costs herein consist of direct production costs of mining operations, including electricity and hosting, as well as depreciation. The depreciation in the full year of 2023 for deployed mining machines was US$53.2 million, compared to US$30.7 million in the full year of 2022. The year-over-year increase was mainly due to the increase in deployed computing power for the Company’s mining operations.

Gross loss in the full year of 2023 was US$240.8 million, compared to a gross profit of US$230.3 million in the full year of 2022.

Total operating expenses in the full year of 2023 increased to US$170.1 million from US$187.4 million in the full year of 2022.

Research and development expenses in the full year of 2023 decreased by 20.7% to US$64.8 million from US$81.8 million in the full year of 2022, primarily due to the decreased research and development costs for new products.

Sales and marketing expenses in the full year of 2023 decreased to US$8.2 million from US$9.4 million in the full year of 2022. The decrease was mainly attributable to decreased share-based compensation expenses.

General and administrative expenses in the full year of 2023 decreased to US$71.2 million from US$88.3 million in the full year of 2022. This year-over-year decrease was mainly due to decreased share-based compensation expenses, and increased realized gain on asset disposals, partially offset by increased staff cost.

Impairment on property and equipment in the full year of 2023 was US$21.1 million, …

Full story available on Benzinga.com


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