GlobeNewswire Inc | Oct 27, 2021 04:05PM EDT

October 27, 2021

FREMONT, Calif., Oct. 27, 2021 (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, 2021.

Management Qualitative Comments

Our third quarter and year-to-date revenue results continue to underscore the gathering momentum of the technology mega trends that our substrates help to enable trends such as 5G telecommunications, data center upgrades, health monitoring, the internet of everything, and the proliferation of LED lighting and display, said Morris Young, chief executive officer. Year to date, we have increased revenue by 46% over the same period in 2020. With our new, expanded manufacturing facilities, we are able to accommodate increasing demand across these applications and others, while meeting the stringent technical requirements of Tier-1 customers. As such, 2021 is unfolding to be a pivotal year for our business. And as we look ahead, we believe 2022 will be another year of strong growth, with existing applications continuing to mature, and new ones being layered on to the current demand.

Third Quarter 2021 Results

In order to provide better clarity on its operational and financial results, AXT will begin reporting its financial results on both a GAAP and non-GAAP basis. Non-GAAP results exclude stock-based compensation. Investors can find GAAP to non-GAAP reconciliation tables in the financial statements in this press release.

-- Revenue for the third quarter of 2021 was $34.6 million, compared with $33.7 million in the second quarter of 2021 and $25.5 million for the third quarter of 2020. This is approximately 35 percent growth over the third quarter of 2020. -- GAAP gross margin was 33.3 percent of revenue for the third quarter of 2021, compared with 36.3 percent of revenue in the second quarter of 2021 and 34.6 percent for the third quarter of 2020. -- Non-GAAP gross margin was 33.8 percent of revenue for the third quarter of 2021, compared with 36.4 percent of revenue in the second quarter of 2021 and 34.8 percent for the third quarter of 2020. -- GAAP operating expenses were $9.1 million in the third quarter of 2021, compared with $8.3 million in the second quarter of 2021 and $6.6 million for the third quarter of 2020. -- Non-GAAP operating expenses were $7.7 million in the third quarter of 2021, compared with $7.4 million in the second quarter of 2021 and $6.0 million for the third quarter of 2020. -- GAAP operating profit for the third quarter of 2021 was $2.4 million, compared with $3.9 million in the second quarter of 2021 and $2.2 million for the third quarter of 2020. -- Non-GAAP operating profit for the third quarter of 2021 was $4.0 million, compared with $4.9 million in the second quarter of 2021 and $2.8 million for the third quarter of 2020. -- Non-operating income and expense, net for the third quarter of 2021 was a gain of $1.4 million, compared with a gain of $0.5 million in the second quarter of 2021 and a loss of $1.2 million for the third quarter of 2020. -- GAAP net income in the third quarter of 2021 was $3.8 million, or $0.09 per share, compared with net income of $4.4 million or $0.10 per share in the second quarter of 2021 and net income of $1.0 million or $0.02 per share for the third quarter of 2020. -- Non-GAAP net income in the third quarter of 2021 was $5.4 million, or $0.13 per share, compared with net income of $5.4 million or $0.12 per share in the second quarter of 2021 and net income of $1.6 million or $0.04 per share for the third quarter of 2020.

STAR Market Listing Update

AXT previously announced on November 16, 2020 a strategic plan to access Chinas capital markets and progress to an initial public offering by Beijing Tongmei Xtal Technology Co., Ltd. (Tongmei), its company in China, on the Shanghai Stock Exchanges Sci-Tech innovAtion boaRd (the STAR Market). The company is currently preparing required documents for submission to the STAR Market authorities.

The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Tongmei expects to accomplish this goal in mid-2022. AXT has posted a brief summary of the plan and the process on its website at 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 (844) 892-6598 (passcode 8289338). The call will also be simulcast at www.axt.com. Replays will be available at (855) 859-2056 (passcode 8289338) until November 3, 2021. 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 and includes sales, administration and customer service functions. AXT has its Asia headquarters in Beijing, China and manufacturing facilities inthree 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 AXTs website at http://www.axt.com.

Note Regarding Use of Non-GAAP Financial Measures

As discussed above, in addition to the companys condensed consolidated financial statements, which are presented according to GAAP, the company provides certain non-GAAP financial information that excludes stock-based compensation. We believe that non-GAAP measures provide better comparability with our peer companies, many of which also use similar non-GAAP financial measures. Further, the company believes that these non-GAAP measures offer an important analytical tool to help investors understand the companys core operating results and trends. These non-GAAP measures have certain limitations and are not meant to be considered in isolation or as a substitute for GAAP financial information. Please note that other companies may calculate non-GAAP financial measures differently. A reconciliation of our GAAP consolidated financial statements to our non-GAAP consolidated financial statements is provided below.

Forward-Looking Statements

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal securities laws, including, for example, statements regarding completing other preliminary steps in connection with the proposed listing of shares of Tongmei on the STAR Market, being accepted to list shares of Tongmei on the STAR Market and the timing and completion of such 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 and new applications, our market opportunity, our ability to lead our industry, 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 withdrawal, cancellations or 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 investments in Tongmei and 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; 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, 2021 2020 2021 2020 Revenue $ 34,576 $ 25,469 $ 99,661 $ 68,326 Cost of revenue 23,075 16,646 64,386 47,213 Gross profit 11,501 8,823 35,275 21,113 Operating expenses:Selling, generaland 6,476 4,623 17,841 14,119 administrativeResearch and 2,629 2,023 7,571 4,973 developmentTotal operating 9,105 6,646 25,412 19,092 expensesIncome from 2,396 2,177 9,863 2,021 operationsInterest (44 ) (70 ) (55 ) (138 ) expense, netEquity in income(loss) of 1,061 45 3,674 (243 ) unconsolidatedjoint venturesOther income 948 (34 ) 898 2,940 (expense), netIncome beforeprovision for 4,361 2,118 14,380 4,580 (benefit from)income taxesProvision for(benefit from) (135 ) 637 1,504 1,923 income taxesNet income 4,496 1,481 12,876 2,657 Less: Net incomeattributable tononcontrollinginterests and (696 ) (490 ) (1,266 ) (1,483 ) redeemablenoncontrollinginterestsNet incomeattributable to $ 3,800 $ 991 $ 11,610 $ 1,174 AXT, Inc.Net incomeattributable to AXT,Inc. percommon share:Basic $ 0.09 $ 0.02 $ 0.28 $ 0.03 Diluted $ 0.09 $ 0.02 $ 0.27 $ 0.03 Weighted-averagenumber of common sharesoutstanding:Basic 41,460 40,152 41,237 39,978 Diluted 42,678 40,979 42,710 40,688

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

September December31, 30, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 43,608 $ 72,602 Short-term investments 5,681 240 Accounts receivable, net 36,584 24,558 Inventories 60,683 51,515 Prepaid expenses and other current assets 13,062 15,603 Total current assets 159,618 164,518 Long-term investments 6,680 5,726 Property, plant and equipment, net 131,617 115,825 Operating lease right-of-use assets 2,401 2,683 Other assets 15,347 10,110 Total assets $ 315,663 $ 298,862 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS? EQUITYCurrent liabilities: Accounts payable $ 11,384 $ 12,669 Accrued liabilities 12,670 15,995 Bank loan 13,285 10,411 Total current liabilities 37,339 39,075 Long-term loan, related party 929 ? Noncurrent operating lease liabilities 2,035 2,374 Other long-term liabilities 1,628 1,881 Total liabilities 41,931 43,330 Redeemable noncontrolling interests 50,178 47,563 Stockholders? equity: Preferred stock 3,532 3,532 Common stock 43 42 Additional paid-in capital 230,517 230,381 Accumulated deficit (32,935 ) (44,545 ) Accumulated other comprehensive income 4,583 3,209 Total AXT,Inc. stockholders? equity 205,740 192,619 Noncontrolling interests 17,814 15,350 Total stockholders? equity 223,554 207,969 Total liabilities, redeemablenoncontrolling interests and $ 315,663 $ 298,862 stockholders? equity

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, 2021 2020 2021 2020GAAP gross $ 11,501 $ 8,823 $ 35,275 $ 21,113profitStockcompensation 188 28 263 83expenseNon-GAAP $ 11,689 $ 8,851 $ 35,538 $ 21,196gross profit GAAPoperating $ 9,105 $ 6,646 $ 25,412 $ 19,092expensesStockcompensation 1,451 619 3,168 1,847expenseNon-GAAPoperating $ 7,654 $ 6,027 $ 22,244 $ 17,245expenses GAAP incomefrom $ 2,396 $ 2,177 $ 9,863 $ 2,021operationsStockcompensation 1,639 647 3,431 1,930expenseNon-GAAPincome from $ 4,035 $ 2,824 $ 13,294 $ 3,951operations GAAP net $ 3,800 $ 991 $ 11,610 $ 1,174incomeStockcompensation 1,639 647 3,431 1,930expenseNon-GAAP net $ 5,439 $ 1,638 $ 15,041 $ 3,104income GAAP netincome per $ 0.09 $ 0.02 $ 0.27 $ 0.03dilutedshareStockcompensation 0.04 0.02 0.08 0.05expenseNon-GAAP netincome per $ 0.13 $ 0.04 $ 0.35 $ 0.07dilutedshare Shares usedto computediluted net 42,678 40,979 42,710 40,688income pershare

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

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