Chinese bitcoin miner manufacturer Canaan Creative has disclosed it made a net loss of $148.6 million for 2019 on a revenue of $204.3 million, reflecting a declining profitability over the past three years.

On Thursday, the firm released its first unaudited earnings report since it went public in the U.S. last November. Canaan said it sold computing power totaling 10.5 exhashes per second (EH/s), which accounted for roughly 20 percent of the Bitcoin network’s computing power growth last year.

Since its $90 million IPO, Canaan’s share price has been on a downward trend and is currently around $3.5 per share – 61 percent below its offering price.

The firm said it recorded $114.7 million in net loss in Q4 2019 alone, which had widened its $31.2 million net loss for the first nine months in 2019.

Nangeng Zhang, CEO and founder of Canaan, said in an earning call on Thursday morning Eastern time that although the firm recorded sales uptick in October and November, it saw a “considerable drop” in December’s volume amid volatility of bitcoin’s price.

What’s also notable in the earning report is the increasing ratio of the “cost of revenues” over Canaan’s sales of bitcoin miners over the past year, which leads to a declining profitability. In 2019, the cost of revenue for Canaan was $278 million, which was $78 million more than the total revenue made for the year.

Canaan’s cost of revenues generally include the costs of raw material, production and logistic for manufacturing its mining equipment as well as the write-downs of prepayments and inventories.

To put this into perspective, in 2017, Canaan’s total cost of revenues was $100 million with no inventory write-down, accounting for 54 percent of its $183 million revenue on the back of the crypto market’s bull run. It brought home $53 million with a 30 percent net profit margin.

In 2018, its total cost of revenues went up to $307.4 million, taking up 80 percent of its $378 million revenue. But the total cost included a write-down of $110 million in inventories as the market downturn made it not possible for Canaan to sell those machines. 

The increase of the cost of revenues is perhaps also due to the fact that more advanced mining equipment relies on more costly chip technology. 

According to Canaan’s IPO prospect, the cost of its Avalon 10, the latest machines launched to help weather through bitcoin’s halving event, is around $751, compared to $354 and $600 for its older Avalon 8 and 9 series.

Based on information advertised by Canaan’s authorized distributors, several models of its Avalon 10 series are currently on sales, with price ranging from $650 to $1,000, as investors’ buying spree has cooled down in recent months.

The firm has also recently been hit with a lawsuit filed by an investor who bought its shares and accused the company of misleading investors about its operations and financial data and of violating the U.S. securities laws. 

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