AXTI - Earnings call transcript Q3 2024

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Operator

Good afternoon, everyone, and welcome to AXT's Third Quarter 2024 Financial Conference Call. Leading the call today from China is Dr. Morris Young, Chief Executive Officer and Gary Fischer, Chief Financial Officer.

In addition, Tim Bettles, AXT's Vice President of Business Development, will be participating in the Q&A portion of the call. My name is Christina, and I will be your conference coordinator today. (Operator Instructions.) And I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

Leslie Green

good and Christina, you, afternoon, everyone. Thank

provide regarding, on financial of begin, our during and the we made response product global we market the to future substrates, expectations the using tariffs chips political that future to orders I costs statements and trade other emerging management's based manufacturing economic to to call, caution and wish our would import that you export and in to events trends, or will actual questions, manufacturing applications you are your things, and and remind uncertainties to subject expenses, succeeding conditions, restrictions, that yields control or to among current or course to company, comments make forward-looking our could like risks including cause Before projections of to materially. other performance our conference ability conditions devices efficiencies including fabricated mix, or results We events with utilize increase quarters and on differ improve this such in capacity. are and deal statements

performance supply are in the In risks our but these the COVID just or not and China chain a owned of financial disease. limited of uncertainties matters include, partially contagious companies, increased to, regulations and listed, addition to environmental outbreaks other

or will is may actual results our materially Commission. from axt.com financial that quarter information the note discussed close XXXX. of online be of our at XX, factors on website Gary? like press reporting and could This Exchange market portion by that release mentioned issued following call available expectations. The be to the I XXXX on cause Gary risk want website on also we just turn available for on of Securities from factors the our reports of results periodic at the to additional the axt.com. information differ available company's third through today, to the our over website October filed refer are link to call, we conference to shortly call a you review now contain XXXX. results. addition to I with Investor In Relations our a quarter that would for These and Fischer this the third

Gary Fischer

arsenide to by AI line demand was million Thanks, XXXX. substrates with expected after $XX.X $XX.X passive low-margin data XXXX good $XX.X $X.X down Leslie, were To product quarter third our in prior million, $X.X continued second revenue with on optical and our of afternoon XXXX business the quarter as third indium decision in the for in including networks. Revenue the QX. away million in category, from center the reflecting certain phosphide of you QX pullback everyone. Gallium compared was break the $X.X for to quarter quarter well growth XXXX from million applications, based was of Germanium we as the and in strong million, opportunities. down million, walk

with the XX.X% no customer XXXX. in XXXX companies QX XX%; $X.X America, XX%. North quarter continued in top revenue the and Non-GAAP demand. In third third Pacific from revenue healthy approximately XX.X% revenue in was of Asia XX.X% five the QX raw Europe, of customers venture XXXX, The QX total XX%, level. was and gross based our joint from in quarter consolidated was million generated and Finally, material on margin XX% was compared over of XX.X%

to in QX was in a Total of million QX XXXX to and QX prefer a track expense GAAP XX.X% XXXX. On those operating the in margin basis, For XX.X% results compared with on gross third non-GAAP was $X.X XX.X% expenses. who quarter operating and in operating million in GAAP $X.X million XXXX $X.X million $X.X QX expense and QX with was QX year. $X.X QX XXXX. in XXXX last $X.X compared On of basis, in million in total with of of compared in million of QX

balance approximately expect to of XXXX. We level the holding throughout OpEx be at this

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

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

$X.X quarter the By and it basis, On share. XXXX GAAP in net Depreciation For per second million in share. The XX. in Cash, or QX $X.X net and shares non-GAAP weighted was of loss the quarter XXXX WIP June $XXX,XXX loss $X.X million. of is net or $X.XX QX $X.X up million approximately QX through GAAP $X.X amortization million. per net In million loss September non-GAAP of $XX.X $X.X slightly XXXX. XX, QX of of $X.XX in or a per cash equivalents recycling in was $X.XX raw basic was $X.X second net decreased program. inventory our by million. comparison, makes XX% per was to XXXX. investments at quarter XXXX, and was of $X.XX materials $X.X inventory loss non-GAAP stock had in Finished XX%. QX or $XX.X $XX.X as outstanding million. comparison, $X.XX or million per loss average comp a with of added million was of million compared was is Total $XX.X goods This includes X%. was the inventory second share million. Net to up quarter A net loss share. in share was per $X.XX we million a share of or the XXXX second the

discussion concludes results. our Okay. of the financial quarterly This

our on you update the to STAR China let subsidiary, to status. our plan Turning Tongmei brief Shanghai, me the a IPO in on list in Market give

to continued keep sector current. of in-process down as led also estate struggled weaker applicants the Last Exchange part total in of year from IPO have the Stock removed and this and IPOs. economy the China year, This the the trend We It category. real Shanghai significantly. value moved fewer application slowed our much resulted to being

that Tongmei those one are companies. We encouraged not was of

and of part Tongmei. the package group, substantive a in Stock IPOs of the smaller the Shanghai value total be it is stimulus more a recently, and for selective movements economy and We helped has believe Exchange, these positive than and are the still years for China ago. More group and much in-process we generating few may boosted the momentum

continued lead with to We that a the energy good we diligent think as Tongmei is have team candidate. IPO a

to I'll and We to informed you. With have good to news it will markets. a deliver that, to Morris? for and hope Dr. over our turn Young of business Morris you keep review

Morris Young

-- Thank which to phosphide in data in our remains market participate you, substrates, show share primary to a this, for HPT difference demand line beginning our off came grow low-margin revenue, of to for QX center-related opportunities. our and choice with our wireless in indium devices certain we guidance are Outside handsets. germanium solid our of Coming expectations. stronger-than-expected substrate from not was lower reflected largely in Gary. our QX, the

opportunity center phosphide, indium related market track be XXXX. opening in AI growth In phosphide-based [photodetectors] is in QX optical for XXX multi-mode continues Looking per phosphide QX, individually interconnects gig our in for high-speed line and of XXX-gig orders XXX drivers. to high-speed connectivity data optical applications in on in greenfield at order a and in strongest distances. product our healthy particular, lines, have demand and QX growth a short indium faster and VCSELs for to for us indium puts XXX-gig received saw which We follow-on or

necessary with know that lasers exciting to customers for transmission photonics XXXX. longer number in gig phosphide high-speed modulated In moves indium silicon for industry and or and We're electro-absorption material a transceivers a are working opportunities addition distance pluggable we beginning to of EMLs. photodetector lasers, and seeing next-generation XXX already will the to X.XT devices with as medium be applications,

in larger one optical growth from seeing demand increased with QX in our and we're photonics transceivers. for QX example, customers of silicon For orders

indium In silicon targeting we and have a phosphide product EMLs. photonics addition, developed new

our first with win our and customers. additional We with leading design have qualifications customer multiple ongoing

stimulus wireless catalyst lasers China base broad a back revenue applications, QX is in will somewhat applications China. announced and a market new including expected amplifiers, arsenide HPT in more power in benefit gallium QX. demand September switches, the in This But pulled power environment. could high-speed for an provide in across of industrial LEDs. for improving conditions growing XX% market fiscal as the Our weak given economic than lumpy, after recovery Overall, particularly

product cost us We in gives learnings our we additional penetration our gallium eight-inch our believe to in production. continue bringing applications arsenide by confidence to provide be we a that Initial six-inch be leading We encouraged new where customers our advancement is highly and in gaining improve traction relatively arsenide our a historically solution market into competitive can shipments gallium by structure our the can successful wafer low. share. our HBT development to from

from ramp. to this application in We our revenue grow expect continue as to we XXXX

gross and joint to but and to JinMei, the over meaningful revenue our now margin gallium did recycle. continue have commitment addition, time, our that material of raw licensed drive material companies. and our both in in We're one ESG at efforts In arsenide is have we processing venture community visible successful. investment our This fully efforts These capability our also manufacturing. advanced to the of recycling be collected efficiency not

germanium Turning to substrates.

revenue This raw in participate we gross our revenue the affects which germanium QX are margins, [selective] the meaningfully With in our in in. again QX. germanium and being negatively rapid down to we impacted choose in opportunity bring rise pricing, our will material highly

our shows contribution office values. in We where we QX raw a QX and grew success and to again will level low longer material in in those the other of participate our in the coming can they business we finally, they will promise gallium expect our that increasing as our believe quarters, prices so growth be in we corporate demand, bottom on headwind market derive limited that overall efforts. business. We that expand opportunities do the satellite for stable business recycling And areas with no will of

with opportunity coming phosphide backhaul of business Data applications. great XXXX a the for be expansion continually material a and and portfolio to us our strategic are over of center optimistic indium raw contribute continue value our quarters. we Our in see in and telecom recovery companies joint PON the ventures, to our and business our we results. In to represents tailwinds further closing, for spending positively of growth to of CapEx business, about

economy our the you applications, and in back forward remain look to and profitability our gallium including applications, likely in HPT reporting guidance. to LEDs. wide is benefit for business and progress. With the in our catalyst XXXX in Our lasers we industrial quarter on is China that, positive arsenide on of a We I growth return improvement the call a fourth for focused believe be accelerating of turn Gary poised from to a variety to to Gary? to highly strengthening

Gary Fischer

Morris. are In $XX.X with out applications contribution between material be partially in $XX.X driven which we our stronger areas revenue decrease a takes as from be expect expected offset This and today, by Thanks, to raw Growth consistent to center arsenide germanium comments bottom in substrates our QX consideration data is likely in our approximately QX. indium million. as coming million substrates growth revenues, keeping phosphide in gallium in these to and well revenues. into improved, by slightly

for we We we and business, of are XXXX. growth most positioning pleased parts the strongly by believe ourselves are in strategic our the

our the gross the net will of be with of in range GAAP in range of $X.XX our $X.XX loss to $X.XX million shares. count Share to healthy will non-GAAP approximately we be $X.XX. guidance, performance, be the of terms margin XX.X In net rest the continued will of and expect loss expectation

Christina, Okay. This concludes our operator? prepared your questions. answer glad comments. to We'd be

Operator

question Richard Shannon first comes Your from of Craig-Hallum. line Instructions.) from the (Operator

Richard Shannon

guess of to there's important here. a that number ask seem I them

environment. third the a you is of big surprise How the revenues into a to -- past? in this expect you and of compete hope business here would Let here. dynamics level and a Or is over have me lower understand the in to I assume germanium just this of revenues this business back briefly generate time? in you quarter Is pricing look continue relative difficult to the was like this expect the business serially and a

Morris Young

Yes.

are customers the satellite to germanium [builders] our our more doubled their it's think material because I as raw price increase you so And price than difficult they to third of during budget. and most customers have know, quarter. own --

on margin not very So, attractive we business. those quote opted to not

QX. to going more we're decline So, business some in

reduce of So, germanium. expectation our that will

I business, that solid we footing raw much a has substrate on germanium have what business than a of see the other have the fact cost the as competitors in However, will -- still our believe, we the I material. very But are. that dependent it's same problem is

So, come, as highly the and market we down, competitive. everybody to think settles we're we believe starts

So, the will come down, back the as market. market to settles we

[altitude] know up orbit low As of booming you there have to scheduled and going think, China to and a satellite that as is have, is launch satellite business even low is -- it I satellite satellite low is XX,XXX to [marks] number well.

we the that will think see structure how evolves. back, I come will pricing So, market but eventually

Richard Shannon

and That's Okay. know. helpful good to

here. just phosphide, your two drivers here. clear you're here I what's growth to more on or this talking wanted most mean drivers about the business I mentioned centers, of or or sense strategic question photodetectors silicon touch for there. maybe photonics Let's on indium data be growth just a the get probably the

Tim Bettles

Yes. I take can that.

Gary Fischer

go Yes, ahead.

Tim Bettles

your the some beginnings QX. revenues in be will question. strong Tim. growth and is that right in think seen for data seeing AI that Thanks And demand us. of and We we now. This we're QX center believe for We've good increases Sorry.

here photodetector that looking at pair a phosphide-based So, at high-speed transceiver. a VCSEL what multimode really photodetectors we're is go for we're looking indium into

go to moment. to quickly distance as per of all photodetector. market a line move speeds to VCSELs short there's in-gas we need transceiver at gig know So, the an the higher, is the XXX that the multimode growing and And

of in seeing we're So, increase lot participating that. and a quite we're that, in well

is these focus photonics devices. through where chosen silicon and participating the applications, So, next. our EML only also really, and and really we the believe benefits that's to this a set greenfield to of grow year then strongly to that rest opportunity us We're for substrate on into the we've count

customers photonics So, EML some and penetrated customers, well. key as we've we're in some seeing growth silicon and also there

Richard Shannon

to this photoinjectors, to Okay. photonics. correct? be just clear last just Tim, specifically And follow and lasers are for this, These not silicon is on up topic that here, on

Tim Bettles

go that's other that into lasers It's CWDFB correct. Correct. or silicon predominantly lasers Yes, that business. photonics

Richard Shannon

Do place? trajectory mean kind the enough. Fair think you characterize have breadth growth? how what do we forecasts we we the Okay. AXT next, Do to would the And in into over and visibility engagements in that for of And wins How this place? general say, here? about have one could years? of two

Tim Bettles

Right.

definitely in we're that. yes, participating heavily So

I product. at we're customers the think business silicon sector we're specifically that largest for being number the the key next And one growth seeing in years of a the far in to photonics center of this three so and the space. seeing we're as in one this data of time what transceiver sectors over is

We've in some to that got we do. still We customers with are, need qualifying of in still as for to Morris work and number with We've for a their new silicon lasers. have I get got of say, the customers design other we a other that market more participating photonics launched heavily already number qualified win we've discussion, a that products specifically the said But customers. and EML with. we're as some

So, we really see big. there opportunities of the being

Richard Shannon

I HBTs, that one mentioned Maybe and most last market underpenetrated noting, of time. been some it's talk Maybe with us opportunities think prepared market? losing imagine you one where -- you're be again, of here out your remarks for haven't line. kind Wonderful. what what wins, of Again, of What Morris, a here share question, incumbents about where quite in design jump of in Okay. visibility you've to I you I'll some would seeing here. it's is might been. know as the here? might getting this share been kind kind resist you're And -- possible how

just can I over to this how we want big of getting get sense So, a see market time.

Morris Young

the really it's to because the -- depending XG million. from from our gallium restrictions steady phones are think a market China. how they HPTs exporting $XXX more -- worried $XX This size the Yes. is customers much million number interest phone. a And in because of comes of a China about I more about of of participation require sort HPT who on per market built in business out And

they So, diversified a want supplier.

for of And So, the door lot was we got We into a successful. think effort we opening sort us. that we believe spent of [eight-inch] development development. that very

cost, But the approximately demand eight-inch, of to yield apply yield. characteristic into three unfortunately, highly program eight-inch. eight-inch our six-inch, six-inch for We we the have well we're been only our think as know, to on now, just able because learned competitive new the has we our right improving that able And program I we are the you be market the in easily the And that we of so players landscape. we our improve that slowed, I for have find can XX% share. think but reduce should with this competitive what HPT as there as

So, we to opportunity share. believe plenty that of increase we our have

Operator

from do (Operator Shannon Craig-Hallum. We have Instructions.) Richard question from another

Richard Shannon

Well, I quick you one thanks talked great. I'm of to you can China. about guys. Maybe talk but not Maybe opportunity sure just another the two line, here. or Morris, in or which opportunity stimulus of see about to product for ones, over, or revenues line out got go? might China-based quarters, where the trying should can how think that how to judge And happen? your on lines couple we're then fast impact expect you we say, that you if next product

Morris Young

Yes.

they but the the do from center, they of laser believe is go? our they when know, one really phosphide laser mean customers, centers China the the slower, layers in device two high-power mainly believe, customers, sensitive but expand. I go then activities. definitely, we I [active] And the or China will very market makers, enjoy into economic hyper mainly sell to we could also Western States. are -- go They that opportunity market really, indium although our we where think think are I to although United customers, market direct into but speed what they I is market probably data

know mainly lasers you used for cutting that high-power As are tools.

automobile demand well their the think another battery a cars, if up. economy make go as lot dries demand up. LED is And I both manufacturing, the And whole example. in the you so to LED slows bit, as And more manufacturing a is going when

cell is phones. So,

cell recovery sometime really of a As you the strong. early sort coming selling in having know year COVID. year not now, volume is during this low the was right I a phones half economy China from of especially second really that think But

we to up, activities help in that if So, anything consumer us. go they think that cell industrial I phone believe related and particular, should

to think I help help the us believe, Stock like the index, moved was up. Exchange, activities, positively XX% impact bottom. saw has stimulus package not also, I in Shanghai grow the because So, Last IPO almost terms the only product of to us us our will I offering but from will

So, go way to the that's I I in public for should us momentum that if clear builds, the think -- think China.

Richard Shannon

Okay. question but That to I in is touch again a to want helpful. that to last second, phosphide. I'm on on on indium my touch going just related

heard in to please other is telecom again, made in the a you if I next you sense the be -- indicate or of some little that's PON market. market, improvement clear, of if a of in getting signs But visibility that's that to I be -- year? orders an going you clear like that visibility relative that which market, assume, seeing one. be It to you're the telecom things on think sounds case, about we terms while can any here. are excluding brief comment haven't

Morris Young

XX, if And we gauge time think would at now, is steady. are right our maybe not I year, boom say, not last almost down. I think it's like looking [Palms] up. inventory. mean XX. going we're said it's I the But they market right now, year. Everybody dried I low -- But that much it by got they was Last XXX, was Richard, it's around all the too activity.

Richard Shannon

here, Okay. potential That's just it of to right. kind All relates topic the China of question hitting on One fair. last listing. as STAR the

about AXT interactions there's market regulator, weaker left opportunities here. been we're the in there negatives. or there's some that positive maybe want get signs for if out and this progress you of can here you've mentioned any than of You of whatever, I years of any the seeing more couple moving forward. and suggest a has winnowing if guess some than a Obviously, a just been sense to rather positive talking signals lack

Morris Young

good Yes, a but me. question hard Richard, it's question, that it's -- a for

-- what They sell the But finances, all Stock everything public the account some ever that but that three very going okay? public and to. COVID four the would early more I we do, due at you through diligence and say, of especially thoroughly one they the when I on market fairly approving do. think I like time, your look up they applied, the was difficulty Exchange. XXX% personal got Shanghai of we Stock -- market your as well first the payable, And companies Exchange I something because you per Exchange on we think week, receivable, each executive real activities. China way who account inventory as estate, collapsed, since were Stock mean, in happened optimistic since ever questions all go China and XXXX from companies with drives to But

public unless So, are stellar they they bring start more to blame high don't company the any advancement, to well technology. in the as especially economic for drive are public say, needed in hey, as they -- performance and

But the And their resolved, well bit a with at one are saying, as hopefully, help. bill. stimulus Shanghai quarter I package was the the in is the the think major fit last end light or of a on tunnel and of revenue here. latter coming issue back the years so. think for us back definitely of Stock seeing Exchange as that however, wo But revenue have Gary with we our the because I rundown coming concerns we is the didn't last for the we

Morris Young

dancing sort have us think really but I of think it's to They before to bit go. very boxes. they They check optimistic, fairly all up although I'm have because approve little I to everything a them. -- let I the much

Operator

And floor back I'll with Morris questions, further no over to the turn Dr. Young.

Morris Young

in Thank conference call. our participation you for your

report in you there. again, of will earnings we Before We be Needham many the participating to see -- hope Conference. we you to Growth you

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

Operator

does Thank today's you. conference And this call. conclude

disconnect. may now You a great Have day.

AXT (AXTI) 31 Oct 242024 Q3 Earnings call transcript