EX-99.1 2 a08-27078_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

FOR IMMEDIATE RELEASE

 

Contacts:

 

 

Wilson W. Cheung

 

Chief Financial Officer

 

(510) 683-5900

 

 

 

 

 

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.

 

 

 

 

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.

 

2


 

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.

 

###

 

FINANCIAL TABLES TO FOLLOW

 

3


 

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

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

$

0.03

 

$

0.05

 

$

0.11

 

Diluted

 

$

(0.03

)

$

0.03

 

$

0.05

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

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

 

 

- more -

 


 

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

 

 

 

 

 

 

 

Property, plant and equipment, net

 

21,462

 

15,986

 

Restricted deposits

 

3,000

 

6,700

 

Other assets

 

5,246

 

5,242

 

 

 

 

 

 

 

Total assets

 

$

114,586

 

$

112,772

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

18

 

6,250

 

Other long-term liabilities

 

3,233

 

3,778

 

Total liabilities

 

18,638

 

19,522

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

114,586

 

$

112,772