Daqo New Energy Corp ADR

Good day and welcome to the DACO 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 touch-tone 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 Jessie Zhao, Director of Investor Relations. Please go ahead.

Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Darko New Energy. Thank you for joining our conference call today. Darko New Energy just issued its financial results for the second 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 Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, 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 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 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 and uncertainties. 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 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. I would like to thank everyone for participating in the second round of the Sino-Turkish Cooperation Conference in 2025. I think the content of my speech today will be translated by Anita. She will represent me. I think China's prosperity has slowly changed from the inside out. I would like to recommend and thank you for your questions. Thank you.

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, San Antonio Energy recorded quarterly operating and net losses. Nevertheless, we maintain a strong and healthy balancing 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 $49 million, and total fixed-term bank deposit balance of $994 million. In total, our financial bank deposits and investment assets, readily convertible into cash if needed, stood at $2.06 billion U.S. dollars. providing us with ample financial liquidity. With no financial debt, our solid financial position brings us confidence 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 main plate capacity and response to challenging market conditions and weak selling prices. Total production volume at our two Hospital facility for the quarter was 29,012 metric tons, was in our guidance range of 25,000 metric tons to 28,000 metric tons. Towards the end of the quarter, our 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 1.38 USD 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 USD per kilogram, consequentially. including approximately 18 cents per kilogram related to item facility maintenance. Overall, Paul Silicon's unit production cost decreased by 4% sequentially to an average of 7.26 US dollars per kilogram, with lower unit depreciation costs resulting from higher production. In light of the current market conditions, we expect our total Paul 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 the range of 110,000 metric tons to 130,000 metric tons. During the second quarter, the solar PV industry remained in a difficult 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 stagnant 93 gigawatts of new solar power capacity added in May. However, installations plummeted to 14 gigawatts in June, falling from loading earlier ahead of the May 31st 2025 cutoff date for new projects. Holiday market prices trended downward during the quarter, falling from RMB 39 to 45 per kilogram in April to 32 to 35 RMB per kilogram by the end of June. According to industry statistics, overall industry poly production for 2025 year-to-date has been running below overall demand and consumption, with monthly supply at approximately 100,000 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 poly silicon inventory lower than at the beginning of the year. Heading into the third quarter, Chinese authorities have demonstrated increased determination to address irrational competition and initial 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 People's 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 1st, President Xi emphasized the need to regulate disorderly low-price competition and phase out all 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 24th, government authorities released a draft amendment to the price law representing a significant step towards strengthening market supervision and deterring unfair pricing practices. The draft clarifies criteria for identifying unfair pricing behavior, such as low price dumping, and strengthens legal accountability for price-related violations. As a result, poly-spot 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 2506-09 contract rose sharply from a low of RMB 30 per kilogram in June 2025 to a record high of 55 RMB per kilogram in July 2025, the strongest level since the beginning. The solar PV industry continues to show strong long-term prospects. In the median term, we believe that the combined effects of industry self-discipline and government anti-involution regulations will foster a healthier and 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 and strengthen its competitive edge by enhancing its higher efficiency and touch technology and optimizing its cost structure through digital transformation and AI adoption. As one of the world's lowest cost producers with the highest cost, highest quality end-type products, it's strong balance sheet with no financial debt. We're confident in our ability to weather the current market downturn, capitalize on market recovery, 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 Ye, 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 DocuNew Energy. We appreciate you joining our earnings conference 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 same quarter of 2025. The decreasing revenue compared to the first quarter of 2025 was primarily due to a decrease in sales volume. Growth 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. Growth 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 growth margin compared to the first quarter of 2025 was primarily because sales volume decreased while idle facility costs remained relatively fixed. The Q&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. SG&A 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 SG&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&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&D activities that take place during the quarter. As a result of the foregoing, loss on operations was $115 million compared to $114 million in the first quarter of 2025 and $195.6 million in the same quarter of 2024. Operating margin was negative 153% compared to negative 92% in the first quarter of 2025 and negative 89% in the second quarter of 2024. Net loss attributable to Dr. Newman G 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 2024. 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 DACA New Energy Corp shareholders excluding non-cashier-based compensation costs 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. Assisted loss for basic ADS was 86 cents compared to 80 cents in the first quarter of 2025 or 50 cents in the same quarter of 2024. EBITDA was negative 48 million compared to negative 48.4 million in the first 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 had $599 million in cash, cash equivalents, and restricted compared to $792 million as of March 31, 2025, and $998 million as of June 30, 2024. As of June 30, 2025, short-term investments was $418.8 million, compared to $168 million as of March 31, 2025, and $219.5 million as of June 30, 2024. And as of June 30, 2025, no 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, 2025, the balance of fixed-term deposits within one year was 960.7 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 sixth month, end of 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 sixth month, end of June 30, 2025, Net cash used in investing activities was $342.7 million compared to $1.7 billion in the same period of 2024. The net cash used in investing activities in the first half of 2025 includes $87.8 million in the purchase of P&E 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 finance activities was $32,000 compared to $43 million in the same period of 2024. And that concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.

Thank you. We will now begin the question and answer session. To ask a question, you may press star and then 1 on your touchtone phone. If you are 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 like to withdraw your question, please press star and two. At this time, we will pause momentarily to assemble our roster. Our first question today will come from Alan Hahn of J.P. Morgan. Please go ahead.

Thank you for letting me ask the questions, management. I have two questions. The first one is on the policy development. Can you share some of the latest development on the legislation on the consolidation fund or other policy development right now? And number two is on policy prices. I understand like due to the pricing law, I mean the policy prices increased towards the 45 to 50 level. very thin time, but the sequential demand supply and China's inventory is also increasing. So how should we think about the quality price in the next three months? Thank you.

Can you speak? Can you speak? Can you speak? So regarding the latest development in the industry, August 19th, the MIT, also the NDRC, along with the Ministry of Social Affairs and State Administration for Market Regulation and National Energy Administration, They have jointly held a symposium on the solar PV industry. So during that meeting, a number of government officials together with a number of solar PV manufacturers and a lot of power companies as well as the CPIA and relevant local industrial and information technology departments, 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 TV projects 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 in the quarterly competition, so to improving the price monitoring and also the product pricing mechanism to crack down on irregular practices such as selling low costs. And lastly, to standardize the product quality, so combat practices such as reducing the quality code 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 SPV for acquiring outdated capacity in the industry. And regarding prices, it will really depend on how this buyout SPV 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 sign of the industry development, the China Quadium Corporation, they had a 20 gigawatt project. And from that, the module prices was around 71 RMB cents per watt to 75 RMB per watt. So it has really increased, and it's way above the small prices for modules right now. And we believe that has passed through to the upstream poly sector. I hope that answers your question.

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

Great. Thank you, Ellen.

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

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 with the anti-involution initiatives? And secondly, you know, what's your outlook for you know, industry production volumes, and when would you expect to see, you know, the inventory levels be healthy again?

Give us a minute. We're going to translate for Mr. Schieber.

I think the price will not be lower than the cost. The price will not be lower than the cost. It's impossible. We can't do anything illegal or illegal. We have to follow the law. We can't do anything illegal or illegal.

Okay, so 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 illegal risks and hence we won't we would be enforcing the regulations and the laws, and we think that 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.

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?

Yes, I think we're still under, first of all, we're still under 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 For similar industries in China, such as EV and also lithium batteries, I think they're starting with solar PV, which is why they are 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 That's what the industry should be, and that's good for the overall development of the industry. Because right now, selling below cash cost, first of all, none of the company is making a profit. And second of all, internationally, they are viewing China or accusing China of anti-dumping, and that's not something that we want to see as a whole.

Thank you. I'll pass it on.

Great. Thanks, Matt.

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

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 share purchase program. I wonder what's the thinking behind that and also what's the timeline in the buyback?

Yeah, thank you, Alan. So we actually just authorized this new share repurchase program today in the amount of $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 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, it would 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 the 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 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 was also be contingent upon the market development, but that's definitely the first move we're working towards, strengthening the confidence in the market.

That's very clear. Given that the stock price of Asia is actually above the ideal price already, so will share price or shareholding reduction on the A share to fund further buyback in U.S. back on the table again?

Yes, I think that's definitely a consideration given that we have been trading above the IPO issue price. Right now it should be around $30,000. 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 list code right now because previously we still have a meaningful amount on the list code. So we will start with that allocation first. But selling on Azure to repurchase on the U.S. is definitely back on the table.

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

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 have produced per year really depends 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 the supply would meet the demand per year from now on. So I believe that going forward, all the companies will reduce their utilization rates or operate at a utilization rate that would match the demand. So it won't be 100% at least in the coming years.

I see. I will pass on. Thank you.

Great. Thanks, Alan.

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

Hi. Thank you, management, for taking my question. I have two questions mainly related to the polyprice outlook. So first, do we have any color on the benchmark production cost to derive the policy regulated pricing? Because I know there's a lot of news coming in to talk about the selling price should not be under the production cost. Do we have any more colors on the definition of the production cost? And certainly, as we mentioned, 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 balance the price and inventory, the dynamic? Yeah, that's my question.

Thanks. OK.

Thanks, Moa, 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 quote-unquote, production costs probably in the mid-40-ish range. So our view is that because of the Chinese laws and the government policy, 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 costs. So that is our probably price outlook going forward.

Yes, to follow up the question, if the polyprice stay at around 50 BNB 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 this kind of situation?

I think there will be industry policies and perhaps government policies supported by the government, but that will require industry supply to balance with industry demand, right? So let's say, just making assumptions, right? If industry demand is 1.2 million tons per year in 100,000 tons, per month, then the industry sales and the annual production will be consistent with that kind of demand level. It will be adjusted so that poly pricing can be maintained at the production costs or above level.

And to follow up on your question on inventory, I think for A big picture is people want to manage their inventory. I think the direction is to manage the utilization rates of the companies so that it 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 month, then 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 participated a meaningful amount in the futures market just to hedge against risks and to arbitrage as a strategy.

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

We were registered as the first batch of the companies who are allowed to sell on the futures market. will really depend on how the regulations will come out and how the spot prices will move.

How about the policy timeline? Should we expect any meaningful policy kicking into September?

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

Yeah, sure. That's all for my question. I'll pass it on. Thank you.

Great. Thank you, Maureen.

The next question today will come from of CICC. Please go ahead with your question.

CICC . This is Suhui Hu from CICC, and my first question is, I find 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 keep reduce the production cost besides the reduced cash cost, so what other ways are there to reduce the cost? Thank you.

I think for the first question, the reason why the sales volume is meaningfully below the production volume is because prices are really trading at a very low level and below cost-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 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?

Regarding utilization rates, I think we're maintaining the 30 to 35 percent utilization rate. I think it will be subject to, for example, demand environment and pricing as well as the industry. a consensus or industry self-discipline in terms of supply and production. So there will be a balance of those decisions, but I think currently we're maintaining the 30 to 35 percent utilization rate for now in the monitoring industry status and progress. In terms of production cost, I think for Q2 it is slightly lower than Q3. Q1, I think it's helped by both improvements in manufacturing efficiency and, for example, lower energy usage as well as lower metal costs. And currently, we're expecting this cost trend to continue to improve for Q3 as well. So, for example, our current cash cost is approximately, say, $5.00. I think based on the current fundamental cost, which is already lower than our Q2 2025 cost. So, that's the current cost status for the company.

Okay. Very clear. So, that's all my questions.

Thank you. Okay. Thank you.

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

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 cells 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.

Okay, thank you, Gordon. So first of all, I think the reason why we helped backwards sold relatively a lot lower than our actual production volume was because it was trading at a low cash cost and as we don't want to disrupt the overall industry dynamics or I should say 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 picked 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 would 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.

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 slash low 50s levels right now? Thank you for the questions.

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 I think we will start below, above our production cost for sure. I think the levels indicated is representative of the market current transactional cost. And also, another of our company's 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. I guess one clarification regarding pricing is the RMB price that we quote actually includes a 13% VAT. Okay, so I think you have to divide by 1.13 to get to the actual selling price, ex-VAT. So that's a rent-out is roughly maybe $5, maybe $6, range, something like that.

Does that mean you guys will be gross margin positive in Q3? Thank you.

Let me just conclude that we expect to be cash generating cash from our sales. Because there's a lot of non-cash depreciation costs related to our idle facility. Because we're only running a one-third But I think if you remove the non-cash depreciation, I think we're going to generate a positive cash margin.

Very helpful.

Thank you. Thank you. Okay, good. Thanks for this. Thank you.

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.

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. And you may now disconnect your lines.