EMAN - Earnings call transcript Q2 2022

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Operator

Good morning and welcome to eMagin Corporation's Second Quarter 2022 Earnings Conference Call. Please note this event is being recorded. After management prepared remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference over to Mark Koch eMagin's CFO. Please go ahead.

Mark Koch

morning good and you everyone. Thank second Welcome earnings call. XXXX to eMagin's conference quarter

accurate, statements may be light like by only begin, Form should in you and update from conjunction may our uncertainties will we relate Form especially those to and I contained securities the statements to to prepared not the undertake detailed forward-looking effects in future make that we be materially session, Before Actual performance. future information filings forward-looking guarantees considered statements would these on disclosures. purposes statements implied current not Q&A or our remarks we and following remind in about described to XX-Q. these results of risk expected pandemic. the the factors that for obligation forward-looking report that ongoing estimates, the difficult to expressed XX-K be vary prove statements in risks annual with the are assumptions federal and SEC of These and including expectations, may predict of current results They our XXXX laws. and projections of are in involve and no in our These

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

Andrew Sculley

greater our joining I'll from technological provide quarterly results you On some hello discuss Thank us Thank discuss and our schedule. will our equipment for Mark Mark you, takeaways results key and then today. detail. in advances everyone. and today's call, consolidated

quarter gross margin, new of certification. included including ASXXXX Our progress higher ISO a highlights, second number business and our on wins, revenue, improved

rose our X% to ago. the favorable in in the Our year-over-year military manufacturing by driven increased government-funded increased equipment yields revenues. the in and a throughput. year in and revenue to veterinary we from impact in achieved improvements year-over-year, along with programs, in The manufacturing continued margin from gross is resulted our third XX% the quarter new revenues improved realized production XX% and display increased while impact growth other surgical and $X.X yields improved higher a margin ENVG-B gross along in gain our throughput program sales total was million the which The We of volumes. This facility of part increases with consecutive from mix, and operations.

strengthened with surgery. a contractor also providing for customer and relationship shipped assembly to our displays heads-up a our capabilities by for We level advancing optical higher displays major prime

applications. XX strong the in at weapon reflects quarter, the million sites, thermal $XX.X night backlog our of over and $XX.X the shippable end our orders remained use military As of for months. goggles, total for with second displays next of vision million open demand medical This

daylight secure in conditions. high Additionally high-performance provides that for is the $X.X a US Army's in awarded two-year bright to Executive and million program goal Simulation and a visual us QX. office Instrumentation acuity source Their US -- Office contract for Program even Training brightness development microdisplay

our III from both new X acquiring the high anticipating will chamber our arrival of anticipate early funding AR/VR will for markets. our brightness chamber accelerate our government-funded dPd for same Tier phase of that are equipment display which it This backplane we under advanced higher the satisfy as new a will, We Moreover, as we in this OLED for military potential serving we Title will and dPd dPd our military demand of high allow a September will of leverage usage the luminance and the additional At to R&D full design a time for complete remaining and tool, to the we should that us we displays grants. That available of ultimately await are contract. IBAS map customers. second luminance prototypes. with continuing proof-of-concept significantly government-funded and as be existing be work progress an capable use product of qualification half are Furthermore, dPd customer demand enable will our and commercial this deposition road will R&D to well tool the displays XXXX. of fabricate

is square announced per XXXX Display Week OLED in we maximum People's luminance. capable XX,XXX previously over the received New we at As where for our Award Best meter which Display May, Choice direct candela pattern, of color, Technology, single-stack of microdisplay showcased

continue Dr. on the Operating an at Ghosh We our IMID International on this Meeting OLED display Information leadership month at Officer, Amal presentation Chief our for Korea. industry microdisplays to including by XXXX, in paper Busan, conferences, Display technological applications, later upcoming AR/VR

of to quarter we the in audit XXXX year. an Lastly, third a ASXXXX/ISO obtain completed expect have this preliminary and certification

improvements programs. efforts under be provided OLED financials. for that, as our control equipment supplier yield and of We who elevate discuss certification turn expect the choice III Title we over additive throughput With Furthermore, serve. we this the the I'll will our markets Mark, microdisplays profile that that from call new to for and our various the expect will anticipated our will to quality IBAS

Mark Koch

display contract $X.X quarter the with revenues with from Total increased compared quarter second top-line were of Thank of XXXX an $X.X of $X.X revenue. Andrew to in period. the XXXX million, total Starting with XX% for strength in everyone. were prior to contributions million higher due from million million hello year the of medical $X.X reported reported in including and revenue military year, you, second increase quarter in shipments was and product customers. prior and The Product markets product increase in work ENVG-B for $X.X the consists $X.X revenues for reported compared revenue decrease displays revenue the reflecting used associated development project. of year-over-year both Contract prior the anticipated million year proof-of-concept of million, revenue the in second million an revenues $X.X a period. with revenues program

expected As the with increased delivery we Andrew consumer Tier this of activities anticipate the mentioned, R&D XXXX deposition following company chamber. X September development

$X.X recognize per and as We IBAS primarily loss Operating a per $X.X of improved a loss period compared loss X% basis. favorable zero year manufacturing above. the were reflecting volumes. gross in current the and in higher million gross sales Total the fair prior the prior for to XX% loss provided revenues, profit an of with to increased million period. was was in mix improvement to gross product by million XX% R&D capital million million value in operational for expenses with Net in impact year $X.X in performance with $X.X which period, liability, sales profit increased million QX, in a compared per of margin share QX to contract. a revenue on processes Operating narrowed Additionally, yields gross and year share, subsequent year in under manufacturing a the a or of the The $X.X margin as million, the margin the million Operating diluted in to prices the After with $X.XX upgrades noted compared the over for combined began of impact of resulting $X.X period. warrant million, for second were with quarter higher Title year's for $X.X the adjusting our operating resulted loss XX% due $X.X government the was expenses a compared with new quarters, anticipate fully prior the prior average of of programs. selling higher year or of period. second percentage including gross period. QX QX a the XXXX $X.X Army gross prior improvements quarter reflects of and due compared development net for we share significant U.S. the the profit change or in expenses III $X.XX equipment

impact of period, compared year million prior $X.X change loss or year the the $X.X $X.XX net EBITDA negative to the with fair prior for $X.X liability Excluding warrant in million quarter the negative the the of the Adjusted million per second for value $X.X improved for million period. of QX in share. was XXXX

XXXX, June cash XX, company $X.X of $XX.X the of and capital As equivalents million and cash had million. working of

$X.X XXXX. asset-based million $X.X lending During repaid XX, $X.X of the under availability million second and were company the the respectively Borrowings June million ABL facility. under facility its quarter, and as

net under that in common Additionally, Operator, from the its million company open please for call we will proceeds questions. the sales realized of go ATM ahead. With $X.X program. shares

Operator

Thank Our question coming from HCW. you. [Operator first Instructions]

Your line open. is

Kevin Dede

Andrew and morning, you? are Mark. Good How

Mark Koch

Good morning.

Andrew Sculley

are How Good morning, Kevin. you? are We good.

Kevin Dede

on call. for the Thanks good. having me Good,

in the to How line the to understand new I that month. contract. in me asking operating come get next long what little on help I deposition time do? Army understand to you and guess thing in place to the more you is properly Just a online for it maybe perform and development order take will tool that bit need that you Army

Andrew Sculley

get One about. the that. requires an the R&D – of a program other in million very tool good And there's that is doing Well to realize think we $X.X tool the then some comes backplane just and upgraded to with September. in. redesign a US that good It tool, But R&D is of the will couple and some that thing up. we're for take an comes upgrade in This old things time to upgrades. it's Army is

year backplane through and take up will R&D And the and design be so the of running. then the that will end tool us

Kevin Dede

Okay.

Mark Koch

program And Kevin. that's two-year a

Andrew Sculley

the two we deposition Tier because we project to new and use Yes other thing on, expect enormous And years. is start important it the it's and that additional we after R&D we're should amount don't to shortly tool take want do to time so working tool, the an X need that of is OLED September.

Kevin Dede

I see.

The Okay. press…

Andrew Sculley

produce III can we very talking I'm color the remarks about to prepared important the The other volume during brightness this Title display will high other said the be new thing Kevin our important say in other this is thing sorry, able And volume. type. I'm I one tool thing?

be positive. that's extremely an So going to

Kevin Dede

Right.

some kind Three that Is was the big the of are tools tool. press that do on four that tried there's one then seems of part of because think I math Do deposition you're you process. coming. to? one upgrade And are have that I correctly? understand and the based I referring it total I going a seven that's So to where rough and there's

Andrew Sculley

that's, And Yes. correct.

large able counting the will to You're our could us. one production It and direct do mass for also patterning be that is well. in And the deposition be will production that's dPd, tool, or the able Army. ---any high tool. will able do done also display we project brightness, make new with by today, be And to the on it to do very this be that

Kevin Dede

Can be the but end of you sort taking up through Okay. that's year? expect in. mind a running, really it get I that? me be take shouldn't maybe on understand until it of the just third you We next to year, would could Andrew, by supposed timeline it quarter to while – and to dialed the the in

Andrew Sculley

second would tool. next yes, qualify to would things we What And big able we'll early We it second half, that we said half the of therefore, year. then be run the it. in, on be it in said, and

will it our course, to take we of want if dPd Of all to products on products qualify our do some on today. time every one it,

Kevin Dede

Okay.

that is give you're So parallel, understanding you have will you going a more run currently redundancy? my Now that in little to what right?

Andrew Sculley

tools. effort high compared and one, that that that Yes. tool will to single-use course that -- it's be new X the already now to for One ideas, display the and also now current candela meter the have tool brightness, large very failure, to mass And but two the be new run that's small run And of next times this one we tool, Yes is mass current brightness, squared. the to capable is of able high what parallel. in we'll and displays, XX,XXX designing current be both production. good large tools of the And very this continuing will larger per the to estimate very what over going pattern full-color here, I got can times we X.X by direct production will we're is. in mean

Kevin Dede

do dual that be stack able will a going a in be to just configuration, to you Is that or single?

Andrew Sculley

is that Well well. stack working or Sure. of as things on dual one tandem the architecture the we're

Kevin Dede

Okay

Andrew Sculley

more the from a the we singly, tandem green but heard the things tandem with at so an white patterning program, common Display thing And do don't from had have. way we an over white, to which filter a a nits, Week over have And architecture, tandem light, architecture with know, only that's is, the one here. of color were great and very as advantage heard like here when company easier you've -- other One we XX,XXX. is it's we and red, tandem. my with filters, at a maximum inventors, a I throw this away eyes going everyone. a X,XXX by And you next XX,XXX. XX% architecture, when advantage the language direct got go tandem X,XXX they to color X,XXX. have do And of architecture like three-stack where on you nits something running What stack, to much advantage a doing And do the big actually XXXX. we've blue the at tandem than three although stack, the so it

Kevin Dede

you're there you've I'm much current that are lots in just where are speak that you programs for Obviously, others are walk my hoping, color. side? to could of is to Andrew you just you, the development you understanding and us the consumer done but spoke And and where interest program, Thank one Could extra your Yes. how you through past. seeing. on development

Andrew Sculley

on to everyone talk AR so resolution they and very They don't side, always we side tell is to VR square, they us is diagonal. did was X.X a the want. Well, this the on gave to a can or as what number to, as want high how X,XXX to The the didn't stitch if diagonal. nowadays. be get it path newer sorry have great ones, and a diagonal a We inches, in the to of smaller something there's have with the you X.X have has backplane, companies. of forward, -- you it's we If the near inches key X,XXX something but with instead backplane like them spoken want stitch want the X.X-inch smaller diagonal don't technical And for we number jargon, nowadays. resolution, get excitement. we X,XXX People

they that, less one I withstand thing than no XX,XXX have other The is to nits. say us has told can

past. three-stack that Week saw those Display not we And white you XXXX that's even enough. So at good asked about the

So already September, the then, to to next that finish X,XXX the course. have. coming Tier a to in also shown new violate R&D for of too. X,XXX the working thing, those us number companies the happen. prototypes of creates And design the that this displays resolution that's allows we we're We and we more other And don't OLED. of that who display of paid want then, that excitement to with step we've all anything, now, to need company prototypes the in, And the with we the system produce X is,

Kevin Dede

Okay.

bit. to have flattish like the Just switch little you revenues, just me sequentially. happened? those Mark, gross down Do want gears margin help correct? it on a understand And was that why I numbers looks could

Mark Koch

reclaim a the our we able we look and adjustment. which does ourselves. were being quarter, first Yes, lower cost WIP It put that tough slightly of and taken include the XX% into lower And had specs recoveries of It inventory, volume. positive some manufacturing displays in we say, some recoveries at to we was were was absorb on a that out, the displays sure, too discovered in that volume a Kevin. had to

have did that second we in not reoccur the quarter. So

Kevin Dede

me, question refresh I then, that of on accounting just because last on And the memory liability? income accounting the deferred could the or Okay. synopsis you my keep for actually as a increase and seeing award, government

Andrew Sculley

revenue in increased as advance us the When bill to deferred we payment we section. certainly. government we we the And other the income we another fixed the you're Yes, progress funds our government, to progress step increased that due, government. Then then -- The payments equipment. see like And to assets. the our for -- for vendors of being pays also in the it liability. reimburse starting we so make there's

in other You income see, there's of QX. $XXX,XXX

for new depreciate from equipment, grant. But the for the the as we as we So government benefit we this the the shows equipment or the recognize in depreciate COGS. income depreciation, accounting government it, says, equipment the actually

program, accounting will all that deferred depreciation received considered quarter. funds the which, a guess, and a pull a equipment, I the the course course that over $XX is it's of million with an level, the on commensurate the that, if proxy expense of involved, life but the you be of the that macro we've back Rather over macro of to All recognize that course, revenue the sense. level over amount amortized in income income. for the basically will life million $XX other of of the government decline So, these each from is over in It's we program, eventually equipment. useful depreciable And on the grant. income of the

Kevin Dede

longer? using, Okay. what years are you XX And like, or

Andrew Sculley

most, for equipment. done is using years, we've we're which what for seven No,

Kevin Dede

Okay.

Andrew Sculley

longer that, of of been longer convention last manufacturing that's much but pieces course for would our than equipment. our It major

Kevin Dede

Okay. I'm sorry, going to stay on. I'm

you new else helicopter, a in there targeting, things the walk with? the me of but government and are Just other that me through know help projects. were What development missile can you one EMVG, helmets, where Understand I bunch displays.

Andrew Sculley

had customer. we to with name weapon can't and place another just bid there sights we're And is our Just and And that working on. like the we're already on like actual one the projects that award. forgive was looks that number And a that, number working who family helicopter. a I'll of is on we of There's primes. used mention also them are the of going there me -- taken number a for example, get it's displays of the

So that's one.

we're aircraft, supplying a We to helmet. are displays on still significant an aircraft and

name, mention but the can't that's I Sorry, for good very us.

we're of the some in US. And that the are they on other programs not

one looks providing where that outside put as AR tank device their they in We is an tank. inside they people to US see And the tank can the tank head the of is a on have And and and also. well. also are the can as it program a device there outside stick displays don't outside the of them

it's to So very us. interesting

one other is now obviously And one that that is also big for Okay, government you might for And that's scopes the a very we but a for on customer which think have side. a volume, small longstanding it's big. they hunting. us consumer customer thermal work

We well. have of going programs very a number

Kevin Dede

you much Thank gentlemen, over. floor turn Wonderful. for appreciate. entertaining so I'll really questions all I the

Andrew Sculley

My pleasure.

Mark Koch

you, Thank Kevin.

Andrew Sculley

Kevin. you, Thank

Operator

our -- next our last And question line from coming of you. Thank Michael Wells. the

Your line open. is

Unidentified Analyst

and morning, Mark. Good Andrew

Andrew Sculley

Michael Good morning,

Mark Koch

Good morning, Michael

Andrew Sculley

to should $XXX start to so performs I it a in terms to the this government press on reach it to expect look up And before you number in the going much Instead but read the up $XXX sorry the big ENVG-B we larger question. necessarily of It's got to and thing million. My up $XX program for But One very also million than well. Kevin, funding. interrupting mention plus of million it be $XX not apologies million, went if you up Internet they recently to for ENVG-B I Kevin's Michael. mention forgot they government funding. it's of

right So good that's biggest now. program that's our news. And other

apologize for And Sorry, I I interrupting forgot it. Kevin question. your Michael,

Unidentified Analyst

the do is can XXXXX No company ahead. wanted my microdisplay go eMagin OLED to right knowledge -- over problem. a to ask nits. Xk I that Andrew still now at only

Andrew Sculley

correct. is That

Unidentified Analyst

ask Okay. I wanted to

Andrew Sculley

Yes.

we're other me Let To the that at only our knowledge an one and produced company has say above. OLED knowledge. nits To microdisplay our thing. XXXXX

Unidentified Analyst

Okay.

Andrew Sculley

And…

Unidentified Analyst

competitive about What kind I of view Okay. wanted this I've of of ask just landscape. the to asked and your kind before

same the getting with kind you generation of sorts see or of, maybe here hey and after next headset yeah. and we're targets. one some wanted guys, the you next says those check of stretch of consumers' of think we changes the if the you've coming do think can going big like down much that home couple there's in kind of kind just close gets I As to I consumer to do too, over -- kind Where there got you years? guys of feel to that these

Andrew Sculley

Yes.

partner. Act. we're and We CHIPS whom have speaking in get patent our one a We're about few potentially are production is goals That mass technology. protection knowhow. interested good said, companies production a this to of there a with and partner But also mass the

Unidentified Analyst

Okay.

Andrew Sculley

And patterning interest. good. is get the to way is very and I nits is There think, direct methodology use to easiest XX,XXX our to

Unidentified Analyst

Okay. agreement of been now. manufacturing years And I about know number quite thinking that you've this for a

You just think use anything different of yet, that that license an than you do kind agreement? you roughly or mind that your have more you're would couple which if don't companies finalized a be to settled company going rather more on in you've wondered than one provide exclusive I but for maybe with, it would

Andrew Sculley

about really end is agreement, are value few, higher it four which this. that exclusive An agreement talking more depends than actually And tag a like on companies so nonexclusive result. the to has is that. we a on -- No, price a depends

Unidentified Analyst

ask, Okay. XXXX. back All to a use to your to company wanted consumer a technology there's license And right. I that going holds

Andrew Sculley

Good memory.

Unidentified Analyst

hear hear Do to from you them at still all?

Andrew Sculley

we equipment in. in new do. coming interested They're Yes, that's this very

Unidentified Analyst

kind Okay, with help good. process? and Are to they also willing partner interested of manufacturing finding maybe in a that you

Andrew Sculley

Absolutely. Yes.

Unidentified Analyst

All Okay. right.

see think sounds that's really got, good. I Let's -- but I've that all

taking So, my thank for you questions. very much

Andrew Sculley

You're Michael. welcome.

Mark Koch

Michael. you, Thank

Andrew Sculley

yes, go We chamber the are And very mass new production we the the with making. on. will are And at happy good R&D that be displays. not quite -- making progress

Unidentified Analyst

what R&D the you is with of the chamber, September concept? in do to of step to proof that kind going think here complete last Do you're that the

Andrew Sculley

to. needed It's Yes.

Unidentified Analyst

Okay.

decide, go So manufacturing be company after that -- partner? done gets let's gets some go after forward would it is then -- with see would that let's consumer kind of that that that when

Andrew Sculley

take displays while us a done the will on those tool. all get It to Yes.

Unidentified Analyst

Okay.

Andrew Sculley

tool is this the running later after in and which started year. is But

Unidentified Analyst

again. sounds Well, great. All right. Thanks,

Andrew Sculley

Thank you, Michael.

Mark Koch

Thanks, Michael.

Operator

you. any closing back will Thank now I company the remarks. the turn for to over call

Andrew Sculley

again you, Have This Thank conference the call. for today. joining nice you. Thank day. a concludes us

Operator

Ladies and for our for does participation. Thank gentlemen, your conference today. that end you

You may day. now disconnect. Good

Emagin (EMAN) 11 Aug 222022 Q2 Earnings call transcript