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AXT, Inc. Announces First Quarter 2008 Results

Semi-Insulating GaAs and Ge Substrate Revenues Continue to Dominate Growth
FREMONT, CA, Apr 30, 2008 (MARKET WIRE via COMTEX News Network) -- AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the first quarter ended March 31, 2008.

First Quarter 2008 Results

Revenue for the first quarter of 2008 was $19.6 million, compared with $17.6 million in the fourth quarter of 2007, and $12.5 million in the first quarter of 2007. Total gallium arsenide (GaAs) substrate revenue was $13.7 million for the first quarter of 2008, compared with $12.2 million in the fourth quarter of 2007, and $8.8 million in the first quarter of 2007.

Indium phosphide (InP) substrate revenue was $477,000 for the first quarter of 2008, compared with $330,000 in the fourth quarter of 2007, and $518,000 in the first quarter of 2007. Germanium (Ge) substrate revenue was $1.4 million compared with $747,000 in the fourth quarter of 2007 and $541,000 in the first quarter of 2007. Raw materials sales were $4.0 million for the first quarter of 2008, compared with $4.3 million in the fourth quarter of 2007 and $2.6 million in the first quarter of 2007.

Gross margin was 31.7 percent of revenue for the first quarter of 2008. This included a benefit from the sale of approximately $620,000 in fully reserved wafers, which positively affected the quarterly gross margin by 3.2 percentage points. By comparison, gross margin in the fourth quarter of 2007 was 30.1 percent. This included a benefit from the sales of approximately $466,000 in fully reserved wafers, which positively affected fourth quarter gross margin by 2.7 percentage points. Gross margin in the first quarter of 2007 was 43.2 percent, including a benefit from the sale of approximately $785,000 in fully reserved wafers, which positively affected the quarterly gross margins by 6.3 percentage points.

Operating expenses were $4.3 million in the first quarter of 2008, compared with $3.7 million in the fourth quarter of 2007, and $4.2 million in the first quarter of 2007.

Income from operations for the first quarter of 2008 was $2.0 million compared with $1.6 million in the fourth quarter of 2007, and $1.2 million in the first quarter of 2007.

Net interest and other income for the first quarter of 2008 was $552,000, which included a gain on sale of investment of $459,000 compared with net interest and other income of $608,000 for the fourth quarter of 2007, which included a gain on sale of investment of $1.1 million, and net interest and other income of $213,000 in the first quarter of 2007.

Net income in the first quarter of 2008 was $2.0 million or $0.06 per diluted share, compared with net income of $1.9 million or $0.06 per diluted share in the fourth quarter of 2007, and net income of $1.3 million, or $0.04 per diluted share in the first quarter of 2007.

Management Qualitative Comments

"We are very pleased to report another solid quarter of growth, including strong increases in revenue from strategically important areas of our business such as 6-inch gallium arsenide and germanium substrates," said Phil Yin, chairman and CEO. "Much of our increases are coming from market share gains as key customer qualifications are beginning to generate revenue. Further, our customer engagement and qualification activity is very high and we are pleased to see progression with a number of key companies in our space as a result of significant competitive differentiators. While we remain cautious in the way that we plan and forecast our business, we believe that the industry trends support positive growth opportunities in the coming quarters."

Outlook for Second Quarter, Ending June 30, 2008

AXT estimates revenue for the second quarter will increase to between $19.7 million and $20.0 million. The company estimates that net income per diluted share will be between $0.04 and $0.06, which takes into account our diluted weighted average share count of approximately 31.6 million shares.

Conference Call

The company will also host a conference call today to discuss these results at 1:30 p.m. PT. The conference call can be accessed at (416) 641-6143 (conference ID 325929). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (416) 695-5800 until May 7, 2008. 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) 683-5900.

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its manufacturing facilities in Beijing, China. In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California. The company's substrate products are used primarily in lighting display applications, wireless communications, and fiber optic communications. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates, particularly in optoelectronics applications. AXT has manufacturing facilities in China and invests in five joint ventures 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 statements regarding our outlook for the second quarter of 2008, growth in our customer base and expansion of our addressable markets, increasing market share, industry trends that are driving increasing demand for our products, and opportunities for growth in the coming years. These forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company's operations and business environment, which could cause actual results of the company 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 overall conditions in the markets in which the company competes; market acceptance and demand for the company's products; and other factors as set forth in the company's annual report on Form 10-K 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 publicly any forward-looking statement, as a result of new information, future events or otherwise.

                                AXT, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Unaudited, in thousands, except per share data)
                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2008       2007
                                                      ---------- ---------
Revenue                                               $   19,634 $  12,526
Cost of revenue                                           13,413     7,121
                                                      ---------- ---------
Gross profit                                               6,221     5,405
                                                      ---------- ---------
Operating expenses:
   Selling, general and administrative                     3,667     3,703
   Research and development                                  504       460
   Impairment on assets held for sale                         83         -
                                                      ---------- ---------
      Total operating expenses                             4,254     4,163
                                                      ---------- ---------
Income from operations                                     1,967     1,242
Interest income, net                                         124       224
Other income (expense), net                                  428       (11)
                                                      ---------- ---------
Income before provision for income taxes                   2,519     1,455
Provision for income taxes                                   560       111
                                                      ---------- ---------
Net income                                            $    1,959 $   1,344
                                                      ========== =========
Net income per share:
   Basic                                              $     0.06 $    0.04
                                                      ========== =========
   Diluted                                            $     0.06 $    0.04
                                                      ========== =========
Shares used in computing net income per share:
   Basic                                                  30,367    29,798
                                                      ========== =========
   Diluted                                                31,585    31,324
                                                      ========== =========
                                AXT, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                        (Unaudited, in thousands)
                                                     March 31, December 31,
                                                       2008       2007
                                                     ---------  ---------
Assets:
Current assets
   Cash and cash equivalents                         $  23,225  $  18,380
   Short-term investments                               16,217     20,825
   Accounts receivable, net                             16,693     12,149
   Inventories, net                                     29,077     24,781
   Prepaid expenses and other current assets             5,405      3,569
   Assets held for sale                                      -      5,140
                                                     ---------  ---------
      Total current assets                              90,617     84,844
Property, plant and equipment, net                      17,120     15,986
Restricted deposits                                      6,550      6,700
Other assets                                             5,468      5,242
                                                     ---------  ---------
      Total assets                                   $ 119,755  $ 112,772
                                                     =========  =========
Liabilities and stockholders' equity:
Current liabilities
   Accounts payable                                  $   8,973  $   4,328
   Accrued liabilities                                   4,912      4,716
   Current portion of long-term debt                       735        450
                                                     ---------  ---------
      Total current liabilities                         14,620      9,494
Long-term debt, net of current portion                   6,100      6,250
Other long-term liabilities                              2,983      3,778
                                                     ---------  ---------
      Total liabilities                                 23,703     19,522
                                                     ---------  ---------
Stockholders' equity:
   Preferred stock                                       3,532      3,532
   Common stock                                        186,217    185,979
   Accumulated deficit                                 (96,584)   (98,543)
   Other comprehensive income                            2,887      2,282
                                                     ---------  ---------
      Total stockholders' equity                        96,052     93,250
                                                     ---------  ---------
      Total liabilities and stockholders' equity     $ 119,755  $ 112,772
                                                     =========  =========

Contacts:
Wilson W. Cheung
Chief Financial Officer
(510) 683-5900

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

SOURCE: AXT, Inc.