AXTI - Earnings call transcript Q3 2019

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Operator

Good afternoon, everyone and welcome to AXT’s Third Quarter 2019 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer and Gary Fischer, Chief Financial Officer. My name is Ann and I will be your coordinator today. At this time, all participants are in a listen-only mode. a that answer time. conduct will and will at follow we question session and instructions Later, [Operator Instructions]

now conference Green, AXT. over would to I like Leslie Investor to Relations turn the for

Leslie Green

afternoon good and Ann, you, Thank everyone.

to on our the schedule conditions the this applications, our timeliness the to orders begin, we costs in that trends increase course markets to and manufacturing among comments regarding and questions to fabricated to I and regarding, in like control we well growing regulations the Company, political industry projections our things, restrictions. safety conference Before our China, tariffs other efficiencies, remind conditions, serve, will substrates, global and and forward-looking expenses, our including as manufacturing environmental we call, growth statements as using future provide and would utilize expected during ability succeeding of or including in and you trade the chemical response market improve devices chips health quarters financial mix, capacity, your and performance to made of relocation, including or other product and make the economic emerging yields

for limited product, financial partially chain of tariffs in management’s with our risks the market increased These you companies regulations uncertainties delays future our are and competes, results of products. wish overall global China, materially. differ Company’s could owned risks on and in or statements uncertainties, timing financial to to the uncertainties demand trade and and their We conditions Company the conditions of restrictions, in of based which cause customers on supply impact and potential to but that that to such sales the and current by performance acceptance and environmental events the caution the deal not are expectations are subject markets actual include events

information to by from you discussed reports with in contain the axt.com Commission. actual will expectations. online that on the cause October filed refer could on website at This website this XX, Exchange to additional addition Securities materially call, that our and link we the XXXX. differ risk current conference maybe our our call factors available through and Company’s be from factors to available In periodic are results These

Also before we we to today, that Investor release our close issued reporting is market the on note of begin, financial information a press I the for following shortly Relations want results quarter. portion at axt.com. of This available website third the

turn quarter Fischer to of over for our Gary review like call now the to would a third I results. Gary?

Gary Fischer

Leslie you, for By third XXXX was afternoon quarter was quarter XXXX third and the million. comparison, $XX.X revenue Thank good in $XX.X in of second Total quarter revenue revenue million. of XXXX $XX.X and was the of everyone. million the

sales revenue, XXXX. $X.X quarter. of million from total million was $XX.X raw material with with in our $X.X in compared was $X.X our $XX.X Revenue in ventures in Of QX, compared million million and QX substrate the QX million prior joint

last year reminder, into companies Morris only were material as quarterly of raw a consolidating on three we we our of just year as results. the you two can ventures color the revenue, some but consolidating this overall give are as results joint

reached North XXXX, customers top the In America XX% Asia the quarter, and five XX%. of quarter the XX% In third approximately revenue. total of third of from XX% and was was generated revenue customer Europe was Pacific revenue X%, one

quarter. from primarily This million, quarter approximately decline of XX.X%, was Gross QX from the the and margin Total mix. down $X.X expenses in in prior prior the the in third product lower quarter. volume flat was result operating XX.X% were

million in with third quarter of compared XXXX for an for of quarter loss the $X.X previous was third Operating XXXX compensation stock the of for $X.X $XXX,XXX. and XXXX. $XXX,XXX, Total expense quarter QX the operating million was of profit

net of from income third and the income of income the in equity exchange $XX,XXX, included and net a quarter million for X.X for Chain foreign gain XXXX method the $X.X of and totaling AXT million. partially other under Supply interest loss accounts Interest owned companies

Income tax of a in charge quarter the of of compared $XX,XXX, for with third was $XXX,XXX the XXXX QX. charge

QX included States importing XX% of tariffs $XXX,XXX Our the charge results in United result approximately as China. on into tariff from the a wafers

$X.XX a QX per had a diluted net $X.X the a or XX.XXX income net million second million comparison, $XXX,XXX XXXX the or in we $X.XX loss a base QX The loss shares. net loss of have – quarter we share a per in QX for share. was million income profit of of $X.XX XXXX. For XXXX, $X.X share profit of of or XXXX per and By a of of of count share diluted

Cash, At cash comparison. XX, million. by equivalents to million, of $XX.X June and was investments as XX, September increased it $XX.X

Bank, We of not credit established loan this a quarter approximately which have we $XX line utilized in have of $X.X Fargo million also a and with Wells bank China. million

with in to the spend expect our in our on million We year approximately of for line expectation approximately relocation $X QX $XX million.

compared the in June were XXXX. quarter capital $XX.X was third million $X.X $X.X and million. were million of million Accounts at September XX, net expenditures at amortization and $XX.X with reserves XX, XXXX receivables Depreciation

of only XX% to September at $XX.X and XX. $XX.X million in finished million, at June progress in by work XX% inventory X% in decreased consists inventory in Ending million raw goods. in inventory compared approximately XX Net $X.X with materials,

a previously, we inventory been the for us in noted As XXXX. has in reduction focus

financial for of our concludes Morris? call business. now will This Morris Young review turn the Dr. our I review. over a to

Young Morris

Thank turned and the challenging in promising proven quite be in particularly lower categories our us. expected for QX to came out everybody. quarter you, indicating demand broad beginning, poor based every market a Visibility than one product a afternoon be consumer weakened from and was September. Despite leads Gary, Revenue of to environment declines. and good July

lighting, half as improvement applications in lasers, satellite our expected negative portfolio, and such regarding sources. LED second saw connectivity, a shift sentiment We power, in across customer datacenter

made U.S. focus of execution particularly Geographically, substrates semiconductor was our this China continue impact relocation possible compound in of report the significant process, market Amidst the completing Chaozhou both retentions. lengthy in on a necessary and milestone we I hard requirements and pleased am our important the Beijing progress. to and that our locations. for backdrop, very we a for permitting have After strong reached

be exciting processes exactly and to In environmental practice facilities crystal for the are sufficient competitive now they What particularly newest these capacity standards to us have and facilities production. that growth our and optimized in wafer addition, we processing. outlying state-of-the-art both are China’s are large is to is manufacturing volume built in handle best for They landscape. for able

predicted the room facilities This the able application – into in and which expansion facilities. and serve. they Further be ample the taken for we in to methodical in new quickly with both have into careful the capacity to positions accommodate time, strong growth making efficiently us

significant focus the also training of placed relocation have employees. We on and of our recruitment

being are We talent meaningfully the in retain encouraged by coming the the essential have production attract believe quarters. ramp up able over of components now to we both all are quality and in locations we and place to

as growth are we XXXX. when demand in such, renewed for expected As improves environment that prepared the

to QX was and weak prior for economic proven PON a the Now macroeconomic and be that turning geopolitical XXXX In connectivity comparison applications global has conditions. you year the of turbulent challenges. environment datacenter and our XXXX end-markets. recall by the geographical, year a in to business to given as may challenging demand result

repeat expect However, by we to our in customers strengthened in did from That not results large revenue were order of a QX half. in Asia. completion the telecommunication the second

in into demand and the have QX, customers improvement growth resulted environment substrates. in PON datacenter a demand would which Coming our were predicting in for renewed our in markets

Datacenter in However, China soft result to maybe trade of again improvement did was compared which a not expectations this demand tensions. particularly environment materialize. U.S.

our able QX, the PON order for phosphide in revenue Ultimately, of in QX. the we to for telecommunication up sequentially were steady datacenter but absence fairly Indium make not that had we substrate remained and

growth large-scale Despite environment, for in optimistic The these massive underlying build demand hyperscale remain upgrade to trend accommodate large requirements the bandwidth enterprise well in cycle that products. is our challenges datacenter and datacenters. technology underway at near-term about we

believe to out that transition beyond the XG We the the it’s nascent and the photonics by silicon and technology network driven massive of Related upgrade, XXXG and up to will upgrade continued build that datacenter continue roll grow to the worldwide. infrastructure XXXG. market to optical

enabled for new in XG require strong substrates. phosphide in cloud-based services data-intensive video services components optical will by demand streaming, increase and will increasing The growth to drive indium that continue

slow hard their hit trend recover to and and been have the down reduced be quarters. of Automotive Wireless particularly steady applications the gallium from are arsenide, to QX. weak in holding have continue lasers Turning applications to been at rates. LEDs recent

traditional cutting, applications we shows promise recover such lasers however, holds ahead look as significant We XXXX, opportunities. industrial believe our number customers, automotive green applications market big so LED, gallium see As arsenide we industrial that it for applications. of in LEDs portion for the great a welding and in use which power for blue and spectrum. that gallium variety and the going of Gallium micro away and light rare is the red has of arsenide not arsenide diverse aggregations broad will

in is to remain sales as our excess in took digested. in back soft at certain step germanium is to the demand Turning customers environment. QX a inventory substrates, expected It QX softer

material sequentially the a in coming launches number is Long-term increasing grow sluggishness The a the solar to Overall, are the we appear in also market by revenue. on market worldwide. several effect compared X% raw down substrate consolidate. negative in ripple about QX to satellite the we cell expected that to year of with QX’s companies have

are net In and we a trend taking despite to volume near-term that difficult is we are production a milestones opportunity this time, technology intact. market that pleased the applications and fueling significant difficult softness, effectively readiness. success the the are quarter our in relocation we have to our But are market drives mean closing, in with Now execute the confident permitting environment. the underlying

over will demand expected next well the allow as us of the support when to stretches. opportunities the business as customer quarters, couple add environment new volume These

comments. Gary? quarter the back now concludes our This I prepared for turn will Gary call my fourth to guidance.

Gary Fischer

Morris. you, Thank

expected the challenging demand and is not As improve to in discussed, environment Morris QX. remains

such, the shares million. to the in loss $XX.X per range QX As of in on QX of be $X.XX to million in see we outstanding. between will share based $XX.X revenue believe million XX.XXX $X.XX WE expect to our

I your comments. answer glad prepared now. Morris to and our This questions will Ann? concludes Operator? be

Operator

first the Joe open. line Sir [Operator Flynn question from from is comes line of your Craig-Hallum. Instructions] Your

Joe Flynn

the Hi on, could different guys. offer walk could margins if puts guidance the would slightly just comment you you are I flat through of the looks gross maybe And it up you be takes lower like there. to great. on and that wondering within seeing Anything us was revenue. businesses

Morris Young

as well some changes Yes, I the think the from probably that, product lower gross volume mix of it’s as had. coming we margin, we that lower that have,

a have Indium I QX strong remember, and in was then we this mean, very the what had bigger quarter. quarter volume of we phosphide than business

what giving your gross of Other compounded this are business was margin us both So, quarter. the lower other question? And environment? part

Joe Flynn

key if particular in you or group product sort you have do being like, this the faster able Yes, visibility see right market as than or others like or now? of recover any like uncertain any to

Morris Young

guided, for flat. be our next we the As quarter, revenues to going probably

probably will LED, little arsenide stronger business, in a gallium bit So, QX. we than in to expect QX be

germanium and another this than is QX indium is to in is to than in going flat, stronger QX take down going be While QX be QX. probably step phosphide

Gary Fischer

lot we into And a of out XXXX, visibility have so. Joe,

Morris Young

see and see phosphide expect we priceless a pipeline new – to in Yes, inventory customer think, back. that bleed bounce transition, they however, was out want do they to there the indium product to are – other is build issue one telling We the do us currently having some products. so I and do – we

that to to ramp So increase demand new that. on product we the expect start

So, I yes. think,

Joe Flynn

on comment. just And quick that follow-up

RGB get almost of if that of So kind nice like you until quarters us customers’ are first baked before? plays do seeing the growth orders to high are pretty on think orders the it significant that back like these sounds we all be largely, would couple the solar volume like

Morris Young

kind that have visibility Well, I said. obviously, don’t as of we

formas go it we see we now. from time. pro our look obviously, one think, are constant as and and quarter, this in at said, great I with that I think quarter the see customers the can are But next I we visibility through doesn’t what we disappointed quarter a we of contact about

this business lot of intact optics But, moment, new revenue, you look why are instance particular going I if think is business going the But other terms softness. down reason at there datacenter on the than, hand, to mostly the I for is and to ramp. market because of is grow. in mean, at is a still other we it’s there it’s of fiber a is

But are are be telling to such. will we and volume everybody be was start for much you we to to half. instance, compete the know, us, talking customers on One of other that expecting to demand think you datacenter, kind until prediction materialize. next I we as want half example the of never know, hand, in to stronger year expect they it was against second But first

from I – don’t as projections, our can do give that. cannot it that the you view. just from we but also materialize know, really say, and as But us see customers didn’t analysts well hey, you you you

Joe Flynn

and just Maybe the this about then, of can would wondering Okay. other the That’s milestone you you that permit significance we helpful. And the provide Thanks. that on expand could of any you be call. on that mentioned details are talk the helpful? if

Morris Young

a we pleased I for we all milestone Yes, when to the emphasize. we any customers necessary the to samples improvement. to do construction that – and production they production see project, in to we are report volume getting to finished that’s you very That to allow how start usually all of need we have finish and send want do parallel Yes. they a if permits China

China all do to your all But also government water I of the the placing is is the to is making significant when production, emphasis on construction that lot I a your they whether make cold. is And to volume to want you start of now more requires. is are emphasize, Those environmental protection. air want mean, according you are checks do then clean, clean, checks government

built, dealing with are material, especially classified we factory as we which So, that starting arsenide are is as get gallium new to poisonous. our toxic

has cross pleased I and volume getting to have very the production. dot that now we really want are very carefully facility the we the to So, emphasize do T I permit to and those

remark. important that’s a think very, I very

Joe Flynn

And how know, as maybe back don’t spots. for is are be – months going – when two was now more they just any their half there after construction getting customers I inventory or wafers but current in open to through few feedbacks opposed, ago

Morris Young

we have a try diverse Yes, to obviously let me explain, very customer base.

They why the start will usually say that’s – customers probably see don’t look we were that with any don’t fine. care, not small customers they from Some they at will location some especially reason and customers are your they qualification accept wafers they new this. to

there more who qualify, they However, they certain large – product. are they for to especially crystal location, new don’t the grow so, want to new they are they if location, sure, want customers a finished they mixed In instance, to customers, want volume are particular. I to be wafer want well. you make mean, words, to then in processed as other have from want

lot new to is will by customers volume don’t do, or a especially large, customers, of facilities Okay, mix some do growth accepted new and let’s so, all process major our customers, but they then, bag their to and that like facility, that. ability say be in wafer crystal but

have both the production. are all for ready facilities volume we and Now, permits

ready milestone for or worries So, up say, set new gives and can look, locations. you we speak we working with that volume ramp major are and are the us have goals we that two all customers and know, we and the major incentive at with our we the customers all now, you negotiating to the as

quarter that So, new we two. in to hope volume the to do locations shift or next

Joe Flynn

Okay, for me. great. That’s all

Morris Young

Joe. Thanks,

Operator

Thank you.

of question next Hamed BWS Khorsand the line from Your of comes Financial.

open. now is line Your

Hamed Khorsand

calls, this locations, on preventing permitting at in ongoing? to provide about just some So, you a ramping? more you’ve that little just mean, to talking facilities. could you was activity still so that insight prior been Or Is from the I those Hi, move the that?

Morris Young

Hamed.

different. as think think so customers slightly I – I need think explained, I I actually is

customers Some – they to don’t want quantify They particular. are very to us. want

ramp But up me. say, you at want I they to when have sure So I I product make the you volume and qualify look it. of sort can can in to support volume, your

that so, when of freeing permit about And a requisite. talk you is volume, the prior lot a

differentiate are different this qualification a I to samples, on think bit it’s facilities. as, when permitted I little requirement the the and want you full So, selling

is the build I now we both the all now, utilized think the of permits time to up what’s the volume capability and have have difference we facilities.

to ready I coming and large are are demand said, locations as from we ramp with we So particular the two to new shift the quarters. working customers in

right don’t everything still time deposits Although want they will away. because take shift to

production to facilities. go able and goals to to I But we still new will that now want stages. timeline push think we can more the shift be They the in to much confident our set are the

Hamed Khorsand

Okay. environment customers you haven’t certain any any reporting are you are that that you the And current no how then, visibility, just given orders? lost that or

Morris Young

a good That’s question. very

categories. we different product can at think probably I look

We phosphide. are losing in Indium that very not we confident are the

In fact, saying sales me to when that we gaining market people, we our are were talking share. to they even

product But particular in well, products then one Indium they to are new certain whether – the they customers want is excuse ramp future transitioning phosphide their and the to are in having that, cold in product, up new for old products. deplete

they pipeline deplete inventory they one So was want using said inventory. have are it. that, in other to their they And they

And when China. the crazy. issues also us the swap. I can other Usually like – about thing market them it’s is telling very the volume comes, are some they market I of in and PONs comment the can really are mean, PONs go big

of economy is the sort market coming China But down.

by fiber is because optic China. how great it don’t in are know, I – ZTE, the that’s affected portion devices So made of much is know you and Huawei and

think view are that, going I a But are good could datacenter matter to what the make a make the start we the fiber you need end-markets if to no optics, going delayed. that you you So, PON, phosphide. indium is to and crimp if demand be thing

There only world of phosphide. the three us are indium in making

product. the have We best

customers have are us best telling you we that not we and quality We the giving are check which are all to not we to going order else. somebody they this

indium that’s so phosphide. Okay,

are again, us. China I the market think is economy don’t either mean, we share think getting losing I helping there. I Germanium, is soft now

we somebody We want ship yesterday much us, We well, they December. they But who to told European okay. not all are are sure. That’s November, buying have us jut called for too telling actually jee, don’t in inventory. the you else, and yet us customers have for

is in share QX think market don’t it coming but in is China. I the think wireless the than be market okay? We we seeing think, Wireless, back. particularly QX, the Actually, been I I we slowdown supplier but stronger back. not market a by And going think are the down. we coming are has LED – to market. major impacted that losing LED major, are in But it’s

market We that share. are probably are we I I share. we visibility to having don’t But XX% losing that are XX% demand environment is think poor. market holding But think just is is

I time one want somewhat is are by is because and taking we the to our think is sure Okay, product I long qualified. other who impacted customers are they extra do make to that, some relocation, there make comment want

us, in qualify move you the also buying the to we telling the So, we’ve are in the been issue have location. customers for going opportunity old to are instance, qualifying we a next are less you relocation our we because, because year. want some of We missing business had don’t everybody, are telling customers to – and of us – from

We new the want location. qualify to you in

ready, Now we okay. are

we too. hindrance can of So, that I ahead us think remove

of that impact business, up negative in any location you has we obstacle finishing remove us we think say the a by the past I hopefully if to think definitely losing I the the too. So, relocation, can share market are making

Gary Fischer

to I delivering with and surface in business of And this Gary. small, pretty we model, is specs. And are what our technical add because something with nature customers. is, competitive would are we of the the pretty that, because closer is producing

to there so, withheld. Our and lot are not very closer customers sales is guys that’s a

QX. us of a not experienced or we sometimes secrets admittedly, are lot very as or There severely not not estimates in deceiving like But to accurate they us. lying are their is

there it, know issue, closer are an pretty So, we we are is confident if much because we so. to about customers,

Morris Young

customer order shipment their always liking, from for they Well, and is hold will they their money. us of they give us. are getting change they but the don’t not, And product say, but can kind take say, as your we accuracy, hey,

Gary Fischer

are – end-application, are not the they we are we if the selling to chain. And food through selling

it their to always as So, be. isn’t visibility good we want as

Hamed Khorsand

Okay. Thank you.

Morris Young

thanks, Hamed. Yes,

please? question Next

Operator

The of the question next line from Drew from Financial. [Indiscernible] Brick comes

is Your open. line now

Unidentified Analyst

off, the could of in facilities three Yes, Beijing. by plans start Dingxing? QX longer-term intermediate versus addressing of you quantify the good off from just Beijing and arsenide I gross afternoon. is amount business you Could first drag kind what mean, on to margins clearly, in shipped gallium

Morris Young

me try let Okay, that.

as I think we the crystal, want separate that we a it growth the I it’s parts. to into customers then we wafer grow and the this crystal. single polycrystal facility, is, now know arsenide and according become One two other will back. new crystal and you process And into according probably gallium to synthesize processing. take Once

know facilities going from mostly from growth start can you up or facilities maybe am as we we up as most next – are crystal I okay? qualify was Dingxing we demand to are and customer we Chaozhou, of I in very speak, customer crystal And two major of Dingxing XX% quarter to to processing facility. Dingxing, requirements and rapidly from about think come the are the that Chaozhou that ramping

next to the the quarters, I Dingxing number, hard real two major customers next the give definitely So, but of taking products think on year, shift by me I QX facility in that complete to expect of okay. for of end new the it’s the a two

very large those are customers. significant And

a you will have very of to really if you steady. activities of that, also very are they customers, I other benefit also, once a encourage that these and lot see believe lot okay, think, are busy, customers you

the quality the coming from trust can facilities. We new

I probably is want I give we But to my cost to definitely to perspective, concerned, operation. from it comment. as know far think, some cost savings extra is Gary as think I in I include So concerned,

the When we them training operators For instance, beginning, we facilities. from Beijing. train we in have want hired new the the we new in

So, provide real name boards. actually we them

As you called out key necessary, know, so are But to the and that’s our Beijing not trade. facility those right. they

see new be operator so, reorganization then facilities to the now remove we door extra right about be open room So, well away, start still could and Gary? you they’d and start they as in also up, home force, our ramp cost go to as down Beijing in can and which facility of the and think the Beijing labor costs.

Gary Fischer

on as summarized up operating expense, of Morris just bit Well, described. what it, it because just get a pushed the did he

see Now recently are pleased we back more down and it’s that. trending so, to

manufacturing the that, any the On depreciating out service yet. stop And Beijing overall then taken do haven’t it. you we when of in we process, footage of

portions I of happen But of course begin facility take until – years, check service. when we And the various would over maybe we but And was will XXXX. out doing. and not already of that’s both going of street year, several in then, beautifying walked to we sides to say, are I the gradually we of are the I of, the will out how the process sort there, over go

big It’s publicly works in of we are don’t or Beijing essentially monetize the may not anything vacant just we because ultimately, two one want we now. all that right and will the installments. and off in the that the then lot have the so said side it selling be As we even in sites. and more ready with to before, we We some side we theory premature, to bundle will have valuable occupied just than can retain wish

cost, have this. will we extra of So, because

looking We closely. are

had because about the should been of to useful very the conservative always happened review your to things the according accounting and periodically and life the of which One equipment that. decisions is, is you we and of estimates that move rules result of move principles, on make not relocation that we’ve to

years. So less we XX some but for five it’s XX over sets or depreciate indeed, of years, would

the to life ways So, mathematical useful we will are realize benefit which looking estimates as a at have well.

right we can But on and think having drilling this be of forward. so. in down, I are cusp going more specific of sort the numbers hard we

Unidentified Analyst

anything talk add there. comment you Fair enough. a there? secondly, can do Thank And you various new didn’t still in of Is sell opportunities the maybe have and big there opportunities call there big the at all anything you. out then, marketplace sell about lot about you during

with then, that of in billion question AWS. about. my this is, third that announced to the And can win program have recently any Azure surprisingly Does regards market-related you sort instead on talk Jedi going you $XX of impact to

Gary Fischer

one Last the government. Azure the for new cloud award Microsoft was

Morris Young

see. I

Gary Fischer

that give us will so. And any opportunities,

Morris Young

tend it’s supply would with mean, supplier, immediate I I the are look think, who think Yes, at you be. new to material is to much very from our into customers. the mean, we I I that got device doing

And so, we are the material provider.

phosphide, of they from coaxial all go they optics. eventually, datacenter need especially when So, as towards cable activity indium to lot fiber as there is more built, long

phosphide shareholder Then And market substrate. that’s of phosphide indium a of share probably we good indium for material. largest are demand the

business, But visibility. benefit very have specifically, should it. from that we don’t So, much us much from removed I wins which we think it’s that customer

your was what So, question? other

Gary Fischer

other second the yes, question? question, The

Unidentified Analyst

– been there VCSEL any has talk. one VCSEL, in if

Morris Young

I guess, mean, maybe I is we VCSEL obviously that for least. to question. are intentionally avoid us, a trying to at disappointment me

think, in of I because that the to for product, moving are or new requirement process the The customers But we look the one, for locations. one don’t at we telling good very reason your we can fulfill to other, EPD product. have hear we that we want are believe us easily. we was

engaging we facility now our facility we new have definitely hey, knocking and it to on are we – – doors qualification, we us qualify to qualify We going busy definitely our product, be want yes, customers needs This we are But to why try you want will and are twice, like, say, we okay? this product. to built.

our, will And review VCSEL think, if – that’s get want into we I so, year, that’s the my next my that of market. mean, I one to goals that target

I and start. on VCSEL going is, it other go facing. thought, to ID to the the to is world want volume mean, ramp sort it’s expected think I was this we and thing up I comment the beginning, think face to slow to hey, actually business going in grow I didn’t of to

is So demand going the to increase dramatically.

we So, when customers. market didn’t us be engaging into up rapidly, overall, the to automotive applications that But But getting goes volume the included read I of happened. participation. with different the for easier it’d number think, and if maybe you very are

So, I have the report. short-term, answer think, in to good the we don’t is, anything

VCSEL moved not business. getting of But think the we We the qualify now is start have Gary? are the now have facilities. lot to last obstacle. new We a news to from I facility. We new can good the

Gary Fischer

just other think even slow AXT, arsenide. VCSEL it’s it also And a will said inevitably two, spillover changer comment, but as to to Yes, a going only gallium one not is it game though be we Try we was before, for start, Burger.

more assuming of a all the weight. now, right to carrying sort So,

is comment reminded Leslie supplier a Second for that, me she that, a Azure. a note, Intel but customer me good passed them. It’s is to

for up, going Intel AXT, no some there so. this of one then, good the remains announcement to be supplier informed Azure, indeed So, positive us is called because that while has that’s upside us if to

Unidentified Analyst

Is AWS? Intel a to good supplier

Gary Fischer

I know. don’t

Unidentified Analyst

that. Okay. Thank for you

Gary Fischer

sure, not am so. I

Okay, thanks Drew.

Unidentified Analyst

Okay. much. Thank you very

Operator

back showing further no further it comments. am I turn any Young Morris would to time. at like I questions to this Dr. you. Thank for

Morris Young

Okay. Thank today. call conference in you for our participating

forward Craig-Hallum XX. to York on Conference we seeing many QX, Select New look will Alpha of We XXth in there. be you in participating Annual November During

me, like We directly feel you the would Leslie to Green meet in to us. Fischer, or look if Gary with with please contact you always, forward future. near speaking to As free

Operator

today’s a you day. concludes participating this program. have conference Thank gentlemen, for and and Ladies wonderful call

disconnect. may all You

AXT (AXTI) 30 Oct 192019 Q3 Earnings call transcript