AXT, Inc. (AXTI) Tops Q2 EPS by 1c; Announces Acquisition of Crystacomm

AXT, Inc. (NASDAQ: AXTI) reported Q2 EPS of $0.00, $0.01 better than the analyst estimate of ($0.01). Revenue for the quarter came in at $21 million versus the consensus estimate of $20.98 million.

The company also announced that it has acquired Crystacomm, Inc., a privately held manufacturer of LEC-based indium phosphide (InP) substrates, in an all-cash transaction.

Indium phosphide is rapidly emerging as a material of choice for both new and existing applications, including optoelectronic devices for fiber optic telecommunications, passive optical networks (PON), and data center connectivity, as well as solar cells and next-generation wireless amplifiers. Crystacomm, headquartered in Mountain View, California, has long been a pioneer in the industry as the first company to introduce 2-inch, 3-inch, and 4-inch InP substrates. It has also been a leader in the development of 6-inch InP technology, which has the capability to support the stringent requirements of 5G wireless communications.

"This technology acquisition is highly synergistic to our current InP business and provides further competitive differentiation and cost benefits," said Morris Young, AXT's chief executive officer. "It allows us to broaden our technology base, and gives us the flexibility to serve customers with varying technical requirements. While we are not expecting revenue from the acquisition in this calendar year, we believe that the additional capabilities will provide valuable and incremental business opportunities for AXT in the years to come."

While still relatively small, the InP market has seen considerable growth over the last two years, much of this driven by fiber-to-the-home network deployments that are actively occurring across the globe. For example, China, Singapore, and Taiwan have invested heavily in nationwide PON, and network deployments are ongoing in countries such as Australia and New Zealand.

The landscape of InP substrate providers has been limited as a result of the relative technical difficulty in producing substrates that meet the stringent specifications for various optoelectronic and electronic applications. AXT has worked collaboratively with customers to overcome these challenges and has developed robust proprietary manufacturing processes over time, resulting in significant market share and leadership position in this expanding market.

The terms of the acquisition, which closed in the second quarter, are not being disclosed. The crystal-growth equipment and processes will be installed in AXT's Fremont, Calif. facility. George Antypas, Crystacomm's founder and CEO, will stay on as a consultant to AXT, assisting the company in bringing up the Crystacomm LEC-InP crystal growth and poly-synthesis process.

"I am very pleased to be able to leverage George's extensive expertise in what is emerging to be a very exciting and dynamic market," continued Young. "George's groundbreaking research enabled the early commercialization of InP, and Crystacomm has been at the forefront of the technology progression ever since. We are pleased to bring this valuable technology into our portfolio."

For earnings history and earnings-related data on AXT, Inc. (AXTI) click here.

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