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AXT, Inc. Announces Third Quarter 2017 Financial Results

FREMONT, Calif., Oct. 25, 2017 (GLOBE NEWSWIRE) -- AXT, Inc. (Nasdaq:AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the third quarter, ended Sept. 30, 2017.

Third Quarter 2017 Results

Revenue for the third quarter of 2017 was $28.2 million, compared with $23.6 million in the second quarter of 2017 and $21.9 million for the third quarter of 2016.  Year over year, this is a 29 percent increase in quarterly revenue.

Gross margin was 39.5 percent for the third quarter of 2017, compared with 30.8 percent in the second quarter of 2017 and 34.6 percent for the third quarter of 2016. The improvement in gross margin in the third quarter of 2017 was largely the result of favorable product mix, higher sales volume, and greater manufacturing efficiency.

Operating expenses were $5.9 million in the third quarter of 2017, including one-time expenses of approximately $500,000. By comparison, operating expenses in the second quarter of 2017 were $5.0 million and $4.9 million in the third quarter of 2016.

Operating income was $5.2 million for the third quarter of 2017, compared with $2.3 million in the second quarter of 2017 and $2.7 million for the third quarter of 2016.  Year over year, this is a 94 percent increase in quarterly operating profit.

Interest and other, net was a loss of $0.5 million for the third quarter of 2017, compared with a loss of $0.2 million in the second quarter of 2017 and a loss of $0.3 million for the third quarter of 2016.  Interest and other, net for the third quarter of 2017 included a foreign exchange loss of $0.3 million and a net loss of $0.3 million from the seven partially owned companies in the company’s supply chain accounted for under the equity method.

Income tax expense in the third quarter of 2017 was $0.2 million compared with $0.3 million in the second quarter of 2017 and $0.2 million for the third quarter of 2016.

Net income was $4.4 million, or $0.11 per diluted share, in the third quarter of 2017 compared with a net income of $1.9 million, or $0.05 per diluted share, in the second quarter of 2017 and a net profit of $2.2 million or $0.07 per diluted share for the third quarter of 2016.  Year over year this is a 98 percent increase in quarterly net profit and a 57 percent increase in earnings per share.

Management Qualitative Comments

“The third quarter was another solid quarter in which we posted revenue growth in all of our product categories, including record revenue in indium phosphide,” said Morris Young, chief executive officer. “We also achieved strong gross margin improvement and outperformed our profitability expectations for the quarter. These results demonstrate that our products are well positioned in strategic, growing markets, and that we are seeing the benefit of the operational efficiencies and improvements that we began successfully implementing more than a year ago. In addition, during the quarter we finalized the purchase of our new facility in the city of Dingxing, China. We are on schedule with our relocation plans and are pleased with our progress to date.”

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 1143736). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 1143736) until Oct. 31, 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 growth prospects and opportunities for continued business expansion, our market opportunity, our schedule and timelines regarding our relocation plans 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   Nine Months Ended  
    September 30,    September 30,   
    2017     2016     2017     2016    
                           
Revenue   $ 28,168     $ 21,872     $ 72,341     $ 61,080    
Cost of revenue     17,035       14,294       47,664       42,222    
Gross profit     11,133       7,578       24,677       18,858    
Operating expenses:                          
Selling, general and administrative     4,484       3,313       12,219       10,106    
Research and development     1,410       1,566       3,553       4,419    
Restructuring charge                       226    
Total operating expenses     5,894       4,879       15,772       14,751    
Income from operations     5,239       2,699       8,905       4,107    
Interest income, net     122       105       334       303    
Equity in loss of unconsolidated joint ventures     (266 )     (581 )     (1,387 )     (1,437 )  
Other (expense) income, net     (349 )     164       (403 )     682    
Income before provision for income taxes     4,746       2,387       7,449       3,655    
Provision for income taxes     181       176       661       713    
Net income     4,565       2,211       6,788       2,942    
Less: Net (income) loss attributable to noncontrolling interests     (146 )     18       226       480    
Net income attributable to AXT, Inc.   $ 4,419     $ 2,229     $ 7,014     $ 3,422    
Net income attributable to AXT, Inc. per common share:                          
Basic   $ 0.11     $ 0.07     $ 0.19     $ 0.10    
Diluted   $ 0.11     $ 0.07     $ 0.18     $ 0.10    
Weighted average number of common shares outstanding:                          
Basic     38,499       32,110       36,999       32,043    
Diluted     40,095       33,138       38,469       32,615    
                           


AXT, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited, in thousands)  
    September 30,    December 31,   
    2017
  2016
 
               
ASSETS              
Current assets:              
Cash and cash equivalents   $ 48,078     $ 36,152    
Short-term investments     20,524       11,415    
Accounts receivable, net     20,877       14,453    
Inventories     40,768       40,152    
Related party notes receivable – current     57          
Prepaid expenses and other current assets     5,682       5,114    
Total current assets     135,986       107,286    
Long-term investments     9,685       6,156    
Property, plant and equipment, net     42,255       27,805    
Related party notes receivable – long-term           157    
Other assets     11,696       12,842    
Total assets   $ 199,622     $ 154,246    
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable   $ 9,499     $ 6,691    
Accrued liabilities     9,284       9,260    
Total current liabilities     18,783       15,951    
Long-term portion of royalty payments     144       575    
Other long-term liabilities     278       330    
Total liabilities     19,205       16,856    
Stockholders’ equity:              
Preferred stock     3,532       3,532    
Common stock     39       33    
Additional paid-in-capital     228,516       194,177    
Accumulated deficit     (57,971 )     (64,985 )  
Accumulated other comprehensive income     2,275       253    
Total AXT, Inc. stockholders’ equity     176,391       133,010    
Noncontrolling interests     4,026       4,380    
Total stockholders’ equity     180,417       137,390    
Total liabilities and stockholders’ equity   $ 199,622     $ 154,246    
                   

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

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

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Source: AXT, Inc.