NCTY — The9 Limited

Summary of The9 Limited Q4 2020 Earnings Call

1. Key Financial Results and Metrics

• Net Income: For the year ended December 31, 2020, The9 reported a net income of RMB 397 million (approximately US$60.8 million), a significant turnaround from a net loss of RMB 190.6 million (US$29.2 million) in 2019.
• Attribution: The profit was primarily driven by gains from the disposal of subsidiaries and real estate assets.

2. Strategic Updates and Business Highlights

• Cryptocurrency Mining Initiatives: The9 is actively expanding its cryptocurrency mining operations:
  • Entered a cooperation agreement with investors to enhance its mining business.
  • Signed agreements to purchase a total of 5,000 WhatsMiner Bitcoin mining machines and 24,000 Antminer S19j machines, with significant deposits already made.
  • As of the call, The9 had deployed 922 WhatsMiner machines, achieving a hash rate of approximately 66PH/s, and was mining about 3 Bitcoins per day.
  • Plans to increase total hash rate to approximately 3,558PH/s by October 2022, potentially yielding around 15 Bitcoins per day.
  • Engaged in Filecoin mining, with expectations to generate approximately 200,000 Filecoins, although actual rewards may be lower due to increasing network hash rates.

3. Forward Guidance and Outlook

• Hash Rate Expectations: The9 anticipates that its Bitcoin mining operations will significantly scale up, with projections of achieving a hash rate of 3,558PH/s by October 2022.
• Filecoin Investments: The company is committed to further investments in Filecoin mining, having already signed agreements worth US$10 million and planning to increase its effective storage mining power significantly.

4. Bad News, Challenges, or Points of Concern

• Market Volatility: The cryptocurrency market is subject to significant volatility, which poses risks to mining profitability and operational planning.
• Competitive Pressures: There is increasing competition in the cryptocurrency mining sector, which may affect The9's ability to secure mining machines and maintain profitability.
• Dependence on Market Capitalization: The issuance of shares and warrants tied to market capitalization could impact financial stability and investor confidence.

5. Notable Q&A Insights

• Machine Purchases: Management confirmed a dual strategy of acquiring both new and secondhand mining machines, leveraging share issuance for secondhand purchases.
• Filecoin Potential: The management expressed bullish sentiments regarding Filecoin's market potential, citing its rapid rise in market cap and plans for continued investment.
• Transparency Commitment: The company plans to enhance transparency by potentially releasing quarterly financial results moving forward.
• Ethereum Mining Plans: The9 is also looking into Ethereum mining, with intentions to announce further developments soon.

Overall, The9 Limited is positioning itself aggressively in the cryptocurrency mining space, with a strong focus on Bitcoin and Filecoin, while navigating the challenges of market volatility and competition.