Revenues for third quarter 2015 were approximately $5.4 million, a decrease of $1.6 million from the second quarter 2015 and a $0.3 million decrease from the third quarter last year. Product revenues (primarily display sales) totaled $4.6 million, approximately $0.8 million less than the second quarter 2015 and approximately $0.5 million less than the third quarter last year. The lower revenues reflected fewer units shipped and a modestly lower average selling price due to product and customer mix.
R&D contract revenues totaled approximately $0.8 million, about $0.8 million less than second quarter 2015 revenues of $1.6 million and $0.2 million greater than the third quarter last year. The lower revenues in comparison to the second quarter 2015 are attributable to the unusually high level of activity associated with the ManTech project during the second quarter as well as the completion of several smaller contracts during the second quarter.
Gross profit for the third quarter was approximately $1.1 million, or about 21% of revenues, compared to gross profit of approximately $1.7 million, or about 31% of revenues, in the third quarter last year. The decrease in gross margin from last year was primarily due to higher display costs reflecting the absorption of the company’s fixed manufacturing costs over fewer units produced.
“Our financial performance this quarter did not meet our expectations, but I am pleased to report we accomplished much that will further eMagin’s technological advantages in microdisplays and position the company for profitable growth,” said Andrew G. Sculley, president and CEO.
“During the quarter, we implemented a capacity enhancement initiative to increase our display production while continuing the important research we are doing on several key development programs,” Sculley added. “We qualified an important new display, which possesses the resolution and brightness requirements for several new programs. Our ability to directly pattern microdisplay pixels is in our view unmatched in the industry and has led to great interest in our technology for consumer augmented and virtual reality (VR) applications.
“In particular, our work on ultra-high brightness displays is going well and has captured the interest of the sponsors of our ManTech research and development program and a prominent aviation customer. This effort is anticipated to result in a manufacturable, full-color direct patterned, ultra-high brightness display that is 20 times brighter than a smart phone,” he noted. “These displays will be used in head-mounted displays (HMD) for aviation, both military and commercial, and in consumer applications. In addition, our HMD system has attracted the interest of several major companies.”
As a result, the operating loss for the third quarter increased by $1.2 million to a loss of $2.2 million from a loss of $1.0 million in the third quarter of last year. Net loss for the third quarter was $2.2 million, or $0.09 per basic and diluted share, versus a net loss of $1.0 million, or $0.04 per basic and diluted share, in the third quarter last year.
At September 30, 2015, the company had approximately $5.1 million of cash and cash equivalents compared to $6.0 million of cash, cash equivalents and investments in certificates of deposit at Dec. 31, 2014.
Based on current and forecasted market conditions, current backlog, expected orders and production capacity, eMagin has lowered its revenue guidance for 2015 and anticipates annual revenues above $24 million.