GlobeNewswire Inc | Oct 28, 2020 04:06PM EDT

October 28, 2020

FREMONT, Calif., Oct. 28, 2020 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the third quarter, ended September 30, 2020.

Management Qualitative Comments

We are pleased to report 28 percent year-over-year revenue growth in Q3 and earnings above our guidance range, said Morris Young, chief executive officer. These results were driven by meaningful contribution from strategic applications such as 5G telecommunications, passive optical networks, and data center connectivity, where our indium phosphide substrates play an important role in enabling ongoing technological advancement. We are excited to see so many of the applications and customer opportunities for which we have been preparing over the last two years beginning to take shape. With our gallium arsenide manufacturing relocation largely complete and the success of our efforts visible in customer acceptance, our new facilities are poised to be a cornerstone of our growth and market differentiation.

Third Quarter 2020 Results

Revenue for the third quarter of 2020 was $25.5 million, compared with $22.1 million in the second quarter of 2020 and $19.8 million for the third quarter of 2019.

Gross margin was 34.6 percent of revenue for the third quarter of 2020, compared with 30.6 percent of revenue in the second quarter of 2020 and 29.0 percent for the third quarter of 2019.

Operating expenses were $6.6 million in the third quarter of 2020, compared with $6.3 million in the second quarter of 2020, and $6.2 million for the third quarter of 2019.

Operating profit for the third quarter of 2020 was $2.2 million, compared with an operating profit of $0.5 million in the second quarter of 2020, and an operating loss of $0.5 million for the third quarter of 2019.

Other expense, provision for income taxes and income attributable to noncontrolling interests, net for the third quarter of 2020 was a charge of $1.2 million. This includes a gain from our unconsolidated joint ventures and other income, together totaling $0.1 million, a foreign exchange charge of $0.1 million, $0.7 million for taxes and $0.5 million attributable to noncontrolling interests.

Net income in the third quarter of 2020 was $1.0 million, or $0.02 per diluted share, compared with net income of $0.4 million or $0.01 per diluted share in the second quarter of 2020, and a net loss of $0.9 million or $0.02 per basic share for the third 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 7497220). The call will also be simulcast at www.axt.com. Replays will be available at (855) 859-2056 (passcode 7497220) until November 3, 2020. Financial and statistical information to be discussed in the call will be available on the companys website immediately prior to commencement of the call. Additional investor information can be accessed at http://www.axt.com or by calling the companys 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 companys 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. AXTs worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions.AXT has manufacturing facilities inChinaand, as part of its supply chain strategy, has partial ownership in ten companies in China producing raw materials. For more information, see AXTs 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 companys 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 and ramping of production; 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 companys 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 companys 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, 2020 2019 2020 2019 Revenue $ 25,469 $ 19,841 $ 68,326 $ 64,846 Cost of revenue 16,646 14,082 47,213 43,886 Gross profit 8,823 5,759 21,113 20,960 Operating expenses:Selling, generaland 4,623 4,755 14,119 14,247 administrativeResearch and 2,023 1,482 4,973 4,227 developmentTotal operating 6,646 6,237 19,092 18,474 expensesIncome (loss) 2,177 (478 ) 2,021 2,486 from operationsInterest income (70 ) 41 (138 ) 215 (expense), netEquity in income(loss) of 45 (204 ) (243 ) (1,650 )unconsolidatedjoint venturesOther income (34 ) 169 2,940 (55 )(expense), netIncome (loss)before provision 2,118 (472 ) 4,580 996 for income taxesProvision for 637 23 1,923 776 income taxesNet income 1,481 (495 ) 2,657 220 (loss)Less: Net incomeattributable to (490 ) (403 ) (1,483 ) (771 )noncontrollinginterestsNet income(loss) $ 991 $ (898 ) $ 1,174 $ (551 )attributable toAXT, Inc.Net income(loss)attributable to AXT,Inc. percommon share:Basic $ 0.02 $ (0.02 ) $ 0.03 $ (0.02 )Diluted $ 0.02 $ (0.02 ) $ 0.03 $ (0.02 )Weighted-averagenumber of common sharesoutstanding:Basic 40,152 39,466 39,978 39,438 Diluted 40,979 39,466 40,688 39,438

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

September December31, 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 22,384 $ 26,892 Short-term investments 4,505 9,427 Accounts receivable, net 22,653 19,031 Inventories 48,357 49,152 Prepaid expenses and other current assets 10,649 8,703 Total current assets 108,548 113,205 Long-term investments 2,884 ? Property, plant and equipment, net 108,295 97,403 Operating lease right-of-use assets 2,702 2,938 Other assets 10,308 9,803 Total assets $ 232,737 $ 223,349 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 12,271 $ 10,098 Accrued liabilities 10,842 11,681 Bank loan 3,380 5,747 Total current liabilities 26,493 27,526 Long-term portion of royalty payments 1,193 ? Noncurrent operating lease liabilities 2,415 2,695 Other long-term liabilities 744 366 Total liabilities 30,845 30,587 Stockholders? equity: Preferred stock 3,532 3,532 Common stock 41 41 Additional paid-in capital 240,422 236,957 Accumulated deficit (46,609 ) (47,783 )Accumulated other comprehensive loss (1,992 ) (4,862 )Total AXT,Inc. stockholders? equity 195,394 187,885 Noncontrolling interests 6,498 4,877 Total stockholders? equity 201,892 192,762 Total liabilities and stockholders? equity $ 232,737 $ 223,349

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