Cango (CANG) Q2 2026 Earnings Call Transcript

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DATE

Monday, Aug. 31, 2026 at 9:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Paul Yu
• Chief Financial Officer - Simon Tang

TAKEAWAYS

• Total Revenue -- $50.8 million, including $47.4 million from Bitcoin mining and $3.4 million from other revenue streams.
• Quarterly Revenue Change -- approximately 50% decrease compared to the first quarter of 2026, reflecting a proactive reduction in operational hashrate and the transition to a leasing model.
• Net Loss -- $81.6 million for the quarter, primarily driven by $51 million in noncash impairment and disposal losses on mining machines.
• Bitcoin Production -- 656 Bitcoins mined during the quarter, representing a sequential decline due to capacity restructuring and fleet optimization.
• Total Operating Hashrate -- 27.58 exahashes per second as of June 30, 2026, consisting of 19.84 exahashes per second of self-mining and 7.74 exahashes per second of leased capacity.
• Average Cash Mining Cost -- $73,313 per Bitcoin, representing a 5% reduction from the first quarter of 2026 driven by improved fleet mix.
• All-in Mining Cost -- $98,405 per Bitcoin, including depreciation and other overhead expenses.
• Impairment Loss -- $42.9 million, resulting from the strategic decommissioning of older S19 series mining machines with lower marginal efficiency.
• Disposal Loss -- $8.5 million, related to the removal of less efficient mining hardware from the active fleet.
• Crypto Asset Fair Value Loss -- $4.1 million, compared to a $151.8 million loss in the prior quarter, reflecting Bitcoin price stabilization and new risk management activity.
• Cost of Revenue -- $50.7 million, excluding depreciation, which decreased from $99.6 million in the first quarter of 2026 due to lower electricity and hosting expenses.
• Cash and Equivalents -- $10.1 million as of June 30, 2026, compared with $7.2 million as of March 31, 2026.
• Digital Asset Reserves -- 1,056 Bitcoins held in treasury as of June 30, 2026.
• Long-term Debt -- $31.2 million as of June 30, 2026, representing related-party obligations.
• Short-term Debt -- approximately $8 million as of June 30, 2026, consisting of a Bitcoin-denominated loan used to fund the company's hedging program.
• Non-GAAP Adjusted EBITDA -- a loss of $10.7 million for the second quarter, which included a $4.1 million loss from changes in the fair value of crypto assets.
• Mining Machine Net Value -- $58.7 million after depreciation and impairment as of June 30, 2026.
• AI Infrastructure Capacity -- three megawatts at the Georgia site, completed in early July 2026 to support GPU hosting and colocation activities.
• Depreciation Expense -- $16.9 million, down from $29.4 million in the first quarter of 2026 following hashrate reductions.
• G&A Expenses -- $8.4 million for the quarter, including $647,653 in related-party fees.

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RISKS

• Tang stated, "the third quarter includes the summer months of July and August, whereby we may experience some regional power curtailment," noting potential operational impacts during high-temperature periods.

SUMMARY

Cango Inc. (NYSE:CANG) reported a strategic shift toward unit economics in its mining operations while initiating the commercialization of its AI infrastructure business. Management reported that the company proactively reduced its operating hashrate by phasing out older hardware and transitioning a portion of capacity to a leasing model to lower variable cost exposure. The company introduced a Bitcoin hedging program to manage price volatility and began recognizing results from these risk management tools. Since the end of the second quarter, the company completed its first AI infrastructure site and signed its first customer contract, marking a transition from build-out to monetization.

• CEO Yu stated, "The Georgia site completed conversion in early July and the infrastructure is now capable of supporting up to 3 megawatts, with scope for future expansion."
• Management reported that contracted AI revenue is expected to begin in the third quarter of 2026 following the signing of an initial customer contract after the June 30 cutoff.
• CFO Tang noted that the fleet mix of newer generation 21 series machines now accounts for more than one-third of operational self-mining capacity.
• The company implemented a hedging structure using short-term Bitcoin-denominated loans to reduce cash flow sensitivity to market price ranges.
• Tang stated, "a lot of these contracts have a power price reduction mechanism, whereby the power prices would decrease in an environment where Bitcoin prices are decreasing as well."
• The company is evaluating additional potential AI sites in Texas and the West Coast to support customers who require proximity-based deployment.

INDUSTRY GLOSSARY

• ASIC: Application-Specific Integrated Circuit, specialized hardware used to process the complex calculations required for Bitcoin mining.
• Bare-metal GPU hosting: A service that provides physical graphics processing unit resources directly to a user without a virtualization layer.
• Colocation: A data center service where a provider offers physical space, power, and cooling for a customer's own hardware.
• Exahashes per second (EH/s): A measure of computational power representing one quintillion hashes per second used in mining.
• Hashrate: The total computational power used to mine and process transactions on a blockchain network.
• S19 and S21: Specific series of high-performance Bitcoin mining machines produced by hardware manufacturer Bitmain.

Full Conference Call Transcript

Operator: Good day, and welcome to the Cango Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I'd now like to turn the conference over to Paul Yu, CEO. Please go ahead.

Peng Yu: Thank you. 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 noncash impairment and disposal losses on our mining machines, a direct result of the deliberate restructuring of our asset base. As of June 30, we held 1,056 Bitcoins. In addition, our cash, 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 hashrate was 19.84 exahashes per second, and our lease hashrate was 7.74 exahashes per second for a combined operating hashrate of 27.58 exahashes per second. Under the leasing arrangement, the lessee bears the direct operating costs associated with the hashrate, 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 5% 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 are being installed and GPUs are arriving on site in batches. On the customer side, since the start of the third quarter, we've 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 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 hashrate 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.

Ming Yeung Tang: 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 U.S. dollars. Total revenues were $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 hashrate as we continued to selectively phase out older, less efficient S19 series mining machines and temporarily transitioned some capacity to a hosted leasing model. While this adjustment has reduced our top line mining revenue, it has also significantly lowered our operating costs and improved our cash flow profile. And some of these efforts continued throughout the second quarter. Now let's move on to our cost 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 hashrate 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 2 factors: the decrease in Bitcoin prices as of June 30, 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 noncash impairment and disposal losses I just mentioned, which together totaled 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 30, we had cash and cash equivalents of $10.1 million compared with $7.2 million as of March 31. 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 carry our mining machines at a net value of $58.7 million after depreciation. On the liability side, we had $31.2 million in long-term debt compared with $30.6 million as of March 31.

And this concludes our prepared remarks. Operator, we are now ready to take questions.

Operator: [Operator Instructions] And today's first question comes from Pingyue Wu with Citic Securities.

Pingyue Wu: I have 3 questions. First, can management provide more color on the Bitcoin hedging program in terms of overall notional size, instrument structure and duration? And additionally, could you clarify whether this is risk mitigating or it involves any directional positioning? And my second question is regarding the AI infrastructure progress you highlighted such as the Georgia site completion and container deployment. We think it is a milestone occurred towards the second quarter? And what is the rationale for including them now? And more importantly, could we incorporate this development as material increase in our third quarter financial models? And my third question is regarding the newly signed customer contracts.

Could you provide some visibility into the anticipated revenue contribution and time line for top line recognition?

Ming Yeung Tang: Thanks, Pingyue. It's Simon here. Why don't I take the first question and then Paul can address your second and third questions with regards to the AI progress. In terms of the hedging program, it's structured as a short-term loan denominated in BTC. So that is reflected in our balance sheet under short-term debt, which as of quarter end was around USD 8 million. And at the same time, there is a roughly equivalent amount recorded under current asset as well. So this short-term loan in BTC is led to us on day 1 and then which we typically size based on the scale of our Bitcoin mining production.

For example, we might want to think about, okay, we'll do 1 month of production or 2 months of production. So that's the way we think about this. And then this loan in BTC is sold at spot price on day 1. So if in the coming months, if Bitcoin prices fall below that, then we'll choose to repay in the BTC that is mined out of our mining operations. So I hope that illustratively addresses your question with regards to the -- how we think about the sizing and the structure.

And again, I would like to emphasize that we purely think of this as a risk management tool and the purpose is really just to reduce the sensitivity of our cash flow to the Bitcoin price ranges. And then with that, I'll pass it to Paul for the second and third question.

Peng Yu: Sure, sure. Thank you. We wanted to give you the most current picture of where the AI business stands. Even though this development fall after June 30 cutoff, we are not reflected in this quarter's revenue and only a small amount of property-related costs have been capitalized in Q2. The amount is immaterial. We expect the related revenue to start showing up in our third quarter numbers, which we will report in the normal course. And that means we expect to begin recognizing AI-related revenue in the third quarter. The initial contribution will be modest, but it provides initial validation of the commercial viability of our AI infrastructure strategy and establishes an operating track record we can build on.

Thank you.

Operator: [Operator Instructions] Our next question today comes from Sid Rajeev with Fundamental Research Corp.

Siddharth Rajeev: Should we expect Q3 mining revenue to stabilize at current levels or anticipate further hashrate reductions?

Ming Yeung Tang: Sid, thank you for your question. In terms of the operational hashrate and the mining machines that we have on our balance sheet, in the third quarter, it would not change significantly -- it will not change significantly. But again, given the third quarter includes the summer months of July and August, whereby we may experience some regional power curtailment.

Siddharth Rajeev: Got it. Maybe you could provide some color on roughly how much of the current hashrate is from S19 versus newer generation machines?

Ming Yeung Tang: This percentage is increasing. In terms of the mix between the 19s and the 21s, I would say -- and this is purely the amount that is operational that is on rack and excluding -- let me think about how to address this. Excluding the part that is leased, the split is roughly a little bit above 1/3 in the 21 series.

Siddharth Rajeev: Got it. Are you able to talk about your cash costs? Can you further cut costs? Because I see you did have cost reductions in the quarter. So how about Q3, how should we look at it?

Ming Yeung Tang: Yes. Sid, and I think that is a great question. And the reason that in the second quarter, the cost continued to optimize. There were 2 reasons. One reason was that we were -- we continue to negotiate with our hosted sites because as you remember, most of our sites are externally hosted instead of our self-owned mining sites. Our own self-owned mining site is just a 50-megawatt site in the state of Georgia in LN. And the rest of our mining machines are hosted externally with third parties. So we continue to negotiate contracts with them.

And a lot of these contracts have a power price reduction mechanism, whereby the power prices would decrease in an environment where Bitcoin prices are decreasing as well. So if we were to look at the cash cost on a month-by-month basis between each month of the second quarter, the cash cost was on a downward trend. So this is, in a way, is a price reduction mechanism to give us a little bit more downside protection.

Siddharth Rajeev: Got it. If I may, one more question. This is slightly more long term. How much of your existing, say, mining infrastructure or power capacity could realistically be converted to AI infrastructure over the next 3 years?

Ming Yeung Tang: We're starting in the U.S. at the moment. We're still more focused on our own 50-megawatt site right now, but we have started to install small test nodes in other sites. But these are sites that are not necessarily our own, but they could be with partner sites.

Operator: And that does conclude our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Ming Yeung Tang: Any other remarks? Thank you very much for dialing for our conference call. Thank you.

Operator: Thank you, sir. That does conclude our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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