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Operator: Good morning and evening, everyone. Welcome to Cango Inc.’s First Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is also being broadcast live on the company’s IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management’s prepared remarks, we will conduct the Q&A session. Before we begin, I refer you to the safe harbor statement in the company’s earnings release, which also applies to the conference call today as management will make forward-looking statements. With that said, I am now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

Jiayuan Lin: Hi, everyone, and welcome to Cango’s first quarter 2025 earnings call. In the first quarter of 2025, Bitcoin further solidified its dominance despite significant volatility in the cryptocurrency market. Amid global economic uncertainty, Bitcoin demonstrated strong resilience and stability as a safe haven asset. On the policy front, the Trump administration’s supportive stance towards the crypto market has undoubtedly fostered a more favorable regulatory environment. The establishment of a strategic Bitcoin reserve and pro-digital currency appointments are expected to provide clearer direction and more stable expectations for the industry’s future development. Cango entered the Bitcoin mining industry in November 2024.

Over the past few months of exploration and operation, Cango has not only achieved business growth but also unlocked new development opportunities. In the first quarter of 2025, Cango reported total revenue of USD 145 million with USD 144 million contributed by our Bitcoin mining operations. Gross profit for the quarter reached USD 13.61 million. Operating loss stood at $21.42 million, primarily due to decline in Bitcoin prices towards the end of March, which led to a decrease in the fair value of the company’s Bitcoin holdings. As of the end of the quarter, Cango maintained a strong cash position with total cash, cash equivalents and short-term investments amounting to USD 347 million, providing solid support for future business expansion.

While actively expanding our Bitcoin business, we continue to reduce our total outstanding loan balance and significantly improve loan quality. As of March 31, 2025, our total outstanding loan balance was approximately RMB 2.6 billion with M1+ and M3+ ratios of 2.86% and 1.59%, respectively. In addition, our credit risk exposure not covered by full bad debt allowance or full risk assurance liabilities further declined to RMB 760 million, down 30% from RMB 1.08 billion as of December 31, 2024. Till now, we hold a total computing power of 32 exahashes per second, accounting for approximately 4% of the global average hash rate in Q1. Our mining machines are deployed across North America, South America, the Middle East and Africa, a globally diversified setup that enables us to optimize resource allocation.

Nearly 90% of our currently operational miners are water cooled S19 XP models. In addition, the delivery of an additional 18 exahashes per second of computing power is progressing as planned and is expected to be completed by July 31. Once finalized, our total hash rate capacity will reach 50. Since entering the Bitcoin mining industry, we have remained focused on improving our operational metrics. In the first quarter, we mined a total of 1,541 Bitcoin. As of the end of April, our total Bitcoin holdings reached 2,944.8 coins, ranking 14th globally among publicly listed companies and fifth among listed mining firms. Throughout Q1, our average monthly effective hash rate consistently exceeded 30 exahashes per second with a coin yield of 16.6 bitcoins per Eh/S, placing us among the top 3 publicly listed mining companies and our efficiency rate is as high as 94%.

And in addition, we, in terms of energy efficiency, our average power efficiency for the quarter was 21.6 joules per tera hash with efficiency of 21.5 for March. As we move into 2025, we remain firmly committed to deepening our focus on the Bitcoin mining business. We have a strong confidence in the stability of Bitcoin’s supply and its long-term value appreciation potential. As such, we will adopt a Mine and Hold strategy, prioritizing both self-mining and long-term holding. Looking ahead, we will focus on gradually integrating and optimizing our existing computing power resources to maximize efficiency. At the same time, we will actively pursue M&A opportunities, seeking high-quality targets to further scale up our operations. We believe that greater scale will unlock broader growth opportunities, attract top talent and enhance both our market competitiveness and industry recognition.

On our traditional automotive business, we remain focused on lean asset-light operations for our used car export platform, AutoCango. Since its launch, the platform has attracted over 2.37 million visits and more than 290,000 registered users. Today, AutoCango has more than 480,000 used car listings covering over 68,000 unique models. AutoCango aims to connect China’s used car market with overseas buyers, making it easier for international customers to access high-quality vehicle inventory from China. Looking ahead, Cango will continue to strengthen its global presence and enhance AutoCango’s platform capabilities to deliver an even better experience for our users. Now I’d like to hand over the call to our CFO, Mr. Yongyi Zhang, to share our financial highlights for the first quarter of 2025.

Yongyi Zhang: Thanks, Jiayuan. Hello, everyone, and welcome to our first quarter 2025 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Total revenue in the first quarter of 2025 were RMB 1.1 billion compared with RMB 64.4 million in the same period 2024. The significant year-over-year increase was primarily driven by the Bitcoin mining business launched in November 2024. Revenue from Bitcoin mining business in the first quarter of 2025 was RMB 1 billion with a total of 1,541 Bitcoin mined in the first quarter of 2025. The average cost to mine Bitcoin, excluding depreciation of mining machine, was USD 70,602.1 per coin in the quarter.

Revenue from automotive trading-related income in the first quarter of 2025 was RMB 7.6 million compared with RMB 64.4 million in the same period 2024. Now let’s move on to our cost and expenses during the quarter. Cost of revenue in the first quarter of 2025 increased to RMB 955.1 million from RMB 29.1 million in the same period 2024. The year-over-year increase was primarily driven by the cost of Bitcoin mining business. Sales and marketing expenses in the first quarter decreased to RMB 0.4 million from RMB 3.5 million in the same period of 2024. General and administrative expenses in the first quarter increased to RMB 92.5 million from RMB 37.9 million in the same period 2024. Research and development expenses in the first quarter decreased to RMB 0.3 million from RMB 1.1 million in the same period 2024.

Net gain on contingent risk assurance liability in the first quarter of 2025 was RMB 5.3 million compared with RMB 15 million in the same period 2024. Net recovery on provision for credit losses in the first quarter of 2025 was RMB 28.7 million compared with RMB 66.3 million in the same period 2024. We recorded RMB 155.5 million in loss from operations in the first quarter of 2025 compared with income from operations of RMB 74.2 million in the same period 2024. Net loss in the first quarter of 2025 was RMB 207.3 million. Adjusted EBITDA in the first quarter of 2025 was RMB 27.6 million. Moving on to our balance sheet. As of March 31, 2025, the company had cash and cash equivalents of RMB 2.5 billion compared with RMB 1.3 billion as of December 31, 2024.

As of March 31, 2025, the company had short-term investment of RMB 5.2 million compared with RMB 1.2 billion as of December 31, 2024. Looking ahead to the rest of 2025, we are on track to grow our deployed hash rate to approximately 50 Eh before the end of July. This concludes our prepared remarks. Operator, we are now ready to take questions.

Operator: [Operator Instructions] The first question comes from Emerson Zhao with Goldman Sachs.

Emerson Zhao: I’m Emerson from Goldman Sachs. I have two questions. The first question is what is your view on the trends in the cryptocurrency market so far? And the second question is, 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.

Yongyi Zhang: Thank you, Emerson, for your questions. So the current cryptocurrency market presents both opportunities and challenges. We believe that as technology advances and the market continues to mature, cryptocurrencies will play an increasingly important role. We will closely monitor market developments and flexibly adjust our strategies to better seize emerging opportunities. So on your second question, on the challenges of increasing computing power around the world and increasing mining difficulty. Well, our responses include, firstly, we will continue to optimize the efficiency of our existing mining operations to ensure high productivity. And at the same time, we are working to expedite the delivery of our second batch of computing power totaling 18 exahashes per second and continue to monitor further acquisition opportunities to further enhance our overall production capacity.

Operator: And the next question comes from [Joi Choi] with Sinolink Securities.

Unidentified Analyst: Thank you, management for taking my questions. I’m from Sinolink Securities. So I have altogether three questions. The first question is I noticed that the metrics and data for the company in April saw quite a big decrease. So could you give us more color on the reasons behind these declines? And the second question is that, 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 my third question is a more general question regarding the future strategy of the company because we have seen quite a lot of changes in the company over the past year. And so could you give us more details on your future strategic direction?

Jiayuan Lin: Thank you for your questions. On your first question, in April, we mined 470 coins, a 11.3% decrease compared to March, and this was mainly due to the second largest monthly increase in global network hash rate on record as well as an 8% rise in mining difficulty compared to March. Meanwhile, we maintained a high level of mining efficiency with our deployed hash rate remaining steady at 32 exahashes per second. In the first quarter, our average operational hash rate was about 30 and the efficiency was 93.8%, relatively stable compared to the previous quarter. And for your second question, yes, the company is currently experiencing relatively high electricity costs, primarily due to the premium associated with power procurement under the hosted operation model.

However, it is important to note that this model allows us to avoid a heavy capital investment and large staffing costs required for building and operating our own mining facilities. As a result, we have significantly reduced the capital expenditures and operating costs on the infrastructure and operations front. To continuously refine our cost structure, the company has launched a global energy strategy. On one hand, we are conducting detailed cost analysis of existing hosting agreements to explore potential room for renegotiation. On the other hand, we have formed a dedicated team to carry out on-site researchers in energy-rich regions such as the Middle East and Australia with a focus on evaluating the feasibility of partnerships in low-cost clean energy projects, including solar and natural gas.

Through a diversified energy supply system, we aim to reduce costs and enhance operational efficiency. And on your third question, our future strategic direction, we will remain focused on optimizing our mining operations, enhancing efficiency and exploring new market opportunities. At the same time, we will strengthen our partnerships to jointly drive industry advancements. And we will also continue to proactively pursue sustainable and more cost-efficient energy sources.

Operator: And the next question comes from [Jack Sun with Elonix Research].

Unidentified Analyst: I have three questions. The first question is that, well, the Bitcoin mining business actually accounted for 99% of your quarterly revenue. So 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 my second question is regarding the operating loss. So do you consider using derivatives to hedge against volatilities in your fair value? And my third question is regarding cash flow. Investors are interested in cash flow positions. So my question is, do you have any plan in the future for equity financing or other financing plans?

Jiayuan Lin: On your first question, while the majority of our revenue currently comes from Bitcoin mining, we believe that focusing on mining at this stage is aligned with our overall strategy. Meanwhile, we remain confident in the potential of our used car export business and will concentrate on operating AutoCango, our asset-light platform for used car exports. Looking ahead, we plan to gradually explore additional business opportunities based on market conditions to diversify our operations. At the same time, we will continue to refine our mining business to ensure its stable and sustainable growth. On your second question on operating loss. Well, the operating loss in this quarter was primarily due to the decline in Bitcoin prices in March, and we believe that fluctuations in Bitcoin’s price are primarily short term in nature, and we remain confident in its long-term value.

In addition, we are introducing risk management tools in phases. For the near term, we are signing medium- to longer-term contracts with power suppliers to lock in electricity prices and reduce cost pressures. And at the same time, we are actively seeking low-cost renewable energy sources. Looking ahead, we are also exploring the feasibility of more relevant risk management tools and will adopt them prudently to mitigate new potential risks. Regarding cash flow, we currently have sufficient liquidity to support mining operations at 32 exahashes per second, including a USD 400 million annual credit facility provided by our partners. Given our relatively low debt-to-equity ratio, we still have ample room to take on additional leverage. As such, we plan to prioritize debt financing over equity financing.

Operator: And the next question comes from Michael Donovan with H.C. Wainwright.

Michael Donovan: It’s Michael Donovan from Kevin Dede’s team. Let’s start with the 18 exahash you still have to deploy. Can you provide more clarity on that? And has the deal with Ursalpha been finalized? And you mentioned July. So 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 then my second question is around your Bitcoin HODL strategy that you mentioned on the call. Do you have any plans to use your Bitcoin in terms of lending or have any plans to earn yield on the Bitcoin?

Jiayuan Lin: Thank you for your questions. I will hand over your questions to our CFO, Yongyi Zhang.

Yongyi Zhang: Thank you for your question. So on your first question on the 18 EH deal, actually, we expect to complete – to close the deal by the end of July because we have already reached agreements on the main plans and except for the – some small details, and we still – we are still finalizing the small details. To be more specific about the terms and conditions revisions. Actually, in April, we received some – also a request on our domestic or PRC deal. So that’s why we need to make some revisions to the 18 EH due terms and conditions. So in fact, our plan is that for this February – sorry, I mean, this Friday, we are going to have AGM, Extraordinary Shareholders Meeting, I mean, to have the Shareholders Meeting to deliberate the PRC deal.

And so we expect that after the Extraordinary Shareholders Meeting, then we will be able to complete the PRC deal and then thereby completing our planned revision to the 18 EH deal. On your second question, yes, our strategy is Mine and Hold. So right now, our focus is still on increasing our Bitcoin holdings. However, when our holdings reach a certain size, then we will definitely consider taking on some transactions to improve to earn more yields on Bitcoin.

Operator: And that concludes our question-and-answer session. Thank you once again for joining Cango’s first quarter 2025 earnings conference call today. Have a great day.