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AXT, Inc. Announces Fourth Quarter and Fiscal 2013 Financial Results

FREMONT, CA -- (Marketwired) -- 02/25/14 -- AXT, Inc. (NASDAQ: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter ended Dec. 31, 2013.

Fourth Quarter 2013 Results
Revenue for the fourth quarter of 2013 was $18.6 million compared with $20.5 million in the third quarter of 2013. Total gallium arsenide (GaAs) substrate revenue was $8.9 million for the fourth quarter of 2013, compared with $9.0 million in the third quarter of 2013. Indium phosphide (InP) substrate revenue was $1.8 million for the fourth quarter of 2013, compared with $1.4 million in the third quarter of 2013. Germanium (Ge) substrate revenue was $3.6 million for the fourth quarter of 2013, compared with $5.5 million in the third quarter of 2013. Raw materials sales were $4.3 million for the fourth quarter of 2013, compared with $4.6 million in the third quarter of 2013.

Gross margin was 15.1 percent of revenue for the fourth quarter of 2013, compared with 11.9 percent of revenue in the third quarter of 2013.

Operating expenses were $4.4 million in the fourth quarter of 2013, compared with $5.1 million in the third quarter of 2013.

Loss from operations for the fourth quarter of 2013 was $1.2 million compared with a loss from operations of $2.6 million in the third quarter of 2013.

Net interest and other income for the fourth quarter was $293,000, which was primarily attributable to $278,000 from equity earnings of the company's unconsolidated joint ventures, and $272,000 from interest income, partially offset by $289,000 foreign exchange losses. This compares with net interest and other income of $354,000 in the third quarter, which was mainly attributable to $346,000 equity earnings of our unconsolidated joint ventures, partially offset by $67,000 foreign exchange losses.

Net loss in the fourth quarter of 2013 was $1.2 million or $0.04 per diluted share compared with net loss of $2.3 million or $0.07 per diluted share in the third quarter of 2013.

Fiscal Year 2013 Results
Revenue for fiscal year 2013 was $85.3 million, down from $88.4 million in fiscal year 2012. Gross margin for fiscal year 2013 was 13.9 percent of revenue compared with 28.1 percent of revenue for fiscal year 2012.

Net loss for fiscal year 2013 was $8.0 million or $0.25 per share compared with net income of $3.1 million or $0.09 per diluted share for fiscal year 2012.

Management Qualitative Comments
"Our fiscal year 2013 was among our most difficult years, with a significant technology transition, market consolidation and customer-specific technical issues," said Morris Young, chief executive officer. "We are now focusing our efforts on growing our market presence in strategic areas, and leveraging our low-cost manufacturing as a competitive advantage. In the meantime, we are sizing our operations to be more in line with the demand environment and are implementing a number of programs to improve our gross margins and lower our operating expenses. We continue to focus on cash management and are committed to driving increasing value for our shareholders."

Conference Call
The company will also host a conference call to discuss these results on Feb. 25, 2014 at 1:30 p.m. PT. The conference call can be accessed at (719) 325-2455 (passcode 9920007). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (719) 457-0820 (passcode 9920007) until March 3, 2014. Financial and statistical information to be discussed in the call will be available on the company's website immediately prior to commencement of the call. Additional investor information can be accessed at http://www.axt.com or by calling the company's Investor Relations Department at (510) 683-5900.

AXT will provide highlights of its fourth quarter results on today's conference call, but investors can find the full financial summary on the investor relations portion of the company's website at www.axt.com.

About AXT, Inc.
AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its manufacturing facilities in Beijing, China. In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California. The company's substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates. AXT has manufacturing facilities in China and invests in joint ventures in China producing raw materials. For more information, see AXT's website at http://www.axt.com.

Safe Harbor Statement
The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws, including statements regarding the market demand for our products, our market opportunity, our business planning and management approach and our expectations with respect to our business prospects. These forward-looking statements are based upon specific assumptions that are subject to uncertainties and factors relating to the company's operations and business environment, which could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. These uncertainties and factors include but are not limited to: overall conditions in the markets in which the company competes; global financial conditions and uncertainties; market acceptance and demand for the company's products; the impact of factory closures or other events causing delays by our customers on the timing of sales of our products; and other factors as set forth in the company's annual report on Form 10-K and other filings made with the Securities and Exchange Commission. Each of these factors is difficult to predict and many are beyond the company's control. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise.

                                 AXT, INC.
              (Unaudited, in thousands, except per share data)

                                  Three Months Ended    Twelve Months Ended
                                     December 31,          December 31,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Revenue                          $  18,603  $  18,927  $  85,335  $  88,374
Cost of revenue                     15,790     15,243     73,507     63,522
                                 ---------  ---------  ---------  ---------
Gross profit                         2,813      3,684     11,828     24,852
                                 ---------  ---------  ---------  ---------

Operating expenses:
  Selling, general and
   administrative                    3,631      3,710     16,066     15,419
  Research and development             797        875      3,424      3,468
                                 ---------  ---------  ---------  ---------
    Total operating expenses         4,428      4,585     19,490     18,887
                                 ---------  ---------  ---------  ---------
Income (loss) from operations       (1,615)      (901)    (7,662)     5,965
Interest income, net                   272        316        408        518
Equity in earnings of
 unconsolidated joint ventures         278        495      1,377      1,281
Other income (expense), net           (257)      (289)      (748)      (761)
                                 ---------  ---------  ---------  ---------

Income (loss) before provision
 for income taxes                   (1,322)      (379)    (6,625)     7,003
Provision for (benefit from)
 income taxes                         (134)       294        188        853
                                 ---------  ---------  ---------  ---------
Net income (loss)                   (1,188)      (673)    (6,813)     6,150

Less: Net income (loss)
 attributable to noncontrolling
 interest                              (40)       (83)    (1,145)    (3,040)
                                 ---------  ---------  ---------  ---------
Net income (loss) attributable
 to AXT, Inc.                    $  (1,228) $    (756) $  (7,958) $   3,110
                                 =========  =========  =========  =========

Net income (loss) attributable
 to AXT, Inc. per common share:
  Basic                          $   (0.04) $   (0.02) $   (0.25) $    0.09
                                 =========  =========  =========  =========
  Diluted                        $   (0.04) $   (0.02) $   (0.25) $    0.09
                                 =========  =========  =========  =========

Weighted average number of
 common shares outstanding:
  Basic                             32,628     32,220     32,700     32,144
                                 =========  =========  =========  =========
  Diluted                           32,628     32,220     32,700     32,865
                                 =========  =========  =========  =========

                                 AXT, INC.
                         (Unaudited, in thousands)

                                              December 31,    December 31,
                                                  2013            2012
                                             --------------  --------------
Current assets
  Cash and cash equivalents                  $       24,961  $       30,634
  Short-term investments                             12,499          10,270
  Accounts receivable, net                           14,943          17,912
  Inventories                                        39,127          40,352
  Related party notes receivable - current                0           2,036
  Prepaid expenses and other current assets           8,010           5,268
                                             --------------  --------------
    Total current assets                             99,540         106,472

Long-term investments                                10,145           9,191
Property, plant and equipment, net                   37,621          37,235
Related party notes receivable - long-term            1,715             416
Other assets                                         14,801          14,275

                                             --------------  --------------
    Total assets                             $      163,822  $      167,589
                                             ==============  ==============

Liabilities and stockholders' equity:
Current liabilities
  Accounts payable                           $        8,140  $        5,894
  Accrued liabilities                                 7,286           7,202
                                             --------------  --------------
    Total current liabilities                        15,426          13,096

Long-term portion of royalty payments                 2,525           3,325
Other long-term liabilities                             325             254
                                             --------------  --------------
    Total liabilities                                18,276          16,675
                                             --------------  --------------

Stockholders' equity:
  Preferred stock                                     3,532           3,532
  Common stock                                           32              32
  Additional paid-in capital                        194,156         193,063
  Accumulated deficit                               (67,005)        (59,047)
  Accumulated other comprehensive income              8,953           6,033
                                             --------------  --------------
    Total AXT, Inc. stockholders' equity            139,668         143,613

Noncontrolling interest                               5,878           7,301
                                             --------------  --------------
    Total stockholders' equity                      145,546         150,914

                                             --------------  --------------
    Total liabilities and stockholders'
     equity                                  $      163,822  $      167,589
                                             ==============  ==============

Morris S. Young
Chief Executive Officer
(510) 683-5900

Leslie Green
Green Communications Consulting, LLC
(650) 312-9060

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