AXT, Inc. Announces Second Quarter 2009 Financial Results

FREMONT, CA, Jul 30 (MARKET WIRE) --
AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound
semiconductor substrates, today reported financial results for the second
quarter ended June 30, 2009.

Second Quarter 2009 Results

Revenue for the second quarter of 2009 was $13.1 million, compared with
$7.7 million in the first quarter of 2009, and $19.9 million in the second
quarter of 2008. Total gallium arsenide (GaAs) substrate revenue was $10.1
million for the second quarter of 2009, compared with $5.0 million in the
first quarter of 2009, and $13.1 million in the second quarter of 2008.
The increase in GaAs substrate revenue in the second quarter of 2009
compared to the first quarter of 2009 was primarily due to the overall
increased demand in all diameters, particularly 6-inch substrates.

Indium phosphide (InP) substrate revenue was $684,000 for the second
quarter of 2009, compared with $490,000 in the first quarter of 2009, and
$500,000 in the second quarter of 2008. As a result of increased
production orders from our newly qualified European customer, germanium
(Ge) substrate revenue was $1.2 million compared with $622,000 in the
first quarter of 2009 and $1.4 million in the second quarter of 2008. Raw
materials sales were $1.0 million for the second quarter of 2009,
compared with $1.5 million in the first quarter of 2009 and $4.9 million
in the second quarter of 2008 as a result of lesser customer demand since
late 2008.

Gross margin was 19.3 percent of revenue for the second quarter of 2009.
This included a benefit from the sale of approximately $633,000 of fully
reserved wafers, which positively affected the quarterly gross margin by
4.8 percentage points. By comparison, gross margin in the first quarter of
2009 was negative 3.1 percent. This included a benefit from the sales of
approximately $414,000 of fully reserved wafers, which positively affected
first quarter gross margin by 5.4 percentage points. Gross margin in the
second quarter of 2008 was 32.3 percent, which included a benefit from the
sale of approximately $735,000 of fully reserved wafers, which positively
affected the quarterly gross margin by 3.7 percentage points.

Operating expenses were $3.8 million in the second quarter of 2009,
compared with $5.0 million in the first quarter of 2009 (which included a
$0.5 million restructuring charge), and $4.1 million in the second quarter
of 2008.

Loss from operations for the second quarter of 2009 was $1.3 million
compared with loss from operations of $5.2 million in the first quarter of
2009, and income from operations of $2.3 million in the second quarter of
2008.

Net interest and other income for the second quarter of 2009 was $355,000,
which included an unrealized foreign exchange gain of $212,000, compared
with net interest and other loss of $378,000 in the first quarter of 2009,
which included an unrealized foreign exchange loss of $409,000, and net
interest and other loss of $277,000 in the second quarter of 2008.

Net loss in the second quarter of 2009 was $1.3 million or a loss of $0.04
per diluted share, compared with net loss of $5.5 million or a loss of
$0.18 per diluted share in the first quarter of 2009, and net income of
$0.7 million, or $0.02 per diluted share in the second quarter of 2008.

Cash and equivalents including restricted deposits were $33.6 million as
of June 30, 2009, compared with $32.5 million as of March 31, 2009.

Management Qualitative Comments

"Following very challenging industry conditions early in the year, we are
pleased to report that the improvements we began to see at the end of the
first quarter continued through the second quarter, resulting in stronger
sales and improved gross margins," said Morris Young, chief executive
officer. "We believe that inventory levels in the supply chain have
improved from the first quarter, with the exception of our gallium raw
materials, which are not expected to begin to recover until later in 2009.
Our qualification efforts in both gallium arsenide and germanium
substrates have been very successful and we are pleased with our
increasing diversification in these areas."

Recent Company Highlights

The company announced that the Board of Directors appointed Morris S.
Young, Ph.D. as chief executive officer, effective July 16, 2009. Young
co-founded AXT in 1986 and served as its chief executive officer from 1989
to 2004. He has been a director of AXT since 1989 and held the position of
chairman of the Board from 1998 to 2004.

"We were very pleased to announce the appointment of Morris Young, AXT's
founder, as chief executive officer," said Jesse Chen, chairman of AXT's
Board of Directors. "Morris' knowledge of AXT and its markets have allowed
him to engage very quickly in all aspects of the company's operations and
to make an immediate positive contribution. The Board and I strongly
believe in his vision for AXT and I look forward to working with him again
in this capacity."

Chen continued, "I am also grateful to AXT's dedicated management team,
who has continued to work very diligently through this time towards our
common goal of ensuring a smooth transition and consistent support for our
customers and employees."

Outlook for Third Quarter, Ending September 30, 2009

AXT estimates revenue for the third quarter will increase to between $14.0
million and $15.0 million. The company estimates that net income (loss)
per share will be between $(0.03) and $0.00, which takes into account a
weighted average share count of approximately 30.5 million shares.

Conference Call

The company will also host a conference call to discuss these results on
July 30, 2009 at 1:30 p.m. PST. The conference call can be accessed at
(719) 325-4806 (passcode 6879442). The call will also be simulcast on the
Internet at www.axt.com. Replays will be available at (719) 457-0820 until
August 6, 2009. 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) 683-5900.

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance
compound and single element semiconductor substrates comprising gallium
arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its
manufacturing facilities in Beijing, China. In addition, AXT maintains its
sales, administration and customer service functions at its headquarters
in Fremont, California. The company's substrate products are used
primarily in lighting display applications, wireless communications, and
fiber optic communications. Its vertical gradient freeze (VGF) technique
for manufacturing semiconductor substrates provides significant benefits
over other methods and enabled AXT to become a leading manufacturer of
such substrates, particularly in optoelectronics applications. In
addition to our manufacturing facilities in China, we have invested in
five joint ventures 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 statements regarding our
outlook for the third quarter of 2009, the improvement of our competitive
position as the market improves, the recovery of gallium raw materials
inventory levels, and the impact of our customer qualifications. These
forward-looking statements are based upon specific assumptions that are
subject to uncertainties and factors relating to the company's operations
and business environment, which could cause actual results of the company
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 overall
conditions in the markets in which the company competes; global financial
conditions and uncertainties, market acceptance and demand for the
company's products; the impact of delays by our customers on the timing
of sales of products; and other factors as set forth in the company's
annual report on Form 10-K 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 publicly any forward-looking statement, as a result
of new information or future events.

AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------

Revenue $ 13,055 $ 19,932 $ 20,709 $ 39,566
Cost of revenue 10,539 13,488 18,430 26,901
---------- ---------- ---------- ----------
Gross profit 2,516 6,444 2,279 12,665
---------- ---------- ---------- ----------

Operating expenses:
Selling, general and
administrative 3,486 3,578 7,492 7,245
Research and development 355 569 815 1,073
Impairment on assets held
for sale - - - 83
Restructuring charge - - 507 -
---------- ---------- ---------- ----------
Total operating
expenses 3,841 4,147 8,814 8,401
---------- ---------- ---------- ----------
Income (loss) from
operations (1,325) 2,297 (6,535) 4,264
Interest income, net 34 241 78 365
Other income (expense), net 321 (518) (101) 409
---------- ---------- ---------- ----------

Income (loss) before
provision for income taxes (970) 2,020 (6,558) 5,038
Provision for income taxes 308 635 312 1,195
---------- ---------- ---------- ----------
Net income (loss) (1,278) 1,385 (6,870) 3,843

Less: Net income (loss)
attributable to
noncontrolling interest (2) (648) 74 (1,147)
---------- ---------- ---------- ----------
Net income (loss)
attributable to AXT, Inc. $ (1,280) $ 737 $ (6,796) $ 2,696
========== ========== ========== ==========

Net income (loss)
attributable to AXT, Inc.
per common share:
Basic $ (0.04) $ 0.02 $ (0.23) $ 0.09
========== ========== ========== ==========
Diluted $ (0.04) $ 0.02 $ (0.23) $ 0.08
========== ========== ========== ==========

Weighted average number of
common shares outstanding:
Basic 30,439 30,421 30,437 30,403
========== ========== ========== ==========
Diluted 30,439 31,562 30,437 31,573
========== ========== ========== ==========

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

June 30, December 31,
2009 2008
------------ ------------
Assets:
Current assets
Cash and cash equivalents $ 12,413 $ 13,566
Short-term investments 18,216 17,756
Accounts receivable, net 12,883 11,497
Inventories, net 28,304 35,082
Prepaid expenses and other current assets 1,734 3,131
------------ ------------
Total current assets 73,550 81,032

Property, plant and equipment, net 20,957 22,184
Restricted deposits 3,000 3,013
Other assets 5,531 5,433

------------ ------------
Total assets $ 103,038 $ 111,662
============ ============

Liabilities and stockholders' equity:
Current liabilities
Accounts payable $ 4,347 $ 6,657
Accrued liabilities 4,574 4,453
Line of credit 3,000 3,013
Current portion of long-term debt 74 73
------------ ------------
Total current liabilities 11,995 14,196

Long-term debt, net of current portion 459 496
Other long-term liabilities 64 94
------------ ------------
Total liabilities 12,518 14,786
------------ ------------

Stockholders' equity:
Preferred stock 3,532 3,532
Common stock 187,403 186,784
Accumulated deficit (106,028) (99,232)
Other comprehensive income 3,432 2,580
------------ ------------
Total AXT, Inc. stockholders' equity 88,339 93,664

Noncontrolling interest 2,181 3,212
------------ ------------
Total stockholders' equity 90,520 96,876

------------ ------------
Total liabilities and stockholders'
equity $ 103,038 $ 111,662
============ ============

Contacts:
Wilson W. Cheung
Chief Financial Officer
(510) 683-5900

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

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