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, 2019.
Fourth Quarter 2019 Results
Revenue for the fourth quarter of 2019 was $18.4
million, compared with $19.8 million in the third quarter of 2019
and $22.2 million for the fourth quarter of 2018.
Gross margin was 21.0 percent of revenue for the
fourth quarter of 2019, compared with 29.0 percent of revenue in
the third quarter of 2019 and 26.3 percent for the fourth quarter
of 2018. The decline in gross margin was driven by a decline in
manufacturing efficiencies and yields associated with two new
products for AXT: six-inch indium phosphide substrates and a new
six-inch germanium product configuration for a large customer.
These products address new market opportunities for AXT and the
company believes it will drive improvements in manufacturing yields
and efficiencies in the coming quarters. Additional items that
contributed to the sequential decline were lower gross margins on
consolidated raw material revenue and adjustments to inventory.
Operating expenses were $6.7 million in the
fourth quarter of 2019, compared with $6.2 million in the third
quarter of 2019 and $6.5 million for the fourth quarter of
2018.
Operating loss for the fourth quarter of 2019
was $2.8 million compared with operating loss of $0.5 million in
the third quarter of 2019 and $0.6 million for the fourth quarter
of 2018.
Interest and other, net was a gain of $0.8
million for the fourth quarter of 2019, compared with a de minimis
gain in the third quarter of 2019 and a loss of $0.4 million for
the fourth quarter of 2018. Interest and other, net for the
fourth quarter of 2019 included de minimis interest earnings, a
foreign exchange gain of $0.2 million, a net loss of $0.2 million
from the partially owned companies in the company’s supply chain
accounted for under the equity method, and other income of $0.8
million. Other income included provincial government agency awards
for relocation.
Benefit from income taxes in the fourth quarter of 2019 was $0.2
million compared with a de minimis charge in the third quarter of
2019 and a benefit of $0.2 million for the fourth quarter of
2018.
Net loss in the fourth quarter of 2019 was $2.0
million, or $0.05 per share, compared with a net loss of $0.9
million or $0.02 per share in the third quarter of 2019 and $1.1
million or $0.03 per share for the fourth quarter of 2018.
Fiscal Year 2019 Results (January 1 to
December 31)
Revenue for fiscal year 2019 was $83.3 million,
compared with $102.4 million in fiscal year 2018.
Gross margin for fiscal year 2019 was 29.8
percent of revenue, compared with 36.2 percent of revenue in fiscal
year 2018.
Operating expenses for fiscal year 2019 were
$25.1 million, compared with $24.9 million in fiscal year 2018.
Net interest and other income for fiscal year
2019 was a loss of $0.7 million, compared with a loss of $0.2
million in fiscal year 2018.
Income tax expense for fiscal 2019 was $0.6
million compared with $0.9 million in fiscal year 2018.
Net loss in fiscal year 2019 was $2.6 million,
or $0.07 per share, compared with a net income of $9.7 million, or
$0.24 per diluted share, in fiscal year 2018.
Management Qualitative
Comments
“Q4 capped off a challenging year in which we weathered one of
the most difficult demand environments in recent memory,” said
Morris Young, chief executive officer. “Overall, this had a
negative impact on key applications and certain customers within
AXT’s gallium arsenide and germanium businesses, making up the
majority of our year-over-year revenue decline. Despite these more
challenging conditions, our indium phosphide business exceeded our
expectations in Q4, and finished 2019 with modest growth over the
prior year.”
“As we move into 2020, AXT is poised for growth and improvement
in our financial results. Our indium phosphide business is healthy,
with exciting applications contributing today, and new ones on the
horizon. Our gallium arsenide and germanium businesses are also
well positioned to benefit from a recovery. We are pleased to
report that we expect to complete the qualification of our Dingxing
facility by major customers in Q1. We believe this will open the
door to incremental business opportunities from new and returning
customers.”
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 9179371). The call will also be simulcast on the
Internet at www.axt.com. Replays will be available at (855)
859-2056 (passcode 9179371) until February 25, 2020. 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
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 where the company maintains
its sales, administration and customer service
functions. 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; 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 |
|
Twelve Months Ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
18,410 |
|
|
$ |
22,232 |
|
|
$ |
83,256 |
|
|
$ |
102,397 |
|
|
Cost of revenue |
|
|
14,545 |
|
|
|
16,382 |
|
|
|
58,431 |
|
|
|
65,350 |
|
|
Gross profit |
|
|
3,865 |
|
|
|
5,850 |
|
|
|
24,825 |
|
|
|
37,047 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
5,058 |
|
|
|
5,179 |
|
|
|
19,305 |
|
|
|
19,003 |
|
|
Research and development |
|
|
1,607 |
|
|
|
1,309 |
|
|
|
5,834 |
|
|
|
5,897 |
|
|
Total operating expenses |
|
|
6,665 |
|
|
|
6,488 |
|
|
|
25,139 |
|
|
|
24,900 |
|
|
Income (loss) from
operations |
|
|
(2,800 |
) |
|
|
(638 |
) |
|
|
(314 |
) |
|
|
12,147 |
|
|
Interest income, net |
|
|
2 |
|
|
|
114 |
|
|
|
217 |
|
|
|
528 |
|
|
Equity in loss of
unconsolidated joint ventures |
|
|
(226 |
) |
|
|
(1,059 |
) |
|
|
(1,876 |
) |
|
|
(1,080 |
) |
|
Other income (expense),
net |
|
|
1,002 |
|
|
|
531 |
|
|
|
947 |
|
|
|
352 |
|
|
Income (loss) before provision
for (benefit from) income taxes |
|
|
(2,022 |
) |
|
|
(1,052 |
) |
|
|
(1,026 |
) |
|
|
11,947 |
|
|
Provision for (benefit from)
income taxes |
|
|
(214 |
) |
|
|
(173 |
) |
|
|
562 |
|
|
|
938 |
|
|
Net income (loss) |
|
|
(1,808 |
) |
|
|
(879 |
) |
|
|
(1,588 |
) |
|
|
11,009 |
|
|
Less: Net income attributable to noncontrolling interests |
|
|
(241 |
) |
|
|
(182 |
) |
|
|
(1,012 |
) |
|
|
(1,355 |
) |
|
Net income (loss) attributable
to AXT, Inc. |
|
$ |
(2,049 |
) |
|
$ |
(1,061 |
) |
|
$ |
(2,600 |
) |
|
$ |
9,654 |
|
|
Net income (loss) attributable
to AXT, Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.05 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.24 |
|
|
Diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.24 |
|
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,636 |
|
|
|
39,197 |
|
|
|
39,487 |
|
|
|
39,049 |
|
|
Diluted |
|
|
39,636 |
|
|
|
39,197 |
|
|
|
39,487 |
|
|
|
40,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXT, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(Unaudited, in
thousands)
|
|
December 31, |
|
December 31, |
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
26,892 |
|
|
$ |
16,526 |
|
|
Short-term investments |
|
|
9,427 |
|
|
|
22,129 |
|
|
Accounts receivable, net |
|
|
19,031 |
|
|
|
19,586 |
|
|
Inventories |
|
|
49,152 |
|
|
|
58,571 |
|
|
Prepaid expenses and other current assets |
|
|
8,703 |
|
|
|
11,728 |
|
|
Total current assets |
|
|
113,205 |
|
|
|
128,540 |
|
|
Long-term investments |
|
|
— |
|
|
|
717 |
|
|
Property, plant and equipment,
net |
|
|
97,403 |
|
|
|
82,280 |
|
|
Operating lease right-of-use
assets |
|
|
2,938 |
|
|
|
— |
|
|
Other assets |
|
|
9,803 |
|
|
|
11,987 |
|
|
Total assets |
|
$ |
223,349 |
|
|
$ |
223,524 |
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
10,098 |
|
|
$ |
13,338 |
|
|
Accrued liabilities |
|
|
11,681 |
|
|
|
15,371 |
|
|
Bank loan |
|
|
5,747 |
|
|
|
— |
|
|
Total current liabilities |
|
|
27,526 |
|
|
|
28,709 |
|
|
Noncurrent operating lease
liabilities |
|
|
2,695 |
|
|
|
— |
|
|
Other long-term
liabilities |
|
|
366 |
|
|
|
283 |
|
|
Total liabilities |
|
|
30,587 |
|
|
|
28,992 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Preferred stock |
|
|
3,532 |
|
|
|
3,532 |
|
|
Common stock |
|
|
41 |
|
|
|
40 |
|
|
Additional paid-in capital |
|
|
236,957 |
|
|
|
234,418 |
|
|
Accumulated deficit |
|
|
(47,783 |
) |
|
|
(45,183 |
) |
|
Accumulated other comprehensive loss |
|
|
(4,862 |
) |
|
|
(1,972 |
) |
|
Total AXT, Inc. stockholders’ equity |
|
|
187,885 |
|
|
|
190,835 |
|
|
Noncontrolling interests |
|
|
4,877 |
|
|
|
3,697 |
|
|
Total stockholders’ equity |
|
|
192,762 |
|
|
|
194,532 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
223,349 |
|
|
$ |
223,524 |
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:
Gary FischerChief Financial Officer(510)
438-4700
Leslie
Green
Green Communications Consulting, LLC(650) 312-9060
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