eMagin Corporation Announces 4Q 2018 Financial Results

eMagin Corporation announced financial results and corporate highlights for the fourth quarter ended Dec. 31, 2018.
 
Revenues for 2018 were $26.2 million, up 19% from the $22 million in 2017. Product revenues totaled $23.3 million, representing a 25% increase from $18.7 million in 2017, due primarily to continued growth from the new US and foreign military programs as well as the ramp-up of existing programs. R&D contract revenues totaled approximately $2.9 million as compared to $3.3 million in 2017.
 
Revenues in the fourth quarter of 2018 were $5.4 million as compared to $6.4 million in the fourth quarter of 2017. Production yields and output were negatively impacted by manufacturing related issues which occurred late in the fourth quarter of 2018. The company has implemented remedial measures and expects yields to improve and production capacity to increase during the first and second quarters of 2019.
 
“During 2018, we experienced growing demand for our products, especially from US military and aviation programs, and expanded our presence among medical and other commercial customers. We sold to more than 80 customers this past year and supplied products for over 20 new programs. At Dec. 31, 2018, we had a backlog of non-binding purchase orders of approximately $10.6 million in products ordered for delivery through Dec. 31, 2019, an increase of approximately $800,000 from our backlog of $9.8 million at Dec. 31, 2017,” said CEO Andrew Sculley.
 
“Development efforts to support the F-35 helmet accelerated during the year. Under contract from Collins Aerospace, we designed, manufactured and delivered the initial displays for this multi-service, multi-country program which are being installed in helmets for flight tests scheduled for this year. We will continue to deliver displays throughout 2019 while working closely with the Collins Aerospace team in preparation for limited rate initial production (LRIP) scheduled for 2020,” added Sculley.
 
“From a technology perspective, we continue to make significant advances with our high brightness, full-color microdisplays incorporating our color filter and patented Direct Patterning (dPd) technology which is critical to driving our growth in all the markets we serve. We have surpassed the 5,000 nits threshold requirements of Tier One companies for their enterprise and consumer AR/VR applications. Additionally, by making architectural improvements and using superior OLED materials, we have increased the efficiency and lifetime of our displays by more than 50%,” he continued.
 
“While our full year revenues increased 19% on a year-on-year basis, we did experience a manufacturing equipment related issue in the fourth quarter. This resulted in lower yields and loss of production, affecting our fourth quarter and full-year performance. We addressed this issue and have made the necessary improvements to minimize the risk of future recurrences. It did not affect any of our US military programs but did have an impact on production and deliveries early in the first quarter of 2019.”
 
Gross margin for 2018 was 15%, down from 23% in 2017. The decline in gross margin for the year was due primarily to an impairment charge of $2.7 million related to the Consumer Night Vision Business and fourth quarter production issues. Excluding the impairment charge, the total gross margin was 25%, reflecting higher production volumes and improved yields during the year.
 
Operating loss for the full year 2018 was $11.7 million versus $8.7 million in 2017. Net loss for the full year 2018, including $2.2 million recorded income from the change in the fair value of the warrant liability, was $9.6 million, or $0.21 per diluted share.
 
Product revenues totaled $5.2 million in the fourth quarter of 2018 versus $5.6 million in the fourth quarter of 2017. The decline is a result of the manufacturing related issues mentioned previously. R&D contract revenues totaled approximately $240,000 in the fourth quarter of 2018 versus $787,000 in the fourth quarter or 2017 reflecting the completion of contracts during 2017 and 2018.
 
In the fourth quarter of 2018, the company reported a gross loss of $471,000 compared to a gross profit of $1.8 million in the fourth quarter of 2017. The decrease in gross profit was primarily related to the previously mentioned manufacturing related issues and to the resultant lower production volumes. Operating loss for the fourth quarter of 2018 was $4.2 million compared to $1.6 million in the fourth quarter of 2017.