Cango Inc. 2026 Q2 Earnings Call

Hello, everyone, and thank you for joining Cango's second quarter 2026 earnings call. Let me start with a quick overview of the quarter. On the mining side, we deliberately scaled back operations as planned. That's reflected our second quarter results. On the AI side, since the end of the second quarter, we have made real progress on infrastructure and signed our first customer contract, moving that business from build-out into commercialization. I will be clear that these AI developments occurred after June 30 and are not reflected in this quarter's reported results. In terms of the numbers, total revenue for the quarter was approximately $50.8 million, with about $47.4 million coming from Bitcoin mining. Net loss was approximately $81.6 million, mainly driven by non-cash impairment and disposal losses on our mining machines, as direct results of the deliberate restructuring of our asset base.

As of June 30, we held 1,056 Bitcoins. In addition, our cash equivalents, and cryptocurrencies totaled approximately $23 million, while long-term debt was approximately $31.2 million. Now let me walk through the mining business and AI infrastructure business in more detail. This quarter, we continued to actively rightsize our mining operations, disposing of machines with lower marginal efficiency, and introduced a leasing model to shift our focus from scale to economics. As of June 30, our self-mining hash rate was 19.84 exahashes per second, and our leased hash rate was 7.74 exahashes per second, for a combined operating hash rate of 27.58 exahashes per second. Under the leasing arrangement, the lessee bears the direct operating costs associated with the hash rate, which also reduces our exposure to variable costs. We mined 656 Bitcoins this quarter.

Production was down sequentially, largely reflecting the deliberate reduction in self-mining capacity and shift of some capacity into leasing. We will continue to evaluate the mix between self-mining and leasing based on economics rather than scale. We will keep phasing out less efficient legacy capacity. This quarter, we also began implementing a hedging arrangement to manage our exposure to Bitcoin price volatility, thus enhancing the predictability of our operating cash flows. Our average cash mining cost in Q2 was $73,313 per coin, down about 35% from Q1. Now let's turn into AI infrastructure. A quick on timing, everything I'm about to cover took place after June 30, since the start of the third quarter, so it isn't reflected in the quarter's financial results, but we want to share it with you.

On infrastructure, construction at our Georgia LN site was completed in early July, with the site infrastructure able to support up to 3 megawatts, leaving room for future expansion. Container units have arrived on site and being installed, and GPUs are arriving on site in batches. On the customer side, since the start of the third quarter, we have signed a customer contract and discussion with prospective customers are ongoing. That takes our AI business from technical validation into commercial monetization. This is a development since quarter end. Contracted revenue is still small, and we expect to begin recognizing related revenue in the third quarter. On the business model, we expected to pursue both bare metal GPU hosting using our existing site and power infrastructure to offer a standardized deployment environment and colocation intended to improve our overall infrastructure utilization.

We haven't signed a formal colocation contract yet, and terms are still being worked out. We also have test nodes in Texas and on the West Coast, mainly to support customers who need deployment closer to their location in the future. We are evaluating several potential new sites as well, and we haven't ruled out building our own. We will continue to run mining and AI as parallel businesses. Looking into the second half, our priority are managing the mix of self-mining and lease hash rate prudently, executing our AI deployment, and continuing to sign new customers, and building on the operating experience from Georgia as we evaluate further site expansion. Capital discipline and operating efficiency remain our priorities. That concludes my remarks. I will now turn it over to our CFO, Simon, for a detailed review of the financials.

Thank you. Thanks, Paul. Hi, good morning.

Hi, everyone, and welcome to our second quarter 2026 earnings call. Before I start to review our financials, please note that unless otherwise stated, all amounts discussed are in USD. Total revenues were at $50.8 million. Revenue during the quarter from the Bitcoin mining business was $47.4 million, with a total of 656 Bitcoins mined during the period. The average cost to mine Bitcoin, excluding depreciation of mining machines, was $73,313 per Bitcoin, and all-in cost of $98,405 per Bitcoin. Compared to the first quarter of 2026, total revenue decreased by approximately 50%. This decline primarily reflects our proactive reduction in operational hash rate as we continued to selectively phase out older, less efficient S19 series mining machines and temporarily transition some capacity to a hosted leasing model.

While this adjustment has reduced our top-line mining revenue, it has also significantly lowered our operating cost and improved our cash flow profile, and some of these efforts continued throughout the second quarter. Now let's move on to our costs and expenses. Cost of revenue, exclusive of depreciation, was $50.7 million, down from $99.6 million in the first quarter, driven by lower electricity and hosting expenses following the hash rate reduction. Depreciation was $16.9 million, down from $29.4 million in the first quarter. General and administrative expenses, including related party fees, totaled $8.4 million. Impairment loss from mining machines in the second quarter was $42.9 million, and loss on disposal of mining machines in the second quarter was $8.5 million. Loss from changes in the fair value of crypto assets was $4.1 million compared with a loss of $151.8 million in the first quarter.

The change was primarily driven by two factors. The decrease in Bitcoin prices as of June 30th, and this was partially offset by the implementation of our hedging program. As Paul mentioned earlier, we began implementing a Bitcoin hedging program during the second quarter. The purpose of this program is to manage our exposure to Bitcoin price volatility and provide greater predictability to our operating cash flow. We intend to selectively continue to use hedging as a risk management tool, and this is not for speculative purposes. The related short-term positions are reflected on our balance sheet and will be reflected as we continue to execute this program in a disciplined manner. Operating loss for the quarter was $80.6 million, with a net loss from continuing operations of $81.6 million in the second quarter.

The net loss was primarily driven by the non-cash impairment and disposal losses I just mentioned, which together total approximately $51 million. On a non-GAAP basis, adjusted EBITDA was a loss of $10.7 million, including a $4.1 million loss from the changes in the fair value of the receivables for the Bitcoin collateral. Lastly, moving on to our balance sheet. As of June 30th, we had cash and cash equivalents of $10.1 million, compared with $7.2 million as of March 31st. At the same time, our balance sheet also has Bitcoins in the number of 1,056 Bitcoins held in treasury. In terms of operational assets, we carried our mining machines at a net value of $58.7 after depreciation. On the liability side, we had $31.2 million in long-term debt, compared with $30.6 million as of March 31st. This concludes our prepared remarks.

Operator, we are now ready to take questions.