Ladies and gentlemen, thank you for standing by, and welcome to Canaan Inc.'s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the management's prepared remarks, we'll 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, Mr. Clark Soucy, Investor Relations Director of the company. Please go ahead, Clark.
Thank you. Hello, everyone, and welcome to our earnings conference call. The company's financial and operating results were released by our Newswire services earlier today and are currently available online. Joining us today are our Chairman and CEO, Mr. Nangeng Zhang, and our CFO, Mr. James Jin Cheng. In addition, Mr. Edward Lu, our SVP, Mr. Liang Wang, IR Senior Director, and Miss Xi Zhang, IR Manager, 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 up the call 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 assumes 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 risk factors and documents we file with Securities and Exchange Commission, 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 results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable 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.
[Foreign language] During the second quarter of 2022, under the combined influence of two rounds of interest hikes by the Federal Reserve, the Bitcoin price continued its downward trajectory, declining to about $20,000 from $45,000.
A surge in energy prices caused by geopolitical conflicts further impacted both mining income and demand for mining machines. The situation thus led the Bitcoin network's total computing power to decline slightly. At the same time, the cities where our main offices are located experienced a resurgence of the COVID-19 pandemic, with accompanying large-scale lockdowns and pandemic control measures. This combination of factors negatively impacted our operations during the quarter. Despite this unfavorable backdrop, our team successfully navigated through the difficulties posed by the challenging environment. As well as ensuring that our employees remained healthy and were supplied with daily necessities, we continued to fulfill our clients' orders, achieving 5.5 million terahash per second in total computing power sold. Coupled with the contribution from our steadily developing mining business, we generated total revenues of RMB 1.65 billion for the quarter, meeting our previous expectations.
Notably, we achieved a net profit of RMB 609 million in the second quarter.
[Foreign language] 收到来自全球各地零售客户订单。随着客户群在向海外转移，我们也努力地建设相应的支持措施。公司位于新加坡的海外地区总部已经组建了当地的研发、财务以及运营销售的团队，并且在本季度实现了生产、组装、仓储和物流运营的初步打通，成为了公司第二个综合性办公室。相信这个会对公司海外业务带来强力的支撑。
In regard to the sale of mining machines, we continue to work closely with our customers during the quarter. We delivered a total of 5.5 million terahash per second computing power, generating revenues of RMB 1.6 billion. Sales of mining machines continue to drive the growth of total revenues, which grew 48.6% year-over-year and up 21% quarter-over-quarter. We strove diligently to fill the demands of all of our customers. Following the launch of our online store for overseas retail customers in late May, we have received orders from all over the world. As our customer base shifts to overseas markets, we work tirelessly to build and expand supporting systems.
Our overseas headquarters in Singapore has already established R&D, finance and other operational teams, and launched a supply chain system that encompasses assembly, warehousing and logistics in this quarter. With comprehensive operational functions, our Singapore headquarters has become a second general office and will provide valuable support for our overseas operations.
截至2022年第二季度末，公司的待发货算力为475万T，预收款为人民币10.2亿元。尽管预售订单为我们接下来短期内的营收打下一定的基础，我们也注意到，在币价持续承压下跌而且能源价格上涨的情况下，矿企也面临着非常大的营收和资金的压力。因此，我们认为未来可预见的一至二个季度，矿工对于算力的购买需求将趋于疲弱，进而会对公司的销售造成负面的影响。
As of the end of the second quarter of 2022, we had a total of 4.75 million terahash per second of computing power to be delivered and customer advances of RMB 1.02 billion on hand. Although contract sales orders set a considerable foundation for our upcoming short-term revenue, we are also fully aware that the Bitcoin price remains under pressure while energy prices are increasing. As such, mining companies' revenues and financials are expected to come under significant pressure. Considering these factors, we expect that demand for computing power will weaken over the next one to two quarters, which will negatively affect our sales revenue in the second half of 2022.
[Foreign language] 尽管行业正在经历低谷，我们仍然对比特币以及其背后的区块链技术、超级计算技术的长期前景充满信心。我们也在持续深耕研发，优化供应链，努力为市场和客户提供品质更好、性能更卓越的产品。新一代的比特币矿机的研发项目在下一代支撑上进展顺利，目前也已经到了大规模量产前的关键阶段。由于研发和量产都存在不确定性，我们需要拿到这个样机的测试结果以后，再发出具体的矿机参数。
Although our industry is experiencing a challenging period, we still retain our confidence in the long-term prospect of Bitcoin and its underlying blockchain and supercomputing technology. We continue to invest in research and development, improve our supply chain capability, and work diligently to deliver superior products with high quality and advanced performance to the market and our customers. Our research and development for the next generation of mining machines is progressing smoothly. Currently, we have reached the critical stage of progressing towards mass production. Due to various uncertainties throughout the research and development and mass production process, it is necessary for us to wait until we have the testing results before we disclose the specific performance parameters of our new generation of mining machines.
[Foreign language] 在历史上，无论比特币价格涨跌，我们都持续地坚持投入研发。尽管目前的比特币币价动荡，我们仍然相信比特币在未来会体现出更多的价值。顺利推出并且交付下一代矿机，是我们当前最重要的创新研发任务。新的产品可以帮助我们的客户进一步提升运营效率，让他们可以更好地应对未来的挑战，获得更好的回报。
In retrospect, no matter the upside or the downside cycle of the Bitcoin price, we have always insisted on investing in research and development. Although the Bitcoin price is currently experiencing turbulence, we still believe that Bitcoin will present more value in the future. At the current stage, launching the next generation of mining machines and delivering through mass production are paramount for our innovation and R&D efforts. Our new products will help clients further enhance mining efficiency, better prepare future challenges, and obtain more returns.
在挖矿这个业务上，在币价下行波动的背景下，坚持以灵活的运营开展公司在海外的挖矿业务就显得尤为的重要。本季度，由于通电的情况有所改善，公司的挖矿业务这期间产生了245.11枚比特币。截至季末，持有比特币346.84枚。尽管币价在本季度进一步下跌，挖矿营收仍然录得了5,210万人民币，环比增长了60.9%。在市场环境比较严峻的情况下，我们将努力探索挖矿业务的地域多元化。我们正在北美、东南亚等地区推进合作，以期扩大我们的业务规模，并降低成本。
Given the current environment characterized by downward fluctuations in the Bitcoin price, it's particularly important to insist on flexibility and nimbly developing our business, our mining business overseas. During the quarter, thanks to our improved electricity supply, we mined 245.11 Bitcoins, and we have a total of 346.84 Bitcoins on hold by the end of the quarter. Although the Bitcoin price continues to decline during the quarter, we still generated mining revenue of RMB 52.1 million, representing quarter-over-quarter growth of 60.9%. Faced with such an unfavorable market environment, we are currently exploring more opportunities for regional diversification of our mining business. We are forging partnerships in North America, Southeast Asia, and other regions so as to expand our business scale and lower costs.
[Foreign language] AI芯片这一部分，公司的AI芯片销售，由于本季度国内部分主要的城市新冠疫情的封控，致使下游的集成厂商的消费类产品库存消化比较缓慢，进而影响第二季度的AI芯片销售。随着进入第三季度的疫情防控的改善，下游厂商也重新开始备货，以及我们对于AI芯片销售力度加强等综合影响，销售情况已经有所好转。近期，我们的K510 CRB开发板通过了亚马逊的AWS IoT Core认证。通过了我们的技术参考支持，客户能够更方便的集成AWS IoT的服务软件到K510的芯片平台，以快捷开发了基于AWS IoT服务的产品。同时，经过认证以后，K510开发板的产品也已经在AWS网站上展示，进一步提升了品牌的认知度。
Let's now turn to our AI chip business. As a result of the COVID-19 control measures implemented in major cities during the quarter, downstream manufacturers had slower inventory turnover for consumer products, which negatively impacted our AI chips business revenue in the second quarter. As the pandemic control measures are gradually eased in the third quarter, downstream clients have enjoyed better sales and started to build up their inventories again. Simultaneously, we have further strengthened the sales efforts for our AI chips, and our sales have now begun to recover. Recently, our K510 CRB Customer Reference Board Development Kit obtained Amazon's AWS IoT Core certification. Through our technology reference support, it became easier for our clients to integrate AWS IoT service software on the K510 chip platform, and develop products based on the AWS IoT service. At the same time, obtaining the certification allowed our product to be displayed on the AWS website, further increasing our brand recognition.
[Foreign language] 本季度，公司大力度地执行了现有的上限一亿美元、为期二十四个月的股票回购计划。截至2022年8月12日，共回购超过了二百八十万股的ADS，共计一千零三十三万美元，平均每股回购单价为三点六三美元。股票回购计划大力执行，展现了我们为股东提升价值的决心，以及对公司长期发展的信心。
This quarter, we also made decisive progress on our share buyback program approved in March, under which we may repurchase up to $100 million worth of our outstanding ADS over the next 24 months. As of August 12th, 2022, we have repurchased over 2 million ADS for a total of $10.3 million, with an average price of $3.63 per share, which is lower than the current stock price. Our execution of this repurchase program demonstrates our strong determination to continually increase shareholder value and our confidence in the company's long-term outlook.
Foreign language] 公司于2022年6月23日发布公告，已与特定的权证持有人签署了回购协议，以$661万回购注销了全部流通在外的认股权证。公司已经全额支付了回购价款。在后续完成全部回购的注销手续以后，公司已发行ADS数量就将减少472万。届时，我们也将对此进行公告披露。
On June 23rd, 2022, we announced the repurchase agreement with certain warrant holders to repurchase all outstanding warrants for an aggregate price of approximately $6.61 million. We have made the payments in full. Upon the completion of warrant certificate cancellation, our outstanding ADS will be reduced by 4.72 million. We will discuss in due time when the cancellation process completes.
[Foreign language] 本季度呢，公司没有进行融资，在目前的市场环境以及公司股价承压的情况下呢，回购仍然是我们资本市场运作的重点。
We didn't execute any financing activity during the quarter. Considering the current market environment and our stock price that is under pressure, we'll be focusing on the repurchase program as the core of our capital market operation.
[Foreign language] 此外，我们注意到投资者对于中概股会计底稿引发的退市风险担忧。公司正在积极地寻求可能的解决方案，以保护包括股东在内的利益相关人，并尽力保持上市公司的地位和合规性的优势，以推动公司的长期发展。作为一家主要营收发生在海外的上市企业，我们也将持续保持并提升在不同国家和地区合规合法经营的治理能力，并且保持着与资本市场的沟通。
I would also like to acknowledge that investors have raised concerns over the delisting risk of our company under the Holding Foreign Companies Accountable Act. We have been actively exploring possible solutions to protect the interest of our shareholders and other stakeholders. We are taking every step to maintain our listing status and the advantage and compliance as a listed company to promote the long-term development of our firm. As a public company with the majority of revenues generated overseas, we will further strengthen our governance and operations capabilities to comply with applicable laws and regulations in different locations and maintain active communications with capital markets.
[Foreign language] 展望部分，纵观二季度，无论是国内的新冠疫情反复，还是国际政治经济环境以及比特币价格下行走势，都给我们经营带来诸多的阻力。在这样富有挑战的情况下，我们努力与上下游合作伙伴保持沟通协作，取得了来之不易的稳健业绩。但是我们也注意到，币价下跌，能源价格上涨，环境依然非常严峻，这给整个比特币挖矿行业都带来了巨大的压力，也将会在未来的一段时间严重地冲击矿工对于算力的购买需求。
During the second quarter, our business faced several concurrent headwinds, including further outbreaks of COVID-19, a volatile geopolitical and economic environment, and a downward trend in the Bitcoin price. Against this uncertain backdrop, we relentlessly maintained our communication and collaboration with upstream and downstream partners and performed steadily despite these challenges. However, we are aware that macro adversities, particularly the decline of the Bitcoin price and rising energy costs, have pressured the entire Bitcoin mining industry, seriously impacting miners' demand for computing power for some time in the future.
[Foreign language] 因此，我们预计在未来的一到两个季度，公司的业绩将进一步承压。基于公司管理层目前的判断，我们预计在2022年第三季度，公司总营收将在人民币九到十亿元，相比2021年三季度下降17%到32%。该预测是公司根据目前的市场以及经营情况给出的预期，实际情况可能有所不同。
Therefore, we expect our performance to come under further pressure during the upcoming one to two quarters. Based on our current view, we expect our total revenues in the third quarter of 2022 to be in the range of RMB 900 million-RMB 1.1 billion, representing a decrease of 17%-32% compared with the third quarter of 2021. Please note that this forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change.
[Foreign language] 嘉楠自成立至今已经走过了九个年头，经历了数个比特币币价周期。我们的管理层在应对币价下行方面具有一定的经验。作为一家负责任的企业，在行情最为火热的时候，我们也会对市场保持敬畏，不会为了短期的扩张而牺牲资产负债表的健康。因此公司目前没有有息负债，矿机和加密资产也没有设置抵押。加之目前的现金水平，这些都让我们可以在目前不利的市场环境中稳步推进公司的各项战略，保护员工和合作伙伴，让公司的产品和服务可以继续进步。
It has been nine years since our inception, and during that time, we have been through multiple Bitcoin price cycles. Our management team has a good amount of experience operating in market environments where the Bitcoin price is declining. As a responsible company, we always keep respect for the market. Even in bullish times, we didn't expand at the expense of balance sheet health. As such, now we do not have interest-bearing debt, and our mining machines and cryptocurrencies are not collateralized. These financial advantages, along with our current cash position, allow us to steadily push forward our business strategies, despite unfavorable market environments and protect our employees and partners while continuously improving our products and services.
[Foreign language] 在每一次市场下行的时候，都是我们潜心打磨新产品、稳步进行市场拓展、打通并优化物流和供应链的好时机。在现在这段时间呢，我们会进一步地加强海外业务拓展，加强售后服务体系建设，做好准备呢更好地去服务我们的客户。同时呢灵活、务实、审慎地发展挖矿业务，并增进矿机销售和挖矿业务之间的协同效应。
When the market enters a downswing, it also provides a good time for us to sharpen our new products, steadily develop our markets, and grow and optimize our supply chain and logistics. At the same time, we continue to expand our business internationally and strengthen our after-sales service system to better serve our customers. Furthermore, we will retain the agile and flexible operating strategy when prudently developing our mining business while enhancing synergies between our machine sales and mining business. This concludes my prepared remarks. I will now turn the call over to our CFO, James Cheng.
Thank you, Nangeng Zhang, and good day, everyone. This is James. In the second quarter of 2022, we reported total revenues of RMB 1,652.7 million, representing 21.9% quarter-over-quarter increase, and 52.8% year-over-year growth, meeting our guidance range. During the quarter, the Bitcoin price further sank to below $20,000 from about $45,000 in late March. Despite this soft market sentiment, we strive to achieve this top-line performance, primarily due to the delivery of 5.5 million terahash per second of computing power for our clients. The relatively high average selling price we secured with contract sales in previous quarters also contributed to the top-line results. Our AI chips business recorded revenue of RMB 1.6 million for the quarter due to soft demand from integrated product providers, e.g., our customers.
This is because they stocked up electronic product inventories that embed our chipsets during the quarter, when the pandemic-related lockdown negatively impacted their supply chain and the consumption of these retail electronic products. As the pandemic quarantine control measures gradually eased and the retail started to recover, we are having more progress in our AI chip sales in July and early August. Our mining business, with an improved power supply, generated 245.11 Bitcoins in the second quarter, which contributed RMB 52.1 million in revenue, representing a sequential revenue increase of 60.9%. We had 346.84 Bitcoins on hold as of the quarter's end, compared with 166.96 Bitcoins as of March 31, 2022.
Due to the ongoing energy instability, a portion of our deployed mining machines have not been consistently online, and we are facing increasing energy costs for our operations. Under the evolving market environment, we are prudently exploring other geographical regions with favorable mining conditions to diversify our operations. Above all, our gross profit for the quarter increased by 12% sequentially and 117.3% year-over-year to RMB 929.7 million. As a result of the complex effect of slightly decreased average selling price and increased cost due to wafer price rise, our gross margin for the quarter narrowed to 56.3% from 61.2% in the first quarter of 2022. In the second quarter, we continued our efficient expense management with consistent investment in research and development.
Notably, we have built an R&D team at our Singapore overseas headquarters by leveraging the advantage of local talent. From profit and loss perspective, we have several material non-operating items related to accounting treatment for the quarter. First, we incurred a RMB 30 million impairment for our cryptocurrency assets in the quarter due to the Bitcoin price decrease compared with the first quarter's end. I would like to reiterate that Bitcoins are initially recorded at the price when we generate them. Our digital assets are recorded on the balance sheet, net of any impairment losses incurred since initial recognition. Gains are not recorded until realized upon disposal of such digital assets.
Secondly, during this quarter, due to the depreciation of RMB against the U.S. dollars, we also recorded a foreign exchange gain of RMB 114.3 million, as almost all of our revenues were generated from overseas markets in U.S. dollars. Should the RMB appreciate against the U.S. dollars in the future, we expect to incur corresponding foreign exchange losses. Last but not least, the change in fair value of warrant liability brought us a gain of RMB 25 million in the second quarter. As we completed the repurchase of all outstanding warrants in late June, we don't expect any gains or losses from such fair value change in the foreseeable future.
As a result of foregoing, we realized a solid net income of RMB 608.9 million for the second quarter, achieving 37.9% increase quarter-over-quarter and 148.6% growth year-over-year. Turning to our balance sheet. As of the end of the second quarter, we have customer advances of RMB 1,017.5 million. Together with our cash generated from product sales, we have an aggregate of RMB 2,640.7 million in cash and cash equivalents as of June 30, 2022, maintaining relatively flat compared with the end of the first quarter. Our cash level provides us with a solid position to navigate challenging market environments, enables us to carry out prudent exploration in expanding our global presence, and continues our share repurchase program.
As of August 12, 2022, we have repurchased a total of 2.8 million ADSs with an aggregate value of $10.3 million and an aggregate average repurchase price of $3.63 per ADS under our current stock repurchase program approved in March 10, 2022. This stock buyback demonstrates our firm confidence in the company's long-term growth prospects. Moreover, as mentioned earlier, we reached an agreement with our warrant holders to repurchase all 4.72 million outstanding warrants in late June for an aggregate of $6.61 million. The repurchase of outstanding warrants enables us to capitalize on the current valuation and grants us more financing flexibility in the capital markets in the future.
Under the current market environment, we will continue our conservative approach in the capital market and prioritize the share repurchase program to drive value for our shareholders. Looking forward, we see that the continued lower Bitcoin price level, coupled with the increasing energy costs and the logistics expenses, has significantly jeopardized our clients' demand and their cash flow, thus we expect a considerable decrease in both product orders and average selling price. Taking into account the relatively high level of production costs, we expect an inevitable gross margin decrease in the second half of this year. Subsequently, we expect our bottom line performance to experience a substantial decrease or even loss-making in certain scenarios if the Bitcoin price continues to fluctuate at a low price level.
Maintaining respect for the market, we will continue our prudent and agile operating strategy to navigate the current market dynamics and strengthen our supply chains and develop advanced new products for future opportunities. Now, I would like to briefly walk you through our financial results for the quarter. Revenues in the second quarter of 2022 were RMB 1,652.7 million, $246.7 million, representing an increase of 21.9% compared to the first quarter and an increase of 52.8% from RMB 1,081.8 million in the same period of 2021.
Gross profit in the second quarter of 2022 was RMB 929.7 million, which means $138.8 million, representing an increase of 12% from 829.8 million in the first quarter of 2022, and an increase of 117.3% from RMB 427.9 million in the same period of 2021.
Total operating expenses in the second quarter of 2022 were RMB 270.5 million, which means that $40.4 million, representing an increase of 7.7% from RMB 261.2 million in the first quarter of 2022, and an increase of 3.1% from RMB 262.4 million in the same period of 2021.
Income from operations in the second quarter of 2022 was RMB 659.3 million, which means that $98.4 million, representing an increase of 13.9% from RMB 578.6 million in the first quarter of 2022. An increase of 298.4% from RMB 165.5 million in the same period of 2021.
Net income attributable to ordinary shareholders in the second quarter of 2022 was RMB 608.9 million, which means $90.9 million, representing an increase of 37.9% from 441.6 million RMB in the first quarter of 2022, and an increase of 148.6% from 245 million RMB in the same period of 2021.
Non-GAAP adjusted net income in the second quarter of 2022 was RMB 688.2 million, $102.7 million, representing an increase of 26.6% from RMB 543.4 million in the first quarter, and an increase of 115% from RMB 320.1 million in the same period of 2021. Basic and diluted net earnings per ADS for the quarter were RMB 3.53, which means $0.53. Current liabilities as of June 30, 2022 were RMB 1,017.5 million, $151.9 million, decreasing from RMB 1,340.7 million as of December 31, 2021. This concludes our prepared remarks.
We are now open for questions.
We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question at a time. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. To ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. Thank you. We'll now take our first question. Please stand by. First question is from the line of Jiaer Zhu from China Renaissance Securities. Please go ahead.
Uh, [Foreign language]
Our future contract sales require our clients to prepay at least 50% of the total payment to secure mining machines. By the end of the second quarter, our customer advances reached RMB 1.017 billion. So far, we have seen very limited cases of payment defaults. Future contract sales have always been a part of our business model. We negotiate contract sales with clients to lock in prices for orders to be delivered in the future. The business model has been acknowledged by both our clients and us. Even when the Bitcoin price soars, we will still deliver mining machines at predetermined prices.
[Foreign language] 因此，预计下半年算力的消耗量和销售价格，也会延续一个下降的趋势。就如在这个季报、周报里记录的，我们预计在2022年第三季度的营收，应该是在人民币九到十一亿元。
Our current prepaid orders on hand set a considerable foundation for our third quarter revenue. However, we have noticed a significant decrease in demand from miners' deployment of computing power due to factors such as the declining Bitcoin price and surge in energy prices. We have adjusted our prices in response. As you may have seen on our online shop, the average selling price for retail has been adjusted down to $30 per terahash. Therefore, we expect a downward trend in sales and price of computing power in the second half of this year. As disclosed in the earnings release, we estimate the third quarter's revenues to be between RMB 900 million and RMB 1.1 billion.
[Foreign language] 同时，我们也看到一些有经验的客户，在运营和现金方面并没有受到特别大的影响。因此，也有意在电价和矿机的价格低点去部署更多的算力。我们在进行积极的协商，我们也会关注行业的形势，去谨慎地探索机会，在合适的时机，下盘去部署合作挖矿。继续以灵活务实地运营，去应对电价和市场变化。把算力在现货、期货和挖矿业务之间进行动态调整。公司在过去几年其实已经经历过几次比特币价格的大波动和熊市周期了。所以，目前的市场虽然不太理想，但是我们还是对这个公司的发展保持一些这个。
Meanwhile, we've observed that for some of our experienced clients, their businesses haven't been particularly impacted in terms of operations and cash. They have the intention to deploy more computing power at the low point of the Bitcoin and mining machine prices. We are currently in active communication with these clients. We will also continue to closely monitor market conditions and prudently explore opportunities for mining collaborations at the appropriate time. We will also flexibly adjust our operations in response to Bitcoin price and market changes. Computing power will be dynamically adjusted in its allocation of spot sales, future contract sales and our mining business. During the past few years, we've experienced multiple dramatic fluctuations in Bitcoin price as well as bear market cycles. Although the market's not in an ideal condition right now, we have faith in our long-term growth.
[Foreign language] 好，谢谢。
[Foreign language] 谢谢张总。我想问一下，就是你刚才说的，我们公司这个应对下行这个市场策略，那我们在海外市场这一块的拓展有没有进一步的计划。So if we have a further plan to expand our overseas markets, on the self mining business.
[Foreign language] 是这样，我们现在其实持续地在和海外客户保持联系和密切的合作。现在全球能源价格都在普遍上涨，所以我们看到在能源相对丰富和价格有优势的地区，客户的购买意愿更强。除了销售以外，我们还积极地派团队去参加在北美等地区的各种展会，或者比特币的矿业大会，去加强和业内客户以及合作伙伴的交流和产品推广。
To answer your question, we continue to closely communicate and collaborate with overseas clients. As energy prices soar globally, we have seen stronger demand in places where energy resources are abundant and have price advantages. Our team are also actively participating in Bitcoin and mining industry conferences held in North America and other regions to enhance communication and product promotion with business partners and clients in the industry.
[Foreign language] 本季度，我们在新加坡的海外总部，已经组建了当地的研发、财务、销售运营团队，而且本季度也实现了供应链、组装、仓储和物流运营的初步打通，预计也会为公司在海外业务提供越来越多的支持和便利。我们的零售商店，也是面向于海外客户的。上线的一个多月，已经收到了来自北美、欧洲、澳洲、东南亚等等地区的订单和付款。尽管线上零售现在整体体量还非常的小，但是我们看到全球各地的客户对挖矿的兴趣，我们也借此机会扩大了我们对于
During the quarter, our overseas headquarters in Singapore has already established R&D, finance and other operational teams and launched a supply chain system that encompasses assembly, warehousing logistics. It is expected to provide more support and convenience for the development of our business overseas. Our online store that targets overseas retail markets has already received many orders and prepayments from North America, Europe, Australia, Southeast Asia, and other regions since its launch more than a month ago. Even though total sales volume is still very small, we've seen interest in Bitcoin mining from clients globally. The online store also opens up a channel for us to extend our reach to customers and expand our brand promotion. Thank you. That's very clear.
Thank you. We'll now take our next question. Please stand by. This is from the line of Michael Legg from The Benchmark Company. Please go ahead.
Thanks, and, congratulations on weathering this tough environment. Can you talk a little bit about your build-out in the U.S. and how that's going, please?
Okay.
[Foreign language] 我们非常看重这个公司在北美的发展。我们注意到，由于丰富能源，尤其是清洁能源的快速发展，以及对于加密货币更广泛的接受度，北美地区其实正在吸引越来越多的比特币矿工投资去建设矿场。今年以来，我们也积极地参加了在美国举办的多个比特币行业的会议。
[Foreign language] 和这个业内的众多的矿企以及合作伙伴呢，深入交流和建立联系。现在呢，我们已经安排了同事呢，在北美实地地去开拓业务，包括了销售和挖矿的这个合作。同时呢，我们已正在搭建当地的，就是美国当地的这个仓储物流，来支持这个业务的发展，而且呢也会做这个属地化的这种售后服务的建设。
[Foreign language] 在北美建立这种维修点，这些都更加地贴近了客户，给我们这个客户提供这个持续的服务。
Thank you for your question. We highly value the North American market and notice the increasing demand for investing in and building mining farms by Bitcoin miners in North America. This is due to the wide acceptance of cryptocurrency and the abundant energy resources there, especially the rapid development of clean energy. This year we actively participated in many Bitcoin industry conferences in the United States. We had valuable dialogues and built connections with mining companies and business partners in North America. We now have colleagues based in North America to expand our business, including sales and exploring mining business opportunities. We are also building local warehousing and logistics there to support our business development. We also set up repair centers and provided continuous and improved local and after-sales services for clients.
[Foreign language] 目前，我们在北美地区已经有了不少的矿场伙伴和我们正在洽谈合作。我们依然采取审慎务实的策略，先期以现在目前市场常见的定金的形式和我们的合作伙伴预定了大概五千台的机位，以在未来开展挖矿业务，在美国这个新地区的尝试。
[Foreign language] 挖矿业务呢，作为我们矿机销售业务的有力补充呢，能够使我们根据市场情况和需求呢，将矿机库存呢在售卖和挖矿业务之间呢，进行动态的调配。这样呢，才能灵活运营，来实现收益的最大化。
Currently in North America, we're in dialogue with multiple mining farm partners. Maintaining a prudent strategy, we have initially booked mining site resources that can host 5,000 units of mining machines through typical deposit prepayment to explore mining operations in this new region in the future. The mining business, serving as the critical supplement for our mining machine sales, enables us to dynamically allocate our mining machine inventories among sales and mining operations so as to maximize our returns through our agile operations.
Great. Thank you very much. Appreciate it.
Thank you. We'll now take our next question. Please stand by. This is from the line of Kevin Dede from H.C. Wainwright. Please go ahead.
[Foreign language] Xie xie. I understand a strong interest in continuing to develop new machines and new technology would be continued spending on R&D. What I would like to understand is how you see semiconductor development and machine technology improving such that efficiency improves, and your opinion on the inclusion of immersion capability. Thank you.
[Foreign language] 其实对于将来来说的话呢，在这个挖矿机的这个业务领域呢，未来的主要工作，就研发这边的主要工作，我觉得是垂直整合，去打通整个产品的体系。
[Foreign language] 也就是呢，从这个芯片到场地，到挖矿算力的这个全产业链，目前呢在这个过程中呢，之前的主要产品其实我们到矿机的硬件就结束了。对于场地部署、运维等部分呢涉入的不深。从最近这段时间的工作来看的话，整个行业还是需要更多的这个标准化产品，尽量去简化自身或者是客户的部署，来提升整体的这个运营水平，降低成本，以及更好地利用这个性能和清洁能源。而对于公司来说的话，产品和服务呢也会在垂直的方向去进行整合和拓展。
For us in the mining machine business, an important task in the future is to integrate products and solutions vertically, penetrating the whole product system from chip to site and mining computing power throughout the industry value chain. Currently, in this process, the product front only includes mining machine hardware. There is limited penetration into providing solutions for mining site deployment, operations and maintenance of mining machines. Based on our recent observations, the entire industry still lacks standardized products, simplified deployment for improved operations and lower costs, and better use of waste and clean energy. For us, products and services will continue to be integrated and developed vertically.
[Foreign language] 半导体技术呢，现在其实是从这个FinFET走向GAA或者是nanosheet一类的3D工艺的一个十字路口吧。比特币挖矿机这个具体的应用呢，现在依然是可以作为这个尖兵去帮助先进制程呢实现工艺稳定。我们这个行业呢，实质上也是这样做的。
Semiconductor technology is at the crossroads of transitioning from FinFET to GAA or nanosheet types of 3D technology. This application of mining machines is still the vanguard of helping stabilize advanced fabrication technology. Actually, our industry is currently doing this.
Thank you. Thank you very much.
Thank you. That's all the time we have for questions. I will now turn the call back over to management for closing remarks.
Thank you everyone very much for attending our earnings conference call today. Please feel free to reach out to our IR team. Thank you.
Thank you. That concludes the call today. Thank you everyone for attending. You may now disconnect.