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eMagin 3Q17 report -4

14:08 10-Nov-17

The main problem with this quarter's report was that equipment was down for a month due to a broken part that was unavailable for replacement.  That impacted revenue to the tune of $1M.  A new VP of operations is now in place and making changes to processes.  New equipment is also expected to be delivered by year end, but I have to wonder at what cost?

The broader problem is that it was very evident that management is facing a crisis of faith from analysts and investors.  It can tout progress on a common display for multiple customers, and a new optical interface to be available in 2H18.  It can point to a resurgence in military contracts, but they care more about being able to get hard numbers for backlog, which were denied.  Management can call 2018 a transformative year, but it said the same thing about this year back in May.  Inability to provide any quantitative detail on the contract with a tier-one customer makes investors discount comments about signing a second one.  This is all the more true since the company has already been working with the potential customers that it keeps highlighting for a year or more.

What's really needed is for investors to be able to see something positive in the financial statements  What can bee seen right now is a lot of inventory build.  Manage projects this could be converted to cash in 12-18 months, but it spoke of an initiative to find alternate end markets.  Clearly, there is valid concern about a possible write-off.  Having to raise more cash is, of course, an equally valid concern.  Offsetting that a little is the point that disruption in the third quarter should lead to some increased pace in this one.  Those two factors could combine to put off further dilution, but it's hard to forecast any sustainable positive inflection point for eMagin just yet.

eMagin has reported results for its third quarter:

• a loss of 9 cents per share misses by 4 cents
• on revenue of $4.3M, which misses by $1.6M
  

The misses seem to be due to production issues, which have been a recurring problem.  Although management speaks of building momentum, the competition that I've been highlighting recently needs to be considered as well.  In particular, Kopin just reported progress with its own efforts.  I'll circle back to the call, after I finish new research, but will only report further if I see something surprising.

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