- Revenue: $23.6 million in Q3 2024, compared to $27.9 million in Q2 2024 and $17.4 million in Q3 2023.
- Indium Phosphide Revenue: $6.8 million, driven by demand in data center applications.
- Gallium Arsenide Revenue: $6.6 million, following expected pullback after Q2 growth.
- Germanium Substrates Revenue: $1.6 million, decreased due to strategic decisions.
- Raw Material Joint Venture Revenue: $8.6 million, reflecting healthy demand.
- Non-GAAP Gross Margin: 24.3% in Q3 2024, compared to 27.6% in Q2 2024 and 11.3% in Q3 2023.
- GAAP Gross Margin: 24.0% in Q3 2024, compared to 27.4% in Q2 2024 and 10.7% in Q3 2023.
- Non-GAAP Operating Expense: $9.0 million in Q3 2024, compared to $8.9 million in Q2 2024 and $7.8 million in Q3 2023.
- GAAP Operating Expense: $9.1 million in Q3 2024, compared to $9.5 million in Q2 2024 and $8.6 million in Q3 2023.
- Non-GAAP Operating Loss: $2.6 million in Q3 2024, compared to $1.2 million in Q2 2024 and $5.8 million in Q3 2023.
- GAAP Operating Loss: $3.4 million in Q3 2024, compared to $1.9 million in Q2 2024 and $6.7 million in Q3 2023.
- Non-GAAP Net Loss: $2.1 million or 5¢ per share in Q3 2024, compared to $800,000 or 2¢ per share in Q2 2024.
- GAAP Net Loss: $2.9 million or 7¢ per share in Q3 2024, compared to $1.5 million or 4¢ per share in Q2 2024.
- Cash and Cash Equivalents: $38.8 million as of September 30, 2024, down from $43.3 million as of June 30, 2024.
- Depreciation and Amortization: $2.3 million in Q3 2024.
- Stock Compensation: $0.8 million in Q3 2024.
- Net Inventory: $86.1 million in Q3 2024.
Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AXT Inc (AXTI, Financial) reported a year-over-year revenue increase from $17.4 million in Q3 2023 to $23.6 million in Q3 2024, indicating growth.
- The company is experiencing solid demand for indium phosphide substrates, particularly in data center applications and AI, which are expected to drive future growth.
- AXT Inc (AXTI) has successfully developed a new indium phosphide product targeting silicon photonics and electro-absorption modulated lasers, securing a design win with a leading customer.
- The company's raw material joint ventures continue to contribute positively to results, with increased demand and stable gallium prices.
- AXT Inc (AXTI) is optimistic about the growth and expansion of its business, particularly in data centers and telecom CapEx spending, which are expected to provide tailwinds in 2025.
Negative Points
- Revenue for Q3 2024 decreased from $27.9 million in Q2 2024, indicating a sequential decline.
- The company reported a non-GAAP net loss of $2.1 million in Q3 2024, compared to a smaller loss of $800,000 in Q2 2024.
- Gross margins decreased to 24.3% in Q3 2024 from 27.6% in Q2 2024, reflecting margin pressure.
- AXT Inc (AXTI) faced challenges in the germanium substrate market due to increased raw material costs, leading to a decision to walk away from low-margin opportunities.
- The economic slowdown in China and weak market conditions have impacted the company's performance, particularly in the gallium arsenide market.
Q & A Highlights
Q: How did the pricing environment impact the Germanium business, and what are the future expectations for this segment?
A: Morris Young, CEO, explained that raw material prices more than doubled, making it difficult to increase prices for customers. AXT chose not to quote unattractive margins, leading to reduced expectations for Germanium revenue. However, the company believes it remains competitive and expects the market to stabilize, allowing them to re-enter as demand for low-orbit satellites grows.
Q: What are the growth drivers for the Indium Phosphide business, particularly in data centers?
A: Tim Bettles, VP of Business Development, highlighted that AI and data center revenues are strong growth drivers. The company is seeing increased demand for Indium Phosphide-based high-speed photo detectors used in multi-mode transceivers. This market is growing as speeds increase to 100 gig per line and higher, requiring Indium Phosphide photo detectors.
Q: Can you elaborate on the opportunities in the HPT market and AXT's competitive position?
A: Morris Young noted that the HPT market is about $80 to $100 million and is steady, with potential growth from 5G. AXT's entry is driven by Chinese customers seeking diversified suppliers due to gallium restrictions. The company has improved its cost structure and yield, gaining approximately 10% market share, with opportunities to increase it further.
Q: How might the Chinese stimulus package impact AXT's business and IPO plans?
A: Morris Young stated that the stimulus package could boost demand in sectors like high-power lasers and LEDs, which are sensitive to economic activity. It may also positively impact AXT's IPO plans, as the Shanghai Stock Exchange index has risen, potentially clearing the way for AXT's subsidiary Tongmei to go public.
Q: What is the current state of the telecom market, and are there signs of improvement?
A: Morris Young indicated that the telecom market is steady and not declining like last year. The company gauges this by the PON market activity, which is currently at about 30% of its peak, suggesting a stabilization rather than a downturn.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
