Axt Inc 10-Q for FY2021 Q2

Axt Inc (AXTI)

10-Q 2021-08-12 For: 2021-06-30

Added on April 06, 2026

About this 10-Q

Axt Inc filed this 10-Q on August 12, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $33.74M; up 52.4% from $22.13M a year earlier
Net income: $4.39M; up 1114.7% from net income of $361K a year earlier
Diluted EPS: $0.10; up 900.0% from $0.01 a year earlier

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DELAWARE		94-3031310
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)


Large accelerated filer ◻		Accelerated filer ◻

Non-accelerated filer ⌧		Smaller reporting company ☒
		Emerging growth company ☐


Class		Outstanding at August 1, 2021
Common Stock, $0.001 par value		42,506,615

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020	5
Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020	6
Notes To Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	49
Item 4. Controls and Procedures	51
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	52
Item 1A. Risk Factors	52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3. Defaults upon Senior Securities	74
Item 4. Mine Safety Disclosures	74
Item 5. Other Information	74
Item 6. Exhibits	75
Signatures	77


	June 30,		December 31,
	2021		2020

ASSETS
Current assets:
Cash and cash equivalents	$	52,783	$	72,602
Short-term investments		2,751		240
Accounts receivable, net of allowances of $217 as of June 30, 2021 and December 31, 2020		33,473		24,558
Inventories		58,926		51,515
Prepaid expenses and other current assets		16,509		15,603
Total current assets		164,442		164,518
Long-term investments		2,944		5,726
Property, plant and equipment, net		127,241		115,825
Operating lease right-of-use assets		2,504		2,683
Other assets		12,273		10,110
Total assets	$	309,404	$	298,862
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,130	$	12,669
Accrued liabilities		11,547		15,995
Bank loan		10,533		10,411
Total current liabilities		38,210		39,075
Noncurrent operating lease liabilities		2,156		2,374
Other long-term liabilities		1,693		1,881
Total liabilities		42,059		43,330
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests (Note 18)		50,083		47,563
Stockholders’ equity:
Preferred stock Series A, $0.001 par value; 2,000 shares authorized; 883 shares issued and outstanding as of June 30, 2021 and December 31, 2020 (Liquidation preference of $7,434 and $7,346 as of June 30, 2021 and December 31, 2020)		3,532		3,532
Common stock, $0.001 par value; 70,000 shares authorized; 42,480 and 41,967 shares issued and outstanding as of June 30, 2021 and December 31, 2020		42		42
Additional paid-in capital		228,411		230,381
Accumulated deficit		(36,735)		(44,545)
Accumulated other comprehensive income		4,533		3,209
Total AXT, Inc. stockholders’ equity		199,783		192,619
Noncontrolling interests		17,479		15,350
Total stockholders’ equity		217,262		207,969
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	309,404	$	298,862


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

Revenue	$	33,735	$	22,134	$	65,085	$	42,857
Cost of revenue		21,497		15,366		41,311		30,567
Gross profit		12,238		6,768		23,774		12,290
Operating expenses:
Selling, general and administrative		5,795		4,747		11,365		9,496
Research and development		2,537		1,543		4,942		2,950
Total operating expenses		8,332		6,290		16,307		12,446
Income (loss) from operations		3,906		478		7,467		(156)
Interest income (expense), net		39		(39)		(11)		(68)
Equity in income (loss) of unconsolidated joint ventures		1,502		(168)		2,613		(288)
Other income (expense), net		61		1,608		(50)		2,974
Income before provision for income taxes		5,508		1,879		10,019		2,462
Provision for income taxes		893		920		1,639		1,286
Net income		4,615		959		8,380		1,176
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interests		(230)		(598)		(570)		(993)
Net income attributable to AXT, Inc.	$	4,385	$	361	$	7,810	$	183
Net income attributable to AXT, Inc. per common share:
Basic	$	0.11	$	0.01	$	0.19	$	0.00
Diluted	$	0.10	$	0.01	$	0.18	$	0.00
Weighted-average number of common shares outstanding:
Basic		41,248		39,973		41,124		39,891
Diluted		42,727		40,750		42,725		40,543


	June 30, 2021								December 31, 2020
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		(Loss)		Value		Cost		Gain		(Loss)		Value
Classified as:
Cash	$	43,496	$	—	$	—	$	43,496	$	72,602	$	—	$	—	$	72,602
Cash equivalents:
Certificates of deposit ¹		9,287		—		—		9,287		—		—		—		—
Total cash and cash equivalents		52,783		—		—		52,783		72,602		—		—		72,602
Investments (available-for-sale):
Certificates of deposit ²		2,640		3		—		2,643		2,880		5		—		2,885
Corporate bonds		3,054		—		(2)		3,052		3,083		—		(2)		3,081
Total investments		5,694		3		(2)		5,695		5,963		5		(2)		5,966
Total cash, cash equivalents and investments	$	58,477	$	3	$	(2)	$	58,478	$	78,565	$	5	$	(2)	$	78,568
Contractual maturities on investments:
Due within 1 year ³	$	2,752					$	2,751	$	240					$	240
Due after 1 through 5 years ⁴		2,942						2,944		5,723						5,726
	$	5,694					$	5,695	$	5,963					$	5,966


	In Loss Position				In Loss Position				Total In
	< 12 months				> 12 months				Loss Position
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
As of June 30, 2021	Value		(Losses)		Value		(Losses)		Value		(Losses)
Investments:
Corporate bonds		2,040		(2)		—		—		2,040		(2)
Total in loss position	$	2,040	$	(2)	$	—	$	—	$	2,040	$	(2)


			Quoted Prices in				Significant
			Active Markets of		Significant Other		Unobservable
	Balance as of		Identical Assets		Observable Inputs		Inputs
	June 30, 2021		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents and investments:
Certificates of deposit	$	11,930	$	—	$	11,930	$	—
Corporate bonds		3,052		—		3,052		—
Total	$	14,982	$	—	$	14,982	$	—


	Investment Balance as of
	June 30,		December 31,		Accounting	Ownership	*
Company	2021		2020		Method	Percentage
Nanjing JinMei Gallium Co., Ltd.	$	592	$	592	Consolidated	**85.5	%
Chaoyang JinMei Gallium Co., Ltd.		1,820		1,820	Consolidated	**85.5	%
Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd.		1,346		1,346	Consolidated	**85.5	%
ChaoYang XinMei High Purity Semiconductor Materials Co., Ltd.		1,814		—	Consolidated	***58.5	%
	$	5,572	$	3,758

Donghai County Dongfang High Purity Electronic Materials Co., Ltd.	$	1,878	$	1,651	Equity	**46	%
Beijing JiYa Semiconductor Material Co., Ltd.		2,767		1,418	Equity	39	%
Xilingol Tongli Germanium Co., Ltd.		—		—	Equity	25	%
Xiaoyi XingAn Gallium Co., Ltd.		3,248		2,822	Equity	**25	%
Emeishan Jia Mei High Purity Metals Co., Ltd.		384		485	Equity	25	%
	$	8,277	$	6,376


									Accumulated
									Other		AXT, Inc.				Total
	Preferred		Common		Additional		Accumulated		Comprehensive		Stockholders’		Noncontrolling		Stockholders’
	Stock		Stock		Paid-In Capital		Deficit		Income (Loss)		Equity		Interests		Equity
Balance as of December 31, 2020	$	3,532	$	42	$	230,381	$	(44,545)	$	3,209	$	192,619	$	15,350	$	207,969
Common stock options exercised		—		—		704		—		—		704		—		704
Stock-based compensation		—		—		816		—		—		816		—		816
Formation of new subsidiary with noncontrolling interests		—		—		(131)		—		—		(131)		707		576
Sale of common stock to employees in connection with the reorganization		—		—		538		—		—		538		—		538
Purchase of subsidiary shares from noncontrolling interests		—		—		(2,691)		—		—		(2,691)		(1,039)		(3,730)
Net income (loss)		—		—		—		3,425		—		3,425		311		3,736
Other comprehensive loss		—		—		—		—		(131)		(131)		(16)		(147)
Balance as of March 31, 2021	$	3,532	$	42	$	229,617	$	(41,120)	$	3,078	$	195,149	$	15,313	$	210,462
Common stock options exercised		—		—		420		—		—		420		—		420
Stock-based compensation		—		—		975		—		—		975		—		975
Formation of new subsidiary with noncontrolling interests		—		—		(131)		—		—		(131)		706		575
Transfer of subsidiary with noncontrolling interest		—		—		(1,229)		—		—		(1,229)		1,229		—
Transfer of subsidiary with redeemable noncontrolling interest		—		—		(1,241)		—		—		(1,241)		—		(1,241)
Net income		—		—		—		4,385		—		4,385		94		4,479
Other comprehensive income		—		—		—		—		1,455		1,455		137		1,592
Balance as of June 30, 2021	$	3,532	$	42	$	228,411	$	(36,735)	$	4,533	$	199,783	$	17,479	$	217,262


				Weighted-
				average
		Weighted-		Remaining
	Number of	average		Contractual	Aggregate
	Options	Exercise		Life	Intrinsic
Stock Options	Outstanding	Price		(in years)	Value
Balance as of January 1, 2021	1,885	$	4.42	6.17	$	9,713
Granted	—		—
Exercised	(348)		3.23
Canceled and expired	—		—
Balance as of June 30, 2021	1,537	$	4.69	6.16	$	9,678
Options vested as of June 30, 2021 and unvested options expected to vest, net of forfeitures	1,530	$	4.69	6.15	$	9,619
Options exercisable as of June 30, 2021	1,168	$	4.94	5.56	$	7,051


		Weighted-Average
		Grant Date
Stock Awards	Shares	Share Value
Non-vested as of January 1, 2021	1,022	$	5.27
Granted	65	$	11.63
Vested	(136)	$	5.89
Forfeited	(1)	$	5.21
Non-vested as of June 30, 2021	950	$	5.62


	As of
	June 30,		December 31,
	2021		2020
Long-lived assets by geographic region, net of depreciation:
North America	$	1,306	$	836
China		128,439		117,672
	$	129,745	$	118,508


Maturity of Lease Liabilities
2021	$	285
2022		586
2023		577
2024		288
2025		288
Thereafter		1,032
Total minimum lease payments		3,056
Less: Interest		(434)
Present value of lease obligations		2,622
Less: Current portion, included in accrued liabilities		(466)
Long-term portion of lease obligations	$	2,156


	June 30,		December 31,
	2021		2020
Inventories:
Raw materials	$	28,274	$	24,738
Work in process		27,024		24,215
Finished goods		3,628		2,562
	$	58,926	$	51,515


	June 30,		December 31,
	2021		2020
Property, plant and equipment:
Machinery and equipment, at cost	$	53,936	$	48,206
Less: accumulated depreciation and amortization		(38,913)		(37,832)
Building, at cost		97,670		94,567
Less: accumulated depreciation and amortization		(16,915)		(15,324)
Leasehold improvements, at cost		6,422		6,285
Less: accumulated depreciation and amortization		(4,985)		(4,616)
Construction in progress		30,026		24,539
	$	127,241	$	115,825


	June 30,		December 31,
	2021		2020
Accrued compensation and related charges	$	3,625	$	4,417
Preferred stock dividends payable		2,901		2,901
Accrued product warranty		792		609
Payable in connection with land restoration of Nanjing JinMei factory		758		750
Accrued professional services		634		675
Current portion of operating lease liabilities		466		445
Advance from customers		258		374
Payable in connection with construction		222		1,457
Other personnel-related costs		193		101
Accrued income taxes		163		760
Other tax payable		106		295
Accrual for sales returns		33		81
Payable in connection with repurchase of subsidiaries shares		—		1,439
Other accrued liabilities		1,396		1,691
	$	11,547	$	15,995


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Geographical region:
China	$	15,546	$	7,753	$	31,092	$	12,477
Taiwan		4,996		4,398		8,011		9,575
Japan		2,635		1,698		5,158		3,032
Asia Pacific (excluding China, Taiwan and Japan)		1,396		1,701		3,213		3,057
Europe (primarily Germany)		6,411		4,114		11,846		10,328
North America (primarily the United States)		2,751		2,470		5,765		4,388
Total	$	33,735	$	22,134	$	65,085	$	42,857


Balance as of January 1, 2021	$	47,563
Increase in redeemable noncontrolling interests due to issuance of Tongmei's common stock		1,514
Increase in redeemable noncontrolling interests due to transfer of subsidiary with noncontrolling interests		1,242
Increase in redeemable noncontrolling interests due to formation of new subsidiary with noncontrolling interests		132
Equity issuance costs incurred for the six months ended June 30, 2021		(1,237)
Net income attributable to redeemable noncontrolling interests		165
Effect of foreign currency translation attributable to redeemable noncontrolling interests		704
Balance as of June 30, 2021	$	50,083


Products
Substrate Group and Wafer Diameter		Sample of Applications
Indium Phosphide		• Data center connectivity using light/lasers
(InP)		• 5G communications
2”, 3”, 4”		• Fiber optic lasers and detectors
		• Passive Optical Networks (PONs)
		• Silicon photonics
		• Photonic Integrated circuits (PICs)
		• High efficiency terrestrial solar cells (CPV)
		• RF amplifier and switching (military wireless & 5G)
		• Infrared light-emitting diode (LEDs) motion control
		• Lidar for robotics and autonomous vehicles
		• Infrared thermal imaging
Gallium Arsenide		• Wi-Fi devices
(GaAs - semi-insulating)		• IoT devices
1”, 2”, 3”, 4”, 5”, 6”		• High-performance transistors
		• Direct broadcast television
		• Power amplifiers for wireless devices
		• Satellite communications
		• High efficiency solar cells for drones and automobiles
		• Solar cells
Gallium Arsenide		• High brightness LEDs
(GaAs - semi-conducting)		• Screen displays using micro-LEDs
1”, 2”, 3”, 4”, 5", 6”		• Printer head lasers and LEDs
		• 3-D sensing using VCSELs
		• Data center communication using VCSELs
		• Sensors for industrial robotics/Near-infrared sensors
		• Laser machining, cutting and drilling
		• Optical couplers
		• High efficiency solar cells for drones and automobiles
		• Other lasers
		• Night vision goggles
		• Lidar for robotics and autonomous vehicles
		• Solar cells
Germanium		• Multi-junction solar cells for satellites
(Ge)		• Optical sensors and detectors
2”, 4”, 6”		• Terrestrial concentrated photo voltaic (CPV) cells
		• Infrared detectors
		• Carrier wafer for LED
Raw Materials Group
6N+ and 7N+ purified gallium		• Key material in single crystal ingots such as:
		- Gallium Arsenide (GaAs)
		- Gallium Nitride (GaN)
		- Gallium Antimonite (GaSb)
		- Gallium Phosphide (GaP)
Boron trioxide (B2O3)		• Encapsulant in the ingot growth of III-V compound semiconductors
Gallium-Magnesium alloy		• Used for the synthesis of organo-gallium compounds in epitaxial growth on semiconductor wafers
pyrolytic boron nitride (pBN) crucibles		• Used when growing single-crystal compound semiconductor ingots
		• Used as effusion rings growing OLED tools
pBN insulating parts		• Used in MOCVD reactors
		• Used when growing epitaxial layers in Molecular Beam Epitaxy (MBE) reactors



	Three Months Ended						2020 to 2021
	June 30,						Increase
	2021			2020			(Decrease)		% Change

	($ in thousands)
China	$	15,546		$	7,753		$	7,793	100.5	%
% of total revenue		46	%		35	%
Taiwan		4,996			4,398			598	13.6	%
% of total revenue		15	%		20	%
Japan		2,635			1,698			937	55.2	%
% of total revenue		8	%		8	%
Asia Pacific (excluding China, Taiwan and Japan)		1,396			1,701			(305)	(17.9)	%
% of total revenue		4	%		8	%
Europe (primarily Germany)		6,411			4,114			2,297	55.8	%
% of total revenue		19	%		18	%
North America (primarily the United States)		2,751			2,470			281	11.4	%
% of total revenue		8	%		11	%
Total revenue	$	33,735		$	22,134		$	11,601	52.4	%


	Three Months Ended						Net income attributable to				Six Months Ended						Net income attributable to
							noncontrolling interests and										noncontrolling interests and
	June 30,						redeemable noncontrolling interests				June 30,						redeemable noncontrolling interests
	2021			2020			Change		% Change		2021			2020			Change		% Change

	($ in thousands)										($ in thousands)
Net income attributable to noncontrolling interests and redeemable noncontrolling interests	$	230		$	598		$	(368)	(61.5)	%	$	570		$	993		$	(423)	(42.6)	%
% of total revenue		0.7	%		2.7	%						0.9	%		2.3	%


							Proforma 10%		Proforma 10%
	Balance as of		Current		Projected Annual		Interest Rate		Interest Rate
	June 30,		Interest		Interest		Decline		Increase
Instrument	2021		Rate		Income		Income		Income
Cash and cash equivalents	$	52,783	0.42	%	$	222	$	200	$	244
Investments in marketable debt		5,695	1.30	%		74		67		81
					$	296	$	267	$	325

Exhibit Number		Description

10.1(1)*		2015 Equity Incentive Plan, as amended
31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance.
101.SCH		Inline XBRL Taxonomy Extension Schema.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)



Exhibit
Number		Description

10.1(1)*		2015 Equity Incentive Plan, as amended
31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance.
101.SCH		Inline XBRL Taxonomy Extension Schema.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


	AXT, INC.

Dated: August 12, 2021	By:	/s/ MORRIS S. YOUNG
		Morris S. Young
		Chief Executive Officer and Chairman of the Board of Directors
		(Principal Executive Officer)

		/s/ GARY L. FISCHER
		Gary L. Fischer
		Chief Financial Officer and Corporate Secretary
		(Principal Financial Officer and Principal Accounting Officer)