Gulf Resources, Inc. (GURE) CEO Xiaobin Liu on Q2 2021 Results - Earnings Call Transcript

Aug. 16, 2021 1:06 PM ETGulf Resources, Inc. (GURE)
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Gulf Resources, Inc. (NASDAQ:GURE) Q2 2021 Results Earnings Conference Call August 16, 2021 8:00 AM ET

Company Participants

Helen Xu - Director, Investor Relations

Xiaobin Liu - Chief Executive Officer

Conference Call Participants

Max Waring - Private Investor

John Rolls - Private Investor

Matthew Macchiarella - Private Investor

Randy Leggett - Private Investor

Keegan Wynn Switzer - Private Investor

Peter Osiris - Private Investor

Operator

Good day, ladies and gentlemen. And welcome to the Gulf Resources 2021 Second Quarter Earnings Conference. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Helen Xu, IR Director at Gulf Resources. Helen, the floor is yours.

Helen Xu

Thank you, operator. Good morning, ladies and gentlemen. And good evening to all of you joining us from China and US. We'd like to welcome all of you to Gulf Resources' second quarter 2021 earnings conference call. I am Helen Xu, the IR Director. Our CEO of the company, Mr. Xiaobin Liu, will also join us this call today.

I'd like to remind you to all of our listeners that, in this call, certain management's statements during the call will contain forward-looking information about Gulf Resources and its subsidiaries' business and products within the meaning of Rule 175 under Securities Act of 1933 and Rule 3b-6 under the SEC Act of 1934 and are subject to the Safe Harbor created by those rules.

Actual results may differ from those discussed today, taking into account a number of risk factors, including, but not limited to, the general economic and business conditions in the PRC, the risks associated with the COVID-19 pandemic outbreak, future product developments and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competition from the bromine and the other oilfield and power production chemicals, changing technology, the ability to make future bromine assets and the various other factors beyond the company's control.

All forward-looking statements are expressly qualified in their entirety by this cautionary statement and the risk factors detailed with the company's reports filed with the SEC. Gulf Resources assumes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting those forward-looking statements are reasonable and there can be no assurance of such will prove to be correct. In addition, any reference to the company's future performance represents the management's estimates as of today, August 16, 2021.

For those of you unable to listen to the entire call at this time, a replay will be available at the company's website. The call is also accessible through the webcast and the link is accessible through our website. So, please locate our press release issued earlier for the details.

And at this moment, I just want to say that due to the company website issue and the webcasting we issued early in our press release has been updated and the company already issued a new webcasting link and the PR is on its way. So, I think it will be issued very soon in 5 or 10 minutes before the call, supposed to be the before the call. It's underway now.

So, now, let's turn the call back to Mr. Liu now.

Xiaobin Liu

[Foreign Language] Thank you, Helen. I'm Xiaobin Liu, CEO of the company. First of all, I'd like to welcome all of you to the Gulf Resources earnings call second quarter of year 2021.

In this quarter, the company's former auditors Morison Cogen resigned, and the company engaged WWC to serve as independent auditor very quickly and then be able to file its 2021 second quarter 10-Q report on time.

The company is optimistic about the second half of year 2021. Production loss in the second quarter is likely to be recovered in the third quarter and bromine prices remains high. At current levels of production, our bromine business should be profitable.

We have expensed all of our annual stock grants. So, overhead will be reduced. We believe that we could receive approvals for one or more of our closed bromine facilities in the near future.

In year 2022, we may begin to generate revenues from our chemical factory. We expect that our chemical business could be profitable in year 2023. We continue to believe that we may be able to produce both natural gas and brine products in Sichuan if we are able to obtain the required government approvals.

So now, I will turn the call back to Helen.

Helen Xu

So, now, I would like to discuss with our investors and shareholders about the company's financial results and some questions we received from our investors. So, I assume most of you have seen our press release that contains our income statement, balance sheet and the cash flow as well as a review of events in the quarter and the future expectations.

Because there is much to discuss, so we will go quickly with reviewing the press release, major press [ph] and focus on questions we have already received from the investors. Then we will open the call to questions for those on the phone now.

So, now let's look at the balance sheet first ended by June 30, 2021. The cash balance is approximately $97.1 million and the current asset is approximately $105 million. Working capital was approximately $95.7 million. Book value is approximately $278.1 million.

Now, looking at the income statement. Net revenues for the second quarter of 2021 increased 108% to approximately $11.1 million compared to previous year the same period.

Gross margin increased for second quarter 2021 by 1,157% from $336,500 to $4 million compared to the same period of previous year. As a percentage of revenues, gross margin for second quarter year 2021 was 38% compared to 6.3% in the previous year. Direct labor and factory overhead for second quarter 2021 incurred during plant shutdown decreased 19.7%. As a percentage of sales, they were 10.5% against 32.4%.

G&A expenses for second quarter 2021 increased approximately $3.7 million compared to the previous year. However, there was – approximately $3.1 million of the increase was attributable to one-time stock awards.

Net loss before taxes for second quarter 2021 declined 19.6% compared to the previous year same period.

Taxes were a loss of $356,000 for second quarter 2021, against a benefit of $672.6 million (sic) [$672,633] for the second quarter year 2020. And net loss after taxes was $2.7 million for second quarter 2021 versus the $2.2 million for second quarter year 2020. The company had a comprehensive net gain for second quarter year 2021 of approximately $2.6 million versus a net loss of $2 million for second quarter 2020.

So, now we will read the questions we have received and then provide answers. Each question can be answered by either Helen – by me – or Mr Liu later on on the Q&A section.

Firstly, now let's look at the questions regarding company auditors. The first question relates to the change in auditors. The question, while Morison Cogen stated there were no political reasons for their resignation, such a resignation always makes investors nervous. Can the company provide an understanding of why they resigned?

The answer, we do not know why Morison Cogen resigned, but it did not have any conflict with the company while it resigned.

And question, why did you select WWC? So, the answer is this, WWC came highly recommended by other Chinese firms. We see several advantages to using WWC. WWC has an extensive Chinese speaking staff. If an auditor is going to be effective, its staff has to be able to speak to people and understand the answers. WWC has offices in Beijing, Guangzhou, Hong Kong. So, we can discuss methods with them on our time. WWC is also an approved registrant of the PCAOB in the US, the CPAB in Canada and the HKICPA in Hong Kong, given some of the issues that are currently occurring between the US and China. We believe it was important to have an auditor – auditing partner that was approved in Hong Kong and had offices in China. WWC is committed to filing our 10-Q in a timely manner. We did not want to disappoint investors and file late. We'd like to thank WWDC for working so hard that we could get our 10-Q filed on time.

Question. I know you filed an 8-K, but why is it now to issue a press release? Changing the auditor is an important issue. Some investors may have missed the 8-K. We agree completely. But we were advised by our counsel that the 8-K filing was sufficient based on related policies and requirements at that time. So in the future, we'll be more assertive to make sure we file a press release as well.

Did changing auditor have any adverse impact on the company? The answer: Changing auditor was a major distract. Morison Cogen has been our auditor for nearly 10 years. We've never contemplated having to find a new auditor on short notice. When we received the letter from Morison Cogen, we talked to them a lot. We also started calling other companies to get recommendation. We rushed to interview and conduct due diligence on potential auditors. During this time period, a number of issues that we probably should have addressed fell through the cracks. We would like you to understand this created great stress for us.

Question: Can you explain the stock awards in the second quarter and their impact on earnings? First of all, during the quarter, we issued shares of stock to the company management, directors, consultants and the employees. Our auditors determined they should be priced at $6 – approximately $6.61 based on when they were issued. Had they been issued at the end of the quarter when the closing price was approximately $5, the charge would have been much lower. These are annual grants in lieu of other compensation. In coming quarters, our SG&A should be lower because we had paid people in shares.

Question: Why are you giving these stock grants? This is a very important element of our investor relations strategy.

Shareholders keep asking about the low price of our stock and often seem to think management does not care. They do care about the price and we wish we could do more at this time. However, by giving out in stock instead of cash compensation, we are aligning their interests with that of you, our shareholders, as these people increase their holdings in our stock, they become increasingly focused on the price. By keeping the stock grants in lieu of salary, we are making sure management has a vested interest in seeing the price of the stock go up.

Financial statements. Question: You normally provide balance sheet or share valuation to save us the trouble of doing the calculation. Can you provide these numbers? Answer: Yes. Based 10,469,477 shares outstanding at the end of the second quarter, cash per share was $9.27. Net-net cash, which is cash minus all liabilities, was $7.52. Working capital was $9.15 and the book value was $26.56. As you can see, our stock continues to sell at a discount to all of these measures.

Operations. The next set of questions related to the operations. Now, firstly, let's look at the questions regarding bromine business segment. You have been optimistic about the reopening of factories number 2, number 8 and number 10. But these factories are still not open. What is happening with these factories? Why is it taking so long to get open?

As we disclosed in our 10-Q, to the company's knowledge, the government is currently completing its planning process for all mining areas, including that for prevention of flood. As a result, the company may be required to make some modification to our current wells and aqueducts prior to commencement of operations of these factories to satisfy the local government's requirements. Because when Gulf Resources acquired these facilities, it was able to use its corporate mining license, but now government is requiring that each factory have its own license. The major issue with these factories relates to the processing of crude salt and wastewater. These factories are located in some areas. However, the presence of halogen water means the soil content is not rich. The economic value for this land from the production of bromine and crude salt is much higher than the economic value from crops. To finalize license for these three properties, the company is working to reach agreement with the village government. We are optimistic about receiving approval. But as part of the process, we may have to modify our crude salt field and aqueducts.

So question: What can we expect from bromine in the third and fourth quarter in terms of pricing and production? Before we deal with the third and fourth quarter, I want to stress that, even with the destruction caused by the inspection, bromine had an excellent quarter. Revenue increased 123%. Gross profit increased 1,953%. As a percentage of sales, gross profit was 45% compared to 5%. During the quarter, bromine made a profit of approximately $2.7 million compared to a loss of approximately $1.5 million. Production in tonnes increased 48% to 1,805 tonnes, while the average selling price increased 51.3% to $5,554 per tonne.

As we indicated, we expect no further inspection for the remainder of the year. This means that production should be at least 25% higher in coming quarters. Bromine prices have continued at a very high level. At the end of Q1, bromine was around RMB 35,000. In the middle of the quarter, it was at RMB 41,000. At the end of Q2, it had risen to recording highs of RMB 45,950. Since the end of the quarter, it has declined slightly to RMB 43,000, still very close to its record highs and well above the average for second quarter. The company expects bromine price to remain near its current level for the foreseeable future. This augurs well for our profitability in third quarter and fourth quarter.

So, now let's look at the chemical segment question. The first question. I was confused by the photograph on your website and hope you can label them in the future. How many buildings are there in the chemical factory? And are they all compete? How many square meters are they in total?

So, answer. We have 11 major buildings including workshop and warehouses and a number of smaller supporting facilities. We will label our photograph in the future.

Can you explain the timing for installing equipment and the various parts of the production? We are starting to install equipment. This should take a few more months. Then we will begin to test the equipment. If everything works well, we could start trial production early next year. However, since this is all new and modern equipment, we do not know what problems will occur. Trial production in which we produce small amounts of products on a trial basis should take approximately six months. Assuming teams work at plant, we could begin commercial production around the middle of year 2022, but we cannot assure. We expect full production in year 2023. However, since this is a major new project with new equipment, there is no guarantees.

How much will this factory cost and how much has been spent to date? We originally estimated $60 million. Inflation has raised the cost somewhat. We are now expecting cost around $67 million. We have already spent $41.4 million, including $5.8 million in the second quarter.

Question. What can we expect in revenues and profits when the factory is at full production? Where are you focusing on pharmaceutical intermediaries and other products? The answer. Because we will have modern equipment and focus on pharmaceutical intermediaries, products and its byproducts, the margin will be higher. There are two primary reasons for focusing on the pharmaceutical product. They are much profitable and they are less polluting. Given the focus on green energy and more difficult government approvals, we did not want to produce products like oil and gas activities, which had traditionally been our largest product segment.

The third question regarding Sichuan natural gas projects. Question. What is happening in Sichuan province? Are we ever going to be able to [indiscernible] gas or mine bromine there? Answer: We remain optimistic about our opportunities in the Sichuan region. We continue to maintain a staff in Sichuan. And the senior amendment always continues to travel to province to meet with government officials. We know investors are frustrated, but creating environmental plans for a province of 84 million people is a complex undertaking. We believe we will receive government feedback regarding this matter by the first half of next year 2021.

This concludes our answer to some of the questions we have received directly from our shareholder. We'd like now to offer those of you on the call to ask questions on your own. So, operator, can we open up the call for the Q&A session?

Question-and-Answer Session

Operator

[Operator Instructions]. Your first question is coming from Max Waring [ph].

Max Waring

Hi. This is Max Waring. I was just wondering what's the annual production capacity of these four factories? This quarter, we did about 1,800 tonnes. I thought maybe we could do about 2,500 tonnes. What's about the maximum these four factors can do in one quarter?

[Foreign Language]

Xiaobin Liu

[Foreign Language] For this whole year, for the full bromine facilities, if they are operating, considering normally, we have one month holiday and stop of production at around the end of the year. The whole year production would be around 8,000 tonnes to 8,500 tonnes for this fall.

Max Waring

Okay, for this year, but what's maximum capacity? Like, what's full production?

Helen Xu

You mean this year? Or, like, the whole year?

Max Waring

No, not this year. Just ever. What's full capacity? Is that that full capacity for any year, 8,500 tonnes? Or can we do more?

Helen Xu

8,000 tonnes to 8,500 tonnes is the maximum production. Like is a normally production.

Q - Max Waring

This question has to do with – I think we get every quarter, but share repurchases. That would bring huge shareholder value. Is there any chance to get that next year once we get the cash flows going or is that still longer than that?

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Currently, the company management did not think about these share buybacks yet because you know that we need the cash for – put back company's own business operation back on track. And secondly, because company was always looking for – if there is any good acquisition target. But when all of our business operations back on track and when they can produce good cash flow and revenues, company will consider about this buyback.

Operator

The next question is coming from John Rolls.

John Rolls

My summary is the company managed to lose money in an extremely strong market for your main product, bromine. And that leads me to two questions and then one comment. One question is that the average price you received for bromine was much lower than the market price throughout the second quarter. How did that come about and what are the prospects for the future? Are you now selling bromine at close to the market price?

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Firstly, the second quarter bromine market prices were increased badly. So, our data is the average selling price. And because some of our bromine was sold based on our first quarter agreements with our customers. These are two major reasons. But in the third quarter, this selling price will be come up because we use some second quarter agreements to sell our third quarter bromine products. So third quarter, the price will be more close to market price.

John Rolls

The second question is that you spent a considerable amount of money during your shutdown to add wells. And it was stated that this would increase capacity utilization. Instead, your bromine capacity utilization does not go up in quarter two. But according to my calculations, actually went down somewhat. Why did that happen?

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Firstly, because the wells and output aqueducts, we have their useful lives. So, in order to extending their useful lives, we have to do a lot of maintenance in order to keep the utilization rate not going down so much. Secondly, because after some wells and aqueducts, they're utilized and they write off them. Now your cost to build new wells and aqueducts also increased a lot.

John Rolls

I'd like to close with just one comment. I agree that stock grants are a sensible way of rewarding management. But it's almost always linked to good performance. In my view, performance in this quarter was not good. You had lower volume sales than you had yourself predicted, the lower price than the market price, your auditor quits, there was no progress and the continuing issues of shut-down factories of natural gas, and the stock price has not improved. Yet you rewarded management for the second time in a year. I recommend that you look at future grants as rewards for good performance.

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Thanks for your comments. Mr. Liu explains that, yes, the company's – first of all, its revenue and income didn't decrease this quarter. It's under its taxation because that this quarter the National Environmental Protection inspection team came to Shandong Province. I think this news we can see on the older news on any public media. Because they came to Shandong and the local governments become nervous, and they always come to the company, they have asked for unexpected and unplanned intermittent inspection or ask the company to temporarily stop production for one or two days and do some – for their work preparation. So, this quarter, the company's production work [indiscernible] affected by this issue. That's why its production volume decreased this quarter under the company's expectations and this matter was unexpected.

Secondly, because company's auditor resigned this quarter and the company staff and management was depressed that time, in order to increase the staff's confidence and to make them more motivated, that's why this stock compensation was granted that time. Later on, company will consider about your comment. Of course, we'll not issue like this much to staff and we'll make their performance connected to stocks and the company performance as well in the future.

Operator

The next question is coming from Matthew Macchiarella.

Matthew Macchiarella

I just want to make a comment. I think there's one problem with the company as such. It's about communication. So, I really appreciate if you think to invest, like, for example, $1 million in order to do these three things. The first one, hire a professional investor relator, so that you can start to participate to conference with investment bankers and make sure that Gulf Resources will be known in the financial community. Make a presentation of your company, like a PDF.

Another topic that according to me would be very important is to hire a professional communication firm, so that you can start to give, for example, one month update. So, each month, you write like a press release giving an update to investors, so they are informed of what happens because we will have 12 updates during the new year.

And the third part is that – I really think that you should hire also like a professional web service because, as of today, I am just on your website, it told that the site is temporarily unavailable. It's very important as of today that website provides a lot of information to investors. It works well. It's full of information that is not accessible, that your website is unavailable today. Because otherwise people have a bad reputation of your company if your website doesn't work.

[Foreign Language]

Xiaobin Liu

[Foreign Language] Hi, Massimo. So, here's the response from Mr. Liu. He says, thanks very much for your comments. We did consider about your question and we did receive your email already. Because previously, for previous past years, the company had no income because all our facilities were shut down at that time. We don't have any income. And this year, due to COVID-19, our discussion with US professional IR company was not so smoothly. And due to this COVID-19, they cannot easily travel to China and the company also cannot easily travel to US as well. So, this created the difficulties for company to hire a new IR. But we will consider your comments and we will hire a professional IR in the near future. And we will also consider to redo the company website again based on your comments.

Matthew Macchiarella

As I mentioned before, communication is very important. So, please consider also to make a lot of press releases in order to get investor informed.

I want to do another question that was already done, but I want to put on another angle. In the last two, three years, the number of shares passed from 9.5 million to 10.5 million primarily for stock grants. Your company has $100 million of cash. I understand that you want to invest this cash for rebuild the company factories and also to make a light acquisition. But I really ask you – probably I would be your first international shareholder because I have a huge backup – to do at least a share buyback of 1 million shares. This is the number of shares of stock granted in the last two years. So, basically, if you do like this one, it would be really appreciated. All the stocks granted to management for incentives should come from bank of the company and not from issue of new share. This is something very useful and is something very common in Europe and United States where the stock grants are not done to dilute shareholder, but the stock grants are done with share buyback. So, if you do 1 million share buybacks, you basically do the share buybacks to cover the stocks granted in the last two years. I would really be happy if you can accept like this one. Not huge share buyback, but just share buyback to cover the stock grants, so you give a signal to the market. 1 million of shares through stock buyback is just $5 million. You have more than $90 million.

[Foreign Language]

Helen Xu

Hi, Maximo. Do you mean $1 million buyback or 1 million share buyback.

Matthew Macchiarella

1 million share buyback. That is $5 million. Because three years ago, the company had 9.5 million shares. As of today, you have 10.5 million shares. So, there were issued around 1 million share for stock grants to management. I think that would be right for shareholder if you announced today like a 1 million share buyback that is $5 million that is to cover all the stock grants that were issued in the last year.

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Yes, thanks for your comments and we'll consider it very carefully.

John Rolls

I hope that you would also put into practice because I think that would be a good choice.

Helen Xu

Yes, we will. Just email me anytime where you have questions.

Operator

And the next question is coming from Randy Leggett.

Randy Leggett

Just to reiterate what the fellow said before. It's kind of like hiding – I know you're not hiding and don't take that the wrong way. It's kind of like the accounting thing and then not telling us about the inspection because all of us are working at the price of bromine and saying, there's no way they can't hit that guide. And then we either find out on a conference call. It just seems to happen every quarter. And I totally agree, and we've talked about this and talked about it about hiring a professional PR firm. You can't do it all under that. But just not Helen – it just doesn't look good. Let's face that fact. And any company that I've ever invested in, if they didn't do that, they'd get creamed in the market. And it's just kind of frustrating.

And on top of that, is there any government regulation? I know, we have a problem with dividends because we don't have an overseas subsidiary. And that's been talked about for years too. But is there anything holding us back from doing a buyback from a government regulation standpoint? That's my question really. We should have said something about the accounting firm, and we should have said something about the inspection before the quarterly call. And the CEO should know that. I don't really know what else to say, it's just kind of frustrating. You've got so much going on for you, nobody really knows about except for us on the conference calls. That's what I find kind of just sad. Y'all could be making tons of money if we just get the thing out somewhere.

But getting back, but is that a government regulation on the buyback or is that just something y'all decided just – I know we've held off on because we had all these expenses. But is there any government – do they prohibit that?

Helen Xu

Yes, I'll double check it for you.

[Foreign Language]

[Technical Difficulty]

Randy Leggett

And also, we should let investors know week beforehand when we're doing an investor call too. Those are just simple things that the management can get straightened out on their own, I think.

Xiaobin Liu

[Foreign Language]

Actually, there is no government restrictions on the share buyback. But, now, Chinese government have very strict policy on wiring funds to overseas. So, this is a problem. If we want to wire funds to overseas, it's very difficult. We have to submit application, everything get approval. Even company paying invoices, we have to provide a lot of documentation.

Randy Leggett

I guess I understand that. But there again, the other thing was, it's just really simple to tell investors. Hey, put out a press release until we hire a PR firm. Hey, this is what happened with the accounting firm. Hey, we had an inspection this week. We're two weeks behind. People would understand that if you just tell us. It just concerns shareholders when we don't tell everybody. I think he should know that. So, just please tell him that.

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Okay, we got you.

Operator

The next question is coming from Keegan Wynn Switzer.

Keegan Wynn Switzer

This is Keegan Wynn Switzer. I'm a private investor. My question is actually one that was submitted earlier around the chemical factory. I think someone had asked what the projected revenues and profits or profit margins were expected to be. I know this is really hard to predict this far in advance, but are there any ranges that you guys are thinking or considering?

[Foreign Language]

Xiaobin Liu

[Foreign Language]

We cannot provide it right now, but we try our best – the next time while company is going to issue a guidance, we try to estimate the gross margin and revenue for our chemical segments and products.

Keegan Wynn Switzer

I think that'd be great. And then, I know it'll probably have to ramp. So maybe, by quarter or by half year would be helpful because I know it will take some time to ramp up. But people like me are holding this just because that'll be coming in the future. It'll be helpful to know how much revenue it will bring in. So, that's all for me.

Operator

And the next question is coming from Peter Osiris.

Peter Osiris

I'm a private investor. I have two questions. Just so I understand, when you gave guidance in the first quarter of $14 million in [Technical Difficulty], I just want to understand what happened with [Technical Difficulty] with inspections. You mentioned the inspections a couple of times. These were unplanned inspections and it forced you to stop and start your production. Is that correct?

Helen Xu

Yes, you're right.

Peter Osiris

Have you expected to have these inspections in a different quarter, like the third quarter or the fourth quarter? Or this is just a new inspection?

Helen Xu

We expected this production loss in the second quarter will be recovered in the third quarter.

Peter Osiris

If the inspections had not happened, would you have made your guide? Think you would have made your guide?

Helen Xu

The line was not clear. I cannot hear you really. Will we issue a new guidance?

Peter Osiris

If there had been no inspection, do you think that you would have made your original guidance?

[Foreign Language]

Xiaobin Liu

[Foreign Language]

Yes, definitely. Because due to this National Environmental Protection inspection team, they came to the Shandong province. Every level of government agencies, they become very nervous. So because they become nervous, they came – every level comes to company and they said, okay, you have to stop for one or two days for the inspection. But then later, we stop and start our production continually for one or two days. Because this is not planned and it's totally unexpected every time, so we cannot predict it the as usual. And we were not able to issue a press release saying, okay, this government inspection team is going to come because we do not know when and how long any time they come just without any notice or plan. So, by end of the quarter, then our production results come out, we did not achieve our quarterly guidance. But without this issue, definitely, we can meet our guidance in terms of revenue and net income.

Peter Osiris

I'd just make the comment, I agree with the earlier comments that – I understand you were working very hard on getting new orders, but the next time this happens, you should issue a press release about it.

The second thing I'd like to ask was actually a comment. [indiscernible] asking about stock buybacks. And I understand there is a problem of getting money out of China to do stock buybacks, is that correct?

Helen Xu

Sorry.

Peter Osiris

There is a problem of getting money out of China to do stock buybacks, is that correct?

Helen Xu

Yes. Yes. It is.

Peter Osiris

Here is something I would like the company to consider, okay? Given that stock grants is given to executives, the executives now own stock in the company in the United States, is that correct?

Helen Xu

Yes.

Peter Osiris

If the company could buy stock from the executives, pay the executives in R&D, the company would then have stock and money in the United States where it could do the stock buybacks? Do you understand me?

Helen Xu

Yes, I got your idea.

Peter Osiris

The stock issues to executives could provide over the long term a way for the company to get money out of China to do the things that investors want.

[Foreign Language]

Xiaobin Liu

[Foreign Language]

We will discuss with the management and staff to see how to do it and the possibilities of this way. Or if it's applicable.

Operator

Thank you. And there were no other questions. Helen, if there are any closing remarks, I'll pass the call back to you.

Helen Xu

No, I think if there is no more questions, we can close the call for today.

[Foreign Language]

Okay, thank you all for joining the call. Have a good day. And have a good night in China.

Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.

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