AXT Inc

Good afternoon, everyone, and welcome to AXT's third quarter 2026 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, 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 Tracy, and I will be your coordinator today. I would like to now turn the call over to Leslie Green, Investor Relations for AXT. Leslie, please go ahead.

Thank you, Tracy, 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 and receipt of export permits. Our plan to list our subsidiary Tang Mei in Hong Kong. The closing of the intended investment into Tang Mei by a leading Asia-based asset manager. 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, 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, 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 at AXT.com through October 29, 2028. I also want to note that shortly following the close of market today, we issued a press release reporting financial results for the third quarter of 2026. 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 Fischer for a review of our third quarter results. Gary?

Thank you, Leslie, and good afternoon to everyone. Our financial results highlight the continuing inflection in our business trajectory in the early stages of a multi-year growth phase for AXT. Revenue for the third quarter of 2026 was $73.4 million. This is an increase of 54% from $47.6 million in the second quarter of 2026 and an increase of 162% from $28.0 million in the third quarter of 2025. To break down our Q3 26 revenue for you by product category, indium phosphide was $54.3 million, primarily from data center applications. Gallium arsenide was $9.1 million. Germanium substrates were $344,000. Finally, revenue from our consolidated raw material companies in Q3 was $9.7 million. The top five customers generated approximately 35% of total revenue, and one customer was over the 10% level. Gross margins showed continued gain in the third quarter, driven by an increase in total volume and a favorable product mix. In addition, market prices for Indian Phosphite have increased, and a shift from 3-inch to 4-inch wafers has also contributed. Morris will give more color on this in a moment. Non-GAAP gross margin was 56.1% compared with 45.0% gross margin in Q2 and 22.4% gross margin in Q3 of 2025. For those who prefer to track results on a GAAP basis, gross margin in the third quarter is 56.0% compared with 44.9% in Q2 and 22.3% in Q3 2025. Moving to OPEX. Our total non-GAAP operating expense in Q3 was $11.7 million compared with $10.2 million in Q2 and $6.7 million in Q3 of 2025. On a GAAP basis, total OPEX in Q3 was $12.7 million compared with $10.9 million in Q2 of 2026 and $7.3 million in Q3 of 2025. Our non-GAAP operating profit for the third quarter of 2026 was $29.5 million or 40.2% of revenue compared with the non-GAAP operating percent in Q2 of 2026 of 11.2 million and a non-GAAP operating loss of 384,000 in Q3 of 2025. For reference, our non-GAAP operating line for the third quarter of 2026 was a profit of 28.4 million or 38.7% of revenue compared with an operating profit of 10.4 million in Q2 and an operating loss of 1.1 million in Q3 of 2025. Non-operating income and expense and other items below the line of the operating line for the third quarter of 2026 was a net loss of 2.7 million. The details can be seen in the P&L included in our press release today. We are pleased to report a non-GAAP net profit of 26.8 million or 41 cents per diluted share. This compares with the non-GAAP net profit of $11.9 million or $0.19 per share in the second quarter of 2026. Non-GAAP net loss in Q3 at 25 was $1.2 million or $0.03 a share. On a GAAP basis, net profit in Q3 was $25.7 million or $0.39 per diluted share. By comparison, net profit was $11.1 million or $0.17 per share in the second quarter of 2026. Gap net loss in Q3 of 2025 was $1.9 million, or $0.04 per share. The weighted average diluted shares outstanding in Q3 was $65.9 million. Cash equivalents and investments increased by $77 million to $825.9 million as of September 30th. By comparison, at June 30th, it was $748.8 million. Accounts receivable increased by only $3 million. In Q3, DSO improved to 49 days as a result of multiple customer prepayments. During Q3, we signed a long-term supply agreement with Lumentum. Under the terms of the agreement, we received a prepayment for wafers of $43.5 million. This type of agreement with significant upfront cash is an additional signpost regarding the important use of indium phosphide for high-speed optical data transmission required in the AI data centers. This prepayment is posted on our financial statements as a liability and will be converted to revenue as we ship products against the agreements. Depreciation and amortization in the third quarter was 2.6 million. Total stock comp was 1.1 million. Net inventory was up by approximately 7.4 million in the third quarter. This concludes the discussion of our financials. Before I turn the call over to Morris, I want to note that yesterday, We announced that our majority-owned subsidiary, Tong Mei, has entered into a definitive agreement for private equity financing, selling its own shares, not AXTI shares, to provide RMB directly into its operations. This is an exciting milestone for Tong Mei as it works towards a public offering on the Hong Kong Stock Exchange. Funds will be used to advance capacity expansion for Indian phosphide wafers at a time when demand for these wafers is outpacing supply. Proceeds will also be used to increase capacity at our raw material companies in China. Assuming the maximum amount of the investment at 545 million US dollars, AXT will maintain control of Tang Mei with approximately 73.4% ownership down approximately 12.1% following the completion of the transaction. This transaction turns the spotlight on Tang Mei, reflecting its substance and generating momentum towards the future. and finally, as previously stated, Tong Mei is proceeding with its efforts towards a listing on the Hong Kong Stock Exchange. We continue to believe that an IPO in China is highly beneficial as expanding both the substrate and raw material capacity in China is the most efficient way to support the rapidly evolving AI infrastructure build out. Okay, thank you. With that, now I'll turn the call over to Dr. Morris Young for a review of our business and markets. Morris.