eMagin has a Strong Quarter but Delay of Microdisplays for AR/VR Disappoints
November 19, 2018
eMagin’s prime market has been the military, which by definition means high ASPs, max development and low volume. Revenue growth typically been tied to the military and no doubt limited the company’s potential. Recently, eMagin has been extolling their development of the ability to micro pattern sub-pixels, which enable the production of an OLED micro display without the use of a color filter and thereby increase the light output from <1000 nits to 5,000 nits or even more. The capability excited AR companies and has led to serious interest in that high volume application, which promised the potential of the company shifting to the CE market where volumes would be in the millions. So even though eMagin had a positive quarter revenue and margin wise, they disappointed analysts by failing to deliver the new product to a highly motivated list of CE customer. Revenues in Q318 were $6.9 million, a 60% increase Y/Y. Product revenue for the quarter was $6.2 million compared to $4 million in the third quarter of last year, up 51% Y/Y. Product gross margin was 35%, up from 5% Y/Y, reflecting the benefit of higher volumes and average selling price and the leveraging of fixed production cost over a greater product sales compared to the prior year’s volumes and production-related issues. Total backlog at the end of September was $10.9 million, an increase of $1.3 million from the beginning of the year.They generated revenue from 66 customers this quarter, including eight new customers and supplied product for 23 new programs in our existing customer base. They are upgrading their custom direct patterning production equipment and expect to significantly increase product yields, lower unit costs and extend the lifetimes. The tool will be operational in the second quarter of 2019. The shortcoming was the extension of the time line for mainstream AR/VR, which would enable much higher volumes and revenue.