Nano Labs - H1 2024

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. Welcome to Nano Labs first half of twenty twenty-four earnings conference call. During today's call, all participants will be in a listen-only mode. This conference is being recorded today, Wednesday, September eighteenth, twenty twenty-four. Joining us today from Nano Labs are the company's Chairman and Chief Executive Officer, Mr. Jianping Kong, and the company's Chief Financial Officer, Mr. Bing Chen. On our call today, Mr. Kong will give you an overview of the company's performance. Mr. Chen will share the details of the company's financial results. After that, we will conduct a question and answer session to take your questions.

Before we continue, I'd like to remind you that some information discussed on this call will contain forward-looking statements within the meaning of Section twenty-one E of the Securities Exchange Act of nineteen thirty-four, as amended and as defined in the U.S. Private Securities Litigation Reform Act of nineteen ninety-five. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the Securities and Exchange Commission. During today's call, Mr. Kong and Mr.

Chen will deliver their remarks in Chinese, and the company's representative will provide corresponding English translations. With that, I will now turn the call over to Mr. Kong, the company's Chairman and Chief Executive Officer. Mr. Kong, please go ahead.

Jianping Kong (Chairman and CEO)

Thank you, operator, and everyone for joining Nano Labs first half of 2024 earnings conference call today. On our call today, I will provide an overview of our recent development and our strategic initiative in the future. The first half of 2024 has clearly witnessed a recovery in the industry and the continuous emergence of new market opportunities. Amidst this existing bull market environment, our company has been making substantial investments in the research and development of our upgraded Cuckoo series products.

In May twenty twenty-four, we successfully commenced the mass production of Cuckoo 3.0 chip, which features significantly enhanced performance compared to the Cuckoo 2.0 chip, setting a new global benchmark. This key development positions us to capitalize on new market opportunities progressively. Moreover, our company plans to launch a range of models equipped with the Cuckoo 3.0 chip for various application scenarios in the remainder of this year and the first half of next year, which is expected to drive significant growth in our sales. Furthermore, we are continuously innovating in packaging technology and IP to improve the efficiency of chip production. The development of promising AI computing, ZK computing, and other chips is also on the way. Concurrently, our iPollo Metaverse Photographic Studio service, a component of our Metaverse business suite, is making consistent progress.

We have established a profound collaborations with various institutions and organizations, which lay the groundwork for substantial growth potential in the future. We anticipate that through the combined persistence and efforts of the industry and ourselves, we will overcome existing bottlenecks and unlock new heights of success in the future. Furthermore, we are continuously innovating in packaging technology and IP to improve the efficiency of chip production. The development of promising AI computing, ZK computing, and other chips is also on the way. Concurrently, our iPollo Metaverse Photographic Studio service, a component of our Metaverse business suite, is making consistent progress.

We anticipate that through the combined persistence and efforts of the industry and ourselves, we will overcome existing bottlenecks and unlock new heights of success in the future. Thank you.

Thank you for your support and trust. Next, I will turn the call over to our Chief Financial Officer, Mr. Chen, for a closer review of our financial results. Mr. Chen, please go ahead.

Bing Chen (CFO)

Thank you, Mr. Jianping Kong. Good morning, everyone. I will represent.

[Foreign language]?

Thank you, Jianping Kong. Good morning, everyone. I will represent the management team to briefly introduce the financial overview for the first half of 2024. For the first half of 2024, the company's operating revenue was CNY 24.74 million, or $3.47 million. Last year same period was CNY 52.27 million. The decline in operating revenue was mainly due to the decrease in sales volume of the iPollo V1 series products. However, our 3D printing products revenue for the first half of 2024 surged from CNY 0.022 million in the same period last year to CNY 0.459 million, with rapid growth. For the first half of 2024, the company's cost of revenue was CNY 24.71 million or $3.47 million. For the same period in 2023, it was CNY 115.2 million. The main reason was the decline in sales volume and the decrease in inventory impairment.

Thank you, Mr.

Kong, good morning, everyone. On behalf of the management team, I will provide a brief financial overview of the first half of 2024. In the first half of 2024, our net revenue was RMB 24.74 million, $3.47 million, compared to RMB 52.27 million in the same period last year. This decline was primarily due to the decreased sale of the iPollo V1 series products. However, revenue from our 3D printing products showed significant growth, increasing to RMB 459,200 from RMB 22,000. Cost of revenue for the first half of fiscal year 2024 were RMB 24.71 million, $3.47 million, compared to RMB 115.2 million in the same period of 2023. The decline was mainly due to the decrease in sales volume and less inventory write-down recorded.

In the first half of fiscal year 2024, total operating expenses decreased by 20.1%, to RMB 58.72 million, or $8.2 million. In the same period of 2023, it was RMB 73.5 million. In the first half of fiscal year 2024, the company's sales expenses decreased 54.4% from RMB 9.5 million in the same period of 2023, to RMB 4.33 million or $0.608 million, mainly due to the reduction in sales commissions and logistics expenses.

Such operating expenses for the first half of fiscal year 2024 decreased by 20.1% to RMB 58.72 million, $8.24 million, down from RMB 73.50 million in the same period of 2023. Sales and marketing expenses dropped by 64.4% to RMB 4.33 million, $0.61 million, compared to RMB 9.50 million in the same period of 2023. This decrease was mainly due to reduced sales commissions and product shipping expenses.

In the first half of fiscal year 2024, management expenses decreased 18% from CNY 31.04 million in the same period of 2023 to CNY 25.45 million or $3.57 million. The decrease in management expenses was mainly due to the relocation of the headquarters, resulting in a decrease in office rental expenses, as well as a decrease in the number of general and administrative personnel, resulting in a decrease in employee salary expenses.

General and administrative expenses decreased by 18% to RMB 25.45 million, $3.57 million for the first half of 2024, from RMB 31.04 million for the same period of 2023. The decrease in general and administrative expenses was primarily due to the decrease in office lease expenses, mainly attributable to the relocation of the head office and the decrease in employee salary expenses as the number and salaries of general and administrative staff decreased.

R&D expenses decreased 12.2% from RMB 32,950,000 in the first half of fiscal year 2023 to RMB 28,930,000 in the same period of 2024, or $4,060,000. The decrease in R&D expenses was mainly due to the decrease in salary expenses.

Research and development expenses decreased by 12.2% to RMB 28.93 million, $4.06 million for the first year, for the first half of 2024, from RMB 32.95 million for the same period of 2023. The decrease in research and development expenses was primarily due to the decrease in salary expenses.

For the first half of fiscal year 2024, operating loss was RMB 58.69 million, or $8.24 million. For the same period in 2022, operating loss was RMB 136.4 million. For the first half of fiscal year 2024, net loss was RMB 59.15 million, or $8.3 million. For the same period in 2023, loss was RMB 134.3 million. For the first half of fiscal year 2024, basic and diluted loss per ordinary share was RMB 0.85 or $0.12. For the same period in 2022, basic and diluted loss per ordinary share was RMB 2.40. As of June 30th, 2024, company cash and cash equivalents were RMB 23.51 million or $3.35 million. As of December 31st, 2023, that value was RMB 48.16 million.

Loss from operations was CNY 58.69 million, $8.24 million for the first half of 2024, compared with loss from operations of CNY 136.4 million for the same period of 2023. Net loss was CNY 59.50 million, $8.30 million for the first half of 2024, compared to a net loss of CNY 134.3 million in the same period of 2023. Basic and diluted loss per share was CNY 0.85, $0.12 for the first half of 2024, compared to basic and diluted loss per share of CNY 2.41 in the same period of 2023.

As of June 30th, 2024, the company had cash and cash equivalents of RMB 23.51 million, $3.3 million, compared with RMB 48.60 million as of December 31st, 2023.

[Foreign language].

We will. We remain confident in our business strategy and ability to execute it. We will continue to leverage the strength of our technology to capture development opportunities, drive long-term growth, and create additional value for our shareholders. Now, I would like to turn the call over to the operator for questions and answers session.

Operator (participant)

Thank you. 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 cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Oscar Tracy, a private investor. Please go ahead.

Hey, thank you for your introduction, so I'm just wondering, could you provide some more details about your new accelerator products? Thank you.

Bing Chen (CFO)

[Foreign language].

The company's newly launched Cuckoo 3.0 chip is the upgrade iteration product of the original Cuckoo 2.0. Performance compared to the Cuckoo 2.0 chip is significantly improved, reaching the global leading level, and it is equipped with different types of machines with different chip quantities, not only can be applied to data center scenarios, but also can be independently used in home or consumer scenarios.

Our company's newly launched Cuckoo 3.0 chip is an upgraded iteration of the original Cuckoo 2.0 with significantly improved performance. The Cuckoo 3.0 has reached a leading position globally. Machines equipped with varying quantities of these chips can be used not only in data center environments, but also independently in home or consumer settings, offering a flexibility for various user scenarios.

Operator (participant)

Your next question comes from Arana Rabno, a private investor. Please go ahead.

Hi, thank you. What are the company's expectations for the market and financial figures in the second half of this year?

[Foreign language].

Our company plans to launch our complete machine equipped with Cuckoo 3.0 chip in the second half of the year, which is expected to drive an increase in sales of V Series products. Additionally, we are gradually introducing new product lines to the market.

and we anticipate the sales volume to go over time.

Your next question comes from Clara Watson, private investor. Please go ahead.

Okay. Thank you. I have a question. What's the compatibility advantage of the recent large Cuckoo 3.0? Does it have relevance to the recent AI trend? Thank you.

Jianping Kong (Chairman and CEO)

[Foreign language].

In existing products, the Cuckoo 3.0 single chip has the highest efficiency, V1 the lowest, and the company has developed multiple models for different application scenarios for users to choose from. Regarding AI, the high-bandwidth multi-channel 3D DRAM in the Cuckoo 3.0 is designed with a dedicated distributed on-chip network, realizing efficient data exchange between the computing unit and the storage unit. This is one of the key technologies in AI chips. In addition, the Cuckoo 3.0 has a dedicated low-voltage circuit for low-power design and a complete set of corresponding timing sign-off processes, which can also create comparative advantages for AI chip design.

The Cuckoo 3.0 chip offers the highest computing power and the lowest power efficiency among our current products. Our company has developed multiple models to cater to different application scenarios. Regarding AI, the Cuckoo 3.0 features high bandwidth, multi-channel, 3D DRAM, with a dedicated distributed on-chip network to enable efficient data exchange between computing and storage units, which is a key technology in AI chips. Additionally, the chip specializes in low-voltage circuits designed to reduce power consumption, along with corresponding timing sign-off processes provide a comparative advantage for AI chip design.

Operator (participant)

The next question comes from Armstrong Wu, private investor. Please go ahead.

Hi. Thank you. My question is, will the company introduce any new product lines that could support its business revenue in the future? Thank you.

Jianping Kong (Chairman and CEO)

[Foreign language].

As mentioned before, our company plans to launch complete machines equipped with Cuckoo 3.0 chips in the second half of this year and the first half of next year, which is expected to significantly boost sales. Additionally, our photo studio services will contribute to the company's overall revenue. We are also exploring new opportunities in fields such as AI computing to drive our future revenue growth.

Operator (participant)

That concludes the question and answer session. Let me turn the call over to Mr. Chen for closing remarks.

Bing Chen (CFO)

[Foreign language]. Ascent Investor Relations.

Thank you very much for joining this conference call. If you have any questions, please contact us through email at [email protected] or reach our IR consultant Ascent Investor Relations at [email protected]. Management will respond to your questions as soon as possible. We appreciate your interest and support in Nano Labs, and we look forward to speaking with you again next time.

Operator (participant)

Thank you again for attending Nano Labs first half of 2024 earnings conference call. This concludes our call today, and we thank you all for listening in. Goodbye.

Bing Chen (CFO)

Goodbye.