AXT INC — Call Transcript 2026

Good afternoon, everyone, and welcome to AXT's First Quarter 2026 Earnings Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. In addition, Tim Bettles, VP of Business Development, will be participating in the Q&A portion of the call. My name is Tracy, and I will be your coordinator today. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. I would now like to turn the call over to Leslie Green, Investor Relations for AXT. Leslie, go ahead. Thank you, Tracy, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, our plan to list our subsidiary, Tongmei, in China, our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. In addition to the matters just listed, these uncertainties and risks include but are not limited to the financial performance of our partially owned supply chain companies and increased environmental regulations in China. In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic report filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com through April 30th, 2027. Also, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter of 2026. This information is available on our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our first quarter results. Gary? Thank you, Leslie, and good afternoon to everyone. Revenue for the first quarter of 2026 was $26.9 million, compared with $23.0 million in the fourth quarter of 2025 and $19.4 million in the first quarter of 2025 last year. To break down our Q1 2026 revenue for you by product category, Indium Phosphide was $13.6 million, primarily from data center applications. Gallium Arsenide was $5.4 million. Germanium substrates were $200,000. Finally, revenue from our consolidated raw material joint venture companies in Q1 was $7.6 million. In the first quarter of 2026, revenue from Asia Pacific was 78%, Europe was 21%, and North America was 1%. The top five customers generated approximately 32% of total revenue, and no customers were over the 10% level. Gross margin showed a substantial improvement in the first quarter. Non-GAAP gross margin was 29.9% compared with 21.5% gross margin in Q4 of 2025 and a -6.1% gross margin in Q1 of 2025 last year. For those who prefer to track results on a GAAP basis, gross margin in the first quarter was 29.6%, compared with 20.9% in Q4 and a -6.4% in Q1 of 2025. Moving to operating expenses, total non-GAAP operating expense in Q1 was $8.6 million, compared with $7.5 million in Q4 and $8.5 million in Q1 of 2025. On a GAAP basis, total operating expenses in Q1 was $9.6 million, compared with $8.7 million in Q4 of 2025 and $9.0 million in Q1 of 2025. Our non-GAAP operating loss for the first quarter of 2026 was $550,000, compared to the non-GAAP operating loss in Q4 of 2025 of $2.6 million and a non-GAAP operating loss of $9.6 million in Q1 of 2025. For reference, our GAAP operating line for the first quarter of 2026 was a net loss of $1.6 million, compared with an operating loss of $3.8 million in Q4 of 2025 and an operating loss of $10.3 million in Q1 of 2025. Non-operating other income and expense and other items below the operating line for the first quarter of 2026 was a net loss of $35,000. The details can be seen in the P&L included in our press release today. In Q1 of 2026, we made substantial progress towards profitability. We had a non-GAAP net loss of $585,000 or $0.01 per share, compared with a non-GAAP net loss of $2.3 million or $0.05 per share in the fourth quarter and non-GAAP net loss in Q1 of 2025 of $8.2 million or $0.19 per share. On a GAAP basis, the net loss in Q1 was $1.6 million or $0.03 per share, compared to a net loss of $3.6 million or $0.08 a share in the fourth quarter and $8.8 million or $0.20 per share last year in Q1 of 2025. The weighted average basic shares outstanding in Q1 of 2026 was 53.3 million. Cash, cash equivalents and investments decreased by $5.1 million to $123 million as of March 31st. By comparison, at December 31st, it was $128.4 million. Accounts receivable increased by $5.2 million, almost exactly the same as the change in cash. Depreciation and amortization in the first quarter was $2.4 million. Total stock comp was $1.0 million. Net inventory was up approximately $8.5 million for the first quarter to $90.2 million. This concludes the discussion of our quarterly financial results. Turning to our plan to list our subsidiary, Tongmei, in China on the STAR Market in Shanghai, we remain very interested in completing the IPO, particularly in light of the rapidly evolving AI infrastructure build-out in China and China's development of its semiconductor supply chain, which is fueling increased China-based demand for Indium Phosphide substrates. We have continued to keep our IPO application current, and Tongmei remains in process as a part of a much more selective and smaller group of prospective listings than a few years ago. Though the current geopolitical environment is dynamic, Tongmei is considered a Chinese company and continues to be regarded in China as a good IPO candidate. We'll keep you informed of any updates. With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris? Thank you, Gary. This is an incredibly exciting time for AXT. As many of you are aware, last week, we completed a capital raise for $632.5 million in support of Tongmei's Indium Phosphide capacity expansion, as well as R&D investment in new products like 6-inch Indium Phosphide and other working capital needs. With our backlog of orders and customer forecasts achieving record levels, we are laser-focused on adding capacity to support customer requirements. I'm pleased to report that we are running ahead of our plan to double our Indium Phosphide capacity this year from Q4 of 2025 levels. Our capability to scale up quickly is unique among our peers. Unlike our competitors, AXT designs and builds our own crystal growth furnaces, has our own supply of critical raw materials, and has the manufacturing space in place to achieve our expansion goal this year. As you can imagine, longer-term capacity planning is one of the most important discussions we're having today with customers and major supply chain players in our space. The message we are having for them is this "AXT is stepping up". Beyond our 2026 capacity expansion, we're planning to double our Indium Phosphide capacity again in 2027 with a new facility near our current one that we will be dedicated to Indium Phosphide wafer production. Our 2028 planning is also underway, and we expect to expand again meaningfully. This is an industry in which scale matters. The barrier to entry are high, even for most skilled manufacturers. As the market continues to grow, capacity has become a critical enabler. What we are hearing from the industry sources and echoed from our customers is the expectation that the market for optical components will increase significantly in the coming years, driving a 4x to 6x increase in substrate market overall in the next three to five years, driven by both scale-out and scale-up applications. Beyond pluggable transceivers, we're seeing a very large developing market for CPO, Co-Packaged Optics. We are actively engaging in discussions with customers about their technical and timing requirements and believe this could represent another inflection point in our business beginning in late 2027 and beyond. With this massive growth cycle ahead of us, we're actively working with a multitude of players from our direct customers to the end customers, with whom we have not historically had direct relationships. We are there to understand their long, longer-term requirements and to align our growth and innovation plans accordingly. This will be a thoughtful and measured process, but we believe we are in a best position competitively to support and enable our industry in meeting its current and future needs. Over the last few quarters, the expansion of our Indium Phosphide customer base has been gratifying. We're now supporting nearly all leading customers in the optical space. This includes Tier 1 laser manufacturers and optical transceiver module makers, both around the globe and in China. In alignment with our customers' technical requirements and roadmaps, we're making important progress on our 6-inch Indium Phosphide product for both iron doped and sulfur doped specifications. A significant part of our capacity expansion will be focused on 6-inch crystal growth technology to support the planned roadmap of 6-inch capability by our customers. We're excited to be able to demonstrate the technological advantage of our low EPD wafers as the market moves to optical devices with higher speeds and greater sophistication for both scale up and scale out applications. Now turning to Q1. Export permits in our first quarter came in as slightly better than our guidance and are off to a solid start in Q2. Gary will take you through our full guidance in a few minutes, but we're expecting to achieve sequential revenue growth in Q2, driven primarily by growth in Indium Phosphide. In fact, Q2 will be expected to be our largest quarter for Indium Phosphide in AXT's history. This derives from an Indium Phosphide backlog that has now reached a new high of over $100 million. As we mentioned last quarter, customers are giving us more visibility into their expected demand and working closely with them in this supply-constrained environment to meet their need as we continue to expand our capacity. From a geographic demand perspective, the massive AI infrastructure build-out and planned CapEx spending by cloud services and AI platform providers in the U.S. is the primary driver for EML and Silicon Photonics-based optical transceivers, as well as high-speed photodetectors. We believe that today our material is being used in multiple U.S. hyperscalers. We expect that end customers' use will continue to broaden. We're also seeing significant growth in China as China moves to accelerate its capability throughout the AI supply chain. Our revenue related to Indium Phosphide-based laser market in China more than doubled in Q1 from the prior quarter. We expect them to double again in Q2. This highlights China's increasing investment in AI infrastructure supply chain for the global market. This is a great opportunity for AXT as there is no permit required to ship our product within China. Turning to Gallium Arsenide. In Q1, demand for semiconducting wafers for industry, robotics, and data center lasers applications all held steady from the prior quarter. We continue to see demand for semi-insulating wafers for wireless RF devices and believe that we have a strong opportunity for market share expansion. However, this is gated primarily by our ability to obtain export license, which came in light in Q1. Finally, our raw material business continue to be a crown jewel in our growth strategy. We're pleased to report that our subsidiary, JinMei, has begun to refine high-purity indium, which gives us direct control of a guaranteed supply of another critical material for our Indium Phosphide substrates. We're also investing to help JinMei expand its capability so that our AXT's demand grows, JinMei will continue to provide a meaningful portion of our raw material requirements. Globally, there continue to be a greater awareness of the importance of earth's materials, and we are decades ahead of the curve in developing our unique integrated supply chain. We continue to invest in our portfolio as we believe it's a major competitive differentiator. In summary, we believe AXT is entering one of the most consequential chapters in our company's history. The investment we're making today in capacity, in technology, and in our unique integrated supply chain positions us to meet extraordinary demand we see building across the optical and AI infrastructure markets. Our customer engagement is deepening, our visibility is improving, and our competitive differentiation is strong. While we remain disciplined and thoughtful in our execution, we're confident that the groundwork we are laying out now will enable us for meaningful growth in the years to come. With that, I turn the call back to Gary for our second quarter guidance. Gary? Thank you, Morris. To reiterate a couple of key points from Morris's commentary, we are seeing a strong increase in our Indium Phosphide wafer demand related to AI and the ongoing data center upgrade cycle. Given the geopolitical complexity surrounding this market trend, our customer base is diversifying and expanding, and customers are placing longer-term orders and providing greater visibility into their needs. With all of these positive market and AXT specific growth drivers, the most significant single factor to our growth in Q2 and beyond is the success and timing of getting export permits. Therefore, guiding for future revenue is somewhat tricky for us right now as we cannot predict future timing of permits or our success in obtaining them for any customer or individual order. Drawing on what we know and what we've experienced thus far in the export permitting process, we can offer the following insight into our expectations for Q2. As of today, we have approximately $34 million in revenue that can be realized in Q2 across our substrate product lines and raw materials, for which we either already have a permit to ship or for which an export permit is not required. We have a high degree of confidence in recognizing this revenue in Q2. We could see upside, even significant upside, to this number in Q2 should we receive permits for additional orders for which we have the inventory to support. We do want to stress that the timing for permit issuance is not predictable, nor in our control, and doesn't align with our quarterly reporting. We continue to focus on gross margin improvement. Further improvement depends on a number of factors, including total revenue as it relates to revenue mixed by product, absorption of fixed cost, and our ability to continue to drive better manufacturing efficiency. With regards to OpEx, we expect that it'll be approximately $9.3 million in Q2 on a non-GAAP basis and approximately $10 million on a GAAP basis. With these factors in mind, we expect to achieve profitability on both a GAAP and non-GAAP basis in Q2. We believe our non-GAAP net income will be in the range of $0.06-$0.08, and our GAAP net income will be in the range of $0.05-$0.07. We estimate share count for Q2 will be approximately 63.5 million shares. Okay. This concludes our prepared comments. We'll be glad to answer your questions now. Tracy? Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one now to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Finally, please limit yourself to one question and one follow-up. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Tim Savageaux with Northland Securities. Your line is open. Please go ahead. Hey, good afternoon, and congrats on the step up in backlog, and the strong guidance for next quarter in Indium Phosphide. Guess my first question, you know, you mentioned backlog and customer forecasts at record levels, and we certainly saw that with $100 million in backlog. You know, with regards to long-term capacity planning with customers, you know, are you at the point of, you know, coming to any sort of long-term supply agreements with various customers? If so, you know, what's the kind of, what sort of timing might you'd expect on that? Thanks. Tim? I'll follow up. Yeah. Yeah. Thanks, Tim. Yes, we're talking to a number of customers right now on long-term supply agreements as we build our capacity out and try and understand where their demand is going. Nearly all of the larger customers in this space are talking about long-term supply agreements with us. We expect to come to resolution with some of those in the very near future. Great. Just following up on that. Sorry, go ahead. Oh, no. I was just saying it's your turn, Tim. Tim S. Okay. Roger that. Just an update, you'd mentioned last quarter that you were developing some relationships with Tier 1 customers or Tier 1 suppliers who hadn't, you know, necessarily been, you know, close relationships or customers over time. I wonder if we can get an update on that, and I have one more follow-up after that. Yeah. Thanks, Tim. That's going really well, actually. We've got qualification wafers in with a lot of customers, and we're finding paths and avenues to get wafers into a lot of these Tier 1 customers. You know, we've, as we see this market grow, there's a lot of opportunity for us, and we've said in the past that we've really been focused on these next generation technology products that require high quality material that frankly only AXT can build and can supply. Of course, we've. Emerging supply chain constraints with Indium Phosphide, we are in the strongest position to grow capacity. We're qualifying and we're supplying wafers to a lot of new Tier 1 customers in this field. It's exciting times for us. Yeah. I want to add one point because I think, you know, Tim, you are the front soldier, you're talking to them. From my perspective, I started to hear, let's say three months ago, was some of the tier 1 customers. Now I'm starting to hear even add on to it, is the end hyperscalers we're hearing. In other words, the customer's customer, the end users, are also interested in seeing how we develop the supply chain guarantee for their growth plan. Yeah, that's correct, Morris. It's a good point. You know, there's been a lot of press releases out about long-term supply agreements into our customers from the hyperscalers and from the hardware companies. There's been a lot of encouragement from those hyperscalers and hardware companies for their suppliers to enter into long-term supply agreements with AXT. That is actually driving a lot of the discussions, I think, that we're having on long-term supply agreements. Of course, it's given us a lot more visibility into what the market demands are at the hyperscaler side of things, and how that trickles down to demands for AXT. It also gives us a lot of visibility into technical demands as we move forward into high-end lasers and detectors in these new products. Great. That makes sense and maybe somewhat related to those discussions. I'd be interested in an update on where, what you're seeing in terms of pricing for Indium Phosphide substrates. Yeah, that's a, that's a good question. Again, thanks, Tim. What we are doing is we are raising some of our prices. We're seeing some recent pricing increase in raw materials, specifically with indium. We're having conversations with our customers to align our costs and maintain gross margins, maintain or grow gross margins. We're also starting to globalize or we've been globalizing our pricing. Obviously, certain geographical regions have been more aggressive in the past on price targets, especially when we're looking at the lower-end markets such as GPON. We're starting to globalize our markets so that it is more standardized across those geographical regions. Let me add on to that. I think nevertheless, I think the pricing opportunity for us, I believe, is also the fact we're migrating more towards larger size. As you know, some of the smaller size, they are more traditional, they are more price sensitive, and they are more competitor who can fill their shoes. But when you get to 4-inch and 6-inch, and then as well, as well as higher, specification requirement, then we can really demand, you know, that's where our product shines. Okay. Thanks very much. Appreciate it. Thanks, Tim. Your next question comes from the line of Matt Bryson with Wedbush Securities. Your line is open. Please go ahead. Hey, thanks for taking my question. Great results. I just wanted to hone in on gross margins a bit. Obviously you saw a pretty big uptick in Q1. I'm not quite getting to the peak you had in Q2, I'm not quite getting the peak back in the COVID time frame, but I'm getting pretty close. I guess, could you talk a little bit about how much of that is higher utilization levels versus how much of it is increased pricing, and whether my math is roughly accurate? For Q1, there is some that's a result of increased pricing, but it's the primary you know, drivers are the traditional two drivers that we highlight. One is volume is up, and the other is the mix is rich towards Indium Phosphide. As a matter of fact, if you look at it percentage-wise, Indium Phosphide was just an, a tad north over 50% of total revenue. It's really helped in that. The pricing effects are being put in place, but we'll see them, we'll see the impact from your eye viewpoint, Matt, for your eyes. Your eyes will see that later this year. Got it. Just, Q2, Gary, if I said that the gross margins are coming in roughly around 40%, is that in the ballpark? Again, can you just talk to how much that's mix versus utilization versus pricing? Yeah. I don't have your forecast in front of me, but I think that's too aggressive. You know, you know us, we like to take. Be a little bit more conservative. You know, we're definitely gonna be crossing the 30% threshold, which we've said for several years, if we can get to $30 million in revenue and have a good mix, then we could be above 30% in gross margin, so. I would. I think you're probably. You know, it's up to you, but I'd encourage you to, you know, maybe knock that down a bit. We can talk about it maybe later, so. Having said that, I, we're both on the right direction. Gross margins should go up, and we feel very confident that they will. You know, we have to, you know, how fast and what we calculate is to be determined. All the indicators are exactly what I've been saying for many years now. The mix is rich for Indium Phosphide, and the volume is up. You know, it's a unique sort of transition for us that it's, you know, inside the company, we're very pleased, so. Yeah, I do want to add another point about this. I mean, obviously, Gary, you own the gross margin calculation, I would argue the supply chain strategy will start to shine. You know. I always say AXT like a choo-choo train. We're the locomotive. We're chugging along. When we are accelerating, all the boxes behind us, such as our JinMei, BoYu, which makes our crucibles, high purity materials, et cetera, they also are gonna chug along with us. When we slow down, of course, they will crash against us. Right now is a good time. We're chugging along very strongly, you're gonna see their contribution to our, you know, ability to make profit will grow, too. Got it. My one follow-up is, I noticed going back to the last filing that you'd gotten export licenses, I think for every geography except for the U.S. Just any more thoughts on getting licenses for shipping to the U.S., and how important is that in terms of being able to fully utilize that additional capacity you're bringing on? I don't think we're giving up United States. No. It's still pending. Right. We're still, you know, Matt, we're still being encouraged to apply for export permits for U.S. customers both in the U.S. and in other global regions. You know, at the moment, obviously we are getting permits pretty readily for U.S. customers based in other global regions. That, as Morris said, that doesn't mean that we are completely stopping any work on trying to obtain permits for the U.S. We've been contacted by the Ministry of Commerce in China on a number of U.S. applications right now to submit more data that gives us an encouraging sign that they're still looking at U.S.-based permits, and there's still a possibility to get a permit for the U.S. in the near future, as I say. We are definitely looking at that avenue, and in the meantime, we are supplying wafers, globally to other regions as well. This is a very global supply chain, and it's a very global market, and I think we're taking advantage of all the avenues that we can. Yeah, thanks. I didn't mean to intimate that you weren't gonna get a U.S. permit or weren't working on it. I just wanted an update. That was an also update. Thanks. Thanks again guys. No problem. Just a reminder that if you would like to ask a question or a follow-up, please press star one to raise your hand now. Your next question comes from the line of Charles Shi with Needham. Your line is open. Please go ahead. Hi, thanks for taking my question. Wanna ask you more about the capacity and the capacity build plan here. I think your last COVID high for Indium Phosphide quarterly record was $17.7 million. That was achieved in second quarter 2022. You are basically implying you're gonna be at or above that level in this coming Q2, but I recall back in 2022, you probably also built above that $17.7 because back then you thought you would have Indium Phosphide demand from the premium electronics company for smartphone applications. Wanna ask you this. What's the max factory output for your existing factory today? How utilized is the existing factory, and what's the expected capacity factory output once you add the next two factories? I mean, I think that's something you talked about after, the follow-on offering. If you can provide any color, on the numbers, that would be great. Yeah. I usually take the last digit out. We usually say our highest Indium Phosphide revenue per quarter was $17 million. You have a very good memory. Okay. We did say in Q4, we said we have increased our capacity about 25% in Q4 of 2025, and in 2026 we're gonna double that. Okay? In my calculation, our own capacity planning, we think we're gonna get about $35 million per quarter capability by the end of 2026. Okay? Don't forget, that's the end of 2026. In other words, the capacity are increasing every month, every time we as we talk about. Look, I mean, in the next quarter, our Indium Phosphide revenue is gonna be above and beyond the $17 million per quarter. It'll be a new record. Yeah. Will be a new record in Q2. Okay? The other capacity we also mentioned about is that we are acquiring another piece of land near our existing factory in Beijing right now, which is we're in the process of negotiating buying the land and doing the design, and we're probably gonna start building it. Because it's a greenfield, it will probably take us about a year, maybe a year and a half to complete that expansion. Okay? Our capacity expansion is sort of in stages, you know. For instance, our sometimes, you know, the clean room is the most critical because if you don't have a clean room, you don't have no space to put in your machine. That's very digital. Some of the crystal growth capacity is more incremental. Okay? Right now the clean room capacity is greater, much greater than our crystal growth capacity. As we speak now, we're increasing our capacity sort of gradually. I think in the next year or so, once the greenfield is up for construction, I think it would be more logical to expand our clean room capacity. I mean, do you have anything to add, Tim? I just wanted to add a little bit. Morris talked about doubling our capacity to a rate of $35 million per quarter in Indium Phosphide by the end of this year. Remember, that's in a brownfield site that was once a crystal growth facility used for Gallium Arsenide. As we relocated Gallium Arsenide, we've been able to move into that. We've been extremely fortunate that we're in a position I think that nobody else in the Indium Phosphide world is in, that we can double our capacity so quickly. You know, looking into the next growth as Morris just mentioned, we're acquiring a facility which is right next door to us. Again, extremely fortunate. Building is already there, that allows us to double yet again. By the time we've completed that expansion, which should be by the end of 2027, maybe early 2028, we should be at the region of somewhere in the region of $65 million-$70 million of capacity per quarter. That really takes us to the type of capacity that we're expecting to see in our existing locations. Then as Morris mentioned again in his call, or in his script as we talked earlier, we're now looking at where we need to go from here. We're looking at other opportunities and other ways to expand beyond that, probably in a greenfield site somewhere else. Yeah. That's for 2028. Correct. Yeah. Let me be a bit more specific as sort of the detailed guys, but $17 million, which we've already achieved, by the end of this year we'll be at $35 million. Per quarter. Per quarter. Mm-hmm. That's times four. $35 million, $140 million? Per quarter? Per year. Yeah. Yeah. We'll have the capacity at the end of 2026 to do $140 million. Yeah, you cannot do that because of the capacity is continually increasing. Yeah, yeah. You're not, you can't use the end of the year. It's not digital. It's analog. A year later it'll be $280 million. It's double, double. Thanks. Maybe a follow-up on the capacity expansion, right? I think this is not like I come up with a question, but the investors do ask this question. When you think about your capacity expansion, why can't you do the China Plus One type of a strategy like many companies in the global economic electronic supply chain? Like, maybe you should continue to build in China to satisfy China demand, but can you build outside of China maybe to supply to the rest of the world? I know that there is a this is more, easier said than done. There are policy reasons that may stop you from doing that, but is there anything you think of from the business perspective that is preventing you from doing that, and why? Thank you. Well, there's certainly, there's certainly a lot of opportunity, both within China and outside of China for us to consider that. As I said just now, we're looking to build more capacity in 2028 and beyond, which is going to be meaningful capacity expansion in 2028 and beyond. As part of that plan, we are working closely with our customer base to understand the long-term requirements and aligning the plans globally, right? Our recent capital raise will be fundamental to expanding, as we enter this next growth plan, which could include more capacity within China, potentially also with capacity outside of China. Yeah. I do want to add one point. I know you don't want me to say this, okay? I tell you, important thing to answer to investors is that adding capacity versus able to deliver wafers is two different thing. You're gonna hear a lot of people is gonna say, "I'm gonna add capacity." Look, Indium Phosphide, I tell you, it's not easy. You know, one question a lot of investors asking me is, "You gonna double your capacity, why don't you triple or quadruple? Our need is 10x." It's not easy. Morris, that's a really good point. That's really why our focus on the next two years has been focused on Beijing. Yeah Increasing the capacity on our existing Beijing Tongmei site. That is the minimum, the minimum risk that we can absolutely take to get wafers out, not just to increase capacity. Well, not only that, it's also for the good of our customers. Their demand is so aggressive, the better way or the guaranteed way to satisfy that capacity, and we're stretching, we're working very hard to answer that, their demand, is to do now, okay? Do we have other plans? You bet, we do. We're stepping up, don't forget. Yeah. Thanks, Morris. Like I said, easier said than done. Just felt like that's a question so common that I have to ask. Maybe last question. You talk about 6-inch versus maybe 4-inch or below. What's the shipment or maybe shipment is a bad metric here, but what's in the backlog that you're seeing that the mix between 6-inch and the 4-inch or below right now? Yeah, and want to get some thoughts around that. If you can, also, we're kind of curious about the mix between iron doped and sulfur doped. We know one is for laser, the other is for photodetector. Want to get some thoughts on what's the mix you expect to mix within that, the $100 million plus backlog. Thanks. That's the last question. Okay. Iron doped is coming up big time. We used to see about 10 to one in favor of sulfur doped prior to this. Right now, I would say the mix, especially the large diameter, is almost like iron doped is 40%, 60%. Correct, Tim? When we look at, when we look at backlog and we look at customer demand over the next few quarters into next year and beyond, what we can see is there's still a lot of 3-inch out there, specifically for the laser. sulfur doped is still going strong on 3-inch. There is a transition to 4-inch on N-type material for the laser, whereas the high-speed detector, frankly, has pretty much all transitioned to 4-inch already. We're seeing still a lot of 3-inch coming along, a lot of transitioning over to 4-inch. As we look into the future, of course, 6-inch is incredibly important, and there's a lot of interest and a lot of opportunity out there for 6-inch. I'll say at this moment in time, a lot of the production that we're seeing and a lot of our capacity that we're seeing is still focused on the 3 and 4-inch, with a longer term plan to transition to 6-inch within the next probably year or so. Yeah. The, the signal is, are obviously very strong. A lot of customers are telling us, "Can we get more 4-inch?" Okay. 6-inch is actually a little bit more out, but people are warning us it's coming, it's coming, okay? 4-inch is real. I would say the ratio for 6-inch, 3-inch and 6-inch right now is maybe 4 to 1 in favor of 3-inch. I think, going out in about six months to one year, it could be, I mean, as far as wafer number is concerned, it becomes probably two to one in favor of 3-inch. 3-inch is still the majority, the larger, the numbers. Because 4-inch is actually at a lower number right now, so it's gonna grow very rapidly in the next coming quarters. Thanks. Great color. I appreciate that. Thank you. Thank you, Charles. Your next question comes from the line of Richard Shannon with Craig-Hallum. Your line is open. Please go ahead. Well, hi, guys. Thanks for letting me ask a couple questions here. I'd love to understand how do we think about the CapEx requirements here for these capacity builds. You talked about a Brownfield 1 this year that's doubling. Then a Greenfield 1, I think that's gonna happen in 2028 or maybe in or in 2027, maybe going into 2028 here that's more greenfield. I wonder if you could give us some numbers or at least some statistics to think about what that's gonna require and over what period of time. Okay. Well, for this year, it's mostly adding, you know, high-tech growth equipment for crystal growth. Furnaces, some backend stuff for polishers. Yeah As Tim and Morris have said, we have an existing footprint. That's one reason we think we have an advantage. Our current Indium Phosphide crystal growth site has room for more furnaces, and as Tim explained, we're repurposing our Gallium Arsenide crystal growth that was in Beijing for even more. This year compared to future years, it's probably gonna be $35 million in CapEx, maybe $30 million, maybe $40 million, somewhere in that range. To be honest, we'll spend as much as we can as fast as we can because we're uniquely positioned to be able to add capacity quickly. Next year, it's dependent on which things we're talking about. Tim, you wanna, you've got it split up in your, in your paperwork there. I think as we, as we go into next year and we look at building out this facility next door to us, obviously buying a new facility, putting, doubling our capacity again there, and also building some capacity through our supply chains as well, I think we're looking somewhere in the region of about $100 million or so. Beyond that, if we were to build a greenfield site somewhere else, I think we're looking at somewhere in the region of $220 million-$250 million, depending on obviously what capacity we put in that greenfield site. Again, I'm thinking if we're putting a meaningful capacity there, you're looking at $200+ million. Okay. Fair enough. Thanks for that detail here. Wanted to ask on your Indium Phosphide business here by geography. You made a couple interesting comments here. Last call you said China was gonna grow by 60% this first quarter, and then you said it actually was up 100%, if I caught you correctly. It's gonna double again here in the second quarter. What kind of percentage of your Indium Phosphide business in the second quarter is China gonna be? That's a great question. I think we're seeing a lot of growth in China, and it's not just because we're seeing data center growth in China, but we're seeing China enter the global supply chain market for optical transceivers and potentially co-packaged optics as we go forward. Again, you know, remember this is fully globalized, and a lot of those transceiver companies that manufacture their transceivers within China are driving to a Chinese supply chain of laser diodes and photodetectors. In Q2, we estimate that the Chinese demand is probably about 30% of the overall Indium Phosphide global market demand that we're seeing. We're seeing that increasing through certainly through Q3 and Q4 as well. You know, as we get into Q4, it could even be as high as something pushing up to 40% share of the total Indium Phosphide market. Okay. That is helpful, Tim, I'll ask one last question, jump on the line here, and that's on the topic of gross margins. Gary, you've talked about in the past here with, you know, hoping to get to 35% with kind of an upside goal of looking at 40%. When you're talking about the pretty strong mix shift towards Indium Phosphide here and even about price increases here, I would imagine you'd maybe help us think about whether that could go higher at some point in time. I'm not asking for any time soon, but are you looking for a for a kind of a ceiling of gross margins that get us above that 40% level? Thank you. Well, internally as a management team, we're definitely gonna be targeting something that begins with a four, but it's far out, you know, we don't know yet. I'd still stick with my sense that, you know, somewhere in the 35% range is very, very reasonable, but that's for, you know, for the outside world. It's a safe, you know, arrival, landing point. That doesn't mean that we're satisfied with it and we think we can, you know, do better. Let's get it farther down the road and prove that first, so. Okay. That's all I want to hear. That's all for me, Gary. Thank you. You're welcome, Richard. Good to hear from you. There are no further questions at this time. I will now turn the call back to Leslie Green, Investor Relations at AXT, for closing remarks. Thank you, Tracy, and thank you all for participating in our conference call. We will be participating in the B. Riley Securities 2026 Annual Investor Conference and the Craig-Hallum Institutional Conference in May, as well as the Northland Virtual Conference in June. We hope to see many of you there. As always, feel free to contact us if you'd like to set up a call. We look forward to speaking with you all in the near future. Thanks. This concludes today's call. Thank you for attending. You may now disconnect.

Speaker 6: Good afternoon, everyone, and welcome to AXT's First Quarter 2026 Earnings Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. In addition, Tim Bettles, VP of Business Development, will be participating in the Q&A portion of the call. My name is Tracy, and I will be your coordinator today. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. I would now like to turn the call over to Leslie Green, Investor Relations for AXT. Leslie, go ahead. Good afternoon, everyone, and welcome to AXT's First Quarter 2026 Earnings Conference Call. good afternoon everyone and welcome to axt's first quarter 2026 earnings conference call Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. leading the call today is dr morris young chief executive officer and gary fischer chief financial officer In addition, Tim Bettles, VP of Business Development, will be participating in the Q&A portion of the call. in addition tim bettles vp of business development will be participating in the q&a portion of the call My name is Tracy, and I will be your coordinator today. my name is tracy and i will be your coordinator today After today's prepared remarks, we will host a question and answer session. after today's prepared remarks we will host a question and answer session If you would like to ask a question, please press star one to raise your hand. if you would like to ask a question please press star one to raise your hand I would now like to turn the call over to Leslie Green, Investor Relations for AXT. i would now like to turn the call over to leslie green investor relations for axt Leslie, go ahead. leslie go ahead

Speaker 3: Thank you, Tracy, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, our plan to list our subsidiary, Tongmei, in China, our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity. Thank you, Tracy, and good afternoon, everyone. thank you tracy and good afternoon everyone Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company, market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, our plan to list our subsidiary, Tongmei, in China, our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies, or to utilize our manufacturing capacity. before we begin i would like to remind you that during the course of this conference call including comments made in response to your questions we will provide projections or make other forward-looking statements regarding among other things the future financial performance of the company market conditions and trends emerging applications using chips or devices fabricated on our substrates our product mix global economic and political conditions including trade tariffs and import and export restrictions ability to obtain china export permits timing of receipt of export permits our plan to list our subsidiary tongmei in china our ability to increase orders in succeeding quarters to control costs and expenses to improve manufacturing yields and efficiencies or to utilize our manufacturing capacity We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. In addition to the matters just listed, these uncertainties and risks include but are not limited to the financial performance of our partially owned supply chain companies and increased environmental regulations in China. In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic report filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com through April 30th, 2027. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events or results to differ materially. we wish to caution you that such statements deal with future events are based on management's current expectations and are subject to risks and uncertainties that could cause actual events or results to differ materially In addition to the matters just listed, these uncertainties and risks include but are not limited to the financial performance of our partially owned supply chain companies and increased environmental regulations in China. in addition to the matters just listed these uncertainties and risks include but are not limited to the financial performance of our partially owned supply chain companies and increased environmental regulations in china In addition to the factors just mentioned or that may be discussed in this call, we refer you to the company's periodic report filed with the Securities and Exchange Commission. in addition to the factors just mentioned or that may be discussed in this call we refer you to the company's periodic report filed with the securities and exchange commission These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. these are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations This conference call will be available on our website at axt.com through April 30th, 2027. this conference call will be available on our website at axt.com through april 30th 2027 Also, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter of 2026. This information is available on our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our first quarter results. Gary? Also, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the first quarter of 2026. also i want to note that shortly following the close of market today we issued a press release reporting financial results for the first quarter of 2026 This information is available on our website at axt.com. this information is available on our website at axt.com I would now like to turn the call over to Gary Fischer for a review of our first quarter results. i would now like to turn the call over to gary fischer for a review of our first quarter results Gary? gary

Speaker 2: Thank you, Leslie, and good afternoon to everyone. Revenue for the first quarter of 2026 was $26.9 million, compared with $23.0 million in the fourth quarter of 2025 and $19.4 million in the first quarter of 2025 last year. To break down our Q1 2026 revenue for you by product category, Indium Phosphide was $13.6 million, primarily from data center applications. Gallium Arsenide was $5.4 million. Germanium substrates were $200,000. Finally, revenue from our consolidated raw material joint venture companies in Q1 was $7.6 million. In the first quarter of 2026, revenue from Asia Pacific was 78%, Europe was 21%, and North America was 1%. The top five customers generated approximately 32% of total revenue, and no customers were over the 10% level. Thank you, Leslie, and good afternoon to everyone. thank you leslie and good afternoon to everyone Revenue for the first quarter of 2026 was $26.9 million, compared with $23.0 million in the fourth quarter of 2025 and $19.4 million in the first quarter of 2025 last year. revenue for the first quarter of 2026 was $26.9 million compared with $23.0 million in the fourth quarter of 2025 and $19.4 million in the first quarter of 2025 last year To break down our Q1 2026 revenue for you by product category, Indium Phosphide was $13.6 million, primarily from data center applications. to break down our q1 2026 revenue for you by product category indium phosphide was $13.6 million primarily from data center applications Gallium Arsenide was $5.4 million. gallium arsenide was $5.4 million Germanium substrates were $200,000. germanium substrates were $200,000 Finally, revenue from our consolidated raw material joint venture companies in Q1 was $7.6 million. finally revenue from our consolidated raw material joint venture companies in q1 was $7.6 million In the first quarter of 2026, revenue from Asia Pacific was 78%, Europe was 21%, and North America was 1%. in the first quarter of 2026 revenue from asia pacific was 78% europe was 21% and north america was 1% The top five customers generated approximately 32% of total revenue, and no customers were over the 10% level. the top five customers generated approximately 32% of total revenue and no customers were over the 10% level Gross margin showed a substantial improvement in the first quarter. Non-GAAP gross margin was 29.9% compared with 21.5% gross margin in Q4 of 2025 and a -6.1% gross margin in Q1 of 2025 last year. For those who prefer to track results on a GAAP basis, gross margin in the first quarter was 29.6%, compared with 20.9% in Q4 and a -6.4% in Q1 of 2025. Moving to operating expenses, total non-GAAP operating expense in Q1 was $8.6 million, compared with $7.5 million in Q4 and $8.5 million in Q1 of 2025. Gross margin showed a substantial improvement in the first quarter. gross margin showed a substantial improvement in the first quarter Non-GAAP gross margin was 29.9% compared with 21.5% gross margin in Q4 of 2025 and a - 6.1% gross margin in Q1 of 2025 last year. non-gaap gross margin was 29.9% compared with 21.5% gross margin in q4 of 2025 and a - 6.1% gross margin in q1 of 2025 last year For those who prefer to track results on a GAAP basis, gross margin in the first quarter was 29.6%, compared with 20.9% in Q4 and a - 6.4% in Q1 of 2025. for those who prefer to track results on a gaap basis gross margin in the first quarter was 29.6% compared with 20.9% in q4 and a - 6.4% in q1 of 2025 Moving to operating expenses, total non-GAAP operating expense in Q1 was $8.6 million, compared with $7.5 million in Q4 and $8.5 million in Q1 of 2025. moving to operating expenses total non-gaap operating expense in q1 was $8.6 million compared with $7.5 million in q4 and $8.5 million in q1 of 2025 On a GAAP basis, total operating expenses in Q1 was $9.6 million, compared with $8.7 million in Q4 of 2025 and $9.0 million in Q1 of 2025. Our non-GAAP operating loss for the first quarter of 2026 was $550,000, compared to the non-GAAP operating loss in Q4 of 2025 of $2.6 million and a non-GAAP operating loss of $9.6 million in Q1 of 2025. For reference, our GAAP operating line for the first quarter of 2026 was a net loss of $1.6 million, compared with an operating loss of $3.8 million in Q4 of 2025 and an operating loss of $10.3 million in Q1 of 2025. On a GAAP basis, total operating expenses in Q1 was $9.6 million, compared with $8.7 million in Q4 of 2025 and $9.0 million in Q1 of 2025. on a gaap basis total operating expenses in q1 was $9.6 million compared with $8.7 million in q4 of 2025 and $9.0 million in q1 of 2025 Our non-GAAP operating loss for the first quarter of 2026 was $550,000, compared to the non-GAAP operating loss in Q4 of 2025 of $2.6 million and a non-GAAP operating loss of $9.6 million in Q1 of 2025. our non-gaap operating loss for the first quarter of 2026 was $550,000 compared to the non-gaap operating loss in q4 of 2025 of $2.6 million and a non-gaap operating loss of $9.6 million in q1 of 2025 For reference, our GAAP operating line for the first quarter of 2026 was a net loss of $1.6 million, compared with an operating loss of $3.8 million in Q4 of 2025 and an operating loss of $10.3 million in Q1 of 2025. for reference our gaap operating line for the first quarter of 2026 was a net loss of $1.6 million compared with an operating loss of $3.8 million in q4 of 2025 and an operating loss of $10.3 million in q1 of 2025 Non-operating other income and expense and other items below the operating line for the first quarter of 2026 was a net loss of $35,000. The details can be seen in the P&L included in our press release today. In Q1 of 2026, we made substantial progress towards profitability. We had a non-GAAP net loss of $585,000 or $0.01 per share, compared with a non-GAAP net loss of $2.3 million or $0.05 per share in the fourth quarter and non-GAAP net loss in Q1 of 2025 of $8.2 million or $0.19 per share. Non-operating other income and expense and other items below the operating line for the first quarter of 2026 was a net loss of $35,000. non-operating other income and expense and other items below the operating line for the first quarter of 2026 was a net loss of $35,000 The details can be seen in the P&L included in our press release today. the details can be seen in the p&l included in our press release today In Q1 of 2026, we made substantial progress towards profitability. in q1 of 2026 we made substantial progress towards profitability We had a non-GAAP net loss of $585,000 or $0.01 per share, compared with a non-GAAP net loss of $2.3 million or $0.05 per share in the fourth quarter and non-GAAP net loss in Q1 of 2025 of $8.2 million or $0.19 per share. we had a non-gaap net loss of $585,000 or $0.01 per share compared with a non-gaap net loss of $2.3 million or $0.05 per share in the fourth quarter and non-gaap net loss in q1 of 2025 of $8.2 million or $0.19 per share On a GAAP basis, the net loss in Q1 was $1.6 million or $0.03 per share, compared to a net loss of $3.6 million or $0.08 a share in the fourth quarter and $8.8 million or $0.20 per share last year in Q1 of 2025. The weighted average basic shares outstanding in Q1 of 2026 was 53.3 million. Cash, cash equivalents and investments decreased by $5.1 million to $123 million as of March 31st. By comparison, at December 31st, it was $128.4 million. Accounts receivable increased by $5.2 million, almost exactly the same as the change in cash. Depreciation and amortization in the first quarter was $2.4 million. Total stock comp was $1.0 million. On a GAAP basis, the net loss in Q1 was $1.6 million or $0.03 per share, compared to a net loss of $3.6 million or $0.08 a share in the fourth quarter and $8.8 million or $0.20 per share last year in Q1 of 2025. on a gaap basis the net loss in q1 was $1.6 million or $0.03 per share compared to a net loss of $3.6 million or $0.08 a share in the fourth quarter and $8.8 million or $0.20 per share last year in q1 of 2025 The weighted average basic shares outstanding in Q1 of 2026 was 53.3 million. the weighted average basic shares outstanding in q1 of 2026 was 53.3 million Cash, cash equivalents and investments decreased by $5.1 million to $123 million as of March 31st. cash cash equivalents and investments decreased by $5.1 million to $123 million as of march 31st By comparison, at December 31st, it was $128.4 million. by comparison at december 31st it was $128.4 million Accounts receivable increased by $5.2 million, almost exactly the same as the change in cash. accounts receivable increased by $5.2 million almost exactly the same as the change in cash Depreciation and amortization in the first quarter was $2.4 million. depreciation and amortization in the first quarter was $2.4 million Total stock comp was $1.0 million. total stock comp was $1.0 million Net inventory was up approximately $8.5 million for the first quarter to $90.2 million. This concludes the discussion of our quarterly financial results. Turning to our plan to list our subsidiary, Tongmei, in China on the STAR Market in Shanghai, we remain very interested in completing the IPO, particularly in light of the rapidly evolving AI infrastructure build-out in China and China's development of its semiconductor supply chain, which is fueling increased China-based demand for Indium Phosphide substrates. We have continued to keep our IPO application current, and Tongmei remains in process as a part of a much more selective and smaller group of prospective listings than a few years ago. Though the current geopolitical environment is dynamic, Tongmei is considered a Chinese company and continues to be regarded in China as a good IPO candidate. We'll keep you informed of any updates. Net inventory was up approximately $8.5 million for the first quarter to $90.2 million. net inventory was up approximately $8.5 million for the first quarter to $90.2 million This concludes the discussion of our quarterly financial results. this concludes the discussion of our quarterly financial results Turning to our plan to list our subsidiary, Tongmei, in China on the STAR Market in Shanghai, we remain very interested in completing the IPO, particularly in light of the rapidly evolving AI infrastructure build-out in China and China's development of its semiconductor supply chain, which is fueling increased China-based demand for Indium Phosphide substrates. turning to our plan to list our subsidiary tongmei in china on the star market in shanghai we remain very interested in completing the ipo particularly in light of the rapidly evolving ai infrastructure build-out in china and china's development of its semiconductor supply chain which is fueling increased china-based demand for indium phosphide substrates We have continued to keep our IPO application current, and Tongmei remains in process as a part of a much more selective and smaller group of prospective listings than a few years ago. we have continued to keep our ipo application current and tongmei remains in process as a part of a much more selective and smaller group of prospective listings than a few years ago Though the current geopolitical environment is dynamic, Tongmei is considered a Chinese company and continues to be regarded in China as a good IPO candidate. though the current geopolitical environment is dynamic tongmei is considered a chinese company and continues to be regarded in china as a good ipo candidate We'll keep you informed of any updates. we'll keep you informed of any updates With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris? With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. with that i'll now turn the call over to dr morris young for a review of our business and markets Morris? morris

Speaker 5: Thank you, Gary. This is an incredibly exciting time for AXT. As many of you are aware, last week, we completed a capital raise for $632.5 million in support of Tongmei's Indium Phosphide capacity expansion, as well as R&D investment in new products like 6-inch Indium Phosphide and other working capital needs. With our backlog of orders and customer forecasts achieving record levels, we are laser-focused on adding capacity to support customer requirements. I'm pleased to report that we are running ahead of our plan to double our Indium Phosphide capacity this year from Q4 of 2025 levels. Our capability to scale up quickly is unique among our peers. Thank you, Gary. thank you gary This is an incredibly exciting time for AXT. this is an incredibly exciting time for axt As many of you are aware, last week, we completed a capital raise for $632.5 million in support of Tongmei's Indium Phosphide capacity expansion, as well as R&D investment in new products like 6-inch Indium Phosphide and other working capital needs. as many of you are aware last week we completed a capital raise for $632.5 million in support of tongmei's indium phosphide capacity expansion as well as r&d investment in new products like 6-inch indium phosphide and other working capital needs With our backlog of orders and customer forecasts achieving record levels, we are laser-focused on adding capacity to support customer requirements. with our backlog of orders and customer forecasts achieving record levels we are laser-focused on adding capacity to support customer requirements I'm pleased to report that we are running ahead of our plan to double our Indium Phosphide capacity this year from Q4 of 2025 levels. i'm pleased to report that we are running ahead of our plan to double our indium phosphide capacity this year from q4 of 2025 levels Our capability to scale up quickly is unique among our peers. our capability to scale up quickly is unique among our peers Unlike our competitors, AXT designs and builds our own crystal growth furnaces, has our own supply of critical raw materials, and has the manufacturing space in place to achieve our expansion goal this year. As you can imagine, longer-term capacity planning is one of the most important discussions we're having today with customers and major supply chain players in our space. The message we are having for them is this "AXT is stepping up". Beyond our 2026 capacity expansion, we're planning to double our Indium Phosphide capacity again in 2027 with a new facility near our current one that we will be dedicated to Indium Phosphide wafer production. Our 2028 planning is also underway, and we expect to expand again meaningfully. This is an industry in which scale matters. The barrier to entry are high, even for most skilled manufacturers. Unlike our competitors, AXT designs and builds our own crystal growth furnaces, has our own supply of critical raw materials, and has the manufacturing space in place to achieve our expansion goal this year. unlike our competitors axt designs and builds our own crystal growth furnaces has our own supply of critical raw materials and has the manufacturing space in place to achieve our expansion goal this year As you can imagine, longer-term capacity planning is one of the most important discussions we're having today with customers and major supply chain players in our space. as you can imagine longer-term capacity planning is one of the most important discussions we're having today with customers and major supply chain players in our space The message we are having for them is this " AXT is stepping up". the message we are having for them is this " axt is stepping up" Beyond our 2026 capacity expansion, we're planning to double our Indium Phosphide capacity again in 2027 with a new facility near our current one that we will be dedicated to Indium Phosphide wafer production. beyond our 2026 capacity expansion we're planning to double our indium phosphide capacity again in 2027 with a new facility near our current one that we will be dedicated to indium phosphide wafer production Our 2028 planning is also underway, and we expect to expand again meaningfully. our 2028 planning is also underway and we expect to expand again meaningfully This is an industry in which scale matters. this is an industry in which scale matters The barrier to entry are high, even for most skilled manufacturers. the barrier to entry are high even for most skilled manufacturers As the market continues to grow, capacity has become a critical enabler. What we are hearing from the industry sources and echoed from our customers is the expectation that the market for optical components will increase significantly in the coming years, driving a 4x to 6x increase in substrate market overall in the next three to five years, driven by both scale-out and scale-up applications. Beyond pluggable transceivers, we're seeing a very large developing market for CPO, Co-Packaged Optics. We are actively engaging in discussions with customers about their technical and timing requirements and believe this could represent another inflection point in our business beginning in late 2027 and beyond. With this massive growth cycle ahead of us, we're actively working with a multitude of players from our direct customers to the end customers, with whom we have not historically had direct relationships. As the market continues to grow, capacity has become a critical enabler. as the market continues to grow capacity has become a critical enabler What we are hearing from the industry sources and echoed from our customers is the expectation that the market for optical components will increase significantly in the coming years, driving a 4x to 6 x increase in substrate market overall in the next three to five years, driven by both scale-out and scale-up applications. what we are hearing from the industry sources and echoed from our customers is the expectation that the market for optical components will increase significantly in the coming years driving a 4x to 6 x increase in substrate market overall in the next three to five years driven by both scale-out and scale-up applications Beyond pluggable transceivers, we're seeing a very large developing market for CPO, Co-Packaged Optics. beyond pluggable transceivers we're seeing a very large developing market for cpo co-packaged optics We are actively engaging in discussions with customers about their technical and timing requirements and believe this could represent another inflection point in our business beginning in late 2027 and beyond. we are actively engaging in discussions with customers about their technical and timing requirements and believe this could represent another inflection point in our business beginning in late 2027 and beyond With this massive growth cycle ahead of us, we're actively working with a multitude of players from our direct customers to the end customers, with whom we have not historically had direct relationships. with this massive growth cycle ahead of us we're actively working with a multitude of players from our direct customers to the end customers with whom we have not historically had direct relationships We are there to understand their long, longer-term requirements and to align our growth and innovation plans accordingly. This will be a thoughtful and measured process, but we believe we are in a best position competitively to support and enable our industry in meeting its current and future needs. Over the last few quarters, the expansion of our Indium Phosphide customer base has been gratifying. We're now supporting nearly all leading customers in the optical space. This includes Tier 1 laser manufacturers and optical transceiver module makers, both around the globe and in China. In alignment with our customers' technical requirements and roadmaps, we're making important progress on our 6-inch Indium Phosphide product for both iron doped and sulfur doped specifications. A significant part of our capacity expansion will be focused on 6-inch crystal growth technology to support the planned roadmap of 6-inch capability by our customers. We are there to understand their long, longer-term requirements and to align our growth and innovation plans accordingly. we are there to understand their long longer-term requirements and to align our growth and innovation plans accordingly This will be a thoughtful and measured process, but we believe we are in a best position competitively to support and enable our industry in meeting its current and future needs. this will be a thoughtful and measured process but we believe we are in a best position competitively to support and enable our industry in meeting its current and future needs Over the last few quarters, the expansion of our Indium Phosphide customer base has been gratifying. over the last few quarters the expansion of our indium phosphide customer base has been gratifying We're now supporting nearly all leading customers in the optical space. we're now supporting nearly all leading customers in the optical space This includes Tier 1 laser manufacturers and optical transceiver module makers, both around the globe and in China. In alignment with our customers' technical requirements and roadmaps, we're making important progress on our 6-inch Indium Phosphide product for both iron doped and sulfur doped specifications. this includes tier 1 laser manufacturers and optical transceiver module makers both around the globe and in china. in alignment with our customers' technical requirements and roadmaps we're making important progress on our 6-inch indium phosphide product for both iron doped and sulfur doped specifications A significant part of our capacity expansion will be focused on 6-inch crystal growth technology to support the planned roadmap of 6-inch capability by our customers. a significant part of our capacity expansion will be focused on 6-inch crystal growth technology to support the planned roadmap of 6-inch capability by our customers We're excited to be able to demonstrate the technological advantage of our low EPD wafers as the market moves to optical devices with higher speeds and greater sophistication for both scale up and scale out applications. Now turning to Q1. Export permits in our first quarter came in as slightly better than our guidance and are off to a solid start in Q2. Gary will take you through our full guidance in a few minutes, but we're expecting to achieve sequential revenue growth in Q2, driven primarily by growth in Indium Phosphide. In fact, Q2 will be expected to be our largest quarter for Indium Phosphide in AXT's history. This derives from an Indium Phosphide backlog that has now reached a new high of over $100 million. We're excited to be able to demonstrate the technological advantage of our low EPD wafers as the market moves to optical devices with higher speeds and greater sophistication for both scale up and scale out applications. we're excited to be able to demonstrate the technological advantage of our low epd wafers as the market moves to optical devices with higher speeds and greater sophistication for both scale up and scale out applications Now turning to Q1. now turning to q1 Export permits in our first quarter came in as slightly better than our guidance and are off to a solid start in Q2. export permits in our first quarter came in as slightly better than our guidance and are off to a solid start in q2 Gary will take you through our full guidance in a few minutes, but we're expecting to achieve sequential revenue growth in Q2, driven primarily by growth in Indium Phosphide. gary will take you through our full guidance in a few minutes but we're expecting to achieve sequential revenue growth in q2 driven primarily by growth in indium phosphide In fact, Q2 will be expected to be our largest quarter for Indium Phosphide in AXT's history. in fact q2 will be expected to be our largest quarter for indium phosphide in axt's history This derives from an Indium Phosphide backlog that has now reached a new high of over $100 million. this derives from an indium phosphide backlog that has now reached a new high of over $100 million As we mentioned last quarter, customers are giving us more visibility into their expected demand and working closely with them in this supply-constrained environment to meet their need as we continue to expand our capacity. From a geographic demand perspective, the massive AI infrastructure build-out and planned CapEx spending by cloud services and AI platform providers in the U.S. is the primary driver for EML and Silicon Photonics-based optical transceivers, as well as high-speed photodetectors. We believe that today our material is being used in multiple U.S. hyperscalers. We expect that end customers' use will continue to broaden. We're also seeing significant growth in China as China moves to accelerate its capability throughout the AI supply chain. Our revenue related to Indium Phosphide-based laser market in China more than doubled in Q1 from the prior quarter. We expect them to double again in Q2. As we mentioned last quarter, customers are giving us more visibility into their expected demand and working closely with them in this supply-constrained environment to meet their need as we continue to expand our capacity. as we mentioned last quarter customers are giving us more visibility into their expected demand and working closely with them in this supply-constrained environment to meet their need as we continue to expand our capacity From a geographic demand perspective, the massive AI infrastructure build-out and planned CapEx spending by cloud services and AI platform providers in the U.S. is the primary driver for EML and Silicon Photonics-based optical transceivers, as well as high-speed photodetectors. from a geographic demand perspective the massive ai infrastructure build-out and planned capex spending by cloud services and ai platform providers in the u.s is the primary driver for eml and silicon photonics-based optical transceivers as well as high-speed photodetectors We believe that today our material is being used in multiple U.S. hyperscalers. we believe that today our material is being used in multiple u.s hyperscalers We expect that end customers' use will continue to broaden. we expect that end customers' use will continue to broaden We're also seeing significant growth in China as China moves to accelerate its capability throughout the AI supply chain. we're also seeing significant growth in china as china moves to accelerate its capability throughout the ai supply chain Our revenue related to Indium Phosphide-based laser market in China more than doubled in Q1 from the prior quarter. our revenue related to indium phosphide-based laser market in china more than doubled in q1 from the prior quarter We expect them to double again in Q2. we expect them to double again in q2 This highlights China's increasing investment in AI infrastructure supply chain for the global market. This is a great opportunity for AXT as there is no permit required to ship our product within China. Turning to Gallium Arsenide. In Q1, demand for semiconducting wafers for industry, robotics, and data center lasers applications all held steady from the prior quarter. We continue to see demand for semi-insulating wafers for wireless RF devices and believe that we have a strong opportunity for market share expansion. However, this is gated primarily by our ability to obtain export license, which came in light in Q1. Finally, our raw material business continue to be a crown jewel in our growth strategy. We're pleased to report that our subsidiary, JinMei, has begun to refine high-purity indium, which gives us direct control of a guaranteed supply of another critical material for our Indium Phosphide substrates. This highlights China's increasing investment in AI infrastructure supply chain for the global market. this highlights china's increasing investment in ai infrastructure supply chain for the global market This is a great opportunity for AXT as there is no permit required to ship our product within China. this is a great opportunity for axt as there is no permit required to ship our product within china Turning to Gallium Arsenide. turning to gallium arsenide In Q1, demand for semiconducting wafers for industry, robotics, and data center lasers applications all held steady from the prior quarter. in q1 demand for semiconducting wafers for industry robotics and data center lasers applications all held steady from the prior quarter We continue to see demand for semi-insulating wafers for wireless RF devices and believe that we have a strong opportunity for market share expansion. we continue to see demand for semi-insulating wafers for wireless rf devices and believe that we have a strong opportunity for market share expansion However, this is gated primarily by our ability to obtain export license, which came in light in Q1. however this is gated primarily by our ability to obtain export license which came in light in q1 Finally, our raw material business continue to be a crown jewel in our growth strategy. finally our raw material business continue to be a crown jewel in our growth strategy We're pleased to report that our subsidiary, JinMei, has begun to refine high-purity indium, which gives us direct control of a guaranteed supply of another critical material for our Indium Phosphide substrates. we're pleased to report that our subsidiary jinmei has begun to refine high-purity indium which gives us direct control of a guaranteed supply of another critical material for our indium phosphide substrates We're also investing to help JinMei expand its capability so that our AXT's demand grows, JinMei will continue to provide a meaningful portion of our raw material requirements. Globally, there continue to be a greater awareness of the importance of earth's materials, and we are decades ahead of the curve in developing our unique integrated supply chain. We continue to invest in our portfolio as we believe it's a major competitive differentiator. In summary, we believe AXT is entering one of the most consequential chapters in our company's history. The investment we're making today in capacity, in technology, and in our unique integrated supply chain positions us to meet extraordinary demand we see building across the optical and AI infrastructure markets. Our customer engagement is deepening, our visibility is improving, and our competitive differentiation is strong. We're also investing to help JinMei expand its capability so that our AXT's demand grows, JinMei will continue to provide a meaningful portion of our raw material requirements. we're also investing to help jinmei expand its capability so that our axt's demand grows jinmei will continue to provide a meaningful portion of our raw material requirements Globally, there continue to be a greater awareness of the importance of earth's materials, and we are decades ahead of the curve in developing our unique integrated supply chain. globally there continue to be a greater awareness of the importance of earth's materials and we are decades ahead of the curve in developing our unique integrated supply chain We continue to invest in our portfolio as we believe it's a major competitive differentiator. we continue to invest in our portfolio as we believe it's a major competitive differentiator In summary, we believe AXT is entering one of the most consequential chapters in our company's history. in summary we believe axt is entering one of the most consequential chapters in our company's history The investment we're making today in capacity, in technology, and in our unique integrated supply chain positions us to meet extraordinary demand we see building across the optical and AI infrastructure markets. the investment we're making today in capacity in technology and in our unique integrated supply chain positions us to meet extraordinary demand we see building across the optical and ai infrastructure markets Our customer engagement is deepening, our visibility is improving, and our competitive differentiation is strong. our customer engagement is deepening our visibility is improving and our competitive differentiation is strong While we remain disciplined and thoughtful in our execution, we're confident that the groundwork we are laying out now will enable us for meaningful growth in the years to come. With that, I turn the call back to Gary for our second quarter guidance. Gary? While we remain disciplined and thoughtful in our execution, we're confident that the groundwork we are laying out now will enable us for meaningful growth in the years to come. while we remain disciplined and thoughtful in our execution we're confident that the groundwork we are laying out now will enable us for meaningful growth in the years to come With that, I turn the call back to Gary for our second quarter guidance. with that i turn the call back to gary for our second quarter guidance Gary? gary

Speaker 2: Thank you, Morris. To reiterate a couple of key points from Morris's commentary, we are seeing a strong increase in our Indium Phosphide wafer demand related to AI and the ongoing data center upgrade cycle. Given the geopolitical complexity surrounding this market trend, our customer base is diversifying and expanding, and customers are placing longer-term orders and providing greater visibility into their needs. With all of these positive market and AXT specific growth drivers, the most significant single factor to our growth in Q2 and beyond is the success and timing of getting export permits. Therefore, guiding for future revenue is somewhat tricky for us right now as we cannot predict future timing of permits or our success in obtaining them for any customer or individual order. Thank you, Morris. To reiterate a couple of key points from Morris's commentary, we are seeing a strong increase in our Indium Phosphide wafer demand related to AI and the ongoing data center upgrade cycle. thank you morris. to reiterate a couple of key points from morris's commentary we are seeing a strong increase in our indium phosphide wafer demand related to ai and the ongoing data center upgrade cycle Given the geopolitical complexity surrounding this market trend, our customer base is diversifying and expanding, and customers are placing longer-term orders and providing greater visibility into their needs. given the geopolitical complexity surrounding this market trend our customer base is diversifying and expanding and customers are placing longer-term orders and providing greater visibility into their needs With all of these positive market and AXT specific growth drivers, the most significant single factor to our growth in Q2 and beyond is the success and timing of getting export permits. with all of these positive market and axt specific growth drivers the most significant single factor to our growth in q2 and beyond is the success and timing of getting export permits Therefore, guiding for future revenue is somewhat tricky for us right now as we cannot predict future timing of permits or our success in obtaining them for any customer or individual order. therefore guiding for future revenue is somewhat tricky for us right now as we cannot predict future timing of permits or our success in obtaining them for any customer or individual order Drawing on what we know and what we've experienced thus far in the export permitting process, we can offer the following insight into our expectations for Q2. As of today, we have approximately $34 million in revenue that can be realized in Q2 across our substrate product lines and raw materials, for which we either already have a permit to ship or for which an export permit is not required. We have a high degree of confidence in recognizing this revenue in Q2. We could see upside, even significant upside, to this number in Q2 should we receive permits for additional orders for which we have the inventory to support. We do want to stress that the timing for permit issuance is not predictable, nor in our control, and doesn't align with our quarterly reporting. Drawing on what we know and what we've experienced thus far in the export permitting process, we can offer the following insight into our expectations for Q2. drawing on what we know and what we've experienced thus far in the export permitting process we can offer the following insight into our expectations for q2 As of today, we have approximately $34 million in revenue that can be realized in Q2 across our substrate product lines and raw materials, for which we either already have a permit to ship or for which an export permit is not required. as of today we have approximately $34 million in revenue that can be realized in q2 across our substrate product lines and raw materials for which we either already have a permit to ship or for which an export permit is not required We have a high degree of confidence in recognizing this revenue in Q2. we have a high degree of confidence in recognizing this revenue in q2 We could see upside, even significant upside, to this number in Q2 should we receive permits for additional orders for which we have the inventory to support. we could see upside even significant upside to this number in q2 should we receive permits for additional orders for which we have the inventory to support We do want to stress that the timing for permit issuance is not predictable, nor in our control, and doesn't align with our quarterly reporting. we do want to stress that the timing for permit issuance is not predictable nor in our control and doesn't align with our quarterly reporting We continue to focus on gross margin improvement. Further improvement depends on a number of factors, including total revenue as it relates to revenue mixed by product, absorption of fixed cost, and our ability to continue to drive better manufacturing efficiency. With regards to OpEx, we expect that it'll be approximately $9.3 million in Q2 on a non-GAAP basis and approximately $10 million on a GAAP basis. With these factors in mind, we expect to achieve profitability on both a GAAP and non-GAAP basis in Q2. We believe our non-GAAP net income will be in the range of $0.06-$0.08, and our GAAP net income will be in the range of $0.05-$0.07. We estimate share count for Q2 will be approximately 63.5 million shares. Okay. This concludes our prepared comments. We'll be glad to answer your questions now. Tracy? We continue to focus on gross margin improvement. we continue to focus on gross margin improvement Further improvement depends on a number of factors, including total revenue as it relates to revenue mixed by product, absorption of fixed cost, and our ability to continue to drive better manufacturing efficiency. further improvement depends on a number of factors including total revenue as it relates to revenue mixed by product absorption of fixed cost and our ability to continue to drive better manufacturing efficiency With regards to OpEx, we expect that it'll be approximately $9.3 million in Q2 on a non-GAAP basis and approximately $10 million on a GAAP basis. with regards to opex we expect that it'll be approximately $9.3 million in q2 on a non-gaap basis and approximately $10 million on a gaap basis With these factors in mind, we expect to achieve profitability on both a GAAP and non-GAAP basis in Q2. with these factors in mind we expect to achieve profitability on both a gaap and non-gaap basis in q2 We believe our non-GAAP net income will be in the range of $0.06-$0.08, and our GAAP net income will be in the range of $0.05-$0.07. we believe our non-gaap net income will be in the range of $0.06-$0.08 and our gaap net income will be in the range of $0.05-$0.07 We estimate share count for Q2 will be approximately 63.5 million shares. we estimate share count for q2 will be approximately 63.5 million shares Okay. okay This concludes our prepared comments. this concludes our prepared comments We'll be glad to answer your questions now. we'll be glad to answer your questions now Tracy? tracy

Speaker 6: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one now to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Finally, please limit yourself to one question and one follow-up. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Tim Savageaux with Northland Securities. Your line is open. Please go ahead. Thank you. thank you We will now begin the question and answer session. we will now begin the question and answer session If you would like to ask a question, please press star one now to raise your hand. if you would like to ask a question please press star one now to raise your hand To withdraw your question, press star one again. to withdraw your question press star one again We ask that you pick up your handset when asking a question to allow for optimum sound quality. we ask that you pick up your handset when asking a question to allow for optimum sound quality If you are muted locally, please remember to unmute your device. if you are muted locally please remember to unmute your device Finally, please limit yourself to one question and one follow-up. finally please limit yourself to one question and one follow-up Please stand by now while we compile the Q&A roster. please stand by now while we compile the q&a roster Your first question comes from the line of Tim Savageaux with Northland Securities. your first question comes from the line of tim savageaux with northland securities Your line is open. your line is open Please go ahead. please go ahead

Speaker 9: Hey, good afternoon, and congrats on the step up in backlog, and the strong guidance for next quarter in Indium Phosphide. Guess my first question, you know, you mentioned backlog and customer forecasts at record levels, and we certainly saw that with $100 million in backlog. You know, with regards to long-term capacity planning with customers, you know, are you at the point of, you know, coming to any sort of long-term supply agreements with various customers? If so, you know, what's the kind of, what sort of timing might you'd expect on that? Thanks. Hey, good afternoon, and congrats on the step up in backlog, and the strong guidance for next quarter in Indium Phosphide. hey good afternoon and congrats on the step up in backlog and the strong guidance for next quarter in indium phosphide Guess my first question, you know, you mentioned backlog and customer forecasts at record levels, and we certainly saw that with $100 million in backlog. guess my first question you know you mentioned backlog and customer forecasts at record levels and we certainly saw that with $100 million in backlog You know, with regards to long-term capacity planning with customers, you know, are you at the point of, you know, coming to any sort of long-term supply agreements with various customers? you know with regards to long-term capacity planning with customers you know are you at the point of you know coming to any sort of long-term supply agreements with various customers If so, you know, what's the kind of, what sort of timing might you'd expect on that? if so you know what's the kind of what sort of timing might you'd expect on that Thanks. thanks

Speaker 5: Tim? Tim? tim

Speaker 9: I'll follow up. I'll follow up. i'll follow up

Speaker 8: Yeah. Yeah. Thanks, Tim. Yes, we're talking to a number of customers right now on long-term supply agreements as we build our capacity out and try and understand where their demand is going. Nearly all of the larger customers in this space are talking about long-term supply agreements with us. We expect to come to resolution with some of those in the very near future. Yeah. yeah Yeah. yeah Thanks, Tim. thanks tim Yes, we're talking to a number of customers right now on long-term supply agreements as we build our capacity out and try and understand where their demand is going. yes we're talking to a number of customers right now on long-term supply agreements as we build our capacity out and try and understand where their demand is going Nearly all of the larger customers in this space are talking about long-term supply agreements with us. nearly all of the larger customers in this space are talking about long-term supply agreements with us We expect to come to resolution with some of those in the very near future. we expect to come to resolution with some of those in the very near future

Speaker 9: Great. Just following up on that. Sorry, go ahead. Great. great Just following up on that. just following up on that Sorry, go ahead. sorry go ahead

Speaker 5: Oh, no. I was just saying it's your turn, Tim. Tim S. Oh, no. oh no I was just saying it's your turn, Tim. i was just saying it's your turn tim Tim S. tim s

Speaker 9: Okay. Roger that. Just an update, you'd mentioned last quarter that you were developing some relationships with Tier 1 customers or Tier 1 suppliers who hadn't, you know, necessarily been, you know, close relationships or customers over time. I wonder if we can get an update on that, and I have one more follow-up after that. Okay. okay Roger that. roger that Just an update, you'd mentioned last quarter that you were developing some relationships with Tier 1 customers or Tier 1 suppliers who hadn't, you know, necessarily been, you know, close relationships or customers over time. just an update you'd mentioned last quarter that you were developing some relationships with tier 1 customers or tier 1 suppliers who hadn't you know necessarily been you know close relationships or customers over time I wonder if we can get an update on that, and I have one more follow-up after that. i wonder if we can get an update on that and i have one more follow-up after that

Speaker 8: Yeah. Thanks, Tim. That's going really well, actually. We've got qualification wafers in with a lot of customers, and we're finding paths and avenues to get wafers into a lot of these Tier 1 customers. You know, we've, as we see this market grow, there's a lot of opportunity for us, and we've said in the past that we've really been focused on these next generation technology products that require high quality material that frankly only AXT can build and can supply. Of course, we've. Yeah. yeah Thanks, Tim. thanks tim That's going really well, actually. that's going really well actually We've got qualification wafers in with a lot of customers, and we're finding paths and avenues to get wafers into a lot of these Tier 1 customers. we've got qualification wafers in with a lot of customers and we're finding paths and avenues to get wafers into a lot of these tier 1 customers You know, we've, as we see this market grow, there's a lot of opportunity for us, and we've said in the past that we've really been focused on these next generation technology products that require high quality material that frankly only AXT can build and can supply. you know we've as we see this market grow there's a lot of opportunity for us and we've said in the past that we've really been focused on these next generation technology products that require high quality material that frankly only axt can build and can supply Of course, we've. of course we've Emerging supply chain constraints with Indium Phosphide, we are in the strongest position to grow capacity. We're qualifying and we're supplying wafers to a lot of new Tier 1 customers in this field. It's exciting times for us. Emerging supply chain constraints with Indium Phosphide, we are in the strongest position to grow capacity. emerging supply chain constraints with indium phosphide we are in the strongest position to grow capacity We're qualifying and we're supplying wafers to a lot of new T ier 1 customers in this field. we're qualifying and we're supplying wafers to a lot of new t ier 1 customers in this field It's exciting times for us. it's exciting times for us

Speaker 5: Yeah. I want to add one point because I think, you know, Tim, you are the front soldier, you're talking to them. From my perspective, I started to hear, let's say three months ago, was some of the tier 1 customers. Now I'm starting to hear even add on to it, is the end hyperscalers we're hearing. In other words, the customer's customer, the end users, are also interested in seeing how we develop the supply chain guarantee for their growth plan. Yeah. yeah I want to add one point because I think, you know, Tim, you are the front soldier, you're talking to them. i want to add one point because i think you know tim you are the front soldier you're talking to them From my perspective, I started to hear, let's say three months ago, was some of the tier 1 customers. from my perspective i started to hear let's say three months ago was some of the tier 1 customers Now I'm starting to hear even add on to it, is the end hyperscalers we're hearing. now i'm starting to hear even add on to it is the end hyperscalers we're hearing In other words, the customer's customer, the end users, are also interested in seeing how we develop the supply chain guarantee for their growth plan. in other words the customer's customer the end users are also interested in seeing how we develop the supply chain guarantee for their growth plan

Speaker 8: Yeah, that's correct, Morris. It's a good point. You know, there's been a lot of press releases out about long-term supply agreements into our customers from the hyperscalers and from the hardware companies. There's been a lot of encouragement from those hyperscalers and hardware companies for their suppliers to enter into long-term supply agreements with AXT. That is actually driving a lot of the discussions, I think, that we're having on long-term supply agreements. Of course, it's given us a lot more visibility into what the market demands are at the hyperscaler side of things, and how that trickles down to demands for AXT. It also gives us a lot of visibility into technical demands as we move forward into high-end lasers and detectors in these new products. Yeah, that's correct, Morris. yeah that's correct morris It's a good point. it's a good point You know, there's been a lot of press releases out about long-term supply agreements into our customers from the hyperscalers and from the hardware companies. you know there's been a lot of press releases out about long-term supply agreements into our customers from the hyperscalers and from the hardware companies There's been a lot of encouragement from those hyperscalers and hardware companies for their suppliers to enter into long-term supply agreements with AXT. there's been a lot of encouragement from those hyperscalers and hardware companies for their suppliers to enter into long-term supply agreements with axt That is actually driving a lot of the discussions, I think, that we're having on long-term supply agreements. that is actually driving a lot of the discussions i think that we're having on long-term supply agreements Of course, it's given us a lot more visibility into what the market demands are at the hyperscaler side of things, and how that trickles down to demands for AXT. of course it's given us a lot more visibility into what the market demands are at the hyperscaler side of things and how that trickles down to demands for axt It also gives us a lot of visibility into technical demands as we move forward into high-end lasers and detectors in these new products. it also gives us a lot of visibility into technical demands as we move forward into high-end lasers and detectors in these new products

Speaker 9: Great. That makes sense and maybe somewhat related to those discussions. I'd be interested in an update on where, what you're seeing in terms of pricing for Indium Phosphide substrates. Great. great That makes sense and maybe somewhat related to those discussions. that makes sense and maybe somewhat related to those discussions I'd be interested in an update on where, what you're seeing in terms of pricing for Indium Phosphide substrates. i'd be interested in an update on where what you're seeing in terms of pricing for indium phosphide substrates

Speaker 8: Yeah, that's a, that's a good question. Again, thanks, Tim. What we are doing is we are raising some of our prices. We're seeing some recent pricing increase in raw materials, specifically with indium. We're having conversations with our customers to align our costs and maintain gross margins, maintain or grow gross margins. We're also starting to globalize or we've been globalizing our pricing. Obviously, certain geographical regions have been more aggressive in the past on price targets, especially when we're looking at the lower-end markets such as GPON. We're starting to globalize our markets so that it is more standardized across those geographical regions. Yeah, that's a, that's a good question. yeah that's a that's a good question Again, thanks, Tim. again thanks tim What we are doing is we are raising some of our prices. what we are doing is we are raising some of our prices We're seeing some recent pricing increase in raw materials, specifically with indium. we're seeing some recent pricing increase in raw materials specifically with indium We're having conversations with our customers to align our costs and maintain gross margins, maintain or grow gross margins. we're having conversations with our customers to align our costs and maintain gross margins maintain or grow gross margins We're also starting to globalize or we've been globalizing our pricing. we're also starting to globalize or we've been globalizing our pricing Obviously, certain geographical regions have been more aggressive in the past on price targets, especially when we're looking at the lower-end markets such as GPON. obviously certain geographical regions have been more aggressive in the past on price targets especially when we're looking at the lower-end markets such as gpon We're starting to globalize our markets so that it is more standardized across those geographical regions. we're starting to globalize our markets so that it is more standardized across those geographical regions

Speaker 5: Let me add on to that. I think nevertheless, I think the pricing opportunity for us, I believe, is also the fact we're migrating more towards larger size. As you know, some of the smaller size, they are more traditional, they are more price sensitive, and they are more competitor who can fill their shoes. But when you get to 4-inch and 6-inch, and then as well, as well as higher, specification requirement, then we can really demand, you know, that's where our product shines. Let me add on to that. let me add on to that I think nevertheless, I think the pricing opportunity for us, I believe, is also the fact we're migrating more towards larger size. i think nevertheless i think the pricing opportunity for us i believe is also the fact we're migrating more towards larger size As you know, some of the smaller size, they are more traditional, they are more price sensitive, and they are more competitor who can fill their shoes. as you know some of the smaller size they are more traditional they are more price sensitive and they are more competitor who can fill their shoes But when you get to 4- inch and 6- inch, and then as well, as well as higher, specification requirement, then we can really demand, you know, that's where our product shines. but when you get to 4- inch and 6- inch and then as well as well as higher specification requirement then we can really demand you know that's where our product shines

Speaker 9: Okay. Thanks very much. Appreciate it. Okay. okay Thanks very much. thanks very much Appreciate it. appreciate it

Speaker 5: Thanks, Tim. Thanks, Tim. thanks tim

Speaker 6: Your next question comes from the line of Matt Bryson with Wedbush Securities. Your line is open. Please go ahead. Your next question comes from the line of Matt Bryson with Wedbush Securities. your next question comes from the line of matt bryson with wedbush securities Your line is open. your line is open Please go ahead. please go ahead

Speaker 4: Hey, thanks for taking my question. Great results. I just wanted to hone in on gross margins a bit. Obviously you saw a pretty big uptick in Q1. I'm not quite getting to the peak you had in Q2, I'm not quite getting the peak back in the COVID time frame, but I'm getting pretty close. I guess, could you talk a little bit about how much of that is higher utilization levels versus how much of it is increased pricing, and whether my math is roughly accurate? Hey, thanks for taking my question. hey thanks for taking my question Great results. great results I just wanted to hone in on gross margins a bit. i just wanted to hone in on gross margins a bit Obviously you saw a pretty big uptick in Q1. obviously you saw a pretty big uptick in q1 I'm not quite getting to the peak you had in Q2, I'm not quite getting the peak back in the COVID time frame, but I'm getting pretty close. i'm not quite getting to the peak you had in q2 i'm not quite getting the peak back in the covid time frame but i'm getting pretty close I guess, could you talk a little bit about how much of that is higher utilization levels versus how much of it is increased pricing, and whether my math is roughly accurate? i guess could you talk a little bit about how much of that is higher utilization levels versus how much of it is increased pricing and whether my math is roughly accurate

Speaker 2: For Q1, there is some that's a result of increased pricing, but it's the primary you know, drivers are the traditional two drivers that we highlight. One is volume is up, and the other is the mix is rich towards Indium Phosphide. As a matter of fact, if you look at it percentage-wise, Indium Phosphide was just an, a tad north over 50% of total revenue. It's really helped in that. The pricing effects are being put in place, but we'll see them, we'll see the impact from your eye viewpoint, Matt, for your eyes. Your eyes will see that later this year. For Q1, there is some that's a result of increased pricing, but it's the primary you know, drivers are the traditional two drivers that we highlight. for q1 there is some that's a result of increased pricing but it's the primary you know drivers are the traditional two drivers that we highlight One is volume is up, and the other is the mix is rich towards Indium Phosphide. one is volume is up and the other is the mix is rich towards indium phosphide As a matter of fact, if you look at it percentage-wise, Indium Phosphide was just an, a tad north over 50% of total revenue. as a matter of fact if you look at it percentage-wise indium phosphide was just an a tad north over 50% of total revenue It's really helped in that. it's really helped in that The pricing effects are being put in place, but we'll see them, we'll see the impact from your eye viewpoint, Matt, for your eyes. the pricing effects are being put in place but we'll see them we'll see the impact from your eye viewpoint matt for your eyes Your eyes will see that later this year. your eyes will see that later this year

Speaker 4: Got it. Just, Q2, Gary, if I said that the gross margins are coming in roughly around 40%, is that in the ballpark? Again, can you just talk to how much that's mix versus utilization versus pricing? Got it. got it Just, Q2, Gary, if I said that the gross margins are coming in roughly around 40%, is that in the ballpark? just q2 gary if i said that the gross margins are coming in roughly around 40% is that in the ballpark Again, can you just talk to how much that's mix versus utilization versus pricing? again can you just talk to how much that's mix versus utilization versus pricing

Speaker 2: Yeah. I don't have your forecast in front of me, but I think that's too aggressive. You know, you know us, we like to take. Yeah. yeah I don't have your forecast in front of me, but I think that's too aggressive. i don't have your forecast in front of me but i think that's too aggressive You know, you know us, we like to take. you know you know us we like to take Be a little bit more conservative. You know, we're definitely gonna be crossing the 30% threshold, which we've said for several years, if we can get to $30 million in revenue and have a good mix, then we could be above 30% in gross margin, so. I would. I think you're probably. You know, it's up to you, but I'd encourage you to, you know, maybe knock that down a bit. We can talk about it maybe later, so. Having said that, I, we're both on the right direction. Gross margins should go up, and we feel very confident that they will. You know, we have to, you know, how fast and what we calculate is to be determined. All the indicators are exactly what I've been saying for many years now. Be a little bit more conservative. be a little bit more conservative You know, we're definitely gonna be crossing the 30% threshold, which we've said for several years, if we can get to $30 million in revenue and have a good mix, then we could be above 30% in gross margin, so. you know we're definitely gonna be crossing the 30% threshold which we've said for several years if we can get to $30 million in revenue and have a good mix then we could be above 30% in gross margin so I would. i would I think you're probably. i think you're probably You know, it's up to you, but I'd encourage you to, you know, maybe knock that down a bit. you know it's up to you but i'd encourage you to you know maybe knock that down a bit We can talk about it maybe later, so. we can talk about it maybe later so Having said that, I, we're both on the right direction. having said that i we're both on the right direction Gross margins should go up, and we feel very confident that they will. gross margins should go up and we feel very confident that they will You know, we have to, you know, how fast and what we calculate is to be determined. you know we have to you know how fast and what we calculate is to be determined All the indicators are exactly what I've been saying for many years now. all the indicators are exactly what i've been saying for many years now The mix is rich for Indium Phosphide, and the volume is up. You know, it's a unique sort of transition for us that it's, you know, inside the company, we're very pleased, so. The mix is rich for Indium Phosphide, and the volume is up. the mix is rich for indium phosphide and the volume is up You know, it's a unique sort of transition for us that it's, you know, inside the company, we're very pleased, so. you know it's a unique sort of transition for us that it's you know inside the company we're very pleased so

Speaker 5: Yeah, I do want to add another point about this. I mean, obviously, Gary, you own the gross margin calculation, I would argue the supply chain strategy will start to shine. You know. I always say AXT like a choo-choo train. We're the locomotive. We're chugging along. When we are accelerating, all the boxes behind us, such as our JinMei, BoYu, which makes our crucibles, high purity materials, et cetera, they also are gonna chug along with us. When we slow down, of course, they will crash against us. Right now is a good time. We're chugging along very strongly, you're gonna see their contribution to our, you know, ability to make profit will grow, too. Yeah, I do want to add another point about this. yeah i do want to add another point about this I mean, obviously, Gary, you own the gross margin calculation, I would argue the supply chain strategy will start to shine. i mean obviously gary you own the gross margin calculation i would argue the supply chain strategy will start to shine You know. you know I always say AXT like a choo-choo train. i always say axt like a choo-choo train We're the locomotive. we're the locomotive We're chugging along. we're chugging along When we are accelerating, all the boxes behind us, such as our JinMei, BoYu, which makes our crucibles, high purity materials, et cetera, they also are gonna chug along with us. when we are accelerating all the boxes behind us such as our jinmei boyu which makes our crucibles high purity materials et cetera they also are gonna chug along with us When we slow down, of course, they will crash against us. when we slow down of course they will crash against us Right now is a good time. right now is a good time We're chugging along very strongly, you're gonna see their contribution to our, you know, ability to make profit will grow, too. we're chugging along very strongly you're gonna see their contribution to our you know ability to make profit will grow too

Speaker 4: Got it. My one follow-up is, I noticed going back to the last filing that you'd gotten export licenses, I think for every geography except for the U.S. Just any more thoughts on getting licenses for shipping to the U.S., and how important is that in terms of being able to fully utilize that additional capacity you're bringing on? Got it. got it My one follow-up is, I noticed going back to the last filing that you'd gotten export licenses, I think for every geography except for the U.S. my one follow-up is i noticed going back to the last filing that you'd gotten export licenses i think for every geography except for the u.s Just any more thoughts on getting licenses for shipping to the U.S., and how important is that in terms of being able to fully utilize that additional capacity you're bringing on? just any more thoughts on getting licenses for shipping to the u.s and how important is that in terms of being able to fully utilize that additional capacity you're bringing on

Speaker 5: I don't think we're giving up United States. No. It's still pending. I don't think we're giving up United States. i don't think we're giving up united states No. no It's still pending. it's still pending

Speaker 8: Right. We're still, you know, Matt, we're still being encouraged to apply for export permits for U.S. customers both in the U.S. and in other global regions. You know, at the moment, obviously we are getting permits pretty readily for U.S. customers based in other global regions. That, as Morris said, that doesn't mean that we are completely stopping any work on trying to obtain permits for the U.S. We've been contacted by the Ministry of Commerce in China on a number of U.S. applications right now to submit more data that gives us an encouraging sign that they're still looking at U.S.-based permits, and there's still a possibility to get a permit for the U.S. in the near future, as I say. Right. right We're still, you know, Matt, we're still being encouraged to apply for export permits for U.S. customers both in the U.S. and in other global regions. we're still you know matt we're still being encouraged to apply for export permits for u.s customers both in the u.s and in other global regions You know, at the moment, obviously we are getting permits pretty readily for U.S. customers based in other global regions. you know at the moment obviously we are getting permits pretty readily for u.s customers based in other global regions That, as Morris said, that doesn't mean that we are completely stopping any work on trying to obtain permits for the U.S. that as morris said that doesn't mean that we are completely stopping any work on trying to obtain permits for the u.s We've been contacted by the Ministry of Commerce in China on a number of U.S. applications right now to submit more data that gives us an encouraging sign that they're still looking at U.S.-based permits, and there's still a possibility to get a permit for the U.S. in the near future, as I say. we've been contacted by the ministry of commerce in china on a number of u.s applications right now to submit more data that gives us an encouraging sign that they're still looking at u.s.-based permits and there's still a possibility to get a permit for the u.s in the near future as i say We are definitely looking at that avenue, and in the meantime, we are supplying wafers, globally to other regions as well. This is a very global supply chain, and it's a very global market, and I think we're taking advantage of all the avenues that we can. We are definitely looking at that avenue, and in the meantime, we are supplying wafers, globally to other regions as well. we are definitely looking at that avenue and in the meantime we are supplying wafers globally to other regions as well This is a very global supply chain, and it's a very global market, and I think we're taking advantage of all the avenues that we can. this is a very global supply chain and it's a very global market and i think we're taking advantage of all the avenues that we can

Speaker 4: Yeah, thanks. I didn't mean to intimate that you weren't gonna get a U.S. permit or weren't working on it. I just wanted an update. That was an also update. Thanks. Thanks again guys. Yeah, thanks. yeah thanks I didn't mean to intimate that you weren't gonna get a U.S. permit or weren't working on it. i didn't mean to intimate that you weren't gonna get a u.s permit or weren't working on it I just wanted an update. i just wanted an update That was an also update. that was an also update Thanks. thanks Thanks again guys. thanks again guys

Speaker 8: No problem. No problem. no problem

Speaker 6: Just a reminder that if you would like to ask a question or a follow-up, please press star one to raise your hand now. Your next question comes from the line of Charles Shi with Needham. Your line is open. Please go ahead. Just a reminder that if you would like to ask a question or a follow-up, please press star one to raise your hand now. just a reminder that if you would like to ask a question or a follow-up please press star one to raise your hand now Your next question comes from the line of Charles Shi with Needham. your next question comes from the line of charles shi with needham Your line is open. your line is open Please go ahead. please go ahead

Speaker 1: Hi, thanks for taking my question. Wanna ask you more about the capacity and the capacity build plan here. I think your last COVID high for Indium Phosphide quarterly record was $17.7 million. That was achieved in second quarter 2022. You are basically implying you're gonna be at or above that level in this coming Q2, but I recall back in 2022, you probably also built above that $17.7 because back then you thought you would have Indium Phosphide demand from the premium electronics company for smartphone applications. Wanna ask you this. What's the max factory output for your existing factory today? How utilized is the existing factory, and what's the expected capacity factory output once you add the next two factories? Hi, thanks for taking my question. hi thanks for taking my question Wanna ask you more about the capacity and the capacity build plan here. wanna ask you more about the capacity and the capacity build plan here I think your last COVID high for Indium Phosphide quarterly record was $17.7 million. i think your last covid high for indium phosphide quarterly record was $17.7 million That was achieved in second quarter 2022. that was achieved in second quarter 2022 You are basically implying you're gonna be at or above that level in this coming Q2, but I recall back in 2022, you probably also built above that $17.7 because back then you thought you would have Indium Phosphide demand from the premium electronics company for smartphone applications. you are basically implying you're gonna be at or above that level in this coming q2 but i recall back in 2022 you probably also built above that $17.7 because back then you thought you would have indium phosphide demand from the premium electronics company for smartphone applications Wanna ask you this. wanna ask you this What's the max factory output for your existing factory today? what's the max factory output for your existing factory today How utilized is the existing factory, and what's the expected capacity factory output once you add the next two factories? how utilized is the existing factory and what's the expected capacity factory output once you add the next two factories I mean, I think that's something you talked about after, the follow-on offering. If you can provide any color, on the numbers, that would be great. I mean, I think that's something you talked about after, the follow-on offering. i mean i think that's something you talked about after the follow-on offering If you can provide any color, on the numbers, that would be great. if you can provide any color on the numbers that would be great

Speaker 5: Yeah. I usually take the last digit out. We usually say our highest Indium Phosphide revenue per quarter was $17 million. You have a very good memory. Okay. We did say in Q4, we said we have increased our capacity about 25% in Q4 of 2025, and in 2026 we're gonna double that. Okay? In my calculation, our own capacity planning, we think we're gonna get about $35 million per quarter capability by the end of 2026. Okay? Don't forget, that's the end of 2026. In other words, the capacity are increasing every month, every time we as we talk about. Look, I mean, in the next quarter, our Indium Phosphide revenue is gonna be above and beyond the $17 million per quarter. Yeah. yeah I usually take the last digit out. i usually take the last digit out We usually say our highest Indium Phosphide revenue per quarter was $17 million. we usually say our highest indium phosphide revenue per quarter was $17 million You have a very good memory. you have a very good memory Okay. okay We did say in Q4, we said we have increased our capacity about 25% in Q4 of 2025, and in 2026 we're gonna double that. we did say in q4 we said we have increased our capacity about 25% in q4 of 2025 and in 2026 we're gonna double that Okay? okay In my calculation, our own capacity planning, we think we're gonna get about $35 million per quarter capability by the end of 2026. in my calculation our own capacity planning we think we're gonna get about $35 million per quarter capability by the end of 2026 Okay? okay Don't forget, that's the end of 2026. don't forget that's the end of 2026 In other words, the capacity are increasing every month, every time we as we talk about. in other words the capacity are increasing every month every time we as we talk about Look, I mean, in the next quarter, our Indium Phosphide revenue is gonna be above and beyond the $17 million per quarter. look i mean in the next quarter our indium phosphide revenue is gonna be above and beyond the $17 million per quarter

Speaker 2: It'll be a new record. It'll be a new record. it'll be a new record

Speaker 5: Yeah. Will be a new record in Q2. Okay? The other capacity we also mentioned about is that we are acquiring another piece of land near our existing factory in Beijing right now, which is we're in the process of negotiating buying the land and doing the design, and we're probably gonna start building it. Because it's a greenfield, it will probably take us about a year, maybe a year and a half to complete that expansion. Okay? Our capacity expansion is sort of in stages, you know. For instance, our sometimes, you know, the clean room is the most critical because if you don't have a clean room, you don't have no space to put in your machine. That's very digital. Yeah. yeah Will be a new record in Q2. will be a new record in q2 Okay? okay The other capacity we also mentioned about is that we are acquiring another piece of land near our existing factory in Beijing right now, which is we're in the process of negotiating buying the land and doing the design, and we're probably gonna start building it. the other capacity we also mentioned about is that we are acquiring another piece of land near our existing factory in beijing right now which is we're in the process of negotiating buying the land and doing the design and we're probably gonna start building it Because it's a greenfield, it will probably take us about a year, maybe a year and a half to complete that expansion. because it's a greenfield it will probably take us about a year maybe a year and a half to complete that expansion Okay? okay Our capacity expansion is sort of in stages, you know. our capacity expansion is sort of in stages you know For instance, our sometimes, you know, the clean room is the most critical because if you don't have a clean room, you don't have no space to put in your machine. for instance our sometimes you know the clean room is the most critical because if you don't have a clean room you don't have no space to put in your machine That's very digital. that's very digital Some of the crystal growth capacity is more incremental. Okay? Right now the clean room capacity is greater, much greater than our crystal growth capacity. As we speak now, we're increasing our capacity sort of gradually. I think in the next year or so, once the greenfield is up for construction, I think it would be more logical to expand our clean room capacity. I mean, do you have anything to add, Tim? Some of the crystal growth capacity is more incremental. some of the crystal growth capacity is more incremental Okay? okay Right now the clean room capacity is greater, much greater than our crystal growth capacity. right now the clean room capacity is greater much greater than our crystal growth capacity As we speak now, we're increasing our capacity sort of gradually. as we speak now we're increasing our capacity sort of gradually I think in the next year or so, once the greenfield is up for construction, I think it would be more logical to expand our clean room capacity. i think in the next year or so once the greenfield is up for construction i think it would be more logical to expand our clean room capacity I mean, do you have anything to add, Tim? i mean do you have anything to add tim

Speaker 8: I just wanted to add a little bit. Morris talked about doubling our capacity to a rate of $35 million per quarter in Indium Phosphide by the end of this year. Remember, that's in a brownfield site that was once a crystal growth facility used for Gallium Arsenide. As we relocated Gallium Arsenide, we've been able to move into that. We've been extremely fortunate that we're in a position I think that nobody else in the Indium Phosphide world is in, that we can double our capacity so quickly. You know, looking into the next growth as Morris just mentioned, we're acquiring a facility which is right next door to us. Again, extremely fortunate. Building is already there, that allows us to double yet again. I just wanted to add a little bit. i just wanted to add a little bit Morris talked about doubling our capacity to a rate of $35 million per quarter in Indium Phosphide by the end of this year. morris talked about doubling our capacity to a rate of $35 million per quarter in indium phosphide by the end of this year Remember, that's in a brownfield site that was once a crystal growth facility used for Gallium Arsenide. remember that's in a brownfield site that was once a crystal growth facility used for gallium arsenide As we relocated Gallium Arsenide, we've been able to move into that. as we relocated gallium arsenide we've been able to move into that We've been extremely fortunate that we're in a position I think that nobody else in the Indium Phosphide world is in, that we can double our capacity so quickly. we've been extremely fortunate that we're in a position i think that nobody else in the indium phosphide world is in that we can double our capacity so quickly You know, looking into the next growth as Morris just mentioned, we're acquiring a facility which is right next door to us. you know looking into the next growth as morris just mentioned we're acquiring a facility which is right next door to us Again, extremely fortunate. again extremely fortunate Building is already there, that allows us to double yet again. building is already there that allows us to double yet again By the time we've completed that expansion, which should be by the end of 2027, maybe early 2028, we should be at the region of somewhere in the region of $65 million-$70 million of capacity per quarter. That really takes us to the type of capacity that we're expecting to see in our existing locations. Then as Morris mentioned again in his call, or in his script as we talked earlier, we're now looking at where we need to go from here. We're looking at other opportunities and other ways to expand beyond that, probably in a greenfield site somewhere else. By the time we've completed that expansion, which should be by the end of 2027, maybe early 2028, we should be at the region of somewhere in the region of $65 million-$70 million of capacity per quarter. by the time we've completed that expansion which should be by the end of 2027 maybe early 2028 we should be at the region of somewhere in the region of $65 million-$70 million of capacity per quarter That really takes us to the type of capacity that we're expecting to see in our existing locations. that really takes us to the type of capacity that we're expecting to see in our existing locations Then as Morris mentioned again in his call, or in his script as we talked earlier, we're now looking at where we need to go from here. then as morris mentioned again in his call or in his script as we talked earlier we're now looking at where we need to go from here We're looking at other opportunities and other ways to expand beyond that, probably in a greenfield site somewhere else. we're looking at other opportunities and other ways to expand beyond that probably in a greenfield site somewhere else

Speaker 5: Yeah. That's for 2028. Yeah. yeah That's for 2028. that's for 2028

Speaker 8: Correct. Correct. correct

Speaker 5: Yeah. Yeah. yeah

Speaker 2: Let me be a bit more specific as sort of the detailed guys, but $17 million, which we've already achieved, by the end of this year we'll be at $35 million. Let me be a bit more specific as sort of the detailed guys, but $17 million, which we've already achieved, by the end of this year we'll be at $35 million. let me be a bit more specific as sort of the detailed guys but $17 million which we've already achieved by the end of this year we'll be at $35 million

Speaker 5: Per quarter. Per quarter. per quarter

Speaker 2: Per quarter. Per quarter. per quarter

Speaker 5: Mm-hmm. Mm-hmm. mm-hmm

Speaker 2: That's times four. $35 million, $140 million? That's times four. $35 million, $140 million? that's times four $35 million $140 million

Speaker 5: Per quarter? Per quarter? per quarter

Speaker 2: Per year. Per year. per year

Speaker 8: Yeah. Yeah. yeah

Speaker 5: Yeah. Yeah. yeah

Speaker 2: We'll have the capacity at the end of 2026 to do $140 million. We'll have the capacity at the end of 2026 to do $140 million. we'll have the capacity at the end of 2026 to do $140 million

Speaker 5: Yeah, you cannot do that because of the capacity is continually increasing. Yeah, you cannot do that because of the capacity is continually increasing. yeah you cannot do that because of the capacity is continually increasing

Speaker 2: Yeah, yeah. Yeah, yeah. yeah yeah

Speaker 5: You're not, you can't use the end of the year. You're not, you can't use the end of the year. you're not you can't use the end of the year

Speaker 2: It's not digital. It's analog. A year later it'll be $280 million. It's double, double. It's not digital. it's not digital It's analog. it's analog A year later it'll be $280 million. a year later it'll be $280 million It's double, double. it's double double

Speaker 1: Thanks. Maybe a follow-up on the capacity expansion, right? I think this is not like I come up with a question, but the investors do ask this question. When you think about your capacity expansion, why can't you do the China Plus One type of a strategy like many companies in the global economic electronic supply chain? Like, maybe you should continue to build in China to satisfy China demand, but can you build outside of China maybe to supply to the rest of the world? I know that there is a this is more, easier said than done. Thanks. thanks Maybe a follow-up on the capacity expansion, right? maybe a follow-up on the capacity expansion right I think this is not like I come up with a question, but the investors do ask this question. i think this is not like i come up with a question but the investors do ask this question When you think about your capacity expansion, why can't you do the China Plus One type of a strategy like many companies in the global economic electronic supply chain? when you think about your capacity expansion why can't you do the china plus one type of a strategy like many companies in the global economic electronic supply chain Like, maybe you should continue to build in China to satisfy China demand, but can you build outside of China maybe to supply to the rest of the world? like maybe you should continue to build in china to satisfy china demand but can you build outside of china maybe to supply to the rest of the world I know that there is a this is more, easier said than done. i know that there is a this is more easier said than done There are policy reasons that may stop you from doing that, but is there anything you think of from the business perspective that is preventing you from doing that, and why? Thank you. There are policy reasons that may stop you from doing that, but is there anything you think of from the business perspective that is preventing you from doing that, and why? there are policy reasons that may stop you from doing that but is there anything you think of from the business perspective that is preventing you from doing that and why Thank you. thank you

Speaker 8: Well, there's certainly, there's certainly a lot of opportunity, both within China and outside of China for us to consider that. As I said just now, we're looking to build more capacity in 2028 and beyond, which is going to be meaningful capacity expansion in 2028 and beyond. As part of that plan, we are working closely with our customer base to understand the long-term requirements and aligning the plans globally, right? Our recent capital raise will be fundamental to expanding, as we enter this next growth plan, which could include more capacity within China, potentially also with capacity outside of China. Well, there's certainly, there's certainly a lot of opportunity, both within China and outside of China for us to consider that. well there's certainly there's certainly a lot of opportunity both within china and outside of china for us to consider that As I said just now, we're looking to build more capacity in 2028 and beyond, which is going to be meaningful capacity expansion in 2028 and beyond. as i said just now we're looking to build more capacity in 2028 and beyond which is going to be meaningful capacity expansion in 2028 and beyond As part of that plan, we are working closely with our customer base to understand the long-term requirements and aligning the plans globally, right? as part of that plan we are working closely with our customer base to understand the long-term requirements and aligning the plans globally right Our recent capital raise will be fundamental to expanding, as we enter this next growth plan, which could include more capacity within China, potentially also with capacity outside of China. our recent capital raise will be fundamental to expanding as we enter this next growth plan which could include more capacity within china potentially also with capacity outside of china

Speaker 5: Yeah. I do want to add one point. I know you don't want me to say this, okay? I tell you, important thing to answer to investors is that adding capacity versus able to deliver wafers is two different thing. You're gonna hear a lot of people is gonna say, "I'm gonna add capacity." Look, Indium Phosphide, I tell you, it's not easy. You know, one question a lot of investors asking me is, "You gonna double your capacity, why don't you triple or quadruple? Our need is 10x." It's not easy. Yeah. yeah I do want to add one point. i do want to add one point I know you don't want me to say this, okay? i know you don't want me to say this okay I tell you, important thing to answer to investors is that adding capacity versus able to deliver wafers is two different thing. i tell you important thing to answer to investors is that adding capacity versus able to deliver wafers is two different thing You're gonna hear a lot of people is gonna say, "I'm gonna add capacity." Look, Indium Phosphide, I tell you, it's not easy. you're gonna hear a lot of people is gonna say "i'm gonna add capacity." look indium phosphide i tell you it's not easy You know, one question a lot of investors asking me is, "You gonna double your capacity, why don't you triple or quadruple? you know one question a lot of investors asking me is "you gonna double your capacity why don't you triple or quadruple Our need is 10 x." It's not easy. our need is 10 x." it's not easy

Speaker 8: Morris, that's a really good point. That's really why our focus on the next two years has been focused on Beijing. Morris, that's a really good point. morris that's a really good point That's really why our focus on the next two years has been focused on Beijing. that's really why our focus on the next two years has been focused on beijing

Speaker 5: Yeah Yeah yeah

Speaker 8: Increasing the capacity on our existing Beijing Tongmei site. That is the minimum, the minimum risk that we can absolutely take to get wafers out, not just to increase capacity. Increasing the capacity on our existing Beijing Tongmei site. increasing the capacity on our existing beijing tongmei site That is the minimum, the minimum risk that we can absolutely take to get wafers out, not just to increase capacity. that is the minimum the minimum risk that we can absolutely take to get wafers out not just to increase capacity

Speaker 5: Well, not only that, it's also for the good of our customers. Their demand is so aggressive, the better way or the guaranteed way to satisfy that capacity, and we're stretching, we're working very hard to answer that, their demand, is to do now, okay? Do we have other plans? You bet, we do. We're stepping up, don't forget. Well, not only that, it's also for the good of our customers. well not only that it's also for the good of our customers Their demand is so aggressive, the better way or the guaranteed way to satisfy that capacity, and we're stretching, we're working very hard to answer that, their demand, is to do now, okay? their demand is so aggressive the better way or the guaranteed way to satisfy that capacity and we're stretching we're working very hard to answer that their demand is to do now okay Do we have other plans? do we have other plans You bet, we do. you bet we do We're stepping up, don't forget. we're stepping up don't forget

Speaker 1: Yeah. Thanks, Morris. Like I said, easier said than done. Just felt like that's a question so common that I have to ask. Maybe last question. You talk about 6-inch versus maybe 4-inch or below. What's the shipment or maybe shipment is a bad metric here, but what's in the backlog that you're seeing that the mix between 6-inch and the 4-inch or below right now? Yeah, and want to get some thoughts around that. If you can, also, we're kind of curious about the mix between iron doped and sulfur doped. We know one is for laser, the other is for photodetector. Want to get some thoughts on what's the mix you expect to mix within that, the $100 million plus backlog. Thanks. Yeah. yeah Thanks, Morris. thanks morris Like I said, easier said than done. like i said easier said than done Just felt like that's a question so common that I have to ask. just felt like that's a question so common that i have to ask Maybe last question. maybe last question You talk about 6-inch versus maybe 4-inch or below. you talk about 6-inch versus maybe 4-inch or below What's the shipment or maybe shipment is a bad metric here, but what's in the backlog that you're seeing that the mix between 6-inch and the 4-inch or below right now? what's the shipment or maybe shipment is a bad metric here but what's in the backlog that you're seeing that the mix between 6-inch and the 4-inch or below right now Yeah, and want to get some thoughts around that. yeah and want to get some thoughts around that If you can, also, we're kind of curious about the mix between iron doped and sulfur doped. if you can also we're kind of curious about the mix between iron doped and sulfur doped We know one is for laser, the other is for photodetector. we know one is for laser the other is for photodetector Want to get some thoughts on what's the mix you expect to mix within that, the $100 million plus backlog. want to get some thoughts on what's the mix you expect to mix within that the $100 million plus backlog Thanks. thanks That's the last question. That's the last question. that's the last question

Speaker 5: Okay. Iron doped is coming up big time. We used to see about 10 to one in favor of sulfur doped prior to this. Right now, I would say the mix, especially the large diameter, is almost like iron doped is 40%, 60%. Correct, Tim? Okay. okay Iron doped is coming up big time. iron doped is coming up big time We used to see about 10 to one in favor of sulfur doped prior to this. we used to see about 10 to one in favor of sulfur doped prior to this Right now, I would say the mix, especially the large diameter, is almost like iron doped is 40%, 60%. right now i would say the mix especially the large diameter is almost like iron doped is 40% 60% Correct, Tim? correct tim

Speaker 8: When we look at, when we look at backlog and we look at customer demand over the next few quarters into next year and beyond, what we can see is there's still a lot of 3-inch out there, specifically for the laser. sulfur doped is still going strong on 3-inch. There is a transition to 4-inch on N-type material for the laser, whereas the high-speed detector, frankly, has pretty much all transitioned to 4-inch already. We're seeing still a lot of 3-inch coming along, a lot of transitioning over to 4-inch. As we look into the future, of course, 6-inch is incredibly important, and there's a lot of interest and a lot of opportunity out there for 6-inch. When we look at, when we look at backlog and we look at customer demand over the next few quarters into next year and beyond, what we can see is there's still a lot of 3-inch out there, specifically for the laser. sulfur doped is still going strong on 3-inch. when we look at when we look at backlog and we look at customer demand over the next few quarters into next year and beyond what we can see is there's still a lot of 3-inch out there specifically for the laser sulfur doped is still going strong on 3-inch There is a transition to 4-inch on N-type material for the laser, whereas the high-speed detector, frankly, has pretty much all transitioned to 4-inch already. there is a transition to 4-inch on n-type material for the laser whereas the high-speed detector frankly has pretty much all transitioned to 4-inch already We're seeing still a lot of 3-inch coming along, a lot of transitioning over to 4-inch. we're seeing still a lot of 3-inch coming along a lot of transitioning over to 4-inch As we look into the future, of course, 6-inch is incredibly important, and there's a lot of interest and a lot of opportunity out there for 6-inch. as we look into the future of course 6-inch is incredibly important and there's a lot of interest and a lot of opportunity out there for 6-inch I'll say at this moment in time, a lot of the production that we're seeing and a lot of our capacity that we're seeing is still focused on the 3 and 4-inch, with a longer term plan to transition to 6-inch within the next probably year or so. I'll say at this moment in time, a lot of the production that we're seeing and a lot of our capacity that we're seeing is still focused on the 3 and 4-inch, with a longer term plan to transition to 6-inch within the next probably year or so. i'll say at this moment in time a lot of the production that we're seeing and a lot of our capacity that we're seeing is still focused on the 3 and 4-inch with a longer term plan to transition to 6-inch within the next probably year or so

Speaker 5: Yeah. The, the signal is, are obviously very strong. A lot of customers are telling us, "Can we get more 4-inch?" Okay. 6-inch is actually a little bit more out, but people are warning us it's coming, it's coming, okay? 4-inch is real. I would say the ratio for 6-inch, 3-inch and 6-inch right now is maybe 4 to 1 in favor of 3-inch. I think, going out in about six months to one year, it could be, I mean, as far as wafer number is concerned, it becomes probably two to one in favor of 3-inch. 3-inch is still the majority, the larger, the numbers. Because 4-inch is actually at a lower number right now, so it's gonna grow very rapidly in the next coming quarters. Yeah. yeah The, the signal is, are obviously very strong. the the signal is are obviously very strong A lot of customers are telling us, "Can we get more 4-inch?" Okay. 6-inch is actually a little bit more out, but people are warning us it's coming, it's coming, okay? 4-inch is real. a lot of customers are telling us "can we get more 4-inch?" okay 6-inch is actually a little bit more out but people are warning us it's coming it's coming okay 4-inch is real I would say the ratio for 6-inch, 3-inch and 6-inch right now is maybe 4 to 1 in favor of 3-inch. i would say the ratio for 6-inch 3-inch and 6-inch right now is maybe 4 to 1 in favor of 3-inch I think, going out in about six months to one year, it could be, I mean, as far as wafer number is concerned, it becomes probably two to one in favor of 3-inch. 3-inch is still the majority, the larger, the numbers. i think going out in about six months to one year it could be i mean as far as wafer number is concerned it becomes probably two to one in favor of 3-inch 3-inch is still the majority the larger the numbers Because 4-inch is actually at a lower number right now, so it's gonna grow very rapidly in the next coming quarters. because 4-inch is actually at a lower number right now so it's gonna grow very rapidly in the next coming quarters

Speaker 1: Thanks. Great color. I appreciate that. Thank you. Thanks. thanks Great color. great color I appreciate that. i appreciate that Thank you. thank you

Speaker 8: Thank you, Charles. Thank you, Charles. thank you charles

Speaker 6: Your next question comes from the line of Richard Shannon with Craig-Hallum. Your line is open. Please go ahead. Your next question comes from the line of Richard Shannon with Craig-Hallum. your next question comes from the line of richard shannon with craig-hallum Your line is open. your line is open Please go ahead. please go ahead

Speaker 7: Well, hi, guys. Thanks for letting me ask a couple questions here. I'd love to understand how do we think about the CapEx requirements here for these capacity builds. You talked about a Brownfield 1 this year that's doubling. Then a Greenfield 1, I think that's gonna happen in 2028 or maybe in or in 2027, maybe going into 2028 here that's more greenfield. I wonder if you could give us some numbers or at least some statistics to think about what that's gonna require and over what period of time. Well, hi, guys. well hi guys Thanks for letting me ask a couple questions here. thanks for letting me ask a couple questions here I'd love to understand how do we think about the CapEx requirements here for these capacity builds. i'd love to understand how do we think about the capex requirements here for these capacity builds You talked about a Brownfield 1 this year that's doubling. you talked about a brownfield 1 this year that's doubling Then a Greenfield 1, I think that's gonna happen in 2028 or maybe in or in 2027, maybe going into 2028 here that's more greenfield. then a greenfield 1 i think that's gonna happen in 2028 or maybe in or in 2027 maybe going into 2028 here that's more greenfield I wonder if you could give us some numbers or at least some statistics to think about what that's gonna require and over what period of time. i wonder if you could give us some numbers or at least some statistics to think about what that's gonna require and over what period of time

Speaker 2: Okay. Well, for this year, it's mostly adding, you know, high-tech growth equipment for crystal growth. Furnaces, some backend stuff for polishers. Okay. okay Well, for this year, it's mostly adding, you know, high-tech growth equipment for crystal growth. well for this year it's mostly adding you know high-tech growth equipment for crystal growth Furnaces, some backend stuff for polishers. furnaces some backend stuff for polishers

Speaker 7: Yeah Yeah yeah

Speaker 2: As Tim and Morris have said, we have an existing footprint. That's one reason we think we have an advantage. Our current Indium Phosphide crystal growth site has room for more furnaces, and as Tim explained, we're repurposing our Gallium Arsenide crystal growth that was in Beijing for even more. This year compared to future years, it's probably gonna be $35 million in CapEx, maybe $30 million, maybe $40 million, somewhere in that range. To be honest, we'll spend as much as we can as fast as we can because we're uniquely positioned to be able to add capacity quickly. Next year, it's dependent on which things we're talking about. Tim, you wanna, you've got it split up in your, in your paperwork there. As Tim and Morris have said, we have an existing footprint. as tim and morris have said we have an existing footprint That's one reason we think we have an advantage. that's one reason we think we have an advantage Our current Indium Phosphide crystal growth site has room for more furnaces, and as Tim explained, we're repurposing our Gallium Arsenide crystal growth that was in Beijing for even more. our current indium phosphide crystal growth site has room for more furnaces and as tim explained we're repurposing our gallium arsenide crystal growth that was in beijing for even more This year compared to future years, it's probably gonna be $35 million in CapEx, maybe $30 million, maybe $40 million, somewhere in that range. this year compared to future years it's probably gonna be $35 million in capex maybe $30 million maybe $40 million somewhere in that range To be honest, we'll spend as much as we can as fast as we can because we're uniquely positioned to be able to add capacity quickly. to be honest we'll spend as much as we can as fast as we can because we're uniquely positioned to be able to add capacity quickly Next year, it's dependent on which things we're talking about. next year it's dependent on which things we're talking about Tim, you wanna, you've got it split up in your, in your paperwork there. tim you wanna you've got it split up in your in your paperwork there

Speaker 8: I think as we, as we go into next year and we look at building out this facility next door to us, obviously buying a new facility, putting, doubling our capacity again there, and also building some capacity through our supply chains as well, I think we're looking somewhere in the region of about $100 million or so. Beyond that, if we were to build a greenfield site somewhere else, I think we're looking at somewhere in the region of $220 million-$250 million, depending on obviously what capacity we put in that greenfield site. Again, I'm thinking if we're putting a meaningful capacity there, you're looking at $200+ million. I think as we, as we go into next year and we look at building out this facility next door to us, obviously buying a new facility, putting, doubling our capacity again there, and also building some capacity through our supply chains as well, I think we're looking somewhere in the region of about $100 million or so. i think as we as we go into next year and we look at building out this facility next door to us obviously buying a new facility putting doubling our capacity again there and also building some capacity through our supply chains as well i think we're looking somewhere in the region of about $100 million or so Beyond that, if we were to build a greenfield site somewhere else, I think we're looking at somewhere in the region of $220 million-$250 million, depending on obviously what capacity we put in that greenfield site. beyond that if we were to build a greenfield site somewhere else i think we're looking at somewhere in the region of $220 million-$250 million depending on obviously what capacity we put in that greenfield site Again, I'm thinking if we're putting a meaningful capacity there, you're looking at $200+ million. again i'm thinking if we're putting a meaningful capacity there you're looking at $200+ million

Speaker 7: Okay. Fair enough. Thanks for that detail here. Wanted to ask on your Indium Phosphide business here by geography. You made a couple interesting comments here. Last call you said China was gonna grow by 60% this first quarter, and then you said it actually was up 100%, if I caught you correctly. It's gonna double again here in the second quarter. What kind of percentage of your Indium Phosphide business in the second quarter is China gonna be? Okay. okay Fair enough. fair enough Thanks for that detail here. thanks for that detail here Wanted to ask on your Indium Phosphide business here by geography. wanted to ask on your indium phosphide business here by geography You made a couple interesting comments here. you made a couple interesting comments here Last call you said China was gonna grow by 60% this first quarter, and then you said it actually was up 100%, if I caught you correctly. last call you said china was gonna grow by 60% this first quarter and then you said it actually was up 100% if i caught you correctly It's gonna double again here in the second quarter. it's gonna double again here in the second quarter What kind of percentage of your Indium Phosphide business in the second quarter is China gonna be? what kind of percentage of your indium phosphide business in the second quarter is china gonna be

Speaker 8: That's a great question. I think we're seeing a lot of growth in China, and it's not just because we're seeing data center growth in China, but we're seeing China enter the global supply chain market for optical transceivers and potentially co-packaged optics as we go forward. Again, you know, remember this is fully globalized, and a lot of those transceiver companies that manufacture their transceivers within China are driving to a Chinese supply chain of laser diodes and photodetectors. In Q2, we estimate that the Chinese demand is probably about 30% of the overall Indium Phosphide global market demand that we're seeing. We're seeing that increasing through certainly through Q3 and Q4 as well. That's a great question. that's a great question I think we're seeing a lot of growth in China, and it's not just because we're seeing data center growth in China, but we're seeing China enter the global supply chain market for optical transceivers and potentially co-packaged optics as we go forward. i think we're seeing a lot of growth in china and it's not just because we're seeing data center growth in china but we're seeing china enter the global supply chain market for optical transceivers and potentially co-packaged optics as we go forward Again, you know, remember this is fully globalized, and a lot of those transceiver companies that manufacture their transceivers within China are driving to a Chinese supply chain of laser diodes and photodetectors. again you know remember this is fully globalized and a lot of those transceiver companies that manufacture their transceivers within china are driving to a chinese supply chain of laser diodes and photodetectors In Q2, we estimate that the Chinese demand is probably about 30% of the overall Indium Phosphide global market demand that we're seeing. in q2 we estimate that the chinese demand is probably about 30% of the overall indium phosphide global market demand that we're seeing We're seeing that increasing through certainly through Q3 and Q4 as well. we're seeing that increasing through certainly through q3 and q4 as well You know, as we get into Q4, it could even be as high as something pushing up to 40% share of the total Indium Phosphide market. You know, as we get into Q4, it could even be as high as something pushing up to 40% share of the total Indium Phosphide market. you know as we get into q4 it could even be as high as something pushing up to 40% share of the total indium phosphide market

Speaker 7: Okay. That is helpful, Tim, I'll ask one last question, jump on the line here, and that's on the topic of gross margins. Gary, you've talked about in the past here with, you know, hoping to get to 35% with kind of an upside goal of looking at 40%. When you're talking about the pretty strong mix shift towards Indium Phosphide here and even about price increases here, I would imagine you'd maybe help us think about whether that could go higher at some point in time. I'm not asking for any time soon, but are you looking for a for a kind of a ceiling of gross margins that get us above that 40% level? Thank you. Okay. okay That is helpful, Tim, I'll ask one last question, jump on the line here, and that's on the topic of gross margins. that is helpful tim i'll ask one last question jump on the line here and that's on the topic of gross margins Gary, you've talked about in the past here with, you know, hoping to get to 35% with kind of an upside goal of looking at 40%. gary you've talked about in the past here with you know hoping to get to 35% with kind of an upside goal of looking at 40% When you're talking about the pretty strong mix shift towards Indium Phosphide here and even about price increases here, I would imagine you'd maybe help us think about whether that could go higher at some point in time. when you're talking about the pretty strong mix shift towards indium phosphide here and even about price increases here i would imagine you'd maybe help us think about whether that could go higher at some point in time I'm not asking for any time soon, but are you looking for a for a kind of a ceiling of gross margins that get us above that 40% level? i'm not asking for any time soon but are you looking for a for a kind of a ceiling of gross margins that get us above that 40% level Thank you. thank you

Speaker 2: Well, internally as a management team, we're definitely gonna be targeting something that begins with a four, but it's far out, you know, we don't know yet. I'd still stick with my sense that, you know, somewhere in the 35% range is very, very reasonable, but that's for, you know, for the outside world. It's a safe, you know, arrival, landing point. That doesn't mean that we're satisfied with it and we think we can, you know, do better. Let's get it farther down the road and prove that first, so. Well, internally as a management team, we're definitely gonna be targeting something that begins with a four, but it's far out, you know, we don't know yet. well internally as a management team we're definitely gonna be targeting something that begins with a four but it's far out you know we don't know yet I'd still stick with my sense that, you know, somewhere in the 35% range is very, very reasonable, but that's for, you know, for the outside world. i'd still stick with my sense that you know somewhere in the 35% range is very very reasonable but that's for you know for the outside world It's a safe, you know, arrival, landing point. it's a safe you know arrival landing point That doesn't mean that we're satisfied with it and we think we can, you know, do better. that doesn't mean that we're satisfied with it and we think we can you know do better Let's get it farther down the road and prove that first, so. let's get it farther down the road and prove that first so

Speaker 7: Okay. That's all I want to hear. That's all for me, Gary. Thank you. Okay. okay That's all I want to hear. that's all i want to hear That's all for me, Gary. that's all for me gary Thank you. thank you

Speaker 2: You're welcome, Richard. Good to hear from you. You're welcome, Richard. you're welcome richard Good to hear from you. good to hear from you

Speaker 6: There are no further questions at this time. I will now turn the call back to Leslie Green, Investor Relations at AXT, for closing remarks. There are no further questions at this time. there are no further questions at this time I will now turn the call back to Leslie Green, Investor Relations at AXT, for closing remarks. i will now turn the call back to leslie green investor relations at axt for closing remarks

Speaker 3: Thank you, Tracy, and thank you all for participating in our conference call. We will be participating in the B. Riley Securities 2026 Annual Investor Conference and the Craig-Hallum Institutional Conference in May, as well as the Northland Virtual Conference in June. We hope to see many of you there. As always, feel free to contact us if you'd like to set up a call. We look forward to speaking with you all in the near future. Thanks. Thank you, Tracy, and thank you all for participating in our conference call. thank you tracy and thank you all for participating in our conference call We will be participating in the B. we will be participating in the b Riley Securities 2026 Annual Investor Conference and the Craig-Hallum Institutional Conference in May, as well as the Northland Virtual Conference in June. riley securities 2026 annual investor conference and the craig-hallum institutional conference in may as well as the northland virtual conference in june We hope to see many of you there. we hope to see many of you there As always, feel free to contact us if you'd like to set up a call. as always feel free to contact us if you'd like to set up a call We look forward to speaking with you all in the near future. we look forward to speaking with you all in the near future Thanks. thanks

Speaker 6: This concludes today's call. Thank you for attending. You may now disconnect. This concludes today's call. this concludes today's call Thank you for attending. thank you for attending You may now disconnect. you may now disconnect