Image source: The Motley Fool.
DATE
Tuesday, May 20, 2025 at 8 a.m. ET
CALL PARTICIPANTS
Chairman and Chief Executive Officer — Nangeng Zhang
Chief Financial Officer — James Cheng
Investor Relations Director — Gwyn Lauber
Need a quote from one of our analysts? Email [email protected]
RISKS
Management stated that "the new series of U.S. tariff measures introduced in the first quarter and still ongoing have brought considerable institutional risk and uncertainty," resulting in "delays and adjustments in some orders currently under negotiation and in delivery schedules."
CFO James Cheng said, "Given the prevailing wait-and-see sentiment among North American customers and the postponement in our mining project deployments caused by the significant uncertainties surrounding tariffs, we cautiously expect the revenue for the second quarter to be approximately $100 million."
CEO Nangeng Zhang announced the company "has decided to withdraw its previously issued full-year revenue guidance as well as mining hash rate deployment targets for the first half of 2025" due to ongoing macro and policy uncertainty.
The company recognized an aggregate unrealized fair value loss of $16 million on crypto assets in Q1 2025, linked to a lower Bitcoin price at quarter-end, which negatively impacted bottom-line results.
TAKEAWAYS
Total Revenue: Beat previous guidance of $75 million.
Mining Revenue: $24 million, up 132% year over year compared to Q1 2024 with 259 Bitcoins mined, up 33% compared to Q1 2024.
Computing Power Sold: Over 19,000 A15 mining machines were delivered, contributing $45 million in revenue and 3.9 exahash per second to the total.
Average Selling Price (ASP): $10.5 per terahash—a 30% sequential increase in Q1 2025 and ASP was 53% higher compared to Q1 2024.
Avalon Home Series Sales: Generated $1.3 million in revenue from approximately 6,000 units delivered; year-to-date 2025 orders surpassed 17,600 units totaling $6.6 million in value as of May 18, 2025.
Operational Computing Power: Increased from 4.75 exahash per second at year-end 2024 to 5.97 exahash per second by the end of Q1 2025 reached 8.15 exahash per second deployed as of April 2025 with 6.2 exahash per second actively running as of April 2025.
Mining Gross Margin: 31% mining gross margin in Q1 2025, supported by an average electricity cost of 4.2 U.S. cents per kilowatt hour.
Bitcoins Held: Reached 1,408 by March 31, 2025 (Q1 2025), up from 1,293 at the prior quarter-end; increased to 1,424 by April 30, 2025.
Gross Profit: Gross profit (GAAP) was $0.6 million in Q1 2025, marking the first positive quarterly gross profit in two years.
Operating Loss: Narrowed by 32% quarter over quarter and 45% year over year to $37.6 million in Q1 2025.
Operating Expenses: Operating expenses totaled approximately $38 million in Q1 2025 (including a $5.7 million year-over-year increase driven by R&D and staff costs for consumer and mining solutions in Q1 2025).
Adjusted EBITDA Loss: $38 million adjusted EBITDA loss in Q1 2025, narrowing by 47% year over year.
Bitcoin Purchases: 27.46 Bitcoins acquired at an average price of $83,660 during Q1 2025.
Cash Position: $97 million in cash as of March 31, 2025 (Q1 2025) with $51 million cash inflow from sales in Q1 2025 $21 million from secured loans in Q1 2025 and $18 million from VAT refunds received during Q1 2025 $88 million paid for production and operations in Q1 2025 $144 million for wafer supply was secured mainly from financing proceeds in Q1 2025.
Inventory: Company increased inventory of A15 series products to support uninterrupted delivery and manage supply risk amid macro uncertainty.
Foundry and Manufacturing: Chip yield for the A15 series now exceeds 90% as of Q1 2025, machine performance improved by 15%, and power consumption reduced by 10% compared to launch for the A15 series.
U.S. Manufacturing Initiative: Pilot production line completed in the United States; full commercial viability still under review due to high current costs.
Guidance for Q2 2025: Management anticipates approximately $100 million in revenue for Q2 2025, acknowledging results may diverge due to policy and market volatility.
Tariff Impact: At least a 10% extra duty applies to mining machine shipments into the U.S., with some cases incurring higher actual costs due to customs enforcement and reciprocal tariffs as high as 145% in Q1 2025.
Shareholder Initiatives: Management is "actively evaluating a range of strategic initiatives, including a potential share repurchase program" subject to board approval.
SUMMARY
Management attributed the sharp rise in revenue and margins in Q1 2025 to record A15 series shipments and improved product pricing, despite ongoing sector volatility driven by global tariffs and weaker U.S. demand. The new U.S. tariff regime, combined with reciprocal measures, has generated substantial uncertainty, delaying both customer order flow and planned self-mining deployments, and leading to the withdrawal of annual guidance. Internal efficiency gains—evident in higher chip yield, improved machine performance, and enhanced inventory management—have partially offset external headwinds, culminating in Canaan's first positive gross profit in Q1 2025.
Management is actively evaluating a potential share repurchase program, subject to board approval.
Over 900 Bitcoins, valued at $45 million, were pledged for secured loans by quarter-end (Q1 2025) to enhance liquidity without reducing holdings and 100 Bitcoins were placed into a fixed-term product with guaranteed yield as of Q1 2025.
CEO Nangeng Zhang emphasized expanding non-U.S. operations—including East Serbia, which achieved 98% uptime in Q1 2025 and 95% in April 2025—to mitigate regulatory and energy risk exposure.
Management underscored the growing strategic importance of Southeast Asia and other non-North American geographies in the company's deployment and sales pipeline given persistent U.S. market headwinds.
INDUSTRY GLOSSARY
Exahash per second: A unit of computational power equal to one quintillion (1018) hash calculations per second, commonly used to measure Bitcoin mining hardware performance.
ASP (Average Selling Price): The average price realized per unit of mining hardware sold, typically expressed per terahash for industry comparability.
SMT (Surface-Mount Technology): A method for producing electronic circuits in which components are mounted or placed directly onto the surface of printed circuit boards.
HODL Strategy: Industry slang for a long-term holding approach to cryptocurrency assets, regardless of short-term price movements.
Pilot Production Line: Initial, small-scale manufacturing setup used to validate production processes before large-scale commercial manufacturing.
ATM (At-the-Market) Financing: A type of equity offering in which shares are sold directly into the secondary trading market through a designated broker at prevailing market prices.
Full Conference Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. And welcome to Canaan Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management 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 today, Ms. Gwyn Lauber, Investor Relations Director of the company. Please go ahead, Gwyn.
Gwyn Lauber: Thank you, operator. Hello, everyone. And welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, James Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development, and Shuang Sun, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO 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 I begin, I would like to refer you to our Safe Harbor statement in our earnings press release. Today's call includes forward-looking statements.
These statements include, but are not limited to, our outlook for the company, and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today 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 the Securities and Exchange Commission, including our most recent 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, 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. And finally, please note that during the call, all dollar amounts refer to US dollars. With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. Please go ahead.
Nangeng Zhang: Hello, everyone. This is Nangeng Zhang, the CEO of Canaan Inc. Thank you for joining our conference call. James and I are pleased to share our first quarter 2025 results and the recent developments from our headquarters in Singapore. In the first quarter of 2025, the global Bitcoin mining industry faced a series of macroeconomic challenges. In February, the US president signed an order under the International Emergency Economic Powers Act (IEEPA), imposing a 10% tariff on goods imported from China. This tariff was raised to 20% in early March.
Then in April, the US further announced a 10% universal tariff on imports from all countries, along with higher reciprocal tariffs targeting selected nations, with tariffs on Chinese goods reaching as high as 145%. In response, China imposed up to 125% tariffs on US goods and introduced non-tariff measures, including export controls. These developments caused major volatility in global markets. As a result, the Bitcoin price dropped sharply from about $104,000 at the end of January to $76,000 in early March, before slightly rebounding to around $85,000 in late March. Despite the sharp price swings, the total network hash rate rose from 795 exahash per second to 856 exahash per second.
This combination of falling Bitcoin price and the rising hash rate significantly compressed miners' profit margins. Entering the second quarter, the Bitcoin price dropped again to $74,000 in early April, but gradually recovered. As of the date of our earnings conference, it has risen back above $100,000, which should be reflecting Bitcoin's value as a safe haven asset. We have seen clear signs of recovery in global demand for mining machines, except in the US market, due to the 10% universal tariff imposed by the US on imported goods and even higher reciprocal tariffs on some countries.
Both Canaan Inc. and our competitors now face at least a 10% extra duty when shipping mining machines within Southeast Asia to the US. In addition, fast-changing policies have created a great deal of uncertainty and confusion in actual customs operations. In some cases, the effective tariff rates have been even higher than 10%, and the customs enforcement standards and clearance times have been inconsistent. Since the value of Bitcoin is globally unified, this has led to higher mining costs and greater uncertainty for American miners compared to miners in other regions, which has significantly suppressed mining machines demand in the US.
We have observed that many US-listed mining companies are adjusting their business models and accelerating their transformation towards AI and high-performance computing businesses. Amid a complex and rapidly changing market environment, our team still delivered a solid operational performance. In the first quarter, we achieved total revenues of $82.8 million, exceeding our previous guidance of $75 million. This represents a 136% year-over-year increase and demonstrates our strong execution and resilience across global markets. The first quarter of 2025 is traditionally a slow season.
However, thanks to the continued large-scale delivery of our A15 series mining machines, we achieved 5.5 exahash per second in total computing power sold during the quarter, up 62.6% year over year, with sales revenue exceeding $58 million. This includes ongoing deliveries of flash presale orders to public mining companies such as HIVE. With the new generation high-performance A15 models becoming the main driver of shipments, our average selling price per terahash significantly increased to $10.5 per terahash, representing a 30% sequential growth. In overseas markets outside of North America, we are seeing continued growth in demand from regions such as Asia, South America, and Africa. We have made tangible sales progress in these areas.
Our Avalon Home series of mining machines for individual consumers also achieved encouraging progress in Q1. Following the launch of several new models in this quarter, we generated $1.3 million in sales revenue and delivered around 6,000 units. In spite of summer approaching in the northern hemisphere leading to a gradual decline in indoor heating demand, our Avalon Home series, which features dual functionality of mining and home heating, still sells well, beyond our expectations. We are ramping up production to ensure timely delivery. By May 18, 2025, we have sold a total of over 17,600 units year to date, with total order value reaching over $6.6 million.
Our self-mining business delivered strong results this quarter with a total of 259 bitcoins mined, up 39% over the quarter. This was mainly driven by the continued growth of our Energizer hash rate and the optimization of several project partnerships. Our operational computing power increased from 4.75 exahash per second at the end of 2024 to 5.97 exahash per second by the end of March 2025. Coupled with a higher average Bitcoin price during the quarter, our mining revenue reached a record high of over $24 million, marking a 59% sequential increase. Thanks to our competitive electricity cost of 4.2 US cents per kilowatt hour, we maintained a solid mining gross margin of 31% in Q1.
By the end of the quarter, the number of bitcoins owned by the company reached 1,408, setting a new record. We continue to steadily deploy more hash rates, and by the end of April, our total deployed computing power reached 8.15 exahash per second. Notably, in the US, we fully deployed 3 exahash per second across four projects. Alongside the mass production and delivery of our A15 series, we have continued to work closely with our foundry partners on technical optimization. As a result, chip yield now exceeds 90% compared to the initial launch last year.
Overall machine performance of the A15 series has improved by 15%, while power consumption has been reduced by 10%, effectively lowering the cost per unit of mining power. We have also introduced more advanced products across various cooling technologies, including hydro and immersion cooling. One recent example is our new A15-66HA hydro cooling model, which delivers close to 500 terahash per unit and better energy efficiency than the air-cooled machine, an outstanding product in the industry. Looking ahead, our next-generation A16 series has successfully completed tape-out in the first quarter. The corresponding products will be officially launched after full machine testing, and they are expected to deliver significant performance upgrades.
On the production and logistics front, our diversified geographic deployments over the past few years, especially the establishment of manufacturing capacity in Southeast Asia, have helped cushion the impact of recent US tariff adjustments. Starting at the end of Q1, we set up a pilot production line in the United States and successfully completed trial production. This means our US-based manufacturing process is now essentially up and running. While the current production cost in the US is relatively high, we believe taking this step holds strategic value. It allows us to be closer to the US market and our customers while also reducing supply chain risks.
We are now actively exploring the possibility of building a larger-scale manufacturing facility in the US and identifying ways to significantly lower production costs, aiming to make US-based manufacturing commercially viable. This quarter, we maintained stability in our operations, with key indicators showing further improvement. Supported by higher ASP and the continued growth in our mining operations, we achieved positive gross profit for the first time since the bear market began nearly two years ago. While focusing on R&D investments, we also continue to enforce disciplined expense control in our daily operations. As a result, our general and administrative expenses decreased by 39% quarter over quarter.
This helped narrow our operating loss by 32% quarter over quarter and by 45% year over year to $37.6 million. Although Bitcoin price declined by approximately 12% from the end of the previous quarter due to a fair value loss in cryptocurrency assets of $16.3 million, we remain committed to our Bitcoin holding strategy as we strongly believe in the long-term appreciation potential of the asset. We are also pleased to see that, as of today, Bitcoin has returned to above the $100,000 level. On the balance sheet side, with the large-scale production of our A15 series underway, we have started to build up some inventory of new products to ensure uninterrupted deliveries.
By the end of March, the company maintained a healthy cash balance of approximately $100 million. In addition, we took advantage of the price pullback in Bitcoin during the first quarter to further strengthen our crypto holdings. We purchased 27.46 bitcoins at an average price of $83,660 per Bitcoin. At the end of April 2025, the total number of bitcoins held by the company reached 1,424. Looking ahead to the coming quarter of 2025, we are actively adjusting our focus across key markets and stepping up our sales efforts. As of now, we have secured a solid pipeline of A15 orders with delivery booked into June.
We are also continuously coordinating our production capacity between self-mining and fulfilling customer orders based on evolving market demand. The new series of US tariff measures introduced in the first quarter and still ongoing have brought considerable institutional risk and uncertainty. So far, demand from North American customers remains under pressure with no clear sign of recovery. In the capital markets, uncertainty has also impacted stock performance and fundraising activities for many US-based mining companies. As a result, customers in the US have generally adopted a wait-and-see attitude towards orders. We have observed delays and adjustments in some orders currently under negotiation and in delivery schedules.
Additionally, certain joint mining projects have faced increased costs due to import tariffs, which could delay the pace of hash rate deployment. Given the ongoing uncertainty in the global political and economic landscape, the company has decided to withdraw its previously issued full-year revenue guidance as well as mining hash rate deployment targets for the first half of 2025. Until there is greater clarity in the overall environment, we will focus on pivoting to respond to market fluctuations to further consolidate our business amid the current uncertainty. We are actively scouting our self-mining strategy to future global expansion opportunities that align with our long-term growth objectives.
We are confident in our ability to identify and collaborate with experienced partners both within and beyond North America, enabling our assets to scale effectively and maintain operational excellence across diverse markets. Our track record of success outside the United States includes our operations in East Serbia, where we recently reported an impressive average uptime of 98% during the first quarter and 95% uptime in April, despite minor power disruptions early in the month. These results reflect our team's ability to navigate local challenges while maintaining high performance and reliability. In the near term, the company is adopting a more cautious approach to expectations for the second quarter of 2025. We currently anticipate revenues of approximately $100 million for Q2.
This forecast is based on the current market and operational conditions. However, given recent policy uncertainties and market volatility, actual results may differ from these expectations. In response to recent market developments, including the US tariff measures on our share price, we believe that our current stock valuation is significantly below the company's intrinsic value and long-term growth potential. To address this disconnect and enhance shareholder value, we are actively evaluating a range of strategic initiatives, including a potential share repurchase program. These objectives are currently under review and may be subject to approval by our board of directors. Any implementation will be conducted in full compliance with all applicable laws and regulations.
We will keep the market informed of any material developments through subsequent announcements. Amid a complex and rapidly evolving macro and industry environment, we remain focused on technology and product innovation, strengthening customer service, and advancing our global strategy as we prepare to address more opportunities and challenges ahead. This concludes my prepared remarks. Thank you, everyone. I will now turn the call over to our CFO, James. Thank you.
James Cheng: Thank you, Nangeng. And good day, everyone. This is James Cheng, CFO of Canaan Inc. I'm very glad to share our Q1 financial results with you today. As Nangeng stated at the start of the call, in Q1, especially in February and March, the Bitcoin mining industry faced challenges as miners' profit margins were squeezed by Bitcoin price volatility and the higher total network hash rate. Despite volatile market conditions, we delivered solid performance results. Let me give a quick summary of our financial performance. First, driven by the growth in the computing power sold and average selling price, total revenue reached $82.8 million, exceeding our $75 million revenue guidance and up 136% year over year.
Second, our mining operations grew steadily, fueled by the combined growth in the deployed mining capacity and average Bitcoin price. In the first quarter, our mining revenue reached $24 million, up 132% year over year, with 259 bitcoins mined, up 33% year over year. Next, due to product iteration and mass delivery of the A15 series, our average selling price rose to $10.5 per terahash per second in the quarter, resulting in a return to gross profit. It's the first time in two years amid the bear market. Last but not least, our cash balance remained flat sequentially as we continue to manage cash in a prudent way and streamline our expenses to make sure strategic items are prioritized.
Turning to our profit and loss for the quarter, total revenue was $82.8 million, beating the guidance by $8 million. Mining revenue contributed $24 million, increasing 132% year over year. We mined 259 bitcoins in the quarter, a year-over-year increase of 33%. This increase was primarily driven by more computing power installed at our mining sites, which reached 6.6 exahash per second at the end of the quarter, increasing 22% from the end of last year. Now turning to product revenue, revenue from machine sales was $58.3 million, an increase of 149% year over year. We delivered a total computing power sold of 5.5 million terahash per second, representing a year-over-year increase of 63%.
The first quarter of each year is typically our seasonally lower quarter due to the impact of the New Year and the Lunar New Year holidays. However, the mass delivery of A15 series in this quarter drove the major year-over-year growth in both mining machine sales revenue and computing power sold. More than 19,000 A15 mining rigs were delivered in Q1, contributing $45 million to the mining machine sales revenue and 3.9 million terahash per second to the computing power sold. In addition, driven by the mass delivery of our A15 series, the average selling price, or ASP, rose to $10.5 per terahash per second, up 53% from $6.9 per terahash per second in the same quarter of 2024.
Turning to the revenue from our Avalon Home series, in Q1, we delivered approximately 6,000 units of our Avalon Home products, contributing revenue of $1.3 million. From the beginning of 2025 to date, we have already received orders for more than 17,600 units of Avalon Home products, with a total amount of $6.6 million. As I mentioned earlier, due to the product iteration, upgrades, and the higher A15 delivery volume, gross profit turned positive, reaching $0.6 million in the quarter, the first time since the start of the market downturn two years ago. Turning to the expenses, our operating expenses totaled approximately $38 million compared to $31 million in the same period of last year.
Please note that a $2.4 million disposal gain on our self-mining rigs was recorded in the first quarter of last year, which correspondingly offsets the overall operating expenses. Excluding this non-routine impact, the operating expenses increased by $5.7 million year over year, mainly due to the increased staff cost and R&D expenses, including the staff we added for the development of our consumer-level mining products and mining solutions. By the end of this quarter, the price of Bitcoin decreased to around $83,000 versus around $95,000 by the end of 2024. The decrease in the Bitcoin price on the last day of the quarter resulted in an aggregate unrealized fair value loss on crypto assets of $16 million.
Encouragingly, the recent appreciation of Bitcoin price has reversed these unrealized losses. In total, we recognized an adjusted EBITDA loss of $38 million, narrowed by 47% year over year. In March 2025, we issued 100,000 Series A/1 preferred shares with gross proceeds of $100 million. Additionally, the third tranche of the Series A preferred shares issued in Q3 2024 was still recognized as a convertible liability at fair value by the quarter-end. This financing incurred an excess of fair value over proceeds received and fair value changes. This non-cash accounting treatment impacted our Q1 bottom line for a total of $33 million.
In order to represent our performance more accurately and more comparably, we excluded the impact of these accounting treatments from our non-GAAP measures. Turning to our balance sheet and cash flow, at the end of Q1, we held cash of $97 million on our balance sheet, remaining stable compared to the end of Q4. In Q1, we generated $51 million of cash inflow from sales, received $21 million from secured loans, and $18 million from export VAT refunds, and we paid $88 million for production and operation. We also paid $144 million to secure our wafer supply, primarily funded by the proceeds of $100 million from preferred shares financing and $42 million from ATM financing.
Now turning to our Bitcoin assets, Bitcoin held as our own holding asset increased in the quarter, reaching a record high of 1,408 bitcoins as of March 31st. This is 115 coins more than 1,293 coins at the end of last quarter. On March 31st, 2025, the fair market value of our own bitcoins totaled around $107 million, and our total gain was approximately $49 million higher than the original value of the Bitcoin that we gained from mining or other operations. With the Bitcoin price rebounding to over $100,000, the current market value of these crypto assets stands at approximately $147 million as of April 30th. Our total Bitcoin holdings increased to 1,424 as already disclosed.
Turning to fundraising, as mentioned earlier, in March 2025, we closed the Series A/1 preferred shares financing with gross proceeds of $100 million. From the end of 2024 to February 19, 2025, we utilized the ATM for fundraising with net proceeds of $42.5 million. These financings have been reported in the previous quarterly release. After that, we have not done any fundraising. We have also mutually agreed with the investor to terminate the agreement for the second tranche of Series A/1 preferred shares of another $100 million, effective April 30, 2025. As Nangeng mentioned, the recent market dynamics, including the US tariff hike, have seriously impacted our stock price.
We believe our current stock price is undervalued and disconnected from long-term growth potential. We are actively evaluating strategic initiatives, including a potential share repurchase program to enhance our shareholder value. We will promptly disclose relevant material developments in subsequent announcements. By the end of Q1, 900 bitcoins were pledged for the secured loans with an aggregate carrying value of $45 million, which we believe is at a reasonable interest level, and 100 bitcoins were transferred into a fixed-term product with a guaranteed minimum annual return. The secured loans enable additional liquidity, which we will use to fund our production expansion and operations.
In the future, as part of our HODL strategy, we will explore more ways to increase capital liquidity through our own crypto assets. Please note that the bitcoins pledged or transferred into fixed-term products are recognized as cryptocurrency receivables in our balance sheet, and the classification between current and non-current assets is consistent with the periods of corresponding secured loans or fixed-term products. Given the prevailing wait-and-see sentiment among North American customers and the postponement in our mining project deployments caused by the significant uncertainties surrounding tariffs, we cautiously expect the revenue for the second quarter to be approximately $100 million. This concludes our prepared remarks. We are now open for questions.
Operator: As a courtesy to other investors and analysts who may wish to ask questions, please limit yourself to one question and one follow-up. If you have questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today's call, if you ask a question to management in Chinese, please immediately repeat your question in English. To withdraw your question, please press star one. We will take our first question. And the first question comes from Kevin Cassidy from Rosenblatt Securities. Please go ahead.
Kevin Cassidy: Yes. Thanks for taking my question. Congratulations on the good results considering the market. I wonder, considering the market, if you could give a description of what happened with your ASP, you know, what the equipment pricing trends were through the quarter as Bitcoin prices went down. Do your ASPs per terahash come down with that? Or do they hold up? And if you can, can you give an idea of what to expect in the second quarter?
James Cheng: Yeah. Thank you, Kevin. Thank you, Kevin. I think from an ASP perspective, in Q1, we have already seen the ASP climb up to $10.5. I think there are several reasons behind it to support that. One thing is the market sentiment in early Q1, especially January and early February, was quite good. The demand was very strong. And the second reason behind that is our A15 series got very good feedback from the early stage customers in Q4. Then, you know, a lot of customers ordered in Q1, and we had to identify the orders' urgency after doing some, you know, price raising during that time. So I think that's in the early stage of Q1.
And also, we still have some clearance on the older generation products like A14 in Q1. That makes the Q1's average price still lower than $11, which gives us some room in Q2 to further develop our average selling price. Even, I think, in April, the market sentiment was not good, but our locked contract sales price in April and May is still higher than, you know, the previous selling price of the A15 series. And we don't have much A14 inventory in Q2. That makes the average selling price continue to have a chance to improve in Q2. Until now, I have no final numbers for Q2, but I'm very optimistic about the Q2 average selling price development.
But from a long-term perspective, you know, looking at Q3 and Q4, now if the US market demand is so under pressure because people are still waiting to see the tariff surrounding all kinds of policies, I don't think that we have a clear answer about Q3 and Q4's market demand, especially for the United States, the leading country. So with that assumption, I could only be, you know, cautious about the future development of average selling price. I should say it could be flat with Q2, or even, you know, a little bit lower if the Bitcoin price is not higher in Q3. But currently, I think the Q2's average selling price could be better.
That's something we have already had some confidence in. Does that answer your question, Kevin?
Kevin Cassidy: Yes. You made it very clear. Thank you, James. And thank you. Maybe just a follow-up to that. A lot of Bitcoin miners have employed a strategy to use their access to power for HPC or AI hosting. How is this changing your TAM for your equipment?
Nangeng Zhang: Hi, Kevin. This is Nangeng. I think I can answer this question shortly. I believe you are correct. Some customers have redirected their power towards the emerging AI and HPC applications. However, in my view, these efforts appear more like experimental quick fixes than strategic solutions to the underlying challenges. This is my personal view.
James Cheng: Thank you.
Operator: Thank you. We will take our next question. Your next question comes from the line of Michael Donovan from HCW. Please go ahead.
Michael Donovan: Hi, Nangeng and James. Thank you for taking my question. This is Michael Donovan on the call for Kevin Dede. Now I understand you're not offering guidance for the full year for 2025. But can you add more clarity about expansion plans for self-mining?
Nangeng Zhang: Yeah. I think before the US tariff policies were implemented, we had already shipped a batch of mining machines to the US for our self-mining. So our North American self-mining projects are still moving forward in Q1 and Q2. In April alone, we added over 1.5 exahash of newly installed capacity through our partnerships with Luna Square and the Boston Host in Pennsylvania and Texas. This brings our total deployed global hash rate to 8.15 exahash, with 6.2 exahash per second actively running. We managed to maintain a competitive OEM power cost of just 4.4 US cents per kilowatt hour across our mining operations, which shows the effectiveness of our focus on high-quality partnerships and our long-term global deployment strategy.
Because of the situation in the US, I think our projects outside North America show strategic value. In East Serbia, our joint mining operations have helped us avoid geopolitical and regulatory uncertainty while extending the equipment's life cycle and leveraging cost-efficient local power. In Q1, the local project achieved a strong 98% machine uptime. Even though there was a small-scale power disruption in April, our partner responded quickly, and the uptime for the month still reached 95%, which is above the industry average. Looking ahead, I think we will continue to stay agile globally, optimizing our partnership models and technical developments. We are actively reviewing our options for scaling up existing projects and talking with new site developments. Thank you.
Michael Donovan: Thank you, Nangeng. That's helpful. I want to follow up. I know it may be too early to tell, but has the 90-day tariff truce resulted in an increase in rig orders for May versus April?
Nangeng Zhang: Yeah. I think for the tariff stuff, the US raised import tariffs by at least 10% across most major economies. This affects US miners in two ways. First, the tariff adds at least 10% to the cost of imported mining machines. This applies not just to us, but to all of our peers in the industry. Second, there are also added tariffs to power-related infrastructures and other equipment needed for building mining parks. So for us, there are two impacts. First is the higher import cost is slowing down purchases from US customers. Second is some of our own planned mining deployments in the US have been delayed due to the increased import cost.
You know, because Bitcoin doesn't carry a "Made in" label, with Bitcoin price once again breaking through $100,000 recently, and with slower deployments in the US, the global hash rate growth has been more moderate in Q2. So that created opportunities for miners outside the US, especially in regions with energy cost advantages, to expand and earn more mining rewards. So what we are doing is actively using our global sales network to capture these kinds of opportunities and close more deals. At the same time, we have already built a solid mining presence outside the US, and we are now evaluating expansions and exploring new project partnerships outside the US.
So this allows us the flexibility to allocate mining machines between sales and our own mining projects, depending on the market conditions.
James Cheng: Yeah. My two cents here, Michael. I think in April, the sentiment was very bad from the market, from the customers. In May, when Bitcoin price climbed back, people's sentiment will be better. But in the reality perspective, it's all about the 10%. This 10% will be kind of a solid included extra cost no matter from the infrastructure perspective or machine perspective, borne by the miners, which makes the US miners a little bit less competitive compared to the rest of the world. So that's something, you know, we cannot ignore at the current stage. But let's see how it goes after the 90 days, you know, close.
Then we can know and answer after that what kind of, you know, tariff on Southeast Asia, including Malaysia, Thailand, and, you know, in certain cases, other countries in Southeast Asia. Just my two cents. I think there's another add-on to this question.
Nangeng Zhang: From current operation data, you know, we are roughly in the middle of Q2. Right? The number of orders we have locked in non-US regions is basically equal to the volume of the entire Q1 non-US regions orders. So from a practical point of view, sales in other regions are indeed linked to the recovery of the Bitcoin price. However, in the US region, we have not seen any improvements in sales. Yeah. For the record, you.
James Cheng: Thank you, Michael.
Michael Donovan: Thank you.
Operator: We will take our next question. Your next question comes from the line of Mike Grondahl from Northland. Please go ahead.
Mike Grondahl: Hey, guys. Thanks a lot. Could you give us some insight into what you would need to see, how much lead time you need for orders for Q3 or Q4 to be better than Q2?
Nangeng Zhang: Sorry. You are asking about the machine lead times? Or machine sales time. Right? Yeah. Okay. I think, yeah. I think we started the mass production of our A15 in the second half of last year. And during that time, I think most of the customers have, it's a little bit suffering, I think. It's about three to five months for the lead time. But currently, we are building up some inventories. So if you order today, I think our lead time is about, you can expect to get the machines in June. So that's about six to eight weeks lead time. It's much better. And I think for the lead time issue, it's about the demand and supply.
Everything goes well, I think we can expect that the lead time is between one and two months. Yeah.
Mike Grondahl: Got it. And in terms of CapEx for the rest of the year, what's a good range for your committed CapEx and or even growth CapEx for the rest of the year?
James Cheng: Mike, I can answer this question by two ways of spending. The first way is we have to build up our wafer supply part. This can be considered also as a kind of inventory and also can be considered as a kind of CapEx in machine sales business. The other side, we also do our self-mining operation. In that side, the only CapEx we invest in the current business model is the machine. So overall speaking, all the CapEx is related to machine wafer supplies, wafer preparing. Putting this together, I think we have already built up a kind of inventory for Q2 and Q3. We just mentioned the cash spending in Q1 was, like, $144 million for wafer.
And I can tell you in Q2, we continuously invest in this part. So from a full-year perspective, it will be adjusted according to the demand and supply. It's a kind of a rolling forecast process. For every six months, we have to monitor the market demand and then place orders from the wafer supplier and also manage our cash flow. So in terms of the full year now, I don't have a quick answer for you. But, you know, what I can say from an overall wafer supply perspective, it can be like between $400 million, something even above that. It's not only CapEx for self-mining but also the wafer preparation for the whole machine sales part.
And to be very honest, it is closely linked to the full-year revenue because all the wafers can turn into machine sales revenue or self-mining revenue eventually. So we didn't provide the full-year guidance. We still need to monitor the status of the tariff and other policies. So with that assumption, currently, I don't have a fixed answer for this total CapEx spending. But to be very honest, it will be higher than $400 million in the year 2025. That's something in my mind. Don't know if I answered your question, Mike.
Mike Grondahl: Makes sense.
Operator: Thank you. We will take our next question. Your next question comes from the line of Bill Papanastasiou from KBW. Please go ahead.
Bill Papanastasiou: Good morning, and thanks for taking my questions. Just a quick one for me. Apologies if it was already touched upon. Acknowledging that the tariff landscape has brought significant uncertainty, just curious as part of your evaluations, with respect to ASIC manufacturing, is there any capacity to shift a portion of your manufacturing to the United States to limit the impact of heightened tariffs? What does management think the best option is here?
James Cheng: Wow. That's a difficult question. Let me see.
Nangeng Zhang: Yes. We, I think we have, yeah. I think we just mentioned we already deployed, you know, for late Q1, we have started a small-scale trial production in the US. The process works, but manufacturing in the US doesn't mean, you know, everything from, like, from refining standard to build wafers, aluminum to chips, and, like, iron to machine chassis. It's all done in the US. In practice, it's extremely, I think during our operation, we found out that it's extremely complicated to do proper tariff planning for all imported materials. I think we already manufacture the PCBs and do the SMT sorting inside the US. And also, you know, the policy environment is changing almost every day.
It's very costly. So our internal goal, I think the number today we got is of no sense. It's absolutely nonsense. But our internal goal is to limit the overall cost increase of US-based production to no more than around, like, 15 to 20% compared to, like, Malaysia. Yeah. We are working hard to reach that topic. I think the schedule will not be earlier than the tariff stuff gets stabilized.
James Cheng: Yeah. Adding some colors to this question, it's all about cost reductions and it's all about the economics of this thing. If the demand is not going up from the United States, then it will be a painful process if we build up a factory there and our customers, they didn't order a lot. Then it will create problems for us. I think on the other hand, if the tariff thing has been solved, you know, with some good results from Southeast Asia, then we don't necessarily need to build up the factory manufacturing in the United States. So it's a kind of dilemma. It's all about demand and supply.
So if our customers would like to have us made in the USA for this machine, and also, our cost structure can cover, like, as Nangeng said, less than 15 to 20% higher than Malaysia, then we should consider doing manufacturing in the United States. But if US market demand is not that high, for us, it's difficult to amortize the cost into every single unit of machine, then we don't do that. So it's kind of quite uncertain yet, but our supply chain is the best team inside the company. They would like to do some pilot run, which is very successful. But I think in the future, it still depends on the economics calculated together inside the company.
Bill, I don't know if we answered your question.
Bill Papanastasiou: Yeah. I think so. Thank you, James.
Operator: Thank you. Before we move to the next question, as a reminder, please limit yourself to one question. And the next question comes from the line of Nick Giles from B. Riley Securities. Please go ahead.
Nick Giles: Thank you, operator. Hi, Nangeng and James. Just wanted to go back to how you're thinking about site acquisitions, whether or not the tariff landscape is really increasing your desire to add more sites in the US, and whether it's increasing your desire to pursue HPC or AI, kind of where do you stand there? Thank you very much.
Nangeng Zhang: Thank you, Nick. So far, I think all the sites and sides we are involved in, we haven't seen major changes in energy prices. Things have remained quite stable. Looking ahead, I am quite optimistic. Policy changes in the US may unlock more energy prices in the future, which could improve the outlook for power availability over the long term. Yeah.
Nick Giles: Thank you.
Gwyn Lauber: Thank you.
Operator: We will take our next question. Your next question comes from the line of Joe Flynn from Compass Point Research and Trading. Please go ahead.
Joe Flynn: Hi. Just based on my comment, you know, regarding the kind of CapEx spend over, you know, $400 million for ultimately just kind of wafer cost. I was curious, like, you know, with the uncertain kind of macro environment and the slowdown you mentioned in US customers who, like, were receiving strong pricing ultimately exchanged for, you know, the ability to secure higher volumes of wafers. Have you looked there was how do you, I guess, like, you know, think about those relative to each other going forward? Because based on those numbers, it seems like, you know, you're still obliged to buy your allotment. Is that like, more true to be take or pay or already paid the deposit?
Any other color there would be helpful.
Nangeng Zhang: You're asking about the wafer supply chain side?
Joe Flynn: Yes. Like so.
Nangeng Zhang: Yeah.
James Cheng: Mean, how can you guys justify your continued spending of $400 million in wafer as if, you know, ultimately your strategy going into this year was, you know, to increase our demand in the US, extend for, you know, prepayments.
Nangeng Zhang: Yeah. I understand. I think we continue to maintain strong and long-term partnerships with our wafer foundry partners. At present, I think the fab capacity is still manageable, and we are locking in production capacity through prepayments. As I mentioned earlier, our current wafer in progress is sufficient to support our production through Q3. Given the recent sales slowdown, then expected at the beginning of this year, I think the inventory could actually carry us to Q4. This is also helped by our process optimization efforts. That means we can get more hash rate from a certain number of wafers. We are watching the market very closely.
In my view, if the US tariff policies do not go away, just everyone believes it is stabilized, then and the market expectations become clear, I think the US market will recover. And if the market comes back, the Bitcoin price is another historically high. It's already possible in a couple of months, I think. The tech market financing channels will reopen to our customers. So there is a real chance that the mining machine supply could quickly fall short of demand. And if we observe that kind of smell, we will put more orders to our foundry partners. And I think they still have capacities for the end of this year. Yeah. Thank you.
Operator: Thank you. As there are no further questions, I'd like to turn the call back to Gwyn Lauber for any closing remarks.
Gwyn Lauber: Thanks, everyone, for joining us today. If you have any further questions, please feel free to reach out to us with the contact information on our website. Thanks very much, everyone.
Operator: Thank you. Thank you. Please end the call today. Thank you, everyone, for attending. You may now disconnect.