Canaan Inc.

Ladies and gentlemen, thank you for standing by and welcome to Canons Inc's First Quarter 2025 Earnings Conference Core. At this time, all participants are in a listen-only mode. After the management prepared remarks, we will have a question and answer session. Please note that this event is being recorded. Now, I'd like to hand the conference over to your speaker today, Ms. Gwynne Lauber, Investor Relations Director of the company. Please go ahead, Gwynne.

Thank you, Operator. Hello, everyone, and welcome to our Earnings Conference Call. Joining us today are our Chairman and CEO, Nanjing Zhang, and our CFO, Jin James Zhang. Leo Wang, Vice President of Capital Markets and Corporate Development, and Xu Zhang, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions. Before I begin, I would like to refer you to our Safe Harbor Statement and our Earnings Press Release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call, or webcast, except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent report on Form 20F for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, which is posted on the company's website. And finally, please note that during the call, all dollar amounts refer to U.S. dollars. With that, I will now turn the call over to our Chairman and CEO, NG Zhang. Please go ahead.

Thank you, Gwen. Hello, everyone. This

is NG, the CEO of Tenant. Thank you for joining our conference call. Our CFO James and I are pleased to share our first quarter 2025 results and the recent developments from our headquarters in Singapore. In the first quarter of 2025, the global Bitcoin mining industry faced serious macroeconomic challenges. In February 1, the U.S. President signed an order under the International Emergency Economic Powers Act, IEPA, imposing a 10% tariff on goods imported from China. This tariff was raised to 20% in early March. Then in April, the U.S. further announced a 10% universal tariff on imports from all countries, along with higher reciprocal tariff targets targeting selected nations with tariffs on Chinese goods reaching as high as 145%. In response, China imposed up to 125% tariffs on U.S. markets. As a result, the Bitcoin price dropped sharply from about 104,000 U.S. dollars at the end of January to 76,000 U.S. The total network hash rate rose from 795x hash per second to 856x hash per second. This combination of falling Bitcoin price and the U.S. dollar is now at a rate of 74,000 U.S. dollars in early April, but gradually recovered. The data of our earnings conference, it has risen back to about 100,000 U.S. dollars, gradually reflecting Bitcoin's value as a safe haven asset. We have seen clear signs of recovery in global demand for money machines, except in the U.S. market. Due to the 10% universal tariffs imposed by the U.S. on imported goods, and even higher reciprocal tariffs on some countries, both China and our competitors now face at least a 10% extra duty when shipping money machines made in Southeast Asia to the U.S. in addition. Fast-changing policies have created a great deal of uncertainty and confusion in actual custom operations. In some cases, the effective tariffs rate has been even higher than 10%, and the customs enforcement standards and clearance times have been incosted. Since the value of Bitcoin is globally unified, this has led to higher mining costs and greater uncertainty for American miners compared to miners in other regions, which has significantly surpassed mining machines' demand in the U.S. We have observed that many U.S. listed mining companies are adjusting their business models and accelerating their transformation towards A.I. and high-performance computing businesses. Aimed complex and rapidly changing market environments, our team still delivered a solid operational performance. In the first quarter, we achieved total revenues of 82.8 million U.S. dollars, exceeding our previous guidance of 75 million U.S. dollars. This represents a 136% -over-year increase and demonstrates our strong execution and resilience across global markets. The first quarter of 2025 is traditionally a slow season. However, thanks to the continued large-scale delivery of our A15 series mining machines, we achieved 5.5 X-hash per second in total computing power source during the quarter, up .6% -over-year. With sales revenue exceeding 58 million U.S. dollars, this includes ongoing deliveries of large pre-sale orders to public mining companies such as Hive. With new generation high-performance A15 models becoming the main driver of shipments, our average selling price per TeraHash significantly increased to 10.5 U.S. dollars per TeraHash, representing a 30% screenshot growth. In overseas markets outside of North America, we are seeing continued growth in demand from regions such as Asia, South America, and Africa. We have made tangible sales progress in these areas. Our Avalon Home series of mining machines for individual consumers also achieved encouraging progress in Q1. Following the launch of several new models in this quarter, we generated 1.3 million U.S. dollars in sales revenue and delivered around 6,000 units. In spite of summer approaching in the northern hemisphere leading to a gradual decline in indoor heating demand, our Avalon Home series, which features steel functionality of mining and home heating, still sells well. This is well beyond our expectations. We have ramped up production to ensure timely delivery. As of May 18, 2025, we have sold a total of over 17.6 thousand units -to-date, with total order value reaching over 6.6 million U.S. dollars. Our self-mining business delivered strong results this quarter, with a total of 259 bitcoins mined, up 39% -over-quarter. This was mainly driven by the continued growth of our energized hash rate and the optimization of several project partnerships. Our operational computing power increased from 4.75 x-hash per second at the end of 2024 to 5.97 x-hash per second by the end of March 2025. Coupled with higher average bitcoin price during the quarter, our mining revenue reached a record high of over 24 million U.S. dollars, marking a 59% screenshot increase. Thanks to our competitive electricity cost of 4.2 U.S. cents per kilowatt hour, we maintained a solid mining growth margin of 31% in Q1. By the end of the quarter, the number of bitcoins owned by the company reached 1,408, setting a new record. We continued to steadily deploy more hash rates, and by the end of April, our total deployed computing power reached 8.15 x-hash per second. Notably, in the U.S., we fully deployed 3 x-hash per second across four projects. Alongside the mass production and delivery of our A15 series, we have continued to work closely with our foundry partners on technical optimization. As a result, cheap yield now exceeds 90%. Compared to the initial launch last year, overall machine performance of A15 series has improved by 15%, while power consumption has been reduced by 10%, effectively lowering the cost per unit of computing power. We have also introduced more advanced products across various cooling technologies, including hydro and emergent cooling. One recent example is our new A1566HA hydro cooling model, which delivers close to 500 h-hash per unit and better energy efficiency than the air-cooled machine. This is an outstanding product in the industry. Looking ahead, our next-generation A16 series has successfully completed take-out in the first quarter. The corresponding products will be officially launched after full machine testing, and they are expected to deliver significant performance upgrades. On the production and logistics front, our diversified geographic deployment over the past few years, especially the establishment of manufacturing capacity in Southeast Asia, has helped cushion the impact of recent U.S. tariffs adjustments. Starting at the end of Q1, we set up a pilot production line in the United States and successfully completed trial production. This means our U.S.-based manufacturing progress is now essentially up and running. While the current production cost in the U.S. is relatively high, we believe taking this step holds strategic value. It allows us to be closer to the U.S. market and our customers, while also reducing supply chain risks. We are now actively exploring the possibility of building a larger-scale manufacturing facility in the U.S. and identifying ways to significantly lower production costs, aiming to make U.S.-based manufacturing commercially viable. This quarter, we maintained stability in our operations, with key indicators showing further improvement. Supported by higher ASP and continued growth in our mining operations, we achieved positive growth profit for the first time since the beginning of Q1. The bear market began nearly two years ago. While focusing on R&D investment, we also continue to enforce this planned expense control in our daily operations. As a result, our general and administrative expenses decreased by 39% -over-quarter. This helped narrow our operating loss by 32% -over-quarter and by 45% -over-year to $37.6 million. Although Bitcoin price declined by approximately 12% from the end of previous quarter, leading to a fair value loss in cryptocurrency assets of $16.3 million, we remain committed to our Bitcoin holding strategy. As we strongly believe in the long-term appreciation potential of the asset, we are also pleased to see that as of today Bitcoin has returned to about $100,000. On the balance sheet side, with the large-scale production of our A15 series underway, we have started to build up some inventory of new products to ensure uninterrupted deliveries. Up for the end of March, the company maintained a healthy cash balance of approximately $100 million. In addition, we took advantage of the price pullback in Bitcoin during the first quarter to further strengthen our crypto holdings. We purchased 27.46 Bitcoins at an average price of 83.6 thousand US dollars per Bitcoin. At the end of April 2025, the total number of Bitcoins held by the company reached 1,424. Looking ahead to the coming quarter of 2025, we are actively adjusting our focus across key markets and setting up our sales efforts. As of now, we have secured a solid pipeline of A15 orders with delivery booked into June. We are also continuously coordinating our production capacity between self-mining and fulfilling customer orders based on evolving market demand. That said, the new series of US tariff measures introduced in the first quarter and still ongoing have brought considerable execution risks and uncertainty. So far, demand from North American customers remains under pressure with no clear sign of recovery. In the capital market, uncertainty has also impacted the stock performance and fundraising activities for many US listed mining companies. Other results, customers in the US have generally adopted a weak and see attitude towards orders. We have observed delays and adjustments in some orders currently under negotiation and in delivery schedules. Additionally, certain joint mining projects have faced increased costs due to import tariffs, which could delay the pace of hash rate deployment. Given the ongoing orientality in the global political and economic landscape, the company has decided to withdraw its previously issued full-year revenue guidance, as well as the mining hash rate deployment targets for the first half of 2025. Until there is greater clarity in the overall environment, we will focus on pivoting to respond to market fluctuations. To further insulate our business from the current uncertainty, we are actively executing our self-mining strategy to procure global expansion opportunities that align with our long-term growth objectives. We are confident in our ability to identify and collaborate with experienced partners both within and beyond North America, enabling our apps to scale efficiently and maintain operational excellence across diverse markets. Our track record of success outside the United States includes our operations in Ethiopia, where we recently reported an impressive average uptime of 98% during the first quarter and 95% uptime in April, despite minor power disrupts early in this month. These results reflect our team's ability to navigate local challenges while maintaining high performance and reliability. In the near term, the company is adopting a more cautious approach to expectations for the second quarter of 2025. We currently anticipate revenues of approximately 100 million US dollars for Q2. This forecast is based on the current market and operational conditions. However, given recent policy uncertainties and market volatility, actual results may differ from these expectations. In response to recent market developments, including the US tariff measures on our share price, we believe that our current stock valuation is significantly below the company's intrinsic value and long-term growth potential. To address this disconnect and enhance shareholder value, we are actively evaluating a range of strategic interactives, including a potential share repurchase program. These interactives are currently under review and may be subject to approval by our board of directors. Any implementation will be conducted in full compliance with all applicable laws and regulations. We will keep the marketing form of any material developments through subsequent announcements. Aiming a complex and rapidly evolving macro and industry environment, we remain focused on technology and product innovation, strengthening customer service and advancing our global strategy as we prepare to address more opportunities and challenges ahead. This concludes my prepared remarks. Thank you everyone. I will now turn the call over to our CFO James. Thank you.

Thank you, NG. Good day everyone. This is James, CFO of Cana. I'm very glad to share our quarter one financial results with you today. As NG stated at the start of the call, in quarter one, especially February and March, the Bitcoin mining industry faced challenges as miners' profit margins were squeezed by the Bitcoin price volatility and the higher total network cash rate. Despite volatile market conditions, we delivered a solid performance results. Let me give a quick summary of our financial performance. First, driven by the growth in the computing power sold and average selling price, total revenue reached $82.8 million, exceeding our $75 million revenue guidance and up 136% year over year. Second, our mining operations grew steadily, fueled by the combined growth in the deployed mining capacity and average Bitcoin price in the first quarter. Our mining revenue reached $24 million, up 132% year over year, with 259 Bitcoins mined, up 33% year over year. Next, due to product iteration and mass delivery of the A15 series, our average selling price rose to $10.5 per tera hash per second in the quarter, resulting in a return to gross profit. It's the first time in two years amid the bear market. Last but not least, our cash balance remained flat sequentially. We continued to manage cash in a prudent way and streamlined our expenses to make sure strategic items are prioritized. Turning to our profit and loss for the quarter, total revenue was $82.8 million, beating the guidance by $8 million. Mining revenue contributed $24 million, increasing 132% year over year. We mined 259 Bitcoins in the quarter, a year over year increase of 33%. This increase was primarily driven by more computing power installed at our mining sites, which reached 6.6x hash per second at the end of the quarter, increasing 22% from the end of last year. Now turning to product revenue. Revenue from machine sales was $58.3 million, an increase of 149% year over year. We delivered a total computing power sold of 5.5 million tera hash per second, representing a year over year increase of 63%. The first quarter of each year is typically our seasonally lower quarter due to the impact of the New Year and the Lunar New Year holidays. However, the mass delivery of A15 series in this quarter drove the major year over year growth in both mining machine sales revenue and computing power sold. More than 19,000 A15 mining rigs were delivered in quarter one, contributing $45 million to the mining machine sales revenue and a 3.9 million tera hash per second to the computing power sold. In addition, driven by the mass delivery of our A15 series, the average selling price, or we call ASP, rose to $10.5 per tera hash per second, up 53% from $6.9 per tera hash per second in the same quarter of 2024. Turning to the revenue from our Avalon Home series. In quarter one, we delivered approximately 6,000 units of our Avalon Home products, contributing revenue of $1.3 million. From the beginning of 2025 to date, we have already received orders for more than 17,600 units of Avalon Home products, with a total amount of $6.6 million. As I mentioned earlier, due to the product iteration upgrades and the higher A15 delivery volume, gross profit turned positive, reaching at $0.6 million in the quarter, the first time since the start of market downturn two years ago. Turning to the expenses. Our operating expenses totaled approximately $38 million compared to $31 million in the same period of last year. Please note, $2.4 million of disposal gain on our self-mining rigs was recorded in the first quarter of last year, which correspondingly offset the overall operating expenses. Excluding this non-routine impact, the operating expenses increased $5.7 million year over year, mainly due to the increased staff cost and R&D expenditures, including the staff we added for the development of our consumer-level mining products and mining solutions. By the end of this quarter, the price of Bitcoin decreased to around $83,000 versus around $95,000 by the end of 2024. The decreased Bitcoin price on the last day of the quarter resulted in an aggregate unrealized fair value loss on crypto assets of $16 million. Encouragingly, the recent appreciation of Bitcoin price has reversed these unrealized losses. In total, we recognized an adjusted EBITDA loss of $38 million, narrowed 47% year over year. In March 2025, we issued 100,000 SAA-1 preferred shares with a gross proceeds of $100 million. Additionally, the third tranche of the SAA preferred shares issued in quarter 3 2024 was still recognized as a convertible liability at fair value by the end of the quarter. This financing incurred an excess of fair value over proceeds received and fair value changes. These non-cash accounting treatments hit our Q1 bottom line for total $33 million. In order to represent our performance more accurately and more comparably, we excluded that impact of these accounting treatments from our non-GAP measures. Turning to our balance sheet and cash flow, at the end of quarter 1, we held cash of $97 million on our balance sheet, remaining stable compared to the end of quarter 4. In quarter 1, we generated $51 million of cash inflow from sales, received $21 million from secured loans, and $18 million from export VAT refunds, and we paid $88 million for production and operation. In quarter 2, we also paid $144 million to secure our wafer supply, primarily funded by the proceeds of $100 million from preferred shares financing and $42 million from ATM financing. Now turning to our Bitcoin assets. Bitcoins held as our own holding asset increased in the quarter, reaching a record high of 1,408 bitcoins as of March 31. This is 115 coins more than 1,293 coins at the end of last quarter. On March 31, 2025, the fair market value of our own bitcoins totaled around $117 million, and our hold-over gain was approximately $49 million higher than the original value of the bitcoins that we gained from mining or other operations. With the bitcoin price rebounding to over $100,000, the current market value of these crypto assets stands at approximately $147 million. As of April 30, our total bitcoin holdings increased to $1,424 million as already disclosed. Turning to fundraising. As mentioned earlier, in March 2025, we closed series A-1 preferred shares financing with the gross proceeds of $100 million. From the end of 2024 to February 19, 2025, we utilized the ATM for fundraising with net proceeds of $42.5 million. These financings have been reported in the previous quarterly release. After that, we have not done any fundraising. We have also mutually agreed with the investor to terminate the agreement for the second tranche of series A-1 preferred shares of another $100 million, effective April 30, 2025. As Engie mentioned, the recent market dynamics, including US tariff hikes, have seriously impacted our stock price. We believe our current stock price is undervalued and disconnected from long-term growth potential. We are actively evaluating strategic initiatives, including a potential share repurchase program to enhance our shareholder value. We will promulgately disclose relevant material developments in subsequent announcements. By the end of quarter one, 900 bitcoins were pledged for the secured loans with an aggregate carrying value of $45 million, which we believe is in a reasonable interest level. And 100 bitcoins were transferred into a fixed-term product with a guaranteed minimum annual return. The secured loans enable additional liquidity, which we will use to fund our production expansion and operations. In the future, as part of our holdover strategy, we will explore more ways to increase capital liquidity through our own decrepit assets. Please note that the bitcoins pledged or transferred into fixed-term products are recognized as criminal currency receivables in our balance sheet. And the classification between current and non-current assets is consistent with the prior rates of corresponding secured loans or fixed-term products. Given the prevailing weight and sea sentiment among North American customers and performance in our mining project deployment caused by the significant uncertainties surrounding tariffs, we cautiously expect the revenue for the second quarter to be approximately $100 million. This concludes our prepared remarks. We are now open for questions.

Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question and one follow-up. If you have questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. If you wish to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will take our first question. And the first question comes from Kevin Custy from Rosenblatt Securities. Please go ahead.

Yes, thanks for taking my question. Congratulations on the good results considering the market. I wonder, considering the market, if you could give a description of what happened with your ASP, what the equipment pricing trends were through the quarter as Bitcoin prices went down. Do your ASP per terahash come down with that or did they hold up? And if you can, can you give an idea of what to expect in the second quarter?

Do you have a question? Yeah, thank you, Kevin. Thank you, Kevin. I think from an ASP perspective, in quarter one, we have already seen the ASP climbing up to $10.5. I think there are several reasons behind to support that. One thing is the market sentiment in early quarter one, especially January and early February was quite good. The demand was very strong. And the second reason behind that is our A15 series got a very good feedback from the early stage customers in quarter four. Then a lot of customers ordered in quarter one and we have to identify the orders urgency after doing some price raising during that time. So I think that's in the early stage of quarter one. And also we still have some clearance on the older generation products like A14 in quarter one. That makes the quarter one's average price still lower than $11, which gives us some room in quarter two to further develop our average selling price. Even I think in April, the market sentiment was not good, but our locked contract sales price in April and May still higher than previous selling price of A15 series. And we don't have much A14 inventory in quarter two. That makes the average selling price continue to have a chance to improve in quarter two. Until now I have no final numbers for quarter two, but I'm very optimistic about the quarter two average selling price development. But from long term perspective, you know, looking at quarter three and quarter four, now if the US market demand is so under pressure because people are still waiting to see the tariff surrounding all kinds of policies, I don't think that we have a clear answer about quarter three and quarter four's market demand, especially for United States, the leading country. So with that assumption, I could only be cautious about the future development of average selling price. I should say it could be flat with quarter two or even, you know, a little bit lower if the Bitcoin price not higher in quarter three. But currently, I think a quarter two's average selling price could be better. That's something we have already have some confidence. Does that answer your question, Kevin?

Yes, I made it very clear. Thank you, James. And maybe just a follow up to that. A lot of Bitcoin miners have employed a strategy to use their access to power for HPC or AI hosting. How is this changing your TAM for your equipment?

Hi, Kevin. This is NG. I think I can I will answer this question in short. I believe you are correct. Some customers have redirected their power towards the emerging AI and HPC applications. However, in my view, this effort appear more like experimental quick fix than strategic solutions to the underlying challenges. This is my personal view. Thank you.

Thank you. We will take our next question. Your next question comes from the line of Michael Donovan from HCW. Please go ahead.

Hi, NG and James. Thank you for taking my question. This is Michael Dov. I only call for Kevin Deedee. Now, I understand you're not offering guidance for the full year for 2025. But can you add more clarity about expansion plans for self-mining?

I think before the US tariff policies were implemented, we have already shipped a batch of mining machines to the US for our self-mining. So our North American self-mining project is still moving forward in quarter one and two. In April alone, we add over 1.5 x hash of new installed capacity through our partnerships with Luna Square and the Mousen Hosting in Pennsylvania and Texas. With this, our total deployed global hash rate reached 8.15 x hash with 6.2 x hash per second actively running. We managed to maintain a competitive all-in power cost of just 4.4 US cents for a few hours across our mining operations, which shows the effectiveness of our focus on high quality partnerships and our long-term global deployment strategy. Because of the situation in the US, I think outside North America, our projects outside North America show stretching value. In Ethiopia, our joint mining operations have us avoid geo-projective and regulatory uncertainty while extending the equipment's life cycle and leveraging core cost efficient local power. So in Q1, the local project achieved a strong 98% machine uptime. Even though there is a small scale power disruption in early April, our partner responded quickly and the uptime for the month still reached 95%. It's above the industry average. Looking ahead, I think we will continue to stay at AGL globally, optimizing our partnership models and technical development. The deployment, we are actively reviewing our options for scale up existing projects and talking with new sites. Thank you.

Thank you, Angie. That's helpful. I want to follow up. I know it may be too early to tell, but has the 90-day tariff truce resulted in an increase in rig orders for May versus April?

Yeah, I think for the tariff stuff, yeah. I think the US raised import tariffs by at least 10% across most major economies. This affects US miners in two key ways. First, the tariff adds at least 10% to the cost of imported mining machines. This applies not just to us, but to all of our peers in the industry. Second is, there's also added tariffs to power-related infrastructure and other equipment needed for building mining farms. For us, there are two impacts. First is the higher import cost is slowing down purchase from US customers. Second is some of our own planned mining deployments in the US have been delayed due to the increased import cost. Because Bitcoin doesn't carry a made-in label, so with Bitcoin price once again breaks through US, $100,000 recently. With lower deployment progress in the US, the global hash rate growth has been more moderate in Q2. That created opportunities for miners outside the US, especially in regions with energy cost advantages, to expand and earn more mining rewards. What we are doing is to actively use our global sales network to capture these kinds of opportunities and close more deals. At the same time, we have already built a solid mining presence outside the US. We are now evaluating expansions and exploring new projects and partnerships outside the US. This allows us to have flexibility to allocate mining machines between sales and our own mining projects, depending on market conditions.

My two cents here, Michael. I think April, the sentiment was very bad from the market, from the customers. In May, when Bitcoin price climbs back, people's sentiment will be better. But in the reality perspective, it's all 10%. This 10% will be a kind of solid, included extra cost, no matter from the infrastructure perspective or machine perspective, be bared by the miners, which makes the US miners a little bit less competitive compared to the rest of the world. That's something we cannot ignore in the current stage. But let's see how it goes after 90 days closed. Then we can know and answer after that what kind of tariffs on Southeast Asia, including Malaysia, Thailand, and in certain cases, other countries in Southeast Asia. Just my two cents. I

think there's another add-on on this question. From the current operation data, we are roughly in the middle of Q2. The number of orders we have logged in non-US regions is basically equal to the volume of the entire Q1 non-US region's orders. From a practical point of view, sales in other regions are indeed linked to the recovery of the Bitcoin price. However, in the US region, we have not seen any improvement in sales. So, fair reference. Thank you.

Thank you, Michael.

Thank you. We will take our next question. Your next question comes from the line of Mike Gondel from Northam. Please go ahead.

Hey, guys. Thanks a lot. Could you give us some insight into what you would need to see how much lead time you need for orders for 3Q or 4Q to be better than 2Q?

Sorry, you are asking about the machine lead times

or machine sales, I guess. I think we started the mass production of our A15 in the second half last year. During that time, I think most of the customers are suffering. It's about three to five months for the lead time. But currently, we are building up some inventories. So, if you order today, I think our pipeline is about, you can expect it to get the machines in June. So, that's about six to eight weeks lead time. It's much better. And I think for the lead time issue, it's about the demand and the supply. If everything goes well, I think we can expect that the lead time is between one and two months.

Got it. And in terms of capex the rest of the year, what's a good range for your committed capex or even growth capex the rest of the year?

Mike, I can answer this question by two ways of, you know, ascending. The first way is we have to build up our wafer supply part. This can be considered also as a kind of a human tree and also can be considered as a kind of capex in machine sales business. The other side, we also do our sales mining operation. In that side, the only capex we invest in current business model is the machine. So, overall speaking, all the capex is related to machine wafer supplies, wafer preparing. Putting this together, I think we have already built up a kind of human tree for quarter two and quarter three. We just mentioned the cash spending in quarter one was like 144 million for wafer. And I can tell you in quarter two, we continuously invest in this part. So, for the four-year perspective, it will be adjusted according to the demand and supply. It's a kind of a rolling forecast process. For every six months, we have to, you know, monitor the market demand and then place orders from the wafer supplier. And also manage our cash flow. So, in terms of the four-year, now I don't have a quick answer to you. But, you know, what I can say for overall wafer supply perspective, it can be like this between 400, beyond the 400 million, something even above that. It's not only capex for self-mining, but also the wafer preparation for the whole machine sales part. And to be very honest, it is closely linked to the four-year revenue because all the wafers can turn into machine sales revenue or self-mining revenue eventually. So, we didn't provide the four-year guidance. We still need to monitor the status of the tariff and other policies. So, with that assumption, currently, I don't have a fixed answer for this total capex spending. But to be very honest, it will be higher than 400 million in year 2025. That's something in my mind. I don't know if I answered your question, Mike. Mike has moved.

Thank you. We will take our next question. Your next question comes from the line of Bill Papanasol from KBW. Please go ahead.

Good morning and thanks for taking my questions. Just a quick one for me. And apologies if it was already touched upon. Acknowledging that the tariff landscape has brought significant uncertainty. Just curious, as part of your evaluations, with respect to ASIC manufacturing, is there any capacity to shift a portion of your manufacturing to the United States to limit the impact of heightened tariffs? What does management think the best option is here?

Wow. Thank you. That's a difficult question.

Let me see. Yes, I think we just mentioned we already deployed. For LeapQ1, we have started a small-scale trial production in the US. The process works. But manufacturing in the US, that doesn't mean everything from refining sand to building the first aluminum to heat sinks and iron to machine cheeses. It's all done in the US. In practice, I think during our operation, we found out that it's extremely complicated to do proper tariff planning for all imported materials. I think we already manufacture the PCBs and do the SMT sorting in the US. And also, the policy environment is changing almost every day. It's very costly. So our internal goal, I think the number today we got has no sense. It's absolutely nonsense. But our internal goal is to limit the overall cost increase of US-based production to no more than around 15 to 20% compared to like within Malaysia. We are working hard to reach that target. I think the schedule will not be early when the tariff stuff gets stabilized.

Adding some colors to this question, it's all about cost reductions and it's all about economics of this thing. If the demand is not going up from the United States, then it will be a painful process if we build up a factory there and our customers, they didn't order a lot, then it will create problems for us. I think on the other hand, if the tariff thing has been solved with some good results from Southeast Asia, then we don't necessarily have to build up the manufacturing in the United States. So it's a kind of dilemma. It's all about demand and supply. So if our customers would like to have us made in the USA for this machine, and also our cost structure can cover like as NG said, less than 15 to 20% higher than Malaysia, then we should consider doing manufacturing in the United States. But if US market demand is not that high, for us it's difficult to armatize the cost into every single unit of machine, then we don't do that. So it's kind of quite uncertain yet, but our supply chain is the best team inside the company. I think they would like to do some pilot run, which is very successful, but I think in the future it still depends on the economics calculated together inside the company. Bill, I don't know if we answered your question. Yeah, I think so. Thank you, Bill.

Thank you. Before we move to the next question, as a reminder, please limit yourself to one question. And the next question comes from the line of Nick Giles from B. Reiney Securities. Please go ahead.

Thank you, operator. Hi, NG and James. Just wanted to go back to how you're thinking about site acquisitions, whether or not the tariff landscape is really increasing your desire to add more sites in the US, and whether it's increasing your desire to pursue HPC or AI, kind of where do you stand there? Thank you very much.

Thank you, Nick.

So far, I think all the sites and sites we are involved in, we haven't seen major changes in energy prices. Things have remained quite stable. Looking ahead, I am quite optimistic. Policy changes in the US may unlock more energy supplies in the future, which could improve the outlook for power availability over the long term.

Thank you.

Thank you. We will take our next question. Your next question comes from the line of Joe Flynn from Compass Point Research and Trade-In. Please go ahead.

Hi. Just based on that comment regarding the cap expense of $400 million for ultimately just kind of wafer costs, I was curious, with the uncertain kind of macro environment and the slow, you mentioned the US cost barriers, like we're receiving strong pricing, ultimately in exchange for the ability to secure higher volumes of wafers. How do you, I guess, think about those relative to each other going forward? Because based on those numbers, it seems like you're still ultimately buying your allotment. That's like more due to be a take or pay or already paid the deposit.

The

other color there would be helpful.

I think you're asking about

the wafer, about the wafers or the hours by supply chains. The supply chains?

Yes. So, how can you guys justify your continuing to spend $400 million in the wafers if ultimately your strategy going into this year was to increase your demand in the US exchange for pre-payments?

Yeah, I understand. I think we continue to maintain strong and long-term partnerships with our wafer boundary partners. At present, I think the FAPS capacity is still manageable and we are locking in production capacity through pre-payments. I think as I mentioned earlier, our current wafer in progress is sufficient to support our production through Q3. Given the recent sales slow down than expected in the beginning of this year, I think the inventory could actually carry us to Q4. This is also helped by our process optimization efforts. That means we can get more hash rate from a certain number of wafers. We are watching the market very closely. In my view, if the US tariff policies not go away, just everyone believes it is stabilized and the market expectations become clear, I think the US market will recover. If the market comes back, the Bitcoin price is another historical high. It is very possible in a few months. I think the type of market financing channels will be open to our customers. There is a real chance that the mining machine supply could quickly fall short of demand. If we observe that kind of smell, we will put more orders to our boundary partners. I think they still have capacities for the end of this year. Thank you.

Thank you. As there are no further questions, I would like to turn the call back to Gwynne Lauber for any closing remarks.

Thanks everyone for joining us today. If you have any further questions, please feel free to reach out to us through the contact information on our website. Thanks very much everyone.

Thank you. That concludes

the call today.

Thank you everyone for attending. You may now disconnect.