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AXT, Inc. Announces Second Quarter 2023 Financial Results

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AXT, Inc. reports Q2 2023 financial results with revenue of $18.6 million, a decrease from previous quarters. GAAP gross margin was 9.2% and operating expenses were $8.6 million. The company also provides an update on the listing of its subsidiary, Tongmei, on the STAR Market.
Positive
  • Revenue for Q2 2023 was $18.6 million, a decrease from previous quarters.
  • GAAP gross margin was 9.2% of revenue for Q2 2023.
  • Operating expenses were $8.6 million for Q2 2023.
  • Tongmei's IPO on the STAR Market is subject to review and approval by the CSRC and other authorities.
Negative
  • Revenue decreased from previous quarters.
  • GAAP gross margin decreased to 9.2% for Q2 2023.
  • Operating expenses were $8.6 million for Q2 2023.
  • Tongmei's IPO on the STAR Market is a lengthy process subject to review and approval.

FREMONT, Calif., Aug. 03, 2023 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor wafer substrates, today reported financial results for the second quarter, ended June 30, 2023.

Management Qualitative Comments

“Though the macro environment continues to impact our growth near-term, the trends that have driven our revenue and customer expansion remain very much intact,” said Morris Young, chief executive officer. “We continue to excel in our technical capabilities and are readying our business to support new applications in data center, consumer, and other high growth areas. Further, we continue to expand our recycling program and are focused on improving our efficiency and accelerating our return to profitability.”

Second Quarter 2023 Results

  • Revenue for the second quarter of 2023 was $18.6 million, compared with $19.4 million for the first quarter of 2023 and $39.5 million for the second quarter of 2022.

  • GAAP gross margin was 9.2 percent of revenue for the second quarter of 2023, compared with 26.3 percent of revenue for the first quarter of 2023 and 39.1 percent for the second quarter of 2022.

  • Non-GAAP gross margin was 9.8 percent of revenue for the second quarter of 2023, compared with 26.9 percent of revenue for the first quarter of 2023 and 39.4 percent for the second quarter of 2022.

  • GAAP operating expenses were $8.6 million for the second quarter of 2023, compared with $9.5 million for the first quarter of 2023 and $10.1 million for the second quarter of 2022.

  • Non-GAAP operating expenses were $7.8 million for the second quarter of 2023, compared with $8.7 million for the first quarter of 2023 and $9.1 million for the second quarter of 2022.

  • GAAP operating profit/(loss) for the second quarter of 2023 was an operating loss of ($6.8) million, compared with an operating loss of ($4.4) million for the first quarter of 2023 and an operating profit of $5.3 million for the second quarter of 2022.

  • Non-GAAP operating profit/(loss) for the second quarter of 2023 was an operating loss of ($5.9) million, compared with an operating loss of ($3.5) million for the first quarter of 2023 and an operating profit of $6.4 million for the second quarter of 2022.

  • Non-operating income and expense, taxes and minority interest for the second quarter of 2023 was a net gain of $1.8 million, compared with a net gain of $1.1 million in the first quarter of 2023 and a net gain of $0.3 million for the second quarter of 2022.

  • GAAP net income, after minority interests, for the second quarter of 2023 was a net loss of ($5.1) million, or ($0.12) per share, compared with a net loss of ($3.3) million, or ($0.08) per share, for the first quarter of 2023 and a net income of $5.5 million, or $0.13 per share, for the second quarter of 2022.

  • Non-GAAP net income for the second quarter of 2023 was a net loss of ($4.2) million, or ($0.10) per share, compared with a net loss of ($2.4) million, or ($0.06) per share, for the first quarter of 2023 and a net income of $6.7 million, or $0.16 per share, for the second quarter of 2022.

STAR Market Listing Update

On January 10, 2022, AXT announced that Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), its subsidiary in Beijing, China, submitted to the Shanghai Stock Exchange (the “SSE”) its application to list its shares in an initial public offering (the “IPO”) on the SSE’s Sci-Tech innovAtion boaRd (the “STAR Market”) and the application was accepted for review. Subsequently, Tongmei responded to several rounds of questions received from the SSE. On July 12, 2022, the SSE approved the listing of Tongmei’s shares in an IPO on the STAR Market. On August 1, 2022, the China Securities Regulatory Commission (the “CSRC”) accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei hopes to accomplish this goal in the coming months. AXT has posted a brief summary of the plan and the process on its website at http://www.axt.com.

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 (888) 300-4150 (passcode 7175811). The call will also be simulcast at www.axt.com. Replays will be available at (800) 770-2030 (passcode 7175811) until August 17, 2023. 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 sales, administration and customer service functions. AXT has its Asia headquarters in Beijing, China and manufacturing facilities in three separate locations in China. In addition, as part of its supply chain strategy, the company has partial ownership in ten companies in China producing raw materials for its manufacturing process. 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 timing and completion of the proposed listing of shares of Tongmei on the STAR Market. Additional examples of forward-looking statements include statements regarding the market demand for our products, our product mix, our growth prospects and opportunities for continued business expansion, including trends, new applications and the ramping of Tier-1 customers, our market opportunity, our ability to lead our industry, our relocation, our expectations with respect to our business prospects and financial results, including our gross margin performance, and our development of larger diameter substrates that we believe will enable the next generation of technology innovation across a number of end-markets. 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 requests for redemptions by private equity funds in China of investments in Tongmei, the administrative challenges in satisfying the requirements of various government agencies in China in connection with the listing of shares of Tongmei on the STAR Market, continued open access to companies to list shares on the STAR Market, investor enthusiasm for new listings of shares on the STAR Market and geopolitical tensions between China and the United States. Additional 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 or COVID-19; 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)

            
 Three Months Ended  Six Months Ended
 June 30, June 30,
 2023  2022  2023  2022 
            
Revenue$18,595  $39,487  $38,000  $79,140 
Cost of revenue 16,880   24,052   31,175   50,397 
Gross profit 1,715   15,435   6,825   28,743 
Operating expenses:           
Selling, general and administrative 5,820   6,693   11,772   13,143 
Research and development 2,740   3,453   6,335   6,612 
Total operating expenses 8,560   10,146   18,107   19,755 
Income (loss) from operations (6,845)  5,289   (11,282)  8,988 
Interest expense, net (365)  (188)  (762)  (371)
Equity in income of unconsolidated joint ventures 941   2,177   1,975   3,302 
Other income, net 777   294   1,059   285 
Income (loss) before provision (benefit) for income taxes (5,492)  7,572   (9,010)  12,204 
Provision (benefit) for income taxes (139)  1,027   9   1,687 
Net income (loss) (5,353)  6,545   (9,019)  10,517 
Less: Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests 264   (999)  582   (1,806)
Net income (loss) attributable to AXT, Inc.$(5,089) $5,546  $(8,437) $8,711 
Net income (loss) attributable to AXT, Inc. per common share:           
Basic$(0.12) $0.13  $(0.20) $0.21 
Diluted$(0.12) $0.13  $(0.20) $0.20 
Weighted-average number of common shares outstanding:           
Basic 42,586   42,001   42,542   41,935 
Diluted 42,586   42,511   42,542   42,586 
                
                

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

      
 June 30, December 31,
 2023  2022 
      
ASSETS     
Current assets:     
Cash and cash equivalents$30,092  $34,948 
Restricted cash 10,794   6,400 
Short-term investments 7,088   9,339 
Accounts receivable, net 19,857   29,252 
Inventories 87,063   89,629 
Prepaid expenses and other current assets 10,576   13,977 
Total current assets 165,470   183,545 
Long-term investments 1,641   2,118 
Property, plant and equipment, net 158,672   161,017 
Operating lease right-of-use assets 1,473   1,761 
Other assets 18,946   21,631 
Total assets$346,202  $370,072 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY     
Current liabilities:     
Accounts payable$4,692  $10,084 
Accrued liabilities 16,949   18,164 
Bank loans 45,622   47,078 
Total current liabilities 67,263   75,326 
Noncurrent operating lease liabilities 1,157   1,322 
Other long-term liabilities 3,398   3,678 
Total liabilities 71,818   80,326 
      
Redeemable noncontrolling interests 41,393   44,846 
      
Stockholders’ equity:     
Preferred stock 3,532   3,532 
Common stock 44   44 
Additional paid-in capital 236,988   235,308 
Accumulated deficit (22,596)  (14,159)
Accumulated other comprehensive loss (8,175)  (3,118)
Total AXT, Inc. stockholders’ equity 209,793   221,607 
Noncontrolling interests 23,198   23,293 
Total stockholders’ equity 232,991   244,900 
Total liabilities, redeemable noncontrolling interests and stockholders’ equity$346,202  $370,072 
        
        

AXT, INC.
Reconciliation of Statements of Operations Under GAAP and Non-GAAP
(Unaudited, in thousands)

            
 Three Months Ended  Six Months Ended
 June 30, June 30,
 2023  2022 2023  2022
GAAP gross profit$1,715  $15,435 $6,825  $28,743
Stock-based compensation expense 103   113  208   226
Non-GAAP gross profit$1,818  $15,548 $7,033  $28,969
            
GAAP operating expenses$8,560  $10,146 $18,107  $19,755
Stock-based compensation expense 809   1,021  1,619   1,996
Non-GAAP operating expenses$7,751  $9,125 $16,488  $17,759
            
GAAP income (loss) from operations$(6,845) $5,289 $(11,282) $8,988
Stock-based compensation expense 912   1,134  1,827   2,222
Non-GAAP income (loss) from operations$(5,933) $6,423 $(9,455) $11,210
            
GAAP net income (loss)$(5,089) $5,546 $(8,437) $8,711
Stock-based compensation expense 912   1,134  1,827   2,222
Non-GAAP net income (loss)$(4,177) $6,680 $(6,610) $10,933
            
GAAP net income (loss) per diluted share$(0.12) $0.13 $(0.20) $0.20
Stock-based compensation expense per diluted share$0.02  $0.03 $0.04  $0.05
Non-GAAP net income (loss) per diluted share$(0.10) $0.16 $(0.16) $0.25
            
Shares used to compute diluted net income per share 42,586   42,511  42,542   42,586
              
              


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

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

FAQ

What was AXT, Inc.'s revenue for Q2 2023?

AXT, Inc.'s revenue for Q2 2023 was $18.6 million.

What was the GAAP gross margin for Q2 2023?

The GAAP gross margin for Q2 2023 was 9.2%.

What were the operating expenses for Q2 2023?

The operating expenses for Q2 2023 were $8.6 million.

What is the status of Tongmei's IPO on the STAR Market?

Tongmei's IPO on the STAR Market is subject to review and approval by the CSRC and other authorities.

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