AXT, Inc. Announces Second Quarter 2013 Financial Results

FREMONT, CA--(Marketwired - Jul 31, 2013) - AXT, Inc. ( NASDAQ : AXTI ), a leading manufacturer of compound semiconductor substrates, today reported financial results for the second quarter ended June 30, 2013.

Second Quarter 2013 Results
Revenue for the second quarter of 2013 was $23.8 million compared with $22.4 million in the first quarter of 2013. Total gallium arsenide (GaAs) substrate revenue was $10.6 million for the second quarter of 2013, compared with $11.7 million in the first quarter of 2013. Indium phosphide (InP) substrate revenue was $2.0 million for the second quarter of 2013, compared with $1.8 million in the first quarter of 2013. Germanium (Ge) substrate revenue was $5.3 million for the second quarter of 2013, up 110% compared with $2.6 million in the first quarter of 2013. Raw materials sales were $5.8 million for the second quarter of 2013, compared with $6.3 million in the first quarter of 2013.

Gross margin was 12.9 percent of revenue for the second quarter of 2013. By comparison, gross margin in the first quarter of 2013 was 15.6 percent of revenue.

Operating expenses were $5.2 million in the second quarter of 2013, compared with $4.7 million in the first quarter of 2013.

Loss from operations for the second quarter of 2013 was $2.2 million compared with loss from operations of $1.3 million in the first quarter of 2013.

There was a positive swing of approximately $1.4 million from last quarter's net interest and other expense of $512,000 to this quarter's net interest and other income of $902,000, which was mainly attributable to an $811,000 gain on a minority investment in a privately-held company, $289,000 less foreign exchange loss, $189,000 more equity earnings of unconsolidated joint ventures, and $86,000 less withholding tax in China on dividends declared by our consolidated joint ventures.

Net loss in the second quarter of 2013 was $2.0 million or $0.06 per diluted share compared with net loss of $2.4 million or $0.08 per diluted share in the first quarter of 2013.

Management Qualitative Comments
"Our results for the second quarter came in within our guidance range, with revenue improving modestly from the prior quarter," said Morris Young, chief executive officer. "We continued to see an evolution of our business as our revenues further diversified across our substrate product portfolio. While the wireless market remains soft, germanium substrates showed strong growth in the second quarter. Germanium substrates are gaining momentum with increasing demand from CPV terrestrial solar applications. As we continue to work through challenges in the gallium arsenide substrate side of our business, it is encouraging to see growth in other areas in which we have invested over the past two years. We continue to manage our expenses carefully and plan our business conservatively in order to weather the near-term environment and position ourselves for success as the market improves."

Conference Call
The company will also host a conference call to discuss these results on July 31, 2013 at 1:30 p.m. PDT. The conference call can be accessed at (719) 325-2308 (passcode 8763822). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 8763822) until Aug 7, 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 http://www.axt.com 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 http://www.axt.com.

Safe Harbor Statement
The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements regarding momentum in the demand for germanium substrates. 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.

   
AXT, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited, in thousands, except per share data)  
                         
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
                                 
Revenue   $ 23,831     $ 25,153     $ 46,211     $ 48,639  
Cost of revenue     20,746       17,645       39,642       32,937  
Gross profit     3,085       7,508       6,569       15,702  
                                 
Operating expenses:                                
  Selling, general and administrative     4,207       3,974       8,132       7,759  
  Research and development     1,039       914       1,861       1,749  
    Total operating expenses     5,246       4,888       9,993       9,508  
Income (loss) from operations     (2,161 )     2,620       (3,424 )     6,194  
Interest income, net     50       62       81       150  
Equity in earnings of unconsolidated joint ventures     471       284       753       438  
Other income (expense), net     381       (127 )     (444 )     (616 )
                                 
Income (loss) before provision for income taxes     (1,259 )     2,839       (3,034 )     6,166  
Provision for income taxes     (342 )     (412 )     (526 )     (787 )
Net income (loss)     (1,601 )     2,427       (3,560 )     5,379  
                                 
Less: Net income attributable to noncontrolling interest     (434 )     (1,128 )     (875 )     (2,445 )
Net income (loss) attributable to AXT, Inc.   $ (2,035 )   $ 1,299     $ (4,435 )   $ 2,934  
                                 
Net income (loss) attributable to AXT, Inc. per common share:                                
  Basic   $ (0.06 )   $ 0.04     $ (0.14 )   $ 0.09  
  Diluted   $ (0.06 )   $ 0.04     $ (0.14 )   $ 0.09  
                                 
Weighted average number of common shares outstanding:                                
  Basic     32,382       32,138       32,340       32,086  
  Diluted     32,382       32,944       32,340       32,981  
                                 
                                 
                                 
AXT, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited, in thousands)  
             
    June 30,     December 31,  
    2013     2012  
Assets:                
Current assets                
  Cash and cash equivalents   $ 21,959     $ 30,634  
  Short-term investments     6,581       10,270  
  Accounts receivable, net     20,091       17,912  
  Inventories     36,836       40,352  
  Related party notes receivable - current     2,502       2,036  
  Prepaid expenses and other current assets     7,022       5,268  
    Total current assets     94,991       106,472  
                 
Long-term investments     16,886       9,191  
Property, plant and equipment, net     37,301       37,235  
Related party notes receivable - long-term     -       416  
Other assets     14,352       14,275  
                 
    Total assets   $ 163,530     $ 167,589  
                 
Liabilities and stockholders' equity:                
Current liabilities                
  Accounts payable   $ 5,375     $ 5,894  
  Accrued liabilities     9,136       7,202  
    Total current liabilities     14,511       13,096  
                 
Long-term portion of royalty payments     2,925       3,325  
Other long-term liabilities     157       254  
    Total liabilities     17,593       16,675  
                 
Stockholders' equity:                
  Preferred stock     3,532       3,532  
  Common stock     32       32  
  Additional paid-in capital     193,720       193,063  
  Accumulated deficit     (63,482 )     (59,047 )
  Accumulated other comprehensive income     6,650       6,033  
    Total AXT, Inc. stockholders' equity     140,452       143,613  
                 
  Noncontrolling interest     5,485       7,301  
    Total stockholders' equity     145,937       150,914  
                 
    Total liabilities and stockholders' equity   $ 163,530     $ 167,589