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AXT, Inc. Announces First Quarter 2020 Financial Results

FREMONT, Calif., April 22, 2020 (GLOBE NEWSWIRE) -- AXT, Inc. (AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the first quarter, ended March 31, 2020.

Management Qualitative Comments
“For much of the first quarter, our manufacturing facilities in China were operating at reduced staffing levels to limit the risk of COVID-19 exposure for our employees,” said Morris Young, chief executive officer. “We adopted a number of protective measures and thankfully none of our employees have contracted the virus so far. Despite the impact to productivity, we were able to meet customer demand in the first quarter, posting revenue and earnings results that were slightly ahead of our expectations. Further, we were pleased to announce in March that one of our largest gallium arsenide customers completed its site qualification of our new facilities for volume production, an important milestone for our manufacturing relocation.

“As we enter Q2, visibility remains limited and we are taking an appropriately conservative view of our markets. However, demand for our substrates is holding fairly steady amidst the difficult global conditions. We are seeing pockets of strength in wireless, data center connectivity and solar cell applications. In recent weeks, the government mandates have evolved, allowing us to return to full staffing levels at all three manufacturing locations. As such, we believe we are well positioned to support improved demand in the quarters ahead.

“In this environment, we continue to prioritize the well-being of our employees, the support of our customers, and accessibility to our investors. We believe AXT continues to have a healthy balance sheet and we will continue to emphasize strong fiscal discipline as we navigate these unusual times, and plan and prepare for better days ahead.”

First Quarter 2020 Results

Revenue for the first quarter of 2020 was $20.7 million, compared with $18.4 million in the fourth quarter of 2019 and $20.2 million for the first quarter of 2019.   

Gross margin was 26.6 percent of revenue for the first quarter of 2020, compared with 21.0 percent of revenue in the fourth quarter of 2019 and 33.1 percent for the first quarter of 2019.

Operating expenses were $6.2 million in the first quarter of 2020, compared with $6.7 million in the fourth quarter of 2019, and $6.1 million for the first quarter of 2019. 

Operating loss for the first quarter of 2020 was $0.6 million, compared with an operating loss of $2.8 million in the fourth quarter of 2019, and an operating profit of $0.6 million for the first quarter of 2019.

Other income, net for the first quarter of 2020 is a gain of $1.2 million. This includes a grant of $1.4 million from a provincial government agency as an award for relocating to its province.  

Net loss in the first quarter of 2020 was $0.2 million, or $0.01 per share, compared with a net loss of $2.0 million or $0.05 per share in the fourth quarter of 2019, and a net loss of $1.1 million or $0.03 per share for the first quarter of 2019.

Conference Call

The company will host a conference call to discuss these results today at 1:30 p.m. PT. The conference call can be accessed at (844) 892-6598 (passcode 2074409). The call will also be simulcast at www.axt.com. Replays will be available at (855) 859-2056 (passcode 2074409) until April 29, 2020. 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) 438-4700.

About AXT, Inc.

AXT is a material science company that develops and manufactures high-performance compound and single element semiconductor substrate wafers comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge).   The company’s substrate wafers are used when a typical silicon substrate wafer cannot meet the performance requirements of a semiconductor or optoelectronic device.  End markets include 5G infrastructure, data center connectivity (silicon photonics), passive optical networks, LED lighting, lasers, sensors, power amplifiers for wireless devices and satellite solar cells.  AXT’s worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions.   AXT has manufacturing facilities in China and, as part of its supply chain strategy, has partial ownership in ten companies in China producing raw materials. For more information, see AXT’s website at http://www.axt.com.

 Forward-Looking Statements

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal securities laws, including, for example, statements regarding the market demand for our products, our growth prospects and opportunities for continued business expansion, our market opportunity, our relocation and our expectations with respect to our business prospects and financial results. These forward-looking statements are based upon assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results 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: the timing and receipt of significant orders; the cancellation of orders and return of product; emerging applications using chips or devices fabricated on our substrates; end-user acceptance of products containing chips or devices fabricated on our substrates; our ability to bring new products to market; product announcements by our competitors; the ability to control costs and improve efficiency; the ability to utilize our manufacturing capacity; product yields and their impact on gross margins; the relocation of manufacturing lines; possible factory shutdowns as a result of air pollution in China; COVID-19 or other outbreaks of a contagious disease; tariffs and other trade war issues; the financial performance of our partially owned supply chain companies; policies and regulations in China and other factors as set forth in the company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q 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
    March 31,
    2020
  2019
             
Revenue   $  20,723     $  20,208  
Cost of revenue      15,201        13,513  
Gross profit      5,522        6,695  
Operating expenses:            
Selling, general and administrative      4,749        4,723  
Research and development      1,407        1,346  
Total operating expenses      6,156        6,069  
Income (loss) from operations      (634 )      626  
Interest income (expense), net      (29 )      95  
Equity in loss of unconsolidated joint ventures      (120 )      (1,454 )
Other income (expense), net      1,366        (134 )
Income (loss) before provision for income taxes      583        (867 )
Provision for income taxes      366        156  
Net income (loss)      217        (1,023 )
Less: Net income attributable to noncontrolling interests      (395 )      (81 )
Net loss attributable to AXT, Inc.   $  (178 )   $  (1,104 )
Net loss attributable to AXT, Inc. per common share:            
Basic and diluted   $  (0.01 )   $  (0.03 )
Weighted-average number of common shares outstanding:            
Basic and diluted      39,812        39,352  
                 


AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

             
    March 31,   December 31, 
    2020
  2019
             
ASSETS            
Current assets:            
Cash and cash equivalents   $  20,061     $  26,892  
Short-term investments      8,697        9,427  
Accounts receivable, net      23,613        19,031  
Inventories      48,253        49,152  
Prepaid expenses and other current assets      10,638        8,703  
Total current assets      111,262        113,205  
Property, plant and equipment, net      97,490        97,403  
Operating lease right-of-use assets      2,810        2,938  
Other assets      11,078        9,803  
Total assets   $  222,640     $  223,349  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $  9,518     $  10,098  
Accrued liabilities      10,371        11,681  
Bank loan      6,071        5,747  
Total current liabilities      25,960        27,526  
Long-term portion of royalty payments      1,445        —  
Noncurrent operating lease liabilities      2,542        2,695  
Other long-term liabilities      503        366  
Total liabilities      30,450        30,587  
             
Stockholders’ equity:            
Preferred stock      3,532        3,532  
Common stock      41        41  
Additional paid-in capital      238,041        236,957  
Accumulated deficit      (47,961 )      (47,783 )
Accumulated other comprehensive loss      (6,637 )      (4,862 )
Total AXT, Inc. stockholders’ equity      187,016        187,885  
Noncontrolling interests      5,174        4,877  
Total stockholders’ equity      192,190        192,762  
Total liabilities and stockholders’ equity   $  222,640     $  223,349  
                 


Contacts:

Gary Fischer
Chief Financial Officer
(510) 438-4700

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