eMagin Reports Strong Q4 and 2011 Financial Results

eMagin Corporation announced financial results for its fourth quarter and full year ending Dec. 31, 2011.

“2011 was a key year in the development of eMagin as we opened additional avenues of growth by securing R&D contracts with a diversified leading manufacturer of highly engineered critical components, the University of Rochester for the Department of Energy and the U.S. Special Operations Command (SOCOM), while completing contracts and maintaining our ongoing relationships with U.S. Army Telemedicine and Advanced Technology Research Center (TATRC) and the Night Vision and Electronic Sensors Directorate (NVESD). We also won a contract to commercialize our new, very high resolution (1920×1200) WUXGA display and secured an important first-time customer in a new market, electronic viewfinders, which could grow substantially in the future,” stated Andrew Sculley, president and CEO.

“We also continued to address our production output challenges, which were primarily due to the limited capabilities of our current OLED deposition machine and which impacted our ability to meet growing customer demand for our advanced OLED microdisplays,” Sculley added. “Our new OLED deposition machine has been installed and is now being tested and qualified at our Hopewell Junction, NY, manufacturing facility. When fully operational, the new deposition machine is expected to increase OLED deposition capacity by approximately tenfold, to increase yield, and to contribute to a substantially more efficient, automated process, with lower maintenance requirements and greater utilization. The greater production efficiencies expected to be realized from the new machine will enable us to further address our key domestic and international markets, which include a range of military, commercial, industrial, medical, and consumer applications.”

Revenues for the fourth quarter were $8 million, an increase of $65,000 over the comparable period in 2010. Gross margin for the fourth quarter increased 7% to 65% of revenue on gross profit of $5.2 million, compared to a gross margin of 62% of revenue on gross profit of $4.9 million in the same quarter last year. The year-over-year improvement in gross margin was achieved through increased volume of production and improved contract margin.

Operating expenses for the fourth quarter of 2011 were $3.8 million, versus operating expenses of $3.7 million for the prior year period.

Operating income increased 18% for the fourth quarter of 2011 to $1.5 million compared to $1.3 million for the same period of 2010.

Net income for the fourth quarter of 2011 was $1.2 million, or $0.04 per diluted share, compared to net income of $3.9 million, or $0.13 per diluted share, in the prior-year period.

For the year ended Dec. 31, 2011, eMagin generated revenues of $29.2 million versus $30.5 million for 2010. The company met its revised revenue guidance for 2011 of $29 million to $32 million. Display sales increased 2%, offset by decreases in contract revenue (17% down) and headset revenue (54% down). The headset (primarily the z800) reduction was due to how the company prioritized production to favor customers’ display orders, and therefore could not produce 3D displays to fill our own headset product orders. Gross profit for the year ended Dec. 31, 2011, totaled $15.5 million versus $18.4 million for 2010. Gross margin for 2011 was 53% versus 61% for 2010 due to lower average selling price and higher production labor and material costs.

Net income for 2011 was $5 million, or $0.07 per diluted share, versus net loss of $1.1 million, or a loss of $0.06 per diluted share, for 2010.

Recent Corporate Highlights:
• eMagin and the University of Rochester received funding from the U.S. Department of Energy for a three-year research program to develop OLED lighting technology for a new generation of efficient lighting systems.
• eMagin’s new OLED deposition machine was installed and is currently undergoing testing and qualification processes at the company’s facility in Hopewell Junction, NY, and is expected to be ready to begin handling production in second quarter 2012.
• eMagin was awarded a contract by U.S. Army NVESD to work on Silicon on Insulator (SOI) substrate.
• eMagin was ranked the 311th fastest growing technology company in North America on Deloitte’s 2011 Technology Fast 500 list. This was the fifth consecutive year eMagin was included on the Fast 500 list.
• The company’s new Seal machine will augment the existing seal process that will improve yield and capacity. It is expected to come online in the second quarter of 2012.
• The company completed an R&D contract to commercialize the WUVGA display.
• eMagin signed a $1.1 million Small Business Innovation Research (SBIR) contract with U.S. Special Operations Command (USSOCOM) to optimize our WUXGA OLED microdisplay for mass production. Completion expected in the third quarter of 2012.
• The company developed a high-brightness green for the high resolution WUXGA (1920×1200).
• eMagin expects to continue research for U.S. Army Telemedicine and Advanced Technology Research Center (TATRC) by developing an HMD (head-mounted display) for medical simulation with the next contract expected in the third quarter.
• The French FELIN soldier program is continuing as planned and expected volume orders to continue for three to four more years.
• The company expects volume orders of our new digital VGA in the second quarter of 2012.
• The company is developing a commercial display product for the electronic viewfinder market and we began supplying a display for a high end electronic viewfinder.
• The company expects funding from the U.S. military for developing high brightness color displays that will eliminate the use of color filters and substantially increase the efficiency of displays.

Based on current market conditions, 2012 expectations, and scheduled shipments and deliveries under existing contracts, the company expects 2012 revenue to fall within the range of $30 million to $34 million.