Revenues for the second quarter of 2016 were US$5.5 million, down 21% from the second quarter of 2015.
Product revenues totaled US$4.8 million, 12% less than second quarter last year, primarily due to lower volumes on government contracts and the previously mentioned manufacturing issues. R&D contract revenues totaled approximately US$752 thousand, an increase of 7% sequentially from Q1 and a decrease of 53% from the second quarter last year. The reduced R&D contract revenue year-over-year was due to extensive contract work performed on a few large contracts in the 2015 second quarter.
Overall gross margin for the second quarter was 24% on gross profit of US$1.3 million compared to a gross margin of 37% on gross profit of US$2.6 million in the same quarter last year. The lower gross margin was primarily due to lower revenue and the aforementioned equipment downtime. This downtime resulted in lower cost absorption and higher unit costs of sales.
Operating expenses for the second quarter of 2016, including R&D expenses, increased to US$3.5 million from US$2.7 million in the second quarter of 2015. Q2 operating expenses reflect higher spending as we advanced our consumer products toward revenue this year and costs associated with the consolidation of the Company’s finance and procurement functions.
Operating loss for the second quarter increased to US$2.2 million from a loss of $60 thousand in the second quarter last year. Net loss for Q2 2016 increased to US$2.2 million, or US$0.07 per basic and diluted share, from a loss of US$66 thousand, or US$0.00 per basic and diluted share, in Q2 2015.
At June 30, 2016, the Company had approximately US$6.1 million of cash and cash equivalents compared to US$9.3 million of cash and cash equivalents at December 31, 2015
During the quarter we increased our R&D investment and began to build inventory in anticipation of our consumer product launch scheduled for later this year.
| eMagin reports financial results for Q2 2016 (US$ ,000) |
2016 Q2 |
2015 Q2 |
2016 H1 |
2015 H1 |
|---|---|---|---|---|
| Revenue - Products | 4,781 | 5,426 | 6,956 | 10,530 |
| Revenue - Contract | 752 | 1,608 | 62 | 2,493 |
| Revenue - Total | 5,533 | 7,034 | 7,018 | 13,026 |
| Gross profit | 1,335 | 2,608 | 2,169 | 4,968 |
| Operating expenses | 3,492 | 2,668 | 3,213 | 4,699 |
| Net (loss) Income | (60) | (1,044) | 269 | (2,658) |
| Net result per share - basic($) | (0.07) | -- | (0.07) | 0.01 |
Andrew G. Sculley, President and CEO, said:
- We remain encouraged by expanding end markets for Virtual Reality, Augmented Reality and military applications that can leverage our leading OLED technology
- We believe eMagin is the only Company whose products can meet the brightness and resolution requirements for high-pixel density displays that these markets demand
- While Q2 was a financially challenging quarter, we are excited about our progress on opportunities we are pursuing in the broader commercial and consumer segments
- Our dialogues with several large Tier One companies are accelerating and we are seeing positive results from several business development initiatives
- Our second quarter financial performance was impacted by lower volumes on certain military contracts and by downtime on one of our manufacturing tools
- As part of our manufacturing upgrade planning earlier this year, we had ordered a replacement for this older machine and expect delivery in the fourth quarter
- The softness in our domestic military business is due to lower volume run rates on maturing programs in advance of the expected ramp-up on new military programs
- We are currently working on pre-production orders under the Enhanced Night Vision Goggle III (ENVG III) and Family of Weapon Sights (FWS) programs and expect an increase late in the fourth quarter
- We remain encouraged longer term by our portfolio of military contracts including potential future sales into military aviation programs, a key strategic growth opportunity for us
- Additionally, we are aggressively pursuing foreign military sales
- The foreign military component of our international business, which accounts for over 55% of Q2 product revenues, experienced growth in the quarter
- We have made significant strides as we move strategically beyond our core military business and pursue commercial opportunities to achieve greater growth for the Company
- Our ongoing discussions with a number of Tier One companies are progressing more rapidly than at any time in the past and several are at advanced stages
- Another of our strategic growth initiatives to expand into commercially attractive markets has been to realign our sales and marketing resources to focus on high growth areas in the industrial, medical device and consumer sectors where our advanced optics and OLED microdisplay technologies are at the cutting edge of product development
- During the first six months of 2016, we expanded our active customer count by 11% to 108 customers
- In the second quarter, we were awarded an $825 thousand order with a major medical device company, the largest single order in this market in the Company’s history