-Significant Progress in Commercial Market
and Military Momentum Increases-
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, 2017.
“We experienced a heightened level of activity in the third
quarter, both in our commercial initiatives as well as our military
programs,” said Andrew Sculley, President and Chief Executive
Officer. “While this was not reflected in our financial results for
the period, in part due to a manufacturing issue we have since
resolved, our activities during the quarter enabled us to achieve
major milestones towards the commercialization of our display
technology in the consumer sector and positioned us for stronger
performance in our military business in the quarters ahead. In
particular, we believe our accomplishments with multiple consumer
partners demonstrate the critical role eMagin’s display technology
plays in driving the AR/VR market to the next level.
“It is widely acknowledged across the AR/VR ecosystem that
display quality is a major obstacle to bringing AR/VR into the
mainstream. We believe that the partner agreements that we have
signed and the attention we are receiving from tier-one consumer
companies, headset creators and volume manufacturers underscores
the fact that our proprietary, patented direct patterning
technology solves this problem and makes us the ‘go-to’
microdisplay company that will enable AR/VR.
“Our agreements with these tier-one consumer electronics
companies, each following rigorous and extensive diligence on our
direct patterning technology, are outstanding endorsements of
eMagin’s direct patterning technology. These are major steps toward
the commercialization of our technology and further evidence of our
belief that our direct patterned display technology will enable the
next generation of AR/VR for the consumer the market. Momentum is
building as we continue to have discussions with other top tier
consumer electronics companies and pursue additional agreements. At
the same time, the agreements we have signed to date are fueling
our ongoing discussions with prospective mass production partners
to scale production for our technology to meet commercial
demand.
“On the military side of our business, we saw increased booking
activity for both our U.S. programs as well as with foreign
military customers. We booked over 90 new orders totaling more than
$6.5 million in the third quarter and are seeing the pace continue
into the fourth quarter with several sizeable orders. In addition
to over 60 follow-on orders from existing customers, we booked
another 30 orders related to new projects from both new and
existing customers which will provide us with a strong backlog
entering 2018. This is consistent with our previously communicated
expectation of a ramp up in our military business.
“Additionally, we have accelerated our activity in the aviation
sector in several key programs, most notably in our work to upgrade
the F-35 production helmet to OLED displays which will eliminate
the ‘green glow’ effect of the current LCD displays. We believe
that this is an area of tremendous opportunity for eMagin.
“Finally, we are continuing to advance our product technology as
we have increased brightness beyond 5,000 nits while further
reducing power consumption. We have also made enhancements to our
manufacturing processes for displays and have ordered new equipment
that we expect will help us improve yields and reduce cycle time,”
continued Mr. Sculley. “We are developing a compact interface for
our 2K X 2K microdisplay, which we believe has the highest
brightness and sharpest resolution in the global marketplace today,
for system integrators to quickly insert into optical systems. We
expect to introduce this hardware to the marketplace in the second
quarter of 2018. This compact interface will enable both consumer
and military prospects to more easily integrate our 2K x 2K
microdisplay into development systems and therefore speed time to
prototype and to production. Overall, I believe that we have made
significant progress in all areas of our business this year and are
well-positioned entering 2018,” concluded Mr. Sculley.
Business and Product Highlights as of November 8,
2017
- Furthered development of our Original
Design Manufacturing (ODM) partner efforts to enable multiple
partners to leverage a common microdisplay design for the consumer
segment.
- Awarded a follow-on contract worth over
$3.7 million for the Army’s Enhanced Night Vision Goggle III
(ENVGIII) and Family of Weapons Sight-Individual (FWS-I) programs
with delivery expected over twelve months.
- Received a multi-year $1.7 million
order from a European military prime contractor to provide displays
for a see-through, augmented reality HMD to support airborne and
ground missions requirements.
- Received a $1.5 million order to
support the Light Weight Thermal Sight (LWTS) program with
deliveries expected to begin in December 2017 and continuing
through 2018
- Received a $660,000 order for a new
foreign military thermal weapons sight with deliveries commencing
in the fourth quarter and expected to be completed by the third
quarter 2018.
- Received funding for the design and
development of support hardware that will be integral to new system
designs utilizing eMagin’s 2K x 2K microdisplays with the hardware
anticipated to be available to defense and commercial integrators
in mid-2018.
- Completed the Critical Design Review
(CDR) in October 2017 with a major aviation prime contractor for an
OLED upgrade to a fixed wing production helmet that will eliminate
the reported “green glow” problem.
- Continued to support a major US Army
helicopter helmet upgrade program to retrofit high brightness
microdisplays into the current fielded helmet. The CDR was
completed in August with additional OLED display, taper, and lens
assemblies to be delivered for integration and testing in December
2017.
- Received a production order from a
foreign aviation prime contractor to supply high brightness
microdisplays to upgrade an existing fixed wing helmet. It is
expected that this will be a multi-year program with the initial
order delivering displays through fourth quarter 2018.
- Delivered high brightness 2K x 2K
microdisplays to another major foreign contractor for use in a
prototype aviation helmet.
Third Quarter Results
Revenues for the third quarter of 2017 were $4.3 million, flat
with the third quarter of 2016.
Product revenues totaled $4.0 million versus $3.5 million in the
third quarter last year. The year-on-year increase in product
revenue was due to an increase in display revenues from the gradual
ramp up of new U.S. military programs and increased demand by
international customers, offset by the impact of production issues
in the quarter that have since been resolved. Contract revenues
totaled $266 thousand in the third quarter compared to $769
thousand in the same quarter of last year due to the greater volume
of work performed in the prior year quarter on military contracts,
including the Mantech program.
Overall gross margin for the third quarter was 7% on gross
profit of $278 thousand compared to a gross margin of 30% on gross
profit of $1.3 million in the prior year period, primarily due to
lower volumes and higher unit costs associated with the production
issues in the quarter.
Operating expenses for the third quarter of 2017, including
R&D expenses, decreased to $3.2 million, from $3.7 million in
the third quarter of 2016.
Third quarter R&D expenses decreased 24% over the prior year
quarter due to the reduction in R&D spending on the night
vision consumer products offset in part by the work performed on
the Company’s direct patterning technology. SG&A expenses were
essentially flat with the prior year third quarter at $2.0
million.
Operating loss for the third quarter was $3.0 million versus an
operating loss of $2.4 million in the third quarter of last year.
Net loss for the third quarter of 2017 was $3.0 million, or $0.09
per diluted share, compared to a net loss of $2.4 million, or $0.08
per diluted share, in the third quarter of 2016.
As of September 30, 2017, the Company had cash of $2.0 million,
working capital of $10.6 million, 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 December 9, 2017. 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, 2016 and Current Report on Form 8-K filed with
the SEC on May 19, 2017.
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 CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands, except share and
per share data)
September 30,2017
December 31,2016
(unaudited) ASSETS Current assets: Cash and
cash equivalents $ 1,964 $ 5,241 Accounts receivable, net 3,428
2,834 Unbilled accounts receivable 475 1,401 Inventories 9,080
7,435 Prepaid expenses and other current assets 1,132
1,040
Total current assets 16,079 17,951
Equipment, furniture and leasehold improvements, net 8,802 8,980
Intangibles and other assets 241 282
Total assets $ 25,122 $ 27,213
LIABILITIES AND SHAREHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 1,272 $ 1,432 Accrued
compensation 1,285 1,528 Revolving credit facility, net 920 1,689
Other accrued expenses 492 1,069 Deferred revenue 988 445 Other
current liabilities 566 590
Total
current liabilities 5,523 6,753
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 September 30, 2017 and December 31,
2016
— —
Common stock, $.001 par value: authorized
200,000,000 shares, issued 35,134,655 shares as
of September 30, 2017 and 31,788,582
shares as of December 31, 2016
35 32 Additional paid-in capital 246,312 239,915 Accumulated
deficit (226,248 ) (218,987 ) Treasury stock, 162,066 shares as of
September 30, 2017 and December 31, 2016 (500 )
(500 )
Total shareholders’ equity 19,599
20,460
Total liabilities and shareholders’
equity $ 25,122 $ 27,213
EMAGIN CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except
share and per share data) (unaudited)
Three Months Ended Nine Months Ended September
30, September 30, 2017
2016 2017 2016
Revenues: Product $ 4,014 $ 3,536 $ 13,050 $
13,612 Contract 266 769 2,559 2,227 License —
— — 1,000
Total revenues,
net 4,280 4,305 15,609
16,839
Cost of revenues:
Product 3,802 2,545 10,918 9,639 Contract 200 478 1,346 1,248
License — — — —
Total cost of revenues 4,002
3,023 12,264 10,887
Gross profit 278 1,282
3,345 5,952
Operating expenses:
Research and development 1,271 1,666 3,782 4,468 Selling,
general and administrative 1,970 2,041
6,586 6,044
Total operating
expenses 3,241 3,707 10,368
10,512
Loss from operations
(2,963 ) (2,425 ) (7,023 ) (4,560 )
Other income
(expense): Interest expense, net (27 ) (8 ) (249 ) (28 ) Other
income, net (2 ) 4 11 8
Total other income (expense) (29 ) (4 )
(238 ) (20 )
Loss before provision for income
taxes (2,992 ) (2,429 ) (7,261 ) (4,580 ) Provision for income
taxes — (1 ) — (1 )
Net loss $ (2,992 ) $ (2,430 ) $ (7,261 ) $ (4,581 )
Loss per share, basic $ (0.09 ) $ (0.08 ) $ (0.22 ) $ (0.15
) Loss per share, diluted $ (0.09 ) $ (0.08 ) $ (0.22 ) $ (0.15 )
Weighted average number of shares outstanding:
Basic 34,972,589 30,292,166
33,214,262 29,689,458 Diluted
34,972,589 30,292,166 33,214,262
29,689,458
Non-GAAP
Information
Three Months Ended Nine Months Ended
September 30, September 30, 2017
2016 2017 2016 Net
loss $ (2,992 ) $ (2,430 ) $ (7,261 ) $ (4,581 ) Non-cash
compensation 190 398 520 658 Depreciation and intangibles
amortization expense 406 400 1,376 1,214 Interest expense 27 8 249
28 Provision for income taxes - 1 - 1
Adjusted EBITDA $ (2,367 ) $ (1,623 ) $ (5,116 ) $ (2,680 )
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version on businesswire.com: http://www.businesswire.com/news/home/20171109005309/en/
eMagin Corporation,Jeffrey Lucas, 845-838-7931Chief Financial
Officerjlucas@emagin.comorAffinity Growth PartnersBetsy Brod,
212-661-2231Betsy.brod@affinitygrowth.com
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