SINGAPORE, May 17, 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 ended March 31, 2024. First Quarter 2024 Operating and Financial Highlights Revenues were US$35.1 million, which beat the previous guidance of US$33 million by 6%. Mining revenue was US$10.5 million, representing a sequential increase of 182.1%. 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 US$39.4 million, narrowed 71.7% sequentially and 53.3% year-over-year. 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 US$10.5 million, a significant sequential growth of 182.1%. Our total revenue for the quarter reached US$35 million, surpassing our previous forecasts. This topline performance is underpinned by relentless sales efforts and the optimization of our mining operations. Furthermore, the introduction of our new A1566 mining machines and the continued demand for our A14 series post the halving underscore our consistent capabilities in product innovation and market responsiveness." "The industry has witnessed several positive developments early this year, such as the approval of Bitcoin spot ETFs in the U.S. and Hong Kong markets, a record high Bitcoin price, and the seamless completion of the fourth Bitcoin halving. These milestones herald the beginning of a new bullish cycle for Bitcoin, attracting a larger base of participants and fostering a more concrete consensus within the industry. With the upcoming mass deliveries of our A14 series and the launch of the A1566 Avalon Miner, Canaan is well-prepared to capitalize on these emerging opportunities. We remain committed to enhancing our technology and offering advanced mining solutions that meet the evolving needs of our clients, ensuring that Canaan continues to be a pivotal player in the blockchain ecosystem." 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 US$35.1 million, as compared to US$49.1 million in the fourth quarter of 2023 and US$55.2 million in the same period of 2023. Total revenues consisted of US$23.4 million in products revenue, US$10.5 million in mining revenue and US$1.2 million in other revenues. Products revenue in the first quarter of 2024 was US$23.4 million, compared to US$44.9 million in the fourth quarter of 2023 and US$44.1 million in the same period of 2023. The decreases compared to the fourth quarter of 2023 and the first quarter of 2023 were mainly due to the decrease in total computing power sold and average selling price resulting from the softened demand before the halving event, despite a gradual recovery in the price of bitcoin. AI product revenue was US$0.1 million in the first quarter of 2024. Mining revenue in the first quarter of 2024 was US$10.5 million, representing an increase of 182.1% from US$3.7 million in the fourth quarter of 2023 and a decrease of 5.7% from US$11.1 million in the same period of 2023. The sequential increase was mainly driven by the recovery of the bitcoin price and the resumed mining computing power in Kazakhstan. The year-over-year decrease was due to the deployment change. Cost of revenues in the first quarter of 2024 was US$72.4 million, compared to US$103.1 million in the fourth quarter of 2023 and US$102.8 million in the same period of 2023. Products costs in the first quarter of 2024 were US$59.8 million, compared to US$95.8 million in the fourth quarter of 2023 and US$75.4 million in the same period of 2023. The sequential and year-over-year decreases were consistent with the decrease of computing power sold. The inventory write-down, prepayment write-down and provision for inventory purchase commitments accrued for this quarter was US$47.5 million, compared to US$55.5 million for the fourth quarter of 2023 and US$34.9 million for the same period of 2023. 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 inventory purchase commitments. Mining costs in the first quarter of 2024 were US$12.2 million, compared to US$6.0 million in the fourth quarter of 2023 and US$27.3 million in the same period of 2023. 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 increase was mainly due to the increased electricity cost, which was driven by the increase in energized mining computing power. The 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$5.2 million, compared to US$3.8 million in the fourth quarter of 2023 and US$16.3 million in the same period of 2023. Gross loss in the first quarter of 2024 was US$37.3 million, compared to US$54.1 million in the fourth quarter of 2023 and US$47.5 million in the same period of 2023. Total operating expenses in the first quarter of 2024 were US$30.7 million, compared to US$39.2 million in the fourth quarter of 2023 and US$38.1 million in the same period of 2023. Research and development expenses in the first quarter of 2024 were US$15.3 million, compared to US$10.8 million in the fourth quarter of 2023 and US$19.1 million in the same period of 2023. The sequential change of US$4.6 million was mainly due to the change of staff cost and research and development expenditure, totalled US$5.1 million，offset by a decrease of US$0.5 million in depreciation. The year-over-year decreases were mainly due to a decrease of US$3.8 million in staff costs. Research and development expenses in the first quarter of 2024 also included share-based compensation expenses of US$1.9 million. Sales and marketing expenses in the first quarter of 2024 were US$1.1 million, compared to US$1.8 million in the fourth quarter of 2023 and US$1.5 million in the same period of 2023. The sequential decrease was mainly due to a decrease of US$0.4 million in staff costs and a decrease of US$0.3 million in promotion expenses. The year-over-year decrease was mainly due to a decrease of US$0.8 million in staff costs, offset by an increase of US$0.2 million in share-based compensation expenses. Sales and marketing expenses in the first quarter of 2024 also included share-based compensation expenses of US$43 thousand. General and administrative expenses in the first quarter of 2024 were US$14.3 million, compared to US$20.2 million in the fourth quarter of 2023 and US$17.6 million in the same period of 2023. The sequential decrease was mainly due to a decrease of US$4.9 million in staff cost, a decrease of US$0.7 million in share-based compensation expenses and a decrease of US$0.7 million in professional service fees. The year-over-year decrease was mainly due to a decrease of US$4.4 million in share-based compensation expenses. General and administrative expenses in the first quarter of 2024 also included share-based compensation expenses of US$5.9 million. Impairment on property, equipment and software in the first quarter of 2024 was nil, compared to US$6.3 million in the fourth quarter of 2023 and nil in the same period of 2023. Loss from operations in the first quarter of 2024 was US$68.0 million, compared to US$93.3 million in the fourth quarter of 2023 and US$85.7 million in the same period of 2023. Excess of fair value of Series A Convertible Preferred Shares in the first quarter of 2024 was US$0.4 million, which was insurance cost related to the second tranche of Preferred Shares, compared to US$59.2 million in the fourth quarter of 2023 and nil in the same period of 2023. For further information, please refer to "Preferred Shares Financing" in this press release. Change in fair value of cryptocurrency in the first quarter of 2024 was an unrealized gain of US$33.6 million, compared to nil in the fourth quarter of 2023 and nil in the same period of 2023. The unrealized gain of change in fair value of cryptocurrency was driven by the bitcoin price, which increased from approximately US$42,400 on January 1, 2024 to approximately US$70,400 on March 31, 2024. For further information, please refer to "Early Adoption of FASB's New Accounting Rules for Crypto Assets Since January 1, 2024". Foreign exchange losses, net in the first quarter of 2024 were US$1.8 million, compared with a gain of US$1.4 million in the fourth quarter of 2023 and a loss of US$2.6 million in the same period of 2023, respectively. The foreign exchange losses were due to the U.S. dollar depreciation against the Renminbi during the first quarter of 2024. Net loss in the first quarter of 2024 was US$39.4 million, compared to US$139.0 million in the fourth quarter of 2023 and US$84.4 million in the same period of 2023. Non-GAAP adjusted EBITDA in the first quarter of 2024 was a loss of US$26.0 million, as compared to a loss of US$69.4 million in the fourth quarter of 2023 and a loss of US$57.5 million in the same period of 2023. Non-GAAP adjusted EBITDA is a financial measure defined as EBITDA adjusted to eliminate the effects of certain non-cash and/or non-recurring items that do not reflect our ongoing operations. 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 first quarter of 2024 was a loss of US$5.0 million, compared with a loss of US$0.3 million in the fourth quarter of 2023 and a gain of US$9.2 million in the same period of 2023, respectively. Basic and diluted net loss per American depositary share ("ADS") in the first quarter of 2024 were US$0.16. In comparison, basic and diluted net loss per ADS in the fourth quarter of 2023 were US$0.77, while basic and diluted net loss per ADS in the same period of 2023 were US$0.51. Each ADS represents 15 of the Company's Class A ordinary shares. As of March 31, 2024, the Company held cryptocurrency assets that primarily comprised 1,271.7 bitcoins with a total fair value of US$90.2 million, which consisted of 1,057.4 bitcoins owned by the Company and 214.3 bitcoins received as customer deposits. For further information, please refer to "Early Adoption of FASB's New Accounting Rules for Crypto Assets Since January 1, 2024". As of March 31, 2024, the Company had cash of US$54.7 million, compared to US$96.2 million as of December 31, 2023. Accounts receivable, net as of March 31, 2024 was US$1.6 million, compared to US$3.0 million as of December 31, 2023. Accounts receivable was mainly due to an installment policy implemented for some major customers who meet certain conditions. Contract liability as of March 31, 2024 was