A challenging Q4 for AXT
“As we move into 2020, AXT is poised for growth and improvement in our financial results," says CEO Morris Young
AXT, a manufacturer of compound semiconductor substrates, has reported financial results for the fourth quarter and fiscal year, ended December 31, 2019.
“Q4 capped off a challenging year in which we weathered one of the most difficult demand environments in recent memory,” said Morris Young, chief executive officer. “Overall, this had a negative impact on key applications and certain customers within AXT’s GaAs and germanium businesses, making up the majority of our year-over-year revenue decline. Despite these more challenging conditions, our InP business exceeded our expectations in Q4, and finished 2019 with modest growth over the prior year.”
“As we move into 2020, AXT is poised for growth and improvement in our financial results. Our InP business is healthy, with exciting applications contributing today, and new ones on the horizon. Our GaAs and germanium businesses are also well positioned to benefit from a recovery. We are pleased to report that we expect to complete the qualification of our Dingxing facility by major customers in Q1. We believe this will open the door to incremental business opportunities from new and returning customers.”
Q4 Results
Revenue for the fourth quarter of 2019 was $18.4 million, compared with $19.8 million in the third quarter of 2019 and $22.2 million for the fourth quarter of 2018. Gross margin was 21.0 percent of revenue for the fourth quarter of 2019, compared with 29.0 percent of revenue in the third quarter of 2019 and 26.3 percent for the fourth quarter of 2018.
The decline in gross margin was driven by a decline in manufacturing efficiencies and yields associated with two new products for AXT: six-inch InP substrates and a new six-inch germanium product configuration for a large customer. These products address new market opportunities for AXT and the company believes it will drive improvements in manufacturing yields and efficiencies in the coming quarters. Additional items that contributed to the sequential decline were lower gross margins on consolidated raw material revenue and adjustments to inventory.
Operating expenses were $6.7 million in the fourth quarter of 2019, compared with $6.2 million in the third quarter of 2019 and $6.5 million for the fourth quarter of 2018. Operating loss for the fourth quarter of 2019 was $2.8 million compared with operating loss of $0.5 million in the third quarter of 2019 and $0.6 million for the fourth quarter of 2018. Net loss in the fourth quarter of 2019 was $2.0 million, or $0.05 per share, compared with a net loss of $0.9 million or $0.02 per share in the third quarter of 2019 and $1.1 million or $0.03 per share for the fourth quarter of 2018.
Fiscal Year results
Revenue for fiscal year 2019 was $83.3 million, compared with $102.4 million in fiscal year 2018. Gross margin for fiscal year 2019 was 29.8 percent of revenue, compared with 36.2 percent of revenue in fiscal year 2018. Operating expenses for fiscal year 2019 were $25.1 million, compared with $24.9 million in fiscal year 2018. Net loss in fiscal year 2019 was $2.6 million, or $0.07 per share, compared with a net income of $9.7 million, or $0.24 per diluted share, in fiscal year 2018.
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