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 third quarter ended September 30, 2016.
“While our third quarter was impacted by the previously
announced softness in our domestic military business due to lower
volumes on maturing programs, we are now beginning to ship under
new military programs and expect volumes to increase in 2017,” said
President and CEO Andrew G. Sculley. “Additionally, we announced
today the formal launch of two consumer products. This is an
important step for eMagin as we capitalize on our intellectual
property and know how to pursue new, potentially high growth
markets. We are pleased that, with our product launch in this new
market segment, we were named a 2017 Consumer Electronics Show
(“CES”) Innovation Award Honoree in the Digital Imaging product
category. Click for Release.
“Importantly, we are in active discussions with multiple Tier
One companies who recognize the superior functionality of our
industry-leading OLED microdisplays for consumer applications.
Progress in these discussions has recently accelerated as we
address prototype designs and a path to high volume production.
“The low-power, high resolution, small form factor of our
leading OLED microdisplays are finding their way into a larger
number of applications and markets compared with just 12 months
ago. We continue to see further traction in industrial markets as
we received another design win from a leading medical device
company who has chosen to integrate our microdisplays into their
next generation surgical device. We also continue to see expanding
interest for our technology among foreign militaries where advanced
night vision and high-resolution avionics applications remain
relatively underpenetrated.
“The technology in our new consumer products complements the
expertise we have accumulated over the years developing leading
solutions for our US military and commercial customers. We are able
to enter the market for consumer and industrial night vision
systems at what we believe is a disruptive price point which could
result in a significantly larger market size than what is available
for existing products. Not only are these new markets large, we
believe they could provide eMagin with attractive gross profit
opportunities over time.
“We have also made enhancements to our organization to better
match our resources with future growth opportunities. Our
re-aligned sales and marketing team is focused on our key end
markets, including commercial/industrial, foreign military and our
domestic military business. We recently made several key hires
including a Vice President of Business Development who is
spearheading our discussions and negotiations with potential Tier
One partners and a Vice President of Operations to oversee our
yield improvement program as we prepare for higher volumes and a
more complex products mix. Also, we have completed the migration of
our procurement and finance teams to Hopewell Junction to work
hand-in-hand with the production, sales and marketing, business
development and R&D groups.”
Q3 Business and Product Highlights
The Company continued to make progress towards its goals of
winning new U.S. military programs while expanding its presence in
foreign military, commercial and industrial markets.
- Beginning to deliver displays for the
Low Rate Initial Production (LRIP) phases of the U.S. Army’s
Enhanced Night Vision Goggle III (ENVG III) and Family of Weapon
Sight-Individual (FWS-I) programs. Shipments under these programs
are expected to accelerate beginning in the fourth quarter 2016 and
continuing into 2020.
- Entered into a multi-year agreement
with a major European defense company that manufactures thermal
weapon sights and goggle systems that continues through 2018 and
totals in excess of $3.5 million in display sales.
- Awarded a new production contract
for a European military helmet mounted display system for augmented
reality training and simulation. This order will provide displays
for initial production in 2017 with follow-on orders expected for
several years.
- Received an initial order for a
military air defense missile system which will be deployed in 19
countries. Production is scheduled to last through 2020, followed
by long-term maintenance and support.
- Notified by a major medical device
company that eMagin’s HD-plus resolution WUXGA display has been
selected for the next generation of surgical equipment. This
further establishes eMagin’s presence in the medical device field
and follows a large order in the second quarter from another major
medical device company.
- Prepared for launch of first two
consumer products, BlazeSparkTM and BlazeTorchTM, for night vision.
Click for Release.
The Company continued to make improvements in technology and
product design.
- The Company is completing qualification
of the XGA (1024 x 768) display which is expected to be available
in the first quarter of 2017 for consumer and industrial
applications that require cost effective medium resolution
microdisplays.
- The Company’s direct patterning
development work under the Defense Manufacturing, Science and
Technology program (Man Tech) progressed during the quarter and is
on track for completion in 2017.
- eMagin’s direct patterning technology
has generated significant interest from our military and commercial
customers. We will be offering direct patterned displays to our
military customers in the second half of 2017.
- The Company’s direct patterning
production equipment has been upgraded by the equipment
manufacturers based on our design changes to provide significant
improvements in display performance and higher production volumes.
The upgraded equipment has been re-installed during the fourth
quarter with fabrication samples expected by the end of the
quarter.
- Product development on the 2K x 2K full
color RGB microdisplay, eMagin Corporation’s largest microdisplay
design, which expands the Company’s product offerings for the
consumer and commercial marketplaces, is on schedule to produce
engineering samples. Select customers, including the customer with
whom we entered into the license agreement in December 2015, will
receive samples beginning in December. Associated products are
expected to be generally available in the first quarter of
2017.
Third Quarter Results
Revenues for the third quarter of 2016 were $4.3 million, down
20% from the third quarter of 2015.
Product revenues totaled $3.5 million, 24% less than third
quarter last year, primarily due to lower volumes from maturing
military programs partially offset by a lower average price due to
product mix. R&D contract revenues totaled approximately $769
thousand, consistent with the third quarter last year.
Overall gross margin for the third quarter was 30 percent on
gross profit of $1.3 million compared to a gross margin of 20
percent on gross profit of $1.1 million in the same quarter last
year. The increased gross margin for the quarter reflects a
favorable impact of higher production volumes as inventory is built
for the consumer products launch.
Operating expenses for the third quarter of 2016, including
R&D expenses, increased to $3.7 million from $3.3 million in
the third quarter of 2015. Third quarter operating expenses reflect
higher spending on the development and marketing of our consumer
products as well as the costs associated with the consolidation of
the Company’s finance and procurement functions.
Operating loss for the third quarter increased to $2.4 million
from a loss of $2.2 million in the third quarter last year. Net
loss for third quarter of 2016 increased to $2.4 million, or $0.08
per basic and diluted share, from a loss of $2.2 million, or $0.09
per basic and diluted share, in the third quarter of 2015.
At September 30, 2016, the Company had approximately $6.9
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
for our consumer product launch.
Outlook
“We remain focused on our milestone approach to driving
shareholder value for the remainder of 2016 and into 2017. While
not reflected in our financial performance during the quarter, we
are making considerable strategic business progress as we advance
our microdisplay technology, expand our presence in our existing
markets and penetrate new ones. 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 remains focused on the following objectives to drive
shareholder value:
- Advance our product development
discussions with Tier One companies to incorporate OLED technology
into their next generation products,
- Further penetrate 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,
- Expand our presence in existing and
future major military programs and overall customer count in
domestic and international military markets,
- Launch new products focused on the
consumer market which offer high performance and broad appeal at an
attractive price,
- Advance discussions with high volume
production partners to utilize our leading production and process
technologies, and
- Continue our progress in manufacturing
improvements including yield enhancement and production capacity
expansion.
“We look forward to updating you on our progress,” concluded Mr.
Sculley.
Conference Call Information
Full results will be published in the Company’s 10-Q report for
the third quarter ended September 30, 2016, expected to be filed on
November 14th, 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 December 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. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, such statements should not be regarded as a
representation by the Company, or any other person, that such
forward-looking statements will be achieved. The business and
operations of the Company are subject to substantial risks which
increase the uncertainty inherent in forward-looking statements. We
undertake no duty to update any of the forward-looking statements,
whether as a result of new information, future events or otherwise.
In light of the foregoing, readers are cautioned not to place undue
reliance on such forward-looking statements.
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
data)
September 30, 2016
December 31, 2015
(unaudited) ASSETS Current assets: Cash and
cash equivalents $ 6,879 $ 9,273 Accounts receivable, net 2,476
3,508 Unbilled accounts receivable 1,163 1,445 Inventories, net
7,027 3,901 Prepaid expenses and other current assets 977
489
Total current assets 18,522 18,616
Equipment, furniture and leasehold improvements, net 8,953 9,131
Intangibles and other assets 296 336
Total assets $ 27,771 $ 28,083
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 1,651 $ 1,636 Accrued compensation 1,142 1,246 Other
accrued expenses 748 1,193 Other current liabilities 415
602
Total current liabilities 3,956
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 September 30, 2016 and December 31, 2015 — — Common stock, $.001
par value: authorized 200,000,000 shares, issued 31,784,730 shares
as of September 30, 2016 and 29,550,170 shares as December 31, 2015
32 30 Additional paid-in capital 239,802 234,814 Accumulated
deficit (215,519 ) (210,938 ) Treasury stock, 162,066 shares as of
September 30, 2016 and December 31, 2015 (500 ) (500
)
Total shareholders’ equity 23,815
23,406
Total liabilities and shareholders’ equity $
27,771 $ 28,083
eMAGIN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share and per
share data)
(unaudited)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30, 2016
2015 2016 2015
Revenues: Product $ 3,536 $ 4,633 $ 13,612 $ 15,163
Contract 769 772 2,227 3,265 License — —
1,000 —
Total revenues,
net 4,305 5,405 16,839 18,428
Cost of revenues:
Product 2,545 3,732 9,639 10,317 Contract 478 567 1,248
2,037 License — — —
—
Total cost of revenues 3,023 4,299 10,887
12,354
Gross profit 1,282 1,106 5,952 6,074
Operating expenses: Research and development 1,666
1,151 4,468 2,983 Selling, general and administrative 2,041
2,183 6,044 5,050
Total operating expenses 3,707 3,334 10,512 8,033
Loss from operations (2,425 ) (2,228 ) (4,560 ) (1,959 )
Other income (expense): Interest expense, net (8 )
(11 ) (28 ) (32 ) Other income, net 4 5 8 11
Total other income
(expense), net (4 ) (6 ) (20 ) (21
)
Loss before provision for income taxes (2,429 )
(2,234 ) (4,580 ) (1,980 ) Provision for
income taxes (1 )
—
(1 ) —
Net loss $ (2,430
) $ (2,234 ) $ (4,581 ) $ (1,980 ) Loss per share,
basic $ (0.08 ) $ (0.09 ) $ (0.15 ) $ (0.08 ) Loss per share,
diluted $ (0.08 ) $ (0.09 ) $ (0.15 ) $ (0.08 )
Weighted average number of shares outstanding: Basic
30,292,166 25,287,849 29,689,458 25,157,200 Diluted
30,292,166 25,287,849 29,689,458 25,157,200
Non-GAAP
Information
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2016 2015 2016
2015 Net loss $ (2,430 ) $ (2,234 ) $ (4,581 ) $
(1,980 ) Non-cash compensation 398 186 658 502 Depreciation and
amortization expense 400 410 1,214 1,113 Interest expense 8 11 28
32 Provision for income taxes 1 - 1 -
Adjusted EBITDA $ (1,623 ) $ (1,627 ) $ (2,680 ) $ (333 )
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version on businesswire.com: http://www.businesswire.com/news/home/20161111005076/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorMBS Value PartnersBetsy Brod,
212-661-2231Betsy.brod@mbsvalue.com
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