Nano Labs Ltd

Ladies and gentlemen, thank you for standing by. Welcome to the NanoLabs fourth quarter of 2022 earnings conference call.

During today's call, all participants will be in listen-only mode. This conference is being recorded today, Tuesday, March 14th, 2023. Joining us today from NanoLabs are the company's chairman and chief executive officer, Mr. Jinping Chong, and company's chief financial officer, Mr. Bing Chen. On our call today, Mr. Chong will give you an overview of the company's performance. Mr. Chen will share the details of the company's financial results. After that, we'll collect a question and answer session to take your questions. Before we continue, I'd like to remind you that some information discussed on this call will contain four looking statements within the meaning of Section 21E of the Securities Exchange Acts of 1934 as amended and as defined in the U.S. Private Securities Regulation Act of 1995. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks. uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performances, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's planings on the Securities and Chains Commission. During today's call, Mr. Kong and Mr. Chen will deliver their remarks in Chinese, and the company representatives will provide corresponding English translations. With that, I'd like to turn the call over to Mr. Kong, the chief company's chairman and chief executive officer.

Mr. Kong, please go ahead. Mr. Kong, please go ahead. Did I say it? Yes.

Thank you to the host and all the friends who came to the Nanolabs' 4th quarter financial phone conference in 2022. At our phone conference today, I will talk about the company's recent development and the company's strategy for the next fiscal year.

Thank you operator and everyone for joining Nanolab's fourth quarter of 2022 earnings conference call today. On our call today, I will provide an overview of our recent development and our strategic initiatives in the next fiscal year.

The fourth quarter of 2022 is a difficult quarter for our industry and the entire cryptocurrency market. The turmoil in the market environment has had a partial impact on our business. For example, in September of this year, Ethereum went from POW to POS. Despite this, we still continue to provide high-quality products for our customers. We also actively adjust the development strategy to adapt to the constantly changing market environment. Our management team visited other countries and met with industry experts and potential partners. We hope to use this opportunity to explore the expansion of the global market of our company. We will continue to discover growth potentials and increase our market share.

The fourth quarter of 2022 is a difficult quarter for industry and overall crypto market. The dynamic market environment, such as the conversion of Ethereum from POW to POS in May-September last year, had partially impacted our business. We continue to provide high-quality products to our customers. We also actively shifted our development strategy to adapt to the changing market conditions. Our management team has visited other countries and met the industry experts and potential partners to explore expansion opportunities in the global market. We will continue seeking for growth potential to increase our market share. In the future, we will pay more attention to overseas markets, focusing on North America, North Europe, the Middle East and Southeast Asia.

In addition, I would like to share the latest progress of our Apollo original universe. AIDC has become an important layer 2 tool to integrate the Apollo original universe. The Apollo original universe is a distributed 3D real-time rendering network that meets the needs of the original universe construction. Relying on decentralized technology and innovative consensus mechanisms, it can deeply integrate AIDC to reduce the threshold of user creation In addition, I would like to show the most recent developments of our Apollo Metaverse.

AIGC has been connected to the Apollo Metaverse as an important layer to the tool. It is a distributed 3D real-time rendering network aimed at the needs of Metaverse construction. Depending on the decentralized technology and innovative consensus mechanism, it can deeply integrate with AIGC. Lower the threshold for user creation, providing metaverse developers with low-cost rendering solutions and more efficient developer tools.

Taipolo YangYuzhou's flexible computing network now supports Stable Diversion's machine learning model reasoning can generate patterns through text and directly form NFTs. With AIGC as an important layer 2 tool for intervention, Apollo Original Universe as a basic infrastructure service provider, the developers can now better contact AIGC to create a unique and innovative original universe experience, providing a wide range of possibilities.

Apollo's Elastic Computing Network now supports the inference of stable division machine learning models, allowing for the generation of patterns from the text that can be directly minted at NFTs, with the integration of AIGC as an important layer to talk. Apollo Metaverse, as the metaverse infrastructure provider, allowed the developers to create the metaverse. which provides a wide range of possibilities for the creation of unique and innovative Madras experiences.

At the same time, Apollo's journey to realize open social and immersive experiences in the 3D original universe allows tens of thousands of real users to engage in real-time low-cost interaction in a high-safety, unmistakable environment at the same time and in the same scene, bringing a new Web3 way of life to users, At the same time, Apollo Metaverse is committed to achieving open social and immersive experiences in the 3D Metaverse world, which allows tens of thousands of real users

to achieve real-time and low-cost interaction in the same thing with high fidelity and zero latency environment, bringing users new Web3 lifestyles. At the same time, our company also plans to provide 3D printing services for the users' metaverse world so that the virtual and reality can be organically combined. We expect to launch our iPolo metaverse as soon as we can. We believe our Apollo metaverse will become an iconic product in the industry.

感谢各位一直以来对本公司的支持, 接下来我们将把电话转给我们的首席财务官陈斌先生, 有他对我们的财务业绩进行更详细的阐述, 陈斌先生请您继续。 Thank you for your continued support to the company.

Next, I will turn the call over to our Shelf Financial Officer, Mr. Chen, for a closer review of our financial results. Mr. Chen, please go ahead.

感谢孔建平先生。 大家早上好。 我将代表管理团队介绍2022年第十季度的财务状况。 2022年第十季度,公司的营业收入从2021年同期的人民币320万元增至人民币1270万元或180万美元。 The growth in sales is mainly due to the increase in sales of Apollo V1 and V1 products. In the fourth quarter of 2022, the company's sales cost increased from RMB 26.9 million in the same period of 2022 to RMB 89.3 million or $12.8 million, mainly due to the decline in market expectations.

Thank you, Ms. Kong. Good morning, everyone. On behalf of the management, I will provide a brief financial overview of the fourth quarter of 2022. Net revenues increased to RMB 12.7 million, or U.S. dollars 1.8 million, for the fourth quarter of 2022, from RMB 3.2 million for the same period of 2021. The increase in net revenues was primarily due to the increase in sales volume of Apollo V1 series and V1 series products. Cost of revenues increased significantly to RMB 89.3 million, or USD 12.8 million for the fourth quarter of 2022, from RMB 26.9 million for the same period of 2021, mainly due to the inventory write-down caused by a decline in market expectations.

The total operating cost of the fourth quarter of 2022 was RMB 6030 million, or 870 million, The same period in 2021 was RMB 1.13 billion. In the fourth quarter of 2022, the company's sales cost increased from RMB 3.4 million in the same period in 2021 to RMB 5.6 million or RMB 80 million. The increase in sales cost is mainly due to the increase in advertising cost to support marketing strategy, expand market share and improve brand visibility.

Total operating expenses were RMB 60.3 million for the first quarter of 2022, from RMB 130 million for the same period of 2021. Selling and marketing expenses increased to RMB 5.6 million for the first quarter of 2022, from RMB 3.4 million for the same period of 2021. The increase in selling and marketing expenses was primarily due to the increase in advertising expenses to support marketing strategies, expand market share, and improve brand visibility.

管理费用从2021年同期的人民币1000万元增加到人民币1550万元或220万美元。

GENERAL AND ADMINISTRATIVE EXPENSES INCREASED TO RMB 15.5 MILLION OR US DOLLARS 2.2 MILLION FOR THE FOURTH QUARTER OF 2022 FROM RMB 10 MILLION FOR THE SAME PERIOD OF 2021. THE INCREASE IN GENERAL AND ADMINISTRATIVE EXPENSES was primarily due to the increase in employee salary expenses, as the number and salaries of general and administrative staff increased, and increase in equipment fees and travel fees due to the development and expansion of its business.

研发费用从2021年同期的人民币9960万元减少到2022年第四季度人民币

research and development expenses decreased to RMB 39.2 million or US dollars 5.6 million for the fourth quarter of 2022 from RMB 99.6 million for the same period of 2021. The decrease in research and development expenses was primarily because the direct materials related to research and development decreased in the current period.

2022年第四季度的营业额,营业亏损为人民币1.369亿元或1970万美元。 2021年同期的亏损为人民币1.368亿元。 In the fourth quarter of 2022, the net loss was US$13.28 billion or US$19.1 billion. In the same period of 2021, the net loss was US$1.35 billion. In the fourth quarter of 2022, the net loss of US$1.19 or US$0.17 was US$1.2 billion. In the same period of 2021, the net loss of US$1.32 billion was US$1.2 billion. As of December 31, 2022, the company's cash and cash-related contributions amounted to RMB 8,700 million or $1,260 million. As of December 31, 2021, the number amounted to RMB 2.339 billion.

Last firm operations was RMB 136.9 million or USD 19.7 million for the fourth quarter of 2022. compared with loss from operations or RMB 136.8 million for the same period of 2021. Net loss was RMB 132.8 million or USD 19.1 million for the fourth quarter of 2022, compared with net loss of RMB 135.5 million for the same period of 2021. Basic and diluted loss per ordinary share was RMB 1.19 or USD 0.17 for the fourth quarter of 2022, compared with basic and diluted loss per ordinary share of RMB 1.32 for the same period of 2021. As of December 31, 2022, the company had cash and cash equivalents of RMB 87.8 million or USD 12.6 million. compared with RMB 233.9 million as of December 31, 2021.

We will continue to create long-term value for shareholders.

Although the company is facing an uncertain market environment, we are actively addressing our development objectives and are full of confidence in the company's future development potential. We believe that our capabilities and technology are the solid foundation for our business development. We will continue to create long-term value for shareholders. Now I would like to turn the call over to the operator for questions and answer session.

If you'd like to ask a question, please press star then one on your telephone and wait for your name to be announced.

If you wish to cancel your request, please press star then two.

If you're on a speakerphone, please pick up your handset to ask your question. The first question comes from Kathleen Ross, private investor. Please go ahead.

Thank you for taking my question. So I actually have two questions here. First of all, I wanted to know like what has caused the company's financial metrics decline in the fourth quarter. Thank you.

为什么四季度的业绩表现有所下降?

由于2022年9月以太坊由POW转POS以

First, the convention of Ethereum Manatee from pool of work to pool of stake in September 2022 affected some of the company's existing business. Besides, the decline in the price of cryptocurrency during the second half of 2022 further results in a decline in our financial performance.

Sure, thank you. And do you have some expectations for your new product? Thank you.

请问公司对迭代的新产品有什么期望吗?

公司目前正在研发不顾鸟3.0芯片, 另外今期公司也推出了新的系列的Apollo A系列, 采用高性能。 AIGC has become an important layer 2 tool to connect the Apollo universe. By adding AIGC tool layer 2 to the Apollo universe, developers can make better use of AIGC to create unique They are currently developing Cuckoo 3.

Also recently, we launched a new A-series iPolo computing devices, which feature high-performance graphics cards with large memory and high core central processing units. The products are designed to support computing of AI-generated content and zero-knowledge proof. At the same time, the company's Apollo Metaverse has recently made new technological progress. AIGC has been connected to the Apollo Metaverse as an important layer to talk, so developers can better leverage AIGC to create metaverses. It also offers extensive possibilities for creating unique and innovative metaverse experiences. Additionally, we also plan to provide 3D printing services for users' metaverses to integrate the virtual and the real world. That's all. Thank you.

Thank you. Thank you very much. Thank you. Our next question will be from Irene Lobin, a private investor. Please go ahead.

Thank you. I have two questions, actually. My first question would be, could you give some brief introduction of AIGC and efficiency computing? And my second question is, what is the performance outlook for 2023? Thank you.

These two questions, the first one is, can you give a brief introduction to AIGC and ZKP? The second question is, what is your perspective on the performance in 2023?

AIGC uses artificial intelligence technology to generate content. Its characteristics are automated production efficiency. In recent years, the original universe is developing step by step. In our face-to-face original universe process, we need a lot of digital content to support it.

AIGC uses artificial intelligence technology to generate content that is characterized by automation and high efficiency. In recent years, the metaverse has been gradually developing and in the process of moving towards the metaverse, a large amount of digital content is needed to support it. It is important to meet the demand by relying solely on human design and development. AIGC can solve this problem perfectly because it will be a new content generation tool in the Web3 era.

Your knowledge of proof is a kind of encrypted agreement. One side of it proves that something is true without revealing how it is true. Your knowledge of proof is based on a simple explanation to prove that a person has a certain knowledge of information is insufficient. The challenge is to prove that you have this kind of information without revealing the information itself and any other information. Your knowledge of proof plays an important role in the encrypted field and Web3.0.

The zero-knowledge proof is an encryption protocol where one party proves to another party that something is true without revealing how it is true. The instance of zero-knowledge proof is that proving knowledge of certain information through a simple disclosure is insignificant. The challenge is to prove the possession of such information without revealing the information itself or any other information. Serial knowledge proof plays an important role in the encryption and Web3, and is highly expected in the Ethereum scaling and even blockchain development. Next question.

We are expanding the product line of the company. and can improve performance and reduce power consumption in the delivery of products, and can attract more customers for the company. Therefore, we expect that in 2023, we can get an objective profit from the delivery of new products and existing products. We believe that the performance of the industry in 2023 will result in a certain degree of recovery in the fourth quarter of 2022.

We strive to enrich the company's product portfolio and our product iterations can improve performance and reduce power consumption. This is expected to attract more customers. We expect to gain considerable benefits from the new product portfolio and our product iterations. We estimate that our financial performance in 2023 will be well improved compared to the fourth quarter of 2022.

Thank you.

Our next question will be from Kathleen Smith, private investor. Please go ahead.

Thank you for taking my question. So my question is what's the key direction of the company's development in the future? Thank you.

我想请问一下未来公司的重点发展方向是什么?

In the future, we will expand the product line of the company, not only focus on the generation and upgrade of the previous series of products, but also focus on and develop AIDC implementation. In addition, in the future, we will pay more attention to the central focus of the regional and foreign market in the North America, North Europe, Middle East and Southeast Asia.

In the future, we will strive to enrich our product portfolio by only focusing on the interactive upgrade of the premium series of products. In addition, we began to develop AIGC, real-time rendering, DKP computing, and 3D printing, as well as other development directions of metaverse. In addition, in the future, we will pay more attention to overseas markets, focusing on North America, North Europe, the Middle East, and Southeast Asia. Thank you.

Well, thank you so much. Thank you. We have no further questions at this time, and that concludes the question and answer session.

Please let me turn the call back over to Mr. Chen for closing remarks.

Thank you very much for joining this conference call. If you have any questions, please contact us through e-mails at ir at nano.cn or reach our IR consumer, Ascent Investor Relations at tina.show at ascentir.com. Management will respond to your questions as soon as possible. We appreciate your interest and support in NanoLabs and look forward to speaking with you again next time.

Thank you for attending NanoLab's fourth quarter of 2022 earnings conference call. This concludes our call today, and we thank you for listening. Goodbye.