AXT Inc

Good afternoon, everyone, and welcome to AXT's fourth 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 portions 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, ability to obtain China export permits, timing of receipt of export permits, our plan to list our subsidiary Tongmei in China, 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 and increased environmental regulations in China. 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 through February 19, 2027. Also, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the fourth quarter of 2025. This information is 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 fourth quarter results. Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the fourth quarter of 2025 was $23.0 million, compared with $28.0 million in the third quarter of 2025. and 25.1 million in the fourth quarter of 2024. To break down our Q4-25 revenue for you by product category, indium phosphide was 8.0 million, primarily from data center applications. Gallium arsenide was 7.0 million. Germanium substrates were 231,000. Finally, revenue from our consolidated raw material joint venture companies in Q4 was 7.6 million. In the fourth quarter of 2025, revenue from Asia Pacific was 81.5%, Europe was 17.5%, and North America was 1%. The top five customers generated approximately 22.6% of total revenue, and no customers were over the 10% level. Non-GAAP gross margin in the fourth quarter was 21.5%. For comparison, we reported 22.6% gross margin in Q3 of 2025, and 18.0 gross margin in Q4 of last year. For those who prefer to track results on a gap basis, gross margin in the fourth quarter was 20, 20.9% compared with 22.3% in Q3 of 2025 and 17.6% in Q4 of 2024. We continue to be highly focused on driving continued improvement, including further recovery in Q1. Moving to operating expenses, Our total non-GAAP operating expense in Q4 was $7.8 million, compared with $6.5 million in Q3 of 2025. As a reminder, Q3 included some favorable adjustments in R&D that brought our OpEx down to a lower-than-normal level. Non-GAAP OpEx in Q4 of 2024 was $9.8 million. On a GAAP basis, total operating expense in Q4 of 2025 was $8.8 million, compared with $7.3 million in Q3. and 10.6 million in Q4 of 2024. Our non-GAAP operating loss in the fourth quarter of 2025 was 2.6 million compared with the non-GAAP operating loss in Q3 of 2025 of 384,000 and the non-GAAP operating loss of 5.4 million in Q4 of 2024. For reference, our GAAP operating line for the fourth quarter of 2025 was a loss of 3.8 million compared with an operating loss of 1.1 million in Q3 of 2025 and an operating loss of 6.2 million in Q4 of 2024. Non-operating other income and expense and other items below the operating line for the fourth quarter of 2025 was a net gain of 285,000. The details can be seen in the P&L included in our press release today. For Q4 of 2025, we had a non-GAAP net loss of 2.6 million or $0.06 per share compared with the non-GAAP net loss of $1.2 million or $0.02 per share in the third quarter of 2025. Non-GAAP net loss in Q4 of 2024 was $4.2 million or $0.10 per share. On a GAAP basis, net loss in Q4 was $3.6 million or $0.08 per share. By comparison, net loss was $1.9 million or $0.04 per share in the third quarter of 2025. GAAP net loss in Q4 of 2024 was $5.1 million or $0.12 per share. Weighted basic shares outstanding for the quarter was 44.7 million. Cash, cash equivalents and investments increased by 97.2 million to 128.4 million as of December 31st. This is primarily the result of our public offering of common stock, which closed on December 30th and generated approximately 93.9 million. By comparison, at September 30th, cash was 31.2 million, Accounts receivable decreased in the quarter by 2.6 million. Depreciation and amortization in the fourth quarter was 2.3 million. Total stock comp was 1.3 million. Net inventory was up by approximately 4 million in the fourth quarter to 81.7 million. This continues to be a focus for us, and we expect to bring it down in coming quarters. This concludes our discussion or comments about the quarterly financials. Turning to our plan to list our subsidiary Tongmei in China on the star market in Shanghai, we remain very interested in completing the IPO, particularly in light of the rapidly evolving AI infrastructure build-out in China, which is fueling increased China-based demand for Indian phosphide substrates. We've continued to keep our IPO application current, and Tongmei remains, quote, in process. as part of much of a more selective and smaller group of prospective listings than a few years ago. Though the current geopolitical environment is dynamic, 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. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris.