AXT Inc (AXTI) Q1 2025 Earnings Call Highlights: Navigating Challenges Amid Revenue Decline

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Fri, May 2, 2025, 1:16 AM 4 min read

Revenue: $19.4 million in Q1 2025, compared to $25.1 million in Q4 2024 and $22.7 million in Q1 2024.
Indium Phosphide Revenue: $3.8 million, primarily from paw and data center applications.
Gallium Arsenide Revenue: $6.7 million.
Germanium Substrates Revenue: $0.6 million.
Raw Material Joint Venture Revenue: $8.3 million.
Regional Revenue Distribution: Asia Pacific 83%, Europe 11%, North America 6%.
Non-GAAP Gross Margin: Negative 6.1% in Q1 2025, compared to 17.9% in Q4 2024 and 27.3% in Q1 2024.
GAAP Gross Margin: 6.4% in Q1 2025, compared to 17.6% in Q4 2024 and 26.9% in Q1 2024.
Non-GAAP Operating Expense: $8.5 million in Q1 2025, compared to $10.5 million in Q4 2024 and $8.7 million in Q1 2024.
GAAP Operating Expense: $9.0 million in Q1 2025, compared to $10.6 million in Q4 2024 and $9.4 million in Q1 2024.
Non-GAAP Operating Loss: $9.6 million in Q1 2025, compared to $5.4 million in Q4 2024 and $2.5 million in Q1 2024.
GAAP Operating Loss: $10.3 million in Q1 2025, compared to $6.2 million in Q4 2024 and $3.3 million in Q1 2024.
Non-GAAP Net Loss: $8.2 million or $0.19 per share in Q1 2025, compared to $4.3 million or $0.10 per share in Q4 2024.
GAAP Net Loss: $8.8 million or $0.20 per share in Q1 2025, compared to $5.1 million or $0.12 per share in Q4 2024.
Cash and Cash Equivalents: $38.2 million as of March 31, 2025, up from $33.8 million on December 31, 2024.
Depreciation and Amortization: $2.2 million in Q1 2025.
Stock Compensation: $0.6 million in Q1 2025.
Net Inventory: $80.4 million, down by approximately $4.7 million in Q1 2025.

Warning! GuruFocus has detected 5 Warning Signs with AXTI.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

AXT Inc (NASDAQ:AXTI) reported Q1 2025 revenue slightly above the midpoint of guidance at $19.4 million.
Revenue from the Asia Pacific region was strong, accounting for 83% of total revenue.
AXT Inc (NASDAQ:AXTI) has a significant backlog of Indium phosphide sales ready to ship once export permits are secured.
The company is seeing increased sales of Indium phosphide within China, driven by the data center market.
AXT Inc (NASDAQ:AXTI) has a strong position in the Indium phosphide market, holding an estimated 40% to 50% worldwide market share.

Negative Points

Non-GAAP gross margin for Q1 2025 was a negative 6.1%, a significant decline from previous quarters.
The company faced yield issues with semi-insulating gallium arsenide wafers, impacting gross margins.
Trade restrictions on Indium phosphide exports have delayed shipments to customers outside of China.
AXT Inc (NASDAQ:AXTI) reported a non-GAAP net loss of $8.2 million for Q1 2025, compared to a smaller loss in previous quarters.
The geopolitical environment and trade restrictions are creating challenges for the company's operations and revenue.

Q & A Highlights

Q: Can you elaborate on the yield issues with semi-insulating gallium arsenide and when you expect them to be resolved? A: Morris Young, CEO: We were too aggressive in entering the HPT market for wireless, which led to yield problems. However, we have identified the source of the issue and expect a quick recovery, aiming for a 10% gross margin next quarter. The market opportunity remains, and we plan to approach it more carefully to ensure effective production.

Q: Why is it taking more than a quarter to fix the yield issues? Is this a new product? A: Morris Young, CEO: The product is not new, but commercial volumes and changing customer specifications require recalibration of our production line. We need to approach this problem more measurably to protect our gross margin and profitability. We expect to recover to a 10% gross margin in Q2.

Q: Regarding Indium phosphide, are there any risks of losing customers due to shipping delays? A: Tim Bettles, VP of Business Development: We are a major supplier with 40-50% market share, and qualifying new suppliers takes time. Customers are still placing orders and waiting for permits. We expect a healthy bump in shipments once permits are approved.

Q: What impact do tariffs have on your business, especially with shipments to the US? A: Tim Bettles, VP of Business Development: Revenues to the US were about 8% in 2024 and may be less in 2025 due to trade restrictions. Tariffs are still under discussion, and we expect to navigate this issue. Some customers may pick up the tariffs, but it varies case by case.

Q: Can you quantify the business opportunity with the wireless HBT market despite the yield issues? A: Morris Young, CEO: The opportunity is with a large customer, and we haven't lost it. Once we align specifications with customer demand, we expect to generate around $1 million to $2 million per quarter from this market.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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