Good day, ladies and gentlemen. Thank you for standing by, and welcome to Intchains Third Quarter 2024 Earnings Conference Call. This conference call 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; 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’d now like to turn the call over to Minty Wang, Head of Investor Relations at Intchains Group Limited. Please go ahead.

Thank you, operator. Good day, everyone. I'm Minty. Welcome to Intchains Group Limited Third 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 forward-looking statements are reasonable, we 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 review other factors that may affect its future results in the company's registration statement and other filings with the SEC. We will discuss certain non-GAAP financial measures. Please also refer to a 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 over to our CFO, Mr. Chaowei Yan. Please?

Thank you, Minty, and everyone, for joining Intchains earnings conference call for the third quarter of 2024. On today’s call, we will provide an overview of our operational and financial performance. After that, we will conduct a Q&A session to take your questions. In reviewing the third quarter of 2024, the cryptocurrency market was mostly range bound with Bitcoin prices remaining relatively stable, while other cryptos experienced varying degrees of decline. The crypto industry’s narrative primarily focused on national and institutional investments in Ether, while some funds flowed into the Meme sector due to a lack of prevailing applications. However, as the fourth quarter began, the results of the U.S. presidential election strengthened global investors’ expectations for pro-crypto regulation, leading to renewed optimism about crypto’s future development. In November 2024, Bitcoin prices consistently broke all-time highs. And sectors such as payment, Meme, and RWA also experienced rapid growth. We are confident about the upcoming development of the crypto market and actively preparing new ASICs and beginning primary efforts to build blockchain applications. As the company’s growth strategy in the long term, Intchains’ vision is to achieve growth that transcends crypto cycles through the development of applications based on Web3, while in the short term, the company is primarily focused on increasing ROI during the crypto cycle. We enhanced ROI through continuously exploring promising crypto projects and accumulating Ether. In the third quarter of 2024, we continued to drive sales of our Goldshell-branded computing equipment, designed for Kaspa, Alephium, Dogecoin, and Litecoin mining. This decision has allowed us to effectively capture the crypto market trends emerging in the fourth quarter. To seize the current wave of cryptocurrency development, we will continue to actively explore new projects and expect to produce new ASICs by the first quarter of 2025. Meanwhile, we will stick to our Ether accumulation strategy, whether in the peak or trough of the crypto cycle. In the third quarter of 2024, we continued to implement our strategy to accumulate Ether, reaching 4,149 Ether as of September 30, 2024, representing a 71.7% increase since June 30. This month, we were excited to see that the total market cap of cryptocurrencies reached a historical high with Ether prices surpassing the average cost of our holdings as of September 30. Furthermore, as part of our initial foray into blockchain application expansion, we launched the Goldshell Pay in this quarter, offering a one-stop payment solution for merchants. Based on our confidence in the future of the crypto industry, we plan to launch a hardware crypto wallet in the fourth quarter, which will further enhance our complete payment product line and application ecosystem. We are confident that as Intchains’ positioning and business model become more defined, our company’s growing 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 crypto cycles. Now I will provide a brief financial overview on the third quarter of 2024. I’m pleased to report that the company’s third quarter revenue was CNY 60.3 million or USD 8.6 million, representing a year-on-year increase of 781%, continuing the strong growth momentum from the second quarter of 2024. Revenue from overseas accounted for 66.2% in the third quarter of 2024. Our global expansion strategy has continued successfully since the second quarter. Our sales volume of ASIC chips for the third quarter was 207,838 units compared to 165,056 units for the same period in 2023, representing an increase of 26%. Revenue for the third quarter was driven not only by the increase in sales volume but more importantly by the rise in the average selling price. The gross margin was 67.7% in the third quarter, reaching the highest level since Q1 2023, primarily due to the higher gross margins for our latest ASIC chips products launched in 2024 compared to the older ASIC chips products. In terms of total operating expenses, it was CNY 37.7 million or USD 5.4 million for the third quarter, representing an increase of 90.8% for the same period of 2023. The increase was primarily due to the loss on fair value of cryptocurrency and an increase in share-based incentive expenses. The loss on fair value of cryptocurrency for the third quarter was CNY 13.1 million or USD 1.9 million, primarily due to the volatility of the cryptocurrency market with Ether prices falling 24.2% from the end of the second quarter to the end of the third quarter. While in November, as mentioned before, the Ether price surpassed the average cost of our holdings as of September 30, 2024. Our net income for the third quarter was CNY 3.2 million or USD 450,000. And the non-GAAP adjusted net income was CNY 19.1 million or USD 912,000, both turning from a loss to a profit compared to the same period of last year. This was primarily due to the faster revenue growth in the third quarter compared to the growth in cost of revenue and operating expenses. This quarter, we started to disclose non-GAAP adjusted net income, primarily excluding share-based compensation expenses. We believe non-GAAP net profit reflects the company’s ongoing operational performance. Basic and diluted net earnings per share was RMB 0.03 for the third quarter of 2024 compared to the basic and diluted net loss ordinary share of RMB 0.16 for the same period of 2023, each ADS representing 2 of the company’s Class A ordinary shares. Looking ahead, we will continue to focus on product and project innovation and foster the adoption of blockchain technology for our clients and partners. We look forward to updating you on our progress. Thank you for your continued support.

Thank you, Mr. Yan. At this point, I'd like to open the floor for questions. You're welcome to ask questions in Chinese or English, and we will provide English translation when necessary for convenience purposes only. In case of any discrepancies, please refer to our management's statements in the original language. Now operator, we may start the Q&A session. Thank you.

The first question comes from Marco Chan from Golonghui Research.

Congrats on the company's strong growth in Q3. Firstly, I noticed that the company launched an app called Goldshell Pay in Q3, and you said you plan to launch a hardware crypto wallet in Q4. So my question for you is that, can you tell us a little bit more about the assumptions of your Goldshell Pay and your hardware crypto wallet? And what differentiates yourself from the other apps and wallets in the market?

Okay. Thank you for your question. First, the Goldshell Pay was released in the third quarter. And it is a one-stop payment platform serving global merchants currently and supports our merchants to receive cryptos, including Bitcoin, Ether, Dogecoin, Litecoin, and Polygon in both USD Coin and Tether USD. Goldshell Pay provides services including not only limited to payment processing but also risk monitoring and data analytics. However, it’s still in the early stages. We do not expect it to generate revenue in the short term. And for the hardware wallet, it’s still in development and confidential at this stage. But what we can say is that both Goldshell Pay and Goldshell wallet are important steps for us to explore our product line and develop our application ecosystem. And of course, both products will not have any custodian function, and the users should store their security keys by themselves, yes.

Next question is coming from the line of Tao from Maxim.

My question is also related to the wallet to be launched in the short future. So could you give us some projections about what the cost and how the revenue would be like driven by this project? And also, is this project to be developed in-house or does the company have a third-party partner to launch this cryptocurrency wallet?

Okay. The company’s management firmly believes that in the future of blockchain applications, which is also one of the reasons behind our long-term Ether accumulation strategy. In the past few years, the company primarily focused on providing mining assets for altcoins. These projects have proven to be successful. However, we do not want to remain confined to our comfort zone. Instead, we have continuously sought the next growth curve for our company. As we mentioned, in previous years, we did not venture into blockchain applications because our primary focus was on achieving business survival through ASIC sales. Now we have sufficient cash reserves to sustain us through the cycles and the market has developed a certain level of awareness of blockchain applications. The management believes it is time to begin exploring blockchain applications, starting with payments. Goldshell Pay is designed to offer merchants one-stop payment solutions, providing risk monitoring data, operating, and other functions with service fees collected in the process. And our hardware wallet is another product set to be released in the fourth quarter. But further details will be disclosed upon launch. Currently, all these are in the trial stage. We do not expect both Goldshell Pay and wallet to contribute materially to our profits during this phase, and it’s difficult to provide a specific commercialization timeline. But we aim to continue exploring a variety of application directions and break out of our current operational comfort zone to achieve long-term stable growth. Thank you.

Your question is coming from the line of David Lee of Premier Partners.

I wonder, the company has been saying that one of the strategies is accumulating Ether, which is a little bit different from more popular strategies like accumulating Bitcoin, as MicroStrategy does. So can the management elaborate on that strategy in particular? And also, some other companies are also leveraging or even employing some financing to do that. Is the company also planning to do so?

The question is why we choose Ether accumulation, right? So regardless of whether it's in a bull or bear market, the company remains committed to accumulating Ether. The reason for accumulating Ether is, firstly, we position ourselves as an altcoin development company. Our primary business focuses on providing ASIC chips for promising Proof of Work coins. As Proof of Stake is one of the main consensus mechanisms besides Proof of Work, we aim to share in the growth of the Proof of Stake sector by accumulating Ether. Therefore, investing in Intchains is, in a sense, similar to investing in an enhanced altcoin portfolio, which offers a higher beta in all markets. Secondly, the company's founder has a technical background and certainly believes in the widespread application of the crypto industry. We have also begun initial trials in blockchain applications. Currently, Ether remains the dominant public chain for Web3 applications, making our strategy of accumulating Ether a fitting choice. Finally, the altcoin market is relatively untapped and overcomes the complete crypto cycle. The company has consistently generated operating profits and maintained self-sustaining growth. As a result, the company has a healthy cash reserve. This reserve allows us to navigate crypto bear markets smoothly and tends to lower overall ROI during bull markets. Accumulating Ether serves as one way to improve our ROI. Regarding the possibility of financing strategies to accumulate assets, at present, the company primarily uses its own cash to accumulate assets. However, we are aware that some U.S. listed companies have deployed financing strategies to accumulate cryptocurrency like MicroStrategy, and their stock price, as you've indicated, investors recognize their approach fully. Therefore, we will consider adopting their successful experience and may explore financing options for asset accumulation at the appropriate time. Thank you.

At this time, there seem to be no further questions from the line. I will now hand the call back to management for closing.

Okay. Thank you, operator. If there are no more questions online, let’s call it a day. I also want to say that if you have further questions, you can contact us via email or visit our website to refer to the materials we have listed. Thank you, operator, and thank you, everyone.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.