Good day, and welcome to the DACA 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 2. Please note this event is being recorded. I would now like to turn the conference over to Jesse Zhao, Director of Investor Relations. Please go ahead.

Everyone, I'm Jesse Zhao, the Investor Relations Director of Darko New Energy. Thank you for joining our conference for today. Darko 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 Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiang Xu, is on a business stream now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Ms. Xu 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 US private Securities-led 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 further working statement. Further information regarding this and other risks is included in the reports or documents we have passed 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 on the applicable rule. Also during the call, We will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our five 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 Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.

Thank you, Jessie. Hello, everyone. This is Anita. I will 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 continues to exert downward pressure on policy 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 31, 2026, we held a cash flow of $559.4 million, short-term investments of $288.3 million, U.S. dollars, bank notes receivable of $20.8 million, ultimate maturity investment of $50.3 million, and a fixed-term bank deposit balance of $1.1 billion U.S. dollars. In total, these assets that can be converting to cash stood at $2 billion U.S. dollars, 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 plate capacity utilization rate operating at approximately 57%. Total production volume at our two post-second facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons. With market prices for post-second experiencing a notable decline to be below production costs during the quarter, we adhered to the Chinese authorities' self-regulation guidelines but declining to engage in below-cost sales. We adopted a disciplined, wait-and-see approach pending further implementation of the national anti-evolution 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 U.S. dollar per cure there. On the cost side, total production and cash cost 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 RMB terms actually declined slightly on a sequential basis, reflecting our continued improvements in manufacturing efficiency. In light of the current market and the dynamics, we expect total policy production volume in the second quarter of 2026 to be approximately 35,000 mt to 40,000 mt. For the full year of 2026, we expect production volume to remain in the range of 140,000 to 170,000 mt. tons. With the solar market impacted by seasonality surrounding the Chinese New Year holidays and the absence of concrete updates, capacity rationalization policies, policy account transactions and shipment volumes remain low during the quarter. The tight policy account prices dropped from 48 to 55 RMB per kilogram at the end of 2025 to 35 to 37 RMB per kilogram by the end of the first quarter. However, policy account 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 over capacity a weak demand outlook industry inventory buildup and financial pressure force several peers to adjust their production pricing strategy toward a more market-oriented approach as a result industry-level policy econ monthly supply fell to approximately 93 000 next time due to the quarter, representing an industry average utilization rate of just 39%. Looking ahead, we expect government authorities to strengthen the anti-evolution policies necessary to address these industry-wide overcapacity issues. As an encouraging move, 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 evolution. 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 a respect of capacity regulations, 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 anti-pulse silicon backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well-positioned to capitalize on anticipated market recovery and long-term growth opportunities. We'll continue to strengthen our competitive edge through advancements in high-efficiency anti-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 shaping that future. So 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 Dako New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter of 2026 financial performance. Revenues were $26.7 million compared to $221.7 million in the fourth quarter of 2025 and $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 $139.4 million compared to a gross profit of $15.4 million in the fourth quarter of 2025 and gross loss of $81.5 million in the first quarter of 2025. Gross margin was negative 521% compared to 7% in the fourth quarter of 2025 and negative 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 $98.4 million of provisions for inventory impairment due to end-of-quarter market polycylican pricing that is below production cost. Selling general and administrative expenses were $12.2 million compared to $18.7 million in the fourth quarter of 2025 and $35 million in the first quarter of 2025. The sequential decrease of HG&A expenses 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 $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 $0.8 million compared to $0.7 million in the fourth quarter of 2025 and $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 $123.8 million compared to $20.9 million in the fourth quarter of 2025 and $114 million in the first quarter of 2025. Operating margin was negative 564% compared to negative 9.4% in the fourth quarter of 2025 and negative 92% in the first quarter of 2020. Net loss attributed to Rotoduckal New Energy shareholders was $88.4 million compared to $7.3 million in in the fourth quarter of 2025 and $71.8 million in the first quarter of 2025. Loss per basic ADS was $1.31 compared to 11 cents in the fourth quarter of 2025 and $1.07 in the first quarter of 2025. Adjusted net loss attributable to docking new entry shareholders, excluding non-cashure-based compensation costs was $88.4 million compared to $7.3 million fourth quarter of 2025 and 53.2 million in the first quarter of 2025. Adjusted loss per basic ADS was $1.31 compared to 11 cents in the fourth quarter of 2025 and 80 cents in the first quarter of 2025. EBITDA was a negative 83 million compared to 52.5 million in the fourth quarter of 2025 and negative 48 million in the first quarter of 2025. EBITDA margin was negative 311 percent compared to 23.7% in the fourth quarter of 2025 and negative 39% in the first quarter of 2025. And now on the company's financial condition. As of March 31st, 2026, the company had $559.4 million in cash, cash requirements and restricted cash, compared to $980 million as of December 31st, 2025 and $792 million as of March 31st, 2025. And as of March 31st, 2026, short-term investments was $288 million compared to $114 million as of December 31st, 2025 and $168 million as of March 31st, 2025. As of March 31st, 2026, the notes receivable balance was $20.8 million compared to $135.5 million as of December 31st, 2025 and $62.7 million as of March 31st, 2025. Note receivables represent bank notes with maturity within six months. And as of March 31st, 2026, how-to maturity investment was $50.3 million compared to nil as of December 31st, 2025 and nil as of March 31st, 2025. As of March 31, 2026, the balance of fixed-term deposits within one year was $1 billion, compared to $972 million as of December 31, 2025, or $1.1 billion as of March 31, 2025. Now the company's cash flow. For three months, ended March 31, 2026, net cash used in operating activities was $147.5 million compared to $38.9 million in the same period of 2025. For three months ended March 31, 2026, net cash using investing activities was $275.8 million compared to $211 million in the same period of 0.25. Net cash using investing activities in 2026 was primarily due to the purchase of short term investments and fixed term deposits. Over the three months ended March 31st, 2026, net cash used in financing activities was 7.8 million compared to nil in the same period of 2025. Net cash used in financing activities in 2026 was primarily to $7.8 million of stock shared purchases made by the company subsidiary Xinjiang.co from its minority shareholders. And 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 1 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 the question, please press star then 2. 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.

Hey, guys. Thanks for taking my questions. First one is on the state administration for market regulation. Tier 1 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?

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

Yeah, sure. So just wanted to understand what the submissions to the state administration for market regulation, those proposals, how could they practically improve the competitive dynamics to accelerate or delay the necessary industry consolidation needed to stabilize ASPs?

Anita, do you want to start first, and I can add to that? Or 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 the Market Regulation Agency, so basically there is a consensus from the government that at the minimum, and while maintaining some market competition, there's a need to enforce the price law. And now there is some details to be determined in terms of, for example, how to measure cost for all the different manufacturers. and our understanding is they're doing a new round of price determination. So this should come out, say, in the next two months or so. Our understanding is around mid-year. So once that new cost determination is being done, 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 are being discussed, but that hasn't taken place yet. At least for us, we're in observation mode in terms of whether enforcement happens. I mean, if there's no enforcement, then we maybe need to, you know, sell wherever the market is, right? I mean, at least right now we're enforcing the price on our sales efforts, right? But obviously that's having a negative impact on our sales volume, right? So we're waiting for that to happen. But our expectation is that once the new cost determination comes out and manufacturers are now required to sell up of production costs, and then the market price should recover. So that's at least our, yeah.

Okay, thanks, Ming. You know, in terms of enforcement actions, you know, what could that look like, and 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%? Okay.

Okay, our understanding is rather than depending on the company's own reported cost, right? So the government is trying to have a cost model that is consistent across all the manufacturers in terms of like material cost, depreciation, labor, and things like that, right? So once that is done, then we don't know if it's going to be one general price or there could be a different price for manufacturers. So that's to be determined. And then once that is done, then I think there will be enforcement or at least it will communicate how enforcement would be done. Previously, 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. So there are many ways that the government could enforce, but we're yet to see that right now.

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

I mean, for Q2, then it will be optimistic, right? So, I mean, cash price is kind of in the 35 to 37 range. I think some producers, if they have cash issues, they might sell a little discount to that. And then there are opportunities in the futures market, for example, where you might be able to sell a little bit higher, maybe in the 38 to 41 RMB per range, depending on the contract period. So we're looking at that as well. So let's say if there's no price guidance and enforcement action, I think then the price range is maybe $35 to $40. Honestly, if price guidance has come out, it should be in the range of $40 to $45 or maybe even higher. And these are inclusive of VATs. So, yeah.

Okay, thank you. And then the utilization rate, do you have a sense for Q2 and Q3? Yeah, thanks.

For us or for the industry? For us. We'll be at roughly 50% to 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. and adjustments will generally, our experiences will bring short-term volatility to both quality and cost. So at least we're in the short term and we're maintaining the current production level. And obviously, if either the new price guidance or enforcement, if it's below expectation, below what we would expect and price remain low, then, then we would make further adjustments in the second half, and the subject to demand environment as well. And Q1 was a really, fairly negative demand environment overall.

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 And the revenue in first quarter is a bit of a surprise. We'd like to know if I do the math and back the ASP in first quarter seems to be at around 41 or 42, so XBAT. So does it mean that the company didn't sell anything maybe after February?

I think that is the right. the way the right way to look at this in terms of, yeah, we did sell a volume in January at the high 40s inclusive VAT, right? I think you can see actually our Q1 recognized ESP is higher than Q4, while you look at market ESP is actually on average is much lower than Q4. And 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 of market regulators was that, you know, the anti-evolution policy that was counted on previously to reduce capacity and enforce price was kind of disrupted, right? So that's when we started to see price to come down fairly quickly and significantly, right? So once price fell below production costs, then we stopped selling to the market. And the market generally in the first quarter was really, you can characterize it by fairly high uncertainty, right? You have a number of things happening, the war in the Middle East, high silver prices, right? That led to a lot of uncertainty for the downstream, actually, where 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. So these combined really led to a fairly low industry transaction volume for polycylite in the first quarter.

I recall before March…

Maybe just let me add a little…

Okay, Anita, go ahead.

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

understood so sorry uh how much did the tier one uh producers are holding in terms of inventory is it 500,000 like in total that total is around that so how much is in how much is in

including including the down streams as well in all including waiver players

okay so I recall actually in January and February actually demand was quite good because some downstream players are having a rush export because to catch the VAT deadline, so I wonder why the company didn't sell more in January or February maybe? Because 4,000 times 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. So I think what happened was that there's fairly strong demand for the modules, especially for the European market. But what happened was these integrated manufacturers especially were selling mostly their existing inventory of modules. And then they were also producing, but primarily, I would call it, using their own inventory, right? They had some inventory of poly and materials. And 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. And then with the war, that made it even a little bit worse. So I would say the market probably had a reasonable amount of transactions in January, but really February and March was lower. And then you have, you know, this expectation of falling prices, especially for polycylids because of the policy inventory issues. So that made it even worse, so a little bit worse in terms of the customers, they buy when prices are rising, but they delay purchase when prices are falling.

So in terms of the price outlook, I think I just want to have a follow-up on Phil's question. um so uh like approximately when you think um there will be a uh a guideline coming from the authority like when you think or like is it within a month or a quarter that a price will start to rebound or like what is the timeline there and is there regular meetings with the authority to discuss the details on the enforcement or like what is the status now our standing

understanding it should be around june and then right now they're redoing their uh the cost model for all the different producers and then trying to make an alignment so so once that cost the term is done and and then the next step will be updated uh price guidance so um

to my understanding that will be more like an enforcement of the uh price law which means uh everyone should sell above their cost but the previous uh acquisition incentives are is it basically rejected or it's still alive for like what was the any any

update on that there's no update to that there's no new guidance yeah I would

say we're open to different kinds of proposals but we're not 100% sure how that might unfold but we're engaging in the conversations now to discover or to test different sorts of solutions so 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 but consider it efforts to work

that? I would say that the general policy is the government is positive and promoting mergers acquisition to call it for more consolidation, right? But in terms of how that might lead to actual policies or actions, that's still yet to be seen. So I wonder if you are seeing any

uptake of demand recently because demand, I think, was quite poor in the past couple of months. But what if you are seeing any recovery in demand?

I would say that Modules Center and market certainly right now Q2 is actually trending to look better than Q1, so we shall see. And then definitely, I think downstream inventory is coming down, so that's also a good sign.

Yeah, probably prices are also bottoming too, and so we'd 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, then we'd like to know, has the company considered maintaining an even lower utilization rate? Because the company was also running at more than 50%. But I recall the company used to be running at 30%. So 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 development of the price law especially. So if the companies do ref all the price law and all are required to sell about production cost and we're fairly confident on where we are in terms of industry positioning, right? And then we should regain market share. And it will be a function of demand as well. So if that's the case, then we might maintain the current utilization level. But let's say it turns out to be more negative in terms of, especially if prices remain where it is right now, then we would consider a lower utilization rate.

Okay, understood. So, yeah, I'll stop and pass. Thank you. Thank you for taking my question I need to make.

Okay. Thanks, Alan.

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

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

That's generally the right thinking. So it's kind of a scenario, right? So the two major scenarios where if the government does what it says, right, enforce price law, right, penalties and all that, and then have the manufacturer sell above cost, then we would maintain at the current utilization. On the other hand, unfortunately, price law hasn't been enforced for whatever reason, right, and the manufacturers continue to sell below cost, then we would lower our utilization.

So if we assume a scenario like no policy kicking and the pricing is likely to stay at the current level, Then what's our sell strategy and production strategy in 2Q and in the second half? Is there any guidance on the utilization rate in this scenario? And 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 to turn around.

So, right, so, I mean, we assume, right, the government, despite all their rhetoric, nothing happens, right? And I think that's unlikely because, I mean, there's a lot of pressure on MIT right now as well. So, anyway, let's assume that happens. And then, obviously, we would lower our utilization and then start to sell at close to market pricing, right? Whatever it takes to move on. Yeah, so, I mean, then we would, you know, compete with our peers, right? And then, obviously, we have a strong balance sheet. so I mean we expect we would be one of the last survivors not the last survivor random we would actually meaning say two or three years we will see fairly significant exit of the industry where then we have a market based to call it capacity exit or consolidation right there and then the company will do

fairly well after that yeah so it's a trade-off yeah and that's clear so I recall you just mentioned like you expect the policy will kick in June and that's the month where we would expect a potential price hack so if to reconcile your expectations and can we assume like we will keep utilization at 50% above to June and then start selling at close-to-market pricing if no policy

kicking? I think that's the right assumption yes so there's no policy right price remain low then we would be able to reduce utilization and if the government does enforce price law right and then we would maintain at least the

current utilization. So June is the month we are waiting for any policy to And if no, we will switch our strategy.

As in terms of communication with the government? Go ahead, Nina.

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

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

Sure, that's clear. And my final question is about cash costs. Are there any guidance about our cash costs in the second quarter and in the second half of 2006?

I think based on our current call utilization, production level, and the current slick and metal costs and material costs, for example, we're expecting our cash costs to be in line with Q2 in terms of R&B terms and trending slightly lower over the next quarter. So a fairly steady cost structure.

Yeah, 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 an awesome day goodbye the conference

is now concluded thank you for attending today's presentation you may now disconnect