-- Year-to-Date Contract R&D up 57%
Driven by Consumer Applications --
eMagin Corporation, or the “Company”, (NYSE
American: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, 2017.
“We have set ambitious goals for 2017, and I am confident that
we will achieve them. We have seen a sequential increase in our
display sales from the first quarter as the new military contracts
are coming on line, as well as a significant uptick from sales of
newly developed displays supported by our R&D programs for
commercial customers. Our direct patterned 2Kx2K display, which is
the highest resolution and highest brightness full color OLED
microdisplay in the marketplace today, was demonstrated during the
Display Week Conference at the Society for Information Display in
Los Angeles in May. We received an outstanding reception for this
achievement from many of the participants who represent leading
display and related applications manufacturers and users,” said
Andrew Sculley, President and Chief Executive Officer.
“As we have previously stated, we are in active discussions with
well-known consumer product companies to develop and design their
next-generation microdisplays. Our contract R&D work reflects
this as we are up 57% over last year at this time and anticipate
that this will result in higher product-related revenues in the
future. The consumer AR/VR market will be the driver for high
volume business and we are executing successfully on a plan to both
secure consumer electronics companies as our channel to this market
and partner with a mass production company to ensure our ability to
meet the future volume demands of this segment.
“Several prospective commercial customers have accelerated their
negotiations with us and our related discussions with potential
high volume manufacturers are progressing. As a result, I believe
we remain on target to sign an additional agreement by the end of
the year,” continued Mr. Sculley.
Business and Product Highlights
Commercial
- Commenced work with a major consumer
electronics company to design and develop a microdisplay for a VR
headset. Under this program, which is expected take between 12 and
15 months, a limited quantity of sample displays will be produced.
Additionally, the Company is actively negotiating with companies to
provide high volume manufacturing capability.
- Furthered negotiations with multiple
consumer electronics companies on both new display designs and low
rate production capability.
Military
- Secured a $1 million order for a new
thermal weapon sight program with a major European customer.
- Procured tooling and delivered the
initial OLED display, taper, and lens assemblies for integration
and testing as part of our selection as a sole source provider of
OLED microdisplays for a major U.S. Army helicopter helmet upgrade
program.
- Completed a requirements review with a
major aviation prime contractor for an OLED upgrade to a fixed wing
production helmet. This program continues on schedule.
- Delivered first 2K x 2K display to a
defense contractor for integration into a new HMD prototype.
- Delivered high brightness displays for
the U.S. Army Soldier Visual Interface Technology (SVIT) program.
This key program will improve the situational awareness, lethality
and survivability of the dismounted warrior and the eMagin OLED
display is integral in providing the technological path for future
military head mounted display systems.
Financial
- Completed on May 24th an underwritten
offering of 3.3 million shares of common stock at $2.00 per share
and warrants to purchase up to 1.65 million shares of common stock.
The Company realized net proceeds of $5.8 million after
underwriting discounts and offering expenses.
Second Quarter Results
Revenues for the second quarter of 2017 were $5.3 million as
compared to $5.5 million in the second quarter of 2016.
Product revenues totaled $4.7 million versus $4.8 million in the
second quarter last year and $4.4 million in the first quarter of
2017. The year-on-year decline in product revenue was due to the
wind down beginning mid-2016 of maturing military programs
partially offset by the gradual ramp up of new military programs
and sales of newly developed displays to commercial customers.
R&D contract revenues totaled approximately $605 thousand
versus $752 thousand reported in the prior year quarter. The
decline in military R&D contract revenues from completed
contracts masks the contribution from commercial R&D contract
revenues earned from multiple major consumer electronics companies
and on which no R&D revenues were earned in 2016.
Overall gross margin for the second quarter was 24% on gross
profit of $1.2 million compared to a gross margin of 24% on gross
profit of $1.3M in the second quarter of 2016.
Operating expenses for the second quarter of 2017, including
R&D expenses, decreased to $3.3 million, from $3.5 million in
the second quarter of 2016. Second quarter R&D expenses reflect
a greater allocation of R&D resources to commercial R&D
contract revenues partially offset by continuing investment in the
Company’s direct patterning technology. SG&A expenses increased
over the prior year period due largely to greater travel and
professional services spending, including legal services,
associated with our negotiations with prospective consumer
electronics and volume manufacturing partners. Interest expense of
$188 thousand in the second quarter of 2017 included a $158
thousand write-off of capitalized debt issuance costs associated
with the expiration of an unsecured debt financing commitment.
Operating loss for the second quarter was $2.1 million versus
operating loss of $2.2 million in the second quarter of last year.
Net loss for the second quarter of 2017 was $2.3 million, or $0.07
per diluted share, compared to net loss of $2.2 million, or $0.07
per diluted share, in the second quarter of 2016.
Cash and cash equivalents were $4.9 million, no debt was
outstanding, and borrowing availability under the ABL facility was
$3.8 million at the end of the second quarter.
Outlook
“Our leading-edge OLED direct patterning technology continues to
generate strong interest and enthusiasm. We are actively engaged in
negotiations with potential partners for both high volume and low
volume production as well as consumer applications. Additionally,
there is renewed activity amongst our military customers, both
domestic and international which bodes well for future display
sales,” concluded 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 our direct patterning 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
commercial and consumer markets 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.
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 September 10, 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. For a more complete description of the
risks that could cause our actual results to differ from our
current expectations, please see the section entitled “Risk
Factors” in eMagin’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 and Current Report on Form 8-K filed with
the SEC on May 19, 2017.
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 30,2017
December 31, 2016
(unaudited) ASSETS Current assets: Cash and
cash equivalents $ 4,869 $ 5,241 Accounts receivable, net 3,110
2,834 Unbilled accounts receivable 850 1,401 Inventories 8,973
7,435 Prepaid expenses and other current assets 1,302
1,040
Total current assets 19,104 17,951 Equipment,
furniture and leasehold improvements, net 9,045 8,980 Intangibles
and other assets 462 282
Total assets $ 28,611
$ 27,213
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 1,680 $ 1,432
Accrued compensation 1,721 1,528 Revolving credit facility, net —
1,689 Other accrued expenses 973 1,069 Deferred Revenue 1,231 445
Other current liabilities 591 590
Total current
liabilities 6,196 6,753
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) stated value $1,000 per share,
$.001 par value: 10,000shares designated and 5,659 issued and
outstanding as of June 30, 2017 and December 31, 2016
— —
Common stock, $.001 par value: authorized
200,000,000 shares,issued 35,114,655 shares as of June 30, 2017 and
31,788,582 shares as of December 31, 2016
35 32 Additional paid-in capital 246,136 239,915 Accumulated
deficit (223,256) (218,987) Treasury stock, 162,066 shares as of
June 30, 2017 and December 31, 2016 (500) (500)
Total shareholders’ equity 22,415 20,460
Total liabilities and shareholders’ equity $ 28,611 $ 27,213
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,
2017 2016 2017 2016 Revenues:
Product $ 4,655 $ 4,781 $ 9,036 $ 10,076 Contract 605 752
2,293 1,458 License — — — 1,000
Total revenues, net 5,260 5,533 11,329
12,534
Cost of revenues: Product 3,658
3,807 7,116 7,094 Contract 353 391 1,146 770 License —
— — —
Total cost of revenues
4,011 4,198 8,262 7,864
Gross
profit 1,249 1,335 3,067 4,670
Operating expenses: Research and development
1,177 1,499 2,511 2,802 Selling, general and administrative
2,153 1,993 4,616 4,003
Total operating
expenses 3,330 3,492 7,127 6,805
Loss from operations (2,081) (2,157) (4,060) (2,135)
Other income (expense): Interest expense, net (188)
(10) (223) (20) Other income, net (1) 3 14
5
Total other income (expense), net (189)
(7) (209) (15)
Loss before provision for
income taxes (2,270) (2,164) (4,269) (2,150) Provision for
income taxes
—
— — —
Net loss $ (2,270) $
(2,164) $ (4,269) $ (2,150) Loss per share, basic $ (0.07) $
(0.07) $ (0.13) $ (0.07) Loss per share, diluted $ (0.07) $ (0.07)
$ (0.13) $ (0.07)
Weighted average number of shares
outstanding: Basic 33,019,478 29,388,104
32,320,527 29,388,104 Diluted
33,019,478 29,388,104 32,320,527 29,388,104
Non-GAAP
Information
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Net income (loss)
$
(2,270)
$
(2,164)
$
(4,269)
$
(2,150)
Non-cash compensation
116
93
330
260
Depreciation and intangibles amortization
expense
481
399
981
814
Interest expense
188
10
223
20
Provision for income taxes
—
—
—
—
Adjusted EBITDA
$
(1,485)
$
(1,662)
$
(2,735)
$
(1,056)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170810005146/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorMBS Value PartnersBetsy Brod,
212-661-2231Betsy.brod@mbsvalue.com
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