--Signs Additional Strategic Partnership
Agreement with a Major Consumer Electronics Company--
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 fourth quarter ended December 31, 2016.
“I am pleased to announce that we recently signed an additional,
multi-million dollar agreement with another major Tier 1 consumer
electronics company. We now have in place multiple agreements with
commercial partners for next generation prototype products for
consumer HMD’s and expect a considerable boost to 2017 revenue from
our commercial efforts, including approximately $1.5 million that
we expect to recognize in the first quarter of 2017. As we continue
to enhance our technological advantage through direct patterning, I
believe that we are gaining the recognition we deserve for having
the most comprehensive suite of high performance OLED microdisplays
in the market today,” commented Andrew Sculley, President and Chief
Executive Officer.
“Improvements to our direct patterning equipment and processes
have led to higher throughput for our development efforts and, more
importantly, brightness levels that surpass threshold requirements
for both commercial and military customers. We have begun shipping
limited quantities of these enhanced direct patterning displays to
key strategic partners, potential partners and defense prime
contractors, and are in active discussions with several parties for
high volume production to support commercial demand.
“As expected, our fourth quarter revenue was impacted by lower
sales volumes from the previously announced wind down of certain
domestic military programs. However, we continue to develop market
leading products for both military and commercial applications and
were selected to participate in both the U.S. Army’s Enhanced Night
Vision Goggle III (ENVG III) and the Family of Weapon
Sight-Individual (FWS-I) programs. We have a solid base of business
within the military and expect it will provide us with a growing,
recurring revenue stream over the next several years.”
Business and Product Highlights
The Company continued to expand its presence in commercial,
industrial and foreign military markets while winning new U.S.
military programs. Additionally, the Company made improvements in
technology and product design. Some of the highlights include:
- Signed a multi-year agreement with a
major European defense company that is expected to exceed $3.5
million in display sales through 2018.
- Continued to deliver displays for a
major United States Marine Corps contract in support of a laser
range finder program.
- Worked with U.S. Army and a defense
aviation prime contractor for a major aircraft helmet modernization
program.
- Delivered HD-plus resolution WUXGA
display to a major medical company for use in prototyping in their
next generation surgical equipment.
- Produced samples of 2K x 2K full color
RGB microdisplay project to a leading consumer product company for
evaluation in December 2016. Products are expected to be available
for customers during the second quarter of 2017.
- Announced the introduction of consumer
night vision products that are now in production and providing demo
units to prospective customers.
- Completed prototyping of a new .48-inch
diagonal full color XGA format microdisplay targeted at industrial
and commercial markets. Initial displays are scheduled to be
available in the second quarter of 2017.
Full Year Results
Revenues for 2016 were $21.4 million, down 15% from 2015.
Product revenues totaled $17.3 million, 17% less than last year,
primarily due to lower volumes from maturing military programs and
a larger portion of sales of displays with lower unit prices.
R&D contract revenues totaled approximately $3.1 million, down
26% from 2015. The decline in R&D contract revenue was mainly
the result of a decrease in active R&D contracts and work
completed on those contracts.
Gross margin for 2016 was 30% on gross profit of $6.4 million,
up 2 percentage points from 28% in 2015. The increased gross margin
for the year benefitted from $1.0 million in license revenue that
was recorded with no cost in the current year.
Operating expenses for 2016, including R&D expenses, were
$14.8 million, up $3.7 million from 2015. The majority of the
increase is due to higher R&D expenses which totaled $6.4
million, up from $4.4 million in the prior year. The overall
increase reflected costs incurred for the development of our
consumer products that were launched in the first quarter of 2017
and R&D activities including hiring additional engineers to
support our process development including direct pattering.
Operating loss for 2016 was $8.3 million versus $4.1 million in
2015 as a result of the lower production volumes and the Company’s
investment in R&D to improve its market leading technology and
in the launch of its consumer products. Net loss for the full year
2016 was $8.0 million, or $0.27 per diluted share, compared to a
net loss of $4.1 million, or $0.16 per diluted share, in 2015.
As of December 31, 2016, the Company had approximately $5.2
million of cash and cash equivalents compared to $9.3 million of
cash and cash equivalents as of December 31, 2015. The decrease in
the cash balance was due to operating losses from the lower
volumes, R&D investment and inventory build-up for the launch
of our night vision products. In December, the Company entered into
a working capital facility allowing it to borrow up to $5 million
against its eligible accounts receivable and inventory. At December
31, 2016, there was $1.9 million outstanding on the facility. The
Company also put in place a new credit facility for $5 million with
its largest shareholder in March of 2017 to support its
commercialization efforts in fiscal 2017.
Fourth Quarter Results
Revenues for the fourth quarter of 2016 were $4.6 million as
compared to $6.7 million in the fourth quarter of 2015.
Product revenues totaled $3.7 million versus $5.7 million in the
fourth quarter last year. This was primarily due to lower volumes
from maturing military programs. R&D contract revenues totaled
approximately $905 thousand, in line with the $965 thousand
reported in the prior year quarter.
Overall gross margin for the fourth quarter was 11% on gross
profit of $490 thousand compared to a gross margin of 13% on gross
profit of $904 thousand in the fourth quarter of 2015 due to the
impact of lower production volumes on the high fixed cost nature of
our manufacturing processes.
Operating expenses for the fourth quarter of 2016, including
R&D expenses, increased to $4.3 million, from $3.0 million in
the fourth quarter of 2015. Fourth quarter operating expenses
reflect higher spending on the development and marketing of our
consumer products and a lower allocation of our R&D expense to
R&D contracts.
Operating loss for the fourth quarter was $3.8 million versus
$2.1 million in the fourth quarter last year. Net loss for the
fourth quarter of 2016 increased to $3.5 million, or $0.11 per
diluted share compared to net loss of $2.1 million, or $0.08 in the
fourth quarter of 2015.
Outlook
“We continue to pursue our milestone approach to driving
shareholder value. We believe eMagin is the only company whose
products can meet the low power, high brightness and resolution
requirements for high-pixel density displays being demanded both
for next generation VR/AR Consumer HMDs as well as today’s
commercial and military applications,” continued Mr. Sculley.
The Company remains focused on the following objectives to drive
shareholder value:
- Advance our product development
discussions with major consumer electronics companies to
incorporate OLED technology into their next generation
products,
- Advance discussions with high volume
production partners to utilize our leading production and process
technologies,
- 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, and
- Continue our progress in manufacturing
improvements including yield enhancement and production capacity
expansion.
“We made great strides in 2016 toward these objectives and
expect to report several significant developments in 2017,
especially with respect to our commercial efforts,” concluded Mr.
Sculley.
Conference Call Information
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 April 27, 2017. 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 and per
share data)
December 31,
December 31,
2016
2015 ASSETS Current assets: Cash and
cash equivalents $ 5,241 $ 9,273 Accounts receivable, net 2,834
3,508 Unbilled accounts receivable 1,401 1,445 Inventories, net
7,435 3,901 Prepaid expenses and other current assets 1,040
489
Total current assets 17,951 18,616 Equipment,
furniture and leasehold improvements, net 8,980 9,131 Intangibles
and other assets 282 336
Total assets $ 27,213
$ 28,083
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 1,432 $ 1,636
Accrued compensation 1,528 1,246 Revolving Credit Facility 1,689 —
Other accrued expenses 1,513 1,193 Other current liabilities
591 602
Total current liabilities 6,753
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 December 31, 2016 and
2015
— —
Common stock, $.001 par value: authorized
200,000,000 shares, issued 31,788,582
shares as of December 31, 2016 and
29,550,170 shares as December 31, 2015
32 30 Additional paid-in capital 239,915 234,814 Accumulated
deficit (218,987) (210,938) Treasury stock, 162,066 shares as of
December 31, 2016, and 2015 (500) (500)
Total
shareholders’ equity 20,460 23,406
Total
liabilities and shareholders’ equity $ 27,213 $ 28,083
eMAGIN
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except share and per share
data) Three Months Ended Year Ended
December 31, December 31, 2016 2015
2016 2015 Revenues: Product $ 3,653 $
5,749 $ 17,265 $ 20,912 Contract 905 965 3,132 4,230 License
— — 1,000 —
Total revenues, net
4,558 6,714 21,397 25,142
Cost of
revenues: Product 3,349 5,149 12,988 15,466 Contract 719
661 1,967 2,698 License — — — —
Total cost of revenues 4,068 5,810
14,955 18,164
Gross profit 490
904 6,442 6,978
Operating expenses:
Research and development 1,895 1,150 6,362 4,353 Selling,
general and administrative 2,366 1,857 8,411
6,687
Total operating expenses 4,261
3,007 14,773 11,040
Loss from
operations (3,771) (2,103) (8,331) (4,062)
Other
income (expense): Interest expense, net (2) (11) (30) (43)
Other income (expense), net 305 (11) 313
—
Total other income (expense), net 303
(22) 283 (43)
Loss before provision for income
taxes (3,468) (2,125) (8,048) (4,105) Provision for income
taxes — — (1) —
Net loss
$ (3,468) $ (2,125) $ (8,049) $ (4,105) Loss per
share, basic $ (0.11) $ (0.08) $ (0.27) $ (0.16) Loss per share,
diluted $ (0.11) $ (0.08) $ (0.27) $ (0.16)
Weighted average number of shares outstanding: Basic
31,623,334 25,712,652 30,172,927
25,296,040 Diluted 31,623,334 25,712,652
30,172,927 25,296,040
Non-GAAP
Information
(In thousands) Three Months Ended
Twelve Months Ended December 31, December
31, 2016 2015 2016
2015 Net loss $ (3,468) $ (2,125) $ (8,049) $
(4,105) Litigation expense - 30 - 446 Non-cash compensation 113 105
771 606 Depreciation and amortization expense 427 417 1,641 1,530
Non-cash adjustments to other income (302) - (302) - Interest
expense 2 11 30 43 Provision for income taxes - - 1 - Adjusted
EBITDA $ (3,228) $ (1,562) $ (5,908) $ (1,480)
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version on businesswire.com: http://www.businesswire.com/news/home/20170328005582/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorMBS Value PartnersBetsy Brod,
212-661-2231Betsy.brod@mbsvalue.com
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