Cango Inc.

Hello and welcome to the CanGo Inc. First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. 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 this 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 non-cash 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 31st, 2026, Tango's total operational hash rate was 37.01 exahash per second, comprising 27.98 exahashes per second of self-mining capacity and 9.02 exahashes per second of hosted hash rate. This operational model prioritizes margin resilience over skill 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 continuous focus on profitability profitability and operational efficiency as our business model involves. 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 and location. In April, we maintained our focus on cost optimization measures and operational efficiency. Our self-mining operations produced 230.04 Bitcoin for the month. When the average cash cost per coin 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 hatchery composition, The contribution ratio between S19 and S21 models is approximately 8 to 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 set-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, 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 30th, 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 exahashes 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 Kangol's power access and many operational expertise to develop 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 enterprises efficiently. Based approach are multi stage 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 balance to approximately $30.6 million. Concurrently, our remaining Bitcoin reserves stands at 1,057.46 Bitcoin as of April 20th, 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 node 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 involving dynamics between global AI compute demand and the power infrastructure capacity. Within this marketing 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 continue the 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.

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 US 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 $1,266 million. The average cost to mine Bitcoin, excluding depreciation of mining machines, was $76,928 per Bitcoin, with all-in costs 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 VC 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 you see. 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 reduction. 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 $150 $1.8 million compared to $171.4 million in the fourth quarter. This non-cash loss was primarily driven by the decline in Bitcoin price during the quarter as we started off the quarter with over 7,500 Bitcoins. Operating loss for the quarter was 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 31st, we had cash and cash equivalent of $7.2 million, down from $41.2 million at year-end, mainly due to debt repayment 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 practice the leveraging 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're now ready to take questions.