Good day, and welcome to the Daqo New Energy Corp. First Quarter 2025 Results Conference Call. All participants will be in a listen-only mode. 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 first quarter of 2025, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Chairman and CEO, Mr. Xiang Xu, our CFO, Ming Yang, and myself. Today's call will begin with an update from Mr. Xu on our market conditions and company operations, followed by a translation for Mr. Xu, 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 this 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 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 RMB. We offer these translations into U.S. dollars solely for the convenience of the audience. Now I will turn the call to our Chairman and CEO, Mr. Xiang Xu. Mr. Xu, please go ahead.

Hello, everyone. This is Anita Zhu. Thank you for joining our conference today, and I will now deliver the management remarks on behalf of Mr. Xu. In the first quarter of 2025, the solar PV industry continues to face significant challenges. Overcapacity persisted, and polysilicon prices stayed below cash cost levels. Although Daqo New Energy Corp. did sustain quarterly operating and net losses, our losses narrowed sequentially, and we continue to maintain a strong and healthy balance sheet with no financial debt. As of March 31, 2025, the company had a cash balance of $792 million, short-term investments of $168 million, bank notes receivable of $63 million, and a fixed-term bank deposit balance of $1.1 billion. In total, our quick assets readily convertible into cash if needed stood at $2.15 billion, providing us with ample liquidity. With no financial debt, our solid financial position gives us the confidence that we will remain strategically resilient and well-positioned to overcome the current market downturn. On the operational front, the company operated at a reduced utilization rate of approximately 33% of our nameplate capacity in response to challenging market conditions and weak selling prices. Total production volume at our Xinjiang facilities for the quarter was 24,810 metric tons, slightly below our guidance range of 25,000 metric tons to 28,000 metric tons. However, sales volume reached 28,008 metric tons, exceeding production and enabling us to reduce inventory to a healthier level. As a result of lower utilization across our factories, idle facility-related costs for the quarter were approximately $1.58 per kilogram, which was primarily related to non-cash depreciation expenses. Overall, polysilicon unit production cost increased by 11% sequentially to an average of $11.57 per kilogram, primarily due to higher unit depreciation costs as a result of lower production. Our cash cost increased by 5% to $5.31 per kilogram quarter over quarter, primarily due to maintenance and facilities-related costs during the quarter. In light of the current market conditions, we expect our production volume for the second quarter to be in the range of 25,000 to 28,000 metric tons. As a result, we anticipate our full-year 2025 production volume to be in the range of 110,000 to 140,000 metric tons. During the first quarter, polysilicon producers implemented self-discipline measures to mitigate the impact of irrational competition and falling prices, resulting in industry-wide capacity utilization of approximately 50%. According to industry data, domestic polysilicon production volume came in at 105,500 metric tons in March and below 100,000 metric tons for both January and February. Consequently, supply in the first quarter fell short of demand, gradually reducing industry inventory levels. On February 9, Chinese authorities introduced a market-based reform policy for new energy on-grid tariffs to promote the high-quality development of the renewable energy sector. All on-grid electricity generated from renewable energy such as wind and solar power will be traded through market mechanisms with prices determined by supply and demand. This policy aims to balance grid load more effectively. Under the mandate in the policy, the cutoff date that distinguishes new projects from existing projects is May 31, 2025, and new energy projects that commence operations on and after June 1, 2025, will be subject to a provincial-level competitive bidding process. As the fixed tariff structure for renewable energy electricity transitions to a market-based pricing mechanism, uncertainties around future electricity prices and revenue generation have emerged. In response, project developers and investors are accelerating project completions ahead of the June 1 deadline in order to secure current policy benefits, which have led to a surge in downstream installations. Fueled by this front-loading, market prices for solar products have trended upward, narrowing losses across the value chain, particularly for end products. However, given the relatively high level of polysilicon inventory held by wafer manufacturers, price increases have yet to fully materialize in the polysilicon segment. Polysilicon prices remained stable throughout the quarter at approximately 37 to 42 RMB per kilogram. In the medium to long term, however, we believe current low prices and market downturn will eventually result in a healthier and more sustainable industry. As ongoing losses force less competitive players to exit the market, we expect overcapacity to be ultimately eliminated, bringing the solar PV industry back to normal with improved profitability and healthier margins. The solar PV industry continued to show promising prospects. China's new solar PV installations reached 59.71 gigawatts in the first quarter, a robust 30.5% year-over-year growth. In the long run, as one of the most cost-effective and sustainable energy resources worldwide, solar power is expected to remain a key driver of the global energy transition and sustainable development. Looking ahead, Daqo New Energy Corp. is well-positioned to capitalize on the long-term growth in the global solar PV market, enhancing its competitive edge by advancing its higher efficiency N-type technology and optimizing its cost structure through digital transformation and AI adoption. As one of the world's lowest-cost producers with the highest quality N-type products and a strong balance sheet with no financial debt, we are confident in our ability to weather the current market downturn and emerge as a leader in the industry, ready to capture future growth. Now I will turn the call to our CFO, Mr. Ming Yang, who will discuss the financial performance for the quarter. Ming, please go ahead.

Thank you, Anita, and 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 first quarter 2025 financial performance. Revenues were $123.9 million compared to $195.4 million in the fourth quarter of 2024 and $415 million in the first quarter of 2024. The decrease in revenue compared to the fourth quarter of 2024 was primarily due to a decrease in average selling prices and lower sales volume. The gross loss was $81.5 million compared to $65.3 million in the fourth quarter of 2024 and a gross profit of $72 million in the first quarter of 2024. Gross margin was negative 66%, compared to negative 33% in the fourth quarter of 2024 and 17.4% in the first quarter of 2024. The decrease in gross margin compared to the fourth quarter of 2024 was primarily due to a lower average selling price and higher production costs. SG&A expenses were $35.1 million compared to $29.4 million in the fourth quarter of 2024 and $38 million in the first quarter of 2024. The SG&A expenses during the first quarter included $18.6 million in non-cash share-based compensation costs related to the company's share incentive plans, compared to $14.9 million in the fourth quarter of 2024. R&D expenses for the quarter were $0.5 million compared to $0.4 million in the fourth quarter of 2024 and $1.5 million in the first quarter of 2024. The R&D expenses vary from period to period and reflect R&D activities that take place during the quarter. As a result of the foregoing, the loss from operations was $114 million compared to a loss of $200 million in the fourth quarter of 2024 and income from operations of $30 million in the first quarter of 2024. The decrease in loss from operations in the first quarter of 2025 compared to the fourth quarter of 2024 was also attributable to the lack of asset impairment charges of $125.6 million and an allowance for expected credit loss of $18 million reported in the fourth quarter of 2024. Operating margin was negative 92%, compared to negative 154% in the fourth quarter of 2024 and 7.3% in the first quarter of 2024. Net loss attributable to Daqo New Energy Corp. shareholders was $71.8 million compared to $180 million in the fourth quarter of 2024 and net income of $15.5 million in the first quarter of 2024. Loss per basic ADS was $1.07 compared to $2.71 in the fourth quarter of 2024 and earnings per basic ADS of $0.24 in the first quarter of 2024. Non-GAAP adjusted net loss attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $53 million compared to $170.6 million in the fourth quarter of 2024 and adjusted net income of $36 million in the first quarter of 2024. This translates to a loss per basic ADS of $0.88 compared to $2.86 in the fourth quarter of 2024 and adjusted earnings per basic ADS of $0.55 in the first quarter of 2024. EBITDA was negative $48 million compared to negative $236 million in the fourth quarter of 2024 and $76.9 million in the first quarter of 2024. EBITDA margin was negative 39%, compared to negative 121% in the fourth quarter of 2024 and 18.5% in the first quarter of 2024. Now on the company's financial condition. As of March 31, 2025, the company had $792 million in cash, cash equivalents, and restricted cash compared to $1.04 billion as of December 31, 2024, and $2.7 billion as of March 31, 2024. As of March 31, 2025, the notes receivable balance was $62.7 million compared to $55 million as of December 31, 2024, and $194 million as of March 31, 2024. Notes receivable represent bank notes with maturity within six months. As of March 31, 2025, the balance of fixed-term deposits within one year was $1.12 billion compared to $1.09 billion as of December 31, 2024, and $1.2 billion as of March 31, 2024. Now on the company's cash flow, for the three months ended March 31, 2025, net cash used in operating activities was $38.9 million compared to $116 million in the same period of 2024. For the three months ended March 31, 2025, net cash used in investing activities was $211 million compared to $190.5 million in the same period of 2024. The net cash used in investing activities in the first quarter of 2025 was primarily related to the purchase of short-term investments and fixed-term deposits. For the three months ended March 31, 2025, net cash used in financing activities was nil compared to $6 million in the same period of 2024. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

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

Hi, everyone. Thank you for taking my questions. In your prepared remarks, you talked about overcapacity ultimately being eliminated. I was wondering if you could talk through when you think that could happen. You also mentioned less competitive players will exit the market. Who have you seen exit thus far? And then which exits do you think might be near term? Thanks.

Thank you, Phil. In terms of the rebalancing of supply and demand, to give a quick recap, back in 2024, the total polysilicon production volume was around 1.82 million metric tons. The nameplate production capacity of all completed projects, regardless of whether they are completed or temporarily shut down, exceeded 1,400 gigawatts, which is roughly 3.2 million metric tons. That is more than double the demand. What we have seen in this cycle compared to the previous cycle is that the incumbents and even some of the new players either have a very solid shareholder base that, in a worst-case scenario, can inject assets or have other sources of financing. For instance, recently, we have seen Tongwei announcing 10 billion RMB in fundraising at its subsidiary. I think that is just one case that signals rebalancing of supply and demand would take longer than expected compared to previous cycles. We have seen that the overall industry utilization rate is currently around 40% to 50%. We actually have not seen any companies completely exiting the market. Most of them are either lowering their utilization rate or undergoing temporary shutdowns. It is hard to say when exactly we would see players exiting, but as we are still transacting prices below most companies' cash costs, it will be relatively difficult for some companies to sustain the current situation.

Thank you, Anita. That is helpful. You mentioned the industry utilization rate is between 40% and 50%. Can you tell us how you expect it to trend by quarter through this year? Do you think it goes above 50%? Or do you think we are well below 50% even in Q4? Thanks.

Sure. In the first quarter, the monthly domestic production actually came in at around 90,000 to 100,000 metric tons per month. We have seen a slight shortage in supply compared to monthly demand. The inventory depletion of polysilicon is happening at a very slow pace. However, because of the high level of inventory in polysilicon, we have seen almost, I would say, 400,000 metric tons in total of poly at the poly manufacturer and at the ingot manufacturing. That is across the entire chain. We think the inventory depletion will take at least four months, assuming the most extreme case of zero production per month and also a monthly production of 950,000 metric tons. Because of that, the poly prices remained relatively stable during the first quarter, trading at 38 to 42 RMB per kilogram, with N-type from the top players actually coming in at 41 to 42. If we are looking at the second quarter and going forward, we believe the prices will be supported at the current level because of the policy that was rolled out in February. We expect the price level to sustain at the current range before the policy cutoff date of May 31, especially because we expect strong April and May demand at around 55 to 65 gigawatts, which will translate to a polysilicon demand of around 125,000 metric tons. However, we do see potential downside risk both coming from the policy change and also from external tensions, especially from the Trump administration's trade war 2.0. After the rush installation, we see demand would trend down slightly. That is why we remain cautious and expect pricing to be relatively suppressed as the low price changes to 35 to 40 RMB per kilogram throughout the remaining of 2025.

Great. Again, a lot of information there. Thank you. You said demand in China after May would be down slightly, but I think you mentioned 55 gigawatts for April and May. What is your expectation for after May 31? How much lower could demand be on a monthly basis in China? Thanks.

Overall, for the whole year of 2025, we believe China demand will still come in relatively strong in the range of 250 to 300 gigawatts, which would be roughly equivalent to 1.4 to 1.6 million metric tons of polysilicon demand. Although compared to 2024, it may seem more stagnant primarily because of the potentially deteriorating solar project returns, which were impacted by the new policy in February, primarily because of the uncertainty in calculating the yield. In the long run, we are encouraged to see that renewable energy is transitioning to a more market-driven and heading into a more sustainable and high-quality development compared to being subsidized by the government, with more guaranteed on-grid volume price for all incremental renewable energy projects. Overall, this year in China, it will still be relatively supported at 250 to 300 gigawatts.

Okay. Great. Appreciate the time and taking my questions. Thanks. I will pass it on.

Thank you, Phil.

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

Hi, management. Thank you for taking my questions. My first question is regarding ADR delisting risk. What is the strategy you are looking toward to end or what do you think? How should we encounter the ADR listing risk?

Thank you, Alan. First of all, we fully understand our investors' concern over the risk of forcing the ADR to delist from the U.S. amid the heightened U.S.-China trade war. Although we personally think that we would remain vigilant and consider the delisting of the ADRs a relatively low probability, I do acknowledge that the Trump administration is putting all options on the table. Because of that, this will be a key stake for negotiation as decoupling from the two largest economies spreads to the financial sector. We actually considered a potential dual listing of returning to the Hong Kong exchange back in 2022. As some background information, because of the risk arising from the Holding Foreign Companies Accountable Act, that issue was effectively resolved in the same year after the PCAOB determined at the end of 2022 that it was able to inspect and investigate all the firms in mainland China and Hong Kong completely. So it vacated its 2021 determination. This is why our listing in Hong Kong was held off, and we decided to keep our ADRs because the trading volume is much higher for ADRs compared to the Hong Kong listing. Based on our understanding, I think a Hong Kong listing would take maybe around six months depending on regulatory approvals, market conditions, and our internal readiness. To be transparent to our investors, while we have no immediate plans in place amid the current situation, we are definitely closely monitoring the market and the regulatory developments. We want to assure you that we remain fully committed to driving long-term value for our stakeholders and executing our long-term growth vision. It is very unfortunate for us to see tensions escalate, but if circumstances do exacerbate to the most extreme case of a forced delisting, our management team will definitely evaluate all strategic options to protect the interests of our shareholders, such as a listing in Hong Kong or seeking other means to return capital to our shareholders.

Thank you very much. My next question is regarding cash cost. I know that the cash production cost in the first quarter has edged up a little bit from the fourth quarter last year. You mentioned maintenance costs. I just want to get a feeling about the outlook on cash cost in the subsequent quarters of the year.

Alan, thanks for your questions. Cash cost did trend up slightly this quarter, about 5% to 6% compared to the previous quarter. It is primarily due to two reasons. The first reason is that since December of last year, our Inner Mongolia phase two was shut down completely and then went into what is called in Chinese 'maintenance' for longer-term facilities. It is incurring roughly $0.20 per kilogram of cost this quarter. Even though there is no production, there is that additional cost relative to, for example, electricity, air, and the employees necessary to maintain facilities. That actually adds up to roughly $0.20 in cash cost. If you look at the way we record cash cost, it is actually all of the cash costs that occur for the facilities, not just for production but also for maintenance. We subtract out the depreciation and the non-cash share-based compensation to arrive at the cash cost. There is that $0.20 additional impact because of the maintenance related to the facility that is now being shut down. There is another roughly $0.10 of cost related to the maintenance of the facility. Inner Mongolia went into maintenance in roughly the second half of March. As you can see, it had some impact on production for the quarter. For example, if you compare to the previous quarter, we produced around 34,000 metric tons, and for this quarter, we only produced roughly 24,800 metric tons, but we incurred relatively similar levels of staffing costs. That is the part that has to be amortized over a fewer amount of production. There is about a $0.10 impact of cost that we have. If we remove these impacts, we would have roughly $5. Going forward, for Q2, depending on production level, but based on current guidance, we should probably have similar to slightly lower cash costs compared to the current quarter.

Got it. Thank you. I will pass it on.

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 do not hesitate to contact us. Thank you, and have a great day. Goodbye.

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