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1 March 2007


AXT’s fourth quarter drove return to profitability in 2006

Substrate maker AXT Inc of Fremont, CA, USA has reported fourth-quarter 2006 revenue of $13.1m (up 70% on $7.7m a year ago and up 4.2% on $12.5m in Q3/2006). This comprised substrate revenue for GaAs of $11.1m (up 4.7% from $10.6m in Q3), for InP of $456,000 (up from $340,000), and for Ge of $318,000 (down from $387,000), plus raw materials revenues of $1.2m (compared with $1.3m).

“During the fourth quarter, we were able to achieve tremendous yield improvements and cost reductions in nearly all areas of our manufacturing process, including longer ingot growth and shorter cycle times in crystal growing, and less material losses during slicing,” says CEO Phil Yin. “These yield improvements and cost reduction programs helped to drive our gross margins to 38.2% in the fourth quarter [from 27.7% in Q3] and allowed us to achieve profitability sooner than we had expected,” he adds.

Including $424,000 in severance for the retirement of the chief technology officer, operating expenses were $3.8m (down from Q3’s $4.5m, which included a $1.4m impairment charge to write down the firm’s US property). Operating income was $1.2m compared with Q3’s loss of $971,000. Net income rose from just $639,000 in Q3 to $3.4m (including a gain of $1.3m from selling the firm’s remaining shares in Finisar Corp).

For full-year 2006, revenue was $44.4m (up 67.5% from 2005’s $26.5m), driven by “strong market conditions, positive customer reception for our products and solid company-wide execution of our plans”, according to Yin. Gross margin was 28.7% (up from just 8.3%). Net income was $944,000, compared with a loss of $12.2m in 2005. “The last time the company achieved profitability was in the year 2000,” says Yin.

“As we enter 2007, we are energized by our achievements in product quality, yield improvements and sales penetration and we are optimistic about our prospects with increasing demand in the markets that we serve,” he adds.

For first-quarter 2007, AXT expects revenue to rise slightly to $13.1-13.6m.