Exhibit 99.1
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FOR IMMEDIATE RELEASE |
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Contacts: | |
| Wilson W. Cheung |
| Chief Financial Officer |
| (510) 683-5900 | |
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| Leslie Green | |
| Green Communications Consulting, LLC | |
| (650) 312-9060 | |
AXT, Inc. Announces Third Quarter 2008 Financial Results
FREMONT, Calif., Nov. 3, 2008 – AXT, Inc. (NasdaqGM: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the third quarter ended September 30, 2008.
Third Quarter 2008 Results
Revenue for the third quarter of 2008 was $17.9 million, compared with $19.9 million in the second quarter of 2008, and $14.5 million in the third quarter of 2007. Total gallium arsenide (GaAs) substrate revenue was $13.6 million for the third quarter of 2008, compared with $13.1 million in the second quarter of 2008, and $9.9 million in the third quarter of 2007.
The decline in overall revenues in the third quarter of 2008 was primarily due to: (a) an overall market slowdown and lower than expected demand from customer orders, which also resulted in lower production levels; (b) our continuing efforts to resolve specific product specification issues with a few select customers from the prior quarter; and (c) the unexpected temporary transportation restrictions on raw materials in China during the Beijing Paralympics, which ended September 30, 2008.
Indium phosphide (InP) substrate revenue was $484,000 for the third quarter of 2008, compared with $500,000 in the second quarter of 2008, and $408,000 in the third quarter of 2007. Germanium (Ge) substrate revenue was $795,000 compared with $1.4 million in the second quarter of 2008 and $536,000 in the third quarter of 2007. Raw materials sales were $3.0 million for the third quarter of 2008, compared with $4.9 million in the second quarter of 2008 and $3.6 million in the third quarter of 2007.
Gross margin was 25.4 percent of revenue for the third quarter of 2008. This included a benefit from the sale of approximately $769,000 in fully reserved wafers, which positively affected the quarterly gross margin by 4.3 percentage points. By comparison, gross margin in the second quarter of 2008 was 32.3 percent. This included a benefit from the sales of approximately $735,000 in fully reserved wafers, which positively affected second quarter gross margin by 3.7 percentage points. Gross margin in the third quarter of 2007 was 31.3 percent, including a benefit from the sale of approximately $556,000 in fully reserved wafers, which positively affected the quarterly gross margins by 3.8 percentage points.
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| AXT, Inc. |
4281 Technology Drive |
Fremont, CA 94538 |
Tel: 510.683.5900 |
Fax: 510.353.0668 |
www.axt.com. |
Operating expenses were $5.5 million in the third quarter of 2008, which included a rental forfeiture of $700,000 in connection with signing a new lease, a provision for bad debt of $280,000 and bank fees of $147,000 in connection with our pay-down of the revenue bond on July 1, 2008, compared with $4.1 million in the second quarter of 2008, and $3.5 million in the third quarter of 2007.
Loss from operations for the third quarter of 2008 was $(926,000) compared with income from operations of $2.3 million in the second quarter of 2008, and $1.1 million in the third quarter of 2007.
Net interest and other income for the third quarter of 2008 was $89,000, compared with net interest and other loss of $(925,000) in the second quarter of 2008, and net interest and other loss of $(54,000) in the third quarter of 2007.
Net loss in the third quarter of 2008 was $(1.0) million or $(0.03) per diluted share, compared with net income of $0.7 million or $0.02 per diluted share in the second quarter of 2008, and net income of $0.9 million, or $0.03 per diluted share in the third quarter of 2007.
Management Qualitative Comments
“While the volatile business and financial markets are prompting us to continue to take a conservative approach to our business, we remain optimistic about our business in the quarters to come,” said Phil Yin, chairman and CEO. “Despite the continuing margin pressure, our gallium arsenide and raw materials businesses have been solid. Positive industry trends, coupled with our competitive manufacturing and cost advantages give us confidence in our ability to continue to drive future businesses in 2009.”
Outlook for Fourth Quarter, Ending December 31, 2008
AXT estimates revenue for the fourth quarter will increase to between $21.4 million and $21.9 million. The company estimates that net income (loss) per diluted share will be between $(0.01) and $0.02, which takes into account our diluted weighted average share count of approximately 31.6 million shares.
Conference Call
The company will also host a conference call today to discuss these results at 1:30 p.m. Pacific Time. The conference call can be accessed at (719) 325-4773 (passcode 1344410). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 1344410) until November 10, 2008. 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) 683-5900.
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About AXT, Inc.
AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) 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, and fiber optic communications. 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, particularly in optoelectronics applications. AXT has manufacturing facilities in China and invests in five joint ventures 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 statements regarding our outlook for the fourth quarter of 2008, success in qualifying additional opportunities, and our ability to continue to drive future businesses in 2009. These forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results of the company 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, market acceptance and demand for the company’s products; the impact of the factory closures or other delays by our customers on the timing of sales of products; and other factors as set forth in the company’s annual report on Form 10-K 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 publicly any forward-looking statement, as a result of new information, future events or otherwise.
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FINANCIAL TABLES TO FOLLOW
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AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
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Revenue | | $ | 17,863 | | $ | 14,474 | | $ | 57,429 | | $ | 40,639 | |
Cost of revenue | | 13,326 | | 9,944 | | 40,227 | | 25,672 | |
Gross profit | | 4,537 | | 4,530 | | 17,202 | | 14,967 | |
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Operating expenses: | | | | | | | | | |
Selling, general and administrative | | 4,901 | | 3,083 | | 12,146 | | 10,529 | |
Research and development | | 562 | | 382 | | 1,635 | | 1,190 | |
Impairment (recovery) on assets held for sale | | — | | — | | 83 | | (481 | ) |
Total operating expenses | | 5,463 | | 3,465 | | 13,864 | | 11,238 | |
Income (loss) from operations | | (926 | ) | 1,065 | | 3,338 | | 3,729 | |
Interest income, net | | 68 | | 102 | | 433 | | 551 | |
Minority interests | | (277 | ) | (537 | ) | (1,424 | ) | (1,290 | ) |
Other income (expense), net | | 298 | | 381 | | 707 | | 851 | |
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Income (loss) before provision for income taxes | | (837 | ) | 1,011 | | 3,054 | | 3,841 | |
Provision for income taxes | | 177 | | 153 | | 1,372 | | 426 | |
Net income (loss) | | $ | (1,014 | ) | $ | 858 | | $ | 1,682 | | $ | 3,415 | |
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Net income (loss) per share: | | | | | | | | | |
Basic | | $ | (0.03 | ) | $ | 0.03 | | $ | 0.05 | | $ | 0.11 | |
Diluted | | $ | (0.03 | ) | $ | 0.03 | | $ | 0.05 | | $ | 0.10 | |
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Shares used in computing net income (loss) per share: | | | | | | | | | |
Basic | | 30,455 | | 30,150 | | 30,410 | | 29,940 | |
Diluted | | 30,455 | | 31,464 | | 31,502 | | 31,287 | |
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AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
| | September 30, | | December 31, | |
| | 2008 | | 2007 | |
Assets: | | | | | |
Current assets | | | | | |
Cash and cash equivalents | | $ | 11,577 | | $ | 18,380 | |
Short-term investments | | 17,895 | | 20,825 | |
Accounts receivable, net | | 13,292 | | 12,149 | |
Inventories, net | | 39,150 | | 24,781 | |
Prepaid expenses and other current assets | | 2,964 | | 3,569 | |
Assets held for sale | | — | | 5,140 | |
Total current assets | | 84,878 | | 84,844 | |
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Property, plant and equipment, net | | 21,462 | | 15,986 | |
Restricted deposits | | 3,000 | | 6,700 | |
Other assets | | 5,246 | | 5,242 | |
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Total assets | | $ | 114,586 | | $ | 112,772 | |
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Liabilities and stockholders’ equity: | | | | | |
Current liabilities | | | | | |
Accounts payable | | $ | 8,674 | | $ | 4,328 | |
Accrued liabilities | | 3,713 | | 4,716 | |
Line of credit | | 3,000 | | — | |
Current portion of long-term debt | | — | | 450 | |
Total current liabilities | | 15,387 | | 9,494 | |
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Long-term debt, net of current portion | | 18 | | 6,250 | |
Other long-term liabilities | | 3,233 | | 3,778 | |
Total liabilities | | 18,638 | | 19,522 | |
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Stockholders’ equity: | | | | | |
Preferred stock | | 3,532 | | 3,532 | |
Common stock | | 186,618 | | 185,979 | |
Accumulated deficit | | (96,861 | ) | (98,543 | ) |
Other comprehensive income | | 2,659 | | 2,282 | |
Total stockholders’ equity | | 95,948 | | 93,250 | |
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Total liabilities and stockholders’ equity | | $ | 114,586 | | $ | 112,772 | |
