eMagin has announced financial results and corporate highlights for the second quarter ended June 30, 2017.
Revenues for the second quarter of 2017 were US$5.3 million as compared to US$5.5 million in the second quarter of 2016.
Product revenues totalled US$4.7 million versus US$4.8 million in the second quarter last year and US$4.4 million in the first quarter of 2017. The year-on-year decline in product revenue was due to the wind down beginning mid-2016 of maturing military programs partially offset by the gradual ramp up of new military programs and sales of newly developed displays to commercial customers.
R&D contract revenues totalled approximately US$605,000 versus US$752,000 reported in the prior year quarter. The decline in military R&D contract revenues from completed contracts masks the contribution from commercial R&D contract revenues earned from multiple major consumer electronics companies and on which no R&D revenues were earned in 2016.
Overall gross margin for the second quarter was 24% on gross profit of US$1.2 million compared to a gross margin of 24% on gross profit of US$1.3 million in the second quarter of 2016.
Operating expenses for the second quarter of 2017, including R&D expenses, decreased to $3.3 million, from $3.5 million in the second quarter of 2016. Second quarter R&D expenses reflect a greater allocation of R&D resources to commercial R&D contract revenues partially offset by continuing investment in the Company’s direct patterning technology.
SG&A expenses increased over the prior year period due largely to greater travel and professional services spending, including legal services, associated with our negotiations with prospective consumer electronics and volume manufacturing partners. Interest expense of US$188,000 in the second quarter of 2017 included a US$158,000 write-off of capitalised debt issuance costs associated with the expiration of an unsecured debt financing commitment.
Operating loss for the second quarter was US$2.1 million versus operating loss of US$2.2 million in the second quarter of last year. Net loss for the second quarter of 2017 was US$2.3 million, or US$0.07 per diluted share, compared to net loss of US$2.2 million, or US$0.07 per diluted share, in the second quarter of 2016.
Cash and cash equivalents were US$4.9 million, no debt was outstanding, and borrowing availability under the ABL facility was US$3.8 million at the end of the second quarter.
| eMagin reports financial results for Q2 2017 (US$ ,000) |
2017 Q2 |
2016 Q2 |
2017 H1 |
2016 H1 |
|---|---|---|---|---|
| Revenue - Products | 4,655 | 4,781 | 9,036 | 10,064 |
| Revenue - Contract | 605 | 752 | 2,293 | 1,458 |
| Revenue - Total | 5,260 | 5,533 | 11.329 | 12,534 |
| Gross profit | 1,249 | 1,335 | 3,067 | 4.670 |
| Operating expenses | 3,330 | 3,492 | 7,127 | 6,805 |
| Net (loss) Income | (2,270) | (2,164) | (4,269) | (2,150) |
| Net result per share - basic($) | (0.07) | (0.07) | (0.13) | (0.07) |
Andrew G. Sculley, President and CEO, said:
- We have set ambitious goals for 2017, and I am confident that we will achieve them
- We have seen a sequential increase in our display sales from the first quarter as the new military contracts are coming on line, as well as a significant uptick from sales of newly developed displays supported by our R&D programs for commercial customers
- Our direct patterned 2K x 2K display, which is the highest resolution and highest brightness full color OLED microdisplay in the marketplace today, was demonstrated during the Display Week Conference at the Society for Information Display in Los Angeles in May
- We received an outstanding reception for this achievement from many of the participants who represent leading display and related applications manufacturers and users
- As we have previously stated, we are in active discussions with well-known consumer product companies to develop and design their next-generation microdisplays
- Our contract R&D work reflects this as we are up 57% over last year at this time and anticipate that this will result in higher product-related revenues in the future
- The consumer AR/VR market will be the driver for high volume business and we are executing successfully on a plan to both secure consumer electronics companies as our channel to this market and partner with a mass production company to ensure our ability to meet the future volume demands of this segment
- Several prospective commercial customers have accelerated their negotiations with us and our related discussions with potential high volume manufacturers are progressing
- As a result, I believe we remain on target to sign an additional agreement by the end of the year
Business and Product Highlights
Commercial
- Commenced work with a major consumer electronics company to design and develop a microdisplay for a VR headset
- Under this program, which is expected take between 12 and 15 months, a limited quantity of sample displays will be produced
- Additionally, the Company is actively negotiating with companies to provide high volume manufacturing capability
- Furthered negotiations with multiple consumer electronics companies on both new display designs and low rate production capability
Military
- Secured a $1 million order for a new thermal weapon sight program with a major European customer
- Procured tooling and delivered the initial OLED display, taper, and lens assemblies for integration and testing as part of our selection as a sole source provider of OLED microdisplays for a major U.S. Army helicopter helmet upgrade program
- Completed a requirements review with a major aviation prime contractor for an OLED upgrade to a fixed wing production helmet
- This program continues on schedule
- Delivered first 2K x 2K display to a defense contractor for integration into a new HMD prototype
- Delivered high brightness displays for the U.S. Army Soldier Visual Interface Technology (SVIT) program
- This key program will improve the situational awareness, lethality and survivability of the dismounted warrior and the eMagin OLED display is integral in providing the technological path for future military head mounted display systems
Financial
- Completed on May 24th an underwritten offering of 3.3 million shares of common stock at US$2.00 per share and warrants to purchase up to 1.65 million shares of common stock
- The Company realized net proceeds of $5.8 million after underwriting discounts and offering expenses
Outlook
- The Company remains focused on the following objectives to drive shareholder value:
- Advance our product development discussions with major consumer electronics companies to incorporate our direct patterning 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 commercial and consumer markets which offer high performance and broad appeal at an attractive price
- Continue our progress in manufacturing improvements including yield enhancement and production capacity expansion.
"Our leading-edge OLED direct patterning technology continues to generate strong interest and enthusiasm. We are actively engaged in negotiations with potential partners for both high volume and low volume production as well as consumer applications. Additionally, there is renewed activity amongst our military customers, both domestic and international which bodes well for future display sale"
Andrew Sculley, CEO emagin