AXT Inc

Good afternoon, everyone, and welcome to AXT's first quarter 2025 financial conference call. Leading the call today is Dr. Maurice Young, Chief Executive Officer, and Gary Fisher, Chief Financial Officer. In addition, Tim Bettles, VP of Business Development, will be participating in the Q&A portion of the call. My name is John, and I will be your coordinator today. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. Thank you. I would now like to turn the call over to Leslie Green, investor relations for AXP. Please go ahead.

Thank you, John, 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 substrate, our product mix, global economic and political conditions, including trade tariffs and export and import 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 expectations. This conference call will be on our website through May 1st, 2026. I also want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter and fiscal year 2025. This information is also available on the investor relations portion of our website. I would now like to turn the call over to Gary Fisher for a review of our first quarter 2025 results. Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the first quarter of 2025 was slightly above the midpoint of our guidance at $19.4 million, compared with $25.1 million in the fourth quarter of 2024. $22.7 million in the first quarter of last year, 2024. To break down our Q1 2025 revenue for you by product category, indium phosphide was $3.8 million, primarily from pond and data center applications. Gallium arsenide was $6.7 million. Germanium substrates were $0.6 million. Finally, revenue from our consolidated raw material joint venture companies in Q1 was $8.3 million based on continued healthy demand. In the first quarter of 2025, revenue from the Asia Pacific region was 83%, Europe was 11%, and North America was 6%. The top five customers generated approximately 35.9% of total revenue, and no customer was over the 10% level. Non-GAAP gross margin in the first quarter was a negative 6.1%, compared with 17.9% in Q4 2024, and 27.3% in Q1 of 2024. For those who prefer to track results on a gap basis, gross margin in the first quarter was negative 6.4% compared with 17.6% in Q4 and 26.9% in Q1 of 2024. The magnitude of the decline in gross margin was a disappointment in the quarter and primarily the result of three factors. First, we had significant yield issues and our semi-insulating gallium arsenide wafers as we worked quickly to scale our output for sizable wireless opportunity. I think the lesson for us is that while the opportunity is compelling, the sophistication of the product specs require us to move in a more measured way to ensure that we can execute cost efficiently. Revenue in the mix also played a role in our gross margin deficit. Due to the current trade restrictions, substrate sales were down meaningfully in the quarter, our joint venture sales were higher than normal as a percentage of our revenue as a manufacturing company this resulted in under absorbed factory overhead that was greater than expected and finally we were expecting to see a little bit higher gross margins across the board from our joint ventures from gallium arsenide and from germanium sales morris will talk more about gross margins and our plans for improvement shortly moving to operating expenses which is better than expected in holding OpEx down in Q1. Total non-GAAP operating expense in Q1 was $8.5 million compared with $10.5 million in Q4 of 2024 and $8.7 million in Q1 of 2024. On a GAAP basis, total operating expense in Q1 was $9.0 million compared with $10.6 million in Q4 of 2024 and $9.4 million in Q1 of 2024. Our non-GAAP operating loss for the first quarter of 2025 was $9.6 million compared with the non-GAAP operating loss in Q4 of 2024 of $5.4 million and a non-GAAP operating loss of $2.5 million in Q1 of 2024. For reference, our GAAP operating line for the first quarter of 2025 was a loss of $10.3 million compared with an operating loss of $6.2 million in Q4 of 2024 and an operating loss of 3.3 million in Q1 of 2024. Non-operating other income and expense and other items below the operating line for the first quarter was a net gain of 0.4 million. The details can be seen in the P&L included in our press release today. For Q1 of 2025, we had a non-GAAP net loss of 8.2 million or 19 cents per share compared to the non-GAAP net loss of 4.3 million or $0.10 per share in the fourth quarter of 2024. Non-GAAP net loss in Q1 of 2024 was $1.3 million or $0.03 per share. On a GAAP basis, net loss in Q1 was $8.8 million or $0.20 per share. By comparison, net loss was $5.1 million or $0.12 per share in the fourth quarter. And GAAP net loss in Q1 of 2024 was $2.1 million or $0.05 per share. The weighted average basic shares outstanding in Q1 of 2025 was 43.6 million. Cash and cash equivalents and investments increased by 4.4 million to 38.2 million as of March 31st. By comparison, at December 31st, it was 33.8 million. Depreciation and amortization in the first quarter was 2.2 million. Total stock comp was 0.6 million. Net inventory was down by approximately 4.7 million in the first quarter to 80.4 million. This continues to be a focus for us, and we expect to bring it down further in quarters to come. Okay, this concludes the brief discussion of quarterly financial results. Turning to our plan to list the subsidiary in China, Tang Mei, on the star market, we continue to keep our IPO application current. Tang remains an in-process category. as part of a much more selective and smaller group prospective listings than a few years ago. While we're not insensitive to the current geopolitical environment, Tang Mei is considered a Chinese company and continues to be regarded in China as a good IPO candidate. We will keep you informed of any updates. Okay, with that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris?