eMagin Corporation, or the “Company” (NYSE
MKT:EMAN), a leader in the development, design and manufacture
of Active Matrix OLED microdisplays for high resolution imaging
products, today announced financial results and corporate
highlights for the second quarter ended June 30, 2016.
“While Q2 was a financially challenging quarter, we are excited
about our progress on opportunities we are pursuing in the broader
commercial and consumer segments,” said President and CEO Andrew G.
Sculley. “Our dialogues with several large Tier One companies are
accelerating and we are seeing positive results from several
business development initiatives.
“Our second quarter financial performance was impacted by lower
volumes on certain military contracts and by downtime on one of our
manufacturing tools. This resulted in lower production cost
absorption and lower gross margins. The manufacturing issue has
been resolved. As part of our manufacturing upgrade planning
earlier this year, we had ordered a replacement for this older
machine and expect delivery in the fourth quarter.
“The softness in our domestic military business is due to lower
volume run rates on maturing programs in advance of the expected
ramp-up on new military programs. We are currently working on
preproduction orders under the Enhanced Night Vision Goggle III
(ENVG III) and Family of Weapon Sights (FWS) programs and expect an
increase late in the fourth quarter. We remain encouraged longer
term by our portfolio of military contracts including potential
future sales into military aviation programs, a key strategic
growth opportunity for us. Additionally, we are aggressively
pursuing foreign military sales. The foreign military component of
our international business, which accounts for over 55% of Q2
product revenues, experienced growth in the quarter.
“We have made significant strides as we move strategically
beyond our core military business and pursue commercial
opportunities to achieve greater growth for the Company. Our
ongoing discussions with a number of Tier One companies are
progressing more rapidly than at any time in the past and several
are at advanced stages. These companies recognize that our direct
patterning OLED technology provides the resolution, speed and
brightness that are needed for their next generation of virtual
reality devices in order to provide consumers the user experience
they require. We are engaged in regularly scheduled product
development meetings with these companies and have submitted
proposals to develop displays to meet their particular
requirements.
“Another of our strategic growth initiatives to expand into
commercially attractive markets has been to realign our sales and
marketing resources to focus on high growth areas in the
industrial, medical device and consumer sectors where our advanced
optics and OLED microdisplay technologies are at the cutting edge
of product development. We believe our new strategy is working as
evidenced by some recent successes. During the first six months of
2016, we expanded our active customer count by 11% to 108
customers. And, in the second quarter, we were awarded an $825
thousand order with a major medical device company, the largest
single order in this market in the Company’s history.
“Finally, we are excited about our upcoming consumer product
offerings. We have leveraged our microdisplay and optics
technology, combined with our manufacturing capability, to develop
affordable, high performance wearable and handheld products for the
broader consumer market. We plan to release two products in the
fourth quarter of 2016. In addition to the expected revenue growth
from this new channel, the higher production volumes are expected
to lower our unit costs and raise our overall product margins.”
Q2 Business and Product Highlights
- Received the first production order for
a display upgrade to a United States Army training system that is
expected to generate follow-on orders over three years.
- Received an $825 thousand order from an
existing customer to upgrade displays in their medical device
equipment; the largest single order from a medical device
customer.
- Continued our growth in the
international market with over $2.2 million in foreign military
sales during the second quarter.
- Completed a review of current and
potential new business and realigned sales and marketing personnel
to expand the existing customer base and penetrate newly identified
markets.
- Sold Design Reference Kits and displays
to 22 customers to facilitate development and prototyping of new
systems.
- Delivered sample displays for over
twenty new projects including major military and commercial
avionics applications.
Second Quarter Results
Revenues for the second quarter of 2016 were $5.5 million, down
21% from the second quarter of 2015.
Product revenues totaled $4.8 million, 12% less than second
quarter last year, primarily due to lower volumes on government
contracts and the previously mentioned manufacturing issues.
R&D contract revenues totaled approximately $752 thousand, an
increase of 7% sequentially from Q1 and a decrease of 53% from the
second quarter last year. The reduced R&D contract revenue
year-over-year was due to extensive contract work performed on a
few large contracts in the 2015 second quarter.
Overall gross margin for the second quarter was 24% on gross
profit of $1.3 million compared to a gross margin of 37% on gross
profit of $2.6 million in the same quarter last year. The lower
gross margin was primarily due to lower revenue and the
aforementioned equipment downtime. This downtime resulted in lower
cost absorption and higher unit costs of sales.
Operating expenses for the second quarter of 2016, including
R&D expenses, increased to $3.5 million from $2.7 million in
the second quarter of 2015. Q2 operating expenses reflect higher
spending as we advanced our consumer products toward revenue this
year and costs associated with the consolidation of the Company’s
finance and procurement functions. We remain focused on investment
in the business which we believe will provide growth in the
future.
Operating loss for the second quarter increased to $2.2 million
from a loss of $60 thousand in the second quarter last year. Net
loss for Q2 2016 increased to $2.2 million, or $0.07 per basic and
diluted share, from a loss of $66 thousand, or $0.00 per basic and
diluted share, in Q2 2015.
At June 30, 2016, the Company had approximately $6.1 million of
cash and cash equivalents compared to $9.3 million of cash and cash
equivalents at December 31, 2015. During the quarter we increased
our R&D investment and began to build inventory in anticipation
of our consumer product launch scheduled for later this year.
At June 30, 2016, the Company had no outstanding debt.
Outlook
“We remain encouraged by expanding end markets for Virtual
Reality, Augmented Reality and military applications that can
leverage our leading OLED technology. We believe eMagin is the only
Company whose products can meet the brightness and resolution
requirements for high-pixel density displays that these markets
demand,” continued Mr. Sculley.
The Company is focused on the following objectives to drive
shareholder value in 2016 and into 2017:
- Advancement of product development
discussions with Tier One companies to incorporate OLED technology
into their next generation products,
- Further penetration of high growth
commercial/industrial markets, including medical devices and other
vertical markets, where integration of our OLED microdisplays and
optics technology advances product development and adoption,
- Expansion of our presence in existing
and future major military programs and overall customer count in
domestic and international military markets,
- Further progress on display sales under
the commercial licensing agreement that we signed in December,
- Launch of new products focused on the
consumer market which offer high performance and broad appeal at an
attractive price,
- Advancement of discussions with high
volume production partners to utilize our leading production and
process technologies,
- Continued progress in manufacturing
improvements including yield enhancement and production capacity
expansion, and
- Consolidation of our finance and
procurement functions from our Bellevue to our Hopewell Junction
facilities.
“We look forward to updating you on our progress during the
year,” concluded Mr. Sculley.
Conference Call Information
Full results will be published in the Company’s 10-Q report for
the second quarter ended June 30, 2016, expected to be filed by
August 11th, and will also be available via the Company’s website,
www.emagin.com. A conference call and live webcast will begin today
at 9:00 am ET. An archive of the webcast will be available one hour
after the live call through September 12, 2016. To access the live
webcast or archive, please visit the Company’s website at
ir.emagin.com or www.earnings.com.
About eMagin Corporation
A leader in OLED microdisplay technology, OLED microdisplay
manufacturing know-how and mobile display systems, eMagin
manufactures high-resolution OLED microdisplays and integrates them
with magnifying optics to deliver virtual images comparable to
large-screen computer and television displays in portable,
low-power, lightweight personal displays. eMagin’s microdisplays
provide near-eye imagery in a variety of products from military,
industrial, medical and consumer OEMs. More information about
eMagin is available at www.emagin.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including those
regarding eMagin Corporation’s expectations, intentions, strategies
and beliefs pertaining to future events or future financial
performance. Actual events or results may differ materially from
those in the forward-looking statements as a result of various
important factors, including those described in the Company’s most
recent filings with the SEC. Any statements contained in this press
release that are not statements of historical fact may be deemed to
be forward-looking statements. Words such as "believe," "expected,"
"hope," "plan," "potential," "will" and similar expressions are
intended to identify forward-looking statements. These
forward-looking statements are based upon our current expectations.
Forward-looking statements involve risks and uncertainties and our
actual results and the timing of events could differ materially
from those anticipated in such forward-looking statements as a
result of these risks and uncertainties, including those risks and
uncertainties discussed under the heading "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31,
2015 and subsequent filings with the SEC. All information in
this press release is as of the date of the release, and we
undertake no duty to update this information unless required by
law.
Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements
presented on a GAAP basis, the Company has provided non-GAAP
financial information, namely earnings before interest, taxes,
depreciation and amortization, and non-cash compensation expense
(“Adjusted EBITDA”). The Company’s management believes that this
non-GAAP measure provides investors with a better understanding of
how the results relate to the Company’s historical performance. The
additional adjusted information is not meant to be considered in
isolation or as a substitute for GAAP financial statements.
Management believes that these adjusted measures reflect the
essential operating activities of the Company. A reconciliation of
non-GAAP financial information appears below.
eMAGIN CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share and per
share data)
June 30, 2016
December 31, 2015
(unaudited) ASSETS Current assets: Cash and
cash equivalents $ 6,100 $ 9,273 Accounts receivable, net 3,455
3,508 Unbilled accounts receivable 1,383 1,445 Inventories, net
5,272 3,901 Prepaid expenses and other current assets 706
489
Total current assets 16,916 18,616
Equipment, furniture and leasehold improvements, net 8,806 9,131
Intangibles and other assets 309 336
Total assets $ 26,031 $ 28,083
LIABILITIES AND SHAREHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 1,571 $ 1,636 Accrued
compensation 1,354 1,246 Other accrued expenses 1,044 1,193 Other
current liabilities 546 602
Total
current liabilities 4,515 4,677 Commitments and
contingencies
Shareholders’ equity: Preferred stock,
$.001 par value: authorized 10,000,000 shares:
Series B Convertible Preferred stock,
(liquidation preference of $5,659,000) stated
value $1,000 per share, $.001 par value:
10,000 shares designated and 5,659 issued
and outstanding as of June 30, 2016 and
December 31, 2015
— —
Common stock, $.001 par value: authorized
200,000,000 shares, issued 29,550,170
shares as of June 30, 2016 and December
31, 2015
30 30 Additional paid-in capital 235,074 234,814 Accumulated
deficit (213,088 ) (210,938 ) Treasury stock, 162,066 shares as of
June 30, 2016 and December 31, 2015 (500 ) (500 )
Total shareholders’ equity 21,516
23,406
Total liabilities and shareholders’ equity $
26,031 $ 28,083
eMAGIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share and per
share data)
(unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2016 2015 2016
2015 Revenues: Product $ 4,781 $ 5,426 $
10,076 $ 10,530 Contract 752 1,608 1,458 2,493 License —
— 1,000 —
Total
revenues, net 5,533 7,034
12,534 13,023
Cost of revenues:
Product 3,807 3,533 7,094 6,585 Contract 391 893 770 1,470
License — — — —
Total cost of revenues 4,198
4,426 7,864 8,055
Gross profit 1,335 2,608
4,670 4,968
Operating expenses:
Research and development 1,499 1,028 2,802 2,013 Selling,
general and administrative 1,993 1,640
4,003 2,686
Total operating
expenses 3,492 2,668 6,805
4,699
Income (loss) from operations
(2,157 ) (60 ) (2,135 ) 269
Other income (expense):
Interest expense, net (10 ) (11 ) (20 ) (21 ) Other income, net
3 5 5 6
Total other income (expense), net (7 ) (6 )
(15 ) (15 )
Income (loss) before provision for
income taxes
(2,164 ) (66 ) (2,150 ) 254 Provision for income taxes —
- — —
Net income (loss)
$ (2,164 ) $ (66 ) $ (2,150 ) $ 254 Less net income allocated to
participating securities — — —
59
Net income (loss) allocated to common
shares
$ (2,164 ) $ (66 ) $ (2,150 ) $ 195
Income (loss) per share, basic
$ (0.07 ) $ — $ (0.07 ) $ 0.01
Income (loss) per share, diluted
$ (0.07 ) $ — $ (0.07 ) $ 0.01
Weighted
average number of shares outstanding: Basic
29,388,104 25,142,371 29,388,104
25,091,875 Diluted 29,388,104
25,142,371 29,388,104 25,759,778
Non-GAAP
Information
Three Months Ended Six Months Ended June 30,
June 30, 2016
2015
2016
2015
Net income (loss) $ (2,164 ) (66 ) (2,150 ) 254 Non-cash
compensation 93 99 260 316 Depreciation and amortization expense
399 377 814 703 Interest expense 10 11 20 21
Provision for income taxes
- -
Adjusted EBITDA
$ (1,662 ) $ 421 $ (1,056 ) $ 1,294
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version on businesswire.com: http://www.businesswire.com/news/home/20160811005257/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief
Financial Officerjlucas@emagin.comorMBS Value PartnersBetsy
Brod, 212-661-2231Betsy.brod@mbsvalue.comorJoseph Vafi, CFA,
415-515-6558Joseph.Vafi@mbsvalue.com
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