AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound
semiconductor substrates, today reported financial results for the
fourth quarter and fiscal year, ended December 31, 2018.
Fourth Quarter 2018 Results
Revenue for the fourth quarter of 2018 was $22.2
million, compared with $28.6 million in the third quarter of 2018
and $26.3 million for the fourth quarter of 2017.
Gross margin was 26.3 percent of revenue for the
fourth quarter of 2018, compared with 37.1 percent of revenue in
the third quarter of 2018 and 37.2 percent for the fourth quarter
of 2017.
Operating expenses were $6.5 million in the
fourth quarter of 2018, compared with $6.3 million in the third
quarter of 2018 and $6.1 million for the fourth quarter of
2017.
Operating loss for the fourth quarter of 2018
was $0.6 million compared with operating profit of $4.3 million in
the third quarter of 2018 and $3.7 million for the fourth quarter
of 2017.
Interest and other, net was a loss of $0.4
million for the fourth quarter of 2018, compared with a gain of
$0.2 million in the third quarter of 2018 and a loss of $0.3
million for the fourth quarter of 2017. Interest and other,
net for the fourth quarter of 2018 included interest earnings of
$0.1 million, a foreign exchange gain of $0.4 million, other income
of $0.1 million and a net loss of $1.0 million from the seven
partially owned companies in the company’s supply chain accounted
for under the equity method.
Income tax expense in the fourth quarter of 2018 was favorably
adjusted for a gain of $0.2 million compared with a charge of $0.4
million in the third quarter of 2018 and $0.1 million for the
fourth quarter of 2017.
Net loss in the fourth quarter of 2018 was $1.1
million, or $0.03 per share, compared with a net income of $3.9
million or $0.10 per diluted share in the third quarter of 2018 and
$3.1 million or $0.08 per diluted share for the fourth quarter of
2017.
Fiscal Year 2018 Results (January 1 to
December 31)
Revenue for fiscal year 2018 was $102.4 million,
compared with $98.7 million in fiscal year 2017.
Gross margin for fiscal year 2018 was 36.2
percent of revenue, compared with 34.9 percent of revenue in fiscal
year 2017.
Operating expenses for fiscal year 2018 were
$24.9 million, compared with $21.8 million in fiscal year 2017.
Net interest and other income for fiscal year
2018 was a loss of $0.2 million, compared with a loss of $1.8
million in fiscal year 2017.
Income tax expense for fiscal 2018 was $0.9
million compared with $0.8 million in fiscal year 2017.
Net income in fiscal year 2018 was $9.7 million,
or $0.24 per diluted share, compared with a net income of $10.1
million, or $0.26 per diluted share, in fiscal year 2017.
Management Qualitative
Comments
“2018 was a mixed year for AXT,” said Morris Young, chief
executive officer. “Global economic conditions were made more
difficult by the uncertainty of trade tensions, and spending in
certain end markets took a pause, impacting our expected growth and
profitability for the year. Despite these challenges, our
indium phosphide revenue set another record in 2018, and we saw
growth in a host of new gallium arsenide applications that further
suggest this material is entering its next period of
expansion. In 2018, AXT achieved every major milestone
established in the relocation of our gallium arsenide and germanium
product lines. Although Q1 2019 is challenging, as we look
ahead we are encouraged that the tone of customer comments includes
an expectation for market recoveries later this year. We believe
our competitive position remains strong, and that this will enable
us to return to growth when the markets recover. In the
meantime, we intend to continue the relocation, strengthen our
business and drive greater efficiencies in our model.”
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 9999917). The call will also be simulcast on the
Internet at www.axt.com. Replays will be available at (855)
859-2056 (passcode 9999917) until February 26, 2019. 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. AXT’s worldwide headquarters
are in Fremont, California where the company maintains its sales,
administration and customer service functions. 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)
process technology 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, as part of its
supply chain strategy, has partial ownership in ten companies 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 relocation and our
expectations with respect to our business prospects and financial
results. 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 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; possible factory
shutdowns as a result of air pollution in China; 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 |
|
Year
Ended |
|
|
December
31, |
|
December
31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
22,232 |
|
|
$ |
26,332 |
|
|
$ |
102,397 |
|
|
$ |
98,673 |
|
Cost of revenue |
|
|
16,382 |
|
|
|
16,534 |
|
|
|
65,350 |
|
|
|
64,198 |
|
Gross profit |
|
|
5,850 |
|
|
|
9,798 |
|
|
|
37,047 |
|
|
|
34,475 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
5,179 |
|
|
|
4,790 |
|
|
|
19,003 |
|
|
|
17,009 |
|
Research
and development |
|
|
1,309 |
|
|
|
1,274 |
|
|
|
5,897 |
|
|
|
4,827 |
|
Total
operating expenses |
|
|
6,488 |
|
|
|
6,064 |
|
|
|
24,900 |
|
|
|
21,836 |
|
Income (loss) from
operations |
|
|
(638 |
) |
|
|
3,734 |
|
|
|
12,147 |
|
|
|
12,639 |
|
Interest income,
net |
|
|
114 |
|
|
|
127 |
|
|
|
528 |
|
|
|
461 |
|
Equity in loss of
unconsolidated joint ventures |
|
|
(1,059 |
) |
|
|
(307 |
) |
|
|
(1,080 |
) |
|
|
(1,694 |
) |
Other income (expense),
net |
|
|
531 |
|
|
|
(150 |
) |
|
|
352 |
|
|
|
(553 |
) |
Income (loss) before
provision for income taxes |
|
|
(1,052 |
) |
|
|
3,404 |
|
|
|
11,947 |
|
|
|
10,853 |
|
Provision for (Benefit
from) income taxes |
|
|
(173 |
) |
|
|
131 |
|
|
|
938 |
|
|
|
792 |
|
Net income (loss) |
|
|
(879 |
) |
|
|
3,273 |
|
|
|
11,009 |
|
|
|
10,061 |
|
Less: Net
(income) loss attributable to noncontrolling interests |
|
|
(182 |
) |
|
|
(139 |
) |
|
|
(1,355 |
) |
|
|
87 |
|
Net income (loss)
attributable to AXT, Inc. |
|
$ |
(1,061 |
) |
|
$ |
3,134 |
|
|
$ |
9,654 |
|
|
$ |
10,148 |
|
Net income (loss)
attributable to AXT, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03 |
) |
|
$ |
0.08 |
|
|
$ |
0.24 |
|
|
$ |
0.27 |
|
Diluted |
|
$ |
(0.03 |
) |
|
$ |
0.08 |
|
|
$ |
0.24 |
|
|
$ |
0.26 |
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,197 |
|
|
|
38,766 |
|
|
|
39,049 |
|
|
|
37,444 |
|
Diluted |
|
|
39,197 |
|
|
|
40,448 |
|
|
|
40,265 |
|
|
|
38,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXT, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(Unaudited, in
thousands)
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
16,526 |
|
|
$ |
44,352 |
|
Short-term investments |
|
|
22,129 |
|
|
|
20,032 |
|
Accounts
receivable, net |
|
|
19,586 |
|
|
|
22,778 |
|
Inventories |
|
|
58,571 |
|
|
|
45,840 |
|
Prepaid
expenses and other current assets |
|
|
11,728 |
|
|
|
7,519 |
|
Total
current assets |
|
|
128,540 |
|
|
|
140,521 |
|
Long-term
investments |
|
|
717 |
|
|
|
12,576 |
|
Property, plant and
equipment, net |
|
|
82,280 |
|
|
|
46,530 |
|
Other assets |
|
|
11,987 |
|
|
|
11,573 |
|
Total
assets |
|
$ |
223,524 |
|
|
$ |
211,200 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
13,338 |
|
|
$ |
11,445 |
|
Accrued
liabilities |
|
|
15,371 |
|
|
|
11,149 |
|
Total
current liabilities |
|
|
28,709 |
|
|
|
22,594 |
|
Other long-term
liabilities |
|
|
283 |
|
|
|
289 |
|
Total
liabilities |
|
|
28,992 |
|
|
|
22,883 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
Preferred
stock |
|
|
3,532 |
|
|
|
3,532 |
|
Common
stock |
|
|
39 |
|
|
|
39 |
|
Additional paid-in capital |
|
|
234,419 |
|
|
|
231,679 |
|
Accumulated deficit |
|
|
(45,183 |
) |
|
|
(54,837 |
) |
Accumulated other comprehensive income (loss) |
|
|
(1,972 |
) |
|
|
3,407 |
|
Total
AXT, Inc. stockholders’ equity |
|
|
190,835 |
|
|
|
183,820 |
|
Noncontrolling interests |
|
|
3,697 |
|
|
|
4,497 |
|
Total
stockholders’ equity |
|
|
194,532 |
|
|
|
188,317 |
|
Total
liabilities and stockholders’ equity |
|
$ |
223,524 |
|
|
$ |
211,200 |
|
|
|
|
|
|
|
|
|
|
Contacts:
Gary
Fischer
Chief Financial
Officer
(510) 683-5900
Leslie
Green
Green Communications Consulting,
LLC
(650) 312-9060
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