AXT, Inc. Announces Third Quarter 2023 Financial Results
02 November 2023 - 9:05PM
AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound
semiconductor wafer substrates, today reported financial results
for the third quarter, ended September 30, 2023.
Management Qualitative Comments
“The demand environment in the third quarter of 2023 remained
stable, and we were pleased to see some encouraging early signs of
improvement in the data center market, resulting in modestly higher
indium phosphide revenue quarter over quarter,” said Morris Young,
chief executive officer. “While inventory rationalization may
persist into the new year, we believe that the trends that have
driven our revenue and customer expansion remain very much intact.
Further, we have executed well in our development of larger
diameter substrates that will pave the way for our opportunities in
next-generation devices spanning data center, consumer, and other
markets. As we navigate the near-term environment, we will continue
to prioritize cost savings and efficiency, and are focused on
accelerating our return to profitability.”
Third Quarter 2023 Results
- Revenue for the third quarter of
2023 was $17.4 million, compared with $18.6 million for the second
quarter of 2023 and $35.2 million for the third quarter of
2022.
- GAAP gross margin was 10.7 percent
of revenue for the third quarter of 2023, compared with 9.2 percent
of revenue for the second quarter of 2023 and 42.0 percent of
revenue for the third quarter of 2022.
- Non-GAAP gross margin was 11.3 percent of revenue for the third
quarter of 2023, compared with 9.8 percent of revenue for the
second quarter of 2023 and 42.2 percent of revenue for the third
quarter of 2022.
- GAAP operating
expenses were $8.6 million for the third quarter of 2023, compared
with $8.6 million for the second quarter of 2023 and $10.2 million
for the third quarter of 2022.
- Non-GAAP operating expenses were
$7.8 million for the third quarter of 2023, compared with $7.8
million for the second quarter of 2023 and $9.2 million for the
third quarter of 2022.
- GAAP operating profit/(loss) for
the third quarter of 2023 was an operating loss of ($6.7) million,
compared with an operating loss of ($6.8) million for the second
quarter of 2023 and an operating profit of $4.6 million for the
third quarter of 2022.
- Non-GAAP operating profit/(loss)
for the third quarter of 2023 was an operating loss of ($5.8)
million, compared with an operating loss of ($5.9) million for the
second quarter of 2023 and an operating profit of $5.6 million for
the third quarter of 2022.
- Non-operating income and expense,
taxes and minority interest for the third quarter of 2023 was a net
gain of $0.9 million, compared with a net gain of $1.8 million in
the second quarter of 2023 and a net gain of $1.2 million for the
third quarter of 2022.
- GAAP net income/(loss), after
minority interests, for the third quarter of 2023 was a net loss of
($5.8) million, or ($0.14) per share, compared with a net loss of
($5.1) million, or ($0.12) per share, for the second quarter of
2023 and net income of $5.8 million, or $0.13 per share, for the
third quarter of 2022.
- Non-GAAP net
income/(loss) for the third quarter of 2023 was a net loss of
($4.9) million, or ($0.12) per share, compared with a net loss of
($4.2) million, or ($0.10) per share, for the second quarter of
2023 and net income of $6.8 million, or $0.16 per share, for the
third 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 November 16, 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 wafer
substrates 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 trends, new applications and the
ramping of Tier-1 customers, our market opportunity, our ability to
lead our industry, 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 |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
17,366 |
|
|
$ |
35,183 |
|
|
$ |
55,366 |
|
|
$ |
114,323 |
|
Cost of revenue |
|
15,500 |
|
|
|
20,401 |
|
|
|
46,675 |
|
|
|
70,798 |
|
Gross profit |
|
1,866 |
|
|
|
14,782 |
|
|
|
8,691 |
|
|
|
43,525 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
5,667 |
|
|
|
6,576 |
|
|
|
17,439 |
|
|
|
19,719 |
|
Research and development |
|
2,926 |
|
|
|
3,639 |
|
|
|
9,261 |
|
|
|
10,251 |
|
Total operating expenses |
|
8,593 |
|
|
|
10,215 |
|
|
|
26,700 |
|
|
|
29,970 |
|
Income (loss) from
operations |
|
(6,727 |
) |
|
|
4,567 |
|
|
|
(18,009 |
) |
|
|
13,555 |
|
Interest expense, net |
|
(381 |
) |
|
|
(299 |
) |
|
|
(1,143 |
) |
|
|
(670 |
) |
Equity in income of
unconsolidated joint ventures |
|
369 |
|
|
|
2,006 |
|
|
|
2,344 |
|
|
|
5,308 |
|
Other income, net |
|
223 |
|
|
|
957 |
|
|
|
1,282 |
|
|
|
1,242 |
|
Income (loss) before provision
(benefit) for income taxes |
|
(6,516 |
) |
|
|
7,231 |
|
|
|
(15,526 |
) |
|
|
19,435 |
|
Provision (benefit) for income
taxes |
|
(101 |
) |
|
|
501 |
|
|
|
(92 |
) |
|
|
2,188 |
|
Net income (loss) |
|
(6,415 |
) |
|
|
6,730 |
|
|
|
(15,434 |
) |
|
|
17,247 |
|
Less: Net (income) loss attributable to noncontrolling interests
and redeemable noncontrolling interests |
|
592 |
|
|
|
(971 |
) |
|
|
1,174 |
|
|
|
(2,777 |
) |
Net income (loss) attributable
to AXT, Inc. |
$ |
(5,823 |
) |
|
$ |
5,759 |
|
|
$ |
(14,260 |
) |
|
$ |
14,470 |
|
Net income (loss) attributable
to AXT, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.14 |
) |
|
$ |
0.14 |
|
|
$ |
(0.34 |
) |
|
$ |
0.34 |
|
Diluted |
$ |
(0.14 |
) |
|
$ |
0.13 |
|
|
$ |
(0.34 |
) |
|
$ |
0.34 |
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
42,638 |
|
|
|
42,163 |
|
|
|
42,574 |
|
|
|
42,011 |
|
Diluted |
|
42,638 |
|
|
|
42,982 |
|
|
|
42,574 |
|
|
|
42,718 |
|
AXT, INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited, in thousands) |
|
|
September 30, |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
28,522 |
|
|
$ |
34,948 |
|
Restricted cash |
|
10,778 |
|
|
|
6,400 |
|
Short-term investments |
|
4,270 |
|
|
|
9,339 |
|
Accounts receivable, net |
|
18,883 |
|
|
|
29,252 |
|
Inventories |
|
86,383 |
|
|
|
89,629 |
|
Prepaid expenses and other current assets |
|
11,474 |
|
|
|
13,977 |
|
Total current assets |
|
160,310 |
|
|
|
183,545 |
|
Long-term investments |
|
— |
|
|
|
2,118 |
|
Property, plant and equipment,
net |
|
158,773 |
|
|
|
161,017 |
|
Operating lease right-of-use
assets |
|
2,878 |
|
|
|
1,761 |
|
Other assets |
|
20,229 |
|
|
|
21,631 |
|
Total assets |
$ |
342,190 |
|
|
$ |
370,072 |
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
6,369 |
|
|
$ |
10,084 |
|
Accrued liabilities |
|
15,520 |
|
|
|
18,164 |
|
Bank loans |
|
45,776 |
|
|
|
47,078 |
|
Total current liabilities |
|
67,665 |
|
|
|
75,326 |
|
Noncurrent operating lease
liabilities |
|
2,437 |
|
|
|
1,322 |
|
Other long-term
liabilities |
|
4,007 |
|
|
|
3,678 |
|
Total liabilities |
|
74,109 |
|
|
|
80,326 |
|
|
|
|
|
|
|
Redeemable noncontrolling
interests |
|
40,634 |
|
|
|
44,846 |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
Preferred stock |
|
3,532 |
|
|
|
3,532 |
|
Common stock |
|
44 |
|
|
|
44 |
|
Additional paid-in capital |
|
237,653 |
|
|
|
235,308 |
|
Accumulated deficit |
|
(28,419 |
) |
|
|
(14,159 |
) |
Accumulated other comprehensive loss |
|
(8,581 |
) |
|
|
(3,118 |
) |
Total AXT, Inc. stockholders’ equity |
|
204,229 |
|
|
|
221,607 |
|
Noncontrolling interests |
|
23,218 |
|
|
|
23,293 |
|
Total stockholders’ equity |
|
227,447 |
|
|
|
244,900 |
|
Total liabilities, redeemable noncontrolling interests and
stockholders’ equity |
$ |
342,190 |
|
|
$ |
370,072 |
|
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, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP gross profit |
$ |
1,866 |
|
|
$ |
14,782 |
|
|
$ |
8,691 |
|
|
$ |
43,525 |
|
Stock-based compensation
expense |
|
102 |
|
|
|
51 |
|
|
|
310 |
|
|
|
277 |
|
Non-GAAP gross profit |
$ |
1,968 |
|
|
$ |
14,833 |
|
|
$ |
9,001 |
|
|
$ |
43,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses |
$ |
8,593 |
|
|
$ |
10,215 |
|
|
$ |
26,700 |
|
|
$ |
29,970 |
|
Stock-based compensation
expense |
|
789 |
|
|
|
985 |
|
|
|
2,408 |
|
|
|
2,981 |
|
Non-GAAP operating
expenses |
$ |
7,804 |
|
|
$ |
9,230 |
|
|
$ |
24,292 |
|
|
$ |
26,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income (loss) from
operations |
$ |
(6,727 |
) |
|
$ |
4,567 |
|
|
$ |
(18,009 |
) |
|
$ |
13,555 |
|
Stock-based compensation
expense |
|
891 |
|
|
|
1,036 |
|
|
|
2,718 |
|
|
|
3,258 |
|
Non-GAAP income (loss) from
operations |
$ |
(5,836 |
) |
|
$ |
5,603 |
|
|
$ |
(15,291 |
) |
|
$ |
16,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) |
$ |
(5,823 |
) |
|
$ |
5,759 |
|
|
$ |
(14,260 |
) |
|
$ |
14,470 |
|
Stock-based compensation
expense |
|
891 |
|
|
|
1,036 |
|
|
|
2,718 |
|
|
|
3,258 |
|
Non-GAAP net income
(loss) |
$ |
(4,932 |
) |
|
$ |
6,795 |
|
|
$ |
(11,542 |
) |
|
$ |
17,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) per
diluted share |
$ |
(0.14 |
) |
|
$ |
0.13 |
|
|
$ |
(0.34 |
) |
|
$ |
0.34 |
|
Stock-based compensation
expense per diluted share |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.06 |
|
|
$ |
0.08 |
|
Non-GAAP net income (loss) per
diluted share |
$ |
(0.12 |
) |
|
$ |
0.16 |
|
|
$ |
(0.27 |
) |
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute diluted
net income per share |
|
42,638 |
|
|
|
42,982 |
|
|
|
42,574 |
|
|
|
42,718 |
|
Contacts: |
|
|
Gary Fischer |
|
Chief Financial Officer |
|
(510) 438-4700 |
|
|
|
Leslie Green |
|
Green Communications Consulting, LLC |
|
(650) 312-9060 |
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