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.
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.