AXT Presentation Morris S. Young Chief Executive Officer Raymond Low Chief Financial Officer May 2013
Safe Harbor Statement This presentation contains forward-looking information about the Company s business and financial outlook. Forward-looking information addresses matters that are subject to risks and uncertainties. In addition to the risks associated with developing complex technology, the Company s future results will depend on a variety of factors, including the cancellation or modification of major contracts; the timing of significant orders; the cancellation of orders and returns of product; the ability of the Company to bring new products to market; the timing of product releases; product announcements by the Company s competitors and other competitive factors. For further discussion of risks and uncertainties relating to the Company, please see the Company s filings with the SEC 2
Brief Synopsis AXT is a substrate provider for the fast-growing smartphone, Light Emitting Diode (LED) and Concentrated Photo Voltaic (CPV) solar cell industries We are a low-cost manufacturer based in China We have a differentiated capability in Vertical Gradient Freeze (VGF) technology We aim to increase market share with existing customers while adding new customers Our Joint Ventures (JVs) in China provide additional value, leverage cost and supply expansion advantages Consolidation in the wireless supply chain has created business opportunities/uncertainties 3
Compound Semiconductor Value Chain Ga Wireless As HB LEDs Ge pbn (Crucible) Photo voltaics Raw Substrates Epi-layer Epi-layer + Devices Systems Materials 4
Product And Market Applications Product Market % of AXT Revenue Growth Rate 2012/2016 Market Size 2012/2016 AXT Share 2012 GaAs Gallium Arsenide Handset LED, Lasers 27% 31% CAGR 10% CAGR 12% $140M / $205M $160M / $252M 17% 17% InP Indium Phosphide Fiber Optics 7% CAGR 15% $52M / $91M 11% Ge Germanium Solar Cell 10% CAGR 13% $59M / $98M 15% In 2012 Raw Material sales, primarily 99.99% Gallium, made up approx. 25% of AXT s revenue. Source: Strategy Analytics and Management estimates 5
GaAs Semi-Insulating (S.I.) Substrate Smartphones are projected to grow >25% CAGR through 2016, other wireless devices such as phone tablets may provide future growth opportunities Smartphones and phone tablets will need 4-6 x GaAs content versus voice-only phones 3G, 3G+, 4G phones are heavily promoted by industry giants, such as Apple, Samsung, Google, Microsoft, Verizon, AT&T 6
GaAs S.I. Substrate Competitive Landscape GaAs substrates still dominate the wireless PA/switch market 4 suppliers in GaAs SI substrates: AXT, 2 in Japan, 1 in Germany SOI devices are making inroad into the GaAs switch market Power efficiency, linearity, higher speed capability and faster turn around design cycle are the forte of GaAs technology Consolidation in the GaAs supply chain may create business opportunities 7
GaAs Semi-Conducting (S.C.) Substrate GaAs makes red and yellow LEDs Applications are very diverse and include: traffic lights, automobile instrumentation, automobile tail lights, cell phone backlighting, signage, display, printers/copy machines, remote controls, novelty products, direct lit LED TVs and solid state lighting Recent price reduction in LED industry will accelerate LED light bulb adoption New applications are emerging, including CPV applications for terrestrial solar cells 8
GaAs S.C. Substrate Competitive Landscape 4 suppliers in GaAs SC substrates: AXT, 2 in Japan, 1 in China Strong price pressure in certain mass markets leads to lower prices with large market size Certain niche markets require high precision high quality products which lead to higher prices with moderate market opportunities 9
Ge Substrate Business Germanium (Ge) Majority of Ge requirements is for the satellite solar cell market AXT is qualified through epitaxial device houses that supply the US, European, Russian and Chinese satellite solar cell markets CPV terrestrial solar cell market is poised to begin meaningful growth in 2013 10
InP Substrate Business Indium Phosphide (InP) AXT VGF InP has low dislocation density and low internal strain The major application is in long wavelength optoelectronic devices for optical fiber communications AXT InP is poised to grow market share in laser diodes, photodetectors and InP based high speed electronics applications 11
Total Market Opportunity 700 644 700 600 576 91 600 $ Millions 500 400 300 200 460 60 67 179 515 69 76 200 79 86 225 97 251 500 400 300 200 100 0 154 169 186 205 2013 2014 2015 2016 SI GaAs SC GaAs Ge InP Total 100 0 Source: Strategy Analytics and Management estimates 12
Joint Ventures Provide Additional Value and Market Advantages Six JV operations - Supply critical raw materials Ga, As, Ge, PBN, B2O3 Give insight into pricing trends and provide volume guarantees Provide gross margin protection during periods of significant raw material pricing increases 3 more JV s were created by AXT s JVs in China JVs have increased capacities in the last business cycle Ga price have declined but the demand volume is still strong 13
AXT s Compelling Business Model Key material supplier to fast growing materials market Low cost in labor, facilities, and raw material Expansive capacity to gain market share VGF technology that AXT pioneered with 26 years experience JVs provide advantages in capacity, pricing visibility, & ability to hedge against raw material pricing fluctuations 14
AXT, Inc. Financial Overview 15
Statement Of Operations (In millions except margins and EPS) Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Revenue $23.5 $25.2 $20.8 $18.9 $22.4 Gross Profit $8.2 $7.5 $5.5 $3.7 $3.5 Gross Margin 34.9% 29.8% 26.3% 19.5% 15.6% Net Income (loss) $1.6 $1.3 $0.9 ($0.8) ($2.4) Diluted EPS (loss) $0.05 $0.04 $0.03 ($0.02) ($0.08) Note Reported under US GAAP 16
Balance Sheet (in millions) 2010 2011 2012 Mar 13 Cash and investments $41.0 $40.6 $50.1 $49.4 Net Acct. Receivable $23.1 $18.0 $17.9 $17.0 Net Inventory $36.0 $46.0 $40.4 $38.8 Total Assets $140.6 $162.5 $167.6 $166.3 Total Debt/Credit Line $ - $ - $ - $ - NOTE: Reported under US GAAP 17
THANK YOU! 18