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AXT, Inc. Announces Third Quarter 2011 Financial Results

FREMONT, CA, Oct 26, 2011 (MARKETWIRE via COMTEX) -- AXT, Inc. (NASDAQ: AXTI)

--  Q3 FY 2011 Net Revenues: $28.3 million


--  Q3 FY 2011 GAAP Gross Margin: 43.2 percent


--  Q3 FY 2011 GAAP Net Income: $6.5 million; $0.19 per share (diluted)


AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Results Revenue for the third quarter of 2011 was $28.3 million, down 5.7 percent from $30.0 million in the second quarter of 2011, and up 5.6 percent from $26.8 million in the third quarter of 2010.

Total gallium arsenide (GaAs) substrate revenue was $18.7 million for the third quarter of 2011, compared with $18.0 million in the second quarter of 2011, and $19.2 million in the third quarter of 2010. Indium phosphide (InP) substrate revenue was $1.5 million for the third quarter of 2011, compared with $1.6 million in the second quarter of 2011, and $1.0 million in the third quarter of 2010. Germanium (Ge) substrate revenue was $3.0 million for the third quarter of 2011 compared with $2.7 million in the second quarter of 2011 and $2.3 million in the third quarter of 2010. Raw materials sales were $5.1 million for the third quarter of 2011, compared with $7.7 million in the second quarter of 2011 and $4.4 million in the third quarter of 2010.

Gross margin was 43.2 percent of revenue for the third quarter of 2011. By comparison, gross margin in the second quarter of 2011 was 46.7 percent of revenue. Gross margin was 39.3 percent of revenue for the third quarter of 2010.

Operating expenses were $4.2 million in the third quarter of 2011, compared with $4.4 million in the second quarter of 2011. Operating expenses in the third quarter of 2010 were $3.8 million.

Income from operations for the third quarter of 2011 was $8.1 million compared with income from operations of $9.6 million in the second quarter of 2011, and income from operations of $6.7 million in the third quarter of 2010.

Net interest and other income for the third quarter of 2011 was $459,000, which included a foreign exchange gain of $180,000. This compares with net interest and other income of $519,000 in the second quarter of 2011, which included a foreign exchange gain of $65,000, and net interest and other income of $468,000 in the third quarter of 2010, which included a foreign exchange gain of $210,000.

Net income in the third quarter of 2011 was $6.5 million or $0.19 per diluted share compared with net income of $7.1 million or $0.21 per diluted share in the second quarter of 2011, and with a net income of $5.6 million or $0.17 per diluted share in the third quarter of 2010.

Management Qualitative Comments "The current environment is presenting both great challenges and great opportunities for AXT," said Morris Young, chief executive officer. "While we are heading into a challenging quarter, we believe that we have established a solid foundation to build upon when markets improve. In all of our key markets, we are in a great competitive position and are actively engaged with new potential customers that can help us to broaden and deepen our footprint in the markets we serve. Our engineering, manufacturing and operations teams continue to execute well against our goals to provide a broad portfolio of high-quality products and strong customer support. Further, we have a solid business model that is allowing us to weather near-term weakness, while generating cash and delivering profitability. We believe that these factors will provide tremendous opportunity for us as the demand environment improves."

Outlook for Fourth Quarter, Ending December 31, 2011 AXT estimates revenue for the fourth quarter for 2011 will be between $20 million and $23 million. The company estimates that net income per share will be between $0.08 and $0.12, which takes into account our weighted average share count of approximately 33.2 million shares.

Conference Call The company will also host a conference call to discuss these results on October 26, 2011 at 1:30 p.m. PDT. The conference call can be accessed at (719) 325-4929 (passcode 8433592). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 8433592) until November 3, 2011. 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 statements regarding our outlook for the fourth quarter of 2011, 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.

                                 AXT, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (Unaudited, in thousands, except per share data)

                               Three Months Ended       Nine Months Ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------

Revenue                      $   28,305  $   26,809  $   82,902  $   68,627
Cost of revenue                  16,068      16,278      45,979      42,829
                             ----------  ----------  ----------  ----------
Gross profit                     12,237      10,531      36,923      25,798
                             ----------  ----------  ----------  ----------

Operating expenses:
  Selling, general and
   administrative                 3,555       3,347      10,959       9,805
  Research and development          612         462       1,816       1,428
                             ----------  ----------  ----------  ----------
    Total operating expenses      4,167       3,809      12,775      11,233
                             ----------  ----------  ----------  ----------
Income from operations            8,070       6,722      24,148      14,565
Interest income, net                103          26         259          16
Other income, net                   356         442         443       2,077
                             ----------  ----------  ----------  ----------

Income before provision for
 income taxes                     8,529       7,190      24,850      16,658
Provision for income taxes          667         871       2,633       1,677
                             ----------  ----------  ----------  ----------
Net income                        7,862       6,319      22,217      14,981

Less: Net income
 attributable to
 noncontrolling interest         (1,378)       (680)     (4,463)     (1,227)
                             ----------  ----------  ----------  ----------
Net income attributable to
 AXT, Inc.                   $    6,484  $    5,639  $   17,754  $   13,754
                             ==========  ==========  ==========  ==========

Net income attributable to
 AXT, Inc. per common share:
  Basic                      $     0.20  $     0.18  $     0.55  $     0.44
                             ==========  ==========  ==========  ==========
  Diluted                    $     0.19  $     0.17  $     0.53  $     0.42
                             ==========  ==========  ==========  ==========

Weighted average number of
 common shares outstanding:
  Basic                          31,944      30,944      31,832      30,853
                             ==========  ==========  ==========  ==========
  Diluted                        33,126      32,509      33,140      32,170
                             ==========  ==========  ==========  ==========


                                 AXT, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                         (Unaudited, in thousands)

                                               September 30,   December 31,
                                                    2011           2010
                                               -------------  -------------
Assets:
Current assets
  Cash and cash equivalents                    $      24,401  $      23,724
  Short-term investments                              14,758         17,251
  Accounts receivable, net                            21,990         23,076
  Inventories, net                                    44,335         35,986
  Prepaid expenses and other current assets            7,155          4,090
                                               -------------  -------------
    Total current assets                             112,639        104,127

Property, plant and equipment, net                    31,619         24,240
Other assets                                          16,781         11,884

                                               -------------  -------------
    Total assets                               $     161,039  $     140,251
                                               =============  =============

Liabilities and stockholders' equity:
Current liabilities
  Accounts payable                             $       6,598  $       7,094
  Accrued liabilities                                  7,077          7,745
                                               -------------  -------------
    Total current liabilities                         13,675         14,839

Other long-term liabilities                            4,545          5,608
                                               -------------  -------------
    Total liabilities                                 18,220         20,447
                                               -------------  -------------

Stockholders' equity:
  Preferred stock                                      3,532          3,532
  Common stock                                       191,328        190,053
  Accumulated deficit                                (64,723)       (82,477)
  Other comprehensive income                           5,530          4,652
                                               -------------  -------------
    Total AXT, Inc. stockholders' equity             135,667        115,760

  Noncontrolling interest                              7,152          4,044
                                               -------------  -------------
    Total stockholders' equity                       142,819        119,804

                                               -------------  -------------
    Total liabilities and stockholders'
     equity                                    $     161,039  $     140,251
                                               =============  =============



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

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

SOURCE: AXT, Inc.