– Posted Product Revenues of $7.3 Million; Total Revenue of $7.9 Million
– Operational Improvements and Cost Reduction Efforts Yield Positive Results
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 near-eye imaging products, today announced financial results and corporate highlights for the third quarter ended September 30, 2019.
“We successfully executed on our strategic priorities in the third quarter of 2019 which resulted in a significant improvement in our financial results,” stated Jeffrey Lucas, President and CFO. “For the quarter, we achieved over $7.3 million in product revenues, the highest level of product revenues in six years and the second highest in the Company’s history. Operating loss for the quarter was $394 thousand and down from an operating loss of $1.3 million in the prior year quarter. Adjusted EBITDA of $263 thousand was positive for the first time since the first quarter 2016 when the Company earned one million dollars from nonrecurring licensing revenue.
“During the third quarter, we demonstrated significant improvement in yield and throughput as production volumes increased over 50% from the second quarter. We believe these initiatives, including enhanced maintenance support and optimizing production runs, along with others we are implementing in the current quarter, provide us with additional opportunities for operating improvements in the future,” continued Mr. Lucas.
“In addition, during the third quarter we took actions to reduce our cost structure. Expense controls put into effect during the quarter contributed to a 21% decrease in operating expenses from the prior year period. Operating expenses as a percent of sales declined to 36% in the third quarter compared to 53% a year ago and 57% from this year’s second quarter. We initiated additional expense savings actions in October, including reductions in our senior management compensation structure, which we anticipate will benefit our fourth quarter results. Overall, we expect these initiatives to reduce our operating expenses, on an annualized basis, by over $2 million,” concluded Mr. Lucas.
“Demand for our OLED microdisplays continues to be strong. Our backlog of $6.3 million reflects the fulfillment of several sizeable orders during the quarter and an approximate $1.1 million reduction from the government’s cancelation of the ENVG-III program as it begins fielding the 108,000 system ENVG-B program where we are supplying displays to the two prime contractors on the program, ” stated Andrew G. Sculley, CEO. “We believe our backlog in the near term will return to or exceed recent levels as our business development team is currently negotiating a number of large orders. In addition, we are currently manufacturing displays for a new helicopter program with deliveries beginning in the current quarter.
“Orders for the F-35 program and other long-term programs continue to meet our expectations. Our displays for the F-35 program were recently highlighted in Naval Aviation News where it was reported that the improved Generation III helmet, incorporating our OLED displays, performed well in operational testing and will be fully implemented to the entire F-35 community.
“From a technology advancement perspective, we are on target to achieve 10,000 nits brightness by the second quarter of 2020 and are working to reach more than 25,000 nits within three years. This high level of brightness is being requested within the U.S. military and we are pursuing government funding as part of this effort.
“Finally, during the third quarter, we received 93 orders, of which 7 were from new customers, and supplied products for 23 new programs. I am especially pleased to report that we have orders from two new medical customers and continue to supply an existing medical customer under our long-term contract,” concluded Mr. Sculley.
Third Quarter Results
Revenues for the third quarter of 2019 were $7.9 million, an increase of approximately $1.0 million from revenues of $6.9 million reported a year ago, and an increase sequentially of $2.5 million from the second quarter of 2019.
Product revenues totaled $7.3 million as compared to $6.0 million in the third quarter of 2018. On a sequential basis, product revenues increased 49% from the second quarter of 2019. The year-over-year and sequential increases in product revenue were due primarily to growth in display revenues from customer demand coupled with higher production volumes as a result of increases in throughput and manufacturing yields. Contract revenues totaled $0.6 million as compared to $0.8 million in the third quarter of 2018 as higher military and government-funded contract revenues did not fully offset lower commercial contract revenues.
Overall gross margin for the third quarter was 31% on gross profit of $2.5 million compared to a gross margin of 35% on gross profit of $2.4 million in the prior year period. The higher gross profit is due largely to higher product revenues. The lower gross margin reflects greater spending on production improvements and the resultant lower allocation of production capacity costs to R&D.
Operating expenses for the third quarter of 2019, including R&D expenses, were $2.9 million as compared to $3.6 million in the third quarter of 2018. Operating expenses as a percentage of sales were 36% in the third quarter of 2019 compared to 53% in the year ago period. R&D expenses were lower in the third quarter, primarily reflecting lower internal R&D activity as we focused on production improvements. SG&A expenses were lower in the third quarter versus the year ago period due in part to lower spending on professional services, legal, and travel and other discretionary expenses
Operating loss for the third quarter of 2019 was $0.4 million versus an operating loss of $1.3 million in the third quarter of last year. Net loss for the third quarter of 2019 was $0.3 million, or $0.01 per diluted share. The net loss included income related to the change in fair value of warrant liability of $0.1 million. For the third quarter of 2018, the Company reported net income of $63 thousand inclusive of income of $1.3 million for the warrant liability revaluation.
Adjusted EBITDA for the third quarter was approximately $0.3 million versus a negative $0.6 million in the year ago period.
As of September 30, 2019, the Company had cash and working capital of $2.6 million and $8.5 million, respectively, and borrowings and availability under the ABL Facility of $2.0 million and $1.2 million, respectively.
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 7, 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 for military, industrial, medical and consumer applications. 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, and Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2019
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 STATEMENTS OF OPERATIONS |
||||||||||||||||
|
(in thousands, except share and per share data) |
||||||||||||||||
|
(unaudited) |
||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2019 |
2018 |
2019 |
2018 |
|||||||||||||
| Revenues: | ||||||||||||||||
| Product |
$ |
7,321 |
|
$ |
6,048 |
|
$ |
17,786 |
|
$ |
18,127 |
|
||||
| Contract |
598 |
|
819 |
|
1,606 |
|
2,673 |
|
||||||||
| Total revenues, net |
7,919 |
|
6,867 |
|
19,392 |
|
20,800 |
|
||||||||
| Cost of revenues: | ||||||||||||||||
| Product |
5,112 |
|
3,926 |
|
14,436 |
|
12,256 |
|
||||||||
| Contract |
316 |
|
562 |
|
904 |
|
1,389 |
|
||||||||
| Total cost of revenues |
5,428 |
|
4,488 |
|
15,340 |
|
16,335 |
|
||||||||
| Gross profit |
2,491 |
|
2,379 |
|
4,052 |
|
4,465 |
|
||||||||
| Operating expenses: | ||||||||||||||||
| Research and development |
1,046 |
|
1,590 |
|
3,943 |
|
4,941 |
|
||||||||
| Selling, general and administrative |
1,839 |
|
2,039 |
|
5,555 |
|
6,982 |
|
||||||||
| Total operating expenses |
2,885 |
|
3,629 |
|
9,498 |
|
11,923 |
|
||||||||
| Loss from operations |
(394 |
) |
(1,250 |
) |
(5,446 |
) |
(7,458 |
) |
||||||||
| Other income (expense): | ||||||||||||||||
| Change in fair value of common stock warrant liability |
120 |
|
1,311 |
|
1,450 |
|
387 |
|
||||||||
| Interest expense, net |
(41 |
) |
1 |
|
(96 |
) |
(12 |
) |
||||||||
| Other income, net |
— |
1 |
|
— |
— |
|||||||||||
| Total other income |
79 |
|
1,313 |
|
1,354 |
|
375 |
|
||||||||
| (Loss) income before provision for income taxes |
(315 |
) |
63 |
|
(4,092 |
) |
(7,083 |
) |
||||||||
| (Provision) benefit for income taxes |
— |
— |
— |
— |
||||||||||||
| Net (loss) income |
$ |
(315 |
) |
$ |
63 |
|
$ |
(4,092 |
) |
$ |
(7,083 |
) |
||||
| Less net income allocated to participating securities |
— |
9 |
|
— |
— |
|||||||||||
| Net (loss) income allocated to common shares |
$ |
(315 |
) |
$ |
54 |
|
$ |
(4,092 |
) |
$ |
(7,083 |
) |
||||
| Loss per share, basic |
$ |
(0.01 |
) |
$ |
— |
$ |
(0.09 |
) |
$ |
(0.16 |
) |
|||||
| Loss per share, diluted |
$ |
(0.01 |
) |
$ |
— |
$ |
(0.09 |
) |
$ |
(0.16 |
) |
|||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic |
49,173,773 |
|
45,149,717 |
|
47,718,965 |
|
44,182,379 |
|
||||||||
| Diluted |
49,173,773 |
|
45,265,370 |
|
47,718,965 |
|
44,182,379 |
|
||||||||
| EMAGIN CORPORATION | ||||||||
| CONSOLIDATED BALANCE SHEETS |
September 30, |
December 31, |
||||||
| (in thousands, except share and per share data) |
2019 |
2018 |
||||||
|
(unaudited) |
||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents |
$ |
2,563 |
|
$ |
3,359 |
|
||
| Accounts receivable, net |
3,956 |
|
3,186 |
|
||||
| Unbilled accounts receivable |
279 |
|
224 |
|
||||
| Inventories |
8,447 |
|
8,582 |
|
||||
| Prepaid expenses and other current assets |
1,209 |
|
875 |
|
||||
| Total current assets |
16,454 |
|
16,226 |
|
||||
| Equipment, furniture and leasehold improvements, net |
8,346 |
|
8,921 |
|
||||
| Operating lease right- of- use assets |
3,790 |
|
— |
|||||
| Intangibles and other assets |
191 |
|
269 |
|
||||
| Total assets |
$ |
28,781 |
|
$ |
25,416 |
|
||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable |
$ |
1,208 |
|
$ |
2,024 |
|
||
| Accrued compensation |
1,602 |
|
1,634 |
|
||||
| Revolving credit facility, net |
2,002 |
|
— |
|||||
| Finance lease liability – current portion |
16 |
|
— |
|||||
| Common stock warrant liability |
47 |
|
1,497 |
|
||||
| Other accrued expenses |
1,603 |
|
1,827 |
|
||||
| Deferred revenue |
328 |
|
38 |
|
||||
| Operating lease liability – current portion |
704 |
|
— |
|||||
| Other current liabilities |
398 |
|
427 |
|
||||
| Total current liabilities |
7,908 |
|
7,447 |
|
||||
| Finance lease liability-long term |
28 |
|
— |
|||||
| Operating lease liability-long term |
3,202 |
|
— |
|||||
| Total liabilities |
$ |
11,138 |
|
$ |
7,447 |
|
||
| 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, 2019 and December 31, 2018 |
— |
— |
||||||
| Common stock, $.001 par value: authorized 200,000,000 shares, issued 49,335,839 shares, outstanding 49,173,773 shares as of September 30, 2019 and issued 45,323,339 shares, outstanding 45,161,273 shares as of December 31, 2018 |
49 |
|
45 |
|
||||
| Additional paid-in capital |
258,498 |
|
254,736 |
|
||||
| Accumulated deficit |
(240,404 |
) |
(236,312 |
) |
||||
| Treasury stock, 162,066 shares as of September 30, 2019 and December 31, 2018 |
(500 |
) |
(500 |
) |
||||
| Total shareholders’ equity |
17,643 |
|
17,969 |
|
||||
| Total liabilities and shareholders’ equity |
$ |
28,781 |
|
$ |
25,416 |
|
||
| Non-GAAP Information | |||||||||||||||
|
Three Months Ended |
|
|
Nine Months Ended |
||||||||||||
|
September 30, |
|
|
September 30, |
||||||||||||
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
||||||
| Net income (loss) |
$ |
(315 |
) |
$ |
63 |
|
$ |
(4,092 |
) |
$ |
(7,083 |
) |
|||
| Non-cash compensation |
164 |
|
177 |
|
454 |
|
512 |
|
|||||||
| Change in fair value of common stock warrant liability |
(120 |
) |
(1,311 |
) |
(1,450 |
) |
(387 |
) |
|||||||
| Depreciation and intangibles amortization expense |
493 |
|
470 |
|
1,480 |
|
1,420 |
|
|||||||
| Interest expense |
41 |
|
34 |
|
96 |
|
106 |
|
|||||||
| Provision for income taxes |
— |
|
— |
|
— |
|
— |
||||||||
| Adjusted EBITDA |
$ |
263 |
|
$ |
(567 |
) |
$ |
(3,512 |
) |
$ |
(5,432 |
) |
|||
Contacts
eMagin Corporation
Jeffrey Lucas, President and Chief Financial Officer
845-838-7931
[email protected]
Affinity Growth Advisors
Betsy Brod
212-661-2231
[email protected]
