Axt Inc 10-Q for FY2022 Q1

Axt Inc (AXTI)

10-Q 2022-05-09 For: 2022-03-31

Added on April 06, 2026

About this 10-Q

Axt Inc filed this 10-Q on May 9, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $39.65M; up 26.5% from $31.35M a year earlier
Net income: $3.17M; down 7.6% from net income of $3.43M a year earlier
Diluted EPS: $0.07; down 12.5% from $0.08 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 May 1, 2022
Common Stock, $0.001 par value		42,951,852

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	4
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	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	50
Item 4. Controls and Procedures	52
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	53
Item 1A. Risk Factors	53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3. Defaults upon Senior Securities	79
Item 4. Mine Safety Disclosures	79
Item 5. Other Information	79
Item 6. Exhibits	80
Signatures	82


	March 31,		December 31,
	2022		2021

ASSETS
Current assets:
Cash and cash equivalents	$	29,494	$	36,763
Short-term investments		5,400		5,419
Accounts receivable, net of allowances of $130 as of March 31, 2022 and December 31, 2021		39,848		34,839
Inventories		68,821		65,912
Prepaid expenses and other current assets		16,501		17,252
Total current assets		160,064		160,185
Long-term investments		9,400		9,576
Property, plant and equipment, net		147,286		142,415
Operating lease right-of-use assets		2,223		2,324
Other assets		19,426		17,941
Total assets	$	338,399	$	332,441
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,399	$	16,649
Accrued liabilities		12,213		17,057
Short-term loan from noncontrolling interest		—		1,887
Bank loan		20,192		12,229
Total current liabilities		46,804		47,822
Noncurrent operating lease liabilities		1,810		1,935
Other long-term liabilities		2,263		2,453
Total liabilities		50,877		52,210
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests (Note 18)		50,971		50,385
Stockholders’ equity:
Preferred stock Series A, $0.001 par value; 2,000 shares authorized; 883 shares issued and outstanding as of March 31, 2022 and December 31, 2021 (Liquidation preference of $7,566 and $7,522 as of March 31, 2022 and December 31, 2021)		3,532		3,532
Common stock, $0.001 par value; 70,000 shares authorized; 42,952 and 42,886 shares issued and outstanding as of March 31, 2022 and December 31, 2021		43		43
Additional paid-in capital		232,317		231,622
Accumulated deficit		(26,805)		(29,970)
Accumulated other comprehensive income		6,629		6,302
Total AXT, Inc. stockholders’ equity		215,716		211,529
Noncontrolling interests		20,835		18,317
Total stockholders’ equity		236,551		229,846
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	338,399	$	332,441


	Three Months Ended
	March 31,
	2022		2021

Revenue	$	39,653	$	31,350
Cost of revenue		26,345		19,814
Gross profit		13,308		11,536
Operating expenses:
Selling, general and administrative		6,450		5,570
Research and development		3,159		2,405
Total operating expenses		9,609		7,975
Income from operations		3,699		3,561
Interest expense, net		(183)		(50)
Equity in income of unconsolidated joint ventures		1,125		1,111
Other expense, net		(9)		(111)
Income before provision for income taxes		4,632		4,511
Provision for income taxes		660		746
Net income		3,972		3,765
Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interests		(807)		(340)
Net income attributable to AXT, Inc.	$	3,165	$	3,425
Net income attributable to AXT, Inc. per common share:
Basic	$	0.07	$	0.08
Diluted	$	0.07	$	0.08
Weighted-average number of common shares outstanding:
Basic		41,871		41,004
Diluted		42,662		42,726


	March 31, 2022								December 31, 2021
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		(Loss)		Value		Cost		Gain		(Loss)		Value
Classified as:
Cash	$	29,494	$	—	$	—	$	29,494	$	36,763	$	—	$	—	$	36,763
Cash equivalents:
Certificates of deposit ¹		—		—		—		—		—		—		—		—
Total cash and cash equivalents		29,494		—		—		29,494		36,763		—		—		36,763
Investments (available-for-sale):
Certificates of deposit ²		6,680		—		(90)		6,590		6,680		—		(19)		6,661
Corporate bonds		8,357		—		(147)		8,210		8,380		—		(46)		8,334
Total investments		15,037		—		(237)		14,800		15,060		—		(65)		14,995
Total cash, cash equivalents and investments	$	44,531	$	—	$	(237)	$	44,294	$	51,823	$	—	$	(65)	$	51,758
Contractual maturities on investments:
Due within 1 year ³	$	5,409					$	5,400	$	5,424					$	5,419
Due after 1 through 5 years ⁴		9,627						9,400		9,636						9,576
	$	15,036					$	14,800	$	15,060					$	14,995


	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 March 31, 2022	Value		(Losses)		Value		(Losses)		Value		(Losses)
Investments:
Certificates of deposit	$	6,590	$	(90)	$	—	$	—	$	6,590	$	(90)
Corporate bonds		4,857		(139)		3,002		(7)		7,859		(146)
Total in loss position	$	11,447	$	(229)	$	3,002	$	(7)	$	14,449	$	(236)


			Quoted Prices in				Significant
			Active Markets of		Significant Other		Unobservable
	Balance as of		Identical Assets		Observable Inputs		Inputs
	March 31, 2022		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents and investments:
Certificates of deposit	$	6,590	$	—	$	6,590	$	—
Corporate bonds		8,210		—		8,210		—
Total	$	14,800	$	—	$	14,800	$	—


	Investment Balance as of
	March 31,		December 31,		Accounting	Ownership	*
Company	2022		2021		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.		4,642		1,814	Consolidated	***58.5	%
	$	8,400	$	5,572

Donghai County Dongfang High Purity Electronic Materials Co., Ltd.	$	2,057	$	2,053	Equity	**46	%
Beijing JiYa Semiconductor Material Co., Ltd.		4,292		3,760	Equity	39	%
Xilingol Tongli Germanium Co., Ltd.		—		—	Equity	25	%
Xiaoyi XingAn Gallium Co., Ltd.		4,739		4,095	Equity	**25	%
Emeishan Jia Mei High Purity Metals Co., Ltd.		224		258	Equity	25	%
	$	11,312	$	10,166


									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, 2021	$	3,532	$	43	$	231,622	$	(29,970)	$	6,302	$	211,529	$	18,317	$	229,846
Investment in subsidiary with noncontrolling interest		—		—		(410)		—		—		(410)		204		(206)
Noncontrolling interest portion of Tongmei stock-based compensation		—		—		17		—		—		17		(7)		10
Stock-based compensation		—		—		875		—		—		875		—		875
Tongmei stock-based compensation		—		—		213		—		—		213		—		213
Net income		—		—		—		3,165		—		3,165		389		3,554
Investment in subsidiary from noncontrolling interest		—		—		—		—		—		—		1,887		1,887
Other comprehensive income		—		—		—		—		327		327		45		372
Balance as of March 31, 2022	$	3,532	$	43	$	232,317	$	(26,805)	$	6,629	$	215,716	$	20,835	$	236,551


				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, 2022	1,378	$	4.83	5.60	$	5,573
Granted	—		—
Exercised	—		—
Canceled and expired	—		—
Balance as of March 31, 2022	1,378	$	4.83	5.36	$	3,383
Options vested as of March 31, 2022 and unvested options expected to vest, net of forfeitures	1,376	$	4.83	5.35	$	3,371
Options exercisable as of March 31, 2022	1,140	$	5.10	4.92	$	2,547


		Weighted-Average
		Grant Date
Stock Awards	Shares	Share Value
Non-vested as of January 1, 2022	875	$	6.26
Granted	2	$	9.05
Vested	(9)	$	11.60
Forfeited	(8)	$	5.21
Non-vested as of March 31, 2022	860	$	6.22


	As of
	March 31,		December 31,
	2022		2021
Long-lived assets by geographic region, net of depreciation:
North America	$	897	$	1,610
China		148,612		143,129
	$	149,509	$	144,739


Maturity of Lease Liabilities
2022	$	444
2023		582
2024		293
2025		293
2026		293
Thereafter		757
Total minimum lease payments		2,662
Less: Interest		(353)
Present value of lease obligations		2,309
Less: Current portion, included in accrued liabilities		(499)
Long-term portion of lease obligations	$	1,810


	March 31,		December 31,
	2022		2021
Inventories:
Raw materials	$	32,949	$	29,658
Work in process		32,411		32,605
Finished goods		3,461		3,649
	$	68,821	$	65,912


	March 31,		December 31,
	2022		2021
Property, plant and equipment:
Machinery and equipment, at cost	$	59,617	$	59,284
Less: accumulated depreciation and amortization		(40,848)		(40,292)
Building, at cost		109,071		108,782
Less: accumulated depreciation and amortization		(19,560)		(18,710)
Leasehold improvements, at cost		7,060		7,039
Less: accumulated depreciation and amortization		(5,521)		(5,352)
Construction in progress		37,467		31,664
	$	147,286	$	142,415


	March 31,		December 31,
	2022		2021
Accrued compensation and related charges	$	3,436	$	5,115
Preferred stock dividends payable		2,901		2,901
Advances from customers		1,024		946
Accrued income taxes		1,001		539
Accrued product warranty		832		743
Current portion of operating lease liabilities		499		488
Accrued professional services		423		880
Other personnel-related costs		278		279
Payable in connection with construction in progress		268		2,974
Other tax payable		230		392
Accrual for sales returns		20		48
Other accrued liabilities		1,301		1,752
	$	12,213	$	17,057


	Three Months Ended
	March 31,
	2022		2021
Geographical region:
China	$	17,480	$	15,546
Taiwan		6,859		3,015
Japan		2,807		2,523
Asia Pacific (excluding China, Taiwan and Japan)		1,756		1,817
Europe (primarily Germany)		6,394		5,435
North America (primarily the United States)		4,357		3,014
Total	$	39,653	$	31,350


Balance as of January 1, 2022	$	50,385
Investment in subsidiary with redeemable noncontrolling interest		206
Equity issuance costs incurred		(227)
Stock-based compensation attributable to redeemable noncontrolling interests		(6)
Net income attributable to redeemable noncontrolling interests		418
Effect of foreign currency translation on redeemable noncontrolling interests		149
Effect of foreign currency translation attributable to redeemable noncontrolling interests		46
Balance as of March 31, 2022	$	50,971


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
	March 31,				Increase
	2022		2021		(Decrease)		% Change

Product Type:	($ in thousands)
Substrates	$	31,745	$	23,373	$	8,372	35.8	%
Raw materials and other		7,908		7,977		(69)	(0.9)	%
Total revenue	$	39,653	$	31,350	$	8,303	26.5	%



	Three Months Ended						2021 to 2022
	March 31,						Increase
	2022			2021			(Decrease)		% Change

	($ in thousands)
China	$	17,480		$	15,546		$	1,934	12.4	%
% of total revenue		44	%		49	%
Taiwan		6,859			3,015			3,844	127.5	%
% of total revenue		17	%		10	%
Japan		2,807			2,523			284	11.3	%
% of total revenue		7	%		8	%
Asia Pacific (excluding China, Taiwan and Japan)		1,756			1,817			(61)	(3.4)	%
% of total revenue		5	%		6	%
Europe (primarily Germany)		6,394			5,435			959	17.6	%
% of total revenue		16	%		17	%
North America (primarily the United States)		4,357			3,014			1,343	44.6	%
% of total revenue		11	%		10	%
Total revenue	$	39,653		$	31,350		$	8,303	26.5	%


	Three Months Ended
	March 31,						Equity in Income
	2022			2021			Change		% Change

	($ in thousands)
Equity in income of unconsolidated joint ventures	$	1,125		$	1,111		$	14	1.3	%
% of total revenue		2.8	%		3.5	%


	Three Months Ended
	March 31,						Other Expense
	2022			2021			Change		% Change

	($ in thousands)
Other expense, net	$	9		$	111		$	(102)	(91.9)	%
% of total revenue		0.0	%		0.4	%


	Three Months Ended						Net income attributable to
							noncontrolling interests and
	March 31,						redeemable noncontrolling interests
	2022			2021			Change		% Change

	($ in thousands)
Net income attributable to noncontrolling interests and redeemable noncontrolling interests	$	807		$	340		$	467	137.4	%
% of total revenue		2.0	%		1.1	%


							Proforma 10%		Proforma 10%
	Balance as of		Current		Projected Annual		Interest Rate		Interest Rate
	March 31,		Interest		Interest		Decline		Increase
Instrument	2022		Rate		Income		Income		Income
Cash and cash equivalents	$	29,494	0.16	%	$	47	$	42	$	52
Investments in marketable debt		14,800	0.90	%		133		120		146
					$	180	$	162	$	198

Exhibit Number		Description


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


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: May 9, 2022	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)