Cango, Inc. Sponsored ADR Stock

Good day, and welcome to the Cango Inc. Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note today's event is being recorded. I'd now like to turn the conference over to Paul Yu, CEO. Please go ahead.

Thank you. Hello, everyone, and thank you for joining Cango's Second Quarter 2026 Earnings Call. Let me start with a quick overview of the quarter. On the mining side, we deliberately scaled back operations as planned. That's reflected our second quarter results. On the AI side, since the end of the second quarter, we have made real progress on infrastructure and signed our first customer contract, moving that business from build-out into commercialization. I will be clear that these AI developments occurred after June 30 and are not reflected in this quarter's reported results.

In terms of the numbers, total revenue for the quarter was approximately $50.8 million with about $47.4 million coming from Bitcoin mining. Net loss was approximately $81.6 million, mainly driven by noncash impairment and disposal losses on our mining machines, a direct result of the deliberate restructuring of our asset base. As of June 30, we held 1,056 Bitcoins. In addition, our cash, cash equivalents and cryptocurrencies totaled approximately $23 million, while long-term debt was approximately $31.2 million.

Now let me walk through the mining business and AI infrastructure business in more detail. This quarter, we continued to actively rightsize our mining operations, disposing of machines with lower marginal efficiency and introduced a leasing model to shift our focus from scale to economics. As of June 30, our self-mining hashrate was 19.84 exahashes per second, and our lease hashrate was 7.74 exahashes per second for a combined operating hashrate of 27.58 exahashes per second. Under the leasing arrangement, the lessee bears the direct operating costs associated with the hashrate, which also reduces our exposure to variable costs. We mined 656 Bitcoins this quarter.

Production was down sequentially, largely reflecting the deliberate reduction in self-mining capacity and shift of some capacity into leasing. We will continue to evaluate the mix between self-mining and leasing based on economics rather than scale. We will keep phasing out less efficient legacy capacity. This quarter, we also began implementing a hedging arrangement to manage our exposure to Bitcoin price volatility, thus enhancing the predictability of our operating cash flows. Our average cash mining cost in Q2 was $73,313 per coin, down about 5% from Q1.

Now let's turn into AI infrastructure. A quick on timing, everything I'm about to cover took place after June 30 since the start of the third quarter. So it isn't reflected in the quarter's financial results, but we want to share it with you. On infrastructure, construction at our Georgia LN site was completed in early July with the site infrastructure able to support up to 3 megawatts, leaving room for future expansion. Container units have arrived on site and are being installed and GPUs are arriving on site in batches. On the customer side, since the start of the third quarter, we've signed a customer contract and discussion with prospective customers are ongoing. That takes our AI business from technical validation into commercial monetization. This is a development since quarter end. Contracted revenue is still small, and we expect to begin recognizing related revenue in the third quarter.

On the business model, we expected to pursue both bare-metal GPU hosting using our existing site and power infrastructure to offer a standardized deployment environment and colocation intended to improve overall infrastructure utilization. We haven't signed a formal colocation contract yet and terms are still being worked out. We also have test nodes in Texas and on the West Coast, mainly to support customers who need deployment closer to their location in the future. We are evaluating several potential new sites as well, and we haven't ruled out building our own. We will continue to run mining and AI as parallel businesses.

Looking into the second half, our priority are managing the mix of self-mining and lease hashrate prudently, executing our AI deployment and continuing to sign new customers and building on the operating experience from Georgia as we evaluate further site expansion. Capital discipline and operating efficiency remain our priorities.

That concludes my remarks. I will now turn it over to our CFO, Simon, for a detailed review of the financials. Thank you.

Thanks, Paul. Hi, good morning. Hi, everyone, and welcome to our second quarter 2026 earnings call. Before I start to review our financials, please note that unless otherwise stated, all amounts discussed are in U.S. dollars.

Total revenues were $50.8 million. Revenue during the quarter from the Bitcoin mining business was $47.4 million with a total of 656 Bitcoins mined during the period. The average cost to mine Bitcoin, excluding depreciation of mining machines, was $73,313 per Bitcoin and all-in cost of $98,405 per Bitcoin. Compared to the first quarter of 2026, total revenue decreased by approximately 50%. This decline primarily reflects our proactive reduction in operational hashrate as we continued to selectively phase out older, less efficient S19 series mining machines and temporarily transitioned some capacity to a hosted leasing model. While this adjustment has reduced our top line mining revenue, it has also significantly lowered our operating costs and improved our cash flow profile. And some of these efforts continued throughout the second quarter.

Now let's move on to our cost and expenses. Cost of revenue, exclusive of depreciation was $50.7 million, down from $99.6 million in the first quarter, driven by lower electricity and hosting expenses following the hashrate reduction. Depreciation was $16.9 million, down from $29.4 million in the first quarter. General and administrative expenses, including related party fees, totaled $8.4 million. Impairment loss from mining machines in the second quarter was $42.9 million and loss on disposal of mining machines in the second quarter was $8.5 million. Loss from changes in the fair value of crypto assets was $4.1 million compared with a loss of $151.8 million in the first quarter.

The change was primarily driven by 2 factors: the decrease in Bitcoin prices as of June 30, and this was partially offset by the implementation of our hedging program. As Paul mentioned earlier, we began implementing a Bitcoin hedging program during the second quarter. The purpose of this program is to manage our exposure to Bitcoin price volatility and provide greater predictability to our operating cash flow. We intend to selectively continue to use hedging as a risk management tool, and this is not for speculative purposes. The related short-term positions are reflected on our balance sheet and will be reflected as we continue to execute this program in a disciplined manner.

Operating loss for the quarter was $80.6 million with a net loss from continuing operations of $81.6 million in the second quarter. The net loss was primarily driven by the noncash impairment and disposal losses I just mentioned, which together totaled approximately $51 million. On a non-GAAP basis, adjusted EBITDA was a loss of $10.7 million, including a $4.1 million loss from the changes in the fair value of the receivables for the Bitcoin collateral.

Lastly, moving on to our balance sheet. As of June 30, we had cash and cash equivalents of $10.1 million compared with $7.2 million as of March 31. At the same time, our balance sheet also has Bitcoins in the number of 1,056 Bitcoins held in treasury. In terms of operational assets, we carry our mining machines at a net value of $58.7 million after depreciation. On the liability side, we had $31.2 million in long-term debt compared with $30.6 million as of March 31.

And this concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions]

And today's first question comes from Pingyue Wu with Citic Securities.

I have 3 questions. First, can management provide more color on the Bitcoin hedging program in terms of overall notional size, instrument structure and duration? And additionally, could you clarify whether this is risk mitigating or it involves any directional positioning?

And my second question is regarding the AI infrastructure progress you highlighted such as the Georgia site completion and container deployment. We think it is a milestone occurred towards the second quarter? And what is the rationale for including them now? And more importantly, could we incorporate this development as material increase in our third quarter financial models?

And my third question is regarding the newly signed customer contracts. Could you provide some visibility into the anticipated revenue contribution and time line for top line recognition?

Thanks, Pingyue. It's Simon here. Why don't I take the first question and then Paul can address your second and third questions with regards to the AI progress. In terms of the hedging program, it's structured as a short-term loan denominated in BTC. So that is reflected in our balance sheet under short-term debt, which as of quarter end was around USD 8 million. And at the same time, there is a roughly equivalent amount recorded under current asset as well. So this short-term loan in BTC is led to us on day 1 and then which we typically size based on the scale of our Bitcoin mining production. For example, we might want to think about, okay, we'll do 1 month of production or 2 months of production. So that's the way we think about this.

And then this loan in BTC is sold at spot price on day 1. So if in the coming months, if Bitcoin prices fall below that, then we'll choose to repay in the BTC that is mined out of our mining operations. So I hope that illustratively addresses your question with regards to the -- how we think about the sizing and the structure. And again, I would like to emphasize that we purely think of this as a risk management tool and the purpose is really just to reduce the sensitivity of our cash flow to the Bitcoin price ranges. And then with that, I'll pass it to Paul for the second and third question.

Sure, sure. Thank you. We wanted to give you the most current picture of where the AI business stands. Even though this development fall after June 30 cutoff, we are not reflected in this quarter's revenue and only a small amount of property-related costs have been capitalized in Q2. The amount is immaterial. We expect the related revenue to start showing up in our third quarter numbers, which we will report in the normal course. And that means we expect to begin recognizing AI-related revenue in the third quarter. The initial contribution will be modest, but it provides initial validation of the commercial viability of our AI infrastructure strategy and establishes an operating track record we can build on. Thank you.

[Operator Instructions]

Our next question today comes from Sid Rajeev with Fundamental Research Corp.

Should we expect Q3 mining revenue to stabilize at current levels or anticipate further hashrate reductions?

Sid, thank you for your question. In terms of the operational hashrate and the mining machines that we have on our balance sheet, in the third quarter, it would not change significantly -- it will not change significantly. But again, given the third quarter includes the summer months of July and August, whereby we may experience some regional power curtailment.

Got it. Maybe you could provide some color on roughly how much of the current hashrate is from S19 versus newer generation machines?

This percentage is increasing. In terms of the mix between the 19s and the 21s, I would say -- and this is purely the amount that is operational that is on rack and excluding -- let me think about how to address this. Excluding the part that is leased, the split is roughly a little bit above 1/3 in the 21 series.

Got it. Are you able to talk about your cash costs? Can you further cut costs? Because I see you did have cost reductions in the quarter. So how about Q3, how should we look at it?

Yes. Sid, and I think that is a great question. And the reason that in the second quarter, the cost continued to optimize. There were 2 reasons. One reason was that we were -- we continue to negotiate with our hosted sites because as you remember, most of our sites are externally hosted instead of our self-owned mining sites. Our own self-owned mining site is just a 50-megawatt site in the state of Georgia in LN. And the rest of our mining machines are hosted externally with third parties. So we continue to negotiate contracts with them.

And a lot of these contracts have a power price reduction mechanism, whereby the power prices would decrease in an environment where Bitcoin prices are decreasing as well. So if we were to look at the cash cost on a month-by-month basis between each month of the second quarter, the cash cost was on a downward trend. So this is, in a way, is a price reduction mechanism to give us a little bit more downside protection.

Got it. If I may, one more question. This is slightly more long term. How much of your existing, say, mining infrastructure or power capacity could realistically be converted to AI infrastructure over the next 3 years?

We're starting in the U.S. at the moment. We're still more focused on our own 50-megawatt site right now, but we have started to install small test nodes in other sites. But these are sites that are not necessarily our own, but they could be with partner sites.

And that does conclude our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Any other remarks? Thank you very much for dialing for our conference call. Thank you.

Thank you, sir. That does conclude our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Hello, and welcome to the Cango Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Paul Yu, Chief Executive Officer. Please go ahead.

Good morning, everyone, and thank you for joining Cango's First Quarter 2026 Earnings Call. First, I will summarize our key financials and operational performance for the quarter. The first quarter of 2026 was characterized by industry-wide adjustments and our results reflect these macro headwinds alongside our ongoing efforts to manage our strategic transition. During Q1, we generated total revenue of approximately $102 million, primarily driven by revenue from our Bitcoin mining business. We reported a net loss from continuing operations of $261.1 million primarily due to noncash impairment charges on Bitcoin mining machines and loss from changes in fair value of receivable for Bitcoin collateral, both resulting from the decline in Bitcoin market price. By the end of the quarter, we held 1,025.7 Bitcoin, and we reduced our long-term debt to $30.6 million. As of March 31, 2026, Cango's total operational hash rate was 37.01 exahash per second, comprising 27.98 exahash per second of self-mining capacity and 9.02 exahash per second of hosted hash rate. This operational model prioritizes margin resilience over scale.

In Q1, we mined 1,266 Bitcoin. Through disciplined cost management, our average cash cost per Bitcoin mined was $76,928 showing a 9% decrease from Q4 2025. These figures reflect our continued focus on profitability and operational efficiency as our business model evolves.

Following this brief quarterly review, I'd like to provide an update on our operational activities during April and May, which offer additional context regarding our strategic direction. Regarding our mining business, our immediate priority is to streamline operations and carefully manage our resources at location. In April, we maintained our focus on cost optimization measures and operational efficiency. Our self-mining operations produced 230.04 Bitcoin in for the month when the average cash cost per core further decreased. This result stems primarily from our ongoing fleet upgrade beginning in March, we have been selling less efficient older generation S19 miners and selectively replacing them with more energy-efficient S21 series machines. As of the end of May, within our self-mining hash rate composition, the contribution ratio between S19 and S21 models is approximately 8:2. This operational mix supports our efforts to enhance our overall cost structure.

Our objective is to manage our Mining segment toward an operational baseline capable of supporting improved cash flow resilience. Currently, some sites have transitioned to a revenue-sharing hosting arrangement, while this arrangement introduces depreciation expenses on our financial statements from a cash perspective, the hosting structure requires the counterparty to cover direct power costs and maintenance and operation expenses, allowing us to participate in revenue sharing while reducing our direct exposure to site level operating expenses. This structure helps mitigate operating risk and provides an operational buffer as we optimize our fleet. As our fleet adjustments proceed and stabilize, our strategic intent is to focus our operations primarily on disciplined self-mining while managing an orderly exit from less efficient hardware or higher-cost sites as of April 30, through a diversified footprint across 26 active mining sites globally. We operated a total hash rate of 31.58 exahashes per second, comprising 20.43 exahashes per second in self-mining capacity and 11.15 xahashes per second in hosted capacity. This current hash rate structure helps mitigate operational risk, supporting our ability to manage market volatility and execute our fleet upgrade strategy.

Next, turning to our AI infrastructure initiatives. The objective of EcoHash is to leverage Cango's power access and mining operational expertise to develop a standardized compute solutions. We are continuing to advance our milestones. Pilot evaluation, site retrofitting and hardware installation at our Georgia location have progressed significantly and testing for modular high-density compute units is underway. Our objective with this modular design is to evaluate whether modular development can reduce cost and improve operational efficiency relative to traditional data center infrastructure.

Operational model. This framework is intended to allow us to utilize existing operational assets to address market demand aiming to serve small and medium-sized enterprise efficiently. Based approach, our multistate strategy begins with an entry to GPU compute capacity leasing. Over the long term we plan to evaluate ecosystem integration through Ecolink management platform with the objective of developing an AI compute network. We have taken a disciplined approach to improve our capital structure and balance sheet position. Through active treasury and debt management, we have reduced our Bitcoin-backed loan balance to approximately at $30.6 million. Concurrently, our remaining Bitcoin reserves stands at 1,057.46 Bitcoin as of April 20, reflecting our strategic priority to lower leverage and reserve balance sheet stability.

Our strategic alignment and partnerships support our ongoing operational focus. In Q1, our Chairman and our Board Director made an investment of $65 million in the company through entities they control. Furthermore, we established a strategic collaboration with DL group a Hong Kong listed company, which includes a $10 million convertible note and a strategic operation MoU which complements our commitment to AI infrastructure opportunities.

As we look to the remainder of 2026, we have closely monitoring the evolving dynamics between global AI compute demand and power infrastructure capacity. Within this market environment, our operational priorities are twofold. First, to continue optimization of cost efficiency of our mining business; and second, to methodically advance the evaluation of EcoHash and continuous technical testing of our pilot project. We will continue to approach our strategy with a focus on capital discipline, aiming to leverage our existing infrastructure assets to support long-term stability and shareholder value.

That concludes my remarks. I will now turn the call over to our CFO, Simon for a detailed financial review. Thank you.

Thanks, Paul. Hello, everyone, and welcome to our first quarter earnings call. Before I start to review our financials, please note that unless otherwise stated, all amounts discussed are in U.S. dollars. Total revenues in the first quarter was $102 million. Revenue during the quarter from the Bitcoin mining business was $98.4 million with a total of 1,200 and 66.1 Bitcoins mined during the period. The average cost to mine Bitcoin, excluding depreciation of mining machines, was $76,928 per Bitcoin with all-in cost of 99,747 per Bitcoin. Compared to the fourth quarter of 2025, total revenue decreased by approximately 43%. This decline primarily reflects our proactive reduction in operational hash rate as we began to phase out older and less-efficient S19 series mining machines and temporarily transitioned some capacity to a leasing model that Paul discussed just now. While this adjustment has reduced top line mining revenue, it has also contributed to lower operating costs and improved cash flow profile. And some of these efforts remain ongoing in the second quarter as we speak.

Now let's move on to our cost and expenses. Cost of revenue, excluding depreciation in the first quarter was $99.6 million, down from $155.3 million in the fourth quarter, driven by lower electricity and hosting expenses following the hash rate reductions. Depreciation in the first quarter was $29.4 million. General and administrative expenses, including related parties totaled $7.2 million. There was an impairment loss from mining machines in the first quarter of $49 million and a loss on disposal of mining machines in the first quarter of $20.3 million. Loss from changes in fair value of receivable for Bitcoin collateral was $151.8 million compared to $171.4 million in the fourth quarter. This noncash loss was primarily driven by the decline in Bitcoin price during the quarter as we started off this quarter with over 7,500 Bitcoins. Operating loss for the quarter was $254.4 million with a net loss from continuing operations of $261.1 million. On a non-GAAP basis, adjusted EBITDA was a loss of $154.1 million, of which there was a $151.8 million impact from the loss from changes in fair value of receivable for Bitcoin collaterals.

Moving on to our balance sheet. As of March 31, we had cash and cash equivalents of $7.2 million, down from $41.2 million at year-end, mainly due to debt repayments and operational activities. That said, our balance sheet also includes cryptocurrencies of $7.9 million as well as receivables for Bitcoin collaterals of $68.2 million. In terms of operational assets, we carried our mining machines at a net value of $130.8 million.

On the liability side, we had $30.6 million in long-term debt, which is significantly lower than the $557.6 million recorded as of year-end. The substantial reduction in both the receivable for Bitcoin collaterals and the associated long-term debt reflects our proactive deleveraging efforts during the quarter. By selling a portion of our Bitcoin holdings and using the proceeds to repay related party loans, we have meaningfully strengthened the balance sheet and also reduced our interest expenses. This concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions]

Your first question comes from Pingyue Wu from Citic Securities.

I'm Pingyue from Citic Securities. And my first question is the company's cash cost per core declined in the first quarter compared with the first quarter of last year, and management also mentioned further optimization in April. What were the main drivers behind the cost reduction? Is there still room for further cost improvements going forward?

And also my second question is our management team mentioned that the 2026 strategy is efficiency over scale. And in April, total operating hash rate was 31.55 exahash per second, including 11.50 exahash per second of leased hash rate. Will the hash rate continues to decline over the next few months? Could you explain in more detail how the leasing model works and a specific impact on the financial statements?

Regarding your first question, the cost reduction was mainly driven by 2 factors. First, we proactively phased out part of our higher energy consumption S19 series mining machines and gradually replaced them with small energy-efficient S21 series models. Second, we continued to migrate hash rate to regions with lower power costs including developing next-generation miners in locations such as Paraguay and Oman. At the same time, we temporarily adopted a revenue-sharing model at certain higher-cost mining sites, which effectively reduced power costs. Looking ahead, we intend to leverage our ongoing fleet upgrades and as some of our hosting contracts expire, we will strive to optimize our hosting arrangements to lower power costs.

And I'll take your second question with regards to the hash rate, we're not spending a hard hash rate target and instead, we're really focusing on margin and cash flow KPIs for the mining business for now. We do -- and we are continuing to retire older S19 series machines in certain higher power cost sites. So during this period, our total hash rate may experience modest fluctuations in the short term. And at the same time, we are selectively deploying more energy efficient S21 machines. So this process has helped us reduce cash cost per point and improve the resilience of our mining fleet in general.

And as for your question regarding our leasing model, we reiterate that it is a temporary arrangement, especially with some of the higher cost sites where the arrangement instead of paying for power cost on a consumption basis. The Bitcoin mines will go to the site owner who will share mining revenue with us based on the agreed ratios. And thereby, the power cost and maintenance and operation fees are born by the site owner.

From a cash flow perspective, this leasing model ensures that we do not mine at a loss purely as a result of the higher cost. And this is our core strategy to protect -- in line with our core strategy to protect cash flow. And currently, the lead hash rate is mainly deployed in certain parts of America, but this may change once the relevant -- once the respective mining hosting contract expires. So we will enter into new contracts or alternatively, we may move the machine to alternative sites.

[Operator Instructions] Your next question comes from Marco Zhang from Geelong Research.

This is Marco from Geelong Research. I have 3 questions here. My first question is regarding your Bitcoin business. You sold 2,000 Bitcoin in Q1 and currently hold approximately 1,057 Bitcoins. Will the company continue to sell Bitcoin going forward? Has the company's long term holding strategy changed?

Our BTC treasury strategy has shifted from mine and hold to a more dynamic balanced approach. Given the current level of market volatility, we placed greater emphasis on liquidity and balance sheet strength. The BTC sale in Q1 was mainly used to reduce BTC-backed loans and the outstanding loan balance has now declined to approximately $30.6 million as of the end of the first quarter. Going forward, we will address flexibly based on market price, operational needs and debt levels, while we maintain a positive long-term view on Bitcoin, our treasury decisions will align with our overall capital allocation strategy.

Got it. So we understand that the company's AI business will be carried out through EcoHash. Could you share an update on the [ LN ] pilot mentioned previously. Are there any specific commercialization milestones for 2026? And when could it start contributing revenue?

Sure. So the [ LN ] site is currently our only fully self-owned infrastructure assets with 50 megawatts of grid connected capacity, and the power contract is in place till 2029. And in terms of the progress of the construction and renovation, that in itself is now close to completion, and we have placed orders for standardized compute containers, which are arriving at phases and will be ready for installation and testing very soon. We plan to activate a portion of the power capacity at this site for this purpose. And at the same time, this site is expected to serve as a real-world production environment showroom. What that means is that the containers are of different specifications, and we expect to evaluate and showcase the different specifications. There are air cooled containers, liquid cooled as well as hybrid containers for different environmental conditions. And this allows us to assess the conversion, deployment and operating performance of the compute nodes in an actual set environment. So this project in itself is a proof-of-concept stepping stone towards scaled commercialization initiatives. And once this model is ready and proven, we'll evaluate opportunities to replicate this model at other suitable sites as well, whether it be sites for our wholesale partners.

And from the perspective of the overall AI project build-out, we have not set any specific revenue target at this point, but revenue generation will start in the second half of this year. Our top priority at the moment is to complete the technical validation of this pilot, and we're in the process of ordering a small number of servers at the moment. If the validation results meet expectations, we will be begin to work with partners to deploy more compute nodes. AI compute services take time to move from pilot stage to scale, but we will update the market in a timely manner once there's substantial progress. Thank you.

Got it. And how about the CapEx or how much CapEx will be required for the EcoHash pilot and future expansion? And how do you plan to fund it?

We're actually doing in phases. So the thing about our business model on this side that is modularized. So in terms of the containers, we have the flexibility of doing it per container. So in terms of the CapEx, we're being very prudent at the moment. And in the first is the model validation phase, we will mainly use our own capital right now. So we've deployed our own capital for the site renovation. So the Georgia pilot leverages the existing site infrastructure and the power, right? And the retrofit cost is relatively limited. The bulk of the project CapEx itself will be for the purchases of the servers, which we're in the process of doing right now. In the future, we do hope that we'll be able to use other types of financing, whether it's GPU-backed financing or using a financial lease model rather than just purely rely on our own capital. And obviously, we are open to and hope to establish other strategic partnerships as well so that we can do it together with other partners.

There are no further questions at this time. I'll now hand the conference back to management for any closing remarks.

No. We don't have any closing remarks. Thanks a lot.

Thank you. That does conclude our conference for today. Thank you for attending today's presentation. You may now disconnect.

Good evening, and welcome to the Cango Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Paul Yu, Chief Executive Officer. Please go ahead.

Thank you. Hello, everyone, and welcome to Cango's Fourth Quarter and Full Year 2025 Earnings Call. 2025 marks a landmark year in our company's history, our first year of transformation since pivoting to Bitcoin mining in November 2024. It was a year of accelerated execution, and we accomplished several critical objectives. First, asset restructuring and global deployment through a series of transactions, we relocated our assets from traditional auto finance business to our Bitcoin mining operations within 6 months. This helped us build a global distributed mining network.

Second, leadership and management to align with our new strategy, we have strengthened our board and management team with seasoned industry professionals. They have both deep expertise and established networks in both digital assets and infrastructure which has sharpened our competitive edge in the sector. Third, listing structure optimization during the year, we transitioned from an ADR listing to a direct stock listing. This move lays a solid foundation for us to access a broader range of capital market tools, reach a broader base of investors and reduce holding costs for existing shareholders.

Operationally, 2025 showed a clear execution discipline despite significant market volatility in the second half of the year. We maintained professional standards across core metrics, including hashrate scale, Bitcoin production and minor uptime. In the fourth quarter of 2025, we recorded total revenue of $179 million and produced 1,718.3 Bitcoin. For the full year, total revenue reached $688 million, with Bitcoin production totaling 6,595.6.

As economy of scale took hold we achieved strong revenue growth and posted positive EBITDA for the full year. The net loss attributable to shareholders for 2025 was $622 million, mainly due to the following factors: First, some nonrecurring transformation costs. This includes a onetime book loss of around $169 million from discontinued operations then a further loss of $257 million came from impairment loss from mining equipment and the company acquired and settled in equity triggered by us by the significant appreciation in Cango's share price between selling and delivery; second, towards the end of fourth quarter, the price of Bitcoin and other crypto currencies declined sharply, driven by external macroeconomic factors and geopolitical tensions.

This resulted in a fair value loss of $96.5 million on our Bitcoin holdings and an additional impairment provision of $81 million on mining machines as a result of the downward price impact on their fair value. In the early stages of our transformation constrained by our CapEx capabilities, we adopted a colocation model to rapidly secure a large share of the Bitcoin network hashrate. We quickly built a hashrate of 50 exahash per second, capturing approximately 4 to 5 of the global network.

However, competition intensified globally and our cash cost per Bitcoin mine approached a high of $84,000 in the fourth quarter 2025, recognizing further price pressure heading into 2026, we took prudent actions, we reduced debt exposure, recovered liquidity and began phasing out inefficient capacity. These steps have strengthened our balance sheet and enhanced operational efficiency as we enter the new year. In February 2026, we strategically sold 4,451 Bitcoin from inventory and used the proceeds to repay loans, reducing our overall debt, we then completed a $10.5 million capital injection from shareholders.

Additionally, we signed agreement with Armada New Network Limited and Fortune Peak Limited for new funding around totaling $65 million. We expect these steps to progressively strengthen our active base and mitigate potential market volatility risks going forward. On the operation side, we are optimizing our operations by phasing out older high-energy-consuming mining machines.

We are also gradually moving our computing power to regions with lower electricity price. While this will lead to a contraction in our total hashrate scale in the short term, it will effectively improve the energy efficiency of our overall fleet, lower cost per coin and enhancing our resilience against dramatic -- drastic market fluctuations.

Finally, many of you have asked about our AI business transformation, our efforts to reduce existing debt, strengthened equity capital and optimized Bitcoin operations have created the necessary flexibility to really make progress on AI. On that note, we have officially established EcoHash, a wholly owned subsidiary based in Texas, dedicated to high-performance computing and AI inference, leveraging our accumulated experience in large-scale deployment and management of distributed computing infrastructure as well as our broadly partnered globally energy network of Bitcoin mining sites.

We will launch standardized modular AI computing nodes aiming to provide highly flexible and cost-effective solutions for long-tail AI inference demand. As of today, we are making steady progress of feasibility studies and preparatory work. Let me share a few updates on the infrastructure front, we have initiated the first phase retrofit of our owned LN site in Georgia USA, for standardized AI node deployment on the product side, our containerized GPU computing solutions also reached the leverage deliverable stage.

Our objective is to leveraging our existing accessible skilled energy network to provide flexible and intelligent computing power to support the digital economy. In 2025, we demonstrated the speed of our transformation. In 2026, we will demonstrate our resilience and our ability to adapt and evolve. While the current macroeconomic environment presents challenges but also a long-term opportunity. The logic behind our decisions is clear, proactive adjustment, disciplined execution and commitment to the AI era.

With that, I will turn the call to Michael Zhang, our Chief Financial Officer, to take you through the financials in more detail.

Thanks, Paul. Hello, everyone, and welcome to our fourth quarter and full year 2025 earnings call. Before I start to review our financials, please note that unless otherwise stated, all amounts discussed are in U.S. dollars. Total revenue in the fourth quarter were $179.5 million, for the full year, revenue reached $688.1 million. Revenue during the quarter from the Bitcoin mining business was $172.4 million, with a total of 1,718.3 bitcoin mined during the period.

The average cost to mine Bitcoin excluding depreciation of mining machine was $84,552 per coin with all-in cost of $106,251 per coin. For the full year, revenue from the Bitcoin mining business was $675.5 million with a total of 6,594.6 Bitcoin mined during the year. The average cost to mine bitcoin, excluding depreciation of mining machine was $79,707 per coin with all-in cost at $97,172 per coin. Revenue from our automobile trading business was $4.8 million in the fourth quarter and $9.8 million for the full year.

Now let's move on to our cost and expenses. Cost of revenue exclusive of depreciation in the fourth quarter was $155.3 million and $543.3 million for the full year. Depreciation in the fourth quarter was $38.1 million and $116.6 million for the full year. General and administrative expenses in the fourth quarter was $9.9 million and $28.9 million for the full year. Impairment loss from mining machine in the fourth quarter was $81.4 million at $338.3 million for the full year.

Loss from change in fair value of receivable for Bitcoin collateral in the fourth quarter was $171.4 million and $96.5 million for the full year. Operating loss for the quarter was $276.6 million with a net loss from continuing operations of $285 million in the fourth quarter. For the full year, the operating loss was $437.1 million and net loss from continuing operations was $452.8 million. On a non-GAAP basis, adjusted EBITDA for the full year was $24.5 million.

Moving on to our balance sheet. As of December 31, 2025, we had cash and cash equivalents of $41.2 million, our balance sheet also includes $663 million of receivables for Bitcoin collateral. In terms of operational assets, we carry out mining machine at a net value of $248.7 million of depreciation. On the liability side, we had $557.6 million in long-term debt.

Together, these figures represent a core component of our financial structure as we closed the fourth quarter of 2025. This concludes our prepared remarks.

Operator, we are now ready to take questions.

[Operator Instructions]

Your first question today comes from Pingyue Wu with Citic Securities.

This is Pingyue Wu from Citic Securities. And my first question is, the company recently launched EcoHash subsidiary focused on HPC and AI inference compute service? And how do EcoHash position itself in a highly competitive AI compute market? And what is the core logic behind our approach compared with traditional data centers?

Thank you for your question. EcoHash is now designed to replace traditional hyperscale data centers. Instead, we're focus on targeted opportunities within specific segments of the AI compute market. Hyperscale facilities are built for large-scale centralized model training workloads. Those projects require significant upfront capital and construction time lines that can span several years.

By contrast, our initial focus is on AI inference and generative AI workloads. These use cases have distributed demand and are sensitive to latency. This use case often require flexible deployment of compute nodes closer to end users rather than relying solely on massive centralized facilities. Our approach centers on resource reuse and modular design. Notably, we can leveraged our global energy network connected to our existing Bitcoin mining sites.

From this space, we are deploying standardized and modular AI compute nodes that can be deployed much faster than traditional data center infrastructure. This model shortens time lines, lowers upfront construction costs and delivers compute capacity more efficiently. For now, EcoHash remains in early phase of model validation and technical integration. We are taking a major approach, our primary objective is to explore how we can fully leverage our existing energy infrastructure to participate in the rapidly growing AI inference market. with a model that is asset light, quick to deploy and able to deliver stronger capital efficiency.

And my second question is the company sold more than half of its Bitcoin holdings in February 2026 and this appears to be a notable shift from the mining hold strategy highlighted in the third quarter. And my question is what drives this decision?

Thank you for your questions. Actually, we understand that investors are watching this shift very closely. From a financial management perspective, our shift from a pure Bitcoin accumulation strategy towards more strategic monetization reflects our focus on maintaining balance sheet strength in the current market environment. Given the heightened volatility in Bitcoin prices since late in the fourth quarter and into early 2026, we made a decision in February to monetize a portion of our Bitcoin holdings.

The objective was to reduce financial leverage and further optimize our balance sheet, ensuring that the company remains well positioned to navigate potential continued market volatility. It is also worth noting that we are seeing a broader shift across the mining industry. In a cyclical environment with increasing volatility, maintaining excessive exposure to a single asset can introduce unnecessary balance sheet risk. As a result, a more balanced approach between long-term asset exposure and the financial stability is becoming increasingly common across the sector.

At the same time, the company is entering a critical phase in validating the diversification of our computing power business. We see AI computing as an important long-term growth driver. By making this strategic adjustments, we are also creating greater financial and operational flexibility to support continued development and scaling of our AI-related initiatives. Thank you.

Your next question comes from [ Ming Zeng ] with China Securities.

This is Ming Zeng from Citic, and thanks for this opportunity. I have 2 questions. The first one is that we noticed that the company's leverage ratio remained relatively high at the end of this reporting period, and the Bitcoin prices has been volatile simply, I mean the price remains weak, how will the company fund the development of its AI business?

You mentioned that $10.5 million capital injection from the controlling shareholders and USD 16.5 million equity financing arrangement, how will the funds be allocated between -- manage billing and your AI initiatives in 2026? And second question is that regarding the development of AI compute's network, what is the expected timeline over the next year and when could this began to contributing revenue. This is -- that's my question.

I will take your first question. We have taken proactive steps to strengthen our balance sheet, as I just mentioned. We recently sold 4,451 Bitcoin from inventory and used the proceeds to partially repay outstanding loans. This reduced our overall financial leverage and increased flexibility as we advance our AI initiatives. At the same time, we completed the closing of our USD 10.1 million capital injection and enter into agreement with Armada Network Limited and Fortune Peak Limited for an additional USD 65 million equity investment.

Once this new round of financing is completed, the company's leverage ratio will decline further resulting in a stronger balance sheet that better support the development of our AI business. AI segment, we intend to follow a disciplined and phased investment strategy. Phase 1 is product and business model validation. During this stage, we will rely primarily on internal capital. We can -- we will conduct pilot infrastructure upgrades and deploy compute products at our own LN mining site. Phase 2 begins once the model is validated, we plan to establish several backbone nodes in collaboration with selected partner mining facility.

In these cases, infrastructure upgrades will be carried out jointly with site operators and project level structure financing such as GPU backed financing may be used to support expansion. Phase 3 occurs as the computer network gradually forms and begins generating stable operating cash flow. At that point, we expect to use a flexible mix of equity and debt financing to fund the next stage of growth.

Regarding the AI time line, our approach to the AI business remains major and pragmatic. The initiative is still in the early stages. So our near-term focus is on validating the commercial models and evaluating unit economics given where we are in the pilot phase, it would be premature to issue specific revenue forecast at this time. Currently, our most tangible progress is taking place at our self-operated LN mining site in Georgia.

We are conducting a small-scale pilot project to deploy the first batch of standardized AI compute nodes there. This will allow us to validate the technical architecture and gather operational data. The border 1.2 gigawatt energy network that we can access serves a long-term strategic resource pool. However, this represents a medium- to long-term capacity option. It is not necessarily a commitment to immediate large-scale capital expenditure. For now, we are focused on gradually validating the model through the Georgia pilot while ensuring that overall liquidity and financial stability remain intact. Thank you.

Your next question comes from Marco Zhang with Gelonghui Research.

This is Marco from Gelonghui. Congrats on your successful transformation last year. I have 2 questions here. First, you increased your hashrate from 32% exahash per second to 50 in 2025. So do you have specific hashrate expansion targets for 2026?

For 2026, our focus is efficiency rather than scale. Our goal is to maintain a healthy cash flow and strong risk resilience across market cycles. In 2025, we produced approximately 6,600 BTC. We expanded the strength of our existing operational footprint. For 2026, we will implement a prioritized efficiency strategy. This starts with systematically phasing out older, high energy consumption, mining rigs.

We will also gradually relocate some of our hashrate to regions with more competitive electricity pricing. This optimization may result in a temporary reduction in total hashrate in the year -- in the near term. However, it will greatly improve fleet-wide energy efficiency, lower cost per Bitcoin mined and strengthened our resilience during periods of volatility. Our objective is to build a more resilient compute portfolio by phasing out inefficient capacity and freezing up liquidity.

We strengthened our balance sheet. This also preserve capital resources that may later support our ongoing AI transition. Thank you.

Got it. My second question is for our modeling purpose, looking ahead from your perspective, how should investors evaluate Cango's valuation framework in 2026 and beyond? Should the company be viewed primarily as a mining company or as an AI infrastructure provider?

Thank you for your question. Bitcoin mining remains our foundation, while AI represents our incremental growth engine. Over time, we believe investors may increasingly evaluate our performance through metrics, such as revenue per megawatt, whether we are deploying power into Bitcoin money or AI compute, the underlying principle is the same, converting energy into economic value, we will allocate resources towards whichever segment delivers the strong stronger returns.

In that sense, Cango is evolving into a flexible compute platform, we can dynamically allocate energy-backed compute capacity across different market based on return potential. Thank you.

Your next question comes from Kevin Dede with HC Wainwright.

I'd like to quiz you a little bit more, Paul, please on detail behind your AI pilot in Georgia. How long do you think it will take you to validate the model? And do you think you might be able to turn to live market revenue sometime within this calendar year?

Hi, Kevin, this is Simon Tang, Chief Investment Officer here. I'll step in and take this question if that's okay.

Perfect, Simon. Thank you.

Great to reconnect. In terms of the AI pilot in Georgia because this is going to be a modular containerized solution, so it should be relatively quick, we anticipate that the -- from breaking ground to overall coming on stream, it should take somewhere between 4 to 6 months, and this is a relatively conservative estimate.

And secondly, to answer your second question, in terms of revenue generation within this year, yes, we do anticipate that there is going to be some sort of revenue generated from this business model this year.

Okay. Simon, as you look at optimizing the Bitcoin mining fleet, how much of it -- of your 50 exahash would you classify as inefficient? And how much capital do you think you'll be able to allocate toward replacing the fleet versus investment in AI infrastructure.

Got it. I think when we talk about inefficient, it's a function of both the mining machine model as well as the power price that we have in place for that particular site, right? So it's very difficult for us to quantify at the moment holistically how much of that we would classify as inefficient.

But overall, in terms of the general direction of this business, as Paul and Michael have alluded to earlier, we're looking at a variety of ways to increase the economics and outcome of this business, whether it be swapping some of these machines for newer models, whether it be moving them to some more cost-efficient sites or whether it be through renegotiating of these contracts, which are either expiring or which are just generally being renegotiated as well.

And in terms of the capital allocation for this effort, I think our -- in terms of new capital investment, it's going to be more geared on the AI side. So on the mining machine side, currently, we do not have any significant plans for allocating more investment into procuring new machines.

Okay. The auto business seemed to kick up pretty nicely in the fourth quarter. And I was hoping you could help me understand whether or not there was some seasonality there, how you would expect this year 2026 to progress? Do you think you should see an overall lifting in revenue there? And then -- please give us some indication of where you are on profitability in that business?

Thank you, Kevin, for your question. I think, yes, we see that there is a very quick development in our auto trading, I mean, overseas auto trading business overall. And we do expect that there is still got a significant -- I mean, the growth about -- related to that sector, I mean, in the coming year. But as Simon just mentioned, since we allocate the majority of our capital into the AI sectors, I mean, the AI initiatives. So we do not expect that we will allocate the further capital into the auto trading sectors. So it's -- actually, it's a type of -- I mean internal growth, I mean, the genetical growth by our -- I mean, the auto trading business line itself.

So I think -- yes. And also, it's also related to the demand side. You know that there is due to the geopolitical reasons and actually, the price volatility related to the energy. So I think it's very difficult for us to give a very clear view about -- I mean, the performance -- the financial performance for the automotive automobile trading business in the next year.

Paul. I'd like to offer my congratulations. It's really pretty amazing on how quickly you're able to transform the company, and I have no doubt that you'll be able to work out all the problems you may run into addressing HPC and AI. So congratulations on all the progress and good luck in the future.

Thank you, Kevin. Thank you for your time.

Your next question comes from William Gregozeski with Greenridge Global.

I just wanted to ask about how much of the Georgia facility is being allocated to the Phase 1 pilot? And are you able to give some kind of rough sense as to how much money is being spent on that Phase 1 pilot?

Hi, Bill, this is Juliet. Thank you for your question. I'll try to take this one. So with regard to the LN site, we are currently starting the retrofitting work for the site basically because we are actually adopting a modular kind of like approach. So we don't expect to turn like a major kind of like hashrate or megawatt into AI at this stage. So that one should be used as a showcase. So we will say 1 to 2 megawatts to show the possibility, to show the things we can do with our existing infrastructure.

So in terms of CapEx, so basically, we've been running demo projects as we actually discussed in previous calls last year in terms of AI transition. So we are thinking of like a ballpark of around like $20 million for 1 megawatt, including GPU. So just in case -- so it's still in the process of feasibility study. We will show more details, including numbers. When we have the LN site ready, probably later this year, as just mentioned by Simon.

So for the retrofitting work, it might take around like 46 months in kind of like conservative approach. I hope that answers your question.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Thank you for joining us. We're good. Thank you very much. Thank you, everyone, for joining our earnings call today. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Cango Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded.

I would now like to turn the conference over to Paul Yu, CEO. Please go ahead.

Hello, everyone, and welcome to Cango's third quarter 2025 Earnings Call. This quarter marks the 1-year anniversary of our strategic transformation into a Bitcoin miner, an important milestone for the company. Today, I will reveal our third quarter results and share how Cango continues to create long-term value in a rapidly changing market environment.

During third quarter, we remain focused on our core mining operations further strengthening Cango's position with the skilled and operationally disciplined Bitcoin manner. This is clearly reflected in our financial performance. In the third quarter total revenue reached USD 225 million, up 60.6% sequentially. Operating income was USD 43.5 million and net income was USD 37.3 million.

Today, Cango operates a deployed hashrate of 50 exahash globally, positioning us among the leading miners worldwide. In the third quarter, we produced 1,930.8 Bitcoins, averaging 21 Bitcoins per day, up 37.5% and in total output and 36% in daily production compared with the second quarter 2025. Leveraging our asset-light model we've built a competitive global footprint across the Americas, the Middle East and Africa in just 1 year.

In our mining operations, we continue to execute our strategy to reprioritize hashrate optimization over expansion by refreshing older, less energy-efficient models to the T21 and S21 series and disciplined operations with significantly improved average operating hashrate, from 40.91 exahash in July to 44.85 exahash in September and further to 46.09 exahash in October, with efficiency surpassing 90%. In August, we also acquired a 50-megawatt mining facility in the state of Georgia, lowering per unit operating costs and building dedicated energy infrastructure to support our long-term strategy.

The current market environment remains volatile with significant fluctuations in Bitcoin prices. Cango is closely monitoring these dynamics, and we'll continue to manage our deployed output and explore partnership models to mitigate market risks and enhance operating stability. While consolidating our core business, we also clarified our long-term strategy, building a global distributed AI compute network powered by green energy, with Bitcoin combining as a practical on ramp towards our energy and compute ambitions, following the sequence from Bitcoin mining to energy exercise and from operational depth to AI compute deployments.

In the third quarter were executed our phased road map with strict financial discipline, looking small-scale pilots with clear technical and IRR thresholds across both energy and AI compute. Our clean energy projects in Oman and in Indonesia are now underway and are expected to be commissioned within the next 1 or 2 years, providing strategic support for subsequent AI infrastructure development.

The AI compute. In AI compute, Cango is taking a differentiated approach. Instead of building large centralized data centers, we focus on flexible distributed compute units in practical, this will integrate dispersed GPU resources into standardized compute pools and break them into smaller units tailored to the needs of small and midsized enterprises. This approach is enabled by 2 core advantages our distributed operational expertise and our global energy footprint, allowing us to execute a unique asset-light first strategy.

In terms of governance, we have assembled a new leadership team with deep experience in digital infrastructure and finance and completed the transmission from an APR listing to a direct listing on the NYSE to enhance transparency and reduce shareholder transaction costs. These initiatives provide strong support for our next phase of development.

Lastly, let me briefly update you on our legacy business. Our used car export platform, AutoCango, delivered strong performance this quarter with revenue of USD 3.3 million, 90% sequentially. The platform remains asset-light and continues to scale, connecting buyers from Africa, the Middle East and Eastern Europe with quality vehicle inventory from China.

With that, I will now turn the call over to Michael Zhang, our Chief Financial Officer, to take you through the financials in more detail.

Thanks, Paul. Hello, everyone, and welcome to our third quarter 2025 earnings call. Before I begin the review of our financials, please note that starting this quarter, we will begin reporting U.S. dollars, which better reflects the profile of our revenue and profit following the divestiture of our charter asset in May 2025. Unless otherwise specified, all amounts discussed are in U.S. dollars.

Total revenue in the third quarter of 2025 were $224.6 million, up 60.6% sequentially. Revenue from the Bitcoin mining business in the third quarter of 2025 was $220.9 million with a total of 1,930.8 Bitcoins mined during the period, up 50.9% and 37.5%, respectively, on a sequential basis. The average cost of mining Bitcoin, excluding depreciation of mining machines, was $81,072 per coin with all-in costs at $99,383 per coin. Revenue from our automotive training business was $3.3 million in the third quarter of 2025.

Now let's move on to our cost and expenses during the quarter. Cost of revenues exclusive for depreciation in the third quarter 2025 was $162.6 million. Depreciation in the third quarter 2025 was $35.4 million. General and administrative expenses in the third quarter was $6 million. We recorded operating income of $43.5 million and net income of $37.3 million in the third quarter of 2025 compared with an operating loss of $1.2 million and a net loss of $9.5 million in the same period last year. On a non-GAAP basis, adjusted EBITDA for the third quarter of 2025 was $80.1 million compared with $1.2 million in the same period last year.

Moving on to our balance sheet. As of September 30, 2025, we had cash and cash equivalents of $44.9 million. Our balance sheet also reflects a $660 million receivables for Bitcoin collateral. In terms of operational assets, we carry our mining machine at a net value of $365.7 million of depreciation. On the liability side, we had $405.1 million in long-term debt owed to related parties. Together, these figures represent the core components of our financial structure as we closed the third quarter of 2025.

This concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions] And today's first question comes from Emerson Zao with Goldman Sachs.

I have 2 questions. Number one, given the current Bitcoin prices, will the company consider selling Bitcoin holdings to fund new business expansion or manage market risk or support operation needs?

And the second question is, you mentioned that equipment operates improved energy efficiency. But we see October operational hashrate, which was 46.6 exahash, which is still below the deployed hashrate of 50 exahash. So what are the main factors behind this gap? And when do you expect full utilization?

Thank you for your question. I think I would take the first one. This quarter, we continue to follow our mine and hold strategy, retaining all mined Bitcoin as part of our strategic reserve. We've seen a heightened volatility recently, driven by tight market liquidity and increased uncertainty around the U.S. rate cut parts. However, we believe the fundamental thesis for Bitcoin as core reserve assets remain intact under broader macro spectrum. We will take a flexible approach across that equity and other financing channels to support our development of our new initiatives. Our Bitcoin reserves also provide a meaningful liquidity buffer and optionality for structured financing if needed.

Thank you for your question. I'm going to answer the question regarding the operation efficiency. After completing the acquisition of 18 exahash in late June, we reached full scale operations at safe for the first time in July during the initial integration phase we experienced temporary downtime due to cross state machine relocations and ongoing power system commissioning at the newly acquired sites. This factor created a short-term pressure on our time.

Our operations team responded quickly and throw system-level optimization uptime has now stabilized about 90%, which is considered industry-leading and demonstrating the strength of our operational capabilities. It is important to note that external factors such as experience weather and great curtailment periodically affect minor availability. This is an industry-wide reality and achieving 100% uptime is not visible. Among comparable industry peers uptime about 90% is regarded as a strong performance benchmark.

Going forward, we will continue enhancing efficiency through upgrade to our intelligent operations and maternal system while replacing low efficiency, however, will improve plant.

Our next question comes from Pingyue Wu with Citic Securities.

This is Pingyue from Citic Securities. And I have 2 questions. The first question is related to the debt structure. And the company mentioned converting short-term debt into long-term debt. Can you elaborate on the financial benefit of this shift? And what is your current cost of debt?

And secondly, my question is related to CapEx. Some capital-intensive data center operators have undergone significant value reset. Some people are questioning whether AI CapEx is entering bubble in territory. Given that you are now entering into the AI infrastructure space, how do you view this risk?

Thank you for your questions. And I will take the first one. Through this optimization of our debt maturity profile, our liability now primarily composed of long-term borrowings. This better aligns our capital structure with our strategic strategy of building big oil reserves through self-mining, enhancing balance sheet stability and reducing financial risk. At present, we plan borrowing costs remain in the 7% to 8% annualized range at this level is expected to remain stable following the maturity structure adjustment.

Regarding the second question, I think it's true that the market is reassessing returns on AI investments, particularly for hyperscale data centers with high leverage heavy CapEx and long contract cycles, but the demand level, AI influence and industry-specific applications are still expanding rapidly the demand mix may evolve, but long-term compute demand is not appearing.

In turning later, gives us the benefit of observing market shifts and avoiding high leverage expansion at the end of the previous cycle, our advantage slicing a lighter asset and leverage structure and a more distributed edge-oriented operating footprint. We evaluate and monitor AI project investments, potential returns and cash flow profiles at every stage. This allows us to dynamically adjust course, optimize capital efficiency and preserve strategic feasibility at all times.

Our next question comes from [ Joey Chai ] with [ Wujen ] Securities.

I have 2 questions as well. The first one, Bitcoin has pulled back sharply from its all-time high in October. How does this affect your operating pace for Q4 in 2026. With your current cash position in BTC Holdings, how long can you operate under extreme market conditions? And do you have a worst case plan? And the second one, the Georgia site is self-owned and this contradicts the asset-light model. Will future expansion favor on the sites or leased sites?

Well, thank you for your questions. Yes, we conduct frequent internal stress tests. And thanks to our asset-light models and operational flexibility we can dynamically adjust and even shut down high-cost sites on the extreme scenario to reallocate harsh power and control operating expenses. And we have the flexibility to adjust our BTC Holdings strategy as needed. We focus on long-term return per unit of harsh power as a long-term economics of Bitcoin rather than short-term market noise.

Regarding the Georgia side, it's important to clarify that. Today, acquisition is not a strategic bet, but rather an upgrade of our SLI model, we choose to acquire the site because it aligns with our long-term needs around securing low-cost power, gaining great stability and deepening our infrastructure operations capabilities.

Looking ahead, we will continue to follow a balanced model of lease first with selected selective strategic acquisitions. These things will remain our primary path for rapid expansion and geographic diversification we evaluate potential acquisitions against strict criteria, power cost, stability for AI grade data center upgrades and regulatory stability We believe only a portion of 3 sites is essential to maintaining long-term cost advantages and supporting our strategic transition.

On capital allocation, we prioritized efficiency over share scale. All cash flows will be direct to first to initiatives that strengthen our structure cost advantages such as acquiring sites to lower power costs or upgrading underperforming compute equipment. At the same time, we remain disciplined in managing our asset structure, evaluating and monitoring leverage and financial discipline through ranges, financial and operational metrics.

And our next question comes from Kevin Dede at H.C. Wainwright.

This is [ Daniel Malin ] on for Kevin Dede. We're curious how Cango feels it's best to address the HPC market, whether that be through cloud compute or a power shell model. And if the recent pullback in Bitcoin could it all accelerate this? And how are you guys thinking about time lines with those 2 ventures?

Thank you for your question. In AI compute, Cango is taking a differentiated approach instead of building large centralized data center. We focus our black for distributed compute units in practice, this will integrate dispersed GPU resources into standardized compute pools and break them into smaller units tailored to the needs of small and midsized enterprises. This approach is enabled by 2 core advantages; our distributed operational expertise and our global energy footprint, allowing us to execute a unique SLI first strategy.

Thank you. That's all the questions we have time for today. And this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Good morning and good evening, everyone. Welcome to Cango Inc.'s Second Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is also being broadcast live on the company's IR website and is being recorded.

Joining us today are Mr. Paul Yu, Chief Executive Officer; and Mr. Michael Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the question-and-answer session.

Before we begin, I refer you to the safe harbor statement in the company's earnings release, which also applies to the conference call today as management will make forward-looking statements.

With that said, I will now turn the call over to Mr. Paul Yu, CEO of Cango. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining Cango's Second Quarter 2025 Earnings Call. Today marks an important milestone as we report our first quarter following Cango's strategic transformation. This isn't just another quarterly update. It showcases our complete transformation into a leading Bitcoin mining company. In just 9 months, we have scaled to 50 exahash of computing power placing us firmly among the world's top miners. As part of this transformation, we recently completed a governance and leadership restructuring onboarding a senior management team with deep expertise across digital asset infrastructure, finance and energy investments. This leadership team gives us the right mix of skills to hit the ground running and execute our next phase of growth. I'm optimistic about what we can achieve together as we enter a new chapter in the journey.

Today, I will walk you through how our strategic execution has fundamentally repositioned us to lead the industry over the long term. Let me start with our financials, where we generated RMB 1 billion in total revenue in the second quarter of 2025, with Bitcoin mining contributing RMB 989.4 million of that amount. However, you can see we incurred a net loss, which reflects two accounting adjustments that temporarily mask our operational strength and should be built as the essential investment in our foundation for the future. First, our clean exit from China. We completed the $352 million divestiture of our legacy China asset in May, which resulted in one-off loss from discontinued operations. Second, as a part of the acquisition of mining equipment last November, we purchased 18 exahash of mining capacity, so a share-based payment. By the time the equipment was delivered in June, our stock price has nearly doubled, triggering a noncash hedge accounting adjustment in accordance with applicable fair value accounting standards. These were strategic decisions we took into consideration to rapidly build competitive scale and sharpen our focus.

The important story is what lies beneath. Excluding these one-off adjustments, adjusted EBITDA for the quarter was RMB 710.1 million, clear evidence of the underlying strength of our Bitcoin mining business. Now let me view the progress we've made in the transformative quarter. We've already achieved one of the industries largest scale at 50 exahash, representing approximately 6% of the global networks hashrate as of June 30, 2025. July's Bitcoin production reached 650.5 BTC, up 44.4% (sic) [ 44% ] or approximately 200 BTC increase from June, primarily driven by the full deployment of the 50 exahash mining equipment since end of June. In addition, in August, we strategically acquired a 50-megawatt mining site in Georgia, a move that will reduce power costs and enhance operational stability and lays the groundwork for future expansion.

We maintain a fortress balance sheet with $118 million in cash and cash equivalents as of June 30, provide ample capital to fund our strategic expansion. Our asset-light strategy provides a distinct advantage. By acquiring Plug & Play mining rigs with minimal upfront capital, we are able to scale more quickly and cost effectively than vertically integrated competitors. Although this model resulted in higher cash costs per BTC of $83,091 during the quarter, our all-in costs remain competitive at $98,636 per BTC. This is primarily due to significantly reduced depreciation expenses from low equipment acquisition costs, which offset elevated power expenses. As a result, our capital efficiency supports a solid return on capital employed and ensure resilience across market cycles without burden of heavy equipment financing.

Additionally, our geographic diversified footprint across North and South America, Middle East and Africa helps mitigate regional risks while sustaining industry-leading efficiency. Our road map forward is clear and purposeful. In the near term, we will maximize value from our 50 exahash of mining capacity by implementing efficiency upgrades and replicating the low-cost operational model of our Georgia site.

Looking to the midterm, we plan to pilot renewable energy storage project aimed at achieving near-zero-cost mining operations while simultaneously retrofitting select facilities to support HPC applications. Over the long term, we are ultimately building a dynamic computing platform that intelligently balances Bitcoin mining and AI workloads, all powered by our expanding energy expertise. This quarter's results reflect a company making bold and strategic moves. We have accepted temporary accounting adjustments to secure lasting competitive advantages, namely meaningful scale, cost-effective infrastructure and a focused commitment on pure-play high-value computing. With this strong foundation, firmly in place and a clear path to continued value, I will never be more confident in Cango's future.

Before I turn the call to Michael Zhang, our CFO, to take you through our financial results for the quarter in more detail, let me quickly review our legacy business. We remain focused on lean asset-light operations for our used car export platform, AutoCango. Since its launch, our platform has attracted over 6 million visits and surpassed 456,000 registered users. It now hosts more than 800,000 vehicles listing with 70,000 different models on offer, connecting China's used car market with international buyers seeking quality inventory. We continue to see steady growth opportunities in this segment in the future.

With that, I will turn the call to Michael.

Thanks, Paul. Hello, everyone, and welcome to our second quarter 2025 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in RMB terms. Total revenues in the second quarter of 2025 were RMB 1 billion. Revenue from Bitcoin mining business in the second quarter 2025 was RMB 989.4 million with a total of 1,404.4 bitcoins mined in the second quarter of 2025. The average cost from mined Bitcons excluding depreciation of mining machines was USD 83,091 per coin with all-in costs at USD 98,636 per coin during the quarter. Revenue from automobile trading income was RMB 12.4 million in the second quarter of 2025.

Now let's move on to our cost and expenses during the quarter. Cost of revenue exclusive of depreciation and amortization in the second quarter of 2025 was RMB 836.9 million, depreciation and amortization in the second quarter of 2025 was RMB 156.4 million, general and administrative expenses in the second quarter was RMB 21.7 million. Due to one-off loss from discontinued operations and noncash impairment loss, we recorded an operating loss of RMB 1.3 billion and a net loss of RMB 2.1 billion in the second quarter of 2025, respectively. Excluding the impairment loss and one-off loss from discontinued operations, we recorded adjusted EBITDA of RMB 710.1 million in the second quarter 2025 compared with RMB 5.4 million in the same period of last year.

Moving on to our balance sheet. As of June 30, 2025, we had cash and cash equivalents of RMB 843.8 million. Starting from -- starting with our second quarter 2025 results, we intend to change the reporting currency of our consolidated financial statement from RMB to U.S. dollars, reflecting the profile of our revenue and profit after divestiture of our China asset in May 2025. The change is expected to be effective from the company's results for the third quarter of 2025, which will be reported in U.S. dollars.

This concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions] And today's first question comes from Emerson Zhao with Goldman Sachs.

This is Emerson from Goldman Sachs. I have 2 questions. Number one, could you outline your road map for computing power over the next 12 months as well as the capital expenditure plans? For example, whether you will continue to acquire mining sites or order new miners. Number two, we understand the previous announcements mentioned your -- the strategic direction of green energy plus storage. Could you update us when is the new progress expected?

Thank you, Emerson, for attending the conference call. I will take the first question, and our CEO, Paul will take the second one. For the first question, for computing power, our goal for the second half of the year is to fully unlock the value of the current 50 exahash computing power. This will be achieved by improving operational efficiency, upgrading machines and selectively acquisition of mining site with low electricity costs. One example of such a site is our newly acquired mining facility in the state of Georgia. Of course, if suitable opportunities come up, we will be open to expanding computing power through M&A as well.

As for capital allocation, we will continue to maintain strict capital expenditure discipline. We are also evaluating opportunity in areas, including computing power expansion, green energy storage, AI HPC center and more for long-term growth. For the second half of the year, in particular, the focus will be on selective mining site acquisition. Specifically, we are looking at sites that significantly reduce electricity costs, enhance energy security and support the stability of our overall operations. More importantly, by operating this infrastructure, we will get critical hands-on management expertise. We believe this will provide a solid foundation and strategic flexibility for future business expansion into energy plus HPC sector. Thank you.

Regarding the green energy plus storage, it is one of our most important strategic objectives. We are advancing through two parallel paths. First, we are actively seeking M&A targets globally for rapid deployment. And second, we will develop critical hands-on management experience by investing in pilot projects that are developed with experienced partners. Thank you.

And our next question today comes from Pingyue Wu with Citic Securities.

This is Pingyue from Citic. And I have also 2 questions. The first is the company previously mentioned to follow a light asset model, and we also acquired mining sites. So does it mean that the company is gradually shifting towards an integrated operation? And my second question is, is there a plan to acquire more low electricity cost mining sites in the next phases? And are low-cost regions, such as Latin America and Middle East prioritized? And what are the screening criteria?

Thank you for your question. Acquiring those mining sites isn't solely about reducing costs. Beyond cost reduction, there are 3 strategic benefits. First, stable energy supply supporting our existing large-scale computing power requires reliable and consistent energy sources; second, infrastructure and operational expertise. We gained critical operational experience that lays a solid foundation for upgrading our capacities. Third, creating a foundation for strategic transformation. By securing low-cost power and scalable sites, we are building the infrastructure needed for future transformation into AI data centers.

With these benefits in mind, our criteria for selecting mining sites also fall under 3 pillars, low-cost electricity to maintain business competitiveness, sufficient capacity and power redundancy to support future upgrading and stronger regional grid stability to handle high load demand after transformation.

Our asset-light strategy avoids the risk of CapEx, heavy mining models and by managing energy sources and billable sites, we achieved due strategic positioning for both current business support and future AI transformation. In our view, selectively acquiring mining sites doesn't change our capacity -- capital-light strategy in mining business. Instead, it enhances our operational efficiency and gradually creates a pathway towards green energy and AI computing centers.

Regarding the plan to acquiring more mining facilities, in general, we will continue to monitor M&A opportunities for energy projects in line with the company's strategic transformation needs. In mining sets selection, we conduct an in-depth evaluations based on actual operational performance, detailed cost benefit calculations and potential strategic synergies. Regionally, the U.S. is our current priority. Most of our miners and hosting sites are already located there, and we want to strengthen our local operations and marketing position. The Middle East, a region with attractive energy prices and policy stability is also within our scope of consideration.

For specific targets, we will focus on factors such as local climate, energy prices and policy stability. We tend to prioritize acquiring sites where we already have long-term stable collaborative relationships, good operating conditions and sustained low power cost advantages. Thank you.

[Operator Instructions] Our next question today comes from [ Joey Chee ] with [indiscernible] Securities.

This is Joey from [indiscernible] Securities. And I have 2 questions as well. The first 1 is that we have noticed the leading mining companies like Mara, CleanSpark, et cetera, have reached 50 EH. How will Cango maintain its computing power market share are facing miner supply shortage or energy efficiency bottleneck? And the second 1 is that when promoting related infrastructure investment in the U.S. do you face restrictive policy risks.

Thank you for your question. I will take the first one. As one of the largest miners with the current scale of 50 exahash per second, maintaining competitiveness isn't just about increasing the total volume of the computation of power. The critical factor, I think, is deep optimization of computing power efficiency. We have established a unique asset-light model, which focuses on strategic acquisition of secondhand on-rack miners to achieve rapid low-cost mining capacity expansion. This strategy will continue to be a core advantage.

Meanwhile, we will not cling to inefficient capacity. We closely monitor miner performance and economic metrics. We dynamically phase out inefficient capacity and upgrade to more energy-efficient miners. Miner supply shortage will not be a bottleneck. I think we've got the expertise and the relationships to acquire cost-effective power to grow our -- to cover our -- to drive our growth. Furthermore, we remain open to computing power M&A opportunities that align with our strategies. Thank you.

Regarding U.S. infrastructure investment, we continuously monitor changes in the policy environment. We have developed local -- we have deployed local compliance team and legal advisers to evaluate potential restrictive policies and mitigate related risks. Currently, most computing power friendly states in the U.S. have no restrictive policies on power access or land use for data centers. In fact, they have introduced computing power infrastructure investment services. Only a few states have strict approval process requirements for converting critical computing power to general purpose computing power. We have established regular communications with local energy regulators to ensure compliance and efficiency during project implementation. Thank you.

And our next question today comes from William Gregozeski with Greenridge Global.

Congratulations on all the progress you guys have made over the last 10 months on this change. I also have 2 questions. The cost per BTC has increased, and you mentioned you have the new mining equipment, the Georgia acquisition and then you're making optimizations. Is there a number we should be looking at for what you think the cost is going to be as you exit the year on that with your current exahash portfolio? And then second question is, given how undervalued the stock is, do you plan to do any repurchases or just prioritize the cash for operational expansion?

Thank you, William. I think I will take most of your questions. For the first one, as we just disclosed in our second quarter results, our cash cost per BTC was approximately $83,000 with an all-in cost of around $8,000. The deployment of our new equipment in July bringing our operational hash rate to 50 exahash is a key step towards improving both metrics. The increased scale and efficiency of these new fleets are expected to increase our absolute Bitcoin production and improve our cost profile on a per coin basis. However. We are also seeing continuous upward pressure on mining costs across the sector, driven primarily by the rapid increase in global network hash rate. Therefore, while our new risks will gain us further economy of scale, we anticipate these industry-wide headwinds will also be reflecting our cost structure during the third quarter.

And as for your second question, we absolutely agree that our current stock price doesn't reflect the instant value of our business. We firmly believe that the most sustainable way to achieve a fair value is through the continued development of our core business and enhancement of our profitability. Therefore, our primary focus is to strategically deploy our cash and liquidity to fund high-return operational expansion and our business transformation. This includes investing in new high-value areas such as AIDC, which we believe will drive future growth and profitability. Simultaneously, we are deeply committed to delivering returns to our investors. We will continue to take a balanced approach carefully evaluating our business development needs with along our capital market conditions to manage our liquidity prudently. This means we will consider all tools at our disposal, including our ongoing share repurchase program to ensure we are creating long-term value for our shareholders. Thank you.

And our next question today comes from Kevin Dede at H.C. Wainright.

Paul and Michael, you've addressed this question a number of times, but it's still a little unclear to me. The August hash rate was almost 44 exahash of the 50 exahash that you have deployed. I don't understand how improvements and optimization will get you that next 6 exahash. Could you maybe explain that? And how should we look at that going forward?

Thank you, Kevin, for your questions. I think first, we'd like to highlight that 43 -- I mean near 44 exahash disclosed in our August production report represent our effective operational hash rate, although it's reached like 87%, I mean, effective rate but it still has a difference on the gap compared to -- I mean, the top miner, which is above 90%. So we think -- we expect -- we still have space to improve our efficiency. I think that's the -- our main -- our major ways to improve our efficiency is to maybe to upgrade our inefficient miners and also to develop our, I mean, operational team, I think maybe we can further improve the efficiency, I mean, of the miners. Paul, do you have anything to add?

Yes. I think it takes time to implement our rigs on track after acquiring all the mining machines. And also, there are a lot of curtailment in the U.S. during the summertime. I think we will improve our operational efficiency in the future. Thank you.

Thank you, Paul. I had suspected that curtailment was certainly a factor. Okay. Just from a high level, what do you think is the most important aspect of Cango's June report? What would you really like to have resonate for investors?

This quarter was truly a milestone for us. First, we completed the divestiture of our China operations and the acquisition of 18 exahash in assets. We have finalized the change in ownership and established a new management structure and team. We are now fully prepared and ready to move forward. For a business perspective, having 50 exahash means we have officially entered the first tier of industry players. At the same time, our Bitcoin holdings continue to grow, now exceeding 5,000 BTC, and this has future solidified our mine and hold strategy. On the financial side, it's especially worth highlighting that while maintaining scale with validating the effectiveness of our business model drove solid financials. We also see continued opportunities for cost optimization, which will remain a focus in our next phase.

Perfect, Paul. It was a very comprehensive review, and I appreciate you discussing it with me. Congratulations on all the progress you've made.

Thank you.

And that concludes the question-and-answer session. Thank you once again for joining Cango's Second Quarter 2025 Earnings Conference Call today. Have a great day.