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AXT, Inc. Announces Fourth Quarter and Fiscal Year 2017 Financial Results

FREMONT, Calif., Feb. 21, 2018 (GLOBE NEWSWIRE) -- AXT, Inc. (Nasdaq:AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter and fiscal Year 2017, ended December 31, 2017.

Fourth Quarter 2017 Results

Revenue for the fourth quarter of 2017 was $26.3 million, compared with $28.2 million in the third quarter of 2017 and $20.3 million for the fourth quarter of 2016.  This is a 30% increase in quarterly revenue as compared to the fourth quarter of 2016.

Gross margin was 37.2 percent of revenue for the fourth quarter of 2017, compared with 39.5 percent of revenue in the third quarter of 2017 and 37.1 percent for the fourth quarter of 2016.

Operating expenses were $6.1 million in the fourth quarter of 2017, compared with $5.9 million in the third quarter of 2017 and $5.2 million for the fourth quarter of 2016.

Operating profit for the fourth quarter of 2017 was $3.7 million compared with operating profit of $5.2 million in the third quarter of 2017 and $2.3 million for the fourth quarter of 2016.

Interest and other, net was a loss of $0.3 million for the fourth quarter of 2017, compared with a loss of $0.5 million in the third quarter of 2017 and a loss of $0.3 million for the fourth quarter of 2016.  Interest and other, net for the fourth quarter of 2017 included interest earnings of $0.1 million, a foreign exchange loss of $0.1 million and a net loss of $0.3 million from the seven partially owned companies in the company’s supply chain accounted for under the equity method.

/EIN News/ -- Income tax expense in the fourth quarter of 2017 was $0.1 million compared with $0.2 million in the third quarter of 2017 and $0.0 million for the fourth quarter of 2016.

Net income in the fourth quarter of 2017 was $3.1 million, or $0.08 per diluted share, compared with a net income of $4.4 million or $0.11 per diluted share in the third quarter of 2017 and $2.2 million or $0.06 per diluted share for the fourth quarter of 2016.

Fiscal Year 2017 Results (January 1 to December 31)

Revenue for fiscal year 2017 was $98.7 million, compared with $81.3 million in fiscal year 2016.  This is a 21% increase in annual revenue as compared to fiscal year 2016.

Gross margin for fiscal year 2017 was 34.9 percent of revenue, compared with 32.4 percent of revenue in fiscal year 2016.

Operating expenses for fiscal year 2017 were $21.8 million, compared with $20.0 million in fiscal year 2016.

Net interest and other income for fiscal year 2017 was a loss of $1.8 million, compared with a loss of $0.7 million in fiscal year 2016.

Income tax expense for fiscal 2017 was $0.8 million compared with $0.7 million in fiscal year 2016.

Net income in fiscal year 2017 was $10.1 million, or $0.26 per diluted share, compared with a net income of $5.6 million, or $0.17 per diluted share, in fiscal year 2016.  This is an 80% increase in net income as compared to fiscal year 2016.

Management Qualitative Comments

“Our Q4 results capped off a strong year of execution for AXT,” said Morris Young, chief executive officer. “We delivered 21 percent growth in 2017, including record indium phosphide revenue and solid performance across our product portfolio. In addition, we achieved meaningful improvement in key financial metrics, including an 80 percent increase in net profits from the prior year. We are excited to see a resurgence of demand for compound semiconductor substrates in new applications that have the power to reshape the technology landscape over the coming decades. As such, we continue to invest in the advancement of our products and customer support capabilities, and believe that we are positioning the company well for continued growth and new opportunities in 2018 and beyond.”

Conference Call

The company will host a conference call to discuss these results today at 1:30 p.m. PT. The conference call can be accessed at (844) 892-6598 (passcode 7887748). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 7887748) until February 27, 2018. 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) 438-4700.

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge) through its manufacturing facilities in Beijing, China.   AXT’s worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions.  The company’s substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell applications. Its vertical gradient freeze (VGF) process technology 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, as part of its supply chain strategy, has partial ownership in ten companies 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, for example, statements regarding the market demand for our products, our growth prospects and opportunities for continued business expansion, our market opportunity, our schedule and timelines regarding our relocation plans and our expectations with respect to our business prospects. These forward-looking statements are based upon assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results 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; policies and regulations in China; 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; our ability to control costs, our ability to utilize our manufacturing capacity; product yields and their impact on gross margins; and other factors as set forth in the company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q 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.


FINANCIAL TABLES TO FOLLOW


AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

                           
    Three Months Ended   Year Ended  
    December 31,    December 31,  
    2017     2016     2017     2016    
                           
Revenue   $  26,332     $  20,269     $  98,673     $  81,349    
Cost of revenue      16,534        12,746        64,198        54,968    
Gross profit      9,798        7,523        34,475        26,381    
Operating expenses:                          
Selling, general and administrative      4,790        3,774        17,009        13,880    
Research and development      1,274        1,431        4,827        5,850    
Restructuring charge      —        —        —        226    
Total operating expenses      6,064        5,205        21,836        19,956    
Income from operations      3,734        2,318        12,639        6,425    
Interest income, net      127        106        461        409    
Equity in loss of unconsolidated joint ventures      (307 )      (558 )      (1,694 )      (1,995 )  
Other (expense) income, net      (150 )      178        (553 )      860    
Income before provision for income taxes      3,404        2,044        10,853        5,699    
Provision for income taxes      131        20        792        733    
Net income      3,273        2,024        10,061        4,966    
Less: Net (income) loss attributable to noncontrolling interests      (139 )      190        87        670    
Net income attributable to AXT, Inc.   $  3,134     $  2,214     $  10,148     $  5,636    
Net income attributable to AXT, Inc. per common share:                          
Basic   $  0.08     $  0.07     $  0.27     $  0.17    
Diluted   $  0.08     $  0.06     $  0.26     $  0.17    
Weighted average number of common shares outstanding:                          
Basic      38,766        32,431        37,444        32,139    
Diluted      40,448        33,734        38,966        32,894    
                           



AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

               
    December 31,    December 31,   
    2017
  2016
 
               
ASSETS              
Current assets:              
Cash and cash equivalents   $  44,352     $  36,152    
Short-term investments      20,032        11,415    
Accounts receivable, net      22,778        14,453    
Inventories      45,840        40,152    
Prepaid expenses and other current assets      7,519        5,114    
Total current assets      140,521        107,286    
Long-term investments      12,576        6,156    
Property, plant and equipment, net      46,530        27,805    
Related party notes receivable – long-term      —        157    
Other assets      11,573        12,842    
Total assets   $  211,200     $  154,246    
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable   $  11,445     $  6,691    
Accrued liabilities      11,149        9,260    
Total current liabilities      22,594        15,951    
Long-term portion of royalty payments      —        575    
Other long-term liabilities      289        330    
Total liabilities      22,883        16,856    
Stockholders’ equity:              
Preferred stock      3,532        3,532    
Common stock      39        33    
Additional paid-in capital      231,679        194,177    
Accumulated deficit      (54,837 )      (64,985 )  
Accumulated other comprehensive income      3,407        253    
Total AXT, Inc. stockholders’ equity      183,820        133,010    
Noncontrolling interests      4,497        4,380    
Total stockholders’ equity      188,317        137,390    
Total liabilities and stockholders’ equity   $  211,200     $  154,246    
                   

Contacts:
Gary Fischer
Chief Financial Officer
(510) 683-5900

Leslie Green
Green Communications Consulting, LLC
(650) 312-9060

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