Canaan, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Market Trends: Bitcoin price rose from $61,000 to $93,000 in Q4 2024, and total network hash rate increased from 622 exahash to 842 exahash, creating a favorable environment for miners.
• Mining Machine Sales: A15 series officially entered mass production, sold 9.1 million tera hash per second, a record high. North America became the largest market for mining machine sales, with orders from major public mining companies like Cipher, CleanSpark, and HIVE.
• Inventory Upgrade: Prior generation product inventory (A16, A14) cleared, with A15 becoming the main product.
• Consumer Products: Nano 3 Mining Heater popular globally, new Avalon Home products pre-ordered well, showing strong customer interest.
• Mining Operations: Mined 186 Bitcoins in Q4, revenue up 313% YOY. Expanded mining capacity in Africa with low electricity costs.
• R&D and Supply Chain: Completed mass production of A15 series, A16 ASIC taped out. Navigated semiconductor supply chain regulations by transitioning A15 chip packaging to approved OSAT partners.

Segment Performance

• Mining Machine Sales: Achieved $73 million in revenue, contributing 82% to total revenue. Sold 9.1 million tera hash per second of computing power, up 66% year-over-year and 24.7% quarter-over-quarter. North America became the largest regional market for mining machine sales, accounting for ~40%.
• Mining Business: Mined 186 Bitcoins in Q4, up 84% year-over-year. Mining revenue reached $15.3 million, up 313% year-over-year. Total installed mining hash rate at end of 2024 was 5.4 exahash per second, with 4.8 exahash per second energized. Mining gross margin increased to 42% in Q4.
• Consumer Product: First consumer product, Nano 3 Mining Heater, had 24,000 orders from 80 countries by year-end. New consumer products like Nano 3S, Avalon Mini 3, and Avalon Q had 12,000 pre-orders worth over $5 million as of early 2025.

Guidance

• Q1 2025: Expected revenue of approximately $75 million, noting Q1 is traditionally a slow season with market volatility.
• Q2 2025: Anticipated revenue in the range of $120 million to $150 million, driven by ramp-up in production capacity and completion of mining project deployment.
• Full Year 2025: Maintained guidance of total annual revenue in the range of $900 million to $1.1 billion, based on current market and operational conditions but noting potential impacts from market volatility.

Risks

• Regulatory Changes: Sudden new rules in the global semiconductor supply chain from the US BIS in January 2025, though the company navigated it by transitioning to approved OSAT partners.
• Market Volatility: Uncertainty in Bitcoin price and economic environment, affecting market sentiment and financing activities.

Question and Answer

• Q: Update on site acquisition activity and power infrastructure?

A: Actively looking in energy-rich regions across North America, with flexible cooperation models (fixed rate hosting, joint mining). AI and HPC are complementary to Bitcoin mining in the long term.

• Q: Second half demand outlook?

A: Machines for Q2 and Q3 majorly delivered, with demand depending on Bitcoin price and economic environment; confident in achieving full-year guidance if market conditions improve.

• Q: A16 ASIC details?

A: A16 ASIC is taped out, with performance improvement from multiple technical advancements; mass production expected in Q3.

• Q: North American customer pipeline?

A: Secured major clients like Cipher, CleanSpark, and HIVE, with new customers showing strong interest; optimistic on Q2 and Q3 due to pre-orders and capacity ramp-up.

• Q: A15 ramp and liquidity risk?

A: A15 orders prepaid, managed liquidity via financing tools to lock production capacity for machine sales and self-mining.

• Q: R&D for AI/HPC?

A: Preparing for future pivots, investing in US infrastructure to be ready for potential shifts to AI/HPC if market demands change.

• Q: Self-mining hash rate and external sales?

A: On track for 10 exahash per second in North America by mid-2025, focusing on gaining market share in the mining machine segment.