Good day, ladies and gentlemen. Thank you for standing by, and welcome to Intchains Group Limited First Quarter 2025 Earnings Conference Call. Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today, Mr. Chaowei Yan, Chief Financial Officer of Intchains Group Limited, and Ms. Minty Wang, Director of Investor Relations. Mr. Yan will provide an overview of the company's performance and financial results. Following his remarks, we will open the floor for a question and answer session. I'll now turn the call over to Minty Wang, please. Go ahead.

Thank you, Operator. Good day, everyone. I'm Minty Wang. Welcome to Intchains Group Limited's first quarter 2025 earnings call. On today's call, Mr. Chaowei Yan, our CFO, will present a comprehensive overview of the company's performance and financial results for the quarter. Before we begin, please note 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 could affect 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 and changes in expectations except as required by law. Although the company believes these expectations are reasonable, there's no guarantee they will prove to be accurate. Actual results may differ materially from those anticipated. Investors should refer to our registration statements and other filings with the SEC for additional factors that may affect future performance. We'll also discuss certain non-GAAP financial measures. Please refer to the reconciliation of these non-GAAP measures to the comparable GAAP figures in our earnings press release. The presentation and a replay of this call will be available on our website at ir.intchains.com. With that, I'll turn the call over to Mr. Chaowei Yan. Please go ahead.

Thank you, Minty, and thank you all for joining today's first quarter 2025 earnings conference call. Today, I will provide an overview of our operational and financial performance, followed by a Q&A session. We are pleased to report solid operational performance despite a challenging macroeconomic environment and significant volatility in the crypto market, particularly an 18% decline in the total market cap of cryptocurrency during the quarter. Our revenue reached $18.2 million, a 78.5% quarter-over-quarter increase. In our previous earnings call, we guided Q1 2025 revenue to be between $15 million to $16 million. Our results exceeded the upper end of that range. Gross margin grew by 286.9%, with gross margin improving to 56.9%, up from 26.2% last quarter. This reflects our continued focus on product optimization and operational efficiency. Our operating income turned positive at $5.1 million, a strong recovery from the loss in Q4 2024. While net income was impacted by a non-cash revaluation loss on its service, we remain committed to our Ether accumulation strategy, increasing our holding by over 23% to 7,023. This long-term approach remains central to our value creation strategy. For context, our business operates across three core segments. Firstly, we produce home miners for high-potential altcoins such as Aleo and Dogecoin under the Goldshell brand. Secondly, we reinvest the profit to accumulate Ether, optimizing our asset structure. Last but not least, we actively explore Web3 innovations to drive long-term growth. As a pioneer in home mining products and a long-term Ether holder, we occupy a unique position in the US capital market. Our differentiated strategy focused on blue ocean altcoin miners and mining sector enables us to maintain gross margins higher than the industry average for Bitcoin miners, regardless of market cycles. This strategic focus has allowed us to achieve a cumulative net profit from 2019 to 2024 that outperforms our peers, making us one of the few consistently profitable mining companies. In early 2025, we further solidified our leadership in altcoin mining machines. Since launching the Aleo series miners in February, we have released five iterations, strengthening our market position. According to a third-party miner evaluation website, our AE Max miner currently ranks sixth in daily profitability among all the mining machines, outperforming most Bitcoin miners. In March, we launched the Goldshell Byte, an innovative power mining machine that supports Aleo, Dogecoin, and Litecoin. With hot-swappable mining cards, users can switch between cryptocurrencies based on market conditions to maximize returns. This product showcases our technical strength in developing advanced altcoin mining machines. Looking ahead, we plan to continue refining our Goldshell miner through chip upgrades and enhanced product design, aiming to become a top-tier player in Goldshell mining equipment. Now let's review our financial results for the first quarter of 2025. During Q1, the price of Ether, Dogecoin, and Aleo fell by 46%, 49%, and 75%, respectively. However, prices have shown signs of recovery in Q2. Despite these headwinds, we delivered strong results. Revenue for Q1 was $18.2 million, exceeding the high end of our guidance and marking our highest quarterly revenue since 2023. This performance was largely driven by the successful launch of our Aleo mining miner series, which accounted for nearly 75% of our total revenue. The product's strong margin and timely launch helped us respond quickly to market demand. Revenue increased 78% quarter over quarter, significantly outperforming industry peers. Cost of revenue rose modestly from $7.5 million in Q4 to $7.9 million in Q1, growing at a much lower pace than revenue due to the high margins of Aleo miners. Operating income turned positive at $5.1 million, driven by top-line growth and reduced R&D expenses as several early-stage projects concluded. Among crypto mining companies, we are one of the few to report positive operating income in Q1 2025. Net income was negative $4.7 million compared to a profit in the previous quarter, primarily due to the $9.8 million non-cash loss from revaluation of our cryptocurrency holding, mainly due to the Ethereum price drop of 46%. Despite the downturn, we maintain a steady pace of Ethereum accumulation. As of March 31, 2025, we held approximately 7,023 units of Ether, up 23.2% quarter over quarter. Non-GAAP net income was negative $4.4 million, also declined from the previous quarter. As of March 31, 2025, our cash, cash equivalents, and short-term investments totaled $74.9 million, up from year-end 2024. Thanks to positive operating income, our USDC and cryptocurrency holdings other than Ether amounted to $16.1 million. Including Ether, our account amounted to $60.1 million. As of May 21, 2025, our total assets represented 147% of our market capitalization. Looking forward, several catalysts could drive long-term upside in 2025. First is anticipated interest rate cuts potentially improving liquidity conditions. Second is broader regulatory support for crypto-linked ETFs beyond Bitcoin. Third is new blockchain applications in payment and AI agents. Fourth is continued advancement in zero-knowledge proofs and the Ethereum protocol upgrade. And finally, the passage of new half-share Bitcoin reserve deals at the US state level may encourage similar moves elsewhere. Ethereum has also undergone significant updates, including the Petra upgrade completed in May, anticipated layer one scaling, and new leadership at the Ethereum Foundation. We remain confident in Ethereum's future and the broader blockchain ecosystem, and we will continue our long-term Ethereum accumulation strategy. Looking ahead, we are optimistic about sustaining momentum into Q2 and beyond. Market sentiment is improving, and our rapid product iteration, especially in the AE and 30 series, positions us well for future growth. However, taking into account tariffs and the crypto market volatility, we project the first half of 2025 revenue of approximately RMB 180 million to RMB 200 million. In conclusion, we remain focused on innovation, disciplined execution, and long-term value creation. As we navigate the evolving crypto and Web3 landscape, our strategy is anchored in technological leadership, operational excellence, and prudent capital management. Thank you for your attention. We look forward to keeping you updated on our progress as we continue to grow across different market cycles.

Thank you, Mr. Yan. We are now beginning the question and answer session. You are welcome to ask questions in either Chinese or English. For convenience, English translations will be provided by Minty Wang. In case of discrepancies, please refer to the original language used by the management. Operator, please begin the Q&A session. Thank you. Star one one again. A moment for this question. Mark Palmer from The Benchmark Company. Please go ahead, Mark.

Yes. Thank you for taking my question. And congratulations on the strong operating performance during what was a challenging quarter in the cryptocurrency industry. With regard to the mix of the company's revenue going forward, insofar as about 75% of revenue was derived from Aleo chips and miners during the first quarter, and at the same time, the company continues to develop new iterations of Doge miners, how should we think about the mix of the company's mining rigs in the second quarter and, you know, perhaps during the balance of the year?

Yeah. Thank you for your question, Mark. Yeah. The first thing, we are very optimistic about the Dogecoin future development, and we will upgrade our Dogecoin miners' progress continuously. So we aim to become the top-tier supplier of Goldshell mining miners in this industry. But we will also identify promising innovative projects in the future, not only as miners. So we also hope to lead the market launching of corresponding miners. This is similar to how we launched the Aleo Series miner in Q1, creating substantial returns for miners and contributing to the project ecosystem while earning our share of the reward. So in conclusion, our future revenue will come from Goldshell miners, Aleo miners, and new miners, maybe launched in the second or third quarter. Yeah. Thank you.

And thank you. And one other question. Just wanted to touch base on Goldshell Byte, you know, the new dual miner that you introduced in March. Could you talk a bit about the potential of that miner in terms of revenue generation and how we should think about the timing of that rollout?

Yeah. Yeah. The Goldshell Byte, at the end of March 2025, our company launched this product, which accounted for mining of cryptocurrencies such as Aleo and Dogecoin, but in the future, maybe with potential compatibility for more projects through the flexible mining card. So the primary motivation behind this product was addressing a common pain point for individual miners. Every time they switch projects, they typically need to purchase entirely new machines, which also take up significant space at home. So in response, we introduced the standardized miner with flexible mining cards, allowing the miner to easily switch cards based on market conditions. From a company perspective, this product helps us to standardize the hardware design while leveraging our technical expertise across multiple cryptocurrencies. For the crypto industry, we hope this project will lower the barrier to entry and encourage more people to participate in crypto mining, ultimately contributing to the decentralization of more blockchain projects.

And, Mark, in conclusion, for your first and these questions, we think that for the first half of this year, most of our revenues were generated from the Aleo series miners. Yeah. And for the second half of this year, we think some revenues may come from the Goldshell Byte products, but it's kind of hard to give you a specific guidance. But for the first half of this year, we think the Aleo series miners will still be very competitive in the market among all the PoW machines. And for the whole year, just as Chaowei stated, we may launch some new innovative miners in this quarter or maybe the next quarter. Yeah. So we think regarding the revenues of the whole year, our revenue will be comprised of the sales of the Aleo miners, innovative miners, and the Dogecoin miners. But the percentage of these miners will depend on the market price of these miners. So it's kind of hard for us to give you a precise percentage. Yeah. Thank you.

Thank you very much.

Thank you. We will now take our next question from the line of Matthew Galinko from Mac Group. Please ask your question, Matthew.

Hey. Thanks. Thanks for taking my questions. And congratulations on the strong quarter. I noticed that inventories remain pretty high, down a little bit from the fourth quarter. But I was curious if you could comment on what we could expect from the inventory through the balance of the year.

Yeah. In fact, most of our inventory is for Goldshell miners, and some of them are Aleo miners related chip inventory. So now we cannot predict strong performance during this quarter. But in the future, we will adjust our price depending on the market condition. So what we can predict is we will try our best to sell these inventories to the market instead of writing off the inventory. But it still depends on the market condition in the next quarters. Thank you.

Got it. Thank you. And I guess as a follow-up question also on Goldshell Byte, can you talk about where you're getting the feedback from the market that, you know, consumers want that kind of all-in-one style device for providing the ability to mine multiple currencies? Is it direct feedback you're getting from existing customers? Is it kind of broad industry expectations? Or, you know, talk a little bit about that feedback.

Okay. Yeah. Yeah. Goldshell Byte was very welcomed by many individual miners. We assessed and explored our customer base because we received a lot of feedback from new customers. And all these will be a good entry for these new customers. So our market strategy is that we use home miners to attract new customers and use professional miners to maintain them. Because from a profit perspective, maybe the small miner like Goldshell Byte will not have a big return, but it will be a good entry for some new customers. So this is our market strategy. So I think the Goldshell Byte individually may not have a big proportion of our total revenue stream, but eventually, the launch of this kind of product will further our customer base and will have a positive impact on our revenue. Thank you.

And still, the Goldshell Byte is kind of a profitable product for the individual miners because you can check the daily profit of our Goldshell Byte. If you use two Aleo mining cards, you may get about $0.50 to $1 daily profit per day, and you may get your cost back, I think, within three to four hundred days. Yeah. So for three to four hundred days, I think it's still more profitable than some Bitcoin or other cryptocurrencies mining machines.

Yeah. But for individual users, maybe they don't care about this hundred percent. It's an interesting product. Yeah. And if they want a higher return, they will purchase our box miners or other miners instead. Yeah. Yeah. It's just like the switch in the mining sector. Yeah. Yeah. Thank you. Thank you.

As a reminder, to ask a question, please press star one one on your telephone. We will now take our next question from the line of Theresa Lowe from Eastgate. Alright. Theresa has left the call. Once again, to ask a question, please press star one one on your telephone. We now have a follow-up question from the line of Matthew Galinko.

Thanks for taking my follow-up question. I just wanted to ask about R&D spending this year. I think, you know, Q1 was down from Q4. But just given your, you know, plans to launch additional new products and the success of the Aleo Miner, should we expect, you know, a return to higher R&D spending at some point this year, or, you know, can you sort of level set us?

Yeah. Maybe we cannot predict the date because last year and the first of this year, we launched three new projects rapidly. So this year, currently, we have some projects in progress. But now we cannot actually predict when to do the wafer tape-out at this time. Yeah.

Thank you. Thank you.

Thank you. Once again, to ask a question, please press star one one on your telephone. I'm not showing any further questions. And with that, we conclude our conference call for today. Thank you for participating. You may now disconnect your lines.