Knobias Clip Report (02-26-2009) AXTI
Submitted By Knobias ClipReport
AXTI: Shares Decline on Q4 Results and Weak Q1 Outlook
By Fain Hughes, fhughes@knobias.com
Shares of AXT, Inc. (AXTI) declined during Thursday’s session after the Company reported its financial results yesterday for the fourth quarter and fiscal year ended December 31, 2008.
Revenue for the fourth quarter of 2008 was $15.6 million, compared with $17.9 million in the third quarter of 2008, and $17.6 million in the fourth quarter of 2007. Net loss in the fourth quarter was $(2.4) million or $(0.08) per diluted share, compared with net loss of $(1.0) million or $(0.03) per diluted share in the third quarter of 2008, and net income of $1.9 million, or $0.06 per diluted share in the fourth quarter of 2007.
Wilson W. Cheung, CFO of AXT, commented in a conference call, “The decline in Q4 revenue was primarily due to an overall market slowdown with lower than expected demand from customers and some push-out of scheduled shipments to Q1 and Q2, which also resulted in lower production levels.”
Revenue for fiscal year 2008 was $73.1 million, compared with $58.2 million in fiscal year 2007. Net loss for fiscal year 2008 was $(689,000) or $(0.03) per diluted share compared with net income of $5.3 million or $0.16 per diluted share for fiscal year 2007.
Gross margin was 4.8 percent of revenue for the fourth quarter of 2008. Gross margin for fiscal year 2008 was 24.6 percent of revenue compared with 34.8 percent of revenue for fiscal year 2007.
Mr. Cheung explained, “The deterioration in gross margin in Q4 was primarily due to a shutdown of our joint venture in China for five weeks because of a supply shortage of raw materials. Gross margin was also negatively impacted by lower production volume, higher warranty expenses and higher unfavorable variances due to lower yields from a particular product line that does not typically make up such a high percentage of our overall sales.
Dr. Philip Yin, Chairman and CEO of AXT, commented, “The economic downturn in 2008, inventory overhang in the industry and customer specific issues that we continue to work through put pressure on our financial performance, and they will also have a significant impact on Q1 results.”
He continued, “The global handset market declined significantly in Q4, and this softness is expected to remain throughout 2009. This weakened demand environment continues to have a meaningful effect on our results. We believe that the majority of our customers’ inventories will be digested in Q1 with some overhang into Q2.”
Dr. Yin added, “Although we expect to see a strong decline in Q1 revenues, we expect to see a marked improvement in our Q1 gross margin. We have taken meaningful steps to reduce our expenses including headcount reductions, reduction in manufacturing and operational work hours, elimination of per diem for our ex-pats, elimination of non-essential contract workers and renegotiation of vendor contracts. We believe that these steps will allow us to improve our cost structure and bottom line performance, and these initiatives will begin to be reflected in Q2.”
AXT estimates that Q1 revenue will decrease to between $7.0 million and $8.0 million. The Company estimates that net loss per diluted share will be between $(0.05) and $(0.08).
Mr. Cheung added, “We expect the business to continue to generate cash in Q1.”
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