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This content is a press release from our partner Globe Newswire. The AP newsroom and editorial departments were not involved in its creation.

AXT, Inc. Announces Fourth Quarter and Fiscal Year 2018 Financial Results

February 22, 2019

FREMONT, Calif., Feb. 20, 2019 (GLOBE NEWSWIRE) -- AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter and fiscal year, ended December 31, 2018.

Fourth Quarter 2018 Results

Revenue for the fourth quarter of 2018 was $22.2 million, compared with $28.6 million in the third quarter of 2018 and $26.3 million for the fourth quarter of 2017.

Gross margin was 26.3 percent of revenue for the fourth quarter of 2018, compared with 37.1 percent of revenue in the third quarter of 2018 and 37.2 percent for the fourth quarter of 2017.

Operating expenses were $6.5 million in the fourth quarter of 2018, compared with $6.3 million in the third quarter of 2018 and $6.1 million for the fourth quarter of 2017.

Operating loss for the fourth quarter of 2018 was $0.6 million compared with operating profit of $4.3 million in the third quarter of 2018 and $3.7 million for the fourth quarter of 2017.

Interest and other, net was a loss of $0.4 million for the fourth quarter of 2018, compared with a gain of $0.2 million in the third quarter of 2018 and a loss of $0.3 million for the fourth quarter of 2017. Interest and other, net for the fourth quarter of 2018 included interest earnings of $0.1 million, a foreign exchange gain of $0.4 million, other income of $0.1 million and a net loss of $1.0 million from the seven partially owned companies in the company’s supply chain accounted for under the equity method.

Income tax expense in the fourth quarter of 2018 was favorably adjusted for a gain of $0.2 million compared with a charge of $0.4 million in the third quarter of 2018 and $0.1 million for the fourth quarter of 2017.

Net loss in the fourth quarter of 2018 was $1.1 million, or $0.03 per share, compared with a net income of $3.9 million or $0.10 per diluted share in the third quarter of 2018 and $3.1 million or $0.08 per diluted share for the fourth quarter of 2017.

Fiscal Year 2018 Results (January 1 to December 31)

Revenue for fiscal year 2018 was $102.4 million, compared with $98.7 million in fiscal year 2017.

Gross margin for fiscal year 2018 was 36.2 percent of revenue, compared with 34.9 percent of revenue in fiscal year 2017.

Operating expenses for fiscal year 2018 were $24.9 million, compared with $21.8 million in fiscal year 2017.

Net interest and other income for fiscal year 2018 was a loss of $0.2 million, compared with a loss of $1.8 million in fiscal year 2017.

Income tax expense for fiscal 2018 was $0.9 million compared with $0.8 million in fiscal year 2017.

Net income in fiscal year 2018 was $9.7 million, or $0.24 per diluted share, compared with a net income of $10.1 million, or $0.26 per diluted share, in fiscal year 2017.

Management Qualitative Comments

“2018 was a mixed year for AXT,” said Morris Young, chief executive officer. “Global economic conditions were made more difficult by the uncertainty of trade tensions, and spending in certain end markets took a pause, impacting our expected growth and profitability for the year. Despite these challenges, our indium phosphide revenue set another record in 2018, and we saw growth in a host of new gallium arsenide applications that further suggest this material is entering its next period of expansion. In 2018, AXT achieved every major milestone established in the relocation of our gallium arsenide and germanium product lines. Although Q1 2019 is challenging, as we look ahead we are encouraged that the tone of customer comments includes an expectation for market recoveries later this year. We believe our competitive position remains strong, and that this will enable us to return to growth when the markets recover. In the meantime, we intend to continue the relocation, strengthen our business and drive greater efficiencies in our model.”

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 9999917). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 9999917) until February 26, 2019. 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 relocation and our expectations with respect to our business prospects and financial results. 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: the timing and receipt of significant orders; the cancellation of orders and return of product; emerging applications using chips or devices fabricated on our substrates; end-user acceptance of products containing chips or devices fabricated on our substrates; our ability to bring new products to market; product announcements by our competitors; the ability to control costs and improve efficiency; the ability to utilize our manufacturing capacity; product yields and their impact on gross margins; the relocation of manufacturing lines; possible factory shutdowns as a result of air pollution in China; the financial performance of our partially owned supply chain companies; policies and regulations in China 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, ---------------------- ----------------------- 2018 2017 2018 2017 ---------- ---------- ----------- ---------- Revenue $ 22,232 $ 26,332 $ 102,397 $ 98,673 Cost of revenue 16,382 16,534 65,350 64,198 - ------ - - ------ - - ------- - - ------ - Gross profit 5,850 9,798 37,047 34,475 - ------ - - ------ - - ------- - - ------ - Operating expenses: Selling, general and administrative 5,179 4,790 19,003 17,009 Research and development 1,309 1,274 5,897 4,827 - ------ - - ------ - - ------- - - ------ - Total operating expenses 6,488 6,064 24,900 21,836 - ------ - - ------ - - ------- - - ------ - Income (loss) from operations (638 ) 3,734 12,147 12,639 Interest income, net 114 127 528 461 Equity in loss of unconsolidated joint ventures (1,059 ) (307 ) (1,080 ) (1,694 ) Other income (expense), net 531 (150 ) 352 (553 ) - ------ - - ------ - - ------- - - ------ - Income (loss) before provision for income taxes (1,052 ) 3,404 11,947 10,853 Provision for (Benefit from) income taxes (173 ) 131 938 792 - ------ - - ------ - - ------- - - ------ - Net income (loss) (879 ) 3,273 11,009 10,061 Less: Net (income) loss attributable to noncontrolling (182 ) (139 ) (1,355 ) 87 interests - ------ - - ------ - - ------- - - ------ - Net income (loss) attributable to AXT, Inc. $ (1,061 ) $ 3,134 $ 9,654 $ 10,148 - ------ - - ------ - - ------- - - ------ - Net income (loss) attributable to AXT, Inc. per common share: Basic $ (0.03 ) $ 0.08 $ 0.24 $ 0.27 - ------ - - ------ - - ------- - - ------ - Diluted $ (0.03 ) $ 0.08 $ 0.24 $ 0.26 - ------ - - ------ - - ------- - - ------ - Weighted-average number of common shares outstanding: Basic 39,197 38,766 39,049 37,444 - ------ - - ------ - - ------- - - ------ - Diluted 39,197 40,448 40,265 38,966 - ------ - - ------ - - ------- - - ------ -

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

December December 31, 31, ----------- ----------- 2018 2017 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 16,526 $ 44,352 Short-term investments 22,129 20,032 Accounts receivable, net 19,586 22,778 Inventories 58,571 45,840 Prepaid expenses and other current assets 11,728 7,519 - ------- - - ------- - Total current assets 128,540 140,521 Long-term investments 717 12,576 Property, plant and equipment, net 82,280 46,530 Other assets 11,987 11,573 - ------- - - ------- - Total assets $ 223,524 $ 211,200 - ------- - - ------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 13,338 $ 11,445 Accrued liabilities 15,371 11,149 - ------- - - ------- - Total current liabilities 28,709 22,594 Other long-term liabilities 283 289 - ------- - - ------- - Total liabilities 28,992 22,883 - ------- - - ------- - Stockholders’ equity: Preferred stock 3,532 3,532 Common stock 39 39 Additional paid-in capital 234,419 231,679 Accumulated deficit (45,183 ) (54,837 ) Accumulated other comprehensive income (loss) (1,972 ) 3,407 - ------- - - ------- - Total AXT, Inc. stockholders’ equity 190,835 183,820 Noncontrolling interests 3,697 4,497 - ------- - - ------- - Total stockholders’ equity 194,532 188,317 - ------- - - ------- - Total liabilities and stockholders’ equity $ 223,524 $ 211,200 - ------- - - ------- -

Contacts:

Gary Fischer Chief Financial Officer (510) 683-5900

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