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 quarter ended June 30,
2021.
“We continue to make steady progress in developing our Direct
Patterning Display (dPd™) technology and remain on schedule to
produce disruptive and industry-leading, high-brightness,
high-resolution, and full-color prototypes this year,” said eMagin
CEO Andrew G. Sculley. “We believe our improvements in the OLED
architecture and dPd processes will meet the performance goals of
our tier-one OEM customers using the high-resolution backplanes we
have developed for them. As a further testament to our
technological leadership, several new patents were issued and
allowed in the second quarter, which are centered on improvements
to the dPd process for improved yield and device performance.
“In addition to improvements in dPd materials and processes, we
have advanced the state of the art with our XLE technology, which
utilizes a white OLED emitter with color filters. This technology
provides customers with a substantial gain in luminance and/or
power savings for their applications. We have already closed a
major design win with a military customer to use these displays and
are currently ramping production. We will enhance the technology
over the next year to provide even greater luminance improvement to
our customers, a critical need for the military, medical and
commercial AR/VR solutions of tomorrow. We believe our parallel
strategy of disrupting the industry with direct patterning combined
with improvements in the color filter roadmap will enable us to
continue to lead the high brightness at lower power roadmap and
drive the AR/VR applications of the future.
“In the second quarter, we continued to see uptake of our
technology into new applications, including new head-mounted
display programs, undersea connected-diver products, and new
thermal weapon scopes. The thermal scope business continued to show
a strong recovery in post-pandemic order growth. We believe that as
XLE and dPd mature, we will accelerate our growth of new technology
insertions.
“In terms of revenue, our second-quarter results were mixed,
with continued display revenue growth in our ENVG-B program, and
increased shipments to medical, veterinary and hunting scope
customers. However, our year-over-year decrease in total revenue
reflected the impact of production issues and unexpected
manufacturing tool downtime in the quarter. As we continue to bring
on new equipment as part of our $39.1 million Title III and IBAS
programs, we expect to resolve these issues. Our contract revenue
decreased year over year mainly due to the timing of certain
development work for a tier-one consumer customer. Overall, as of
June 30, 2021, our sales backlog of open orders was $10.3 million,
which grew to $16.0 million by July 31, 2021.”
Second Quarter Results
Total revenues for the second quarter of 2021 were
$6.3 million, compared with $7.7 million reported in the
prior-year period.
Total revenue consists of both product revenue and contract
revenue. Product revenues for the second quarter of 2021 were
$5.7 million, a decrease of $0.5 million from product
revenues of $6.3 million reported in the prior-year period.
The year-over-year decrease in display revenue primarily resulted
from unexpected downtime experienced with manufacturing equipment,
which delayed certain display shipments into the third quarter. The
decline was partially offset by higher sales to military, medical
and veterinary customers. Contract revenues were $0.5 million,
compared with $1.4 million reported in the prior year, reflecting
the timing of phases and milestones associated with the contract of
a tier-one consumer company. eMagin is continuing to work on a
proof of concept and anticipates ongoing contract revenue with this
customer.
Total gross margin for the second quarter was 9% on gross profit
of $0.6 million, compared with a gross margin of 26% on gross
profit of $2.0 million in the prior-year period. The decrease
in gross margin reflects decreased shipments of displays in the
three months ended June 30, 2021, combined with the impact of
lower manufacturing volumes and decreases in period costs
capitalized into inventory due to equipment issues that occurred
during the second quarter of 2021.
Operating expenses for the second quarter of 2021, including
R&D expenses, were $3.5 million, compared with
$3.3 million in the prior-year period. Operating expenses as a
percentage of sales were 55% in the second quarter of 2021 compared
with 43% in the prior-year period. The year-over-year increase in
R&D reflects materials and other overhead costs related to
development and qualification of the Company’s higher brightness
XLE and dPd displays, and a decrease in costs allocated to
contracts reflecting lower contract revenues in the 2021
period.
Operating loss for the second quarter of 2021 was
$2.9 million, compared with an operating loss of
$1.3 million in the prior-year period, reflecting the
decreased gross profit and increased investments in R&D in the
current year.
Net loss for the second quarter of 2021 was $0.3 million, or
$0.00 per share, compared with a loss of $2.8 million, or $0.05 per
share, in the prior year period. Net loss for the current period
includes a $2.6 million non-cash profit related to the change in
fair value of a warrant liability. Excluding the impact of the
change in the fair value of the warrant liability for both periods,
net loss for the second quarter of 2021 was $2.9 million, or $0.04
per share, versus a net loss of $1.3 million, or $0.02 per share in
the prior-year period.
Adjusted EBITDA for the second quarter of 2021 was negative
$2.0 million, compared with negative $0.8 million in the
prior-year period.
Balance Sheet Highlights
As of June 30, 2021, the Company had cash and cash
equivalents of $10.6 million and working capital of
$9.0 million. During the second quarter, the Company borrowed
$0.2 million under its asset-based lending (ABL) facility and
realized proceeds from the exercise of stock options and warrants
of $1.0 million. Borrowings and availability under the ABL facility
were $0.4 million and $1.9 million, respectively, as of
June 30, 2021.
During the quarter eMagin took delivery of two additional
production tools, which will improve the reliability of our
processes and improve yields. We continue to make down payments
with vendors that are building equipment requested under the
Company’s government capital equipment funding awards.
Measurement of Inventory
As previously announced, in recognition of a shift in product
demand toward larger, more complex displays yielding fewer die per
wafer, the Company determined that measuring output by the number
of displays produced per quarter is not an accurate measure of
production capacity, and that measuring output based on the number
of wafers produced per quarter is a more appropriate measure of
production volume. As the number of wafers produced per quarter has
remained consistent for the past two years, the Company concluded
it was no longer in a period of abnormal production that would
require limiting the amount of overheads allocated to inventory.
The Company believes that fully allocating the overhead to work in
process and finished goods inventories results in more accurate
inventory valuation and computation of costs of goods sold, in
addition to providing better information for making pricing
decisions.
Under this change in estimate for allocating overhead, which was
adopted in the first quarter of 2021, overhead is now fully
allocated to products, resulting in an increase in standard costs
and decrease inventory values. In the second quarter of 2021, the
impact of this change was a decrease of approximately $0.2 million
in the carrying value of the Company’s work in process and finished
goods inventory, with a corresponding decrease in product cost of
goods sold.
Chief Financial OfficerIn July, eMagin’s board
of directors formally named Mark Koch as chief financial officer.
Mr. Koch had served as the Company’s acting CFO since January of
2020.Conference Call and Webcast
InformationManagement will host a conference call and
simultaneous webcast at 9 a.m. ET on Thursday, August 12 to discuss
eMagin’s quarterly results, business highlights and outlook. To
join the live listen-only webcast, please visit the Company’s
Investor Relations website at
https://www.emagin.com/investors/events. To join the conference
call, dial 1-844-308-1725 in the United States, or 1-929-517-0939
internationally. The entry code is 2481588. Participants are
encouraged to join at least 10 minutes before the start of the
call. An archive of the webcast will be available approximately one
hour after the live call.
About eMagin CorporationeMagin is 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. 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, 2020, 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 ManganaroVice
President617-542-5300eman@investorrelations.com
eMAGIN CORPORATIONCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share data)(Unaudited)
|
June 30, |
|
December 31, |
|
2021 |
|
2020 |
ASSETS |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
10,568 |
|
|
$ |
8,315 |
|
Restricted cash |
|
1,491 |
|
|
|
2,111 |
|
Accounts receivable, net |
|
3,117 |
|
|
|
5,314 |
|
Account receivable-due from
government awards |
|
77 |
|
|
|
1,013 |
|
Unbilled accounts
receivable |
|
783 |
|
|
|
253 |
|
Inventories |
|
8,133 |
|
|
|
8,379 |
|
Prepaid expenses and other
current assets |
|
795 |
|
|
|
943 |
|
Total current
assets |
|
24,964 |
|
|
|
26,328 |
|
Property, plant and equipment,
net |
|
25,517 |
|
|
|
21,132 |
|
Operating lease right - of -
use assets |
|
21 |
|
|
|
50 |
|
Intangibles and other
assets |
|
121 |
|
|
|
126 |
|
Total
assets |
$ |
50,623 |
|
|
$ |
47,636 |
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts payable |
$ |
1,425 |
|
|
$ |
1,206 |
|
Accrued compensation |
|
2,346 |
|
|
|
1,628 |
|
Paycheck Protection Program
loan - current |
|
— |
|
|
|
982 |
|
Revolving credit facility,
net |
|
405 |
|
|
|
1,875 |
|
Common stock warrant
liability |
|
9,188 |
|
|
|
4,622 |
|
Other accrued expenses |
|
559 |
|
|
|
1,693 |
|
Deferred revenue |
|
86 |
|
|
|
425 |
|
Operating lease liability -
current |
|
21 |
|
|
|
51 |
|
Finance lease liability -
current |
|
1,129 |
|
|
|
1,027 |
|
Other current liabilities |
|
825 |
|
|
|
757 |
|
Total current
liabilities |
|
15,984 |
|
|
|
14,266 |
|
Other liability - long
term |
|
42 |
|
|
|
56 |
|
Paycheck Protection Program
loan - long term |
|
— |
|
|
|
982 |
|
Deferred Income - government
awards - long term |
|
7,935 |
|
|
|
4,309 |
|
Finance lease liability - long
term |
|
11,631 |
|
|
|
11,783 |
|
Total
liabilities |
|
35,592 |
|
|
|
31,396 |
|
|
|
|
|
|
|
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 June 30, 2021 and December 31, 2020. |
|
— |
|
|
|
— |
|
Common stock, $.001 par value:
authorized 200,000,000 shares, issued 72,665,730 shares,
outstanding 72,503,664 shares as of June 30, 2021 and issued
68,890,819 shares, outstanding 68,728,753 shares as of December 31,
2020. |
|
72 |
|
|
|
69 |
|
Additional paid-in
capital |
|
275,173 |
|
|
|
268,729 |
|
Accumulated deficit |
|
(259,714 |
) |
|
|
(252,058 |
) |
Treasury stock, 162,066 shares
as of June 30, 2021 and December 31, 2020. |
|
(500 |
) |
|
|
(500 |
) |
Total shareholders’
equity |
|
15,031 |
|
|
|
16,240 |
|
Total liabilities and
shareholders’ equity |
$ |
50,623 |
|
|
$ |
47,636 |
|
|
|
|
|
|
|
|
|
eMAGIN CORPORATIONCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
$ |
5,742 |
|
|
$ |
6,260 |
|
|
$ |
11,847 |
|
|
$ |
11,894 |
|
Contract |
|
|
537 |
|
|
|
1,440 |
|
|
|
1,205 |
|
|
|
2,537 |
|
Total revenues,
net |
|
|
6,279 |
|
|
|
7,700 |
|
|
|
13,052 |
|
|
|
14,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
5,466 |
|
|
|
4,978 |
|
|
|
10,173 |
|
|
|
9,768 |
|
Contract |
|
|
242 |
|
|
|
746 |
|
|
|
600 |
|
|
|
1,253 |
|
Total cost of
revenues |
|
|
5,708 |
|
|
|
5,724 |
|
|
|
10,773 |
|
|
|
11,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
571 |
|
|
|
1,976 |
|
|
|
2,279 |
|
|
|
3,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,788 |
|
|
|
1,599 |
|
|
|
3,630 |
|
|
|
2,579 |
|
Selling, general and
administrative |
|
|
1,690 |
|
|
|
1,712 |
|
|
|
3,514 |
|
|
|
3,510 |
|
Total operating
expenses |
|
|
3,478 |
|
|
|
3,311 |
|
|
|
7,144 |
|
|
|
6,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(2,907 |
) |
|
|
(1,335 |
) |
|
|
(4,865 |
) |
|
|
(2,679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of common
stock warrant liability |
|
|
2,642 |
|
|
|
(1,481 |
) |
|
|
(4,566 |
) |
|
|
(1,501 |
) |
Interest expense, net |
|
|
(205 |
) |
|
|
(18 |
) |
|
|
(415 |
) |
|
|
(35 |
) |
Gain on forgiveness of
debt |
|
|
— |
|
|
|
— |
|
|
|
1,963 |
|
|
|
— |
|
Other income, net |
|
|
192 |
|
|
|
3 |
|
|
|
227 |
|
|
|
15 |
|
Total other
(expense) |
|
|
2,629 |
|
|
|
(1,496 |
) |
|
|
(2,791 |
) |
|
|
(1,521 |
) |
Loss before provision
for income taxes |
|
|
(278 |
) |
|
|
(2,831 |
) |
|
|
(7,656 |
) |
|
|
(4,200 |
) |
Income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
$ |
(278 |
) |
|
$ |
(2,831 |
) |
|
$ |
(7,656 |
) |
|
$ |
(4,200 |
) |
Less net income allocated to
participating securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss allocated to
common shares |
|
$ |
(278 |
) |
|
$ |
(2,831 |
) |
|
$ |
(7,656 |
) |
|
$ |
(4,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and
diluted |
|
$ |
— |
|
|
$ |
(0.05 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
72,193,205 |
|
|
|
56,754,867 |
|
|
|
71,238,060 |
|
|
|
54,196,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(278 |
) |
|
$ |
(2,831 |
) |
|
$ |
(7,656 |
) |
|
$ |
(4,200 |
) |
Non-cash compensation |
|
|
37 |
|
|
|
44 |
|
|
|
50 |
|
|
|
87 |
|
Change in fair value of common
stock warrant liability |
|
|
(2,642 |
) |
|
|
1,481 |
|
|
|
4,566 |
|
|
|
1,501 |
|
Depreciation and intangibles
amortization expense |
|
|
694 |
|
|
|
479 |
|
|
|
1,427 |
|
|
|
959 |
|
Interest expense |
|
|
205 |
|
|
|
18 |
|
|
|
415 |
|
|
|
35 |
|
Adjusted EBITDA |
|
$ |
(1,984 |
) |
|
$ |
(809 |
) |
|
$ |
(1,198 |
) |
|
$ |
(1,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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