AXT(AXTI) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $19.4 million, down from$ 25.1 million in Q4 2024 and $20.2 million in Q1 2024 [5][6] - Non-GAAP gross margin was negative 6.1% in Q1 2025, compared to 17.9% in Q4 2024 and 27.3% in Q1 2024 [6][9] - Non-GAAP net loss for Q1 2025 was$ 8.2 million or $0.19 per share, compared to a loss of$ 4.3 million or $0.10 per share in Q4 2024 [9][10] Business Line Data and Key Metrics Changes - Revenue from indium phosphide was$ 3.8 million, gallium arsenide was $6.7 million, and germanium substrates were$ 600,000 in Q1 2025 [5] - Revenue from consolidated raw material joint ventures was $8.3 million, indicating healthy demand [5] Market Data and Key Metrics Changes - Revenue distribution: Asia Pacific region accounted for 83%, Europe 11%, and North America 6% in Q1 2025 [5] - The Chinese data center optical interconnect market is estimated to be one-third of the global market, with increasing sales of indium phosphide within China [16] Company Strategy and Development Direction - The company is focusing on optimizing growth opportunities in China, particularly in high-speed data center connectivity and sensors for autonomous driving [25] - Plans to improve gross margins through a more measured approach to production and addressing yield issues [21][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by geopolitical factors and trade restrictions but expressed optimism about future growth opportunities in the Chinese market [15][25] - Expected healthy double-digit growth for revenue from data center applications in China in Q2 2025 [17] Other Important Information - The company is preparing for an IPO of its subsidiary in China, Tongmei, on the STAR Market [11] - Cash and cash equivalents increased to$ 38.2 million as of March 31, 2025, from $33.8 million at the end of 2024 [10] Q&A Session Summary Question: Yield issues for semi-insulating gallium arsenide - Management acknowledged yield problems due to aggressive market penetration but believes solutions are in place for recovery [30][32] Question: Timeline for resolving yield issues - Management indicated that while the product is established, changes in customer specifications require careful recalibration, which may take time [36][38] Question: Indium phosphide permitting process - Management expressed confidence in obtaining permits by mid-June, allowing for backlog shipments [41][46] Question: Risk of losing customers due to shipping delays - Management believes they hold a significant market share and that customers are willing to wait for shipments [55][60] Question: Impact of tariffs on gross margin - Management noted that tariffs are a concern but not a significant factor affecting gross margins at this time [72][78]