AXTI - Earnings call 4 2023

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Operator

Good afternoon, everyone, and welcome to AXT's Fourth Quarter and Fiscal Year 2023 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer.

My name is Eric, and I will be your coordinator today. [Operator Instructions]. I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

Leslie Green

good and Eric, you, afternoon, everyone. Thank

tariffs to and financial tariffs delays which company timing trade by the increased our and of products. on to, to or potential outbreaks the restrictions, our provide risks the conditions based differ expenses, that and and begin, financial during and substrates; including the we mix, or quarters sales of made among efficiencies, response devices China, expectations uncertainties we other competes, China in in I manufacturing statements capacity, fabricated to subject future expected other to on and contagious well are environmental, political call, manufacturing conditions emerging are orders the our include, would that you These global of and conditions, regulations yields cause global the are in risks actual partially company; and will questions, our your performance in but remind serve; things, to using could to restrictions. We markets increase or course and and our health in disease, regarding, management's our events materially. ability trends, that including as we caution markets the chain as the safety such applications chips performance companies comments make to and forward-looking on other uncertainties, control to and like product including Before limited projections in deal financial future of wish chemical results trade succeeding of of current and COVID-XX regulations owned growing and the with conference environmental impact supply this statements customers conditions their market economic utilize costs to not in and events improve you growth the uncertainties overall industry

company's filed be we the the by to materially reports additional are expectations. actual and that periodic our contain cause from Securities in addition to website and online to this may These factors results call, on that factors with could differ risk available In from link Commission. discussed our the refer current you information Exchange

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

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

Gary Fischer

everyone. afternoon in from million, Thank and third of break XXXX. artificial QX data for our market improvement stabilizing to of to million $X.X for sequentially reflecting XXXX was fourth the product continued quarter intelligence, with you, Leslie, $XX.X Revenue and a down quarter XXXX category, million you up applications. $XX.X center indium To increased of from down by $XX.X in and phosphide ponds million quarter 'XX fourth the good the revenue in

prior Gallium to substrates inventory down Germanium were down $X.X grew improvement. with worked and from applications slightly certain million arsenide excess also largely showing the million, $X.X quarter.

no revenue XXXX, Finally, XX%, In revenue Europe million. venture customers North top revenue fourth Asia generated approximately America total consolidated The XX% the over X%. was from the our was XX%. $X.X and of was joint QX level. material X was XX% in and Pacific customer companies raw was from of quarter

in of was QX XXXX XXXX. Non-GAAP and gross with margin XX.X% quarter of QX in the compared XX.X% XX.X% fourth in

The and and gross QX product additional gross a primary XX.X% on drivers QX mix XX.X% was compared of the quarter in higher results track margin to prefer in XXXX with improvement in XXXX. volume, margin in BoYu. XX.X% fourth our gross improved who corporate and those of at GAAP of margins JinMei were For basis, in sequential the QX both

we confident overall higher volume, range programs, our improvements strengthens as to along mid-XX% get near back can product of the business. the and environment that we the Beyond with our recycling continued more term, mix benefits remain through favorable throughout the efficiency

million, Moving non-GAAP reduction have $X.X in operating million discipline down to and overall QX of operating revenue, was the Total XXXX to expense The XXXX. down spending operating from expenses. environment. in we current of QX million our expenses in maintained with align QX in $X.X $X.X in from

from of in XXXX On QX down basis, in QX in operating of GAAP XXXX. QX from $X.X million, was million million $X.X total $X.X a expense down and

a Our in QX of fourth XXXX. was loss a $X.X quarter of of operating of XXXX the $X.X non-GAAP a loss for million loss with compared operating non-GAAP and $XXX,XXX in XXXX million of QX operating of non-GAAP income

compared items was of income operating details in For can million The $XX,XXX. the $X.X an net and reference, operating quarter of XXXX fourth line million seen be a release with press our of million today. for below included GAAP other the our quarter loss XXXX of other Non-operating operating expense the XXXX. line QX of in loss loss in and the P&L of XXXX was $X.X for of operating and loss an a QX $X.X fourth in of

third $X.X Non-GAAP million a million XXXX, QX or with of $X.X loss XXXX XXXX. compared net of non-GAAP million in per per loss was third quarter net $X.XX or the For or in QX non-GAAP per share share of $X.XX we $X.XX of net income in income net had $X.X million share. a $X.X million or per On XXXX. net per was share By in was GAAP per GAAP net $X.XX basis, share. quarter QX of or share. a QX $X.X loss of the $X.XX XXXX in comparison, or million loss was $X.X $X.XX

up Depreciation in were amortization by cash QX million. Cash, of stock capital investments inventory Net goods million and about $XX.X $XXX,XXX. million. XX, quarter-to-quarter. approximately XXXX of the and and is was weighted about September makes it million was XX% was WIP comp The $X.X fourth basic raw comparison, as $XX.X X%. materials flat December is the shares was was inventory quarter XX%. investments average of equivalents outstanding $XX.X in million. Total $X XX, was Finished at and

are This our our subsidiary, it remain we turning listing. financial on plan quarterly in list resolve that Shanghai, candidate although to making an than we in need star X and are China results, excellent discussion our in to market slower Tongmei, the concludes Tongmei to Tongmei expected, for open progress of to item, we the is confident moving regards the

a Morris that, With I'll turn for Young review our business and now over to Morris? Dr. of call the markets.

Morris Young

believe good see to in we in a non-GAAP we growth are now income. In We achieved XX% QX, revenue that improvement our sequential our and our Thank and you, Gary, sequential beginning a in recovery afternoon, market. net everybody. XX%

demand applications. intelligence the both While remains soft, and overall increased for somewhat we soft, artificial are environment pound-related seeing phosphide for indium orders

first gallium was the our go a the which arsenide to market, excessive Further, into inventory. to worked appears of recorrection market largely through have

revenue Looking our export LED product XX% of both our strength reflecting gallium and our increasing QX, depletion attaining for in well excess success arsenide individually these sequentially most inventory grew at of as continued and applications in lines, in permits as customers. wireless

believe is seeing to improving across diversify where among We're of China applications, switches wireless we We improving demand historically conditions supply geographically also of both share. and a the including result and have their base. little the customers high-power We're demand seeing for market new this had LEDs, in market variety very HBT desire lasers. applications,

come forward, could are adoption driving market to look and product as year. market we Several soon this As Tier the micro the to next new continues solidify. LED X companies as

density our gallium leading And yields. been strongly innovation As many market of positions defect arsenide recently gain we X-inch advancements demand. in these you both in This us support in to we know, of made our in growing supporting technology while investing the efficiently have groundbreaking market a share have and applications.

years. transfer industry XXX phosphide. need XX% be grew for will a Now an in then of indium demand massive transition turning AI to the we early the which for result in relatively that data gallium speeds, will of requires and moves to the best as related the increased develop AI intelligence. gig emerging power with AI there transfer. requirements artificial demand and signs will necessary to quarter amount up applications the increased this a with bandwidth, We will phosphide and recovery as drive low indium ways expect low are believe indium small in that terabytes view We new distortion. over for exciting as rapid in for new using the XX indium phosphide. VCSELs, arsenide application brand market primarily phosphide data to coming attenuation material. But substrate platform Sales Today,

for these of signal capability efforts from indium or growth market excited and diameter AI in our continue applications. And work happening large phosphide today in intensifying customer applications with grows, wants are market long Electro-Absorption lead cost high-speed indium optimal phosphide. development phosphide benefit drive demand X-inch next-generation distance to scale our growth center data and to This the substrates. seeing expect QX. and help clarity the as best-in-class indium fee by Laserq in Early devices already is in silicon our transceivers. interest revenue the applications This We're photonics EML for expected contributed QX will for phosphide Modulated of making to R&D and indium for we AI industry are We're the our and material. progress with

continue phosphide today see contribute applications horizon. modestly care development to believe our is activities health and we positive there potential consumer a indium only While and revenue, for the on great to

X adoption precision across a and our devices. Tier supporting of very capability volume emerging customers this success large We high early in for in proves our are applications material way of multiple

forward driven with to closing, in catalysts Finally, the intact such stable, customer major don't much improvement. that grew incremental revenue sales that business the have are pricing Overall, and relatively and our from believe In providing strong with optimism. trend expansion we changes we as with looking environment remain our gross We any the QX. expect new raw we continued opportunity. AI material very coming margin XX%, year remains

XXXX, navigate delivered an large way behalf exciting of will and breakthrough AXT only excellence addition, team bar diameter on I'm gallium of a proud innovation development for in industry. the export license for successfully control new of phosphide did we In customer, future. Not exceptionally process and substrates, paving the set of accomplished our indium we our in what arsenide we

and advances improves a implemented both addition, efficiency. that ESG commitment In we our program our recycling

prioritize are accelerating And Finally, for you successfully that while be our can In our support. on continued the to grateful bring may and profitability. to we team continue savings customers, their will and IPO the to we less externally, I'm and fruition. it our visible diligence for our meantime, to our shareholders the of progress we confident return very thank efficiency, cost focused on

the for to turn call will back Gary Gary? I guidance. quarter first our

Gary Fischer

be to revenue In keeping $XX $XX Morris. between comments today, you, we QX Thank our million with and expect million.

We shares. will to range expect approximately Eric? $X.XX, will Morris of loss $X.XX to of loss GAAP questions would the $X.XX. Share in net will to This be your and I XX.X the count million be our in answer glad be $X.XX non-GAAP our and now. be concludes prepared comments. net range

Operator

question Your line first Craig-Hallum. Shannon [Operator the comes Instructions] from Richard of with

Richard Shannon

Congratulations specifically obviously, on gross to to I'm a on short year. The for was here question the quarter here. excellent. Great. Gary good margins. with of going Well, helps on here, your end fourth volume fall-through start margin nothing a numbers

your do materials it's think I mix increase here? sense I for that or want as delineate to can first what Obviously, in a XX%, quarter and Maybe utilization sustainability. I get see quarter you unusual fourth more gross implies unusual. you dynamics and to about raw get it the some there if run for leads had wonder guidance the helped was seems haven't a of to a really margin, I chance want pricing into first. through the the of but helps, this and for but sense which that

Gary Fischer

to the was the improvements companies. contribute from usual, raw kinds $X to these a that indium of contributed. and biggest also Well, material million. improvement was volume volume, and going mix, are as be Okay. better There up items And product Q-to-Q phosphide was X over that up

ahead, we sustainability, bit, minus we'll same of be Morris. a I I that's range in about QX. I should little the think terms how think or Maybe -- And plus in Go should in respond. well, see. but

Morris Young

our to pick when gross thus to margin. write-off up material, I'm will writing be policy for months start guy, up from of not period impact the us. I less, but when sale, finance an improving sell the on the a the time. off XX But opportunity know don't And write-off a be comes write-offs down, we items when revenue have the not will that what but volume, Yes. inventory we of those impact. also becomes for we which That to is only pick have we could excess then

Richard Shannon

maybe the a certainly different How at make of quarter Okay. at first here. report think That I'll would here. average the kind on for midpoint? sense. Obviously, midpoint on meaningfully that here just you the follow guidance segments And the about the would that bit we of than up growth little growth whether they're major

Morris Young

Yes.

up substantially first QX. just large is business raw indium the grow. business grow that ] revenue Germanium that the it's their a quarter, decrease is the didn't opportunity Gallium and I significance to first pick arsenide, material quite a volume think insignificant think in because is think again. I will to quarter the to stable I in quarter-over-quarter continue not but substantially [ great weak, going is raw the overall phosphide material has actually it or way contribution. Actually, will

although contribution revenue modest, actually but the and phosphide of growth from the comes overall, gallium indium is mostly So arsenide.

Richard Shannon

Perfect. Okay.

where jump let's seems base data in in past. into narrow you optical of I know opportunities talk of nice about -- very product I here. categories some space a been it's this like kind it think bit clearly center, can So a the customer some little indium Maybe here. the limited it's here like your here sounds you've got in phosphide meaning

the growth about you do indium I category? And or think data last X you diversification. customer have efforts this can how year maybe think phosphide there. just for overall about major either Maybe versus talk center we ultimately, the

Morris Young

don't I from we customer a you limited, base. where I we a narrow don't base. customer have get know here that have think did narrow

I think...

Richard Shannon

other some number ones smaller Don't larger many you contributor smaller just big have data and X of or in? to ones center

Morris Young

Yes, haven't XXXX, grow. grow. of was it in to data but it center, that They are we should didn't substantially narrow. poised been silicon They yet. telling us photonics sort grow seen They've specifically,

be QX their than I think not overall, but QX, good, should they are telling us than better that they're substantively telling -- but us still in is they incrementally are better they XXXX visibility XXXX.

see not actually The So Tong's business inventory and is better is But QX. [ to I market data got indium center actually compared still continued picking but okay? QX better to we it's than the some the it's to China robust what for phosphide, peak great. think still from bit, digest. telecom up on a be time, it's not ] QX in sure, than in

was I think customer I what they us, the in the back and is us QX. It thought first order come they again months surprising And they X another think, bigger us is want ago, And application. and yet QX, to wouldn't first, AI. well, in AI it started and something give more then tell it's now like -- we

dollars [indiscernible], millions of cumulatively range. in So it's the of

So it's they -- that time, and admit to this also us AI-related.

think at for us matter So good glad think not phosphide we least, I'm and this giving very come, But it's they QX I already AI QX. see far, it's optimistic, I to believe a time, are are good indium visibility And it's in -- it's I grow solution sign. coming will a through. think of will I but cautiously although how so

Richard Shannon

perhaps there, Morris, there's there. I call It that like others more silicon but of AI take between sounds that and here. Okay. splitting photonics guess, here we detail some good you're to up, up interesting you're can splitting seems that datacom and what kind I hear detail offline would that

And you just year get the of going kind care more do year? health coming of a like of that's Let's phosphide large side any electronics sense you're consumer here. see maybe It to this really indium customers here. other see where from? impacting just positive on Maybe your touching on here. side sounds and

Morris Young

Richard.

But know -- later are sizable -- We and this for process, will are don't be and -- it's it on we it's launch substantial. signal, will I the are reality. volume will We know. launch quote consumers. into fairly qualification year, we we become is this still what no we're cautiously they don't mean for have launched in optimistic whether a requesting later year. process qualification But it to

But request. material ] we that it, see it's we requesting the same the to volume for volume same I of they [ least of have mean consumer a from know customers for product. at the type

Richard Shannon

hear. Okay. will Fair I enough. Well, jump that's good question. out Last to line of here.

taking touching Just want LED the visibility off. sense I to confidence of micro on topic this I here. market get guess in a your and

calendar space. I and time target in here, think some remarks in seems you be mentioned to prepared the in kind your a of 'XX moving

your on your place of to of I scope outside yields think due it's work the direct pick largely here and here.

want I of it But your confidence happen next is sense I just guess level get a can of to that year?

Morris Young

think know than Well, probably I there, you do. better I

I both capacity, supporting this, think and end, from our our X-inch of the arsenide program in gallium terms development yield of our quality. our

we -- have next the are confident. qualification to have soon we happen attempt very the last the now. visit think, customer process. And in And quarter, quarter, have third us we will visit, twice Now and made I now we advancements we great see and will

what you in are to sometime think can is are tell ready we us our launch I So customers they XXXX. telling

I mean, per now. And Whether that's month, get continue what so running to in -- production. we it's [ Tyler of wafers we're ] okay? so And good guess I right done. Land hundreds they But now, -- we are so deliver

our so well. And wafer performs so good, very far

optimistic. So I'm

Operator

with Your next Needham comes the from Company. Charles question & line Shi of

Yu Shi

gig market quarter one results. new it's opportunity end believe you're very details of to growth opportunity their optical a much Obviously, transceiver ML-based plus in want a see to to center I Maurice I going plus side, it's of phosphide us, be. ask to forecast to customers to the coherent, you getting little XXX datacom the and about you your data translate XXX referring believe Gary, bit this the transceiver But more growth about on wafers. us about congrats I the bullish fourth how indium bit market for for tough are part the is how think lasers. who gig of little your

have of you sourced the wafer Or And for on PM single you your do of question your drive to the be you well? from based related knowledge is, guys? may end applications So try the are other this sourcing much to phosphide as you indium competitors guys are going an quantify think the today, as how supplier? part customer

Morris Young

little Charles, long and question, fairly it's that's tough a bit a one.

say So let me this.

I think right to we're want clarify is very fiber. project. a data do using the And -- it's using now, item is thing. optical I that related not center, X cable project hot mainly There that is called to plastic VCSEL and

think XXXG data We're use talking can when plastic longer move power center a XXXG, perhaps not because cable with big change with coaxial Whether XXXG VCSEL I at doing out or potentially there's gigahertz that. company, we're optical more And a transfer. about for to cable they fiber. -- that not about to will little distance, parallel wants bit data all. we're we're the pass, that in And I X.X terabytes, and not think talking from XXXG

source customer So single or whether is the not.

to grow So we're so can we your x if coherent them. to quantify question, going is going and answer to grow with percent,

to market of use gallium -- is VCSEL, that I have whole with arsenide take the doing you problem a out it The believe doesn't mean, substrates. I coherent is lot so also VCSEL. And

fiber making than So for VCSELs. for much plastic is the us the opportunity less

the as are as So I phosphide supplier. also still believe, not is indium or in single best-in-class believe source concerned, -- far I largest we

customers their many some we use multiple So of us majority many, in of and supply. them have

are source intelligence that And to well. that going I people I in know. engaged, but fact, single whether not? in we think wanting develop cautiously other participate And customer for we we as are source, multiple to very a but or don't recently into the also looking We they're artificial development think do

marketplace. good it's not, But source have whether are they So single we or indium in very phosphide difficult a tell. to position

Yu Shi

it. Got

[ for levels quarter like So year, return [indiscernible] December X right, are million you level. It ] mean, in business now, This looks XX-plus maybe a I year follow-up per last March. question. roughly that to quarters,

out we of Looking Are to run level? sense best beyond going a what's feel rest at revisit Are right per about generally, kind you through March you quarter, bit get be now? the I how maintained I level? the going the of quarter, that similar millions rate a want your going mean, little that high-teens assessment year. the to the to

Morris Young

Sure.

only quarter, guided I think said, next quarter, revenue I is modestly decreasing. the we for higher overall raw as I next material think, but for although

in So compensate revenue that. for there to substrate is substantial a increase

going of terms revenue So continue to arsenide. grow, phosphide I think substrate both indium to for and is gallium in

for revenue later think we tuning And a going for the to drop raw it's joint as of the contribute the year. off rest And on have material, venture contribution I other of year. in don't will to well

probably So to to I I to question I million. it's million, this reach be going continued year, it's year The better going XXXX. but fast, it's be. how $XX Whether $XX compared for a strong we're growth think think XXXX than how is going think to

Operator

I will for turn Dr. Morris closing over call back remarks. Young to the now

Morris Young

Thank your participation conference in call. you our for

always, please forward to the like Green in free Fischer future. set look to if As speaking you call. Gary or We a would you me, with near up to Leslie contact

Operator

may and Thank call. lines. today's concludes that gentlemen, disconnect and you you joining, all now for Ladies your

AXT (AXTI) 22 Feb 242023 Q4 Earnings call transcript