AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound
semiconductor wafer substrates, today reported financial results
for the third quarter, ended September 30, 2022.
Management Qualitative
Comments
“Although revenue decreased quarter over
quarter, EPS remains solid. We have confidence in the fundamental
market trends that drive our revenue, customer, and application
adoption.” said Morris Young, chief executive officer. “Our Q3
results demonstrate several key factors: First, indium phosphide
applications are expanding and indium phosphide is becoming an
increasingly strategic material across the landscape of technology.
Despite the overall setback, our indium phosphide revenue grew 12
percent over Q2, setting a new high for quarterly revenue, and grew
48 percent over the same period in 2021. Second, AXT has made
meaningful progress in driving our gross margin performance making
the revenue more profitable and contributing to EPS strength. And
third, with the strong ramp of our new consumer applications, we
continue to demonstrate our success in supporting the requirements
of some of the most discerning Tier-1 companies in the world today.
These factors illustrate how we have evolved as a company, and
demonstrate our readiness for continued growth and market
leadership.”
Third Quarter 2022
Results
In order to provide better clarity on its
operational and financial results, AXT began reporting its
financial results on both a GAAP and non-GAAP basis in the third
quarter of 2021. Non-GAAP results exclude stock-based compensation.
Investors can find GAAP to non-GAAP reconciliation tables in the
financial statements in this earnings release.
- Revenue for the third quarter of
2022 was $35.2 million, compared with $39.5 million for the second
quarter of 2022 and $34.6 million for the third quarter of
2021.
- GAAP gross margin was 42.0 percent
of revenue for the third quarter of 2022, compared with 39.1
percent of revenue for the second quarter of 2022 and 33.3 percent
for the third quarter of 2021.
- Non-GAAP gross margin was 42.2
percent of revenue for the third quarter of 2022, compared with
39.4 percent of revenue for the second quarter of 2022 and 33.8
percent for the third quarter of 2021.
- GAAP operating expenses were $10.2
million for the third quarter of 2022, compared with $10.1 million
for the second quarter of 2022 and $9.1 million for the third
quarter of 2021.
- Non-GAAP operating expenses were
$9.2 million for the third quarter of 2022, compared with $9.1
million for the second quarter of 2022 and $7.7 million for the
third quarter of 2021.
- GAAP operating profit for the third
quarter of 2022 was $4.6 million, compared with $5.3 million for
the second quarter of 2022 and $2.4 million for the third quarter
of 2021.
- Non-GAAP operating profit for the
third quarter of 2022 was $5.6 million, compared with $6.4 million
for the second quarter of 2022 and $4.0 million for the third
quarter of 2021.
- Non-operating income and expense,
taxes and minority interest for the third quarter of 2022 was a
gain of $1.2 million, compared with a gain of $0.3 million in the
second quarter of 2022 and a gain of $1.4 million for the third
quarter of 2021.
- GAAP net income, after minority
interests, for the third quarter of 2022 was $5.8 million, or $0.13
per share, compared with net income of $5.5 million or $0.13 per
share for the second quarter of 2022 and net income of $3.8 million
or $0.09 per share for the third quarter of 2021.
- Non-GAAP net income for the third
quarter of 2022 was $6.8 million, or $0.16 per share, compared with
net income of $6.7 million or $0.16 per share for the second
quarter of 2022 and net income of $5.4 million or $0.13 per share
for the third quarter of 2021.
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 as early as Q4
2022. 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 on October 27, 2022 at 1:30 p.m. PT. To
access the call by phone, please go to this link to register and
you will be provided with dial in details:
https://register.vevent.com/register/BIdbf7aee0a4da485ab0623751b90236cf.
A webcast link for the call will also be available on the investor
relations page at www.axt.com. 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 and includes 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.
Note Regarding Use of Non-GAAP Financial
Measures
As discussed above, the company provides certain
non-GAAP financial measures that exclude stock-based compensation
in addition to, and not as a substitute for, or because it believes
that such information is superior to, financial measures calculated
in accordance with GAAP. The company believes that non-GAAP
financial measures, when taken collectively, may be helpful to
investors because they provide consistency and comparability with
past financial performance and provide better comparability with
our peer companies, many of which also use similar non-GAAP
financial measures. Further, the company believes that these
non-GAAP financial measures offer an important analytical tool to
help investors understand the company’s core operating results and
trends. In addition, management uses non-GAAP financial measures to
compare the company’s performance relative to forecasts and
strategic plans and to benchmark its performance externally against
peer companies. However, non-GAAP financial information is
presented for supplemental informational purposes only, has
limitations as an analytical tool and should not be considered in
isolation or as a substitute for financial information presented in
accordance with GAAP. In addition, other companies may calculate
similarly-titled non-GAAP financial measures differently or may use
other measures to evaluate their performance, all of which could
reduce the usefulness of the company’s non-GAAP financial measures
as tools for comparison. The company encourages investors to
carefully consider its results under GAAP, as well as its
supplemental non‐GAAP information and the reconciliation between
these presentations, to more fully understand its business. A
reconciliation of our GAAP consolidated financial statements to our
non-GAAP consolidated financial statements is provided below.
Forward-Looking Statements
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 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.
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, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
35,183 |
|
|
$ |
34,576 |
|
|
$ |
114,323 |
|
|
$ |
99,661 |
|
|
Cost of revenue |
|
|
20,401 |
|
|
|
23,075 |
|
|
|
70,798 |
|
|
|
64,386 |
|
|
Gross profit |
|
|
14,782 |
|
|
|
11,501 |
|
|
|
43,525 |
|
|
|
35,275 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
6,576 |
|
|
|
6,476 |
|
|
|
19,719 |
|
|
|
17,841 |
|
|
Research and development |
|
|
3,639 |
|
|
|
2,629 |
|
|
|
10,251 |
|
|
|
7,571 |
|
|
Total operating expenses |
|
|
10,215 |
|
|
|
9,105 |
|
|
|
29,970 |
|
|
|
25,412 |
|
|
Income from operations |
|
|
4,567 |
|
|
|
2,396 |
|
|
|
13,555 |
|
|
|
9,863 |
|
|
Interest expense, net |
|
|
(299 |
) |
|
|
(44 |
) |
|
|
(670 |
) |
|
|
(55 |
) |
|
Equity in income of
unconsolidated joint ventures |
|
|
2,006 |
|
|
|
1,061 |
|
|
|
5,308 |
|
|
|
3,674 |
|
|
Other income, net |
|
|
957 |
|
|
|
948 |
|
|
|
1,242 |
|
|
|
898 |
|
|
Income before provision for
income taxes |
|
|
7,231 |
|
|
|
4,361 |
|
|
|
19,435 |
|
|
|
14,380 |
|
|
Provision for (benefit from)
income taxes |
|
|
501 |
|
|
|
(135 |
) |
|
|
2,188 |
|
|
|
1,504 |
|
|
Net income |
|
|
6,730 |
|
|
|
4,496 |
|
|
|
17,247 |
|
|
|
12,876 |
|
|
Less: Net income attributable to noncontrolling interests and
redeemable noncontrolling interests |
|
|
(971 |
) |
|
|
(696 |
) |
|
|
(2,777 |
) |
|
|
(1,266 |
) |
|
Net income attributable to
AXT, Inc. |
|
$ |
5,759 |
|
|
$ |
3,800 |
|
|
$ |
14,470 |
|
|
$ |
11,610 |
|
|
Net income attributable to
AXT, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.34 |
|
|
$ |
0.28 |
|
|
Diluted |
|
$ |
0.13 |
|
|
$ |
0.09 |
|
|
$ |
0.34 |
|
|
$ |
0.27 |
|
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
42,163 |
|
|
|
41,460 |
|
|
|
42,011 |
|
|
|
41,237 |
|
|
Diluted |
|
|
42,982 |
|
|
|
42,678 |
|
|
|
42,718 |
|
|
|
42,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXT, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(Unaudited, in
thousands)
|
|
September 30, |
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
32,918 |
|
|
$ |
36,763 |
|
|
Restricted Cash |
|
|
3,900 |
|
|
|
— |
|
|
Short-term investments |
|
|
7,207 |
|
|
|
5,419 |
|
|
Accounts receivable, net |
|
|
38,131 |
|
|
|
34,839 |
|
|
Inventories |
|
|
88,496 |
|
|
|
65,912 |
|
|
Prepaid expenses and other current assets |
|
|
10,804 |
|
|
|
17,252 |
|
|
Total current assets |
|
|
181,456 |
|
|
|
160,185 |
|
|
Long-term investments |
|
|
4,196 |
|
|
|
9,576 |
|
|
Property, plant and equipment,
net |
|
|
152,727 |
|
|
|
142,415 |
|
|
Operating lease right-of-use
assets |
|
|
1,820 |
|
|
|
2,324 |
|
|
Other assets |
|
|
21,577 |
|
|
|
17,941 |
|
|
Total assets |
|
$ |
361,776 |
|
|
$ |
332,441 |
|
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
13,354 |
|
|
$ |
16,649 |
|
|
Accrued liabilities |
|
|
16,555 |
|
|
|
17,057 |
|
|
Short-term loan, related party |
|
|
— |
|
|
|
1,887 |
|
|
Bank loan |
|
|
42,998 |
|
|
|
12,229 |
|
|
Total current liabilities |
|
|
72,907 |
|
|
|
47,822 |
|
|
Noncurrent operating lease
liabilities |
|
|
1,384 |
|
|
|
1,935 |
|
|
Other long-term
liabilities |
|
|
2,128 |
|
|
|
2,453 |
|
|
Total liabilities |
|
|
76,419 |
|
|
|
52,210 |
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling
interests |
|
|
45,198 |
|
|
|
50,385 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Preferred stock |
|
|
3,532 |
|
|
|
3,532 |
|
|
Common stock |
|
|
43 |
|
|
|
43 |
|
|
Additional paid-in capital |
|
|
234,532 |
|
|
|
231,622 |
|
|
Accumulated deficit |
|
|
(15,500 |
) |
|
|
(29,970 |
) |
|
Accumulated other comprehensive income |
|
|
(5,457 |
) |
|
|
6,302 |
|
|
Total AXT, Inc. stockholders’ equity |
|
|
217,150 |
|
|
|
211,529 |
|
|
Noncontrolling interests |
|
|
23,009 |
|
|
|
18,317 |
|
|
Total stockholders’ equity |
|
|
240,159 |
|
|
|
229,846 |
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders’ equity |
|
$ |
361,776 |
|
|
$ |
332,441 |
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
GAAP gross profit |
|
$ |
14,782 |
|
$ |
11,501 |
|
$ |
43,525 |
|
$ |
35,275 |
Stock compensation
expense |
|
|
51 |
|
|
188 |
|
|
277 |
|
|
263 |
Non-GAAP gross profit |
|
$ |
14,833 |
|
$ |
11,689 |
|
$ |
43,802 |
|
$ |
35,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses |
|
$ |
10,215 |
|
$ |
9,105 |
|
$ |
29,970 |
|
$ |
25,412 |
Stock compensation
expense |
|
|
985 |
|
|
1,451 |
|
|
2,981 |
|
|
3,168 |
Non-GAAP operating
expenses |
|
$ |
9,230 |
|
$ |
7,654 |
|
$ |
26,989 |
|
$ |
22,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income from
operations |
|
$ |
4,567 |
|
$ |
2,396 |
|
$ |
13,555 |
|
$ |
9,863 |
Stock compensation
expense |
|
|
1,036 |
|
|
1,639 |
|
|
3,258 |
|
|
3,431 |
Non-GAAP income from
operations |
|
$ |
5,603 |
|
$ |
4,035 |
|
$ |
16,813 |
|
$ |
13,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income |
|
$ |
5,759 |
|
$ |
3,800 |
|
$ |
14,470 |
|
$ |
11,610 |
Stock compensation
expense |
|
|
1,036 |
|
|
1,639 |
|
|
3,258 |
|
|
3,431 |
Non-GAAP net income |
|
$ |
6,795 |
|
$ |
5,439 |
|
$ |
17,728 |
|
$ |
15,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income per diluted
share |
|
$ |
0.13 |
|
$ |
0.09 |
|
$ |
0.34 |
|
$ |
0.27 |
Stock compensation expense per
diluted share |
|
$ |
0.02 |
|
$ |
0.04 |
|
$ |
0.08 |
|
$ |
0.08 |
Non-GAAP net income per
diluted share |
|
$ |
0.16 |
|
$ |
0.13 |
|
$ |
0.41 |
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute diluted
net income per share |
|
|
42,982 |
|
|
42,678 |
|
|
42,718 |
|
|
42,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:Gary FischerChief Financial Officer(510)
438-4700
Leslie
Green Green
Communications Consulting, LLC(650) 312-9060
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