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eMagin Corporation Announces Fourth-Quarter and Full-Year 2021 Results

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eMagin Corporation (EMAN) reported a fourth-quarter revenue of $7.2 million, down from $7.7 million year-over-year but up sequentially by $1.4 million from Q3 2021. Full-year revenue totaled $26.0 million, a 12% decline from the previous year. Despite challenges, the company has a strong backlog of orders at $13.8 million, up 26% from 2020. The fourth-quarter gross margin improved to 24%. However, the operating loss for 2021 increased to $10.0 million. eMagin is expecting to leverage its advanced production machinery and improve yields in 2022.

Positive
  • Backlog of open orders increased by 26% to $13.8 million.
  • Fourth-quarter gross margin improved to 24% from 16% year-over-year.
  • Product revenues in Q4 2021 rose to $7.0 million, up from $6.2 million in Q4 2020.
  • Company qualified high-brightness XLE displays and launched new medical market products.
Negative
  • Fourth-quarter revenue decreased by $0.5 million from the prior-year period.
  • Full-year revenue fell by 12% to $26.0 million, primarily due to manufacturing downtime.
  • Contract revenues for 2021 dropped by 57% to approximately $1.9 million.
  • Operating loss for 2021 increased to $10.0 million from $6.9 million.

Fourth-Quarter Revenue of $7.2 million; Full-Year Revenue of $26.0 million

Advanced OLED Manufacturing Equipment to be Added to Production Through 2022

Strong Backlog of Open Orders of $13.8 million increased 26% from the end of 2020

HOPEWELL JUNCTION, N.Y., March 10, 2022 (GLOBE NEWSWIRE) -- eMagin Corporation, or the “Company,” (NYSE American: EMAN), a leader in the development, design and manufacture of Active Matrix OLED microdisplays for high-resolution, AR/VR and other near-eye imaging products, today announced results for its fourth quarter and full-year 2021.

“Thanks to our skilled workforce and their dedication to our mission of producing the world’s leading OLED microdisplays, 2021 was a year of great technical achievement for eMagin,” said eMagin CEO Andrew G. Sculley. “We ended the year with strong shipments of displays used in the Enhanced Night Vision Goggle–Binocular (ENVG-B) program, as we continue work on this advanced goggle to provide superior situational awareness, mobility, lethality and protection on the battlefield. The ENVG-B incorporates rapid target acquisition, which allows soldiers to fire around corners, and employs AR technology to deliver real-time video and target information through eMagin displays. The reception among soldiers in the field has been very positive, including praise for the ruggedness and reliability of the device.

“Our core military business is benefitting from a ramp-up in volume of our existing programs and we are actively pursuing several others, as well as opportunities in defense markets for thermal weapons sights. This year, we expect to continue to ship displays under the ENVG-B program and to compete for other large U.S. military programs. In addition, we expect to capitalize on improved yields and capacity as we install new, advanced-production machinery purchased under our Defense Production Act Title III and IBAS funding grants.

“In 2022, we look forward to demonstrating our dPd technology to more consumer-oriented customers and continuing our business development efforts in the eye care, surgical and veterinary markets. At the same time, we expect to benefit from contributions of new engineering talent that joined eMagin in late 2021.”

2021 Business and Operational Highlights

  • Qualification of eMagin’s high-brightness, XLE display of more than five times the brightness of the displays the Company currently ships
  • New display products developed and launched for the medical market
  • Ongoing product shipments for the ENVG-B night vision program, with positive customer feedback
  • R&D milestones related to eMagin’s Direct Patterning Technology (dPd™) technology, including new patents and the introduction of a new prototype for a widescreen ultra-extended graphics array (WUXGA) (1920x1200 pixels) to achieve over 10,000 cd/m2 of maximum luminance, which the Company believes is the world’s brightest high-resolution, full-color OLED microdisplay
  • Showcasing the WUXGA dPd OLED microdisplay in the AR headsets of an eMagin customer
  • Ongoing work to build proof-of-concept displays for AR/VR applications with a tier-one consumer electronics company
  • Stabilized manufacturing yield in the fourth quarter, leading to anticipated improvements in 2022
  • Manufacturing equipment acquisitions and installation on track and within requirements of the U.S. Defense Production Act Title III and IBAS programs
  • 26% year-over increase in order backlog
  • Inclusion in the Russell Microcap Index

Fourth-Quarter Results

Total revenues for the fourth quarter of 2021 were $7.2 million, a decrease of $0.5 million from $7.7 million in the prior-year period, and a sequential increase of $1.4 million from the third quarter of 2021. Total revenues consist of both product revenues and contract revenues.

Product revenues for the fourth quarter of 2021 were $7.0 million, an increase of $0.8 million from product revenues of $6.2 million reported in the prior-year period, and an increase of $1.7 million compared with the third quarter of 2021. The year-over-year quarterly increase in product revenue was due primarily to the timing of certain orders from prime defense contractors and shipments under the Company’s ENVG-B program. This was partially offset by approximately $1.1 million in fourth-quarter shipments that were delayed into 2022 due to capacity constraints related to unexpected machine downtime.

Contract revenues were $0.2 million, compared with $1.5 million in the prior-year period, due to the timing of activities under the Company’s development agreement with a tier-one consumer customer that is milestone-based rather than uniformly distributed each month.

Total gross margin for the fourth quarter was 24% on gross profit of $1.8 million, compared with gross margin of 16% on gross profit of $1.3 million in the prior-year period. The increase in gross margin was due to higher product revenues, increased production, and absorption of fixed cost into inventory, as well as improved yields during the fourth quarter of 2021.

Operating expenses for the fourth quarter of 2021, including R&D expenses, were $3.5 million, compared with $3.6 million in the prior-year period. Operating expenses as a percentage of sales were 49% in the fourth quarter of 2021, compared with 47% in the prior-year period. R&D expenses as a percentage of sales were higher in the fourth quarter of 2021 due to lower costs allocated to contract cost of goods sold. SG&A expenses were lower in the fourth quarter versus the prior-year period due primarily to a reduction in legal costs.

In the fourth quarter of 2021, operating loss was $1.8 million, compared with $2.4 million in the prior-year period.

Despite the operating loss, net income allocated to common shares for the fourth quarter of 2021 was $0.9 million, or $0.01 per share, due to $3.1 million in income related to a non-cash change in the fair value of the warrant liability during the fourth quarter. Excluding the impact of the change in the warrant liabilities in both quarters, net loss was $2.2 million, or $0.03 per share, on a fully-diluted basis, compared with a loss of $2.4 million, or $0.04 per share, in the prior-year period.

Adjusted EBITDA for the fourth quarter was negative $0.8 million, compared with negative $1.7 million in the prior-year period.

As of the end of 2021, the Company’s backlog of open orders scheduled for delivery over the next year was $13.8 million, which represented a 26% increase from the end of 2020.

In response to ongoing supply-chain, capacity and pricing pressures, the Company continues to monitor its wafer suppliers and is creating backplane designs suitable for alternative foundries to be able to optimize its allocations. In addition, the Company has implemented product price increases for 2022.

Full-Year Results

Revenues for 2021 were $26.0 million, down 12% from $29.4 million in 2020. Product revenues totaled $24.2 million, representing a 3% decrease from $25.0 million in 2020, primarily due to unexpected downtime of manufacturing equipment and resulting capacity constraints, resulting in approximately $1.1 million in late orders that did not ship during 2021. Contract revenues totaled approximately $1.9 million, representing a 57% decrease from $4.4 million in 2020. Contract revenues primarily reflected development work for an advanced display design and proof-of-concept for a consumer AR/VR device. This work is expected to continue through 2022. Contract revenues are milestone-based and not uniformly distributed throughout the project duration.

Gross margin for 2021 was 18%, compared with 22% in 2020. Gross margin for 2021 was primarily impacted by decreases in contract revenue gross profit related to the timing of activities under the Company’s agreement for development work with its tier-one consumer customer.

Operating expenses for 2021, including R&D expenses, were $14.6 million, compared with $13.3 million in 2020. The majority of the increase was due to materials and other overhead costs related to the development and qualification of the Company’s higher-brightness XLE and dPd displays, as well as a decrease of $0.8 million in costs allocated to contract costs of goods sold relative to 2020, due to lower contract revenues in 2021.

Operating loss for 2021 was $10.0 million, versus $6.9 million in 2020. Net loss for 2021 was $5.2 million, or $0.07 per share. This compares with a net loss of $11.4 million, or $0.19 per share, in 2020. Excluding the impact of the non-cash change in the fair value of the warrant liability for both years, net loss for 2021 was $0.12 per share, versus a net loss of $0.11 per share in 2020.

Adjusted EBITDA for the year was negative $4.1 million, compared with negative $4.4 million in the prior year.

As disclosed in its Form 10-K for the year ending December 31, 2021, the Company received an audit opinion with a going concern qualification.

Balance Sheet Highlights

The Company’s financial position as of December 31, 2021 reflects a total of $5.7 million in unrestricted cash and cash equivalents, a year-over-year decrease of $2.6 million. This is in addition to $0.8 million of cash restricted for purchases of equipment under Title III and IBAS government grants. The Company had $2.0 million in outstanding borrowings and $2.3 million in credit availability under its revolving credit facility as of year-end 2021. This compares with outstanding borrowings of $1.9 million and borrowing availability of $2.1 million at year-end 2020.

In November 2021, the Company entered into an at-the-market, or ATM, facility with H.C. Wainwright, pursuant to which eMagin may currently offer and sell shares of common stock having an aggregate offering price of up to $10.0 million. The Company anticipates that the ATM facility will provide additional liquidity during 2022.

Conference Call and Webcast Information

Management will host a conference call and simultaneous webcast at 9 a.m. ET on Thursday, March 10, 2022, to discuss eMagin’s quarterly and year-end results, business highlights and outlook. To join the live listen-only webcast, please visit the Company’s Investor Relations website at https://www.emagin.com/investors/event-webcast. To join the conference call, dial 1-844-308-1725 in the United States, or 1-929-517-0939 internationally. The passcode is 3728878. Participants are encouraged to join at least 10 minutes before the start of the call. An archive of the webcast will be available approximately one hour after the live call.

About eMagin Corporation

eMagin is the leader in OLED microdisplay technology, enabling the visualization of digital information and imagery for world-class customers in the military, consumer, and commercial, including medical and industrial markets. The Company invents, engineers and manufactures display technologies of the future and is the only manufacturer of OLED displays in the United States. eMagin's Direct Patterning Technology (dPd™) will transform the way the world consumes information. Since 2001, eMagin's microdisplays have been used in AR/VR, aircraft helmets, heads-up display systems, thermal scopes, night vision goggles, weapon systems and a variety of other applications. For more information, please visit www.emagin.com.

Important Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including those regarding eMagin Corporation's expectations, intentions, strategies and beliefs pertaining to future events or future financial performance. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors, including those described in the Company's most recent filings with the SEC. For a more complete description of the risk factors that could cause our actual results to differ from our current expectations, please see the section entitled "Risk Factors" in eMagin's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Contact
eMagin Corporation
Mark A. Koch
Chief Financial Officer
845-838-7900
investorrelations@emagin.com

Sharon Merrill Associates, Inc.
Nicholas Manganaro
Vice President
617-542-5300
eman@investorrelations.com



eMAGIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

       
  December 31, December 31,
  2021  2020 
ASSETS      
Current assets:      
Cash and cash equivalents $5,724  $8,315 
Restricted cash  806   2,111 
Accounts receivable, net  4,488   5,314 
Account receivable-due from government awards  292   1,013 
Unbilled accounts receivable  1,102   253 
Inventories  7,632   8,379 
Prepaid expenses and other current assets  691   943 
Total current assets  20,735   26,328 
Property, plant and equipment, net  30,483   21,132 
Operating lease right - of - use assets  113   50 
Intangibles and other assets  37   126 
Total assets $51,368  $47,636 
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $1,348  $1,206 
Accrued compensation  1,664   1,628 
Paycheck Protection Program loan - current     982 
Revolving credit facility, net  1,974   1,875 
Common stock warrant liability  1,374   4,622 
Other accrued expenses  722   1,693 
Deferred revenue  54   425 
Operating lease liability - current  60   51 
Finance lease liability - current  1,133   1,027 
Other current liabilities  608   757 
Total current liabilities  8,937   14,266 
Other liability - long term  28   56 
Paycheck Protection Program loan - long term     982 
Deferred Income - government awards - long term  12,458   4,309 
Operating lease liability - long term  54    
Finance lease liability - long term  11,647   11,783 
Total liabilities  33,124   31,396 
       
Commitments and contingencies (Note 15)      
       
Shareholders’ equity:      
Preferred stock, $0.001 par value: authorized 10,000,000 shares:      
Series B Convertible Preferred stock, (liquidation preference of $5,659) stated value $1,000 per share, $0.001 par value: 10,000 shares designated and 5,659 issued and outstanding as of December 31, 2021 and December 31, 2020.      
Common stock, $0.001 par value: authorized 200,000,000 shares, issued 72,931,490 shares, outstanding 72,769,424 shares as of December 31, 2021 and issued 68,890,819 shares, outstanding 68,728,753 shares as of December 31, 2020.  72   69 
Additional paid-in capital  275,936   268,729 
Accumulated deficit  (257,264)  (252,058)
Treasury stock, 162,066 shares as of December 31, 2021 and December 31, 2020.  (500)  (500)
Total shareholders’ equity  18,244   16,240 
Total liabilities and shareholders’ equity $51,368  $47,636 



eMAGIN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

             
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2021  2020  2021  2020 
Revenues:            
Product $7,016  $6,170  $24,176  $25,042 
Contract  196   1,512   1,870   4,382 
Total revenues, net  7,212   7,682   26,046   29,424 
             
Cost of revenues:            
             
Product  5,345   5,901   20,480   21,054 
Contract  112   518   973   2,005 
Total cost of revenues  5,457   6,419   21,453   23,059 
             
Gross profit  1,755   1,263   4,593   6,365 
             
Operating expenses:            
             
Research and development  1,677   1,402   6,976   5,715 
Selling, general and administrative  1,862   2,233   7,579   7,567 
Total operating expenses  3,539   3,635   14,555   13,282 
             
Loss from operations  (1,784)  (2,372)  (9,962)  (6,917)
             
Other (expense) income:            
Change in fair value of common stock warrant liability  3,072   (1,295)  3,248   (4,599)
Interest expense, net  (226)  (87)  (851)  (132)
Gain on forgiveness of debt        1,963    
Other income, net  82   37   396   200 
Total other income (expense)  2,928   (1,345)  4,756   (4,531)
Loss before provision for income taxes  1,144   (3,717)  (5,206)  (11,448)
Income taxes            
             
Net loss $1,144  $(3,717) $(5,206) $(11,448)
Less net income allocated to participating securities  235          
Net loss allocated to common shares  $909  $(3,717) $(5,206) $(11,448)
             
Loss per share, basic $0.01  $(0.05) $(0.07) $(0.19)
Loss per share, diluted $(0.03) $(0.05) $(0.12) $(0.19)
             
Weighted average number of shares outstanding:            
             
Basic  72,563   67,620   71,899   60,458 
             
Diluted  73,217   67,620   73,179   60,458 



eMAGIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

       
  Twelve Months Ended
  December 31,
  2021  2020 
Cash flows from operating activities:      
Net loss $(5,206) $(11,448)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization  2,815   2,112 
Change in fair value of common stock warrant liability  (3,248)  4,599 
Loss on sale of equipment     19 
Gain on forgiveness of debt  (1,963)   
Stock-based compensation  650   158 
Amortization of operating lease right-of-use assets  (63)  698 
Changes in operating assets and liabilities:      
Accounts receivable  1,547   (1,348)
Unbilled accounts receivable  (849)  (98)
Inventories  747   453 
Prepaid expenses and other current assets  128   187 
Deferred revenues  (371)  148 
Operating lease liabilities  187   (730)
Accounts payable, accrued expenses, and other current liabilities  (1,805)  353 
Net cash used in operating activities  (7,431)  (4,897)
Cash flows from investing activities:      
Purchase of equipment  (1,420)  (1,089)
Purchase of equipment, government grant  (10,475)  (1,411)
Proceeds from sale of equipment     50 
Net cash used in investing activities  (11,895)  (2,450)
Cash flows from financing activities:      
Borrowings (repayments) under revolving line of credit, net  99   (1,016)
Proceeds from public offering, net  183   9,783 
Proceeds from Paycheck Protection Program loan     1,963 
Change in finance lease liabilities  (293)  (17)
Proceeds from government grant  9,064   3,505 
Proceeds from warrant exercise  5,652   40 
Proceeds from exercise of stock options  725    
Net cash provided by financing activities  15,430   14,258 
Net (decrease) increase in cash, cash equivalents, and restricted cash  (3,896)  6,911 
Cash, cash equivalents, and restricted cash, beginning of period  10,426   3,515 
Cash, cash equivalents, and restricted cash, end of period $6,530  $10,426 
Cash, cash equivalents, end of period  5,724   8,315 
Restricted cash, end of period  806   2,111 
       
Supplementary Cash Flow Information      
Cash paid for interest $851  $52 
Cash paid for income taxes $  $ 
       
Non-cash activities:      
Right-of-use assets obtained in exchange for finance lease liabilities $263  $12,706 

Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements presented on a GAAP basis; the Company has provided non-GAAP financial information, namely earnings before interest, taxes, depreciation and amortization, and non-cash compensation expense (“Adjusted EBITDA”). The Company’s management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company’s historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financial statements. Management believes that these adjusted measures reflect the essential operating activities of the Company. A reconciliation of non-GAAP financial information appears below.

             
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2021  2020  2021  2020 
             
Net loss $1,144  $(3,717) $(5,206) $(11,448)
Non-cash compensation  181   11   650   158 
Change in fair value of common stock warrant liability  (3,072)  1,295   (3,248)  4,599 
Depreciation and intangibles amortization expense  705   631   2,815   2,112 
Interest expense  226   87   851   132 
Adjusted EBITDA $(816) $(1,693) $(4,138) $(4,447)

 


FAQ

What were eMagin's fourth-quarter revenue results for 2021?

eMagin reported fourth-quarter revenue of $7.2 million, down from $7.7 million the previous year.

How much was eMagin's full-year revenue in 2021?

eMagin's full-year revenue for 2021 was $26.0 million, a 12% decrease from $29.4 million in 2020.

What is the status of eMagin's order backlog?

As of the end of 2021, eMagin's backlog of open orders was $13.8 million, reflecting a 26% increase from the end of 2020.

What improvements did eMagin see in gross margin during Q4 2021?

eMagin's gross margin for Q4 2021 increased to 24%, up from 16% in the prior year.

What financial challenges did eMagin face in 2021?

eMagin faced a 12% decline in revenue and a $10.0 million operating loss for the year.

eMagin Corporation

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