On November 30th, the first share of mining machinesCanaan Technology (NASDAQ: CAN)Published the financial report for the third quarter of 2020.
The report shows:
Total revenue for the quarter was 163 million yuan, down 8.5% from the second quarter;
A net loss of RMB 86.4 million for the quarter, compared with a net loss of RMB 16.8 million in the second quarter of 2020;
The total computing power sold in the quarter was 2.9 million Thash/s, a quarter-on-quarter increase of 13.4%;
Research and development expenses in the quarter were 32.1 million yuan, an increase of 23.2% from the previous quarter.
Total operating expenses for the quarter were RMB 75.9 million, a year-on-year increase of 4.4% and a quarter-on-quarter increase of 22.0%.
Affected by this news, Canaans share price plunged more than 10% before the market, and fell as low as $4.9.
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(1) Highlights of Q3 financial report
The highlights of this financial report are as follows:
Total net revenue for the third quarter of 2020 was RMB 163 million (US$24 million), a decrease of 75.7% from the same period in 2019 and a decrease of 8.5% from the second quarter of 2020.
The year-on-year decrease was mainly due to the decrease in the total computing power sold and the average selling price per Thash/s; the quarter-on-quarter decrease was mainly due to the decrease in the average selling price per Thash/s.
Gross loss for the quarter was 17 million yuan (approximately US$2.5 million), compared with gross profit of 146.2 million yuan in the same period in 2019 and 43.3 million yuan in the second quarter of 2020.
Net loss for the quarter of 86.4 million yuan (US$12.7 million), compared with net income of 94.6 million yuan for the same period in 2019 and 16.8 million yuan for the second quarter of 2020; adjusted net loss of 84.8 million yuan ($12.5 million).
Total operating expenses for the quarter were RMB75.9 million (US$11.2 million), representing a year-over-year increase of 4.4% and a quarter-over-quarter increase of 22.0%.
Research and development expenses for the quarter were RMB 32.1 million (US$4.7 million), a decrease of 15.8% year-on-year from the same period in 2019 and an increase of 23.2% quarter-on-quarter. RD expenses as a percentage of revenue also increased to 19.7% from 14.6% in the previous quarter.
Sales and marketing expenses for the quarter were RMB 3.2 million (US$0.5 million), a decrease of 49.4% year-over-year from the same period in 2019 and a decrease of 51.2% quarter-on-quarter. The decrease was mainly due to lower salaries for employees in the companys sales and marketing departments.
Administrative expenses for the quarter were RMB 40.6 million (US$6.0 million), an increase of 43% year-over-year from the same period in 2019 and an increase of 37% quarter-on-quarter. The increase was primarily due to increases in salaries, professional service fees and other overhead.
As of September 30, 2020, Canaan had cash and cash equivalents of 177.4 million yuan, compared with 157 million yuan at the end of the second quarter, a quarter-on-quarter increase of 12.9%.
At the same time, Canaan said that as of September 30, the company has invested 204.6 million yuan in short-term investments. The company has purchased short-term financial products to obtain higher returns, but can withdraw at any time.
In terms of business, in terms of mining machine products, the company launched a series of products mainly A1246 in the third quarter. This series of products greatly optimized the computing power and energy efficiency ratio, and met the market demand for mining machines with large computing power and low energy efficiency ratio. In terms of AI, the company has cooperated with Verge Sense, a sensor hardware and SaaS company in the US office field, to develop hardware sensors for social safety distance detection and has achieved mass production. At the same time, the progress of the companys projects with DJI and UBTECH in STEAM educational robots and smart cities is also progressing rapidly.
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(2) Change of personnel of the board of directors
Since its listing in November 2019, Canaans stock price has been sluggish.
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according toScience and Technology Innovation Board DailyAccording to reports, in July this year, Hangzhou Jianan Yunzhi underwent industrial and commercial changes. The original directors Kong Jianping, Sun Qifeng, Li Jiaxuan, and supervisor Tu Songhua withdrew from the main staff, and Meng Lu was added as a supervisor. At the same time, Zhang Nangeng was changed from Chairman and General Manager to Executive Director and General Manager, and the corporate contact person was also changed from financial Zhang Jing to Zhang Ning.
A number of people familiar with the matter said that the above-mentioned changes in business information were caused by infighting in the management. Zhang Nangeng from the Beijing side was competing with the Hangzhou Gang for control.
In response to the change of business information, Kong Jianping, the former joint director of Canaan, said: The structure of our entire listed company (ie Canaan Technology) is in Cayman, not in China. Hangzhou Jianan Yunzhi Information Technology Co., Ltd. is also normal now.
At that time, the media speculated that Canaan Technology might become the second Bitmain.
August 3,Canaan TechnologyOfficially announced the change of the board of directors. The terms of the two directors Kong Jianping and Sun Qifeng expired on July 31, and the other three independent directors Zhang Hong, Yang Xiaohu and Luo Mei also expired on August 1. Directors will not continue to run for election to the Board of Directors. Moreover, Canaan Technology re-announced the appointment of four independent directors to the board of directors, namely Zhang Wenjun, Du Hongchao, Shu Zhitang and Zhang Yaping.
In response to rumors of infighting,Canaan TechnologyIt also responded on August 4 that the company does not have gangs. In terms of functions, Beijing is the RD and sales center, and Hangzhou undertakes part of the sales and after-sales service. In addition, in terms of business, the business planning of Canaan Technology in the later stage will still focus on the current two core businesses of mining machines and AI.
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(3) The stock price has soared 247% in the past month
Since its listing on NASDAQ in November 2019, Canaan’s stock price has not recorded positive quarterly growth for three consecutive quarters, as shown below:
However, since the third quarter, the stock price has shown signs of stabilization. In Q3, it fell by 1.06%, and finally ushered in a rebound in the fourth quarter. According to the data, Canaan’s share price has increased by 207% in the fourth quarter, especially in the past month, with a maximum increase of more than 247%; as of press time, Canaan’s share price was temporarily reported at US$5.75, a cumulative decline of 5.5% during the year. The issue price fell by 36.1%,
Why Canaans share price rebounded so quickly?
On the one hand, it is Canaan’s10 million yuan repurchase planIt worked, stabilizing and boosting stock prices. Under the plan, the company will repurchase up to $10 million worth of American Depositary Shares (ADS) and/or Class A ordinary shares within the next 12 months beginning September 22, 2020. Among them, each ADS represents 15 Class A ordinary shares. As of October 30, Canaan has completed the repurchase of 1.225 million shares, with a transaction amount of US$2.43 million.
The more important thing is naturally the surge of Bitcoin. Bitcoin has gradually been recognized by institutional investors, and its market value has hit a new high. It once exceeded 19,000 US dollars, approaching a historical high. As the first mining machine manufacturing stock, Canaan has also won the favor of capital .
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(Ebang International stock price change)
