Chinese bitcoin mining company Canaan reported a slight improvement in some financial indicators in the first quarter of 2023. However, progress in this period is still far behind last year.
According to an unaudited report posted on its investor relations page, Canaan’s first-quarter net loss was $84.4 million, down from its $91.6 million net loss in the previous quarter. The net loss represents a significant reversal from the same period in 2022, when the firm reported net income of $65.1 million.
Diluted net loss per American Depositary Share (ADS) in the first quarter of 2023 was $0.51, down from $0.55 in the prior quarter, while diluted net loss per ADS for the same period in 2022 was $0.38. According to to Investopedia, an ADS is an equity interest in a non-US company held by a United States depository bank and available for purchase by investors.
The company says it does expanding operations despite the ongoing bear market and the associated drop in earnings.
The quarterly results were affected by several factors, including weak market demand that hindered product revenues, the ongoing crisis in the banking system and the slow recovery of Bitcoin (BTC) price. First-quarter revenue was $55.1 million, up from $58.3 million last quarter and $201.8 million in the same period in 2022.
“In the first quarter of 2023, we experienced a further decline in our sales due to industry-wide reductions in selling prices and unforeseen payment and delivery delays following a series of US bank failures. In addition, our mining operation has experienced issues that have delayed the increase in our installed hash rates.” he said Canaan CFO James Cheng says in a report that the revenue results “fell short” of expectations.
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A breakdown of revenue shows $44.1 million coming from product sales and $11.1 million from mining activities, as well as $300,000 in other revenue. Revenue from mining activities increased 3.3% from $10.7 million in the fourth quarter of 2022 and represents a 130.2% increase from $4.8 million in the same period of 2022.
Costs associated with mining operations include electricity and hosting, as well as depreciation and amortization of equipment.
Total operating expenses in the first quarter of 2023 were $38.1 million, compared to $60.8 million in the fourth quarter of 2022 and almost the same as the same period last year, when they were $38 million. “We were able to reduce our operating loss by 31.4% compared to last quarter,” noted Cheng.
The report shows a decline in investment in research and development. Canaan spent $19.1 million in the first quarter, compared to $33.4 million in the prior period. The decrease was due to one-time expenses of $14.3 million for research and development of the A13 series products. In the same period of 2022, the company allocated $15.1 million for research and development.
Cryptocurrency assets held by Canaan as of March 31, 2023 were 623 BTC worth $13.4 million, according to the report. Cash and cash equivalents were $72 million compared to $101.6 million at December 31, 2022.
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