Q1 2024 Kopin Corp Earnings Call
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Hello.
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Speaker Change: Good morning, everyone and welcome to the cope incorporation first quarter 2024 earnings call. Please note that this event is being recorded at this time I would like to turn the conference over to you Brian for Nova Investor Relations for coping. Please go ahead.
Speaker Change: Thank you operator, and good morning, everyone.
Speaker Change: Before we get started I'd like to remind everyone that during today's call taking place on Tuesday may 14th 2024, we will be making forward looking statements as defined in the private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations projections beliefs and estimates and are subject.
Speaker Change: So a number of risks and uncertainties that could cause actual results to differ materially from those forward looking statements potential risks include but are not limited to demand for our products operating results of our subsidiaries market conditions and other factors discussed in <unk>. Most recent annual report on Form 10-K and other documents.
Speaker Change: <unk> filed with the Securities and Exchange Commission, although the company believes that the assumptions underlying these statements are reasonable any of them can be proven inaccurate and there can be no assurances that the results will be realized the company undertakes no obligation to update the forward looking statements made during today's call.
Company Representative: In addition references may be made to certain non generally accepted accounting principles or non-GAAP measures for which you should refer to the appropriate disclaimers and reconciliation and the Companys SEC filings and press releases.
Company Representative: Hoping corporation's Chief Executive Officer, Michael Murray will begin today's call with an overview of Kokan's progress within the company strategy, Oh, Hey, Michael Coke and CFO, Richard Sneider will review the company's first quarter 2024 financial results I would now like to turn the conference over to Michael Mary Michael.
Michael Murray: Thank you Brian good morning.
Michael Murray: To everyone and welcome to our first quarter 2024 earnings call.
Michael Murray: I'm going to spend much of the time on this call updating you on the strong progress we've made operationally on our strategic initiatives, which are the most important parts of this call.
Michael Murray: I'm very proud of the significant progress we continue to make in our transformation, including achieving our sixth consecutive positive book to Bill quarter, We now have over $55 million in backlog for 'twenty 'twenty four and.
Michael Murray: Beyond <unk>.
Speaker Change: Our new orders include repeat or follow on orders from existing customers and programs and most importantly, very importantly, new orders from new customers. We are actively expanding our revenue and our customer base.
Speaker Change: Just to recap our first quarter order activity for current production programs. We received 25 million dollar order for thermal weapon sights.
Speaker Change: 1.4 million dollar order for a special long range weapons sight, and a 3 million dollar order for training and stimulation weapons sites as well.
Speaker Change: On the new customers and programs fronts, we received a contract from the Navy to develop a high resolution micro display which can operate at very high frame rates to support the development of trusted AI and autonomous capabilities for computational imaging.
Speaker Change: And we were awarded a contract from Blue Halo LLC for the design development and production of advanced stimulated by Nokia layers and a monoscope product for use in their advanced Stinger training system or <unk> system.
Speaker Change: Beyond those secured orders or pipeline is deeper than it ever has been.
Speaker Change: In the last 12 months, we've added new business development resources from outside the company and more recently dedicated additional internal resources.
Speaker Change: New business and it's paying off as shown in the new customer orders and significant opportunity pipeline that we believe has high probability of wins.
Speaker Change: Last week, we did demonstrated combat use head worn helmet warrant daytime and nighttime readable heads up displays or HUD concepts during special forces or special operation forces week or soft week in Tampa, Florida.
Openness: Openness developed what we call an integrated visual acuity system or IVAX now solution.
Openness: Which allows warfighters both at night and daytime solution today that works with their current fields.
Openness: <unk> systems like the current versions of enhanced night vision goggles or E. N V G goggles and popular helmet warrants systems.
Speaker Change: The need for advanced head mounted display solutions that are easily readable and all ambient light conditions, it's increasing as the number of digital information sources for the Warfighter during combat continues to expand.
Our fighters: Our fighters require a solution that can display a wide variety of information in our heads up viewing configuration, eliminating the loss of situational awareness that comes from viewing information and our head down mode.
Company Representative: Companies developing several products that address this growing market by capitalizing on the company's strong technology portfolio and extensive experience in developing dismounted War fighter vision systems.
Company spokesperson: Now in relation to our technology developments in Q1, we announced an important milestone towards establishing our fab less organic light emitting diode or OLED display production with a needle friendly partner for defense applications specifically.
Speaker Change: We completed initial life testing unrepresentative samples and have achieved near zero degradation in brightness performance after operating displays of brightness levels excluding.
Speaker Change: Exceeding 20000 candela per meter squared for several thousand hours. This is a tremendously important advancement as OLED performance degradation over time has hindered use of OLED <unk> and defense application for many many years.
Speaker Change: As far as we can tell none of our competitors can match. This technology performance and it's something that our customers are very excited about as it is a market enabling achievement.
Speaker Change: We also announced that we demonstrated our neural display technology.
Speaker Change: Our highly advanced OLED display that includes embedded sensors that tracks eye movement.
Speaker Change: <unk> and gays.
Speaker Change: While simultaneously processing, the tracking data and <unk> proprietary integrated AI engine that adjust the displayed information in real time to optimize the user experience and performance in several use cases.
Iva Systems: We believe that this technology development system will be a great fit for the next generation of Iva systems. Furthermore, the product is receiving significant interest from consumers spatial computing manufacturers due to its ability to reduce size weight and power consumption, while still offering great image quality.
Speaker Change: Lastly, we entered into an agreement with <unk> micro displays.
Speaker Change: Semiconductor design and technology company to provide a more immersive and information rich consumer augmented reality or VR experience and high brightness like condition specific to our micro OLED technology development.
unknown: In January we launched our one coping initiative to enhance synergies expand capabilities gain efficiencies decreased cost and increased accountability across our three sites being Westborough, Massachusetts, Reston, Virginia, and Dalgety based Scotland, which previously operated fairly autonomously.
General Manager: We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies and most recently, we announced the general manager of our fourth dimension display business out of Dalgety Bay.
unknown: It was added to our business development team focused on driving European and Asian opportunities.
unknown: To further promote additional focus and increase our cash position. We have started the process to value and potentially monetize the ownership shares coping hasnt several of our portfolio companies.
coping: As a reminder, coping owns minority shares in real where Lenovo, new vision into where each in DMD cooperate and lightning silicon <unk>.
Speaker Change: We've also begun to evaluate our IP portfolio to understand what it is critical to our business moving forward and what can be or should be monetized.
Lenovo: Having reviewed the quarterly progress, let me turn to the longer term and our strategic initiatives, which ultimately will be the foundation of our future success.
Lenovo: Turning to our first strategic initiative building the backlog our first quarter book to Bill was approximately two seven to one our sixth consecutive positive book to bill quarter at a record level for a single quarter.
Speaker Change: While we don't expect such high ratios in the future or every quarter.
Speaker Change: The programs, we are working on and the significant opportunities we have in our pipeline hold the promise of larger orders on a more routine basis.
Speaker Change: Based on just current demand Copeland could potentially ship triple the volume of weapons sights as 2023 within the calendar year of 2024.
Mike: Now turning to our second strategic initiative focused on our fab Lite strategy for OLED and Mike really displays as I mentioned, we made significant progress in the first quarter of 2024 as a reminder, coping as the only U S manufacturer of human centric AI and.
Michael Murray: And V are application specific optical solutions and we build for different types of micro displays used primarily and.
Mike: To provide situational awareness for Warfighters surgeons and spatial computing device users.
Michael Murray: You can find our solutions and weapons sights armored vehicles surgeons head mounted display pilot helmet, visors and it fielded maintenance and warehouse workers head worn computers.
V: To support the demanding needs of our markets between consumer and medical industrial and defense customers, we've taken significant steps to strengthen our supply chain by qualifying a new deposition partner.
Speaker Change: As we previously announced our European OLED deposition partner was able to achieve brightness of more than 20000 microcontroller square.
Speaker Change: At lower power consumption compared to our previous displays. In addition, the initial displays using our proprietary back plane had been fabricated and are now exiting performance validation testing.
Apple: Recently, there have been reports that the Apple vision pro demand has been slowing like many other AI devices. There are concerns around size weight cost usability and the neurological challenges associated with AR VR systems. This is not surprising to cope and not at all.
Apple: Hopefully that's been working on our systems for many years, including military pilot helmets, which cost hundreds of thousands of dollars each and have similar challenges.
Apple: <unk> initial efforts were on improving the display and then the optics. We are now tackling the neurological challenges and previously announced that we're working on software defined AI enabled back plane, which we call our neural display.
AI software: <unk> display architecture features embedded sensor pixels within the screen focussed on the users is providing immediate feedback to the AI software powering the display.
AI software: The feedback from these pixel sensors empowers the software.
AI software: To quickly adjust the contrast brightness of the display to accommodate the changes the challenges and changes in the user's vision.
unknown: During the first quarter, we demonstrated an OLED display the tracks eye movement position and gaze, while displaying video using <unk> internally developed software and AI engine.
unknown: This is a very positive step our first step in producing what we believe will be the first software defined AI enabled bidirectional micro display.
Speaker Change: If the neural display is successful.
System developers: System developers will be able to increase their users' comfort by reducing the cantilever effects of a heavy system by eliminating user facing cameras resting on the nose or the head and in the future adapt the image to the user's eyesight capability.
Speaker Change: We believe that this new design will also help eliminate many of the other common complaints around systems, including the nausea induced environment that many AR VR users find themselves in.
unknown: In the first quarter of 2024, we continued to execute our plans to explain them expand the markets we serve.
Speaker Change: We made an announcement of a production order for our CRE three product for assisted surgery markets I.
I: I just mentioned the heads up display or HUD concepts within our IVF now strategy and we demonstrated them at the special operations forces in Tampa, Florida as I spoke of earlier.
I: We believe this technology has a significant and unique opportunity to drive consumer spatial computing opportunities and we have begun partnerships with market, leading firms who could develop and deliver the volumes required in this market.
Speaker Change: Moreover, this technology provides coping the opportunity to license our internally developed software in the future.
Speaker Change: Do you expect to announce more progress on these initiatives throughout 2024.
Otis: Turning to another of our strategic initiatives is quality improvement specifically improving our on time in full our <unk> rate in 2023, we moved from 63% <unk> rate to 84% across the company strong Otis performance is key to customer satisfaction and repeat business. We continue.
Speaker Change: To focus on this and our most recent results show consistent and continued improvement there is more to accomplish and we remain focused on reaching and surpassing our goals in this critical area.
Otis Performance: Complementary to our <unk> initiative, returning the operation to a cash breakeven level as a milestone of our transformation.
Speaker Change: We believe Q2 will be the last quarter, we experienced heavy litigation expenses and going forward SG&A expense should normalize at a much lower level.
Speaker Change: Furthermore, we continue to focus on pricing raising that ROI requirements for internal R&D expenses and challenging all aspects of SG&A spending we have.
Speaker Change: Done well controlling what we can control in Q1, we came very close to cash flow breakeven, excluding the legal fees.
Coping CEO: Lastly, our one coping cultural initiative and talent strategy made significant progress this past year and quarter due to the hard work of our board of directors the leadership team and all of our team members here at coping we were able to retain the best talent within cope and attract new talent with the skill sets we require for our growth plans.
Coping CEO: And to execute the strategy of the company.
Coping CEO: We celebrated our direction focus and strategy this quarter with the announcement of our new brand logo and website.
Speaker Change: <unk> continues to focus improve win and grow and it will be the people of coping that execute on these initiatives this year and next.
Speaker Change: I know several of you have specific questions about our litigation.
Blue Radios: As we announced on April 23rd the jury delivered a verdict awarding blue radios $5 1 million in damages as well as recommending $19 7 million, an exemplary and disgorgement damages.
Speaker Change: These damages our recommendations the jury.
Judge: As to the judge and the judge has the discretion to increase or decrease these amounts.
Speaker Change: We anticipate a judgment in late summer of this year at that point, we will evaluate our options, including an appeal if necessary.
Speaker Change: Of course in parallel with the legal process, we are working proactively to resolve the issue.
Speaker Change: I will now turn the call over to our CFO Rich Sneider to review our results in further detail rich.
Richard A. Sneider: Thank you Michael.
Richard A. Sneider: Turning to our financial results for the first quarter of 2024.
Richard A. Sneider: Total revenues from Q1, 2024 with $10 million versus $10 8 million for the prior year.
Richard A. Sneider: 7% decrease year over year.
Richard A. Sneider: Product revenues for the first quarter ended March 32024 were $9 million compared to $7 7 million for the first quarter ended April one 2023.
Speaker Change: The increase in product revenue was the result of higher defense product revenues, which increased $1 8 million year over year.
Speaker Change: The first quarter of 2024 funded research and development revenues were 900000, a decrease of $2 million due to the completion of several program, which moved into production.
Speaker Change: Cost of product revenues for the first quarter of 2024 were $8 5 million or <unk>, 95% of product revenues compared with $6 6 million or <unk>, 87% of net product revenues in the first quarter of 2023.
Speaker Change: The increase in cost of product revenues was the result of higher provision for excess and obsolete materials in 'twenty four as opposed to 23.
Speaker Change: R&D expense for the first quarter of 2024, with $2 1 million compared to $2 3 million a year ago, essentially flat year over year.
Speaker Change: SG&A expenses were $7 2 million in the first quarter of 2024 compared to $4 6 million in the first quarter of 'twenty three the.
Speaker Change: The increase was primarily due to $2 6 million in legal fees associated with the blue radios.
Speaker Change: Litigation previously mentioned.
Jeremy: With the announced Jeremy decision of the Blue radios lawsuit awarding approximately $5 $1 million in damages as well as recommending $19 7 million disgorgement and exemplary damages, we have accrued the judgment under the relevant accounting guidance.
Speaker Change: As mentioned the company is reviewing its legal options, including a possible appeal of any judgment that the court ultimately enters.
Speaker Change: Turning to the bottom line net loss attributable to cope for the first quarter of 2024 was $32 5 million or <unk> 27 per share compared with a net loss of tubular Copeland of $2 6 million or <unk> <unk> per share for the first quarter of 2023.
Speaker Change: The amounts discussed above are based on our current estimates and listeners should review our Form 10-Q for the quarter.
Speaker Change: Quarter ended March 30, <unk> 2024 for any possible changes.
Speaker Change: And of course any additional violent.
Speaker Change: And with that I'll turn it over to Mike.
Richard A. Sneider: Rich as evidenced in our first quarter, our focus remains strengthening our order book pushing on time in full rates higher.
Michael Murray: Cost controls and making the strategic investments in products and people, which in the aggregate will improve cash flow and provide long term sustainable profitability and growth for the company.
Speaker Change: We put tremendous focus on working with our customers to move up the value chain and gain more share of their system and spending.
Speaker Change: Furthermore, we have carefully selected new strategic partners and customers to work with and remain focused on new opportunities and projects, which support our strategic plan.
Speaker Change: To this end and due to the application specific strategy are qualified opportunity pipeline has grown exponentially in the past few quarters due to the recent geopolitical issues and increased sovereign and foreign NATO spending pushing the demand curve significantly to the right.
Speaker Change: We expect several new customers partners and project awards and announcements soon which will not only add to our order book, but will fuel larger returns in the future as these new projects move into full rate production.
Speaker Change: <unk> remains focused on invention and innovation, but with more focus on cost controls and return on investment.
Speaker Change: These new inventions discussed today will help drive our innovations that solve our customers' most difficult technical problems and serve as the bedrock of our business, which will fuel our long term sustainable growth for our employees, our customers and our stakeholders.
Speaker Change: <unk>.
Operator: Everyone for your time today and for showing interest in Copa and I'd like to thank our employees customers and stakeholders for their continued hard work support and dedication and with that operator, I'll turn it over to you and take some questions.
Speaker Change: Thank you.
Operator: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star Q, we will pause for a moment to allow questions to queue.
Operator: And we will take our first question from Matt Sheerin with Stifel.
Matthew John Sheerin: Yes. Thank you. Good morning first question just regarding the gross margin, which was weak in the quarter.
Speaker Change: I guess there was some.
Matthew John Sheerin: Component obsolescence issues and other things could you talk about that I know.
Speaker Change: Michael one thing that you've been.
Speaker Change: I'm pleased with is the margin expansion.
Michael Murray: Particularly the gross margin and that's been weak now for the last couple of quarters. So how should we expect them.
Michael Murray: To think about gross margins as we get through the year.
Matthew John Sheerin: Matt I would note sequentially its a significant improvement in gross margin and if you actually the comparison is bad because as we discussed last year in Q1, we utilize the bunch of previously written off materials. So Q1 of last year was I don't want to say.
Matt: Because it was correct, but it did have the benefit of materials previously written off and Thats why it added 13%.
Speaker Change: But as you see we actually had about a 10% sequential improvement and we continue to expect further.
Speaker Change: <unk> based upon the results that we're getting this year.
Matt: From both our customers and our own internal quality numbers.
Speaker Change: Whats the target then for this for the second half of the year that <unk> been talking about 40% plus gross margin and obviously, we're not even close.
Speaker Change: Right. So I think it is.
Speaker Change: How you do the calculation.
Speaker Change: Gross margin if you take revenue less.
Speaker Change: Cost of sales as opposed to taking product revenue less cost of sales. So it depends on how you count computation is but for the product revenue less.
Speaker Change: Cost of sales calculation.
Speaker Change: Still shooting for 15% to 20% in the second half of the year.
Speaker Change: Okay. Thank you and then just on revenue Michael you talked about the strong book to Bill.
Speaker Change: You talked about.
Michael Murray: Backlog and still expecting double digit growth this year, which would imply about a strong back half.
Speaker Change: So how should we think about Q2 should that be flat and then up in the second half or how should we think about the revenue and how that flows groups.
Speaker Change: Sure.
Speaker Change: So in terms of revenue for the year Q1 was really all about.
Speaker Change: <unk> material, bringing in material to ramp in Q2 Q3 Q4, So we are ramping now.
Speaker Change: We've hit a all time record for on time in full actually.
Speaker Change: <unk> received a briefing yesterday that we hit an all time record for quality and and throughput out of the factory. So so the ramp is going well we've hired we've got some more folks that we're bringing in.
Speaker Change: To help us with that ramp, but Q2 is about ramping up in terms of production and then Q3 and Q4, we should be moving along quite nicely based on our recent updates. So we are back half loaded just simply because we've been waiting for product.
Speaker Change: As we sit here today, we're ramping.
Speaker Change: Okay alright, thank you.
Speaker Change: Thank you and we will take our next question from Glenn Mattson with Ladenburg Thalmann.
Glenn George Mattson: Hey, guys. Thanks for taking my questions a quick because a couple of last few questions out of the way quick can you give us a sense or give everyone. A sense of the timing in terms of what you think are the timing would be for when the judge will make his final ruling and then win.
Speaker Change: If you decide to appeal like how long that would take just to get a sense of like cash flow wise, but we're looking at in terms of when you would have to pay this and also is there. Some bond do you have to put up into Bayou appeal or something like that and what what maybe ballpark <unk>.
Speaker Change: Percent of what the ruling final ruling is would you have to maybe put up there just that kind of.
Speaker Change: Color there would be great.
Speaker Change: Sure we are understanding as we you should expect a judgment.
Speaker Change: Sometime around the end of summer.
Speaker Change: And at that point in time, we can put in for an appeal I assume there would be some sort of bond.
Speaker Change: That could be negotiated with the court at that point in time, if we were to appeal.
Speaker Change: But again I want to stress that currently there is no judgment until the judge comes back in the court renders their judgment so.
Speaker Change: That would be at the end of the summer.
Speaker Change: If we were to appeal, which would be likely.
Speaker Change: We would enter the appeal at that point, we would have to potentially post a bond don't know how much that would be it would be a negotiation with the court.
Speaker Change: And then if we were to appeal average appeals that my understanding based on talking to our lawyers and average appeal as 24 to 36 months, if not 48 months.
Speaker Change: Based on the court.
Speaker Change: The legal cost with that is that obviously much lower than a trial so right.
Speaker Change: Just thought is on modestly lower right.
Glenn George Mattson: Yeah, Glenn it's tremendously lower.
Glenn George Mattson: It's really about the cycle time of the courts.
Glenn George Mattson: But from a legal cost perspective, it is a fraction of what the legal expenses are that we've been incurred because of the trial.
Glenn George Mattson: Right.
Speaker Change: And just maybe it's related maybe it's not but you talked about valuing to monetizing the portfolio companies.
Speaker Change: I guess on your balance sheet, they're listed in kind of like the four and a half million dollar value range is there.
Speaker Change: I guess.
Speaker Change: Is there any expectation that they would come in slightly higher than that or anything or and as a is that.
Speaker Change: Priority or just something you're kind of looking at in terms of.
Speaker Change: Yeah.
Speaker Change #159: Monetizing that but I think yeah, great question. So.
Speaker Change #151: We are looking at ways to raise capital in a non dilutive way number one number two it's about focus.
Speaker Change: We have these assets.
Speaker Change: It takes money it takes time to work with them.
Speaker Change: And I think we want to focus the balance sheet focus the management team monetize those assets get the balance sheet clean and focused keep the management team focused.
Speaker Change: So that's really the priority.
Speaker Change: As I mentioned, we have several investments that we think we can monetize over the course of the next year or so and then also looking at what IP, we have that is.
Speaker Change: <unk> for our future and what IP is not.
Speaker Change: Monetize that as well.
Speaker Change: And make sure that we're carrying the cost of that IP for the right reasons. So these things have been going on for quite a while but I think just now we want to focus our attention there and clean up the balance sheet and the ownership Stakes that we have in some of these companies.
Speaker Change #147: Great. Thanks for that color My target is you got a.
Glenn George Mattson: A little bit more of a target for you Glenn.
Speaker Change: Think.
Speaker Change #148: From my perspective, I'm looking at $6 million to $12 million is kind of the range that I am hoping for here.
Speaker Change: Oh, great, Okay and then.
Speaker Change #164: Just moving on to the actual business, a solid book to Bill and everything.
Speaker Change #152: I think last quarter, you talked about the government funding vehicles kind of opening up if they were to open up that there'll be $10 million to $28 million in potential orders out there is that what we saw here or is this.
Speaker Change #149: They're just more momentum now than maybe some of the funding issues have temporarily eased perhaps.
Speaker Change: Yes.
Speaker Change #154: Actually so everything that we have in the order book is excluded from the funding that we talked about.
Speaker Change #155: So this would be additive and we're actively working with our congressional partners to access some funds that is in the budget that we would like allocated to a program.
Speaker Change: Actually two programs that we have here at <unk>. So that work is ongoing with our legislation partners and it's progressing so too early to tell if and when we will receive those monies, but we're working on are proactively and it's fairly significant investment into the company and technology development, if and when we do get it.
Speaker Change #150: Great and then last one for me just on the E. N V. G. Goggle comment that you made that there's obviously, there's a lot of those out there deployed and just so is there is.
Speaker Change #150: Any sense of.
Speaker Change #153: Is there a long R&D process to get on.
Speaker Change #156: So those systems or is this something that would there be R&D revenue associated with that or something over time, while you. While you are.
Speaker Change #157: Like what.
Speaker Change: It's.
Speaker Change: Playing gets formulated or is there or is there some quicker pace to expect or anything like that color would be great.
Speaker Change: Yeah.
Speaker Change #171: Sure you'll you'll hear more about this from me shortly but we have a daytime and nighttime I've asked now strategy as I mentioned earlier and the night time version of that is and adapt taishan and a module that we would sell alongside the current E. N V. G goggles that would provide.
Speaker Change: Thermal imaging.
Speaker Change: As an additional input to that that system. So to your point I think it's one of the highest volumes if not the highest volume gogo.
Speaker Change: Goggle that the U S government acquires as well as our friends at NATO.
Speaker Change: So it is an exciting opportunity for us the nighttime vision goggle market is as fast.
Speaker Change: And we have we have a partner already selected to work with us in this area. We hope to announce that shortly we have already received some small business initiatives and funding to develop the technology, because our warfighters need it today, we learned this in Israel, specifically in the tunnels there.
Speaker Change: So.
Speaker Change: We're working very diligently to develop that technology and it's a very elegant design that can be used today. So so we think it's a quick turn to market I think we'll be in market in production next year with this technology and the volumes are exciting tens of thousands of units.
Speaker Change: Furthermore, our day time HUD.
Speaker Change: Which currently doesn't exist in the market, we're working with a very significant partner.
Speaker Change: <unk>.
Speaker Change: I don't think I can say just yet but.
Speaker Change: Once we do they have a tremendous market share and so calm seal team six and special forces.
Speaker Change: And Thats an additional.
Speaker Change #176: Item that they would sell alongside their popular helmet worn systems. So that's our daytime strategy and.
Speaker Change: So I think there is some small and army that we will receive for that but the really exciting revenue comes from production, which we believe will be 2025, and then certainly in 2026 and beyond.
Speaker Change #167: Great Alright, thanks for all the color Michael Good luck.
Speaker Change: Thanks Glenn.
Speaker Change #165: Thank you once again, if you would like to ask a question. Please press star and one on your telephone keypad now and we will take our next question from Kevin Dede with H C. Wainwright.
Speaker Change: Good morning, Michael Hi, Rich.
Speaker Change #158: They come out.
Kevin Darryl Dede: Looking for a little insight on your 2.7 book to Bill vis vis capacity utilization can you give us some sort of color on where you are and how.
Speaker Change #170: How much room do you have.
Speaker Change: Within your three facilities to meet demand that youre expecting.
Speaker Change #172: Yeah, Great question. So if you recall, Kevin I took the very.
Speaker Change: Unpopular.
Speaker Change: Decision too.
Speaker Change: Yes.
Kevin Darryl Dede: Close the fabric for a couple of days in Q4 of last year, which impacted our revenues. The reason we did that was we needed to move.
Speaker Change: Items around and base seven in Bay eight we'd also did a sprint and based seven at that point in time.
Speaker Change: That was really to make the capacity and the opportunity to be able to build this level of volume. So so far so good the teams are working well, we're hitting new volume levels within the fab, but we're scaling well and we do not see any resource requirement issues from a capex perspective.
Speaker Change #163: <unk> for the fab it is.
Speaker Change #173: Really now about getting the right people and trained in that time to market for them to be trained to then start to be productive. So we're on plan. We're on target, we're producing well and our quality levels at low single digits in terms of rejects.
Speaker Change: Incoming inspection at our customer, which we've never actually had before I don't believe so.
Speaker Change: We're moving along quite well.
Speaker Change: We have not yet pulled the trigger on a second shift so that option is available to us.
Speaker Change: Okay.
Speaker Change: On time in full.
Speaker Change #160: Mike You gave us was 84% in March versus 63 in December was that did I hear that right.
Speaker Change #162: No so that was.
Michael Murray: 84% was previous year.
Speaker Change #160: And we are now in the low single digits and spot pardon me.
Speaker Change #160: Where we're now in the high nineties.
Speaker Change: Okay. So what was so.
Speaker Change #161: Just Kevin just to clarify so what Mike was saying is when he came in it was at 63, Okay last year in January and he drove it up to 84 by the end of the year and now we've moved it further up.
Speaker Change: Okay.
Speaker Change #166: How much more room do you think you have to go there I mean, I don't know that 100% as possible I'm just.
Kevin Darryl Dede: Just give me sort of what your target is.
Kevin Darryl Dede: Well the target is always a 100.
Kevin: And there is a band though to your point, Kevin where you ended up having diminished returns number one number two.
Speaker Change #115: These display systems are very difficult to manufacturer without any sort of level of thought or foreign object.
Kevin Darryl Dede: Debris that gets in the lenses, but what I consider good as a 1% to 3%.
Speaker Change: Right, where you've got a fallout of 1% to 3% I think that's best in class, it's much better than what we see from other competitors in the space and certainly even from a customer perspective.
Speaker Change #107: When I hear our customers ask our quality group to visit their quality group and their facilities I know, we're doing a good job and that's already happened in several locations here, but I can report my briefing yesterday.
Speaker Change: The firm created a month, where we hit 100% on time in full on every single project, we have last month and we've never done that before since I've been here. So.
Speaker Change #140: Great progress by that by the firms so far.
Speaker Change #169: Can you help me understand where you have to go with W.
Speaker Change: WSI versus E N V G and Ah com are addressing that the night vision and the day vision.
Speaker Change #102: I mean, I'm, just and look and view of or with regards to the technology you need to develop.
Speaker Change: Oh I see.
Speaker Change: It's it's definitely leveraging knowledge that we have around.
Speaker Change: The marriage between the display.
Speaker Change: The optics.
Speaker Change: And the form factor that's required in terms of.
Speaker Change: Very small form factors.
customer base: Working with current systems and inputs into current systems and working very closely with our customer base.
Speaker Change #106: An intimacy that we need to have with our customer.
Speaker Change #104: To work within their system, and that's a trust level that coping as creating because of the business development folks that we've been able to bring into the company. So the technology is there the display capabilities there with our OLED capability now that we have it.
Speaker Change #104: In a NATO friendly location the opportunities Kevin that we're seeing because of that.
Speaker Change #104: <unk>.
Speaker Change: And you know moving.
Speaker Change: Into a NATO friendly country has definitely opened up a lot of opportunities, but the technology right now that we see winning the day is our OLED capability, along with a bespoke optic and between F. WSI the thermal weapon sight for a weapon and the thermal.
Speaker Change: Capability for ENB Gee, it's very similar but it acts more like an injector versus the viewing angle type of device.
Speaker Change: Can you in that discussion Michael can you kind of layer on I mean, I, if I heard correctly in your prepared remarks, you alluded to the number of inputs that a war fighter has to deal with and I was wondering how.
Speaker Change #108: How the D. O D is asking you to handle that and what sort of timeline, you have and whether or not that has to get integrated into half WSI.
Speaker Change #108: Right.
Speaker Change #132: Great question.
Speaker Change #100: So when we talk with the U S Department of defense.
Speaker Change #114: They want simplicity.
Speaker Change #100: And they want.
Speaker Change #103: Size weight and power, obviously at a decent cost and the ability to enter into sensor fusion capabilities like neural display is what they want to see and hear about more and invest and more importantly, and coping is very unique in that capability here in the United States. So what they're asking for is very flexible software defined.
Speaker Change #100: Technology.
Speaker Change #100: It can be adapted for the 252 1 million.
Speaker Change #100: Service people that we have to put through.
Speaker Change #100: You know a year or over the course of several years so.
Speaker Change #100: I think it's that level of sophistication.
Speaker Change #105: Sophistication, but the ability to make it software defined as really what we're hearing from the from the customer base.
Speaker Change #100: Sure.
Speaker Change #100: So I think that's that's where we're focused and where we're going the capability of the company is very unique for that customer base and what they're valuing is our ability to do a lot of different things through software utilizing our capability with micro displays in the optics.
Speaker Change #100: That's what we see kind of winning the day in the future.
Speaker Change #135: Would you mind sort of segregating starting human user.
Speaker Change #123: Inputs versus battlefield awareness inputs I think maybe that's what I'm tripped up.
Richard A. Sneider: So Kevin this is rich.
Speaker Change #118: Just need to take a step back so.
Speaker Change #111: Soldier at night with his night vision goggles and as F. WSI is getting a tremendous amount of information through his systems not just thermal imaging, but have you ever seen a presentation we provide.
Speaker Change #111: We overlay on the on the natural seen over a dozen different types of information. So the soldiers getting all of this information about what's going on around them at night soon.
Speaker Change #109: As soon as the Sun comes up they lose it all.
Richard A. Sneider: It's gone now Theyre, just walking around with a pair of binoculars and in optical site and.
Richard A. Sneider: So all of that other information is gone.
Speaker Change #110: And so that's what they're trying to do is the ACO question you compete against the Sun.
Richard A. Sneider: Try to overlay during the daytime so what they're trying to do is give the soldier all that information they get at night.
Richard A. Sneider: During the day.
Richard A. Sneider: And Thats whats really high because youre dealing with the Sun.
Richard A. Sneider: That's why you need that 20000.
Speaker Change #112: Knits rate.
Speaker Change #121: Correct and that's our daytime HUD. So it provides you Kevin telematics geospatial awareness, where your buddies are where the where theyre not so friendly folks are and which way to travel. So so that type of technology. During the day is critically important as long as it doesn't add size weight.
Richard A. Sneider: <unk> power consumption. So our designs are very lightweight.
Richard A. Sneider: Our soldiers can carry them in a backpack use them when they need to it attaches to a very popular helmet warrants system that special forces already uses and I think that's the big thing Kevin If you take anything away from the strategy as we have that visual acuity system for daytime and nighttime today.
Richard A. Sneider: For use for what is in field today, that's our Ipass now strategy and Youll see some graphics from us on this at our next.
Kevin Darryl Dede: The presentation, but we also have a long term I've asked next strategy, which is the neural display architecture, which takes that big goggle for daytime and nighttime use and reduces it down to what we think should be you know a set of <unk> as an example, so.
Richard A. Sneider: But that that level of technology to provide geospatial awareness.
Richard A. Sneider: Trajectory.
Richard A. Sneider: Even shot whistle, where did this come from as an example, those are all types of technologies and information that the Warfighter is getting through this type of HUD or heads up display that we're enabling for daytime and nighttime uses.
Richard A. Sneider: So book to Bill almost doubled sequentially can can you give us the highlights of the drivers there and clearly consumer business fell off to zero.
Speaker Change #133: Just maybe offer a little insight on where you think that's going.
Speaker Change #116: The new order is for a new configuration that $25 million order is for a new.
Speaker Change #116: Thermal weapon sight configuration.
Speaker Change #113: We believe that that is due to a new weapons selection by the U S government.
Speaker Change #117: And if you Google hard enough you can find out which squad weapons those are.
Speaker Change #124: So that's where that order came from we believe that it's going to be a sustainable new product for us for several years in.
Speaker Change #124: In the future so great additional revenue on our thermal weapon sight programs.
Speaker Change #113: But again, our new weapons selection, that's where that came from.
Speaker Change #113: Secondly.
Speaker Change #113: From a standpoint of the consumer business.
Speaker Change #138: Tumor right now I mentioned, the AR VR marketplace for spatial computing, it's it's still emerging I think the systems that are out there today are really software development systems for platforms.
Speaker Change #113: I see the largest customers in the world developing their software ecosystems.
Speaker Change #113: Software stores.
Speaker Change #113: And their applications for that technology I think the next generations of those technologies are going to be much sleeker definitely lighter because of the cantilever weight.
Speaker Change #113: That we're seeing with the Apple TV Pro is a perfect example, far too heavy on the nose.
Speaker Change #113: And creating tremendous can lever weight.
Speaker Change #119: On the back of your neck. It just can't be used for long enough periods of time. So koeppen can help with that we have decades of experience in helping with those types of technologies and we think neural display is a great opportunity for these customers to reduce size weight and power consumption, while still doing things like eye gaze for things like.
Speaker Change #120: Shopping as an example, and marketing feedback as to where the eyes go on a Facebook page and offerings page. So we see that being one of the key drivers for consumer.
Speaker Change #143: Which is really exciting technology for us.
Speaker Change #113: So I understand.
Speaker Change #128: The the source vendors for helmets are different in different <unk>.
Speaker Change #113: Are frames.
Speaker Change #137: I was wondering if you had any insight on given the success you've had with the F 35, and where you might be able to go with the.
Speaker Change #127: <unk> <unk> and some of the new Halo programs I know you spoken to them in the past I was just wondering if you could give us an update on those.
Speaker Change #122: Sure so our customer there.
Speaker Change #122: <unk> is.
Speaker Change #122: Moving forward with our <unk> two project.
Speaker Change #122: That's a.
Speaker Change #122: A project that we've had with Elbit for several years, you see that opportunity moving forward.
Speaker Change #175: We also see.
Speaker Change #126: I believe increased volumes when it comes to the Chinook helicopter and some of the other helicopter programs that we're engaged in and that technology is moving forward. So.
Speaker Change #122: That's mainly on our LCD technology, we are seeing the transition to OLED finally.
Speaker Change #134: We believe that we will have a production order for our OLED capability for both rotary wing and fast movers.
Speaker Change #130: This year, so we're expecting that and on the fast mover program. The F 35. The team did complete our last milestone in that program for our customer this quarter. So we're now through all the development phases on the F 35 foot led program.
Speaker Change #130: Okay.
Speaker Change #125: I hope that one last one just on the Abrams and any insight you might have some of the feedback coming.
Speaker Change #144: On the Abrams performance in Ukraine, Hasnt been stellar so I was wondering if any of that as sort of infiltrated the way.
Speaker Change #129: <unk> been asked update or upgrade their optics.
Speaker Change #141: Great question, Yes, we continue our <unk> program, we've hit all of our milestones so far it's.
Speaker Change #125: It's coming to a close shortly here, we do expect to have an RFP for production use.
Speaker Change #125: <unk> in the next quarter as we articulated last year.
Speaker Change #125: We've been in discussion directly with general dynamics, who actually visited the facility here several weeks ago.
Speaker Change #125: Because we are a part of their thermal imaging and AI targeting system.
Speaker Change #125: They are moving forward with our platform that's what they said to us recently and that platform will help.
Speaker Change #125: Improved lithology of the Abrams tank reduced size weight and power, which is a significant problem as you correctly stated that we're seeing with the Abrams tank program. So.
Speaker Change #125: To summarize that we increase lithology.
Speaker Change #125: Because of what we do and how we do it and we reduced size weight and power, which is a key aspect of the next generation spec for Abrams as well as some of the other general dynamics programs that we're working on currently but too early to tell what those will relate to in terms of revenue.
Speaker Change #131: Thank you very much Michael Thank you too rich for.
Speaker Change #146: Color the color for the Idiots like me.
Speaker Change #139: Myself I appreciate it.
Kevin: Yeah. Thank you Kevin.
Speaker Change #142: Thank you. It appears that we have no further questions. At this time I will now turn the program back over to our presenters for any additional or closing remarks.
Speaker Change #145: Thank you very much operator, I just wanted to say thank you to everyone for participating today. Thank you to the analysts for their great questions and color. We hope this is helpful and rich and I will be available over the course of the next week.
Speaker Change #131: Several weeks to answer any other questions. We can on the one to one basis. So thank you very much for your time attention and investment and coping and as a reminder, you will be receiving a proxy vote in the next week or so please vote. Thank you. Thank you.
Speaker Change #136: This does conclude today's program. Thank you for your participation you may disconnect at any time.
Speaker Change #136: Yeah.
Speaker Change #136: Okay.
Speaker Change #136: Hmm.
Speaker Change #131: [music].
Speaker Change #131: Okay.
Speaker Change #131: Okay.
Speaker Change #131: Mhm.
Speaker Change #131: Hum.
Speaker Change #131: [music].
Speaker Change #131: Mhm.
Speaker Change #131: [music].
Speaker Change #131:
Speaker Change #131: Mhm.