eMagin Corporation Announces 2Q 2016 Financial Results

eMagin Corporation announced financial results and corporate highlights for the second quarter ended June 30, 2016.
 
Revenues for the second quarter of 2016 were $5.5 million, down 21% from the second quarter of 2015.
 
Product revenues totaled $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 $752,000, 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 $1.3 million compared to a gross margin of 37% on gross profit of $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 loss for the second quarter increased to $2.2 million from a loss of $60,000 in the second quarter last year. Net loss for Q2 2016 increased to $2.2 million, or $0.07 per basic and diluted share, from a loss of $66 thousand, or $0.00 per basic and diluted share, in Q2 2015.
 
At June 30, 2016, the company had approximately $6.1 million of cash and cash equivalents compared to $9.3 million of cash and cash equivalents at December 31, 2015. At June 30, 2016, the company had no outstanding debt.
 
“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,” said president and CEO Andrew G. Sculley. “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,” Sculley added. “This resulted in lower production cost absorption and lower gross margins. The manufacturing issue has been resolved. 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 preproduction 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.
 
“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,” Sculley observed. “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. These companies recognize that our direct patterning OLED technology provides the resolution, speed and brightness that are needed for their next generation of virtual reality devices in order to provide consumers the user experience they require. We are engaged in regularly scheduled product development meetings with these companies and have submitted proposals to develop displays to meet their particular requirements.
 
“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. We believe our new strategy is working as evidenced by some recent successes. During the first six months of 2016, we expanded our active customer count by 11% to 108 customers. And, in the second quarter, we were awarded an $825,000 order with a major medical device company, the largest single order in this market in the company’s history.
 
“Finally, we are excited about our upcoming consumer product offerings. We have leveraged our microdisplay and optics technology, combined with our manufacturing capability, to develop affordable, high performance wearable and handheld products for the broader consumer market. We plan to release two products in the fourth quarter of 2016,” he concluded.