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Daqo New Energy Announces Unaudited Second Quarter 2017 Results

Aug 08, 2017

CHONGQING, China—August8, 2017—Daqo New Energy Corp. (NYSE: DQ) ("Daqo New Energy", the"Company" or “we”), a leading manufacturer of high-purity polysiliconfor the global solar PV industry, today announced its unaudited financialresults for the second quarter of 2017.

Second Quarter 2017 Financial and OperatingHighlights

· Record-high polysilicon production volume of 4,993MT in Q2 2017, increased from 4,927 MT in Q1 2017

· Record-high polysilicon external sales volume⁽¹⁾of 4,497 MT in Q2 2017, increased from 4,223 MT in Q1 2017

· Polysilicon average total production cost⁽²⁾of $8.53/kg in Q2 2017, compared to $8.41/kg in Q1 2017

· Polysilicon average cash cost⁽²⁾of $6.77/kg in Q2 2017, compared to $6.68/kg in Q1 2017

· Average selling price (ASP) of polysiliconwas $13.58/kg in Q2 2017, compared to $16.66/kg in Q1 2017

· Solar wafer sales volume of 27.0 millionpieces in Q2 2017, increased from 22.4 million pieces in Q1 2017

· Revenue of $76.0 million in Q2 2017, comparedto $83.8 million in Q1 2017

· Gross profit of $24.2 million in Q2 2017, comparedto $35.9 million in Q1 2017

· Gross margin of 31.9% in Q2 2017, compared to42.8% in Q1 2017

· Non-GAAP gross margin⁽³⁾ of 32.6%in Q2 2017, compared to 44.0% in Q1 2017

· EBITDA (non-GAAP)⁽³⁾ of $29.8 millionin Q2 2017, compared to $41.7 million in Q1 2017

· EBITDA margin (non-GAAP)⁽³⁾ of 39.2%in Q2 2017, compared to 49.8% in Q1 2017

· Net income attributable to Daqo New Energyshareholders of $12.1 million in Q2 2017, compared to $22.9 million in Q1 2017 and$19.8 million in Q2 2016

· Earnings per basic ADS of $1.15 in Q2 2017, comparedto $2.18 in Q1 2017 and $1.90 in Q2 2016

· Adjusted net income (non-GAAP)⁽³⁾ attributableto Daqo New Energy shareholders of $13.8 million in Q2 2017, compared to $24.8million in Q1 2017 and $22.0 million inQ2 2016

· Adjusted earnings per basic ADS (non-GAAP)⁽³⁾of $1.31 in Q2 2017, compared to $2.36 in Q1 2017 and $2.10inQ2 2016

	Three months ended
US$ millions except as indicated otherwise		June 30, 2017	March 31, 2017	June 30, 2016
Revenues		76.0	83.8	71.0
Gross profit		24.2	35.9	29.4
Gross margin		31.9%	42.8%	41.4%
Operating income		20.2	32.2	26.1
Net income attributable to Daqo New Energy Corp. shareholders		12.1	22.9	19.8
Earnings per basic ADS ($ per ADS)		1.15	2.18	1.90
Adjusted net income (non-GAAP)⁽³⁾ attributable to Daqo New Energy Corp. shareholders		13.8	24.8	22.0
Adjusted earnings per basic ADS (non-GAAP)⁽³⁾ ($ per ADS)		1.31	2.36	2.10
Non-GAAP gross profit⁽³⁾		24.8	36.9	31.2
Non-GAAP gross margin⁽³⁾		32.6%	44.0%	43.9%
EBITDA (non-GAAP)⁽³⁾		29.8	41.7	34.7
EBITDA margin⁽³⁾ (non-GAAP)		39.2%	49.8%	48.9%
Polysilicon sales volume (MT)⁽¹⁾		4,497	4,223	2,931
Polysilicon production cost ($/kg)⁽²⁾		8.53	8.41	9.43
Polysilicon cash cost (excl. dep’n) ($/kg)⁽²⁾		6.77	6.68	7.42

Notes:

(1) Our polysilicon external sales volumeexcludes internal sales to our Chongqing wafer manufacturing subsidiary, whichutilizes polysilicon as raw material for the production of solar wafers. Thesales volume is the quantity of goods that have been received by customers, andthus the corresponding revenue has been recognized during the period indicated.

(2) Production cost and cash cost only refer toproduction in our Xinjiang polysilicon facilities. Production cost iscalculated by the inventoriable costs relating to production of polysilicon inXinjiang divided by the production volume in the period indicted. Cash cost iscalculated by the inventoriable costs relating to production of polysiliconexcluding depreciation expense in Xinjiang, divided by the production volume inthe period indicated.

(3) Daqo New Energy provides non-GAAP grossprofit, non-GAAP gross margin, EBITDA, EBITDA margin, adjusted net income (loss)attributable to Daqo New Energy Corp. shareholders and adjusted earnings (loss)per ADS on a non-GAAP basis to provide supplemental information regarding itsfinancial performance. For more information on these non-GAAP financialmeasures, please see the section captioned "Use of Non-GAAP FinancialMeasures" and the tables captioned "Reconciliation of non-GAAPfinancial measures to comparable US GAAP measures" set forth at the end ofthis press release.

Commentary

"Weare pleased to report that the second quarter of 2017 was a solid quarter withnew records on both polysilicon production volume and external sales volume.During the quarter, we produced 4,993 MT of polysilicon and sold 4,497 MT toexternal customers. We also conductedvarious experiments to improve polysilicon quality, particularly for themono-crystalline grade polysilicon, which had a slight impact to overallproduction cost and volume. However, weare seeing meaningful quality improvements. Production volume as well as shipment of mono-crystalline quality polysiliconhit a record high in June,” said Dr. Gongda Yao, Chief Executive Officer ofDaqo New Energy.

“Due todownstream customer inventory management at the end of the first quarter, ASPfell in April, but ASP started to recover in May. Demand and pricing improved throughout the secondquarter, with the ASP in June approximately 15% higher than that in April. So far in the third quarter, customer demand hasremained robust with pricing continuing to improve.”

“In termsof the PV end market, China installed 24.4 GW of solar PV in the first half of2017, representing a new record high and a 9% increase from the first half of2016. For the full year of 2017, China’sannual PV installation forecast is currently expected to exceed 35GW. Based on discussions with our customers, webelieve that China’s PV market demand continues to be strong, driven bytop-runner projects as well as distributed generation. Globally, the U.S. andIndian markets are also seeing strong PV product demand. Starting in late July, we have seen a fairlysignificant shortage of polysilicon in the China market and continued improvementsin polysilicon pricing. With a muchstronger than expected solar PV installations in China, the annual total globalsolar installation in 2017 is likely to exceed 80 GW for the first time ever. "

“Duringthe second quarter of 2017, the company generated $12.1 million in net incomeattributable to Daqo New Energy shareholders and $29.8 million in EBITDA with anEBITDA margin of 39.2%. In particular, ouroperating cash flow remains strong. Inthe first half of 2017, we generated $73.6 million in net cash provided byoperating activities."

"Goingforward, we will continue our efforts to improve quality throughout the year. With our high product quality and stablesupply capabilities, we continue to be a supplier of choice with strong demandfor our high quality polysilicon from our diverse customer base."

Outlook and Q3 2017guidance

The Company’s annual maintenancefor the Xinjiang polysilicon facility is scheduled for late September andOctober. The annual maintenance is anticipatedto impact production volume by approximately two weeks. As a result, the Company expects to produce4,200 MT to 4,500 MT of polysilicon and sell approximately 3,700 MT to 4,000 MTto external customers during the third quarter of 2017. The above external sales guidanceexcludes shipments of polysilicon to be used internally by our Chongqing solarwafer facility, which utilizes polysilicon for its wafer manufacturingoperation. Wafer sales volume isexpected to be approximately 25.0 million to 25.5 million pieces in the third quarterof 2017.

This outlook reflectsour current and preliminary view as of the date of this press release and maybe subject to change. Our ability to achieve these projections is subject torisks and uncertainties. See “Safe Harbor Statement” at the end of this pressrelease.

Second Quarter 2017 Results

Revenues

Revenues were $76.0 million, compared to $83.8 million inthe first quarter of 2017 and $71.0 million in the second quarter of 2016.

Revenues from polysilicon sales to external customers were$61.1 million, compared to $70.4 million in the first quarter of 2017 and $50.5million in the second quarter of 2016. External polysilicon sales volume was 4,497MT, increased from 4,223 MT in the first quarter of 2017 and 2,931 MT in the secondquarter of 2016. The average selling price (ASP) of polysilicon was $13.58/kgin the second quarter of 2017, compared to $16.66/kg in the first quarter of 2017.The decrease in polysilicon revenues as compared to the first quarter of 2017was primarily due to lower ASPs, partially offset by higher polysilicon salesvolume.

Revenues from wafer sales were $14.9 million, compared to$13.4 million in the first quarter of 2017 and $20.5 million in the secondquarter of 2016. Wafer sales volume was 27.0 million pieces, compared to 22.4million pieces in the first quarter of 2017 and 25.0 million pieces in the secondquarter of 2016.

Grossprofit and margin

Gross profit was approximately $24.2 million, compared to$35.9 million in the first quarter of 2017 and $29.4 millionin the second quarter of 2016. Non-GAAP gross profit, which excludes costsrelated to the non-operational polysilicon assets in Chongqing, was approximately$24.8 million, compared to $36.9 million in the first quarter of 2017 and $31.2million in the second quarter of 2016.

Gross margin was 31.9%, compared to 42.8% in the firstquarter of 2017 and 41.4% in the secondquarter of 2016.

In the second quarter of 2017, total costs related to thenon-operational Chongqing polysilicon assets including depreciation were $0.5million, decreased from $1.0 million in the first quarter of 2017 and $1.8million in the second quarter of 2016. Excluding costs related to thenon-operational Chongqing polysilicon assets, the non-GAAP gross margin wasapproximately 32.6%, compared to 44.0% in the first quarter of 2017 and 43.9%in the second quarter of 2016.

Selling,general and administrative expenses

Selling, general and administrative expenses were $4.5 million,compared to $4.1 million in the first quarter of 2017 and $3.7 million in the secondquarter of 2016.

Researchand development expenses

Research and development expenses were approximately $0.3million, compared to $0.4 million in the first quarter of 2017 and $0.1 millionin the second quarter of 2016. The research and development expenses vary fromperiod to period reflecting the R&D activities that occur in such period.

Otheroperating income

Other operating incomewas $0.8 million, compared to $0.8 million in the first quarter of 2017 and $0.6million in the second quarter of 2016. Other operating income was mainlycomposed of unrestricted cash incentives that the Company received from localgovernment authorities, the amount of which varies from period to period.

Operating incomeand margin

As a result of the foregoing, operating income was $20.2 million,comparedto $32.2 million in the first quarter of 2017 and $26.1 million in the second quarterof 2016.

Operating margin was 26.6%, comparedto 38.4% in the first quarter of 2017 and 36.8% in the second quarter of 2016.

Interest expense

Interest expense was $5.3million, compared to $4.3 million in the first quarter of 2017 and $3.5 millionin the second quarter of 2016.

EBITDA

EBITDA was $29.8 million, compared to $41.7 million inthe first quarter of 2017 and $34.7 million in the second quarter of 2016.EBITDA margin was 39.2%, compared to 49.8% in the first quarter of 2017 and 48.9%in the second quarter of 2016.

Net incomeattributable to Daqo New Energy Corp. shareholders and earnings per ADS

Net income attributable to Daqo New Energy Corp.shareholders was $12.1 million in the second quarter of 2017, compared to $22.9million in the first quarter of 2017 and $19.8 million in the second quarter of 2016.

Earnings per basic ADS were $1.15 inthe second quarter of 2017, compared to $2.18 in the first quarter of 2017 and $1.90 in the second quarter of 2016.

FinancialCondition

As of June 30, 2017,the Company had $49.8 million in cash and cash equivalents and restricted cash,compared to $61.2 million as of March 31, 2017 and $42.9 million as of June 30,2016. As of June 30, 2017, the accounts receivable balance was $3.8 million,compared to $13.1 million as of March 31, 2017. As of June 30, 2017, the notesreceivable balance was $10.5 million, compared to $11.7 million as of March 31,2017. As of June 30, 2017, total borrowings were $219.3 million, of which $123.1million were long-term borrowings, compared to total borrowings of $236.0million, including $129.2 million long-term borrowings, as of March 31, 2017.

Cash Flows

For the six monthsended June 30, 2017, net cash provided by operating activities was $73.6 million,increased from $66.6 million in the same period of 2016.

For the six monthsended June 30, 2017, net cash used in investing activities was $36.0 million,compared to $37.6 million in the same period of 2016. The net cash used ininvesting activities in 2017 was primarily related to the capital expenditureof Xinjiang Phase 3A polysilicon projects.

For the six monthsended June 30, 2017, net cash used in financing activities was $23.4 million, comparedto net cash used in financing activities of $13.5 million in the same period of2016. The increase was primarily due to repayment of related parties loans.

Useof Non-GAAP Financial Measures

Tosupplement Daqo New Energy’s consolidated financial results presented inaccordance with United States Generally Accepted Accounting Principles (“USGAAP”), the Company uses certain non-GAAP financial measures that are adjustedfor certain items from the most directly comparable GAAP measures includingnon-GAAP gross profit and non-GAAP gross margin; earnings before interest,taxes, depreciation and amortization ("EBITDA") and EBITDA margin;adjusted net income attributable to Daqo New Energy Corp. shareholders andadjusted earnings per basic ADS. Managementbelieves that each of these non-GAAP measures is useful to investors, enablingthem to better assess changes in key elements of the Company's results ofoperations across different reporting periods on a consistent basis,independent of certain items as described below. Thus, management believesthat, used in conjunction with US GAAP financial measures, these non-GAAPfinancial measures provide investors with meaningful supplemental information toassess the Company's operating results in a manner that is focused on itsongoing, core operating performance. Management uses these non-GAAP measuresinternally to assess the business, its financial performance, current andhistorical results, as well as for strategic decision-making and forecastingfuture results. Given management's useof these non-GAAP measures, the Company believes these measures are importantto investors in understanding the Company's operating results as seen throughthe eyes of management. These non-GAAPmeasures are not prepared in accordance with US GAAP or intended to beconsidered in isolation or as a substitute for the financial informationprepared and presented in accordance with US GAAP; the non-GAAP measures shouldbe reviewed together with the US GAAP measures and may be different fromnon-GAAP measures used by other companies.

Non-GAAPgross profit and non-GAAP gross margin includes adjustments for costs relatedto the non-operational polysilicon assets in Chongqing. Such costs mainlyconsist of non-cash depreciation costs, as well as utilities and maintenancecosts associated with the temporarily idle polysilicon machinery and equipment,which will be or are in the process of being relocated to the Company'sXinjiang polysilicon manufacturing facility. The Company expects a majority ofthese costs, such as depreciation, will continue to occur as part of theproduction cost at the Xinjiang facilities subsequent to the completion of therelocation plan. Once these assets are placed back in service, the Company willremove this adjustment from the non-GAAP reconciling item. The Company alsouses EBITDA, which represents earnings before interest, taxes, depreciation andamortization, and EBITDA margin, which represents the proportion of EBITDA inrevenues. Adjusted net incomeattributable to Daqo New Energy Corp. shareholders and adjusted earnings perbasic ADS exclude costs related to the non-operational polysilicon assets inChongqing as described above. Adjustednet income attributable to Daqo New Energy Corp. shareholders and adjustedearnings per basic ADS also exclude costs related to share-based compensation. Share-basedcompensation is a non-cash expense that varies from period to period. As aresult, management excludes this item from its internal operating forecasts andmodels. Management believes that this adjustment for share-based compensationprovides investors with a basis to measure the company's core performance,including compared with the performance of other companies, without theperiod-to-period variability created by share-based compensation.

A reconciliation ofnon-GAAP financial measures to comparable US GAAP measures is presented laterin this document.

Conference Call

The Company has scheduled a conference callto discuss the results at 8:00 AM U.S. Eastern Time on August 8, 2017 (8:00 PM Beijing / Hong Kong time onthe same day).

The dial-in details for the earningsconference call are as follows:

Participant dial in (U.S. toll free):	+1-888-346-8982
Participant international dial in:	+1-412-902-4272
China mainland toll free:	4001-201203
Hong Kong toll free:	800-905945
Hong Kong local dial in:	+852-301-84992

Participants please ask to be joined into the Daqo New Energy Corp. call. Please dial in 10 minutes before the call is scheduled to begin.

You can also listen to the conference call via Webcastthrough the URL:

http://mms.prnasia.com/DQ/20170808/default.aspx

A replayof the call will be available 1 hour after the conclusion of the conference callthrough August 15, 2017.

The dialin details for the conference call replay are as follows:

U.S. toll free:	+1-877-344-7529
International dial in:	+1-412-317-0088
Canada toll free:	855-669-9658
Replay access code:	1011073
To access the replay using an international dial-in number, please select the link below. https://services.choruscall.com/ccforms/replay.html

Participantswill be asked to provide their name and company name upon entering the call.

About Daqo New Energy Corp.

Founded in 2008, DaqoNew Energy Corp. (NYSE: DQ) is a leading manufacturer of high-puritypolysilicon for the global solar PV industry. As one of the world's lowest costproducers of high-purity polysilicon and solar wafers, the Company primarilysells its products to solar cell and solar module manufacturers. The Companyhas built a manufacturing facility that is technically advanced and highlyefficient with a nameplate capacity of 18,000 metric tons in Xinjiang,China. The Company also operates a solarwafer manufacturing facility in Chongqing, China.

Safe Harbor Statement

This announcementcontains forward-looking statements. These statements are made under the “safeharbor” provisions of the U.S. Private Securities Litigation Reform Act of1995. These forward-looking statements can be identified by terminology such as“will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”“estimates” and similar statements. Among other things, the outlook for the thirdquarter of 2017 and quotations from management in this announcement, as well asDaqo New Energy’s strategic and operational plans, contain forward-lookingstatements. The Company may also make written or oral forward-lookingstatements in its reports filed or furnished to the U.S. Securities andExchange Commission, in its annual reports to shareholders, in press releasesand other written materials and in oral statements made by its officers,directors or employees to third parties. Statements that are not historicalfacts, including statements about the Company’s beliefs and expectations, areforward-looking statements. Forward-looking statements involve inherent risksand uncertainties. A number of factors could cause actual results to differmaterially from those contained in any forward-looking statement, including butnot limited to the following: the demand for photovoltaic products and thedevelopment of photovoltaic technologies; global supply and demand forpolysilicon; alternative technologies in cell manufacturing; our ability tosignificantly expand our polysilicon production capacity and output; thereduction in or elimination of government subsidies and economic incentives forsolar energy applications; and our ability to lower our production costs.Further information regarding these and other risks is included in the reportsor documents we have filed with, or furnished to, the Securities and ExchangeCommission. Daqo New Energy does not undertake any obligation to update anyforward-looking statement, except as required under applicable law. Allinformation provided in this press release and in the attachments is as of thedate of this press release, and Daqo New Energy undertakes no duty to updatesuch information, except as required under applicable law.

DaqoNew Energy Corp.

UnauditedConsolidated Statement of Operations and Comprehensive Income

(US dollars inthousands, except ADS and per ADS data)

	For the three months Ended
		Jun 30, 2017	Mar 31, 2017	Jun 30, 2016

Revenues		$76,002	$83,808	$71,021
Cost of revenues		(51,757)	(47,914)	(41,640)
Gross profit		24,245	35,894	29,381
Operating expenses
Selling, general and administrative expenses		(4,514)	(4,060)	(3,675)
Research and development expenses		(279)	(448)	(148)
Other operating income		751	775	583
Total operating expenses		(4,042)	(3,733)	(3,240)
Income from operations		20,203	32,161	26,141
Interest expense		(5,288)	(4,344)	(3,487)
Interest income		111	75	171
Foreign exchange gain (loss)		2	1	(3)
Income before income taxes		15,028	27,893	22,822
Income tax expense		(2,768)	(4,742)	(2,802)
Net income		12,260	23,151	20,020
Net income attributable to noncontrolling interest		135	257	176
Net income attributable to Daqo New Energy Corp. shareholders		$12,125	$22,894	$19,844

Net income		12,260	23,151	20,020
Other comprehensive income (loss):
Foreign currency translation adjustments		4,904	2,166	(8,116)
Total other comprehensive income (loss)		4,904	2,166	(8,116)
Comprehensive income		17,164	25,317	11,904
Comprehensive income attributable to noncontrolling interest		167	270	130
Comprehensive income attributable to Daqo New Energy Corp. shareholders		$16,997	$25,047		$11,774

Income per ADS
Basic		1.15	2.18		1.90
Diluted		1.14	2.14		1.87
Weighted average ADS outstanding
Basic		10,529,730	10,519,425		10,457,105
Diluted		10,678,845	10,691,911		10,596,753

Daqo New Energy Corp.

UnauditedConsolidated Balance Sheet

(US dollarsin thousands)

	Jun 30, 2017		Mar 31, 2017	Jun 30, 2016

ASSETS:
Current Assets:
Cash and cash equivalents	$30,443		$44,651	$29,659
Restricted cash	19,403		16,596	13,201
Accounts receivable, net	3,796		13,121	10,061
Notes Receivable	10,540		11,702	14,798
Prepaid expenses and other current assets	7,011		6,069	6,630
Advances to suppliers	1,688		1,283	1,072
Inventories	15,981		16,268	9,539
Amount due from related parties	1,386		345	4,514
Total current assets	90,248		110,035	89,474
Property, plant and equipment, net	554,062		559,900	546,227
Prepaid land use right	25,125		24,871	26,205
Deferred tax assets	600		591	612
Investment accounted for under cost-method	596		586	182
TOTAL ASSETS	670,631		695,983	662,700

Current liabilities:
Short-term borrowings, including current portion of long-term borrowings	96,158		106,842	109,494
Accounts payable	20,972		23,130	18,665
Notes payable	26,080		23,749	26,092
Advances from customers	10,483		1,025	3,408
Payables for purchases of property, plant and equipment		25,839	39,367	39,681
Accrued expenses and other current liabilities		9,426	11,417	11,973
Amount due to related parties		12,162	32,925	41,100
Income tax payable		6,386	7,095	3,411
Total current liabilities		207,506	245,550	253,824
Long-term borrowings		123,145	129,198	118,368
Other long Term Liabilities		23,509	23,304	24,414
TOTAL LIABILITIES		354,160	398,052	396,606
EQUITY:
Ordinary shares		27	27	26
Treasury stock		(1,749)	(1,749)	(1,749)
Additional paid-in capital		242,372	240,996	238,484
Retained earnings		75,451	63,326	25,107
Accumulated other comprehensive income		(1,697)	(6,569)	2,717
Total Daqo New Energy Corp.’s shareholders’ equity		314,404	296,031	264,585
Noncontrolling interest		2,067	1,900	1,509
Total equity		316,471	297,931	266,094
TOTAL LIABILITIES & EQUITY		670,631	695,983	662,700

Daqo New Energy Corp.

UnauditedConsolidated Statements of Cash Flows

(US dollarsin thousands)

	For the six months ended June 30,
		2017	2016
Operating Activities:
Net income		35,411	28,410
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation		1,985	1,737
Provision/(reversal) of allowance for doubtful accounts		(3)	(849)
Depreciation of property, plant and equipment		19,208	17,205
Loss on disposal of assets		23	-

Changes in operating assets and liabilities:
Accounts receivable		1,161	10,180
Notes receivable		2,800	(3,945)
Prepaid expenses and other current assets		1,211	5,323
Advances to suppliers		76	(67)
Inventories		(3,403)	930
Amounts due from related parties		182	(4,303)
Amounts due to related parties		275	517
Prepaid land use rights		285	291
Accounts payable		1,776	1,577
Notes payable		8,302	8,367
Accrued expenses and other current liabilities		904	3,555
Income tax payable		958	2,470
Advances from customers		2,782	(4,586)
Deferred government subsidies		(334)	(256)
Net cash provided by operating activities		73,599	66,556

Investing activities:
Purchases of property, plant and equipment		(32,894)	(42,840)
Investment accounted for under the cost-method		-	(188)
Decrease/(Increase) in restricted cash		(3,125)	5,422
Net cash used in investing activities		(36,019)	(37,606)

Financing activities:
Proceeds from related party loans		39,697	69,508
Repayment of related party loans		(59,565)	(74,222)
Proceeds from bank borrowings		32,953	41,309
Repayment of bank borrowings		(36,800)	(50,488)
Cash received from exercises of options		275	389
Net cash (used in) provided by financing activities		(23,440)	(13,504)

Effect of exchange rate changes on cash and cash equivalents		316	(277)
Net increase in cash and cash equivalents		14,456	15,169
Cash and cash equivalents at the beginning of the period		15,987	14,490
Cash and cash equivalents at the end of the period		30,443	29,659

Daqo New Energy Corp.

Reconciliation of non-GAAP financial measures to comparableUS GAAP measures

(US dollars in thousands)

	For the three months ended
		Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016
Gross profit		24,245	35,894	29,381
Costs related to the non-operational Chongqing polysilicon operations		544	1,003	1,775
Non-GAAP gross profit		24,789	36,897	31,156

	For the three months ended
		Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016
Gross margin		31.9%	42.8%	41.4%
Costs related to the non-operational Chongqing polysilicon operations (proportion of revenue)		0.7%	1.2%	2.5%
Non-GAAP gross margin		32.6%	44.0%	43.9%

	For the three months ended
		Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016
Net income		12,260	23,151	20,020
Income tax expense		2,768	4,742	2,802
Interest expense		5,288	4,344	3,487
Interest income		(111)	(75)	(171)
Depreciation		9,621	9,587	8,598
EBITDA (non-GAAP)		29,826	41,749	34,736
EBIDTA margin (non-GAAP)		39.2%	49.8%	48.9%

	For the three months ended
		Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016
Net income attributable to Daqo New Energy Corp. shareholders		12,125	22,894	19,844
Costs related to the non-operational Chongqing polysilicon operations		544	1,003	1,775
Share-based compensation		1,104	882	393
Adjusted net income (non-GAAP) attributable to Daqo New Energy Corp. shareholders		13,773	24,779	22,012
Adjusted earnings per basic ADS (non-GAAP)		1.31	2.36	$2.10
Adjusted earnings per diluted ADS (non-GAAP)		1.29	2.32	$2.08

Forfurther information, please contact:

DaqoNew Energy Corp.

Investor Relations

Phone: +86-187-1658-5553

dqir@daqo.com

SOURCE:Daqo New Energy Corp.