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    Canaan Inc. Reports Unaudited Third Quarter 2021 Financial Results
    publish date 2021-11-16

    BEIJING, Nov. 16, 2021 – Canaan Inc. (NASDAQ: CAN) (“Canaan” or the “Company”), a leading high-performance computing solutions provider, today announced its unaudited financial results for the third quarter ended September 30, 2021.

     

    Third Quarter 2021 Operating and Financial Highlights

     

    Total computing power sold was 6.7 million Thash/s, up 128.4% from 2.9 million Thash/s in the same period of 2020 and up 12.9% from 5.9 million Thash/s in the second quarter of 2021, setting a new record. The robust year-over-year and sequential increases were mainly driven by the solid market demand and the delivery of Bitcoin mining machines.

     

    As of September 30, 2021, the Company had cash and cash equivalents of RMB1,698.5 million (US$263.6 million), up 334.0% compared to RMB391.3 million as of December 31, 2020, primarily due to a larger number of down payments received by the Company as a result of the larger volume of sales orders of Bitcoin mining machines.

     

    Total net revenues were RMB1,317.6 million (US$204.5 million), representing an increase of 708.2% from RMB163.0 million in the same period of 2020, and an increase of 21.8% from RMB1,081.8 million in the second quarter of 2021.

     

    Gross profit was RMB741.7 million (US$115.1 million) compared to a gross loss of RMB17.0 million in the same period of 2020 and a gross profit of RMB427.9 million in the second quarter of 2021, representing a sequential growth of 73.3%.

     

    Net income was RMB467.2 million (US$72.5 million), compared to a net loss of RMB86.4 million in the same period of 2020 and a net income of RMB167.3 million in the second quarter of 2021, representing a sequential growth of 179.3%.

     

    Non-GAAP adjusted net income was RMB587.5 million (US$91.2 million), compared to a non-GAAP adjusted net loss of RMB84.8 million in the same period of 2020 and a non-GAAP adjusted net income of RMB320.1 million in the second quarter of 2021, representing a sequential growth of 83.6%.

     

    Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, “In the third quarter, we continued to navigate through various market and regulatory dynamics, and achieved new highs in multiple operating and financial metrics. Our total computing power sold set another record high to 6.7 million Thash/s in the quarter, while we are increasingly diversifying our global presence. Our expanded footprint is due to our proactive strategic shift to global markets, effective business development, and enhanced relationship with existing clients. Moreover, we have started to extend our collaboration with key clients to joint mining, get further involved in the industry value chain by leveraging our computing solution advantages. Meanwhile, in light of the ongoing IC supply disruptions, we remain steadfast in expanding our cooperation with suppliers and securing the stability of our supply chain. As an integral part of our strategy, we continued to bolster our innovative capabilities by adding elite talents to our R&D team. We will stay vigilant to both challenges and opportunities as we grow in this fast-developing space.”

     

    Mr. James Jin Cheng, Chief Financial Officer of Canaan, stated, “Despite various challenges in the third quarter, we achieved a strong quarter with topline result reaching a new high to RMB1,317.6 million. We also further improved our profit level, evidenced by a robust gross profit of RMB741.7 million, and a non-GAAP adjusted net income of RMB587.5 million. Underpinned by our excellent sales and market development, our improved cash position enables us to drive operation and buffer market volatilities. While we delivered an outstanding performance, we are also cognizant of potential risks, including price pressure and instability from the supply front, bitcoin price fluctuation, regulatory changes in different countries, etc. To preemptively mitigate these risks, we have enhanced our partnership with our suppliers, tapped into the mining business, and strategically advanced our business development in the global markets. With our extensive experience in the industry, efficient financial management, right strategies and effective execution, we are confident to overcome headwinds and generate long-term value for both the industry and our shareholders.”

     

    Third Quarter 2021 Financial Results

     

    Total net revenues in the third quarter of 2021 increased by 708.2% to RMB1,317.6 million (US$204.5 million) from RMB163.0 million in the same period of 2020, and up 21.8% compared to RMB1,081.8 million in the second quarter of 2021. The year-over-year and quarter-over-quarter increases were mainly due to the continuous increase in total computing power sold and average selling price per Thash/s.

     

    Cost of revenues in the third quarter of 2021 was RMB575.9 million (US$89.4 million), representing an increase of 219.9% from RMB180.0 million in the same period of 2020 and a decrease of 11.9% from RMB653.9 million in the second quarter of 2021. The year-over-year increase in cost of revenues was in line with revenue growth. The quarter-over-quarter decrease was attributable to bill-of-material (BOM) cost efficiency with the improved product yield rate.

     

    Gross profit in the third quarter of 2021 was RMB741.7 million (US$115.1 million) compared to a gross loss of RMB17.0 million in the same period of 2020 and a gross profit of RMB427.9 million in the second quarter of 2021, representing a sequential increase of 73.3%.

     

    Total operating expenses in the third quarter of 2021 were RMB278.4 million (US$43.2 million), representing an increase of 267.0% from RMB75.9 million in the same period of 2020 and an increase of 6.1% from RMB262.4 million in the second quarter of 2021.

     

    Research and development expenses in the third quarter of 2021 were RMB92.8 million (US$14.4 million), representing an increase of 188.8% from RMB32.1 million in the same period of 2020 and an increase of 32.7% from RMB69.9 million in the second quarter of 2021. The increase was primarily attributable to the increased staff costs in technology-related departments as well as the incremental development costs for new products. Research and development expenses in the third quarter of 2021 also included share-based compensation expenses of RMB25.9 million (US$4.0 million).

     

    Sales and marketing expenses in the third quarter of 2021 were RMB37.6 million (US$5.8 million), representing an increase of 1,081.9% from RMB3.2 million in the same period of 2020 and an increase of 45.4% from RMB25.9 million in the second quarter of 2021. The increase was mainly attributable to the increased staff costs. Sales and marketing expenses in the third quarter of 2021 also included share-based compensation expenses of RMB1.2 million (US$0.2 million).

     

    General and administrative expenses in the third quarter of 2021 were RMB148.1 million (US$23.0 million), representing an increase of 265.0% from RMB40.6 million in the same period of 2020 and a decrease of 11.2% from RMB166.6 million in the second quarter of 2021. The increase over the same period of 2020 was mainly due to the staff cost and professional service fees. The decrease compared to the second quarter of 2021 was mainly driven by the lower share-based compensation expenses recognized during the third quarter of 2021, which was partially offset by the increased staff costs and professional service fees. General and administrative expenses in the third quarter of 2021 also included share-based compensation expenses of RMB93.2 million (US$14.5 million).

     

    Income from operations in the third quarter of 2021 was RMB463.3 million (US$71.9 million), compared to a loss from operations of RMB92.9 million in the same period of 2020 and income from operations of RMB165.5 million in the second quarter of 2021, representing a sequential increase of 179.9%.

     

    Net income attributable to ordinary shareholders in the third quarter of 2021 was RMB467.2 million (US$72.5 million), compared to a net loss of RMB86.4 million in the same period of 2020 and a net income of RMB167.3 million in the second quarter of 2021, representing a sequential increase of 179.3%.

     

    Non-GAAP adjusted net income in the third quarter of 2021 was RMB587.5 million (US$91.2 million), compared to a non-GAAP adjusted net loss of RMB84.8 million in the same period of 2020 and a non-GAAP adjusted net income of RMB320.1 million in the second quarter of 2021, representing a sequential increase of 83.6%. Non-GAAP adjusted net (loss)/income excludes share-based compensation expenses. For further information, please refer to “Use of Non-GAAP Financial Measures” in this press release.

     

    Foreign currency translation adjustment, net of nil tax, was a gain of RMB5.1 million (US$0.8 million), compared with a loss of RMB15.4 million in the same period of 2020 and a loss of RMB10.2 million in the second quarter of 2021, due to the US dollar appreciation against the Renminbi during the third quarter of 2021.

     

    Basic net earnings per American depositary share (“ADS”) in the third quarter of 2021 was RMB2.68 (US$0.42). In comparison, basic net loss per ADS in the same period of 2020 was RMB0.55, while basic net earnings per ADS in the second quarter of 2021 was RMB0.99. Each ADS represents 15 of the Company’s Class A ordinary shares.

     

    Diluted net earnings per ADS in the third quarter of 2021 was RMB2.64 (US$0.41). In comparison, diluted net loss per ADS in the same period of 2020 was RMB0.55, while diluted net earnings per ADS in the second quarter of 2021 was RMB0.96. Each ADS represents 15 of the Company’s Class A ordinary shares.

     

    As of September 30, 2021, the carrying value of cryptocurrencies held by the Company was RMB6.1 million (US$0.9 million).

     

    Contract liabilities as of September 30, 2021, were RMB1,026.7 million (US$159.3 million), increasing from RMB430.4 million as of December 31, 2020, mainly due to the increased down payments for the sales orders of Bitcoin mining machines to be delivered in the coming quarters.

     

    As of September 30, 2021, the Company had cash and cash equivalents of 1,698.5 million (US$263.6 million), up 334.0% compared to RMB391.3 million as of December 31, 2020.

     

    Shares Outstanding

     

    As of September 30, 2021, the Company had a total of 157,945,733 ADSs, each representing 15 Class A ordinary shares.

     

    Recent Developments

     

    The Company’s Share Repurchase Update

     

    On September 20, 2021, the Company announced that its board of directors has authorized a share repurchase program under which the Company may repurchase up to US$20 million worth of its outstanding ADSs, each representing 15 Class A ordinary shares, and/or (ii) Class A ordinary shares over the next 12 months starting from September 20, 2021.

     

    As of November 12, 2021, the Company has deployed approximately US$4.6 million to repurchase approximately 0.6 million ADSs under the Company’s existing share repurchase program.

     

    Business Outlook

     

    For the fourth quarter of 2021, the Company expects total revenues to have a sequential increase of 35% to 50%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

     

    Conference Call Information

     

    The Company’s management team will hold a Direct Event conference call on November 16, 2021, at 7:00 A.M. Eastern Time (or 8:00 P.M. Beijing Time on the same day) to discuss the financial results. Details for the conference call are as follows:

     

    Event Title: Canaan Inc. Third Quarter 2021 Earnings Conference Call

    Registration Link: http://apac.directeventreg.com/registration/event/2827548

     

    All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of participant dial-in numbers, the Direct Event passcode, and a unique access PIN, which can be used to join the conference call.

     

    A replay of the conference call will be accessible through November 23, 2021, by dialing the following numbers:

     

    International: +61-2-8199-0299
    United States: +1-646-254-3697
    Hong Kong, China: +852-3051-2780
    Replay PIN: 2827548

     

    A live and archived webcast of the conference call will also be available at the Company’s investor relations website at investor.canaan-creative.com.

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