Cango Inc.

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

Hello, everyone, and welcome to Kendall's third quarter 2025 earnings call. This quarter marks the one-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 Kangal 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 Kangal's position as a skilled and operationally disciplined Bitcoin miner. This is clearly reflected in our financial performance. In the third quarter, Total revenue reached $225 million, up 60.6% sequentially. Operating income was $43.5 million, and net income was $37.3 million. Today, Tango operates a deployed hash rate 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% in total output and 36% in daily production compared with the second quarter, 2025. Leveraging our asset-light model, we built a competitive global footprint across the Americas, the Middle East, and Africa in just one year. In our mining operations, we continue to execute our strategy of prioritizing hash rate optimization over expansion by refreshing older, less energy efficient models to the T21 and S21 series and discipline operations with significantly improved average operating hash rate 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 Kendall is closely monitoring this dynamics and will 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 clarify our long-term strategy. Building a global distributed AI compute network powered by green energy, we will be combining as a practical on-ramp towards our energy and compute ambitions, following the sequence of from Bitcoin mining to energy exercise, and from operational steps to AI compute deployment. In the third quarter, we executed our first roadmap with strict financial discipline, launching small-scale pilots with clear technical and IRR thresholds across both energy and AI compute. Our clean energy projects in Oman and Indonesia are now underway and are expected to be commissioned within the next one or two years, providing strategic support for subsequent AI infrastructure development. In AI compute, Kendall is taking a differentiated approach. Instead of building large centralized data centers, they 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 mid-sized enterprises. This approach is enabled by two core advantages, our distributed operational expertise and our global energy footprints, allowing us to execute a unique isolated plus edge-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 ADR 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, Auto Kangal, delivered strong performance this quarter with revenue of 3.3 million US dollars, up 90% sequentially. The platform remains at that 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 revenues and profit following divestiture of our China asset in May 2025. Unless otherwise specified, all amounts discussed are U.S. dollars. Total revenue in the third quarter of 2025 was $224.6 million, up 60.6 percent sequentially revenue from the bitcoin mining business in the third quarter of 2025 was 220.9 million with a total of 1930.8 bitcoins mined during the period up 50.9 percent and 37.5 percent respectively respectively out of sequential basis the average cost of mining bitcoin excluding depreciation of mining machines was $81,072 per coin, with owing cost 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 of 2025 was $100,000 62.6 million. Depreciation in the third quarter of 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 $660 million receivables for Bitcoin collateral. In terms of operational asset, we carry our mining machine at a net value of $365.7 million after depreciation. On the liability side, we have $405.1 million in long-term debt owed to related parties. Together, these figures represent the core components of our financial structure as we close the third quarter of 2025. This concludes our prepared remarks. Operator, we are now ready to take questions.

Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed, you would like to withdraw your question, please press star them too. At this time, we'll pause for just a moment to assemble our roster. And today's first question comes from Emerson Zhao with Goldman Sachs. Please go ahead.

Thank you, management team. I have two 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 in improved energy efficiency. But we see October's operational hash rate, which was 46.6x hash, which is still below the deployed hash rate of 50x hash. So what are the main factors behind this gap? And when do you expect full utilization? Thank you.

Thank you for the 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 a co-reserve asset remains intact under a broader macro backdrop. We would take a flexible approach across that equity and other financing channels to support our development of new initiative. Our Bitcoin reserve also provide a meaningful liquidity buffer and optionality for structure financing if needed. Thank you.

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 50 exahash 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 site. This factor created short-term pressure on uptime. Our operations team responded quickly and through system-level optimization, uptime has now stabilized about 90%, which is considered industry-leading and demonstrates the strength of our operational capabilities. It is important to note that External factors such as extreme weather and great curtailment periodically affect miner availability. This is an industry-wide reality and achieving 100% uptime is not feasible. 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 maintenance system while replacing low efficiency hardware where appropriate. Thank you.

Thank you. Our next question comes from with CITIC Securities. Please go ahead.

Thank you, management team, for taking my question. This is Qingyue from ZTECH Security. And I have two 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 benefits of this shift? And what is your current cost of debt? And secondly, my question is related to AI CapEx. Some capital-intensive data center operators have undergone significant value reset. Some people are questioning whether AI CapEx is entering bubble territory. Given that you are now entering into the AI infrastructure space, how do you view this risk? Thank you.

Thank you for the questions, and I will take the first one. Through this optimization of our debt maturity profile, our liability was now primarily composed of long-term borrowings. This better aligned our capital structure with our strategy of building Bitcoin 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, and this level is expected to remain stable following the maturity structure adjustment. Thank you.

Regarding the second question, it is true that the market is reassessing returns on AI investments, particularly for hyperscaler data centers with high leverage, heavy CapEx, and long contract cycles. Demand level, AI inference, and industry-specific applications are still expanding rapidly. The demand mix may evolve, but long-term compute demand is not disappearing. Entering later gives us the benefit of observing market shifts and avoiding high leverage extension at the tail end of the previous cycle. Our advantage lies in 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. Thank you.

Thank you. Our next question comes from Joey Chai with Guojin Securities. Please go ahead.

Thanks, Benjamin, for taking my question. I have two 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 and 2026? With your current cash position and 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 side is self-owned. Does this contradict the asset-light model? Will future expansion favor all the sides or least the sides? Thanks.

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

Regarding the Georgia site, it's important to clarify that Georgia site acquisition is not a strategic pivot, but rather an upgrade of our SLI model. We chose to acquire this 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 Leads First with selective strategic acquisitions. Leasing will remain our primary path for rapid extension and geographic diversification. We evaluate potential acquisitions against strict criteria, power cost, scalability for AI-grade data center upgrades, and regulatory stability. We believe owning a portion of K sites is essential to maintaining long-term cost advantages and supporting our strategic transition. On capital allocation, we prioritize efficiency over sheer skill. All cash flows will be directed first to initiatives that strengthen our structure cost advantages, such as acquiring sites to lower power costs or upgrading underperforming computer equipment. At the same time, we remain disciplined in managing our asset structure, evaluating and monitoring leverage and financial discipline through rigorous financial and operational metrics. Thank you.

Thank you. And our next question comes from Kevin Didi at HC Wainwright. Please go ahead.

Hi, this is Daniel Mullane on for Kevin Didi. We're curious how Cango feels it's best to address the HPC market, whether that be through cloud compute or a PowerShell model. And if the recent pullback in Bitcoin Could it all accelerate this, and how are you guys thinking about timelines with those two ventures? Thank you.

Thank you for your question. In AI compute, Kendall is taking a differentiated approach. Instead of building large centralized data center, we focus on flexible distributed compute units. In practice, this will integrate dispersed GPU resources into standardized compute tools and break them into smaller units. tailored to the needs of small and mid-sized enterprises. This approach is enabled by two core advantages, our distributed operational expertise and our global energy footprint, allowing us to execute a unique SLA plus edge-first strategy. Thank you.

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.