Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. Now, I'd like to hand the conference over to your speaker host today, Ms. Xi Zhang, investor relations manager of the company. Please go ahead, Ms. Zhang.
Thank you operator. Hello everyone, and welcome to our Earnings Conference Call. The company's financial and operating results were released by our news release earlier today and are currently available online. Joining us today are our Chairman and CEO, Mr. Nangeng Zhang, and our CFO, James Jin Cheng. In addition, our Mr. Xiao Ming Lu, our SVP, Mr. Leo Wang, IR senior director, Mr.
Clark S. Soucy, IR Director, will also be available during the question-and-answer session. Mr. Zhang will start the call by providing an overview of the company and performance highlights for the quarter. Mr. Cheng will then provide details on the company's operating and financial results for the period before we open the call up for your questions. Before we continue, 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 results of operations or the performance of the company. These statements speak only as of the date hereof, and the company assume 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 list of factors and documents we file with the SEC, 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 and webcast, 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 measures, from GAAP measure results.
You can find additional disclosure regarding these non-GAAP measures, including reconciliation with comparable GAAP measures, 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, Mr. Nangeng Zhang. Please go ahead, sir.
Against the backdrop of the expected increase in U.S. interest rates, the first quarter of 2022 saw a continued trend for both lower and more volatile Bitcoin prices that began in late 2021. At the same time, in the context of an increase in the Bitcoin network's total computing power and relatively sharp energy price increases resulting from geopolitical conflict, ROI per terahash of computing power decreased to a certain extent. In addition, the resurgence of the COVID-19 pandemic in multiple cities across China, along with the implementation of corresponding pandemic prevention and escalating control measures, negatively impacted our supply chain, production and logistics. Despite these challenges, our team achieved encouraging results on multiple fronts. We are resolutely committed to our globalization strategy, deepening customer relationships and services, maintaining a steady operation of our supply chain, and pushing forward our research and development work for new products.
This quarter, we in total sold 4.3 million terahash per second in computing power and achieved revenues of CNY 1.36 billion, and a net income of CNY 442 million.
[Foreign Language]第二部分则是关于矿机销售。本公司本季度的总营收是人民币13.6亿元，主要来自交付的430万匹的算力。正如此前的公告，公司的工厂和仓库所在的城市三月初发生新冠疫情反弹，应当地的政策规定，所有居民全部实施居家隔离，因此导致物流完全停运三周，进而致使一部分一季度的订单无法按时发货而延续到了第二季。尽管本季度的营收受突发的物流停运而导致未达预期，我们的矿机销售业务依然取得了积极的进展。我们持续获得来自于国际市场的订单，特别是中亚、北美和澳洲等能源丰富的地区和市场，需求依旧强劲。本季度，我们还首次获得来自于老挝的订单。在引入新客户的同时，我们持续取得较大比例的老客户复购。为了更好地开拓市场及服务我们的客户，公司在新加坡成立了海外地区总部，并在近期刚刚获得了新加坡招商局EDB的审批、批准和政策支持。对于公司国际化的战略来说，成立新加坡海外总部是一个重要的里程碑。我们长期的目标就是成为一家全球化、文化多元的公司。我们在新加坡已经开始雇佣许多当地人才，协助我们开拓新加坡和东南亚的业务。随着海外售后服务体系的建设，我们将更贴近客户。此外，我们引入了新的销售渠道，近期我们上线了面向于海外零售客户的网上商场，方便小微客户购买我们的产品。
Our revenues of CNY 1.36 billion for the first quarter of 2022 were mainly driven by the 4.3 million terahash per second of computing power we delivered. As mentioned in our earlier press release, the local government implemented a nearly three-week lockdown for all residents and businesses in the city where our mining machine factory and warehouses are located. We were therefore not able to deliver orders during this period, and this created a backlog running into the second quarter. Unexpected logistical disruptions resulted in revenues for the quarter underperforming our expectations. Nevertheless, we still made positive strides in sales of our mining machines. We also continued to win international orders and demand from energy abundant areas such as Central Asia, North America and Australia remained solid. During the quarter of 2022. For the first quarter, we obtained customer orders from Laos.
While we kept engaging new clients, we also achieved a large portion of orders from existing clients. To optimize our market exploration and better serve our customers, we have established an international headquarters in Singapore, which has recently earned recognition and support from the Singapore Economic Development Board. This sets a milestone for our globalization strategy as we evolve into an increasingly globalized and culturally diverse technology company over the long run. Furthermore, we are building a team of local talent to drive our business expansion in Singapore and Southeast Asia. As we gradually build up our after sales service system overseas, we are getting closer to our customers and making headway into our globalization push. In addition, we recently broadened our sales channels by launching an online store for overseas retail customers, providing them convenient access to our products.
[Foreign Language] 下面介绍公司的预售算力情况。由于叠加了一季度延迟发货的影响，截至一季度末，待交付的合同算力约为九百九十六万匹，预收款水平达到了人民币十七点七亿元。随着工厂所在的城市疫情政策的调整，我们在政府的指导下有序地恢复生产和物流发货。二季度至今运转正常。截至本财报日，已经基本完成了今年一季度延迟订单的发货。
Returning to our pre-sales of computing power. Due to delivery delays during the first quarter of 2022, we have a total of 9.96 million terahash of computing power to be delivered and CNY 1.77 billion of advances from customers as of the first quarter's end. Our production and logistics have gradually resumed throughout the second quarter of 2022 to date. Following the local government adjustments and guidelines for resumption of production. As of today, we have delivered most of the orders that were backlogged from the first quarter of this year.
[Foreign Language] 第三部分是关于挖矿业务。本季度，我们目前在海外的挖矿业务由于持续受到新冠疫情、物流不畅和电力供应影响，导致已部署的矿机不能全部上线。截至本季度末，我们已经运抵哈萨克斯坦并完成部署的算力超过240万P。上线挖矿的部分浮动较大，介于零到80万P之间。本季度共产出了113.94枚比特币。截至一季度末，公司持有比特币166.96枚。我们在密切关注当地能源供应的同时，也在和合作伙伴积极协商，评估其他调整方案，以实现更有效的CMP。
During the first quarter of 2022, our overseas mining operations were impacted by the COVID-19 pandemic, logistic congestion and inadequate power supplies. By the end of the first quarter, our deployed computing power in Kazakhstan exceeded 2.4 million terahash per second. There was volatility in the number of active machines, which resulted in mining capacity during the period varying between zero and 0.8 million terahash per second. In the quarter, we mined a total of 113.94 bitcoins. By the end of the first quarter, we held a total of 166.96 bitcoins. In addition to closely monitoring the status of local energy supplies, we are also proactively liaising with our partners to evaluate alternatives in order to optimize resource allocation.
[Foreign Language] 尽管挖矿业务进展并非一帆风顺，我们依然将其作为公司的一项重要发展战略。挖矿业务可以帮助我们更好平衡算力配置，深度参与比特币挖矿产业的价值链，同时呢，也可以帮助我们更好地理解用户需求。总的来说呢，我们相信挖矿业务将在长期多元化公司的收入来源，并优化公司运营模式。因此呢，我们坚持践行该发展策略，更加谨慎和灵活地部署未来的挖矿业务的运营，并通过多地布局的方式来实施。
Despite the headwinds mentioned above, Bitcoin mining is still a significant component of our business development strategy. This business segment allows us to balance computing power allocation, engage more deeply in the Bitcoin mining industry value chain, and helps us better understand customers' needs. Overall, we believe that the long term development of our mining business will diversify our revenue sources and optimize our operations. Therefore, we will continue executing on our strategy and will be more prudent and agile in developing our mining business while mitigating risks by deploying machines to multiple localities.
[Foreign Language] 第四部分关于研发。在研发方面，大家可能已经注意到，我们近期推出了新型号的矿机1266，其在现有制程的基础上进行了工艺优化，实现了更高的算力表现，算力达到100T每秒。同时，新一代的比特币矿机的研发项目在下一代制程上进展顺利。我们已经完成了部分项目的设计工作，正在导入量产的关键阶段。由于研发和量产都存在不确定性，我们坚持只有在拿到样机测试结果后，再发布具体矿机的参数并开启预售。
In terms of research and development, as you may have noticed already, we recently launched our new mining machine model, the Avalon 1266. With process optimization based on our existing fabrication node, this new model outperforms previous models and has a computing power of 100 terahash per second. Meanwhile, research and development for the next generation of Bitcoin mining machines is progressing smoothly. We have completed the design work for some of the programs, and we are in the critical stage of progressing towards mass production. Due to various uncertainties throughout the research and development and mass production progress, we will disclose the specific performance parameters of our new generation of mining machines and commence pre-sales only after we complete the full testing process for the machine.
[Foreign Language] 在AI芯片业务上，我们坚持开源的理念，并于近期向公众客户开放了Kendryte K510的软件开发工具包SDK和文档的访问权限，并在软件开发工具包仓库中提供了数十款嘉楠精选的AI模型示例。开发者可以根据自己实际应用场景进行处理，进行训练，并部署在K510上，以获得K510上不同的AI应用体验。
Turning to our AI chip business, we insist on open source philosophy and recently made our Kendryte K510 software development kit and the documentation publicly available on the Internet. We carefully selected and provide dozens of AI model applications in the software development kit storage. Developers can add their own data and train on the K510 to acquire different user experiences based on real world scenarios.
[Foreign Language] 第五部分关于回购、ATM和退市风险。在克服各种挑战、努力推进业务和开发新产品的同时，公司也注意到近期国内疫情反复，资本市场相关因素对公司股价产生了负面影响。基于公司强劲的基本面和现金水平，我们通过了近期上限一亿美元、为期二十四个月的股票回购计划，并将在本次窗口期内开启执行。如此前公告，我们提前完成了2021年9月通过的上一期股票回购。此次新的回购计划显示了我们对公司长期前景的信心。我们将持续在季报中向大家披露更多的信息。
As we overcame challenges and endeavor to expand our business and propel our research and development in new products. We are also aware that uncertainties rising from reoccurrence of the COVID-19 pandemic and macro headwinds in the capital market have had an adverse impact on our stock price. Given our solid fundamentals and cash position, we recently announced another share repurchase program under which we may repurchase up to $100 million worth of outstanding ADS over the next 24 months. The share repurchase program will commence execution in the coming window period. As previously announced, we completed the share repurchase plan authorized in September of 2021 ahead of schedule. This new share repurchase program demonstrates our confidence in the company's long-term outlook. We will provide updates on the program in our future earnings release.
[Foreign Language] 公司的一季度结束的资金余额为人民币26.4亿元，营业资金充足。根据我们的业务特点，为了长期融资的可能性，降低潜在运营风险，我们与HCW签署了按市价发行协议。该协议呢，可以为我们提供一个按市价发行的融资项目。目前呢，这个项目并没有开始执行，仅进行了融资工具的设计，以便在未来市场情况改善以及时机成熟时，帮助公司灵活地在公开市场以较低的成本，发行成本进行融资。我们将持续在季报中向大家披露ATM的执行情况。公司呢，会充分地考虑股东的权益和资本市场环境，灵活地对各种融资工具进行配置调整。
By the end of the first quarter, the company had cash and cash equivalents of CNY 2.664 billion, demonstrating sufficient cash liquidity for operations. Considering the inherent need for capital in our business operations, we have been exploring access to long-term financing to mitigate our potential operating risks. As such, we entered into an at-the-market offering agreement providing for an ATM equity offering program with H.C. Wainwright & Co. The program is yet to be executed, but we have set up the relevant financial instruments that extend us the flexibility to raise capital with relatively lower costs in the open market when market conditions improve in the future. We will provide updates on its use in our future earnings release. The company will also prioritize shareholder interests and the general market when considering the execution of financing facilities and will make proactive adjustments to accommodate market conditions.
[Foreign Language] 我们注意到，由于中概股公司普遍面临的会计底稿问题，SEC在今年五月四日根据外国公司问责法的规定将我们列入了预摘牌名单，并很有可能在后续进一步将我们列入确定摘牌名单。这一事件引发投资者对我司退市风险的关注，我司在五月五号即对此做出了积极回应。我们也将继续按照中美法律法规和监管部门的要求，合法合规地经营。我们注意到中美两国政府正在就会计底稿披露的问题进行磋商谈判。我们积极盼望中美两国政府在该问题上尽快达成一致。作为一家主要营收发生在海外的企业，从公司的角度，我们会持续保持并提升在不同国家和地区合法合规经营的治理能力，坚持与资本市场沟通，寻求各种可能的解决方案来保护投资者的长期权益。
[Foreign Language] Taking a wider view, we have been monitoring the challenges that Chinese ADR companies are facing under the Holding Foreign Companies Accountable Act. On May fourth of this year, we were provisionally identified under the Holding Foreign Companies Accountable Act, and are likely to be conclusively identified at some times in the future. This has raised some shareholder concerns over the possible delisting of our company. We have proactively responded to our inclusion on the SEC's list on the following date, and we will continue to comply with all relevant laws and regulations in both China and the United States. We have seen progress in discussions between the Chinese and U.S. governments, and we hope that the two parties can reach an agreement in the near future regarding inspections and investigations of auditors' work.
As a company generating the majority of revenues overseas, we will maintain and improve our strong corporate governance and compliance with local laws and regulations. We will continue to communicate with the capital markets and actively explore possible solutions to protect the interests of our stakeholders.
[Foreign Language] 第六部分是展望。总的来说，本季度我们克服了诸多突发的挑战，尽管业绩受到一些发货延迟的影响，但我们依然实现了较为稳健的业绩表现。在业务上做出了新的尝试和探索，持续开拓市场并强化与客户的合作，这些都取得了积极的进展。面对未来可预见和无法预见的挑战，当继续坚持灵活务实的运营方式，努力地稳定供应，积极地应对行业市场变化和币价的波动，保持运营资金健康稳定，谨慎地平衡矿机售卖和挖矿业务，积极推动AI芯片业务的发展，实现投资者收益最大化。同时，我们也会继续推进业务的全球化发展，以更加贴近客户的方式提供优质的服务。
To conclude, we overcame many unexpected challenges and volatility during the first quarter of 2022. Despite our top-line results being negatively impacted due to pandemic-related delivery delays, our business performed steadily and achieved promising results. These were achieved as we implemented initiatives to support our business long-term development, and continued to expand our market and strengthen collaboration with our customers. Facing foreseeable headwinds or unexpected challenges in the future, we will continue to execute on our agile and flexible operating strategy and endeavor to maintain sustainable supply to respond to market fluctuations and Bitcoin volatility. We will aim to maximize shareholder returns by maintaining healthy operational cash flows, prudently allocating our mining machines between sales and our mining business, and actively promoting the development of our AI chip business.
Meanwhile, we will continue to advance our business globalization while better serving our customers by fostering a more client-centric after-sales service system.
[Foreign Language] 在今年第二季度，市场环境的不确定性依然较大。据公司管理层目前的判断，我们预测在2022年第二季度，公司的总营收将在人民币16到18亿元，约较2021年的二次增长48%到67%。该预测是公司根据目前的市场环境所给出的预估，实际情况可能会有所不同。
[Foreign Language] Looking forward to the second quarter of 2022, we see that significant uncertainties in the market environment still remain. Based on our current view, we expect our total net revenue in the second quarter of 2022 will be in the range of CNY 1.6 billion-CNY 1.8 billion, representing an increase of 48%-67% compared to the second quarter of 2021. Please note that this forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change.
[Foreign Language] 我的介绍就到这里，感谢大家。下面有请CFO James。
This concludes my prepared remarks. I will now turn the call over to our CFO, James.
Thank you, Mr. Zhang, and good day, everyone. This is James. As Ms. Zhang mentioned, the first quarter of 2022 was a challenging one for our company. Facing various unexpected obstacles, we still managed to deliver solid results for our investors. In the first quarter of 2022, we recorded 4.3 million terahashes in total computing power sold, representing a year-over-year increase of 119%. Our revenues were CNY 1,356 million, increased by 237% compared with the same period of last year. As we expected, our top line results were not able to meet the previous guidance we projected in our fourth quarter financial report due to the postponement of all the deliveries from our warehouses.
This is because of the unfortunate resurgence of COVID-19 pandemic since mid-March and the subsequent overall lockdown measures in the city where our mining machine factory and warehouses are located. Since the end of March, although we swiftly prepared to resume production and delivery under the guidelines of the local government, our delivery schedule for the first quarter has been materially delayed due to the nearly three weeks of halted operations. Against the backdrop of these difficulties, we maintained our international business development and a dynamic pricing strategy. Therefore, we continued to engage new and existing clients and managed to sustain a relatively high average selling price in the first quarter of 2022. With our relentless efforts to resume normal operations as of today, we have delivered most of the delayed machine orders from the first quarter.
Our mining business is gradually ramping up, but still facing headwinds from the power supply shortage. This resulted in a considerable portion of our deployed mining machines not being online in the first quarter of 2022. During the quarter, our mining computing power online varied in a rough range from 0- 0.8 million terahashes. During the first quarter of 2022, we generated 113.94 Bitcoins and held 166.96 Bitcoins as of the quarter's end. As winter has ended, the power shortage situation is improving. Since the second quarter of this year, more and more machines are gradually coming online. Our gross profit for the quarter grew 327% year-over-year to CNY 830 million.
As mentioned in previous quarters, due to the continued wafer shortage across the semiconductor industry, the inevitable increase in wafer price further weighed on our profit margin, which narrowed to 61% in the first quarter of 2022. Still higher than the average level of 57% in the full year 2021, but declining from 68% in the fourth quarter of 2021. To further strengthen our supply chain, we have made prepayments to our foundry partners to secure their production capacity throughout the year 2022. We are also grateful for all of our foundry testing and packaging partners' great effort as they strive to continue the supply for us despite the serious resurgence of COVID-19 in their cities during the first quarter of 2022.
In the face of challenging supply environment and the recent Bitcoin price downward fluctuations, we expect our growth margin may further come under pressure in the coming quarters. We reported a net income of CNY 442 million in the first quarter of 2022, a healthy bottom-line result considering the impacted top-line performance and increased production cost. Please also note that as we have utilized a part of deferred tax assets as of the first quarter of 2022, we incurred higher income tax expenses. We also expect an increasing tax burden for our profitable quarters going forward. I would now like to comment briefly on our share repurchase program.
During the first quarter of 2022, we repurchased a total of 2.1 million ADSs with an aggregate value of $10.3 million, representing an average repurchase price of $4.81 per ADS. Earlier on March 16th, we announced up to $100 million share repurchase program effective over the next 24 months. This new program follows on the heels of our recently completed $20 million buyback that we authorized in September of 2021 and completed ahead of schedule. Recently in the capital markets, we have been under pressure from both cryptocurrency price fluctuations and delisting suspicions. We consider it's good timing to focus on repurchasing shares, which helps to protect value for our shareholders.
We are committed to delivering value to our investors, and this enhanced buyback program indicates the confidence that both the management team and the board of directors have in the company over the long run. Last month, we also entered into an at-the-market offering agreement, providing for an at-the-market equity offering program to access capital in the public market with H.C. Wainwright. Please note that as of now, we do not currently expect to sell any ADS under the ATM program at this point in time. In light of the recent industry fluctuations and negative market sentiment, we are focused on executing our aforementioned buyback program to drive value for our shareholders.
As of the end of the first quarter, we had cash and cash equivalents of CNY 2,643 million, demonstrating a solid cash position that enables us to sustain our operations and business resilience. We will be cautious and prudent with any use of the ATM facility. Any share sales executed by the ATM facility will be disclosed in future quarterly earnings reports regularly. While Mr. Zhang has already discussed the potential delisting issue, we sincerely hope a détente will be reached on the audit matter by the respective regulatory authorities. Please be assured that we are carefully monitoring the situation and exploring potential practical measures to protect the interests of our investors. Now, I would like to briefly walk you through our financial results for the quarter.
Revenues were CNY 1,356.1 million, equals to $213.9 million, representing an increase of 236.7% from CNY 402.8 million in the same period of 2021.
Gross profit was CNY 829.8 million, which equals to $130.9 million, representing an increase of 327.2% from CNY 194.2 million in the same period of 2021. Total operating expenses in the first quarter of 2022 were CNY 251.5 million, which equals to $39.7 million, representing an increase of 21.0% from CNY 207.9 million in the same period of 2021. Income from operations in the first quarter of 2022 was CNY 578.3 million, which equals to $91.2 million compared to a loss from operation of CNY 13.7 million in the same period of 2021.
Net income attributable to ordinary shareholders in the first quarter of 2022 was CNY 441.6 million, which equals to $69.7 million, compared to a net income of CNY 1.2 million in the same period of 2021. Non-GAAP adjusted net income in the first quarter of 2022 was CNY 543.4 million, which equals to $85.7 million, representing an increase of 279.5% from CNY 143.2 million in the same period of 2021. Basic and diluted net earnings per ADS for the quarter were CNY 2.57, which equals to $0.41 in U.S. dollar.
Contract liabilities as of March 31, 2022 were CNY 1,769.9 million, which equals to $279.2 million, increasing from CNY 1,340.7 million as of December 31, 2021. This concludes our prepared remarks. We are now open for questions.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Once again, it's star one for questions. Our first question comes from Hans Zhang from D.A. Davidson. Please ask your question.
Hi, my name is Hans Zhang. Thank you for taking my question. I have several questions, and I'll ask in English first, and then I'll translate to Mandarin by myself. First, what would the revenue have been if there were no impact from the COVID-19 control measure for the March quarter? Have the production or delivery fully recovered at this moment? I mean, going forward, given China's zero-COVID policy, does the company have any backup plan like to mitigate the related risk from a similar lockdown or supply disruption?
Let me translate. Since the beginning of March this year, the pandemic has resurged in multiple cities across China. In response, local governments have taken pandemic prevention and control measures. On March fourteenth of this year, we received notice from the local government of the area where our factory is located that it will implement a five-day quarantine lockdown for all residents and businesses in the city. We fully expect that our business performance will be affected. Later, the quarantine policy was extended until the end of March.
During the quarantine period, local logistics and our deliveries were suspended. These delays to inventory delivery negatively impacted our revenue recognition in the first quarter of 2022. Since the end of March, the local government has switched to different levels of control measures based on the severity of the COVID-19 outbreaks, while encouraging businesses to return to normal operations. During this period, we have been closely communicating with the local government and have tried our best to resume normal production and inventory delivery. So far, we have basically completed the deliveries that have been delayed from the first quarter of 2022.
[Foreign Language] 公司也在仓储物流和供应链运营方面进行了多元化的尝试，包括在新加坡设立办公室和仓库，来运作部分的国际业务。这对于公司稳定的供应链也很有帮助。特别指出的是，不仅是为了应对疫情的不确定性，这也是公司国际化战略的重要一步。刚才有问了一下，就说如果受那个疫情影响，咱们利润率应该什么，应该还是有几个亿的影响，人民币几个亿的影响。
[Foreign Language] 应该会做到我们的guidance。
[Foreign Language] 对，基本上可以 meet guidance。
Okay. Let me first translate. We are also making new efforts on many operational fronts, such as warehousing, logistics and supply chain. For example, we have established an international headquarters as well as warehouses in Singapore to handle parts of our global businesses, which is also beneficial for the stability of our supply chain. This not only acts as a countermeasure to the uncertainty brought by the COVID-19 pandemic, but is also an important step forward in our globalization strategy. As we also mentioned, I think, excluding the impact of the COVID-19 control measures, I think we can meet our guidance previously we projected in our first quarter.
Thank you. Okay. Thank you. Yeah. It's been helpful. My second question, can you provide color on the mix and pricing trend of the spot shipments versus the futures contract? I think I guess it seems like we may have higher mix on the spot shipment given the gross margin is I think better than expected. How would that and going forward in second, say in second quarter, how is that trend evolving? Especially we are in the bearish environment of the Bitcoin market. Longer what will be the trend for longer term in terms of the mix?
[Foreign Language] 我想问一下，就是公司的这个现货跟预售的比例，啊，在第一季度的情况是怎么样？还有价格是怎么样？啊，因为一季度的毛利看起来，啊，就是好像比想象中的好一些，是不是，啊，这现货卖得比较多，然后还是说整体的这个价格有上升的趋势。那往往二Q看的话，啊，那二Q因为现在是比较，呃，比特币比较熊市，那二Q的情况，啊，有没有什么变化？就是现货预售的比例，还有就是价格。那长期来讲的话，我们怎么看，啊，这个现货跟预售的比例。
[Foreign Language] 好，公司其实是采取一个动态灵活的运营方式。其实那个期货和现货的占比每季度都会是个差异的。因为北半球的这个冬季的能源供应紧张和节假日等等原因的话，第一季度也是传统淡季，再加上近期市场波动的影响，我们预计今年二季度的现货订单比例会比较小。在币价现在持续承压的情况下，我们可能会分配更多的算力给挖矿。就像以往所说的，我们并不执着于锁定一个现货和期货的比例，而是在币价和市场的波动中，谨慎敏捷地将生产的矿机在现货、期货和挖矿业务上进行动态的分配，来实现收益的最大化。
Due to our dynamic and flexible operating models, the proportion of spot sales and future contract sales vary from quarter to quarter.
Because of the tight energy supply in the northern hemisphere in winter and the number of holidays, the first quarter is typically traditionally low season. In addition, considering the recent market volatility, we expect a smaller proportion of spot sales in the second quarter of 2022. If the Bitcoin price continues to be under pressure, we may allocate more of our computing power to our own mining business. As we have said in previous quarters, we are not trying to fix the proportion of spot sales and future contract sales. Instead, we will maximize shareholder returns. By dynamically adjusting the proportion of mining machines allocated to spot sales, future contract sales and our mining business based on the Bitcoin price and market volatility.
Thank you. Thank you.
[Foreign Language] 好，可以。谢谢。下一个问题，就是公司海外业务发展情况，特别是北美，就是我们目前大概有做哪些事情，然后有没有看到什么样的挑战，然后什么时候可以看到比较有规模的业务发展起来。can you share with us your overseas market development, particularly the business in North America, and what have you been done?
Have you achieved? What challenge have you seen so far? Then when will expect the meaningful ramp up in the market? Thank you.
[Foreign Language] 正如我们之前分享的，我们在新加坡设立了海外总部，开展研发、仓储和供应链相关的业务，并且我们已经获得了新加坡招商局的审批和优惠政策的支持。
As we have mentioned before, we set up an international headquarters in Singapore to handle operations such as research and development, warehousing and supply chain. This has been approved by the Singapore and the Singapore Economic Development Board, which has supported us with referral policies.
[Foreign Language] 同时，在海外的业务中，我们非常看重公司在北美的发展。我们注意到，由于丰富的能源，尤其是清洁能源的快速发展，以及对加密货币更广泛的接受度，北美地区正在吸引越来越多的比特币矿工投资建设矿场。今年四月初，我们参加了Miami举行的Bitcoin 2022大会，与行业内的众多矿企以及合作伙伴深入交流，建立联系。我们已经安排一些同事在北美实力开拓业务，包括销售和挖矿的合作。一个最重要的突破点，就是加强售后服务的建设，提供更加贴近客户的社区服务。
Meanwhile, of our overseas businesses, we pay especially high attention to our development in North America. We have seen that abundant energy supply, especially the rapid development of clean energy and a wide acceptance of cryptocurrencies in the region, are attracting more and more miners to invest in and develop mines. In early April this year, we participated in Bitcoin 2022, a conference held in Miami, and held in-depth dialogues and established connections with many mining companies and industry partners. We are building our local teams in North America as well and already have some team members on board. They are helping to expand our business in a number of ways. For example, in the field of sales and developing partnerships for mining business. More importantly, we are improving our after sales services to provide continuous services closer to our customers.
[Foreign Language] 总的来说，北美是我们非常重视的一个重要市场，我们也在积极地努力地进行开拓。目前，其实是在一个组织第二次创业阶段，也预期到在探索阶段会遇到各种各样的问题，我们希望通过持续不断的努力做出成绩，然后在时机成熟的时候再和各位投资人披露进展。谢谢。
Overall, we attach great importance to the North American market and are proactively expanding our businesses. Yes, we expect to encounter many different kinds of challenges during this second startup. Hopefully our continuous efforts will deliver solid results. We will disclose more details about our progress to our shareholders when appropriate. Thank you.
Okay. Thank you. I'll pause here and jump back to you.
Thank you.
Thank you. Our next question comes from Mark Palmer from The Benchmark Company. Please ask your question.
Thank you. With Bitcoin being weak here in the second quarter, could you talk about how that impacts mining machine sales and the average selling price?
[Foreign Language]好的，谢谢。Let me translate for Nangeng Zhang。我们看到第二季度币价表现不是很好，那这个情况对公司矿机的销量和均价有什么影响？目前看的这个整体的情况怎么样？
[Foreign Language] 正如刚才已经给出的指引，我们预期2022年第二季度的总营收在人民币16到18亿元的区间。这个预测呢，是根据公司根据目前的市场和经营情况给出的预期，考虑到市场环境的不确定性依然较大，实际情况可能会有所不一样。
As we have mentioned earlier, we expect our total net revenue for the second quarter of 2022 to be between CNY 1.6 billion-CNY 1.8 billion. This forecast reflects our current and preliminary view on the market and operational conditions, considering that there are still significant uncertainties in the market environment. This forecast is subject to change.
[Foreign Language] 我们注意到比特币价格从去年四季度的高位持续震荡下降，尤其是进入五月份，币价进一步受到了美联储加息节奏等宏观因素的影响。我们也相应地对矿机产品的定价进行了动态调整，与我们的客户共同承担币价下行带来的压力。我们通过在全球市场努力扩展，以及为客户提供更好的售后服务，持续巩固和现有客户的关系，矿机销售业务也努力地去吸引新客户签订订单。截止到一季度末，我们的客户预收款达到了人民币十七点七亿元，剔除其中一部分因疫情导致的一季度延迟发货订单，我们的预收款也是处于较高水平，对于我们今年第二季度的营收打下了基础。
We have noticed that the Bitcoin price has continued to fluctuate and fall from its previous highs. In particular since we entered May. The Bitcoin price has been further affected by macroeconomic factors such as the Fed increasing rates. We have dynamically adjusted our mining machine pricing to share the pressure created by downward Bitcoin prices with our customers. By expanding our businesses in the global markets and providing better after-sales services. We continue to strengthen our current customer relationships, fortify our mining machine sales business, and attract new customers orders. As of the end of the first quarter of 2022 our advances from customers had reached CNY 1.77 billion. Even excluding the orders that are delayed due to the effect of the COVID-19 pandemic.
Advances from customers are still at a relatively high level, setting a solid foundation for our second quarter revenue this year.
[Foreign Language] 从以往经验判断，矿工收益和矿机的需求都会受到币价波动影响，矿机的价格也会受到影响，这个就是我们面对的这个行业特点。公司经过九年多的运营和管理，积累了一些应对的经验，我们会继续以审慎灵活的运营、稳定的供应来应对各种市场波动和突发情况。
Based on past experience, mining revenues, demand for mining machines and mining machine price are all affected by Bitcoin price volatility. Which has always been a challenge we have faced within this industry. With over nine years of operations and management, we have accumulated good experience to deal with this challenge. We will continue to react to market volatility and unexpected situations through our agile and prudent operations and our stable supplies.
[Foreign Language] 我们预计在美元加息的周期里边，比特币的价格可能还会有波动，我们依然看好比特币和其相关的超级计算技术的长期前景。谢谢。
We expect that in the trend of Bitcoin price volatility will continue within this Fed interest rate hike cycle for U.S. dollars. We remain optimistic on the long-term prospects for Bitcoin and its associated supercomputing technology. Hope I answered your question. Thank you.
Yes that's great. Thank you. Just one follow-up. You mentioned the supply chain was impacted in multiple Chinese cities. I know you also set up some warehouses and stuff for logistics. Can you talk about your expectations for future supplies?
[Foreign Language] 他是想问就是我们的供应链是否受到了这个疫情封城的影响。
[Foreign Language] 是这样，我们位于长三角、珠三角的晶圆厂和封装测试厂这些合作伙伴，应对新冠疫情都做了充分的准备和预案，并没有出现停工或停产现象，一直在为我们持续地供应。在此也非常感谢这些合作伙伴的大力支持。
Our partners including foundry, testing and packaging partners located in the Greater Yangtze River and Pearl River Delta were fully prepared and had backup plans for the resurgence of the COVID-19 pandemic. They did not suspended their business operations and continued to supply for us. I would like to express our gratitude for the great support from our partners.
[Foreign Language] 公司目前也通过预付款的方式锁定了今年的产能。如财报公布的，截至今年一季度末，我们的预付款水平达到了人民币18.9亿元，创历史新高。在新冠疫情严峻的情况下，我们会更紧密地和供应链相互支持、互助互援。我们和供应端的联系是稳固和扎实的，我们对保持持续供应现在持谨慎乐观的态度。公司也持续布局未来更先进制程的技术和产能。
Okay。
[Foreign Language] 谢谢
Okay. On the other hand, we have secured production capacity this year through upfront prepayment to our foundry partners. As announced in the earnings press release, our prepayments were CNY 1.89 billion as of the end of the first quarter this year, reaching a new historical high. In the severe market environment brought by the COVID-19 pandemic, we and our supply chain partners are supporting each other to navigate through the tough time. We have a stable and solid relationship with our suppliers, and we remain cautiously optimistic for maintaining a stable supply. We are also in progress towards exploring and acquiring the technology and production capacity for more advanced nodes. Hope I answered your question. Thank you.
Yeah. Yes, thank you very much. Thank you. Our next question comes from Shang Chen from Guosen Securities . Please ask the question.
Can you hear me?
Yes.
My question is, most of your customers are institutional buyers, so why have you built up your online store targeting retail customers?
As a matter of fact, customers can always buy mining machines from us regardless of the quantity, even just one machine. Putting customers as our priority and reducing friction in the transaction process and related costs is a very important aspect of our sales system. Now small and micro scale customers and those who would like to purchase a sample machine can make a purchase in our online store. They can even settle with Bitcoin in the region where such settlement is legally permitted, enjoying a quick and very convenient experience. In addition, our online store is important for raising the transparency of machine models and prices for our customers. Going forward, we will further develop our sales channels and gradually improve after-sale services in the global market.
Whether customers are small or micro scale or mid and large scale, they can all enjoy an upgrade to every aspect of our service. I hope I answered your question. Thank you. We presented a new mining machine model, the Avalon 1266 miners during the Bitcoin 2022 Miami conference. Our model 1266 is an upgrade on the current design and fabrication nodes with about 10% improvement in the power efficiency and performance. As a result, this new mining machine produces overall computing power of 100 terahash per second. Additionally, we will keep propelling forward the upgrade in our processing and design and expected progress of introducing more advanced nodes thus bringing more competitive products to the market. Hope I answered your question. Thank you.
Great.
I think we can conclude the call. Thank you.
Right. Thank you very much. That is all the time we have for questions. I will now turn the call back to the management for closing remarks.
Thank you once again for joining us today. If you have further questions, please feel free to reach us through the contact information provided on our website.
Thank you. That concludes the call today. Thank you everyone for attending. You may now disconnect.