AXT(AXTI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $23.0 million, down from $28.0 million in Q3 2025 and $25.1 million in Q4 2024 [4] - Non-GAAP gross margin in Q4 was 21.5%, compared to 22.6% in Q3 2025 and 18.0% in Q4 2024 [5] - Non-GAAP operating loss in Q4 2025 was $2.6 million, an increase from a loss of $384,000 in Q3 2025 and a loss of $5.4 million in Q4 2024 [6][7] - Cash and investments increased by $97.2 million to $128.4 million as of December 31, primarily due to a public offering [9] Business Line Data and Key Metrics Changes - Revenue from Indium Phosphide was $8.0 million, primarily from data center applications, while Gallium Arsenide generated $7.0 million [4] - Revenue from consolidated raw material joint ventures was $7.6 million in Q4 [4] - The backlog for indium phosphide wafers reached over $60 million, indicating strong demand [16] Market Data and Key Metrics Changes - Revenue from Asia Pacific accounted for 81.5% of total revenue, Europe 17.5%, and North America 1% [4] - Revenue related to the data center market in China is expected to grow by more than 60% in Q1 2026 compared to Q4 2025 [18] Company Strategy and Development Direction - The company plans to list its subsidiary, Tongmei, on the STAR Market in Shanghai, focusing on the growing demand for indium phosphide substrates in AI infrastructure [10] - AXT is expanding its capacity, aiming to double it by the end of 2026, with a focus on six-inch indium phosphide products [19][53] - The company is actively engaging with customers to understand their long-term requirements and align expansion plans globally [19] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the number of export permits received in Q4 but noted improvements in Q1 [14] - The company expects sequential revenue growth in Q1, driven by indium phosphide demand for AI data centers [15] - The geopolitical environment is affecting the export permit process, which remains a significant gating factor for growth [23] Other Important Information - The company is focused on improving gross margins, controlling operating expenses, and reducing inventory [24] - The management highlighted the importance of maintaining efficiency in operations to meet growing demand [23] Q&A Session Summary Question: Revenue number for the quarter - The company confirmed a revenue number of approximately $26 million for Q1, with potential upside if more permits are received [31][32] Question: Licensing process insights - The licensing process has become less predictable, with some permits being denied but with instructions for resubmission [40][41] Question: Backlog and customer ordering patterns - Customers are placing longer-term orders, with forecasts extending beyond 2030, indicating strong demand [50] Question: Capacity additions and CapEx requirements - The company plans to double its capacity by the end of 2026, requiring approximately $30 million for the initial phase [53] Question: Demand and shipment capabilities - If permits were not a constraint, the company could potentially ship $20 million worth of indium phosphide, with expectations to increase to $35 million by year-end [90][91]