Intchains Group Ltd (ICG) Q2 2026 Earnings Call Transcript

Thank you for standing by. My name is Prilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the InChange Group Limited First Hap 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. I would now like to turn the conference over to Ala Zhang with the equity group. Please go ahead.

Thank you, Operator. Good evening to everyone. Welcome to Enchant's first half 2026 earnings conference call. Please be advised that the discussions on today's call will include four looking statements. These statements involve known and unknown risk 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. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations would turn out to be correct, and the company cautions investors that actual results may differ materially from those 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. The company undertakes no obligation to publicly update or revise any photo key statements to reflect subsequent events or circumstances or changes in its expectations, except as required by law. Please refer to reconciliation of non-GAAP measures to comparable GAAP measures in the earnings press release. The webcast replay of this conference call will be available on the InChance website at www.ir.inchance.com. It is my pleasure to introduce Inchance CFO Mr. Charles Yen, who will provide an overview of first half 2026 financial results and the company's business strategy and focus for the remainder of the year. Before opening the floor for questions, Charles, please go ahead.

Thank you, Alice, and welcome everyone. Let me start with a quick look at our first half 2026 results. The period reflected continued cyclical softness in outcry demand, which was also impacted by the PRC mining machine sales restrictions announced in February. Revenue was 11.1 million RMB and the total operating expenses were 42 million RMB with a basic and diluted net loss per ordinary share of 1.22 RMB. We ended the period with 461 million RMB in cash and cash equivalents, deposits, and government securities. A balance sheet that has allowed us to fund our next generation cheap program entirely from internal resources. Now turning into the remainder of 2026, our progress on new product development and where we are taking the business from here. We entered this cycle with a deliberate choice. Keep funding our next generation mining asset development through a weaker demand environment, so that we'd be ready with new products when the market turns. And that decision is now paying off. In July, we successfully completed the tape out of our new next generation mining asset, a major technical milestone that keeps us on track for commercial launch in Q4 2026. This chip is architected specifically to optimize performance, balancing efficiency, reliability, and supply availability using a mature process, and is designed to improve unit economics and returns on invested capital for retail and professional miners. The successful tape-out transitions the ASIC project from design completion to the start of the manufacturing process and sets the stage for silicon validation, followed by mass production and official commercial launch. With a capital and R&D intensive phase of this ASIC chip development now complete, the company has initiated engineering sample production, and the laboratory validation, including performance, reliability, and the thermal testing against the internal benchmarks. Subjected to successful validation, in-chains expect to converse initial production ramp and system-level integration in advance of a planned commercial launch targeted for Q4. Once launched through the sales of our Gautio miner series, we believe it will broaden our addressable market across retired and professional miners, enhance the competitiveness of our hardware portfolio, and unlock new revenue streams through future system and service offerings. Looking into the second half, we believe we are moving quickly to capture the opportunities Our new mining ethic is expected to begin contributing modest revenue in H2 2026, building a far more meaningful impact in fiscal 2027 as commercialization accelerates. Longer term, we believe that this platform further stresses our position as a leading active supplier of purpose-built mining ethic systems. driving superior operational efficiency for our customers and advising a more sustainable approach to proof-of-work infrastructure. It's a core part of our strategy to build a more resilient diversified revenue base. Beyond this new project we are also in the early stages of evaluating new growth opportunities in artificial intelligence, including potential acquisitions that would extend our core competencies in custom asset design and hardware systems integration into AI enabled computing applications. Our goal is to reduce reliance on cryptocurrency market cycles over time and to position in chains are in a higher value computing market adjacent to our existing hardware expertise. This work is still in early stages and we look forward to share more details as our plans develop. On the cost side, we continued to make progress on our cost optimization efforts. As of June 30, In early 2026, we had realized approximately 23.1 million RMB in annualized labor cost savings through our organizational restructuring. The diversity of our non-core chief related business and the expanded use of AI enabled tools across our business operations. We expect to continue these cost-discipline initiatives throughout the remainder of the year. On our ETH Treasury holdings, as of June 30, 2026, the fair value of our cryptocurrency assets, excluding stablecoins such as USDC and USDT, was 98.9 million RMB, including approximately 9,176 ETHs. As of August 20, 2026, the company's total units of ETHs staked were 4,556 with 3,556 ETHs deposited through our Gold Shield staking platform pending validation activation, and 1,000 ETH staked on FalconX platform. Going forward, we expect to maintain a prudent ETH treasury and staking position, preserving our existing treasury holdings and continue generating staking yields. While prioritizing capital allocation toward our next generation asset program and the new AI initiatives over additional ease accumulation. We also announced today that our board of directors had approved a share repurchase program under which we may repurchase up to $15 million of our ADS over the next two years funded from our existing cash balance. We believe that this program reflects our confidence in InChain's long-term strategic direction and our commitment to creating value for shareholders. And it's consistent with our disciplined approach to capital allocation, balancing returns to shareholders with continued investment in our next generation asset and the new AI initiatives. Looking ahead to second half of 2026, while we expect continued market headwinds, we will remain focused on disciplined execution. commercializing our new ethic, prioritizing cost optimization, and advising our evaluation of AI-related growth opportunities. We believe these initiatives will position any chance for a more diversified and resilient business over the long term. With that operator, let's open it up for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press a star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press a star 1 again. Your first question comes from the line of Mark Palmer with StoneX. Please go ahead.

Good evening, and thank you for taking my question. Announce the new share of ongoing R&D activities, as well as the potential for M&A, especially focused on AI and AI. Can you talk a bit about what your capital allocation priorities are and more broadly what your capital allocation strategy looks like going forward? Thank you.

Thank you, Mark. Thank you for your question. And firstly, for the share repurchase program, we planned $15 million for the share repurchase program. And for the R&D in current assets, we will handle this as usual. We will do the tape out and buy the inventory and then sell So, the capital cost of the current business will remain the same with our prior projects. And finally, for the AI initiatives and M&A, it will depend on the project we engaged. Currently, we have several projects to assess, and every project has different capital requirements. So currently, for the AI part, we cannot give accurate estimation. Thank you.

Yes, and a question, please. Charles, you made reference to the fact that you're anticipating that there will be a pickup in the impact from the newly developed ASIC product in 2027. Can you talk a bit about how you're currently thinking about 2027, particularly with regard to the diversification of revenue that you made reference to, reducing reliance on crypto cycles? And also, what should we be watching for over the next few quarters in terms of milestones or signs of your progress? Thank you.

Yes. Firstly, our next milestone of the product is the product launch. It will happen in Q4, 2026. And it will contribute some revenue for the second half, but it will not be very big. But for the 2027, the whole product will be the whole mass production will be on track. So in 2027, our expectation is the revenue will be better than the last cycle. I mean maybe 2025 and 2024. And this is our business is basic. And in addition, for other revenue base, we will continue to stake ease and will contribute meaningful revenue compared with this year and last year. And finally, the AI initiatives, if it has some meaningful process, it will also contribute additional I think in current stage, I think we cannot estimate the apparent figure of that part, but I believe that 2027 will be a good year or the best year among five years of the company.

Thank you.

And your next question comes from the line of Matthew Galenko with Maxim Group. hey thanks for taking my questions maybe firstly can you just given the environment we've been in for for crypto can you discuss any changes you're seeing in competition in the asic design business Yeah.

Currently, what I can say now is that our new next generation asset, the foundation The foundation of this new cryptocurrency is very good, and the competition of this new cryptocurrency is not intense. We may not be the first one entering into that area, but we believe that our products have a leading performance among all competitors. And I think we are very confident on this new asset or new mining machine for this new coin and for 2027. And on the other hand, I think the crypto environment currently it has some soft demand issues. And now I think for the second half and next year, the market will recover and together with our business and our revenue and the ETH price. Yeah, this is all our company, this is all our company's business. Yes, thank you.

Great. And I guess as a follow-up, to drill a little bit more into the capital allocation decisions, How do you view your ETH treasury holdings with, you know, respect to other investment opportunities, including M&A, you know, additional ASIC development, if you see opportunities? You know, are treasury holdings potentially convertible into, you know, cash for M&A or other initiatives if, you know, it suits or do, you know, intend to, you know, hold that as a fixed asset and not really consider it as part of any kind of spend? Thank you.

Yeah. Yes. I think we will not sell ease, firstly. But we're using our own fund to buy ETH. So if we did not generate operating cash, it's difficult for us to pay more money on it. So our current strategy is to sell mining machines and obtain profit and use that profit to buy ETH. So, for the capital allocation, if we will not use the, we will not fully use current cash to buy ETH, but this is our current strategy, as well, I cannot ensure we will, if we will change in the future, but currently we are using this strategy. Our current cash flow is used in R&D, money machine sales, current business, and AI initiatives. Thank you.

Thank you. And maybe last question for me. In addition to the new machine that you're rolling out in Q4 and you expect to contribute to 27, do you expect any – if we get a recovery in the crypto market, do you expect to have decent contribution from other products in your portfolio do you think that 27 is going to be just predominantly driven by the new the new launch uh i think uh if the currently if the if the enough currently cryptocurrency is in the bear market so if the market did not recover uh uh if the market did not did not recover i think

We can, our main product is this new product. Our main revenue will come from contributed by this new product. But if the market recovered, all the price, the Dogecoin price, the allele coin price recovered, then we will have other contributions from this prior product line. because we have finished the tape out so it's it's very quick for us to to order more waiver uh from our uh from our uh fab yeah thank you great thank you thank you and i'm showing no further questions at this time i would like to turn it back to charles hand for closing remarks uh yeah uh thanks again to all of you for joining us we are always open to a dialogue with investors please feel free to reach out to us or to our investor relation firm the equity group for any additional questions we look forward to speaking with you or again our next next call thank you ladies and gentlemen this concludes today's conference call thank you all for joining you may now disconnect