eMagin Corporation Announces Third Quarter 2017 Financial Results

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.

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