AXT, Inc. Announces First Quarter 2013 Financial Results

Q1 FY 2013 Net Revenues: $22.4 Million Q1 FY 2013 GAAP Net Loss: $(2.4) Million; $(0.08) per Share


FREMONT, CA--(Marketwired - May 1, 2013) - AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Results
Revenue for the first quarter of 2013 was $22.4 million compared with $18.9 million in the fourth quarter of 2012. Total gallium arsenide (GaAs) substrate revenue was $11.7 million for the first quarter of 2013, compared with $11.3 million in the fourth quarter of 2012. Indium phosphide (InP) substrate revenue was $1.8 million for the first quarter of 2013, compared with $1.6 million in the fourth quarter of 2012. Germanium (Ge) substrate revenue was $2.6 million for the first quarter of 2013 compared with $1.7 million in the fourth quarter of 2012. Raw materials sales were $6.3 million for the first quarter of 2013, compared with $4.3 million in the fourth quarter of 2012.

Gross margin was 15.6 percent of revenue for the first quarter of 2013. By comparison, gross margin in the fourth quarter of 2012 was 19.5 percent of revenue. The decrease of 3.9 percentage points in gross margin in the first quarter was expected.

Operating expenses were $4.7 million in the first quarter of 2013, compared with $4.6 million in the fourth quarter of 2012.

Loss from operations for the first quarter of 2013 was $1.3 million compared with loss from operations of $0.9 million in the fourth quarter of 2012.

There was a swing of approximately $1.0 million from last quarter's net interest and other income of $522,000 to this quarter's net interest and other expense of $512,000, which was mainly attributable to $314,000 this quarter of withholding tax in China on dividends declared by our consolidated joint ventures, $213,000 less equity earnings of unconsolidated joint ventures, $285,000 less net interest income this quarter since the prior quarter had interest income in one of our consolidated joint ventures from long term notes that matured in the fourth quarter, $114,000 of one-time net income items in the fourth quarter, and $94,000 greater foreign exchange loss this quarter.

Net loss in the first quarter of 2013 was $2.4 million or $0.08 per diluted share compared with net loss of $0.8 million or $0.02 per diluted share in the fourth quarter of 2012.

Management Qualitative Comments
"Revenue trends in the first quarter came in largely as expected in each of our product categories, although our performance in germanium substrates and raw materials outperformed our plan," said Morris Young, chief executive officer. "With our industry continuing to evolve, both in terms of the customer landscape and technology trends, we experienced a continuation of the softness in semi-insulating substrates that we began to see in the second half of 2012. The wireless industry, while growing in terms of devices, is transitioning to new technologies for certain devices in order to maximize cost efficiency, reduce size requirements and increase performance capabilities. These transitions are likely to occur throughout 2013, and continue to constrain our semi-insulating substrate results as customers evaluate their ongoing requirements. However, we are seeing renewed growth in our semi-conducting gallium substrate business as well as improving demand for our indium phosphide substrates, germanium substrates and raw materials. While the changes to the wireless side of our business have been challenging, we remain optimistic that new opportunities, coupled with improving market conditions in other product lines will allow us to drive improved shareholder value in 2013."

Conference Call
The company will also host a conference call to discuss these results on May 1, 2013 at 1:30 p.m. PDT. The conference call can be accessed at (719) 457-2627 (passcode 3064379). The call will also be simulcast on the Internet at Replays will be available at (719) 457-0820 (passcode 3064379) until May 8, 2013. Financial and statistical information to be discussed in the call will be available on the company's website immediately prior to commencement of the call. Additional investor information can be accessed at or by calling the company's Investor Relations Department at (510) 683-5900.

About AXT, Inc.
AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its manufacturing facilities in Beijing, China. In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California. The company's substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates. AXT has manufacturing facilities in China and invests in joint ventures in China producing raw materials. For more information, see AXT's website at

Safe Harbor Statement
The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements regarding our customers and potential customers transition to new technologies to reduce size requirements and increase performance capabilities being likely to occur throughout 2013, and continuing to constrain our semi-insulating substrate results and our current expectations regarding long-term growth and trends in the demand for our products, our progress in our strategic plans, and the positioning of the company. These forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company's operations and business environment, which could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. These uncertainties and factors include but are not limited to: overall conditions in the markets in which the company competes; global financial conditions and uncertainties; market acceptance and demand for the company's products; the impact of factory closures or other events causing delays by our customers on the timing of sales of our products; and other factors as set forth in the company's annual report on Form 10-K and other filings made with the Securities and Exchange Commission. Each of these factors is difficult to predict and many are beyond the company's control. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise.

(Unaudited, in thousands, except per share data)  
    Three Months Ended  
    March 31,  
    2013     2012  
Revenue   $ 22,380     $ 23,486  
Cost of revenue     18,896       15,292  
Gross profit     3,484       8,194  
Operating expenses:                
  Selling, general and administrative     3,904       3,785  
  Research and development     822       835  
    Total operating expenses     4,726       4,620  
Income (loss) from operations     (1,242 )     3,574  
Interest income, net     31       88  
Equity in earnings of unconsolidated joint ventures     282       154  
Other expense, net     (825 )     (489 )
Income (loss) before provision for income taxes     (1,754 )     3,327  
Provision for income taxes     184       375  
Net income (loss)     (1,938 )     2,952  
Less: Net income attributable to noncontrolling interest     (441 )     (1,317 )
Net income (loss) attributable to AXT, Inc.   $ (2,379 )   $ 1,635  
Net income (loss) attributable to AXT, Inc. per common share:                
  Basic   $ (0.0750 )   $ 0.05  
  Diluted   $ (0.08 )   $ 0.05  
Weighted average number of common shares outstanding:                
  Basic     32,297       32,034  
  Diluted     32,297       33,018  
      - more -          
(Unaudited, in thousands)  
    March 31,     December 31,  
    2013     2012  
Current assets                
  Cash and cash equivalents   $ 25,792     $ 30,634  
  Short-term investments     6,540       10,270  
  Accounts receivable, net     17,014       17,912  
  Inventories     38,768       40,352  
  Related party notes receivable - current     2,047       2,036  
  Prepaid expenses and other current assets     7,034       5,268  
    Total current assets     97,195       106,472  
Long-term investments     17,038       9,191  
Property, plant and equipment, net     37,477       37,235  
Related party notes receivable - long-term     418       416  
Other assets     14,196       14,275  
    Total assets   $ 166,324     $ 167,589  
Liabilities and stockholders' equity:                
Current liabilities                
  Accounts payable   $ 6,581     $ 5,894  
  Accrued liabilities     9,434       7,202  
    Total current liabilities     16,015       13,096  
Long-term portion of royalty payments     3,125       3,325  
Other long-term liabilities     148       254  
    Total liabilities     19,288       16,675  
Stockholders' equity:                
  Preferred stock     3,532       3,532  
  Common stock     32       32  
  Additional paid-in capital     193,651       193,063  
  Accumulated deficit     (61,447 )     (59,047 )
  Accumulated other comprehensive income     6,366       6,033  
    Total AXT, Inc. stockholders' equity     142,134       143,613  
  Noncontrolling interest     4,902       7,301  
    Total stockholders' equity     147,036       150,914  
    Total liabilities and stockholders' equity   $ 166,324     $ 167,589  

Raymond A. Low
Chief Financial Officer
(510) 683-5900

Leslie Green
Green Communications Consulting, LLC
(650) 312-9060
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