eMagin Corporation Announces Fourth Quarter and Full-Year 2020 Results

  • Fourth-Quarter Revenue of $7.7 million; Full-Year Revenue of $29.4 million
  • Company Takes First Delivery of New Equipment Under U.S. Department of Defense Grants
  • Ending Unrestricted Cash Balance of $8.3 million, up from $3.5 million
  • Strong Backlog of Open Orders of $12.2 million

HOPEWELL JUNCTION, NY / ACCESSWIRE / March 18, 2021 / eMagin Corporation, or the “Company”, (NYSE American:EMAN), a leader in the development, design and manufacture of Active Matrix OLED microdisplays for high-resolution, AR/VR and other near-eye imaging products, today announced fourth-quarter and full-year results for 2020.

Fourth-quarter revenues were $7.7 million, compared with $7.3 million in the prior-year period. Contract revenues were $1.5 million, compared with $0.5 million a year ago, reflecting continued Direct Patterning Display (dPd™) development work for tier-one consumer companies. Fourth-quarter 2020 display sales totaled $6.2 million, compared with sales of $6.8 million a year ago, reflecting timing of certain orders with large military customers.

Full-year revenues increased to $29.4 million, compared with $26.7 million in the prior year, reflecting increases in both product and contract revenues. Higher contract revenues of $4.4 million in 2020 primarily reflect development work for a tier-one consumer company for an advanced display design and proof of concept for a consumer AR/VR device.

“In 2020, thanks to the courage and tireless efforts of our employees, we moved forward on several initiatives while increasing revenues, despite unfavorable conditions brought on by the pandemic,” said eMagin CEO Andrew G. Sculley. “Last year, we announced the award of more than $39 million in government funding for the purchase of factory equipment to protect and enhance our ability to manufacture in our Hopewell Junction facility and we are proud to be the only U.S. manufacturer of OLED microdisplays. We are on track with the program requirements and appreciate the support of the U.S. Military in helping to protect our vital U.S. production line and the manufacturing jobs we provide.”

“In December, we signed a long-term lease at our Hopewell Junction facility, and increased our manufacturing footprint by more than 25% to accommodate the new equipment and cleanroom funded by the U.S. Department of Defense. Furthermore, we are hiring additional engineers to continue to improve our technical capabilities and are increasing R&D investment in our dPd technology, which we believe will position us to drive additional contract revenues in the near term.”

“In the fourth quarter, we had strong bookings of $8.3 million, which led to a 22% increase in our backlog from the third quarter of 2020,” said Mark Koch, the Company’s acting CFO. “During the fourth quarter, we received significant orders from night vision, eye care and veterinary customers. As of December 31, 2020, our backlog of open orders was $12.2 million, including $10.9 million scheduled for delivery through December 31 of this year.”

“In addition to strong bookings under continuing programs, in the fourth quarter we received orders under 10 new programs, including thermal sights, thermal imaging glasses, and automotive manufacturing monitoring,” added Sculley. “We continued to supply sole-sourced displays under the Enhance Night Vision Goggle-Binocular (ENVG-B) program as it ramps to volume, as well as other key military programs worldwide.”

“Overall, we continue to see strong interest in our high-brightness dPd technology and believe it to be the best display solution for AR/VR applications. We are making steady progress in developing our dPdtechnology and are targeting an initial brightness of 10,000 cd/m2 for the high-resolution prototypes we are producing for tier-one consumer companies. We have developed and tested the color OLED device stacks consistent with this goal and these will be used in direct patterning of the prototype displays in the first half of 2021. Since dPd is a process technology that can be applied to any OLED microdisplay, future dPd roadmap milestones will include the addition of tandem, or double, OLED structures and other improvements that we believe will allow us to stay ahead of the competition in providing the highest brightness displays to the marketplace. Moreover, our OLED microdisplays will satisfy the brightness, contrast and resolution needed for AR and VR headsets. We expect our consumer contract revenues will continue in 2021 as we work with customers on continued development and scalability of our dPdtechnology to serve the consumer AR/VR markets.”

“In parallel with our dPd efforts, we continue to advance the state-of-the-art microdisplays that utilize white OLED with color filters. We significantly advanced development efforts on our XLE technology, which will give customers a sizeable boost in luminance and/or lifetime over their current eMagin displays, and shipped early samples to key customers. We expect to qualify initial products in the first half of 2021 with nominal luminance of 1,500 cd/m2 for full color displays, with a roadmap to even brighter color-filter based displays to follow. We feel confident that further improvements in this technology will be manufacturable in volume in the near term, with a bridge to dPd technology as that continues to mature.”

Fourth Quarter Results
Revenues for the fourth quarter of 2020 were $7.7 million, an increase of $0.4 million from $7.3 million in the prior-year period, and a sequential increase of $0.4 million from the third quarter of 2020.

Total revenue consists of both product revenues and contract revenues. Product revenues for the fourth quarter of 2020 were $6.2 million, a decrease of $0.6 million from product revenues of $6.8 million reported in the prior-year period, and a decrease of $0.8 million compared to the third quarter of 2020. The year-over-year quarterly decrease in product revenue was due primarily to the timing of certain orders from prime defense contractors.

Contract revenues were $1.5 million, compared with $0.5 million in the prior-year period, due to the display design work for tier-one consumer customers.

Total gross margin for the fourth quarter was 17% on gross profit of $1.3 million compared to a gross margin of 37% on gross profit of $2.7 million in the prior-year period. The decrease in gross margins was impacted by lower revenues and lower production and absorption of fixed cost into inventory, due to equipment issues and repair delays related to COVID-19 travel restrictions. The Company expects a recovery in yields in 2021 due to the arrival of a key vendor support person, repairs made to date, and the contributions of equipment purchased under the government awards.

Operating expenses for the fourth quarter of 2020, including R&D expenses, were $3.6 million, compared with $2.8 million in the prior-year period. Operating expenses as a percentage of sales were 47% in the fourth quarter of 2020, compared with 38% in the prior-year period. R&D expenses were higher in the fourth quarter, primarily reflecting additional headcount and internal costs incurred in the development of the Company’s high-brightness dPd and XLE displays. SG&A expenses were higher in the fourth quarter versus the year-ago period due primarily to increased legal costs related to the consumer contract work and arbitration of a dispute with a former contract manufacturer. The Company expects a reduction in these legal costs going forward.

Operating loss for the fourth quarter 2020 was $2.4 million, compared with $0.1 million in the prior-year period. The result was mainly due to a decrease in non-military revenues, production equipment issues that affected yields, higher legal fees related to an ongoing arbitration and consumer contract negotiations, plus increased investments in R&D efforts for the Company’s dPd and XLE processes.

Net loss for the fourth quarter 2020 was $3.7 million, or $0.05 per share, compared with a loss of $0.2 million, or $0.00 per share, in the same period of 2019. Excluding the impact of the non-cash change in the fair value of the warrant liability, net loss for the fourth quarter of 2020 was $0.04 per share, versus $0.00 per share in the year-ago fourth quarter.

Adjusted EBITDA for the fourth quarter was negative $1.7 million, compared with $0.4 million in the prior-year period.

Full-Year Results
Revenues for 2020 were $29.4 million, up 10% from $26.7 million in 2019. Product revenues totaled $25.0 million, representing a 2% increase from $24.6 million in 2019, due primarily to customer demand. R&D contract revenues totaled approximately $4.4 million, representing a 105% increase from $2.1 million in 2019.

Gross margin for 2020 was 22%, compared with 25% in 2019. Gross margin for 2020 was impacted by issues related to the COVID-19 pandemic, including employee absences, stricter cleaning requirements, and longer than normal repair times as a result of travel restrictions for vendor personnel.

Operating expenses for 2020, including R&D expenses, were $13.3 million, compared with $12.3 million in 2019. The majority of the increase was due to higher legal costs and investments in R&D expenses for Company-funded work related to eMagin’s high-brightness dPd product and XLE process development, along with resources expended on improving manufacturing processes.

Operating loss for 2020 was $6.9 million, versus $5.6 million in 2019. Net loss for 2020 was $11.4 million, or $0.19 per diluted share. This compares to a net loss of $4.3 million, or $0.09 per diluted share, in 2019. Excluding the impact of the non-cash change in the fair value of the warrant liability, net loss for full-year 2020 was $0.11 per share, versus a net loss of $0.12 per share in 2019.

Balance Sheet Highlights
eMagin’s financial position as of December 31, 2020 reflects a total of $8.3 million in unrestricted cash, an improvement of $4.8 million compared to year-end 2019. This is in addition to $2.1 million of cash restricted for purchases of equipment under Title III and IBAS government grants announced in June and July 2020. The Company had $1.9 million in borrowings and $2.1 million in credit availability under its revolving credit facility as of year-end 2020. This compares to borrowings of $2.9 million and borrowing availability of $1.2 million at year-end 2019.

In January 2021, the Company took delivery of an advanced wafer inspection tool valued at $1.1 million, which was the first equipment to be received under the combined $39.1 million in U.S. government funding awarded to eMagin to enhance its manufacturing capabilities as the only U.S. provider of OLED microdisplays.

In December 2020, eMagin signed a 10-year lease with its current landlord to provide 25% of additional space to house the new equipment provided under the U.S. government grants, including equipment to be purchased for the Company’s patented high-brightness dPdproduction process. The approximately $12.7 million in discounted payments is reflected as a finance lease in the property, plant and equipment line.

Conference Call and Webcast Information
Management will host a conference call and simultaneous webcast at 9 a.m. ET on March 18 to discuss eMagin’s quarterly and year-end results, business highlights and outlook. To join the live listen-only webcast, please visit the Company’s website at www.emagin.com or use the following link: https://www.webcaster4.com/Webcast/Page/2471/40130. To join the conference call, dial 1-888-506-0062 in the United States, or 1-973-528-0011 internationally. The entry code is 230318. Participants are encouraged to join at least 15 minutes before the start of the call. An archive of the webcast will be available approximately one hour after the live call.

About eMagin Corporation
eMagin is the leader in OLED microdisplay technology for the next generation of computing and imaging devices, serving world-class customers in the military, consumer, medical and industrial markets. The Company invents, engineers and manufactures display technologies of the future and is the only manufacturer of OLED displays in the United States. eMagin’s Direct Patterning Technology (dPd™) will transform the way the world consumes information. Since 2001, eMagin’s microdisplays have been used in AR/VR, aircraft helmets, heads-up display systems, thermal scopes, night vision goggles, future weapon systems and a variety of other applications. For more information, please visit 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 risk 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, 2020, 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]

Sharon Merrill Associates, Inc.
Nicholas Manganaro
617-542-5300
[email protected]

eMAGIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

 
  December 31,     December 31,  
 
  2020     2019  
ASSETS
           
Current assets:
           
Cash and cash equivalents
  8,315     3,515  
Restricted cash
    2,111        
Accounts receivable, net
    5,314       3,966  
Account receivable-due from government awards
    1,013        
Unbilled accounts receivable
    253       155  
Inventories
    8,379       8,832  
Prepaid expenses and other current assets
    943       1,130  
Total current assets
    26,328       17,598  
Property, plant and equipment, net
    21,132       8,100  
Operating lease right – of – use assets
    50       3,729  
Intangibles and other assets
    126       160  
Total assets
  47,636     29,587  
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  1,206     1,302  
Accrued compensation
    1,628       1,778  
Paycheck Protection Program loan – current
    982        
Revolving credit facility, net
    1,875       2,891  
Common stock warrant liability
    4,622       23  
Other accrued expenses
    1,693       1,401  
Deferred revenue
    425       277  
Operating lease liability – current
    51       775  
Finance lease liability – current
    1,027       16  
Other current liabilities
    757       326  
Total current liabilities
    14,266       8,789  
Other liability – long term
    56        
Paycheck Protection Program loan – long term
    982        
Deferred Income – government awards – long term
    4,309        
Operating lease liability – long term
          3,067  
Finance lease liability – long term
    11,783       24  
Total liabilities
    31,396       11,880  
 
               
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 December 31, 2020 and December 31, 2019.
           
Common stock, $.001 par value: authorized 200,000,000 shares, issued 68,890,819 shares, outstanding 68,728,753 shares as of December 31, 2020 and issued 50,250,378 shares, outstanding 50,088,312 shares as of December 31, 2019.
    69       50  
Additional paid-in capital
    268,729       258,767  
Accumulated deficit
    (252,058 )     (240,610 )
Treasury stock, 162,066 shares as of December 31, 2020 and December 31, 2019.
    (500 )     (500 )
Total shareholders’ equity
    16,240       17,707  
Total liabilities and shareholders’ equity
  47,636     29,587  
                 

eMAGIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 
  Three Months Ended     Twelve Months Ended  
 
  December 31,     December 31,  
 
  2020     2019     2020     2019  
Revenues:
                       
 
                       
Product
  6,170     6,803     25,042     24,589  
Contract
    1,512       531       4,382       2,137  
Total revenues, net
    7,682       7,334       29,424       26,726  
 
                               
Cost of revenues:
                               
 
                               
Product
    5,901       4,338       21,054       18,775  
Contract
    518       320       2,005       1,223  
Total cost of revenues
    6,419       4,658       23,059       19,998  
 
                               
Gross profit
    1,263       2,676       6,365       6,728  
 
                               
Operating expenses:
                               
 
                               
Research and development
    1,402       1,105       5,715       5,048  
Selling, general and administrative
    2,233       1,696       7,567       7,251  
Total operating expenses
    3,635       2,801       13,282       12,299  
 
                               
Loss from operations
    (2,372 )     (125 )     (6,917 )     (5,571 )
 
                               
Other (expense) income:
                               
Change in fair value of common stock warrant liability
    (1,295 )     23       (4,599 )     1,474  
Interest expense, net
    (87 )     (103 )     (132 )     (201 )
Other income, net
    37             200        
Total other (expense) income
    (1,345 )     (80 )     (4,531 )     1,273  
Loss before provision for income taxes
    (3,717 )     (205 )     (11,448 )     (4,298 )
Income taxes
                       
Net loss
  (3,717 )   (205 )   (11,448 )   (4,298 )
 
                               
Loss per share, basic and diluted
  (0.05 )   0.00     (0.19 )   (0.09 )
 
                               
Weighted average number of shares outstanding:
                               
 
                               
Basic and Diluted
    67,619,845       49,316,852       60,457,652       48,132,714  
                 

eMAGIN CORPORATION
CONSOLIDATED CASH FLOW
(In thousands, except share data)

 
  Twelve Months Ended  
 
  December 31,  
 
  2020     2019  
Cash flows from operating activities:
           
Net loss
  (11,448 )   (4,298 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    2,112       2,046  
Change in fair value of common stock warrant liability
    4,599       (1,474 )
Loss on sale of equipment
    19        
Stock-based compensation
    158       551  
Amortization of operating lease right-of-use assets
    698       538  
Changes in operating assets and liabilities:
               
Accounts receivable
    (1,348 )     (780 )
Unbilled accounts receivable
    (98 )     69  
Inventories
    453       (250 )
Prepaid expenses and other current assets
    187       (255 )
Deferred revenues
    148       239  
Operating lease liabilities
    (730 )     (554 )
Accounts payable, accrued expenses, and other current liabilities
    353       (982 )
Net cash used in operating activities
    (4,897 )     (5,150 )
Cash flows from investing activities:
               
Purchase of equipment
    (1,089 )     (1,060 )
Purchase of equipment government grant
    (1,411 )      
Proceeds from sale of equipment
    50        
Net cash used in investing activities
    (2,450 )     (1,060 )
Cash flows from financing activities:
               
(Repayments) borrowings under revolving line of credit, net
    (1,016 )     2,891  
Proceeds from public offering, net
    9,783       3,476  
Change in finance lease liabilities
    (17 )     (10 )
Proceeds from government grant
    3,505        
Proceeds from Paycheck Protection Program loan
    1,963        
Proceeds from warrant exercise, net
    40        
Proceeds from exercise of stock options
          9  
Net cash provided by financing activities
    14,258       6,366  
Net increase in cash, cash equivalents, and restricted cash
    6,911       156  
Cash, cash equivalents, and restricted cash, beginning of period
    3,515       3,359  
Cash, cash equivalents, and restricted cash, end of period
  10,426     3,515  
Cash, cash equivalents, end of period
    8,315       3,515  
Restricted cash, end of period
    2,111        
 
               
Supplementary Cash Flow Information
               
Cash paid for interest
  52     177  
Cash paid for income taxes
       
 
               
                 

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.

             
 
  Three Months Ended     Twelve Months Ended  
 
  December 31,     December 31,  
 
  2020     2019     2020     2019  
 
                       
Net loss
  (3,717 )   (205 )   (11,448 )   (4,298 )
Non-cash compensation
    11       96       158       551  
Change in fair value of common stock warrant liability
    1,295       (23 )     4,599       (1,474 )
Depreciation and intangibles amortization expense
    631       483       2,112       1,963  
Interest expense
    87       103       132       201  
Adjusted EBITDA
  (1,693 )   454     (4,447 )   (3,057 )
                 

SOURCE: eMagin Corporation

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