AXT, Inc. Announces Second Quarter 2024 Financial Results

Rhea-AI Summary

AXT, Inc. (NasdaqGS: AXTI) reported strong financial results for Q2 2024. Revenue increased by 23% sequentially and 50% year-over-year to $27.9 million. GAAP gross margin improved to 27.4%, up from 9.2% in Q2 2023. The company reported a GAAP net loss of ($1.5) million, or ($0.04) per share, compared to a loss of ($5.1) million, or ($0.12) per share, in Q2 2023.

CEO Morris Young highlighted growing adoption in new applications, particularly in AI, where indium phosphide is expected to be used in optical transceivers for high-speed data transmission. The company sees tangible signs of market recovery across its product portfolio, despite potential quarterly fluctuations as end markets return to normalized seasonality.

Positive

• Revenue increased by 23% sequentially and 50% year-over-year to $27.9 million
• GAAP gross margin improved to 27.4%, up from 9.2% in Q2 2023
• Non-GAAP gross margin increased to 27.6%, up from 9.8% in Q2 2023
• GAAP operating loss narrowed to ($1.9) million from ($6.8) million in Q2 2023
• Non-GAAP operating loss reduced to ($1.2) million from ($5.9) million in Q2 2023
• GAAP net loss per share improved to ($0.04) from ($0.12) in Q2 2023

Negative

• Company still reported a GAAP net loss of ($1.5) million
• Non-GAAP net loss of ($0.8) million
• Operating expenses increased to $9.5 million from $8.6 million in Q2 2023

Insights

Financial Analyst

AXT's Q2 2024 results show significant improvement, with revenue up 23% sequentially and 50% year-over-year, reaching $27.9 million. This growth is impressive, especially considering the challenging market conditions in recent years. The GAAP gross margin improved to 27.4%, up from 9.2% in Q2 2023, indicating better operational efficiency.

However, the company still reported a GAAP net loss of $1.5 million, or $0.04 per share. While this is an improvement from the $5.1 million loss in Q2 2023, it suggests that AXT is still working towards profitability. The non-GAAP net loss of $0.8 million shows progress when excluding certain charges.

The company's focus on new applications, particularly in AI and optical transceivers for high-speed data transmission, could be a significant growth driver. However, investors should note the expected "lumpiness" in quarterly results as markets return to normalized seasonality.

The potential STAR Market listing of AXT's subsidiary, Tongmei, is a key development to watch. If successful, this could provide additional capital and market exposure, potentially benefiting AXT's overall valuation and growth prospects.

Tech Expert

AXT's focus on compound semiconductor wafer substrates positions it well in the evolving tech landscape. The company's mention of indium phosphide for AI applications in optical transceivers is particularly noteworthy. As AI continues to drive demand for high-speed data transmission, AXT could see increased demand for its products.

The applications spanning "longer distances, such as from rack to rack, rack to aggregation point and between cloud and edge data centers" highlight the expanding use cases for AXT's materials. This aligns with the broader trend of distributed computing and the need for faster, more efficient data transfer across various network points.

However, the tech sector is known for rapid changes and fierce competition. AXT will need to continue innovating and adapting to maintain its market position. The company's ability to scale production and meet potential increased demand from AI and other emerging technologies will be important for its long-term success.

Investors should also consider the broader semiconductor industry dynamics, including potential supply chain issues and geopolitical factors that could impact AXT's operations and growth trajectory.

Market Research Analyst

AXT's Q2 results reflect a broader recovery in the semiconductor industry. The 50% year-over-year revenue growth is a strong indicator of improving market conditions. However, it's important to contextualize this growth against the industry's cyclical nature and the low base from the previous year.

The company's emphasis on new applications, particularly in AI, aligns with current market trends. The growing demand for high-performance computing and data centers is likely to drive demand for specialized semiconductor materials like those produced by AXT.

Investors should note the company's caution about potential "lumpiness" in quarterly results. This suggests that while the overall trend may be positive, short-term fluctuations are likely. This is typical in the semiconductor industry, where demand can be volatile and influenced by factors such as inventory cycles and end-market dynamics.

The potential STAR Market listing of AXT's subsidiary is an interesting development. If successful, it could provide AXT with better access to Chinese capital markets and potentially enhance its competitive position in the important Chinese market. However, investors should also consider the regulatory risks and potential complexities associated with this move, particularly given the current geopolitical climate.

Revenue up 23 percent sequentially and up 50 percent from Q2 2023

FREMONT, Calif.--(BUSINESS WIRE)-- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor wafer substrates, today reported financial results for the second quarter, ended June 30, 2024.

Management Qualitative Comments

“Q2 was another solid quarter of growth, with our revenues up 23 percent sequentially and more than 50 percent year over year,” said Morris Young, chief executive officer. “We are encouraged by the signs of adoption in new applications, such as AI where we expect that indium phosphide will be required in optical transceivers for high-speed data transmission. These applications span longer distances, such as from rack to rack, rack to aggregation point and between cloud and edge data centers. Across the rest of our portfolio of products, the signs of market recovery are tangible, and though we expect some lumpiness quarter to quarter as our end markets come back to normalized seasonality, we are executing well on behalf of our customers and have laid important groundwork for growth within this highly dynamic technology landscape.”

Second Quarter 2024 Results

• Revenue for the second quarter of 2024 was $27.9 million, compared with $22.7 million for the first quarter of 2024 and $18.6 million for the second quarter of 2023.

• GAAP gross margin was 27.4 percent of revenue for the second quarter of 2024, compared with 26.9 percent of revenue for the first quarter of 2024 and 9.2 percent for the second quarter of 2023.

• Non-GAAP gross margin, after excluding charges for stock-based compensation, was 27.6 percent of revenue for the second quarter of 2024, compared with 27.3 percent of revenue for the first quarter of 2024 and 9.8 percent for the second quarter of 2023.

• GAAP operating expenses were $9.5 million for the second quarter of 2024, compared with $9.4 million for the first quarter of 2024 and $8.6 million for the second quarter of 2023.

• Non-GAAP operating expenses were $8.9 million for the second quarter of 2024, compared with $8.7 million for the first quarter of 2024 and $7.8 million for the second quarter of 2023.

• GAAP operating loss for the second quarter of 2024 was an operating loss of ($1.9) million, compared with an operating loss of ($3.3) million for the first quarter of 2024 and an operating loss of ($6.8) million for the second quarter of 2023.

• Non-GAAP operating loss for the second quarter of 2024 was an operating loss of ($1.2) million, compared with an operating loss of ($2.5) million for the first quarter of 2024 and an operating loss of ($5.9) million for the second quarter of 2023.

• Non-operating income and expense, taxes and minority interest for the second quarter of 2024 was a net gain of $0.4 million, compared with a net gain of $1.3 million in the first quarter of 2024 and a net gain of $1.8 million for the second quarter of 2023.

• GAAP net loss, after minority interests, for the second quarter of 2024 was a net loss of ($1.5) million, or ($0.04) per share, compared with a net loss of ($2.1) million, or ($0.05) per share, for the first quarter of 2024 and a net loss of ($5.1) million, or ($0.12) per share, for the second quarter of 2023.

• Non-GAAP net loss for the second quarter of 2024 was a net loss of ($0.8) million, or ($0.02) per share, compared with a net loss of ($1.3) million, or ($0.03) per share, for the first quarter of 2024 and a net loss of ($4.2) million, or ($0.10) per share, for the second quarter of 2023.

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 (800) 715-9871 (passcode 4378083). The call will also be simulcast at www.axt.com. Replays will be available at (800) 770-2030 (passcode 4378083) until August 15, 2024. 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 wafer substrates are used when a typical silicon wafer substrate 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 more than ten companies in China producing raw materials and consumables 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 technology 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.

AXT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Revenue		$	27,923			$	18,595			$	50,611			$	38,000
Cost of revenue			20,271				16,880				36,865				31,175
Gross profit			7,652				1,715				13,746				6,825
Operating expenses:
Selling, general and administrative			5,779				5,820				12,006				11,772
Research and development			3,758				2,740				6,972				6,335
Total operating expenses			9,537				8,560				18,978				18,107
Loss from operations			(1,885	)			(6,845	)			(5,232	)			(11,282	)
Interest expense, net			(282	)			(365	)			(631	)			(762	)
Equity in income of unconsolidated joint ventures			598				941				1,488				1,975
Other income, net			491				777				1,523				1,059
Loss before provision (benefit) for income taxes			(1,078	)			(5,492	)			(2,852	)			(9,010	)
Provision (benefit ) for income taxes			121				(139	)			395				9
Net loss			(1,199	)			(5,353	)			(3,247	)			(9,019	)
Less: Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests			(317	)			264				(352	)			582
Net loss attributable to AXT, Inc.		$	(1,516	)		$	(5,089	)		$	(3,599	)		$	(8,437	)
Net loss attributable to AXT, Inc. per common share:
Basic		$	(0.04	)		$	(0.12	)		$	(0.09	)		$	(0.20	)
Diluted		$	(0.04	)		$	(0.12	)		$	(0.09	)		$	(0.20	)
Weighted-average number of common shares outstanding:
Basic			43,092				42,586				43,039				42,542
Diluted			43,092				42,586				43,039				42,542

AXT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)
		June 30,				December 31,
		2024				2023
ASSETS
Current assets:
Cash and cash equivalents		$	27,808			$	37,752
Restricted cash			13,789				12,362
Short-term investments			1,675				2,140
Accounts receivable, net			27,163				19,256
Inventories			85,774				86,503
Prepaid expenses and other current assets			11,187				12,643
Total current assets			167,396				170,656
Property, plant and equipment, net			161,332				166,348
Operating lease right-of-use assets			2,531				2,799
Other assets			18,154				18,898
Total assets		$	349,413			$	358,701
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	11,655			$	9,617
Accrued liabilities			12,268				19,019
Short-term loans			50,724				52,921
Total current liabilities			74,647				81,557
Noncurrent operating lease liabilities			2,083				2,351
Other long-term liabilities			9,570				5,647
Total liabilities			86,300				89,555
Redeemable noncontrolling interests			39,761				41,663
Stockholders’ equity:
Preferred stock			3,532				3,532
Common stock			44				44
Additional paid-in capital			239,962				238,452
Accumulated deficit			(35,639	)			(32,040	)
Accumulated other comprehensive loss			(8,227	)			(5,999	)
Total AXT, Inc. stockholders’ equity			199,672				203,989
Noncontrolling interests			23,680				23,494
Total stockholders’ equity			223,352				227,483
Total liabilities, redeemable noncontrolling interests and stockholders’ equity		$	349,413			$	358,701

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,
		2024				2023				2024				2023
GAAP gross profit		$	7,652			$	1,715			$	13,746			$	6,825
Stock-based compensation expense			68				103				173				208
Non-GAAP gross profit		$	7,720			$	1,818			$	13,919			$	7,033
GAAP operating expenses		$	9,537			$	8,560			$	18,978			$	18,107
Stock-based compensation expense			647				809				1,351				1,619
Non-GAAP operating expenses		$	8,890			$	7,751			$	17,627			$	16,488
GAAP loss from operations		$	(1,885	)		$	(6,845	)		$	(5,232	)		$	(11,282	)
Stock-based compensation expense			715				912				1,524				1,827
Non-GAAP loss from operations		$	(1,170	)		$	(5,933	)		$	(3,708	)		$	(9,455	)
GAAP net loss		$	(1,516	)		$	(5,089	)		$	(3,599	)		$	(8,437	)
Stock-based compensation expense			715				912				1,524				1,827
Non-GAAP net loss		$	(801	)		$	(4,177	)		$	(2,075	)		$	(6,610	)
GAAP net loss per diluted share		$	(0.04	)		$	(0.12	)		$	(0.09	)		$	(0.20	)
Stock-based compensation expense per diluted share		$	0.02			$	0.02			$	0.04			$	0.04
Non-GAAP net loss per diluted share		$	(0.02	)		$	(0.10	)		$	(0.05	)		$	(0.16	)
Shares used to compute diluted net income per share			43,092				42,586				43,039				42,542

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801051530/en/

Gary Fischer

Chief Financial Officer

(510) 438-4700

Leslie Green

Green Communications Consulting, LLC

(650) 312-9060

Source: AXT, Inc.

FAQ

What was AXT's (AXTI) revenue for Q2 2024?

AXT's revenue for Q2 2024 was $27.9 million, up 23% sequentially and 50% year-over-year.

How did AXT's (AXTI) gross margin change in Q2 2024 compared to Q2 2023?

AXT's GAAP gross margin improved to 27.4% in Q2 2024, up from 9.2% in Q2 2023.

What was AXT's (AXTI) net loss per share for Q2 2024?

AXT reported a GAAP net loss of ($0.04) per share for Q2 2024, compared to a loss of ($0.12) per share in Q2 2023.

What new applications is AXT (AXTI) seeing growth in according to the Q2 2024 report?

AXT is seeing growth in AI applications, where indium phosphide is expected to be used in optical transceivers for high-speed data transmission.

What is the status of AXT's subsidiary Tongmei's IPO on the STAR Market as of Q2 2024?

Tongmei's IPO application is under review by the China Securities Regulatory Commission (CSRC) and other authorities, with hopes to accomplish the goal in the coming months.