Good day, ladies and gentlemen. Thank you for standing by, and welcome to Intchains Second Quarter 2024 Earnings Conference Call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Joining us today is Mr. Chaowei Yan, Chief Financial Officer of Intchains. Mr. Yan will provide an overview of the company's performance and details of the company's financial results. After that, we will conduct the question-and-answer session to take your questions. During the question-and-answer session, Mr. Yan will deliver the answers in Chinese, and the company's representative will provide corresponding English translation. Before we continue, I'd like to remind you that today's discussion will contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the company's current expectations and projections about future events that the company believes may affect its financial conditions, results of operations, business strategy and financial needs. The company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring 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 forward-looking 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 and encourages investors to review other factors that may affect its future results in the company's registration statement and other filings with the SEC. As a reminder, an investor presentation and a webcast replay of this conference call will be available on Intchains' IR website at www.intchains.com. With that, I will now turn the call over to Mr. Chaowei Yan, the company's CFO. Mr. Yan, please go ahead.

Thank you, operator, and everyone, for joining Intchains' earnings conference call for the second quarter of 2024. On today's call, we will provide an overview of our operational and financial performance. After that, we will conduct our Q&A session to take your questions. In reviewing the second quarter of 2024, the cryptocurrency market has experienced a series of remarkable market trends and movements. While bitcoin and other liquid cryptocurrencies grew slightly compared to the strong growth since the beginning of the year, the market still demonstrated significant growth compared to the same period last year, exerting a positive influence on the overall WEB3 industry. The second quarter also saw a substantial increase in activity across the WEB3 domain driven not only by technological advancement within the industry but also the growing interest and participation from both internal and external stakeholders. In March of this year, the computing equipment products, that incorporate our latest chip for Alephium, Kaspa, Litecoin, and Dogecoin, were officially launched for sale. As of June 30, 2024, chip sales have exceeded 274,019 units. This outstanding performance is a clear testament to the market's strong recognition of our products. Moreover, the AL BOX and the KA BOX have also won the favor of individual users due to their exceptional attach rate and ultra-low-power consumption. Driven by the impressive sales of these two products, the company's overall revenue in the second quarter increased by over 785% year-over-year. Furthermore, since the company adopted a strategy of holding cryptocurrency, primarily ETH, as a key long-term asset reserve for the group, we have closely monitored the volatility and the momentum of the cryptocurrency market and optimized the timing for our asset allocation. As of June 30, 2024, the company has accumulated a total holding of 2,417 ETH. This reserve position not only enhances the company's financial flexibility and risk resilience, it also illustrates the strong blockchain infrastructure and the long-term value of ETH. Going forward, the company will continue to follow this asset holding strategy, making timely adjustments to our portfolio to capitalize on the opportunities we see within the WEB3 industry. We will also closely monitor industry trends and review market risks, ensuring that our investment portfolio can adapt to the evolving market environment and create long-term value for our shareholders. As we move into the second half of 2024, we remain steadfast in our commitment to technological innovation and expanding our footprint within the industry value chain. In response to the evolving market and the technological landscape, we are proactively developing new WEB3 products beyond mining machines to enhance efficiency and improve customer experience for our industry partners. We hope to accelerate the adoption of blockchain technology while supporting more enterprises in achieving their digital transformation goals. We are confident that, as Intchains' positioning and business model become more defined, our company's growth potential and long-term value will be fully realized. Moving forward, Intchains will continue to lead the industry, collaborating with partners to drive robust growth across the sector. Now I will provide a brief financial overview of the second quarter of 2024. Our revenue was RMB 123 million or USD 16.9 million for the second quarter of 2024, representing an increase of 785% from RMB 13.9 million for the same period of 2023. The substantial growth was primarily driven by a significant increase in the average selling price of our ASIC chip products, which was attributed to the sales of our latest ASIC chip products, which commanded higher average selling prices compared to the older ASIC chip products. Cost of revenue was RMB 40.9 million or USD 5.6 million for the second quarter of 2024, representing an increase of 33.2% from RMB 30.7 million for the same period of 2023. The increase was primarily caused by the impact of inventory write-downs, prepayment write-downs, and provisions for purchase commitments, which amounted to RMB 30.3 million or USD 4.2 million for the second quarter of 2024 compared to RMB 22.5 million for the same period of 2023. The percentage increase in cost of revenue was substantially lower than the percentage increase in our revenue, which was primarily due to the higher gross margin for our latest ASIC chip products. Our total operating expenses were RMB 24.3 million or USD 3.3 million for the second quarter, representing an increase of 40.2% from RMB 17.3 million for the same period of 2023. The increase was primarily due to an increase in research and development expenses, sales and marketing expenses, and general and administrative expenses. Research and development expenses increased by 47.6% to RMB 13.2 million or USD 1.8 million for the second quarter of 2024 from RMB 9 million for the same period of 2023, primarily due to the increased share-based incentive expenses, labor costs, and expenses related to our R&D projects. Sales and marketing expenses increased by 48.5% to RMB 1.9 million or USD 0.3 million for the second quarter of 2024 from RMB 1.3 million for the same period of 2023, mainly driven by increased business promotion expenses, increased share-based incentive expenses, and labor costs. General and administrative expenses increased by 25.5% to RMB 8.9 million or USD 1.2 million for the second quarter of 2024 from RMB 7.1 million for the same period of 2023, mainly driven by increased tax surcharges as well as increased share-based incentive expenses and labor costs. Loss on the fair value of cryptocurrency for the second quarter was RMB 0.3 million or USD 0.04 million compared to 0 in the same period of 2023. Interest income decreased by 5.6% to RMB 4.1 million or USD 0.6 million for the second quarter of 2024 from RMB 4.4 million for the same period of 2023. Other income decreased to RMB 0.1 million or USD 0.02 million for the second quarter from RMB 0.3 million for the same period of 2023, mainly due to the decrease in government grants, which was partially offset by the change in the fair value of short-term investments. As a result of the foregoing, we recorded a net income of RMB 50.4 million or USD 6.9 million for the second quarter of 2024 compared to the net loss of RMB 20.5 million for the same period of 2023. Basic and diluted net earnings per ordinary share were RMB 0.42 or USD 0.06 for the second quarter of 2024 compared to basic and diluted net loss per ordinary share of RMB 0.17 for the same period of 2023. Each ADS represents two of our company's ordinary shares. Thank you for your continued support. We look forward to updating you on our progress in the future. Now I'd like to turn the discussion over to the operator for any questions.

We'll take our first question now from Mark Palmer at Benchmark.

Congratulations on the strong quarter. I wanted to ask you about the demand environment you are seeing for your ASIC chips and mining equipment. What are you seeing in terms of the impact of the more buoyant markets thus far in 2024? And how is that translating into increased demand for the types of mining equipment for which you provide chips?

Congratulations on the strong quarter. I wanted to ask you about the demand environment you are seeing for your ASIC chips and mining equipment. What are you seeing in terms of the impact of the more buoyant markets thus far in 2024? And how is that translating into increased demand for the types of mining equipment for which you provide chips?

Thank you for your question, Mark. I will provide a brief response. I might answer in Chinese, and our staff will translate it into English.

Mark, thank you for your questions. It’s my pleasure to address them. As Chaowei Yan mentioned, the second quarter of 2024 is seeing a slow start in the crypto market. However, our products will remain competitive within the industry, particularly our AL BOX and KA BOX, which have received favorable responses from the market and our customers. Looking at the current quarter, the market trend is down, but we believe there is strong confidence in our products, supported by solid financials, especially looking ahead.

And one more question, the company has meaningfully diversified both its business line and its geographic footprint through the acquisition of Goldshell. What are your thoughts about the company's potential next steps in terms of further diversification into new product lines as it continues to focus on expanding its role within the WEB3 infrastructure space?

They have a strong confidence in our products and solid financials, particularly looking forward. Regarding the company's recent acquisition of Goldshell, what are your views on the potential for further diversification into new product lines as it aims to enhance its presence in the WEB3 infrastructure space?

Thank you for your question. And actually, in this quarter, our overseas revenue achieved about 72%. Our revenue was 72% coming from the overseas market. And compared with the last quarter, that was a significant increase. Last quarter, about 90%, over 90% of revenue came from China. Yes, so this is the main advantage that we acquired the Goldshell brand because we have the ability to expand in the overseas market. And furthermore, we believe we will have other projects planned in other areas beyond the cryptocurrency mining machine, which also the Goldshell brand will make sales. So I believe in the future, our product line will be more diversified with the Goldshell brand. Thank you.

We will now take our next question from Zhaoyuan Wang from Sinolink.

I'm not sure whether you can hear me clearly, but I have one question for you. We're aware that the company has sold more ETH during Q2. Could you please share more plans on ETH as an asset allocation strategy? This is my first question.

Thank you for your question, and I would like to pass it on to our CFO.

Thank you for your question, and I would like to translate your question to our CFO.

This is our answer to your question. Our company, Intchains, leverages our operating cash flows to accumulate ETH and other growing cryptocurrencies. From the first quarter of 2024, we held 825 ETH. And up to June 30, 2024, the current holdings of ETH are 2,417. So basically, our ETH asset strategy is considering our cash flows and continues to hold and accumulate ETH, and we will not sell ETH. Yes, so this is our answer to your question.

And I'm not showing any further questions in the queue. I will just conclude this period and conference for today. Thank you once again for joining Intchains' Second Quarter 2024 Financial Results and Business Update Conference Call today. Have a great day.