• AXT, Inc. Announces Third Quarter 2023 Financial Results

    Source: Nasdaq GlobeNewswire / 02 Nov 2023 16:05:00   America/New_York

    FREMONT, Calif., Nov. 02, 2023 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor wafer substrates, today reported financial results for the third quarter, ended September 30, 2023.

    Management Qualitative Comments

    “The demand environment in the third quarter of 2023 remained stable, and we were pleased to see some encouraging early signs of improvement in the data center market, resulting in modestly higher indium phosphide revenue quarter over quarter,” said Morris Young, chief executive officer. “While inventory rationalization may persist into the new year, we believe that the trends that have driven our revenue and customer expansion remain very much intact. Further, we have executed well in our development of larger diameter substrates that will pave the way for our opportunities in next-generation devices spanning data center, consumer, and other markets. As we navigate the near-term environment, we will continue to prioritize cost savings and efficiency, and are focused on accelerating our return to profitability.”

    Third Quarter 2023 Results

    • Revenue for the third quarter of 2023 was $17.4 million, compared with $18.6 million for the second quarter of 2023 and $35.2 million for the third quarter of 2022.
    • GAAP gross margin was 10.7 percent of revenue for the third quarter of 2023, compared with 9.2 percent of revenue for the second quarter of 2023 and 42.0 percent of revenue for the third quarter of 2022.
    • Non-GAAP gross margin was 11.3 percent of revenue for the third quarter of 2023, compared with 9.8 percent of revenue for the second quarter of 2023 and 42.2 percent of revenue for the third quarter of 2022.
    • GAAP operating expenses were $8.6 million for the third quarter of 2023, compared with $8.6 million for the second quarter of 2023 and $10.2 million for the third quarter of 2022.
    • Non-GAAP operating expenses were $7.8 million for the third quarter of 2023, compared with $7.8 million for the second quarter of 2023 and $9.2 million for the third quarter of 2022.
    • GAAP operating profit/(loss) for the third quarter of 2023 was an operating loss of ($6.7) million, compared with an operating loss of ($6.8) million for the second quarter of 2023 and an operating profit of $4.6 million for the third quarter of 2022.
    • Non-GAAP operating profit/(loss) for the third quarter of 2023 was an operating loss of ($5.8) million, compared with an operating loss of ($5.9) million for the second quarter of 2023 and an operating profit of $5.6 million for the third quarter of 2022.
    • Non-operating income and expense, taxes and minority interest for the third quarter of 2023 was a net gain of $0.9 million, compared with a net gain of $1.8 million in the second quarter of 2023 and a net gain of $1.2 million for the third quarter of 2022.
    • GAAP net income/(loss), after minority interests, for the third quarter of 2023 was a net loss of ($5.8) million, or ($0.14) per share, compared with a net loss of ($5.1) million, or ($0.12) per share, for the second quarter of 2023 and net income of $5.8 million, or $0.13 per share, for the third quarter of 2022.
    • Non-GAAP net income/(loss) for the third quarter of 2023 was a net loss of ($4.9) million, or ($0.12) per share, compared with a net loss of ($4.2) million, or ($0.10) per share, for the second quarter of 2023 and net income of $6.8 million, or $0.16 per share, for the third quarter of 2022.

    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. On August 1, 2022, the China Securities Regulatory Commission (the “CSRC”) accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the 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 hopes to accomplish this goal in the coming months. 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 today at 1:30 p.m. PT. The conference call can be accessed at (888) 300-4150 (passcode 7175811). The call will also be simulcast at www.axt.com. Replays will be available at (800) 770-2030 (passcode 7175811) until November 16, 2023. 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 wafer substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge). The company’s wafer substrates are used when a typical silicon wafer substrate 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 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 more than ten companies in China producing raw materials and consumables for its manufacturing process. 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, 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 product mix, our growth prospects and opportunities for continued business expansion, including trends, new applications and the ramping of Tier-1 customers, our market opportunity, our ability to lead our industry, our expectations with respect to our business prospects and financial results, including our gross margin performance, 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.

    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,
      2023   2022   2023   2022 
                
    Revenue$17,366  $35,183  $55,366  $114,323 
    Cost of revenue 15,500   20,401   46,675   70,798 
    Gross profit 1,866   14,782   8,691   43,525 
    Operating expenses:           
    Selling, general and administrative 5,667   6,576   17,439   19,719 
    Research and development 2,926   3,639   9,261   10,251 
    Total operating expenses 8,593   10,215   26,700   29,970 
    Income (loss) from operations (6,727)  4,567   (18,009)  13,555 
    Interest expense, net (381)  (299)  (1,143)  (670)
    Equity in income of unconsolidated joint ventures 369   2,006   2,344   5,308 
    Other income, net 223   957   1,282   1,242 
    Income (loss) before provision (benefit) for income taxes (6,516)  7,231   (15,526)  19,435 
    Provision (benefit) for income taxes (101)  501   (92)  2,188 
    Net income (loss) (6,415)  6,730   (15,434)  17,247 
    Less: Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests 592   (971)  1,174   (2,777)
    Net income (loss) attributable to AXT, Inc.$(5,823) $5,759  $(14,260) $14,470 
    Net income (loss) attributable to AXT, Inc. per common share:           
    Basic$(0.14) $0.14  $(0.34) $0.34 
    Diluted$(0.14) $0.13  $(0.34) $0.34 
    Weighted-average number of common shares outstanding:           
    Basic 42,638   42,163   42,574   42,011 
    Diluted 42,638   42,982   42,574   42,718 


    AXT, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (Unaudited, in thousands)
     
     September 30, December 31,
      2023   2022 
          
    ASSETS     
    Current assets:     
    Cash and cash equivalents$28,522  $34,948 
    Restricted cash 10,778   6,400 
    Short-term investments 4,270   9,339 
    Accounts receivable, net 18,883   29,252 
    Inventories 86,383   89,629 
    Prepaid expenses and other current assets 11,474   13,977 
    Total current assets 160,310   183,545 
    Long-term investments    2,118 
    Property, plant and equipment, net 158,773   161,017 
    Operating lease right-of-use assets 2,878   1,761 
    Other assets 20,229   21,631 
    Total assets$342,190  $370,072 
    LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY     
    Current liabilities:     
    Accounts payable$6,369  $10,084 
    Accrued liabilities 15,520   18,164 
    Bank loans 45,776   47,078 
    Total current liabilities 67,665   75,326 
    Noncurrent operating lease liabilities 2,437   1,322 
    Other long-term liabilities 4,007   3,678 
    Total liabilities 74,109   80,326 
          
    Redeemable noncontrolling interests 40,634   44,846 
          
    Stockholders’ equity:     
    Preferred stock 3,532   3,532 
    Common stock 44   44 
    Additional paid-in capital 237,653   235,308 
    Accumulated deficit (28,419)  (14,159)
    Accumulated other comprehensive loss (8,581)  (3,118)
    Total AXT, Inc. stockholders’ equity 204,229   221,607 
    Noncontrolling interests 23,218   23,293 
    Total stockholders’ equity 227,447   244,900 
    Total liabilities, redeemable noncontrolling interests and stockholders’ equity$342,190  $370,072 


    AXT, INC.
    Reconciliation of Statements of Operations Under GAAP and Non-GAAP
    (Unaudited, in thousands)
     
     Three Months Ended Nine Months Ended
     September 30, September 30,
      2023   2022   2023   2022 
    GAAP gross profit$1,866  $14,782  $8,691  $43,525 
    Stock-based compensation expense 102   51   310   277 
    Non-GAAP gross profit$1,968  $14,833  $9,001  $43,802 
                  
    GAAP operating expenses$8,593  $10,215  $26,700  $29,970 
    Stock-based compensation expense 789   985   2,408   2,981 
    Non-GAAP operating expenses$7,804  $9,230  $24,292  $26,989 
                  
    GAAP income (loss) from operations$(6,727) $4,567  $(18,009) $13,555 
    Stock-based compensation expense 891   1,036   2,718   3,258 
    Non-GAAP income (loss) from operations$(5,836) $5,603  $(15,291) $16,813 
                  
    GAAP net income (loss)$(5,823) $5,759  $(14,260) $14,470 
    Stock-based compensation expense 891   1,036   2,718   3,258 
    Non-GAAP net income (loss)$(4,932) $6,795  $(11,542) $17,728 
                  
    GAAP net income (loss) per diluted share$(0.14) $0.13  $(0.34) $0.34 
    Stock-based compensation expense per diluted share$0.02  $0.02  $0.06  $0.08 
    Non-GAAP net income (loss) per diluted share$(0.12) $0.16  $(0.27) $0.41 
                  
    Shares used to compute diluted net income per share 42,638   42,982   42,574   42,718 


    Contacts: 
     Gary Fischer
     Chief Financial Officer
     (510) 438-4700
      
     Leslie Green 
     Green Communications Consulting, LLC
     (650) 312-9060

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