- Continued Revenue Strength and Yield
Improvement -
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 third quarter ended September 30, 2018.
“We had another strong quarter supported by growth in our
military and commercial business as we deepened our penetration
both in the U.S. and abroad. As a result of efforts to expand our
revenue base, we are seeing significant interest globally in our
technology with 57% of our revenues this quarter outside the U.S.
Total revenues in the third quarter were $6.9 million, a 60%
year-over-year increase, with sales to 66 customers. Our production
yields continued to improve, driving up our product and overall
gross margins to 35%,” said Andrew Sculley, Chief Executive
Officer.
“On the military side of the business, our momentum is
continuing as evidenced by several new program wins, reinforcing
the value of our cutting-edge technology. In addition, we continue
to successfully execute on a number of existing key domestic and
foreign military programs. Earlier this year we participated in the
DefExpo18 show to capitalize on India’s rapid market expansion and
I am pleased to report that we now have five new Indian
customers.
“On the commercial front, we are seeing expanded interest from
established medical device companies to incorporate our
microdisplays into their products. These applications include
viewing devices for cataract surgery and for transmitting images to
MRI patients. We also received orders in the quarter from an
existing medical device customer to upgrade their equipment as well
as from a new customer who will be incorporating our displays into
equipment used for a variety of surgical applications.
During the quarter, we achieved design approval from one of our
Tier 1 consumer electronics partners. This design meets the wide
field of view, no screen door effect and high brightness afforded
by our patented Direct Patterning (“dPd”) technology that our
partner requires. Our foundry partner for consumer applications
will be manufacturing wafers for the display prototypes.
“Overall, our discussions with consumer electronics partners are
ongoing and productive as we advance our cutting-edge product to
meet the demanding performance requirements for this market. We are
in dialogue with potential mass production and licensing partners
to ensure that we will have manufacturing capacity sufficient for
the consumer electronics end market. In concert with our consumer
activities, we are actively working on improvements to our dPd
technology and upgrading our custom dPd production equipment. We
anticipate that these upgrades will increase product yields, lower
unit costs, and significantly extend display lifetime.
“Our backlog at the end of September for the next 12 months was
$10.9 million, reflective of the strong bookings we have had
throughout this year, representing an increase of $1.3 million from
2017 year-end. While our backlog can vary depending on the timing
of new orders as well as shipment dates, demand has remained very
strong and we are encouraged by the ongoing level of interest in
our OLED microdisplays,” concluded Mr. Sculley.
Business and Product Highlights
- We received a $780 thousand order from
an existing medical device customer upgrading their product with
our high brightness XLT technology. These displays are scheduled
for delivery over the next twelve months with anticipated follow-on
orders.
- We continued to expand our presence in
the medical field with the second order from a new customer that is
developing/prototyping a non-invasive surgical application device
using our displays. This customer anticipates bringing these
systems to market in early 2019.
- 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 are scheduled to begin
shipping in the fourth quarter as we progress towards Limited Rate
Initial Production (LRIP).
- We received an order totaling
$400 thousand in support of the Javelin Missile program
Command Launch Unit (CLU). A follow-on order worth
$560 thousand is anticipated in the fourth quarter.
Separately, we received our third order for displays for the
Javelin trainers.
- We continue to ship on the U.S. Army
Enhanced Night Vision Goggle (ENVG-III) program and are providing
additional engineering support for the Binocular (ENVG-B) program.
This program is anticipated to commence production in 2019 with an
overall acquisition objective by the U.S. Army of 190,000
systems.
- We delivered final displays to support
a major U.S. Army helicopter helmet upgrade program to retrofit
high brightness microdisplays into the current fielded helmet in
preparation for scheduled ground and flight tests.
- We received a follow-on contract for
the Family of Weapon Sight – Individual (FWS-I) program following
the delivery of displays for the LRIP phase of the program late
last year. We are currently in the process of finalizing another
follow-on contract for the FWS-I.
- In September we signed a long-term
agreement with a major French Defense Contractor to supply all
their microdisplays for their weapons products and helmets.
- We delivered the first 2K x 2K compact
board interface to an aviation prime for the development of a next
generation helmet prototype.
- We received three new awards in July
from the U.S. Army totaling $545 thousand to improve OLED
production yields and expand capacity. Total awards to date under
this project are $830 thousand and having are an impact on our
production performance.
Quarter Results
Revenues for the third quarter of 2018 grew 60% to $6.9 million,
an increase of $2.6 million from revenues of $4.3 million reported
a year ago. Revenue for the first nine months of 2018 increased 33%
over the year ago period to $20.8 million.
Product revenues increased in the quarter by 51% to $6.0 million
compared to $4.0 million in the third 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 $0.8 million
in the third quarter of 2018 compared to $0.3 million in the same
quarter of last year. The increase in contract revenue was
primarily due to acceleration of consumer development work,
expanded activity for a major aviation program and work performed
in connection with the receipt of U.S. Government funding for yield
improvement initiatives.
Overall gross margin for the third quarter was 35% compared to
7% in the prior year period. The increase in gross margin was
primarily due to increased volumes and higher yields, resulting in
lower costs per displays, as well as the addition of several
military related contracts at favorable margins. The 2017 third
quarter was impacted by production issues which were subsequently
resolved.
Operating expenses for the third quarter of 2018, including
R&D expenses, were $3.6 million compared to $3.2 million in the
third quarter of 2017. Operating expenses as a percentage of sales
declined to 53% in the third quarter compared to 76% 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 were $2.0 million in the third
quarter, flat with both the year ago period and the second quarter
of 2018. As a percent of revenue, SG&A declined to 30% of net
revenue in the third quarter.
Operating loss for the third quarter was $1.3 million versus an
operating loss of $3.0 million in the third quarter of last
year.
Other income for the third quarter was $1.3 million and was
primarily related to the non-cash change in the fair value of
warrants outstanding.
Net income for the third quarter of 2018, inclusive of the $1.3
million for the warrant liability revaluation, was $63,000, or
break-even, compared to a net loss of $3.0 million, or $0.09 per
diluted share, in the third quarter of 2017.
Non-GAAP Adjusted EBITDA for the quarter was negative $0.6
million compared to negative $5.5 million in the prior year
period.
As of September 30, 2018, the Company had cash and cash
equivalents of $6.2 million, working capital of $11.5 million, no
outstanding borrowings and borrowing availability under our ABL
facility of $4.9 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 December 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 Quarterly 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)
(unaudited)
September 30, December 31, 2018
2017
ASSETS Current assets: Cash and cash equivalents $
6,190 $ 3,526 Accounts receivable, net 4,381 4,528 Unbilled
accounts receivable 364 406 Inventories 8,719 8,640 Prepaid
expenses and other current assets 869 1,328
Total current assets 20,523 18,428 Equipment,
furniture and leasehold improvements, net 8,567 8,553 Intangibles
and other assets 314 326
Total
assets $ 29,404 $ 27,307
LIABILITIES
AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 1,996 $ 1,714 Accrued compensation 1,436 1,557 Revolving
credit facility, net — 3,808 Common stock warrant liability 3,303
784 Other accrued expenses 1,909 719 Deferred revenue 41 765 Other
current liabilities 389 469
Total
current liabilities 9,074 9,816
Commitments and contingencies (Note 9)
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 September 30, 2018 and December 31, 2017 — —
Common stock, $.001 par value: authorized 200,000,000 shares,
issued 45,323,339 shares, outstanding 45,161,273 shares as of
September 30, 2018 and issued 35,182,589 shares, outstanding
35,020,523 shares as of December 31, 2017 45 35 Additional paid-in
capital 254,638 244,726 Accumulated deficit (233,853 ) (226,770 )
Treasury stock, 162,066 shares as of September 30, 2018 and
December 31, 2017 (500 ) (500 )
Total
shareholders’ equity 20,330 17,491
Total liabilities and shareholders’ equity $ 29,404 $
27,307
EMAGIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except share and per share data) (unaudited)
Three Months Ended Nine Months
Ended September 30, September 30, 2018
2017 2018 2017 Revenues: Product
$ 6,048 $ 4,014 $ 18,127 $ 13,050 Contract 819
266 2,673 2,559
Total
revenues, net 6,867 4,280
20,800 15,609
Cost of revenues:
Product 3,926 3,802 12,256 10,918 Contract 562 200 1,389
1,346 Impairment of Consumer Night Vision inventory —
— 2,690 —
Total cost
of revenues 4,488 4,002
16,335 12,264
Gross profit
2,379 278 4,465
3,345
Operating expenses: Research and
development 1,590 1,271 4,941 3,782 Selling, general and
administrative 2,039 1,970 6,982
6,586
Total operating expenses
3,629 3,241 11,923 10,368
Loss from operations (1,250 ) (2,963 ) (7,458
) (7,023 )
Other income (expense): Change in fair
value of common stock warrant liability 1,311 — 387 — Interest
expense, net 1 (27 ) (12 ) (249 ) Other income, net 1
(2 ) — 11
Total other income
(expense) 1,313 (29 ) 375
(238 )
Income (loss) before provision for income
taxes 63 (2,992 ) (7,083 ) (7,261 ) (Provision) benefit for
income taxes — — —
—
Net income (loss) $ 63 $ (2,992 ) $
(7,083 ) $ (7,261 ) Less net income allocated to participating
securities 9 — — —
Net income (loss) allocated to common shares $ 54 $
(2,992 ) $ (7,083 ) $ (7,261 ) Loss per share, basic
$ 0.00 $ (0.09 ) $ (0.16 ) $ (0.22 ) Loss per share, diluted
$ 0.00 $ (0.09 ) $ (0.16 ) $ (0.22 )
Weighted
average number of shares outstanding: Basic
45,149,717 34,972,589 44,182,379
33,214,262 Diluted 45,265,370
34,972,589 44,182,379 33,214,262
Non-GAAP
Information
Three Months Ended Nine Months Ended
September 30, September 30, 2018 2017
2018 2017 Net income (loss) $ 63 $ (2,992 ) $
(7,083 ) $ (7,261 ) Non-cash compensation 177 190 512 520 Change in
fair value of common stock warrant liability (1,311 ) — (387 ) —
Depreciation and intangibles amortization expense 470 395 1,420
1,376 Interest expense 34 26 106 249 Provision for income taxes
— — — —
Adjusted EBITDA $ (567 ) $ (2,381 ) $ (5,432 ) $ (5,116 )
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version on businesswire.com: https://www.businesswire.com/news/home/20181108005140/en/
eMagin CorporationJeffrey Lucas, President and Chief Financial
Officer845-838-7931jlucas@emagin.comorAffinity Growth AdvisorsBetsy
Brod212-661-2231betsy.brod@affinitygrowth.com
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