Intchains Group Ltd (ICG) 2024 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by and welcome to Intchains' fourth-quarter 2024 earnings conference call. With this conference is being recorded. (Operator Instructions)

Joining us today is Mr. Chaowei Yan, Chief Financial Officer of Intchains; and Ms. Minty Wang, Investor Relations Director. Mr. Yan will provide an overview of the company's performance and the details of the company's financial results. After that, we will conduct a question-and-answer session to take your questions.

I would now like to hand the call over to Minty Wang, Head of Investor Relations on Intchains Group Limited. Please go ahead.

Thank you, operator. Good day everyone. I'm Minty. Welcome to the Intchains Group Limited fourth-quarter 2024 earnings call. For today's call, Mr. Chaowei Yan, CFO of Intchains Group Limited, will provide a comprehensive overview of the company's performance and financial results for the quarter.

Before we proceed, I would like to remind everyone that today's discussion will include forward-looking statements. These statements involve known and unknown risks and uncertainties and are based on the company's current expectations and projections regarding future events that may impact its financial condition, operating results, and strategic direction. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances or changes in its expectations, except as may be required by law.

Although the company believes that the expectations expressed in these overlooking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the company cautions investors that actual results may differ materially from the anticipated results.

Investors should reveal the other factors that may affect its future results in the company's registration statements and other filings with the SEC. We'll discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. The presentation and the webcast replay of this conference call will be available on the Intchains' website at ir.intchains.com.

Now let me turn the call to our CFO, Mr. Chaowei Yan. Please go ahead.

Thank you, Minty, and everyone for joining Intchains' conference call for the fourth quarter of 2024. After this call, I will provide an overview of our operational and financial performance. After that, we will conduct a Q&A session to take your questions.

In the fourth quarter of 2024, the cryptocurrency market rebounded strongly. It currently is resurgence, and we benefited from the renewed optimism following the US Presidential election, which is spread expectations for a more crypto-friendly regulatory environment. This positive environment translated into robust operational performance for our company.

In the fourth quarter, we achieved the revenue of $10.2 million, a remarkable 109% increase year over year. It is important to know that due to our production cycle, some orders placed in Q4 will be recognized as revenue in 2025. In addition to our strong revenue performance, our non-GAAP adjusted net income rose by 54% to $2 million. Our strategic focus on accumulating Ethereum also paid off. As our holdings of the Australian-based cryptocurrencies increased by 37% quarter on quarter to a total number of 5,702 units.

Looking ahead, we are optimistic about our upcoming product initiative. In February, we launched in February 2025, we launched our Aleo mining products, a more -- a move we expect to be a significant performance driver in the first half of this year.

We have also introduced a new hardware wallet, expanding our payment application ecosystem built on last year's social pay. Moreover, we remain committed to upgrading our Dogecoin series mining machines to capture additional market share while steadfastly pursuing our long-term Ethereum treasury strategy.

For those less familiar with our business, let me briefly outline our core operation. We operate in three key segments. Firstly, under the Goldshell brand. We produce mining products for promising altcoins such as Kaspa, Alephuim, Dogecoin, and Aleo. Secondly, we reinvest our profits by accumulating Ethereum, which of (technical difficulty) structure. Last but not the least, we are actively exploring innovative web application to drive long-term growth.

Our differentiated growth strategy focused on blue-ocean altcoin mining sector as one of the pioneers of home mining products and are committed long-term holder of the serving. We have established a unique position in capital markets.

Looking forward, the industry is poised to experience several catalysts this year, ranging from progress in Bitcoin reserve legislation in various US states, to the approval of additional crypto ETFs, emerging new technologies and applications, and anticipated upgrade to Ethereum.

In February, we made a significant stride by launching our Aleo miners. This mining -- these machines designed to pass into promising world of zero-knowledge proof are already generated between 40 to 50 Aleo produced per day, with an attractive return for miners.

We will also continue to enhance our Dogecoin mining products to maintain our leadership in this area. We see several short-term catalysts for Dogecoin including live broadcast from US DOGE Department and the potential approval of ETS. We have also expanded our productive with the launch of the Goldshell Wallet fishing air-gapped technology that allows payment without an internet connection, an important step in advancing our application.

Looking ahead to the first half of 2025, our operational pillars will be built around our Doge and Aleo series mining machines. While some orders from Q4 2025 will have -- will recognize the revenue refer to Q1 2025 due to the production cycle limitation. We are confident that the strong profitability and all the demand for our AE BOX series and Doge series products will contribute positively to our growth margins.

Now, I will provide a brief financial overview of our fourth quarter of 2024. In the fourth quarter, the cryptocurrency industry witnessed a global regulation turning point following the conclusion of the US Presidential election in November. This market was filled with optimistic expectations for a more relaxed regulatory environment for the crypto industry in the future.

So turning to our financial performance, Q4 so our revenue reached $10.2 million representing a 109% year-over-year increase. While this strong performance reflects the rebound in market sentiment, please note that some Q4 orders will be recognized as revenue in 2025 due to the production cycle limit.

Our non-GAAP adjusted net income increased by 54% to $2 million, a significant turnaround from previous periods. Despite like dip in the gross margin in Q4 attributed to a higher proportion of lower-margin Dogecoin minor sales compared to Q3 higher margin Alephuim and Kaspa products, we have made a substantial investment in R&D for new projects related for 2025. We expect the lighter expense pressure in the first half of 2025, which should further support our profitability in this year.

Moreover, the gain on that value of cryptocurrency for the fourth quarter was about $4 million. It also significantly contributed to the company's net income growth in '24. The gain was primarily due to an approximately 31.5% increase in the price of Ethereum and approximately 37.4% increase in the number of Ethereum.

For the full-year 2024, we also achieved a significant growth across key financial markets. In 2024, our revenue was largely driven by the sales of mining products across the Dogecoin, Alephuim, and Kaspa line. This performance not only underscore our big industry insights but also validates our investment approach in altcoin sectors. On an operational level, we experience rebounds in revenue, gross margin, and non-GAAP adjusted net compared to 2023, reinforcing our confidence that we remain in the most -- we remain in the middle of the whole cycle.

At the at the year end, our total assets stood at approximately $149 million. Our crypto assets were valued at around $24.7 million, representing 16.6% of total assets with Ethereum-based -- Ethereum holding comprised about 13.2%. Combined the cash equivalent, short term investment, and cryptocurrency totaled around $96 million or roughly 64% of our total assets. This robust balance sheet underpins our future growth initiatives and the reinforces our ongoing Ethereum treasury strategy.

Looking forward, we anticipate Q1 2025 revenue of approximately RMB100 million to RMB120 million, with first-half 2025 revenue projected to reach around RMB200 million to RMB250 million, driven largely by new product sales and the continued market momentum. Thank you for your attention. We look forward to updating you on our progress as we continue to drive growth across the crypto cycle.

Thank you, Mr. Yan. At this point, I would like to open the floor for questions. (Moderator Instructions) Now operator, when I start the Q&A session. Thank you.

(Operator Instructions) Mark Palmer, The Benchmark Company.

Yes, hello, thank you very much for taking my question. I definitely appreciate the extent to which the crypto markets have rebounded, particularly in the fourth quarter, and we saw a demand for Dogecoin increase nicely. Can you talk a little bit about what your expectations are with regard to Dogecoin for 2025 and what you are seeing in terms of demand for Dogecoin mining rigs at this point.

Thank you, Mark. Yeah, we are always a -- we are always a pioneer of the Dogecoin mining machine. From the second half of 2024, we seriously considering about the future or the potential market potential of the Dogecoin. So we believe that the Dogecoin money market, the potential of the Dogecoin money market is in the future [details] have a possibility to surpass the Bitcoin mining market.

So we decide to have a deep -- to have a series R&D input on this Dogecoin mining market. So firstly, we -- in 2025 perspective, our plan is that, firstly, we expect to reduce the cost or yeah, reduce the cost of existing mining machines and then improve the mining efficiency and further we will diversify our mining hardware for mining the Dogecoin in -- and please just keep patient. Yeah, we will have a more competitive Dogecoin mining products launching into the market this year. Thank you.

And to be specifically, some of the revenue will be recognized in the first quarter of this year. And also, according to our order book, the demand of the Dogecoin machine is still very strong.

Yeah, because, firstly, we underestimated the Dogecoin price search after the Trump election. So we didn't prepare enough Dogecoin money really, and you can see on our balance sheet that our contract liability increased significantly and this contract liability will reflect -- will turn into revenue in this Q1. Thank you.

Very good. And can I also ask a question about your move into Aleo mining, which you know is the first time that the company has gone into the zero-knowledge proof space. Can you talk about what you are expecting in terms of demand for Aleo mining equipment in the coming months.

Yeah, thank you for your question. Firstly, we think that Aleo is a project, crypto project based on zero-knowledge proof technology, and it's a future trend. And our company has always been optimistic about the private computing field and, therefore, once the algorithm was -- of the algorithm for Aleo project was finalized, we immediately began developing the Aleo specialized miner.

So we're using our consistent approach of quick time to market. Now, we are the first mining -- we have the first mining machine in the total market. And for the future plan, we believe that the Aleo mining, currently the Aleo mining machine are generating a very attractive returns and the productive demand is quite good and also for the future plan, it will depends on the market condition and also the Aleo project, their future development roadmap.

So we will close monitor the Aleo project development and make the decision of upgrading the mining machine to make this decision, accordingly.

Yeah, just as Chao stated, you can watch that, that's where the first professional Aleo asset provider around the world. And for our Aleo series mining rigs, it will produce around of 40 to 50 Aleos per day, which means that if you buy our Aleo products, you may get around $15 to $20 per day, which makes this series of products a very attractive products for miners. And because this is a very attractive product for miners, so for us, it generates a very strong demand, and we think, the sales of Aleo machines and the sales of the Doge series machines will be the main drivers of our revenue at least in the first half of this year.

Very good. Chao and Minty, thank you very much.

Thank you.

Laura Lui, Premia Partners.

Thank you for the presentation. So you mentioned about the performances for the first quarter. So I would like to ask, under the pressure of the overall market in the first quarter, what's the company's current guidance based on the current market pressure? Or did you make, neutral or optimistic assumptions already about the development of the crypto market in the first half of the year and also the first quarter, please?

Yeah, currently we think the overall crypto market is under pressure and for a due to series of events first including the concern or concern over an economic recession, the buy big hack and the improper insurance of many meme coins, all these things leading the market to a decline in risk appetite. However, we do believe that now is in interest rate cutting cycle. So it's now crypto market, it remains in a full cycle and the company, are very confident of the crypto industry and we'll keep accumulating Ethereum and develop our new miners.

And for the fourth quarter, yes, our guidance for the 2025 is taken the current market situation into our consideration and we believe we set a relatively conservative assumption for the Q1 revenue guidance. Thank you.

Thank you very much. So now that you mentioned about, the crypto market, can I also ask about the company's outlook for the crypto market this year?

Yes, I think. Yeah.

Actually, Chao has just mentioned his outlook. He just stated that, he believes that the global market is in the interest-rate-cutting channel. So we think, we are still on the way. Although the crypto market didn't perform very well in recent days. But we think during both cycle, it's a very normal price adjustment.

It's about the risk preference of the market. But we think the crypto market has a very close relationship to the whole, to the money liquidity of the whole world. So we're still very optimistic about the performance of the whole market. Although the market seems not performed very well recently, but we still, just as the [Ericron] say that it's a good chance, it's a good opportunity to buy the dip. So we're still very confident about this year's performance.

And according to our order book, we still have a very strong demand on our Aleo series mining rigs and the Dogecoin series mining rigs. So according to us, it seems that some miners are all well-prepared for the rebound of the market, and that's why we are still insist in our strategy of accumulating Ethereum and upgrade our Dogecoin series mining machines this year. Yeah.

Great, thank you, Chao, and the team for the market outlook. I don't have further questions from my side. Thank you.

Thank you.

Kelvin Yu, Growth Investment Management.

Thank you for the presentation. The company just mentioned the market catalyst. What are the market catalysts for the company's own growth in 2025, please?

Thank you for your question. Firstly, for the four companies' catalyst, firstly is, of course, the Dogecoin and Litecoin ETF approval and the price of altcoins, if they have a good price performance as well also increase our financial performance. And the third one is the new initiative project or new technology, which applies in the crypto market. So all these all these factors could potentially enhance our company's performance. Thank you.

That's great, thank you.

Thank you for the questions. We have no further questions on the line. I'd like to end the call back to management for closing.

Oh, okay. If there are no questions in the line, maybe we'll call it a today. Thank you for joining our conference, and you can visit our website for further materials or email the IR team for further information. Thank you.

Let us conclude today's conference call. Thank you for your participation. You may now disconnect.