News Column

AXT, Inc. Announces Fourth Quarter and Fiscal 2013 Financial Results

February 25, 2014

FREMONT, CA -- (Marketwired) -- 02/25/14 -- AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter ended Dec. 31, 2013.

Fourth Quarter 2013 Results

Revenue for the fourth quarter of 2013 was $18.6 million compared with $20.5 million in the third quarter of 2013. Total gallium arsenide (GaAs) substrate revenue was $8.9 million for the fourth quarter of 2013, compared with $9.0 million in the third quarter of 2013. Indium phosphide (InP) substrate revenue was $1.8 million for the fourth quarter of 2013, compared with $1.4 million in the third quarter of 2013. Germanium (Ge) substrate revenue was $3.6 million for the fourth quarter of 2013, compared with $5.5 million in the third quarter of 2013. Raw materials sales were $4.3 million for the fourth quarter of 2013, compared with $4.6 million in the third quarter of 2013.

Gross margin was 15.1 percent of revenue for the fourth quarter of 2013, compared with 11.9 percent of revenue in the third quarter of 2013.

Operating expenses were $4.4 million in the fourth quarter of 2013, compared with $5.1 million in the third quarter of 2013.

Loss from operations for the fourth quarter of 2013 was $1.2 million compared with a loss from operations of $2.6 million in the third quarter of 2013.

Net interest and other income for the fourth quarter was $293,000, which was primarily attributable to $278,000 from equity earnings of the company's unconsolidated joint ventures, and $272,000 from interest income, partially offset by $289,000 foreign exchange losses. This compares with net interest and other income of $354,000 in the third quarter, which was mainly attributable to $346,000 equity earnings of our unconsolidated joint ventures, partially offset by $67,000 foreign exchange losses.

Net loss in the fourth quarter of 2013 was $1.2 million or $0.04 per diluted share compared with net loss of $2.3 million or $0.07 per diluted share in the third quarter of 2013.

Fiscal Year 2013 Results

Revenue for fiscal year 2013 was $85.3 million, down from $88.4 million in fiscal year 2012. Gross margin for fiscal year 2013 was 13.9 percent of revenue compared with 28.1 percent of revenue for fiscal year 2012.

Net loss for fiscal year 2013 was $8.0 million or $0.25 per share compared with net income of $3.1 million or $0.09 per diluted share for fiscal year 2012.

Management Qualitative Comments

"Our fiscal year 2013 was among our most difficult years, with a significant technology transition, market consolidation and customer-specific technical issues," said Morris Young, chief executive officer. "We are now focusing our efforts on growing our market presence in strategic areas, and leveraging our low-cost manufacturing as a competitive advantage. In the meantime, we are sizing our operations to be more in line with the demand environment and are implementing a number of programs to improve our gross margins and lower our operating expenses. We continue to focus on cash management and are committed to driving increasing value for our shareholders."

Conference Call

The company will also host a conference call to discuss these results on Feb. 25, 2014 at 1:30 p.m. PT. The conference call can be accessed at (719) 325-2455 (passcode 9920007). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 9920007) until March 3, 2014. 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.

AXT will provide highlights of its fourth quarter results on today's conference call, but investors can find the full financial summary on the investor relations portion of the company's website at www.axt.com.

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, fiber optic communications and solar cell. 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. AXT has manufacturing facilities in China and invests in joint ventures in China 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 the market demand for our products, our market opportunity, our business planning and management approach and our expectations with respect to our business prospects. 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 factory closures or other events causing delays by our customers on the timing of sales of our 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 any forward-looking statement, as a result of new information, future events or otherwise.


AXT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, -------------------- -------------------- 2013 2012 2013 2012 --------- --------- --------- --------- Revenue $ 18,603$ 18,927$ 85,335$ 88,374 Cost of revenue 15,790 15,243 73,507 63,522 --------- --------- --------- --------- Gross profit 2,813 3,684 11,828 24,852 --------- --------- --------- --------- Operating expenses: Selling, general and administrative 3,631 3,710 16,066 15,419 Research and development 797 875 3,424 3,468 --------- --------- --------- --------- Total operating expenses 4,428 4,585 19,490 18,887 --------- --------- --------- --------- Income (loss) from operations (1,615) (901) (7,662) 5,965 Interest income, net 272 316 408 518 Equity in earnings of unconsolidated joint ventures 278 495 1,377 1,281 Other income (expense), net (257) (289) (748) (761) --------- --------- --------- --------- Income (loss) before provision for income taxes (1,322) (379) (6,625) 7,003 Provision for (benefit from) income taxes (134) 294 188 853 --------- --------- --------- --------- Net income (loss) (1,188) (673) (6,813) 6,150 Less: Net income (loss) attributable to noncontrolling interest (40) (83) (1,145) (3,040) --------- --------- --------- --------- Net income (loss) attributable to AXT, Inc. $ (1,228)$ (756)$ (7,958)$ 3,110 ========= ========= ========= ========= Net income (loss) attributable to AXT, Inc. per common share: Basic $ (0.04)$ (0.02)$ (0.25)$ 0.09 ========= ========= ========= ========= Diluted $ (0.04)$ (0.02)$ (0.25)$ 0.09 ========= ========= ========= ========= Weighted average number of common shares outstanding: Basic 32,628 32,220 32,700 32,144 ========= ========= ========= ========= Diluted 32,628 32,220 32,700 32,865 ========= ========= ========= ========= AXT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) December 31, December 31, 2013 2012 -------------- -------------- Assets: Current assets Cash and cash equivalents $ 24,961$ 30,634 Short-term investments 12,499 10,270 Accounts receivable, net 14,943 17,912 Inventories 39,127 40,352 Related party notes receivable - current 0 2,036 Prepaid expenses and other current assets 8,010 5,268 -------------- -------------- Total current assets 99,540 106,472 Long-term investments 10,145 9,191 Property, plant and equipment, net 37,621 37,235 Related party notes receivable - long-term 1,715 416 Other assets 14,801 14,275 -------------- -------------- Total assets $ 163,822$ 167,589 ============== ============== Liabilities and stockholders' equity: Current liabilities Accounts payable $ 8,140$ 5,894 Accrued liabilities 7,286 7,202 -------------- -------------- Total current liabilities 15,426 13,096 Long-term portion of royalty payments 2,525 3,325 Other long-term liabilities 325 254 -------------- -------------- Total liabilities 18,276 16,675 -------------- -------------- Stockholders' equity: Preferred stock 3,532 3,532 Common stock 32 32 Additional paid-in capital 194,156 193,063 Accumulated deficit (67,005) (59,047) Accumulated other comprehensive income 8,953 6,033 -------------- -------------- Total AXT, Inc. stockholders' equity 139,668 143,613 Noncontrolling interest 5,878 7,301 -------------- -------------- Total stockholders' equity 145,546 150,914 -------------- -------------- Total liabilities and stockholders' equity $ 163,822$ 167,589 ============== ==============



Contacts: Morris S. Young Chief Executive Officer (510) 683-5900 Leslie GreenGreen Communications Consulting, LLC (650) 312-9060



Source: AXT, Inc.


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