AXT Inc

Good afternoon, everyone, and welcome to AXT's second quarter 2024 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fisher, Chief Financial Officer. My name is Christina, and I'll be your coordinator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, you can press star 1 again. Thank you. I would now like to turn the call over to Leslie Greene, Investor Relations for AXT.

Thank you, Christina, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements. regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. In addition to the matters just listed, these uncertainties and risks include but are not limited to the financial performance of our partially owned supply chain companies, increased environmental regulation in China, and COVID-19 and other outbreaks of a contagious disease. In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This call will be available on our website at AXT.com through August 1, 2025. I also want to note that shortly following the close of market today, we issued a press release reporting financial results for the second quarter of 2024. This information is also available on the investor relations portion of our website at axc.com. I would now like to turn the call over to Gary Fisher for a review of our second quarter of 2024 results.

Thank you, Leslie, and good afternoon to everyone. Revenue for the second quarter of 2024 was $27.9 million. up 23% from 22.7 in the first quarter of 2024, and up 50% from 18.6 million in the second quarter of 2023. To break down our Q2 2024 revenue for you by product category, indium phosphide was 7.7 million, reflecting continued demand from data center applications, including AI, as well as passive optical networks. Gallium arsenide also grew to 9.1 million, with broad-based improvement across a number of applications. Germanium substrates were $2.9 million, up from the prior quarter, with renewed strength in demand for satellite solar cells. Finally, revenue from our consolidated raw material joint venture companies in Q2 was $8.2 million, up substantially from Q1 on growing demand. In the second quarter of 2024, revenue from Asia Pacific was 78%, Europe was 17%, and North America was 5%. The top five customers generated approximately 31.8% of total revenue and no customer was over the 10% level. Non-GAAP gross margin in the first quarter was 27.6% compared with 27.3% in Q1 and 9.8% in Q2 of 2023. For those who preferred to track results on a GAAP basis, gross margin in the second quarter was 27.4% compared with 26.9% in Q1 and 9.2% in Q2 of 2023. Moving to OPEX, total non-GAAP operating expense in Q2 was $8.9 million compared with $8.7 million in Q1 of 2024 and $7.8 million in Q2 of last year. On a GAAP basis, total OPEX in Q2 2024 was $9.5 million compared with $9.4 million in Q1 of 2024 and $8.6 million in Q2 of 2023. We expect OPEX to hold at approximately this level throughout the balance of 2024. Our non-GAAP operating loss for the second quarter of 2024 is $1.2 million compared with the non-GAAP operating loss in Q1 of 2024 of $2.5 million and a non-GAAP operating loss of $5.9 million in Q2 of 2023. For reference, our GAAP operating line for the second quarter of 2024 was a loss of $1.9 million compared with an operating loss of $3.3 million in Q1 and an operating loss of $6.8 million in Q2 of last year. Non-operating other income and expense and other items below the operating line for the second quarter of 2024 was a net gain of $369,000. The details can be seen in the P&L included in our press release today. For Q2 of 2024, we had a non-GAAP net loss of 800K, or two cents per share, compared with a non-GAAP net loss of 1.3 million, or three cents per share, in the first quarter of 2024. Non-GAAP net loss in Q2 of 2023 was $4.2 million, or $0.10 per share. On a GAAP basis, net loss in Q2 was $1.5 million, or $0.04 per share. By comparison, net loss was $2.1 million, or $0.05 per share in the first quarter of 2024, and the GAAP net loss in Q2 of last year was $5.1 million, or $0.12 per share. The weighted average basic shares outstanding in Q2 was $43.1 million, Cash, cash equivalents and investments increased by $2 million to $43.3 million as of June 30th. By comparison, at March 31st, it was $41.3. Depreciation and amortization in the second quarter was $2.2 million. Total stock comp was $700K. Net inventory was down slightly in the second quarter to $85.8 million. This includes inventory added through our recycling program. 34% of the inventory is raw materials. and WIP is 64%. Finished goods makes up only about 2%. With improving demand, we hope to continue to bring our total inventory down in 2024. Okay, this concludes the discussion of our quarterly financial results. Turning to our plan to list our subsidiary, Tongmei and China, on the star market in Shanghai, we continue to make positive progress and have been in active discussions with the Shanghai Stock Exchange. Recent developments have been encouraging. We've kept our application current while many other Shanghai Stock Exchange applicants in the queue have been dismissed for business, financial, or other shortcomings. We expect to continue to work through this process during the summer and hope to have more news in the fall. As we've consistently said, this is a lengthy process, but we continue to believe that Tong Mei is an excellent candidate for the listing. Okay, with that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris?