Cango Inc. (CANG) Q4 2025 Earnings Call Transcript

Good evening, and welcome to the Kango Inc. fourth quarter and full year 2025 earnings conference call. All participants will be in 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.

Thank you. Hello everyone and welcome to Kangol'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 money 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 asset finance business to our Bitcoin mining operations within six 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 professionals they have bought deep expertise and established networks in both digital assets and infrastructure which has sharpened our competitive edge in the sector listing structure optimization during the year we transitioned from an ADR listing to a direct stock listing. This move lays a solid foundation for the border range of capital market tools, which are border-based operationally. 2025 showed a clear execution discipline. Despite significant market volatility in the second half of the year we maintained professional standards some non-recurring transformation costs one-time bulk loss of around 169 million from discontinued operations then a further loss of 257 million came from an impairment loss from mining equipment and the company acquired and settled in FT triggered by the significant appreciation in Congo's share price between sending and delivery. Second, towards the end of fourth quarter, the price of Bitcoin and other cryptocurrencies declined sharply, driven by external microeconomic factor tensions. This resulted in a fair value loss of 96.5 million on our Bitcoin holdings and an additional impairment of 81 million on mining machines as a result of the downward stages of our transformation. Constrainted capabilities is a model to rapidly secure a large share recognizing further price pressure were heading out in the new year. In February 2026, we strategically sold 4,451 Bitcoin from additionally older high energy consumers also gradually moving our computing power to regions

The average cost to the mining machine is $106 million. Revenue from the Bitcoin mining business was $675.5 million with a mine Bitcoin. Excluding depreciation of the mining machine was $79,707 per coin, $172 million. Revenue from our automobile trading business. Cost of revenue exclusive depreciation in the fourth quarter was $38.1 million and $169 million million and $28.9 million for the full year. Impairment loss from a fair value of $171.4 million. Operating loss for the 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 a non-GAAP basis of $24.5 million. Moving on to our balance sheet. As of December 31st, 2025, we had cash and cash equivalents of $41.2 million. Our balance sheet also includes $660. In terms of operational assets, we carry out mining, machine, and a net value of $248.7 million of depreciation. On the liability side, we had $557.6 million in long-term debts. Together, these figures represent the core component of our financial structure as we close the fourth quarter of 2025. This concludes our prepared remarks. Our reader, we are now ready to take questions.

We will now begin the question and answer session. To ask a question, you may press Start N1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press Start N2. If you would like to state your question in Chinese, you may do so, but then please also restate your question in English. Your first question today comes from Pinyui Wu with CitySea Securities. Please go ahead.

Thank you, management team, for taking my question. This is Pinyui from CitySea Securities, and my first question is, the company recently launched EchoHash, a subsidiary focused on HPC and AI inference compute service. And how do EchoHash position itself in a highly competitive AI compute market, and what is the core logic behind our project compared with traditional data centers? Thank you.

Thank you for your question. EchoHash is not designed to replace traditional hyperscale data centers. Instead, we 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 significant timelines that can spend on AI inference workloads. This uses deployment of compute nodes rather than a massive circular design. Notably, we can leverage our global energy network connected to our existing Bitcoin mining sites. From this base, we are deploying standardized compute nodes that can be deployed much faster than traditional data center. This This model shortens timelines, lowers up-run construction costs, and delivers complete earliest phase of model validations. We objectively leverage our AI inference market with the model that is deployed and able to deliver Thank you.

And my second question is, the company sold more than half of its Bitcoin holdings in February of 1996. and this appears to be a notable shift from the mine house strategy to highlight it in the third quarter and my question is what drives this decision thank you thank you for your question actually we understand that investors are watching this shift very closely from a financial management perspective our shift from a pure Bitcoin accumulation strategy toward more strategic monetization reflects our focus on maintaining balance sheet strength in a current market environment. Given the heightened volatility in Bitcoin prices since lately 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 then 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 financial stability is becoming increasingly in common across the sector. At the same time, the company is entering a critical phase in validating the domestic digital computing power, building as an important long-term growth strategy. We are also creating greater financial and operational flexibility to support continued development and scaling of our AI-related initiatives. Thank you.

Thank you. Thank you very much.

Your next question comes from Min Zhang with China Securities. Please go ahead.

Morning. This is Johnny from CITIC. Thanks for this opportunity. I have two questions. The first one is that we noticed that the company's malaried duration remained relatively high at the end of the reporting period, And the Bitcoin crisis has been volatile recently. And if the price reminds Rick, how will the companies fund the development of its AI bill list? You mentioned that $1.10.5 million capital injection from the control room shareholders and U.S. dollar $1.65 million equal to financing arrangements. How will this fund be allocated between the Mylan Billings and the AI initiatives in 2026? And the second question is that regarding the development of AI compute, let's work, what is expected to tie nine over the next year? And when could the billions begin contributing to a million-four revenue? That's my question.

Thank you. We have taken proactive steps to strengthen our balance sheet, as I just mentioned. We recently sold 4,451 Bitcoins from inventory and used proceeds to partially repay outstanding loans. This reduced our overall financial leverage and increased flexibility as we advanced our AI initiatives. At the same time, we completed the closing of our 10.1 million US dollar capital injection and entered into agreement with Amada Network Limited and Fortune Peak Limited for an additional 65 million US dollar equity investment. Once this new run of financing is completed, the company's leverage ratio will decline further, resulting in a stronger balance sheet that better supports the development of our AI business. For the AI segment, we intend to follow a disciplinary phase investment strategy. Phase one is product and business model validation. During this stage, we will rely primarily on internal capital. 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 selective 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 three 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. Thank you.

Regarding the AI timeline, 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 you. Given where we are in the pilot phase, it would be specific revenue forecast and 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 This will allow us to validate the technical architecture and gather operational data. The border 1.2 gigawatt energy network that we can access, gradually validating the Georgia pilot, Thank you.

Your next question comes from Marco Zhang with Geelongie Research. Please go ahead.

Hi, this is Marco from Konohui. Thanks for taking my question. Congrats on your successful transformation last year. I have two questions here. First, you increased your hash rate from 32X cash per second to 50 in 2025. Do you have specific cash rate expansion targets for 2026?

For 2026, our focus is efficiency rather than skill, cash flow, and strong risk resilience across market cycles. In 2025, we produced over 6,600 BTC existing operational for 2026 we will implement in total hashrate. However, it will increase lower cost.

My second question is, for our modeling purpose, looking ahead from your perspective how should investors evaluate Kangol'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. Will AI represent whether we are deploying power into Bitcoin money or AI compute? The underlying energy factor.

The next question comes from Kevin Deedy with HC Wainwright. Please go ahead.

Hi, Paul. Hi, Michael. Thank you so much for having me on the call. 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 Tan, Chief Investment Officer here. I'll step in and take this question, if that's okay.

Perfect, Simon. Thank you.

Hi. 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 from breaking ground to overall coming on stream, it should take somewhere between four to six months, and this is a relatively conservative estimate. And secondly, to answer a 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 50x a hash, 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?

I think when we talk about 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, Paul and Michael have alluded to earlier, we're looking at a variety of whether it be and in terms of the capital, I think are in terms of new capital.

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.

I think, yes, significant. I mean, the AR sectors, I mean, the AR initial trading sectors. So it's, I mean, internal growth. I mean, the genetical growth. I think, yeah. And also, it's also related to the demand side. You know that there is due to the Joe political reasons and actually the performance.

Thank you, Michael, for taking my questions. I appreciate it. 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 in addressing HPC and AI. So congratulations on all the progress, and good luck in the future.

Thank you, Kevin.

Your next question comes from William Grigosky with Green Ridge Global. Please go ahead.

Hi, thanks. 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. it. Thank you for your question. I'll try to take this one. So with regard to the LN site, we're currently starting the retrophying 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 hash rate or megawatt into AI at this stage. So that one should be used as a showcase. So we will say one to two megawatts to to 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 course in last year in terms of AI transition so we are thinking of like a ballpark of around like 20 million for one megawatt including GPU so just in case so it's it's still in the in the process of feasibility study so we will show more details including numbers when we have the LN site ready probably later this year I've just mentioned by Simon and so for the retrofitting work it might take around like 46 months in a kind of like conservative approach. I hope that answers your question.

Yes, thank you.

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

Thank you very much. Thank you, everyone, for joining our earnings call today.

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