Intchains Group Limited

Ladies and gentlemen, thank you for standing by and welcome to Inchins' fourth quarter and full year 2022 earnings conference call. This conference is being recorded today, Tuesday, April 18th, 2023. If you have any objections, you may disconnect at this time. Joining us today from Inchins are the company's chairman and chief executive officer, Mr. Chiang Ding, and the company's chief financial officer, Mr. Chao-Wei Yan. On our call today, Mr. Ding will give you an overview of the company's performance. Mr. Yan will share the details of the company's financial results. After that, we will conduct a question and answer session to take your questions. During the question and answer session, Mr. Ding and Mr. Yan will deliver the answers in Chinese, and the company's representative will provide corresponding English translations. Before we continue, I would like to remind you that some information discussed on this call will contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the company's current expectations and predictions about future events that the company believes may affect its financial condition, results of operations, business strategy and financial needs. The company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances or changes in its expectations, except as may be required by law. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the company's registration statement and other filings with the SEC. With that, I would like to turn the call over to Mr. Chiang Ding, the company's chairman and chief executive officer. Mr. Ding, please go ahead.

Okay. Thank you, operator, and everyone. for joining InterChair's own conference call for the fourth quarter and four year 2022. In today's call, I will provide an overview of our performance for the fourth quarter and four year of 2022. After that, our CFO, Ms. Yen Tsao-Wei, will share the details of the company's financial review. Finally, we will conduct a Q&A session to take your questions. The cryptocurrency industry has experienced several upheavals in 2022, involving companies such as Terra, 3iOS Capital, and FTX. In the fourth quarter of 2022, the whole industry entered an interim period with relatively low volatility. 2022 was also a challenging year for MTS. Following the rising performance in 2021, we were inevitably impacted by the industry's downturn cycle. We achieved revenue of RMB 474 million in 2022 with a gross margin of 82%, which is comparable to that in 2021. Our net income, which is RMB, Our diversified product portfolio strategy allows us to meet our customers' needs by adjusting our product price and thus we will still be able to maintain profitable for the single quarter despite the unfavorable market conditions in the fourth quarter 2022. We achieved revenue of RMB 133.7 million and net income of RMB 12.7 million the fourth quarter 2022, which was in line with the management anticipation. In 2023, we complete our initial public offering of 1,140,560 ADS, underwrite partial excised over-allotment options to purchase additional ADS. We are delighted with the success of the offering. and appreciate the acknowledgement and continued support from our investors. The proceeds from the initial private opening will be used for the continued development of products on our XIHE and WAN2 platforms, as well as the expansion of our business in Singapore. Looking ahead, despite the current volatility in the cryptocurrency industry, there is a certain degree of price bounce overall. We believe this shift will be gradually reflected in our 2023 performance through our order cycle. Meanwhile, We will continue in large investment in our ID capability and launch new exciting products when time is right. We have also planned expanding our business in Singapore. We believe that we will, as always, capture much opportunity and create long-term value for our shareholders. We greatly appreciate your continued support for our company. At this time, I would like to turn the call over to our CFO, Ms. Cao Yen, who will provide a detailed review of the financials for the fourth quarter and four years of 2022 on behalf of the management team. Ms.

Yen, please proceed. Thank you, Mr. Ding. Good evening, everyone. On behalf of the management team, I will provide a brief financial overview of the fourth quarter and the full year 2022. Let's first take a look at the financial overview for the fourth quarter. Our revenue is down 88.8% to RMB $33.7 million, or US dollar $5.9 million in the fourth quarter. Such decrease was primarily attributable to the continued broader decline of the cryptocurrency market, which caused the decrease in the sales volume and average sales price of our asset chips that were primarily used in cryptocurrency mining machines. Our cost of revenue down 69.9% to RMB 20 million or RMB 2.9 million in the first quarter, which was in line with the decrease in the sales volume of our asset chips. Our total expenses down 66.4% to RMB 12.7 million, or US dollar 1.8 million in the fourth quarter, primarily due to the decrease in research and development expenses. And the research and development expenses down 64.1% to RMB 10 million, or U.S. dollar 1.4 million in the fourth quarter, primarily due to the reduction in direct materials and payout expenses in connection with our research and development projects. Our sales and marketing expenses down 6.8 percent to RMB 1.1 million or U.S. dollar 0.16 billion in the fourth quarter. Our general and administrative expenses down 81.2% to RMB 1.7 million or U.S. dollar 0.25 million in the fourth quarter, primarily due to a decrease in tax surcharges and professional expenses. Other income up 4,697.7% to RMB 10.6 million or US dollar 1.5 million in the first quarter, primarily due to an increase in government grants we received from the local government. Such government grants were granted to us to support qualified projects in IC industry with no repayment obligations. As a result of the foregoing, our net income RMB 12.8 million or US dollar 1.8 million in the fourth quarter. Our basic and diluted net earning per ordinary share was RMB 0.11 or 0.02 dollars in the fourth quarter. Each ADS represents two of our company's class A ordinary shares. Now, let's look at our full year 2022 financial results. The revenue for 2022 down 25% to RMB $473.7 million, or $68.7 million in 2022, primarily due to the decrease in the sales volume of our asset chips, which was in line with the broad decline of the cryptocurrency market in 2022. Cost of revenue. down 23.6% to RMB 87 million or US dollar 12.6 million in 2022, primarily due to the decrease in the sales volume of our asset chips. Operating expenses down 9.3% to RMB 64 million or US dollar 9.3 million in 2022, primarily due to the decrease in research and development expenses. And the research and development expenses down 9% to RMB 48.4 million or US dollar 7 million in 2022, primarily due to the reduction in direct materials and tape out expenses in connection with our research and development projects, which was partially offset by increased staff cost of research and development personnel. Our research and development expenses as a percentage of our revenue was 10.2% in 2022 as compared with 8.4% in 2021. Sales and marketing expenses up 35.4% to RMB 4.1 million or US dollar 0.6 million in 2022. Primarily due to the increase in staff costs of sales and marketing personnel. Sales and marketing expenses accounted for less than 1% of our total revenue in 2022. General and administrative expenses down 19.8% to RMB 11.6 million or US dollar 1.7 million in 2022. Primarily due to the decrease in tax surcharge and professional expenses. General and administrative expenses accounted for 2.4% of total revenue in 2022. Other income up to RMB 29.8 million or US dollar 4.3 million in 2022, primarily due to the increase in government grants we received from local government. Net income was RMB 355.2 million or US dollar 51.5 million in 2022. Basic and diluted earning per share was RMB 3.02 or US dollar 0.44 in 2022. As mentioned by Mr. Ding, currently we can see some improvement in price of the cryptocurrency, which will gradually boost our performance through customer orders. Our revenue in the first quarter of 2023 to be approximately RMB 26 million or US dollar 3.8 million. Looking ahead, we remain confident that although we may still encounter certain near-term macroeconomic uncertainties, the long-term opportunities in global market remain abundant. We will continue to invest in research and development of new products and business expansion. seize the market opportunity and strive to create long-term value for our shareholders. Thank you for your continued support and we look forward to updating you our new progress in the future. Now, I'd like to turn the discussion over to operator for any questions.