Revenues for the second quarter of 2018 grew 34% to $7.1 million, an increase of $1.8 million from revenues of $5.3 million reported a year ago and up sequentially by $0.2 million from the first quarter of 2018.
Product revenues increased 34% to $6.2 million compared to $4.7 million in the second quarter of 2017. The increase in product revenue was due to growth from US and foreign military programs and to a larger proportion of sales of displays with higher average unit prices. Contract revenues totaled $0.9 million in the second quarter of 2018 compared to $0.6 million in the same quarter of last year.
Overall gross margin for the second quarter included the impact of the one-time write-off of the consumer night vision products inventory. Excluding the impairment charge of $2.7 million, the gross margin was 40% compared to 24% in the prior year period. The increase in gross margin excluding the impairment charge was primarily due to increased volumes and product revenue, higher average selling prices, and favorable contract revenue gross margin in the 2018 period.
Operating loss for the second quarter was $3.6 million inclusive of the $2.7 million write-down of the consumer night vision products inventory, versus an operating loss of $2.1 million in the second quarter of last year.
eMagin is progressing with the OLED upgrade to a production helmet for a multi-service, multi-country, fixed wing aircraft program. Its OLED displays will be replacing the LCD displays currently employed in these helmets. Displays required for Initial Operational Capability will begin deliveries in the fourth quarter.
The company has decided to discontinue its two consumer night vision products, BlazeSpark and BlazeTorch. It was determined that the engineering, marketing and managerial resources needed to advance these products could be better utilized focusing on the company’s core business.
“Our revenues of $7.1 million for the quarter, an increase of 34% over the prior year quarter, underscore the resurgence we have seen in our military and commercial businesses, both in the US and abroad. Demand for our OLED microdisplays globally remains strong as demonstrated by the growth in orders as well as the requested acceleration of existing orders among many of our customers,” said Andrew Sculley, president and CEO.
“During the quarter, we sold to 75 customers, including three new customers, and supplied displays for 53 new customer applications,” Sculley added. “We are supporting many programs that the US military considers to be of high importance, including applications for night vision, thermal weapon sights, see-through HMD systems for mounted and dismounted missions as well as aviation helmet upgrades and prototypes for next generation helmet systems.
“From a production perspective, our efforts led to higher yields which in turn contributed to a higher gross profit margin. In addition to the investments we have made in engineering resources, equipment and manufacturing processes, we received government funding in the second quarter for OLED display production and yield improvement,” continued Sculley.
“Our backlog at the end of June was $10.3 million, an increase of $0.5 million from the end of 2017 despite our increase in sales. While our backlog may vary based on the timing of new orders and scheduled shipment dates, we are encouraged by the strong demand for our OLED microdisplays and expect our gross margins to expand as our volumes increase and as we continue to enhance our manufacturing processes and achieve additional yield improvements,” concluded Sculley.