Intchains Group Ltd. Q3 FY2024 earnings call

Market Context

• The cryptocurrency market in the third quarter of 2024 was mostly range bound, with Bitcoin price relatively stable while other cryptos had varying declines. Post the U.S. president election in the fourth quarter, global investors' expectations for pro crypto regulation increased, bringing renewed optimism. In November 2024, Bitcoin price broke all-time highs, and sectors like payment, Meme, and RWA saw rapid growth.

Company Strategies

• Intchains aims to achieve growth beyond crypto cycles through developing Web3-based applications in the long term and increasing ROI during crypto cycles in the short term. It enhanced ROI by exploring promising crypto projects and accumulating Ether. In the third quarter, it continued to drive sales of Goldshell-branded computing equipment for mining Kaspa, Alephium, Dogecoin, and Litecoin.

Product Developments

• Launched Goldshell Pay in the third quarter, a one-stop payment solution for merchants. Plans to launch a hardware crypto wallet in the fourth quarter as part of expanding the blockchain application ecosystem.

In the third quarter of 2024, Intchains' revenue was CNY 60.3 million (USD 8.6 million), marking a year-on-year increase of 781%. Overseas revenue accounted for 66.2% of the total revenue. The sales volume of ASIC chips was 207,838 units, which was a 26% increase compared to the same period in 2023. The gross margin in the third quarter was 67.7%, reaching the highest level since Q1 2023. Total operating expenses were CNY 37.7 million (USD 5.4 million), showing a 90.8% increase from the same period in 2023. The net income for the third quarter was CNY 3.2 million (USD 450,000), and the non-GAAP adjusted net income was CNY 19.1 million (USD 912,000).

Product and Project Innovation

• Will continue to focus on product and project innovation and foster the adoption of blockchain technology for clients and partners.

ASIC and Wallet Plans

• Expect to produce new ASICs by the first quarter of 2025.
• Plans to launch a hardware crypto wallet in the fourth quarter.

Market Volatility

• The volatility of the cryptocurrency market led to a loss on fair value of cryptocurrency of CNY 13.1 million (USD 1.9 million) in the third quarter due to Ether price falling 24.2% from the end of the second quarter to the end of the third quarter.

Regulatory Uncertainty

• Uncertainty regarding crypto regulation could impact the company's business operations and financial results.

Q: Could you tell us a little bit more about the assumptions of your Goldshell Pay and your hardware crypto wallet? And what differentiates yourself from the other app and wallets in the market?

A: Goldshell Pay is a one-stop payment platform serving global merchants currently, with functions like risk monitoring and data analytics, but it's in the early stage and not expected to generate revenue in the short term. The hardware wallet is in the development process. Both Goldshell Pay and the hardware wallet have no custodian function, and users need to store their security key by themselves.

Q: Could you give us some projections about what the cost and how the revenue would be like driven by this project? And also, is this project to be developed in-house or the company is - have a third-party partner to launch this cryptocurrency wallet?

A: Currently, all these are in the trial stage. We don't expect both Goldshell Pay and the wallet to materially contribute to our profits during this phase, and it's difficult to provide a specific commercialization timeline. All are in the trial stage and developed in-house for now.

Q: The company has been saying that it had - one of the strategies is accumulating Ether, which is a little bit different from more popular strategy, which is accumulating Bitcoin like MicroStrategy. So can the management elaborate on that strategy in particular? And also, some other company are also adopting - like some leveraging or even some other financing to do that. So is the company also planning to do so?

A: The reason for accumulating Ether is that we position ourselves as an altcoin development company. Our main business focuses on providing ASIC chips for promising PoW coins, and we aim to share the growth of the POS sector by accumulating Ether. At present, the company is primarily using its own cash to accumulate assets, and while we are aware of other companies' financing strategies, there is no immediate plan to adopt leveraging or other financing for this at present.