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AXT, Inc. Announces Fourth Quarter and Fiscal 2014 Financial Results

FREMONT, CA -- (Marketwired) -- 02/23/15 -- 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, 2014.

Fourth Quarter 2014 Results
Revenue for the fourth quarter of 2014 was $19.6 million compared with $23.1 million in the third quarter of 2014.

Gross margin was 25.4 percent of revenue for the fourth quarter of 2014, compared with 23.0 percent of revenue in the third quarter of 2014.

Operating expenses were $5.6 million in the fourth quarter of 2014, up from $4.7 million in the third quarter of 2014. The increase was largely the result of professional fees associated with a recently completed internal investigation, initiated during the fourth quarter, of certain potential related-party transactions.

Operating loss for the fourth quarter of 2014 was $592,000 compared with an operating profit of $653,000 in the third quarter of 2014.

Net interest and other income for the fourth quarter of 2014 was $260,000. This was primarily attributable to $26,000 from equity earnings of the company's unconsolidated joint ventures, $637,000 from the sale of IntelliEpi stock, $618,000 from a loss on foreign exchange and $123,000 from interest income.

Net loss in the fourth quarter of 2014 was $311,000 or a loss of $0.01 per diluted share compared with a net income of $644,000 or a profit of $0.02 per diluted share in the third quarter of 2014.

Fiscal Year 2014 Results
Revenue for fiscal 2014 was $83.5 million, down slightly from $85.3 million in fiscal year 2013.

Gross margin for fiscal year 2014 was 20.6 percent of revenue, a significant improvement from 13.9 percent of revenue for fiscal year 2013.

Net loss for fiscal year 2014 also improved to $1.4 million or $0.05 per share compared with net loss of $8.0 million or $0.25 per diluted share for fiscal year 2013.

Management Qualitative Comments
"While the fourth quarter demand weakness contributed to a modest decline in our annual revenue from the prior year, meaningful improvements in our cost structure early in the year, coupled with ongoing discipline in our spending throughout the year, and a positive shift in our revenue mix resulted in a significant improvement year-over-year to our bottom line," said Morris Young, chief executive officer. "Further, we grew our cash and investments by $1.3 million, ending the year with a balance of $48.9 million. As we enter 2015, we are well positioned to drive growth in our business and to continue executing on our strategic priorities."

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 (719) 457-2664 (passcode 8715677). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 8715677) until March 1, 2015. 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 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.

AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
Revenue $ 19,567 $ 18,603 $ 83,499 $ 85,335
Cost of revenue 14,596 15,790 66,332 73,507
Gross profit 4,971 2,813 17,167 11,828
Operating expenses:
Selling, general and administrative 4,341 3,631 14,970 16,066
Research and development 1,222 797 4,144 3,424
Restructuring charge 0 0 907 0
Total operating expenses 5,563 4,428 20,021 19,490
Income (loss) from operations (592 ) (1,615 ) (2,854 ) (7,662 )
Interest income, net 123 272 483 408
Equity in earnings of unconsolidated joint ventures 26 278 1,528 1,377
Other income (expense), net 111 (257 ) 361 (748 )
Income (loss) before provision for income taxes (332 ) (1,322 ) (482 ) (6,625 )
Provision for (benefit from) income taxes (39 ) (134 ) 215 188
Net income (loss) (293 ) (1,188 ) (697 ) (6,813 )
Less: Net income (loss) attributable to noncontrolling interest (18 ) (40 ) (691 ) (1,145 )
Net income (loss) attributable to AXT, Inc. $ (311 ) $ (1,228 ) $ (1,388 ) $ (7,958 )
Net income (loss) attributable to AXT, Inc. per common share:
Basic $ (0.01 ) $ (0.04 ) $ (0.05 ) $ (0.25 )
Diluted $ (0.01 ) $ (0.04 ) $ (0.05 ) $ (0.25 )
Weighted average number of common shares outstanding:
Basic 32,558 32,628 32,452 32,700
Diluted 32,558 32,628 32,452 32,700
AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
December 31, December 31,
2,014 2013
Assets:
Current assets
Cash and cash equivalents $ 28,814 $ 24,961
Short-term investments 12,340 12,499
Accounts receivable, net 17,864 14,943
Inventories 38,574 39,127
Related party notes receivable - current 171 0
Prepaid expenses and other current assets 5,430 8,010
Total current assets 103,193 99,540
Long-term investments 7,783 10,145
Property, plant and equipment, net 33,862 37,621
Related party notes receivable - long-term 1,704 1,715
Other assets 14,975 14,801
Total assets $ 161,517 $ 163,822
Liabilities and stockholders' equity:
Current liabilities
Accounts payable $ 7,137 $ 8,140
Accrued liabilities 7,634 7,286
Total current liabilities 14,771 15,426
Long-term portion of royalty payments 1,725 2,525
Other long-term liabilities 333 325
Total liabilities 16,829 18,276
Stockholders' equity:
Preferred stock 3,532 3,532
Common stock 32 32
Additional paid-in capital 195,419 194,156
Accumulated deficit (68,393 ) (67,005 )
Accumulated other comprehensive income 7,673 8,953
Total AXT, Inc. stockholders' equity 138,263 139,668
Noncontrolling interest 6,425 5,878
Total stockholders' equity 144,688 145,546
Total liabilities and stockholders' equity $ 161,517 $ 163,822

Contacts:
Gary Fischer
Chief Financial Officer
(510) 683-5900

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

Source: AXT, Inc.