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eMagin Corporation Announces First Quarter 2016 Financial Results

HOPEWELL JUNCTION, N.Y.--(BUSINESS WIRE)--May 12, 2016-- eMagin Corporation, or the “Company” (NYSE MKT: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, 2016. “I am pleased to report that we had good performance in the quarter and continued to make solid progress. In Q1, we recorded $7 million in revenue including $1 million from a commercial sector strategic licensing deal that we announced in December,” stated President and CEO Andrew G. Sculley. “We remain encouraged by the expanding commercialization potential of some of our newest product efforts including, among others, our WUXGA display technology, and our leading 2Kx2K microdisplays. Some of our newest WUXGA displays are already shipping; and our 2Kx2K microdisplay prototypes will be ready for sampling by customers in Q4 of this year. “Discussions continue with several companies who are interested in incorporating our display technology into high-volume production applications. “We made further progress on yield and through-put improvements in our production processes which enabled us to build additional inventory to meet customer demand. We continue to focus on improving manufacturing by strengthening our production resources and adding equipment to achieve better results. As our yields and through-put improve, we see the potential for lower unit costs. “Finally, we remain committed to furthering our industry leading technology and continued to invest in our R&D and Sales and Marketing during Q1. Our cash position remained strong at the end of the quarter and our balance sheet remains debt free.” Q1 Business and Product Highlights Won contracts worth several million dollars each for the U.S. military’s Enhanced Night Vision Goggle III (ENVG III) and Family of Weapon Sights – Individual (FWS-I) programs. We are supporting the qualification testing for both programs and anticipate entering the production phase in 2017. Won a contract with a prime contractor valued at approximately $800,000 for a laser range finder system and have begun delivering microdisplays in the production phase of the contract. Booked new R&D projects worth over $800,000. One project is for continuing improvements in our direct patterned ultra-high brightness technology. The second is for the development of a new display backplane that offers lower power consumption and a higher frame rate demanded by military and consumer markets. And the third project is focused on building display samples for a customer developing a new consumer virtual reality headset. Received production orders for two new projects, one for a U.S. Marine Corps application and the other with a large Asian company using our WUXGA full color display in a new product. Shipped a new version of our WUXGA microdisplay product with qualification scheduled to be completed by July 2016. Delivered sample displays for over twenty new projects including military and commercial avionics applications. First Quarter Results Revenues for the first quarter of 2016 were $7.0 million, an increase of 17% from the first quarter of 2015, and included$1.0 million of licensing revenue from the agreement signed in December. Product revenues (primarily display sales) totaled $5.3 million, 4% more than first quarter last year. The higher product revenues were primarily due to product mix as customers purchased more of the Company’s higher priced advanced microdisplays. R&D contract revenues totaled approximately $706 thousand, a decrease of 20% from the first quarter last year. The lower revenues in the quarter reflect the late award of a key R&D contract which will be performed in Q2 instead of Q1. Gross margin for the first quarter was 48 percent on gross profit of $3.3 million compared to a gross margin of 39 percent on a gross profit of $2.4 million in the same quarter last year. Excluding the profit contribution from the license revenues, on which there were no cost of revenues during the quarter, the gross margin for the first quarter would have been 39%, comparable to the prior year quarter. Operating expenses for the first quarter of 2016, including R&D expenses, increased to $3.3 million from $2.0 million in the first quarter of 2015. Last year’s quarter included approximately $500 thousand in favorable effects from a reduction in the allowance for bad debts and the reversal of the Company’s vacation accrual. This year’s first quarter reflected higher spending in our HMD effort, higher legal expenses and costs associated with the consolidation of the Company’s finance and procurement functions. Operating income for the first quarter decreased to $22,000 from $329,000 in the first quarter last year. Net income for Q1 2016 was $14,000, or break-even, as compared to $320,000, or $0.01 per diluted share in Q1 2015. At March 31, 2016, the Company had approximately $9.1 million of cash and cash equivalents compared to $9.3 millionof cash and cash equivalents at December 31, 2015. At March 31, 2016, the Company had no outstanding debt. Outlook “Looking into 2016, we are encouraged by what we believe to be expanding end markets for Virtual Reality, Augmented Reality and Night Vision applications leveraging our leading OLED technology. We believe our technology approach in these markets remains superior to the competition,” continued Mr. Sculley. “While military product sales held steady in the quarter, we believe that future growth in this segment will be largely driven by newer contracts and programs that are currently under review to receive funding for next generation technology. “Our military contract R&D efforts, where we work closely with the U.S. government and with international companies on designing next generation requirements and specifications, position us well to capture these new production contract vehicles when awarded. Overall we feel eMagin’s presence in both domestic and international military markets remains quite strong. “For 2016, we are focusing on the following objectives: Expansion of our presence in major military programs and overall customer count, Further progress on display sales under the commercial licensing agreement that we signed in December, Advancement of discussions with high volume production partners to incorporate our technology into displays and other products, Continued progress in manufacturing improvements, Consolidation of our finance and procurement functions from our Bellevue to Hopewell Junction facilities, Potential new product introductions in the commercial sector to leverage our leading display and headset technologies. These new products have the potential to provide revenue this year. “We look forward to updating you on our progress during the year,” concluded Mr. Sculley.