-- Posts 40% Revenue Growth in Q4; 53%
Increase in Backlog Entering 2018 --
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 fourth quarter ended December 31, 2017.
“We made tremendous progress on all fronts in 2017 and I believe
we are well positioned entering 2018. The fourth quarter was strong
as we saw a rebound in our military business which drove a 40%
year-over-year increase in sales and a 49% increase sequentially
from the third quarter of 2017. During the year we entered into
agreements with consumer electronics and technology companies to
advance our cutting-edge technology and to design and develop
microdisplays for AR/VR head mounted device applications. Securing
these agreements was a logical prerequisite in our strategy for
establishing a mass production partnership. We also signed an
agreement with a U.S. based chipmaker to support scaling to mass
production for the consumer AR and VR markets. We anticipate that
this will provide valuable supply chain development assistance to
enable prototype and mass production OLED microdisplays. Lastly,
and importantly, we continue to be actively engaged in discussions
with potential manufacturing partners to support our commercial
efforts,” commented Andrew Sculley, President and Chief Executive
Officer.
“Our base military business is solid, and we are experiencing an
upswing in demand as new programs are replacing many of those that
matured. During 2017, we experienced an improvement in booking
activity as we made progress towards our goals of securing new, and
expanding existing, U.S. and foreign military programs while
growing our presence in foreign military, commercial and industrial
markets. At December 31, 2017, we had a backlog of non-binding
purchase orders of approximately $9.8 million in products
ordered for delivery through December 31, 2018, an increase of
over 50% from our backlog of $6.4 million at December 31, 2016.
“We continue to refine our production processes and have made a
number of operational improvements and productivity enhancements
which have contributed to our ongoing yield improvement and higher
capacity utilization. Additionally, we are selectively making
capital expenditures to improve the timely delivery on our orders
and expand gross profit margins by providing for more efficient
utilization of our production operations.”
Business and Product Highlights
In addition to expanding our presence in consumer,
commercial/industrial and foreign military markets and [winning new
U.S. military programs], we made significant improvements in
technology and product design. Further optimization of our direct
patterning process (“dPd”) has led to brightness levels that we
believe surpass the threshold requirements for AR/VR applications
for consumer products and enterprise focused companies and satisfy
the requirements of several pending military programs. We have
demonstrated more than 15,000 nits brightness in monochrome and
more than 5,300 nits brightness in full color, a milestone towards
the application of eMagin’s microdisplays to AR/VR headsets. We are
currently targeting a maximum brightness of 10,000 nits in full
color.
Fiscal 2017 highlights include:
- We completed a Critical Design Review
(CDR) in October 2017 with a major aviation prime contractor for an
OLED upgrade to a production helmet for a multi-service fixed wing
aircraft. Additional displays and supporting hardware were
delivered to the prime contractor in January 2018 for
pre-production testing. This program is anticipated to generate
significant revenues beginning in the second half of 2018 as our
OLED microdisplays continue to receive praise during flight
testing.
- We supplied to consumer and commercial
customers our largest microdisplay design, the 2k x 2k full color
RGB during 2017. We expect that this display design will expand our
product offerings for the consumer and commercial marketplaces. In
concert with this effort, we advanced a compact interface for the
2K × 2K microdisplay that we believe will facilitate the
integration of the display into optical solutions. This hardware is
targeted to be introduced to the market during the second quarter
2018.
- We delivered displays for the Low Rate
Initial Production (LRIP) phase of both the U.S. Army’s Enhanced
Night Vision Goggle III (ENVG III) and Family of Weapon
Sight-Individual (FWS-I) programs. We were awarded follow-on
contracts worth over $3.7 million for the ENVG III and FWS-I
programs. We also delivered displays for prototype systems for the
FWS-Crew Served program to two defense prime contractors.
- We received a multi-year
$1.7 million order from a European military prime contractor
to provide displays for see-through, head-mounted displays to
support airborne and ground missions’ requirements.
- We received a $1.5 million order
to support the Light Weight Thermal Sight (LWTS) program with
deliveries which began in December 2017 and continue through
2018.
- We continued to support a major U.S.
Army helicopter helmet upgrade program to retrofit high brightness
microdisplays into the current fielded helmet. Critical Design
Review was completed in August of 2017 and Testing Readiness Review
(TRR) was completed in December 2017. Additional OLED display,
taper, and lens assemblies were delivered for integration and
testing in December 2017.
- We received a production order from a
foreign aviation prime contractor to supply high brightness
microdisplays to upgrade an existing helmet for fixed wing
aircraft. It is expected that this will be a multi-year program.
The initial displays were delivered in November 2017 and are
expected to continue through the fourth quarter of 2018.
- We delivered high brightness
2K × 2K microdisplays to a major foreign contractor for
use in a prototype aviation helmet scheduled for initial tests in
May 2018.
Full Year Results
Revenues for 2017 were $22.0 million, up 3% from the $21.4
million in 2016. Excluding $1 million licensing revenue in 2016,
revenues are up 8% in 2017 versus 2016. Product revenues totaled
$18.7 million, representing an 8% increase from $17.3 million in
2016, primarily due to increased demand from newer military
programs in 2017 compared to reduced demand from maturing programs
in 2016. R&D contract revenues totaled approximately $3.3
million, up 7% from 2016. The increase in R&D contract revenue
was mainly the result of an increase in the number of commercial
R&D contracts and the work completed on these contracts,
partially offset by a decrease in revenues from a US government
R&D contract as it nears completion.
Gross margin for 2017 was 23%, down from 30% in 2016. The
decline in gross margin for the year was primarily due to $1.0
million in license revenue recorded in 2016 that had no associated
cost, the impact during the third quarter of 2017 of lower volumes
and higher unit costs attributable to a production equipment issue,
and the write-down of obsolete inventory in the fourth quarter of
2017 as part of our product rationalization program.
Operating expenses for 2017, including R&D expenses, were
$13.9 million, down $0.9 million from 2016. The decline was due to
lower R&D expenses which totaled $5.2 million, down from $6.4
million in 2016. The decrease in operating expenses in 2017 was
primarily due to the allocation of R&D engineering resources to
commercial contract cost of sales and the decrease in expenses
incurred for the development of our night vision consumer products
in 2016, partially offset by higher spending on professional
services and travel expenses related to contract negotiations.
Operating loss for the full year 2017 was $8.7 million versus
$8.3 million in 2016. Net loss for the full year 2017, including
the impact from the change in the fair value of the warrant
liability and an income tax benefit, was $7.8 million, or $0.23 per
diluted share, compared to a net loss of $8.0 million, or $0.27 per
diluted share, in 2016 on a weighted average share count of 33.7
million shares in 2017 and 30.2 million in 2016.
As of December 31, 2017, the Company had approximately $3.5
million of cash and cash equivalents compared to $5.2 million of
cash and cash equivalents as of December 31, 2016. The decrease in
the cash balance was due to operating losses and working capital
requirements offset by funds generated during the year from an
equity raise in May 2017 and higher borrowings on the Company’s ABL
facility. As of December 31, 2017, the Company had borrowings of
$4.0 million outstanding under its ABL facility and had unused
borrowing availability of $1.0 million. On May 24, 2017, the
company raised net proceeds of $5.8 million through an underwritten
offering of common stock and warrants.
Subsequent to the end of the year, the Company received net
proceeds of $11.9 million on January 29, 2018, from a public
offering of common stock and warrants. In a concurrent private
placement which closed on February 18, 2018, certain directors and
officers purchased common stock and warrants totaling $0.3
million.
Fourth Quarter Results
Revenues increased 40% in the fourth quarter of 2017 and were
$6.4 million as compared to $4.6 million in the fourth quarter of
2016. On a sequential basis from the third quarter of 2017,
revenues increased 49%.
Product revenues totaled $5.6 million in the fourth quarter of
2017 versus $3.7 million in the fourth quarter of 2016. This
increase was primarily due to higher volumes from new military
programs. R&D contract revenues totaled approximately $787
thousand in the fourth quarter of 2017 versus $905 thousand in the
fourth quarter or 2016.
Overall gross margin for the fourth quarter of 2017 was 28% on
gross profit of $1.8 million compared to a gross margin of 11% on
gross profit of $490 thousand in the fourth quarter of 2016. The
increase in gross margin was due to the impact of higher production
volumes.
Operating expenses for the fourth quarter of 2017, including
R&D expenses, decreased to $3.4 million, from $4.3 million in
the fourth quarter of 2016. The favorable comparison reflects
higher development spending on the consumer night vision products
and non-recurring expenses associated with the consolidation of the
Company’s administrative operations in 2016.
Operating loss narrowed in the fourth quarter of 2017 to $1.6
million compared to $3.8 million in the fourth quarter of 2016. Net
loss for the fourth quarter of 2017 decreased to $0.9 million, or
$0.03 per diluted share including the impact of $616 thousand
related to the change in the fair value of the warrant liability
and an income tax benefit of $212 thousand, compared to net loss of
$3.5 million or $0.11 per diluted share, in the fourth quarter of
2016.
Outlook
“We continue to believe that eMagin is the only company whose
products can meet the low power, high brightness, high contrast and
resolution requirements for high-pixel density displays being
demanded both for next gen VR/AR Consumer HMDs as well as today’s
commercial and military applications. Our accomplishments in 2017
demonstrate the superiority of our technology and, with the rebound
in our military business, we believe we are well positioned for
2018,” 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 March 28, 2019. 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
CONSOLIDATED BALANCE SHEETS (in thousands, except share
and per share data) December 31, December
31, 2017 2016 ASSETS Current
assets: Cash and cash equivalents $ 3,526 $ 5,241 Accounts
receivable, net 4,528 2,834 Unbilled accounts receivable 406 1,401
Inventories 8,640 7,435 Prepaid expenses and other current assets
1,328 1,040
Total current assets 18,428 17,951
Equipment, furniture and leasehold improvements, net 8,553 8,980
Intangibles and other assets 326 282
Total
assets $ 27,307 $ 27,213
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 1,714 $ 1,432 Accrued compensation 1,557 1,528 Revolving
credit facility, net 3,808 1,689 Common stock warrant liability 784
— Other accrued expenses 719 1,068 Deferred Revenue 765 445 Other
current liabilities 468 591
Total current
liabilities 9,815 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: 10,000 sharesdesignated and 5,659 issued and
outstanding as of December 31, 2017and December 31, 2016
— —
Common stock, $.001 par value: authorized
200,000,000 shares,issued 35,182,589 shares, outstanding 35,020,523
shares as ofDecember 31, 2017 and issued 31,788,582
shares,outstanding 31,626,516 shares as of December 31, 2016
35 32 Additional paid-in capital 244,726 239,915 Accumulated
deficit (226,769) (218,987)
Treasury stock, 162,066 shares as
ofDecember 31, 2017 and December 31, 2016
(500) (500)
Total shareholders’ equity
17,492 20,460
Total liabilities and shareholders’
equity $ 27,307 $ 27,213
EMAGIN CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except share and per share
data) Three Months
Ended Twelve Months Ended December 31,
December 31, 2017 2016 2017 2016
Revenues: Product $ 5,635 $ 3,653 $ 18,685 $ 17,265
Contract 787 905 3,346 3,132 License — — —
1,000
Total revenues, net 6,422 4,558
22,031 21,397
Cost of revenues:
Product 4,277 3,349 15,195 12,988 Contract 366 719 1,712 1,967
License — — — —
Total cost of
revenues 4,643 4,068 16,907 14,955
Gross profit 1,779 490 5,124
6,442
Operating expenses: Research and
development 1,393 1,895 5,175 6,362 Selling, general and
administrative 1,976 2,366 8,682 8,411
Total operating expenses 3,369 4,261
13,857 14,773
Loss from operations (1,590)
(3,771) (8,733) (8,331)
Other income (expense):
Change in fair value of common stock warrant liability 616 — 1,089
— Interest expense, net (114) 2 (363) (30) Other income, net
1 301 12 313
Total other income
(expense) 503 303 738 283
Loss
before provision for income taxes (1,087) (3,468) (7,995)
(8,048) (Provision) benefit for income taxes 212 —
212 (1)
Net loss $ (875) $ (3,468) $ (7,783) $
(8,049) Loss per share, basic $ (0.03) $ (0.11) $ (0.23) $
(0.27) Loss per share, diluted $ (0.03) $ (0.11) $ (0.23) $ (0.27)
Weighted average number of shares outstanding:
Basic 34,989,530 31,623,334 33,661,727
30,172,927 Diluted 34,989,530 31,623,334
33,661,727 30,172,927
Non-GAAP
Information
Three Months Ended Twelve Months Ended
December 31, December 31, 2017 2016
2017 2016 Net income (loss) $ (875) $ (3,468)
$ (7,783) $ (8,049) Non-cash compensation 108 113 628 771
Depreciation and intangibles amortization expense 460 427 1,836
1,641 Change in fair value of common stock warrant liability (616)
(1,089) Non-cash adjustments to other income - (302) (302) Interest
expense 114 2 363 30 Provision for income taxes (212) - (212) 1
Adjusted EBITDA $ (1,021) $ (3,228) $ (6,257) $ (5,908)
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version on businesswire.com: https://www.businesswire.com/news/home/20180328005395/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorMBS Value PartnersBetsy Brod,
212-661-2231Betsy.brod@mbsvalue.com
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