Canaan Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Hainan Inc.'s second quarter 2026 earnings conference call. At this time, all participants are in the listen-only mode. After the management prepared remarks, we will have a question and answer session. Please note that this event is being recorded. I'll now hand the conference over to your speaker today, Gwyn Lauber, investor relations for the company. Please go ahead, Gwyn.

Thank you, Operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, Jin James Cheng. Liang Wang, Vice President of Capital Markets and Corporate Development, and Xi 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 we begin, I would like to refer you to our safe harbor statement in 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 annual 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. With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. NG, please go ahead.

Thank you, Gwyn. Hello, everyone. This is NG, CEO of Canon. Thank you for joining our earnings conference call today. James, our CFO, and I are here at our Singapore headquarters to share our financial results and recent business updates for the second quarter of 2026. Q2 2026 remained a difficult environment for the Bitcoin mining industry. In the first half of the quarter, Bitcoin prices recovered from approximately and many others. The price of hash price fluctuates between 2.8 and 3.9 US cents per terahash per second and others. At the same time, in the U.S., the capital markets and traditional mining companies continue to shift more attention toward AI and HPC, localize armed conflicts in certain countries and regions, and tighten mining-related policies in China and elsewhere. are factors that affected miners' investment willingness and capacity. From the second half of the quarter onward, miner sales weakened noticeably and elevated industry inventory levels further intensified price competition. During the quarter, The company generated total revenues of approximately 32 million U.S. dollars below our previous guidance range of 35 million U.S. dollars to 45 million U.S. dollars. We sold 2.5x hash per second of computing power and our mining business produced 243 bitcoins. When we issued guidance in May, Our demand outlook was primarily based on the market conditions in the first half of the quarter. We did not fully expect the later decline in demand and pricing. In the second half of the quarter, Bitcoin prices fall quickly, miners become more cautious about equipment purchases, and high industry inventory levels increase price competition. These were the main reasons revenues came in below expectations. In response to the revenue decline, we further tightened our spending, strengthened cash flow and liquidity management, and continued organizational finalization. As of quarter end, the company held 1,915 Bitcoins and 3,952 ETH, bringing our digital asset treasury to another record high. I'll start with our mining machine business. As mining economics weakened, many miners delayed equipment purchases, and the average selling prices remained under pressure. During the quarter, we generated approximately $14 million in product revenue. In response to softened demand, we adjusted pricing, more flexibility. At the same time, we again emphasized production based on actual sales. We controlled new production according to real orders and put more focus on inventory management, cash flow, and order quality. For existing machines, we will evaluate whether to sell them to customers or deploy them in our old mining operations based on cash collection, deployment conditions and additional investment required. Now let me turn to our mining operations. In Q2, we adjusted our deployed hash rate in a timely manner based on power prices, load management and operating conditions and other different sites. We allocated resources to projects with better economics. Mining revenues was approximately $18 million, according for more than 50% of the company's total revenue in Q2, and continued to cover direct operating costs, such as power and hosting. As of the end of June, our installed hash rate in non-GV projects was approximately 10.05x hash per second and the average OIN power cost in June was about 4.3 cents US dollar per kilowatt hour. Overall power and hosting costs remained relatively competitive. Project ABC remains one of our key priorities. For Project ABC, we focused not only on current period profit, but more importantly on the cash it can generate and the long-term returns that can be created after optimization. This is consistent with the transformation the company is pursuing. Whether it is project ABC or the longer term power resources we are developing, our goal is to gradually build mining and energy infrastructure assets that have a cost advantage and can generate sustainable cash flow. In Q2, together with our partner, we continued the mining machine upgrade at Project ABC. The project generated positive cash flow and maintained efficient operations. At the end of July, installed hash rate at Project ABC reached 4.85x hash per second, up 10% from the end of March. Through this project, while increasing half-rate and cash generation, we also gain experience in operations, power dispatch, fleet upgrades, and management of low-cost power resources. Beyond traditional mining use cases, we continue to advance energy utilization partnerships such as compute-to-heat. Our earlier Nordic project has already validated the feasibility of using hydro-cooled equipment for district heating. Our high temperature hydro-cooled equipment can supply the hot water needed for heating, which is particularly suitable for winter heating demand. These projects are still relatively small in scale, but using the heat generated from computing for comfort heating is a useful explanation of compute-to-heat closed-loop. Regarding R&D and the products, we continued advancing the A16 series in the second quarter. with a focus on cost-effective air-cooled models and high-temperature hydro-cooled models. We pay close attention to products' full lifecycle economics, including purchase cost, power consumption, stability, maintenance, and deployment efficiency. On the consumer side, The second quarter was mainly devoted to R&D on new Avalon home products which we will prepare for mass production in the third quarter. These home series products are designed for home heating use cases and we hope to capitalize on the winter heating season in the northern hemisphere and deliver a solid and Zhang Zhe. Long-term power resources remain another key focus of the company's transformation. Over the past several quarters, we have been advancing long-term, stable, cost-advanced and expandable power resources projects in North America. On our fourth quarter 2025 Earnings Score, we mentioned our confidence in our ability to secure substantial load by year-end 2026, potentially reaching the gigawatt scale. Based on the progress we have made so far, our confidence in securing gigawatt scale load by the end of 2026 remains intent. We continue to work with all the stakeholders and hope to provide an update when we are in a position to do so. Finally, let me discuss capital allocation. Since the beginning of the second quarter to date, the company has not utilized the ATM program or raised capital. Under the existing $30 million share repurchase authorization, we recently mentioned a portion of our digital assets and used to proceed to repurchase the company's ADS. We believe that the current share price meaningfully undervalues the company while retaining the capital needed for operations and project investments. We choose to use a portion of our digital assets for buybacks We deployed around $2 million in the first quarter and around $5.4 million in August to repurchase our ADS shares. In 2026, the company deployed $7.4 million and repurchased approximately 16.4 million ADSs so far. James will provide more details on the execution of digital assets monetization and the buyback. James and I also continue to purchase the company's ADS in the open market this quarter. We remain confident in the company's long-term development and the transformation underway, and we hope these purchases further align and others. Digital assets remain an important part of the company's asset allocation. We will continue to evaluate the risks and rewards of holding digital assets, investing in mining and power infrastructure, and repurchasing the company's shares. While meeting our operating and liquidity needs, we will choose the uses of capital that we believe can create the best long-term value per share. Finally, during this quarter, the company completed its transfer to Nasdaq Capital Market and have been granted an additional 180-day grace period to We will continue to monitor the trading price of our ADS and take necessary actions to regain compliance and maintain the company's listing status. Despite the significant impact of industry volatility on our second quarter financial results, changes in the macro environment have actually strengthened our conviction in Bitcoin as a decentralized financial asset. In response to market changes, we managed the inventory Thank you very much. Thank you. We believe we have come through the most difficult period and were able to sell these digital assets at relatively favorable prices. Looking ahead to the third quarter, although Bitcoin price recovered somewhat at the end of August, miner procurement remains cautious. and industry inventory still needs to be digested. Some competitors have adopted a more aggressive pricing strategy to speed up cash collectors. We expect minor sales and average selling prices to remain under pressure in the third quarter. We remain cautious about the near-term mining machine market. Based on the current market and operating conditions, we expect total revenues for the third quarter of 2026 to be between $11 million and $15 million. This outlook reflects measurement's current judgment. and the actual results may differ due to changes in macroeconomic conditions, policies, Bitcoin prices and industry demand. That concludes my remarks. Thank you. I will now turn the call over to our CFO James.