Q1 2021 Kopin Corp Earnings Call
Okay.
Good day and welcome to the COVID-19 Corporation first quarter 2021 earnings call today's conference is being recorded.
At this time I would turn the conference over concern with just letter Chief Financial Officer. Please go ahead Sir.
Thank you operator.
Welcome everyone and thank you for joining us this morning.
John will begin today's call with the discussion of our strategy technology and markets.
I will then go to the first quarter results at a high level John will conclude our prepared remarks, and then we'll be happy to take the questions.
I'd like to remind everyone that during today's call taking place on Tuesday may 4th 2021, we will be making forward looking statements as defined in the private Securities Litigation Reform Act of the 1995.
These statements are based on the company's current expectations projections beliefs and estimates.
And I was talking to a number of risks and uncertainties that could cause actual results to differ materially from the.
The forward looking statements.
Potential risks include but are not limited to demands of our products operating results of our subsidiaries market conditions and the other factors discussed in our most recent annual report on form 10-K, and other documents filed with Securities Exchange Commission.
The company undertakes no obligation to update these forward looking statements made during today's call.
With that I'll turn the call over to John.
Thank you Richard.
Good morning.
And thank you for joining us to discuss our first quarter of results.
I wanted to start by expressing I wish.
You and your families continue to stay well and safe.
As we hopefully are closer to the end of the is awful pandemic.
We are pleased.
With our strong start of the year.
The second continued increasing demand for <unk>.
Across multiple of seven.
Revenue increased.
Cost of maybe 40% in the.
The first quarter of 2021.
As compared to the first quite a range right.
With schools.
The defense production programs.
Our funded development program.
We would not have bought in pain programs.
In various stages.
Out of it.
Well some of it they may not contribute significantly.
Product revenue for the next year or two.
These are by far the strongest defense program sort of Neil.
And Colby history.
It sets the stage well for the coming years.
We continue to aggressively pursue additional opportunities.
The defense market.
And we expect to make some notwithstanding the got these opportunities in the coming months.
Our R&D activities have been increasing in the past several quarters.
Reflecting the significant opportunities we see the army.
Virtual reality of the space.
In particular.
Customer funded R&D revenue.
John the 80%.
Over here.
Primarily the cost of the salary of the interest.
Yes, the next generation displays.
We anticipate technology activities.
Additionally.
We continue to see strengthening our enterprise market standards.
The strong volume growth.
The enterprise.
And three the automatic.
I can make it up the optical inspection systems.
What's your of recovering nicely.
Following a slow down.
In the early days of again.
Yeah.
The growth in these areas.
Oh, what's the offset.
The decrease in the public safety sector.
Municipal government budgets.
Thank you.
The defense revenues in the first quarter of Chinese probably one.
The increase.
42%.
Compared to the first quite of Triangulating.
Defense revenues.
The children by FWS item of weapons sight.
And the F 35 fighter jet program.
That.
It is true defense programs.
Which is still quite early in the.
The private faces the.
Junior a core component of the revenue in the coming years.
Once the remain on track.
The transition several more products. So the early low rate production is yet.
We expect the revenues beginning in the second half.
As mentioned.
Coping as the oldest and defense programs.
In various stages of development.
These programs out of all using a microgrid space.
The increase and I increasingly utilizing our specialized optical system.
The high assemblies.
We believe with the sole source supplier.
The most of these programs.
All of our defense programs.
I E. The E R of applications.
Applications.
And coping continues.
Additional VR and VR applications in the.
The strength in <unk>.
That's the way in consumer area.
One of the sample.
In the first quarter of 2021.
We announced the coping fiber display.
Why <unk>.
The kiln, how could the G eight displayed.
Display the modulus.
The 830 Tuesday would you drive the Ics.
Now incorporate.
In terms of the Canadian based candidate based share of water.
Wearable and yet the moat display driving computer.
Is the product is a near to the high display well under water.
Much of it.
And provide critical types of installations, including death.
Five times complex.
Believable gas.
Of course.
This is just one example of the.
Many areas of the market.
Finding a solution.
Moving copay Mac with the spec product.
It's the only micro display company in the world.
The product and technology solutions.
Utilizing each of the leading macro display technologies.
All of that Mike.
Micro Leds Ltd's.
Well, it's the outcome.
Copies of the newly proficient.
All of it the right technology solution.
And the markets and applications.
Yeah.
Yeah.
As mentioned last quarter.
We've received our first production order.
From a U S based customer.
And began shipment.
All of our seven try the Pea Penguin pending deals that kind of Max exactly space.
Hi, Brian, Yes, and breeding color fidelity.
Compatible very low power consumption.
This new technology of representing a modest of coffee.
It's a record 7000 nits brightness.
With a much lower power and previous technology.
This is a huge of cheap which like the RF micro the space.
We continue to ship, our 790 <unk> micro OLED display the day in July.
Meanwhile.
We continue to innovate and improve.
Our audit technology.
The meeting market demand.
Sure.
In addition to our customer base R&D activities.
We have been increasing.
<unk> spending.
To meet the timing of a RMB.
We believe gives us the one thing of that gap of J D.
If the device will expand.
Anyhow, the hands free devices.
Oh coping with the ready to meet market demand.
Finally.
Yeah, Alright, how long history of leadership in Wearables the three.
Free pilot.
Well, the last series entitled AR and VR the.
Paradise shift the smart glasses starts now.
Most of that in fact media.
The first standard called <unk>.
Yeah.
Was held on April 27.
And now he's available on Youtube.
He was very well received.
With over 500.
And I must apologize.
We were oversubscribed for the lack of ebay.
Unfortunately, the me too.
Hundreds of attendees.
Yes, what that everyone who want to attend live.
Kinetic.
The web not hide the recall it right away and.
And we did provide a link.
Two of the recording of.
Of the registration.
People shortly afterwards.
We have seen increased the capacity.
The lack of dissipation in the next two sessions.
In part two of the trilogy.
To be held on May 20 belt trucks.
The focus on the present.
We would tackle the current speak about.
And there lies the interesting success stories.
Day.
In concluding that the.
Tipping point get the rights for some of market.
To begin mass adoption.
The impact we could.
To be held on May 26.
We will focus all of the future.
We would look to the next stages of AI VR tobacco products.
Also in the role that so.
The developed products with the right form factor.
Technology.
All of them it features and cost.
Indeed, the exciting transformation.
We present our views.
Of the next streak of bad years.
We started.
<unk> learned the lessons we learned from all these past and present.
The <unk> product in the back of base.
We were Danske bank connect.
How to get to the ultimate customer base smartphones.
This will be the Holy Grail.
Really.
What kind of does so much from.
What the defense system had been doing.
This is John.
The next two webinars.
You will not be disappointed.
Registration of links and we price it can be found on our website.
As well as the hub in fact website.
The shocked.
We're continuing to make great progress.
She has a good strategy.
Andy of children walnuts.
Okay.
The market conditions are favorable.
It's a R M VR.
Gaining strong traction.
Throughout the past year.
We believe co pays the grid position the.
Capitalize on the scoring training.
With this I would think is call the rich.
Thank you John.
Turning to our financial results.
Total revenue for the first quarter ended March 27, 2021 were $11 7 million.
Paired with $7 9 million for the first quarter of March 28, 2020 of 48% increase year over year.
Cost of product flow for the first quarter ended March 27, 2021 were $6 4 million compared with $5 6 million for the first quarter ended March 28 2020.
Gross margin for the first quarter of 2021 was 15% compared with 5% for the first quarter of 2020.
The increase in gross margin for the three months ended March 27, 2021 as compared to three months ended March 28, 2020 was primarily due to improved manufacturing efficiencies driven by higher volumes.
Research and development expenses for the first quarter of 2021 was $3 6 million compared with $2 3 million for the first quarter of 2020 of 52% increase year over year R&D.
R&D expense for the three months ended March 27, 2020 increased as compared to the three months ended March 28 2020.
Primarily due to an increased spending on U S funded development programs and internal R&D expenses.
<unk> development.
Selling general and administrative expenses were $5 9 million for the first quarter of 2021, compared with $3 4 million for the first quarter of 2020.
SG&A expenses for the three months ended March 27th 2021 at approximately $2 4 million of stock based compensation costs as compared to 89000 from the same period in 2020.
Excluding the noncash stock based compensation costs SG&A expenses were $3 5 million for the first quarter of 2021, compared with $3 3 million for the first quarter of 2020 of 5% increase year over year.
Other income expense was income of approximately 37000 for the first quarter 2021, compared with 87000 of expense for the first quarter of 2020.
During the three months ended March 28, 2021, we recorded 28000 of foreign currency gain.
As compared to 172000 of foreign currency losses for the three months ended March 28 2020.
Turning to the bottom line, our net loss attributed the coat incorporation for the first quarter of 2021 was $4 1 million or <unk> <unk> per share compared with the net loss attributed corp, incorporation of $3 6 million or <unk> <unk> per share for the first quarter of 2020.
Non-GAAP net loss attributed the Coca Corp for the first quarter of 2021 was $1 8 million or <unk> <unk> per share compared with non-GAAP net loss of tubes, Couldnt cooperation of $3 5 million or <unk> <unk> per share for the fourth quarter of 2020.
<unk> cash and marketable securities were approximately 35 6 million at March 27 of 2021 as compared to $20 7 million at December 26 2020.
During the quarter ended March 27th 2021, we issued $2 4 million shares under our then existing at the market or ATM program and generated $15 5 million net cash proceeds which concluded our 20 million ATM program.
First quarter amounts for depreciation and stock compensation expense are attached in the table. The Q1 press release.
The amounts discussed above of our current estimates and listeners should review our form 10-Q for the first quarter 2021 for any possible changes and additional disclosures.
Finally, I would like to address.
The global semiconductor shortage cope and did not experience any significant effects caused by the shortage in the first quarter of 2021.
We have been proactive in our actions of the communications with our semiconductor suppliers and have placed orders well into the future we.
We continue to monitor the current dynamic environment and manage accordingly.
Operator, we will now take questions.
Thank you.
If you'd like to ask the question.
The Sigma by pressing star one on the telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to the signal the chance to reach our equipment again press. The star of wanted to ask the question well I'll pause just one moment.
Yes.
So we will now take the first the question from Glenn Mattson from Ladenburg Thalmann. Please go ahead.
Hi, Thanks for taking the question and congrats on the south of the great results the.
So first question on the the two areas of outperformance versus my model, where in the industrial side and the R&D could I just get a little more color as that was the industrial a bounce back in the fire and safety stuff or was it more of the real wear.
At the end user and then on the R&D front I'm curious is that all government related or some of that.
Is there any commercial or consumer related the R&D revenue.
So mostly it was the industrial headsets, the folks like real where where the strength in the industrial segment as well, including our three D. A O L. A was very strong in the first quarter.
And as far as R&D and the.
Majority of it is the fence related but there is some commercial.
Consumer RV in that also.
Okay, great Thanks, and on the on the.
On the defense side, you've been talked about for a while 10 programs are in development, So and I think I'm not sure. If you reiterated it this quarter or not but in the past you said you expect one of those so.
So kind of contribute.
The initial production volumes, but contribute meaningfully towards the second half.
Is that still the case and win win.
Have you won that yet or what would you announce that when you win it or you're not allowed to or just some some thoughts about how that news flow is going to play out over the course of the year.
Yeah, So we would actually expect the.
Right now our estimate is about three programs in the second half of the year to go into.
<unk> low rate initial production.
So let's start providing revenues.
It is low rate initial production of the net it would really ramp up in 2022.
But our programs are on schedule as John indicated in his prepared remarks.
And the Gray will.
We will announce.
When the times out there that day and back.
First of all of us.
That's the impact going to lap.
Great. Thanks, John So.
Moving on to the E. R V. Our stuff John you talked about it being a.
You know a once in a lifetime opportunity I mean, <unk> has been a part of other opportunities like that in the past I'm thinking about like.
The digital cameras and displays things like that.
Yeah.
Uh huh.
Would you.
Categorize this as similar to that kind of of situation, maybe even on a scale of larger just based on this versus what you've seen.
The COVID-19 test.
The good question.
I mean I've been preparing these true leggy.
<unk>.
The webinar.
Yes, that'd be password and I would just say that.
The opportunity is actually bigger die initially thought I do is going to be at the opportunity non mobile I thinking it could be that could be bigger than the even the cell phone business. So it could be could be a tree and out of this distinct from 15.
15 years.
Well I would talk about that you can get the.
Secondly, the way, especially of the one.
Yeah, he's talked by the future of which allowed to expect I think that's going to be a very interesting seminar.
Remember that the last time and now we have about 30 minutes of Q&A. It was the lot of people ask questions of where to cut the off because of the time's up.
So we will continue to have their act of the.
The Q&A session of the Hartford, the webinar and I think the cell will make back the predominate.
One of our Q&A.
Right great. Thanks, we look forward of that for sure and the.
The last question from me just as on the on the.
On the chip supply side.
You've said that are you guys feel pretty comfortable that the preorders that you've made and things like that and in the and that you don't didn't have any effects in Q1, but.
Can you just give us a better sense of just the.
Our concern of investors should be if at all about the potential disruptions in supply.
Well you know.
The reality is we saw the article by the CEO of Intel.
And you know like what the auto industry is experiencing you just need one chip missing and the whole product doesn't yet now we're not in that type of situation, we had multiple products.
But it is pretty dynamic and we will always take is that there was some panic in the market and people are over buying this is somewhat like we saw frankly in the tech bubble, where people father's day shortages and they started stuffing there their closets with everything they could get and of course, we see people taking the opportunity.
To raise prices there is no doubt about that.
But so far.
We haven't had any of our suppliers you now say hey, listen this is a real big problem. So we're monitoring it literally on a daily basis, and we're trying to get to a sub our vendors to make sure that they are on top of their suppliers as much as we can.
Okay, great. Congrats again on the results I'll pass it on.
We will now take our next question.
Kevin Dede from H C. Wainwright. Please go ahead.
Good morning, gentlemen, thanks for taking my question John.
John could you just talk a little bit more about the Canadian near eye diving display, which us which display of using there is there an extra light source just maybe some more.
Pardon the pun color on that.
Yeah.
Yeah.
Kevin Day.
Yes, I use the of our micro LCD displays and.
Using a special bet right.
A lot of them.
60 day, well those needs of the magic of we've been providing to the.
AI application itself, yes, but this line.
The second thing is obviously at the back in the water.
And you had the especially the talent modules, but they are doing well and I think.
At the the product just came out of the market that the debt.
The responses acre I don't do diving, so I've never tried it myself.
Okay.
I can't imagine there's the acute.
I can't imagine there is a huge market for it but I was just hoping that you could.
Maybe give us a little more insight how how would you say it compares to the Scott helmet that the firefighters use.
As the Sky.
Scott.
How much of the scheme the SaaS suite.
<unk> is now.
So is the difference he has different standards that the Scott.
Given the state of it.
All of those things are not.
<unk>.
The day, you can sell millions per year, Okay. That's why I say at the end of the day in day one.
Holy Grail is the consumer base.
You have the goes through the fans and you have to go to the enterprise the level. What you need is the biggest Arsenal nation.
Hey, How's the ahead free so we're very happy with the opportunity.
Well, yeah, Yeah, Yeah, no that's sort of that's sort of the way I was I was looking at of that and how I mean, what are the features that you see coming from this development and the use meant using of the micro LCD display as the applicable in the can.
<unk> market.
Yeah.
Got you yeah actually [laughter]. Please.
Half of that at the top of the Tox all of next week, which I'm, giving back some of that to Jabil.
If you really look at what's going on when you move around the handheld the hands free.
The amount of component developed for the hand hanging out of the cell phone.
The debt English of used all of the components Galleria is out of the day on the Hill.
The problem of the instead of display.
Let me look at it specific display 50 place to be.
In the early days the accolades could the hostess day on your head the costs.
<unk> never stepped back.
And the type of new day, even 30 years ago, and it's fun to do.
The space smaller display.
Well it displays nine now you still have the best Thank you.
And then the fire.
Especially of how long it takes.
The cans of water the catalyst.
Nicholas Campbell of anything it would be way of life.
Our defense business is a lot of things.
Kind of occupancy in the countries places what kind of recognized housing of needs.
Until the age of the size of it didn't go into the water.
All of these things we learn so I think the.
I think people now understand the is really the micro display module.
Most of the place that cash.
The screen do you have the cell phone is the biggest challenge and we are leading to the average.
Starting 30 years ago.
Okay.
Alright so.
Granted you're.
Your discussion your answers for Glen's questions pointed to consumer development in a R. V. R. Can you can you be more specific how how are you taking what you've done here for the sky helmet, what you've done for the diving helmet and what specific guidance of R&D are you doing to develop the consumer side.
Yeah in the consumer side I think first of all culture.
It is true.
I know I have a big feature of the fan.
The five wounds the rule number one is we had to be in humans.
The second technology, so make major theme of the human the <unk> the eye on the head.
Yes, It's day Nashville, the day small thin lightweight fashionable.
And so the consumer I E.
The transaction for these type of Omega Rehabbing the hydro assets.
Is that okay.
And I would talk about that next week at the special I class at the coming on soon.
And the such kind of factors that coming out.
And then you will be a very is a radio.
The bulk in the next day.
And a few months ago angry with me and the way. The next 12 months and after that you will you will go into more and more constantly applications.
I would say consumer applications, the starting right now in the few months ago, and he's going to the that day.
So when we talk about that I chose the idled one of the top two day. If it comes John that is the best site in time.
Okay, John I appreciate that and thank you for the invitation.
Rich before I, let you go what was the what was the official share count at the.
At the end of the quarter.
And.
And that's not the average but the official Fulton.
Honestly I don't have that at the top of my head.
<unk>.
What's the number was its pretty close to the average.
Oh, okay.
Thank you gentlemen, thank you had a lot of <unk>.
So my question.
Yes, we didn't have a lot of stock activity in the quarter other than the what we sold.
Yes.
Yeah, So I right I guess, that's close and it was really close to the early part of the quarter.
I guess I just have to go look at the date.
Yeah.
Once the once the queue come out.
Mark.
Thursday.
Thursday, alright, thank you gentlemen.
Thank you.
Just a reminder, if the rights to <unk>.
Ask the question. Please press star one on the telephone keypad.
We will now take our next question from Craig Rose from <unk> asset management. Please go ahead.
Hello, John.
Hello from my point of view, there's no shortage of R&D dollars spent on products revolving around.
Rmcer, so when I see the.
That's great the yards is up but the balances in defense.
Where do you see R&D dollars in the future how high could that go considering.
John.
You know everyone's trying to get where you think the market's going to go.
Yeah. Thank you, but the question.
The biggest challenge to getting into the wearable.
Yeah.
Is that mentioned before is the display and optical system, how do you get good display and optical system on the head.
And that display how could the very tiny.
Smaller.
Much higher resolution and read the display you have news on the cell phone.
And you would not be the same technology.
It's still part of it can be all of that.
On the glass is called Silicon and now it described very clearly.
The second session why he had to be on silica.
So anyway, the biggest research money now and all over the World range now is searching for how do you displays and the.
<unk> yeah.
Screen.
Net.
We have some kind of display you had to be of macro display of hits its the best special optics the odd.
Optics turned out to be the major challenge.
The reached San mentioned, we actually are not just focused on display we spent quite a lot of activities. The optics, we found that our customers we cannot use any micro display and net the optics idea.
The opex at the magnified a thousand times 10000 times.
The key image they shop, and you have to be their lightweight investing.
Yeah, I think many of the system, we see from them.
Moving the odd because it's I think the big leg of the system. The uplift the most liza with vapor system, they still too big of TUI and too heavy and I will talk about the next week on the Atlas system, our price dip quite a few of systems in the back of right now and keep the pros and cons.
At your paint and the paint away for the next next step.
Okay. If you had to list the challenges in the water it would be.
<unk>.
Form factor.
And then the screen.
Screen number one screen is because it's really the high tech.
I'll take the number two and it's true.
Is the whole packaging how to assemble it does add to one thing people don't know your magnifying some 10000 times.
So the of housing is not carefully taken the political Dana on the display.
And it looks like the Boulder to yield.
Because of our defense activities will be recognized as that being of a solve those problems and no panic of can come out during operation of the assembly.
The anthro people know about including even thinking of the <unk>.
The customer.
So nowadays they just say please stay on as the whole assembly.
And that's the optics sales of display assets.
The housing.
Assembly and Thats why were sole source of so many defense industry day detailed gigawatt touchy day more than I can consume.
People don't have kind of understanding yet enterprise group of now and I won't go into a.
Detail almost all of the anchor perhaps companies our customers the HEICO who is happening.
Or are you of liberally discuss how many can super product developers youre working with now in R&D.
And.
Maybe the lifecycle of such warranty with those clients.
Uh huh.
I think it's safe to say that we are have worked with the all the major Silicon Valley guys that are on average.
Tom.
I think you have to be honest I'm sure. They are working with everybody else too. This is the big race is going to be a huge market.
So you know we have interactions with all of the point.
Okay. Thank you very much guys.
Thank you.
Sure.
And it appears there are no further questions at this time I will pass the call back over to you I think the floor for closing remarks.
Okay.
Thank you for joining us this morning.
I would like to remind everyone.
The heavy on the annual meeting on May 26 funding of 21.
You should be receiving the proxy vote soon so please zone.
And you got April I can't help the annual meeting after the annual meeting and new time.
The third part of our trilogy Wagner. Thank you.
This concludes today's call. Thank you for your participation you may all disconnect.
Good day.
Yeah.
[music].