AXT, Inc. Announces Fourth Quarter 2010 Financial Results

FREMONT, CA--(Marketwire - February 23, 2011) - AXT, Inc. (NASDAQ: AXTI)

--  Q4 FY 2010 Net Revenues: $26.9 million

--  Q4 FY 2010 GAAP Gross Margin: 39.8 percent

--  Q4 FY 2010 GAAP Net Income: $4.9 million; $0.15 per share (diluted)

AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter ended December 31, 2010.

Fourth Quarter 2010 Results

Revenue for the fourth quarter of 2010 was $26.9 million, flat compared with $26.8 million in the third quarter of 2010, and 51% up from $17.8 million in the fourth quarter of 2009.

Total gallium arsenide (GaAs) substrate revenue was $18.7 million for the fourth quarter of 2010, compared with $19.2 million in the third quarter of 2010, and $12.6 million in the fourth quarter of 2009. Indium phosphide (InP) substrate revenue was $1.1 million for the fourth quarter of 2010, compared with $955,000 in the third quarter of 2010, and $513,000 in the fourth quarter of 2009. Germanium (Ge) substrate revenue was $3.4 million for the fourth quarter of 2010 compared with $2.3 million in the third quarter of 2010 and $1.9 million in the fourth quarter of 2009. Raw materials sales were $3.5 million for the fourth quarter of 2010, compared with $4.4 million in the third quarter of 2010 and $2.8 million in the fourth quarter of 2009.

Gross margin was 39.8 percent of revenue for the fourth quarter of 2010. By comparison, gross margin in the third quarter of 2010 was 39.3 percent of revenue. Gross margin was 33.9 percent of revenue for the fourth quarter of 2009.

Operating expenses were $5.1 million in the fourth quarter of 2010, compared with $3.8 million in the third quarter of 2010. Operating expenses in the fourth quarter of 2009 were $3.0 million.

Income from operations for the fourth quarter of 2010 was $5.6 million compared with income from operations of $6.7 million in the third quarter of 2010, and income from operations of $3.1 million in the fourth quarter of 2009.

Net interest and other income for the fourth quarter of 2010 was $422,000, which included an unrealized foreign exchange gain of $242,000. This compares with net interest and other income of $468,000 in the third quarter of 2010, which included an unrealized foreign exchange gain of $210,000, and net interest and other expense of $92,000 in the fourth quarter of 2009, which included an unrealized foreign exchange loss of $163,000.

Net income in the fourth quarter of 2010 was $4.9 million or $0.15 per diluted share compared with net income of $5.6 million or $0.17 per diluted share in the third quarter of 2010, and with a net income of $2.8 million or $0.09 per diluted share in the fourth quarter of 2009.

Management Qualitative Comments

"2010 was a year of tremendous execution for AXT," said Morris Young, chief executive officer. "Revenue for the year increased by more than 72 percent from 2009; our gross margins performance improved by more than 1300 basis points and our net income grew by $20.5 million. These results reflect healthy growth in our markets as well as continued gains, outstanding product quality and tremendous operational execution across our entire organization. While we are experiencing some near-term softness in the Taiwanese LED market and expect seasonality in our first quarter semi-insulating gallium arsenide revenues, we believe that we will see sequential growth in our business beginning again in the second quarter, driven by positive secular trends in the demand for wireless devices, LEDs and photovoltaics, as well as gains in our positioning within various customers in our market."

Outlook for First Quarter, Ending March 31, 2011

AXT estimates revenue for the first quarter for 2011 will be between $24.0 million and $25.0 million, which is 28% greater than the actual first quarter of 2010. The company estimates that net income per share will be between $0.11 and $0.13, which takes into account our weighted average share count of approximately 32.6 million shares.

Conference Call

The company will host a conference call to discuss these results on February 23, 2011 at 1:30 p.m. PST. The conference call can be accessed at (719) 325-2467 (passcode 3611456). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 3611456) until March 2, 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 five 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 first quarter of 2011, the current and long-term growth and trends in the demand for our products, the outlook for sales of wireless devices and the adoption of and investment in LED technology, the change in the composition of our revenues by product, and the positioning of the company in terms of capacity, raw material access and cost-structure within the industry. 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)


                                                          Twelve Months
                                    Three Months Ended        Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Revenue                             $ 26,866  $ 17,836  $ 95,493  $ 55,364
Cost of revenue                       16,169    11,784    58,998    41,495
                                    --------  --------  --------  --------
Gross profit                          10,697     6,052    36,495    13,869
                                    --------  --------  --------  --------

Operating expenses:
  Selling, general and
   administrative                      4,167     2,574    13,972    13,389
  Research and development               911       394     2,339     1,569
  Restructuring charge                     -         -         -       507
                                    --------  --------  --------  --------
    Total operating expenses           5,078     2,968    16,311    15,465
                                    --------  --------  --------  --------
Income (loss) from operations          5,619     3,084    20,184    (1,596)
Interest income (expense), net            37        60        53       177
Other income (expense), net              385      (152)    2,462       385
                                    --------  --------  --------  --------

Income (loss) before provision for
 income taxes                          6,041     2,992    22,699    (1,034)
Provision for income taxes               646       (42)    2,323       471
                                    --------  --------  --------  --------
Net income (loss)                      5,395     3,034    20,376    (1,505)

Less: Net income (loss)
 attributable to noncontrolling
 interest                               (496)     (257)   (1,723)     (393)
                                    --------  --------  --------  --------
Net income (loss) attributable to
 AXT, Inc.                          $  4,899  $  2,777  $ 18,653  $ (1,898)
                                    ========  ========  ========  ========

Net income (loss) attributable to
 AXT, Inc. per common share:
  Basic                             $   0.16  $   0.09  $   0.60  $  (0.07)
                                    ========  ========  ========  ========
  Diluted                           $   0.15  $   0.09  $   0.57  $  (0.07)
                                    ========  ========  ========  ========

Weighted average number of common
 shares outstanding:
  Basic                               31,061    30,647    31,008    30,500
                                    ========  ========  ========  ========
  Diluted                             32,614    31,322    32,512    30,500
                                    ========  ========  ========  ========





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

                                                      December   December
                                                         31,        31,
                                                        2010       2009
                                                      ---------  ---------
Assets:
Current assets
  Cash and cash equivalents                           $  23,724  $  16,934
  Short-term investments                                 17,251     18,469
  Accounts receivable, net                               23,076     15,362
  Inventories, net                                       35,986     27,718
  Prepaid expenses and other current assets               4,090      2,411
                                                      ---------  ---------
         Total current assets                           104,127     80,894

Property, plant and equipment, net                       24,240     20,853
Other assets                                             11,884      6,199

                                                      ---------  ---------
        Total assets                                  $ 140,251  $ 107,946
                                                      =========  =========

Liabilities and stockholders' equity:
Current liabilities
  Accounts payable                                    $   7,094  $   5,571
  Accrued liabilities                                     7,745      4,566
  Current portion of long-term debt                           -         76
                                                      ---------  ---------
       Total current liabilities                         14,839     10,213

Long-term debt, net of current portion                        -        420
Other long-term liabilities                               5,608         62
                                                      ---------  ---------
       Total liabilities                                 20,447     10,695
                                                      ---------  ---------

Stockholders' equity:
  Preferred stock                                         3,532      3,532
  Common stock                                          190,053    187,901
  Accumulated deficit                                   (82,477)  (101,130)
  Other comprehensive income                              4,652      4,300
                                                      ---------  ---------
       Total AXT, Inc. stockholders' equity             115,760     94,603

  Noncontrolling interest                                 4,044      2,648
                                                      ---------  ---------
       Total stockholders' equity                       119,804     97,251

                                                      ---------  ---------
       Total liabilities and stockholders' equity     $ 140,251  $ 107,946
                                                      =========  =========

Contact Information: Contacts: Raymond A. Low Chief Financial Officer (510) 683-5900 Leslie Green Green Communications Consulting, LLC (650) 312-9060