Canaan Inc - ADR Aktie

Ladies and gentlemen, thank you for standing by, and welcome to Canaan's Inc.'s First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are our Chairman and CEO, Nangeng Zhang; and our CFO, James Jin Cheng, Leo Wang, Vice President of Capital Markets and Corporate Development; and Xi 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 20-F 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, Nangeng Zhang. NG, please go ahead.

Thank you, Gwyn. Hello, everyone. This is NG, CEO of Canaan. Thank you for joining our earnings conference call today. James, our CFO, and I am here at our Singapore headquarters to share our financial results and recent business updates for the first quarter of 2026. Q1 2026 was a very challenging quarter. Bitcoin prices dropped sharply from the height at the beginning of the year. and half price fell to very low levels. As a result, finance around the world became much more cautious with their investments.

After entering in the second quarter, the market saw some recovery, but the recovery has still been limited. At the same time, uncertainties related to the Middle East situation, energy prices, global equity and the policies continue to keep the industry contract environment. For us, our company going through a transition period, this kind of environment created a lot of pressure.

But today, I want to focus less on the gates we faced and more on what we did during the difficult times. I believe investors want to see whether we have strong execution, deplant operations and ability to navigate through market cycles.

In the first quarter, we completed several concrete tasks. First, we completed the final stage of production, delivery and revenue recognition for our large order from a leading North American customer while entering the market downturn with a relatively light inventory position.

Second, we continued expanding our mining business, which still generates positive cash contribution even under extremely low hard price conditions, while further increasing our digital asset treasury. Third, we completed the acquisition of ABC projects through a share exchange transaction, obtaining a 49% equity interest in 3 energies and operating mine site with low power cost invest taxes.

Fourth, we continue to advance in the R&D of 16 series and our next-generation products to prepare for the next mining equipment update cycle. Fifth, we continue shifting the company's strategic focus from a pure mining machine business towards energy computing infrastructure. Taken together, these actions show that during a difficult market environment, we did not simply wait for the market to recover instead, we actively strengthened our survivability, improve our asset quality and expanding our long-term strategic options.

In the quarter, we generated total revenues of USD 62.7 million, in line with our previous guidance range. As of the end of the quarter, we had 1,808 bitcoing and 30,952 Ethereum and our digital asset treasury reached another record high. In mining machine, industry demand was clearly under pressure in the first quarter. We sold 4.1 exahash per second of computing power is an average selling price of about 10.5 per terahash, generating USD 42.9 million in revenue.

Many customers delayed fortress due to low cash price and high market uncertainty and the market pricing also came under pressure. In this environment, we did not pursue short-term sale growth through aggressive inventory buildup or lower quality orders. Instead, we raised higher priority on inventory control, cash flow management and all quality. This also reflects the operating discipline.

We have emphasized over the past several quarters. In Q4 of 2025, we captured the market window and secure the large North American order with all the deliveries completed. In the first quarter of this year, we completed the final stage of execution through this -- the successful completion of this project. We further strengthened our brand reputation and customer base in the North American market. mining machine business may not be the hottest story in the capital market today, but it remains the formation of cane.

As long as the is network continues to operate and low-cost power resources continue to exist around the world. Manas will continue to need machines that are more efficient, more reliable and easy to deploy. Our job is to run the mining machine business with stronger discipline and stay closer to the real needs of our customers. In the fourth quarter, we continued advancing customized products and system-level solutions.

Recently, we expanded our collaboration with Tier by providing customized high-density tax for models for its next-generation emerging mining and unfit systems. This type of partnership shows that leading customers are shifting from pursuing single sand miners to see interpretive systems that are modular metal, gradable and adaptable to different operating scenarios.

For Ken, this is exactly where our long-term strength in ASIC demand system engineering, supply chain management and the global progress delivery can create value. In addition, as we announced earlier today, we sold approximately 8 megawatts of hydro crude equipment to Nordic citing service provider to produce high-grade hot water for the strip heating systems.

Projects like this show that mining machines are gradually expanding beyond pure mining use cases into broader energy utilization scenarios. The combination of computing power, heat recovery and the local energy infrastructure is also an area we will continue to explore going forward. In the consumer and SMB market, the main focus of having a home series in the first half year, has been channel expansion, customer reach and service system development.

Since the beginning of this year, Aram products have entered platforms, including Best by Canada's online channel and Amazon. The consumer market is very different from the industrial mining machine market. Customers are not only about half rate, but also about noise level, stability product design, easy for installation and after-sales stories. We are currently working on the product upgrades for the -- for several or home models and hope to lock them in the second half of this year.

We hope that better products, stronger sales channels and the year-end shopping season, together can help this business line contribute to higher core revenue. Now we move to our mining business. The mining environment in the first quarter was very challenging. In January, during the winter storm across North America.

We materially power down and hotel operations in the certain regions to prioritize electricity supply to local residents and the power grid. We want to be trusted and responsible partner with labor computing load for the grid rather than adding additional pressure during a period of great stress. More importantly, even under a low has price environment, our mining business continued to show strong competitiveness.

During the quarter, we generated 257 bitcoins in total and recognized $19.12 million in mining revenue. From a cash operating perspective, this business continued to contribute positive liquidity inflow to the company. By the end of the quarter, our global installed part reached 15%, up 66% year-over-year and 11% quarter-over-quarter.

Our operating base continue to expand. While our power and hosting costs remained relatively competitive. In April, our non-JV installed hash rate remained around 11 hash per second with an average all-in power cost of about $0.044 per pear. At the same time, ABC JV program also add 4.82 ex hash per second installed cap rate, and 120 megawatts of installed power capacity.

I believe these numbers show 1 important thing. The mining business still has value even during the low point of the cycle. It helped us to accumulate BDC and help us better understand the real operational needs and the pain points of minus. More importantly, it helped us to build real power consumption and operational capabilities. We continue to advancing energy and computing infrastructure future.

The most important development this quarter was the ABC project in late February, we acquired EBITDA interest in par and Simonton products in U.S., Texas from Cyber through a share exchange transaction together with 6,840 Avalon A15 pro mining machines. The biggest advantage of the ABC products is highly competitive power cost, which is below USD 0.03 per kilowatt hour.

Because of this cost advantage, the products maintained a strong profitability and a high uptime, even during a period of Bitcoin price volatility, which significantly improved over time. We have also been working closely with our partner, with HQ to steadily upgrade the mining fleet at a site.

At the end of April, the projects installed hash rate increased from about 4.4 exhash per second to 4.82 exhash per second. In addition, the JV program has potential for future power load expansion, and we are currently evaluating related opportunities. Overall, the AT products operate and their hybrid mining -- power model, combining wind power and a electricity is total installed capacity of 120 megawatts and power cost below us and U.S. do per kilowatt hour.

The projects currently have an in-store hash rate for approximately 4.82 per exhash second. We have maintained a strong long-term relationship with Cyber over the past years. The commission of the ABC Project transaction also reflects our ability to take over high-quality assets released during the doing CIOs business transaction. based on our longstanding cooperation, we believe high-quality power resources and the infrastructure accountabilities will become increasingly important competitive advanced advantages in the industry over the long term.

The completion of ABC projects only future strengthened our footprint in North America energy and infrastructure, but also response represent is an important step in advancing our long-term Energy+ computing infrastructure strategy. Following the transaction, Cyber also become -- became an important shareholder of Canaan, lining the foundation for deeper cooperation between the 2 parties in the future.

This product has very important meaning for us. First, these are low-cost power assets that are already energized already operating and already generating computing power in today's North American market assets with real operations are much more valuable than pipeline opportunities on paper. Second, program is concrete result of our energy strategy. In future, strengthens our access to low-cost power resources, mining operation experience, and the local partnership networks in the United States.

Third, it also provides us with stronger infrastructure commodities and greater strategic flexibilities after we continue to explore future AI and ATC opportunities. Regarding our energy pipeline, we have indeed made some meaningful and encouraging progress. However, as a responsible public company, we do not believe these developments have yet reached the closure milestones required for us to provide more specific details publicly.

So at this stage, I cannot share too much additional information. but I can reaffirm our site view high-quality power resources will become one of the most important barriers in future computing infrastructure. Our goal is to secure power infrastructure that is controllable, developable and available in regions that are compliant close to major customer markets large-in-scale capable for long-term grid connection and expandable over time.

The United States remains one of our most important markets. We hope that in the future, once project conditions become more mature and discoder requires are met. We will be able to provide the market with more concrete and substantial updates.

Now let me talk about our R&D and products. In the fourth quarter of last year, we officially launched the Avalon A16 XP. It delivers up to 300 terahash per second per machine with energy efficiency as well as 4.8 terahash per tons. During the first quarter, some customers received simple units and bigger testing.

Based on the feedback we have received so far, the A16 series has performed well in castrate stability, energy efficiency, noise control and deployment capability. We have also seen growing attention from the mining community and the third-party reviewers towards the A16 Series, which has been very encouraging for our team.

A16 Series will become the core of our future industrial mining machine product line. It is not only a performance upgrade but also represents our overall mobilities in system airing some more design formware, reliability and the cost control. Advanced semiconductor process are becoming increasingly expected and simply pursuing the voice oer Terahash does not always deliver the best returns on investment for customers.

We pay more attention to the products for life cycle economics for the -- for customers, including machine pricing, power costs. operational stability, maintenance costs, delivery certainty and risk deal value. because we have secured a part of our key product capacity early and have maintained the long-term cooperation with our foundry and supply chain partners. We are still able to move forward with A16 series mass production and the future product introductions in a more stable and cost-controlled way.

Even under the current environment where AI-related demand is competing for advanced semiconductor capacity. For our mining machine delivery, we leverage manufacturing capacity across Malaysia, the United States and Mainland China. This allow us to remain compliant while responding more flexibility to changes in the global trade environment and tariff policies. In -- particularly during the delivery of our large North American order, our manufacturing quality control and logistics teams worked closely together and successfully handled the pressure from concentrated shipments and tight delivery schedules demonstrating the resilience and execution capabilities of our supply chain team.

In addition, assembly capacity for our Avalon home series has also been expanded to our Malaysia facility. Beyond the current A16 series, the R&D of our next-generation products has also entered the final stage. And some projects have recently completed tape-out for technical validation. After we complete product testing and the real operation -- operating conditions, we will close more detailed technical specifications to the market.

We are confident in the performance improvements of our next-generation products. And we will continue to follow our principle. Customers are not just buying subscriptions for systems that can operate stably by over the long term and generate stable and reliable returns. Today, I also want to talk more systematically about our AI and HPC strategy. As AI computing demand continues to grow rapidly, power resources sale centers and the computing infrastructure are becoming increasingly important.

The market is also paying close attention to mining companies moving into AI and HPC. We understand this interest many companies are talking about AI and HPC, but I hope investors will see can support -- we will be steadier and more practical. For AI HPC, our long-term strategy has 2 major pillars. The first pillar is energy.

The compilation of the ABC product shows that we have already real progress in energy and infrastructure. These are not conceptual pipeline projects, but assets that are already energized, already operating and already generating computing power and cash flow. At the same time, we are also advancing large scale and a more controllable power resource development.

Our goal is to gradually build the power infrastructure abilities that are financeable, developable and available by the company in compliant regions that are close to key markets and have long-term expansion potential. Energy infrastructure products, orally take a long time. The process from permitting land acquisition and a great connection to construction and operational or request time.

Therefore, we will not make over aggressive promises based on the short-term market segment. But once these projects are completed step by step, we believe that will become one of the most important long-term mats for our future computing infrastructure strategy. The second pillar is our computing systems. Over the past decade, Canaan has been deeply involved in ASIC design, mining machine development, large-scale delivery and real-world mining operations.

We are familiar with turning high-density computing equipment into products that are standardized, modernized mass productible remotely manageable and easy to deploy at scale. We believe broader AI and HPC infrastructure in the future will increasingly require these same capabilities. Our thinking is how to gradually make AI computing systems, which may become the largest source of new computing demand in the future, more like mining machines with a scalable divestment, standardized operations and clear economic models.

This growth process will not have overnight, but we believe the direction is becoming increasingly clear. I don't believe BTC mining and AI HPC are completely separate businesses. For Kena, blockchain computing is a proven workflow today that already generates cash contribution and help us validate power assets and operational capabilities. AI and HPC represents future computing demand with larger scale and higher into structure standards.

The cost transformation is already fully underway internally. Our power infrastructure planning is being designed for long-term and higher-density computing demand. while our chip and system abilities are also gradually expanding towards broader computing platforms. But at this stage, we performed to spend less time talking about concepts and more time building real asset products and engineering come abilities.

What we want to do is gradually expect our existing strength in mining, energy, chip and system engineering into broader and the broad chain computing infrastructure. We believe the right approach is to first build a strong condition in power sources and operations and then gradually integrate new types of computing system when the timing is right. In this way, the company can continue benefiting from the cash contribution and the flexible low value of BTC mining while also creating long-term opportunities in AI HPC and in variable and settlement enabled digital economic network in the future.

This past fits well with the foundation we have built over the years. We believe we already know where the industry is heading. In the future, Scott resources will gradually shift from GPUs themselves to compliant low-cost power, this patch for loads to mass specific texture-based AI computing systems and long-term organizational mobilities. The hardest part is finding the right path from where we are today to the future. what now, including the ABC products, direct power pipeline development, chip demand, system engineering and organizational efficiency improves. This essentially building the foundation for that part.

Finally, I want to talk about our organization and cost structure. Since the fourth quarter of last year, we have continued optimizing our organization in Q1 of 2020. The result of these efforts already started to appear in our operation -- operating expenses. Going forward, we will continue to focus on our resources on core products, key projects and areas that can build long-term competitive advantages.

At the same time, we are also introducing AI tools more deeply across the company, including R&D collaboration, coding and testing, supply chain planning, financial analysis customer support and operational management. My view on AI is very practical. AI is not only a market that we may serve in the future, but also a tool that helps us to improve our on organizational efficiency today.

We want to achieve more go deeper and deliver higher-quality work with a leaner organization. Going forward, we will continue management expenses with stronger discipline while improving business responsiveness and futuring the efficiency. We believe these are critical probabilities for the company to successfully navigate industry cycles.

In March this year, James and I also purchased companies ADS in the open market using our personal funds. The amount itself is not a key point. What matters is that management stands on the same size as all shareholders. to this market environment is in deeply challenging, but we remain confident in the covenants long-term direction and our ability to execute.

Looking ahead to the second quarter, we remain cautious. Although Bitcoin price and cash price have recovered somewhat from the lowest to the first quarter -- in the first quarter. miners globally are still taking a conservative approach to the investment. In addition, energy prices and the geographic -- and the geopolitical uncertainties may continue to affect customer decisions. Therefore, we expect total revenues for the second quarter of 2026 to be between USD 35 million and USD 45 million. This outlook is based on the card market and operating conditions, and actual results may differ due to changes in the market conditions, policies, compliances and customer demand.

In the short term, China is still going through a difficult transition period. We do not award this reality, but I also want to make it clear that the company is not standing still. We are reducing inventory, controlling costs, advancing new products, expanding sales channels, strengthening money operations, securing low-cost power resources advancing our U.S. power infrastructure pipeline and exploring long-term opportunities in AI and the PC computing systems.

The industry cycle will continue to fluctuate and market segment will continue to change. But we can control, but what we can control are our situation, this plan cost structure products asset quality and long-term direction. As long as we continue improving in these areas, we believe Ken will become stronger in the next cycle. My -- that conclusion is in my remarks. Thank you again for your continuous support. I will now turn the call over to our CFO, James, to discuss our financial results in more detail. Go ahead, James.

Thank you, NG, and good day, everyone. This is James speaking in our sincere quarters. As NG highlighted, the first quarter of 2026 was defined by significant volatility global liquidity was tightening and the Middle East geopolitical conflicts were escalated during the quarter, together with energy prices and regulation bonds. .

Bitcoin entered the year trading near $95,000 level in the middle of January before experiencing a quick decline and bottoming at approximately $66,000 in early March. This fluctuation of bitcoin price directly impacted industry-wide mining economics and harsh price, forcing a cautious wait-and-see posture across the institutional sector. Despite these headwinds, our operational performance demonstrates our resilience of going through industry cycles.

We successfully delivered the total revenue within our guided range we increased the revenue from our North American sales, and we strengthened our mining operations by securing a 49% membership interest in 3 high-quality mining projects. At the same time, we also derisked our inventory position through the accrued write-down, continuing to optimize our operational efficiency by continuous expense control.

Collectively, these actions allow us to remain lean and agile, positioning us to navigate ongoing market volatility and prepare to capture future high-margin opportunities as the cycle eventually turns.

Moving on to our financial performance. We delivered total revenue of $63 million in the first quarter, which was within our guided range. Our product revenue contributed $43 million to the top line. This represents a sequential decline because of the market environment change from Q4 to Q1. North American customers contributed over 80% of total product sales, which increased from 75% in the last quarter.

During the quarter, we sold 4.1 exahash per second of computing power at an average price of $10.50 per terahash per second. Within product revenue, our Avalon home service generated $2.7 million as we continue to invest in channel development for this segment.

Our mining business generated $19 million in revenue. While this figure reflects the lower bitcoin prices during the quarter, the business continues to serve as a consistent engine for our asset accumulation. By maintaining our mining activities throughout the market cycle, we are effectively strengthening our digital assets churn and building long-term value for our shareholders.

Turning to our mining operations. We concluded the first quarter with a total installed hash rate of 11 exahash per second up 11% from Q4 last year, and this indicates a year-on-year growth of 66%. The growth is mainly driven by our development in North America. In Q1 we have expected our installed mining hash rate in North America 7.7x of Q1 '25. North America's occupation increased from 11.5% to 53.6% in our quarterly global cash rate. This is fully aligned with our set strategy of continuously investing in mining operations in North America.

This has not even included another 4.4 exahash install hash rate in the JV Corporation acquired from Cyber Digital in February as we own 49% of the interest. As part of our old strategy, we ended the quarter with 1,808 Bitcoin and 3,952 Ethereum on our balance sheet. With the production of 257 Bitcoin points in this quarter, the total market value of our Bitcoin holdings stood at $121 million as of March 31, 2026. This growing reserve serves as a key pillar of our balance sheet strength.

With the recent price recovery towards $77,000 level, the market value of Bitcoin holdings has increased to nearly $140 million. I would like to address our gross loss of $23 million this quarter. which was entirely driven by a $25 million noncash inventory write-down entering product costs. Excluding this impact, our adjusted gross profit was approximately $1 million, representing a breakeven adjusted gross margin. This accounting treatment was due to continuous pricing pressure and aligned our inventory cost structure with the market environment.

Moving to our financial efficiency. Total operating expenses for the first quarter were $31 million an 11% reduction from last quarter and an 18% reduction from $38 million in the same period last year. This improvement reflects our efforts to streamline our organization across all functions and our set discipline to control expenses.

Specifically, research and development expenses were $15 million, down 19% year-over-year. Selling expenses were lower to $1 million to 59% year-over-year, and the general and administrative expenses were reduced to $15 million, down 11% year-over-year. These expense reductions are the direct result of our ongoing commitment to eliminating nonessential spending and focusing our resources on core strategic priorities by all methods, we have built a leaner and more cycle-resilient organization.

Now I would like to provide more details on the noncash items that impacted our bottom line results. This quarter, we recorded a $41 million fair value loss on our digital asset holdings. This reflects the significant bitcoin price fluctuation, which declined from approximately $87,000 by the year end of 2025 to $67,000 by the end of the first quarter of 2026. I want to emphasize that this is a market-to-market accounting adjustment and does not represent realized cash loss as we continue to hold these assets on our balance sheet.

Consistent with industry practice, these fair value changes are included in our adjusted EBITDA calculation. Consequently, our adjusted EBITDA loss for the quarter was $76 million, reflecting the combined impact of the operational environment and the period and revaluation of our digital assets.

Regarding our liquidity, we ended the first quarter with a cash balance of $43 million. On the cash outflow side, we allocated $57 million during the quarter for manufacturing and operations to support our global supply chain, $6 million in wafer procurement payments to secure future production capacity and $2 million for share repurchases. This strategic increase were partially offset by in total cash inflows, which mainly consists of sales collection, ADR relate and value-added tax refund.

The sequential increase in our cash balance from $81 million last quarter was primarily driven by collection timing and our planned capital outlays. This position has already been changed as we have collected $42 million in cash receivables from minor sales in April. This post quarter cash recovery demonstrates that our liquidity remains healthy and provides a solid foundation to navigate near-term market conditions while remaining prepared to capture future opportunities.

I would also like to provide more details on the project ABC acquisition that closed in late February. This transaction was structured as a share for asset exchange, where we issued approximately 54 million ADS with a total fair value of $25 million. This consideration was allocated between 2 key assets, $14 million as equity investment for 49% of stake in the JV comprising Alberta and Chief Mountain, and $11 million for the 6,840 A15 Pro mining units now recognized as part of our PPE, property, plant and equipment.

By utilizing an entirely share-based structure, we secured 100 megawatts of high-quality North American power infrastructure with electricity costs below $0.03 per kilowatt hour without cash outlay. This approach allowed us to preserve our liquidity while onboarding cyber as a strategic shareholder. We view this project as a highly capital efficient deployment of our equity that significantly strengthens our North American footprint and cements our long-term partnership with Cyber.

We remain anchored in long-term strategy that prioritizes structural resilience and asset quality over short-term market fluctuations, while we maintain a cautious and disciplined stance for the upcoming quarters. The fundamental value of our linear cost structure and the risk the balance sheet will become increasingly evident as this industry cycle evolves.

By securing critical infrastructure and optimizing our manufacturing operations, we have built a platform that is prepared to capture the next wave of institutional growth. Moving forward, we will continue to safeguard our liquidity and leverage our technological edge to drive sustainable value.

Given the headwinds and uncertainties in Q2, we are taking a very prudent approach to provide our guidance. We estimate our revenue would be $35 million to $45 million. This concludes our prepared remarks. We will now open the floor for questions. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Logan Hannan from Northern Capital Markets.

First, can you just help us educate us again on how Cana is strategically positioned to secure and develop power for HPC infrastructure and will you be making any upcoming hires or working with a development partner to make this transition.

Let me start with the resion because that is the most important part is we want to do this. We are building our resources in short term, I think mine is the best immediate load for the power. It is simple for us to deploy a flexible in the long term. these power sources and our partner network can become our entry point into AI HPC infrastructure. This is already underway.

On the last earnings call, I said a was transformation. Only 3 months has passed, we already have future progress. We believe we will continue to show progress. On the our chips, we have -- personally, I have long been looking for a way to turn large scale highly dedicated AI workloads into ASIC friendly workloads closer to the mining computation today.

For the end state, I think that direction is almost certain. For many years, we were searching for the right path. Now the path is that can truly use our Assistant it became -- we came in much clear. So in summary, for our question, the summary is very simple. We want to build around energy, computing infrastructure and specialized ASIC design.

Mining give us the starting load. AI HPC gives us the long-term opportunity. Yes. And about the partners, yes, I think the specific sites we always have their own design. But the development and the corporate with other partners is an important model for us. The value is not only about putting money and AI HPC in the same place. The bigger value is time-based load management when AI HPC is powered or when total power is limited, mining can release load.

When there is exist power, low pricing for AH PC demand is in a low use period, mining can ramp up and in some cases run at a higher performance. So the economic benefit is clear because mining machine is relatively low cost and the clean load. So more importantly, it has social value grades like stable, controllable load, and this model can help power assets the grid and computing customers to work together more efficiently. Yes. I hope I answered your question.

Yes, that was very helpful. Then one more. Is there any additional color you can provide into your pipeline maybe how many sites are in that gigawatt, what stage are these sites in? Are they under exclusivity, development, due diligence? Any color there and the current steps being made would be great.

I really want to say harm, but we sit down with our compliance advisers and agree that it's better to announce details after some important commercial and legal documents are formally signed with the greater and our partners. There is -- certainly, there is still uncertainty as always, with large power projects. But our target, what we're working on is very clear. We want sites that can support both mining and AI HPC, and also have scale, have low power cost and give us enough control to lead the project ourselves.

So today, I will not disclose the site count, capacity by stage status, but I can say the work is moving fast, very quick, and our direction is unchanged. Thank you.

We will take our next question. Your next question comes from the line of Ben Sommers from BTIG.

I appreciate all the color on the ABC acquisition. I was just kind of curious, talking about the power pipeline. If you could talk about maybe if there are potential opportunities out there similar to that one, maybe acquire, whether it's a stake or a full project from a previous miner or someone that was mining bitcoin there and just kind of what you're seeing in the market for potential opportunities similar to that one.

Yes, I think the ABC acquisition has been very good for us. it gives us direct exposure to high-quality, low-cost power, invest assets. The electricity cost is below 0.3 per kilowatt hour. So the product remains resilient even when the required cash price volatile operationally, MVC has been 1 of our strongest side with very high uptime. We also been upgrading our miners with HQ by the end of April. The hash rate had to 4.82 exahash per second Also, the Arbor side also added grid connection, which improves our time to have wind plus grade structure. This product provides our low-cost power and execution matter. We will keep looking for similar assets and another app team opportunities.

And then my next question, just kind of given the current market conditions and the outlook you guys provided, how do you think about the future growth for the Avalon Home Series? And just kind of curious on what you're seeing from the demand profile for those rigs?

Yes. I think for the -- currently, I think we are under some pressure. But I see -- yes. This year, over a home was hit by some policy changes in some important markets. For example, in a strengthened restricts on mining products later last year. and other countries also had policy changes. This made us more aware that compliant and a stable market must be our main better field. So this year, our focus has been channel building and product investment.

In the second half, we have plans to launch several new products and several upgrade in these models upgrades. We are also building channels that match a more complete product line. We hope that can support higher revenue in the second half. Also, the gross margin still go on our product quality. I poised you to look at the community and the KOL reviews on YouTube, I think home mining product line, we believe we are far ahead. And yes, and also about the expansion in home serious Yes, we have a...

The question comes from Mark Palmer from Benchmark, StoneX.

Yes. You mentioned that have seen a pickup in the price of Bitcoin during the second quarter and that, that had caused some recovery in the Bitcoin mining equipment market, but it has been limited. If you could just provide some perspective on this. In the past, when we've seen significant drawdowns in the price of bitcoin, and then a recovery. To what extent does Bitcoin need to recover and then stay at higher levels before you begin to see an increase in demand for your products? .

Yes, I think we -- first, we're talking a little bit about the bitcoin price. Yes, I think two new highs last year have partly related to a weak U.S. dollar last year. It's not a very typical breakout cycle. So this year, from a technical perspective, on has shown some patents of falling to rate higher other than pulling back.

Yes. And I think currently, the -- in Q1, our is ASP is about $10.5 per terahhas currently because the demand supply imbalance and high price decrease. The ASP is really under pressure. But in my experience, if there are some index can -- I can help you to observe the recovery of the machines market. I think it's about the hash price. Currently, I think the hash price is about 30-some dollar per hash per day. So it's quite low.

When the hash price growth to like $40 to $45, then you will observe a significant market recovery for the money machines. And the market will want crazy when the hashhit the $55, And you can check the number on life side in real time. Yes. So I think in the month to month, hash price is climbing slowly, but steadily to close to $40, but it's dropped back in the last few weeks. So I think that the market still needs some more time to have a real recovery.

We will next question. And the question comes from Michael Donovan from Compass Point.

NG and James, can you discuss how much 815 series inventory remains in terms of Xs? How should we think about the time line for ramping A16 production.

Like the end of 2022 or early '23 at that time, our inventory was higher than this cycle. -- just because in Q4, we locked the giant order and we deliver in Q4 and early quarter 1. So actually, our inventory is not high. But for certain older generation machines, we still have some inventory, and we lowered down the price we try to clear that entry within quarter 2. I think that's the plan. It seems like the semiconductor sector is in fierce competition with AI-related applications.

They are occupying more and more wafer capacity, that's why for the second half, we still need to prepare for the wafers for our supply and make sure the demand can be covered. And we don't believe the market will continue to be very quiet, like the quarter 1 and quarter 2. And with all this all this news like clarity be approved by the banking committee, and we will see clarity go to the senator.

And eventually, we will see second half the bitcoin price has the possibility of going up. At that time, the machine demand could recover. So we're better prepared for that. So even currently, our inventory structure is not bad, it's quite light. And the cash flow is good, but still, we would like to prepare for second half.

Yes, I will add some thoughts on this. Our production preparation for A16 is ready. The tests are public, you can check it on YouTube, I mentioned. Also, the product performance is real and strong. So -- yes. And we -- another information is so for -- so even currently, we have low inventory. But whether -- if the market improves, we are in a good position to respond.

Appreciate that. What are you seeing in minor demand outside the U.S., which international markets are showing strongest today.

I think after U.S., we have some customers from Europe like we have corporate with hot water prime for their homes. I think we just announced about 8 megawatts orders from our European customers. And also, we have same likely customers from other countries that I want to mention. So -- but I think today, other regions still have opportunities. But near term, the U.S. is still the main focus because this is where we see that most important they have power mining fleets and AI HPC infrastructure. Yes, they remain the most important part for minerals.

Next question comes from Nick Giles from B. Riley Securities.

Yes. Thanks, operator. James. I was wondering if you could think to I was wondering if you could speak to the Teva relationship and just touch on maybe just a little bit more on the economics of that deal. And how could this expand? I believe that the agreement includes an option for additional volume, but just wanted to get a better sense for the overall revenue opportunity in this partnership.

Yes. I think we already cooperated with the technical line and their R&D departments -- for some really long time. So -- yes. I think the customized development service, like Titaro just mentioned, just need more than a standard machines. So we build do core R&D and build specialized customized modules using the different both to our mass production model. And also, we provide software and hardware system level solutions program and also they take the development by themselves for very significant part. Yes. So by this, I think we are quite close to have some mass production contracts. Yes. So it is what we are here today. I hope we can do some announcements after the last one.

Yes. So the other thing is we are doing open source -- we have already released the code, and we will continue to improve the quality of our open source work. So Tiger is a pioneer customer, but sure in the of the last for the third-party solutions, I think Ken is clearly 1 of the brands manufacturer. We provide open source code for software. And we also can sell chips. So we want to -- we provide the most easy way for our partners to build their own system. And I think it will be more and more friendly in the future.

Thank you so much, NG. I really appreciate the update this morning.

Thank you. As there are no further questions now, we would like to close the call. Thank you once again for joining today. If you have further questions, please feel free to reach the company through the contact information provided on its IR website.

Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are our Chairman and CEO, Nangeng Zhang; and our CFO, Jin James Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development; and Xi 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 20-F 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, Nangeng Zhang. Please go ahead.

Hello, everyone. This is NG CEO of Canaan. Welcome to our earnings call. Together with our CFO, James, we are calling from our Singapore headquarters to discuss our Q4 2025 business results and latest updates with you.

During the first quarter, it comprises experienced significant volatility. In early October, Bitcoin briefly broke about its previous all-time high, reaching approximately USD 126,000. It then fell below USD 100,000 in mid-November and dropped to below USD 90,000 by the end of December. At the same time, the wave of new hatchery that enters the pipeline during the price surge in the third quarter came online, pushing total network cash rate to a record high. This puts strong pressures on miners' profit margins. Facing this highly volatile market, we managed our sales pace well at the beginning of Q4. We secured a large order from a major customer in North America and efficiently mobilized resources to support production and the smooth delivery. At the same time, we steadily expanded our self mining operations and diversified mining partnerships, signing several private products. As a result, our total revenue for the fourth quarter reached USD 196 million, up 30.4% quarter-over-quarter and 121.1% year-over-year. This was our highest quarterly revenue in the past 3 years and exceeded the midpoint of our guidance range of USD 175 million to USD 205 million.

We achieved a major breakthrough in mining machine sales in this quarter, benefiting from our continued focus on the North American market. We secured a large scale order of more than 50,000 A15 pro models from a leading mining company. This milestone collaboration drove our strong sales performance and underscores markets growing recognition of our product performance and the delivery comply. To ensure high-quality delivery, our supply chain, production and pricing teams worked closely together to ensure smooth and high-quality execution. This resulted in an all-time high of 14.6 exahash per second in computing power sold during the quarter, up 45.7% quarter-over-quarter and 60.9% year-over-year. While average selling price declined slightly due to volume discounts for large scale of orders, the surge in sales volume drove product revenue to USD 165 million, up 39.1% quarter-over-quarter and 124.5% year-over-year. This marks our highest single quarter revenue in the past 13 quarters.

We will continue creating value for customers through product upgrades and customized services to deepen our partnerships with global customers. And although the company focused most of its resources on rig sales in Q4. Our sales mine operations continue to progress steadily and the principle of resources alignment and the efficiency first. In Q4, while we steadily expand and optimize global development at the end of the fourth quarter total installed has rate increased 8.6% quarter-over-quarter to 9.91 exahash per second, of which 7.7 exahash per second was energized. We mined approximately 300 Bitcoins during the quarter, further contributing to our currency reserves. At the end of 2025, our assets holding were 1,750 Bitcoins and 3,951 Ethereum. This holding reflects the combined contribution from our mining activities and ongoing DAT management strategies.

In the current market environment, this crypto portfolio not only provides liquidity, but also for its potential upside if crypto prices recover. We continue to explore innovates mining applications and promote deeper integration between computing and energy. In October, we partnered with local energy infrastructure provider in Canada to convert flare natural gas at [ wheelhead ] into computing power. This project marks our initial step from utilizing standard energy towards broader participation in energy infrastructure. It demonstrates the value of high-performance computing within emerging energy systems and opens up more space and the long-term facility for expansion of our mining business. In R&D and supply chain management, we maintained our focus on product performance, are driving technological upgrades in tandem with capacity organization.

Last October, we officially launched the A16XP, our flagship next-generation air-cooled model, it achieved breakthroughs across multiple performance metrics by delivering over 300 terahash per second per unit with an industry-leading power efficiency of 12.8 per terahash. This showcases our deep technical and R&D expertise in the design of high-performance AC chips. After we continue to advance our product generation updates, upgrades, we work closely with our wafer foundry partners to optimize manufacturing processes. These efforts have led to higher yields and lower costs for our A15 series, allowing us to deliver more computing power from the same amount of wafers. On the supply chain front, our production footprint across Malaysia, the U.S. and Mainland China, allow us to remain compliant with flexibility adapting to increasingly complex global trade environment.

During the mass delivery of the large scale order this quarter, our teams are across manufacturing, quality control and logistics worked in close coordination, successfully withstanding the dual pressure of shipment volume and the tight time lines. By early January 2026, the entire order has been fully delivered, demonstrating that resilience and the execution strength of our supply chain.

In summary, 2025 was a challenging year we navigated account international trade environment while continuing to expand our business across multiple dimensions. For the full year, total revenue was USD 530 million, surging 96.7% year-over-year. We strengthened our prices in North America, partnered with leading customers and increased total computing power stores by 40.7% year-over-year to a record 36.5 exahash per second. In terms of products, we achieved mass production of the upgraded A15 series launched the next-generation A16 series and expanded our home series into a multifunctional product lineup, significantly improving revenue growth and the brand influence. Our mining business reached a key milestone in 2025. With full year revenue exceeding USD 100 million for the first time. Global installed hash rates rose 82% and energized tax rate grew 61% year-on-year. We now operate 9 mining projects globally with total power capacity exceeding 250 megawatts.

We also expanded into innovative energy scenario by exploring wind power, started gas and the computing generate key reuse, driving deeper integration of computing and energy. We completed the deployment of our assembly and production capabilities across Malaysia, the U.S. and Mainland China, building a flexible and resilient global delivering system. We also established our digital assets to management framework, enhancing our crypto reserve capacity and capital allocation flexibility to support our long-term development. As we enter 2026, the external environment remained highly volatile. Shifts in macro liquidity and risk appetite are making digital asset prices and industry demand more cyclical and faced. We do not base our operations on short-term views of price movements is that we focus on navigating cycles through controllable factors, including product competitiveness, delivery and operational abilities, inventory and cash flow discipline, compliance as well as lower cost and more scalable energy and infrastructure capabilities. This post has enabled us to remain resilience and achieve growth in the complex environment of 2025.

More importantly, we do not see Ken's next page as being defined may as an equipment provider or single load computing player. We have a clear long-term vision. Computing and energy infrastructure are becoming increasingly integrated. Bitcoin mining and AI HPC colocation may appear to be 2 different business on the surface, but they are highly complementary and infrastructure level. The share electricity, facilities, power distribution, cooling systems and human and technical resources from -- for operations and maintenance. By leveraging different growth characteristics, we can improve power utilization efficiency and overall project economics. At the same time, these applications can interact with power grid more attractively. They can absorb energy when the power supply spend it and reduce the loan when the growth is constrained, ultimately contributing to more resilience and dispatchable computing infrastructure.

So in 2026, our strategy centers on 2 core pillars with execution as our top priority scaling proven models, streaming line nonrepeatable pilots and laying the groundwork early for long-term commodities. Our first track focused on power and computing infrastructure. We are shifting our strategy from securing power resources from domestic asset-light approach to a more systematic upstream development path to secure reliable and economic power resources and leverage our North American resources base built since 2022, we will prioritize applying for power directly rather than bidding for capacity with the existing third-party projects. We have made significant progress on a robust pipeline to secure directly -- direct power capacity in the U.S. We are confident of securing substantial load by the year end of 2026, potentially reaching the gigawatt scale.

At the same time, we are exploring ways to integrate Bitcoin mining with AI HPC colocation. This approach can improve returns on invested capital while supporting dynamic load management for the power grid and strengthening our existing positive relationships with great operators. The development of power and infrastructure is not as great, but a long journey with steady gates. The process spans marketable stages include site selection, than the great interconnection assessments, negotiations with power partners, contract trucking engineering construction and commissioning. Each step requires careful and delight fusion. Accordingly, our primary objective of 2026 is to establish a pipeline of executable projects and the clear development pathways. We do not intend to pursue one-off large-scale capital outlay. Instead, we will move forward with a framework of capital this plan. We will leverage partnerships and project financing as key tools relying on asset level cash flows and project level financing to sports expansion. This approach limits unnecessary volatility in our overall financial position. This also means we will prioritize secure high-quality power resources that are well suited for AI HPC location.

Second, in the consumer and small- to medium-sized business segments. We will take more sematic approach to building our 2C SMB business in 2026. Last year, we saw strong potential on both the demand side and the gross margin structure for these products. But we also understand that success in the consumer market is hard. Users expect excellent products experience, stability and attention to detail and service. And we must treat this market with a complete respect. That's why in 2026, we will continue to improve our product line and launch new models. At the same time, we will raise our standards and take more cautious about long-term product reputation matters. We will focus on stability, easier to use knowledge control and user experience at our top priorities. Also, we will continue to strengthen our product competitive while we will also focus heavily on building out our channels, a key priority of growing our 2C and SMB business. Our product experience has shown that the consumer market, the core competitiveness comes not only from the product itself, but also from the strengthening of our channels and the service system.

In 2026, we will make systematic investments in this area. This includes partnerships with online platforms, expanding our offline distributor network, improving after-sales services and content operations and building more efficient user engagement and conversion hits. Our message is clear, even in area, while we are still catching up, we are committed to putting in real efforts and resources. And for areas that are key to long-term success, we will go in to make sure the business plan become more stable and cycle-resistant revenue contributor.

Lastly, I will share our view on the operating pace for 2026 and our preparations. From an operational standpoint, we expect 2026 to show a clear stage-by-stage characteristics. Industry demand and pricing may remain [indiscernible] during the first half of this year. Our focus will mainstreaming -- maintaining a strong discipline in cash flow and inventory, strengthening products and delivery mobilities. And the one thing key interactive in power and infrastructure earlier on. At the same time, we are preparing our supply chain and execution teams for potential demand recovering later in the year. if the industry presents a clear structural opportunity, we will be ready to act quickly with strong execution and a healthy cost structure to capture market share and grow efficiency. We believe that this strategy centered on execution and the long-term capability building, we will allow tenant to remain competitive with mining value chain and gradually become a trusted infrastructure participated with the computing power and energy ecosystem. Our goal is to create more sustainable long-term value for our customers, partners and shareholders.

Before concluding, I would like to note that the outlook about contains forward-looking statements. Our actual results may vary due to changes in macroeconomic conditions, industry cycles regulations and market dynamics. We will continue to communicate with transparency and respond to market expansions through clear verifiable institution progress. Given recent global market on uncertainties include ongoing monetary tightening involving geological developments and heightened volatility in the digital asset market, we maintain a relatively cautious view about the market environment in the first quarter of 2026. Our global miners have adopted a weight and see approach in response to the recent decline in Bitcoin prices, the sale of mining rigs are facing considerable changes. While we expect total revenue for the first quarter of 2026 to be in the range of USD 60 million to USD 70 million. This outlook is based on current market conditions and operating assumed patients. However, actual results may differ due to policy uncertainty and marketability.

This concludes my prepared remarks. Thanks, everyone. Now I will hand it to our CFO, James.

Thank you, NG, and good day, everyone. This is James, CFO of Canaan. I'm pleased to share our Q4 financial performance with you.

To begin my part, I would like to echo NG's perspective on the fourth quarter industry environment, it was a very volatile quarter for the Bitcoin price. Bitcoin reached a new high in October, hitting $126,000 before dropping below $100,000 in November and below $90,000 in December. During the quarter, network cash rates also reached historical highs significantly impacting the profitability of minus. Fortunately, our operation was robust in Q4. We successfully secured large-scale orders from key clients in the North American market and globally and our strong supply chain relationships ensured timely production and delivery. In our mining operations, we continued our deployment and see opportunities for new pilot agreements. Overall, we delivered a solid quarterly results in Q4 despite the market dynamics.

Let's take a close look at the details. First, I will highlight our strong top line results in the fourth quarter and for the full year of 2025. In Q4, we delivered $196 million in total revenue, up 30.4% sequentially and 121.1% year-over-year. Our total computing power sold also reached a record 14.6 exahash per second. This growth was primarily driven by the massive delivery of our A15 series. Our revenue increased consistently throughout every quarter in 2025. This trajectory picks at a new quarterly high for Q4. Consequently, our full year revenue reached $530 million, nearly doubling 2024 results. Within product revenue, our Avalon Home Service also delivered exceptional growth in 2025, contributing approximately $25 million in revenue. Notably, our Q4 revenue mainly came from the North American market. Revenue from North American customers reached $125 million, accounting for over 75% of our total product sales. This demonstrates that top-tier institutional mines in North America continue to recognize Canaan as a primary long-term partner.

Regarding our mining operations and the treasury strategy, we continue to scale our infrastructure while maintaining a robust asset base. By the end of Q4, our in-store computing power reached nearly 10 exahash per second, up 7% from Q3. Our digital assets treasury also remains a core pillar of our financial strategy. As of December 31, 2025, we held 1,750 Bitcoins and 3,951 Ethereum. At year-end prices, these holdings were valued at approximately $166 million. While we manage through market fluctuations, this robust reserve provides a solid foundation for our balance sheet and long-term liquidity. Mining revenue in the full year of 2025 was $113.2 million compared to $44 million in the full year of 2024. The increase was mainly due to the increased computing power energized for mining, especially the expansion in the United States.

On the operational front, we achieved a notable gains in efficiency and supported our liquidity through disciplined capital management. Despite our business scaling up, our operating expenses in Q4 were $38 million, decreasing 6% quarter-over-quarter. This improvement reflects our efforts to streamline our organization and focus on core strategic projects. Our strong sales and financing activities have also strengthened our cash position. In Q4, we generated approximately $75 million in cash inflow from sales and received approximately $80 million from a strategic straight equity financing and the brief utilization of our renewed ATM. This healthy liquidity funded our Q4 payments of $100 million to secure our wafer supply and $89 million for production and operations. These investments ensure our flexible manufacturing footprint across Malaysia, the United States and Mainland China.

Consequently, we ended the quarter with a cash balance of $81 million. This aligns with our commitment to strict cash flow discipline, allowing us to navigate market cycles without compromising our strategic road map. Reflecting our strong confidence in the company's financial position and long-term shareholder value, we have already repurchased approximately 2.8 million ADSs for $2 million under our $30 million stock repurchase program announced in December. We intend to continue executing this plan optimistically as market conditions allow, underscoring our firm belief in the company's prospects.

Turning to our margins. We have taken a proactive approach to address market pressures and derisk our balance sheet. In Q4, our gross margin was $14.6 million compared to $16.6 million in Q3. This compression was primarily due to 3 factors: First, we delivered several large-scale institutional orders. These orders are strategically essential for securing our long-term market share in North America. Second, Bitcoin price softened in the latter half of the quarter, this time weakened market demand. These headwinds lowered our average selling price. Last but not least, we prioritize the delivery of industrial machines to strategic customers instead of the Avalon Home series in Q4. Additionally, considering the severe Bitcoin price volatility early 2026, we recorded inventory write-downs of $13.9 million in Q4. These impairments are based on management's latest estimates and reflect our cautious expectations under current conditions.

Below gross profit, the year-end in Bitcoin prices resulted in a $44 million noncash fair value loss. Another $15 million noncash fair value loss was recorded for the conversion of the final batches of preferred shares. There will not be any fair value loss regarding preferred shares conversion for the next quarter. These noncash items led to an adjusted EBITDA loss of $40.5 million. It is important to note that our cash position remains stable, providing us with sufficient liquidity to fund our operations and R&D plans. Furthermore, our ongoing expansion into the consumer and the small and medium-sized business segment is expected to contribute to a more balanced and resilient margin profile over the long term.

Finally, I want to outline our cautious yet resilient outlook. We are monitoring the very volatile Bitcoin price in the first 2 months of 2026. On February 5, the Bitcoin price dropped to $60,000. Low Bitcoin price triggered machine shutdowns and operations closures for higher cost miners. Profitability of existing miners is also under pressure recently including our own mining operations. Given the headwinds and uncertainties, we are taking a very prudent approach to provide our Q1 guidance. We estimate our revenue will be in the range of $60 million to $70 million. In Q1, our priority is to maintain a healthy cash position and derisk our balance sheet. We will allocate our capital carefully between power source investments and wafer supply for computing hash rate, and we were prepared to capture the next market recovery.

This concludes our prepared remarks. Now we are open for questions.

[Operator Instructions] We will take our first question. The first question comes from [ Ben Semmes ] from BTIG.

So it was good to hear about the strong progress in the supply chain efficiency. Kind of curious how the A16 mass production is progressing and kind of any updates around the time line there.

I think you're asking about our new transition rigs, right? Right now, we are sending the A16 machines to our customers. And I think they're during the transacting phase. We are moving ahead with mass production alterations right now. And I think the mass production will be started after the Lunar new year holiday and we expect to begin volume ramp up by the end of the first quarter. Currently, we don't have any issues or anything can broadcast. On the chip side, the chips are already in the mass production. And on the production side, our main focus now is refining the product at a system level. And also, you will know besides the air-cooled version, we have to -- we will have the liquid cool and the emerging cool models. So now looking we're this different models. So we can better match different customer deployment needs and site conditions. I hope this answers your question.

Awesome. That was super helpful. And then just kind of -- I know you touched on it briefly, but just curious for a little bit more color on the difference in the margin profile between the home series and the A15 and kind of how you think this can potentially help keep margins strong moving forward?

I will take this question, Ben. I think currently, we observed the market price has some influence from the big coin price. So seems like the industrial machines, profitability seems to be under pressure, but it looks like the home service continued without serious competition in the market, so we can still maintain the good profitability. But in Q4, the delivery side, we prioritized the industrial orders because it's from the strategically important customers from North America. Looking forward, I think we will continue to see home series play a more important role in our category to generate profit. I don't know if I answer your question then.

The question comes from Nick Giles from B. Riley Securities.

This is [ Wim Chan ] speaking on behalf of Nick. Congratulations on the quarter. It was good to see your heat recovery, your proof concept announcement in Canada in early January. So I wonder, can you speak to the size of the TAM for this opportunity ideally in megawatt terms? And as a follow-up, how scalable is this specific solution? And what are some other ways that you can expand your energy efficiency initiatives going forward?

I think I fully understand the market's interest in the new energy and ESG-related computing products. I think the core value for these executives is transforming its transforming real estate and concentrated energy into matchable, treatable computing power and even for the cash flow.

Yes. However, I'd like to be more candid. These opportunities are highly dependent on specific scenarios such as resource availability, grid connection conditions and even compliance pathways and also the operational capacity. I think the -- we are working on this for more than 1 year. So the scale of each individual projects are typically regions from few megawatts to several tens megawatts. The true total addressable market largely comes from the number of these plants, but we want to conscience against overly optimistic configurations like, okay, we have a few megawatts for each guidance thousands of points there, and so there's [indiscernible] business. We will get that it's 2 mistakes because the business model is still relatively fragmented and the pace of progress [indiscernible].

So over the past year, we started systematically screening potential sites for several POC products. And we already have implemented some of them flex initial operational data. not only the China one, there's many others. Yes. But moving forward, our focus will be on 3 key areas: First is the data and metrology standardization. The second is productization and modularity. Yes, we aim to attend the POCs into replaceable modular solutions. And third is replication and expansion. This is a surface. Yes. I think when we reach the surface, then we will continue to expand similar projects faster. I hope I answered your question.

Your next question comes from the line of [ Mark Palmer ] from Benchmark.

Yes. As you think about Canaan's manufacturing footprint from a long-term standpoint, what would that look like? And where would the company's U.S. manufacturer place to adjust for the tariff environment fit into that?

Yes, I think -- yes. I think over the last year, the external environment has been very dynamic traps, move back and forth. Compliance requirements become tightened in many markets, and it's very volatile. The Bitcoin in this contract, competition is not only about the press and efficiency. It's also about compliance comobility discipline and how fast you can adjust.

So now the supply chain issue is combined with clients. So -- but we treat compliance as a baseline. So we keep high standards across sales, delivery and regional operations. These multiple policy changes last year, we did not take any meaningful surprise loss from policy swings. This is not always the case in this industry. More particularly, some peers have a heavier fixed as exposed in certain regions. And so policy or the market attends quickly their adjustment cost is higher. We do -- we have -- firstly, our sale money is 100% outside China. And also, we built mutiple region production and assembly setup across Mainland China, South Asia, Malaysia and even in California, North America. So this really gives us resilience and continues to become -- region become less predictable.

So no, I think for your question North America is our most important market. And last year, we built thousands of machines from our U.S. manufacturer facilities. So this year, we will carefully review the whole supply chain and make it safer for U.S. customers and expansion of our U.S. -- mid-U.S.A. products.

Your question comes from Kevin Cassidy from Rosenblatt Securities.

I wonder at what point price in the year is the breakeven for your customers sort of Bitcoin mining? I think it had been $90,000, has that changed?

Thank you, Kevin. I think we have 2 lines for this breakeven point. One, including depreciation of the machines, we say it's an all-in payback level. I think it's almost like 100,000 to 110,000 Southern range for Bitcoin price stay there. And the hash price should be like $55 per day. Something between that, that's all in payback level.

Another interesting metric to measure this is the marginal shutdown level because we only consider the energy cost, the variable cost when we start the operation because the CapEx already -- some cost already. So in this kind of scenario, it's quite lower compared to the previous on payback level for various -- for different miners, of course, it's different. If we use our competitors' machine as a comparison, if the electricity cost is like $0.06 and we use our competitors S21+ and we see the shutdown price is like 50,000. And if it's S19XP, it's 66,000. And then look back to our sales for our mining operation. Our average cost is like [ $0.043 ] globally. So our shutdown price for A15 Pro version is like 37,000 when Bitcoin price hitting like 37,000. So we have to shut down the machine.

But of course, in our mining side, we do have some older generation machines. So it varies from like 40,000 to 50,000 to 60,000 in certain cases. So I think that's the part. If we change that to the A16 series, it's a 12.8 [ to ] power efficiency and the shutdown price is about 30,000 for Bitcoin price. So I think this calculation is based on the latest hash price. It will always change because of the network -- the total network hash rate changes and also the bitcoin price changes. So I think in current stage, we have already observed in December, early January and early February, some of the operations in the network has been shut down and the total hash rate moves back to like 900 exahash from previously 1,100 exahash. So we do see a lot of needs in short term has not been released to the manufacturers. But in longer term, when the electricity has already been prepped -- prepared for mining, they will come back for asking for better machines for the latest generation machines. That's something happened in the past cycles, no matter bear market or bull market. Kevin, I think this answers your question?

That was a great answer. Yes, very good. As you get more orders for the leading edge, then what is the foundry availability on the A16 and what's the cost difference for a wafer versus A15?

Yes, I'll answer this one. Since last year with our assignment of market cycles. We have maintained its plant interest strategy with low stock levels. And we secured -- but we still secured a critical foundry capacity and the supply chain resources in anticipation for market recovery this year.

Currently, global foundry capacity is indeed very [indiscernible], particularly for advanced nodes, which are seeing surging demand for AI-related sectors. But we secured our position earlier, so -- and maintain -- because we have long-term partnerships, we're utilizing, rolling forecast prepayments and collaborative ramp-up mechanisms. So our access to wafers and key comments remains stronger than the industry average, what I say is industry average. So -- and regarding the cost, we cannot disclose in specific products of the unit cost for A16 phases upwards pressure in wafer packaging and certain system components compared to A15.

I think it's for sure. Even the macro is ready priced. So our plan is to offset these costs through yield improvements, testing of medicines and design more efficient systems. So overall, what I can say is we expect the unit cost increase for A16 to remain with a manageable rate. Ultimately, we measure competitiveness by our customers' life cycle economics including power efficiency recent stability and delivery certainty. So I think if the market recoveries, our cost and our performance can give you an opportunity to have a good ASP for [indiscernible].

We will take our next question. Your next question comes from the line of Kev Dede from H.C. Wainwright.

A couple of things for you. One is just -- I know you spoke to strategic priorities, but I'd just like to understand the 1 gigawatt facility objective and what that pipeline looks like? Maybe you could add some color there, please.

Yes. Okay. Yes, we will share more details when the time comes. But currently, we are quite confident in the [indiscernible] level power opportunities, which is based on our results from work at this stage. We already work on this for maybe close to 1 year, I think, yes. Second, yes. We believe our goal is to colocate AI HPC and they combined better. So we are -- our hoping is high-quality power resources.

Okay. James, you mentioned, I think, cash outlay of $100 million for wafers and $89 million in operating costs, I think, in the fourth quarter. Can you offer more detail on the wafers you secured? And of the 14 exahash sold, usually give us sort of an average price per terahash. And I was wondering if you could offer some color on that. And whether or not that figure would include the Home series.

Yes. Thank you, Kevin. I think we start from the average selling price. I think the Q4 average selling price is $11.3, slightly lower than Q3, but I have explained a little bit on the margin side just because our average selling price for the institutional miners in a big order, usually it's lower than the small orders for the retail miners. I think that's the case.

And also, we prioritized the industrial minus in Q4 instead of the home service, even the margin side. Home service is better, but we have to make sure our strategical partner, the clients feel satisfied to get our delivery on time. So we tried our best in Q4 and still a few batch delayed to the early January but we completed most of the deliveries in Q4. I think that's very helpful to the clients but not helping our financials, it looks like the profitability part is not is not as good as we expected for Q4. But we streamlined the expenses as well just like I mentioned, the 38 million is the total expense for Q4, which is slightly lower than Q3 because we did some work in streamlining the organization. And I think the wafer supply side, the $100 million secured is most likely the wafer delivered to the customers and also some of the inventories carried to Q1 is ongoing. We still continued that trajectory in Q1, but with a smaller volume of payment to our wafer partner. I think that's something -- some color added to this question, Kevin?

[Operator Instructions] The question comes from Kev Dede from H.C. Wainwright.

NG, can you talk a little bit about your product development? Understand the 12 tools per terahash target for the A16, but you also mentioned chip development that could push you down to maybe 5 or 6 jewels per terahash. Can you talk about that? And whether or not you see a product cycle shortening and when you might think that latest generation ship might be in the market?

Yes, I think it's an open [ price ]. Yes. Let me think about it. I think for the A16 series, currently, we achieved 12.8 doors for the [indiscernible] with manageable cost right. So our target is to -- when the market recover, currently because deep dive for the [ aircon ] price. So the home market is some kind of trading for a few weeks, maybe -- and after the market recovery, we can -- the competition comes back, we can have a very competitive cost and government to our competitors and give our good benefits to our customers. And for the next elution, yes, we will already move to the next-generation development for the chase.

But because we -- you know because it's already at some nano process node, I think the benefits from the process itself is very tight now. And also the cost for the manufacturer of the chips is writing above. We are trying different measures to further improve the energy efficiency. But it looks like after the -- like the [indiscernible] stage when it comes to the [ sub-10 ] products, it's very hard to say that the manufacturer cost is still manageable if we are using today's standard. We already observed that our competitors' product is they have to price very high because we know that roughly cost for the -- for system, you cannot sell at loss forever. So currently, we -- in many different internal meetings, we are what we are, continuing to discussion is if we -- our target is the best power efficiency, then we may be pay for like twice or triple the cost, how can we avoid this kind of situation because the most important part is to let the TCO for the -- for our customers.

So -- also, we also started big-scale infrastructure in the U.S. So I think in the operational side, we are not only the equipment provider. We also got involved the operations any pens our customers have previously will react to our ourselves. So we are thinking about this more and more carefully. Yes. So currently, I think in conclusion, I think the development for the new system we will not accelerate, but also, it will not delayed. But we'll just go at the very natural progress. We will -- I think we will have new -- we're sure, we will have new products this year. And yes, and also the -- we hope at that time, the AI HPC will not relocate -- we will not relocate 100% of the service conductor capacity. And also, we don't have like the DRAM and HBM kind of memories. So sometimes, we are at a very good position. Still, we can use the rapid -- sometimes the peak capacity is released from the foundries, we can use this kind of capacity to get onetime deals to fill our inventory. So this is what we are waiting for this kind of opportunities.

So basically, I think the industry is not coming to the end. It's still going at a normal speed. Yes, this is my personal view.

Okay. Does Canaan have self mining target for 2026? Congratulations for reaching 10 exahash, I know that was a target in '25. I was wondering if you thought about and are willing to communicate where you hope to be at the end of this year?

Yes, I think we -- our priority is R&D and deliver to our customers first. And because of the current -- the market situation, so personally, I move the priority to allocate energy resources instead of just put more rigs on shelf. So yes, the infrastructure will give our the ability to skew it up when the right window opens. Yes. So currently, I think I don't have fixed number for this year, but we have internal goals for electricity infrastructure. So -- and after that, we -- if the window opens, we will rapidly ramp up the hash rate. I think controllable energy resources and the facilities will give us more opportunities to try different business models and do not provide different kind of products to our customer. Yes, I hope like the hash rate sales can come through to our mainstream in the -- maybe in the next year.

As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks.

Thank you for joining the call today, and we look forward to speaking with everyone throughout the quarter. Thanks.

Thank you. That concludes the call today. Thank you, everyone, for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to Canaan Inc.'s Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

Now I'd like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are our Chairman and CEO, Nangeng Zhang; and our CFO, Jin James Cheng; Leo Wang, Vice President of Capital Markets and Corporate Development; and Xi 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 and 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 20-F 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, Nangeng Zhang. Please go ahead.

Thank you, Gwyn. Hello, everyone. This is NG, CEO of Canaan. Welcome to our earnings call. Together with our CFO, James, we are calling from our Singapore headquarters to discuss our Q3 2025 business results, and let me start this with you.

During the third quarter, the global macro environment remains highly uncertain. In particular, the U.S. recently [indiscernible] tariff policy increased mining costs in North America. However, we also saw the resilience of North America market. Once there was a bit more clarity, demand started to recover clearly during this quarter. Bitcoin prices increased from approximately [ 107,000 ] at the end of June and about [ 114,000 ] at the end of September. This showed a rapid increase in total global hashrate, which rose from [ 846 at hash per second ] at the end of Q2 to [ 1,041 at hash per second ] at the end of Q3. Accompanied by a significant rise in mining difficulty with growing energy competition globally, the mining industry is facing higher operational alternatives.

Despite complex external environment, we delivered results that exceeded expectations. Total revenue for the quarter exceeded USD 150 million, up 50.2% quarter-over-quarter at 104.4% year-over-year and beat our guidance range of USD 125 million to USD 145 million. Gross profit reached USD 15.6 million, much higher than the USD 9.3 million reported in Q2. This improvement in the revenue and gross profit reflects our rapid response to the market, demand and ongoing optimization of global mining operations. Supported by strong sales and revenue momentum, our cash balance at the end of the quarter increased to USD 119 million, representing an 80.9% [ screen show increase ].

In mining machine sales, we delivered a record high of turn [indiscernible] of computing power in Q3, up 55.6% sequentially and 37.7% year-over-year. Our average selling price increased 33.8% year-over-year to USD 11.8 per terahash. Despite a slightly -- slight rise in cost for terahash due to the changes in international trade policies, during this quarter, we achieved a product gross margin of approximately 17%. We continue to serve strong hashrate demand in Asia and also captured the recurring demand in North America.

Notably, during this quarter, we secured large orders from well-known customers in the region, including [ Bitfury, Cyren Spark and Luxer ] in early October, we signed a purchase agreement for over 50,000 A15 pro models with a U.S.-based minor client. This highlights growing recognition of our product performance, quality and service by North American institutional customers.

In the consumer grade mining machine market, our overall home series continue to lead in this emerging space. In additional to revenue marketing and promotional activities, we have also included the Home series in our open source code program. We are actively growing our user and developer community and expanding our brand influence. At the same time, we are exploring new applications of the Home series in smart home scenarios. Currently, we are developing software to make our products compatible with [ Matter ], the mainstream protocol standard for smart home devices. In terms of consumer-grade product sales, we delivered 14,000 units of the Avalon Home Series in Q3, generating over USD 12 million in revenue, a sequential increase of [ 115.3%. ] The Avalon Q model was the top performer this quarter by supporting scale sales through channel partners, the Home Service achieved nearly USD 4 million in gross profit with a solid gross margin of around 33%.

Overall, our total product revenue reached USD 118.6 million with gross profit close to USD 20 million in Q3. The Avalon Home series contributed 10.3% of total product revenue and about 20% of product gross profit. Based on what you are seeing, competition in the consumer money market remains relatively healthy. We plan to maintain solid gross margins with launching new products and expanding channel coverage to drive scale.

Turning to mining operations, despite a notable increase in mining difficulty [ due ] in this quarter, our disciplined execution allow us to steadily advance hashrate development, amortization and overall money efficiency. As a result, we generated another quarterly record of USD 30.55 million in mining revenue while maintaining competitive power costs. In the third quarter, we added approximately [indiscernible] of newly deployed capacity in North America, bringing our total deployed hashrate to 9.3x hash per second by the end of third quarter and approximately 7.8x hashrate per second energized. We mined 267 BTC during this quarter, which further contributed to our crypto asset balance. Our Bitcoin holding reached an all-time high of 1,582 BTC by the end of the quarter, providing solid support for our balance sheet.

We are also actively exploring innovative mining projects. This quarter, we partnered with Soluna to deploy machines at 20 megawatts wind powered mining facility in Texas. In Canada, we worked with a local energy infrastructure partner on a pilot project that convert standard -- stranded natural gas into computing power. We also supply the mining equipment for project design to support local grid stability. These projects mark our first step into the energy infrastructure space, bringing with the utilization of stranded energy. Our long-term [ region ] is to integrate high-density interruptible bitcoin mining [ laws ] with energy-intensive AI and [ HPC ] workloads, building a future where computing and energy infrastructure grow together.

We are entering an era in which AI, software and data centers will profoundly shape daily life. At the same time, we believe that public awareness and the demand for sustainable energy will continue to grow. Throughout Canaan's history, we have held a consistent belief technology should make society more efficient. Today, we are seeing that vision becomes to materialize.

We have unique advantages in this transformation with more than a decade of developing technologies that make chips and systems more energy-efficient. We are now extending these capabilities to both home use and traditional energy sector. Energy operators can use our computing system to balance the grid, improve transmission efficiency and generating new revenue.

On the consumer side, utilizing excess heat from home mining, it's only the beginning. Over time, we envision this concept expanding into broader home computing applications.

For R&D, we continue to innovate and upgrade our products. At the end of October, we officially launched our next-generation [indiscernible] [ A16 ] series, the air-cooled A16XP model delivers 300 [ terahead ] per second of hashrate per unit with an industry-leading power efficiency of [ 4.8 joules per terahash. ] This marks the first time our air-cooled monitor have reached 300 terahash level, clearly showcasing our strong leadership in bitcoin ASIC design. We see improvements to production and supply chain. Our global delivery system is now more flexible and resilient. Today, we have manufacturing [ abilities ] layouts in Mainland China, Malaysia and the U.S., working seamlessly together to support delivery and after-sale service for consumers worldwide.

While enhancing our product and supply chain capabilities, we have also sharpened our focus on core operations. Starting this quarter, we realigned our R&D team and [ around a team ] around the projects that offer clear revenue visibility and strategic value. We have also streamlined head count to support this focus. In addition to organizational and cost optimizations, we are also allocating additional resources to expand our business footprint. We have established a dedicated consumer product team to optimize product quality and accelerate product iteration.

Additional, we are also looking more resources to our hashrate finance and energy infrastructure interactive. We see new power-related opportunities in many regions from home users and small business to power utilities. In Europe and Asia, customers are exploring ASIC-based grid balancing applications. In North America, stranded energy opportunities continue to grow and with similar projects that are emerging globally, including the Middle East.

In our digital asset treasury management, we continue to executing our flexible strategy. At the end of the third quarter, we held [ 1,182 ] Bitcoins and 2,830 [indiscernible]. In early November, during a market [ pullback ], we [ strategically ] acquired an additional 100 Bitcoins as part of crypto asset management strategy, further enhancing our asset allocation and the potential liquidity.

To sum up, Q3 was a highly strategic quarter in Canaan's development [indiscernible] We achieved strong revenue growth and improved gross profit while also optimizing our business structure and organization. At the same time, we made an encouraging progress in several new areas. Looking ahead, we are fully focused on driving Q4 sales, fulfilling large customer orders and converting preorders for our new A16 series. At the same time, we are accelerating the deployment of new [indiscernible] innovate mining products to further expand our money hashrate. We are closely monitoring the impact of U.S. tariff policy, macro liquidity conditions and the potential changes in global mining and energy regulations. Taking all of these factors together, we remain cautiously optimistic for the fourth quarter and expect total revenue to be in the range of USD 175 million to USD 205 million. This outlook is based on current market and operation -- operating conditions and the actual results may vary with policy uncertainties and market volatility.

This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James. Please, sir.

Thank you, NG, and good day, everyone. This is James, CFO of Canaan. I'm very glad to share our Q3 financial results with you. Even today, we are witnessing bitcoin price under big pressure. As NG stated at the start of the call, the macroeconomic environment in Q3 was highly uncertain. Reciprocal tariff policies from the United States added mining costs in North America. Global network hashrate growth continuously outpaced the Bitcoin's price appreciation. This all led to increased mining difficulty and intensified operational challenges across the industry. Despite market volatility, we delivered strong results this quarter. Our revenue exceeded our own expectations. Our gross profit showed consistent growth with the average selling price climbing again and our reserves of cash and digital assets increased significantly in our ending balance sheet of September.

Let me give a quick summary of our financial performance. First, we delivered a total revenue reaching $150.5 million, exceeding our guidance and representing 104% year-over-year increase. This was primarily driven by growth in our product sales of $118.6 million, surpassing the $100 million milestone for the first time in the past 3 years. This growth was achieved while we set a new record of [ 10 exahash of ] quarterly computing power sold and average selling price continued rising to $11.8 per terahash per second, a new high for the past 2 years. After a very quiet Q2, our clients from the United States started actively placing sizable and repeating orders for the A15 series. Sales of North American customers contributed 31% of our total revenue in quarter 3. We are happy to witness the strong demand recovery of the North American market.

Also, our sales of Avalon Home Series generated $12.2 million in revenue during the quarter, representing a 115% quarter-over-quarter increase. This is the first time Avalon Home products have contributed over 10% of total product revenue since the launch just over a year ago. As NG said, we are cultivating the consumer market and establishing our leadership position in the newly defined household mining category.

Second, our mining business also delivered another record result this quarter. Mining revenue reached $30.6 million, an all-time high and a 241% year-over-year increase. We mined the 267 Bitcoins during the quarter, representing 82% year-over-year growth. During the quarter, we deployed over 8,000 mining machines across our projects in the United States and other countries, expanding our total deployed hashrate by 14% from 8.15 [ exahash ] per second at the end of quarter 2 to 9.3 exahash per second at the end of quarter 3. Our in-store computing power in the United States also grew by 20% from 3.66 exahash per second at the end of quarter 2 to 4.4 exahash per second at the end of quarter 3. We also strategically closed our mining operations in Kazakhstan and initiated a small-scale project in Malaysia.

Next, our profitability continued to improve this quarter. Gross profit reached $16.6 million, up 78.6% quarter-over-quarter, marking a significant turnaround from a gross loss of $21.5 million in the same period last year. Product gross margin reached 17% this quarter. Both gross profit and margin continued their growth in quarter 3, expanding the upward trajectory and reinforcing the positive trend. Our Avalon Home series generated nearly $4 million in gross profit with a gross margin of approximately 33%. The Avalon Home series accounted for around 10.3% of product revenue, and it contributed 20% of the products gross profit. The Home series has already become a stable revenue pillar and our recognized gross profit contributor.

Last but not least, our total cryptocurrency [indiscernible] reached approximately 1,582 Bitcoins and 2,803 [indiscernible] with an estimated market value of approximately $189 million at the end of Q3. Our unrealized holder gain was approximately $87 million, reflecting the appreciation in value of the digital assets accumulated from mining and other operations. As of October 31, our total Bitcoin [indiscernible] increased to 1,610, as previously disclosed in our monthly report. In early November, we further strengthened our digital assets portfolio by purchasing another 100 Bitcoin.

Turning to expenses. Our operating expenses totaled approximately $40.5 million. We recorded $1.5 million in onetime expenses relating to the operational efficiency initiatives, including organizational optimization, travel control measures and other related items. In addition, we recorded $1.2 million in impairment related to mining machines deployed in Kazakhstan. By the end of quarter 3, the price of Bitcoin increased to around $113,000 versus around $107,000 at the end of quarter 2. The price of [indiscernible] increased to around [ 4,100 at ] the end of quarter 3 versus around [ 2,500 at ] the end of quarter 2. This price appreciations resulted in an aggregate unrealized fair value gain of $5.7 million on our digital asset holdings.

A noncash change in fair value of preferred shares impacted our Q3 bottom line by $9.5 million. This included a $5.4 million from the Series A-1 preferred shares, which were fully converted during the quarter and another $4.0 million from Series A preferred shares, which were fully converted in early October. To provide a clearer view of our underlying operational performance, we have excluded the impact of this accounting treatment from our non-GAAP measures. With all preferred shares now fully converted, we expect Q4 to include a final impact related to the change in fair value of these instruments. Benefiting from strong top line growth, improved margins and firm cost discipline, we delivered a positive adjusted EBITDA of $2.8 million in quarter 3. Our net loss per ADS narrowed to just USD 0.05 versus $0.27 in the same period last year, demonstrating continued momentum toward profitability.

Turning to our balance sheet and cash flow. We generated a net cash inflow of $53 million in Q3. This was driven by $189 million in sales collections, the highest quarterly level in the past 2 years and supplemented by approximately $10 million in export [ VAT refunds ]. These inflows fully converted the quarter's major cash outflows including $56 million in wafer prepayments and $90 million for production and operations. As a result, our cash balance increased to $119 million at quarter end.

Now moving to our contract liability. The balance of contract advances reached nearly $87 million as of this quarter end, over 85% contributed by North American clients. As of the end of quarter 3, we recorded account receivables of $7 million, all from the customers using Bitcoins as collateral for installment payments. We will continuously evaluate market demand and adopt corresponding credit policies with caution.

Now turning to our recent fund raising. In early November, we closed a strategic investment totaling $72 million with 3 top-tier institutional investors, [ Brevan Howard, Galaxy Digital and Waste Asset Management. ] The proceeds are intended to fund the acquisition and deployment of North American data center sites as well as the expansion of our Bitcoin mining machine production capacity. In late October, we renewed the [ ATM ] program to broaden banking relationships and enhance our financial flexibility for future growth initiatives. Following the renewal, we sold approximately [ 4.8 million ] of ADSs, raising gross proceeds of about $7.8 million as previously reported in the monthly report. We have selected to post further sales under the ATM for the remainder of 2025.

As of the date of the earnings we have cumulatively repurchased approximately 5.1 million ADSs for approximately $3.4 million under our share repurchase program. In the future, we plan to execute on our repurchase plan as market conditions allow us. Moving forward, as our CEO just mentioned, strategically, we will continue our technology-driven efforts with the goal of improving the efficiency of society. These efforts included the development of energy-efficient chips and systems, similar to what we did in the past decade. This includes an extension of our energy operations, which leverages computing technologies.

Also on the consumer side, these efforts include Bitcoin computing and heat reuse. To better utilize our resources, we set up additional internal controls to oversee the operation of our business. These priorities of the strategic importance and will help to provide us with additional revenue visibility. We will increase the expansion of our consumer products and energy operations. But at the same time, streamline existing R&D and administration cost structure.

In cash flow management, we will continue to invest in R&D on new products and wafers in the supply chain. And we will also seek opportunities that will increase our energy operations around the world as well as help our digital assets [indiscernible] to accumulate more digital assets on our balance sheet. All this will happen in a very dynamic environment. We remain cautiously optimistic as we execute on our strategy while focusing on protecting and increasing our shareholder value. We expect revenue for the fourth quarter to be in the range of $175 million to $205 million. This forecast reflects current market conditions. Actual results may vary given policy uncertainties and market volatility.

This concludes our prepared remarks. We are now open for questions.

[Operator Instructions] Your first question comes from the line of Mike Grondahl from Northland.

The 50,000 machine order on the [ A15 PROs ], can you talk a little bit about delivery timing there and gross margin on those sales?

Good morning. Yes. This order for more than [indiscernible] it's one of our most important deals this year. So under the contract, we expect to complete all deliveries by the end of 2025. So far, we have shipped a part of the orders and progressing in the remaining production and logistics [indiscernible] Yes, given the size and the tight time line of this order and the fact that Q4 is generally a peak period for supply chain logistics constraints, our production and operations team are working at full strength to ensure on-time delivery while maintaining product quality.

And also at the same time, we are expecting deliveries for other customers in parallel to avoid any impact on our long-term -- other long-term partners. This is a key test of our delivery management capabilities [indiscernible] Yes. So for the gross margin, yes, we have -- I think we have positive gross margin, yes. But maybe I cannot [indiscernible] numbers. Yes, [ we have gross margins, yes ].

Got it. And then just maybe a follow-up. Your home mining sales have done really well lately. What are the margins on that business line versus the industrial mining equipment?

I think for our home Home Mining series, in quarter 3, we get 33% of gross margin. And by the end of this year, I think we should maintain 30% -- about 30% gross margin. It is significantly higher than industrial [ manners ]. Yes, [ I think that would be it ]. Yes, yes, right. So yes.

So for -- I think for the home [ miners road map ], we plan to launch several new products over the next 12 months and further [ about to see the 2C product ] portfolio, always consumer products need a refresh every year. So we need to refresh almost all existing models in the coming year. So -- but still, for 2026, our most important KPI for the home series still go mainstream and break out of the [indiscernible] [ niche ] please give us some more time.

Next question come from the line are Nick Giles from B. Riley.

Thank you, operator, and good morning or good evening, everyone. This is Henry [indiscernible] On for Nick Giles. So for my first question, when is the earliest you guys could ship your new A16 models and at what scale? And what are your expectations on price and margin, respectively?

Yes. The A16 series was officially launched at the end of October. And now we are at the first batch [indiscernible] production and yes, and we finished the testing stage. According to our plan, we will start shipping [ samples ] to selected customers by the end of this month for their testing and evaluation. Yes, this is constant with our [ euro large ] strategy and we expect to begin our volume shipments in the first quarter of 2026. And yes, and we will adjust production and delivery pace dynamically based on the presale and customer feedback.

For pricing, we will adhere to market-driven principles, taking into supply/demand [ account ] and the competitive demand dynamics and the customer mix. So [indiscernible] a new flagship product, AS16 delivers major performance. The air-cooled A16XP can offer over 300 terahash at [indiscernible] per hash, so which is really industry-leading. So I think it will provide higher [indiscernible] per unit. And also, we can share these benefits with our customers, yes.

So [indiscernible] margins based on the current wafer material and manufacturing costs, the per terahash cost for A16 is under control and this in our expectations and also the yield is acceptable. So I think the product pricing power will help us to offset some cost pressures. Sure, the A16 cost per terahash is higher than A15. So yes, so let's see. Thank you.

Yes. And then for my follow-up, I wanted to get your guys' thoughts on the fact that several public Bitcoin miners have been very vocal about winding down their mining operations in the medium term and then at the same time, supply of ASIC appears to be increasing. So what do you guys think of the market impact will be? And then how is Canaan responding to this trend?

Yes, for -- I think for this question, yes, we will observe that some listed miners maybe they are facing balance sheet pressure, share price performance issues and a desire to pivot towards [ AI, HPC ] have publicly started their intention to reduce Bitcoin mining over the medium term, yes.

But for -- in my perspective, firstly, I think the slowdown, the -- I don't think the global hashrate will slow down the near term and also the AI HPC deployment is still need some time. But our investigation to the energy market in the U.S., the [ AR HPC ] applications needs high-quality energy electricity and which is the high quality always means higher cost. So I think fundamentally, at the next 12 years, the mining -- the power [indiscernible] for mining is not the competition with the energy used for AI/HPC is not the same electricity. So I know our customer, including ourselves, is thinking about how can build mining -- AI-ready mining facilities for the future. But in this stage, deploying more ASIC Bitcoin miners is still the best way to allocate energy today and generate revenues in -- from this stage not waiting for another 1 or 2, 3 years.

So I think still -- the things, it's hard to foresee for long term. So we focus on -- yes, so [ because there's the answer for ] 3 or 5 years later. So we -- now we are focused on cooperate with our partners to fulfill their requirements. We also -- we are also trying to find more energy resources in U.S. and building our own mining sites today. And maybe -- and we should have a potential possibilities to transfer to the AI infrastructure in the future. This is what we are personal observed in the past maybe 6 months.

Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities.

Congratulations on the strong results. And your guidance for $190 million for the fourth quarter is impressive. Is this -- orders also scheduled out into the first quarter? I guess what kind of visibility are your customers giving you?

Thank you, Kevin. I think quarter 4 is a big quarter in terms of seasonality, and we provided the guidance in a very optimistic way. And also, we have already collected some of the orders. We try our best to deliver in quarter 4. Looks to me, quarter 1 traditionally is the low season because there is a New Year and the Chinese New Year together in the western part of the world and the eastern part of the world, both having all kinds of holidays and the global logistics supply chain is not in a normal shape. So I don't personally seeing another peak time for quarter 1. I think the revenue could be going down a little bit. But we will try our best to deliver quarter 4 first and then we predict quarter 1 later when we have a clear understanding about the demand.

Also recently, the Bitcoin price is not in a good shape. So it's under turbulence. And some of the customers, especially the smaller ones, they tend to be more cautious and hesitate to make up their decisions immediately. That will also have a kind of impact on quarter 1 orders. So we will try to make a flexible supply. Anyway, currently, I think the demand is still higher than supply. We're just focusing on quarter 4 delivery first. And then let's see how it goes in quarter 1. Maybe we can balance between the demand the sales and also the sales mining side. If we do have some inventory, we can allocate to self mining in the United States. That will also be long-term strategic goal for us. Yes, I think that's my 2 cents, Kevin.

Thank you, James. That's very good detail. Then maybe you did note that there's a rebound in demand in the U.S. Is the U.S. market, which is less sensitive to the price of Bitcoin?

Sorry, come again?

Okay. Yes. Just you had mentioned that with the price of Bitcoin being down in just very recent times last few days, and you mentioned that would be sensitive to the demand for mining machines. And I was just wondering if the rebound we've seen in the U.S., I think you said it was 31% of revenue in the third quarter, whether that continues even with, I guess, is it less sensitive in North America to prices of Bitcoin versus the rest of the world?

Yes, Kevin, look, to me, in my observation, North America is now the leading area for global mining industry. The whole total hashrate in North America is some percentage between 35% to 40% globally. And there are around 20 listed companies in North America doing mining. They are kind of institutional players. They are more professional building of the site, the electricity facilities and eventually becoming mining sites.

So they have their schedule. It's not easy for them to stop their own schedule even when Bitcoin price has some short-term turbulence. For them, they look at long-term goals. That's why they are not very price sensitive in very short-term time. But we observed the tariff did have a kind of impact on their cost structure, that increased their mining cost. That means some of the miners, especially the smaller ones, even the city United States with consistent policy advantage, they're going to steal withdraw from Bitcoin mining to other activities. They may want to change their [ minus ] purchase plan in quarter 4. So I should say U.S. customers are most important customers for us. And we observed the worries in the short term, but we also respect their long-term strategic goals, and we try our best to support their strategic goals to get realized. So that's something we do together with them.

Yes. And also, I think for looking at this year, especially the market [ initially ] expected is the demand will [ flow ] rapidly into North America. However, changes in tariff policy led to a significant contraction in North America demand from late Q1 to Q2. And at that time, [indiscernible], but [ Asia ] demand ramps up quickly and partly offset the weakness in North America. And in Q3 and Q4, North America customers showed very strong resilience.

Together, we adapted to the new trade environment and the demand there has recovered quickly since [indiscernible] In fact, for the potential already delivered in Q4, North America has begun -- has again accounted for more than 50%. So [indiscernible] price mentality is constant. Sharp moves over a few days or weeks do cause some customers, especially small customers to pause and receives. But over multi years time frame, I think the impact is underlying demand trend is limited. And I highly disagree with like running business by [indiscernible] numbers. So this is my personal opinion. Thank you.

Our next question comes from the line of Michael Donovan from Compass Point.

James, how much inventory do you have left for the A15 series? And then for Q2 -- guidance, what mix do you expect between A15 orders and preorders for A16?

Thank you for the question, Michael. I think our inventory in the end of quarter 3, it's like $200 million, including some of the raw materials like wafers, like other components. And it mainly reflects the strong demand in quarter 4. And you have already known, we got the big order around 50,000 units to United States. So we have to prepare the inventory.

Other than that, if we digested the inventory in quarter 4, I don't think our inventory level will be that high. In quarter 1, we will see a lower inventory level for A15. And that's because we are expecting the uncertainties of the market demand in quarter 1. And for A16, I think it's mainly quarter 3 to be the mass delivery. I think the early delivery could be late quarter 2. But in the transition, we will continue to produce A15 and make it better and better. I think that's the plan. Did I answer your question, Michael?

Yes. You did, James. I appreciate that. And then I guess for my next question, can you expand a bit more on the pilot projects that you have, the 2.5 megawatts in Alberta, Canada and 4.5 megawatts in Japan. What are the growth opportunities in those 2 countries?

Yes, I think for -- we are running several similar pilot projects globally. Actually [indiscernible] Japan, Canada, U.S. and as well as some small projects, it's ongoing in Europe and Asia -- other Asian countries. Since these are pilots, our primary goal is to validate the technical approach and business model rather than maximum like early-stage financial returns. Yes, it's thanks to the use of [ trans gas ] and energy, the power cost for these pilot projects is relatively low and the project level gross margins are decent, but like most money operations, a meaningful economic [ benefits ] ultimately requires scale, yes.

But based on the current results, we believe these pilots all have the potential for scale up. This is very important to remember that power and gas infrastructure are very, very traditional long-cycle industries, building trust and proving out a new model takes time [ on the patients ]. Our strategy is to run the pilots in a stable way, cement the partnership and then we [indiscernible] the larger megawatt levels at the right time.

For example, the Canada [ strand gas ] product. There's a very highly possibilities to scale up to 20 megawatts in the middle of next year. And also, we can do more like, I just mentioned, the AI-ready mining site, [ many farms ] in U.S. with our partner [indiscernible] . So yes, so I think still there's -- please give us some time.

Our last question comes from the line of Kevin Dede of HCW.

Gentlemen, thanks very much for having me on the call. I appreciate it. NG, I'm wondering about your self-mining objectives. Can you refresh us on where you plan to take self mining? In particular, Ethiopia, which remains the largest contributor of your exahash. We're hearing that power tariff rates have increased there, and we're wondering how you might rethink hash deployment.

Okay. Thank you. And I think for our strategy, now in short term, there is some pullback in [indiscernible] And many people are asking the question about our strategy of [indiscernible] Yes, I think in the near term, over the -- maybe over -- next few months, our attention will be on delivering large [indiscernible] orders and which does slow the pace at which we add our self-mining hashrate. Please remember there's still other customers. We cannot [indiscernible] our long-term partners at this time.

So we -- because of the lack of machines at the same time, we are actively developing more [indiscernible] of this including potential greenfield sites. These projects have longer construction cycles, but relatively controllable cash outlays and the [ over better ] long-term value and operation flexibility. The [ gas to compute pilot ] in Canada with area energy and the [indiscernible] data center projects in Texas with Soluna [indiscernible] examples.

For what we see in the market, I think this is indeed more attractively priced mining assets now. The pullback for Bitcoin price gave us benefits to get more energy resources, especially in U.S. yes. So I think [indiscernible] projects with solid resources but short-term funding pressure. So this offers us better entry points. We are continuously screening [indiscernible] return on the risk control and we aim to expand our self mining footprint in a more prudent value attractive way.

So yes, so [ in fact ], I think we are still keeping the [indiscernible] in U.S. And we are moving to the more fundamental size like the energy infrastructure [ in the ] long term, yes. And I think the big order and Bitcoin [ pullback ] [indiscernible] time [ to direct our direction ] to find a more better way to expansion in U.S.

James, I was wondering if you could offer a little more color on the [ 56 million ] wafer purchase and the [ 90 million in ] processing. Would that include pretty much everything that you need for the A15 and 16XP at least as you see orders initially? And how much of it do you think translates to the Avalon Home series?

Well, Kevin, I don't think [ 56 million ] is all the wafer supply we can get for quarter 1. It's actually some payments happen to be in the face of payments just in quarter 3. So the $56 million is some prepayment and also some close payments for the previous contracts. And I think in quarter 4, we will pay more. It's just kind of pacing difference.

And for the Home series, I think currently, it's wintertime. We observed the demand from North America is actually getting stronger compared to quarter 3 and quarter 2. So it seems like we will allocate more chips to Home Series. But of course, we don't want to generate a lot of inventory. We will still produce according to the orders. But to be very honest, currently, we have already noticed the Home series will occupy a higher percentage in quarter 4. And while the total revenue is so big, so we are expecting the sales for quarter 4 of Home series.

And actually, a lot of buyers, a lot of consumers, they posted in their social media talking about Avalon Q. They like it because it's quiet and it can generate Bitcoins and using the same kind of energy in the past, [indiscernible] can do. Actually, we can feel the passion from the consumers asking more for the supply side. That's why when we do allocate the chips, I think internally, we have some discussions and sometimes even very fierce competition between the consumer sector and the industrial sector. But of course, NG will try his best to balance different product lines and different categories, try to satisfy most of the customers and consumers.

And also, currently, the market environment is indeed very complex and changing very fast and especially for the semiconductor sector. You know the -- like the [ DRAM ] price is maybe doubled in the past few months. It's only -- it's indicated that how the types of the global capacity for the semiconductor industry. So currently, I think we have demand because the demand of [ advanced cheap ] growth, especially for the AI related locations and many other stuff, the foundry capacity today is very tightened and also the price is trending up significantly.

I think this could impact both our manufacturing costs and mining CapEx. And this -- but this is influenced the whole industry, not only us. That said, well, we cannot share the exact figures, but we have -- already have secured meaningful wafer allocation for next year at favorable pricing and payment terms. Thanks to our strong relationships with our key suppliers, the volume is built on the cautious number, but this will -- I think this will definitely give us a good cost position heading into 2026. Yes, this is my [ consent ].

James, you didn't touch on the $90 million processing. Can you just give us a feel for that and what the implications are for future cash use?

$90 million. I think...

It's too much.

Yes, I think it's -- you mean, that [ $72 million fund ] raise from the strategic investors and also [ $7.8 million ] from ATM program. I think putting this together is like $80 million.

Okay. No, I thought that when you were discussing cash used in the third quarter, you mentioned $90 million. I apologize. I probably have the number wrong, but...

Yes, you mean the operational and the supply chain together, the expenses?

Right.

I think that -- yes, that outflow is for some payments of the supply chain like components like all kinds of production and logistic to shift the components from here and there, a lot of things, including some of the expenses related to that. I think that's a major part of the supply chain expenses.

And also, I think there is the R&D, G&A and also sales and marketing fees inside this, I think the run rate is still like $28 million to $29 million. Even the P&L shows it's like $40 million, but that includes a lot of noncash items like share-related salaries, but the rest goes to like $28 million to $29 million to -- for the normal operation. And also, we have expenses related to the operation like travel, like marketing. Especially for the consumer product, we started to have some marketing [ try ] in quarter 3 but not much expenses. But that is something we try to do in the transition from a pure machine company to a kind of operational company with energy and also with the 2 consumer products, we will also increase our marketing expenses in the future. I don't know if I answered your question.

Yes, yes. Just 1 more little nuance. I'm just wondering if those payments include prepayments for supply chain, securing supply chain component through the December quarter and into the March quarter?

That's a wonderful question, Kevin. Usually, we only do prepayment for wafer. Most of the components, we usually get the components first, and then we pay them a little bit later in different kind of terms. For example, like 15 days, 30 days, something like that. It's not -- usually not advanced payment.

Well, congratulations on that 50,000 unit order. Congratulations on the sharp pop in revenue and gross margin.

Thank you, Kevin.

Thank you for the question. As there are no further questions, now I would like to turn the call back over to the company for any closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to reach out to us, and we look forward to speaking with you throughout the quarter. Thanks.

Thank you. That does conclude today's conference call. Thank you for everyone for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

Now I'd like to hand the conference over to your speaker today, Ms. Gwyn Lauber, Investor Relations each of the company. Please go ahead, Gwyn.

Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Voting us today are Chairman and CEO, Nangeng Zhang; and our CFO, Jin James Cheng; Leo Wang, Vice President of Capital Markets and Corporate Development; and Shuang, 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, and 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 I 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 report on Form 20-F 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.

And finally, please note that during the call, all dollar amounts refer to U.S. dollars.

With that, I will now turn the call over to our Chairman and CEO, NG Zhang. Please go ahead.

Thank you, Greg. Hello, everyone. This is NG, CEO of Canaan. Welcome to our earnings call. Together with our CFO, James, we are in our Singapore headquarters to share our Q2 2025 business results and business updates with you.

This past quarter marked the first anniversary since the most recent been having, and we are delighted to celebrate icons all-time higher price in recent days. We are pleased to report the strongest quarter -- quarterly results in the current point cycle and also the best quarter in the past 10 quarters since Q3 2022. Total revenue for Q2 reached USD 100.2 million, up 40% year-over-year, breaking the USD 100 million mark. Gross profit rose to USD 9.3 million, a significant increase from USD 0.6 USD 0.6 million in Q1 Operating loss narrowed to USD 27.1 million. EBITDA turned profitable at USD 1.68 million and adjusted EBITDA reached USD 25.3 million, both hitting record high since we began reporting these metrics in Q1 2024.

We attribute our strong results this quarter to 3 main factors: the higher and stable bid contracts. Our quick and effective response to the new tariff policy environment and the rapid growth of our home use Bitcoin mining product line. Throughout the quarter, Bitcoin remained strong, rising from around USD 75,000 at the start of the quarter to the peak of nearly USD 120,000 by late May, and then staying at a high level with some volatility. At the same time, total network cash rate also stayed high, which kept mining margins and pressure -- the harsh price in Q2 moved up overall from a low of about $48 per petahash per day to a peak of petahash $58 per day in May. In addition, during this quarter, many countries were affected by the recyclical tariff policy, which includes the important cost of equipment for U.S. mining customers and brought a lot of uncertainty to global trade.

This led many U.S. customers to delay building money sites or deploying had rate. Facing these challenges, our sales, supply chain and the compliance teams worked closely together and focused on markets outside the U.S., delivering strong performance that offset the negative impact from the U.S. markets weaker business environment. Our product sales reached approximately USD 72 million, including USD 55.9 million from Avalon Industrial Mining Solutions and USD 5.7 million from the AmrolHomeuse Manser. In Q2, we delivered a total of 6.4 million as per second of computing power with an average selling price of USD 11.1 per terahash. Our alohomeminer product line delivered strong performance this quarter generating USD 5.7 million in revenue, a sharp increase of 359% from USD 1.3 million in the previous quarter and maintained a gross margin of 13%, which is higher than that of our institutional mining machines.

This segment now accounts for over 5% of our total revenue. What is more remarkable is that this growth was achieved -- that's in the challenges of high summer temperatures and rising electricity costs. Looking ahead, we will continue to rapidly expand the home use management market especially in heating-related application scenarios where energy that might otherwise be listed can be turned into additional value. In Q2, our money operations produced 284 points, up about 9.4% from 259 Bitcoins in the previous quarter benefiting from the rise of Bitcoin prices during this period. Our mining revenue reached a record USD 28.1 million, and an increase of over 15% from USD 24.3 million in Q1. At the end of June, our total in-store mining capacity worldwide reached 8.15 extra hash per second with a 6.57 exa hash per second already in operation. Last week, we also released our July Bitcoin production and mining operations update, showing continued progress in our mining business. By end of July, our midpoint treasury has reached 1,500 valent.

This brings us to our next topic, our Bitcoin treasury Historically, we have increased our Bitcoin contractor in 3 ways: first, by accepting midpoint payments for mining equipment, second, by earning it points through our mining operations; and third, by directly purchasing Bitcoins in the open market. look back at this decent cycle, we have steadily accumulated Bitcoins at all stages. In recent quarters, our cash cost of mining has constantly been lower than the average market price of Bitcoin during the same period. While the cost of acquiring Bitcoins may fluctuate from quarter-to-quarter, its long-term value has continued to rise. This is why at money remains a profitable strategy for us even during bear markets.

At Tenet, we are proud to be 1 of the few companies in the Bitcoin ecosystem that truly achieved multiple execution. Vertical integration is not just about mining Bitcoin we design and manufacture our own ASIC chips and the mining machines. We operate our mining business better with partners around the world. and we follow a displaced treasury strategy to accumulate Bitcoins at attractive price levels. These 3 pillars work together to help us lower the cost of acquiring Bitcoins, reducing operational risks and maintain strategic flexibility through our Bitcoin cycle over while steadily building enhancing our Bitcoin treasury. Since our founding, we have always delivered believed that Bitcoin is both a global asset class and the foundation of entire cryptocurrency ecosystem likewise our business spends to global and does not relate on any single country or customer growth.

Our ability to adapt flexibility across different markets and supply chains has helped us achieve steady improvements through market cycles and policy changes. We have a strong reputation in many countries, especially in United States, which has earned our repeat orders from some of the most respected mining continent in the industry.

In R&D and supply chain, our A-16 series is now in the chip packaging and taxing stage and will soon move into full machine testing. We are making every effort to bring A-16 series to market as quickly as possible. On the supply chain side, our acuity in U.S. is now up and running. -- can be mentioning our existing capacity in Malaysia. This allows us to meet back delivery needs for U.S. customers with only a modest cost increase. This includes fulfilling part of the order from the listed company in Q3. Recently, we also secured a follow-on order from Clean park for our A-15 emerging cooling model, showing strong customer recognition of our products and services. As a U.S. listed company committed to 100% compliance. Our customers have great confidence in the compliance of our offerings. In today's already volatile trade environment, reducing potential regulatory risks for our clients is more important than ever.

Looking ahead, we will continue to follow our unique full cycle strategy, our vertical integration, despite Bitcoin treasury management and ability to flexibility shift between self-mining and Bitcoin purchase when market conditions are right you gain a clear edge at every stage of the business cycle. By designing and producing our own hardware, operating mining and the most favorable conditions and steadily building our Bitcoin strategy, we have established a clear competitive advantage one that allow us to keep accumulating Bitcoins at a cost lower than the market price, even in challenging environments. Our ongoing commitment to build a company with both resilience and agility, leveraging the advantages of vertical integration to grow our Bitcoin assets, protect shareholder value and see every market opportunity.

We believe this strategy will carry us through short-term volatility and deliver long-term, stable and outstanding returns. It will also position Canaan as a leading institution in both technology innovation and Bitcoin treasury management. We will continue to focus on North America as our core expansion region, strengthening projects institution and customer service, while closely monitoring and policy changes to adjust our strategy, seize opportunities and mitigate risks. In summary, based on the current situation, we remain consciously optimistic for Q3 2025 with revenue expected to be in the range of USD 125 million to USD 145 million. This forecast is based on the present market and operational conditions, and actual results may vary given recent policy uncertainties and market fluctuations.

This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James.

Thank you, NG, and good day, everyone. This is James, CFO of Kaman. I'm very glad to share our Q2 financial results with you today. As NG stated, at the start of the call, we are firmly committed to vertical integration in the Bitcoin ecosystem. Our vertically integrated model encompassing the entire chain of R&D, manufacturing and sales of mining equipment, self-mining operations and pivotal currency treasury management positions us uniquely. With the cryptocurrency industry and Bitcoin ecosystem gaining increasing attention and support globally we are confident that our forward-thinking strategic investment is demonstrating its sustained value potential.

We are pleased to report record quarterly results with both the peak of the current Bitcoin cycle and the highest performance in the past 10 quarters following Q3 2022.

Let me give a quick summary of our financial performance. First, we reported strong Q2 results with total revenue of $100.2 million, not only exceeding our guidance, but also reaching $100 million quarterly milestone and representing a 40% year-over-year increase. Our product sales delivered a robust performance with revenue of $72 million, an increase of 23% quarter-over-quarter and up 17% year-over-year. In Q2, we experienced a softening U.S. demand under the pressure of tariff uncertainties while continuously delivering some early booked contract sales orders from U.S. customers, we were also working hard to expand our distribution channels in Asia. With all efforts our average selling price or ASP increased to $11.1 per terawatt per second, reaching a new quarterly high in the past 2 years.

Turning to the revenue from our Avalon Home series. In quarter 2, we delivered approximately 13,000 units of our Avalon Home products contributing revenue of approximately $5.7 million and reaching the gross profit margin of 39%. As of August 13, unfulfilled orders and finished deliveries in quarter 3 totaled $9.5 million. Second, our mining business also recorded its best quarterly performance. Our mining revenue surged 202% year-over-year to $28 million. We mined 284 Bitcoins in the quarter, up 101% year-over-year. Our deployed hash rate expanded 23% from 6.6 per second at the end of quarter 1 to 8.15 per second at the end of quarter 2. In quarter 2, more than 10,000 mining rigs were newly deployed in our American projects and the installed computing power in America reached 3.66 exahash per second at the end of quarter 2.

Next, driven by the strong results of machine sales and mining operations, our profitability sold both sequentially and year-over-year. Gross profit came in at $9.3 million compared with $0.6 million in quarter 1, also setting a record high for the first time since quarter 3 2022. Adjusted EBITDA achieved a gain of $25 million, a significant turnaround from the prior quarter's loss of $38 million. Our basic and diluted net loss per ADS narrowed to USD 0.03, representing the lowest loss in the past 10 quarters following quarter 3 2022.

Last but not least, we maintained a solid balance sheet with over 1,480 Bitcoins with a market value of approximately $160 million at the end of quarter 2. We continue to manage our Bitcoin reserves to generate sustainable outperformance.

Turning to the expenses. Our operating expenses totaled approximately $36 million, remaining flat sequentially. As previously announced, we are steadily progressing with the exit of our AI business. Once completed, this is expected to significantly reduce operating costs although there will be a onetime expense related to organization optimization in the short-term, the overall operating expense structure will become healthier. By the end of second quarter, the price of Bitcoin increased to around $107,000 versus around $83,000 at the end of the first quarter. The increased Bitcoin price on the last day of the quarter resulted in an aggregate unrealized fair value gain on crypto assets of $34 million. The noncash accounting treatment for the fair value change of the preferred shares hit our quarter 2 bottom line with $7 million consisting of $8 million from the Series A1 preferred shares converted during this quarter and $9 million from the remaining unconverted Series A and Series A1 preferred shares at the quarter end.

In order to represent our performance more accurately and more comparably we have excluded the impact of this accounting treatment for our non-GAAP measures.

Turning to our balance sheet and cash flow. In quarter 2, we paid $41 million to secure our wafer supply, $62 million for production and operations and $5 million prepaid for our share repurchase program. The cash outflow aforementioned was offset by cash inflow of $66 million from sales, $7 million from export VAT refunds and $4 million from ADI program reimbursement. Consequently, at the end of quarter 2, we held cash of $66 million on our balance sheet.

Now turning to our Bitcoin assets. Bitcoin held as our own holding assets increased in the quarter, reaching a record high of 1,484 Bitcoins as of June 30. We -- this is 76 more than 1,408 at the end of the first quarter. On June 30, 2025, the fair market value of our owned Bitcoins totaled around $160 million, and our hold gain was approximately $82 million higher than the original value of the Bitcoins that we gained from mining or other operations. As of July 31, our total Bitcoin treasury increased to 1,511 as already disclosed. As announced recently, by the end of July 2025, all Series A1 preferred shares have been converted into ADSs and sold. As of the date of the earnings we have cumulatively repurchased approximately 3.6 million ADSs for approximately $2.4 million under the share repurchase program.

With rebounding customer demand and proven local manufacturing in North America, we will maintain our strategic focus on this core market. Concurrently, we will continue to be agile in response to geopolitical and policy shifts, seizing opportunities while mitigating risks. Given these developments, we expect the revenue for the third quarter to be in the range of $125 million to $145 million.

This concludes our prepared remarks. We are now open for questions.

[Operator Instructions] Your first question coming from the line of Mike onto with Northland Capital Markets.

This is Logan on for Mike. -- quarter. First, it was nice to see the 6.4 exahash sold an ASP of $11.10 and -- is there anything to call out on current market dynamics, pricing strategy and demand for A15 you guys saw in July and August.

Mike. Yes, in Q1 this year, first, I give some Yes. Of course, I'll give some quick answers at the numbers. comprise now runs to new heights. And demand of A15 today looks somewhat different from when we issued our first year -- first 2025 guidance in January. And in Q1, I think the ASP for our -- the ASP for Q1 is $10.5 per hash, and Q2 ASPs rise to 11.1 million terahash. Yes, this is ASP side. But in Q2 there's -- because of the tariff policy, which has increased the overall cost of our U.S. customers. And I think the estimated impact is roughly from like 15% to 25%. And it remains fluctuate. So as a result, many mining customers in the U.S. are still taking -- we still but several U.S. orders we announced recently, especially from public listed miners shows that through joint efforts customers are gradually adapting the tariff changes and they are well need to purchase.

It's coming back. Yes. And also, we have opened our production facilities in the U.S. And now we can deliver machines from U.S. and Malaysia to avoid the tariffs, some of the tariffs to improve the overall user experience in full service.

So I think in the last 3 quarters, our ASP is increasing. And also ongoing demand outside, especially outside U.S. for high-performance miners is also growing. So -- and another thing is because the 15, the manufacturing advantage process, is improving, and the performance is increasing and the cost is slightly lower or lower -- so it's supported our ASP and gross margin.

Great. And then 1 follow-up from us. Congrats on the Cipher and Clean Spark order during the quarter. Can you guys just provide an update now with the -- I think you said the United States production facility, how is Cana viewing a strategy for penetrating the North American market? Is there any updates for how you guys see to grow market share there?

First, I will say something. And about Cyprus orders, maybe James will add some color after that. I think we have always believed that actively expanding in North America market, it's the right decision at least in mid and long term and fully in line with our long-term strategy I think the U.S. continues to stand strong policy signals supporting the reason is the signal supporting the corporate currency industry. and also American has the world's most true crypto community. And it's home to the largest number of publicly listed mining companies. It also has abundance and diverse power resources, including wind and solar, renewable energy that can support very large-scale deployments.

America's culture of innovation and its capital markets ecosystem provides a very strong foundation for institutional miners. Yes. So for us, because the institutional miners always have set habits in site operations, equipment purchasing. So for us, the key to gain more market share in U.S. is to get more customers to try our products first. So our machines must have very clear performance advantages. So customers have good reasons to test our new models.

Second is our service quality must be the highest in the industry standard. I think in 2024, North America already contributed about 40% of our total mining machine sales revenue on the mining side, we already have deployed 3.67 exahash per second for -- of money hatred in this region. In Q2, our mining revenue in North America reached a record high of USD 28 million. And this year, we -- as I mentioned, we also established manufacturing capacity in U.S. This is all solid for long-term growth in North America.

In short-term, I think the changes in business environment and policies earlier this year slowed our expansion pace in U.S. So -- but we make adjustments and some -- and I think the most thing period is now behind us. Key metrics are recurring, and we remain confident in long-term potential of North American market.

Yes. I will add some color on this because U.S. market is so important for us in our annual report we have mentioned like 40% of our revenue in 2024, has come from U.S. market. And recently, we got orders from Cipher and Clean Spark -- and in the Cipher order, it's the first time we start to have used the manufacturing factory in the United States to -- as a new alternative. Although the cost is a little bit higher, and I think it's beneficial to our customers. It's close to them. And they recognize our product performance.

So we would like to improve the delivery capability and overall cooperation experience for them. So I think that's also showed our execution to the strategic thinking from CEO, just to mention that we really value our customers in the United States and the U.S. strategy is 1 of the most important strategy in our whole integrated system. I think the new orders is mutually beneficial to both us and also Cipher. And we also have the immerse cooling orders from Clean Spark as well. So I think now is the better time compared to the early stage of the tariff come out after Liberation Day U.S. customers tend to slow down their orders. But now we get back to our customers, and we start to have some orders. I believe we will have chance have opportunity to have more -- thank you, Mike.

Our next question coming from the line of Edward angle with Compass.

This is billed Lever on for Evan. Can I just ask, have you seen any changes in customer site demand since May? And has sentiment rebounded back towards like Q1 levels, for example?

I think since July this year, we have indeed seen some positive changes in the market demand recently. We have announced several new orders from institutional customers in North America showing that local customers are gradually adopting this new tariff environment. And their willingness to purchase is returning. I think it's important to note that the direct impact of the tariff policy is concentrated mainly in the U.S. During Q2, we saw very active demand in Asia and other regions, where we secured a large number of orders this quarter. The company delivered over $100 million in revenue, with more than USD 70 million USD 70 million for mining machine sales, and most of these orders did not come from the U.S. This shows that overall global demand remains healthy and risk ceded.

And because in July, Bitcoin prices have also reached a new Others, which has been an important driver for miners to increase purchases. That said, because the U.S. tariff policy is still not settled uncertainty remains. I think the demand from U.S. customers has not fully returned to levels before the tariff policy announced. And I think I need to talk about some indirect impacts. It's because it's more complex restrictions, our mining machines import to U.S. have a great rare situation in this industry, maybe in the past 10 years where mining is still profitable or very profitable. But due to supply demand imbalances, machine originally intend for U.S. market had to be sold to other regions that at discounted prices. This created the virus market doing a board cycle -- so some something is not seen over a decade. So to address this, I must -- I think what we can do is we must continue to work on other ways to get machines into the U.S. at a lower cost. Yes.

So I think our U.S. manufacturer is already in operational but while it's still very complex because complements enter in the U.S. steel base tariffs Overall, I think the setup helps us to lower the cost and the speed of the supply for U.S. market to solve the previous question. And Yes, I think it will help us to gain more locholders.

Our next question coming from the line of Kevin Cassidy with Rosenberg Securities.

Yes. Congratulations on the great results. And -- can you describe the effect that Bitcoin miners with them pursuing the AI and HPC colocation hosting agreements. Is that slowing the demand for the Bitcoin mining rigs.

Yes. Yes, we have seen some mines in recent quarters. They are shifting a part of their power and the facilities to AI HPC colocation projects and sometimes down so very successfully, often leveraging their experience in Bitcoin mining and access to energy resources. We see AI PC and Bitcoin mining as complementary for 2 reasons. First is AI HPC products typically have longer sales cycles and capital recovery period than Bitcoin combining. So when Bitcoin price is high, the network demand strong. Mining continued to offer higher and more predicts which is why many companies are pursuing both.

Second, from an energy standpoint, there is no direct competition for resources. Bitcoin mining is an aural flexible power consumer. Over the long term, it can quickly secure large volumes of energy at very low cost, enabling rapid scaling rather than waiting years for traditional products over stronger timeframes down to a year or even days. It's load profile allows it to absorb intermediate renewable or surpass energy, helping stabilize supply for AI HPC will grow. So many large energy projects now plan for both mining and potential HPC customers together, improving overall energy utilization.

So overall, our customers include large institutional miners distribution partners and home use around the world with a flexible for product portfolio and global delivery capabilities. I think we can meet a wide range of deployment needs. So we expect Bitcoin mining equipment to remain the core driver for our business.

Okay. And maybe just as a follow-up, can you give us an update on the next-gen A-16? And are you seeing a trend for more liquid cool than immersion systems than in the past?

Firstly, I will answer the liquid food and Arco question. Yes. I think currently, worked system have been growth steadily. But now Airpomodel still account for most of our minor sales. I think the reason is because they have lower deployment requirements. It's more simple to install and maintain and can be quickly rolled out across a wide range of global markets, especially for customers who have value flexibility and low operating costs. For the water co system, because it performed very well in high-density computing environments but require stricter standards for water quality and operations. They are mainly used by large mining farms with fixed infrastructure. Since July, we've seen growing demand in Asia from customers who want to use the heat output for water heating many of them start with small batches for around to several hundred machines, while they prepare for larger deployments later in winter yes. emerging cooling is growing very fast, particularly in North America and parts of Middle East.

Large institutional miners like CleanSpark, choosing emerging for its strong performance, high density, low noise and very stable. These projects often involve higher customization, long-term capital investments, which also strengthened customer rotation -- orientation yes. For that generation, we will offer all 3 different coring operations -- options -- and we will optimize designs for different markets or even different customers for different energy conditions. Yes. For example, I think in higher-temperature regions, in merger and controlling may be more attractive and some distributed sites or a smaller sized air cooling maybe continue to deliver strong cost effectiveness. So I think, for -- because the energy efficiency and the next-gen ASIC minus requirements and a larger and larger scale operators emerging and water cool models we will come more and more common.

I think you asked about the A-16. So A-16 now is a -- yes, yes, the A-16 now is at stages for chip assembly and the testing Yes, it's only maybe 2 weeks before we have full machine testing results. So yes, so after that, we will have a product launch when the full system test is complete, we will announce -- officially introduce this ASIC onsite to market.

Our next question coming from the line of John Todaro with Needham & Company.

Two for you. One, if we could just dig a little bit more into the Bitcoin treasury strategy and kind of your thoughts on some of the Bitcoin treasury companies out there? Is there a possibility you could start getting a premium into the stock similar to those type of companies. And then as a follow-up, as you do think about your Bitcoin stack, -- and apologies if I missed this, but any way to generate yield off it, derivative strategies, anything like that, like some of your peers where they're able to generate a yield on that Bitcoin holding?

Thank you, John. This is James speaking. I would like to introduce a little bit, although we are still in the early stage of doing Bitcoin strategy I think our approach to do this Bitcoin treasury contrary management -- the first thing is to build up a kind of conservative foundation with the goal to make sure our holdings is quite safe. And also, we would like to increase the long-term value and liquidity. I think that's the purpose of doing this.

First of all, we have already demonstrated a way of doing this collateral rise financing kind of rising Bitcoin market we can pledge part of our Bitcoin to access low-cost capital for high return projects such as minor production and also self mining expansion for our operation. I think when the financing term ends we usually can repay the principle. Also, we can generate additional financing this can also improve the efficiency of our capital use. I think that's the first method.

Secondly, I think we can also place some of the Bitcoin in short-term interest bearing accounts. As you said, earning a modest yield also make sure it's safe and compliance. In addition, we can also evaluate selective derivative strategies to manage price volatility or capture extra returns under certain market conditions. I think that's also important.

So overall speaking, we have a kind of vertical integrated model. This model is quite interesting. We can grow our Bitcoin reserves through multiple channels. For example, accepting Bitcoin and payments for miners. Also, we can mine coins at a kind of cost below market average. And also, we can directly buy Bitcoin in the secondary market when the prices are more attractive. So I think although we are still in the early stage, our Bitcoin treasury has already reached 1,511 points by the end of July. It's a new record. So over time, I believe the market will see us not only as a kind of a hardware maker or mining machine provider or computing solutions -- the whole market will also look at as a capable Bitcoin treasury company. Thank you -- thank you, John.

Our next question coming from Delina, Kevin Dede with H.C. Weight.

James, I'm curious to dig in a little bit deeper following up on John's question. Would you consider using the Bitcoin treasury to help fund operations. I wasn't really clear, James, if that was part of the intention. I apologize if I messed that up.

Kevin, to find the different operations like mining size expansion and also in certain stage, we also order wafers by utilizing Bitcoins as a pledge to get loans. Does that answer your question, Kevin?

That helps very much. Appreciate it, James. Yes. So also curious about the geographies that you're finding the greatest demand for the Avalon home miners and how you intend to market that effort?

Yes. Yes, I think currently, we will sell the Home series globally. There's many, many in countries. But I think the primary region is still the U.S., yes. So yes. And I think we have the home miner, we have very good metrics in quarter 2 and in quarter 3, this is only 1 month, a little more than 1 month, and we have better -- much better performance than the quarter 2. I don't have the exact numbers, but it's roughly is much better than quarter 2. So yes, so -- the interesting thing is we are selling -- where we're trying to sell more heaters in summer and still is getting very good results. So I think the whole mine is a very new production line for the whole industry. We are working and learning. This is for personal -- from my personal view, I think the home miners today can get a good -- it's already reached a good level for the for product. If a target customer is miners.

But for traditional consumer market, we still need to enhance the everything includes the user experience costs and the quality, everything to reach the requirements for traditional consumer markets. So this is what we need to do next. And we are building a very special team to working on the product itself. Yes. So I hope this answers your question. Thank you.

[Operator Instructions] Our next question coming from the line of Mark Palmer with the Benchmark Company.

Yes. Congratulations on the resilience demonstrated during the quarter. I wanted to see if you could address the company's current capital deployment priorities, given where the share price is, how inexpensive the stock certainly appears, it seems like buybacks would be very much in order. I know that there were some executed during the second quarter. How are you thinking about capital deployment at large, where buybacks fit into the mix versus alternative uses of capital.

Yes. Thank you, Mark. I think we have already completed the $100 million preferred share financing in March. After that, we have not used our ATM program. We have paused the ATM program since February 20 to avoid putting additional pressure on the market especially after our share price fell below $2, I think in early February. Instead in May, we have announced up to $30 million share repurchase program. And in June, both CEO and myself personally purchased like 817,000 shares.

I think in current stage, we believe our shares are significantly undervalued. So buying back stock at current level is a better use of capital than issuing equity. So far, we have already purchased like 3.6 million ADSs. I think -- that's something we have already do. And also in using the fund recently, the demand in Asia remains strong. And I think the customers' interest on expanding their mining fleets from North American customers is steadily recovering. So it seems like the overall market demand is going up, and we got healthy orders and sales growth. Every quarter is better than the previous 1 quarter. So this allows us to prioritize using the capital from the operation to do the operation. Of course, we can also do some self mining, although it's not as fast as previously.

But still, we are growing our mining fleet. I think that's something we are trying to do. We will continuously maintain flexible in capital allocation. We can make all kinds of spending decisions based on the actual business needs, we should balance the allocation of minor inventory between sales and sales mining. Usually, we follow a kind of strategy to build to order, keeping some delivery capacity in reserve. So I think for the capital use in the operation, we always do the allocation in between different business needs, so make sure we have the sufficient funds for future -- but of course, we will also do some stock repurchase recently, and we will not start any kind of fundraising immediately. I think -- I hope I answered your question.

Our next question coming from the line Doreen with B. Riley Securities.

Hello, everyone. And NG and James, maybe my question is the kind of summary and follow-up of what's been asked regarding our North America plans. So given that many, many minor kind of postponed the expansion plan due to HPC AI initiatives, how do you see the evolution of average selling price, let's say, by the end of 2025 and maybe going forward in 2026.

Yes, I think because I think I just mentioned, the -- the global market is quite active currently because you know the -- I think we -- I mentioned a number which is the harsh price for how many dollars per petahash per day. Now today, I think is about $58 per day. There is an experienced number if this number is higher than 55%, then is market for the miner market. But it's lower than 55%, it's maybe a bear market. So currently, it's 58%. So technically, it's a bull market for the miner market. But still because unbalanced caused by the tariff policy fluctuations in North America. So currently, I think the ASP for the miners it's lower than it should be. This is what we are facing today and how to -- we are talking higher ASP -- so the method for us is to reopen the channel to send more or manufacturer produce more miners in U.S. than the supply and demand and bus could be solved.

So I think for the U.S. market because the tariff stuff the ASPs may be higher than what we expected, but because the cost is higher, so we need to sell the machines at a higher price. It's not a healthy ASP growth, I think, but it will happen. And also most of the orders, it happens outside the U.S. in Q2. In Q3, more and more new customers coming -- which is coming in Q1, Q2, making deals with us. So we are I think personally, we are in a very cautious optimistic for the ASPs in late 2025. And because the machines performance is higher, and we have A-16 following. So we have better machines than the ASP should be higher than should also higher yes. Okay. So -- yes, so this is my comment on ASP session. Thank you.

Thank you. As there are no further questions in queue. Now I'd like to turn the call back over to the company for any closing remarks.

Thank you, everyone, for joining us on the call today. If you have any further questions, feel free to reach us directly or through the contact information that you can find on our website.

That concludes the conference call for today. Thank you, everyone, for attending, and you may now disconnect.