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eMagin Corporation Announces First Quarter 2018 Financial Results

- Posts 13% Revenue Growth in Q1; 20% Increase in Backlog from Year End -

HOPEWELL JUNCTION, N.Y.--(BUSINESS WIRE)--May 10, 2018-- 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, 2018.

“We had a strong start to the year for our commercial initiatives as well as our military programs,” said Andrew Sculley, President and Chief Executive Officer. “In addition, we are making important strides in our manufacturing processes that have contributed to improvement in yields and increased throughput.”

“We are seeing broader, accelerating interest within the consumer AR/VR market. New opportunities continue to surface for our high brightness, direct patterned OLED microdisplays. Consistently, we hear from prospects in the consumer segment that our cutting-edge technology is a key enabler for next generation HMD products,” continued Mr. Sculley. “I am happy to say that the design of our next generation display is on track and going well. We look forward to having prototypes available for customers by year end 2018 or early 2019.

“As we work with our prospective manufacturing partners and our consumer electronics OEMs, our focus remains on identifying the optimal business structure to scale our direct patterning (dPd^tm) technology and best capitalize on the consumer AR/VR market opportunity. This will enable us to achieve the broadest application of our dPd technology in the marketplace.

“Our military business continues to grow, and we saw increased bookings from our U.S. programs as well as from foreign military customers. At March 31^st, our product backlog was $11.8 million, an increase of over 20% from the $9.8 millionbacklog at December 31, 2017. We are supporting many programs that the US military considers to be of high importance including applications for night vision, thermal weapon sights, see-through HMD systems for mounted and dismounted missions as well as aviation helmet upgrades and prototypes for next generation helmet systems.

“We are continuing to make progress in our development of very high brightness full-color microdisplays incorporating our dPd technology. To this end, we are designing further improvements to lengthen the lifetime of our microdisplays and incorporating enhancements to our equipment to improve our production yields and expand our manufacturing capacity.

“The response to our micro displays has been overwhelmingly positive. Demand for our products remains strong both domestically and internationally. This is leading to more orders and requests for accelerated deliveries across the board,” concluded Mr. Sculley.

Business and Product Highlights

• We are continuing to optimize our dPd technology and having previously demonstrated maximum brightness of more than 5,300 nits, we have recently achieved greater than 7000 nits while reducing power consumption by 20%.
• We are advancing discussions with multiple consumer electronics partner prospects regarding eMagin’s next generation microdisplays for AR/VR applications. Additionally, we received an inquiry from two additional prospective Tier 1 customers about designing and developing displays.
• We expanded discussions on mass production for the commercial market and included an additional potential partner in those discussions.
• We accelerated shipments for multiple international customers as business activity increases.
• We are expanding our business development initiatives internationally and pursuing new markets in Asia where we have not been as active. In April we participated in the DefExpo 18 India trade show where our microdisplays received strong interest from defense and commercial customers in the rapidly growing Indian market.
• We are on schedule with the OLED upgrade to a production helmet for a multi-service, multi-country, fixed wing aircraft program. Additional displays for pre-production testing will be delivered in the second quarter with deliveries of displays for flight testing expected in the fourth quarter. We are receiving positive feedback on the performance of this OLED helmet during qualification and flight testing.

Quarter Results

Revenues for the first quarter of 2018 grew 13% to $6.9 million, an increase of $0.8 million from revenues of $6.1 millionreported a year ago and up sequentially by $0.5 million from the fourth quarter of 2017.

Product revenues increased 34% to $5.9 million compared to $4.4 million in the first quarter of 2017. The year-on-year increase in product revenue was due to an increase in display revenues from the ramp up of new U.S. military programs and increased demand by international customers. Contract revenues totaled $1.0 million in the first quarter compared to $1.7 million in the same quarter of last year. The current quarter’s revenues were from a number of customers whereas the prior year’s contract revenues were primarily from one consumer customer.

Overall gross margin for the first quarter was 29% on gross profit of $2.0 million compared to a gross margin of 30% on gross profit of $1.8 million in the prior year period. The decrease in gross margin was primarily due to higher unit material costs in the 2018 quarter and lower contract revenues in the quarter on which the Company generally earns a higher gross margin.

Operating expenses for the first quarter of 2018, including R&D expenses, were $4.5 million as compared to $3.8 millionin the first quarter of 2017. Operating expenses as a percentage of sales were 66% in the first quarter compared to 63% a year ago. The increase in operating expenses was due to higher R&D expenses associated with the development of the Company’s dPd and XLS process technologies, as well as greater spending on professional services, legal and travel expenses for negotiations with prospective consumer electronics customers and volume manufacturing partners. Also included in operating expenses were approximately $240 thousand for transaction fees incurred in the January 2018offering which were associated with the fair value of the warrant liability.

Operating loss for the first quarter was $2.6 million versus an operating loss of $2.0 million in the first quarter of last year. Net loss for the first quarter of 2018 was $2.1 million, or $0.05 per diluted share, compared to a net loss of $2.0 million, or $0.06 per diluted share, in the first quarter of 2017.

As of March 31, 2018, the Company had cash and cash equivalents of $9.8 million, working capital of $16.5 million, and borrowing availability under the ABL facility of $4.4 million.