eMagin Corporation

We're standing by and welcome to the Imagine Corporation's third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Mark Koch, Chief Financial Officer. Please go ahead, sir.

Thank you and good morning, everyone. Welcome to IMAGINE's third quarter 2022 earnings conference call. Before we begin, I would like to remind you that in the following prepared remarks and in our Q&A session, we will make statements about expected future results that may be forward-looking statements for the purposes of federal securities laws. These statements relate to our current expectations, estimates, and projections and are not guarantees of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict and may prove not to be accurate, especially in light of the effects of the ongoing pandemic. Actual results may vary materially from those expressed or implied by these forward-looking statements, and we undertake no obligation to update these disclosures. These forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our 2021 annual report on Form 10-K. During this call, we will also refer to adjusted EBITDA, a non-GAAP financial measure, to provide additional information to investors. A reconciliation of adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure, is provided in the press release that we issued this morning. Non-GAAP financial measures such as adjusted EBITDA are not meant to be considered in isolation or as a substitute for our GAAP financial measures and financial statements. With that, I will turn the call over to our CEO, Andrew Sculler.

Thank you, Mark, and hello, everyone. Thanks for joining us today. Our third quarter was highlighted by a 31% year-over-year revenue increase leading to improved gross margins, and positive EBITDA, along with new business wins and continued growth in our backlog of open orders. Our total revenue rose to $7.6 million compared with $5.8 million a year ago, while our gross margin improved to 37% from 10% a year ago. And our EBITDA for the third quarter of 2022 was a positive $0.7 million. This is the fourth consecutive quarter in which we realized year-over-year increases in throughput and product revenues of more than $7 million. This was the result of the new Title III and IBAS funded equipment in our production facility along with improvements in our manufacturing operations. Our display sales grew during the third quarter, reflecting strong military shipments and increased medical segment revenues. As of the end of Q3, ongoing demand for our displays for use in thermal weapon sites, military night vision goggles, and medical applications drove the increase in our total backlog to $16.6 million from $14.3 million at the end of Q2. Approximately 93% of the total third quarter backlog is deliverable within the next 12 months. As we discussed last quarter, the U.S. Army's Program Executive Office for Simulation Training and Instrumentation awarded us a $2.5 million two-year development contract to secure a U.S. source for high-performance micro-displays that provide high brightness and visual acuity even in bright daylight conditions. In the third quarter, we recognized $.6 million of revenue under the initial phase of this contract, which was related to the design of a backplane that will allow for significantly higher luminance of our displays. In December, we will take delivery of the upgraded R&D DPD deposition chamber, which will mark the start of a new era in OLED microdisplay technology. We will use this chamber to make the displays required by the last phase of our proof of concept work with a Tier 1 AR VR customer. This upgraded R&D chamber will be used to fabricate sample quantities of disruptive high brightness DPD displays for both military and commercial markets. The design process for this R&D chamber has played a key role in defining the specifications for the large production capable DPD organic deposition tool purchased under Title III funding that is nearing completion. In September, as previously announced, we received our AS9100 RevD certification along with our ISO 9001-2015 certification. The AS9100D is an internationally recognized quality management standard that is specific to the aerospace aviation and defense industries. These certifications strengthen IMAGINE's competitive position and standardize our quality, reliability, and safety processes. Furthermore, we believe that our certified quality management systems combined with the highly differentiated DPD manufacturing equipment and processes will continue to make IMAGINE the supplier of choice for the high brightness and high resolution OLED microdisplay solutions of the future. Regarding our Title III and IBAS funded programs, as of the end of Q3, we had added and qualified four new pieces of equipment to our production line and had received three additional pieces of equipment that are currently installed and are in the process of being qualified. As I mentioned earlier, this equipment has contributed to the improvements in our production process and we have seven more major pieces of equipment on order, including the production-capable DPD organic deposition tool, which should improve device performance, yield, and throughput of this innovative technology. Overall, we remain on track with the requirements of these important government grants and are beginning to realize the yield, reliability, and throughput improvements that we expected. With that, I'll turn the call over to Mark for a discussion of our financial results.