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AXT, Inc. Announces Second Quarter 2012 Financial Results

Aug 01, 2012 (Marketwire via COMTEX) --AXT, Inc. (NASDAQ: AXTI)

  • Q2 FY 2012 Net Revenues: $25.2 million

  • Q2 FY 2012 GAAP Net Income: $1.3 million; $0.04 per share (diluted)

AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the second quarter ended June 30, 2012.

Revenue for the second quarter of 2012 was $25.2 million, up 7 percent from $23.5 million in the first quarter of 2012.

Total gallium arsenide (GaAs) substrate revenue was $14.9 million for the second quarter of 2012, compared with $12.2 million in the first quarter of 2012. Indium phosphide (InP) substrate revenue was $1.3 million for the second quarter of 2012, compared with $1.5 million in the first quarter of 2012. Germanium (Ge) substrate revenue was $2.4 million for the second quarter of 2012 compared with $2.6 million in the first quarter of 2012. Raw materials sales were $6.5 million for the second quarter of 2012, compared with $7.2 million in the first quarter of 2012.

Gross margin was 29.8 percent of revenue for the second quarter of 2012. By comparison, gross margin in the first quarter of 2012 was 34.9 percent of revenue. The drop in gross margin in the second quarter of 2012 was largely the result of a new People's Republic of China VAT levied on foreign enterprises that import materials which do not form part of the final product. AXT recently received notice of the retroactive VAT which applies for the period July 1, 2011 to June 30, 2012 and amounted to $1.27 million expense in the quarter ended June 30, 2012, which resulted in a 505 basis point impact to gross margins. Excluding the effect of this VAT tax, gross margins in the quarter would have been 34.9 percent. Going forward, the company expects that this new VAT will negatively impact gross margins by approximately 150 basis points per quarter.

Operating expenses were $4.9 million in the second quarter of 2012, compared with $4.6 million in the first quarter of 2012. Income from operations for the second quarter of 2012 was $2.6 million, compared with income from operations of $3.6 million in the first quarter of 2012. Net interest and other income for the second quarter of 2012 was $219,000, which included a foreign exchange gain of $106,000. This compares with net interest and other expense of $247,000 in the first quarter of 2012, which included a foreign exchange loss of $165,000. 

Net income in the second quarter of 2012 was $1.3 million or $0.04 per diluted share, compared with net income of $1.6 million or $0.05 per diluted share in the first quarter of 2012. 

"The second quarter was a positive quarter for our gallium arsenide business, which grew more than 20 percent sequentially," said Morris Young, chief executive officer. "Further, we continued to make good progress with new customer qualifications, and are hopeful that we will begin to layer on additional revenues from new qualifications later this year and into 2013. As we move into Q3, the demand environment appears to be more challenging, particularly in certain geographies. We are continuing to approach the current business environment with measured conservatism based on mixed industry data points and expect to see weaker than normal seasonal performance as a result. However, we have worked diligently to improve our operating structure and efficiency and are well-positioned with key customers in each of our markets. We view improving market conditions, new customer qualifications and a bottoming of raw material pricing as key catalysts for our growth later this year and beyond."

Conference Call
The company will host a conference call to discuss these results on August 1, 2012 at 1:30 p.m. PDT. The conference call can be accessed at (719) 325-2418 (passcode 1714909). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 1714909) until August 7, 2012. 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.

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements regarding our outlook for the third quarter of 2012, the current and long-term growth and trends in the demand for our products, our progress in our strategic plans, and the positioning of the company. 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 factory closures or other events causing delays by our customers on the timing of sales of our 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 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     Six Months Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
                                 
Revenue   $ 25,153     $ 30,031     $ 48,639     $ 54,597  
Cost of revenue     17,645       16,005       32,937       29,911  
Gross profit     7,508       14,026       15,702       24,686  
                                 
Operating expenses:                                
  Selling, general and administrative     3,974       3,714       7,759       7,404  
  Research and development     914       699       1,749       1,204  
    Total operating expenses     4,888       4,413       9,508       8,608  
Income from operations     2,620       9,613       6,194       16,078  
Interest income, net     62       69       150       156  
Other income (expense), net     157       450       (178 )     87  
                                 
Income before provision for income taxes     2,839       10,132       6,166       16,321  
Provision for income taxes     412       1,064       787       1,966  
Net income     2,427       9,068       5,379       14,355  
                                 
Less: Net income attributable to noncontrolling interest     (1,128 )     (2,006 )     (2,445 )     (3,085 )
Net income attributable to AXT, Inc.   $ 1,299     $ 7,062     $ 2,934     $ 11,270  
                                 
Net income attributable to AXT, Inc. per common share:                                
  Basic   $ 0.04     $ 0.22     $ 0.09     $ 0.35  
  Diluted   $ 0.04     $ 0.21     $ 0.09     $ 0.34  
                                 
Weighted average number of common shares outstanding:                                
  Basic     32,138       31,831       32,086       31,775  
  Diluted     32,944       33,093       32,981       33,146  
                                 
                                 
                                 
AXT, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited, in thousands)  
             
    June 30,     December 31,  
    2012     2011  
Assets:                
Current assets                
  Cash and cash equivalents   $ 31,281     $ 26,156  
  Short-term investments     11,465       5,505  
  Accounts receivable, net     22,367       17,966  
  Inventories     40,869       46,012  
  Related party notes receivable - current     415       412  
  Prepaid expenses and other current assets     5,685       7,052  
    Total current assets     112,082       103,103  
                 
Long-term investments     4,322       8,981  
Property, plant and equipment, net     35,316       34,282  
Related party notes receivable - long-term     2,036       2,021  
Other assets     13,918       14,101  
                 
    Total assets   $ 167,674     $ 162,488  
                 
Liabilities and stockholders' equity:                
Current liabilities                
  Accounts payable   $ 5,860     $ 3,286  
  Accrued liabilities     8,360       7,597  
    Total current liabilities     14,220       10,883  
                 
Long-term portion of royalty payments     3,725       4,125  
Other long-term liabilities     131       431  
    Total liabilities     18,076       15,439  
                 
Stockholders' equity:                
  Preferred stock     3,532       3,532  
  Common stock     32       32  
  Additional paid-in capital     192,346       191,554  
  Accumulated deficit     (59,223 )     (62,157 )
  Accumulated other comprehensive income     6,163       5,818  
    Total AXT, Inc. stockholders' equity     142,850       138,779  
                 
  Noncontrolling interest     6,748       8,270  
    Total stockholders' equity     149,598       147,049  
                 
    Total liabilities and stockholders' equity   $ 167,674     $ 162,488  
                 
Contacts:
        Raymond A. Low
        Chief Financial Officer
        (510) 683-5900
        
        Leslie Green
        Green Communications Consulting, LLC
        (650) 312-9060