daCo New Energy faces Q2 losses amid market challenges, yet retains $2.06 billion cash reserves, positioning for future recovery in the solar industry.

OPERATOR - (00:01:32)

Good day and welcome to the Daqo New Energy second quarter 2025 earnings 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 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 touchtone phone and 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 Jesse Zhao, Director of Investor Relations. Please go ahead.

Jesse Zhao - Director of Investor Relations - (00:02:17)

Hello everyone. I'm Jesse 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 second quarter of 2025, which can be found on our website at www.DaqoSolar.com. today, attending the conference call, we have our chairman and CEO, Mr. Jiang Xu, our deputy CEO, Ms. Anita Xu, our CFO, Mr. Mingyang and myself. Today's call will begin with an update from Mr. Xu on market conditions and company operations, followed by a translation from 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 and 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 Security Litigation Reform act of 1995. These statements involve inherent risks. A number of factors could cause actual results to differ materially from those contained in any forward looking statement. 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 occasionally reference monetary amounts in US Dollar terms. Please keep in mind that our functional currency is the Chinese rmb. We offer these translations into US Dollars solely for the convenience of the audience. Now I will turn the call to our chairman and CEO, Mr. Xiangxu. Mr. Xu, please go ahead.

Anita Xu - Deputy CEO - (00:05:19)

Thank you, Mr. Zhu. So, hello everyone, this is Anita and I'll now deliver our CEO Mr. Zhu's remarks. So the solar PV industry faced continuous challenges in the second quarter of 2025, with market prices across the solar value chain declining due to industry overcapacity and high inventory levels, remaining below cash cost levels As a result, Daqo New Energy recorded quarterly operating and net losses. Nevertheless, we maintained a strong and healthy balance with no financial debt. As of June 30, 2025, the company had a cash balance of $599 million, short term investments of 419 million bank notes receivable of US$49 million and total fixed term bank deposit balance of US$994 million. In total, our financial bank deposit and investment assets, readily convertible into cash if needed, stood at US$2.06 billion, providing us with ample financial liquidity with no financial debt. Our solid financial position brings us confident and strategic resilience to navigate the current market downturn and remain well positioned for long term opportunities. On the operational front, the Company operated at a reduced utilization rate of approximately 34% of its nameplate capacity and response to challenging market conditions and weak side. Total production volume at our two hospital facilities for the quarter was 29,012 metric tons within our guidance range of 25,000 metric tons to 28,000 metric tons. Towards the end of the quarter, as Chinese authorities intensified efforts to curb this orderly competition, we proactively scaled back new sales orders in anticipation of future price recovery. Accordingly, our sales volume for the quarter decreased to 18,126 metric tons from 28,008 metric tons in the first quarter due to lower utilization across our factories. Idle facility related costs for the quarter was approximately 1.3 US dollar per kilogram primarily reflecting non cash depreciation expenses. On a positive note, decline in the cost of silicon metal and reduced energy consumption drove our cash costs lower by 4% to 5.12 US dollars per kilogram sequentially, including approximately 18 cents per kilogram related to item facility maintenance. Overall polysilicon unit production cost decreased by 4% sequentially to an average of 7. 7.26 US dollar per kilogram with lower unit depreciation costs resulting from higher production. In light of the current market conditions, we expect our total poly silicon production volume in the third quarter of 2025 to be approximately 27,000 to 30,000 metric tons. As a result, we anticipate our full year 2025 production volume to be in a range of 1 10,000 metric ton to 130,000 metric to during the second quarter, the solar PV industry remained in a cyclical trough, although proactive initiatives started to emerge toward the end of the quarter. On the Demand side China experienced a surge in installations under market based reform policies and set a new global record with a staggering 93 gigawatts of new solar power capacity added in May. However, installations plummeted to 4.14Gigawatt in June following front loading earlier ahead of the May 31, 2025 cutoff date for new projects. Poly market prices trended downward during the quarter, falling from RMD 39 to $6.45 per kg in April to 32 to 35 RMB per kg by the end of June. According to industry statistics, overall industry poly production for 2025 year to date have been running below overall demand and consumption with monthly supply at approximately 100 to 110,000 metric tons. As a result, industry inventory decreased by approximately 30,000 to 40,000 tons between January and July, leaving overall industry polysilic tons inventory lower than at the beginning of the year. Heading into the third quarter, Chinese supplement have demonstrated increased determination to address irrational competition and energy oil capacity, with the anti-evolution initiative taking a lead role in sectors such as solar PV. On June 29, an article from China's official newspaper Peoples Daily highlighted the issue of oversupply and disruptive competition in the solar PV industry, calling for measures to curb vicious competition and promote high quality development. On June 1, President Xi emphasized the need to regulate disorderly low price competition and phase out our data capacity at the Central Financial and Economic Affairs Commission meeting. The following day, the Ministry of Industry and Information Technology convened a symposium with 14 solar PV companies to accelerate the industry's transition toward high quality growth. Most recently on July 24 that government authorities release the draft amendment to the price loan, representing a significant step towards strengthening market supervision and deterring unfair pricing practices. The draft clarifies criteria for identifying unfair pricing behaviors such as low price dumping and strengthens legal accountability for price related violations. As a result, poly swap sales prices have rebounded in July and poly future prices surged significantly, supported by favorable factors such as expected higher spot pools and simultaneous increases in downstream product prices. For reference, the 2506009 contract rose sharply from a low of RMB 30 per kg in June 2025 to a record high of 55 RMB per kg in July 2025, the strongest level. Since solar PV industry continues to show strong long term prospects in the medium term, we believe that the combined effects of industry self discipline and government anti evolution regulations will foster healthier, more sustainable industry in the long run. As one of the most effective and sustainable energy sources globally, solar power is expected to remain a key driver of the global energy transition and sustainable development. Looking ahead, Daco New Energy is well positioned to capitalize on the long term growth in the global solar PV industry. AM strengthens its competitive edge by enhancing its higher efficiency end touch technology and optimizing its cost structure through digital transformation. AI adoption as one of the world's lowest cost producers with the highest cost, highest quality N type product, a strong balance sheet with no financial debt, we're confident in our ability to weather the current market downturn, capitalize on market recovery and and emerge as a leader in the industry positioned to capture further growth. So now I'll turn the call to our CFO, Mr. Ming Ming, who will discuss the company's financial performance for the quarter. Ming, please go ahead.

Ming Yang - Chief Financial Officer - (00:12:43)

Thank you Anita and hello everyone, this is Ming Yang, CFO of Daku New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's second quarter 2025 financial performance. Revenues were 75.2 million compared to 123.9 million in the first quarter of 2025 and $219.9 million in the second quarter of 2024. The decreasing revenue compared to the first quarter of 2025 was primarily due to a decrease in Sales loss was 81.4 million compared to 81.5 million in the first quarter of 2025 and 159 million in the second quarter of 2024. Gross margin was negative 108% compared to negative 65.8% in the first quarter of 2025 and negative 72% in the same quarter of 2024. The decrease in gross margin compared to the first quarter of 2025 was primarily because sales volume decreased while idle facility costs remained relatively fixed. The G and A expenses were 32.1 million compared to 35.1 million in the first quarter of 2025 and 37.5 million in the second quarter of 2024. NGA expenses during the second quarter included 18.6 million in non cash share based compensation costs related to the company's shared incentive Plan compared to $18.6 million in the first quarter of 2025. The declining G&A expenses in the second quarter compared to the first quarter is a result of lower staffing costs as well as lower sales expenses. R and D expenses were 0.8 million compared to 0.5 million in the first quarter of 2025 and 1.8 million in the same quarter of 2024. R&D expenses can vary from period to period and reflect R and D activities that take place during the quarter. As a result, the foregoing loss on operations was 115 million compared to 114 million in the first quarter of 2025 and 195.6 million in the second quarter of 2024. Operating margin was negative 153% compared to -92% in the first quarter of 2025 and negative 89% in the same quarter of 2024. Net loss attributable to Daqo New Energy Corp. Shareholders was 76.5 million compared to 71.8 million in the first quarter of 2025 and 119.8 million in the second quarter of 2020. Loss per basic ADS was $1.14 compared to $1.07 in the first quarter of 2025 and $1.81 in the second quarter of 2024. Adjusted net loss attributable to Dr. New Energy Corp. Shareholders excluding non cashier based compensation. Compensation cost was 57.9 million compared to 53.2 million in the first quarter of 2025 and 98.8 million in the same quarter of 2024. Adjusted loss for basic ADS was $0.86 compared to $0.80 in the first quarter of 2025 or $0.50 in the second quarter of 2024. EBITDA was negative 48 million compared to negative 48.4 million in the first quarter quarter of 2025 and negative $145 million in the second quarter of 2024. EBITDA margin was negative 64% compared to negative 39% in the first quarter of 2025 and negative 66% in the second quarter of 2024. Now on the company's financial condition as of June 30, 2025, the company has 599 million cash, cash equivalent and restricted cash compared to 792 million as of March 31, 2025 and 998 million as of June 30, 2024. As of June 30, 2025, short term investment was 418.8 million compared to 1.68 million as of March 31, 2025 & 219.5 million as of June 30, as of June 30, 2025. Notes receivable balance was 49 million compared to 62.7 million as of March 31, 2025, and 80.7 million as of June 30, 2024. Notes receivable balance represent bank notes with maturity within six months. And as of June 30, 25, the balance of fixed term deposits within one year was 916.7 million, compared to 1.12 billion as of March 31, 2025 and 1.17 billion as of June 30, 2024. Now on the company's cash flows. For the six month ended June 30, 2025, net cash used in operating activities was 105.4 million, compared to 278.6 million in the same period of 2024. And for the six months ended June 30, 2025, Net cash used in investing activities was 342.7 million, compared to 11.7 billion in the same period of 2024. The net cash used in investing activities in the first half of the 2025 includes $87.8 million in the purchase of PNE and $255 million related to purchase of short term investments and fixed term deposits. And for the six months ended June 30, 2025, net cash used in financing activities was $32,000, compared to $43 million in the same period of 2024. And that concludes up the. We will now open the call to Q and A from the audience Operator. Please begin.

OPERATOR - (00:19:08)

Thank you. We will now begin the question and answer session. To ask a question, you may press STAR and 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 and 2. At this time we will pause momentarily to assemble our roster. Our first question today will come from Alan Hahn of JP Morgan. Please go ahead.

Alan Hahn - Equity Analyst - (00:19:49)

Thank you for letting me ask the questions. Management, I have two questions. The first one is on the policy. on the latest development on the discussion on the consolidation fund or other policy development right now. And number two is on Polyprics. I understand, like due to the pricing law, I mean the poly prices increased towards the 4550 level. But at the same time, I mean the sequential demand supply and channel inventory is also increasing. So how should we think about like the Polypride in the next three months? Thank you.

Anita Xu - Deputy CEO - (00:20:51)

Okay, thank you, Alan. So regarding the latest development in industry. So on August 19, the MIIT also the National Development and Reform Commission along with the Ministry of Social affairs and State Administration for Market Regulation and National Energy Administration, they have jointly held a Symposium on a solar PV industry. So during that meeting a number of government officials together with a number of solar PV manufacturers and the relevant power companies as well as the CPIA and relevant local industrial and information technologies department, they all attended the meeting and basically during the meeting they have again reinforced that we have to curb the irrational competition of selling below cost. So first we have to strengthen the industry regulation through strengthening the management of investment in the PV project and promote the gradual phasing out of outdated production capacity through market oriented and law based approaches. And second of all they aim to curb low prices and orderly competition so through improving the price monitoring and also the product pricing mechanism to crack down on irregular practices such as selling low cost and lastly to standardize the products, the product quality so comebacks practices such as reducing the quality control or things like infringing IP rights and I think during the meeting the essence is to support the industry self regulation and to gradually work towards forming this buyout Special Purpose Vehicle (SPV) for acquiring outdated capacity in the industry. And regarding prices it will really depend on how this buyout FTV will roll out because we're still under the progress of working out the details of such spv. So it's hard for us right now to say exactly how prices will develop in the coming months but I think as we can see recently prices have increased especially in the futures market and the expectation of rising prices. Also if we look at the latest solar project that could work as a, as a sign of the industry development, the China Modian Corporation they had a 20 gigawatt project and from that the module crisis was around 71 RMB cents per watt to 75 RMB per watt. So it has really increased and it's way above the floor prices for modules right now and we believe that has passed through to the upstream poly sector. I hope that answers your question.

Alan Hahn - Equity Analyst - (00:24:17)

Thank you. That answered my question and I'll pass it on. Thank you.

Anita Xu - Deputy CEO - (00:24:22)

Great, thank you Alan.

OPERATOR - (00:24:27)

Our next question today will come from Philip Shen of Roth Capital Partners. Please go ahead.

Matt Ingerman - Equity Analyst - (00:24:34)

Hi, this is Matt Ingerman for Phil. Thank you for taking our questions. Kind of following up on the past question is you know how sustainable do you think that you know higher pricing can be when with the anti involution initiatives? And secondly what's your outlook for industry production volumes and when would you expect to see the inventory levels be healthy again?

Anita Xu - Deputy CEO - (00:25:10)

Give us a minute, we're going to translate for Mr. Mr. Xu. Maybe I will see today. First of all I think one thing that's clear is that there has been consensus that selling below cash cost is unsustainable and very detrimental to the overall industry development. And in our view that's disruptive to the healthy development of the industry and hence pose legal risks and hence we won't be. We would be enforcing the regulations than be lost. And we think that all the industries, all the industry players are on the same page regarding that. And in terms of production volume, I think going forward in the next couple months it will be around 100,000 metric tons to around 110,000 metric tons, relatively balanced with demand per month. Per month.

Matt Ingerman - Equity Analyst - (00:27:04)

Okay, thank you. And then you kind of talked about, you know, potentially in the past, like acquiring surplus production capacity. Is there an update on that strategy and do you think we could see anything in the near term?

Anita Xu - Deputy CEO - (00:27:18)

Yes, I think we're still under. First of all, we're still on the progress for the SPV and I think the whole picture will become more clear in the coming weeks or the coming months. But all the industry players as well as the power companies and the relevant regulators are all working hard towards coming to a consensus because that would be very remarkable for the industry and could set the tone for similar industries in China. So such as EV and also lithium batteries, I think are starting with solar pv, which is why they mentioned about solar PV in the news article by People's Daily on June 30th. So we're all working very hard towards coming to a result and we are quite optimistic about that because that's what the industry should and that's good for the overall development of the industry because right now selling zero cash cost, first of all, none of the company is making a profit. And second of all, internationally they have been viewing China or accusing China of anti dumping and that's not something that we want to see as a whole.

Matt Ingerman - Equity Analyst - (00:28:41)

Thank you. I'll pass it on.

Anita Xu - Deputy CEO - (00:28:43)

Great. Thanks, Matt.

OPERATOR - (00:28:47)

Our next question today will come from Alan Yaw of Jefferies. Please go ahead.

Alan Yaw - UNKNOWN - (00:28:55)

Thanks a lot for taking my question. My question is about the buyback the company just announced. So I saw that the company has approved 100 million of SharePoint repurchase program. Wonder if what's the thinking behind that and also what's the timeline in the buyback?

Anita Xu - Deputy CEO - (00:29:14)

Yeah, thank you, Alan. So we have to just authorize this new share repurchase program today of in the amount of US$100 million until the end of next year. And the logic behind this is that we are optimistic about the future of the industry and we believe we could see a turning point soon. I believe in previously, our valuable shareholders have been wondering when will we want to start the share repurchase? And the reason why we were hesitant about it is because we believe if we just rely on the market to rebalance supply and demand will take a relatively long time of approximately two to three years given how strong and all the companies who have expanded their capacity this round are. However, we believe that because we are on the same page towards promoting the healthy development of industry and hence we are more optimistic about the future or the outlook of the entire industry. And we believe that we want to strengthen the company confidence of our shareholders as well. And that's aligned with our overall strategy. And in terms of the overall pace of the share repurchase program, I think that would also be contingent upon the market development. But that's definitely the first move. We're working towards strengthening the confidence in the market.

Alan Yaw - UNKNOWN - (00:31:00)

Given that the stock price of the A share is actually above the IPO price already. So will share price or shareholding reduction on the A share to fund for the buyback in USD back on the table again?

Anita Xu - Deputy CEO - (00:31:22)

Yes, I think that's definitely a consideration given that we have been trading above the IPO issue. Price right now should be around 30 or. Yeah, that's definitely on the table and we'll consider that. But I think how we want to start this program versus the remaining cash on our liquidity right now because previously we still have a meaningful amount on the list go. So we will start with that allocation first. But selling on Asia to repurchase on the US is definitely back on the table.

Alan Yaw - UNKNOWN - (00:32:00)

That's right. And following the question from Ellen and also Philip on the consolidation initiative. So how do you see yourself in terms of the endgame, like the amount of volume you will be able to produce, for example? Now your guidance is around 11, 110 and 130,000 of metrics for the volume of this year. If the consolidation effort is successful, what do you think will be your production volume going forward?

Anita Xu - Deputy CEO - (00:32:42)

I think that depends on a couple of things. If we calculate the amount of overall capacity that's built or in the process of being built, that will be around 3.5 million metric tons at least. And the production volume of how much we can produce per year will really depend on how much capacity are still remaining in the market and the overall demand per year. Right. Because I think the fundamentals behind this action is that supply would meet demand per year from now on. So none. I believe that going forward all the companies will reduce their utilization rate or operate at a utilization Rate that would match the demand. So it won't be 100% at least in the coming years.

Alan Yaw - UNKNOWN - (00:33:43)

I will pass on. Thank you.

Anita Xu - Deputy CEO - (00:33:46)

Great, thanks Alan.

OPERATOR - (00:33:50)

Our next question today will come from Meng Wen Wang of Goldman Sachs. Please go ahead.

Meng Wen Wang - Equity Analyst - (00:33:58)

Hi. Thank you management for taking my question. I have two questions mainly related to the poly price outlook. So first like do we have any color on the benchmark production cost to derive the polysilicon regulated pricing? Because I know there's a lot of news coming in to talk about selling price should not be under the production cost but do we have any more colors on the definition of the production cost? And secondly as we mentioned like the, we have been doing well in terms of to sustain the poly price hike and as a result our shipment volume declined a bit. So going forward how do we see, how do we, we balance the price and inventory the dynamic. Yeah, that's my question. Thanks.

Anita Xu - Deputy CEO - (00:35:26)

Okay, thanks Meng Wen Wang for your question. So our view is that the industry will need to sell at a price above the industry production cost. And our understanding is the industry overall, I would say the average, average quote unquote production cost probably in the mid 40ish range. So our view is that because of the Chinese laws and the government policy is that that's kind of, that will be the minimum poly pricing that the industry players will be required to sell to its customers. And I think if you look at the most recent, I think both transactional pricing as well as futures pricing. Right in the high, kind of the high 40s to the low 50s. So that is reflective of this new government policy that requires the industry players to sell above production cost. So that is our poly price outlook going forward. Yes.

Meng Wen Wang - Equity Analyst - (00:36:56)

To follow up the question, if the poly price stay at around 50 renminbi per kilo and if our product don't sell like we keep piling up our inventory. So how do we see how to like what's our strategy in terms of these kind of situations?

Anita Xu - Deputy CEO - (00:37:25)

I think there will be industry policies and perhaps government policies supported by the government but that will require industry supply to balance within the demand. Right? Right. So let's say just making assumptions, right? If industry demand say is 1.2 million tons per year in 100,000 tons per month then the industry sales and annual production will be consistent with that kind of demand levels. It will be adjusted so that polypricing can be maintained at the production costs are above level. And to follow up on your question on inventory, I think for big picture, if people want to manage their inventory, I think the direction is to manage the utilization rates of the company. So that will not be over demand going forward. And for us, we will really have to wait to see how the regulation unfolds in the next coming weeks or the next coming months before we can decide what our strategy will be. And also to add on, I know there are companies who are participating in the futures market. We've also also participated a meaningful amount in the futures market just to hedge against risk and to arbitrage the strategy.

Meng Wen Wang - Equity Analyst - (00:39:09)

Yeah, thanks Ian. And thanks Anita. That's really clear. So to sum up, we are expecting some kind of policy to help the industry cut production into September. And we have actively engaged in the polysilicon future market in order to, to mitigate the volatility of the polysilicon price.

Anita Xu - Deputy CEO - (00:39:32)

Right. I mean we were registered as the first batch of the companies who are allowed to sell in the futures market. But strategy wise will really depend on how the regulations will come out and. Yeah, and how, how the spot prices will move.

Meng Wen Wang - Equity Analyst - (00:40:00)

Sure. How about the policy timeline? Shall we expect any meaningful policy kicking into September?

Anita Xu - Deputy CEO - (00:40:11)

We are working towards or all of the related parties, including the cpia, the manufacturer and the related regulators are working very diligently toward a result coming out from the continuous meetings. However, we cannot guarantee but we believe that because everyone is on the same page, we are working towards a result or a proposal coming out. Yeah, sure.

Meng Wen Wang - Equity Analyst - (00:40:48)

That's all for my question. I will pass it on.

Anita Xu - Deputy CEO - (00:40:51)

Thank you. Great, thank you.

OPERATOR - (00:40:56)

The next question today will come from Shihua Hu of cicc. Please go ahead with your question.

Shihua Hu - Equity Analyst - (00:41:08)

Thanks Management. This is from CICC and my first question is I found you lower the sales volume for second quarter. So how's the plan on it and what's the plan for utilization rates in the future? And my second question is I find you Daqo reduced the production cost besides the reduced cash cost. So what other ways are there to reduce the cost? Thank you. Hi, thank you. So I think for the first question, the reason why the sales volume is meaningfully below the production volume because prices are really trading at a very low level and below cost level. And as we are working towards or working out a proposal since the first meeting that was hosted and hosted by MIT and DRC were happening in the second quarter. So we were waiting to see how the policies will shift or how much capacity will phase out in the future so that we can adjust the our sales strategy accordingly. And we believe that once the regulations comes out, if any, then we will try to maintain our inventory at a healthy level.

Anita Xu - Deputy CEO - (00:42:54)

Regarding utilization rates. So I think we're maintaining the 30 to 35% utilization rate, I think it will be subject to, for example, demand, environment and pricing as well as the industry consensus or industry self discipline in terms of supply and production. So you'll be a balance of those decisions. But I think currently we're maintaining the 30 to 35% rate for now in a monitoring industry status and progress. In terms of production costs, I think for Q2 it is slightly lower than Q1. I think it's helped by both improvements in manufacturing efficiency and for example, lower energy usage as well as metal cost. And currently we're expecting the cost trend to continue to improve for Q3 as well. So for example, our current cash cost is approximately, say $5 per kilogram right now, I think based on the current fundamental cost, which is already lower than our Q2 2025 cost. So that's the. The current cost status for the company.

Shihua Hu - Equity Analyst - (00:44:31)

Okay. Oh, very clear. So that's all my question. Thank you.

Anita Xu - Deputy CEO - (00:44:36)

Okay, thank you. Good.

OPERATOR - (00:44:41)

Our next question will come from Gordon Johnson of GLJ Research. Please go ahead.

Gordon Johnson - Equity Analyst - (00:44:50)

Hey guys, thanks for taking the questions. So I guess my first question is it seems like you guys explicitly said you intentionally held back polysilicon sales in the second quarter. So can we conclude from that that you'll sell more in the third quarter? If you could provide some color there. And then from my calculations, it seems like you're guiding production to increase from 26,000 metric tons at the midpoint in Q2 to 28.5 in Q3 and then 40.7 in Q4. Should we take from that you intend to sell significantly more polysilicon in Q4? And then I have a follow up. Thank you.

Anita Xu - Deputy CEO - (00:45:34)

Okay, thank you, Gordon. So first of all, I think the reason why we held back or sold relatively a lot lower than our actual production volume was because it was trading at below cash cost. And as we don't want to disrupt the overall the industry dynamics or as the industry has guided that we should not be selling below the production cost, we have adjusted our sales strategy accordingly. And going forward in the third quarter, as you might have seen recently, that prices have ticked up. And we believe if it's not cutting below our cost, then it makes sense for us to start selling. And like I said before, I think it will really depend on when and how the regulations will come out. Then we would adjust our sales strategies accordingly in the remaining days in the third quarter as well as going forward into the fourth quarter.

Gordon Johnson - Equity Analyst - (00:46:52)

Okay, that's helpful. And then if I think about you guys said that transactions and the futures market is around the high 40s, low 50s based on my calculation that would suggest the price of around $7.70 for Polysilicon USD. Yet your ASP in Q2 was you know, 419. So I understand you don't have great visibility. It seems like on what you're going to sell in Q3 until policy is decided. But are you transacting at that price that you highlighted the high 49s low 50s levels right now? Thank you for the questions.

Anita Xu - Deputy CEO - (00:47:58)

Gordon. So I think that there's two specific goals that the company is trying to achieve, right. So one is based on the I think the government policies and the new law. So. So I think we will sell it below, above our production cost for sure. And I think the levels indicated is representative of the market current transactional cost and also another of our company sales operations goal is to significantly reduce our inventory at hand as well given the current market dynamic environment where there's opportunity to do that. So we will try our best to do that. And I guess one clarification regarding pricing is the RMB price that we call actually includes a 13% VAT. Okay so I think you have to divide by 1.13 to get to the actual show a selling price XVAT. So that's right now it's roughly maybe $5.80 range, something like that. Right.

Gordon Johnson - Equity Analyst - (00:49:15)

So I mean does that mean you guys will be gross margin positive in Q3? Thank you.

Anita Xu - Deputy CEO - (00:49:23)

Let me just conclude that we expect to be cash. What's the generating cash from our sales? Because there's a lot of I guess non cash depreciation costs related to our Eidl facility because we're only running a one service utilization. But I think if you remove the non cash depreciation I think we're going to generate positive cash margin. Very helpful. Thank you.

Gordon Johnson - Equity Analyst - (00:49:56)

Thank you.

Anita Xu - Deputy CEO - (00:49:58)

Thanks Gordon. Thank you.

OPERATOR - (00:50:02)

This will conclude our question and answer session. At this time I'd like to turn the conference back over to Jesse Zhao for any closing remarks.

Jesse Zhao - Director of Investor Relations - (00:50:13)

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

OPERATOR - (00:50:27)

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.