Canaan reports loss-making year, expects revenue rebound in 2021 - Android

Crypto mining rig maker Canaan says it has signed contracts worth $174 million to deliver its products. It again reported narrowed losses for Q4 2020.

Cryptocurrency mining rig maker Canaan Creative reported losses and falling revenues for the fourth quarter of 2020, consistent with its full-year results, but said that it expects better financial performance in the first quarter of this year.

Why it matters: Along with Ebang, Canaan is one of two Chinese crypto mining rig makers listed on US exchanges. Both have been targeted by short sellers.

• Its Q4 results are on trend: The company has reported losses since it listed on the Nasdaq last November, and its revenues have been falling, in part due to increased competition from Bitmain and MicroBT.
• The company filing also gave grounds for hope. Canaan has increased its product prices and has received down payments for product deliveries.
• The news did not reassure investors. Canaan share prices fell 29% to $13.05 per share on Monday.

Losses: Canaan’s net loss for the last quarter of 2020 was RMB 72 million ($11 million), narrowed by 17% from RMB 86.4 million in Q3, according to its earnings report.

• Canaan has reduced its Q4 net loss more than 90%, to RMB 798.2 million, compared to the same period a year earlier.
• For the full year 2020, its net loss of RMB 215.1 million is only one-fifth the 2019 level, when the figure was RMB 1.03 billion.

READ MORE: Rig maker Canaan misses Bitcoin surge, losses top $12 million

Revenues: The company’s Q4 net revenues plunged 76% quarter on quarter and 91% year on year to RMB 38.2 million.

• Canaan’s net revenues for 2020 were RMB 447.7 million, down by 68% compared to 2019, when the company reported net revenues of RMB 1,422.6.
• The decreased revenues are somewhat in line with a fall in computing power sold, a measure of how many crypto mining rigs the company sells.
• In Q4 2020, Canaan sold 0.2 million terahash/second (TH/s), which is around 93% down compared to the same time period in 2019 as well as compared to Q3 2020.
• In 2020, the company sold a total of 6.6 million TH/s, which represents a 37.1% year-on-year decline.

Down payments: The company said it has signed $174 million worth of contracts to deliver its mining rigs, which it said lays a solid foundation for strong revenue growth in Q1 2021.

• Canaan has received $66 million cash in advance for these orders, and has started mass production of its latest mining equipment series, dubbed A12.

Product prices: In Q4 2020, Canaan increased its product prices back up to 2019 levels. In Q3 2020, the company sold equipment at a price of $8.10 per Thash/s, down from $27.5 in 2019, likely in a quest to boost dwindling sales.

• The price, calculated as revenue from products over computing power sold, stood at $29 per Thash/s for the fourth quarter of 2020.
• Canaan’s cost of revenues significantly dropped to RMB 29.2 million in Q4 2020, from RMB 180 million in the previous quarter and RMB 1,136.7 in Q4 2019.
• The company also continued to increase its spending on research and development. In Q4 2020, it spent RMB 40 million on R&D, up from RMB 32 million the previous quarter. The short report had accused the company of inferior products due to low spending on R&D.

Context: Amid soaring Bitcoin prices, crypto mining rig makers have their pre-orders booked for the next few months. Canaan largely missed the boat in 2020, but could be rebounding in 2021.

• Competition is heated, especially with the addition of MicroBT to the ranks of Chinese mining equipment makers.

READ MORE: Mining rigmaker MicroBT is planning a US IPO: report