AXT Inc

Good afternoon, everyone, and welcome to AXD's fourth quarter 2024 financial conference call. Leading the call today is Dr. Maurice Yong, Chief Executive Officer, and Gary Fisher, Chief Financial Officer. In addition, Tim Bittles, Vice President of Business Development, will be participating in the Q&A portion of the call. My name is Prilla, and I will be your conference operator 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 the star followed by the number one on your telephone keypad. And if you would like to withdraw your question, you may do so by pressing star one again. Thank you. I would now like to turn the conference over to Leslie Green, Investor Relations for AXC. You may begin.

Thank you, Prila, 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 regulations in China, and COVID-19 and other outbreaks of 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 February 20th, 2026. Also, I want to note that shortly following the close of the market today, we issued a press release reporting financial results for the fourth quarter and fiscal 2024. This information is available on the investor relations portion of our website at AXT.com. I would now like to turn the call over to Gary Fisher for a review of our fourth quarter 2024 results. Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the fourth quarter of 2024 was $25.1 million compared with $23.6 million in the third quarter of 2024 and $20.4 million in the fourth quarter of 2023. To break down our Q4 2024 revenue for you by product category, indium phosphide was $9.1 million reflecting continued demand from data center applications, including AI, as well as passive optical networks. Gallium arsenide was $5.4 million. Germanium substrates were $1.6 million. And finally, revenue from our consolidated raw material joint venture companies in Q4 was $9.0 million based on continued healthy demand. In the fourth quarter of 2024, revenue from Asia Pacific was 79%. Europe was 11% and North America was 10%. The top five customers generated approximately 36% of total revenue and one customer was over the 10% level. Non-GAAP gross margin in the fourth quarter was 17.9% compared with 24.3% in Q3 of 2024 and 23.2% in Q4 of 2023. For those who prefer to track results on a gap basis, gross margin in the fourth quarter was 17.6%, compared with 24.0% in Q3 and 22.6% in Q4 of 2023. The decline in gross margin is primarily the result of lower benefits from our recycling program in the quarter, as well as lower ingot starts and crystal growth, which resulted in underabsorption of our manufacturing overhead, but which also enabled us to reduce the inventory. Moving to operating expenses, total non-GAAP operating expense in Q4 was $9.9 million compared with $9.0 million in Q3 of 2024 and $7.5 in Q4 of 2023. On a GAAP basis, total operating expense in Q4 was $10.6 million compared with $9.1 million in Q3 and $8.2 million in Q4 of 2023. The increase in OPEX in Q4 was primarily the result of an increase in legal expenses as well as an increase in R&D expenses relating to investment in low EPD gallium arsenide crystal growth for the wireless market. We also continue to invest in the development of our six-inch indium phosphide for a variety of applications. Our non-gap operating loss for the fourth quarter of 2024 was 5.4 million, compared with the non-gap operating loss in Q3 of 2024 of 2.6 million, and a non-GAAP operating loss of 2.7 million in Q4 2023. For reference, our GAAP operating line for the fourth quarter of 2024 was a loss of 6.2 million compared with an operating loss of 3.4 million in Q3 and an operating loss of 3.6 million in Q4 2023. Non-operating other income and expense and other items below the operating line for the fourth quarter of 2024 was a net gain of 1.1 million The details can be seen in the P&L included in our press release today. For Q4 2024, we had a non-GAAP net loss of $4.3 million or $0.10 per share compared with a non-GAAP net loss of $2.1 million or $0.05 per share in the third quarter of 2024. Non-GAAP net loss in Q4 of 2023 was $2.8 million or $0.07 per share. On a GAAP basis, net loss in Q4 was $5.1 million or $0.12 per share. By comparison, net loss was $2.9 million, or $0.07 per share, in the third quarter of 2024, and the gap net loss in Q4 of 2023 was $3.6 million, or $0.09 per share. The weighted average basic shares outstanding in Q4 was $43.4 million. Cash equivalents and investments decreased by $5.0 million to $33.8 million as of December 31st. By comparison, at September 30th, it was $38.8 million. The decrease is mostly balance sheet related as over $3 million of the total loss was made up from non-cash depreciation and stock comp. The biggest balance sheet item was that we reduced our loan balance by $6.8 million. Depreciation and amortization in the fourth quarter was $2.2 million. Total stock comp was $0.8 million. Net inventory was down a bit over $1 million in the fourth quarter to $85.1 million. down from the peak by $6.6 million, and we are working to bring it down further. Finished goods make up less than $3 million, and that is a positive. This concludes our discussion of the quarterly financials. For the fiscal year 2024 in total, revenue was $99.4 million, up from $75.8 million in fiscal year 2023, and reflecting growth in every revenue category across our portfolio. This is a 31% increase in revenue and underscores the improvement we're seeing in our business, with major market trends driving the adoption of new technologies, a recovery in the global demand environment, and our own success in winning share as strategic customers. Gross margin for the fiscal year 2024 on a non-GAAP basis was 24.3%, up from 18.1% for fiscal 2023. GAAP gross margin for 2024 was 24% of revenue up from 17.6 for fiscal year 2023. Net loss for the fiscal year 2024 on a non-GAAP basis improved to 8.5 million or 20 cents per diluted share compared to the net loss of 14.3 million or 34 cents per share for fiscal year 2023. GAAP net loss for the fiscal year 2024 was 11.6 million or 27 cents per diluted share up from a net loss of 17.9 million, or 42 cents per share, for fiscal year 2023. Turning to our plan to list our subsidiary, Tongmei, in China on the star market in Shanghai, we have continued to keep our IPO application current. Tongmei remains in process as part of a much more selective and smaller group of prospective listings than a few years ago. We continue to think that Tongmei is a good IPO candidate, and we will keep you informed of any updates. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris.