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AXT, Inc. Announces Fourth Quarter and Fiscal 2009 Financial Results

FREMONT, CA, Feb 23, 2010 (MARKETWIRE via COMTEX) -- AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter and fiscal year ended Dec. 31, 2009.

Fourth Quarter 2009 Results

Revenue for the fourth quarter of 2009 was $17.8 million, compared with $16.8 million in the third quarter of 2009, and $15.6 million in the fourth quarter of 2008. Total gallium arsenide (GaAs) substrate revenue was $12.6 million for the fourth quarter of 2009, compared with $13.3 million in the third quarter of 2009, and $9.1 million in the fourth quarter of 2008.

Indium phosphide (InP) substrate revenue was $513,000 for the fourth quarter of 2009, compared with $688,000 in the third quarter of 2009 and $473,000 in the fourth quarter of 2008. Germanium (Ge) substrate revenue was $1.9 million for the fourth quarter of 2009 compared with $1.8 million in the third quarter of 2009 and $684,000 in the fourth quarter of 2008. Raw materials sales were $2.8 million for the fourth quarter of 2009 compared with $1.0 million in the third quarter of 2009 and $5.3 million in the fourth quarter of 2008.

Gross margin was 33.9 percent of revenue for the fourth quarter of 2009. This included a benefit from the net sale of approximately $727,000 in fully reserved wafers, which positively affected the quarterly gross margin by 4.1 percentage points. By comparison, gross margin in the third quarter of 2009 was 32.9 percent. This included a benefit from the net sales of approximately $94,000 in fully reserved wafers, which positively affected third quarter gross margin by 0.6 percentage points. Gross margin in the fourth quarter of 2008 was 4.8 percent, including a benefit from the net sale of approximately $663,000 in fully reserved wafers, which positively affected the quarterly gross margins by 4.2 percentage points.

Operating expenses were $3.0 million in the fourth quarter of 2009, compared with $3.7 million in the third quarter of 2009, and $4.1 million in the fourth quarter of 2008.

Income from operations for the fourth quarter of 2009 was $3.1 million compared with income from operations of $1.9 million in the third quarter of 2009. In the fourth quarter of 2008, the company recorded a loss from operations of $3.4 million.

Net income in the fourth quarter of 2009 was $2.8 million or $0.09 per diluted share, compared with net income of $2.1 million or $0.07 per diluted share in the third quarter of 2009, and net loss of $2.4 million, or a loss of $0.08 per diluted share in the fourth quarter of 2008.

Fiscal Year 2009 Results

Revenue for fiscal year 2009 was $55.4 million, compared with $73.1 million in fiscal year 2008. Gross margin for fiscal year 2009 was 25.1 percent of revenue compared with 24.6 percent of revenue for fiscal year 2008.

Net loss for fiscal year 2009 was $1.9 million or a loss of $0.07 per diluted share compared with net loss of $689,000 or a loss of $0.03 per diluted share for fiscal year 2008.

Management Qualitative Comments

"The fourth quarter was another positive quarter for AXT," said Morris Young, chief executive officer. "Our successful restructuring efforts and ongoing manufacturing efficiency improvements, coupled with stronger than expected raw materials revenue, resulted in solid financial results that were ahead of our expectations. Further, our qualifications with new and returning customers continued to progress well as we have committed increased funding to our engineering and customer support efforts. We are also seeing positive long-term trends in each of our key markets that are likely to support our growth in 2010 and beyond. AXT is well-positioned to accommodate this increasing demand with minimal capital requirements, and we believe that our unique structure will further separate our capabilities from our competitors as all of these markets develop."

Outlook for First Quarter, Ending March 31, 2010

AXT estimates that the positive demand environment for substrates will offset normal seasonality resulting in revenue of between $17.8 million and $18.5 million. The company estimates that net income per diluted share will be between $0.04 and $0.07, which takes into account its weighted average share count of approximately 31.7 million shares.

Conference Call

The company will also host a conference call today to discuss these results at 1:30 p.m. Pacific Time. The conference call can be accessed at (719) 325-2223 (passcode 1457411). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 1457411) until March 3, 2010. 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, fiber optic communications and solar cell. 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 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 first quarter of 2010, our manufacturing efficiency improvements, our commitment to increased funding for our engineering and customer support efforts, trends in our key markets, our ability to accommodate demand for our products, our capital requirements and our business structures. 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; global financial conditions and uncertainties, market acceptance and demand for the company's products; the impact of the factory closures or other delays by our customers on the timing of sales of 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.

FINANCIAL TABLES TO FOLLOW

                                AXT, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Unaudited, in thousands, except per share data)
                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Revenue                     $   17,836  $   15,646  $   55,364  $   73,075
Cost of revenue                 11,784      14,888      41,495      55,115
                            ----------  ----------  ----------  ----------
Gross profit                     6,052         758      13,869      17,960
                            ----------  ----------  ----------  ----------
Operating expenses:
  Selling, general and
   administrative                2,574       3,605      13,389      15,751
  Research and development         394         529       1,569       2,164
  Impairment on assets held
   for sale                          -           -           -          83
  Restructuring charge               -           -         507           -
                            ----------  ----------  ----------  ----------
    Total operating
     expenses                    2,968       4,134      15,465      17,998
                            ----------  ----------  ----------  ----------
Income (loss) from
 operations                      3,084      (3,376)     (1,596)        (38)
Interest income, net                60          80         177         513
Other income (expense), net       (152)        583         385       1,290
                            ----------  ----------  ----------  ----------
Income (loss) before
 provision for income taxes      2,992      (2,713)     (1,034)      1,765
Provision (benefit) for
 income taxes                      (42)       (349)        471       1,023
                            ----------  ----------  ----------  ----------
Net income (loss)                3,034      (2,364)     (1,505)        742
Less: Net income (loss)
 attributable to
 noncontrolling interest          (257)         (7)       (393)     (1,431)
                            ----------  ----------  ----------  ----------
Net income (loss)
 attributable to AXT, Inc.  $    2,777  $   (2,371) $   (1,898) $     (689)
                            ==========  ==========  ==========  ==========
Net income (loss)
 attributable to AXT, Inc.
 per common share:
  Basic                     $     0.09  $    (0.08) $    (0.07) $    (0.03)
                            ==========  ==========  ==========  ==========
  Diluted                   $     0.09  $    (0.08) $    (0.07) $    (0.03)
                            ==========  ==========  ==========  ==========
Weighted average number of
 common shares outstanding:
  Basic                         30,647      30,434      30,500      30,400
                            ==========  ==========  ==========  ==========
  Diluted                       31,322      30,434      30,500      30,400
                            ==========  ==========  ==========  ==========
                                AXT, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                        (Unaudited, in thousands)
                                                December 31,  December 31,
                                                    2009          2008
                                                ------------  ------------
Assets:
Current assets
  Cash and cash equivalents                     $     16,934  $     13,566
  Short-term investments                              18,469        17,756
  Accounts receivable, net                            15,362        11,497
  Inventories, net                                    27,718        35,082
  Prepaid expenses and other current assets            2,411         3,131
                                                ------------  ------------
         Total current assets                         80,894        81,032
Property, plant and equipment, net                    20,853        22,184
Restricted deposits                                        0         3,013
Other assets                                           6,199         5,433
                                                ------------  ------------
        Total assets                            $    107,946  $    111,662
                                                ============  ============
Liabilities and stockholders' equity:
Current liabilities
  Accounts payable                              $      5,571  $      6,657
  Accrued liabilities                                  4,566         4,453
  Line of credit                                           0         3,013
  Current portion of long-term debt                       76            73
                                                ------------  ------------
       Total current liabilities                      10,213        14,196
Long-term debt, net of current portion                   420           496
Other long-term liabilities                               62            94
                                                ------------  ------------
       Total liabilities                              10,695        14,786
                                                ------------  ------------
Stockholders' equity:
  Preferred stock                                      3,532         3,532
  Common stock                                       187,901       186,784
  Accumulated deficit                               (101,130)      (99,232)
  Other comprehensive income                           4,300         2,580
                                                ------------  ------------
       Total AXT, Inc. stockholders' equity           94,603        93,664
  Noncontrolling interest                              2,648         3,212
                                                ------------  ------------
       Total stockholders' equity                     97,251        96,876
                                                ------------  ------------
       Total liabilities and stockholders'
        equity                                  $    107,946  $    111,662
                                                ============  ============

Contacts:

Raymond A. Low
Chief Financial Officer
(510) 683-5900

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


SOURCE: AXT, Inc.