AXT Inc

Good afternoon, everyone, and welcome to AXT Inc's second quarter 2025 financial conference call. Leading the call today is Dr. Morris 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 Audra, and I will be your coordinator today. I would now like to turn the call over to Leslie Green, Investor Relations for AXT. Please go ahead.

Thank you, Audra, 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 results or events 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 or 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 conference call will be available on our website at AXT.com through July 31st, 2026. 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 2025. 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 second quarter to 2025 results. Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the second quarter of 2025 was $18.0 million compared with $19.4 million in the first quarter of 2025 and $27.9 million in the second quarter of 2024. To break down our Q2 2025 revenue for you by product category, Indian phosphide was 3.6 million, primarily from pond and data center applications in China. Gallium arsenide was 6.2 million. Germanium substrates were 1.5 million. Finally, revenue from our consolidated raw material to adventure companies in Q2 was 6.7 million. In the second quarter of 2025, revenue from Asia Pacific was 90%, Europe was 9%, and North America was 1%. The top five customers generated approximately 30.9% of total revenue, and one customer was over the 10% level. Non-GAAP gross margin in the second quarter was 8.2%, reflecting a solid improvement from the prior quarter. For comparison, we reported a negative 6.1% gross margin in Q1, and a 27.6% gross margin last year in Q2 of 2024. For those who prefer to track results on a gap basis, gross margin in the second quarter was 8.0% compared with negative 6.4% in Q1 and 27.4% last year. We continue to be highly focused on driving continued improvement, including further recovery in Q3. Moving to operating expenses, given the difficult climate, we have been working hard to hold OPEX down, Total non-GAAP operating expense in Q2 was $7.6 million compared with $8.5 million in Q1 and $8.9 million in Q2 of 2024. On a GAAP basis, total operating expense in Q2 was $8.2 million compared with $9.0 million in Q1 and $9.5 million in Q2 of 2024. Our non-GAAP operating loss for the second quarter of 2025 was $6.1 million compared with a non-GAAP operating loss in Q1 of 2025 of $9.6 million and a non-GAAP operating loss of $1.2 million in Q2 of 2024. For reference, our GAAP operating line for the second quarter of 2025 was a loss of $6.7 million compared with an operating loss of $10.3 million in Q1 and an operating loss of $1.9 million in Q2 of 2024. Non-operating other income and expense and other items below the operating line for the second quarter of 2025 was a net loss of $0.4 million. The details can be seen in the P&L included in our press release today. For Q2 of 2025, we had a non-GAAP net loss of $6.4 million, or 15 cents per share, and paired with a non-GAAP net loss of $8.2 million, or 19 cents per share, in the first quarter of 2025. Non-GAAP net loss in Q2 of 2024 was $0.8 million, or $0.02 per share. On a GAAP basis, net loss in Q2 was $7.0 million, or $0.16 per share. By comparison, net loss was $8.8 million, or $0.20 per share in the first quarter of 2025. GAAP net loss in Q2 of 2024 was $1.5 million, or $0.04 per share. The weighted average basic shares outstanding in Q2 of 2025 was $43.7 million, Cash and cash equivalents and investments decreased by 3.1 million to 35.1 million as of June 30th. By comparison, at March 31st, it was 38.2 million. Depreciation and amortization in the second quarter was 2.5 million. Total stock comp was 0.6 million. Net inventory was down by approximately 300K in the second quarter to 80.1 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 presentation of our quarterly financial results. Turning to our plan to list our subsidiary Tongmei in China on the star market in Shanghai, we've 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. While we are not insensitive to the current geopolitical environment, Tongmei 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. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris.