eMagin Announces 3Q 2014 Financial Results

eMagin Corporation announced financial results and corporate highlights for the third quarter ended Sept. 30, 2014.

Revenues for the third quarter of 2014 were $5.7 million versus $6.3 million for the third quarter of 2013. Product revenues (primarily display sales) totaled $5.2 million, 10% less than third quarter last year. A scheduled maintenance period reduced the number of production days in the quarter.

Also, a couple customers delayed delivery dates, which postponed revenue to fourth quarter. Average selling price increased 22% and displays shipped decreased 29% from third quarter last year. The increases in average selling price were a result of changes in product and customer mix. R&D contract revenues increased to $529,000 from $62,000 last quarter but were $30,000 less than third quarter last year. eMagin announced an expected rebound in R&D contract revenues in the coming quarters due to certain new contract awards it has received.

“In the quarter, we completed the install of equipment for producing ultra-high brightness direct-patterned displays, we made improvements to the clean room and we performed scheduled maintenance on both of our OLED deposition tools, which had been overdue,” said Andrew G. Sculley, president and CEO, said. “These were important accomplishments but resulted in fewer production days, which impacted revenues. The clean room improvements and the OLED deposition tool maintenance have already contributed to improved yield and we expect improved yield in the coming quarters.

“We also made impactful additions of other new equipment, which has automated some production processes that were previously done manually,” Sculley added. “As a result, we were able to maintain our gross margin on a sequential basis from the second quarter despite lower volumes and expect our bottom-line performance to improve going forward.

“We continue to work through the Q1 stop ship event with three of our customers,” he noted. “For the first customer shipments resumed in Q2 with no loss of revenue. Shipments to the second customer have resumed with the delivery of parts using a modified manufacturing process for qualification and test by our customer. Qualification of these displays was successfully completed and volume production has resumed. While we expect no loss of overall volume for this customer, some originally scheduled for 2014 will extend into 2015. For the third customer, we have delivered a product with a different packaging design that has successfully completed eMagin’s internal qualification process. Once the customer completes qualification of those parts in their system, we expect deliveries to begin in 2015.

“We made significant progress in several critical areas during the third quarter,” he reported. “First, we continued making great strides toward production of ultra-high brightness OLED microdisplays above 10,000 nits. This accomplishment will help to accelerate the penetration of our OLED microdisplays into new markets such as avionics and consumer headset applications. Additionally, we produced prototypes of ultra-high brightness direct patterned displays which we are demonstrating to our customers. eMagin is leading the industry in this effort for direct patterned OLED at micro-display pixel sizes. Also, we have begun work on a number of new R&D contract awards that will further increase our quarterly R&D contract revenue as well as accelerate our leadership in the development of ultra-high brightness OLED microdisplays. Historically, these government R&D contract awards have been instrumental in fueling our growth and we are excited about the resurgence of this activity.”

“Finally, we just announced our development of a new virtual reality immersive head-mounted display ‘IHMD’ that has 2K by 2K resolution, a wider (over 100 degree) field of view, and superior performance and human factors characteristics compared to any IHMD available today. We expect to have a working prototype available for demonstrations in early 2015,” concluded Sculley.

Gross margin for the third quarter was 31% on gross profit of $1.7 million compared to a gross margin of 35% in the same quarter last year and flat with the second quarter of 2014. The decline in gross margin from third quarter last year was primarily due to lower production volume and lower product revenue, offset somewhat by decreases in manufacturing expenses. Operating loss for the third quarter decreased to $1.0 million from $1.1 million in third quarter last year.