Canaan Inc.

Q4 2020 Earnings Conference Call


spk04: Ladies and gentlemen, thank you for standing by, and welcome to Canon Inc.' 's fourth quarter and full year 2020 earnings call. At this time, all participants are in listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note, this event has been recorded. I would like to hand the conference over to your speaker host today, Mr. Shahokhi Lee, board secretary of the company. Please go ahead, Mr. Lee. Thank you very much. Hello, everyone, and welcome to our earnings conference call. The company's financial and operating results were released by our news services earlier today and are currently available online. Joining us today are our chairman and the CEO, Mr. and our CFO, Mr. . In addition, Mr. , our SVP, will also be available during the question and answer session. Mr. Chang will start the call by providing an overview of the company and the performance highlights for the quarter. Mr. He will then provide details on the company's operating and financial results for the period before we open the call up for your questions. Before we continue, I would like to refer you to our safe harbor statement in our early press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more roughly explained and reconciled to the most comparable measures reported on the generally accepted accounting principles in our earnings release and the filings with SEC. With that, I will now turn the call over to our Chairman and the CEO, Mr. Nankeng Zhang. Mr. Zhang will deliver his remarks in Chinese, and I will provide the corresponding English translations. Please go ahead, sir. Hello, everyone. This is Dangan Zhang, Chairman and the CEO of K9E. I will now provide a brief overview of our progress in the fourth quarter and the fourth year of 2020. In the fourth quarter of 2020, the price of Bitcoin continued to rise, directly promoting the growth of the global mining market demand. The company successfully realized the forward-looking layout of the market, and the client structure continued to optimize. A large number of long-term cooperation pre-sale orders ensured that the company had a comprehensive cash flow. By the end of 2020, During the fourth quarter, Bitcoin prices continued to rise, which helped to grow the market demand for mining machines. Our visionary approach had already enabled us to establish a presence in the market in previous quarters. In the fourth quarter, we further optimized the composition of our customer base and secured a large number of orders from our long-term partners, which helped to safeguard our abundant cash flows. As of December 31, 2020, Our total contracted orders amounted to $174 million, with $66 million in advances from our customers, representing a sequential increase of $54 million from the third quarter of 2020. We also successfully started our mass production and and delivered the next generation of A12 series mining machines in that period. And we have already begun delivering this new product series at a large scale in the fourth quarter of 2021. In this quarter, we aim to expand the market, improve our own research and development capabilities, and improve the competitiveness of our company's core mining industry. In addition, we are also investing more in the AI industry, During the fourth quarter, we further strengthened the core competencies of our mining machine business by expanding our operations in the market, investing in our R&D capabilities, and refining our supply chain management. In addition, our increased investments in our AI chips business segment have enabled us to achieve meaningful progress in developing best-in-class AI chips and facilitating their commercial applications. In terms of mining sales, the company's total order volume in 2020 reached 17.2 million mines. In the second half of 2020, the company's order volume increased significantly. The first quarter's order volume exceeded 9.2 million mines, including 15,000 mines of well-known investment institutions, Blue Energy Investor, and 1,350 mines of Aptos Credit LLC. In particular, the total number of orders we received for our mining machines in 2020 reached 172,000 machines. In the second half of 2020, we were able to significantly grow the number of orders for our mining machines, reaching 92,000 machines in the fourth quarter alone. Among these orders, we continued to secure orders from prominent institutions, including the investment firm Blue Energy Invest, which has ordered 15,000 machines, and OctoCredit, which has ordered 1,350 machines. In addition, we have also started collaborations with several well-regarded mining machine customers in northern Europe. As of the end of the first quarter of 2021, we have already recorded orders for more than 156,000 mining machines with over $238 million in advances from our customers. These orders included 6,400 from Hive Blockchain Technologies, a Canada-listed crypto miner, and 6,000 from Core Scientific, a leading U.S.-based crypto miner. Meanwhile, in order to provide our global customer base with the best services possible, we have been building up our global customer service network and established our first international customer service center in Kazakhstan in the fourth quarter. Going forward, we plan to build additional customer service centers in North America and other regions, which will enable us to provide a timely and effective open-end after-sales service to our local customers around the world. 公司一直以来都非常重视对研发的投入, We have always prioritized Prioritize our investment in product R&D and our total R&D investment reached 21 million US dollars in 2020. We have a team of seasoned engineers as well as complete design flow. We continuously recruit talented people with competitive compensation scheme and the working conditions. 公司與新的定員廠經過了一年多的磨合期。 We also continued to refine our supply chain during the quarter. Since starting to work closely with our new IC manufacturing partner, which we began more than one year ago, we have been continuously improving the yield of the chips. the power consumption and the computing performance of which have basically reached the expected level in the product test. In 2021, we will continue to develop several new generations of our chips. In the AI industry, companies have seen significant growth in the domestic and foreign markets. In 2020, the amount of AI chips exported was three times that of 2019. In addition to advancing our coal mining, in our AI business segment, for example, the usage of AI chips grows significantly across both domestic and international markets in 2020. In fact, our numbers of AI chips tripled on a year-over-year basis. in 2020, and we currently expect that our AI segment revenue will maintain its relatively high year-over-year growth rate in 2021. Through market research, we found that the market space for current AI chip exchanges and products is large, especially in the AI world, which is currently in a general stage. In 2020, China's total production value of smart homes has exceeded 10,000 yuan, and the current market size is up to 58,000 yuan. We have created a three-step product route plan. The first step is a low-cost exchange-type chip. The second step is a medium-sized computing visual chip. The third step is a high-end computing visual chip. The third step is a high-end computing visual chip. Following our research, we have identified significant market opportunities for customer-grade products with AI chips. In particular, the wide adoption of AI vision chips is currently creating a large addressable market. In fact, in 2020, the total production output of China's smartphone sector has exceeded 1 trillion RMB. and the potential market size is expected to be as high as 5.8 trillion RMB. In light of these market opportunities, we have formed a three-tier product plan. First, we will prioritize the development of low-cost customer product solutions with consumer chips. For the second tier, we have vision chips with medium computing power for smart homes smart education, and other applications. The third tier will be vision chips with high computing power for new retail, assisted driving, robotics, and other applications. For the roadmap of AI chips, we have analyzed the specific application use cases, and the corresponding market demand for computing power. As a result, we have designed multiple product lines. K510 is the fourth digital chip in 2020. In March of this year, D-Zhou successfully recreated the chip. This chip is equipped with various digital and simulation IPs that we have developed over the past two years. K510 is a semi-organized chip in the face of the high-end AIoT market. Clients have high expectations for the 510. We have already accumulated a small amount of pre-ordered orders. It is expected to be mass-produced in the second half of 2021. The K230 is an upgraded version of the K210, based on the feedback from customers. It is optimized on the flexibility and support of the power supply chain in today's power generation. It is even closer to the development needs of enterprises. We completed the tape-out process for the K510 series in the fourth quarter last year, and finished the series chip-back process in early March. The K510 series chips, which carry a variety of digital and analog IPs that we have developed over the past two years, are undergoing commissioning. As partially customized chips for the mid- to high-end AIoT market The K510 series chips have already generated significantly high interest in the market and received several small pre-orders. Currently, we expect to start the mass production of the K510 series in the second half of 2021. On the other hand, the K230 series under development is an upgrade version of our K210 series. Using customer feedback from the K210 series, we further optimized the K230 series computing power and the power consumption figures. In addition, we also made this next generation chip more flexible for developers and refined its tool chain support, laying the foundation for the K230 series to better support the needs of future enterprise development. For the first half of 2021, we continue to expect that the future contract sales for our mining machines will contribute around 70% to 80% of our total revenues. However, for the second half of the year, We will adjust such percentage based on the market situation and the production capacity. Our current mining machine production capacity for the first been fully pre-sold through future contracts. As a result, starting from the second quarter of 2021, we plan to dedicate several thousand mining machines to our own Bitcoin mining business. These machines will primarily consist of our A12 and A11 series miners for an additional combined computing power between 350 pH to 450 pH. Since the beginning of the next half of the year, the company plans to deploy 10% less than the monthly production capacity per month for self-sufficiency mining. The actual number of deployments will be adjusted according to the progress of the cooperation mine and the price and production situation. In the event of a huge change in the price and production capacity, it is expected that at least 200 million to 400 million H will be deployed by the end of the year. Starting from the second half of 2021, we plan to allocate no less than 10% of our total monthly production capacity of mining machines to our own Bitcoin mining business every month. The actual number of mining machines will be adjusted based on the development of our partner mining farms, the price of Bitcoin, and our production capacities. In the case that there are no significant changes to the price of Bitcoin and our production capacity, we felt that the total computing power dedicated to our Bitcoin mining business will reach between 2EH to 4EH by the end of the year. 2020 is a very important year for the company's development. We have overcome a number of challenges, including the external epidemic and chip supply. 2020 was an extremely important year for Cayman. We overcame external challenges such as the COVID-19 pandemic and the obstacles that it placed throughout our supply chain. We also continue to optimize our management structure while adding personals, independent directors to our board in order to further strengthen our corporate governance. At this time, I would like to thank the entire staff of Canaan, thank all our partners, and thank all the investors for their trust and support in Canaan. I hope that we can continue to make progress in 2021 to improve the efficiency of social operation, Finally, I would like to take this opportunity to thank all of our employees for your hard work, as well as our business partners and investors for your ongoing trust and support during the challenging year. In 2021, we will remain as committed as ever towards our mission of improving the efficiency of our society and the way of our lives. Thank you. This concludes the remarks of our CEO, Mr. Zhang. I will provide an overview of our fourth quarter and the four-year financial results. Before I start, please note that all numbers are in RMB terms. Total net revenue decreased to $38.2 million from $463.2 million in the same period of 2019 and $163 million in the previous quarter. The decrease was due to a few factors. First, we started mass production of our new product series during the first quarter. which only began to run out in sales in the previous period. Meanwhile, we have almost sold out our inventory of our older production since the third quarter of 2020. Cost of revenue decreased to $29.2 million from $1.14 billion in the same period of 2019. and $118 million in the first quarter of 2020. The flat fluctuations in our cost of revenues were in line with the changes in our sales volume of TH and cost of TH. As a result, we surpassed a gross revenue of $9.1 million in the first quarter of 2020, compared to the to a gross loss of $673.4 million in the same period of 2019 and a gross loss of $17 million in the previous quarter. Research and development expense was $14.1 million compared to $63.6 million in the same period of 2019 and $32.1 million in previous quarter. The year-over-year reduction was mainly due to the changes in materials that we used for R&D purpose. The sequential increase was driven by the higher salary and wealth benefits for R&D personnel. Let's now take a look at other operating expenses in the fourth quarter. First, selling and marketing expenses. were $6.1 million compared to $7.7 million in the same period of 2019 and $3.2 million in previous quarter. The changes in our selling and marketing expense were primarily due to travel expense and salary changes in our selling and marketing department. Secondly, G&A expense decreased to from $56.4 million in the same period of 2019 and $40.6 million in the previous quarter. The reductions were mainly driven by lower share based compensation during the fourth quarter of 2020. Our total operating expense in the fourth quarter of 2020 were $18.1 million compared to $127.7 million in the same period of 2019 and $75.9 million in the previous quarter. Loss from operating narrowed to $71 million from $800 million. and $1.2 million in the same period of 2019, and $92.9 million in the previous quarter. Net loss attributable to ordinary shareholders was $72 million, compared to $798.2 million in the same period of 2019. and $86.4 million in the previous quarter. Non-GAAP-adjusted net loss, which excluded share-based compensation funds, was $73.1 million. In comparison, non-GAAP-adjusted net loss was $715.5 million in the same period of 2019. and 84.8 million in the previous quarter. Diluted net loss per ADS was RMB 0.46 compared to RMB 5.34 in the same period of 2019 and RMB 0.55 in the previous quarter. Now, turning to our results in four years of 2020. Total computing household in the four year of 2020 decreased by 37.1 percentage to 6.6 million THz per second. From 10.5 million THz per second in 2019, as a result of increased of bitcoin price and our proud to clear out our old product series inventory during the first nine months of 2020. Consequently, total net value in 2020 decreased to $447.7 million from $1.42 billion in 2019. Cost of revenue in 2020 decreased by 78.9% to $409.9 million from $1.94 billion in 2019. As a result, our gross progress in 2020 was $37.8 million compared to our gross loss of $516 million in 2019. Total operation expense in 2020 decreased by 45.8% to $291.6 million from $538.5 million in 2019. Loss from operation in 2020 narrowed to $253.9 million from 1.05 billion in 2019. Net loss attributable to ordinary shareholders in 2020 was 215.1 million compared to 1.03 billion in 2019. On a non-GAAP basis, Our net loss in 2019, which excluded share-based compensation of $3 million, was $212.1 million. The net loss per ADS in 2020 was 1.38 compared to 7.21 in 2019. Turning to our balance sheet, contract liabilities as of December 31, 2020 increased to $413.4 million from $8.3 million as of December 13, 2019. The increase was driven by increased down payment for the sales order of our Bitcoin mining machine. which are scheduled for delivery in 2021 and beyond. As of December 31, 2020, we had cash and cash equivalent of $391.1 million, compared to $516.6 million as of December 31, 2019. The decrease was mainly due to higher short-term investment as we had invested $32.4 million in short-term investment as of December 31, 2020, compared with $11 million in short-term investment as of 31, 2019. can withdraw at any time. Looking forward, we are convinced our effect in 2020 will enable us to improve our financial performance significantly in 2021. As the price of Bitcoin started to resume its upward trajectory since the first quarter of 2020. Consequently, we expect our total net revenue in the first quarter of 2021 to exceed RMB 400 million. Please note that the forecast only reflects our current expense expectations and previous on the market and the operation conditions, which are subject to changes, particularly in regarding to the potential fluctuation in the price of Bitcoin as well as the impact of 2019 on the global economy. This concludes our prepared remarks for today. Operator, we have now ready to take questions. Certainly. Ladies and gentlemen, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. When asking a question, please state your question in Chinese first, then immediately repeat your question in English.
spk02: the convenience of everyone on the call. Thank you.
spk04: We have the first question from the line of Mark and Tim from Tennessee. Please go ahead.
spk03: Hi, Mr. Guan. Can you hear me? Yes, we can. My first question is about the new generation of My first question is about our new generation Bitcoin mining machine that CEO just mentioned. And I would like to know which foundry partner are we cooperating with and which technology node are we using? And any launch schedule for this new machine?
spk04: Hello. We are a company that rarely uses multi-experimental factory strategies. Currently, we are In addition to cooperating with the existing software factory, we are also developing new process chips of the same process in other software factories. According to our industry, there will be two to three different updates every year. This year is also an exception. We are a little different this year. uh uh uh uh Let me add a translation. We are one of the few in our industry to have multiple Foundry partners. We are actually working with them for our new generation chips. So every year, we have roughly two to three product iterations. And this year will be no exception. We will evaluate our notes and our selection of partners around a variety of factors, such as technology, the market, as well as the capacity. So the work is currently in progress. But at this point, we cannot really disclose any additional information on the schedule of launches.
spk03: Sure. Okay. My second question is about our capacity. We know that current capacity is very tight, and how much capacity can we secure each month? and that we have any improvement about our WebR capacity.
spk04: It's like this. The reason why there is this tension in chip supply is actually related to some of the industry characteristics of the Bitcoin mining industry. Minerals usually rely on the current the price of Bitcoin to determine the demand of the mining market in the future, and determine the number of miners in the mining market. Because in the first half of 2020, the price of Bitcoin was relatively low, so mining companies generally reduced the number of miners in the mining market in the second half of 2020. So when the price of Bitcoin increased significantly in the second half of 2020, the mining market had a serious supply and demand situation. But now, in order to solve the problem of supply and demand, Jialan has two strategies. One is to try to dig up the remaining production capacity of different supply and demand factories in multi-factory areas, and then to put the pieces on multiple nodes to be developed. Now this is one aspect of the strategy. In addition, we are also actively cooperating with major mining companies and listed companies to develop long-term mining acquisition and cooperation methods. We use long-term orders to lock the production capacity of the power plant for a longer period of time. In this way, we can smooth the fluctuation of the price of the currency, which leads to the problem of the supply and demand of chips. Okay, so let me translate. We believe a series of inherent issues in the Bitcoin mining industry resulted in the shortage of chip supplies. So mining machine manufacturers generally use Bitcoin prices as reference points to estimate future market demands for their mining machines, which in turn will determine the production volume of their mining machines. Due to the low Bitcoin prices in the second half of 2020, most mining machine manufacturers reduced their investments in weaker fabrication during the period. As a result, when the Bitcoin price bounced back, in the second half of 2020, we saw a severe supply shortage in the industry. In addition, the limited supply across the semiconductor manufacturing sector recently also have played a role in building the shortage of chips in 2021, further accelerating the problem of chip supply. We cannot really disclose the exact number of chips that we have under production right now, but one of the strategies we've adopted to address this problem is to maintain our partnerships with multiple foundry partners and keep expanding our collaborations, which had helped us achieve outstanding results in terms of GPL. On the other hand, we are also actively cooperating with large mining companies worldwide, including both public traded companies and professional institutions. With long-term purchase orders for mining machines in place, we can effectively secure the delivery of our chips from our country partners. This in turn would enable us to alleviate the technical shortages of chip supply caused by the electrification of the Bitcoin crisis.
spk03: I would like to continue with this energy production issue. Because I know that we have a good relationship with the domestic advanced foundry partners, and we have also obtained a lot of energy from them. I would like to know if we have any competitors in terms of energy production. My follow-up is that we have a good relationship with Mainland China Advanced Foundry Partners and we got a lot of web capacity from them and do we see any competitor to compete with this capacity in 2021? And what's our strategy to protect that capacity?
spk04: First of all, of course, there will be competitors, because the price of Bitcoin is so high now. So there will definitely be competitors to add to this. This is a very important thing. So what we actually need to do is in this field, The experience we have accumulated, the advantages of the integration of the entire supply chain, and the long-term relationship between large companies overseas, all of these are actually helpful for us to buy a household to maintain our advantages in the competitive industry. From 2021 to now, in fact, the sales strategy of Jialan in the entire new mining machine sales strategy is also very fresh. In fact, the supply chain here is the same as the design of IC. Good design requires continuous and high research and development input. And in terms of guaranteeing the production capacity of the supply chain, it is actually similar. We have now increased the investment in the business technology and engineering of the supply chain. And this year, under the current牛 market, we also need to seize the opportunity to accumulate more cash. OK. So first, there will, of course, be competitors, especially given the high viewpoint prices. But we have already established a strong competitive model with our extensive experience our collaborations with multiple country partners, our integrated supply chain, as well as our large global client base. This is why we actually let the industry market share, so my name is Shin Yu, in new markets during the first half of 2021 so far. And we actually see supply chain in a similar fashion as ICD-5. where good design requires continuous and higher investments in R&D. In terms of screen production capacity, which actually has similar requirements too, we need to increase our investments in supply chain technology and engineering. In the current market environment in 2021 to date, we are working to see the market opportunities to enhance our cash positions and strengthen our product development capabilities. Our work on product designs on multiple nodes at the same time will afford us with additional flexibility when we negotiate or coordinate with these partners to ensure capacity.
spk03: 下一個問題是有關量率。就是CEO剛剛講到說我們量率已經達到一定的水平。 My next question is our current yield rate. CEO already mentioned that our yield rate already achieved some milestones, and how do we expect the improvement in Q2 or second half, and the contribution of the improvement to our It's like this.
spk04: The量率 is actually affected by many environmental factors, and there are also changes in the data. This is actually a very important business secret of the company. But this can still be said. In general, when a new product is imported, especially when a new factory, a new process starts to cooperate, In fact, there will be a period of time to carry out the work of producing energy and measuring energy. In fact, our efforts to work can affect the length of this period. Although the numbers are not willing to reveal, but through the cooperation of all colleagues in the company, including our partners, we have worked very hard. In the second quarter of 2021, So yield rate can easily be affected by a variety of factors, and it is also an important and confidential trade secret. But generally, when introducing new products, especially when starting a corporation with a new partner, it takes a bit of time for the production capacity and the yield rate to ramp up. And we are working around the clock to minimize the so-called break-in period as much as possible. Through the hard work of all of our employees, our colleagues, and our partners, we have effectively completed this difficult break-in process in the second quarter of 2021.
spk03: My last question is about our Ethernet mining machine. Do we have any plan to launch our ETH machine in 2021 or 2022?
spk04: So what I can say right now is that our R&D is currently in progress. But at this point, we can't really disclose any more information on that. Thank you. Thank you. Thank you.
spk02: Thank you. Next question comes from the line of PDK, China Security Service Development.
spk01: Hello, can you hear me? Yes, we can. Hello, Director. I have a few questions. First of all, I want to ask, we know that the price of the miner is based on the price of the land. We know that the selling price of many machines and Bitcoin price are highly related. The Bitcoin price has increased significantly since the first quarter last year. why it didn't reflect our first quarter financial report and the first quarter's guidance?
spk04: First of all, the basis of the pricing of mining machines is the long-term investment efficiency rate of mining. Therefore, the price of the selling price of mining machines is only fluctuating with the price of the B price. Since last year, Okay, so... Yes, to answer your question, the price of mining machines actually moves with the Bitcoin prices only for the mining machines that are ready for delivery. So since the second half of last year and the first half of this year, most of the mining machines we sold were actually sold as futures contracts which had a fixed price. and the prices were actually lower than our existing machines.
spk01: Thank you. And the second question is, I read a news article before, a company called Interreactive Ventures bought 600 of our mining machines, and the total cost was about $2.73 million, and the average price was about $4,500. According to the news, a company called Interactive Ventures purchased 600 mining machines from our company. with a total cost of around 2.53 million U.S. dollars. And the calculated price is around 4,500 U.S. dollars for many machines. May I ask, how much was the Bitcoin price when the deal made? And were those 690 machines all pre-sale orders? How much is the price of mining machines on their credit sales at a discount of the spot price generally?
spk04: This should be the second half of the second half. Of course, it should be the seller of the limited goods. It should be one of the recent sellers of the limited goods. So from this If you look at it from the history, it is the same period of the delivery of the record income of this kind of mining machine, then there are times when the delivery is only a few folds of the current goods, and sometimes it will be very close to the current goods price. If there is a relatively large fluctuation in the market, there will sometimes be a situation where the delivery price exceeds the current goods price of the month, so it is actually more complicated. OK, to answer that question, the order, the deal was made in February. For the mining machines that we sold, we actually sold them at different prices, which made the comparison actually more complicated. And generally speaking, for mining machines that we sell at a given time, futures could be much lower than the price of the existing machines could be similar, or in certain cases could have higher prices. And so it kind of depends on the timing of when we sign those contracts and the timing of when we deliver them, as well as a bunch of other factors. Well, generally speaking, the futures contracts should have around 60 to 80 percent of the price of the existing machine. Thank you.
spk01: My question is how do we expect the sales volume in 2021? How much pre-sales orders we have currently? And what is the average selling price of mining machine under current Bitcoin price?
spk04: This seems like the one just now, when he was speaking, he already talked about the pre-sale situation of this year's first quarter. There should be numbers. Right, so we actually mentioned this number earlier in my prepared remarks. So as I said before, we have already recorded orders for more than 156,000 mining machines with over 238 million in advances from our customers for as of the end of the first quarter of 2021. And to add to my previous question, the current timing of The current timing of delivery of existing machines is actually spent a pretty long period of time. Some of them were scheduled to the middle of next year, actually. And the prices of existing machines actually remain pretty high as well. Some of them are in the range of $50 to $100 US dollars. and most of them are going out as well.
spk01: I didn't hear you well. What do you mean by 50 to 100 US dollars? In recent years, the price of goods and services has been fluctuating.
spk04: I can't say the exact price because many orders are different. But it's basically in the range of 50 to 100 US dollars. It's a relatively close line of orders. Is it 50 to 100 US dollars per device? Yes, according to this order. And now it may be higher. Just to add translation, so that $50 to $100 is the price for each TeraHash. Okay.
spk01: There are two more questions about mining. We have mentioned the mining plan before. I would like to ask about the progress now. At the end of the year, how much mining will we plan to do? And how much will we be able to earn? My question is, you have mentioned that our company was planning to involve in Bitcoin mining activities. What is the current progress? How many mining machines do you plan to use for mining by the end of the year? and how much does our company account for the network computing power? Compared with other mining companies, what is your expectation for computing power at the end of the year?
spk04: We are now automatically mining our business in the development process. Currently, we have set up the main body in Singapore to operate the mining business outside of China. Currently, Kazakhstan is the mining area that the company has prioritized. In addition, North America will also become the area that the company is focusing on. The company is now highly aware of the peace treaty, so we will maintain close communication with legal and audit agencies to reduce the risk of peace and business. So we are advancing our mining business. We have actually already set up an operation center in Singapore to run the operation. And Kazakhstan is also going to be on the top of our consideration, as well as North America. And we have always prioritized compliance for our mining business. which is why we are in constant communication with our lawyers, auditors, as well as other independent agencies to ensure our compliance and reduce our operation risk. Now, in terms of the number of orders, because the company had more orders in the first half of the year, so the orders were full, So in the second quarter, the company plans to invest in a few thousand machines. I just mentioned that the total profit is about 350 to 450 pips. In the second half of this year, we will adjust the proportion of the market and the production capacity to the supply and demand, as well as the mining and mining. From the second half of the year, The monthly deployment is not lower than the monthly production capacity at 0.10 used for autonomous mining. The actual deployment quantity will be adjusted according to the actual situation. According to the current production capacity and price, there will be no major changes. At the end of the year, there will be about 2 to 4 times the total output of XR. So given that our production of mining machines has been pretty much fully booked for the first half of 2021, we actually expect that the deployment of mining machines for our own mining business for the second quarter of the year to be in the 2000s, with a total computing power between 350 petahash So for the second half of the year, 2021, we will adjust that number, that figure based on the market environment as well as our production capacity. So for the second half of the year, we plan to deploy more than 2% of our total production capacity every month for our own mining business. The actual member will be, we will monitor the progress of mining, other mining companies that we're partnering with as well as the Bitcoin crisis to make real-time adjustments. But provided that we don't see any huge changes in the Bitcoin crisis, And our production capacity, we expect to deploy around two exahash, four exahash of total computing power for our mining business by the end of the year.
spk01: Thank you. And my last question is, how does the company plan to deal with these bitcoins? my last question is what's the plan for the mine bitcoins are you going to hold or exchange for us dollars or any other kind of consideration uh
spk04: So as So as I said earlier, we're definitely going to make sure that all of our operations are compliant. And under that guidance, we will aim to hold our bitcoins for the long term. At the same time, it is also possible for us to sell the bitcoins We are doing this so that we can cut into the benefits or the dividends of the growing industry.
spk01: Thank you.
spk02: There are no more questions at this moment. I will hand the call back to the management for closing remarks. Thank you.
spk04: Okay. Thank you all for joining us today. We look forward to talking to you next quarter. Thank you.
spk02: Thank you. Ladies and gentlemen, the best country to conference today. Thank you for participating. You may all disconnect now. Thank you.

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