Intchains Group Limited

Good day, ladies and gentlemen. Thank you for standing by and welcome to InChain's third quarter 2024 earnings conference call. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. Joining us today is Mr. Chow Wei Yen, Chief Financial Officer of InChain and Ms. Minty Wang, Investor Relations Director. Mr. Yen will provide an overview of the company's performance and the details of the company's financial results. After that, we will conduct a question and answer session to take your questions. I would now like to call over to Minty Wang, Head of Investor Relations at InChance Group Limited. Please go ahead.

Thank you, Operator. Good day, everyone. I'm Minty. Welcome to InterChance Group Limited's third quarter 2024 earnings call. For today's call, Mr. Chaowei Yan, CFO of InterChance Group Limited, will provide a comprehensive overview of the company's performance and financial results for the quarter. Before we proceed, I would like to remind everyone that today's discussion will include forward-looking statements. These statements involve known and unknown risk and uncertainties and are based on the company's current expectations and projections regarding future events that may impact its financial condition, operating results, and the strategic direction. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances or changes in its expectations, expect as may be required by law. Although the company believes that the expectations expressed in this forward-looking statement 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. Investors should review other factors that may affect its future results in the company's registration statements and other findings with the SEC. We'll discuss certain non-GAAP financial measures. Please also refer to the Conciliation of Non-GAAP Measures to the Comparable Gadget Measures in the Earnings Price Relief. The presentation and the webcasted display of this conference call will be available on the InterChance website at ir.interchance.com. Now, let me turn the call over to our staff of Mr. Chao-Wei Yang.

Thank you, Mingti, and everyone for joining InterChance Earnings Conference Call for the third quarter of 2024. On today's call, we will provide an overview of our operational and financial performance. After that, we will conduct a Q&A session to take your questions. In reviewing the third quarter of 2024, the cryptocurrency market was mostly rent-bound, with Bitcoin price remaining relatively stable, while other cryptos experienced a varying degree of decline. The crypto industry's narrative primarily focused on national and institutional investments in ETFs, while some funds flowed into the MIMI sector due to a lack of prevailing applications. However, as the fourth quarter began, the result of U.S. President's election strengthened global investors' expectations for pro-crypto regulations, leading to renewed optimism about crypto's future developments. In November 2024, Bitcoin price consistently broke all-time highs, and sectors such as Payment, MIMI, and RWA also experienced rapid growth. We are confident about the upcoming development of the crypto market and actively preparing new ethics and beginning primary efforts to build blockchain applications. As the company's growth strategy in the long term InterChain's vision is to achieve growth that transcends crypto cycles through the developing applications based on Web3. While in the short term, the company is primarily focused on increasing ROI during crypto cycle. We enhance ROI through continuously exploring promising crypto projects and accumulating Ether. In third quarter 2024, we continue to drive sales of our Gold Shield branded computing equipment. designing for Casper, Alfim, Dogecoin and Litecoin mining. This decision has allowed us to effectively capture the crypto market trends emerging in the first quarter. To see the current wave of cryptocurrency development, we will continue to actively explore new projects and expect to produce new assets by first quarter 2025. Meanwhile, we will stick to our Ether accumulating strategy, whether in the peak or trough of the crypto cycle. In the third quarter 2024, we continue to implement our strategy to accumulating Ether, reaching 4,149 Ether as of September 30, 2024, representing a 71.7% increase as of June 30. This month, we were excited to see that the total market cap of cryptocurrencies reached a historical high, with Ether price surpassing the average cost of our holdings as of September 30. Furthermore, as part of our initial foray into blockchain application expansion, we launched GoldShield Pay in this quarter, offering a one-stop payment solution for merchants. Based on our confidence in the future of the crypto industry, We plan to launch a hardware crypto wallet in the fourth quarter, which will further enhance companies' payment product line and application ecosystem. We are confident that as Interchange positioning and the business model become more defined, our company's growing potential and long-term value will be fully realized. Moving forward, Interchange will continue to lead the industry. collaborating with partners to drive robust growth across the crypto cycle. Now I will provide a brief financial overview on the third quarter of 2024. I'm pleased to report that the company's third quarter revenue was 60.3 million yuan or 8.6 million US dollars, representing a year-on-year increase of 781%. continuing the strong growth momentum from the second quarter of 2024. Revenue from the overseas accounted for 66.2% in the third quarter of 2024. Our global expansion strategy has been well continued since the second quarter. Our sales volume of ASIC chips for the third quarter was 207,838 units. compared to 165,056 units for the same period in 2023, representing an increase of 26%. Revenue for third quarter was driven not only by the increase of sales volume, but more importantly, by the rise in the average selling price. The growth margin was 67.7% in the third quarter, reaching the highest level since Q1, 2023, primarily due to the higher gross margins for our latest ASIC chips products launched in 2024 compared to the older ASIC chips products. In terms of total operating expenses, it was 37.7 million yuan or 5.4 million US dollar for the third quarter, representing an increase of 90.8% for the same period of 2023. The increase was primarily due to the loss on fair value of cryptocurrency and the increase of share-based incentive expenses. The loss on fair value of cryptocurrency for the third quarter was 13.1 million yuan or 1.9 million US dollars. It was primarily due to the volatility of the cryptocurrency market with Ether price falling 24.2% from the end of the second quarter to the end of the third quarter. While in November, as mentioned before, the Ether price surpluses the average cost of our holdings as of September 30, 2024. Our net income for the third quarter was 3.2 million yuan or 450,000 US dollars. And the non-GAAP adjusted net income was 19.1 million yuan or $912,000, both turning from a loss to a profit compared to the same period of last year. This was primarily due to the faster revenue growth in the third quarter compared to the growth in cost of revenue and operating expenses. This quarter, we started to disclose non-GAAP adjusted net income and primarily exclude share-based compensation expenses. We believe non-GAAP net profit reflects the company's ongoing operational performance. Basic and diluted net earning per share was RMB 3 cents for the third quarter of 2024, compared to the basic and diluted net loss ordinary share of RMB 16 cents for the same period of 2023, each ADS representing two of the company's Class A ordinary shares. Looking ahead, we will continue to focus on product and project innovation. and foster the adoption of blockchain technology for our clients and partners. We look forward to updating you on our progress. Thank you for your continued support.

Thank you, Mr. Yan. At this point, I'd like to open the floor for questions. You're welcome to ask questions in Chinese or English, and we'll provide English translation when necessary for convenient purpose only. In case of any discrepancy, please refer to our management statements in the original language. Now operator, we may start the Q&A session. Thank you.

Thank you, management. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. If you'd like to cancel your request, you can also press star 11 again.

One moment for the first question. Thank you.

The first question comes from the line of Marco Zhang from Ke Long Hui Research. Please ask your question.

Hi, this is Marco from Ke Long Hui Research. Congrats on the company's strong growth in Q3, first week. I noticed that the company launched an app called GoShare Pay in Q3, and you said you plan to launch a hardware crypto wallet in Q4. So my question for you is, can you tell us a little bit more about the functions of your GoShare Pay and your hardware crypto wallet, and what differentiates yourself from the other app and wallets in the market? Thanks.

Okay, thank you for the question. First, GoldShield Pay was released in the third quarter and it is a one-stop payment platform serving global merchants. Currently, it supports our merchants to receive cryptos, including Bitcoin, Ether, Dogecoin, Litecoin, Polygon, and both USD Coin and Tether USD. Pay serves including not only limited to payment process, but for the risk monitoring and data analytics. However, it's still in the early stage. We did not expect it to generate revenue in the short term. And for the hardware wallet, it's still confidential. It's still in the development process. But what we can say is that both GoldShop Pay and the GoToShow Wallet is an important step for us to explore our product line and develop our application ecosystem. And of course, both products will not have any custodian function, and the users should store their security key by their own.

Thank you.

Thank you for the questions. One moment for the next questions. Next question comes from the line of Carl from Maxim. Please go ahead.

Yeah, thank you. So my question is also related to the cryptocurrency wallet to be launched in the short future. So could you give us some projections about what the cost and how the revenue would be like driven by this project and also is this project to be developed in your house or the company is have a third party partner to launch this cryptocurrency wallet thank you uh excuse me okay okay

The company's management firmly believe that in the future of blockchain applications, which is also one of our reasons behind our long-term ether accumulation strategy. Over the past few years, the company primarily focused on providing mining ethics for altcoins. And this practice has proven that it's successful. But however, we are not remain confined to our comfort zone. So instead, we have continuously sought the next growth curve for our company. So as you mentioned, in previous years, we did not venture into blockchain applications because our primary focus was on achieving business survival through asset sales. Now the sufficient cash reserves to sustain us, we have sufficient cash reserve to sustain us through this cycle and the market that has developed a certain level of awareness of blockchain applications. The management believes it is time to begin exploring blockchain applications, starting with payments. GoldShop Pay is designed to offer merchants one-stop payment solutions, providing risk monitoring data, operating and other functions. with service fee collected in the process. And our hardware wallet is another product set to be released in the fourth quarter. But the further details will be disclosed upon launch. So currently, all these are in trial stage. We do not expect both GoldShop Pay and wallet to contribute materially to our profits during this phase. and it's difficult to provide a specific commercialization timeline. But we aim to continue exploring various application directions and break out of our current operational comfort zone and then achieve long-term stable growth. Thank you.

Thank you.

Thank you for the questions. Once again, to ask questions, please press star 11.

One moment for the next question.

The question comes from the line of David Lai of Premire Partners.

Please go ahead.

Hi. I wonder, the company has been saying that one of the strategies, accumulating ETH, which is a little bit different from more popular strategy, which is accumulating Bitcoin, like MicroStrategy. So can the management elaborate on that strategy in particular? And also some other company also adopting like some leveraging or even some other financing to do that. So is the company also planning to do so?

The question is why we choose the ether accumulating, right? So regardless of whether it's in full of fair market, the company remains sticking to accumulating ether. And the reason for accumulating ether is firstly, we position us as an altcoin development company. Our primary business focused on providing asset chips for promising POW coins. As POS is one of the main consensus mechanism besides POW, We aim to share growth of POS sector by accumulating Ethereum. Therefore, investing in InterChance is, in a sense, similar to investing in an enhanced altcoin portfolio, which offers a higher beta in bull markets. Secondly, the company's founder has a technical background and firmly believes in widespread application of the crypto industry. We have also begun initial trials in blockchain applications. Currently, Ethereum remains the dominant public chain for Web3 applications. Making our strategy of accumulating Ether a natural fit. Finally, the altcoin market is relatively untapped and over a complete crypto cycle. The company has consistently generated operating profits and maintained self-sustaining growth. As a result, the company has a healthy cash reserve. This reserve allows us to navigate crypto bear markets smoothly and tends to lower overall ROI during bull market. Accumulating Ether serves as one way to improve our ROI. And finally, for the financing, possibility of financing strategy to accumulate assets. At present, the company primarily uses its own cash to accumulate assets. However, we are aware that some US listed companies have employed financing strategy to accumulate cryptocurrencies, like MicroStrategy. And their stock price this year indicates that investors give full recognition on their approach. So as such, we will consider joining their successful experiences and may explore financing options for asset accumulation at the appropriate time.

Thank you.

Thank you for the questions. Once again, to ask questions, please press star 11. At this time, there appears to be no more questions from the line.

Allow me to hand the call back to the management for closing.

Okay, thank you, operator. If there are no more questions online, maybe let's call it a day. And also, I want to say that if you have further questions, you can contact us through email, or maybe you can, after this, After this conference, you can visit our website to refer to the materials we listed. Thank you, operator, and thank you, everyone.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.