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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

AXT, Inc. Announces Third Quarter 2019 Financial Results

October 30, 2019

FREMONT, Calif., Oct. 30, 2019 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading material science company manufacturing single crystal compound semiconductor substrates, today reported financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Results

Revenue for the third quarter of 2019 was $19.8 million, compared with $24.8 million in the second quarter of 2019 and $28.6 million for the third quarter of 2018.

Gross margin was 29.0 percent of revenue for the third quarter of 2019, compared with 34.3 percent of revenue in the second quarter of 2019 and 37.1 percent for the third quarter of 2018.

Operating expenses were $6.2 million in the third quarter of 2019, compared with $6.2 million in the second quarter of 2019 and $6.3 million for the third quarter of 2018.

Income/loss from operations for the third quarter of 2019 was a loss of $0.5 million, compared with an operating profit of $2.3 million in the second quarter of 2019 and an operating profit of $4.3 million for the third quarter of 2018.

Interest income, net for the third quarter of 2019 included interest income of $41,000, a net loss of $0.2 million from the partially owned companies in AXT’s supply chain accounted for under the equity method and a foreign exchange gain and other income totaling $0.2 million.

Income tax expense in the third quarter of 2019 was $23,000, compared with income tax expense of $0.6 million in the second quarter of 2019 and income tax expense of $0.4 million for the third quarter of 2018.

Net loss in the third quarter of 2019 was $0.9 million, or $0.02 per basic share, compared with a net income of $1.5 million or $0.04 per diluted share in the second quarter of 2019 and net income of $3.9 million or $0.10 per diluted share for the third quarter of 2018.

Management Qualitative Comments

“Q3 was a difficult quarter in a challenging market environment,” said Morris Young, chief executive officer. “But despite the near-term market softness, we are confident that the underlying technology trends fueling the applications that drive our success are intact. In the meantime, we are taking the opportunity to effectively execute our relocation, and are pleased to have met significant milestones with permitting and volume-production readiness. These will allow us to support the expected customer volume ramp over the coming quarters, as well as new business opportunities when the demand environment strengthens.”

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 5191303). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 5191303) until November 5, 2019. 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 designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge) through its manufacturing facilities in Beijing, China. AXT’s worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions. The company’s substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell applications. Its vertical gradient freeze (VGF) process technology 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, 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.

Safe Harbor Statement

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; 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, ---------------------- ---------------------- 2019 2018 2019 2018 -------- - -------- - -------- - -------- - Revenue $ 19,841 $ 28,626 $ 64,846 $ 80,165 Cost of revenue 14,082 18,012 43,886 48,968 - ------ - - ------ - - ------ - - ------ - Gross profit 5,759 10,614 20,960 31,197 - ------ - - ------ - - ------ - - ------ - Operating expenses: Selling, general and administrative 4,755 4,615 14,247 13,824 Research and development 1,482 1,668 4,227 4,588 Total operating expenses 6,237 6,283 18,474 18,412 - ------ - - ------ - - ------ - - ------ - Income (loss) from operations (478 ) 4,331 2,486 12,785 Interest income, net 41 133 215 414 Equity in income (loss) of unconsolidated joint ventures (204 ) 6 (1,650 ) (21 ) Other income (expense), net 169 87 (55 ) (179 ) - ------ - - ------ - - ------ - - ------ - Income (loss) before provision for income taxes (472 ) 4,557 996 12,999 Provision for income taxes 23 410 776 1,111 - ------ - - ------ - - ------ - - ------ - Net income (loss) (495 ) 4,147 220 11,888 Less: Net income attributable to noncontrolling interests (403 ) (208 ) (771 ) (1,173 ) - ------ - - ------ - - ------ - - ------ - Net income (loss) attributable to AXT, Inc. $ (898 ) $ 3,939 $ (551 ) $ 10,715 - ------ - - ------ - - ------ - - ------ - Net income (loss) attributable to AXT, Inc. per common share: Basic $ (0.02 ) $ 0.10 $ (0.02 ) $ 0.27 - ------ - - ------ - - ------ - - ------ - Diluted $ (0.02 ) $ 0.10 $ (0.02 ) $ 0.26 - ------ - - ------ - - ------ - - ------ - Weighted-average number of common shares outstanding: Basic 39,466 39,008 39,438 39,000 - ------ - - ------ - - ------ - - ------ - Diluted 39,466 40,331 39,438 40,320 - ------ - - ------ - - ------ - - ------ -

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

September December 30, 31, ----------- ----------- 2019 2018 --------- - --------- - ASSETS Current assets: Cash and cash equivalents $ 27,837 $ 16,526 Short-term investments 6,116 22,129 Accounts receivable, net 17,450 19,586 Inventories 49,071 58,571 Prepaid expenses and other current assets 8,249 11,728 - ------- - - ------- - Total current assets 108,723 128,540 Long-term investments 4,519 717 Property, plant and equipment, net 89,680 82,280 Operating lease right-of-use assets 2,981 — Other assets 11,807 11,987 - ------- - - ------- - Total assets $ 217,710 $ 223,524 - ------- - - ------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 8,147 $ 13,338 Accrued liabilities 9,432 15,371 Bank loan 5,609 — - ------- - - ------- - Total current liabilities 23,188 28,709 Noncurrent operating lease liabilities 2,744 — Other long-term liabilities 324 283 - ------- - - ------- - Total liabilities 26,256 28,992 - ------- - - ------- - Stockholders’ equity: Preferred stock 3,532 3,532 Common stock 40 40 Additional paid-in capital 236,320 234,418 Accumulated deficit (45,734 ) (45,183 ) Accumulated other comprehensive loss (7,240 ) (1,972 ) - ------- - - ------- - Total AXT, Inc. stockholders’ equity 186,918 190,835 Noncontrolling interests 4,536 3,697 - ------- - - ------- - Total stockholders’ equity 191,454 194,532 - ------- - - ------- - Total liabilities and stockholders’ equity $ 217,710 $ 223,524 - ------- - - ------- -

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