Cango Inc. Q1 FY2025 earnings call

• Bitcoin Market Context: Bitcoin showed resilience as a safe haven asset, and the Trump administration's supportive policies provided a favorable regulatory environment. - Cango's Bitcoin Mining: Entered the Bitcoin mining industry in November 2024. In Q1 2025, mined 1,541 Bitcoins, held 2,944.8 Bitcoins as of end-April, had 32 exahashes per second computing power (4% of global average hash rate in Q1), with nearly 90% of miners being water-cooled S19 XP models. Delivering 18 exahashes per second by July 31 to reach 50 Eh/s total. - Financials: Total revenue USD 145M, gross profit USD 13.61M, operating loss USD 21.42M. Strong cash position with USD 347M in cash, equivalents, and short-term investments. Reduced loan balance and improved loan quality; total outstanding loan balance RMB 2.6 billion with M1+ and M3+ ratios 2.86% and 1.59% respectively. - Automotive Business: AutoCango platform had over 2.37 million visits, 290,000 registered users, over 480,000 used car listings.

Cango Inc. has two main segments. The Bitcoin mining segment was the primary contributor. In the first quarter of 2025, total revenue was USD 145 million, with USD 144 million contributed by Bitcoin mining operations, accounting for approximately 99.31% of total revenue. Gross profit for the quarter was USD 13.61 million. The automotive trading-related income was USD 1 million, making up about 0.69% of total revenue. The company's Bitcoin mining operations also had an operating loss of $21.42 million primarily due to Bitcoin price decline towards the end of March, which affected the fair value of Bitcoin holdings.

• Plan to grow deployed hash rate to approximately 50 Eh before the end of July 2025. - Adopt Mine and Hold strategy, prioritizing self-mining and long-term holding. - Focus on integrating and optimizing existing computing power resources to maximize efficiency and pursue M&A opportunities to scale up operations.

• Concentration risk due to Bitcoin mining accounting for 99% of quarterly revenue. - Volatility in Bitcoin prices affecting fair value of holdings and operating results. - Challenges from increasing computing power and mining difficulty globally.

Q: What is your view on the trends in the cryptocurrency market so far? And how is the company going to respond to increasing challenges brought about by increasing computing power around the world as well as increasing mining difficulty?

A: Yongyi Zhang stated the cryptocurrency market presents opportunities and challenges, with the company monitoring developments and adjusting strategies. In response to computing power and mining difficulty challenges, the company will optimize existing mining operations, expedite delivery of 18 exahashes per second computing power, and monitor acquisition opportunities.

Q: I noticed that the metrics and data for the company in April saw quite a big decrease. Could you give us more color on the reasons behind these declines? And do you see more pressure from increasing power costs or electricity cost on the company? And what are the plans that the company have to address this challenge? And could you give us more details on your future strategic direction?

A: Jiayuan Lin said April's coin mining decrease was due to global network hash rate increase and mining difficulty rise. The company faces high electricity costs under hosted operation model, with plans to renegotiate hosting agreements and explore low-cost clean energy projects. Future strategy includes optimizing mining operations, enhancing efficiency, exploring new market opportunities, and strengthening used car export business.

Q: The Bitcoin mining business actually accounted for 99% of your quarterly revenue. Do you see any concentration risk in terms of your revenue stream here? And what is your plan to balance or diversify your business lines? And do you consider using derivatives to hedge against volatilities in your fair value? And do you have any plan in the future for equity financing or other financing plans?

A: Jiayuan Lin said while focusing on mining now, they will explore additional opportunities to diversify. Regarding derivatives, they are introducing risk management tools, starting with locking electricity prices. On financing, they have sufficient liquidity and plan to prioritize debt financing over equity financing.

Q: Can you provide more clarity on the 18 exahash you still have to deploy? And has the deal with Ursalpha been finalized? And when can we expect the 18 exahash to be online at the end of July? Or is there anything that would hold this up? And do you have any plans to use your Bitcoin in terms of lending or have any plans to earn yield on the Bitcoin?

A: Yongyi Zhang said they expect to close the 18 EH deal by end of July, finalizing small details after an extraordinary shareholders meeting. On Bitcoin lending, their strategy is Mine and Hold currently, but they will consider earning yield on Bitcoin when holdings reach a certain size.