Cango (NYSE:CANG) held its first-quarter earnings conference call on Sunday. Below is the complete transcript from the call.

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Summary

Cango Inc reported Q1 2026 total revenue of $102 million, primarily from Bitcoin mining, with a net loss of $261.1 million due to non-cash impairment charges and fair value loss on Bitcoin collateral.

The company mined 1,266 Bitcoin with a 9% decrease in average cash cost per Bitcoin from Q4 2025, focusing on cost optimization and operational efficiency.

Cango is transitioning from older S19 to newer S21 mining machines to enhance cost structure and operational resilience.

The company reduced its long-term debt significantly to $30.6 million and continues to manage its capital structure actively.

Strategic focus is on cost efficiency in mining and advancing AI infrastructure initiatives under ECOHASH, with plans for modular compute solutions.

In Q1, Cango's chairman invested $65 million, and a strategic collaboration with DL Group was established, including a $10 million convertible note.

Cango's BTC treasury strategy shifted from holding to a more dynamic approach, selling Bitcoin to reduce loan balances.

Future priorities include optimizing mining operations and developing AI infrastructure, with cautious CAPEX management and potential strategic partnerships.

Full Transcript

OPERATOR

Hello and welcome to the Keengo 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.

Paul Yu (Chief Executive Officer)

Good morning everyone and thank you for joining Keengo Inc'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 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 1025.7 Bitcoin and we reduced our long term debt to to $30.6 million. As of March 31, 2026, Keengo Inc's total operational hashrate was 37.01 exahash per second comprising 27.98 exahashes per second of self mining capacity and 9.02 exahashes per second of hosted hashrate. 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 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 ICE 19 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 I 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 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 hashrate 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 hashrate 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 Keengo Inc'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 enterprise efficiently. Based Approach Our 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 computer 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 $30.6 million. Concurrently, our remaining Bitcoin reserve stands at 1057.46 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 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 the power infrastructure capacity within this market environment. Our operational priorities are 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.

Simon (Chief Financial Officer)

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 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 1,266.1 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 begin 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 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 for mining machines in 1Q49 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 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 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 1.54.1 billion 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 equivalents of 7.2 million down from 41.2 million at year end, mainly due to debt repayment and operational activity. 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 carry 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

Thank you. We will now begin the question and answer session. To ask a question, you may press Start then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, Please press star then 2. Your first question comes from Ping Yuwu from CITIC Securities. Please go ahead.

Jiyu

Good morning and thank you management team for taking my question. I'm Jiyu from Civic securities and my first question is the company's cash cost per coin declined in the first quarter compared with the fourth quarter of last year and management also mentioned further up optimization in April. What were the main drivers behind the cost reduction? Is there still room for further cost improvement 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 11.15 exahash per second of December. Will the hash rate continue to decline over the next few months? Could you explain in more detail how the leasing model works and its specific impact on the financial statements? Thank you.

Paul Yu (Chief Executive Officer)

Regarding your first question, the cost reduction was mainly driven by two factors. First, we proactively phased out part of our high higher energy consumption S19 series mining machines and gradually replaced them with more energy efficient S21 series models. Second, we continue to migrate hashrate 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 upgrade our hosting arrangements to lower power costs and I'll take your second question with regards to the hash rate, we're not setting a hard hash rate target and instead we're really focusing on margin cash flow KPIs for the mining business. For now we do and we are continuing to retire older S19 series machines in Sweden certain higher power cost sites. So during this period our total hash rate may experience modest fluctuation 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, reiterate that it is a temporary arrangement, especially with some of the higher cost sites where the arrangement instead of paying for power costs on a consumption basis, the bitcoins mined 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 fee 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 leased hash rate is mainly deployed in certain parts of America. But this may change once the respective mining hosting contract expires so we'll enter into new contracts or alternatively we may move the machine to alternative sites.

Jiyu

Thank you, I have no further questions.

OPERATOR

Thank you once again. To ask a question, please press Star one. Your next question comes from Marco Zhang from Geelong Hui Research. Please go ahead.

Marco Zhang

Hi, this is Marco from Global Research. Thanks for taking my question. I have three questions here. My first question is regarding your Bitcoin business. You sold 2000 Bitcoin in Q1 and currently holds approximately 1057 Bitcoins. Will the company continue to sell Bitcoin going forward? Has the company's long term holding strategy changed?

Paul Yu (Chief Executive Officer)

Our BTC treasury strategy has shifted from mine and hold to a more dynamic balanced approach. Given the current level of market volatility, we place greater emphasis on on liquidity and balance sheet strength. The BTC sale in Q1 was mainly used to reduce big EC 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 adjust 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. Thank you.

Marco Zhang

Got it. So we understand that the company's AI business will be carried out through Echo Hash. 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? Yeah,

Paul Yu (Chief Executive Officer)

yeah, sure. So the LN site is currently our only fully self owned infrastructure asset 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've placed orders for standardized compute containers which are arriving in phases and will be ready for installation and testing very soon. We plan to activate a portion of the power capacity at at this site for this purpose. at the same time this site is expected to serve as a real world production environmental work. 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 to meet different environmental conditions and this allows us to assess the conversion, deployment and operating performance of compute nodes in an actual site environment. So this project in itself is a proof of concept stepping stone towards skills 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 from our hosting partners and from the perspective of the overall AI project build out. We have not set any specific revenue target 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'll begin to work with pilot 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.

Marco Zhang

Got it. And how about the capex? So how much capex will be required for the Echo Hash pilot and future expansion and how do you plan to fund it?

Paul Yu (Chief Executive Officer)

We're actually doing this in phases. So the thing about our business model on this side is that it's modularized. So in terms of the containers, we have the flexibility of doing it per container basis. So in terms of the capex, we're being very prudent at the moment. And in the first model validation phase, we'll mainly use our own capital right now. So we've deployed our own capital for the, 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 used for the purchase 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 financings, 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.

Marco Zhang

Got it. Thanks. Yeah, I have no more questions here.

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.