AXT, Inc. Announces Fourth Quarter and Fiscal Year 2017 Financial Results

FREMONT, Calif., Feb. 21, 2018 (GLOBE NEWSWIRE) -- AXT, Inc. (Nasdaq:AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter and fiscal Year 2017, ended December 31, 2017.

Fourth Quarter 2017 Results

Revenue for the fourth quarter of 2017 was $26.3 million, compared with $28.2 million in the third quarter of 2017 and $20.3 million for the fourth quarter of 2016. This is a 30% increase in quarterly revenue as compared to the fourth quarter of 2016.

Gross margin was 37.2 percent of revenue for the fourth quarter of 2017, compared with 39.5 percent of revenue in the third quarter of 2017 and 37.1 percent for the fourth quarter of 2016.

Operating expenses were $6.1 million in the fourth quarter of 2017, compared with $5.9 million in the third quarter of 2017 and $5.2 million for the fourth quarter of 2016.

Operating profit for the fourth quarter of 2017 was $3.7 million compared with operating profit of $5.2 million in the third quarter of 2017 and $2.3 million for the fourth quarter of 2016.

Interest and other, net was a loss of $0.3 million for the fourth quarter of 2017, compared with a loss of $0.5 million in the third quarter of 2017 and a loss of $0.3 million for the fourth quarter of 2016. Interest and other, net for the fourth quarter of 2017 included interest earnings of $0.1 million, a foreign exchange loss of $0.1 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 fourth quarter of 2017 was $0.1 million compared with $0.2 million in the third quarter of 2017 and $0.0 million for the fourth quarter of 2016.

Net income in the fourth quarter of 2017 was $3.1 million, or $0.08 per diluted share, compared with a net income of $4.4 million or $0.11 per diluted share in the third quarter of 2017 and $2.2 million or $0.06 per diluted share for the fourth quarter of 2016.

Fiscal Year 2017 Results (January 1 to December 31)

Revenue for fiscal year 2017 was $98.7 million, compared with $81.3 million in fiscal year 2016. This is a 21% increase in annual revenue as compared to fiscal year 2016.

Gross margin for fiscal year 2017 was 34.9 percent of revenue, compared with 32.4 percent of revenue in fiscal year 2016.

Operating expenses for fiscal year 2017 were $21.8 million, compared with $20.0 million in fiscal year 2016.

Net interest and other income for fiscal year 2017 was a loss of $1.8 million, compared with a loss of $0.7 million in fiscal year 2016.

Income tax expense for fiscal 2017 was $0.8 million compared with $0.7 million in fiscal year 2016.

Net income in fiscal year 2017 was $10.1 million, or $0.26 per diluted share, compared with a net income of $5.6 million, or $0.17 per diluted share, in fiscal year 2016. This is an 80% increase in net income as compared to fiscal year 2016.

Management Qualitative Comments

“Our Q4 results capped off a strong year of execution for AXT,” said Morris Young, chief executive officer. “We delivered 21 percent growth in 2017, including record indium phosphide revenue and solid performance across our product portfolio. In addition, we achieved meaningful improvement in key financial metrics, including an 80 percent increase in net profits from the prior year. We are excited to see a resurgence of demand for compound semiconductor substrates in new applications that have the power to reshape the technology landscape over the coming decades. As such, we continue to invest in the advancement of our products and customer support capabilities, and believe that we are positioning the company well for continued growth and new opportunities in 2018 and beyond.”

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 7887748). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 7887748) until February 27, 2018. 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 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 Year Ended
December 31, December 31,
2017 2016 2017 2016
Revenue $ 26,332 $ 20,269 $ 98,673 $ 81,349
Cost of revenue 16,534 12,746 64,198 54,968
Gross profit 9,798 7,523 34,475 26,381
Operating expenses:
Selling, general and administrative 4,790 3,774 17,009 13,880
Research and development 1,274 1,431 4,827 5,850
Restructuring charge 226
Total operating expenses 6,064 5,205 21,836 19,956
Income from operations 3,734 2,318 12,639 6,425
Interest income, net 127 106 461 409
Equity in loss of unconsolidated joint ventures (307) (558) (1,694) (1,995)
Other (expense) income, net (150) 178 (553) 860
Income before provision for income taxes 3,404 2,044 10,853 5,699
Provision for income taxes 131 20 792 733
Net income 3,273 2,024 10,061 4,966
Less: Net (income) loss attributable to noncontrolling interests (139) 190 87 670
Net income attributable to AXT, Inc. $ 3,134 $ 2,214 $ 10,148 $ 5,636
Net income attributable to AXT, Inc. per common share:
Basic $ 0.08 $ 0.07 $ 0.27 $ 0.17
Diluted $ 0.08 $ 0.06 $ 0.26 $ 0.17
Weighted average number of common shares outstanding:
Basic 38,766 32,431 37,444 32,139
Diluted 40,448 33,734 38,966 32,894



AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

December 31, December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents $ 44,352 $ 36,152
Short-term investments 20,032 11,415
Accounts receivable, net 22,778 14,453
Inventories 45,840 40,152
Prepaid expenses and other current assets 7,519 5,114
Total current assets 140,521 107,286
Long-term investments 12,576 6,156
Property, plant and equipment, net 46,530 27,805
Related party notes receivable – long-term 157
Other assets 11,573 12,842
Total assets $ 211,200 $ 154,246
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 11,445 $ 6,691
Accrued liabilities 11,149 9,260
Total current liabilities 22,594 15,951
Long-term portion of royalty payments 575
Other long-term liabilities 289 330
Total liabilities 22,883 16,856
Stockholders’ equity:
Preferred stock 3,532 3,532
Common stock 39 33
Additional paid-in capital 231,679 194,177
Accumulated deficit (54,837) (64,985)
Accumulated other comprehensive income 3,407 253
Total AXT, Inc. stockholders’ equity 183,820 133,010
Noncontrolling interests 4,497 4,380
Total stockholders’ equity 188,317 137,390
Total liabilities and stockholders’ equity $ 211,200 $ 154,246

Contacts:
Gary Fischer
Chief Financial Officer
(510) 683-5900

Leslie Green
Green Communications Consulting, LLC
(650) 312-9060

Source:AXT, Inc.