- Continued Progress on Key Initiatives
-
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 first quarter ended March 31, 2019.
“We are seeing growing demand for our products, particularly
with U.S. military and aviation programs and with new and existing
international customers,” said Andrew Sculley, Chief Executive
Officer. “During the first quarter of fiscal 2019, we made progress
towards our goals of securing new U.S. military programs and
broadening our presence in foreign military applications and in
industrial and medical markets. We continue to participate in
government discussions on microdisplay development for future
defense aviation/mounted/dismounted programs and to position our
displays as a key component of the future Soldier System 2030
technology suite for enhanced soldier performance and accelerated
decision making. In the first quarter alone, we sold to over 70
customers and supplied products for over 20 new programs. Our
backlog of products scheduled for delivery through March 31,
2020, continues to be solid at $10.7 million, an increase of
approximately $100 thousand over the backlog of $10.6 million
at December 31, 2018.
“We continue to work towards supplementing our display sales by
providing our customers a more complete solution. We have developed
a prism optic which we shipped during the quarter to a military
customer for evaluation. We also developed a fiber optic taper that
will enable our displays to be incorporated into products which are
being retrofitted or otherwise designed for a different sized
microdisplay. In addition, a new assembly process was developed and
validated that allows additional optical elements to be attached to
our microdisplays, providing for a broader range of applications by
the customer with less up-front engineering design work.
“I am pleased with the progress we are making with our largest
(4K x 4K) full color display which we are developing in
collaboration with our Tier 1 consumer electronics customer to
incorporate into a consumer headset. We are also working with a new
medical device manufacturer on development of next generation
diagnostic equipment. We believe the high resolution, high
contrast, and brightness of our OLED displays have strong appeal
across both defense and commercial industries, and we continue to
pursue new opportunities.
“On the military side, we are continuing to win new programs and
support existing ones. Many of these are long duration programs
which we support for their entire lifetime. While we provide
displays to the newer U.S. Army Enhanced Night Vision Goggle (ENVG)
III and ENVG-B programs, we recently received a $627,000 order for
displays under the ENVG II program that we have supported since
2013. In addition, ground and flight tests were successfully
completed for a major U.S. Army helicopter helmet upgrade program
which involves retrofitting our high brightness microdisplays into
the current fielded helmet.
“Turning to our operations, we have resolved our production
issues from the fourth quarter with special focus on addressing
potential single point failures. As well, we are making progress on
our multi-year yield improvement initiatives. We have increased our
production resources, made some key technical hires, and installed
and qualified new, advanced production equipment. These efforts
should give us greater production reliability and flexibility while
increasing production capacity, lowering unit costs and providing
greater operating efficiencies.
“Finally, we are working to improve the efficiency and lifetime
of our direct patterned (dPdTM) displays. We have made
architectural improvements and incorporated superior performing
OLED materials. We are also upgrading our existing dPd production
equipment and expect it to be completed and ready for sampling in
the third quarter. The redesigned equipment will have significant
throughput improvement and will better demonstrate the technology’s
capability for mass production,” concluded Mr. Sculley.
Business and Product Highlights
- We successfully processed the initial
4K x 4K wafers that we designed for a Tier 1 consumer electronics
partner which we received in December. This enabled us to validate
the base functionality of the 4K x 4K display and confirmed our
ability to develop a large area silicon microdisplay with no
visible non-uniformities. These high brightness displays will be
used to develop a headset with a wide field of view and no screen
door effect. Validation at the individual display level is expected
to be completed during the second quarter with full color prototype
development using our dPd technology completed in the third
quarter.
- We delivered displays for the F-35
Lightning II helmet throughout the first quarter while continuing
to work closely with the Collins Aerospace team to further improve
the display in preparation for Low Rate Initial Production.
- We increased our presence in the
medical device market with an order from a new customer, an
innovative developer and manufacturer of diagnostic and ophthalmic
surgical equipment, for the development of their next generation
diagnostic equipment.
- In April, we received a follow-on order
of $239,000 in support of the Javelin Missile program Command
Launch Unit. This is in addition to $560,000 of orders that we
received during 2018.
- We continue to support full rate
production for the US ARMY ENVG III program. Additionally, we are
working with both prime contractors on pre-production units for the
ENVG Binocular program. This program is anticipated to commence
production in late 2019/early 2020 with an overall acquisition
objective by the U.S. Army of approximately 190,000 systems.
- In April, we received a $627,000 order
for the ENVG II program which the Company has been supporting since
2013, evidencing the ongoing revenue opportunities from mature
programs.
- In the first quarter of 2019, we
received $150,000 from the US Army for OLED display production and
yield improvement projects in addition to the $830,000 we received
in 2018. An additional $900 thousand of projects are under
consideration with this successful program, of which $120 thousand
has already been confirmed for 2019.
- Our high brightness microdisplay that
we delivered to a major defense contractor last year has been
selected for a next generation U.S. rotary wing helmet program with
procurement expected beginning in 2020.
Quarter Results
Revenues for the first quarter of 2019 were $6.1 million, a
decrease of $0.8 million from revenues of $6.9 million reported a
year ago, but up sequentially by $0.7 million from the fourth
quarter of 2018.
Product revenues were $5.5 million as compared to $5.9 million
in the first quarter of 2018. On a sequential basis, product
revenues grew 13% from 4Q18. The year-over-year decrease in product
revenue was due to display production related issues from the
fourth quarter of 2018 which impacted the first quarter. Contract
revenues totaled $0.6 million in the first quarter compared to $1.0
million in the same quarter of last year, reflecting the lower
level of development work required at this phase of the consumer
contract work to develop the 4K x 4K display. Government contract
revenues during the quarter were largely unchanged from the prior
year period.
Overall gross margin for the first quarter was 22% on gross
profit of $1.3 million compared to a gross margin of 29% on gross
profit of $2.0 million in the prior year period. The decrease in
gross margin was primarily due to lower revenues in the quarter
compared to the year ago period.
Operating expenses for the first quarter of 2019, including
R&D expenses, were $3.5 million as compared to $4.5 million in
the first quarter of 2018. Operating expenses as a percentage of
sales were 58% in the first quarter compared to 66% a year ago. The
decrease in operating expenses was primarily due to lower SG&A
expenses this period versus the year ago period which included
spending on professional services, legal, and travel expenses for
negotiations with prospective partners, as well as $240 thousand
for transaction fees associated with the January 2018 equity
offering.
Operating loss for the first quarter was $2.2 million versus an
operating loss of $2.6 million in the first quarter of last year.
Net loss for the first quarter of 2019 was $1.4 million, or $0.03
per diluted share, compared to a net loss of $2.1 million, or $0.05
per diluted share, in the first quarter of 2018. The net loss
included income related to the change in the fair value of the
warrant liability of $0.8 million and $0.5 million, respectively,
for the first quarters of 2019 and 2018.
As of March 31, 2019, the Company had cash and cash equivalents
of $3.5 million, working capital of $7.3 million, and borrowing
availability under the ABL facility of $0.8 million. Subsequent to
the end of the quarter, the Company announced two separate
registered direct offerings raising total proceeds to eMagin of
$4.0 million before fees and other offering expenses.
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 June 9, 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. 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, 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 STATEMENT OF
OPERATIONS
(in thousands, except share and per
share data)
Three Months Ended March 31,
2019 2018 Revenues: Product $
5,507 $ 5,863 Contract 605 1,004
Total revenues,
net 6,112 6,867
Cost of revenues:
Product 4,426 4,359 Contract 350 528
Total
cost of revenues 4,776 4,887
Gross
profit 1,336 1,980
Operating
expenses: Research and development 1,597 1,631 Selling,
general and administrative 1,939 2,912
Total
operating expenses 3,536 4,543
Loss
from operations (2,200) (2,563)
Other income
(expense): Change in fair value of common stock warrant
liability 794 503 Interest expense, net (33) (42) Other income, net
— 21
Total other income 761 482
Loss before provision for income taxes (1,439) (2,081)
(Provision) benefit for income taxes — —
Net loss $ (1,439) $ (2,081) Loss per share, basic $
(0.03) $ (0.05) Loss per share, diluted $ (0.03) $ (0.05)
Weighted average number of shares outstanding: Basic
45,161,273 42,255,189 Diluted
45,161,273 42,255,189
EMAGIN CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per
share data)
March 31, December 31,
2019 2018 (unaudited) ASSETS Current
assets: Cash and cash equivalents $ 3,457 $ 3,359 Accounts
receivable, net 3,696 3,186 Unbilled accounts receivable 69 224
Inventories 8,827 8,582 Prepaid expenses and other current assets
795 875
Total current assets 16,844 16,226
Equipment, furniture and leasehold improvements, net 8,630 8,921
Operating lease - right of use asset 4,112 — Intangibles and other
assets 209 269
Total assets $ 29,795 $
25,416
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 1,974 $ 2,024
Accrued compensation 1,502 1,634 Revolving credit facility, net
2,535 — Common stock warrant liability 703 1,497 Other accrued
expenses 1,703 1,827 Deferred revenue 95 38 Current portion of
lease liability 675 — Other current liabilities 323
427
Total current liabilities 9,510 7,447 Lease
liability-long term 3,562 —
Total liabilities
$ 13,072 $ 7,447 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 March 31, 2019 and December 31, 2018 — —
Common stock, $.001 par value: authorized 200,000,000 shares,
issued 45,323,339 shares, outstanding 45,161,273 shares as of March
31, 2019 and December 31, 2018 45 45 Additional paid-in capital
254,929 254,736 Accumulated deficit (237,751) (236,312) Treasury
stock, 162,066 shares as of March 31, 2019 and December 31, 2018
(500) (500)
Total shareholders’ equity
16,723 17,969
Total liabilities and shareholders’
equity $ 29,795 $ 25,416
Non-GAAP
Information
Three Months Ended March 31, 2019
2018 Net income (loss) $ (1,439) $ (2,081) Non-cash
compensation 193 205 Change in fair value of common stock warrant
liability (703) (503) Depreciation and intangibles amortization
expense 488 468 Interest expense 33 42 Provision for income taxes -
- Adjusted EBITDA $ (1,428) $ (1,869)
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version on businesswire.com: https://www.businesswire.com/news/home/20190509005188/en/
eMagin CorporationJeffrey Lucas, President and Chief Financial
Officer845-838-7931jlucas@emagin.com
Affinity Growth AdvisorsBetsy
Brod212-661-2231betsy.brod@affinitygrowth.com
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