Ladies and gentlemen, thank you for standing by. Welcome to Canaan Incorporated Fourth Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the management prepared remarks, we will have question-and-answer session. Please note this event is being recorded. Now, I would like to hand first over to your speaker for today Mr. Shaoke Li, Board Secretary of the Company. Please go ahead, sir.

Thank you very much. Hello, everyone and welcome to Cannan Inc. fourth quarter and the full year 2019 earnings conference call. The Company's financial and operating results were released by our newswire services earlier today and are currently available online. Joining us today are our Chairman and CEO, Mr. Nangeng Zhang and our CFO, Mr. Quanfu Hong. In addition, our Co-CEO, Mr. Jianping Kong; and Senior Vice President, Mr. Li Zhang and Mr. Jingjie Wu will also be available during the question-and-answer session. Mr. Zhang will start with a call by providing an overview of the Company and the performance highlights for the first quarter of 2019. I will then provide the details on the Company's operating and the financial results on behalf of our CFO, Mr. Hong. Following our prepared remarks, we will open the call up for your questions. Before we continue, I would like to refer you to our Safe Harbor Statement in our earnings press release, which also applies to this call as we are making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are mostly roughly explained at the written files to the most comparable measures reported on the general accepted accounting principles in our earnings release and the filings with the SEC. With that, I will now turn the call over to our Chairman and the CEO, Mr. Nangeng Zhang. Mr. Zhang will deliver his remarks in Chinese and I will provide corresponding English translation. Please go ahead, sir.

We have successfully completed our initial public offering in 2019, which has proven to be a pivotal year for both our company and the industry with great regard. For Canaan, our listing on NASDAQ marks a milestone of growth of our company. For our industry, our IPO demonstrated as capital markets recognition on blockchain technology and its confidence in the future growth prospects of the application specific AI chips market. Throughout our IPO, we provided the firsthand and the transparent data on our operations offering the public an opportunity to gain insights into the blockchain technology and as an industry overall. Going forward, we will continue to foster technology, innovation and expand blockchain applications to further strengthen our foothold in the industry. With regard to our AI business where we put continuous efforts in cultivating the market and exploring customer and the commercial applications scenarios, we believe that our core business lines blockchain application specific AI chips and further growth drivers of IC industry, by constantly improving our chips computing power, optimizing power consumption rate and the manufacturing cost to expand the application scenarios and reducing cost of ownership. We are well positioned to empower the whole industry from the upstream of the industry chain. Meanwhile, as we continue to grow with the industry, we will generate healthy financial results and create value for our shareholders in return. We believe that the IC industry is one of the few industries that still have significant headroom for growth and the current marketing environment. Canaan as an IC designer is one of the most rapidly growing subsector of the dynamic IC industry. Today's world is in an era of abundance. The market demand for our device, for diversified business, services and the product is stronger than it ever worse. The first comes…

And then now on behalf of our CFO, Mr. Hong Quanfu, I will go through our fourth quarter financial results. Before I start, please note that all numbers are in RMB terms. Total net revenue in the fourth quarter of 2019 increased by 66.8% to RMB463.2 million from RMB277.7 million in the same period of 2018, this growth was mainly driven by the strong uptick in total computing power sold during a period, growing to 2.9 million terahash per second, which represents a year-over-year increase of 86% to 46%. Cost off the revenues in the fourth quarter of 2019 increased to 1136.7 million from 266.1 million in the same period of 2018, which was primary attributable to the 729 million of impairment of inventory and the prepayments as well as the increase in overall sales volume of terahash. The gross loss in the fourth quarter for 2019 was 673.4 million, as established IT designed company, our ability to design high quality ASIC largely depends on our continued investment in research and development, which to a large extends defines our business performance. As Mr. Zhang mentioned earlier, we have invested substantially in research and development to build and enhanced our competitive edge. Our research and the development investment in the fourth quarter of 2019 increased to 63.6 million from 51.1 million in the same period of 2018. Let’s now take a look at our operating expenses in the fourth quarter. Sales and the marketing expense in the fourth quarter of 2019 increased to 7.7 million from 4.4 million in the same period of 2018. This increase was mainly due to the higher amount of compensation expenses paid to our sales and marketing staff resulting from the expansion of product sales during the quarter. As a percentage of the total net revenue,…

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from the line of [James Carrion] from [indiscernible] Capital. Please ask your question.

I will translate from myself. Congratulations on the results. I would like to know the combination of power market share for the last fourth quarter of 2019. As Kevin has mentioned that the product Canadian power has increased around 86.6% year on a year. So like to know the market share and the conditions of the peers of other manufactured. Thank you.

Our CFO Mr. Quanfu Hong will answer this question.

So, as for the fourth quarter of 2019, so the major product still is indiscernible] miner, which increased its computing power a lot. And for the fourth quarter, we still in total 290 million terahash, which is like a 50% increase compared with the same period of 2018. As we don’t have the other manufacturers’ data or financial reports, so we are not positive for the market share for the fourth quarter.

So, my second question is regarding the computable power on the first quarter of 2020, as some managements has based on outlook of the first quarter sales that which is no less than 16 million. So in computable powers side, which is the level regarding their results?

So, we expect to adapt for the first quarter of 2020, the computing power so it would be $0.85 million terahash per second.

So my third question regarding the cost of revenues as we see a majority of the cost revenues come from the even from the prepayment of around RMB730 million. So like to know, when this right down will be right back in the future and any policy regarding that? And also I'd like to know this cash cost or other cash cost? Thank you.

So, basically the inventory write-down will be based on the future sales. Actually right now, we are more optimistic about the future sales and that means the situation will be obviously more optic then the previous write-down. So, at end of each quarter, we will reevaluate the write-down based on the miner sales factory.

So such change regarding the sales and also the demand towards the Martinez which is expanding the upcoming of the high workup maybe that from historical, the miner we have prepared some machines before the high work period. So get to the preparation of this half year high yield period. So I would like to know what is this year’s conditions that regarding that? I think there'll be a starting side of current situation. Thank you.

So, basically, the coronavirus affected minor stock up on mining equipment for the rainy season, and in February we know that the coronavirus outbreak has affected the delivery and also logistics. But in March and April, all is back to normal including logistics and also the manufacturers of the Bitcoin miner. And we are very confident actually for the rainy season. First of all, more and more miner ready for the rainy season, that’s first. And second, we know that many miners willing to prepare miners to for the upcoming rainy season. And except for only sole miners, we also have mew business model. This year, we have released a new model, which is rent the miners. The mine equipment of miners, this will help our cash flow. And also we are pretty confident [indiscernible] including also having in may over the Bitcoin would bring our company opportunities. And one more thing is about the old miners, I mean all generations of mining equipment, many miners they have the demand to replace their old generation mining equipments to newly ones. So, I think basically we think it’s an opportunity for company. Thank you.

So my last question is regarding the AI chips. So as I mentioned that you saw concern of the AI product in the future but you know the percentage that AI product of the total revenues in the last fourth quarter and also I’d like to know what is management estimate or outlook for AI chips revenue percentages in this year? Thank you.

Okay. So, for year 2019, the sales for the AI chip is RMB2.7 million, and for 2020 actually, we don’t think the revenue is being most important part. The most important part is that we now already cooperate with many top players in the AI industry. And our mission has not being changed which is, we hope that the AI revenue in the next three years will payout significant part of our revenue structure. And right now in different areas like the smart control and agriculture and industry, we already collaborated with many major companies. So, we basically are very confident in the future market for AI Chip. Thank you so much.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may all disconnect.