Canaan (CAN) Q2 2026 earnings call transcript

I will now hand the conference over to your speaker today, Gwen Lauber, investor relations for the company. Please go ahead, Gwen. Thank you operator. Hello everyone and welcome to our earnings conference call. Joining us today are our chairman and CEO Nangong Zhang and our CFO Jin James Zhang. Leah Wang, Vice President of Capital Markets and Corporate Development, and Shi Zhang, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter.

Our CFO will then provide details on the company's operating and financial results for the period before we open up the call for your questions. Before we begin, I would like to refer you to our Safe Harbor Statement in our earnings press release. Today's call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company.

These statements speak only as of today, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call, or webcast, except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 20F for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call, we will discuss both GAAP financial measures and certain non-GAAP financial measures, which we believe are useful as supplemental measures of the company's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, which is posted on the company's website.

With that, I will now turn the call over to our chairman and CEO, Mengong Zhang. Engie, please go ahead.

Thank you, Gwen. Hello, everyone. This is Engie, CEO of Canaan. Thank you for joining our earnings conference call today. James, our CFO, and I are here at our Singapore headquarters to share our financial results and recent business updates for the second quarter of 2026. Q2 2026 remained a difficult environment for the Bitcoin mining industry. In the first half of the quarter, income prices recovered from approximately $62,000 to $82,000 before declining sharply and reaching a period low of about $58,000 at the end of the quarter.

Due to the quarter, hash price fluctuated between 2.8 and 3.9 US cents per tera hash per second per day and remained at low levels. At the same time, in the U. S. , the capital markets and the traditional mining companies continue to shift more attention toward AI and HPC, localized armed conflicts in certain countries and regions, and tighter mining-related policies in China and elsewhere are factors that affected miners' investment willingness And the capacity. From the second half of the quarter onward, minor sales weakened noticeably and elevated industry inventory levels further intensified price competition.

During the quarter, the company generated total revenues of approximately 32 million US dollars, below our previous guidance range of 35 million US dollars to 45 million US dollars. We saw 2.5 extra hash per second of computing power, and our mining business produced 243 bitcoins. When we issued guidance in May, our demand outlook was primarily based on the market conditions in the first half of the quarter. We did not fully expect a later decline in demand and pricing.

In the second half of the quarter, Bitcoin prices fall quickly. The miner become more cautious about equipment purchases and high industry inventory levels increased price competition. These were the main reasons revenues came in below expectations. In response to the revenue decline, we further tightened our spending, strengthened cash flow, and liquidity management, and the continued organizational organization. As of quarter end, the company held 1,915 bitcoins and 3,952 ETH, bringing our digital assets treasury to another record high.

I will start with our mining machine business. As mining economics weakened, many miners delayed equipment purchases, and the average selling prices remained under pressure. During the quarter, we generated approximately $14 million in product revenue. In response to softened demand, we We are adjusting pricing more flexibility. At the same time, we again emphasize production based on actual sales. We control new production according to real orders and put more focus on inventory management, cash flow, and order quality.

For existing machines, we will evaluate whether to sell them to customers or deploy them in our online operations. based on cash collection, deployment conditions, and additional investment required. Now let me turn to our mining operations. In Q2, we adjusted our deployed hash rate in a timely manner based on power prices, load management, and operating conditions at different sites. We allocated resources to projects with better economics. Mining revenues was approximately $80 million, according for more than 50% of the company's total revenue in Q2, and continued to cover direct operating costs such as power and hosting.

As of the end of June, our installed The total hash rate in non-GV projects was approximately 10.05 X hash per second, and average owing power cost in June was about 4.3 cents US dollar per kilowatt hour. The total power and hosting costs remain relatively competitive. Project ABC remains one of our key priorities. For Project ABC, we focus not only on current period profit, but more importantly on the cash it can generate and long-term returns that can be created after optimization.

This consists of the transformation the company is pursuing. Whether it is project ABC or the longer term power resources we are developing, our goal is to gradually build mining and energy infrastructure assets that have a cost advantage and can generate sustainable cash flow. In Q2, together with our partner, we continued the mining machine upgrade at Project ABC. The project generated positive cash flow and maintained efficient operations. At the end of July, installed half rate at Project ABC reached 4.85 hectares per second, Second, up 10% from the end of March.

Through this project, while increasing heart rate and cash generation, we also gained experience in operations, power dispatch, fleet upgrades, and the management of low-cost power resources. Beyond traditional mining use cases, we continue to advance energy utilization partnerships. Such as compute to heat. Our earlier Nordic project has already validated the feasibility of using hydro-cooled equipment for district heating. Our high temperature hydro-cooled equipment can supply the hot water needed for heating, which is particularly suitable for winter heating demand.

These projects are still relatively small in scale, but using the heat generated from computing for comfort heating is useful explanation of compute to heat a closed loop. Regarding R&D and the products, we continued advancing the A16 series in the second quarter with a The focus on cost-effective air-cooled models and high-temperature hydro-cooled models. We pay close attention to products full lifecycle economics, including purchase cost, power consumption, stability, maintenance, and deployment efficiency.

On the consumer side, the second quarter was mainly devoted to R&D on new Avalon home products, which we will prepare for mass production in the third quarter. These home series products are designed for home heating use cases, and we hope to capitalize on the winter heating season in the northern hemisphere and deliver a solid sales performance. Long-term power resources remain another key focus of the company's transformation. Over the past several quarters, we have been advancing long-term, stable, cost-advanced, and expandable power resources projects in North America.

On our first quarter 2025 earnings call, we mentioned our confidence in our ability to secure substantial load by year-end 2026, potentially reaching the gigawatt scale. Based on the progress we have made so far, our confidence in securing gigawatts scale load by the end of 2026 remains intent. We continue to work with all the stakeholders and hope to provide an update when we are in a position to do so.

Finally, let me discuss capital allocation. Since the beginning of the second quarter to date, the company has not utilized the ATM program or raised capital. Under the existing 30 million share purchase authorization, we recently mentioned a portion of our digital assets and they used to proceed to repurchase the company's ADS. We believe that the current share price meaningfully undervalues the company while retaining the capital needed for operations and project environment. We chose to use a portion of our digital assets for buybacks.

We deployed around $2 million in the first quarter and around $5.4 million in August to repurchase our AGS shares. In 2026, the company deployed 7.4 million US dollars and we purchased approximately 16.4 million ADS so far. James will provide more details on the execution of digital assets monetization and the backpack. James and I also continue to purchase the companies ATS in the open market this quarter. We remain confident in companies long-term development and the transformation anyway.

And we hope these purchases further align management interest with those of our shareholders. Digital assets remain an important part of the company's asset allocation. We will continue to evaluate the risks and the rewards of holding digital assets, investing in mining and power infrastructure, and repurchasing the company's shares. While meeting our operating and liquidity needs, we will choose the uses of capital that we believe can create the best long-term value per share.

Finally, during this quarter, the company completed its transfer to NASDAQ capital market and have been granted an additional 180-day grace period We will continue to regain compliance with the minimum bid price requirement. With a deadline of January 11, 2027, we will continue to monitor the trading price of our ADS and take necessary actions to regain compliance and maintain the company's listing status.

Despite the significant impact of industry volatility on our second quarter financial results changes in the macro environment have actually strengthened our conviction in Bitcoin as a decentralized financial asset In response to market changes we manage the inventory expenses and cash flow more strictly while continuing to organize our mining fleet advanced fleet upper grades at Project ABC, explore compute to heat applications and prepare Avalon home products for mass production. Work on our resources also continued. In addition, we monetized a portion of our digital assets to fund share repurchases.

We believe we have come through the most difficult period and were able to sell these dishes assets at relatively favorable prices. Looking ahead to the third quarter, although Bitcoin price recovered somewhat at the end of August, minor procurement remains cautious. And the industry inventory still needs to be digested. Some competitors have adopted a more aggressive pricing strategy to speed up cash collectors. And we expect minor sales and average selling prices to remain under pressure in the third quarter.

Therefore, we remain cautious about the near-term mining machine market. Based on the current market and operating conditions, we expect total revenues for the third quarter of 2026 to be between $11 million and $15 million. This outlook reflects measurements current judgment, and actual results may differ due to changes in macroeconomic conditions, policies, bitcoin prices, and industry demand. That concludes my remarks. Thank you. I will now turn the call over our CFO, James.

Thank you, Angie. Hello everyone. This is James speaking to you from our Singapore headquarters. Angie just walked you through the market environment and our business progress during the second quarter. To summarize, in the second half of the quarter, Bitcoin prices and hash price weakened again. Miners became more cautious with equipment purchases. And the elevated industry inventory added further pressure on pricing. This pressure directly impacted our financial results. Computing power sold, average selling price, and revenue all declined, while lower market prices also affected the value of our inventory and fixed assets.

In this environment, we are not waiting for the market to turn. We are focusing on what we can control. From a financial perspective, we are focused on three things. First, managing cash and maintaining sufficient liquidity.

Second, actively allocating capital, including repurchasing our shares when we believe they are significantly undervalued. And third, managing and optimizing our strategic assets so they can generate stronger cash returns over time. Let me go through each of these areas.

First, the cash. At market conditions weakened, we tightened our expense and inventory management and placed even greater emphasis on cash flow. At the end of the second quarter, we had $66 million in cash, up about $23 million from $43 million at the end of the first quarter. So, despite generating less revenue during the quarter, our cash position improved. During the quarter, we collected $54 million in cash from product sales. In the past, we also received $15 million from value added tax refunds, cash distributions from equity investments, and Bitcoin backed financing.

On the cash outflow side, we used $35 million for operating expenses and working capital, and another $11 million for waiver purchases. We also continued to exercise discipline on expenses. Total operating expenses were $40 million in the second quarter, including $9.2 million of impairment charges on property, plant, and equipment, and $2.7 million of credit losses. Excluding these items, operating expenses were $28.2 million, down 9% sequentially and 14% year-over-year. This is consistent with the bill-to-order approach that NG discussed earlier, control new commitments, accelerate collections, manage inventory and working capital, and protect liquidity.

In a down cycle, we believe financial resilience itself is a competitive advantage. Second, capital allocation. At the end of the second quarter, we held 1,915 Bitcoin and 3,952 Ethereum. Based on their carrying value as of June 30, our digital assets holdings were worth $112 million. Digital assets remain an important part of our asset base, but we do not believe they should simply be held passively.

We continuously compare different uses of capital, holding digital assets, investing in mining and power infrastructure, We will be able to do a lot of work with the future and repurchasing our own shares. When our shares trade significantly below what we believe to be their long-term intrinsic value, we view share repurchases as an attractive use of capital. In late August, we were authorized by our board and sold all our Ethereum holdings and 54 Bitcoins, generating approximately $13.9 million in cash.

We used a portion of this proceeds to repurchase our shares. In the first half of 2026, we repurchased 2.8 million ADSs for about $2 million. In late August, we repurchased an additional 13.6 million ADSs for $5.4 million. Year-to-date, we have repurchased 16.4 million ADSs for a total consideration of $7.4 million.

Third, strategic assets, especially mining sites in the United States. NG discussed the operational recovery and Bitcoin miner upgrades at Project ABC. Let me add a few points from a financial perspective. During the second quarter, we've been upgrading the mining fleet at Project ABC to improve efficiency. We received $5.2 million in cash from Project ABC, including sales collections and cash distribution. As of August 31st, cumulative cash received had reached $8.4 million. We would like to thank our partner Wind HQ for the top tier management and the result of Project ABC.

Their long term commitment and shared vision give us confidence in the future of ABC. As part of this process, the retirement of older mining machines and the related accounting treatment resulted in a one time loss. As a result, we recognize approximately $4 million of equity investment losses for project ABC in the second quarter. There is an important distinction here between short-term accounting results and the long-term cash generating ability of the assets. We are not trying to preserve the book value of older equipment.

We are trying to improve asset quality and generate more computing power and better economics from the same energy resources. So for project ABC or other strategic assets, we look beyond the current period earnings. We are focused on the cash the asset can generate and the returns it can produce after optimization. This is also consistent with the broader transformation NG discussed earlier. Let me briefly add a few operating and financial metrics. Total revenue for the second quarter was approximately $32 million.

Product revenue was approximately $40 million. We sold 2.5 extra hash per second of computing power at an average selling price of $5.5 per terahash per second. Mining revenue was approximately $18 million with 243 Bitcoin mined during the quarter. Mining accounted for 55% of total revenue, excluding depreciation, the gross margin for the mining business was 20%. These numbers also showed that during a weak market for mining machines, our mining operations have become an important contributor to revenue.

Over time, we want to build a business that combines technology and mining machines, bitcoin mining, power resources, and infrastructure. Next, let me briefly discuss our income statement. Adjusted EBITDA was a loss of $74.9 million in the second quarter, broadly in line with the previous quarter. Our results included several significant non-cash accounting adjustments, primarily inventory write-downs, impairment of property, plant, and equipment, and fair value losses on digital assets. These items reflect changes in the mining machine market and digital assets prices during the quarter, but they did not result in an equivalent amount of cash outflow.

So, when we're looking at the quarter, I think it is useful to separate three things. First, the real operating impact of weaker demand and lower pricing. Second, the accounting impact from inventory fixed assets, digital assets, and investments, a significant portion of which was non-cash. And third, what we are particularly focused on today, cash flow, liquidity, capital allocation, efficiency, and the ability of our assets to generate cash returns.

Finally, turning to the third quarter, as NG mentioned, although Bitcoin prices have recovered recently, miners remain cautious, industry inventory still needs to be absorbed, and mining machine pricing remains under pressure. As a result, we remain cautious about the near-term market environment. Based on our current market and operating conditions, we expect the total The overall revenue for the third quarter of 2026 to be between $11 million and $15 million. This outlook reflects our current assessment of market and operating conditions.

Actual results may vary depending on changes in the microeconomic environment, policy development, Bitcoin prices, and industry demand. Let me close with three words that summarize our financial priorities today. First, cash, value, and assets.

First, manage cash, maintain financial discipline and liquidity so that we can navigate through the cycle. Second, manage value, continue to compare different capital allocation opportunities. While we believe our shares are significantly undervalued, we are prepared to repurchase them to create value for long-term shareholders.

Third, manage assets. Whether it is our digital assets or project ABC or the mining and energy infrastructures we are developing, our goal is not simply to own assets. Our goal is to make those assets more efficient, generate cash, and create long-term returns. We will not build our strategy around predicting short-term movements in the price of Bitcoin. What we can do is maintain financial discipline during the difficult market, improve capital allocation, and continuously upgrade the quality of our assets.

So when the next industry cycle comes, we want Canaan to have stronger balance sheets, higher Thank you. We will now open the call for questions.

Thank you, I will take this one. We are currently advancing several power resources projects internally. However, securing and developing power resources involve many steps, and it's become more and more complex. The market attention and the competition are both very high now. Even for the projects that are moving the fastest, currently there are still key matters that need to be completed. So as a management team of a public company, we need to be very, very careful about when we disclose project details.

If we disclose too early it may affect project execution It may also cause the market to view an ongoing process as a confirmed outcome So for the benefit for the company and our shareholders we do not think this is appropriate It is appropriate at this stage to declose the exact number and the location of the site The power capacity for each project or specific stage of each project.

What we can say is our view from the Q4 2024-5 earnings call earlier this year, based on the progress we have made so far, our confidence in securing gigawatt scale power resources by the end of the year. This year remains unchanged. We will continue working with the relevant parties and provide updates to the market when we are able to share more specific information. And about the collocation or the GPU cloud rental, I think it's still too early to decide whether we will focus on collocation or GPU cloud rental.

You know, there's many, many steps between even between we secure the power resources and providing computing services. So for a As we have a project of meaningful scale, we normally need different parties to work together, many different parties, including capital providers, engineering contractors, and other resources partners. Which parts can we participate in, and what type of partnership we will use will depend on the specific project. Our approach is to use the capabilities and resources we already have, participate where we can add value, and work with partners that bring complementary strengths.

We do not assume that we need to manage the entire chain from the power to computing services by ourselves, We will not make investments beyond our capabilities for capital capacity to adjust to build an end-to-end model. At this stage, our main focus is still on advancing long-term cost, advanced power resources. As the projects become clear, we will evaluate the most suitable business model and level for participation. So for now, we do not think it's appropriate to make a firm choice between these two rules.

Thank you.

Thank you. Yeah, I think our advantage first comes from the practical experience. We have built in Bitcoin mining over the past several years. Mining requires us to work with many types of power providers and to evaluate sites across different regions. The U. S. is a very large market and our local team has spent years visiting mining sites and advancing projects. Through this work, we have developed a better understanding of how power infrastructure works, the power conditions in different regions, and how to work with our local partners.

We have also built relevant resources and relationships. So, since late 2024, our strategy has gradually shifted from mainly adopting partnerships to increasing the amount of assets we own directly. We want to have more control over long-term power resources and the site operations. This direction has based on the needs of our own business and started before the markets brought a focus on AI and HPC. So as the market attention has moved more towards AI and HPC, we see strong continuity with our existing direction of funding long-term, stable, cost-advanced, and scalable power resources.

Our past experience, resources, and local relationships can continue to support us and give us a good starting point that we expand into this area. Of course, HPC has higher infrastructure requirements, so each project still needs to be evaluated and developed based on its actual use cases. So changing the markets also affect competition for power resources and project economics. We will also adjust our evaluation and execution of push as needed. We will continue to focus on long-term costs and investment returns.

Thank you.

With your internal mining fleet improving energy efficiency, can you tell us a percentage efficiency increase you should see by next year? I think you asked about the mining machine efficiency, right? Yeah. Yeah. Currently. Yeah. Yeah. I think the A15 older machines, we are at like for I think it's 15.8 to like 17.8. And next level is our A16. We have like a 12.8 joules per terahash to 16.8. It's already our cost effective models. So there are a huge advantage for the CANAan.

This is kind of machines. For our mining fleet, we have plans to deploy at least a part of the 60 machines to our mining fleet next year. So currently our OEM power cost was about 4.3 cents per hour, and still we have a positive cash contribution. For the next year, if you have reviewed the total network hash rate, I think it's declining for a few quarters already. So it's quite easy to calculate the income for mining projects.

And we assume we will upgrade a significant percent of our machines from the old one to the more advanced and also cost effective models next year. Yeah, I hope I answer your question. Thank you.

And then just on the power pipeline, are you still pursuing, looking for stranded power around the world? I guess if you could talk more about that development. I think Kevin, we are actively, we always actively exploring and evaluating strand data Power trying to seek for opportunities, but of course from different perspective it takes quite a long time to evaluate the opportunities. And it's not easy to find the partners like Cypher Mining, Cypher Digital, or Wing HQ.

Those partners in project ABC, they supported us. They do good deals with us in a transparent way, in a fair way. It's not easy every time we can find this kind of good partners. So what we do is we mainly look at the long-term power cost, site stability, expansion, potential, and agreed access, and the local policies and the regulatory conditions. We will also try to evaluate the best use for each site, including mining, and where it is suitable potential HPC applications.

Together with the additional equipment and the investment required. So currently we stay open-minded while maintaining our capital discipline. No matter through acquisition, through JV, or joint development, we will only move forward when the risk and the return are attractive And the project can improve the quality of our long-term assets and operating flexibility. So I should say currently we haven't yet to deal another one just like project ABC. But we do have some projects under discussion. We continue the strategy of expanding in North America, especially United States.

I think this strategy remains the same. We will do more, but we do it cautiously, slowly with all kinds of evaluations done, but not immediately jump to many deals. And I think the capital allocation is also in a kind of very cautious way. Canaan, I don't know if I answer your question.

Global demand. Global demand, yeah. Yeah, global demand, to be frank, from its vision. Mining rig demand outside the US is also very, very weak at the moment. Weaker mining economics together with the policy developments and the geopolitical conditions in some regions have affected customers' willingness and ability to invest. We have not yet seen meaningful improvements in overall demand. One specific area of progress we can share is ESG-related applications, particularly computer-heat. Our no-date heating projects already have two megawatts of equipment in operation, and the customer ordered another six megawatts in March this year.

These projects combined with mining with real heating demand, so the same energy input produce both computing power and the usable heat. We will continue to develop this kind of applications. But the market is still at an early age, and then a small scale. So this does not yet indicate that broader recovery in demand outside the U. S. Thank you.

And I think you guys mentioned some product development there that could help potential winter seasonality. So if you could just talk a little bit more about that. Yeah. Yeah, Avro Home is a consumer product line that we have committed to developing. In Q2, it generates approximately $1 million in revenue. So it is still relatively small. I think the long-term value lies on serving household users by combining computing and heating, which can broaden our customer base and revenue resources over time.

After the heating season ended, sales of our home products came down. At first, I was a little disappointed, but But then we realized that this may actually show that consumers are really using these products as a heating device. After all, it's not very easy to sell heaters in summer. So it reminds us that we need to understand the use cases and the seasonality of this kind of business as a true consumer product business. So we began preparing new products for this year, kicking season in Q2 and in Q3.

Currently we are working on preparations for mass production which plans to launch new products and updates during the Christmas shopping season. So most of our key product line will receive updates and we may also introduce additional products. At the same time, we will focus on sales channels, sales service, and the user community. Continue to improve the noise levels easy for use and many different kinds of stuff related to the consumer products We hope Avalon Home will grow its revenue and contribute to the company and become a consumer business with lasting value.

I think it is still too early to give specific revenue mix targets. It shares total revenue will also depend on heating seasonality and changes in our other business. But for now, the priority to get the product experience and the business fundamentals right. So growth is supported by real household demand. I hope I ask your question. Thank you.

Thank you, Bill. I think you asked a very forward-looking question about the future stock repurchase. Currently, I think it's difficult to answer because in September we will see a lot of activities in the United States, especially on September 15. The Senator will start to vote for Clarity Act. We don't know if it's passed, then what will happen to our industry that could make the Bitcoin price jump very high. And also our share price could fluctuate together with the Bitcoin price.

So it's depending on what kind of a share price we were traded in the market and it depends on how we consider it's better to do some allocation to do stock repurchase. So it's difficult to predict the pace. But to be very honest, as the CEO and I myself, we have already purchased to get more shares of the company. We do have strong confidence that in the second half our share price should come back again with some good trajectory and even we are currently under the restriction of NASDAQ compliance requirement.

So we better to regain compliance very soon. So that's why we consider stock repurchase is something we need to put a lot of efforts trying to make sure we do and we allocate funds to do. And that's why we discussed with our board and we got the authorization from them and say management can start to sell the digital assets to generate cash and to repurchase. I think our board understands the shareholder value quite well. They support us to do this and we are together with our shareholders and we are the shareholders.

So we will do everything we can to do, but not within September the particular month, but through the whole second half year or even future. So I think that's our commitment. That's my answer.

Thank you, Bill.

If there's a rough timeline you can provide. Thanks so much. Yeah, I think we have been actively exploring and evaluating this type of opportunity. But you know, if the power cost, we need the power cost, stability, scalability, and the grid access are suitable. We can use mining as flexible load to boost the resources to work relatively quickly. So if the site conditions allow, we can also have the flexibility for other competing loans in the future.

So yeah, our approach is stay open-minded and while maintaining capital discipline, whether Whether through acquisition, GV or joint development, we will only forward when the risk and returns are attractive and the project can improve the quality of our long-term assets and operating flexibility. We do have very good machine, even maybe still at the wafer level, but we can manufacture We have to deploy the machines in a relatively short time to deploy them into new sites if we find somewhere it can fulfill our requirements.

But currently I think it's still at some stage of a bear market. It's not a bull market, right? So investment is very, very – we will have very high cost in investment and consumer cash flow to do this kind of project. So currently we are still evaluating the resources and waiting for the best timing to get the scale-up of our management fees, including upgrade machines. Thank you. I hope I answered your question.

And firstly, on potential JV partners, what type of companies are you engaging with today? And are prospective AI customers already involved in integrating these sites? Additionally, what requirements are they emphasizing, and would you expect to secure customer commitment before making a significant development investment? Yeah, we are open to using GVs or management partners from securing power resources to building infrastructure and finally providing computing services. Different stages require different capabilities and have so. So for each project we will choose a structure that allows all parties to contribute their stresses.

Canaan has always valued working with partners. Our past joint mining projects as well as Project ABC with WindHQ have given us useful experience. At Project ABC, we combine our mining machine and the technology companies with our partner's side operations and power management experience. Together we are upgrading out the fleet and improve the project's catch ratings. This experience can also support future partnerships. I think since late 2024, we have gradually increased the amount of assets we own directly, but this does not mean that we need to do everything by ourselves.

So we want to have more control over core assets and the long-term resources. While we are working with partners that can bring complementary and competitive activities and the resources. So for future projects, we will not limit ourselves to advance to a GV, grant development or any other structure is acceptable. So we will focus on how investment and responsibilities are shared. So whether the risk Canaan takes, it matches by the return we can earn. Our final decision will always be based on the long-term shareholders' interest and the value per share.

But currently, we do not have any specific partnership agreements that we can disclose. Thank you.

And then lastly, if I may, more strategically, how should we think about the allocation of capital and management resources between pursuing the AI-powered land opportunity and then the core Bitcoin mining business? I think for currently, we have already invested in the Bitcoin mining machines We already have them in our inventory or our partner's inventory. So when we have the clear opportunities to deploy the many machines to have good cash returns in the future, then we will do it.

For the data center, I just mentioned we are very open to do any kind of partnerships with third parties, with any kind of companies that can contribute their benefits to the project. To be clear, we are not going to do the end-to-end projects by ourselves because I think to develop a meaningful scale of HPC, AI HPC data center needs a lot of capitals which may be out of I think overall our first priority is the interest of our shareholders.

What kind of benefits we can get for every share is the most important part.

I would like to add some color in this. As NG mentioned, we do have the inventory of mining machines now. So when we do some new mining corporations, this can be injected to the project as a kind of capex investment and without spending any cash. So for the new HPC data center or this kind of power infrastructure thing, sometimes we have to use some cash as a deposit to secure some opportunities. That's something we do. We spend some of the money.

We allocate some of the money as deposit to secure some of the opportunities. That's what we are doing now. I think from long-term perspective we will continue to balance between the different business and we will utilize our technology in mining machine side and do mining operations. And on the other side, I think step by step, we start from initial capital in a kind of smaller scale. But in future, with pipelines, with different projects on air, and we will see step by step, we accumulate more and more assets.

And with this asset, we can use this asset as collateral to leverage to get more funds to sponsor the business in the data center part. I think that that's something in future step by step we will reach there. But first of all, we should try to secure gigawatts level power. And with this on hand, and then we can start to talk about the next step. As NG mentioned, we do have the long-term ambition, but in short term, we will not just immediately try to do everything in the ecosystem.

We will do it step by step and gradually grow ourselves. Thank you.

Thank you, everyone, for joining us today. If you have any further questions, please feel free to reach out to us directly or through the contact information on our website. Thanks.