eMagin Corporation, or the “Company”,
(NYSE American: EMAN), a leader in the
development, design, and manufacture of Active-Matrix OLED
microdisplays for high-resolution, AR/VR and other near-eye imaging
products, today announced results for its second quarter ended
June 30, 2022.
“eMagin’s second quarter was highlighted by a
number of successes, including higher revenue, improved gross
margin, new business wins, a People’s Choice Award at Display Week
2022, and progress on our AS9100/ISO certification,” said eMagin
CEO Andrew G. Sculley. “Our total revenues rose 14% to $7.2 million
year over year while our gross margin improved to 22% from 9% a
year ago. The gain in gross margin was driven in part by increased
yields and a favorable sales mix, along with the impact of higher
manufacturing volumes. This is the third consecutive quarter in
which we realized year-over-year increases in throughput. The
improved yields and increased throughput resulted from the impact
of the new, government-funded equipment in our production facility
and improvements in our manufacturing operations.
“We achieved continued growth in display revenue
from the ENVG-B program and other military programs and increased
veterinary and surgical revenues. Also in the second quarter, we
strengthened our relationship with a major prime contractor by
advancing our capabilities for higher-level assembly and shipped
displays to a customer providing heads-up displays for optical
surgery. As of the end of the second quarter, our total backlog of
open orders remained strong at $14.3 million, with $12.8 million
shippable over the next 12 months, reflecting demand for our
displays for use in thermal weapon sights, military night-vision
goggles, and medical applications.
“The U.S. Army’s Program Executive Office for
Simulation, Training and Instrumentation (PEO STRI) awarded us a
$2.5 million two-year development contract in the second quarter to
secure a U.S. source for a high-performance microdisplay that
provides high brightness and visual acuity, even in bright daylight
conditions. We are using these funds to design a backplane that
will allow for significantly higher luminance of our
dPd™ displays and ultimately leverage the full potential of
the equipment we are acquiring under our Defense Production Act
Title III and Industrial Base Analysis Sustainment (IBAS) funding
grants. The STRI contract provides that upon completion a follow-on
production agreement may be issued without the need for a
competitive process. We anticipate that our government-funded dPd
tool will be available to satisfy this demand for full-color,
high-luminance displays, as well as demand from both existing and
new military customers.
“We are continuing our proof-of-concept display
work for a tier-one AR/VR customer and are anticipating the
September arrival of an enhanced dPd chamber for R&D usage,
which we will use to complete the remaining OLED deposition phase
of this contract. This new R&D chamber will enable us to
fabricate additional high-brightness prototypes and accelerate our
progress with our product roadmap as we await delivery, followed by
qualification in the second half of 2023, of a government-funded
dPd tool that will be capable of serving both military and
commercial markets.
“In May, we received a People’s Choice Award for
“Best New Display Technology” at Display Week 2022, the 59th
International Symposium, Seminar and Exhibition of the Society for
Information Display, where we showcased our direct-patterned,
single-stack color OLED microdisplay, which is capable of over
10,000 candela per square meter (cd/m2) of full color maximum
luminance. We continue to display our technological leadership at
industry conferences, including, as previously announced an invited
paper presentation and tutorial by our Chief Operating Officer, Dr.
Amal Ghosh on OLED Microdisplays for AR/VR applications at iMiD
2022, the 22nd International Meeting on Information Display later
this month in Busan, Korea.
“Additionally, we have completed our Stage2
AS9100/ISO 9001 Certification Audit and have been recommended for
certification, which will be obtained in the third quarter of this
year. We expect our quality-control efforts will be additive to the
yield and throughput improvements anticipated from the new
equipment provided under our Title III and IBAS programs.
Furthermore, we expect that this AS9100/ISO 9001 certification will
elevate our profile as the supplier of choice for OLED
microdisplays for the various markets we serve.”
Defense Production Act Title III and
IBAS Funding
As previously announced, eMagin has committed
the funds and ordered all equipment to be purchased under its $39
million in Defense Production Act Title III and the IBAS Program
funding grants that were awarded in 2020. As of the end of the
second quarter, the Company has qualified and added four pieces of
equipment to its production line and received three additional
pieces of equipment that are currently installed and being
qualified. This equipment has already contributed to improved
yields and reliability in the Company’s production process. eMagin
has five more major pieces of equipment on order, including an
advanced, production-capable dPd organic deposition tool that is
expected to improve yield and throughput of this innovative
technology for the benefit of AR/VR customers. Overall, the Company
remains on track with the requirements of these important
government grants and is beginning to realize the anticipated
yield, reliability, and throughput improvements.
Second Quarter Results
Total revenues for the second quarter of 2022
increased 14% to $7.2 million, compared with $6.3 million
reported in the prior-year period.
Total revenue consists of both product revenue
and contract revenue. Product revenues for the second quarter of
2022 were $7.0 million, an increase of $1.3 million from
product revenues of $5.7 million reported in the prior-year
period. The year-over-year increase in display revenue was due to
strength in military markets including shipments of displays used
for the ENVG-B program, and higher revenue contributions from
medical customers.
Contract revenues were $0.1 million compared
with $0.5 million reported in the prior year, reflecting an
anticipated decrease in second quarter development work associated
with our proof-of-concept project. eMagin anticipates increased
development activities with this tier-one consumer company
following the expected September 2022 delivery of the R&D
deposition chamber mentioned above. In addition, during the second
quarter of 2022 the Company began to recognize revenue under its
new PEO STRI development contract.
Total gross margin for the second quarter was
22% resulting in a gross profit of $1.6 million, compared with
a gross margin of 9%, which resulted in a gross profit of
$0.6 million in the prior-year period. The gross margin
improvement reflects increased product revenues, higher yields, and
the impact of higher average selling prices in the current year’s
period due to a favorable sales mix, combined with the impact of
higher manufacturing volumes.
Operating expenses for the second quarter of
2022, including R&D expenses, were $3.4 million, compared
with $3.5 million in the prior-year period. Operating expenses
as a percentage of sales were 47% in the second quarter of 2022,
compared with 55% in the prior-year period.
Operating loss for the second quarter of 2022
narrowed to $1.8 million, compared with an operating loss of
$2.9 million in the prior-year period, primarily reflecting
the increased gross profit as noted above. The Company anticipates
improved performance over the subsequent quarters due to
operational improvements and significant upgrades to its capital
equipment and manufacturing processes provided by the IBAS and
Title III government programs.
Net loss for the second quarter of 2022 was $1.4
million, or $0.02 per share, compared with a loss of $0.3 million,
or $0.00 per share, in the prior-year period. After adjusting for
change in the fair value of the warrant liability, net loss for the
second quarter of 2022 was $1.7 million, or $0.02 per share on a
fully diluted basis. Excluding the impact of the $2.6 million
change in the fair value of the warrant liability for the prior
year period, net loss for the second quarter of 2021 was $2.9
million, or $0.04 per share.
Adjusted EBITDA for the second quarter of 2022
improved to negative $0.3 million, compared with negative
$2.0 million in the prior-year period.
Balance Sheet Highlights
As of June 30, 2022, the Company had cash
and cash equivalents of $4.3 million and working capital of
$12.3 million. During the second quarter, the Company repaid
$0.6 million under its asset-based lending (ABL) facility.
Borrowings and availability under the ABL facility were
$2.1 million and $0.7 million, respectively, as of
June 30, 2022.
During the quarter, the Company realized $1.6
million in net proceeds from sales of common shares under its ATM
program.
Conference Call and Webcast
InformationManagement will host a conference call and
simultaneous webcast at 9:00 a.m. ET on August 11, 2022, to discuss
quarterly results, business highlights and outlook. The live,
listen-only webcast will be accessible on the Company’s Investor
Relations website via
https://www.emagin.com/investors/event-webcast. A replay of the
event will be available approximately one hour after the live
event. To join the conference call participants will need to
register with this link:
https://register.vevent.com/register/BI826ea03eeac843d2bde290476fcc84a4.
Participants will receive an individualized dial-in number and PIN
after registering for the call.
About eMagin CorporationeMagin
is the leader in OLED microdisplay technology, enabling the
visualization of digital information and imagery for world-class
customers in the military, consumer, medical and industrial
markets. The Company invents, engineers, and manufactures display
technologies of the future and is the only manufacturer of OLED
displays in the United States. eMagin's Direct Patterning
Technology (dPd™) will transform the way the world consumes
information. Since 2001, eMagin's microdisplays have been used in
AR/VR, aircraft helmets, heads-up display systems, thermal scopes,
night vision goggles, future weapon systems and a variety of other
applications. For more information, please visit
www.emagin.com.
Important Cautionary Information
Regarding Forward-Looking StatementsThis 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 risk
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,
2021, 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.
ContacteMagin CorporationMark A. KochChief
Financial Officer845-838-7900investorrelations@emagin.com
Sharon Merrill Associates, Inc. Nicholas
Manganaro617-542-5300eman@investorrelations.com
eMAGIN CORPORATIONCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share data)(Unaudited)
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2022 |
|
2021 |
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,290 |
|
|
$ |
5,724 |
|
Restricted cash |
|
|
511 |
|
|
|
806 |
|
Accounts receivable, net |
|
|
5,020 |
|
|
|
4,488 |
|
Account receivable-due from
government awards |
|
|
367 |
|
|
|
292 |
|
Unbilled accounts
receivable |
|
|
1,318 |
|
|
|
1,102 |
|
Inventories |
|
|
7,661 |
|
|
|
7,632 |
|
Prepaid expenses and other
current assets |
|
|
672 |
|
|
|
691 |
|
Total current
assets |
|
|
19,839 |
|
|
|
20,735 |
|
Property, plant and equipment,
net |
|
|
37,499 |
|
|
|
30,483 |
|
Operating lease right - of -
use assets |
|
|
84 |
|
|
|
113 |
|
Intangibles and other
assets |
|
|
33 |
|
|
|
37 |
|
Total
assets |
|
$ |
57,455 |
|
|
$ |
51,368 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
1,160 |
|
|
$ |
1,348 |
|
Accrued compensation |
|
|
2,181 |
|
|
|
1,664 |
|
Revolving credit facility,
net |
|
|
2,087 |
|
|
|
1,974 |
|
Common stock warrant
liability |
|
|
2 |
|
|
|
1,374 |
|
Other accrued expenses |
|
|
391 |
|
|
|
722 |
|
Deferred revenue |
|
|
114 |
|
|
|
54 |
|
Operating lease liability -
current |
|
|
63 |
|
|
|
60 |
|
Finance lease liability -
current |
|
|
1,127 |
|
|
|
1,133 |
|
Other current liabilities |
|
|
366 |
|
|
|
608 |
|
Total current
liabilities |
|
|
7,491 |
|
|
|
8,937 |
|
Other liability - long
term |
|
|
28 |
|
|
|
28 |
|
Deferred income - government
awards - long term |
|
|
19,161 |
|
|
|
12,458 |
|
Operating lease liability -
long term |
|
|
22 |
|
|
|
54 |
|
Finance lease liability - long
term |
|
|
11,647 |
|
|
|
11,647 |
|
Total
liabilities |
|
|
38,349 |
|
|
|
33,124 |
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
Preferred stock, $0.001 par
value: authorized 10,000,000 shares: |
|
|
|
|
|
|
Series B Convertible Preferred
stock, (liquidation preference of $5,659) stated value $1,000 per
share, $0.001 par value: 10,000 shares designated and 5,659 issued
and outstanding as of June 30, 2022 and December 31, 2021. |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par
value: authorized 200,000,000 shares, issued 75,621,126 shares,
outstanding 75,459,060 shares as of June 30, 2022 and issued
72,931,490 shares, outstanding 72,769,424 shares as of December 31,
2021. |
|
|
75 |
|
|
|
72 |
|
Additional paid-in
capital |
|
|
278,372 |
|
|
|
275,936 |
|
Accumulated deficit |
|
|
(258,841 |
) |
|
|
(257,264 |
) |
Treasury stock, 162,066 shares
as of June 30, 2022 and December 31, 2021. |
|
|
(500 |
) |
|
|
(500 |
) |
Total shareholders’
equity |
|
|
19,106 |
|
|
|
18,244 |
|
Total liabilities and
shareholders’ equity |
|
$ |
57,455 |
|
|
$ |
51,368 |
|
eMAGIN CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except per share
data)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
7,026 |
|
|
$ |
5,742 |
|
|
$ |
14,053 |
|
|
$ |
11,847 |
|
Contract |
|
|
133 |
|
|
|
537 |
|
|
|
464 |
|
|
|
1,205 |
|
Total revenues,
net |
|
|
7,159 |
|
|
|
6,279 |
|
|
|
14,517 |
|
|
|
13,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
5,522 |
|
|
|
5,466 |
|
|
|
10,309 |
|
|
|
10,173 |
|
Contract |
|
|
68 |
|
|
|
242 |
|
|
|
150 |
|
|
|
600 |
|
Total cost of
revenues |
|
|
5,590 |
|
|
|
5,708 |
|
|
|
10,459 |
|
|
|
10,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
1,569 |
|
|
|
571 |
|
|
|
4,058 |
|
|
|
2,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,457 |
|
|
|
1,788 |
|
|
|
2,941 |
|
|
|
3,630 |
|
Selling, general and
administrative |
|
|
1,904 |
|
|
|
1,690 |
|
|
|
4,074 |
|
|
|
3,514 |
|
Total operating
expenses |
|
|
3,361 |
|
|
|
3,478 |
|
|
|
7,015 |
|
|
|
7,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(1,792 |
) |
|
|
(2,907 |
) |
|
|
(2,957 |
) |
|
|
(4,865 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of common
stock warrant liability |
|
|
226 |
|
|
|
2,642 |
|
|
|
1,372 |
|
|
|
(4,566 |
) |
Interest expense, net |
|
|
(225 |
) |
|
|
(205 |
) |
|
|
(439 |
) |
|
|
(415 |
) |
Gain on forgiveness of
debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,963 |
|
Other income, net |
|
|
351 |
|
|
|
192 |
|
|
|
447 |
|
|
|
227 |
|
Total other income
(expense) |
|
|
352 |
|
|
|
2,629 |
|
|
|
1,380 |
|
|
|
(2,791 |
) |
Loss before provision
for income taxes |
|
|
(1,440 |
) |
|
|
(278 |
) |
|
|
(1,577 |
) |
|
|
(7,656 |
) |
Income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss allocated to
common shares |
|
$ |
(1,440 |
) |
|
$ |
(278 |
) |
|
$ |
(1,577 |
) |
|
$ |
(7,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and
diluted |
|
$ |
(0.02 |
) |
|
$ |
— |
|
|
$ |
(0.02 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
73,895 |
|
|
|
72,193 |
|
|
|
73,368 |
|
|
|
71,238 |
|
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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net loss |
|
$ |
(1,440 |
) |
|
$ |
(278 |
) |
|
$ |
(1,577 |
) |
|
$ |
(7,656 |
) |
Non-cash compensation |
|
|
214 |
|
|
|
37 |
|
|
|
379 |
|
|
|
50 |
|
Change in fair value of common stock warrant liability |
|
|
(226 |
) |
|
|
(2,642 |
) |
|
|
(1,372 |
) |
|
|
4,566 |
|
Depreciation and intangibles amortization expense |
|
|
949 |
|
|
|
694 |
|
|
|
1,671 |
|
|
|
1,427 |
|
Interest expense |
|
|
225 |
|
|
|
205 |
|
|
|
439 |
|
|
|
415 |
|
Adjusted EBITDA |
|
$ |
(278 |
) |
|
$ |
(1,984 |
) |
|
$ |
(460 |
) |
|
$ |
(1,198 |
) |
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