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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