eMagin Corporation

Good morning and welcome to Imagine Corporation's first quarter 2023 earnings conference call. Please note this event is being recorded. After management's prepared remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. I will now turn the call over to Mark Koch, Imagine CSO. Please go ahead.

Thank you and good morning, everyone. Welcome to Imagine's first quarter 2023 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 for the purposes of federal securities laws. These statements relate to our current expectations, estimates, and projections that are not guarantees of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict and may prove not to be accurate. 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 2022 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 Scullin.

Thank you, Mark, and hello, everyone. Thank you for joining us today. Our first quarter results were mixed due to the timing of orders under our ENVGB, enhanced night vision goggle programs, and $0.4 million of revenue that was delayed to the current quarter due to an unexpected manufacturing downtime with one of our legacy tools. Nonetheless, we are pleased with our total sales backlog, which remains strong at $16 million, reflecting continued strength in bookings for the military and medical markets. We expect to receive additional follow-on orders under the ENBGB programs this quarter. We are excited to report that the upgraded direct patterning display, or DPD, deposition chamber we received in December has already demonstrated the potential of this disruptive technology. This system will be used to continue our development efforts and produce engineering samples for customers As we recently announced, we use this R&D chamber to produce an ultra-high brightness display with maximum brightness of 15,000 candela per meter squared. This surpassed our previous OLED micro-display maximum luminance record of 10,000 candela per meter squared, which we set 18 months ago. This milestone is beyond the threshold requirements for immersive AR and VR devices and will help to overcome inefficient optics, and alleviate motion artifacts. This higher level of luminance will enable our military, consumer, and commercial customers to implement new and advanced features that to this point have not been technically feasible. Moreover, existing applications will benefit from much better power efficiency, which results in extended battery life for mobile applications. At the same luminance, these direct pattern color displays will have much lower power consumption than a white with color filter display. Furthermore, the performance of the upgraded R&D chamber demonstrates the potential for a production-capable DPD tool that we designed with similar specifications last year. This large 160 metric ton tool, which we expect will double our manufacturing capacity, arrived safely at the Port of Newark in late March and is expected to be delivered this month to our newly expanded clean room. The vendor's team will assist with the installation and the start of qualification efforts, which we expect will be completed in mid-2024. As you may know, our proprietary DPD technology directly patterns primary RGB color OLED emitters on our silicon backplane, which creates ultra-high brightness light output at ultra-high resolutions with brilliant colors. This is in stark contrast to competing products that utilize colored filters with white OLED that significantly degrades the light output. As we continue to advance our technology, future DPD milestones will include the addition of tandem OLED structures and other enhancements that will take the performance of AR, VR headsets and heads-up displays to even greater heights. the DPD production tool will be able to manufacture direct pattern tandem color displays in 2024. In the second quarter, we expect to resume our proof-of-concept work for a Tier 1 consumer company. In addition, we plan to continue work under the U.S. Army's Program Executive Office for simulation training and instrumentation contract to provide high-brightness micro-displays and expect to produce several displays required by the next phase of this contract by the end of the second quarter. As previously announced, Imagine has ordered all equipment to be purchased under the $39 million in Defense Production Act Title III and IBAS program funding grants that were awarded to us in 2020. As of the end of the first quarter, the company had added and qualified four pieces of equipment to its production line, and had received three additional pieces of equipment that are currently installed and being qualified. This equipment has contributed to improved yields and reliability in our production process, and we have seven additional pieces of major equipment on order. We remain on track with the government grants and are beginning to realize the yield, reliability, and throughput improvements we had anticipated. Looking ahead, we're excited to continue serving our important military and medical customers and presenting our DPD technology-based products to customers building consumer devices. With that, I'll turn the call over to Mark for a discussion of our financial results.