HOPEWELL JUNCTION, N.Y.--(BUSINESS WIRE)--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 fourth quarter ended December 31, 2016.
“I am pleased to announce that we recently signed an additional, multi-million dollar agreement with another major Tier 1 consumer electronics company. We now have in place multiple agreements with commercial partners for next generation prototype products for consumer HMD’s and expect a considerable boost to 2017 revenue from our commercial efforts, including approximately $1.5 million that we expect to recognize in the first quarter of 2017. As we continue to enhance our technological advantage through direct patterning, I believe that we are gaining the recognition we deserve for having the most comprehensive suite of high performance OLED microdisplays in the market today,” commented Andrew Sculley, President and Chief Executive Officer.
“Improvements to our direct patterning equipment and processes have led to higher throughput for our development efforts and, more importantly, brightness levels that surpass threshold requirements for both commercial and military customers. We have begun shipping limited quantities of these enhanced direct patterning displays to key strategic partners, potential partners and defense prime contractors, and are in active discussions with several parties for high volume production to support commercial demand.
“As expected, our fourth quarter revenue was impacted by lower sales volumes from the previously announced wind down of certain domestic military programs. However, we continue to develop market leading products for both military and commercial applications and were selected to participate in both the U.S. Army’s Enhanced Night Vision Goggle III (ENVG III) and the Family of Weapon Sight-Individual (FWS-I) programs. We have a solid base of business within the military and expect it will provide us with a growing, recurring revenue stream over the next several years.”
Business and Product Highlights
The Company continued to expand its presence in commercial, industrial and foreign military markets while winning new U.S. military programs. Additionally, the Company made improvements in technology and product design. Some of the highlights include:
- Signed a multi-year agreement with a major European defense company that is expected to exceed $3.5 million in display sales through 2018.
- Continued to deliver displays for a major United States Marine Corps contract in support of a laser range finder program.
- Worked with U.S. Army and a defense aviation prime contractor for a major aircraft helmet modernization program.
- Delivered HD-plus resolution WUXGA display to a major medical company for use in prototyping in their next generation surgical equipment.
- Produced samples of 2K x 2K full color RGB microdisplay project to a leading consumer product company for evaluation in December 2016. Products are expected to be available for customers during the second quarter of 2017.
- Announced the introduction of consumer night vision products that are now in production and providing demo units to prospective customers.
- Completed prototyping of a new .48-inch diagonal full color XGA format microdisplay targeted at industrial and commercial markets. Initial displays are scheduled to be available in the second quarter of 2017.
Full Year Results
Revenues for 2016 were $21.4 million, down 15% from 2015. Product revenues totaled $17.3 million, 17% less than last year, primarily due to lower volumes from maturing military programs and a larger portion of sales of displays with lower unit prices. R&D contract revenues totaled approximately $3.1 million, down 26% from 2015. The decline in R&D contract revenue was mainly the result of a decrease in active R&D contracts and work completed on those contracts.
Gross margin for 2016 was 30% on gross profit of $6.4 million, up 2 percentage points from 28% in 2015. The increased gross margin for the year benefitted from $1.0 million in license revenue that was recorded with no cost in the current year.
Operating expenses for 2016, including R&D expenses, were $14.8 million, up $3.7 million from 2015. The majority of the increase is due to higher R&D expenses which totaled $6.4 million, up from $4.4 million in the prior year. The overall increase reflected costs incurred for the development of our consumer products that were launched in the first quarter of 2017 and R&D activities including hiring additional engineers to support our process development including direct pattering.
Operating loss for 2016 was $8.3 million versus $4.1 million in 2015 as a result of the lower production volumes and the Company’s investment in R&D to improve its market leading technology and in the launch of its consumer products. Net loss for the full year 2016 was $8.0 million, or $0.27 per diluted share, compared to a net loss of $4.1 million, or $0.16 per diluted share, in 2015.
As of December 31, 2016, the Company had approximately $5.2 million of cash and cash equivalents compared to $9.3 million of cash and cash equivalents as of December 31, 2015. The decrease in the cash balance was due to operating losses from the lower volumes, R&D investment and inventory build-up for the launch of our night vision products. In December, the Company entered into a working capital facility allowing it to borrow up to $5 million against its eligible accounts receivable and inventory. At December 31, 2016, there was $1.9 million outstanding on the facility. The Company also put in place a new credit facility for $5 million with its largest shareholder in March of 2017 to support its commercialization efforts in fiscal 2017.
Fourth Quarter Results
Revenues for the fourth quarter of 2016 were $4.6 million as compared to $6.7 million in the fourth quarter of 2015.
Product revenues totaled $3.7 million versus $5.7 million in the fourth quarter last year. This was primarily due to lower volumes from maturing military programs. R&D contract revenues totaled approximately $905 thousand, in line with the $965 thousand reported in the prior year quarter.
Overall gross margin for the fourth quarter was 11% on gross profit of $490 thousand compared to a gross margin of 13% on gross profit of $904 thousand in the fourth quarter of 2015 due to the impact of lower production volumes on the high fixed cost nature of our manufacturing processes.
Operating expenses for the fourth quarter of 2016, including R&D expenses, increased to $4.3 million, from $3.0 million in the fourth quarter of 2015. Fourth quarter operating expenses reflect higher spending on the development and marketing of our consumer products and a lower allocation of our R&D expense to R&D contracts.
Operating loss for the fourth quarter was $3.8 million versus $2.1 million in the fourth quarter last year. Net loss for the fourth quarter of 2016 increased to $3.5 million, or $0.11 per diluted share compared to net loss of $2.1 million, or $0.08 in the fourth quarter of 2015.
“We continue to pursue our milestone approach to driving shareholder value. We believe eMagin is the only company whose products can meet the low power, high brightness and resolution requirements for high-pixel density displays being demanded both for next generation VR/AR Consumer HMDs as well as today’s commercial and military applications,” continued Mr. Sculley.
The Company remains focused on the following objectives to drive shareholder value:
- Advance our product development discussions with major consumer electronics companies to incorporate OLED technology into their next generation products,
- Advance discussions with high volume production partners to utilize our leading production and process technologies,
- Further penetrate high growth commercial/industrial markets including medical devices and other vertical markets where integration of our OLED microdisplays and optics technology advances product development and adoption,
- Expand our presence in existing and future major military programs and overall customer count in domestic and international military markets,
- Launch new products focused on the consumer market which offer high performance and broad appeal at an attractive price, and
- Continue our progress in manufacturing improvements including yield enhancement and production capacity expansion.
“We made great strides in 2016 toward these objectives and expect to report several significant developments in 2017, especially with respect to our commercial efforts,” concluded Mr. Sculley.
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 April 27, 2017. 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.
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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such statements should not be regarded as a representation by the Company, or any other person, that such forward-looking statements will be achieved. The business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in forward-looking statements. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on such forward-looking statements.
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.
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|(In thousands, except share and per share data)|
|Cash and cash equivalents||$||5,241||$||9,273|
|Accounts receivable, net||2,834||3,508|
|Unbilled accounts receivable||1,401||1,445|
|Prepaid expenses and other current assets||1,040||489|
|Total current assets||17,951||18,616|
|Equipment, furniture and leasehold improvements, net||8,980||9,131|
|Intangibles and other assets||282||336|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Revolving Credit Facility||1,689||—|
|Other accrued expenses||1,513||1,193|
|Other current liabilities||591||602|
|Total current liabilities||6,753||4,677|
|Commitments and contingencies|
|Preferred stock, $.001 par value: authorized 10,000,000 shares:|
Series B Convertible Preferred stock, (liquidation preference of $5,659,000) stated value
$1,000 per share, $.001 par value: 10,000 shares designated and 5,659 issued and
outstanding as of December 31, 2016 and 2015
Common stock, $.001 par value: authorized 200,000,000 shares, issued 31,788,582
shares as of December 31, 2016 and 29,550,170 shares as December 31, 2015
|Additional paid-in capital||239,915||234,814|
|Treasury stock, 162,066 shares as of December 31, 2016, and 2015||(500)||(500)|
|Total shareholders’ equity||20,460||23,406|
|Total liabilities and shareholders’ equity||$||27,213||$||28,083|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In thousands, except share and per share data)|
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|Total revenues, net||4,558||6,714||21,397||25,142|
|Cost of revenues:|
|Total cost of revenues||4,068||5,810||14,955||18,164|
|Research and development||1,895||1,150||6,362||4,353|
|Selling, general and administrative||2,366||1,857||8,411||6,687|
|Total operating expenses||4,261||3,007||14,773||11,040|
|Loss from operations||(3,771)||(2,103)||(8,331)||(4,062)|
|Other income (expense):|
|Interest expense, net||(2)||(11)||(30)||(43)|
|Other income (expense), net||305||(11)||313||—|
|Total other income (expense), net||303||(22)||283||(43)|
|Loss before provision for income taxes||(3,468)||(2,125)||(8,048)||(4,105)|
|Provision for income taxes||—||—||(1)||—|
|Loss per share, basic||$||(0.11)||$||(0.08)||$||(0.27)||$||(0.16)|
|Loss per share, diluted||$||(0.11)||$||(0.08)||$||(0.27)||$||(0.16)|
|Weighted average number of shares outstanding:|
|Three Months Ended||Twelve Months Ended|
|December 31,||December 31,|
|Depreciation and amortization expense||427||417||1,641||1,530|
|Non-cash adjustments to other income||(302)||-||(302)||-|
|Provision for income taxes||-||-||1||-|