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AXT, Inc. Announces First Quarter 2017 Financial Results

FREMONT, Calif., April 26, 2017 (GLOBE NEWSWIRE) -- AXT, Inc. (Nasdaq:AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the first quarter, ended March 31, 2017.

First Quarter 2017 Results

Revenue for the first quarter of 2017 was $20.6 million, compared with $20.3 million in the fourth quarter of 2016.

Gross margin was 30.5 percent of revenue for the first quarter of 2017, compared with 37.1 percent of revenue in the fourth quarter of 2016.  This decline was largely the result of product mix, foreign exchange and recovery efforts from the short circuit electrical fire in March of 2017.

Operating expenses were $4.9 million in the first quarter of 2017, compared with $5.2 million in the fourth quarter of 2016. 

Operating profit for the first quarter of 2017 was $1.4 million compared with operating profit of $2.3 million in the fourth quarter of 2016. 

Interest and other, net for the first quarter of 2017 was a loss of $0.8 million, compared with a loss of $0.3 million in the fourth quarter of 2016.

Net profit in the first quarter of 2017 was $0.7 million, or $0.02 per diluted share, compared with a net profit of $2.2 million or $0.06 per diluted share in the fourth quarter of 2016.

Management Qualitative Comments

“Q1 was a busy and productive quarter,” said Morris Young, chief executive officer. “We are seeing encouraging progress in the adoption of several emerging technologies and are continuing to invest in our product development, production capacity, and customer engagement and support capabilities in order to position ourselves for coming business opportunities. In addition, we recently completed a successful secondary offering, helping to ensure that AXT is well capitalized for both business expansion and the future relocation of our gallium arsenide production line. And finally, we experienced, and then quickly and effectively recovered from, a short-circuit electrical fire at our Beijing facility. I am proud of the way our team pulled together with a shared sense of purpose to support all of our key stakeholders, including our customers, investors, and fellow employees. 2017 will likely be an important year for AXT, and I believe we are taking the correct steps to ready our business for our next phase of growth.” 

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 95615587). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 95615587) until May 2, 2017. 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.  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, fiber optic communications and solar cell applications. 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. AXT has manufacturing facilities in China and invests in joint ventures 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 market opportunity, and our expectations with respect to our business prospects. 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: overall conditions in the markets in which the company competes; global financial conditions and uncertainties; policies and regulations in China; market acceptance and demand for the company’s products; the impact of factory closures or other events causing delays by our customers on the timing of sales of our products; our ability to control costs, our ability to utilize our manufacturing capacity; product yields and their impact on gross margins; 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  
    March 31,  
    2017     2016    
           
Revenue   $ 20,616     $ 18,713    
Cost of revenue     14,328       13,460    
Gross profit     6,288       5,253    
Operating expenses:              
Selling, general, and administrative     3,793       3,374    
Research and development     1,124       1,381    
Total operating expenses     4,917       4,755    
Income from operations     1,371       498    
Interest income, net     98       98    
Equity in loss of unconsolidated joint ventures     (933 )     (456 )  
Other income, net     48       190    
Income before provision for income taxes     584       330    
Provision for income taxes     159       397    
Net income (loss)     425       (67 )  
Less: Net loss attributable to noncontrolling interests     240       109    
Net income attributable to AXT, Inc.   $ 665     $ 42    
Net income (loss) attributable to AXT, Inc. per common share:              
Basic   $ 0.02     $ (0.00 ) *
Diluted   $ 0.02     $ (0.00 ) *
Weighted average number of common shares outstanding:              
Basic     34,210       32,002    
Diluted     35,624       32,002    
                   

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* Net loss to AXT, Inc. per common share resulted due to the accrual of preferred dividend liquidation preference during the three months ended March 31, 2016

 
AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
         
    March 31,    December 31, 
    2017      2016   
         
ASSETS            
Current assets:            
Cash and cash equivalents   $ 56,512     $ 36,152  
Short-term investments     20,483       11,415  
Accounts receivable, net     17,649       14,453  
Inventories     39,195       40,152  
Related party notes receivable – current     159        
Prepaid expenses and other current assets     4,663       5,114  
Total current assets     138,661       107,286  
Long-term investments     9,762       6,156  
Property, plant and equipment, net     27,141       27,805  
Related party notes receivable – long-term           157  
Other assets     11,853       12,842  
Total assets   $ 187,417     $ 154,246  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $ 8,159     $ 6,691  
Accrued liabilities     7,906       9,260  
Total current liabilities     16,065       15,951  
Long-term portion of royalty payments     431       575  
Other long-term liabilities     232       330  
Total liabilities     16,728       16,856  
Stockholders’ equity:            
Preferred stock     3,532       3,532  
Common stock     38       33  
Additional paid-in-capital     227,159       194,177  
Accumulated deficit     (64,320 )     (64,985 )
Accumulated other comprehensive income     550       253  
Total AXT, Inc. stockholders’ equity     166,959       133,010  
Noncontrolling interests     3,730       4,380  
Total stockholders’ equity     170,689       137,390  
Total liabilities and stockholders’ equity   $ 187,417     $ 154,246  
                 


Contact:
Gary Fischer
Chief Financial Officer
(510) 438-4700

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AXT, Inc.