Shares of AXT Inc. rose 6.5% during premarket trading on Monday following the disclosure of a new commercial arrangement. The company announced that its subsidiary, AXT-Tongmei, entered into a Master Development and Supply Agreement with Coherent Corp. The deal, which became effective on June 25, outlines the mass production and delivery of 6-inch indium phosphide wafer substrates. Under the terms of the contract, AXT will supply these materials to Coherent through June 2029.
As part of the financial structure of the agreement, Coherent provided a prepayment of $22.3 million to AXT. This funds will be applied toward product purchases at prices established in the contract until the full amount is utilized. The agreement includes specific conditions regarding the return of these funds. If the total prepayment is not fully allocated by the expiration or termination of the deal, Coherent is entitled to a refund of any remaining balance. However, if Coherent fails to meet minimum order quantity requirements, the unused portion becomes nonrefundable, and AXT retains the right to terminate the contract.
The contract also specifies performance obligations for AXT. The company committed to expanding manufacturing capacity at its Beijing facility between 2026 and 2028. Coherent holds the right to end the agreement if AXT fails to meet these capacity commitments for more than six consecutive months. In such a scenario, Coherent would receive a refund of the unused prepayment. Additionally, AXT agreed to offer any production capacity exceeding the committed quantity to Coherent under the same terms as the primary agreement.
The details of the arrangement were disclosed in an 8-K filing submitted by AXT on Thursday evening. The filing noted that the agreement contains standard provisions related to confidentiality, force majeure events, indemnification, and various representations and warranties. The announcement was made while AXT stock was trading on the NASDAQ exchange under the ticker AXTI, and Coherent Corp trades on the NYSE under the ticker COHR.
