Revenue exceeds guidance at $6.7 million,
including over $1.0 million in Contract R&D
eMagin Corporation, or the “Company”, (NYSE American:
EMAN), a leader in the development, design and manufacture of
Active Matrix OLED microdisplays used in Military and Commercial
AR/VR devices, and other near-eye imaging products today announced
results for the first quarter 2020.
“As the only USA manufacturer of OLED microdisplays, we are
deemed an essential business by the U.S. government and have
continued to produce and ship products during the COVID-19
pandemic. We also have implemented additional employee health and
safety measures per CDC guidelines and continue to supply products
on a timely basis to our customers as well as maintain a healthy
supply chain,” said CEO Andrew G. Sculley.
“Consumer, Medical and Military customers are increasingly
turning to eMagin because of our technological leadership in
display brightness, contrast, and resolution. This leadership in
brightness is further demonstrated by our proprietary Direct
Patterning Display (dPd™) capability. Unlike traditional OLEDs that
produce colors by using a white source with filters that eliminate
about 80% of the emitted light, with dPd™, we make full color
displays by directly depositing each of the primary color materials
(RGB) on respective sub-pixels. This allows us to use highly
efficient phosphorescent materials, which increases the brightness
further. With this advanced technology we have already achieved
full color brightness over 7,500 cd/m2 , higher than any
competitor, and we are on track to achieve 10,000 cd/m2 by Q4 2020,
and expect to achieve a brightness level of over 28,000 cd/m2 ready
for mass production of full color displays by 2023. We achieved the
highest monochrome brightness levels in the market years ago and
are continuing our leadership with color displays. Display
brightness is critical for AR/VR devices because of optics
inefficiency and the need to eliminate motion artifacts. This is
especially important for Heads Up Displays (HUDs) used in bright,
daylight environments.”
“First quarter revenue, consisting of $5.6 million product
revenue from sales of displays, and $1.1 million from contract
R&D work, was $0.6 million above our expectations for the
quarter, primarily due to contract R&D work from designing a
display for a Tier One customer in the consumer space. This
customer is evaluating our dPd technology and we are also enabling
new, differentiated features through our advanced backplane design,
and expect that work on this project continue through 2020.”
“We also realized a slight increase in military R&D
contracts as a part of an overall trend which involves the
increasing use of digital visual systems that present data from
multiple sensors to soldiers for at a glance viewability, often
through the use of AR/VR. Examples include Head Mounted Displays
(HMDs) connected to sensors mounted outside military aircraft
giving pilots the ability to see beyond the airframe, as well as
displaying targeting data, status of the aircraft systems, and
visual and infrared views of the world outside the airplane.
Similar HMD systems allow soldiers to see beyond the armor of their
vehicles to navigate terrain, acquire targets, and fire weapons.
Further examples include night vision binoculars and other systems
that integrate our displays, enable individual warfighters to view
AR battlefield information, rapidly acquire targets and fire
weapons from covered positions through darkness, smoke, and other
low visibility conditions.”
“During the quarter, we shipped a significant amount of product
for the ENVG-B program. The improved design of the wafers for the
next generation F-35 HMD systems was recently completed with first
shipments planned for later in the year. In addition, we received
awards for two-multiyear U.S. helicopter helmet programs, one of
which is for a new program with deliveries starting in the second
quarter and the other, an upgrade, which will begin shipping in the
fourth quarter. Finally, we received an order from a European
military customer for displays used in shoulder fired weapon
systems. Our USA-based design and manufacturing, combined with
in-house advanced backplane design, and the promise of our dPd
technology continues to give us a competitive advantage more than
ever before in these markets.”
“In the industrial and medical markets, we had steady sales
during the quarter. We provided displays for thermal systems used
in firefighting and law enforcement. For the medical market, we
shipped our high performance displays to be used in veterinary
ultrasound goggles, cataract operating systems, and functional
magnetic resonance imaging (MRI) and LASIK operating systems. We
continue to gain traction in these markets that are targeting to
leverage AR/VR solutions to advance their capabilities. To increase
awareness about eMagin in these emerging markets, we recently hired
a highly skilled and widely respected marketing consultant,”
continued Mr. Sculley.
“In terms of operations, the upgrade to our direct patterning
equipment was delivered, and installation is complete. We are in
the process of qualifying the equipment and validating the process.
Progress has been very good despite vendor delays due to the
coronavirus. We are expecting to fabricate full color displays in
the second quarter. In addition, we are continually making
improvements in production processes, continuing the turnaround
that began in the third quarter of 2019. And we are pursuing some
promising yield improvement projects that will continue to increase
yields which will directly impact the bottom line.”
“As a USA based manufacturer, we are honored to support mission
critical projects for our military and supply important devices for
our medical customers used in surgery and diagnostic procedures. We
are very proud of our employees and want to thank them for their
courage, dedication and hard work during the current pandemic,”
concluded Mr. Sculley.
First Quarter Results
Total revenues for the first quarter of 2020 were $6.7 million,
an increase of $0.6 million from revenues of $6.1 million reported
in the prior year period, and a slight decrease of $0.6 million
from the fourth quarter of 2019.
Total revenue consists of both product revenue and contract
revenue. Product revenues for the first quarter of 2020 were $5.6
million, an increase of $0.1 million from product revenues of $5.5
million reported in the prior year period. The slight increase in
product revenue was achieved despite some minor disruptions
resulting from the Covid-19 pandemic. Contract revenues were $1.1
million compared to $0.6 million reported in the prior year
reflecting a contribution of contract R&D work from designing a
display for a Tier One customer in the consumer space.
Gross margin for the first quarter was 21% on gross profit of
$1.4 million compared to a gross margin of 22% on gross profit of
$1.3 million in the prior year period. The lower gross margin in
the 2020 first quarter is due to lower production volumes and some
yield losses due to delayed response times from equipment
maintenance providers related to Covid-19 travel restrictions.
Operating expenses for the first quarter of 2020, including
R&D expenses, were $2.8 million as compared to $3.5 million
reported in the prior year period. Operating expenses as a
percentage of sales were 41% in the first quarter of 2020 compared
to 58% reported in the prior year period. R&D expenses were
lower in the first quarter, primarily reflecting R&D activity
charged to contracts and a focus on production and yield
improvement projects. SG&A expenses were lower in the first
quarter versus the year ago period due to a reduction in non-cash
stock compensation for the Board of Directors implemented in
December 2019, lower salary expenses and lower travel and other
discretionary expenses. Both SG&A and R&D expenses in the
first quarter also were lower due to the impact of the October 2019
reduction in senior management compensation.
Operating loss for the first quarter of 2020 was $1.3 million
compared to an operating loss of $2.2 million in the prior year
period. Net loss for the first quarter of 2020 was $1.4 million or
$0.03 per share compared to a loss of $1.4 million or $0.03 per
share in the prior year period. Net loss for the prior year period
reflects a $0.8 million non-cash gain related to the decrease in
fair value of a warrant liability.
Adjusted EBITDA the first quarter was negative $0.8 million
compared to a negative $1.5 million in the prior year period.
Historically, the first quarter has typically been our lowest
revenue quarter and is not indicative of results to be expected for
the full year.
At March 31, 2020, the Company had cash and cash equivalents of
$3.1 million and working capital of $9.2 million. Borrowings and
availability under the ABL facility were $2.2 million and $0.9
million respectively at March 31, 2020. In December 2019, eMagin
entered into an At the Market sales agreement with H.C. Wainwright
& Co. for the sale of common stock. During the quarter, the
Company raised $1.5 million under its ATM facility.
Outlook for second quarter
We had solid bookings of $6.0 million during the first quarter.
At March 31, 2020, the Company’s backlog of open orders was $14.9
million, including $13.3 million shippable within twelve months.
This compares to a backlog of orders shippable within twelve months
of $11.7 million as of December 31, 2019. As deemed an essential
business, the Company continues to ship and produce product and has
not experienced any major material supply chain disruptions.
Currently, we are expecting second quarter product revenue to be
higher than that experienced in the first quarter of 2020.
Conference Call Information
eMagin will hold a Webcast at 9:00 am (New York time) on May 14,
2020 to discuss its first quarter results. To access the live
webcast or archive, please visit the Company’s website at
ir.emagin.com or www.earnings.com. An archive of the webcast will
be available one hour after the live call.
About eMagin Corporation
The Leader in OLED microdisplay technology for the next
generation of computing and imaging devices, serving world-class
customers in the military, consumer, medical and industrial
markets. We invent, engineer and manufacture display technologies
of the future in the USA, including our Direct Patterning
Technology (dPd) that will transform the way the world consumes
information. Since 2001 our microdisplays are being used in AR/VR,
aircraft cockpits, heads-up display systems, thermal scopes, night
vision goggles, future weapon systems and a variety of other
applications. www.emagin.com
Important Cautionary Information Regarding 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 factors that could cause our actual results to differ from
our current expectations, including impacts of the COVID-19
pandemic, please see the section entitled “Risk Factors” in eMagin’
s Annual Report on Form 10-K for the fiscal year ended December 31,
2019, and in any Form 10-Q filed or to be filed by eMagin, and in
other documents we file with the SEC from time to time.
eMAGIN CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
(Unaudited)
March 31, 2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
3,138
$
3,515
Accounts receivable, net
3,737
3,966
Unbilled accounts receivable
470
155
Inventories
8,821
8,832
Prepaid expenses and other current
assets
1,344
1,130
Total current assets
17,510
17,598
Equipment, furniture and leasehold
improvements, net
7,926
8,100
Operating lease right - of - use
assets
3,545
3,729
Intangibles and other assets
133
160
Total assets
$
29,114
$
29,587
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
1,577
$
1,302
Accrued compensation
1,566
1,778
Revolving credit facility, net
2,191
2,891
Common stock warrant liability
43
23
Other accrued expenses
1,485
1,401
Deferred revenue
294
277
Operating lease liability - current
791
775
Other current liabilities
351
342
Total current liabilities
8,298
8,789
Finance lease liability - long term
20
24
Operating lease liability - long term
2,863
3,067
Total liabilities
11,181
11,880
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: 10,000 shares designated and 5,659 issued and
outstanding as of March 31, 2020 and December 31, 2019.
—
—
Common stock, $.001 par value: authorized
200,000,000 shares, issued 53,980,918 shares, outstanding
53,818,852 shares as of March 31, 2020 and issued 50,250,378
shares, outstanding 50,088,312 shares as of December 31, 2019.
54
50
Additional paid-in capital
260,358
258,767
Accumulated deficit
(241,979
)
(240,610
)
Treasury stock, 162,066 shares as of March
31, 2020 and December 31, 2019.
(500
)
(500
)
Total shareholders’ equity
17,933
17,707
Total liabilities and shareholders’
equity
$
29,114
$
29,587
eMAGIN CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share data) (Unaudited)
Three Months Ended
March 31,
2020
2019
Revenues:
Product
$
5,634
$
5,507
Contract
1,097
605
Total revenues, net
6,731
6,112
Cost of revenues:
Product
4,790
4,426
Contract
507
350
Total cost of revenues
5,297
4,776
Gross profit
1,434
1,336
Operating expenses:
Research and development
980
1,597
Selling, general and administrative
1,798
1,939
Total operating expenses
2,778
3,536
Loss from operations
(1,344
)
(2,200
)
Other income (expense):
Change in fair value of common stock
warrant liability
(20
)
794
Interest expense, net
(17
)
(33
)
Other income, net
12
—
Total other (expense) income
(25
)
761
Loss before provision for income
taxes
(1,369
)
(1,439
)
Income taxes
—
—
Net loss
$
(1,369
)
$
(1,439
)
Loss per share, basic and diluted
$
(0.03
)
$
(0.03
)
Weighted average number of shares
outstanding:
Basic and Diluted
51,639
45,161
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 (in thousands).
Three Months Ended
March 31,
2020
2019
Net loss
$
(1,369)
$
(1,439)
Non-cash compensation
43
193
Change in fair value of common stock
warrant liability
20
(794)
Depreciation and intangibles amortization
expense
480
488
Interest expense
17
33
Adjusted EBITDA
$
(809)
$
(1,519)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200514005189/en/
eMagin Corporation Mark A. Koch, Acting Chief Financial Officer
845-838-7951 mkoch@emagin.com
Affinity Growth Advisors Betsy Brod 212-661-2231
betsy.brod@affinitygrowth.com
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