AXT, Inc. Announces Third Quarter 2012 Financial Results

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FREMONT, CA--(Marketwire - Nov 1, 2012) - AXT, Inc. (NASDAQ: AXTI)

  • Q3 FY 2012 Net Revenues: $20.8 million

  • Q3 FY 2012 GAAP Net Income: $0.93 million; $0.03 per share (diluted)

AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the third quarter ended Sept. 30, 2012.

Third Quarter 2012 Results
Revenue for the third quarter of 2012 was $20.8 million, compared to $25.2 million in the second quarter of 2012.

Total gallium arsenide (GaAs) substrate revenue was $12.9 million for the third quarter of 2012, compared with $14.9 million in the second quarter of 2012. Indium phosphide (InP) substrate revenue was $1.6 million for the third quarter of 2012, compared with $1.3 million in the second quarter of 2012. Germanium (Ge) substrate revenue was $2.0 million for the third quarter of 2012 compared with $2.4 million in the second quarter of 2012. Raw materials sales were $4.3 million for the third quarter of 2012, compared with $6.5 million in the second quarter of 2012.

Gross margin was 26.3 percent of revenue for the third quarter of 2012. By comparison, gross margin in the second quarter of 2012 was 29.8 percent of revenue. The drop in gross margin in the third quarter of 2012 was largely the result of lower selling prices of raw gallium, as well as lower tonnage sold, and lower volumes of sales in gallium arsenide substrates in both the wireless market and the LED market.

Operating expenses were $4.8 million in the third quarter of 2012, compared with $4.9 million in the second quarter of 2012.

Income from operations for the third quarter of 2012 was $0.7 million, compared with income from operations of $2.6 million in the second quarter of 2012.

Net interest and other income for the third quarter of 2012 was $544,000, which included a foreign exchange gain of $114,000. This compares with net interest and other income of $219,000 in the second quarter of 2012, which included a foreign exchange gain of $106,000. 

Net income in the third quarter of 2012 was $0.9 million or $0.03 per diluted share, compared with net income of $1.3 million or $0.04 per diluted share in the second quarter of 2012. 

Management Qualitative Comments
"Business conditions in the third quarter were in keeping with the expectations that we outlined when we announced our results last quarter," said Morris Young, president and CEO. "The compound semiconductor substrate market is currently experiencing a correction, largely driven by weaker demand and a moderate amount of excess inventory in the channel. However, our solid execution over the last many quarters is allowing us to weather the current down cycle and we are using this time to support significant qualifications that are still ongoing and to focus our resources on strategic geographies and applications that are likely to benefit AXT in the future. We view improving market conditions, new customer qualifications and a bottoming of raw material pricing as key catalysts for our growth in the coming year and beyond."

Conference Call
The company will host a conference call to discuss these results on Nov. 1, 2012 at 1:30 p.m. PT. The conference call can be accessed at (913) 312-0406 (passcode 6664216). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 6664216) until November 7, 2012. 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 our focus on strategic geographies and applications that are likely to benefit AXT in the future and on our view on the key catalysts for our growth in the coming year and beyond. 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.

FINANCIAL TABLES TO FOLLOW

   
AXT, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited, in thousands, except per share data)  
                         
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012     2011     2012     2011  
                                 
Revenue   $ 20,808     $ 28,305     $ 69,447     $ 82,902  
Cost of revenue     15,342       16,068       48,279       45,979  
Gross profit     5,466       12,237       21,168       36,923  
                                 
Operating expenses:                                
  Selling, general and administrative     3,950       3,555       11,709       10,959  
  Research and development     844       612       2,593       1,816  
    Total operating expenses     4,794       4,167       14,302       12,775  
Income from operations     672       8,070       6,866       24,148  
Interest income, net     52       103       202       259  
Other income, net     492       356       314       443  
                                 
Income before provision for (benefit from) income taxes     1,216       8,529       7,382       24,850  
Provision for (benefit from) income taxes     (228 )     667       559       2,633  
Net income     1,444       7,862       6,823       22,217  
                                 
Less: Net income attributable to noncontrolling interest     (512 )     (1,378 )     (2,957 )     (4,463 )
Net income attributable to AXT, Inc.   $ 932     $ 6,484     $ 3,866     $ 17,754  
                                 
Net income attributable to AXT, Inc. per common share:                                
  Basic   $ 0.03     $ 0.20     $ 0.12     $ 0.55  
  Diluted   $ 0.03     $ 0.19     $ 0.11     $ 0.53  
                                 
Weighted average number of common shares outstanding:                                
  Basic     32,183       31,944       32,118       31,832  
  Diluted     32,769       33,126       32,911       33,140  
                                 
                                 

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AXT, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited, in thousands)  
             
    September 30,     December 31,  
    2012     2011  
Assets:                
Current assets                
  Cash and cash equivalents   $ 35,503     $ 26,156  
  Short-term investments     10,577       5,505  
  Accounts receivable, net     16,888       17,966  
  Inventories     39,932       46,012  
  Related party notes receivable - current     414       412  
  Prepaid expenses and other current assets     5,125       7,052  
    Total current assets     108,439       103,103  
                 
Long-term investments     5,367       8,981  
Property, plant and equipment, net     36,201       34,282  
Related party notes receivable - long-term     2,031       2,021  
Other assets     14,183       14,101  
                 
    Total assets   $ 166,221     $ 162,488  
                 
Liabilities and stockholders' equity:                
Current liabilities                
  Accounts payable   $ 4,570     $ 3,286  
  Accrued liabilities     6,800       7,597  
    Total current liabilities     11,370       10,883  
                 
Long-term portion of royalty payments     3,525       4,125  
Other long-term liabilities     157       431  
    Total liabilities     15,052       15,439  
                 
Stockholders' equity:                
  Preferred stock     3,532       3,532  
  Common stock     32       32  
  Additional paid-in capital     192,703       191,554  
  Accumulated deficit     (58,291 )     (62,157 )
  Accumulated other comprehensive income     6,006       5,818  
    Total AXT, Inc. stockholders' equity     143,982       138,779  
                 
  Noncontrolling interest     7,187       8,270  
    Total stockholders' equity     151,169       147,049  
                 
Total liabilities and stockholders' equity   $ 166,221     $ 162,488  
                 
                 
Contact:

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

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