AXT, Inc. Announces Second Quarter 2011 Financial Results

FREMONT, CA--(Marketwire - Jul 27, 2011) - AXT, Inc. (NASDAQ: AXTI)

• Q2 FY 2011 Net Revenues: $30.0 million

• Q2 FY 2011 GAAP Gross Margin: 46.7 percent

• Q2 FY 2011 GAAP Net Income: $7.1 million; $0.21 per share (diluted)

AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor Substrates, today reported financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Results
Revenue for the second quarter of 2011 was $30.0 million, up 22 percent from $24.6 million in the first quarter of 2011, and up 29.6 percent from $23.2 million in the second quarter of 2010.

Total gallium arsenide (GaAs) substrate revenue was $18.0 million for the second quarter of 2011, compared with $15.9 million in the first quarter of 2011, and $16.2 million in the second quarter of 2010. Indium phosphide (InP) substrate revenue was $1.6 million for the second quarter of 2011, compared with $1.3 million in the first quarter of 2011, and $1.1 million in the second quarter of 2010. Germanium (Ge) substrate revenue was $2.7 million for the second quarter of 2011 compared with $3.0 million in the first quarter of 2011 and $1.6 million in the second quarter of 2010. Raw materials sales were $7.7 million for the second quarter of 2011, compared with $4.4 million in the first quarter of 2011 and $4.2 million in the second quarter of 2010.

Gross margin was 46.7 percent of revenue for the second quarter of 2011. By comparison, gross margin in the first quarter of 2011 was 43.4 percent of revenue. Gross margin was 36.8 percent of revenue for the second quarter of 2010.

Operating expenses were $4.4 million in the second quarter of 2011, compared with $4.2 million in the first quarter of 2011. Operating expenses in the second quarter of 2010 were $3.6 million.

Income from operations for the second quarter of 2011 was $9.5 million compared with income from operations of $6.5 million in the first quarter of 2011, and income from operations of $5.0 million in the second quarter of 2010.

Net interest and other income for the second quarter of 2011 was $519,000, which included a foreign exchange gain of $65,000. This compares with net interest and other expense of $276,000 in the first quarter of 2011, which included a foreign exchange loss of $196,000, and net interest and other income of $1.6 million in the second quarter of 2010, which included $1.2 million, net, sales tax refund and a foreign exchange gain of $230,000.

Net income in the second quarter of 2011 was $7.1 million or $0.21 per diluted share compared with net income of $4.2 million or $0.13 per diluted share in the first quarter of 2011, and with a net income of $5.5 million or $0.17 per diluted share in the second quarter of 2010. Excluding the $1.2 million, net, sales tax refund or $0.04 per diluted share, our net income in the second quarter of 2010 was $4.3 million or $0.13 per diluted share.

Management Qualitative Comments
"This was another strong quarter for AXT," said Morris Young, chief executive officer. "Revenues exceeded our expectations, driven by double-digit growth in our substrate business and record revenues from third party raw material sales. We are experiencing healthy demand across all of our product categories and are pleased to see our competitive positioning continue to strengthen. Further, our strong business model and solid operational execution are resulting in healthy growth to our bottom line. We believe that the trends fueling our growth are substantial, and we are well-positioned to benefit with the capacity, raw material access and attractive cost-structure that are unique in our industry."

Outlook for Third Quarter, Ending September 30, 2011
AXT estimates revenue for the third quarter for 2011 will be between $30.5 million and $31.5 million. The company estimates that net income per share will be between $0.18 and $0.20, which takes into account our weighted average share count of approximately 33.4 million shares.

Conference Call
The company will host a conference call to discuss these results on July 27, 2011 at 1:30 p.m. PDT. The conference call can be accessed at (719) 457-2637 (passcode 1799133). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 1799133) until August 3, 2011. 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.

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 our outlook for the third quarter of 2011, the current and long-term growth and trends in the demand for our products, our progress in our strategic plans, and the positioning of the company. 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.

FINANCIAL TABLES TO FOLLOW

AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2011			2010			2011			2010
Revenue			$	30,031		$	23,177		$	54,597		$	41,818
Cost of revenue				16,005			14,642			29,911			26,551
Gross profit				14,026			8,535			24,686			15,267
Operating expenses:
	Selling, general and administrative			3,714			3,039			7,404			6,458
	Research and development			699			515			1,204			966
		Total operating expenses		4,413			3,554			8,608			7,424
Income from operations				9,613			4,981			16,078			7,843
Interest income (expense), net				69			(25)			156			(10)
Other income, net				450			1,556			87			1,635
Income before provision for income taxes				10,132			6,512			16,321			9,468
Provision for income taxes				1,064			560			1,966			806
Net income				9,068			5,952			14,355			8,662
Less: Net income attributable to noncontrolling interest				(2,006)			(417)			(3,085)			(547)
Net income attributable to AXT, Inc.			$	7,062		$	5,535		$	11,270		$	8,115
Net income attributable to AXT, Inc. per common share:
	Basic		$	0.22		$	0.18		$	0.35		$	0.26
	Diluted		$	0.21		$	0.17		$	0.34		$	0.25
Weighted average number of common shares outstanding:
	Basic			31,831			30,834			31,775			30,789
	Diluted			33,093			32,172			33,146			31,982
				- more -

AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
			June 30,			December 31,
			2011			2010
Assets:
Current assets
	Cash and cash equivalents		$	21,078		$	23,724
	Short-term investments			15,197			17,251
	Accounts receivable, net			22,958			23,076
	Inventories			39,653			35,986
	Prepaid expenses and other current assets			8,699			4,090
		Total current assets		107,585			104,127
Property, plant and equipment, net				28,814			24,240
Other assets				14,263			11,884
		Total assets	$	150,662		$	140,251
Liabilities and stockholders' equity:
Current liabilities
	Accounts payable		$	3,745		$	7,094
	Accrued liabilities			7,681			7,745
		Total current liabilities		11,426			14,839
Other long-term liabilities				4,868			5,608
		Total liabilities		16,294			20,447
Stockholders' equity:
	Preferred stock			3,532			3,532
	Common stock			191,008			190,053
	Accumulated deficit			(71,207)			(82,477)
	Other comprehensive income			5,366			4,652
		Total AXT, Inc. stockholders' equity		128,699			115,760
	Noncontrolling interest			5,669			4,044
		Total stockholders' equity		134,368			119,804
		Total liabilities and stockholders' equity	$	150,662		$	140,251