- 34% Increase in Quarterly Revenue Over
2017; Improvement in Product and Contract Gross Margins -
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, 2018.
“Our revenues of $7.1 million for the quarter, an increase of
34% over the prior year quarter, underscore the resurgence we have
seen in our military and commercial businesses, both in the U.S.
and abroad. Demand for our OLED microdisplays globally remains
strong as demonstrated by the growth in orders as well as the
requested acceleration of existing orders among many of our
customers,” said Andrew Sculley, President and Chief Executive
Officer. “During the quarter, we sold to 75 customers, including
three new customers, and supplied displays for 53 new customer
applications. We are supporting many programs that the U.S.
military considers to be of high importance, including applications
for night vision, thermal weapon sights, see-through HMD systems
for mounted and dismounted missions as well as aviation helmet
upgrades and prototypes for next generation helmet systems.”
“From a production perspective, our efforts led to higher yields
which in turn contributed to a higher gross profit margin. In
addition to the investments we have made in engineering resources,
equipment and manufacturing processes, we received government
funding in the second quarter for OLED display production and yield
improvement,” continued Mr. Sculley. “As a result of these efforts,
we are experiencing better delivery times and improving product
quality, validated by the favorable reports we received from
multiple customers who have conducted quality and service
audits.”
“On the commercial front, as we continue our discussions with
consumer OEM’s about potential licensing agreements, we are moving
forward on the design and development work for next generation
AR/VR microdisplays. We held a final design review with a consumer
customer in July for a very high resolution VR microdisplay. During
the quarter, we also completed work on a 120Hz-capable, compact
interface for our 2k x 2k display which demonstrates the highest
brightness and resolution in the market today. We continue to
believe that our direct patterning (dPdTM) technology will be key
to the acceptance of our displays in the consumer AR/VR market with
consumer electronics companies and advancing our discussions with
potential mass production and licensing partners.”
“Our backlog at the end of June was $10.3 million, an increase
of $0.5 million from the end of 2017 despite our increase in sales.
While our backlog may vary based on the timing of new orders and
scheduled shipment dates, we are encouraged by the strong demand
for our OLED microdisplays and expect our gross margins to expand
as our volumes increase and as we continue to enhance our
manufacturing processes and achieve additional yield improvements,”
concluded Mr. Sculley.
Business and Product Highlights
- We are progressing with the OLED
upgrade to a production helmet for a multi-service, multi-country,
fixed wing aircraft program. Our OLED displays will be replacing
the LCD displays currently employed in these helmets. Displays
required for Initial Operational Capability will begin deliveries
in the fourth quarter. All phases of this program are on schedule
and continue to progress toward Limited Rate Initial Production in
2019.
- We continue to make progress towards
improving our dPd technology and we recently achieved a maximum
brightness of more than 7,500 nits in full color, surpassing our
previous brightness of 5,300 nits.
- We completed the design review phase
for a next generation AR/VR microdisplay and expect that the first
prototype, which will use our dPd technology, will be ready in
early 2019.
- We received an order totaling $398,000
in support of the Javelin Missile program Command Launch Unit
(CLU). The customer has scheduled a follow-on order worth over
$795,000 for the fourth quarter.
- We supported several prime contractors
with display deliveries for pre-production units for the US Army
Enhanced Night Vision Goggle – Binocular (ENVG-B) program. This
program is expected to shift to production in early 2019 with an
overall acquisition objective of 190,000 systems over a 7-year
period.
- We continued to support a major US Army
helicopter helmet upgrade program to retrofit high brightness
microdisplays into the current fielded helmet. We delivered final
displays for test helmets, with ground and flight tests scheduled
for the third quarter.
- We received a $245,000 contract from
the US Army for an OLED display production and yield improvement
project. Three additional projects totaling $585,000 were awarded
in July for total awards for 2018 of $830,000.
Discontinuation of Consumer Night Vision Products
The Company has decided to discontinue its two consumer night
vision products, BlazeSpark and BlazeTorch. It was determined that
the engineering, marketing and managerial resources needed to
advance these products could be better utilized focusing on the
Company’s core business. As a result, the Company recorded a
write-down of $2.7 million, or $0.06 per share, in the second
quarter related to consumer night vision products inventory and
production tooling. This impairment charge is reflected in the
Company’s cost of revenues for the quarter.
Quarter Results
Revenues for the second quarter of 2018 grew 34% to $7.1
million, an increase of $1.8 million from revenues of $5.3 million
reported a year ago and up sequentially by $0.2 million from the
first quarter of 2018.
Product revenues increased 34% to $6.2 million compared to $4.7
million in the second quarter of 2017. The increase in product
revenue was due to growth from U.S. and foreign military programs
and to a larger proportion of sales of displays with higher average
unit prices. Contract revenues totaled $0.9 million in the second
quarter of 2018 compared to $0.6 million in the same quarter of
last year. The increase in contract revenue was primarily due to
acceleration of consumer development work, the addition of several
military contracts and work performed in connection with the
receipt of U.S. Government funding for yield improvement
projects.
Overall gross margin for the second quarter included the impact
of the one-time write-off of the consumer night vision products
inventory. Excluding the impairment charge of $2.7 million, the
gross margin was 40% compared to 24% in the prior year period. The
increase in gross margin excluding the impairment charge was
primarily due to increased volumes and product revenue, higher
average selling prices, and favorable contract revenue gross margin
in the 2018 period.
Operating expenses for the second quarter of 2018, including
R&D expenses, were $3.8 million compared to $3.3 million in the
second quarter of 2017. Operating expenses as a percentage of sales
declined to 53% in the second quarter compared to 63% a year ago.
The increase in operating expenses was due to higher R&D
expenses associated with the ongoing development of the Company’s
dPd technology as well as costs incurred to improve manufacturing
processes. SG&A expenses declined to 29% of net revenue in the
second quarter, or $2.0 million, reflecting a more normalized run
rate following the higher level of expenses incurred in the first
quarter of 2018 associated with the negotiation of consumer
initiatives.
Operating loss for the second quarter was $3.6 million inclusive
of the $2.7 million write-down of the consumer night vision
products inventory, versus an operating loss of $2.1 million in the
second quarter of last year. Excluding the impairment charge, the
operating loss was $955 thousand.
Other expense for the second quarter was $1.4 million and was
primarily related to the non-cash expense related to the fair value
of warrants outstanding. Net loss for the second quarter of 2018,
inclusive of the $2.7 million for the night vision products
inventory impairment charge and $1.4 million for the warrant
liability revaluation, was $5.1 million, or $0.11 per diluted
share, compared to a net loss of $2.3 million, or $0.07 per diluted
share, in the second quarter of 2017. The adjusted net loss for the
second quarter of 2018 excluding the impairment charge and the
warrant liability revaluation was $1.0 million, or $0.02 per
diluted share.
Non-GAAP Adjusted EBITDA for the quarter was negative $2.9
million. Excluding the night vision products inventory impairment
charge of $2.7 million, Adjusted EBITDA for the quarter would have
been negative $306 thousand in comparison to Adjusted EBITDA of
negative $1.5 million in the prior year period.
As of June 30, 2018, the Company had cash and cash equivalents
of $8.7 million, working capital of $11.3 million, no outstanding
borrowings and borrowing availability under the ABL facility of
$3.7 million.
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 9, 2018. 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, 2017, and Report on Form 10-Q for the period
ended June 30, 2018.
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) June 30, December 31,
2018 2017 (unaudited) ASSETS Current
assets: Cash and cash equivalents $ 8,663 $ 3,526 Accounts
receivable, net 3,481 4,528 Unbilled accounts receivable 947 406
Inventories 7,814 8,640 Prepaid expenses and other current assets
715 1,328
Total current assets 21,620
18,428 Equipment, furniture and leasehold improvements, net 8,403
8,553 Intangibles and other assets 336 326
Total assets $ 30,359 $ 27,307
LIABILITIES
AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 2,135 $ 1,714 Accrued compensation 1,658 1,557 Revolving
credit facility, net — 3,808 Common stock warrant liability 4,614
784 Other accrued expenses 1,490 719 Deferred revenue — 765 Other
current liabilities 408 469
Total current
liabilities 10,305 9,816
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 June 30,
2018 and December 31, 2017 — — Common stock, $.001 par value:
authorized 200,000,000 shares, issued 45,273,339 shares,
outstanding 45,111,273 shares as of June 30, 2018 and issued
35,182,589 shares, outstanding 35,020,523 shares as of December 31,
2017 45 35 Additional paid-in capital 254,425 244,726 Accumulated
deficit (233,916) (226,770) Treasury stock, 162,066 shares as of
June 30, 2018 and December 31, 2017 (500)
(500)
Total shareholders’ equity 20,054
17,491
Total liabilities and shareholders’ equity $
30,359 $ 27,307
EMAGIN
CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except share and per share data) (unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2018 2017 2018
2017 Revenues: Product $ 6,216 $ 4,655 $
12,079 $ 9,036 Contract 850 605 1,854
2,293
Total revenues, net 7,066 5,260
13,933 11,329
Cost of revenues: Product
3,971 3,658 8,330 7,116 Contract 299 353 827 1,146 Impairment of
Consumer Night Vision inventory 2,690 — 2,690
—
Total cost of revenues 6,960 4,011
11,847 8,262
Gross profit 106
1,249 2,086 3,067
Operating
expenses: Research and development 1,720 1,177 3,351
2,511 Selling, general and administrative 2,031 2,153
4,943 4,616
Total operating expenses 3,751
3,330 8,294 7,127
Loss from
operations (3,645) (2,081) (6,208) (4,060)
Other
income (expense): Change in fair value of common stock warrant
liability (1,427) — (924) — Interest expense, net (30) (188) (72)
(223) Other income, net 37 (1) 58 14
Total other expense (1,420) (189) (938)
(209)
Loss before provision for income taxes (5,065)
(2,270) (7,146) (4,269) (Provision) benefit for income taxes
— — — —
Net loss $ (5,065) $
(2,270) $ (7,146) $ (4,269) Loss per share, basic $ (0.11) $
(0.07) $ (0.16) $ (0.13) Loss per share, diluted $ (0.11) $ (0.07)
$ (0.16) $ (0.13)
Weighted average number of shares
outstanding: Basic 45,111,273 33,019,478
43,691,117 32,320,527 Diluted
45,111,273 33,019,478 43,691,117 32,320,527
Non-GAAP
Information
Three Months Ended Six Months Ended June
30, June 30, 2018 2017 2018
2017 Net income (loss) $ (5,065) $ (2,270) $ (7,146)
$ (4,269) Non-cash compensation 130 116 335 330 Change in fair
value of common stock warrant liability 1,427 - 924 - Depreciation
and intangibles amortization expense 482 495 950 981 Interest
expense 30 188 72 223 Provision for income taxes - - - - Adjusted
EBITDA $ (2,996) $ (1,471) $ (4,865) $ (2,735)
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version on businesswire.com: https://www.businesswire.com/news/home/20180809005127/en/
eMagin CorporationJeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorAffinity Growth AdvisorsBetsy Brod,
212-661-2231betsy.brod@affinitygrowth.com
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