AXT, Inc. Announces Second Quarter 2020 Financial Results

Rhea-AI Summary

AXT, Inc. (NasdaqGS: AXTI) reported Q2 2020 revenue of $22.1 million, a rise from $20.7 million in Q1 2020 but lower than $24.8 million in Q2 2019. The gross margin increased to 30.6% from 26.6% in Q1 2020, though it declined from 34.3% in Q2 2019. Operating expenses were steady at $6.3 million. The company achieved an operating profit of $0.5 million, compared to a loss in the previous quarter. Net income was $0.4 million or $0.01 per share, recovering from a loss in Q1 2020 but down from $1.5 million in Q2 2019.

Positive

• Revenue increased from $20.7 million in Q1 2020 to $22.1 million in Q2 2020.
• Gross margin improved to 30.6% from 26.6% in Q1 2020.
• Achieved operating profit of $0.5 million, reversing the loss of $0.6 million in Q1 2020.

Negative

• Q2 2020 revenue declined from $24.8 million in Q2 2019.
• Gross margin decreased from 34.3% in Q2 2019.
• Net income dropped significantly from $1.5 million in Q2 2019 to $0.4 million in Q2 2020.

FREMONT, Calif., July 22, 2020 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the second quarter, ended June 30, 2020.

Management Qualitative Comments

“We view 2020 as a turning point in our business,” said Morris Young, chief executive officer. “There are clear signs in the marketplace that strategic applications like 5G, data centers, and passive optical networks (PON) are strengthening. In addition, we believe new applications across our portfolio are creating exciting incremental opportunities beginning later this year. Further, with the relocation of our gallium arsenide manufacturing largely completed and production ramping, we are now focusing on elevating our manufacturing and business processes to serve the needs of increasingly sophisticated applications and customer requirements. In total, we believe we are positioning ourselves for renewed revenue expansion and improving profitability.”

Second Quarter 2020 Results

Revenue for the second quarter of 2020 was $22.1 million, compared with $20.7 million in the first quarter of 2020 and $24.8 million for the second quarter of 2019.   

Gross margin was 30.6 percent of revenue for the second quarter of 2020, compared with 26.6 percent of revenue in the first quarter of 2020 and 34.3 percent for the second quarter of 2019.

Operating expenses were $6.3 million in the second quarter of 2020, compared with $6.2 million in the first quarter of 2020, and $6.2 million for the second quarter of 2019. 

Operating profit for the second quarter of 2020 was $0.5 million, compared with an operating loss of $0.6 million in the first quarter of 2020, and an operating profit of $2.3 million for the second quarter of 2019.

Other income, after deducting for associated taxes and the portion attributable to noncontrolling interests, net for the second quarter of 2020 was a charge of $0.1 million. This includes a grant of $1.6 million from a provincial government agency as an award for relocating to its province, $0.9 million for taxes and $0.6 million attributable to noncontrolling interests and a loss of $0.2 million from our unconsolidated joint ventures.

Net income in the second quarter of 2020 was $0.4 million, or $0.01 per share, compared with a net loss of $0.2 million or ($0.01) per share in the first quarter of 2020, and net income of $1.5 million or $0.04 per share for the second quarter of 2019.

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 2378158). The call will also be simulcast at www.axt.com. Replays will be available at (855) 859-2056 (passcode 2378158) until July 28, 2020. 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 is a material science company that develops and manufactures high-performance compound and single element semiconductor substrate wafers comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge).  The company’s substrate wafers are used when a typical silicon substrate wafer cannot meet the performance requirements of a semiconductor or optoelectronic device.  End markets include 5G infrastructure, data center connectivity (silicon photonics), passive optical networks, LED lighting, lasers, sensors, power amplifiers for wireless devices and satellite solar cells.  AXT’s worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions. AXT has manufacturing facilities in China and, as part of its supply chain strategy, has partial ownership in ten companies in China producing raw materials. For more information, see AXT’s website at http://www.axt.com.

Forward-Looking Statements

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 relocation and our expectations with respect to our business prospects and financial results. 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: the timing and receipt of significant orders; the cancellation of orders and return of product; emerging applications using chips or devices fabricated on our substrates; end-user acceptance of products containing chips or devices fabricated on our substrates; our ability to bring new products to market; product announcements by our competitors; the ability to control costs and improve efficiency; the ability to utilize our manufacturing capacity; product yields and their impact on gross margins; the relocation of manufacturing lines and ramping of production; possible factory shutdowns as a result of air pollution in China; COVID-19 or other outbreaks of a contagious disease; tariffs and other trade war issues; the financial performance of our partially owned supply chain companies; policies and regulations in China 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)

100%; border-collapse:collapse !important;">

		Three Months Ended		Six Months Ended
		June 30,		December 31,
		2020			2019			2020			2019
56%; width:56%; min-width:56%;">Revenue	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">22,134	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">24,797	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">42,857	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">45,005	1%; width:1%; min-width:1%;">
Cost of revenue			15,366				16,291				30,567				29,804
Gross profit			6,768				8,506				12,290				15,201
Operating expenses:
Selling, general and administrative			4,747				4,769				9,496				9,492
Research and development			1,543				1,399				2,950				2,745
Total operating expenses			6,290				6,168				12,446				12,237
Income (loss) from operations			478				2,338				(156	)			2,964
Interest income (expense), net			(39	)			79				(68	)			174
Equity in income (loss) of unconsolidated joint ventures			(168	)			8				(288	)			(1,446	)
Other income (expense), net			1,608				(90	)			2,974				(224	)
Income before provision for income taxes			1,879				2,335				2,462				1,468
Provision for income taxes			920				597				1,286				753
Net income			959				1,738				1,176				715
Less: Net income attributable to noncontrolling interests			(598	)			(287	)			(993	)			(368	)
Net income attributable to AXT, Inc.		$	361			$	1,451			$	183			$	347
Net income attributable to AXT, Inc. per common share:
Basic		$	0.01			$	0.04			$	0.00			$	0.01
Diluted		$	0.01			$	0.04			$	0.00			$	0.01
Weighted-average number of common shares outstanding:
Basic			39,973				39,447				39,891				39,399
Diluted			40,750				40,123				40,543				40,045

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

100%; border-collapse:collapse !important;">

		June 30,		December 31,
		2020		2019
ASSETS
Current assets:
70%; width:70%; min-width:70%;">Cash and cash equivalents	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	12%; width:12%; min-width:12%;">26,515	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	12%; width:12%; min-width:12%;">26,892	1%; width:1%; min-width:1%;">
Short-term investments			5,247				9,427
Accounts receivable, net			19,760				19,031
Inventories			49,586				49,152
Prepaid expenses and other current assets			9,621				8,703
Total current assets			110,729				113,205
Long-term investments			720				—
Property, plant and equipment, net			101,031				97,403
Operating lease right-of-use assets			2,722				2,938
Other assets			11,018				9,803
Total assets		$	226,220			$	223,349
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	11,540			$	10,098
Accrued liabilities			10,511				11,681
Bank loan			6,087				5,747
Total current liabilities			28,138				27,526
Long-term portion of royalty payments			1,177				—
Noncurrent operating lease liabilities			2,455				2,695
Other long-term liabilities			396				366
Total liabilities			32,166				30,587
Stockholders’ equity:
Preferred stock			3,532				3,532
Common stock			41				41
Additional paid-in capital			238,754				236,957
Accumulated deficit			(47,600	)			(47,783	)
Accumulated other comprehensive loss			(6,365	)			(4,862	)
Total AXT, Inc. stockholders’ equity			188,362				187,885
Noncontrolling interests			5,692				4,877
Total stockholders’ equity			194,054				192,762
Total liabilities and stockholders’ equity		$	226,220			$	223,349

Contacts:
Gary Fischer
Chief Financial Officer
(510) 438-4700

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

FAQ

What were AXT's Q2 2020 earnings results?

AXT reported Q2 2020 revenue of $22.1 million, a net income of $0.4 million, and earnings per share of $0.01.

How does AXT's Q2 2020 performance compare to Q2 2019?

Revenue declined from $24.8 million in Q2 2019, and net income decreased from $1.5 million.

What is the outlook for AXT after Q2 2020 results?

Management sees 2020 as a turning point, aiming for growth in strategic applications like 5G and data centers.