-Significant Progress in Commercial Market and Military Momentum
HOPEWELL JUNCTION, N.Y.–(BUSINESS WIRE)–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
“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
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”
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.
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.
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|(in thousands, except share and per share data)|
|Cash and cash equivalents||$||1,964||$||5,241|
|Accounts receivable, net||3,428||2,834|
|Unbilled accounts receivable||475||1,401|
|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|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Revolving credit facility, net||920||1,689|
|Other accrued expenses||492||1,069|
|Other current liabilities||566||590|
|Total current liabilities||5,523||6,753|
|Commitments and contingencies|
|Preferred stock, $.001 par value: authorized 10,000,000 shares:|
Series B Convertible Preferred stock, (liquidation preference of
per share, $.001 par value: 10,000 shares designated and 5,659
of September 30, 2017 and December 31, 2016
Common stock, $.001 par value: authorized 200,000,000 shares,
of September 30, 2017 and 31,788,582 shares as of December 31, 2016
|Additional paid-in capital||246,312||239,915|
Treasury stock, 162,066 shares as of September 30, 2017 and December
|Total shareholders’ equity||19,599||20,460|
|Total liabilities and shareholders’ equity||$||25,122||$||27,213|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS|
|(in thousands, except share and per share data)|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Total revenues, net||4,280||4,305||15,609||16,839|
|Cost of revenues:|
|Total cost of revenues||4,002||3,023||12,264||10,887|
|Research and development||1,271||1,666||3,782||4,468|
|Selling, general and administrative||1,970||2,041||6,586||6,044|
|Total operating expenses||3,241||3,707||10,368||10,512|
|Loss from operations||(2,963||)||(2,425||)||(7,023||)||(4,560||)|
|Other income (expense):|
|Interest expense, net||(27||)||(8||)||(249||)||(28||)|
|Other income, net||(2||)||4||11||8|
|Total other income (expense)||(29||)||(4||)||(238||)||(20||)|
|Loss before provision for income taxes||(2,992||)||(2,429||)||(7,261||)||(4,580||)|
|Provision for income taxes||—||(1||)||—||(1||)|
|Loss per share, basic||$||(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:|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Depreciation and intangibles amortization expense||406||400||1,376||1,214|
|Provision for income taxes||–||1||–||1|