Daqo New Energy Corp. (DQ) Q3 2026 Earnings Report, Transcript and Summary

Good day. And welcome to the Daqo New Energy Third Quarter 26 Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press *1. on a touch-tone phone. To withdraw your question, please press *2. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, IR Director. Please go ahead.

Hello, everyone. I am Jessie Zhao, the investor relations director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy has just issued its financial results for the third quarter of 26. Which can be found on our website at www.cqsolar.com. Today, attending the conference call, we have our deputy CEO, Ms. Xu Xiaoyu. Our CFO, Mr. Ming Yang myself, our chairman and the CEO, Mr. Tang Xu, is on a business trip now. So Ms. Xu Xiaoyu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Ms. Xu on market conditions, and company operations and then Mr. Yang will-- 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 include. 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 Litigation Reform Act of 2000. These statements involve inherent risks and uncertainties and a number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the report 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 maybe 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 assess such information except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into US dollars for the convenience of the audience. Now I will turn the call to our deputy CEO, Ms. Xu Xiaoyu. Ms. Xu, please go ahead.

Thank you. Hello, everyone. This is Xu Xiaoyu. And I will now deliver our management remarks on behalf of our CEO, Mr. Xiang Xu. Supported by continued anti-involution policy, including price enforcement, the polysilicon sector bottom out, and rebounded in Q3 with polysilicon prices gradually recovering towards cost levels. However, downstream players continued to hold back with and inventory and largely limited their purchases to immediate operational needs. Keeping overall sector trading volumes low. Against this backdrop, we delivered a substantial increase in Q3 shipment volume. Driving strong sequential revenue growth and narrowing losses. Our financial position remains sound with a robust balance sheet and zero debt throughout the period. As of 09/30/2026, we held cash equivalents, restricted cash of $546.5 million. Short term investments of $267.3 million. Bank notes receivable of $161.5 million. Held to maturity investment of $51.6 million, and a fixed term bank deposit balance of $1 billion. Together, these readily convertible assets total $2.06 billion up from $1.92 billion at the end of Q2. Providing a strong financial foundation and strategic flexibility to navigate the current market environment. Our nameplate capacity utilization rate was approximately 70% during the period. Total production volume at our 2 polysilicon facilities was 53.5 thousand metric tons. exceeding our guidance range of 50 thousand to 55 thousand metric tons. Sales volume rose sharply from 15.2 thousand metric tons in Q2. To 46.9 thousand metric tons in Q3. Following our shift in June from a wait and see stance to a more market oriented sales and pricing strategy. We believe this increase also reflects greater customer confidence in our product quality and continued preference for our products. Our average selling price increased by 2% sequentially to $4.12 per kilogram. Although the increase lags the broader market recovery because Q3 shipments fulfilled orders signed before late July. On the cost side, average total production cost and average cash cost fell by 9.7% and 7.4% sequentially. Respectively. reaching new record lows of $5.37 per kilogram, and $4.23 per kilogram, respectively, reflecting our continued improvement in manufacturing efficiency and cost control. In light of the current market dynamics, we expect total polysilicon production volume in Q4 of 26 to be approximately 35 thousand-45 thousand metric tons. For the full year of 2026, we expect production volume to be in the range of 175 thousand to 185 thousand thousand metric tons. Anti-involution efforts across the solar PV sector continued during Q3. The state administration for market regulation released price compliance guidance targeting the solar PV sector on July 31. followed in August by an industry initiative against low cost sales that we co-signed. Against this backdrop, Low-cost manufacturers halted the low cost sales and n-type polysilicon prices rebounded from a trough of RMB 30.5-33 per kilogram in Q2 to approximately RMB 40-43 per kilogram by the end of Q3. On September 3, the National Development and Reform Commission and the SAMR jointly issued the notice on matters concerning cost accounting for low price disorder competition in key industrial products. Establishing a firmer regulatory basis for policy compliance. Despite these policy tailwinds, elevated industry inventories, and weak near term demand continued to make the operating environment challenging. In response, we are taking a disciplined approach and evaluating a reduction in our near term utilization rate to better align our production with market demand and support the orderly destocking of industry inventory. This approach is consistent with our commitment to the long term healthy development of the solar industry. We are also diversifying beyond our core polysilicon business to reduce our exposure to solar PV sector's cyclicality by targeting the fast growing AI data center power infrastructure market. On 06/03/2026, we announced investment agreement to establish a manufacturing base for the R&D, manufacturing and sales of next-generation energy solutions and related equipment for AIDC, including energy storage systems, solid state transformers, and solid state circuit breakers. These technologies support the AIDC industry's transition to a high voltage, direct current architecture a 1 thousand-voltage DC standard, advanced by NVIDIA, and other leading AI infrastructure providers. The platform is anchored by Daqo Group, an affiliated entity under common ownership with Daqo New Energy Corp. Which brings over 40 years of power equipment manufacturing expertise. Established technology, experienced talent, and deep customer relationships to help accelerate our entry into the segment. We view AIDC power infrastructure as a structural growth opportunity that complements our core business and has the potential to broaden our earnings base. Drawing on our track record, of navigating multiple policy cycles, We intend to pursue this expansion in a disciplined manner while preserving our balance sheet strength. Despite the challenging market environment, the solar PV industry retains compelling long term growth prospects. Growing vulnerabilities in global energy markets have heightened concerns about national energy security, underscoring the important role that solar PV and other renewable energy sources can play. As 1 of the world's lowest cost producers of high quality n-type polysilicon supported by a robust balance sheet and zero debt. We remain optimistic about the sector and are well positioned to capitalize on anticipated broader market recovery and long-term growth opportunities. We will continue to sharpen our competitive edge by ramping high-efficiency N-type technology and using digital transformation and AI adoption to optimize cost. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in that transition.

And now I will turn the call to our CFO, Mr. Ming Yang, to discuss the company's financial performance for the quarter. Ming, please go ahead.

Thank you, Xu Xiaoyu, and hello, everyone.

This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's third quarter 26 financial performance. Revenues were $194.2 million compared to $62.7 million in the second quarter of 26. $245 million in the third quarter of 25. The sequential increase was primarily driven by higher sales volume as the company resumed normal sales activities in June following its adoption of a more market oriented sales and pricing strategy. Gross loss was $60.6 million compared to a gross loss of $83.7 million in the second quarter of 26. And a gross profit of $9.7 million in the third quarter of 25. Gross margin was negative 31%, compared to negative 132% in the second quarter of 2026 and a positive 4% in the third quarter of 25. The sequential improvement in gross margin reflected higher selling prices, lower production costs, and lower inventory impairment Provisions. Inventory impairment provisions totaled $30.9 million in the third quarter of 26. Down from $55.7 million in the second quarter of 26. Selling, general and administrative expenses were $16.3 million compared to $15.8 million in the second quarter of 26 and $32 million in third quarter of 25. The sequential increase was primarily attributable to higher sales volume. Year over year decrease was primarily because the company recognized $18.6 million in non cash share based compensation related to the strength of the plan in the third quarter of 25. Well, it did not have the same item in the same period of 2026. R&D expenses were $2.7 million compared to $1.6 million in the second quarter of 26 and $600 thousand in the third quarter of 25. Increase in R&D expenses was primarily due to R&D of next generation energy solutions for AIDC. R and 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 from operations was $78.6 million compared to $98.1 million in the second quarter of 2026 and $20.3 million in the third quarter of 25. O margin was negative 40.5%, compared to negative 156% in the same quarter of 26 and negative 8% in the third quarter of 25. And as a result of the foregoing, net loss attributable to Daqo New Energy Corp shareholders was $52.9 million compared to $81.2 million in the same quarter of 2026. And $14.9 million in the third quarter of 25. Loss per basic ADS was $0.78, compared to $1.20 in the second quarter of 26, and $0.22 in the third quarter of 25. Adjusted net loss attributable to shareholders excluding noncash share based compensation costs was $52.9 million compared to adjusted net loss of $81.2 million in the second quarter of 26 and adjusted net profit of $3.7 million in the third quarter of 25. Adjusted loss per basic ADS was $0.78. Compared to adjusted loss per basic ADS of $1.20 in the second quarter of 26. Adjusted earnings per basic ADS of $0.05 in the third quarter of 25. EBITDA was negative $9.2 million compared to negative $29 million in the second quarter of 2026. and $45.8 million in the third quarter of 25. EBITDA margin was negative 4.7%, compared to negative 46.8% in the second quarter of 2026 and 18.7% in the third quarter of 25. Now on the company's financial condition, as of 09/30/2026, company had $546.5 million in cash and cash equivalents compared to $555 million as of 06/30/2026. Short term investments were $267 million compared to $250 million as of 06/30/2026. Notes receivable balance, representing banknotes maturing within 6 months. was $162 million. Compared to $71.7 million as of 06/30/2026. Held-to-maturity investments were $51.6 million compared to $51 million as of 06/30/2026. Fixed term deposits due within 1 year was $965 million. Compared to $928.9 million as of June 30, 2026. On the company's cash flow, for the 9 months ended September 30, 2026, net cash used in operating activities was $215 million compared to $15 million in the same period of 2025. And for the 9 months ended 09/30/2026, net cash used in investing activities was $235 million compared to $449 million in the same period of 2025. Net cash used in investment activities in 2026 primarily attributable to the purchase of short term investments, fixed term assets. it is a deposit net of redemption as of both purchase of PP&E. Purchase of property, plant, equipment, and land use. Price totaled $93.5 million for the first 9 months of the year. And for the 9 months ended 09/30/2026, net cash used in financing activities was $7.8 million compared to $32 thousand in the same period of 2025. The net cash used in financing activities in 2026 was primarily related to $7.8 million in share repurchases. Made by the company's subsidiary, Xinjiang Daqo, from its minority shareholders on the A-share market. And that concludes our prepared remarks. We will now take questions from the audience. Operator, please begin. O: Thank you. We will now begin the question and answer session. To ask a question, you may press *1. On your touch tone 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, At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Han with JPMorgan. Please go ahead.

Thank you, management, for taking my questions. My first question is related to our sales strategy during the third quarter. Because we read that the spot price has increased since August. And during the first 2 quarters, we have been like, not willing to sell at a very low cost to kind of like, reserve cash and hoping the market to recover. But I mean, majority of our sales are transacted at a lower than the average spot price in fourth quarter. You did explain a little bit about, like, securing some sales in probably in July time frame, signing contract. Just want to get a little bit more clarity on how should we look out for the fourth quarter sales ASP. Is it going to be closer to, the current spot market prices? Or is it still, going through some of the contracts signed in July, which is transacted, like, at $4 per kilogram. Thank you.

Thank you, Alan, for your question.

So I think before we shed some light, on our sales strategy and the ASPs going forward into the fourth quarter, I would like to give a little bit more background on the recent development of the anti-involution.

Because recently, there have been conversations happening on a more frequent basis. And we see a strengthened tone on the pricing floor, which means players are not allowed to sell below cost. And this previously was really under the debate of whether that means, like, cash cost, production cost, or full cost, and we think that is leaning more towards the full cost level. And to give a reference for us, our Q3, the all in cost, including a depreciation and the VAT is around 43 RMB per kilogram.

So I would say that would serve as a benchmark for our strategy However, that being recognized because recently, the inventory. The industry level inventory is really accumulating to a relatively high level to around 700 thousand metric tons overall. which has many factors at the polysilicon level and has at the wafer downstream customer level. So I would say we recognize the market dynamics and the goal is to really have our sales at the benchmark level, but I think that is going to undergo a more gradual process.

Like, how in Q2, we have ramped up to above 30, 31, and then now to around 35.

Average. Got it. So in that sense, I think this is probably a situation across the industry. Which would also mean, overall, the industry is not still trying to figure out how to fully follow the guideline.

I would-- yes. Because the conversation are still ongoing, and so it is not sure from our perspective on the exact level of enforcement. What we can say from our company perspective is that we 100% engaged and promote the healthy end of sustainable long term development of the industry, which you can see from our overall sales volume in the first 2 quarters. As we took a wait and see stance for clearer signal from the regulators and from the policy perspective, and we are reluctant to be the first ones to sell at below cost. Prices. So we are still actively participating in these anti-involution efforts. But. Yeah. But given the energy dynamics, we also have to extend our own strategies in this situation.

Got it. I guess, my second question would be, how do we think about, our strategy in ramping up or increasing the production in fourth quarter maybe? Because, I mean, sounds like the situation is not very clear. And maybe maintaining a lower production volume would be a safer bet. To. I just want to get your thoughts on, like, why we are, like, increasing in the fourth quarter?

O, okay. I think the actual production for the fourth quarter is actually fairly fluid. So there are 2 approaches that we are taking. I think if you look at what we have done is right now, we are producing, say, roughly 15 thousand metric tons per month. But the current manufacturing I would say the process and the actual production, for example, I think in terms of quality, and cost, it is actually fairly optimal. I think you can see in the third quarter, we actually achieved fairly significant cost. Reduction while quality improved. So to the extent that we can maintain the current stable process, we would like to do that. But we also recognize that there is this industry initiative or proposal of reducing the entire industry's utilization further to maybe, say, 35% so across the industry. So we are also observing and looking at how our industry peers are working on that. So to the extent that if the industry peers can come to the actual action of jointly reducing utilization, and certainly, we will welcome that, and we would follow. As well. So I think that is why we have a fairly wide range with regard to our Q4 production level. Got it. Got it.

I guess, my last question will be, like, about the policy outlook. I understand, like, we are now in kind of, like, a potential turning point where in the. A regulation intervention is, like, happening, but is time to sort out, I mean, among players. So I would like to hear, your thoughts on, like, how-- what. When do you think we will get to a point where industry at large will be selling at the designated level, like, the all in cost level.

O, I think that will be that will be a more gradual process because, like, Ming had mentioned, the players recently have proposed of lowering the industry level overall rate to around 35% to balance the overall supply and demand for the year ahead. And that is based our estimated demand outlook for next year. And including the high level of inventory of around 700 thousand metric tons currently. And we think maintaining at this rate will allow prices to return to a reasonable level. But of course, I think it will be under the process of first recovering to above cash cost and then to production cost. And finally to full cost. So we do think that is going to take the at least a couple months going forward. And also, that depends on the timing of when the regulation really evolves and rolls out. Got it. Got it. Okay. Thank you very much for sharing with us like, the current industry backdrop and your strategy. And with that, I will pass on to the next person. Thank you.

Great. Thank you, Alan. O: Next question comes from Philip Shen with ROTH Capital Partners. Please go ahead.

Hey, guys. Thanks for taking my questions. First 1, Xu Xiaoyu, you talked about you are unsure about what the enforcement levels are of the anti-involution policies. I was wondering if you could talk through what we could expect to see as it relates to enforcement you know, could the government become more aggressive? And is that a key catalyst to support pricing And then if they do pursue enforcement, you know, what could they actually do that could be meaningful in impact? Thanks.

So thank you, Philip. I think based on our engagement with our peer players and with the CNEA and from attending these meetings. We do sense a firmer tone in combating the vicious competition in the industry, And I think that is on 2 fronts that we see. And first is the energy consumption. Which would phase out the outdated capacity starting from next year. that is a quite clear point. And the other 1 is the pricing floors that we just mentioned. But I think that is still under debate because every company has their own strategies. Right? And they have their own production, sales, and inventory. Levels. So that is still under the debate. And we do think that we will see something coming very soon on that front.

Xu Xiaoyu, I would like to explore that a little bit more. So you know, there is. Everybody has different levels of where they wanna produce and sell and all these things. But, ultimately, somebody there is gotta be some punitive act. Punitive actions that change behavior. So what do you think those actions could be?

I think the most straightforward punitive action upfront would be the fine for the companies that do not abide by these principles and guidelines. For instance, selling at below, like, the floor level that they need to have punitive actions so that would serve as a red flag and signal for other companies to follow. And in terms of the energy consumption, I think it will be easier to measure from that front because you can clearly see how much energy they use when producing polysilicon. So I think the utmost extreme case would be when they just cut off the power for these facilities. Got it. Okay. Thank you very much.

Moving on to pricing. You gave some color for Q4 pricing. Could you talk about how you expect pricing to trend in 2027? I know a lot of it might depend on some of these enforcement actions and so forth, but it would be helpful to have some kind of baseline for 2027 pricing. Thanks.

I think in the coming quarters, the goal is to really sell above the all in cost. Like I mentioned, for us, the benchmark will be based on Q3, all in cost, that will be at least 43 RMB per kilogram. And based on the based on the execution and how strong the policies roll out. We might expect prices to ramp up, suppose that the supply and demand rebalancing happens faster, and we see a stricter policy coming out. To recover to let's say, 45 to 50 RMB per kilogram range. Okay. Great. that is helpful.

Last 1 for me on your AI data center activities and investments. You know, you are diversifying. You are spending more money in R&D Can you talk to us how much in 2027, how much money could you invest in these sectors? Storage, SSD, solid state circuit breakers, When could we see revenues? Could we see any revenues in 2027, or is this really 2028 or beyond? And then which 1 would be first? you know, of these 3? End markets or products that you are developing? Thanks.

Yeah. So, in terms of the AIDC, we are quite pleased with the progress right now. So construction is already underway. And we have actually broken ground and the pile foundation work has already kicked off. And we expect construction to be completed in the first half of next year. And we expect to begin generating sales next year And by the end of next year, we expect the product to be at operating cash flow positive, and that is primarily driven and thanks to our accumulated experiences and client relationship, with our affiliate and company, the Daqo Group, which has over 40 years of experience in electrical equipment. And we would see the fastest growth in AIDC-related. So the more plug and play modular solutions for the AIDC, you will see revenue and orders in that front. Okay.

there is a lot you said there. You could see revenue in 2027 What are you selling in 2027? Are you selling storage? Or are you selling solid state transformers? And how much money are you planning to invest to bring that capacity online And what exactly are you like, sorry if I missed this, but what is the nameplate of whatever capacity you are building? Thanks.

Yes. So for next year, we would have orders in the AIDC-related, the electrical equipment. So what we are selling is actually the integrated solution for the AIDC. Which include the transformers, the busway, the bus duct, and the switchgear, sorry-- and the bus duct. And that is what we see growing fastest next year. And the overall CapEx we expect next year will be RMB 1 billion. that is the rough estimate at this point. Okay. Got it.

So 1 billion RMB, And then what kind of revenue could we see in 2027? At what margin? Thanks.

I think our gross margin will be around like 15%-20% and the net profit margin will be, like, high single digits. Okay. Thank you. Look forward to learning more about this business, and I will pass it on. Thank you.

Thank you, Bill. O: The next question comes from Alan Lau with Jefferies. Please go ahead.

Thanks. Thank you. Thank you, Ming. So I would like to follow-up on the enforcement because I recall back in, July, there was a meeting between SAMR and the industry players. Back then, I think the message was enforcement this time will be in place. Given that there were 2 years already. So I wonder, like. Because if you look at the ASP of most players or the market prices, yes, there is a lot of inventory in the industry, but what is stopping the authority from enforcing or, like, is it back to more market driven? after a couple of meetings?

I think when we sat down to discuss in more depth. Well, what was the thing that somewhat delayed the process was that once we let's say, set a overall production volume and sales volume for the industry that could cause potential monopoly in the industry and that would not lead to the long term healthy development of the polysilicon as well as the entire value chain. I think that was the primary concern. So we had to reconsider how to best set the guidelines for the companies and for the players and the industry. Understood. So how do you see, the growth rate of demand next year from, yeah, globally or in China?

I think overall, in China, the demand compared to this year would be relatively flat.

Or even, as I would say, like, a Y-o-Y decrease. Like, a small amount of Y-o-Y decrease overall. But globally, overall, maybe around a high single digit growth.

Across the globe. Okay. So, yep.

Yeah. But previously, we have installed a significant amount of solar PV itself. Yeah. Because we have a because we had previously not installed a lot of the Solar PV. So I think in the next year or it will be somewhat slower.

Terms of the pay. Understood. So this year, I think demand declined quite meaningfully year over year last year. So I think terms of numbers, is it in the mid or high-100-ish gigawatt next year? Maybe you see another like, 10% decline year over year in China. Yeah.

I think next year will still be around like, the high 100 to 200-gigawatt range. I see. So next year on this basis, probably slight decline, while the overseas market sees. A bit of slight growth. So net pretty flattish. Yes. that is correct. I see.

So wonder if you see any signs of exit from the market because, like, some-- 1 of the leading. Leading company in is buying out another 1, but wonder if you see any of other similar like, voluntary acquisition or exit from the market, etcetera.

I think it would be more market oriented because starting from January 1 of next year, firstly, we thought the outdated capacity which has a higher energy consumption level, will be gradually phased out of the market. And from a more fair perspective, I would say the players currently have a comfortable state with their current nameplate capacity. And based on what we are discussing right now, I think all the players will have to lower their utilization rates. To balance out the demand. So yeah, I would say if a player is to acquire another company if the valuation is at a reasonably low level, that would be an option. Or if that poses, like, a strategic or a different strategy for the company. Say, overseas expansion or so. I guess that would also be a consideration when we think about potential acquisition.

So by overseas expansion, what do you mean? Like, polysilicon overseas expansion or. Because first of all, The US market seems to be restrictive on Chinese players' products. Secondly, it seems Chinese government is also imposing some restrictions on export of equipment as well.

Yeah. I am currently talking about players that might have completed, like, a certification or, like, a feasibility requirement. Right? Because some players might have applied for a specific technical standard. To have their products abroad. And that is what I am talking about in terms of potential overseas expansion, not specifically, like, setting a factory overseas, like, in the U.S. or so. Understood.

So last question is about, given that the company is still holding on a significant amount of cash and stock prices. are, we will say, a bit depressed, to say the least. So I wonder when the company will think it is appropriate to enhance the shareholder return?

First of all, we recognize the current state and we do think we strongly believe that returning value to our shareholders remains a key priority for our management team and our board. And at the current share price, we are undervalued relative to our balance sheet and also our long term. The earnings power. So if you are repurchases definitely something that we are actually considering. But before deciding to launch a program, we want to have a more clear view of how the anti involution policy is rolled out and enforced. And also how our peers will respond to the current situation. And we think that these factors all directly affect industry pricing and our cash generation ability. And that means the-- that informs all the proposals us, that really needs the right size and form of any potential capital return. So we totally understand that an investor would want us-- and would like us to act now given our strong cash position. But I think waiting a short-- a short period of policy clarity would allow us to size any return correctly and choose the most effective form either in the form of a share repurchase or via a dividend. So this is really a question of timing for our management team. So we are definitely keeping a close eye on the dynamics, and we will discuss the options with the board again. In the next coming months and even in Q4 again. So we will communicate the decision. And once we have that decision finalized, we will communicate properly with our shareholders.

I see. Thanks. Thanks, Xu Xiaoyu. We will pass off.

Thank you. Thank you, Alan. O: The next question comes from [Unidentified Analyst] with Citibank. Please go ahead.

Thank you for taking up my questions. So my first question is about the sales volume. So what is the expected sales volume in the fourth quarter and also the volume outlook for 2027?

I think our. For our sales volume, in Q4 would be relatively similar to or close to our production level. So we will strengthen our efforts and our sales. And I will see our top priority is really to reduce our inventory. Is there any outlook for 2027? In terms of sales? Yes. I think the goal for us is to maintain our market share. So that will be around 20% to 25% of the market. For 2027. Thank you, Anita.

So my second is about the production cost. So we have seen that the cash for production cost have been declining quarter by quarter. Can we also expect a similar trend in the fourth quarter and also in next year. So if yes, what will be the percentage of cost reduction?

Okay. Hello, [Unidentified Analyst]. Thank you for your questions. So we did see fairly significant cost reduction across our facilities in Q3. And this is primarily via a reduction in energy usage. Typically related to electricity. As well as silicon powder and also in steam. Via a technical upgrade So I was benefiting from some benefits from silicon, and that is just a matter of price decline. So I would say, based on current trend, we would expect Q4 cost to be similar to Q3 cost based on the most recent data we have. And then we would expect 2027 to be also similar to Q3 cost, maybe with a slight reduction. Thank you. Thank you, Ming. And my last question is about the inventory provision. So I saw that the inventory provision in third quarter is slightly less compared to the second quarter. And I was asked if at the current price, I will still be in charge provision in the fourth quarter or what is the condition to make the provision? Okay. I would say if the market remains at the current ASP, we would expect Q4 inventory provision to be less than Q3. So does it mean that the market price should be higher than 43, which is your all in cost, then there will be-- then there will. No longer be any inventory provision. Is that correct? Or let's say we would expect Q4 ASP to be higher than Q3. So we would expect I would say some reduction in inventory provision. from that perspective. that is all my questions. Thank you. Great. Thank you. O: The next question comes from Gordon Johnson with GLJ Research. Please go ahead.

Hey, guys. Thanks for taking the question. Hey, Gordon. So-- hey. How's it going? So you have built roughly 70 thousand extra tons of inventory this year. With Q4 production guided to 35 thousand-45 thousand metric tons, What sales volume do you expect in Q4? And how much of the $140 million in customer advances will be delivered against this quarter? Then I have a follow-up. Thanks.

O. Currently, expect Q4 shipment to be higher than the Q4 production? So with the reduction in inventory, as a result, And I would say because we received payment before we deliver products. And so, certainly, I think for example, maybe I mean, the $140 million is all contracted for and is expected to be delivered in Q4 while we would continue to receive additional orders as well. Very helpful. And now that you are free cash flow positive this quarter, congrats on that, by the way, what are the priorities for the $2.06 billion? How much will you commit to the AI data center platform with Daqo Group And how is that related party deal being reviewed and priced And how much cash sits at the Daqo parent level versus Xinjiang Daqo?

And thanks for the questions again.

Okay. I would say for AIDC, committed CapEx currently is around $20 million or so. In that range, and primarily, it is to build up the facility related manufacturing and equipment for the AIDC business. And certainly, on the current level right now, we have over $300 million, and then on the-- it is offshore. And then on the domestic entity, Xinjiang Daqo, there is roughly RMB 10 billion of cash balance there.

Thanks again.

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

Thank you, everyone, again for participating in our conference call. Should you have any further questions, please do not hesitate to contact us. Thank you, and have an awesome day. Goodbye. O: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.