eMagin Corporation Announces Second Quarter 2020 Results

Revenue of $7.7 million, up 44 % year-over-year and 15% sequentially from Q1

HOPEWELL JUNCTION, NY / ACCESSWIRE / August 13, 2020 / eMagin Corporation, or the “Company”, (NYSE American:EMAN), a leader in the development, design and manufacture of Active Matrix OLED microdisplays used in Military and Commercial AR/VR devices, and other near-eye imaging products, today announced results for the second quarter 2020.

“We have been deemed an essential business by the U.S. government and as such, have continued to manufacture and ship products during the COVID-19 pandemic. Despite operating with an enhanced number of employee health and safety measures including social distancing, we were still able to significantly increase our revenue in the quarter both sequentially and year-over-year,” said CEO Andrew G. Sculley. “Our revenue increased 44% on a year-over-year basis and 15% sequentially, at the high end of our guidance that we gave on July 22nd. In addition to our revenue growth, we had solid bookings and growth of our backlog to $14.5 million of which $13.2 million is shippable within the next twelve months. Our quarterly operating loss declined from $2.9 million in 2019 to $1.3 million. Because of the significant opportunities related to our direct patterning technology (” dPdTM“) and the progress that we have been making, we increased our R&D activities and expenditures during the quarter.”

“We received a significant affirmation of the strength of our products and technology in the quarter from the U.S. government. In the past two months, we received two Department of Defense awards totaling $39.1 million. eMagin is the only US manufacturer of OLED microdisplays and our displays are used in many important U.S. Military programs.”

“The funding provided by these awards will enable us to procure key equipment and tooling, including dPd equipment, and we are currently defining the specifications and expect to place orders for new equipment beginning in the next few weeks. Our first deliveries of equipment under this three-year program would most likely occur in the second quarter of 2021. Upon receipt of the equipment, there is typically an additional period needed to test and qualify the machinery and the processes. The production tool for dPd is expected to be functional and manufacturing qualified products in the third quarter of 2023.”

“We have several contracts with Tier One customers in the consumer space and are seeing renewed or increased interest in our dPd technology from these and other high-profile Tier One players. We believe that our technology can be broadly applied and licensed to other OLED manufacturers, and is ideal for AR/VR.”

“During the quarter, we continued to ship a significant amount of product for the ENVG-B program as well as produce displays for the F-35 program. Our success in these programs has led to additional design work as well as significant new bookings for other military programs worldwide. We have a number of new customers and projects spanning a broad range of applications from military and medical to law enforcement, industrial, and consumer.”

“In terms of operations, we have fabricated full color displays using the newly upgraded and installed dPd tool in the second quarter. We plan to ship in small quantities to customers in the third quarter,” continued Mr. Sculley. “In addition, we are continually making improvements in production processes. Despite some delays earlier in the quarter related to COVID-19, our manufacturing line and production equipment have been running without major issues. We are in the process of implementing some of the processes from our yield improvement efforts and we have initiated an effort to explore an overall productivity improvement in the operations area that we believe has the potential to significantly impact the bottom line.”

“At the end of the quarter, we had $5.4 million in cash, and borrowings outstanding and borrowings available under our ABL facility of $0.4 million and $3.1 million, respectively. Included in this amount is $1.96 million from a PPP loan, which the Company will use to maintain full employment and expects to be forgiven.”

“Subsequent to the quarter, we further strengthened our overall financial position as we were awarded funds over a three year period from the Department of Defense for new equipment and tooling. Finally, we raised an additional $6.5 million remaining under our ATM facility which improves our liquidity.”

“I want to again extend our thanks and appreciation to our team members at eMagin. This has been a very challenging environment, but the teams have not let this significantly impact our production and ongoing success,” concluded Mr. Sculley.

Second Quarter Results
Total revenues for the second quarter of 2020 were $7.7 million, an increase of approximately $2.3 million from revenues of $5.4 million reported in the prior year period, and an increase of $1.0 million from the first quarter of 2020.

Total revenue consists of both product revenue and contract revenue. Product revenues for the second quarter of 2020 were $6.3 million, an increase of $1.3 million from product revenues of $5.0 million reported in the prior year period. The increase in display revenue for the quarter resulted from increased demand from military customers and higher average selling prices. The increase in product revenue was achieved despite some minor disruptions resulting from the Covid-19 pandemic. Contract revenues were $1.4 million compared to $0.4 million reported in the prior year reflecting the contribution from contract R&D work for the consumer market.

Total gross margin for the second quarter was 26% on gross profit of $2.0 million compared to a gross margin of 4% on gross profit of $0.2 million in the prior year period. The total gross margin of 26% in the second quarter of 2020 reflects favorable margins on contract revenues for the consumer market. Second quarter 2020 product gross margin of 20% compares favorably to 1% in the prior year which was impacted by lower throughput due to manufacturing challenges that had continued from the first quarter of 2019.

Operating expenses for the second quarter of 2020, including R&D expenses, were $3.3 million as compared to $3.1 million reported in the prior year period. Operating expenses as a percentage of sales were 43% in the second quarter of 2020 compared to 57% reported in the prior year period. R&D expenses were higher in the second quarter, primarily reflecting a focus on R&D projects related to dPd technology and our XLE display development, partially offset by costs charged to contract R&D work for the consumer market. SG&A expenses were slightly lower in the second quarter versus the year ago period due to salary reductions implemented in October 2019, a reduction in non-cash stock compensation for the Board of Directors implemented in December 2019 and lower travel and other discretionary expenses.

Operating loss for the second quarter of 2020 was $1.3 million compared to an operating loss of $2.9 million in the prior year period. Net loss for the second quarter of 2020 was $2.8 million or $0.05 per share compared to a loss of $2.3 million or $0.05 per share in the prior year period. Net loss for the current and prior year periods reflects a $1.5 million non-cash loss and $0.5 million non-cash gain related to the change in fair value of a warrant liability, respectively.

Adjusted EBITDA the second quarter was negative $0.8 million compared to a negative $2.3 million in the prior year period.

At June 30, 2020, the Company had cash and cash equivalents of $5.4 million and working capital of $12.0 million. Borrowings and availability under the ABL facility were $0.4 million and $3.1 million respectively at June 30, 2020. In December 2019, eMagin entered into an At the Market sales agreement with H.C. Wainwright & Co. for the sale of common stock. During the quarter, the Company raised $1.8 million under its ATM facility.

Outlook for third quarter
At June 30, 2020, the Company’s backlog of open orders was $14.5 million, including $13.2 million shippable within twelve months. This compares to a backlog of orders shippable within twelve months of $11.7 million as of December 31, 2019. As deemed an essential business, the Company continues to ship and produce product and has not experienced any major material supply chain disruptions.

Conference Call Information
eMagin will hold a Webcast at 9:00 am (New York time) on August 13, 2020 to discuss its second quarter results. To access the live webcast or archive, please visit the Company’s website at ir.emagin.com or www.earnings.com. An archive of the webcast will be available one hour after the live call.

About eMagin Corporation
The leader in OLED microdisplay technology for the next generation of computing and imaging devices, serving world-class customers in the military and consumer, medical and industrial markets. We invent, engineer and manufacture display technologies of the future in the USA, including our Direct Patterning Technology (dPd) that will transform the way the world consumes information. Since 2001, our microdisplays have been, and continue to be, used in AR/VR, aircraft helmets, heads-up display systems, thermal scopes, night vision goggles, future weapon systems and a variety of other applications. www.emagin.com

Important Cautionary Information Regarding 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 factors that could cause our actual results to differ from our current expectations, including impacts of the COVID-19 pandemic, please see the section entitled “Risk Factors” in eMagin’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and in any Form 10-Q filed or to be filed by eMagin, and in other documents we file with the SEC from time to time.

CONTACT
eMagin Corporation
Mark A. Koch
Acting Chief Financial Officer
845-838-7951
[email protected]

Affinity Growth Advisors
Betsy Brod
212-661-2231
[email protected]

 

eMAGIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 
  June 30,     December 31,  
 
  2020     2019  
ASSETS
           
Current assets:
           
Cash and cash equivalents
  5,447     3,515  
Accounts receivable, net
    6,085       3,966  
Unbilled accounts receivable
    16       155  
Inventories
    8,470       8,832  
Prepaid expenses and other current assets
    1,389       1,130  
Total current assets
    21,407       17,598  
Equipment, furniture and leasehold improvements, net
    7,817       8,100  
Operating lease right – of – use assets
    3,358       3,729  
Intangibles and other assets
    130       160  
Total assets
  32,712     29,587  
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  1,809     1,302  
Accrued compensation
    1,914       1,778  
Paycheck Protection Program loan – current
    496        
Revolving credit facility, net
    420       2,891  
Common stock warrant liability
    1,524       23  
Other accrued expenses
    1,598       1,401  
Deferred revenue
    289       277  
Operating lease liability – current
    809       775  
Other current liabilities
    508       342  
Total current liabilities
    9,367       8,789  
Finance lease liability – long term
    16       24  
Paycheck Protection Program loan – long term
    1,467        
Deferred Income – Government awards – long term
    2,263        
Operating lease liability – long term
    2,654       3,067  
Total liabilities
    15,767       11,880  
 
               
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 June 30, 2020 and December 31, 2019.
           
Common stock, $.001 par value: authorized 200,000,000 shares, issued 61,407,331 shares, outstanding 61,245,265 shares as of June 30, 2020 and issued 50,250,378 shares, outstanding 50,088,312 shares as of December 31, 2019.
    61       50  
Additional paid-in capital
    262,194       258,767  
Accumulated deficit
    (244,810 )     (240,610 )
Treasury stock, 162,066 shares as of June 30, 2020 and December 31, 2019.
    (500 )     (500 )
Total shareholders’ equity
    16,945       17,707  
Total liabilities and shareholders’ equity
  32,712     29,587  

 

 

eMAGIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 
  Three Months Ended     Six Months Ended  
 
  June 30,     June 30,  
 
  2020     2019     2020     2019  
Revenues:
                       
 
                       
Product
  6,260     4,958     11,894     10,465  
Contract
    1,440       403       2,537       1,008  
Total revenues, net
    7,700       5,361       14,431       11,473  
 
                               
Cost of revenues:
                               
 
                               
Product
    4,978       4,898       9,768       9,324  
Contract
    746       238       1,253       588  
Total cost of revenues
    5,724       5,136       11,021       9,912  
 
                               
Gross profit
    1,976       225       3,410       1,561  
 
                               
Operating expenses:
                               
 
                               
Research and development
    1,599       1,300       2,579       2,897  
Selling, general and administrative
    1,712       1,777       3,510       3,716  
Total operating expenses
    3,311       3,077       6,089       6,613  
 
                               
Loss from operations
    (1,335 )     (2,852 )     (2,679 )     (5,052 )
 
                               
Other income (expense):
                               
Change in fair value of common stock warrant liability
    (1,481 )     536       (1,501 )     1,330  
Interest expense, net
    (18 )     (21 )     (35 )     (55 )
Other income, net
    3             15        
Total other (expense) income
    (1,496 )     515       (1,521 )     1,275  
Loss before provision for income taxes
    (2,831 )     (2,337 )     (4,200 )     (3,777 )
Income taxes
                       
 
                               
Net loss
  (2,831 )   (2,337 )   (4,200 )   (3,777 )
 
                               
Loss per share, basic and diluted
  (0.05 )   (0.05 )   (0.08 )   (0.08 )
 
                               
Weighted average number of shares outstanding:
                               
 
                               
Basic and Diluted
    56,755       48,818       54,197       46,980  

 

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 (in thousands).

 

 
  Three Months Ended     Six Months Ended  
 
  June 30,     June 30,  
 
  2020     2019     2020     2019  
Net loss
  (2,831 )   (2,337 )   (4,200 )   (3,777 )
Non-cash compensation
    44       97       87       290  
Change in fair value of common stock warrant liability
    1,481       (536 )     1,501       (1,330 )
Depreciation and intangibles amortization expense
    479       499       959       987  
Interest expense
    18       21       35       55  
Adjusted EBITDA
  (809 )   (2,256 )   (1,618 )   (3,775 )

 

SOURCE: eMagin Corporation

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