Good morning, everyone, and welcome to DDC Enterprise Limited's first half 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Cody Fletcher, Investor Relations for DDC. Please go ahead.
Thanks, operator. Hi, everyone, and thank you for joining DDC Enterprise full year 2025 earnings conference call. Joining me today are Norma Chu, DDC's Founder, Chairwoman, and CEO, and Kyu Ho, DDC's Chief of Staff. Before we begin today's call, I'd like to remind everyone that today's call is being recorded and will be available on DDC's investor relations website. After management's prepared remarks, we will open the line for Q&A. A press release covering DDC's full year 2025 results are also available on our IR website. Please note that during the course of this call, we may make forward-looking statements. These statements reflect our current views and expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a more detailed discussion of these risk factors. With that, I'll pass the call over to Norma. Norma?
Thanks, Cody. Hello, everyone, and thank you for joining us today. 2025 was a transformational year for DDC. We took decisive steps to reposition the business. We exited our U.S. operation in the first half and refocused our core food business in Asia, where we see the strongest demand. In parallel, we launched our Bitcoin treasury strategy as a core component of our long-term capital allocation framework. We made these changes to simplify the business, strengthen our foundation, and position DDC to build long-term value. Today, DDC operates on two complementary pillars, a growing consumer food platform and a long-term Bitcoin treasury strategy. Our food business provides revenue and income stability, while Treasury strategy compounds value on the balance sheet over time. These two components work together. Our operating business generates a stable foundation. That foundation allow us to allocate capital to Bitcoin with conviction independent of market cycles.
Turning to our operating performance. For 2025, our core consumer food business delivered record revenue of $39.2 million and positive adjusted EBITDA. These results reflected continued execution across our core markets and improvement in operating efficiency. In the second half, revenue grew 17% year-over-year to $23.6 million, and gross margins remained stable at 30.2%. Demand remained strong across our key markets. We expanded our offline distribution channels, growing our network of regional distributors and deepening customer partnerships. These efforts drove consistent increases in offline sales volume and further penetrate into lower-tier cities. We see a continued shift towards value-oriented consumption and localized distribution across China market. This trend aligns directly with our focus on healthy, ready-to-eat products that support at-home consumption and convenience. In terms of our Bitcoin treasury strategy, from the beginning, we approached it with discipline.
We focused on building the right foundation, strengthening our capital structure, and ensuring we could scale responsibly over time. Following the launch of our strategy in May, we scaled our capital markets efforts, expanded our partnerships, and built the infrastructure required to support long-term accumulation. We accumulated 1,181 Bitcoin across multiple transactions in the second half of the year, demonstrating our long-term conviction in Bitcoin. In 2026, we have continued to execute. Since year-end, we have more than doubled our Bitcoin holdings, increasing from 1,181 Bitcoin at the end of 2025 to 2,383 Bitcoin as of today, which represent approximately $182 million of value based on current Bitcoin prices. This positions DDC among the top 30 publicly traded corporate holders of Bitcoin globally. This reflects our long-term conviction.
We view Bitcoin as a long-term reserve asset that complements our operating business and strengthens our capital allocation framework. In addition, today we introduced the DDC Treasury Intelligence Platform, an AI-driven system designed to enhance how we manage and evaluate our Bitcoin treasury. We believe we are amongst the first corporate treasury companies to take this approach, building dedicated infrastructure to bring greater discipline, transparency, and structure to Bitcoin capital allocation. This platform integrates internal data, market signals, and historical decisions into a unified framework, allowing us to evaluate trade-offs more consistently and with greater clarity over time. Our goal is not to automate decision-making, but to strengthen the quality and consistency of how we allocate capital across different market environments. Over time, we believe this more structured approach to capital allocation can improve the efficiency of our decision-making and support stronger risk-adjusted outcomes across cycles.
We see this as an important step towards building a more scalable and institutional approach to managing our treasury. Looking ahead, we remain focused on scaling both parts of the business with discipline. We will drive growth in higher-margin markets on the operating side. We will continue to accumulate Bitcoin in a measured and strategic manner on the treasury side. With the improved cost structure and operating efficiency as the platform matures, we will also explore selective risk managed opportunities to generate yield on our Bitcoin holdings, with a focus on capital preservation, high-quality counterparties, and disciplined risk management. Over time, we also expect to expand our capital allocation capabilities through structured opportunities that complement our treasury strategy and further differentiate our platform. Our goal remains clear: to build a company that compounds value over time across both the income statement and the balance sheet.
With that, I'll pass the call to Kyu to talk about our financial performance in more details.
Thank you, Norma. For the full year 2025, we delivered record revenue of $39.2 million and positive adjusted EBITDA, reflecting continued improvement in the operating performance of our core consumer food business. Revenue was broadly stable year-over-year, with growth in our core Asia markets offset by the strategic exit of U.S. operations. In Asia, revenue growth was driven by expansion in our offline distribution channels, including deeper penetration into lower-tier cities and stronger regional distributor partnerships. This was partially offset by a decline in online sales, reflecting a deliberate reduction in marketing spend and a strategic shift away from lower-margin and highly promotional channels. Gross margin improved 303 basis points to 31.4%, supported by supply chain optimization, improved procurement efficiency, and favorable raw material costs. For the full year, operating expenses increased year-over-year.
This was driven primarily by the build-out of our Bitcoin treasury platform, which drove changes in our stock-based compensation structure to be more aligned with treasury peers and financing fees related to our capital markets activity. In addition, we increased spending on advisory and legal costs and infrastructure to support day-to-day execution. Excluding these items, we reduced costs across the core business, including lower sales and marketing, and general and administrative expenses following the exit of our U.S. operations and continued cost discipline. As a result, while our reported results reflect non-cash items and strategic investments associated with building our Bitcoin treasury platform, we delivered positive adjusted EBITDA for the full year, reflecting underlying improvement in operating performance of the business. At a high level, the core food business remained operationally stable, while overall cash usage reflects both investment activity and the build-out of our broader platform.
To provide additional context, let me walk through the first half and second half dynamics. In the first half of 2025, we achieved strong profitability, driven by the strategic exit of U.S. operations, and improved cost structure, and growth in our core China business. As we moved into the second half, we began to invest more heavily in building our Bitcoin treasury platform. Revenue in the second half reached $23.6 million, increasing 17% year-over-year and 51% sequentially, reflecting continued demand across our core markets. Gross margin remained stable year-over-year at 30.2%, supported by ongoing supply chain optimization and disciplined pricing. The primary change in the second half was operating expenses as a result of our adoption of a Bitcoin treasury strategy, as I described above. As a result, operating income and net income declined year-over-year in the second half.
We have taken steps to strengthen our liquidity position, including assessing capital markets and aligning our cost structure as the business evolves. During the year, we assessed multiple source of capital, including equity, convertible instruments, and Bitcoin-backed financing to support both our operations and treasury strategy. We believe these actions, together with the continued stability of our core operating business, position us to support ongoing operations and execute on our strategy. On the balance sheet, we continue to execute on our Bitcoin strategy. We increased our Bitcoin holdings materially during the year as we deployed capital from our financing initiatives, positioning Bitcoin as a core component of our balance sheet. Looking into 2026, our priorities are clear. We will continue to grow our core business in higher-margin markets while maintaining discipline around costs and improving cash conversion.
At the same time, we will continue to execute on Bitcoin treasury strategy in a measured and strategic manner. As mentioned, we will also explore selective risk managed opportunities to generate yield on our Bitcoin holdings with a focus on capital preservation, high-quality counterparties, and disciplined risk management. In addition, we also expect to expand our capital allocation capabilities through structured opportunities that complement our treasury strategy and further differentiate our platform. We believe this approach positions us well for long-term value creation, and we look forward to providing further updates as we continue to execute. With that, we will open the call for questions.
Thank you. As a reminder, to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Palmer of The Benchmark Company. Please proceed with your question.
Yes, good morning, and thank you for taking my questions. First of all, the use of the new DDC Intelligence Platform to better inform the Bitcoin acquisition strategy is a very interesting approach. We haven't seen others use this, at least not formally in this manner. If you could talk a little bit about how this would be used in practice, as you said the idea here is not to automate decision-making, but to better inform decisions. Can you give examples of how the platform would better inform your decisions with regard to managing the Bitcoin treasury and purchases as you do so?
Sounds good. Hey, Mark. Good to see you here. Yeah, I think we've been kind of thinking about how we can incorporate all these new AI technology into our day-to-day operation for managing the Bitcoin treasury system. I really think it's a natural next step. I'm really grateful that we have a great development partner, Appnovation, to help us build this out. In terms of application, in terms of how the system can help us better manage the Treasury, I'll pass it over to Kyu to give a couple of samples. Mark, maybe you haven't had time to read it yet. We do have another standalone full press release on the system that will give everybody a bit of a closer look to what we've built so far.
Hi, Mark. Thanks for your question. This initiative, as Norma mentioned, really started from a perspective that it seems odd that for any company not to be leveraging AI at this day and age. Similarly for DDC, as we looked internally, we've been asking ourselves, what can we leverage from what is available with the latest today that can help us make better decisions? At a very baseline, you can imagine that we would be leveraging AI technology for making sure that we have as many signals as possible, so that we are constantly aware of what's happening.
The baseline is obviously knowing what's happening within the Bitcoin space, and then you can expand that scope out to the macro environment, the political environment, the regulatory environment, and so forth, so that it feeds back information to management so that we can be more informed when we make decisions. As Norma mentioned in her remarks, this is meant to be assisting management, not telling management what to do. Our hope is that it helps us be even more, I would say, give us an even more opportunity to get insights into what's happening in the market.
How that translates to what we do, as we think through the timing of our purchases, the size of our purchases, how we think about capital raise, how we think about different strategies and initiatives, we plan to leverage that intelligence platform to give us more insight, to tell us potentially what options are available and how we can be better with all these decision-making processes.
It also falls into governance. It helps us with how we build our governance framework around the process of the Bitcoin treasury strategy itself. It's a bit of an open field, I would say, in terms of what the platform can do for us, and we're consistently trying to feed information into this platform such that eventually it becomes more of a learning machine that evolves over time, as opposed to it just processing information based on parameters that we dictate them to do. We would expect that over time, as we have more and more information, as we teach the system what to look for, what to look at, and we get iterative processes, then we will really get value out of this platform.
Thank you. Could you provide some insight with regard to what potential financing options are on the table for funding Bitcoin purchases going forward, how you're weighing those, and where they stack up right now, in terms of attractiveness? Along those lines, if you can talk a little bit about how you're thinking about the trajectory of Bitcoin purchases going forward? Thank you.
Sure. Thanks, Mark. I think right now we have a number of options as listed in the announcement. Right now, we still have a number of untapped facilities out there, including the convertible note that we have outstanding with Anson. I think that one has over $275 million available. We also have an equity line available. In terms of other financing options, issuing common shares to buy Bitcoin is always top of mind, and it really depends on the partner because, depending on a number of factors, the partners, Bitcoin pricing, where it's at right now, and the mNAV for the company. That's always a negotiation process with potential seller. That's one option. We've also issued preferred shares earlier this year, privately held preferreds, and those kind of carry slightly higher cost of capital, usually 3.5%-5% interest.
Then they convert into common at a premium. That's the second option. The third one, we are currently in discussion with a potential partner in the U.S., another investment bank, that we might consider offering listed perpetual preferreds. That is a slightly more, I would say, early-stage conversation, and that will be a potential third financing tool for more Bitcoin purchases as available for DDC at this stage. In terms of how we think about ongoing accumulation, we wanted to have a North Star of getting to 10,000 Bitcoin as quickly as possible. At the same time, I think, we also have to weigh a number of factors. This year, I think we still carry a view that Bitcoin might be trading more sideways for the next couple of quarters. Right now, in the first quarter, we have already doubled our holdings.
That actually exceeded our internal management guidance. I think right now we're going to continue to acquire consistently throughout the remaining quarter. Probably, conservatively hoping to reach about 5,000 Bitcoin by the end of the year.
Thank you.
Thank you. Our next question coming from the line of Matthew Galinko with Maxim Group.
Hey, thanks for taking my questions. Is there anything in the food business, I think you announced one JV in 2025. Maybe just expand on that pipeline for 2026. Do you see additional similar deals? Or maybe more broadly, how does expanding the food business fit into your capital allocation strategy against Bitcoin accumulation? Thanks.
Yeah, I think as a baseline, we do expect the underlying food business to grow organically and fairly stable 10%-15% year-over-year without acquiring additional capital to grow the underlying business. In terms of doing more M&A deals or JVs, there's always opportunity, and we are assessing a number of potential targets right now. I would say it's very possible that we would do a similar deal at the second half of this year. Yeah. That really depends on negotiation. There's no signed term sheet at this stage.
Got it. I guess, is there always an ongoing balance between allocating or predominantly when you do those sorts of JVs here, it's sort of a lower threshold, versus buying Bitcoin? Does that make sense?
Yeah. I think when we think about capital raises, it's really more for Bitcoin accumulation. The way when we look at M&A deals and setting up these JVs, they are a bit less capital intensive. We tend to structure it out more like an earn-out basis. Typically it's share-based, and a lot of times the shares are issued to the JV partner or the target owner at a premium to where DDC shares are traded. We don't expect to be issuing a lot of new equities at current prices for fundraising for the food business.
Got it. Thanks. Sorry, one more question on the food business. You did announce kind of an innovative AI approach on the kind of a single pane of glass, I guess, for the Bitcoin business. Do you have any similar initiatives on food business to help guide strategy pricing and just your overall approach to it?
Yeah, I think right now when I look at the whole operation across DDC, there are so many functions that the team is already incorporating the use of different AI platforms and tools on a daily basis. That actually became an inspiration for like, well, we're doing so much with AI on the operating business, how come we're not really being more proactive on applying that to our Bitcoin treasury strategy? I would say, Matt, like all businesses, I think AI is becoming a very inevitable part of integrating in terms of day-to-day execution.
Thank you.
Thank you. Ladies and gentlemen, this does conclude today's Q&A session and concludes today's conference call. Thank you all for participating, and you may now disconnect your lines.