Intchains Group Limited

Hey, ladies and gentlemen, thank you for standing by and welcome to IncChain's first quarter 2025 earnings conference call. Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today are Mr. Chow Wei-Yen, Chief Financial Officer of IncChain, and Ms. Lin-Pi Wong, Director of Investment Relations. Mr. Yen will provide an overview of the company's performance and financial results. Following his remarks, We will open the floor for a question and answer session. I'll now turn the call over to Minty Wong. Please go ahead.

Thank you, operator. Good day, everyone. I'm Minty. Welcome to H-Chance Group 1S, first quarter 2025 earnings call. On today's call, Mr. Calvary Yuen, our CFO, will present a comprehensive overview of the company's performance and financial results for the quarter. Before we begin, please note that today's discussion will include forward-looking statements. These statements involve known and unknown risks and uncertainties and are based on the company's current expectations and projections regarding future events that could affect its financial condition, operating results, and strategic directions. The company undertakes no obligation and publicly updates or revives any forward-looking statements to reflect subsequent events and changes in expectations, except as required by law. Although the company believes these expectations are reasonable, there is no guarantee they are provided to be accurate. Actual results may differ materially from the anticipated. Invited to refer to our registration statements and other filings with the SEC for additional factors that may affect future performance. We also discussed non-GAAP financial measures. Please refer to the reconciliation of these non-GAAP measures to the comparable GAAP figures in our earnings catch release. The presentation and the replay of this call will be available on our website at ii.inchchance.com. With that, I will turn the call over to Mr. Kauria. Please go ahead.

Thank you, Nidhi, and thank you all for joining InchChance's first quarter conference by early conference call. Today, I will provide an overview of our operational and financial performance, followed by a Q&A session. We are pleased to report solid operational performance despite a challenging macroeconomic environment and a significant volatility in crypto markets, particularly an 18% decline in the total market cap of crypto currencies during the quarter. Our revenue reached $18.2 million, a 78.5% quarter-over-quarter increase, and our high-risk 15.3%. In our previous earnings score, we guided Q1 2025 revenue to be between $15 million to $16 million. Our results exceeded the upper end of that range. Growth margin grew by 286.9%, with growth margin improving to 56.9%, up from 26.2% last quarter. This reflects our continued focus on the product optimization and operational efficiency. Our operating income turned positive at $5.1 million, a strong recovery from the loss in Q4 2024. While net income was impacted by non-cash revaluation loss on E-Curvy, we remain committed to our Easter accumulation strategy, increasing our holding by over 23% to $7,023 billion. This long-term approach remains central to our value creation strategy. For context, our business operates across three core segments. Firstly, we produce home miners for high-potential altcoins such as Alio and Doge under the Gold Show brand. Secondly, we re-invade the profit to accumulate ETH, optimizing our asset structure. Last but not least, We actively explore Web3 innovations to drive long-term growth. As a pioneer in home mining products and a long-term investor holder, we occupy a unique position in the U.S. capital market. Our differentiated strategy focuses on blue ocean of coin mining sectors, enabling us to maintain growth margins higher than industry average for Bitcoin miners, regardless of market cycle. This strategic focus has allowed us to achieve a cumulative net profit from 2019 to 2024 that outperforms our peers, making us one of the few consistently profitable mining companies. In early 2025, we fully solidified our leadership in outdoor mining machines. Since launching the Alu series miners in February, we have released five iterations. strengthening our market position. According to a third-party miner evaluation website, our AEMax miner currently ranks fifth in daily profitability among all the mining machines, outperforming most of Bitcoin miners. In March, we launched the GoldShieldBite, an innovative DAO mining machine that supports Alio, Doge, and Litecoin. We talked to restable mining hubs, users can switch between cryptocurrencies based on market conditions to maximize returns. This product showcases our technical strength through developing advanced out-of-coin mining machines. Looking ahead, we plan to continue refining our board coin miners through shift upgrades and enhanced product design, aiming to become the top tier player in board coin mining equipment. Now, let's review our financial results for the first quarter of 2025. During Q1, the price of Ether, Dogecoin and Alio fell by 46%, 49% and 75% respectively. However, price has shown signs for recovery in Q2. Despite these headwinds, we delivered a strong result. Revenue for Q1 was $18.2 million, exceeding the high end of our guidance and making our highest quarterly revenue since 2023. This performance was largely driven by the successful launch of our Aleo mining miner series, which accounted for nearly 75% of our total revenue. The product's strong margin and timely launch helped us respond quickly to market demand. revenue increased 78% quarter-over-quarter, significantly outperforming industry peers. Cost of revenue rose modestly from $7.5 million in 2004 to $7.9 million in 2001, growing at a much lower pace than revenue due to the high margins of aluminum miners. Offering income turned positive at $5.1 million, driven by top-line growth and reduced R&D expenses as several early-stage projects concluded. Among crypto mining companies, we are one of the few to report positive operating income in Q1 2025. Net income was negative $4.7 billion compared to our profit in the previous quarter. primarily due to the $9.8 million non-cash loss from the valuation of our cryptocurrency holding, mainly due to the Ethereum price drop of 46%. Despite the downturn, we maintained a steady pace of Ethereum accumulation. As of March 31, 2045, we held approximately 7,023 units of ETH. up 33.2% quarter-over-quarter. Net income was negative 4.4 million, also declined from the previous quarter. As of March 31, 2025, our cash, cash equivalents, and short-term investments totaled $74.9 million, up from year-end 2024. Thanks to positive operating income, our USDC and QFP holding other than Ether amounted to $16.1 million. As of May 21, 2035, our total assets represented $107 percent of our market capitalization. Looking forward, several catalysts could drive long-term upside in 20.5. First is, anticipated interest rate cuts, potentially improving liquidity conditions. Second is, a broader regulatory support for Periscope Link, ETF, Young, Bitcoin. Third is, new blockchain applications in payment and AI agents. Fortis continues its advancement in zero-knowledge proof and Ethereum protocol upgrades. And finally, the passage of new capture Bitcoin reserve fields, the first at the US state level, may encourage similar moves elsewhere. Ethereum has also gone significant upticks, including the capture upgrade completed in May, anticipating layer-1 scaling and new leadership at the Ethereum Foundation. We remain confident in Ether's future and the broader blockchain ecosystem and will continue to our long-term Ether accumulation strategy. Looking ahead, we are optimistic about sustaining momentum into Q2 and beyond. Market sentiment is improving, and our rapid product declaration, especially in AAE and Doge series, positions us well for future growth. However, taking into account tariffs and crypto market volatility, we project the first half of 2025 revenue of approximately RMB 180 million to 200 million. In conclusion, we remain focused on innovation, disciplined execution, and long-term value creation. As we navigate the evolving crypto and Web2 landscape, our strategy is anchored in technological leadership, operational excellence, and a prudent capital management. Thank you for your attention. We look forward to keeping you updated on our progress as we continue to grow across crypto

We are now beginning the questions and answers session. You are welcome to ask questions in either Chinese or English. For convenience, English translations will be provided by minutes. In case of discrepancies, please refer to the original language used by the management. Then, operator, please begin the Q&A session. Thank you. Thank you.

To ask a question now, please press star 11 on your telephone and wait for your name to be known. To resolve your question, please press star 11 again. A moment for our first question. We will now take our first question from the line of Mark Palmer from the Benchmark Company. Please go ahead, Mark.

Yes, thank you for taking my question, and congratulations on the strong operating performance during what was a challenging quarter in the cryptocurrency industry. With regard to the mix of the company's revenue going forward, insofar as about 75% of revenue was derived from Alejo Chips and Meyers during the first quarter, and at the same time, the company continues to develop new iterations of Doge miners. How should we think about the mix of the company's mining rigs in the second quarter and, you know, perhaps during the balance of the year?

Yeah, thank you for the question, Mark. Yeah, personally, we are very optimistic about the Dogecoin future development and we'll upgrade our Doge miner program continuously. So, So, we aim to become the top-tier supplier of first-tier miners in this industry. But we will also identify promising innovative projects in the future, not only Aleve miners. So, we also hope to lead the market launching of corresponding miners. This is similar to how we launched the Aleve series miner in Q1. So, creating substantial returns for miners and the contributing to project ecosystem and all while earning our share of the reward. So, in conclusion, our future revenue will come from those miners, Alium miners, and you miners, maybe launch a second or third course. Yeah, thank you.

And, thank you. And one of the questions, just wanted to touch base on GoldShark Byte, the new dual miner that you introduced in March. Could you talk a bit about the potential of that miner in terms of revenue generation and how we should think about the timing of that rollout?

Yeah. Yeah. GoldShark Byte. In March 2025, our company launched GoldShark Byte. and this product currently supports mining of curricular currency such as Alio and Broadcoin. But in the future, it may be with potential compatibility for more projects in the future through the draftable mining cards. So the primary motivation behind this product was addressing a common pain point for individual miners. Every time they switch projects, they typically need to purchase entirely new machines. So we can also take up significant space at home. So in response, we introduced this standardized miner with flexible mining cards, allowing the miners to easily switch cards based on the market conditions. So from a company's perspective, this product helps us to standardize the hardware design while leveraging our technical expertise across multiple cryptocurrencies. And for the crypto industry, we hope this project will lower the barrier to enter the industry and encourage more people to participate in the crypto mining, ultimately contributing to the decentralized for more blockchain projects.

And Mark, in conclusion of your first and last question, we think that for the first half of this year, most of our revenues were generated from the Allure series miners. And for the second half of this year, we think some revenues may come from the GoShop by-products, but it's kind of hard to for us to give you a specific guidance. But for the first half of this year, we think the a little serious miners will still be very competitive in the market among all the POW machines. And for the whole year, just as Kyle stated, we may launch some new innovative miners in this quarter or maybe the next quarter. So we think regarding to the revenues of the whole year, we think our revenue will be compromised from the sales of the aluminum miners, innovative miners, and the Dogecoin miners. percentage of these miners will depend on the market price of these miners. So it's kind of hard for us to give you a precise percentage, yeah.

Thank you. Thank you very much.

Thank you. We will now take our next question from the line of Matthew Galinko from Maxine Group. So you got your question, Matthew?

Hey, thanks for taking my questions. And congratulations on a strong quarter. I noticed that inventories remain pretty high, down a little bit from the fourth quarter. But I was curious if you could comment on what we could expect from the inventory through the balance of the year.

Yeah. In fact, most of our inventory are inventory for Dogecoin miners and some of them are Alio miners related chief inventory. So now we gain some performances during this quarter, but in the future we will adjust our price, depends on the market conditions. so what what i can what we can predict is uh we will have we will try our best to uh to to to to sell these inventories to the market uh instead of to write off the exact inventory but it still depends on the market condition on that on the next quarter thank you got it thank you and uh in terms of the follow-up question is also on full shell but um

Can you talk about the kind of where you're getting the feedback from the market that, you know, I guess consumers want that kind of all-in-one style device for mining, for ability to mine multiple currencies? Is it direct feedback you're getting from existing customers? Is it kind of broad industry feedback?

expectations or you know talk a little bit about that case uh okay yeah yeah we both applied it was very welcome the best by many uh individual miners uh we we it is it is it is um undoubtedly explore our customer base uh because we we receive the money feedback from new customers and all these all these will be a good entry for these new customers. So our market strategy is that we use home miners to attract new customers, and we use professional miners to maintain them. Because for profit, for profit, for profit perspective, maybe the small miners like Photoshop Bank will not have updates big returns, but it will be a good entry for some new customers. So this is our market strategy. So I think those who buy individually maybe will not have a big proportion of our total revenue stream, but eventually the launch of this kind of product will broaden our customer base and we'll have will have a positive impact on our revenue.

Thank you. And still, the social bite is kind of a profitable product for the individual miners. Yeah, of course. Because you can test the daily profits of our social bite. If you use two real mining cards, you may get about you may get about $0.5 to $1 daily profit per day. And you may get your cost about, I think, maybe $4, $400 a day. Yeah, $4, $400. Yeah, $3 to $400 a day. I think it's still more profitable for some people. Bitcoin or other cryptocurrency mining machines.

But for individual users, maybe they don't care about this return base. It's a little key product. And if they want a higher return, they will purchase our bulk miners or other miners instead.

It's just like a switch in the mining sector.

Thank you. Thank you. Thank you. As a reminder, to ask a question, please press star 11 on your telephone. We will now take our next question from the line of Teresa Lowe from Eastgate.

All right. Teresa has left the call. Once again, to ask a question, please press star 11 on your telephone. We now have a follow-up question from the line of Matthew Galinkos from Maxine Group.

Please go ahead, Matthew.

Thanks for taking my follow-up question. I just wanted to ask about R&D spending this year. I think, you know, Q1 stands for Q4, but just given your, you know, I think plans to launch additional new products and the success of your rail minors, Should we expect, you know, ever trying to hire R&D spending at some point this year or, you know, can you skirt a level set up? R&D expense.

Yeah, maybe we cannot predict the days because last year and the first part of this year, we launched three new projects rapidly. So, this year, probably, We have some projects in progress, but now we cannot actually predict when to do the waiver takeout at this time. Yes. Thank you. Thank you.

Thank you.

Once again, to ask a question, please press star 11 on your telephone. I'm not showing any further questions, and with that, we conclude our conference call for today.