AXT, Inc. Reports Record Q3 2000 Financial Results

Source: AXTI

Strong Growth in Substrates; Positive Developments From Visible Emitter Division

Fremont, CA. AXT, Inc. (Nasdaq: AXTI), a leading manufacturer of compound semiconductor substrates and optoelectronic devices, today reported financial results for the third quarter ended Sept. 30, 2000. Revenues for the third quarter of 2000 were a record $34.4 million, up 72 percent from $20.0 million in revenues reported in the third quarter of 1999, and up 19 percent from the $28.9 million reported in the second quarter of 2000.

Net income for the third quarter of 2000 was $2.9 million, or $0.14 per share on approximately 21.2 million shares. This compares with third quarter 1999 net income of $1.6 million, or $0.08 per share on approximately 19.9 million shares. This also compares with net income of $2.4 million, or $0.12 per share on approximately 20.1 million shares for the second quarter of 2000. All per share amounts are computed on a fully diluted basis.

"We are very pleased, not only with our third quarter results, but with our future business outlook, as well," said Morris Young, president and chief executive officer. "We are seeing a strong trend towards the larger 6-inch gallium arsenide substrates because of the production efficiency derived from using larger diameters. The technological advantages of our VGF process, coupled with the capacity that we have put in place over the last 12 months has allowed AXT to become an industry leader in this area.

"Our indium phosphide business continues to grow rapidly as well, driven by the fiber optic infrastructure expansion. Again, AXT has become an industry leader in the larger 3-inch and 4-inch wafer diameters. As the fiber optic industry moves from a 10GB data rate transmission to a 40 GB rate, we believe that indium phosphide is the best material to handle the performance requirements. We are rapidly increasing our indium phosphide production capacity.

"Finally, our visible emitter division is making positive strides. This quarter we made two important announcements in this area: our first major customer for blue, green and cyan LEDs, and the introduction of our new VCSEL family of products. We believe that both these areas have significant growth potential and we look forward to their increasing revenue contribution in 2001," he said.

Business Outlook Q400 (ending Dec. 30, 2000) · Q400 total revenues are expected to increase 10 to 12 percent over the company s third quarter 2000 results. · Earnings per share are expected to grow 20 to 25 percent over the company s third quarter results. · Income from operations is expected to be 17.5 to 18.5 percent of the company s fourth quarter revenue, compared with 15.9 percent in the third quarter of 2000. · The company also expects to earn significant interest income resulting from the proceeds of recent stock sales. · Fourth quarter results will also reflect an approximate 12 percent increase in the number of shares outstanding as a result of recent stock sales. Fiscal 2001 · The company expects to see continued revenue and profit expansion in 2001 as it ramps production capacity for its products, including 6-inch gallium arsenide substrates, indium phosphide substrates, VCSEL wafers and blue, green and cyan LEDs.

Conference Call

A conference call will be held today at 1:30 p.m. PDT to discuss these announcements. To participate in the call, please dial 712-271-0931 using passcode AXT. A replay of the call will be available through Nov. 8, 2000 by dialing 402-998-0760. The conference call will also be webcast. Those wishing to participate in this fashion may access the call via both www.axt.com and www.streetevents.com. A replay of the webcast will also be available through Nov. 8, 2000. All remarks made during the conference call will be current at the time of the briefing and will not be updated to reflect subsequent material developments.

Securities and Exchange Commission s Regulation Fair Disclosure

In adhering to the Securities and Exchange Commission s newly adopted Regulation Fair Disclosure, AXT will provide its investors and analysts with quarterly information and some forward-looking guidance in its earnings news releases and in its conference calls. AXT will not provide any further guidance or updates on its performance during the quarter unless it does so in a news release, conference call or SEC filing.

Safe Harbor Statement

Statements made by Morris Young and Donald Tatzin in our conference call and the above statements contained in this earnings release, including but not limited to any projections therein, which are not purely historical in nature involve forward looking statements, as that term is defined under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, any statements included herein regarding AXT s future product development, product sales and other revenues, market opportunities, beliefs, expectations, goals, financial performance and future strategies, all of which are dependent on certain risks and uncertainties that may cause actual results to differ materially from those expressed in these or any other forward-looking statements made by or on behalf of AXT.

In addition to factors discussed above, among other factors that could cause actual results to differ materially from those suggested are the following: unpredictable fluctuations in our operating results due, among other factors, to our expansion of our China operations, the limited availability and increased cost of raw materials and timing of orders from customers; shortage of critical raw materials, particularly gallium and arsenic, where we depend on a limited number of suppliers; we need to expand our manufacturing capacity to meet demand for our products; we may not achieve anticipated sales of our new HB LED and VCSEL products; our substrate and opto-electronic device products have a long sales cycle that makes it difficult to plan our expenses and forecast our results; we may experience low product yields, that might result in delayed shipment of our products; if we do not comply with environmental regulations we may incur large fines; loss of key substrate customers would hurt our operating results; if our expansion in China is costlier than expected, our operating results will suffer, and we continue to be dependent on revenue from international sales.

The forward looking statements should be considered in the context of these and other risk factors disclosed in our filings with the Securities and Exchange Commission, including our Registration Statements on Form S-1 and Form S-3, as amended, and our reports on Form 10-K and Form 10-Q, as amended, available online at http://www.sec.gov. All forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update such statements. Furthermore, the factors underlying the forecasts included in our conference call are dynamic and subject to change and therefore our forecasts speak only as of the date they are given. We do not undertake to update them, however we may choose from time to time to update them and if we do so, we will disseminate the updates to the investing public.

About AXT, Inc.

AXT designs, develops, manufactures and markets high-performance substrates for the communications industry. AXT is also a leading producer of diodes for laser pointers and light-emitting diodes (LEDs), such as blue, cyan and green LEDs, for the display and lighting industries. The company s proprietary Vertical Gradient Freeze (VGF) crystal growth technology produces low-defect, semi-insulating and semi-conducting gallium arsenide, germanium and indium phosphide wafers. The company has also introduced gallium nitride substrates for manufacturing blue LEDs. For more information, see AXT s website at www.axt.com. The company can also be reached at 4281 Technology Drive, Fremont, California 94538 or call 510-683-5900. AXT is traded on the Nasdaq National Market under the symbol AXTI.

Contact: Don Tatzin, Chief Financial Officer of AXT, Inc Tel: 510-683-5900 or Leslie Green of Stapleton Communications Inc Tel: 650-470-0200, for AXT, Inc.