• AXT, Inc. Announces Second Quarter 2022 Financial Results

    Source: Nasdaq GlobeNewswire / 28 Jul 2022 15:05:01   America/Chicago

    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 

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