AXT, Inc. Announces Third Quarter 2012 Financial Results

AXT, Inc. Announces Third Quarter 2012 Financial Results 
FREMONT, CA -- (Marketwire) -- 11/01/12 --  AXT, Inc. (NASDAQ: AXTI) 


 
--  Q3 FY 2012 Net Revenues: $20.8 million
    
    
--  Q3 FY 2012 GAAP Net Income: $0.93 million; $0.03 per share (diluted)

  
AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound
semiconductor substrates, today reported financial results for the
third quarter ended Sept. 30, 2012. 
Third Quarter 2012 Results
 Revenue for the third quarter of 2012 was
$20.8 million, compared to $25.2 million in the second quarter of
2012.  
Total gallium arsenide (GaAs) substrate revenue was $12.9 million for
the third quarter of 2012, compared with $14.9 million in the second
quarter of 2012. Indium phosphide (InP) substrate revenue was $1.6
million for the third quarter of 2012, compared with $1.3 million in
the second quarter of 2012. Germanium (Ge) substrate revenue was $2.0
million for the third quarter of 2012 compared with $2.4 million in
the second quarter of 2012. Raw materials sales were $4.3 million for
the third quarter of 2012, compared with $6.5 million in the second
quarter of 2012. 
Gross margin was 26.3 percent of revenue for the third quarter of
2012. By comparison, gross margin in the second quarter of 2012 was
29.8 percent of revenue. The drop in gross margin in the third
quarter of 2012 was largely the result of lower selling prices of raw
gallium, as well as lower tonnage sold, and lower volumes of sales in
gallium arsenide substrates in both the wireless market and the LED
market.  
Operating expenses were $4.8 million in the third quarter of 2012,
compared with $4.9 million in the second quarter of 2012.  
Income from operations for the third quarter of 2012 was $0.7
million, compared with income from operations of $2.6 million in the
second quarter of 2012.  
Net interest and other income for the third quarter of 2012 was
$544,000, which included a foreign exchange gain of $114,000. This
compares with net interest and other income of $219,000 in the second
quarter of 2012, which included a foreign exchange gain of $106,000.  
Net income in the third quarter of 2012 was $0.9 million or $0.03 per
diluted share, compared with net income of $1.3 million or $0.04 per
dilu
ted share in the second quarter of 2012.  
Management Qualitative Comments 
 "Business conditions in the third
quarter were in keeping with the expectations that we outlined when
we announced our results last quarter," said Morris Young, president
and CEO. "The compound semiconductor substrate market is currently
experiencing a correction, largely driven by weaker demand and a
moderate amount of excess inventory in the channel. However, our
solid execution over the last many quarters is allowing us to weather
the current down cycle and we are using this time to support
significant qualifications that are still ongoing and to focus our
resources on strategic geographies and applications that are likely
to benefit AXT in the future. We view improving market conditions,
new customer qualifications and a bottoming of raw material pricing
as key catalysts for our growth in the coming year and beyond." 
Conference Call
 The company will host a conference call to discuss
these results on Nov. 1, 2012 at 1:30 p.m. PT. The conference call
can be accessed at (913) 312-0406 (passcode 6664216). The call will
also be simulcast on the Internet at www.axt.com. Replays will be
available at (719) 457-0820 (passcode 6664216) until November 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. 
Safe Harbor Statement
 The foregoing paragraphs contain
forward-looking statements within the meaning of the Federal
Securities laws, including statements regarding our focus on
strategic geographies and applications that are likely to benefit AXT
in the future and on our view on the key catalysts for our growth in
the coming year and beyond. 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   Nine Months Ended 
                                        September 30,       September 30,   
                                     ------------------  ------------------ 
                                       2012      2011      2012      2011   
                                     --------  --------  --------  -------- 
                                                                            
Revenue                              $ 20,808  $ 28,305  $ 69,447  $ 82,902 
Cost of revenue                        15,342    16,068    48,279    45,979 
                                     --------  --------  --------  -------- 
Gross profit                            5,466    12,237    21,168    36,923 
                                     --------  --------  --------  -------- 
                                                                            
Operating expenses:
                                                         
  Selling, general and                                                      
   administrative                       3,950     3,555    11,709    10,959 
  Research and development                844       612     2,593     1,816 
                                     --------  --------  --------  -------- 
    Total operating expenses            4,794     4,167    14,302    12,775 
                                     --------  --------  --------  -------- 
Income from operations                    672     8,070     6,866    24,148 
Interest income, net                       52       103       202       259 
Other income, net                         492       356       314       443 
                                     --------  --------  --------  -------- 
                                                                            
Income before provision for (benefit                                        
 from) income taxes                     1,216     8,529     7,382    24,850 
Provision for (benefit from) income                                         
 taxes                                   (228)      667       559     2,633 
                                     --------  --------  --------  -------- 
Net income                              1,444     7,862     6,823    22,217 
                                                                            
Less: Net income attributable to                                            
 noncontrolling interest                 (512)   (1,378)   (2,957)   (4,463)
                                     --------  --------  --------  -------- 
Net income attributable to AXT, Inc. $    932  $  6,484  $  3,866  $ 17,754 
                                     ========  ========  ========  ======== 
                                                                            
Net income attributable to AXT, Inc.                                        
 per common share:                                                          
  Basic                              $   0.03  $   0.20  $   0.12  $   0.55 
                                     ========  ========  ========  ======== 
  Diluted                            $   0.03  $   0.19  $   0.11  $   0.53 
                                     ========  ========  ========  ======== 
                                                                            
Weighted average number of common                                           
 shares outstanding:                                                        
  Basic                                32,183    31,944    32,118    31,832 
                                     ========  ========  ========  ======== 
  Diluted                              32,769    33,126    32,911    33,140 
                                     ========  ========  ========  ======== 

 
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                                 AXT, INC.                                  
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                         (Unaudited, in thousands)                          
                                                                            
                                               September 30,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
Assets:                                                                     
Current assets                                                              
  Cash and cash equivalents                    $      35,503  $      26,156 
  Short-term investments                              10,577          5,505 
  Accounts receivable, net                            16,888         17,966 
  Inventories                                         39,932         46,012 
  Related party notes receivable - current               414            412 
  Prepaid expenses and other current assets            5,125          7,052 
                                               -------------  ------------- 
    Total current assets                             108,439        103,103 
                                                                            
Long-term investments                                  5,367          8,981 
Property, plant and equipment, net                    36,201         34,282 
Related party notes receivable - long-term             2,031          2,021 
Other assets                                          14,183         14,101 
                                                                            
                                               -------------  ------------- 
    Total assets                               $     166,221  $     162,488 
                                               =============  ============= 
                                                                            
Liabilities and stockholders' equity:                                       
Current liabilities                                                         
  Accounts payable                             $       4,570  $       3,286 
  Accrued liabilities                                  6,800          7,597 
                                               -------------  ------------- 
    Total current liabilities                         11,370         10,883 
                                                                            
Long-term portion of royalty payments                  3,525          4,125 
Other long-term liabilities                              157            431 
                                               -------------  ------------- 
    Total liabilities                                 15,052         15,439 
                                               -------------  ------------- 
                                                                            
Stockholders' equity:                                                       
  Preferred stock                                      3,532          3,532 
  Common stock                                            32             32 
  Additional paid-in capital                         192,703        191,554 
  Accumulated deficit                                (58,291)       (62,157)
  Accumulated other comprehensive income               6,006          5,818 
                                               -------------  ------------- 
    Total AXT, Inc. stockholders' equity             143,982        138,779 
                                                                            
  Noncontrolling interest                              7,187          8,270 
                                               -------------  ------------- 
    Total stockholders' equity                       151,169        147,049 
                                                                            
                                               -------------  ------------- 
Total liabilities and stockholders' equity     $     166,221  $     162,488 
                           
                    =============  ============= 

  
Contacts:
Raymond A. Low
Chief Financial Officer
(510) 683-5900 
Leslie Green 
Green Communications Consulting, LLC
(650) 312-9060 
 
 
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