eMagin Announces Record 2Q 2012 Revenues

eMagin Corporation announced financial results for the second quarter of 2012 ended June 30, 2012.

“I am pleased to report record revenue of $8.6 million, fueled by a 20% increase in display sales,” stated Andrew G. Sculley, president and CEO. “We captured the highest level of new business bookings ever, which drove our backlog to new highs. This performance, demonstrates the strong demand for our displays, from our new digital VGA to our latest HD WUXGA. These microdisplays are used in a wide range of products from portable viewers and thermal weapons sights to military and personal headsets. Our base business performed well both in domestic and international markets and our outlook for the balance of the year remains positive. Our second quarter performance reflects growing market demand for our advanced OLED technologies, which can address the most demanding applications, as well as further improvements in our manufacturing capacity and yield.

“We are manufacturing displays on our new OLED deposition tool as we continue to work on full-automation to optimize production capacity,” Sculley added. “We believe the displays coming off the new tool are of even higher overall quality, with increased uniformity. The increased uniformity is a benefit to both quality and yield. Once fully optimized, the new machine is expected to provide a 10-fold increase in OLED deposition capacity. During this period, we will continue to also produce on the Satella, our other OLED deposition machine, in order to enhance throughput and meet increasing customer orders.”

Revenues for the second quarter rose 15.3% to a record $8.6 million versus $7.4 million for the second quarter of 2011. The growth in revenues is mainly attributable to increased OLED microdisplays sales, which rose 19.8%.

Gross margin for the second quarter rose to 53% on gross profit of $4.5 million, compared to a gross margin of 49% on gross profit of $3.6 million in the same quarter last year. Gross margin for the second quarter of 2012 increased 24% over the second quarter of last year due to higher yield and fixed production costs being spread over a higher revenue base.

Income from operations increased 46% to $911,000 in the second quarter of 2012 from $624,000 in the second quarter of 2011. Adjusted net income for the second quarter increased 46% to $577,000 from $394,000 in the second quarter of last year. Net income for the second quarter was $577,000, or $0.02 per diluted share, compared to $3.0 million, or $0.01 per diluted share, in the second quarter last year. Second quarter adjusted EBITDA increased 38% to $1.6 million from $1.2 million last year. The company has no debt.

eMagin unveiled and demonstrated its WUXGA OLED-XL microdisplay at the Society for Information Display (SID) conference in Boston in June. The response was very enthusiastic and more than a dozen trade and business reporters, several analysts and numerous attendees visited eMagin’s booth and met with company management. The WUXGA OLED-XL microdisplay offers unmatched performance to a broad range of significant markets including diagnostic equipment and medical devices, simulation and training, homeland security, first responders, aviation, industrial, and augmented reality.

The company completed installation of its new OLED deposition machine. Work is progressing toward fully automated production expected in September. eMagin continuously evaluates its equipment needs based on demand forecasts and will augment its production as needed.

eMagin received a $2.4 million R&D contract from the U.S. Navy for a high brightness 2,000 by 2,000 pixel OLED microdisplay. The $1.1 million Phase I of the project will begin immediately and run through September 2012 when the $1.3 million Phase II option period, which runs an additional 12 months, begins. The proposed work in this program will result in a next generation digital goggle for avionic applications, where it is critical to display high brightness, high resolution sensor video to the pilot’s head-mounted display, leveraging the accomplishments of prior Night Vision and Electronic Sensors Directorate (NVESD) OLED programs and further improving the OLED performance. It is contemplated this work will facilitate the use of eMagin’s OLED microdisplays in environments requiring a very high brightness display such as aircraft cockpits.

The compnay was also awarded $3.5 million subcontract for Display Beam Combiner Assembly (DBCA) for the Enhanced Night Vision Goggle (ENVG) program from ITT Excelis, and received a $2.75 million multi-year purchase order from a subcontractor on the Light Weapon Thermal Sight (LWTS) program, the clip-on sight version of the Thermal Weapon Sight (TWS) program.

The U.S. SOCOM program, which is being funded by a $1.1 million SBIR grant, is on schedule and qualification testing is progressing. The new XGA display for electronic viewfinders is on schedule for completion in 2012. Samples are expected to be shipped to a potentially large customer in August.

eMagin is continuing to ship on a $3.1 million follow-on order for OLED displays for the U.S. Army Remote Viewer. The displays must be delivered in 2012. Deliveries continued under the Javelin Soldier-mounted anti-tank missile launcher program, while shipments continued for the Felin Soldier Modernization program in its second year of fielding.

eMagin continued to ship displays for three of Flir’s industrial thermal cameras. Shipments to a manufacturer of high-end digital cinematography cameras continued.

The company is moving forward with work on direct patterning for color displays. No other company to management’s knowledge is capable of patterning the OLED emission layer at the small pixel size of eMagin’s displays. OLED microdisplay companies use color filters to get full color displays. Direct patterning will improve the display efficiency or brightness by a factor of 4 to 5.

eMagin reaffirms its 2012 revenue guidance range of $30 million to $34 million. The company expects display sales to continue to increase during the balance of the year due to greater activity from existing and new customer and to the enhancements to its production processes currently in progress.