DQ

Good day, and welcome to the Daqo New Energy First quarter 2026 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Director of Investor Relations. Please go ahead.

Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the first quarter of 2026, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Zhu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiang Xu, is on a business trip now. Ms. Anita Zhu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Ms. Zhu on market conditions and company operations. Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience.

Before we begin the formal remarks, I want to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding this and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties.

All information provided in today's call is as of today, and we undertake no duty to update such information except as required under applicable law. Also, during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese Renminbi. We offer these translations into U.S. dollars solely for the convenience of the audience. Now I will turn the call to our Deputy CEO, Ms. Anita Zhu. Ms. Zhu, please go ahead.

Thank you, Jessie. Hello, everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xu. In the first quarter of 2026, market sentiment across the solar PV industry remained cautious amid seasonal softness and elevated inventory levels. It was further exacerbated by rising module prices driven by higher silver, aluminum, and glass costs, which led to a market slowdown in China. Geopolitical tensions in the Middle East also weighed on end market demand in the region. Against this backdrop, persistent industry overcapacity continued to exert downward pressure on polysilicon prices, resulting in quarterly operating and net losses. Notwithstanding these headwinds, we continue to maintain a robust and healthy balance sheet with zero debt.

As of March 31st, 2026, we held a cash balance of $559.4 million, short-term investments of $288.3 million, bank notes receivable as of $20.8 million, out to maturity investment of $50.3 million, and a fixed-term bank deposit balance of $1.1 billion. In total, these assets that can be converted to cash stood at $2 billion, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices, with main capacity utilization rate operating at approximately 57%.

Total production volume at our two polysilicon facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons-40,000 metric tons. With market prices for polysilicon experiencing a notable decline to be below production cost during the quarter, we adhered to the Chinese authority self-regulation guidelines by declining to engage in below-cost sales. We adopted a disciplined wait-and-see approach pending further implementation of the national anti-monopoly policies we highlighted last quarter. As a result, our sales volume dropped to 4,482 metric tons, while our average selling price increased 2.3% sequentially to $5.96 per kilogram. On the cost side, total production and cash costs increased marginally by 2% and 3% respectively on a sequential basis, primarily driven by exchange rate movements.

However, despite higher silicon metal costs, manufacturing costs in Renminbi terms actually declined slightly on a sequential basis, reflecting our continued improvements in manufacturing efficiency. In light of the current market dynamics, we expect total polysilicon production volume in the second quarter of 2026 to be approximately 35,000 metric tons-40,000 metric tons. For the full year of 2026, we expect production volume to remain in the range of 140,000 metric tons-170,000 metric tons. With the solar market impacted by seasonality surrounding the Chinese New Year holiday and the absence of concrete updates, capacity rationalization policies, polysilicon transactions and shipment volumes remain low during the quarter. N-type polysilicon prices dropped from RMB 48- RMB 55 per kilogram at the end of 2025 to RMB 35-RMB 37 per kilogram by the end of the first quarter.

However, polysilicon prices heading into the second quarter are showing signs of bottoming out, with weekly declines gradually easing. While producers awaited clear guidance, guidelines from authorities to tackle overcapacity, a weak demand outlook, industry inventory build-up and financial pressure forced several peers to adjust their production pricing strategy toward a more market-oriented approach. As a result, industry-level polysilicon, monthly supply fell to approximately 93,000 metric ton during the quarter, representing an industry average utilization rate of just 39%. Looking ahead, we expect government authorities to strengthen the anti-involution policies necessary to address these industry-wide overcapacity issues.

As an encouraging move, on April 17th, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration, and other key national departments jointly held a symposium on regulating market competition within the solar PV sector, reinforcing the urgent need to address irrational competition and curb destructive involution. Additionally, all relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidelines.

Pardon me, ladies and gentlemen. It's appeared we've lost connection to our speakers. Please stand by while we reconnect. Pardon me, this is the Operator. We have reconnected the speakers and will continue. Please proceed.

Okay. Okay, thank you. Sorry, apologies. My line got disconnected. Continuing with the April 17th symposium. All relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidance, innovation-driven development, price law enforcement, quality supervision, mergers and acquisitions, and intellectual property rights protection. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. Growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security, in which the solar PV and renewable energy sectors can play a crucial role.

As one of the world's lowest cost producers of the highest quality N-type polysilicon, backed by a robust balance sheet and zero debt. We remain optimistic about the sector and are well positioned to capitalize on the anticipated market recovery and long-term growth opportunities. We'll continue to strengthen our competitive edge through advancements in high efficiency N-type technologies and cost optimization via digital transformation AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in shaping that future. Now I'll turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Thank you, Anita, and hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter 2026 financial performance. Revenues were RMB 26.7 million compared to RMB 221.7 million in the fourth quarter of 2025 and RMB 124 million in the first quarter of 2025. The decrease in revenue compared to the fourth quarter of 2025 was primarily due to a decrease in sales volume as the company reduced sales in light of the relatively low selling prices. Gross loss was RMB 139.4 million, compared to a gross profit of RMB 15.4 million in the fourth quarter of 2025 and gross loss of RMB 81.5 million in the first quarter of 2025.

Gross margin was -521% compared to 7% in the fourth quarter of 2025 and -65.8% in the first quarter of 2025. The decrease in gross margin compared to the fourth quarter of 2025 was primarily due to an increase in provision for inventory impairment. Cost of revenue for the first quarter of 2026 includes RMB 98.4 million of provisions for inventory impairment due to end-of-quarter market polysilicon pricing that is below production cost. Selling, general, and administrative expenses were RMB 12.2 million compared to RMB 18.7 million in the fourth quarter of 2025 and RMB 35 million in the first quarter of 2025. The sequential decrease of SG&A was primarily due to lower sales volume in the first quarter of 2026.

The year-over-year decrease was also due to the company recognizing RMB 18.6 million in non-cash share-based compensation costs related to the company's share incentive plan in the first quarter of 2025. R&D expenses were RMB 0.8 million compared to RMB 0.7 million in the fourth quarter of 2025 and RMB 0.5 million in the first quarter of 2025. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. Loss from operations was RMB 150.8 million compared to RMB 20.9 million in the fourth quarter of 2025 and RMB 114 million in the first quarter of 2025. Operating margin was -564% compared to -9.4% in the fourth quarter of 2025 and -92% in the first quarter of 2025.

Net loss attributable to Daqo New Energy shareholders was RMB 88.4 million compared to RMB 7.3 million in the fourth quarter of 2025 and RMB 71.8 million in the first quarter of 2025. Loss per basic ADS was RMB 1.31 compared to RMB 0.11 in the fourth quarter of 2025 and RMB 1.07 in the first quarter of 2025. Adjusted net loss attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation costs, was RMB 88.4 million compared to RMB 7.3 million in the fourth quarter of 2025 and RMB 53.2 million in the first quarter of 2025.

Adjusted loss per basic ADS was RMB 1.31 compared to RMB 0.11 in the fourth quarter of 2025 and RMB 0.80 in the first quarter of 2025. EBITDA was a RMB -83 million compared to RMB 52.5 million in the fourth quarter of 2025 and RMB -48 million in the first quarter of 2025. EBITDA margin was -311% compared to 23.7% in the fourth quarter of 2025 and -39% in the first quarter of 2025. Now on the company's financial condition. As of March 31st, 2026, the company had RMB 559.4 million in cash equivalent, and restricted cash compared to RMB 980 million as of December 31st, 2025, and RMB 792 million as of March 31st, 2025.

As of March 31st, 2026, short-term investments was RMB 288 million compared to RMB 114 million as of December 31st, 2025, and RMB 168 million as of March 31st, 2025. As of March 31st, 2026, the notes receivable balance was RMB 20.8 million compared to RMB 135.5 million as of December 31st, 2025, and RMB 52.7 million as of March 31st, 2025. Note receivables represent bank notes with maturity within six months. As of March 31st, 2026, held-to-maturity investment was RMB 50.3 million compared to nil as of December 31st, 2025, and nil as of March 31st, 2025.

As of March 31st, 2026, the balance of fixed term deposit within one year was RMB 1 billion. Compared to RMB 972 million as of December 31st, 2025 to RMB 1.1 billion as of March 31st, 2025. Now the company's cash flow. For three months ended March 31st, 2026, net cash used in operating activities was RMB 147.5 million compared to RMB 38.9 million in the same period of 2025. For three months ended March 31st, 2026, net cash used in investing activities was RMB 275.8 million compared to RMB 211 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily due to the purchase of short-term investments and fixed term deposits.

For the three months ended March 31st, 2026, net cash used in financing activities was RMB 7.8 million. Share purchases made by the company's subsidiary, Xinjiang Daqo, from its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would want to withdraw the question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Philip Shen with Roth Capital Partners. Please go ahead.

Thanks for taking my questions. Hey, guys. Thanks for taking my questions. First one is on the State Administration for Market Regulation. You know, tier one manufacturers submitted formal correction proposals. Can you walk us through how these specific proposals are practically shifting or may practically shift competitive dynamics on the ground today? Ultimately, do these commitments accelerate or delay the necessary industry consolidation needed to stabilize ASPs? Thanks, guys.

Sorry, you're kind of breaking up on our end. Can you repeat your question?

Yeah, sure. Hey, Ming.

Okay.

Just want to understand what the submissions to the State Administration for Market Regulation, those, you know, those proposals, how could they practically improve the competitive dynamics to accelerate or delay, you know, the, you know, necessary industry consolidation needed to stabilize ASPs?

Anita, do you wanna start first, and I can add to that? Okay. Let me just start, well, our understanding is, I think that the government, especially at the most recent industry meeting, with the Ministry of Industry and Information Technology and NDRC and NEA, and then the market regulation agency, basically there is consensus from the government that at the minimum, while maintaining some market competition, there's a need to enforce the price law. Now, there is some details to be determined in terms of, for example, of how to measure cost for all the different manufacturers. Our understanding is they're doing a new round of price determination.

This should come out, let's say, in the next two months or so. Our understanding is around mid-year. Once that new cost determination is being done, and then there will be a renewed guidance on where the minimum price would be. At the same time, we're still monitoring in terms of how the enforcement can be done. There may be some enforcement actions that's being discussed, but that hasn't taken place yet. At least for us, right, we're in observation mode in terms of how whether enforcement happens. I mean, if there's no enforcement, then we maybe need to, you know, sell at wherever the market is, right?

I mean, at least right now we're enforcing the price on these in our sales efforts, right? Obviously that's having a negative impact on our sales volume, right? We're waiting for that to happen. Our expectation is that once the new cost determination comes out and manufacturers are now required to sell above production costs, the market price should recover.

Okay.

At least our. Yeah.

Okay, thanks, Ming. You know, in terms of enforcement actions, you know, what could that look like? What kind of timing could that be? Do you think the probability of enforcement action is higher or lower or like greater than 50% or less than 50%? Thanks.

Okay. Our understanding is, rather than depending on the company's own reported cost, right? The government is trying to have a cost model that is consistent across all the manufacturers that were in terms of like material cost, depreciation, labor, and things like that, right? Once that is done, then we don't know if it's gonna be one general price or there could be different price for manufacturers. That has to be determined. Once that is done, then I think there will be enforcement or at least they will communicate how enforcement will be done.

Previously, right, this would be in the form of, a fairly significant penalty or, in terms of, in the worst case scenario, they could revoke your manufacturing license, or shut down your electricity. There are many ways that the government could enforce, but we're yet to see that right now.

Okay, got it. Final question for me. Given all that, and with, you know, the reality is you guys still need to operate and participate in the market. What do you think is a practical outlook for ASPs for, you know, Q2, Q3? What do you think your utilization rate might be in those quarters?

I mean, for Q2, it will be optimistic, right? I mean, cash price is kind of in the RMB 35-RMB 37 range. I think some producers, if they're, they have cash issues, they might sell a little bit discount to that. There are opportunities in the futures market, for example, where you might be able to sell a little bit higher, maybe in the RMB 38-RMB 41 per range, depending on the contract period. We're looking at that as well. Let's say if there's no price guidance enforcement action, I think the price range is maybe RMB 35-RMB 40.

If, understanding if price guidance does come out, it should be in the range of RMB 40-RMB 45 or maybe even higher. These are inclusive of VATs.

Okay.

Yeah.

Great.

Yeah. Okay. Thank you.

The utilization rate, do you have a sense for Q2 and Q3 yet? Thanks.

For us or for the industry?

For you.

Okay. For us. It will be at roughly 50%-55%. We're maintaining utilization for now because we're kind of at a fairly optimal operating condition in terms of both quality and cost and production volume. Our experience is we'll bring short-term volatility to both quality and cost. At least we're in the short term, and we're maintaining the current production level. Obviously, if the new price guidance or production or enforcement, if it stays below expectations, below what we would expect and price remain low, then we would make further adjustments in the second half, and they're subject to demand environment as well. Q1, which is really fairly negative demand environment overall, I would say.

Okay, Ming. Thanks very much. I'll pass it on.

Great. Thank you.

Our next question comes from Alan Lau with Jefferies. Please go ahead.

Yeah. Thanks for taking my question. I think in terms of the sales volume and the revenue in first quarter is a bit of a surprise. Would like to know if I do the math and back the ASP in first quarter seems to be at around RMB 41 or RMB 42, so ex VAT. Does it mean that the company didn't sell anything maybe after February?

I think that is the right way to look at this in terms of, yeah, we did sell a volume in January, you know, at the high RMB 40s, inclusive VAT, right? I think 'cause actually our Q1 recognized ASP is higher than Q4, while if you look at market ASP is actually on average is much lower than Q4.

I think the big change is really around Chinese New Year, especially after Chinese New Year, where with, you know, the new policy from the State Administration for Market Regulation was that, you know, the anti-involution policy that was counted on previously, you know, to reduce capacity and enforce price was kind of disrupted, right? That's when we started to see price to come down fairly quickly and significantly, right? Once price fell below production cost, then we stopped selling to the market. The market generally in the first quarter was really, you can characterized by fairly high uncertainty, right? You have a number of things happening, the war in the Middle East, you know, high silver prices, right?

That led to a lot of uncertainty for the downstream. Actually, you know, they were seeing fairly significant increase in their production costs. At the same time, it was difficult for them to pass through all that increase while that's having a fairly negative impact to the Chinese end market as well. These combined really led to a fairly low industry transaction volume for polysilicon in the first quarter.

Understood. I recall before March.

Let me add a little.

Sorry.

Okay, Anita, go ahead.

Oh, no, I was just gonna say, let me add a little bit more to that. In terms of the industry level inventory, it has accumulated to a relatively high level. I would say, in the first quarter has been above 500,000 metric tons, and it's now nearly 600,000 metric tons. I would say tier one manufacturers held roughly at least three months of stock. That's why that led to a wait-and-see attitude from the downstream buyers. For us, especially, we wanted to adhere to the Chinese authority self-regulation guidelines. We were relatively reluctant to engage in below-cost sales. We took the wait-and-see approach to see further implementation from the national policies level.

Understood. sorry, how much did the tier one producers are holding in terms of inventory? Is it 500,000?

Like in total?

Total is 500,000.

Yeah. Around that.

How much is in tier one?

Yeah, including the downstreams as well.

Oh, including wafer players. Okay.

Total inventory of silicon wafers.

I recall actually in January and February, actually demand was quite good because downstream players are having a rush export because to catch the VAT deadline. Wonder if why the company didn't sell more in January or February, maybe, right? 4,000 tons seems to be just 10% of the production, right?

Okay. I think let me add more color and then maybe Anita can feel free to add more. I think what happened was that there's fairly strong demand for the modules, especially for the European market. What happened was these integrated manufacturers especially were selling mostly their existing inventory of modules. They were also producing, but primarily I would call it using their own inventory, right? They had some inventory of poly and materials. I think the uncertainty in cost actually, especially after Chinese New Year led them to really hold off or delay their procurement of polysilicon. I think because of especially uncertainty related to demand after April 1st, right?

Then with the war that made the even a little bit worse. I would say the market probably had reasonable amount of transactions in January, but really February and March it was lower. You have, you know, this expectation of falling prices, especially for polysilicon because of the points in inventory issues. That made it even worse or a little bit worse in terms of, you know, the customers, right, they buy when prices are rising, but they delay purchase when prices are falling.

Understood. In terms of the price outlook, I think I just wanna have a follow-up on Phil's question. Like approximately when you think there will be a guideline coming from the authority? Like when you think or like is it within a month or a quarter that price will start to rebound? What is the timeline there? Is there regular meetings with the authority to discuss the details on the enforcement? What is the status now?

Our understanding, it should be around June. Right now they're redoing their the cost model for all the different producers, and then trying to make an alignment. Once that cost determine is done, and then the next step will be an updated price guidance.

Understood. Tto my understanding, that will be more like an enforcement of the price law, which means-

Yes.

... everyone should sell above their cost. The previous acquisition incentives are, is it basically rejected or it's still alive? Like, what's the update on that?

There's no update to that as of now. There's no new guidance from the government. Yeah. I mean, they don't say you can't do it.

I think we're open to different, yeah, I would say we're open to different kinds of proposals, but we're not 100% sure how that might unfold. We're engaging in conversations now to discover or to test different sorts of solutions. Anything that would benefit the industry as a whole and for manufacturers as well, we're willing to try it out or at least try to come to a solution, like concerted efforts towards that.

I would say that the general policy is the government is positive and promoting mergers and acquisition to call it for more consolidation, right? In terms of how that might lead to actual policies or actions, that's still yet to be seen.

Understood. I wonder if you are seeing any uptick of demand recently because demand I think was quite poor in past couple of months. I was wondering if you are seeing any recovery in demand.

I would say on the module front, the end markets only right now Q2 is actually trending to look better than Q1. We shall see. Definitely I think, downstream inventory is coming down. That's also a good sign.

Understood. Yeah, poly price is also bottoming too. Would like to know if the company, like, because the sales was very low at first quarter, not sure if the strategy is the same in second quarter. If that's the case, we'd like to know if the company considered maintaining a even lower utilization rate? Like, because the company was also running at, like, more than 50%. I recall company used to be running at 30%. Any consideration behind that, like running the utilization rate at a relatively high level?

I would say that the general framework for the company is, we're monitoring the developments of the price law especially. If the companies do follow the price law and all are required to sell above production cost, and we're fairly confident on where we are in terms of industry positioning, right? Then we should regain market share. It'll be a function of demand as well. If that's the case, then we might maintain the current utilization level. Let's say if it turns out to be more negative in terms of, especially if prices remain where it is right now, right, then we would consider a lower utilization rate.

Okay. Understood. Yeah, I'll stop and pass on.

Okay.

Thank you. Thank you for taking my question.

Okay. Okay. Okay. Thanks, Alan.

Our next question comes from Mengwen Wang with Goldman Sachs. Please go ahead.

Yeah. Hello. Thanks for taking my question. My question is about utilization as well. My understanding now is that our current strategy is to maintain over 50% utilization and stop selling to external customers at below cost pricing, right? This is based on the assumption of potential further regulation to drive poly price higher to RMB 40 per kilo and above. Is that correct?

That's the generally the right thinking. Yeah. It's kind of a scenario, right? There are two major scenarios where if the government does what it says, right? Enforce price law, right? Penalties and all that, and then have the manufacturers sell above cost, then we would maintain at the current utilization. On the other hand, if unfortunately, price law isn't being enforced for whatever reason, right, and the manufacturers continue to sell below cost, then we will lower our utilization.

If we assume a scenario like no policy kicking and the pricing is likely to stay at current level, then what's our sales strategy and production scheduling 2Q and in second half? Is there any guidance on the utilization rate in this scenario? On top of the utilization guidance, will we follow the rest of the industry to sell product at below cost pricing, or we will continue to stop selling at the lower pricing level and continue to pile up the inventory and then wait for the sector turnaround?

Okay. right. I mean, if we assume, right, the government, despite all their rhetoric, nothing happens, right? I think that's unlikely because, I mean, there's a lot of pressure on MIIT right now as well. Anyway, let's assume that happens. Obviously we would lower utilization and then start to sell at close to market pricing, right? Whatever it takes to move volume. I mean, then we would, you know, compete with our peers, right? Obviously we have a strong balance sheet, so I mean, we expect we would be one of the last survivors, if not the last survivor, right?

We would actually in, say, two or three years, we will see fairly significant exit of the industry, where then we have a market-based, you can call it capacity exit or consolidation right there, and then the company will do fairly well after that. Yeah. It's a trade-off. Yeah.

That's clear. I recall you just mentioned, like you expect the policy will kick in in June, and that's the month where we would expect a potential price hike. If to reconcile your expectations, can we assume, like we will keep utilization at 50% above till June and then start selling at close to market pricing if no policy kick in?

Exactly. I think that's the right assumption, yes. If there's no policy, right, if price remain low, then we would be able to reduce utilization. If the government does enforce a price law, right, and then we would maintain at least the current utilization.

June is the month we are waiting for any policy to kick in, right?

Uh-

And if not-

As they will-

Switch our strategy.

As in terms of communication.

I think that's it.

With the government. Yeah. Go ahead, Anita.

Oh, no worries. No, no, it's fine.

Yeah. I understand June is the timeline of the new government policy.

Sure. That's clear. My final question is about cash costs. Is there any guidance about our cash costs in second quarter and in the second half of 2006?

I think based on our current, you call utilization, production level and the current silicon metal cost and material cost. For example, we're expecting our cash costs to be in line with Q2 in terms of Renminbi terms and trending slightly lower over the next quarters. A fairly steady cost structure.

Sure. Thanks. That's all from me. I will pass it on. Thank you.

Okay. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.

Thank you everyone again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and have a awesome day. Goodbye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, welcome to the Daqo New Energy Corp. Fourth Quarter 2025 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead.

Hello, everyone, I am Jessie Zhao, the Investor Relations Director of Daqo New Energy Corp. Thank you for joining our conference call today. Daqo New Energy Corp. just issued its financial results for the fourth quarter of 2025, which can be found on our website at dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Jiang Xu, is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xu. Today's call will begin with an update from Ms. Xu on market conditions and company operations, and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary review as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information except as required under applicable law. During the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer this translation into U.S. dollars solely for the convenience of the audience. I will now turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.

Hello, everyone. This is Anita. Happy Year of the Horse, and I will now deliver the remarks on behalf of our chairman, Mr. Xu. In 2025, China's NT Revolution Initiative supported the solar PV industry's gradual emergence from a cyclical downturn. As a result, solar products market prices rebounded from the third quarter onward, with the polysilicon sector posting the most notable gains. Following this trend, our utilization rate increased from 33% in Q1 to 55% in Q4, bringing our annual production volumes to 123,652 metric tons, in line with our guidance of 121,000-124,000 metric tons, representing a 39.7% year-over-year decrease from 205,068 metric tons in 2024. Furthermore, our 2025 sales volume reached 126,707 metric tons, exceeding production volume and reducing year-end inventory to a reasonable level. In the second half of 2025, we strategically ramped up sales efforts to capitalize on favorable pricing dynamics. The strong market response highlighted growing customer confidence in our product quality and their continued preference for our brand in this new pricing environment. Polysilicon ASPs decreased 7.2% from $5.66 per kilogram in 2024 to $5.25 per kilogram in 2025. This lower pricing, combined with reduced sales volume, resulted in revenue of $665 million in 2025, compared to $1 billion in 2024. Despite the decline in our top line, we significantly narrowed our losses during the year as compared to 2024. In particular, EBITDA swung to a positive $1.7 million in 2025, compared to a negative $337.4 million in 2024. While net loss attributable to Daqo New Energy Corp. shareholders narrowed to $170.5 million from $345.2 million in 2024. Moreover, we generated $66.1 million in positive operating cash flow in 2025, marking a notable turnaround from the $435 million outflow recorded in 2024. We continue to maintain a strong balance sheet and ample cash reserves. At the end of 2025, we had a cash balance of $980 million, short-term investments of $114 million, bank notes receivable of $136 million, and a fixed-term bank deposit balance of $1 billion. In total, these highly liquid assets stood at $2.27 billion, representing an increase of $57 million compared to the end of the previous quarter. This solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capitalize on long-term opportunities. Operationally, we continued to implement proactive measures in the fourth quarter to mitigate market oversupply, including operating at a nameplate capacity utilization rate of 55%. Total polysilicon production for the fourth quarter was 42,181 metric tons, in line with our guidance range of 39,500-42,500 metric tons. Our sales volume for the quarter reached 38,167 metric tons. In addition, we comprehensively reduced our production costs through process improvements, manufacturing efficiency gains, and raw material cost optimization. Extending our ongoing cost reduction initiatives, total production costs declined by 9% to $5.83 per kilogram in Q4 2025, from $6.38 per kilogram in Q3 2025. Total idle facility-related costs, which consist primarily of non-cash depreciation expenses, alongside approximately $0.10 per kilogram in cash costs for maintenance, also fell to $0.74 per kilogram in Q4 from $1.18 per kilogram in Q3, driven by higher production levels. Notably, cash costs decreased by 2% from $4.54 per kilogram in Q3 to a new record low of $4.46 per kilogram in Q4. In light of current market conditions, we expect our total polysilicon production volume in the first quarter of 2026 to be approximately 35,000-40,000 metric tons, and our full year 2026 production volume to be in the range of 140,000-170,000 metric tons. Chinese authorities demonstrated strong resolve in tackling irrational competition and industry overcapacity, formally designating anti-involution as a national priority within China's fifteenth Five-Year Plan, and the solar PV industry was a key focus of these efforts. These initiatives have driven a structural shift from price-based competition to value-driven differentiation. To advance industry governance, authorities deployed targeted measures, including standards, guidance, quality supervision, price enforcement, and promotion of technological progress. Specifically, this involved updating legislative frameworks such as the revised Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, which mandate that sales shall not be below cost. Furthermore, a new mandatory national standard was drafted to set strict energy consumption limits for polysilicon production on a per-unit basis. Led by the China Photovoltaic Industry Association, major polysilicon manufacturers have proactively responded to these initiatives, enforcing self-discipline and exploring innovative market-oriented approaches to combat excess capacity and pricing violations. These coordinated efforts have yielded measurable results in curbing overcapacity. The overall production volume fell by 28.4% to 1.32 million metric tons in 2025, and market prices surged more than 50% from the mid-2025 lows to RMB 50-56 per kilogram by year-end. Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher quality growth through 2026. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. In 2025, China's newly installed solar PV capacity grew 14% year-over-year to 317 gigawatts, setting yet another record high and proving that market potential continues to exceed expectations. As the global AI industry scales rapidly, space-based solar power is increasingly viewed as a vital solution to the immense and expanding energy demands of AI data centers, creating a significant new growth engine for the sector. Looking ahead, as one of the world's lowest-cost producers of the highest-quality N-type polysilicon, with a strong balance sheet and no debt, we remain optimistic about the sector and believe we are ideally positioned to capitalize on the market recovery and these long-term growth opportunities. We will continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in powering the future. I will now turn the call over to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Thank you, Anita. Hello, everyone. This is Ming Yang, CFO of Daqo New Energy Corp. We appreciate you joining our earnings conference call today. I will now go over the company's fourth quarter 2025 financial performance. Revenues were $221.7 million, compared to $244.6 million in the third quarter of 2025, and $195.4 million in the fourth quarter of 2024. The decrease in revenue compared to the third quarter of 2025 was primarily due to a decrease in sales volume. Gross profit was $15.4 million, compared to $9.7 million in the third quarter of 2025, and gross loss of $65.3 million in the fourth quarter of 2024. Gross margin was 7%, compared to 3.9% in the third quarter of 2025 and -33% in the fourth quarter of 2024. The increase in gross margin compared to the third quarter of 2025 was primarily due to the decrease in production costs. Selling, General and Administrative expenses were $18.7 million, compared to $32.3 million in the third quarter of 2025 and $29.4 million in the fourth quarter of 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $0 for the fourth quarter and $18.6 million in the third quarter of 2025. The company recognized $19.3 million non-cash expense related to allowance for credit loss in the fourth quarter, mainly due to the uncertainty regarding the recoverability of long-outstanding other receivables. Let me give a little more color on this. During the early development stage of the company's Inner Mongolia polysilicon project, funds were lent to a local government-affiliated industrial park development entity for supporting the infrastructure building and development of our Inner Mongolia polysilicon site. The local government-affiliated entity will repay these funds later. However, due to the industry downturn that resulted in insufficient local tax revenue, the repayment has been delayed. As a result, we recorded an allowance for credit loss due to the delayed repayment of these funds. All amounts due have been reserved, and we do not expect any future related allowance for credit loss. R&D expenses were $0.7 million, compared to $0.6 million in the third quarter of 2025 and $0.4 million in the fourth quarter of 2024. R&D expenses converted from period to period reflect R&D activities that take place during the quarter. As a result, the foregoing loss from operations was $20.9 million, compared to $20.3 million in the third quarter of 2025 and $300 million in the fourth quarter of 2024. Operating margin was negative 9.4%, compared to negative 8.3% in the third quarter of 2025 and negative 154% in the fourth quarter of 2024. Net loss attributable to Daqo New Energy Corp. shareholders was $7.3 million, compared to $14.9 million in the third quarter of 2025 and $180 million in the fourth quarter of 2024. Loss per basic ADS was $0.11, compared to $0.22 in the third quarter of 2025 and $2.71 in the fourth quarter of 2024. Adjusted net loss attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $7.3 million, compared to adjusted net income attributable to Daqo New Energy Corp. shareholders of $3.7 million in the third quarter of 2025, and adjusted net loss attributable to Daqo New Energy Corp. shareholders of $170.6 million in the fourth quarter of 2024. Adjusted loss per basic ADS was $0.11, compared to adjusted earnings per basic ADS of $0.05 in the third quarter of 2025, and adjusted loss per basic ADS of $2.56 in the fourth quarter of 2024. EBITDA was $52 million, compared to $45.8 million in the third quarter of 2025 and negative $235 million in the fourth quarter of 2024. EBITDA margin was 23.7%, compared to 18.7% in the third quarter of 2025, and negative 120% in the fourth quarter of 2024. I will go over the company's full year 2025 financial results. Revenues were $665 million, compared to $1.03 billion in 2024. The decrease was primarily due to lower sales volume, as well as lower polysilicon average selling prices. Gross loss was $137.9 million, compared to $212.9 million in 2024. Gross margin was negative 20.7%, compared to negative 20.7% in 2024. The decrease in gross loss was primarily due to lower revenue. SG&A expenses were $118.2 million, compared to $143 million in 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $55.8 million and $72.4 million in 2025 and 2024, respectively. R&D expenses were $2.6 million, compared to $4.6 million in 2024. R&D expenses reflect R&D activities that take place during the period. As a result, the foregoing loss from operations was $270 million compared to $564 million in 2024. Operating margin was negative 40.6%, compared to negative 54.8% in 2024. Net interest income was $9 million, compared to $30.2 million in 2024. The decrease in interest income was due to lower cash bank balance, as well as lower bank interest rate. In addition to the interest income, the company did record $24.1 million in gain on short-term investments for 2025, related to the purchase of bank short-term investment products. Net loss attributable to Daqo New Energy Corp. shareholders was $170.5 million, compared to $345 million in 2024. Loss per basic ADS was $2.53, compared to $5.22 in 2024. Adjusted net loss to Daqo New Energy Corp. shareholders was $114.7 million, compared to $272 million in 2024. Adjusted loss per basic ADS was $0.70, compared to $4.12 in 2024. EBITDA was $1.7 million, compared to negative $337 million in 2024. EBITDA margin was 0.3%, compared to negative 32.8% in 2024. On the company's financial condition, as of December 31, 2025, the company had $980 million in cash equivalents and restricted cash, compared to $551.6 million as of September 30, 2025, and $1.04 billion as of December 31, 2024. As of December 31, 2025, short-term investment was $114 million, compared to $431 million as of September 30, 2025, and $9.6 million as of December 31, 2024. As of December 31, 2025, note receivable balance was $135.5 million, compared to $157 million as of September 30, 2025, and $55.2 million as of December 31, 2024. Note receivables represent bank notes with maturity within six months. As of December 31, 2025, a balance of fixed-term deposit within one year was $972.4 million, compared to $1.03 billion as of September 30, 2025, and $1.08 billion as of December 31, 2024. On the company's cash flows, for the 12 months ended December 31, 2025, net cash provided by operating activities was $56.1 million, compared to net cash used in operating activities of $435 million in the same period of 2024. For the 12 months ended December 31, 2025, net cash used in investing activities was $140.7 million, compared to $1.48 billion in the same period of 2024. The net cash used in investing activities in 2025 includes $179.5 million for the purchase of property, plant and equipment, primarily related to the remaining capital expenditures of the company's Inner Mongolia polysilicon project. For the year 2026, the company currently expects approximately $100 million-$150 million of capital expenditures for the year, primarily related to the remaining payments for the Inner Mongolia project, as well as maintenance CapEx. For the 12 months ended December 31, 2025, net cash used in financing activities was $0.9 million, compared to $47.4 million in the same period of 2024. The net cash used in financing activities in 2025 was related to $0.9 million in stock repurchases made by the company's subsidiary, Xinjiang Daqo, to its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Han with JP Morgan. Please go ahead.

Thank you, management, for taking my questions, and it is great to see a recovery for the company. I have the first question regarding a potential buyback, because it is great to see we are finally generating positive operating cash flow for the full year last year. In this sort of environment, how should we think about a buyback strategy?

Thank you, Alan, for raising the question. First, I would say that share repurchase is absolutely a topic that we have been monitoring closely as part of our capital allocation strategy. We are taking a more prudent and informed approach, especially given the evolving landscape around China's anti-involution policies in the solar sector. While we definitely see tremendous value and intrinsic value in our shares, especially amid the current market dynamics, we believe it is essential to wait for more clarity on the policy implementation and the outcomes before proceeding. We believe that this wait-and-see stance would allow us to optimize the timing and the impact of the repurchase program better.

Thank you. My next question is on the policy outlook. We are aware that a consolidation platform was formed in December, soon after followed by antitrust questions by some of the regulators. Can you give us color on how the industry consolidation would happen? Should we discount the consolidation for the moment, or how should we think about that? Also, I noticed one of your peers has just conducted M&A on buying out some of the small traders. Is that part of your strategy as well?

Thank you, Alan. Maybe I will answer the question of the recent acquisition by our peers first and then move on to the anti-involution dynamics. I would say that we see this as the individual player's strategic decision, reflecting their confidence in the sector's future and their determination to further strengthen their competitive positioning. For us, I would say we are completely open-minded toward opportunities that could create value for the industry and for our shareholders. We view such transactions as constructive and ones that would drive the market consolidation the national anti-involution policy is designed to achieve. Direct acquisition or consolidation via the SPV that you mentioned are both forms toward achieving the same goal, essentially shifting toward a more rational and more efficient industry structure, something that we strongly support. That being said, I want to reiterate that anti-involution is designated as a national priority within China's next Five-Year Plan. As one of the major players in the industry, we are determined to address the overcapacity challenge, which we believe would optimally become a value-driven game by innovations and technological progresses, instead of the current price-based competition, and lead to a healthier and more sustainable industry. Indeed, the SPV for consolidation that many of you might be aware of was successfully established by the end of 2025 in December, which marks the first step and signals our resolve to collaboratively tackle the overcapacity issue. Of course, it is not an easy task, with lots of back and forth within the participants and with the government entities. I want to say that discussions are actively ongoing, with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet fair competition and that we are abiding by the regulatory guidelines. To provide more color, we will approach this in well-defined phases, potentially with initial investment injections anticipated in the near term, which would lay the foundation of financial stability. From there, we will gradually move towards consolidation, allowing for more efficient resource allocation and enhanced operational synergies across the value chain. We believe that this structured progression will not only align with the current regulatory guidelines, but also position our company and the industry at large for longer-term resilience and profitability. We are quite optimistic about these developments.

Okay, thank you for your answer. With that, I will pass it on.

Thank you, Alan.

The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead.

Hey, guys. Thanks for taking my questions. As a follow-up to that last question from Alan, I was wondering if you might be able to share what are some of the key milestones that we should be looking for in the coming quarters that show progress on the mandatory national standard? There is a draft, but when does that become implemented, for example? With the Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, what are the milestones that we should be following so that we can see the progress in the industry structure, as well as the competition or the industry consolidating? Thank you.

Thank you, Phil. I would say because there is not much information, and there is a lack of clarity and transparency in the current dynamics, it is difficult for us to say exactly what we might be monitoring because not a lot of details are released until the policies land. Prices, we definitely see a pricing recovery, and as part of the price laws, sales should not be below the industry-level cost, so that is a positive side. I would say we would have to be a bit more patient with the policies, as the conversations are still ongoing.

Okay, got it. Thank you. Then—

This is Ming.

Go ahead, Ming.

Let me just quickly follow up. I think there is a very high-level government meeting coming up that will discuss the next Five-Year Plan. As part of that, I think there is a presentation by a key government agency on the progress of anti-involution. I think after the top-level central government meeting, more policies will come forward. That is something to monitor.

Okay, great. Thanks, Ming. Shifting over to the price outlook, I know there is not as much clarity on the milestones for policy, but what is your assumption for poly prices in Q1 and Q2? If you have a view for the rest of the year, that would be great. Thanks.

As I just said, as part of the Pricing Law, sales should not be below the industry-level cost. I would say the lower bound will be at least RMB 53-54 per kilogram, and we would remain around that level for the coming quarters. It is hard for us to say where prices would go in the coming quarters, because that would essentially depend on how the SPV would evolve and the pace of consolidation.

Okay, got it. For the things that you can control, costs were down and hit a record low in Q4. How much do you think you can lower your cash costs by the end of 2026? Thanks.

Hi, Phil, this is Ming. I think we continue to make progress on both production costs and cash costs. This quarter we benefited from lower energy price or cost, as well as manufacturing efficiencies. I think we should continue to benefit. I think for Q1 and Q2, we are likely to see similar cash costs to the Q4 level, and then further reduction in the second half.

Great. Okay. All right, Ming, Anita, thank you very much. I will pass it on.

Great. Thank you.

Thank you, Phil.

The next question comes from Emmett Lau with Jefferies. Please go ahead.

Thanks for taking my question. It is a follow-up on the previous question. Basically, it is intertwined. If the price you mentioned should be above RMB 60, the question here is: if the price is not allowed to push up to above RMB 60, then what is the incentive for acquiring others' capacities like the plan before? I do not know what was the thinking behind or if the acquisition will happen like what your peers are doing. Basically, are companies acting on a standalone basis, or how is the whole coordination versus the price coordinated?

Sorry, Lau, can you repeat the question again? I do not think I caught all the question.

Yes. Previously, the incentive, to my understanding, is that the remaining players can push prices above RMB 60. I think there was some window guidance from the regulator saying that you cannot control prices. If the industry or the larger players are still going to acquire the smaller players, and you cannot push up the prices, what is the point of acquiring small players? How do you expect the price outlook going forward? If you could not make money, why would you acquire anyone?

As I said, I think it would have to be done in phases. First step is that you are not allowed to sell below cost, then gradually you would move on to consolidation and phasing out the excess and outdated capacities. It is hard for us to say how high prices can go, because we want to focus on a more market-oriented approach to achieving this.

Do you mean the acquisition will happen in phases which probably last for a longer time?

Yes, I would say it would have to be done over a couple of years. It will not be done all at once.

I see. I have noticed that prices actually have gone down a little bit recently from around RMB 60 to the 50-ish. I think futures price is below 50 already. What do you expect the pricing in the first quarter and second quarter?

Phil also touched upon the pricing outlook for the first half of 2026. I would say it would be at least around RMB 53-54, given that is roughly the industry-level cost currently. Moving forward, it will really depend on the pace of consolidation. That will determine.

Understood. In Q4 results, if I simply divide the revenue by the sales volume, apparently the ASP seems to be lower than the spot prices. I wonder if there is some delay recognition that might be delayed to first quarter and support the prices in first quarter's result? Why was the revenue in Q4 slightly lower than the spot prices?

Do you mean that the ASP in Q4 was below spot price?

Yes.

Okay. I think in Q4 the mix is such that because we were ramping up additional volume—production—and the initial batch of production from that initial ramp-up, it is consistent with our past experience that the qualities were not that great. Those actually had a market discount. Maybe in December, we kind of normalized in terms of product quality. It is that factor that led to a slightly lower overall ASP.

I see. Could investors understand this as a factor that would be normalized in first quarter, meaning that even if the spot market prices are marginally lower, the ASP of the company will probably be more flattish than the decline in spot prices?

Yes, we would expect that. Yes.

Thank you. My last question is on the broader perspective from the industry. Would you consider any acquisition? I noticed that Anita Xu mentioned you are open-minded, but are you liaising with any other specific player already, or it is still not on the schedule yet?

Thank you, Lau. As I mentioned at the beginning, we are open-minded toward different opportunities, either via acquisition or consolidation. As part of the SPVs, we are quite confident that we will see something in formation in the near term or in the coming quarters. That would be our primary focus for now. However, in the worst case, of course, acquiring directly would also be something that we could consider.

I see. Thanks. I will pass on. Thank you.

Great. Thanks, Lau.

The next question comes from Man Win with Goldman Sachs. Please go ahead.

Hello. Thanks, management, for taking my question. I have two follow-up questions. First is regarding our M&A target. I heard, Anita, you say you are open-minded for the acquisition opportunities. Could you elaborate from here? Is there any more keener target for us, like from 10-plus to further higher in the future? What kind of capacity do we prefer more in terms of acquisition on our own? That is my first question.

Thank you, Man. First, I would say that we are comfortable with where we are right now, given the current market dynamics, because essentially none of the players is operating at full utilization rates. Of course, in the future, like our peers, if we want to further strengthen our positioning by grasping more market share, we do not have a specific number in mind as to where we want to be. I would say, if it is aligned with the national anti-involution initiative, it is something that we will consider to do in the future.

Thank you. That follows my second question. Can you help us to understand a bit more, based on our conversation with government and with the leading industry players, how we should define the success of the anti-involution in the poly sector from here? Because in the past, we saw the poly price increase to above our operating cost, and then that could conclude the success of the anti-involution. It seems poly price continues increasing and is a bit bumpy. Also, there are some ongoing acquisitions. What shall we look forward to in terms of the future anti-involution progress? When can we call it a successful, complete anti-involution in our poly sector? Thank you.

First, I think that for the anti-involution initiative, it would extend over a number of years, given that this round the excess problem is very deep-rooted. The nameplate capacity, including everything, is more than 3 million metric tons, which is more than double the demand now. I would say until the more outdated and smaller players exit, and prices restore to a healthier level so that the industry as a whole becomes profitable to support the overall renewable energy goal. That is when we would say the anti-involution is completed.

Thank you, Anita. Can we understand in this way: the key target for the anti-involution is to sustain the poly price at over current level at least, to help facilitate outdated capacity exit, and that will take longer time than expected. Ultimately, the key target going forward is to take the smaller players offline. Is that correct?

Yes, I would say that is the aim.

Sure. The total outdated capacity too, right?

Yes, that is about the number.

Sure. Thank you so much. That is all from me.

Thank you, Man.

The next question comes from Gordon Johnson with GLJ Research. Please go ahead.

Hey, guys. Thanks for taking the question. Really appreciate it. Piggybacking off a question that was touched on earlier, it seems like in the spot market, polysilicon prices had surged and now they have come off. Specifically, when I talk about the spot market, I am talking about the futures market. It also seems like, due to the policy changes in China, demand has been somewhat subdued. Can you give us an outlook on what your expectations are with the puts and takes around anti-involution? What is your outlook on polysilicon prices in the first quarter and maybe the second quarter? I have a follow-up. Thank you.

Thank you, Gordon. You are asking about the futures market and the pricing outlook for the first and second quarter?

Yes, please.

For the pricing outlook question, I can repeat it again. For the first and second quarter for pricing, as mandated by the Pricing Law, sales should not be below the industry-level cost. I would say it should be at least RMB 53-54 per kilogram in the coming quarters. For the futures market, I would say it is an area with the potential for risk management and pricing stability in our industry. We see participation in the futures market as an extension of the current sales strategy, offering the chance to hedge against volatility and to secure profitable margins. Similar to our approach on share repurchases, we are prioritizing policy clarity around the anti-involution dynamics in China before diving into the futures market. We will employ a more disciplined strategy in the future, gathering more insights as the policy unfolds, to ensure that our involvement is strategic and value creative.

That is helpful. Looking at the futures price, RMB 46.315 right now, and looking at the recent comments from the government on anti-involution, is there any potential that prices could come in in the first half below the RMB 53-54 range you are targeting? Is that something that you are pretty certain of?

I think that is the industry-level cost at the moment. Given that we are not supposed to be selling below that cost due to the Pricing Law, I would say it should be somewhat sustained at that level.

Helpful. The last question is, you made significant improvement on your free cash flow—congratulations—in 2025. Do you have any thoughts on how you expect free cash flow to trend this year? Thanks for the questions.

Hi, Gordon. Let me answer that. This is Ming. Thanks for your question. I think free cash flow will turn positive, especially in the second half of 2025. Given our expectation for both volume and average selling price to be held more steady, as well as costs to remain stable to lower, we do believe that. Based on the Q4 level, free cash flow should—without giving specific numbers—improve further from the Q4 level going forward for 2026.

Thanks again for the question.

Great. Thank you so much.

This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

Thank you everyone again for participating in today's conference call. Should you have any further questions, please do not hesitate to contact us. Thank you and have an awesome day. Goodbye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.