Canaan shares surged 16% in premarket trading after reporting quarterly results.
Canaan Inc. today announced its unaudited financial results for the three months and twelve months endedDecember 31, 2021.
Fourth Quarter 2021 Operating and Financial Highlights
Total computing power sold was 7.7 million Thash/s, compared to 0.2 million Thash/s in the same period of 2020, and up 15.5% from 6.7 million Thash/s in the third quarter of 2021, setting a new record. The robust year-over-year and sequential increases were mainly driven by the solid market demand and the responsive delivery of Bitcoin mining machines.
As ofDecember 31, 2021, the Company had cash and cash equivalents of RMB2,684.3 million(US$421.2 million), up 586.0% compared toRMB391.3 millionas ofDecember 31, 2020, primarily due to a larger number of down payments received by the Company as a result of the larger volume of sales orders of Bitcoin mining machines and healthy profits from operations.
Total net revenues were RMB2,184.6 million(US$342.8 million), compared toRMB38.2 million in the same period of 2020, andRMB1,317.6 millionin the third quarter of 2021, representing a sequential increase of 65.8%.
Gross profit was RMB1,486.9 million(US$233.3 million), compared to RMB9.1 millionin the same period of 2020, andRMB741.7 millionin the third quarter of 2021, representing a sequential growth of 100.5%.
Net income was RMB1,196.5 million(US$187.8 million), compared to a net loss ofRMB72.0 million in the same period of 2020, and a net income ofRMB557.6 millionin the third quarter of 2021, representing a sequential growth of 114.6%.
Non-GAAP adjusted net income was RMB1,250.7 million(US$196.3 million), compared to a non-GAAP adjusted net loss ofRMB73.1 million in the same period of 2020, and a non-GAAP adjusted net income ofRMB587.5 million in the third quarter of 2021, representing a sequential growth of 112.9%.
Full Year 2021 Operating and Financial Highlights
Total computing power sold was 22.3 million Thash/s, representing a year-over-year increase of238.5% from 6.6 million Thash/s in 2020.
Total net revenuesincreased toRMB4,986.7 million(US$782.5 million) fromRMB447.7 millionin 2020.
Gross profitincreased toRMB2,850.7 million(US$447.3 million) fromRMB37.8 millionin 2020.
Net incomewasRMB2,000.3 million(US$313.9 million), compared to net loss ofRMB215.1 millionin 2020.
Non-GAAP adjusted net incomewasRMB2,301.6 million(US$361.2 million), compared to a non-GAAP adjusted net loss ofRMB212.1 millionin 2020.
Mr. Nangeng Zhang, Chairman and Chief Executive Officer of Canaan, commented, "Against the backdrop of Bitcoin price fluctuations and challenging industry dynamics, we made encouraging progress in our operations and finished the year with a strong fourth-quarter performance. Total computing power sold reached 7.7 million Thash/s in the quarter, up 15.5% sequentially, as we sustained the momentum of business development across a diversified global market and solidified our presence in key geographic areas. In addition, our Bitcoin mining business was enhanced by the delivery of additional computing power in the fourth quarter. We also continuously developed our AI business, expanding our partner base in a broader ecosystem. Looking ahead to the year 2022, we will keep carrying out our growth strategies through proactive investment in our R&D efforts, solid execution in global business development, agile operation to keep pace with industry dynamics, and prudent deployment in our mining operations. By leveraging our acumen, expertise, and our extensive experience in the market, we will continue to capitalize on developing opportunities in the industry."
Mr.James Jin Cheng, Chief Financial Officer of Canaan, stated, "During the fourth quarter, we delivered outstanding results, even as we overcame the headwinds brought about by a volatile and unpredictable market. Our total net revenues grew 65.8% sequentially toRMB2,184.6 million. The higher-than-expected topline result was powered by our business development efforts, which drove the growth of our customer base, enabling us to achieve a larger proportion of spot sales with a higher averaging selling price per Thash/s. In conjunction with our efficient cost and expense management, we reported a substantial increase in net income toRMB1,196.5 million, up 114.6% quarter over quarter. As of the end of 2021, we had garnered contract advances ofRMB1,340.7 million, ensuring stable revenue streams for the quarters to come and delivering further cash flows to expand our supply capabilities. Going forward, we will mitigate the negative effects from fluctuations in the Bitcoin price, geopolitical volatility, and regulatory uncertainties by staying vigilant and agile in our operations. We remain confident that our strategy and execution capabilities will sustain and further expand the Company's growth trajectory."
Fourth Quarter 2021 Financial Results
Total net revenues in the fourth quarter of 2021 increased to RMB2,184.6 million (US$342.8 million) from RMB38.2 million in the same period of 2020, and up 65.8% compared to RMB1,317.6 millionin the third quarter of 2021. The year-over-year and quarter-over-quarter increases were mainly due to the continuous increase in total computing power sold and average selling price per Thash/s.
Cost of revenues in the fourth quarter of 2021 wasRMB697.6 million(US$109.5 million), compared toRMB29.2 million in the same period of 2020, and up 21.1% fromRMB575.9 millionin the third quarter of 2021. The year-over-year and sequential increases in cost of revenues were in line with revenue growth.
Gross profit in the fourth quarter of 2021 wasRMB1,486.9 million (US$233.3 million), compared toRMB9.1 millionin the same period of 2020, andRMB741.7 millionin the third quarter of 2021, representing a sequential growth of 100.5%.
Total operating expenses in the fourth quarter of 2021 wereRMB273.7 million (US$43.0 million), compared toRMB80.1 million in the same period of 2020 andRMB278.4 million in the third quarter of 2021, representing a sequential decrease of 1.7%.
Research and development expenses in the fourth quarter of 2021 wereRMB112.0 million (US$17.6 million), representing an increase of 179.6% fromRMB40.1 million in the same period of 2020 and an increase of 20.8% fromRMB92.8 million in the third quarter of 2021. The increases were primarily attributable to the increased research and development costs for new products, and the increased staff costs in technology-related departments. Research and development expenses in the fourth quarter of 2021 also included share-based compensation expenses ofRMB19.6 million (US$3.1 million).
Sales and marketing expenses in the fourth quarter of 2021 wereRMB30.7 million (US$4.8 million), representing an increase of 399.6% fromRMB6.1 million in the same period of 2020 and a decrease of 18.3% fromRMB37.6 million in the third quarter of 2021. The year-over-year increase was mainly attributable to the increased staff costs, while the sequential decrease was mainly due to the favorable variance from the quarterly pace of advertising expenses. Sales and marketing expenses in the fourth quarter of 2021 also included share-based compensation expenses ofRMB2.1 million (US$0.3 million).
General and administrative expenses in the fourth quarter of 2021 wereRMB131.0 million (US$20.6 million), representing an increase of 286.6% fromRMB33.9 million in the same period of 2020 and a decrease of 11.5% fromRMB148.1 million in the third quarter of 2021. The year-over-year increase was mainly due to higher staff costs, professional service fees, and depreciation expenses, while the sequential decrease was mainly due to the decreased share-based compensation expenses, partially offset by increased staff costs, professional service fees, and depreciation expenses. General and administrative expenses in the fourth quarter of 2021 also included share-based compensation expenses ofRMB54.6 million (US$8.6 million).
Income from operations in the fourth quarter of 2021 wasRMB1,213.2 million (US$190.4 million), compared to a loss from operations ofRMB71.0 million in the same period of 2020 and income from operations ofRMB463.3 millionin the third quarter of 2021, representing a sequential increase of 161.9%.
Net income attributable to ordinary shareholders in the fourth quarter of 2021 wasRMB1,196.5 million (US$187.8 million), compared to a net loss ofRMB72.0 million in the same period of 2020 and a net income ofRMB557.6 millionin the third quarter of 2021, representing a sequential increase of 114.6%.
Non-GAAP adjusted net income in the fourth quarter of 2021 wasRMB1,250.7 million (US$196.3 million), compared to a non-GAAP adjusted net loss ofRMB73.1 million in the same period of 2020 and a non-GAAP adjusted net income ofRMB587.5 million in the third quarter of 2021, representing a sequential increase of 112.9%. Non-GAAP adjusted net (loss)/income excludes share-based compensation expenses. For further information, please refer to "Use of Non-GAAP Financial Measures" in this press release.
Foreign currency translation adjustment, net of nil tax, was a loss ofRMB19.9 million (US$3.1 million), compared with a loss ofRMB15.2 millionin the same period of 2020 and a gain ofRMB5.7 million in the third quarter of 2021, due to the US dollar depreciation against the Renminbi during the fourth quarter of 2021.
Basic net earnings per American depositary share ("ADS") in the fourth quarter of 2021 wasRMB6.90 (US$1.08). In comparison, basic net loss per ADS in the same period of 2020 wasRMB0.46, while basic net earnings per ADS in the third quarter of 2021 wasRMB3.20. Each ADS represents 15 of the Company's Class A ordinary shares.
Diluted net earnings per ADS in the fourth quarter of 2021 wasRMB6.81 (US$1.07). In comparison, diluted net loss per ADS in the same period of 2020 wasRMB0.46, while diluted net earnings per ADS in the third quarter of 2021 wasRMB3.15. Each ADS represents 15 of the Company's Class A ordinary shares.
Full Year 2021 Financial Results
Total net revenues in the full year of 2021 increased toRMB4,986.7 million(US$782.5 million) fromRMB447.7 millionin 2020. The increase was mainly due to the year-over-year increase in total computing power sold and the higher average selling price per Thash/s in the full year of 2021.
Cost of revenues in the full year of 2021 increased toRMB2,136.0 million(US$335.2 million) fromRMB409.9 millionin the full year of 2020. The year-over-year increase in cost of revenues was in line with the changes in the Company's computing power sales volume and cost per Thash/s.
Gross profit in the full year of 2021 increased toRMB2,850.7 million(US$447.3 million) fromRMB37.8 millionin the full year of 2020.
Total operating expenses in the full year of 2021 increased toRMB1,022.4 million(US$160.4 million) fromRMB291.6 millionin the full year of 2020.
Research and development expenses in the full year of 2021 increased by 137.7% toRMB332.8 million(US$52.2 million) fromRMB140.0 millionin the full year of 2020, primarily due to the increased research and development costs for new products and the increased staff costs in technology-related departments.
Sales and marketing expenses in the full year of 2021 increased toRMB100.5 million(US$15.8 million) fromRMB20.0 millionin the full year of 2020. The increase was mainly attributable to increased staff costs, which are in line with better net revenue performance.
General and administrative expenses in the full year of 2021 increased toRMB589.1 million(US$92.4 million) fromRMB131.6 millionin the full year of 2020. This year-over-year increase was mainly due to increased staff costs, professional service fees, and depreciation expenses.
Income from operations in the full year of 2021 wasRMB1,828.3 million(US$286.9 million), compared to a loss from operations ofRMB253.9 millionin the full year of 2020.
Net income attributable to ordinary shareholders in the full year of 2021 wasRMB2,000.3 million(US$313.9 million), compared to a net loss ofRMB215.1 millionin the full year of 2020.
Non-GAAP adjusted net income in the full year of 2021 wasRMB2,301.6 million(US$361.2 million), compared to a non-GAAP adjusted net loss ofRMB212.1 millionin the full year of 2020.
Basic net income per ADS in the full year of 2021 wasRMB11.90(US$1.87), compared to basic net loss per ADS ofRMB1.38in the full year of 2020.
Diluted net income per ADS in the full year of 2021 wasRMB11.73(US$1.84), compared to diluted net loss per ADS ofRMB1.38in the full year of 2020.
As ofDecember 31, 2021, thecryptocurrenciesheld by the Company were 70.5 Bitcoins, with the carrying value ofRMB20.3 million(US$3.2 million).
Contract liabilities as ofDecember 31, 2021, wereRMB1,340.7 million (US$210.4 million), increasing fromRMB430.4 millionas ofDecember 31, 2020, mainly due to the increased down payments for the sales orders of Bitcoin mining machines to be delivered in the coming quarters.
As ofDecember 31, 2021, the Company hadcash and cash equivalentsofRMB2,684.3 million(US$421.2 million), up 586.0% compared toRMB391.3 millionas ofDecember 31, 2020.
Shares Outstanding
As ofDecember 31, 2021, the Company had a total of 157,945,733 ADSs outstanding, each representing 15 Class A ordinary shares.
Recent Developments
The Completion of the Company's Share Repurchase Program
As of the date of this announcement, the Company has completed its up toUS$20 millionshare repurchase program authorized onSeptember 20, 2021, by buying back approximately 3.6 million ADSs with an aggregate price ofUS$20 million. Each ADS represents 15 Class A ordinary shares.
The early completion of the share buyback program demonstrates the Company's commitment to driving shareholder value.
Management Changes
OnMarch 3, 2022, Mr. Shaoke Li, the Secretary to the Company's Board of Directors (the "Board"), resigned from his position due to personal reasons and will continue to serve as a consultant for the Company to ensure a smooth transition. Ms.Lu Mengwill takeMr. Li'sposition as the Secretary to the Board.
Ms. Mengjoined the Company inSeptember 2018as the assistant to the Chief Executive Officer. Prior to joining Canaan,Ms. Mengtook various managerial positions in internet companies, including Kuaishou, and Baidu, Inc. The Board would like to express its gratitude towardsMr. Lifor his unwavering commitment to Canaan over the past years and wish him all the best in his future endeavors. The Board also looks forward to working withMs. Mengin her new role.
Business Outlook
The Company expects its total net revenues for the first quarter of 2022 to be in the range ofRMB1,500 milliontoRMB1,600 million, representing a year-over-year increase of 275%-300%. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
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