AXT, Inc. Announces Third Quarter 2024 Financial Results

Rhea-AI Summary

AXT Inc reported Q3 2024 financial results with revenue of $23.6 million, showing a 36% increase from Q3 2023 but down from $27.9 million in Q2 2024. GAAP gross margin improved to 24.0% from 10.7% year-over-year. The company reported a GAAP net loss of ($2.9) million, or ($0.07) per share, an improvement from ($5.8) million loss in Q3 2023. Data center-related demand remained strong, with all products showing double-digit year-over-year growth. The company expressed optimism about growth prospects in 2025, particularly in indium phosphide substrates for AI applications.

Positive

• Revenue increased 36% year-over-year to $23.6 million
• GAAP gross margin improved significantly to 24.0% from 10.7% year-over-year
• Net loss per share reduced to ($0.07) from ($0.14) year-over-year
• All products achieved double-digit year-over-year growth
• Strong data center-related demand continues

Negative

• Revenue declined from $27.9 million in Q2 2024 to $23.6 million in Q3 2024
• GAAP gross margin decreased from 27.4% in Q2 2024 to 24.0% in Q3 2024
• Net loss increased to ($2.9) million from ($1.5) million in Q2 2024
• Company remains unprofitable with continued quarterly losses

Insights

Financial Analyst

The Q3 2024 results show mixed signals. While year-over-year revenue grew by 36% to $23.6 million, sequential revenue declined from Q2's $27.9 million. The GAAP gross margin improved significantly to 24.0% from 10.7% year-over-year, but deteriorated from Q2's 27.4%. The net loss of $2.9 million ($0.07 per share) represents a concerning sequential increase from Q2's loss of $1.5 million. The company's focus on AI applications and data center demand shows promise, but current financial performance indicates ongoing challenges in achieving consistent profitability. The pending STAR Market listing could provide additional capital and market exposure, though timing remains uncertain.

Tech Industry Analyst

The semiconductor substrate market dynamics are evident in AXT's results. Strong demand for indium phosphide substrates in AI-related photodetector applications signals a strategic position in emerging technologies. The double-digit growth across all product lines, including raw materials, indicates broad-based market recovery. However, sequential revenue decline suggests ongoing market volatility. The focus on data center and AI applications aligns with major industry trends, particularly as AI infrastructure buildout continues. The improved margins demonstrate better operational efficiency, though sustained profitability remains a challenge in this cyclical industry.

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

Management Qualitative Comments

“Q3 came in largely in line with our expectations, coming off a strong quarter in Q2,” said Morris Young, chief executive officer. “By comparison to the year ago quarter Q3 2023, our revenue in Q3 of 2024 increased over 36 percent and we are pleased to see that every product, including raw materials, had double digit year-over-year growth. Data center-related demand remained solid, and we are anticipating new order momentum in indium phosphide substrates for photodetectors in AI applications.”

“This year-over-year revenue improvement benefited our GAAP gross margin significantly, moving from 10.7 percent in Q3 2023 to 24.0 percent in the recent quarter. The impact on the bottom line reduced the GAAP net loss from ($0.14) per share in Q3 2023 to ($0.07) per share in the recent quarter. As we move into 2025, we are optimistic about the growth and expansion of our business. Across our portfolio of products, the signs of recovery are tangible, and we are strongly positioned for success in this highly dynamic technology landscape.”

Third Quarter 2024 Results

• Revenue for the third quarter of 2024 was $23.6 million, compared with $27.9 million for the second quarter of 2024 and $17.4 million for the third quarter of 2023.

• GAAP gross margin was 24.0 percent of revenue for the third quarter of 2024, compared with 27.4 percent of revenue for the second quarter of 2024 and 10.7 percent for the third quarter of 2023.

• Non-GAAP gross margin, after excluding charges for stock-based compensation, was 24.3 percent of revenue for the third quarter of 2024, compared with 27.6 percent of revenue for the second quarter of 2024 and 11.3 percent for the third quarter of 2023.

• GAAP net loss, after minority interests, for the third quarter of 2024 was a net loss of ($2.9) million, or ($0.07) per share, compared with a net loss of ($1.5) million, or ($0.04) per share, for the second quarter of 2024 and a net loss of ($5.8) million, or ($0.14) per share, for the third quarter of 2023.

• Non-GAAP net loss for the third quarter of 2024 was a net loss of ($2.1) million, or ($0.05) per share, compared with a net loss of ($0.8) million, or ($0.02) per share, for the second quarter of 2024 and a net loss of ($4.9) million, or ($0.12) per share, for the third 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 (Playback ID: 4378083 followed by # key) until November 14, 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								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
Revenue		$	23,645			$	17,366			$	74,256			$	55,366
Cost of revenue			17,963				15,500				54,828				46,675
Gross profit			5,682				1,866				19,428				8,691
Operating expenses:
Selling, general and administrative			5,650				5,667				17,656				17,439
Research and development			3,438				2,926				10,410				9,261
Total operating expenses			9,088				8,593				28,066				26,700
Loss from operations			(3,406	)			(6,727	)			(8,638	)			(18,009	)
Interest expense, net			(391	)			(381	)			(1,022	)			(1,143	)
Equity in income of unconsolidated joint ventures			1,007				369				2,495				2,344
Other income, net			529				223				2,052				1,282
Loss before provision (benefit) for income taxes			(2,261	)			(6,516	)			(5,113	)			(15,526	)
Provision (benefit ) for income taxes			626				(101	)			1,021				(92	)
Net loss			(2,887	)			(6,415	)			(6,134	)			(15,434	)
Less: Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests			(50	)			592				(402	)			1,174
Net loss attributable to AXT, Inc.		$	(2,937	)		$	(5,823	)		$	(6,536	)		$	(14,260	)
Net loss attributable to AXT, Inc. per common share:
Basic		$	(0.07	)		$	(0.14	)		$	(0.15	)		$	(0.34	)
Diluted		$	(0.07	)		$	(0.14	)		$	(0.15	)		$	(0.34	)
Weighted-average number of common shares outstanding:
Basic			43,157				42,638				43,079				42,574
Diluted			43,157				42,638				43,079				42,574

AXT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)
		September 30,				December 31,
		2024				2023
ASSETS
Current assets:
Cash and cash equivalents		$	24,898			$	37,752
Restricted cash			13,893				12,362
Short-term investments			—				2,140
Accounts receivable, net			27,970				19,256
Inventories			86,109				86,503
Prepaid expenses and other current assets			14,991				12,643
Total current assets			167,861				170,656
Property, plant and equipment, net			166,459				166,348
Operating lease right-of-use assets			2,451				2,799
Other assets			18,809				18,898
Total assets		$	355,580			$	358,701
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	12,780			$	9,617
Accrued liabilities			11,941				19,019
Short-term loans			54,052				52,921
Total current liabilities			78,773				81,557
Noncurrent operating lease liabilities			1,993				2,351
Other long-term liabilities			8,595				5,647
Total liabilities			89,361				89,555
Redeemable noncontrolling interests			41,237				41,663
Stockholders’ equity:
Preferred stock			3,532				3,532
Common stock			45				44
Additional paid-in capital			240,770				238,452
Accumulated deficit			(38,576	)			(32,040	)
Accumulated other comprehensive loss			(5,038	)			(5,999	)
Total AXT, Inc. stockholders’ equity			200,733				203,989
Noncontrolling interests			24,249				23,494
Total stockholders’ equity			224,982				227,483
Total liabilities, redeemable noncontrolling interests and stockholders’ equity		$	355,580			$	358,701

AXT, INC. Reconciliation of Statements of Operations Under GAAP and Non-GAAP (Unaudited, in thousands)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2024				2023				2024				2023
GAAP gross profit		$	5,682			$	1,866			$	19,428			$	8,691
Stock-based compensation expense			73				102				246				310
Non-GAAP gross profit		$	5,755			$	1,968			$	19,674			$	9,001
GAAP operating expenses		$	9,088			$	8,593			$	28,066			$	26,700
Stock-based compensation expense			747				789				2,098				2,408
Non-GAAP operating expenses		$	8,341			$	7,804			$	25,968			$	24,292
GAAP loss from operations		$	(3,406	)		$	(6,727	)		$	(8,638	)		$	(18,009	)
Stock-based compensation expense			820				891				2,344				2,718
Non-GAAP loss from operations		$	(2,586	)		$	(5,836	)		$	(6,294	)		$	(15,291	)
GAAP net loss		$	(2,937	)		$	(5,823	)		$	(6,536	)		$	(14,260	)
Stock-based compensation expense			820				891				2,344				2,718
Non-GAAP net loss		$	(2,117	)		$	(4,932	)		$	(4,192	)		$	(11,542	)
GAAP net loss per diluted share		$	(0.07	)		$	(0.14	)		$	(0.15	)		$	(0.34	)
Stock-based compensation expense per diluted share		$	0.02			$	0.02			$	0.05			$	0.06
Non-GAAP net loss per diluted share		$	(0.05	)		$	(0.12	)		$	(0.10	)		$	(0.27	)
Shares used to compute diluted net income per share			43,157				42,638				43,079				42,574

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241031052316/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 in Q3 2024?

AXT reported revenue of $23.6 million in Q3 2024.

How did AXT's (AXTI) Q3 2024 performance compare to Q3 2023?

Revenue increased 36% year-over-year, with GAAP gross margin improving from 10.7% to 24.0%, and net loss per share reducing from ($0.14) to ($0.07).

What was AXT's (AXTI) gross margin in Q3 2024?

GAAP gross margin was 24.0% in Q3 2024, compared to 27.4% in Q2 2024 and 10.7% in Q3 2023.

What was AXT's (AXTI) earnings per share in Q3 2024?

AXT reported a GAAP net loss of ($0.07) per share in Q3 2024.