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    Canaan Inc. Reports Unaudited Third Quarter 2020 Financial Results
    publish date 2020-12-01

    Canaan Inc. (NASDAQ: CAN) (“Canaan” or the “Company”), a leading high-performance computing solutions provider, today announced its unaudited financial results for the three months ended September 30, 2020.

     

    Third Quarter 2020 Operating and Financial Highlights

     

    Total computing power sold in the third quarter of 2020 was 2.9 million Thash/s, representing a year-over-year decrease of 20.7% from 3.7 million Thash/s in the same period of 2019 and a quarter-over-quarter increase of 13.4% from 2.6 million Thash/s in the second quarter of 2020.

    Total net revenues in the third quarter of 2020 was RMB163.0 million (US$24.0 million), representing a year-over-year decrease of 75.7% from RMB670.6 million in the same period of 2019 and a quarter-over-quarter decrease of 8.5% from RMB178.1 million in the second quarter of 2020.

    Gross loss in the third quarter of 2020 was RMB17.0 million (US$2.5 million) compared to gross profit of RMB146.2 million in the same period of 2019 and gross profit of RMB43.3 million in the second quarter of 2020.

    Net loss in the third quarter of 2020 was RMB86.4 million (US$12.7 million) compared to net income of RMB94.6 million in the same period of 2019 and net loss of RMB16.8 million in the second quarter of 2020.

    Non-GAAP adjusted net loss in the third quarter of 2020 was RMB84.8 million (US$12.5 million) compared to Non-GAAP adjusted net income of RMB96.2 million in the same period of 2019 and Non-GAAP adjusted net loss of RMB16.0 million in the second quarter of 2020.

     

    Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, “During the third quarter of 2020, we remained undeterred by the pandemic to strengthen our research and development capabilities, expand our AI business, and execute new business initiatives. By leveraging our enhanced R&D capabilities in the third quarter, we launched our A1246 product series, which continues to lead the industry with its energy efficiency, computing power, and unit cost. In addition, we have also accelerated the monetization of our AI business through our partnerships with a number of companies in various industries, such as online education and smart city solutions. In the third quarter of 2020, for example, we implemented our K210 AI chips in hardware sensors from our partner to better ensure the proper execution of social distancing practices in response to the outbreak of COVID-19. With new generations of mining machines and AI chips in the pipeline, we are confident that the enhanced performance of our new products will continue to bolster our competitive advantages and solidify our market leadership going forward.”

     

    Mr. Quanfu Hong, Chief Financial Officer of Canaan, stated, “The pandemic and resulting macroeconomic uncertainties continued to impact the production capacity of the global IC industry in the third quarter of 2020. However, the demand for mining machines in the market continued to rebound during the third quarter, and we have received a large number of pre-sale orders which are scheduled for delivery starting in the fourth quarter of 2020. Looking ahead, we remain committed to investing in areas that will further strengthen our collaboration with established IC manufacturers, enhance our inventory management, streamline our research and development initiatives, and generate lasting value for our shareholders.”

     

    Third Quarter 2020 Financial Results

     

    Total net revenues in the third quarter of 2020 was RMB163.0 million (US$24.0 million), representing a 75.7% year-over-year decrease from RMB670.6 million in the same period of 2019 and a 8.5% quarter-over-quarter decrease from RMB178.1 million in the second quarter of 2020. The year-over-year decrease was mainly due to the decreases in total computing power sold and average selling price per Thash/s. The quarter-over-quarter decrease was mainly due to the decrease in average selling price per Thash/s.

     

    Cost of revenues in the third quarter of 2020 was RMB180.0 million (US$26.5 million) compared to RMB524.4 million in the same period of 2019 and RMB134.8 million in the second quarter of 2020. The year-over-year decrease was in line with the changes in the Company’s sales volume of Thash and cost per Thash. The quarter-over-quarter increase was mainly due to an inventory write-down of RMB44.9 million (US$6.6 million) and the increase in sales volume.

     

    Gross loss in the third quarter of 2020 was RMB17.0 million (US$2.5 million) compared to gross profit of RMB146.2 million in the same period of 2019 and gross profit of RMB43.3 million in the second quarter of 2020.

     

    Total operating expenses in the third quarter of 2020 was RMB75.9 million (US$11.2 million), representing a year-over-year increase of 4.4% from RMB72.7 million in the same period of 2019 and a quarter-over-quarter increase of 22.0% from RMB62.2 million in the second quarter of 2020.

     

    Research and development expenses in the third quarter of 2020 were RMB32.1 million (US$4.7 million), representing a year-over-year decrease of 15.8% from RMB38.1 million in the same period of 2019 and a quarter-over-quarter increase of 23.2% from RMB26.1 million in the second quarter of 2020. The year-over-year decrease and quarter-over-quarter increase were mainly due to the changes in materials that the Company used for research and development purposes. As a percentage of total net revenues, research and development expenses in the third quarter of 2020 increased to 19.7% from 5.7% in the same period of 2019 and from 14.6% in the second quarter of 2020.

     

    Selling and marketing expenses in the third quarter of 2020 were RMB3.2 million (US$0.5 million), representing a year-over-year decrease of 49.4% from RMB6.3 million in the same period of 2019 and a quarter-over-quarter decrease of 51.2% from RMB6.5 million in the second quarter of 2020. The decreases were mainly due to the decreased salaries of the staff in the Company’s sales and marketing departments. As a percentage of total net revenues, sales and marketing expenses in the third quarter of 2020 was 2.0% compared to 0.9% in the same period of 2019 and 3.7% in the second quarter of 2020.

     

    General and administrative expenses in the third quarter of 2020 were RMB40.6 million (US$6.0 million) compared to RMB28.2 million in the same period of 2019 and RMB29.6 million in the second quarter of 2020. The increases were mainly due to the increases in salary, professional service charges, and other daily administrative expenses. As a percentage of total net revenues, general and administrative expenses in the third quarter of 2020 was 24.9% compared to 4.2% in the same period of 2019 and 16.6% in the second quarter of 2020.

     

    Loss from operations in the third quarter of 2020 was RMB92.9 million (US$13.7 million) compared to income from operations of RMB73.5 million in the same period of 2019 and loss from operations of RMB18.9 million in the second quarter of 2020.

     

    Net loss attributable to ordinary shareholders in the third quarter of 2020 was RMB86.4 million (US$12.7 million) compared to net income attributable to ordinary shareholders of RMB94.6 million in the same period of 2019 and net loss attributable to ordinary shareholders of RMB16.8 million in the second quarter of 2020.

     

    Non-GAAP adjusted net loss in the third quarter of 2020 was RMB84.8 million (US$12.5 million) compared to non-GAAP adjusted net income of RMB96.2 million in the same period of 2019 and non-GAAP adjusted net loss of RMB16.0 million in the second quarter of 2020. Non-GAAP adjusted net loss excludes share-based compensation expense. For further information, please refer to “Use of Non-GAAP Financial Measures” in this release.

     

    Basic and diluted net loss per ADS in the third quarter of 2020 were both RMB0.55 (US$0.08). In comparison, basic and diluted net earnings per ADS in the same period of 2019 were both RMB0.65. Basic and diluted net loss per ADS in the second quarter of 2020 were both RMB0.11. Each ADS represents 15 of the Company’s Class A ordinary shares.

     

    As of September 30, 2020, the Company had cash and cash equivalents of RMB177.4 million (US$26.1 million) compared to RMB516.6 million as of December 31, 2019. The decrease was mainly due to higher short-term investments as the Company had invested RMB204.6 million (US$30.1 million) in short-term investments as of September 30, 2020, compared with RMB11.0 million in short-term investments as of December 31, 2019. The company purchased short-term financial products to receive higher returns but at the same time can withdraw at any time.

     

    Business Outlook

     

    Due to the continued uncertainty from the rapidly changing global environment related to the COVID-19 pandemic and the corresponding economic downturn, the Company will not issue any financial guidance in the near term.

     

    About Canaan Inc.

     

    Established in 2013, Canaan Inc. provides high-performance computing solutions to efficiently solve complex problems. In 2016, Canaan successfully initiated the production of its first 16nm chip and passed the test to receive China’s national high-tech enterprise certification. In 2018, Canaan achieved major technological breakthroughs to launch the K210, the world’s first-ever RISC-V-based edge artificial intelligence (AI) chip, which is now widely used for access control in situations such as smart door locks and more. Canaan Inc. is currently focused on the research and development of advanced technology, including such areas as AI chips, AI algorithms, AI architectures, system on a chip (SoC) integration and chip integration. Using the AI chip as its base, Canaan Inc. has established an intellectual value chain. Canaan Inc. also provides a suite of AI service solutions and is able to tailor these solutions to the needs of its partners. For more information, please visit: investor.canaan-creative.com.

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