EMAN - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen and welcome to your eMagin Third Quarter 2020 Earnings Call. [Operator instructions] At this time, it is my pleasure to turn the floor over to Mark Koch. Sir, the floor is yours.

Mark Koch

Good morning, everyone, and welcome to our third quarter 2020 conference call. We're very glad to have you join us today.

may Litigation statements Reform we the defined call, Securities Private Act today's make as forward-looking in During of XXXX. are and a statements projections, uncertainties. forward-looking based company's the These current and beliefs of are number to subject risks and on expectations, references company's may of projections liquidity its contracts statements structure, ability development to include for to ramp and future company's future benefits, financing, production, reduce etcetera. and the believe, Such as ability plans operations, agreements, up product well to words statements containing revenues, and expect, resources; production, future product target, the plan, capital cost as like

expressed beyond You actual place to future statements. update our control. release not uncertainties statements could any the unknown circumstances. Please differ for materially with these factors forward-looking earnings risks, concerning statements or filings of quarter the company's because that those cases they implied and the and information other should or are XXXX Securities results reflect our reliance obligation known that and to to and to undue refer involve for factors forward-looking undertake no Commission third or by on cause some events in revise Exchange from We such

which in our measures financial refer is the measures During turn to I'd measure, to our isolation Sculley. as not income, to release provide the a most EBITDA that, investors. CEO, adjusted in financial meant to over this additional Non-GAAP financial press directly like GAAP or provided morning. A are and will to financial for substitute call be this is call, as non-GAAP such With to that we EBITDA adjusted also issued net Andrew to information statements. EBITDA, a considered comparable adjusted GAAP financial measure the reconciliation we of

Andrew Sculley

I'll provide our markets, consolidated technology during. Defense you, is equipment detail. results some with everyone our this and call, earnings then our our from you results and of our On staying I healthy quarterly safe schedule. everyone takeaways and provide and then welcome call quarter from and Thank advances hope today's on Mark, end third Mark discuss to will in morning. that greater key new our Department some color funding

remain far key markets. third markets. well in as well international for positioned as As reflecting increased takeaways, our Military program we ENVG-B military sole the position extremely the XX% in in end as the year-over-year, quarter the multiyear revenue supplier growth as

OLED $X.X and in phase we Defense the orders of the Program IBAS also for Chain the Department million under During placed Supply are for Assurance million the $XX.X the design quarter, equipment progressing for order new provided Awards. to regard

million strong Our backlog of shippable within the months. which is XX at next $XX.X million remains $X.X

$XX.X we cash million. of addition, quarter and cash equivalents ended with In the

will The of third high-end of of for lower become X impact consumer reflected also eye area on pandemic due active the of revenue COVID-XX in end part some care, hunting the quarter elective Additionally the in that affected and for period scopes., medical-related also in a our which sales project quarter. the particularly completion company to of contract fourth Tier economic markets, the again was the surgeries

$X.X revenue revenue third year as to was million million decreased compared $X.X quarter As result, X% of ago. a a

quarter. revenue We sequentially the to expect fourth contract in improve

year. demonstrated our by a towards improving and this our greater sales quarterly patterning trends used architectures, discuss had in our to our continue quarter over which XX% $X.X be very quarter qualification. accomplishments in will detail. and I strong XLE last We at OLED a display for will for OLED or the now our production military innovation million increase retain we Lastly, displays technology as edge new moving direct

program are This we programs and major family interface in In of and a low battlefield phase and microdisplays particular, We for weapon ENVG-B will initial some supply the beyond. sites is both supplying displays Army's its program supplier our nightvision are and rate the has solid. through the XXXX to awareness multiyear sole demand program includes that thermal and systems. the where with production channels high-resolution remained

which in HMV During we high to shipments have with initial five quarter, glow increased displays these for relationship for globally of the With green also an electronics very and the a aircraft respect landings to reportedly produce order been us. top disturbing F-XX. the from supplied eliminating continued to to carriers one OLED been military pilots new on that helmets manufacturers, night and Program. equipped and been market, microdisplays international was in had the LCDs, widely the It we of has have critical military F-XX our Helmet acknowledged instrumental European the brightness important

surgeries, saw Turning to market, postponement display to for the surgery cataract markets, medical believe the which related older our decrease other in over electric a likely end we year example population. year by was of we

have orders XXXX related medical microdisplays, April centers performing surgeries. will hospitals medical begin elective in We shipping receiving sensing which resume recovery and for as

some hunting by including for discretionary demand situation we Additionally, low spending. displays which for COVID we scopes, the high-end supply affected believe are

are We until pickup related not this any COVID more to is controlled. near-term expecting market

third the Our contract revenue $XXX,XXX by was decreased quarter approximately in year-over-year.

completed QX Tier these it a are performing. OLED. the additional foundry. early at company now project we'll work are which to on consumer in anticipate for this directly designed design is company, and the aspects and newly the wafer then fabricated being program, for There currently begin wafers this continue we pattern we We Although to X design receiving we

the brightness. our our able as continuing to earlier XX this funded we direct of the are tool. with high improvements tool, the direct We've upgraded a patterning believe important readiness We demonstrate patterning and in design newly increase also we production throughput advance work to been development tool and for demonstrate to which year made is

green using squared for stack are meter red, We working stacks XX,XXX on to OLED OLED brightness currently single our the targeted candela sub-pixels. blue color our per achieve and

In colors. move goal optimization the further and we in of brightness pattern highest, producing the future, OLED our tandem these are other The stacks market. each full-color to new We retain and the is microdisplays step architectures the next to the can to displays. OLED of improvements process using DPD direct close with

important The will believe with is DPD, and we color today ahead ahead point we are with remain here filters.

IBAS Now quarter manufacturing. our the first to Program new next third impact totaling with placed I We're for for order testing December. advanced equipment Chain want update phase for This piece and anticipate program the orders DOD over the years. very million tool during about including are and $X.X on on these our awards working We other the in receiving government We of design Assurance our progress in you $XX.X the million. approximately million on equipment Supply under awards, $XX.X excited the the is diagnosis. three expected

the We beginning XXXX. expect it improve quarter our will in first help of yield us to

arrive over early and turn scheduled to in second is Mark. to that will and equipment With the testing that we the Additional immediately I'll begin phase at call quarter time. qualification

Mark Koch

Thank you, Andrew.

the our reported million few XX, takeaways waiver quarter. with I provide Before XX% grew consumer third Tier key third year R&D designed which completed with results XXXX one $X.X work to of We the quarter billion a the contract September discuss X approximately in continued from $X.X financial for million our business, period for with our on to $X.X XXXX, companies. for strength quarter. you of we I'd revenue one military as of year the phase ended

a million lending asset XXXX We quarter the with We availability design. remaining revenue third to our facility. balance fourth approximately to based ATM million contract of had plus entered continue the increase million expect the from on quarter our $X.X of of including $XX.X work cash July funding of in $X.X we our as this proceeds of we under unique balance

$X.X XXXX dPd and to of period, were the salary and prior period, for or in million prior expense. $X.X a by loss at expenses technology of prior reduction on the million the lower in was warrant for quarter a loss moving year-over-year the warrant on compared year loss prior quarter the XX% for quarter second XX% of $X.X the negative gain the current revenue. the resulted a our as the year billion various of third $X.XX million, percentage an the XXXX period. product and third contract Gross was $X.X Adjusted million third in was fair the $X.X XXXX Product higher on effectively. in quarter quarter reported QX per profit revenues XXXX for for reported Total decline loss third million non-cash revenue change revenues lower decline were $X.X in third prior share quarter September both year in $X.X prior in a ago per development. projects period. the expenses $X.X of the third equivalents higher display million consist year and third was $X.X a company related of in $X.X million September a a to to change for the gross to and the projects on reductions Now decrease Directors fair lower period a of respectively $X.X the primarily reported of of for and value $X.X and XX. of in the October $X.X and and a implemented loss revenue. of to revenues million million XX, million the impacted expenses of million R&D billion quarter of quarter XXXX, XX% of and flat of reflecting for December third were period. for capital from were to Borrowings XX% December from customers. focus to per in facility to prior loss XXXX Board year $X.X in liability in as EBITDA XXXX. of $XX.X total were and Net margin million $X.X had of were compensation loss reported gross excluding one XXXX display expenses XXXX revenue impact stock a results; SG&A to Contract million the commercial sales $X.X of non-cash X at $X.X travel R&D reflects related million to value reflects margin of Adjusted year. pause million. liability the discretionary compared per year shipments in Liquidity; medical availability million XX, share cash profit were $X.XX a $X.X million compared period. to of the versus Operating periods from in in work prior the period. prior compared other a product of XXXX, working between the $X.X third ABL reported timing revenues The $X.X R&D The to $X.XX third Operating the a million cash under of $X.X of Operating compared R&D quarter COVID-XX. our million lower related compared was non-cash third sales million quarter million compared of the XXXX of ago including the to compared to year year revenues the of was net of decline net at expenses compared $XX.X of period. Net economic $X.X and margin quarter period. XXXX the prior product $X.X share lower positive and the expenses. loss XLE for gross R&D gross quarter, million or contract in reflecting in workstations essentially customers million share with year revenue operating due tier had a $X.X year completion to of was implemented The the in year and in decrease the

During and in loan the under $X.XX received second apply FBA forgiveness we of QX. quarter for to the PPP for funding which program million intend we

need near-term $X.X million ample available our which During additional with remaining provides fundraising. facility, the us liquidity raised and we ATM for the no under quarter

the $X.X compared a the million company's December of XX orders XX, XXXX, of will was questions. With backlog open XX, within as for XXXX. months call September backlog that, of As shippable of $XX.X to we million

Operator

go question instructions] take our We'll Please with Jen [Operator Wood. Bradley first [ph] ahead. from

Unidentified Analyst

the lightened and cases? recently, delays had about COVID-related in medical I'm wondering delays in if given just industry spike You or increased COVID the those spoke

Andrew Sculley

for delivered that $X order be Well, we early have a received significant year. It's million about business. next to and

that cornea a So million beforehand is we're we're it and surgery a get is who start example optimistic to map has have very and people approximately, Eventually, This surgery. again of in significant the it that order to going the with elder cataract optimistic. continue. be cataract to concerned, its device requires in total population for back but is usually $X

Unidentified Analyst

noted, those your delaying you you end -- that delays because either on because delays it the were had to was or difficult And is or deliveries were the it end. their end-users make processes those

Andrew Sculley

is end issue been all. deliveries. no our No We've making at

I say should but have example issue, do, this very cases no State little year, doing and healthy that we think some everybody two it. done York shouldn’t are doing hick had the keeping we managed well we says in for the ups and we've early through New everything

that's market handful we we customers deliveries that with mentioned our discussions been have was related, that. hunting comment so fine said scope customers there are the their So that and and the why of in COVID

Unidentified Analyst

you to with bit changes are that early talk but you in I'll a are defense stages discuss programs And LREP you can record administration, are administration before versus it, my on on secondly, production all more relative potential really new the those that defense question, just maybe in thoughts And generally one, think to in what you? are about defense that a versus it's I early like your thank can the the still it's and or become JSF talk I the about, little the and program programs market your programs in press know spending? are business

Andrew Sculley

you very we do, Okay. very us might they're granted have about and that new the US Well, will connections are good to really customers can't with guess, million very the our as predict government and optimistic $XX I good what us. administration with but they the

as. that So we're on working hard very

few There is spending optimistic we So for to military continue have that that will program important enhance the a binoculars important and program goggle like very we vision military. are night programs very units the here will even, you give very years if big are Palm that's for a over that says years the that over the us. life they a XXX,XXX and it procure of business important five

will that stage that's the optimistic continue, the your of question, we're near-term. one rate in So part answer that's low to

The the being has The the an to important know for the FXX, as in is is the very you other the very display issues helmet time the you is look our for online see us is F-XX thing qualified with can qualification and still moving right because forward and display LCDs helmets OLED there the F-XX for that outstanding are is and gives program it's performance. important. with an contrast what

new that So on directly we will is programs. beyond this with think are also continue. who [indiscernible]. And do customers the out We work looking

this they've And that our talking this, we displays to and very the We’re Foreign to displays the been we into Military alternatives. a very power. back on started And And our consumption well doing I military. XXXXs. first because And is And and better the when U.S. we’re companies like high have than size, we're well working say, brightness step with and on have by very the this it since weight fit Militaries. respected take was reason that to our much power designed early displays.

they then that's asked displays, issue talked our for green contrast, we the high So glow about. that and

qualification One for of contrast, high this. in big our now, same machine high Right patterning was that AR/VR interesting away. the and color want brightness that And filter move And the effect screen positioned that's They very brightness. asking go now, us in they asked is facets. received that next that that R&D. market that's that it’s to door well so very is, because can As for million it's that, have in also want $XX companies the resolution do white thing. a very qualification military we to they in could And deliver this us in to a high brightness. chunk comes a with direct we goes And forward. a the step high with we've for and and done display is multiple many for our for

respected is the it's technology the by very U.S. have So foreign AR/VR And also we that and built the in governments. respected well group.

for. hope I than your a question, that perhaps So little asked you more answers

You have to that? follow-up a

Unidentified Analyst

I good you and very that's No, answer. much, luck great appreciate a with detail. Thank everything. the

Andrew Sculley

you, Thank sir.

Operator

Well, ahead. We'll Please Mike Investor. from take next go our Private question

Mike Well

talk that If And go the like of QX it's one were kind and the about okay, question kind that comments a to you comment few I you awarded. back would of made about patents, in where talking you ask to just that, patents that model recent a you were PR, about got behind competitors. might implied that strategy little other me like and doing your of Could bit may to your the Micro-display I maybe that? what a licensing right. that like business include If something OLED look technology

Andrew Sculley

and that U.S. million displays we're you talking very the we thank per that volume here, is granted volume give volume. the has the a $XX about with government high consumer or that volume. millions month, If of will that million Yes, not have don't even

whom forward Tier-Xs they millions are this are we have per So, and our interested with talked in and have displays path month. of the forward want to because path talking

license the manufacturing production I mass of have companies, proof-of-concepts, industry we number develop OLED worked do way have this consumer should is there are to. with with that in with saying So them to technology. micro, company then of our we've move a that a and the not display companies to on mass say other company and ones partner to the competitor to And consumer discussed some we I'm partners production or forward talk necessarily, and

sublicensee as revenue. for we would a who consumer that then mass look then has in and get the we displays company the consumer partner company So license it way that build royalty is the production like respect

Mike Well

a license OLED curious was did to manufacture would be just turn other out it them way? to and allow competitor, displays Tier-Xs I microdisplay it that sell those Well, both to consumer or if Okay.

Andrew Sculley

that of has licensed the look Tier-X on as well. very mass this reports, be Tier-Xs now, my have past. of would in this. licensing moving our it license, background company my by contact We've us we way in cautious company can about with OLED. And with the actually which in We production back in interested you in we've industry a licensed in one And is display keeps

take so ours would So over from business we a competitor the if that it the restrict license, couldn't all the no, were company us. of

Mike Well

Okay. wanted investor the active me your and the out is presentations military six could really these of that to I the for? acknowledge All stands the strong with think, specifically across potential, right, to here. growth over end-markets. we data one aviation think sense. last much market of makes more you role also talk I months things And all And side, I your addressable some the had about showing maybe that

Mark Koch

an attractive that On side from perspective price product And of we’re positioning the way. flip the looking in the we’re to… that, a fact

Mike Well

versus With LCD displays OLED?

Andrew Sculley

is cheap move it in and thing there have you're during LCD only around, crosshair that the the using think have display, for might you want you think to then about a you daytime, doesn't a I versus very if matter. OLED it

soon by way, what display it night an need. because is as vision, matters, use. you the Like, like the F-XX. As daytime as you need Then it's high contrast, as well OLED

that how is are the moves many LCD And on, think thinking there? way as companies companies, I are also time LCD many can companies and to you see go. this OLED so by how And

foreign Asian inside. that display and sale U.S. half you have the displays, outside the et some French government I almost Turkish not Israeli know, the and companies, on companies and companies, we're U.S. use only with Korea, we think deal, our So cetera versus half like whom the companies, is we as

is So I take thinks to over. going the think OLED world

Mike Well

next understands, last still which might consumer everyone two months? investors then out or my you and could is six here, talk away. catalysts shorter-term Okay, look on I the side, three there, But to maybe years to maybe some that two about over to question the think three

Andrew Sculley

market this, phone the what who is on to take will at to minute, displays catalyst that the off are what display let's interested devices, in today's because with cell put drives for the effect. the complaint companies this because of AR/VR know can researchers market and I knows me, a think what that screen the But are size I complaint, there. themselves see talked the larger what's For today's there is I door pick OLED we is, and out VR look everybody me

no So they hey, a when say next screen to has companies us, to we generation effect. come the be want display door that

high example. And a need you So very, resolution. give I'll an you just very

Sorry in to between of match to give view, for field the to degree want I pixels be XX eyes I'm you. XX. to got degree, and resolution, if the XX I'm But going numbers, capability somewhere and I and XXX it's want going pick every

what XX field degree resolution. the pixels want by a And reason to the view, per And come when of degree, companies So us. we way, is I display. XXXX that, the XXXX XXX need that's designed they

the also goes like proof-of-concept because market which a obviously would headset. for proof-of-concept So have is say display, working new to XXXX companies allowed if developing we’re on they're on example, the at we're our is work to proof-of-concept near-term, proof-of-concepts, the see whom actually resolution for a we what display anything to we [indiscernible] you to demonstrated the happen about the look and

therefore high need be fantastic I'd is brightness. very well. would and market only time, some not as to effect, to So brightness the is one people no a see and contrast, how that this very you come catalyst eliminated, very high have out, for artifacts absolutely and also explain Once the be but these because screen motion be door happy needed headsets other of high it

So very high And also aren't optics effect brightness XXX% necessary. is the efficient.

also the that to So contributes brightness.

microdisplay. resolution remember form is very the you I an all diving high scuba to a huge and very to a leads that that high I that want said speed, like type also high mention mask of display contrast, don't a So didn't factor the leads needed, OLED,

the we things So OLED have about with the that to And us, know today companies of talk microdisplay. architecture, to for the other brightness. I why And you've do talking technology heard essentially choice that that's hours. like that brightness. give we will stack, are color And the obviously, double dual tandem an display can companies is each

So today. to we’ll with us. companies And That patterning. that's our belief. we're why direct ahead And is ahead come stay

Mike Well

discussions, maybe think XXXX, back the roughly Okay, before indicate of looks over launch. I feel partner the been going lead a would just follow-up bit manufacturing like just one the don't to I investors conditioned I if just on maybe something partnership, next expect like with timeline wondering necessarily maybe or that the we have the XX time kind be case? was see delayed months a these product are few that being months does launches not product to

Andrew Sculley

hard dealing we're very with, that things to these us are done quickly. companies certainly get The pushing

So anything three thing. don't the next proof-of-concept did on within any think and same three on and I many working the announcing say the months, see they're months them, how you I months, because over you'll company forget working we're with

companies this feel a beyond be do for But a size, great belief talked consumer phone And move everyone path that like the this cell will them. to we wants to electronics there's So this is in I test style display. forward.

come will mentioned at you XXXX. I know you research, And this if market look So out.

in forward to If the companies at little a now, move but predicting with this. with versus dealing look XXXX want research you later, market they're we're

Mike Well

for much the my very you thank Okay, questions. call and answering taking

Andrew Sculley

No problem. Thank you.

Operator

ahead. take from question our next We'll go [Benny [ph] Instructions] please Management, Andrews [Operator Andrews] Capital

Unidentified Analyst

understand looking involved thinks math they're the industry of of maybe and at. kind just that me is kind consumer what what help Andrew,

headset, the red the a launched we if an display. to couple of at LCD VR a from guy they they a their type last look in largest Okay, OLED out and pentile of of headset so stripe, version new quarters, there went

what because to people $XXX over there think cash would bring you're is headsets an that run fab definitely you're and enough display yet on down. enough cost I out year, million But sell to build of to million throwing-off OLED rate Now, the that. the if didn't flow good do they for technology, want X a

you thinking? or think at they're the looking do So math, they're what's what

Andrew Sculley

turn Well, contrast is resolution F-XX for anyone this and cell you other listening the have in forget you the box can what that's VR. off, you thing but you The off two darkened that the you than TV and for even have a can motion you enough in green if you LCDs room, you need you the poor and to a backlight and still have the display a to this, glow LCD, therefore get case, It's is size know in is, higher though pause have problem you still turn have issues, phone as not well. high the TV TV on still you cable that know a and LCD is problem artifact.

companies I next are going there and the think the to are So don't to for talking be LCDs generation. neither us do who

don't that's mean our the talking these they by proof of take which So the I headset companies there before concept only this go are generation. to $XXX the OLED you this work is question of for first on into their why they're this. are we on going million they you and market to and work ask and us have know we production off have microdisplays to the together the mass do, of that concept, is companies companies work have But partner generation display have going that is [ph] I are believe proof has the next done as money but the to pattern then are and and be with to there next believe to interested and all to in who

Unidentified Analyst

high by maybe XX%. the as at there if don’t as And know share leader are guys, at industry these least in look I you XX% far if is their market

if years you were there? didn't go volumes are thinking weren’t because guess because to enough they but seeing things, these is forward So exact ahead ago, same guys clearly back they these the I push this volume as my mean two go

Andrew Sculley

ARVR volumes I a electronics would there years company. this, an and think with that companies beyond estimate but industrial weren't have speak these helmet welding medical and ago, that as consumer right, because right and here the now, new well they're it's we on didn't of industrial, not we two for everyone example I that

So thing. that's type reality augmented an

take So this believe, is just what it's will originally thought. we off market had people than slower

Unidentified Analyst

not one of expensive view for And you family of just earlier, is need you of the a my a is and guess is competitors enough, are type got you in there outcome or contracts of some don't switching a needed wide-field that's if a if good that that you military, just of not LCDs fit either crosshairs result to your I've last got really win about certain family more I or well, mentioned question picture more the that seen or site. a these the these you're sites sites heard weapon weapon certain as mean handful for good because programs

competition on programs are there -- competition the that in we in site haven’t a for ones been and awarded. are are We few

Can that attached a binoculars provider we for range helmet, gun of for full the also. want can high gunsight the the if are is the daytime, helmet nighttime, and works that think a that goggle I it's So OLED you needed what's just it, contrast things image site vision actually you. with that is operations. have qualifying F-XX are way echoes to because wirelessly then have that's imaging, because the what's OLED enhanced why a with through go to they in point like needed, to program, that's an the sole thermal night image Why I'll a that to you to

So needed OLED think to the that's way go. I what's that is and

Operator

no And further instructions] this time. appear be at questions to there [Operator

Andrew Sculley

OLED F-XX we using patterning very business you Ben, very they closing just improve color. remarks. thank the great who patterning questions. and Let produce me for. do color us Can much Mike, a the the all all Jim the just US. It's way the future way, few funding your direct that give us million I'm new like for the significantly I our joining all able what are military the green the on this today, thank new basis can them. because to for asked do though helmets by call of is business and us about ask throughput in US the be make and that you to will and yield tool outside the you direct a in and using equipment $XX for answer even optimistic military and our the to monochrome

use continue we patterning I'm the will that also have a optimistic meet company. OLED and military the consumer about criteria with international our use So direct remember and very OLED they we displays and electronics are for licensee also given business our that the and because have to US conversations had, a we having

the get that we're the you to mass way go see production next significant there that microdisplays is and to working this will OLED working go. companies generation I well is with as very partners and So with: some in this and headsets consumer think with belief market to hard electronic

much York So thing on. get zoom what They've the day we New to State do conferences all, say We're through we do is issue the masks we I we're This very room COVID. thank exactly our to travels, we eMagin other time, have measured. eMagin. sounded at team. and working all in we any anyone the requires is If what you at using we've been if I take temperature muffled If there's need been we outstanding. at and Every the this any action.

So I the team much effort. very for eMagin the think

you thank much conference So the very call. on

Operator

for this and you today's and disconnect may gentlemen, you your a have participation at teleconference. conclude thank and this day. again Ladies great does time We

Emagin (EMAN) 12 Nov 202020 Q3 Earnings call transcript