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 June 30,
2020.
Second Quarter 2020 Operating and
Financial Highlights
Total computing power sold was
2.6 million Thash/s, representing a year-over-year decrease of
18.2% from 3.2 million Thash/s in the same period of 2019 and a
quarter-over-quarter increase of 198.5% from 0.9 million Thash/s in
the first quarter of 2020.Total net revenues
decreased by 26.3% year over year and increased by 160.9% quarter
over quarter to RMB178.1 million (US$25.2 million) from RMB241.5
million in the same period of 2019 and RMB68.3 million in the first
quarter of 2020.Gross profit increased by 302.5%
year over year and 1,711.5% quarter over quarter to RMB43.3 million
(US$6.1 million) from RMB10.8 million in the same period of 2019
and RMB2.4 million in the first quarter of 2020. Gross margin
expanded significantly to 24.3% from 4.5% in the same period of
2019 and 3.5% in the first quarter of 2020.Net
loss narrowed to RMB16.8 million (US$2.4 million) from
RMB263.1 million in the same period of 2019 and RMB39.9 million in
the first quarter of 2020.Non-GAAP adjusted net
loss was RMB16.0 million (US$2.3 million) compared to
RMB46.0 million in the same period of 2019 and RMB38.2 million in
the first quarter of 2020.
“Mr. Nangeng Zhang, Chairman and Chief Executive
Officer of Canaan, commented, “During the second quarter of 2020,
the COVID-19 pandemic continued to impact the lives of people
around the world and the Bitcoin halving event also caused
significant volatility in Bitcoin prices. Nevertheless, we remained
focused on strengthening our research and development capabilities,
refining our product offerings, and executing our AI initiatives.
These efforts enabled us to achieve meaningful financial and
operational improvements on a sequential basis the second quarter
as well as helped to ensure that our products could maintain their
positions at the cutting edge of technological innovation. Going
forward, we are confident that our strong pipeline of
next-generation products will continue to sustain our growth
momentum in the future.”
Mr. Quanfu Hong, Chief Financial Officer of
Canaan, stated, “Despite the challenges we experienced during the
second quarter of 2020, we delivered another quarter of solid
financial results. Our total net revenues increased by 160.9%
quarter over quarter to RMB178.1 million during the period, driven
by a 198.5% sequential increase in our total computing power sold
during the second quarter. Looking ahead, we will continue to
invest in those areas that can strengthen our product offerings,
streamline our operations, and solidify our market leadership.
Although the current macroeconomic uncertainties make forecasting
difficult, we are confident in the underlying strength of our
fundamentals and optimistic about the long-term growth prospects of
our business.”
Second Quarter 2020 Financial
Results
Total net revenues in the
second quarter of 2020 were RMB178.1 million (US$25.2 million)
representing a 26.3% year-over-year decrease from RMB241.5 million
in the same period of 2019 and a 160.9% quarter-over-quarter
increase from RMB68.3 million in the first quarter of 2020. The
year-over-year decrease and quarter-over-quarter increase in total
net revenues were mainly in line with the changes in total
computing power sold.
Cost of revenues in the second
quarter of 2020 was RMB134.8 million (US$19.1 million) compared to
RMB230.8 million in the same period of 2019 and RMB65.9 million in
the first quarter of 2020. The year-over-year decrease and
quarter-over-quarter increase in cost of revenues were in line with
the changes in the Company’s sales volume of Thash and cost per
Thash.
Gross profit in the second
quarter of 2020 increased by 302.5% year over year and 1,711.5%
quarter over quarter to RMB43.3 million (US$6.1 million) from
RMB10.8 million in the same period of 2019 and RMB2.4 million in
the first quarter of 2020. Gross margin in the second quarter of
2020 expanded to 24.3% from 4.5% in the same period of 2019 and
3.5% in the first quarter of 2020.
Total operating expenses in the
second quarter of 2020 were RMB62.2 million (US$8.8 million)
compared to RMB279.7 million in the same period of 2019 and RMB73.5
million in the first quarter of 2020.
Research and development expenses in the second
quarter of 2020 were RMB26.1 million (US$3.7 million) compared to
RMB35.9 million in the same period of 2019 and RMB41.8 million in
the first quarter of 2020. The reductions in research and
development expenses were mainly due to the decreases in materials
used for research and development purposes in the same period of
2019 and the second quarter of 2020. As a percentage of total net
revenues, research and development expenses in the second quarter
of 2020 was 14.6% compared to 14.9% in the same period of 2019 and
61.2% in the first quarter of 2020.
Selling and marketing expenses in the second
quarter of 2020 were RMB6.5 million (US$0.9 million) compared to
RMB5.6 million in the same period of 2019 and RMB4.1 million in the
first quarter of 2020, both increases were mainly driven by the
increased salaries of the staff in the Company’s sales and
marketing departments. As a percentage of total net revenues, sales
and marketing expenses in the second quarter of 2020 were 3.7%
compared to 2.3% in the same period of 2019 and 6.1% in the first
quarter of 2020.
General and administrative expenses in the
second quarter of 2020 were RMB29.6 million (US$4.2 million)
compared to RMB238.1 million in the same period of 2019 and RMB27.6
million in the first quarter of 2020. In the second quarter of
2019, the share-based compensation allocated to general and
administrative expenses in the amount of RMB213.1 million was due
to the excess of appraised fair value over the transfer price of
ordinary shares transferred from the existing shareholders to other
existing shareholders who were also the employees. Compared with
the first quarter of 2020, the slight increase was mainly due to
the increase of salary, the professional service charges and other
daily administrative expenses.
Loss from operations in the
second quarter of 2020 was RMB18.9 million (US$2.7 million)
compared to RMB268.9 million in the same period of 2019 and RMB71.1
million in the first quarter of 2020.
Net loss attributable to ordinary
shareholders in the second quarter of 2020 was RMB16.8
million (US$2.4 million) compared to RMB263.1 million in the same
period of 2019 and RMB39.9 million in the first quarter of
2020.
Non-GAAP adjusted net loss in
the second quarter of 2020 was RMB16.0 million (US$2.3 million)
compared to RMB46.0 million in the same period of 2019 and RMB38.2
million in the first quarter of 2020. Non-GAAP adjusted net loss
excludes share-based compensation expense. For further information,
please refer to "Use of Non-GAAP Financial Measures" in this
release.
Basic and diluted net loss per
ADS in the second quarter of 2020 were both RMB0.11
(US$0.02) compared to RMB1.88 in the same period of 2019 and
RMB0.25 in the first quarter of 2020. Each ADS represents 15 of the
Company's Class A ordinary shares.
As of June 30, 2020, the Company had
cash and cash equivalents of RMB157.0 million
(US$22.2 million) compared to RMB516.6 million as of December 31,
2019. The decrease was mainly due to higher short-term investments
as the Company had invested RMB347.6 million (US$49.2 million) in
short-term investments as of June 30, 2020, compared with RMB11.0
million in short-term investments as of December 31, 2019. The
company purchased short-term financial products to receive higher
returns but at the same time can withdraw at any time.
Business
Outlook
Due to the continued uncertainty from the
rapidly changing global environment related to the COVID-19
pandemic and 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, August 31, 2020, at 8:00 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.
Second Quarter 2020 Earnings Conference Call |
Registration Link: |
http://apac.directeventreg.com/registration/event/3977618 |
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 September 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: |
3977618 |
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 RMB7.0651
to US$1.00, the noon buying rate in effect on June 30, 2020, in the
H.10 statistical release of the Federal Reserve Board. The Company
makes no representation that the RMB or US$ amounts referred could
be converted into US$ or RMB, as the case may be, at any particular
rate or at all.
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 LiEmail:
IR@canaan-creative.com
ICR Inc.Jack WangTel: +1 (347) 396-3281Email:
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 ofDecember 31, |
|
As of June 30, |
|
2019 |
|
2020 |
|
2020 |
|
RMB |
|
RMB |
|
US$ |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
516,607 |
|
|
|
157,022 |
|
|
|
22,225 |
|
Restricted cash |
|
8,239 |
|
|
|
5,098 |
|
|
|
722 |
|
Short-term investments |
|
11,005 |
|
|
|
347,559 |
|
|
|
49,194 |
|
Accounts receivable |
|
2,872 |
|
|
|
10,160 |
|
|
|
1,438 |
|
Inventories |
|
196,067 |
|
|
|
88,115 |
|
|
|
12,472 |
|
Prepayments and other current assets |
|
206,020 |
|
|
|
175,347 |
|
|
|
24,819 |
|
Total current assets |
|
940,810 |
|
|
|
783,301 |
|
|
|
110,870 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
|
|
|
Property, equipment and software |
|
22,602 |
|
|
|
17,330 |
|
|
|
2,453 |
|
Operating lease assets |
|
— |
|
|
|
88,287 |
|
|
|
12,496 |
|
Right-of-use assets, net |
|
22,764 |
|
|
|
17,706 |
|
|
|
2,506 |
|
Other non-current assets |
|
5,250 |
|
|
|
2,230 |
|
|
|
316 |
|
Total non-current assets |
|
50,616 |
|
|
|
125,553 |
|
|
|
17,771 |
|
Total assets |
|
991,426 |
|
|
|
908,854 |
|
|
|
128,641 |
|
LIABILITIES, AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
Short-term debts |
|
99,903 |
|
|
|
181,093 |
|
|
|
25,632 |
|
Accounts payable |
|
99,050 |
|
|
|
16,158 |
|
|
|
2,287 |
|
Notes payable |
|
27,462 |
|
|
|
14,912 |
|
|
|
2,111 |
|
Contract liabilities |
|
8,288 |
|
|
|
1,078 |
|
|
|
153 |
|
Accrued liabilities and other current liabilities |
|
40,691 |
|
|
|
24,139 |
|
|
|
3,417 |
|
Lease liabilities, current |
|
9,838 |
|
|
|
9,128 |
|
|
|
1,292 |
|
Total current liabilities |
|
285,232 |
|
|
|
246,508 |
|
|
|
34,892 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities, non-current |
|
13,399 |
|
|
|
7,580 |
|
|
|
1,073 |
|
Other non-current liabilities |
|
— |
|
|
|
9,826 |
|
|
|
1,391 |
|
Total non-current liabilities |
|
13,399 |
|
|
|
17,406 |
|
|
|
2,464 |
|
Total liabilities |
|
298,631 |
|
|
|
263,914 |
|
|
|
37,356 |
|
Shareholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares (US$0.00000005 par value; 1,000,000,000,000
shares authorized, 2,372,222,222 shares issued,
2,350,123,270 shares outstanding as of December 31,
2019 and June 30, 2020, respectively) |
|
1 |
|
|
|
1 |
|
|
|
— |
|
Subscriptions receivable from shareholders |
|
(1 |
) |
|
|
(1 |
) |
|
|
— |
|
Treasury stocks (US$0.00000005 par value; 22,098,952 shares as
of December 31, 2019 and June 30, 2020,
respectively) |
|
— |
|
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
1,631,609 |
|
|
|
1,634,083 |
|
|
|
231,289 |
|
Statutory reserves |
|
97,307 |
|
|
|
97,307 |
|
|
|
13,773 |
|
Accumulated other comprehensive loss |
|
(55,542 |
) |
|
|
(49,140 |
) |
|
|
(6,955 |
) |
Accumulated deficit |
|
(980,579 |
) |
|
|
(1,037,310 |
) |
|
|
(146,822 |
) |
Total shareholders’
equity |
|
692,795 |
|
|
|
644,940 |
|
|
|
91,285 |
|
Total liabilities and
shareholders’
equity |
|
991,426 |
|
|
|
908,854 |
|
|
|
128,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CANAAN INC. UNAUDITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(all
amounts in thousands of RMB, except share and per share data, or as
otherwise noted)
|
For the Three Months Ended |
|
June
30, 2019 |
|
March
31, 2020 |
|
June
30, 2020 |
|
June
30, 2020 |
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
US$ |
Net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products revenue |
|
240,401 |
|
|
|
67,032 |
|
|
|
162,925 |
|
|
|
23,061 |
|
Leases revenue |
|
— |
|
|
|
994 |
|
|
|
15,109 |
|
|
|
2,139 |
|
Services revenue |
|
370 |
|
|
|
24 |
|
|
|
57 |
|
|
|
8 |
|
Other revenue |
|
775 |
|
|
|
223 |
|
|
|
35 |
|
|
|
5 |
|
Total net revenue |
|
241,546 |
|
|
|
68,273 |
|
|
|
178,126 |
|
|
|
25,213 |
|
Cost of revenue |
|
(230,793 |
) |
|
|
(65,885 |
) |
|
|
(134,849 |
) |
|
|
(19,087 |
) |
Gross profit |
|
10,753 |
|
|
|
2,388 |
|
|
|
43,277 |
|
|
|
6,126 |
|
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
(35,912 |
) |
|
|
(41,794 |
) |
|
|
(26,073 |
) |
|
|
(3,690 |
) |
Selling and marketing expenses |
|
(5,615 |
) |
|
|
(4,132 |
) |
|
|
(6,520 |
) |
|
|
(923 |
) |
General and administrative expenses |
|
(238,131 |
) |
|
|
(27,589 |
) |
|
|
(29,587 |
) |
|
|
(4,188 |
) |
Total operating expenses |
|
(279,658 |
) |
|
|
(73,515 |
) |
|
|
(62,180 |
) |
|
|
(8,801 |
) |
Loss from operations |
|
(268,905 |
) |
|
|
(71,127 |
) |
|
|
(18,903 |
) |
|
|
(2,675 |
) |
Interest income |
|
442 |
|
|
|
1,824 |
|
|
|
873 |
|
|
|
124 |
|
Investment income |
|
1,120 |
|
|
|
1,063 |
|
|
|
1,923 |
|
|
|
272 |
|
Interest expense |
|
(3,482 |
) |
|
|
(1,185 |
) |
|
|
(1,519 |
) |
|
|
(215 |
) |
Foreign exchange (loss) gain |
|
4,515 |
|
|
|
240 |
|
|
|
80 |
|
|
|
11 |
|
Value added tax refunds |
|
348 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Others, net |
|
2,897 |
|
|
|
29,239 |
|
|
|
831 |
|
|
|
118 |
|
Loss before income tax expenses |
|
(263,065 |
) |
|
|
(39,946 |
) |
|
|
(16,715 |
) |
|
|
(2,365 |
) |
Income tax expense |
|
— |
|
|
|
— |
|
|
|
(72 |
) |
|
|
(10 |
) |
Net loss |
|
(263,065 |
) |
|
|
(39,946 |
) |
|
|
(16,787 |
) |
|
|
(2,375 |
) |
Foreign currency translation adjustment, net of nil tax |
|
(2,547 |
) |
|
|
6,483 |
|
|
|
(81 |
) |
|
|
(11 |
) |
Total comprehensive loss |
|
(265,612 |
) |
|
|
(33,463 |
) |
|
|
(16,868 |
) |
|
|
(2,386 |
) |
Weighted average number of
shares used in per share
calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— Basic and diluted |
|
2,100,081,511 |
|
|
|
2,350,123,270 |
|
|
|
2,350,123,270 |
|
|
|
2,350,123,270 |
|
Net loss per share (cent per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— Basic and diluted |
|
(12.53 |
) |
|
|
(1.70 |
) |
|
|
(0.71 |
) |
|
|
(0.10 |
) |
Share-based compensation
expenses were included
in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
2,404 |
|
|
|
1,120 |
|
|
|
132 |
|
|
|
19 |
|
Sales and marketing expenses |
|
110 |
|
|
|
11 |
|
|
|
11 |
|
|
|
2 |
|
General and administrative expenses |
|
214,557 |
|
|
|
600 |
|
|
|
600 |
|
|
|
85 |
|
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 |
|
June
30, 2019 |
|
March
31, 2020 |
|
June
30, 2020 |
|
June 30,2020 |
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
US$ |
Net loss |
|
(263,065 |
) |
|
|
(39,946 |
) |
|
|
(16,787 |
) |
|
|
(2,375 |
) |
Add: Share-based compensation expense |
|
217,071 |
|
|
|
1,731 |
|
|
|
743 |
|
|
|
106 |
|
Non-GAAP adjusted net loss |
|
(45,994 |
) |
|
|
(38,215 |
) |
|
|
(16,044 |
) |
|
|
(2,269 |
) |
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