GlobeNewswire Inc | Jul 22, 2020 04:05PM EDT

July 22, 2020

FREMONT, Calif., July 22, 2020 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the second quarter, ended June 30, 2020.

Management Qualitative Comments

We view 2020 as a turning point in our business, said Morris Young, chief executive officer. There are clear signs in the marketplace that strategic applications like 5G, data centers, and passive optical networks (PON) are strengthening. In addition, we believe new applications across our portfolio are creating exciting incremental opportunities beginning later this year. Further, with the relocation of our gallium arsenide manufacturing largely completed and production ramping, we are now focusing on elevating our manufacturing and business processes to serve the needs of increasingly sophisticated applications and customer requirements. In total, we believe we are positioning ourselves for renewed revenue expansion and improving profitability.

Second Quarter 2020 Results

Revenue for the second quarter of 2020 was $22.1 million, compared with $20.7 million in the first quarter of 2020 and $24.8 million for the second quarter of 2019.

Gross margin was 30.6 percent of revenue for the second quarter of 2020, compared with 26.6 percent of revenue in the first quarter of 2020 and 34.3 percent for the second quarter of 2019.

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

Operating profit for the second quarter of 2020 was $0.5 million, compared with an operating loss of $0.6 million in the first quarter of 2020, and an operating profit of $2.3 million for the second quarter of 2019.

Other income, after deducting for associated taxes and the portion attributable to noncontrolling interests, net for the second quarter of 2020 was a charge of $0.1 million. This includes a grant of $1.6 million from a provincial government agency as an award for relocating to its province, $0.9 million for taxes and $0.6 million attributable to noncontrolling interests and a loss of $0.2 million from our unconsolidated joint ventures.

Net income in the second quarter of 2020 was $0.4 million, or $0.01 per share, compared with a net loss of $0.2 million or ($0.01) per share in the first quarter of 2020, and net income of $1.5 million or $0.04 per share for the second 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 2378158). The call will also be simulcast at www.axt.com. Replays will be available at (855) 859-2056 (passcode 2378158) until July 28, 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 Six Months Ended June 30, December 31, 2020 2019 2020 2019 Revenue $ 22,134 $ 24,797 $ 42,857 $ 45,005 Cost of revenue 15,366 16,291 30,567 29,804 Gross profit 6,768 8,506 12,290 15,201 Operating expenses:Selling, generaland 4,747 4,769 9,496 9,492 administrativeResearch and 1,543 1,399 2,950 2,745 developmentTotal operating 6,290 6,168 12,446 12,237 expensesIncome (loss) 478 2,338 (156 ) 2,964 from operationsInterest income (39 ) 79 (68 ) 174 (expense), netEquity in income(loss) of (168 ) 8 (288 ) (1,446 )unconsolidatedjoint venturesOther income 1,608 (90 ) 2,974 (224 )(expense), netIncome beforeprovision for 1,879 2,335 2,462 1,468 income taxesProvision for 920 597 1,286 753 income taxesNet income 959 1,738 1,176 715 Less: Net incomeattributable to (598 ) (287 ) (993 ) (368 )noncontrollinginterestsNet incomeattributable to $ 361 $ 1,451 $ 183 $ 347 AXT, Inc.Net incomeattributable to AXT,Inc. percommon share:Basic $ 0.01 $ 0.04 $ 0.00 $ 0.01 Diluted $ 0.01 $ 0.04 $ 0.00 $ 0.01 Weighted-averagenumber of common sharesoutstanding:Basic 39,973 39,447 39,891 39,399 Diluted 40,750 40,123 40,543 40,045

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

June 30, December31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 26,515 $ 26,892 Short-term investments 5,247 9,427 Accounts receivable, net 19,760 19,031 Inventories 49,586 49,152 Prepaid expenses and other current assets 9,621 8,703 Total current assets 110,729 113,205 Long-term investments 720 ? Property, plant and equipment, net 101,031 97,403 Operating lease right-of-use assets 2,722 2,938 Other assets 11,018 9,803 Total assets $ 226,220 $ 223,349 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 11,540 $ 10,098 Accrued liabilities 10,511 11,681 Bank loan 6,087 5,747 Total current liabilities 28,138 27,526 Long-term portion of royalty payments 1,177 ? Noncurrent operating lease liabilities 2,455 2,695 Other long-term liabilities 396 366 Total liabilities 32,166 30,587 Stockholders? equity: Preferred stock 3,532 3,532 Common stock 41 41 Additional paid-in capital 238,754 236,957 Accumulated deficit (47,600 ) (47,783 )Accumulated other comprehensive loss (6,365 ) (4,862 )Total AXT,Inc. stockholders? equity 188,362 187,885 Noncontrolling interests 5,692 4,877 Total stockholders? equity 194,054 192,762 Total liabilities and stockholders? equity $ 226,220 $ 223,349

Contacts:Gary FischerChief Financial Officer(510) 438-4700

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