AXT, Inc. Announces Third Quarter 2017 Financial Results
October 25 2017 - 4:10PM
AXT, Inc. (Nasdaq:AXTI), a leading manufacturer of compound
semiconductor substrates, today reported financial results for the
third quarter, ended Sept. 30, 2017.
Third Quarter 2017 Results
Revenue for the third quarter of 2017 was $28.2
million, compared with $23.6 million in the second quarter of 2017
and $21.9 million for the third quarter of 2016. Year over
year, this is a 29 percent increase in quarterly revenue.
Gross margin was 39.5 percent for the third
quarter of 2017, compared with 30.8 percent in the second quarter
of 2017 and 34.6 percent for the third quarter of 2016. The
improvement in gross margin in the third quarter of 2017 was
largely the result of favorable product mix, higher sales volume,
and greater manufacturing efficiency.
Operating expenses were $5.9 million in the
third quarter of 2017, including one-time expenses of approximately
$500,000. By comparison, operating expenses in the second quarter
of 2017 were $5.0 million and $4.9 million in the third quarter of
2016.
Operating income was $5.2 million for the third
quarter of 2017, compared with $2.3 million in the second quarter
of 2017 and $2.7 million for the third quarter of 2016. Year
over year, this is a 94 percent increase in quarterly operating
profit.
Interest and other, net was a loss of $0.5
million for the third quarter of 2017, compared with a loss of $0.2
million in the second quarter of 2017 and a loss of $0.3 million
for the third quarter of 2016. Interest and other, net for
the third quarter of 2017 included a foreign exchange loss of $0.3
million and a net loss of $0.3 million from the seven partially
owned companies in the company’s supply chain accounted for under
the equity method.
Income tax expense in the third quarter of 2017 was $0.2 million
compared with $0.3 million in the second quarter of 2017 and $0.2
million for the third quarter of 2016.
Net income was $4.4 million, or $0.11 per
diluted share, in the third quarter of 2017 compared with a net
income of $1.9 million, or $0.05 per diluted share, in the second
quarter of 2017 and a net profit of $2.2 million or $0.07 per
diluted share for the third quarter of 2016. Year over year
this is a 98 percent increase in quarterly net profit and a 57
percent increase in earnings per share.
Management Qualitative
Comments
“The third quarter was another solid quarter in
which we posted revenue growth in all of our product categories,
including record revenue in indium phosphide,” said Morris Young,
chief executive officer. “We also achieved strong gross margin
improvement and outperformed our profitability expectations for the
quarter. These results demonstrate that our products are well
positioned in strategic, growing markets, and that we are seeing
the benefit of the operational efficiencies and improvements that
we began successfully implementing more than a year ago. In
addition, during the quarter we finalized the purchase of our new
facility in the city of Dingxing, China. We are on schedule
with our relocation plans and are pleased with our progress to
date.”
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 (844) 892-6598 (passcode 1143736). The call will
also be simulcast on the Internet at www.axt.com. Replays will be
available at (855) 859-2056 (passcode 1143736) until Oct. 31, 2017.
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 designs, develops, manufactures and
distributes high-performance compound and single element
semiconductor substrates comprising indium phosphide (InP), gallium
arsenide (GaAs) and germanium (Ge) through its manufacturing
facilities in Beijing, China. In addition, AXT maintains its
sales, administration and customer service functions at its
headquarters in Fremont, California. The company’s substrate
products are used primarily in lighting display applications,
wireless communications, fiber optic communications and solar cell
applications. Its vertical gradient freeze (VGF) technique for
manufacturing semiconductor substrates provides significant
benefits over other methods and enabled AXT to become a leading
manufacturer of such substrates. AXT has manufacturing facilities
in China and invests in joint ventures in China producing raw
materials. 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 market demand for
our products, our growth prospects and opportunities for continued
business expansion, our market opportunity, our schedule and
timelines regarding our relocation plans and our expectations with
respect to our business prospects. 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: overall conditions in the
markets in which the company competes; global financial conditions
and uncertainties; policies and regulations in China; market
acceptance and demand for the company’s products; the impact of
factory closures or other events causing delays by our customers on
the timing of sales of our products; our ability to control costs,
our ability to utilize our manufacturing capacity; product yields
and their impact on gross margins; 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, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
28,168 |
|
|
$ |
21,872 |
|
|
$ |
72,341 |
|
|
$ |
61,080 |
|
|
Cost of revenue |
|
|
17,035 |
|
|
|
14,294 |
|
|
|
47,664 |
|
|
|
42,222 |
|
|
Gross profit |
|
|
11,133 |
|
|
|
7,578 |
|
|
|
24,677 |
|
|
|
18,858 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
4,484 |
|
|
|
3,313 |
|
|
|
12,219 |
|
|
|
10,106 |
|
|
Research
and development |
|
|
1,410 |
|
|
|
1,566 |
|
|
|
3,553 |
|
|
|
4,419 |
|
|
Restructuring charge |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
226 |
|
|
Total
operating expenses |
|
|
5,894 |
|
|
|
4,879 |
|
|
|
15,772 |
|
|
|
14,751 |
|
|
Income from
operations |
|
|
5,239 |
|
|
|
2,699 |
|
|
|
8,905 |
|
|
|
4,107 |
|
|
Interest income,
net |
|
|
122 |
|
|
|
105 |
|
|
|
334 |
|
|
|
303 |
|
|
Equity in loss of
unconsolidated joint ventures |
|
|
(266 |
) |
|
|
(581 |
) |
|
|
(1,387 |
) |
|
|
(1,437 |
) |
|
Other (expense) income,
net |
|
|
(349 |
) |
|
|
164 |
|
|
|
(403 |
) |
|
|
682 |
|
|
Income before provision
for income taxes |
|
|
4,746 |
|
|
|
2,387 |
|
|
|
7,449 |
|
|
|
3,655 |
|
|
Provision for income
taxes |
|
|
181 |
|
|
|
176 |
|
|
|
661 |
|
|
|
713 |
|
|
Net income |
|
|
4,565 |
|
|
|
2,211 |
|
|
|
6,788 |
|
|
|
2,942 |
|
|
Less: Net
(income) loss attributable to noncontrolling interests |
|
|
(146 |
) |
|
|
18 |
|
|
|
226 |
|
|
|
480 |
|
|
Net income attributable
to AXT, Inc. |
|
$ |
4,419 |
|
|
$ |
2,229 |
|
|
$ |
7,014 |
|
|
$ |
3,422 |
|
|
Net income attributable
to AXT, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
0.07 |
|
|
$ |
0.19 |
|
|
$ |
0.10 |
|
|
Diluted |
|
$ |
0.11 |
|
|
$ |
0.07 |
|
|
$ |
0.18 |
|
|
$ |
0.10 |
|
|
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
38,499 |
|
|
|
32,110 |
|
|
|
36,999 |
|
|
|
32,043 |
|
|
Diluted |
|
|
40,095 |
|
|
|
33,138 |
|
|
|
38,469 |
|
|
|
32,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXT, INC. |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(Unaudited, in thousands) |
|
|
|
September 30, |
|
December 31, |
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
48,078 |
|
|
$ |
36,152 |
|
|
Short-term investments |
|
|
20,524 |
|
|
|
11,415 |
|
|
Accounts
receivable, net |
|
|
20,877 |
|
|
|
14,453 |
|
|
Inventories |
|
|
40,768 |
|
|
|
40,152 |
|
|
Related
party notes receivable – current |
|
|
57 |
|
|
|
— |
|
|
Prepaid
expenses and other current assets |
|
|
5,682 |
|
|
|
5,114 |
|
|
Total
current assets |
|
|
135,986 |
|
|
|
107,286 |
|
|
Long-term
investments |
|
|
9,685 |
|
|
|
6,156 |
|
|
Property, plant and
equipment, net |
|
|
42,255 |
|
|
|
27,805 |
|
|
Related party notes
receivable – long-term |
|
|
— |
|
|
|
157 |
|
|
Other assets |
|
|
11,696 |
|
|
|
12,842 |
|
|
Total
assets |
|
$ |
199,622 |
|
|
$ |
154,246 |
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
9,499 |
|
|
$ |
6,691 |
|
|
Accrued
liabilities |
|
|
9,284 |
|
|
|
9,260 |
|
|
Total
current liabilities |
|
|
18,783 |
|
|
|
15,951 |
|
|
Long-term portion of
royalty payments |
|
|
144 |
|
|
|
575 |
|
|
Other long-term
liabilities |
|
|
278 |
|
|
|
330 |
|
|
Total
liabilities |
|
|
19,205 |
|
|
|
16,856 |
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
Preferred
stock |
|
|
3,532 |
|
|
|
3,532 |
|
|
Common
stock |
|
|
39 |
|
|
|
33 |
|
|
Additional paid-in-capital |
|
|
228,516 |
|
|
|
194,177 |
|
|
Accumulated deficit |
|
|
(57,971 |
) |
|
|
(64,985 |
) |
|
Accumulated other comprehensive income |
|
|
2,275 |
|
|
|
253 |
|
|
Total
AXT, Inc. stockholders’ equity |
|
|
176,391 |
|
|
|
133,010 |
|
|
Noncontrolling interests |
|
|
4,026 |
|
|
|
4,380 |
|
|
Total
stockholders’ equity |
|
|
180,417 |
|
|
|
137,390 |
|
|
Total
liabilities and stockholders’ equity |
|
$ |
199,622 |
|
|
$ |
154,246 |
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:
Gary Fischer
Chief Financial Officer
(510) 683-5900
Leslie Green
Green Communications Consulting, LLC
(650) 312-9060
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