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AXT, Inc. Announces Second Quarter 2022 Financial Results

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AXT, Inc.
AXT, Inc.

Year-Over-Year Revenue Growth of 22% in 1H22; Gross Margin Expands

FREMONT, Calif., July 28, 2022 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor wafer substrates, today reported financial results for the second quarter, ended June 30, 2022.

Management Qualitative Comments

“This is an exciting time in our business,” said Morris Young, chief executive officer. “Our strong execution on a number of fronts has set the stage for great opportunities in the coming quarters. We continue to achieve strong growth in highly strategic applications, and are currently ramping several Tier-1 customers. We are also achieving notable success in the development of larger diameter substrates that we believe will enable the next generation of technology innovation across a number of end-markets. This strong execution has driven first half revenue growth of 22% over the previous year and continues to enable us to outperform our market, with emerging opportunities that will layer on over the coming quarters.”

Second Quarter 2022 Results

  • Revenue for the second quarter of 2022 was $39.5 million, compared with $39.7 million for the first quarter of 2022 and $33.7 million for the second quarter of 2021.

  • GAAP gross margin was 39.1 percent of revenue for the second quarter of 2022, compared with 33.6 percent of revenue for the first quarter of 2022 and 36.3 percent for the second quarter of 2021.

  • Non-GAAP gross margin was 39.4 percent of revenue for the second quarter of 2022, compared with 33.8 percent of revenue for the first quarter of 2022 and 36.4 percent for the second quarter of 2021.

  • GAAP operating expenses were $10.1 million for the second quarter of 2022, compared with $9.6 million for the first quarter of 2022 and $8.3 million for the second quarter of 2021.

  • Non-GAAP operating expenses were $9.1 million for the second quarter of 2022, compared with $8.6 million for the first quarter of 2022 and $7.4 million for the second quarter of 2021.

  • GAAP operating profit for the second quarter of 2022 was $5.3 million, compared with $3.7 million for the first quarter of 2022 and $3.9 million for the second quarter of 2021.

  • Non-GAAP operating profit for the second quarter of 2022 was $6.4 million, compared with $4.8 million for the first quarter of 2022 and $4.9 million for the second quarter of 2021.

  • Non-operating income and expense, taxes and minority interest for the second quarter of 2022 was an income of $0.3 million, compared with an expense of $0.5 million in the first quarter of 2022 and an income of $0.5 million for the second quarter of 2021.

  • GAAP net income, after minority interests, for the second quarter of 2022 was $5.5 million, or $0.13 per share, compared with net income of $3.2 million or $0.07 per share for the first quarter of 2022 and net income of $4.4 million or $0.10 per share for the second quarter of 2021.

  • Non-GAAP net income for the second quarter of 2022 was $6.7 million, or $0.16 per share, compared with net income of $4.3 million or $0.10 per share for the first quarter of 2022 and net income of $5.4 million or $0.12 per share for the second quarter of 2021.

STAR Market Listing Update

On January 10, 2022, AXT announced that Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), its subsidiary in Beijing, China, submitted to the Shanghai Stock Exchange (the “SSE”) its application to list its shares in an initial public offering (the “IPO”) on the SSE’s Sci-Tech innovAtion boaRd (the “STAR Market”) and the application was accepted for review. Subsequently, Tongmei responded to several rounds of questions received from the SSE. On July 12, 2022, the SSE approved the listing of Tongmei’s shares in an IPO on the STAR Market. The STAR Market IPO remains subject to review and approval by the China Securities Regulatory Commission (“CSRC”) and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei expects to accomplish this goal in the second half of 2022, probably in Q4 2022. AXT has posted a brief summary of the plan and the process on its website at http://www.axt.com.

Conference Call

The company will host a conference call to discuss these results on July 28, 2022 at 1:30 p.m. PT. To access the call by phone, please go to this link to register and you will be provided with dial in details:
https://register.vevent.com/register/BI845e5e766e5542c4807cba2ad13e21f8. A webcast link for the call will also be available on the investor relations page at www.axt.com. 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 and includes sales, administration and customer service functions. AXT has its Asia headquarters in Beijing, China and manufacturing facilities in three separate locations in China. In addition, as part of its supply chain strategy, the Company has partial ownership in ten companies in China producing raw materials for its manufacturing process. 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 timing and completion of the proposed listing of shares of Tongmei on the STAR Market. Additional examples of forward-looking statements include statements regarding the market demand for our products, our growth prospects and opportunities for continued business expansion, including technology trends, new applications and the ramping of Tier-1 customers, our market opportunity, our ability to lead our industry, our relocation, our expectations with respect to our business prospects and financial results and our development of larger diameter substrates that we believe will enable the next generation of technology innovation across a number of end-markets. 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 requests for redemptions by private equity funds in China of investments in Tongmei, the administrative challenges in satisfying the requirements of various government agencies in China in connection with the listing of shares of Tongmei on the STAR Market, continued open access to companies to list shares on the STAR Market, investor enthusiasm for new listings of shares on the STAR Market and geopolitical tensions between China and the United States. Additional 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 and ramping of production; possible factory shutdowns as a result of air pollution in China or COVID-19; 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.

Contacts:
Gary Fischer
Chief Financial Officer
(510) 438-4700

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

FINANCIAL TABLES TO FOLLOW

AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2022

    

2021

 

2022

    

2021

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

39,487

 

 

$

33,735

 

 

$

79,140

 

 

$

65,085

 

 

Cost of revenue

 

 

24,052

 

 

 

21,497

 

 

 

50,397

 

 

 

41,311

 

 

Gross profit

 

 

15,435

 

 

 

12,238

 

 

 

28,743

 

 

 

23,774

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,693

 

 

 

5,795

 

 

 

13,143

 

 

 

11,365

 

 

Research and development

 

 

3,453

 

 

 

2,537

 

 

 

6,612

 

 

 

4,942

 

 

Total operating expenses

 

 

10,146

 

 

 

8,332

 

 

 

19,755

 

 

 

16,307

 

 

Income from operations

 

 

5,289

 

 

 

3,906

 

 

 

8,988

 

 

 

7,467

 

 

Interest income (expense), net

 

 

(188

)

 

 

39

 

 

 

(371

)

 

 

(11

)

 

Equity in income of unconsolidated joint ventures

 

 

2,177

 

 

 

1,502

 

 

 

3,302

 

 

 

2,613

 

 

Other income (expense), net

 

 

294

 

 

 

61

 

 

 

285

 

 

 

(50

)

 

Income before provision for income taxes

 

 

7,572

 

 

 

5,508

 

 

 

12,204

 

 

 

10,019

 

 

Provision for income taxes

 

 

1,027

 

 

 

893

 

 

 

1,687

 

 

 

1,639

 

 

Net income

 

 

6,545

 

 

 

4,615

 

 

 

10,517

 

 

 

8,380

 

 

Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interests

 

 

(999

)

 

 

(230

)

 

 

(1,806

)

 

 

(570

)

 

Net income attributable to AXT, Inc.

 

$

5,546

 

 

$

4,385

 

 

$

8,711

 

 

$

7,810

 

 

Net income attributable to AXT, Inc. per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

0.11

 

 

$

0.21

 

 

$

0.19

 

 

Diluted

 

$

0.13

 

 

$

0.10

 

 

$

0.20

 

 

$

0.18

 

 

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,001

 

 

 

41,248

 

 

 

41,935

 

 

 

41,124

 

 

Diluted

 

 

42,511

 

 

 

42,727

 

 

 

42,586

 

 

 

42,725

 

 

 

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

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,043

 

 

$

36,763

 

 

Restricted cash

 

 

3,900

 

 

 

 

 

Short-term investments

 

 

4,471

 

 

 

5,419

 

 

Accounts receivable, net

 

 

38,751

 

 

 

34,839

 

 

Inventories

 

 

77,280

 

 

 

65,912

 

 

Prepaid expenses and other current assets

 

 

11,935

 

 

 

17,252

 

 

Total current assets

 

 

177,380

 

 

 

160,185

 

 

Long-term investments

 

 

7,760

 

 

 

9,576

 

 

Property, plant and equipment, net

 

 

152,882

 

 

 

142,415

 

 

Operating lease right-of-use assets

 

 

2,021

 

 

 

2,324

 

 

Other assets

 

 

21,222

 

 

 

17,941

 

 

Total assets

 

$

361,265

 

 

$

332,441

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

23,317

 

 

$

16,649

 

 

Accrued liabilities

 

 

14,581

 

 

 

17,057

 

 

Short-term loan, related party

 

 

 

 

 

1,887

 

 

Bank loan

 

 

32,973

 

 

 

12,229

 

 

Total current liabilities

 

 

70,871

 

 

 

47,822

 

 

Noncurrent operating lease liabilities

 

 

1,596

 

 

 

1,935

 

 

Other long-term liabilities

 

 

2,069

 

 

 

2,453

 

 

Total liabilities

 

 

74,536

 

 

 

52,210

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

48,265

 

 

 

50,385

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock

 

 

3,532

 

 

 

3,532

 

 

Common stock

 

 

43

 

 

 

43

 

 

Additional paid-in capital

 

 

233,364

 

 

 

231,622

 

 

Accumulated deficit

 

 

(21,259

)

 

 

(29,970

)

 

Accumulated other comprehensive income

 

 

637

 

 

 

6,302

 

 

Total AXT, Inc. stockholders’ equity

 

 

216,317

 

 

 

211,529

 

 

Noncontrolling interests

 

 

22,147

 

 

 

18,317

 

 

Total stockholders’ equity

 

 

238,464

 

 

 

229,846

 

 

Total liabilities, redeemable noncontrolling interests and stockholders’ equity

 

$

361,265

 

 

$

332,441

 

 

 

AXT, INC.
Reconciliation of Statements of Operations Under GAAP and Non-GAAP
(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2022

    

2021

 

2022

    

2021

GAAP gross profit

 

$

15,435

 

$

12,238

 

$

28,743

 

$

23,774

 

Stock compensation expense

 

 

113

 

 

36

 

 

226

 

 

75

 

Non-GAAP gross profit

 

$

15,548

 

$

12,274

 

$

28,969

 

$

23,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

10,146

 

$

8,332

 

$

19,755

 

$

16,307

 

Stock compensation expense

 

 

1,021

 

 

939

 

 

1,996

 

 

1,716

 

Non-GAAP operating expenses

 

$

9,125

 

$

7,393

 

$

17,759

 

$

14,591

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income from operations

 

$

5,289

 

$

3,906

 

$

8,988

 

$

7,467

 

Stock compensation expense

 

 

1,134

 

 

975

 

 

2,222

 

 

1,791

 

Non-GAAP income from operations

 

$

6,423

 

$

4,881

 

$

11,210

 

$

9,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

5,546

 

$

4,385

 

$

8,711

 

$

7,810

 

Stock compensation expense

 

 

1,134

 

 

975

 

 

2,222

 

 

1,791

 

Non-GAAP net income

 

$

6,680

 

$

5,360

 

$

10,933

 

$

9,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income per diluted share

 

$

0.13

 

$

0.10

 

$

0.20

 

$

0.18

 

Stock compensation expense per diluted share

 

$

0.03

 

$

0.02

 

$

0.05

 

$

0.04

 

Non-GAAP net income per diluted share

 

$

0.16

 

$

0.12

 

$

0.25

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute diluted net income per share

 

 

42,511

 

 

42,727

 

 

42,586

 

 

42,725