Q2 2024 Kopin Corp Earnings Call
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Unknown Executive, Quinn Callanan, Richard Sneider, Brian Prenoveau
Operator: Good morning, everyone, and welcome to the Copenhagen Corporation, 2nd quarter, 2024 earnings call.
Speaker Change: good morning everyone and welcome to the copand corporation second quarter two thousand and twenty four earnings call
Operator: Should you need assistance, please signal a conference specialist by pressing the star key forward by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two.
After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then 1 on a touch-tone phone.
Speaker Change: to withdraw your question please press star then two
Operator: Please note this event is being recorded.
Brian Prenova: At this time, I'd like to turn the conference over to Brian Prenova, Investor Relations for Copenh.
Operator: If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. At this time, I'd like to turn the conference call over to Brian Prenoveau, Investor Relations, for Kopin. Please go ahead.
please note this event is being recorded
At this time, I'd like to turn the conference call over to Brian Prenoveau, Investor Relations for Kopin. Please go ahead.
Cindy: Thank you, Cindy.
Unknown Executive: Thank you, Cindy. Good morning, everyone.
Unknown Executive: Before we get started, I'd like to remind everyone that during today's call, taking place on Thursday, August 8, 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 to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. 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.
Brian Prenoveau: Thank you, Cindy. Good morning, everyone. Before we get started, I'd like to remind everyone that during today's call, taking place on Thursday, August 8, 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 to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements.
Michael Murray: Good morning, everyone.
Michael Murray: Before we get started, I'd like to remind everyone that during today's call, taking place on Thursday, August 8, 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 to 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 our most recent annual report on Form 10-K and other documents filed with the Securities and Exchange Commission.
Brian Prenoveau: Thank you, Cindy. Good morning, everyone.
Speaker Change: Before we get started, I'd like to remind everyone that during today's call, taking place on Thursday, August 8, 2024, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act, 1995.
Speaker Change: these statements are based on the company's current expectations projections beliefs and estimates and are subjects to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements
Brian Prenoveau: Potential risks include, but are not limited to, demand for our products, operating results of our subsidiaries, market conditions, and other factors discussed in our most recent annual report on Form 10-K and other documents 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 results will be realized. The company undertakes no obligation to update the forward-looking statements made during today's call. 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 in the company's SEC filings and press releases.
Speaker Change: potential risks include but are not limited to demand for our products operating results of our subsidiaries market conditions and other factors discussed in our most recent annual report on form ten -k and other documents filed the securities and exchange commission
Michael Murray: 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 results will be realized. The company undertakes no obligation to update the forward-looking statements made during today's call. 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 in the company's SEC filings and press releases.
Speaker Change: 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 results will be realized.
Unknown Executive: The company undertakes no obligation to update the forward-looking statements made during today's call. 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 in the company's SEC filings and press releases.
Speaker Change: The company undertakes no obligation to update the forward-looking statements made during today's call. 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 in the company's SEC filings and press releases.
Brian Prenoveau: Kopin Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Kopin's progress within the company's strategy. Following Michael, Kopin's CFO, Richard Snyder, will review the company's second quarter 2024 financial results. I would now like to turn the call over to Michael Murray.
Michael Murray: Corporation's Chief Executive Officer Michael Murray will begin today's call with an overview of Kopin's progress within the company's strategy.
Michael Murray: Kopin Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Kopin's progress within the company's strategy.
Richard Snyder: Following Michael, Kopin CFO, Richard Snyder will review the company's second quarter 2024 financial results.
Richard Snyder: Following Michael, Kopin, CFO Richard Snyder will review the company's second quarter 2024 financial results.
Michael Murray: I would now like to turn the call over to Michael Murray.
Michael Murray: Michael? Brian, good morning to everyone and welcome to our second quarter 2024 earnings call. I'm going to spend much of the time on this call updating you on the strong progress we made operationally on our strategic initiatives. I'm very proud of the significant progress we are making on our transformation plan. We have received over 55 million in orders for 2024 and beyond, including repeat or follow-on orders from our existing customers and programs, and importantly, orders from new customers within the US and now Europe, which demonstrates that we are actively expanding our revenue and customer base.
Speaker Change: i like i would now like to turn the call over to michael mray michael
Michael Murray: Brian, good morning to everyone, and welcome to our second quarter 2024 earnings call. I'm going to spend much of the time on this call updating you on the strong progress we have made operationally on our strategic initiative. I'm very proud of the significant progress we are making on our transformation plan. We have received over $55 million in orders for 2024 and beyond, including repeat or follow-on orders from our existing customers and programs and, importantly, orders from new customers within the US and now Europe, which demonstrates that we are actively expanding our revenue and customer base. The second quarter was highlighted by continued sales momentum with $12.3 million in revenue.
Brian Prenoveau: Brian, good morning to everyone, and welcome to our second quarter 2024 earnings call. Notably, our products for defense applications delivered year-over-year growth of 106 percent to 10.4 million dollars. This progress has been validated and is validating our strategy to reset the course within Kopin to focus on defense products that we began last year. These concepts were presented during the Special Operations Forces Week or SOF Week in Tampa, Florida.
Michael Murray: bri good morning to everyone and welcome to our second quarter two thousand and twenty four earnings call
Speaker Change: I'm going to spend much of the time on this call updating you on the strong progress we made operationally on our strategic initiatives.
Speaker Change: I am very proud of the significant progress we are making on our transformation plan.
Speaker Change: We have received over 55 million in orders for 2024 and beyond, including repeat or follow-on orders.
Speaker Change: from our existing customers and programs, and importantly, orders from new customers within the U.S. and now Europe , which demonstrates that we are actively expanding our revenue and customer base.
Michael Murray: The second quarter was highlighted by continued sales momentum with 12.3 million in revenue. Notably, our products for defense applications delivered year-over-year growth of 106% to 10.4 million dollars. This progress has been validated and validating our strategy to reset the course within Kopin to focus on defense products that we began last year. Every month in Q2 and in July, incoming inspection rates at our top customers reached 97%, up from 86% the previous quarter, which positively and significantly impacted product growth margins. We now expect Q3 revenues to increase cautiously above analyst guidance, and we are expecting a much stronger second half of 2024 than the first half.
Speaker Change: The second quarter was highlighted by continued sales momentum with $12.3 million in revenue. Notably, our products for defense applications delivered year-over-year growth of 106% to $10.4 million.
Michael Murray: Notably, our products for defense applications delivered year-over-year growth of 106 percent to 10.4 million dollars. This progress has been validated and is confirming our strategy to reset the course within Kopin to focus on defense products that we began last year. Every month in Q2 and in July, incoming inspection rates at our top customers reached 97%, up from 86% the previous quarter, which positively and significantly impacted product gross margin. We now expect Q3 revenues to increase cautiously above analyst guidance. And we're expecting a much stronger second half of 2024 than the first half.
Speaker Change: This progress has been validated and validating our strategy to reset the course within Kopin to focus on defense products that we began last year.
Speaker Change: every month in q two and in july incoming inspection rates at our top customers reached ninety seven percent up from eighty six percent the previous quarter which positively and significantly impacted product gross margins
Speaker Change: We now expect Q3 revenues to increase cautiously above analyst guidance, and we are expecting a much stronger second half of 2024 than the first half.
Michael Murray: During the quarter, we demonstrated combat use helmet-worn daytime and nighttime readable heads-up displays or HUGS. These concepts during the special operation forces week or sock week in Tampa, Florida. We also expanded the focus of our 3D-AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers. This reorganization has already begun to produce orders and increased opportunities. Just to recap, our second quarter order activity: five new customers place development orders, which, when completed, we believe will fuel multi-million dollar per year production orders and significant revenue growth.
Michael Murray: During the quarter, we demonstrated combat use helmet worn daytime and nighttime readable heads-up displays or HUDs. These concepts were during Special Operations Forces Week or SOF Week in Tampa, Florida. We also expanded the focus of our 3D AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers. This reorganization has already begun to produce orders and increased opportunities.
Speaker Change: during the quarter we demonstrated a combat use howmet warren daytime and nighttime readable heads up displays or huds
Speaker Change: These concepts during the Special Operations Forces Week, or SOF Week, in Tampa, Florida. We also expanded the focus of our 3D AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers.
Brian Prenoveau: We have also expanded the focus of our 3D AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers. This reorganization has already begun to produce orders and increased opportunities for the military, and we are honored to be able to be trusted to do this work. As a result of this strategy focus and the reorganizations, we believe our opportunity pipeline has now expanded over $500 million, of which $350 million of the total resides within the defense market and has high probability of contractual awards, while the remaining $150 million of new opportunities are in other markets and in the early stages of formation.
Speaker Change: This reorganization has already begun to produce orders and increased opportunities.
Michael Murray: Now, just to recap our second quarter order activity, five new customers placed development orders, which when completed, we believe, will fuel multi-million dollar per year production orders and significant revenue growth. From an international perspective, we received a 1200 unit production order for OLED micro displays for the Indian Armed Forces, with deliveries taking place over a six month time span. Now, from a domestic perspective, we received a development contract from a new defense customer to support the integration of our OLED micro display with a power efficient, low latency, digital night vision sensor referred to as P. E. B. B. N. B. I.
Speaker Change: Now, just to recap our second quarter order activity, five new customers placed development orders, which when completed, we believe, will fuel multi-million dollar per year production orders and significant revenue growth.
Michael Murray: From an international perspective, we received a 1,200 unit production order for OLED micro displays for the Indian Armed Forces, with deliveries taking place over a six-month time span. Now, from a domestic perspective, we received the development contract from a new defense customer to support the integration of our OLED micro display with a power efficient, low latency digital night vision sensor referred to as P-E-B-B-N-B-I-S for use in next generation warfighter integrated visual acuity systems, also known as IBAS. Furthermore, the US Army awarded Kopin a Phase I SBIR contract to research optical approaches for visual augmentation systems to improve performance and lessen cognitive dissonance and nausea.
Speaker Change: From an international perspective, we received a 1,200-unit production order for OLED micro displays for the Indian Armed Forces with deliveries taking place over a six-month time span.
Speaker Change: Now, from a domestic perspective, we received a development contract from a new defense customer to support the integration of our OLED micro-display with a power-efficient, low-latency, digital night vision sensor, referred to as P-E-B-B-N-B-I-S,
Michael Murray: S, for use in Next Generation Warfighter Integrated Visual Acuity Systems, also known as IVAS. Furthermore, the U.S. Army awarded Kopin a Phase I SBIR contract to research optical approaches for visual augmentation systems to improve performance and lessen cognitive dissonance and nausea. This is critical research for the military, and we are honored to be able to be trusted to do this work. The U.S. Army also awarded Kopin a contract to develop a high-resolution eyepiece assembly for the new Commander's Launch Assembly, or CLLA. Use of the Next Generation Short-Range Interceptor or NGSRI systems
Speaker Change: for use in next-generation warfighter integrated visual acuity systems also known as ias
Speaker Change: Furthermore, the U.S. Army awarded Kopin a Phase I SBIR contract to research optical approaches for visual augmentation systems to improve performance and lessen cognitive dissonance and nausea.
Michael Murray: This is critical research for the military, and we are honored to be able to be trusted to do this work. The U.S. Army also awarded Kopin a contract to develop a high-resolution eyepiece assembly for the new Commander's Launch Assembly or CLLLA, the U.S. in next-generation short-range interceptor or NGSRI system. The NGSRI system and program was won by Lockheed, and it is expected to replace over 100,000 Stinger missiles and launchers. These new projectiles are expected to be faster, turn on enabled, and have radio frequency jamming capabilities. Kopin has been selected to design, develop, and produce the targeting eyepiece for the new launchers.
Speaker Change: this is critical researchthe military and we arehonored to be able to be trusted to do this work
Speaker Change: The U.S. Army also awarded Kopin a contract to develop a high-resolution eyepiece assembly for the new Commander's Launch Assembly, or CLLA, used in the Next Generation Short-Range Interceptor, or NGSRI, system.
Michael Murray: The NGSRI system and program was won by Lockheed, and it is expected to replace over 100,000 Stinger missiles and launchers. These new projectiles are expected to be faster, drone-enabled, and have radio frequency jamming capabilities. Lockheed has been selected to design, develop, and produce the targeting eyepiece for the new launcher. We believe the program will require just as many launchers as there are missiles.
Speaker Change: The NGSRI system and program was won by Lockheed and it is expected to replace over 100,000 Stinger missiles and launchers.
Speaker Change: These new projectiles are expected to be faster, drone-enabled, and have radio-frequency jamming capabilities.
Speaker Change: Kopin has been selected to design, develop, and produce the targeting eyepiece for the new launchers.
Michael Murray: We believe the program will require just as many launchers as there are missiles. When production starts in 2027 and we estimate this contract will provide Kopin tens of millions of revenues in peak annual production.
Michael Murray: When production starts in 2027, we estimate this contract will provide Kopin tens of millions of revenues in peak annual production. Now, I would like to remind you of some of the other notable items that we have been working on in 2024. Kopin has developed its integrated visual acuity system, or IVAS-NOW solution, which allows warfighters both a night and daytime solution that works with their currently fielded systems, like the current versions of night vision goggles or NVG goggles and popular helmet worn systems like those from Wilcox.
Speaker Change: We believe the program will require just as many launchers as there are missiles.
Speaker Change: when production starts in two thousand and twenty seven and we estimate this contract willll provide cop tens of millions of revenues and peak annual production
Michael Murray: Now, I would like to remind folks of some of the other notable items that we have been working on in 2024. Kopin has developed its integrated visual-acuity system or iVAST-NOW solution, which allows war fighters both in night and daytime solution today that works with their currently fielded systems like the current versions of night vision goggles or NVG goggles and popular helmet-worn systems like those from Wilcox. This allows Kopin immediate access to a significant market potential. There are millions of NVG goggles in use today, which require the additional information sources to be visible through the goggles during operation.
Speaker Change: Now I would like to remind folks of some of the other notable items that we have been working on in 2024.
Speaker Change: Kopin has developed its integrated visual acuity system or IVAS-NOW solution which allows warfighters both a night and daytime solution to day that works with their currently fielded systems like the current versions of night vision goggles or NVG goggles.
Michael Murray: This allows Kopin immediate access to significant market potential. There are millions of NVG goggles in use today, which require additional information sources to be visible through the goggles during operations. Kopin's OLED solutions provide a real-time digital overlay to the analog world in a unique, easy-to-use, lightweight, adaptable, and less costly than the high-end systems, which are cost-prohibitive. We've also demonstrated our neural display, a highly advanced OLED bidirectional display that includes embedded sensors to track eye movement, position, and gaze while simultaneously processing the tracking data in Kopin's proprietary software integrated within an AI engine that resides in the backplane of the display.
Speaker Change: and popular helmet-worn systems like those from Wilcox.
Speaker Change: This allows Kopin immediate access to a significant market potential. There are millions of NVG goggles in use today, which require the additional information sources to be visible through the goggles during operation.
Michael Murray: Kopin's OLED solutions provide the real-time digital overlay to the analog world and a unique, easy-to-use, lightweight, adaptable, and lesser cost than the high-end systems which are cost-prohibitive. We've also demonstrated our neural display, a highly advanced OLED bidirectional display that includes embedded sensors to track eye movement, position, and gaze while simultaneously processing the tracking data in Kopin's proprietary software integrated within an AI engine that resides in the back plane of the display. The system adjusts the displayed information in real time to the optimized user experience and performance in high-stakes use cases. This innovative software platform has now reached the alpha-testing stage of development, marking a significant milestone in our neural display development efforts.
Speaker Change: Kopin's OLED solutions provide the real-time digital overlay to the analog world in a unique, easy-to-use, lightweight, adaptable, and lesser cost than the high-end systems, which are cost prohibitive.
Speaker Change: We've also demonstrated our neural display, a highly advanced OLED bidirectional display that includes embedded sensors to track eye movement, position, and gaze while simultaneously processing the tracking data in Kopin's proprietary software integrated within an AI engine that resides in the backplane of the display.
Michael Murray: The system adjusts the displayed information in real-time to optimize user experience and performance in high-stakes use cases. This innovative software platform has now reached the alpha testing stage of development, marking a significant milestone in our neural display development effort. We believe that this display system will be a great fit for the next generation of defense visual augmentation systems, and it's also receiving significant interest from consumer spatial computing manufacturers due to its ability to reduce size, weight, and power consumption while still offering great image quality, eye and pupil tracking, and dynamic image control.
Speaker Change: the system adjust the displayed information in real time to the to optimize user experience and and performance in high akes use cases
Speaker Change: This innovative software platform has now reached the alpha testing stage of development, marking a significant milestone in our neural display development efforts.
Michael Murray: People believe that this display system will be a great fit for the next generation of defense visual augmentation systems, and it's also receiving significant interest from consumer spatial computing manufacturers due to its ability to reduce size, weight, power consumption, while still offering a great image quality, eye, and pupil tracking, and dynamic image control. In addition to our efforts, Kopin is also benefiting from overall market trends. Our pipeline of opportunities is being fueled by USDOD refreshing its current capabilities, investing in new targeting and next generation of visual augmentation systems, and now NATO pushing member countries to spend the required 2% of GDP required by the membership mandate.
Speaker Change: We believe that this display system will be a great fit for the next generation of defense visual augmentation systems.
Speaker Change: and it's also receiving significant interest from consumer spatial computing manufacturers due to its ability to reduce size weight power consumption while still offering a great image quality i and people tracking and dynamic image control
Michael Murray: In addition to our efforts, Kopin is also benefiting from overall market trends. Our pipeline of opportunities is being fueled by the U.S. DOD refreshing its current capabilities, investing in new targeting and the next generation of visual acuity systems, and now NATO pushing member countries to spend the required 2% of GDP required by the membership mandate. Furthermore, consumer, medical, and industrial companies are reevaluating their spatial computing architectures and realizing that not only do customers want a great display, but they're demanding reductions in size, weight, power consumption, and cost.
Speaker Change: In addition to our efforts, Kopin is also benefiting from overall market trends.
Speaker Change: Our pipeline of opportunities is being fueled by U.S. DoD refreshing its current capabilities, investing in new targeting and next generation of visual acuity systems, and now, NATO pushing member countries to spend the required 2% of GDP required by the membership mandate.
Michael Murray: Furthermore, consumer, medical, and industrial companies are re-evaluating their spatial computing architectures and realizing that not only do customers want a great display, but are demanding reductions in size, weight, power consumption, and cost. We anticipated these market signals with our current AI-enabled neural display architecture. As a result of this strategy, focus, and the reorganizations, we believe our opportunity pipeline has now expanded over $500 million, of which $350 million of the total resides within the defense market and has high probabilities for contractual awards, while the remaining $150 million of new opportunities are in other markets and in the early stages of formation.
Speaker Change: Furthermore, consumer, medical, and industrial companies are re-evaluating their spatial computing architectures and realizing that not only do customers want a great display,
Speaker Change: But they're demanding reductions in size, weight, power consumption, and cost. We anticipated these market signals with our patented AI-enabled neural display architecture.
Michael Murray: We anticipated these market signals with our patented AI-enabled neural display architecture. As a result of this strategy focus and the reorganizations, we believe our opportunity pipeline has now expanded over $500 million, of which $350 million of the total resides within the defense market and has high probabilities for contractual awards, while the remaining $150 million of new opportunities are in other markets and in the early stages of formation. On the expense side of the ledger, in January, we launched our OneKopin initiative to enhance synergies, expand capabilities, gain efficiencies, decrease costs, and increase accountability across our three sites. As a reminder, that's Westboro, Massachusetts; Reston, Virginia; and Dalgety Bay, Scotland, which previously operated autonomously.
Speaker Change: asa result of this strategy focus and the reorganizations we believe our opportunity pipeline has now exexpended over five hundred million dollars of which
Speaker Change: 350 million of the total resides within the defense market and has high probabilities for contractual awards, while the remaining 150 million of new opportunities are in other markets and in the early stages of formation.
Michael Murray: On the expense side of the ledger, in January, we launched our one-copen initiative to enhance synergies, expand capabilities, gain efficiencies, decrease costs, and increase accountability across our three sites. As a reminder, that's Westboro, Massachusetts, Rest in Virginia, and Delgetty Bay, Scotland, which previously operated as home autonomously. We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies, and cross-training our sales organizations.
Speaker Change: On the expense side of the ledger, in January , we launched our OneKopin initiative to enhance synergies, expand capabilities, gain efficiencies, decrease costs, and increase accountability across our three sites.
Speaker Change: As a reminder, that's Westborough, Massachusetts, Reston, Virginia, and Dalgety Bay, Scotland, which previously operated autonomously.
Michael Murray: We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies, and cross-training our sales organization. Having reviewed our quarterly progress, let me turn to the longer term and our strategic initiatives, which are the foundation of our future success. As a result of our first strategic initiative, building the backlog,
Speaker Change: We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies, and cross-training our sales organizations.
Michael Murray: Having reviewed our quarterly progress, let me turn to the longer term and our strategic initiatives, which are the foundation of our future success. Turning to our first strategic initiative, building the backlog, our backlog remains ahead of plan for the year thus far, and we are pleased with the new customer adoption, which will bring a stronger, wider, and deeper foundation for Copen's long-term growth. Based on our current purchase orders, Copen could potentially ship triple the volume of weapon sites as 2023, within the calendar year of 2024, while our quality rates continue to improve and are stabilizing at the targeted levels.
Speaker Change: Having reviewed our quarterly progress, let me turn to the longer term and our strategic initiatives, which are the foundation of our future success.
Brian Prenoveau: Our backlog remains ahead of plan for the year thus far, and we are pleased with the new customer adoption, which will bring a stronger, wider, and deeper foundation for Kopin's long-term growth. With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display has reached the final milestone of production readiness, which is a significant milestone for Kopin and our fab light strategy, which supports the need for a USDOD-approved deposition source for this technology, potentially doubling our revenue in that application space.
Michael Murray: Our backlog remains ahead of plan for the year thus far, and we are pleased with the new customer adoption, which will bring a stronger, wider, and deeper foundation for Kopin's long-term growth. Based on its current purchase orders, Kopin could potentially ship triple the volume of weapon sites as in 2023 within the calendar year of 2024. Our quality rates continue to improve and are stabilizing at the targeted levels.
Speaker Change: turning to our first strategic initiative building the backlog our backle remains a head of plan for the year thus far and we'are pleased with the new customer adoption which will bring a stronger wider and deeper foundation for coens's long-term growth
Speaker Change: basedin our current purchase orders cobpen could potentially ship triple the volume of weaponsites as two thousand and twenty three
Speaker Change: within the calendar year of two thousand andtwenty four while quality rates continue to improve in our stabilizing at the target targeted levels
Michael Murray: With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display reached the final milestone of production readiness, which is a significant milestone for Copen and our fab light strategy, which supports the need for a USDOD-approved deposition source for this technology. This highly customized display will run concurrently with the current AMLCD offering within pilot helmets for several years, potentially doubling our revenue in that display applications will also enter its next phase of production shortly as well. Now, turning to our armored vehicle program, as discussed previously, the set for upgrade was cancelled.
Michael Murray: With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display has reached the final milestone of production readiness, which is a significant milestone for Kopin and our fab light strategy, which supports the need for a USDOD-approved deposition source for this technology. This highly customizable display will run concurrently with the current AMLCD offering within Pilot Helmets for several years, potentially doubling our revenue in that application space.
Speaker Change: With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display reached the final milestone of production readiness.
Speaker Change: which is a significant milestone for Kopin, and our Fab Light strategy, which supports the need for a USDOD-approved deposition source for this technology.
Speaker Change: This highly customized display will run concurrently with the current AMLCD offering within Pilot Helmets for several years, potentially doubling our revenue in that application space.
Michael Murray: Our monochrome micro LED product for cockpit heads-up display applications will also enter its next phase of production shortly as well. Now turning to our Armored Vehicle Program. As discussed previously, the Step 4 upgrade was cancelled.
Speaker Change: our monicro microled product for cockthat heads of display applications will also enter its next phase of vate production shortly as well
Speaker Change: Now turning to our Armored Vehicle Program. As discussed previously, the Step 4 upgrade was cancelled.
Michael Murray: However, we reaffirm that our weapon site program will continue as planned and be added to previous upgrade packages and new developments alike. We are pleased to report that the part production approval process for the PPAT program continues to progress on schedule, and we are now receiving early forecasts for production demands from General Dynamics. We are enabled to share these early volume estimates due to the sensitivities of that program; however, the outlook is starting to form through our original expectations. As a reminder, Copen will supply four integrated weapon site systems per vehicle. The system sells for over $10,000 each, and our understanding is that there are over 10,000 vehicles in service today.
Brian Prenoveau: However, As a reminder, Kopin will supply four integrated weapons site systems per vehicle. The system sells for over $10,000 each. We have a strong pipeline of qualified opportunities, newly received research and development orders, and a solid production contract, which offers a clear line of sight to increased revenue in 2024 over 2023, while setting the expectation for further double-digit revenue increases in 2025 compared to this year, with the aim to achieve and sustain over 100 million in yearly revenue in the next three years or so.
Michael Murray: However, we reaffirm that our weapons site program will continue as planned and be added to previous upgrade packages and new developments alike. We are pleased to report that the production approval process for the PPAP program continues to progress on schedule, and we are now receiving early forecasts for production demands from General Dynamics. However, we were unable to share these early volume estimates due to the sensitivities of that program.
Speaker Change: however
Speaker Change: we reaffirm that our weaponsite program will continue as planned
Speaker Change: andbe added to previous upgrade packages and new developments alike
Speaker Change: We are pleased to report that Part Production Approval Process, or PPAP, program continues to progress on schedule, and we are now receiving early forecasts for production demands from General Dynamics.
Michael Murray: However, the outlook is starting to form in line with our original expectations. As a reminder, Kopin will supply four integrated weapons site systems per vehicle. The system sells for over $10,000 each.
Speaker Change: We are unable to share these early volume estimates due to the sensitivities of that program. However, the outlook is starting to form to our original expectations.
Michael Murray: And our understanding is that there are over 10,000 vehicles in service today. We expect to retrofit 10% to 20% of these vehicles while also designing them into new versions, also making this a significant revenue generation program for many years to come. We've also increased our presence in the medical and biomedical space with design wins at the world's most advanced laboratories, universities, and hospitals, which are using our ferroelectric liquid crystal on silicon displays, as we announced previously. Our CR3 headset has also begun to receive interest, as we are now supporting production orders for customers who are putting the product through their testing and through their paces.
Michael Murray: We expect a retrofit 10 to 20% of these vehicles while also being designed into new versions, also making this a significant revenue generation program for many years. We've also increased our presence in the medical and biomedical space, with design wins at the world's most advanced laboratories, universities, and hospitals, which are using our ferroelectric liquid crystal on silicon displays, as we announced previously. Our CR3 headset also begun to receive interest, as we are now supporting production orders for customers who are putting the product through their testing and through their cases. We are hopeful to announce a new strategic partner in this space later on this year, which will greatly accelerate our go-to-market plans and product adoption.
Operator: John[inaudible] Corporations Chief Executive Officer Michael Murray will begin today's call with an overview of Kopin's progress within the company's strategy.
Michael Murray: We are hopeful to announce a new strategic partner in this space later this year, which will greatly accelerate our go-to-market plans and product adoption. Lastly, I spoke about our Stinger Missile Replacement Order, which is significant for Kopin, and there are several other opportunities like it. We understand the U.S. Army will seek to replenish and replace over 100,000 missiles, and we believe that they may also refresh the launching systems for other surface-to-air projectiles, which are active opportunities we are pursuing, both in the United States and in NATO countries.
Michael Murray: Lastly, I spoke about our Stair and Missile Replacement Order, which is significant for Kopin, and there are several other opportunities like it. We understand the US Army will seek to replenish and replace over 100,000 missiles, and we believe that they may also refresh the launching systems for other surface-to-air projectiles, which are active opportunities we are pursuing both in the United States and in NATO countries.
Speaker Change: We understand the U S Army will seek to replenish and replace over 100000 missiles. We believe that they may also refresh the launching systems for other surface to air projectiles, which are active opportunities. We are pursuing both in the United States and NATO countries.
Michael Murray: Over the long term, we believe Kopin has the technology, product solutions, customers, and confirmed contracts to grow yearly revenues to $100 million or beyond. We are now deeply embedded within several US and NATO countries, Department of Defense programs, that have multi-year demands of reoccurring revenue scheduled up to 2030 in some programs. We have a strong pipeline of qualified opportunities, newly received research and development orders, and a solid production contract, which offers a clear line of sight to increase revenue in 2024 over 2023, while setting the expectation for further double-digit revenue increases in 2025 compared to this year, with the aim to achieve and sustain over 100 million year-revenue in the next three years or so.
Michael Murray: Over the long term, we believe Kopin has the technology, products, solutions, customers, and confirmed contracts to grow yearly revenues to $100 million or beyond. We are now deeply embedded within several U.S. and NATO countries' Department of Defense programs that have multi-year demands of recurring revenue scheduled out to 2030 in some programs. We have a strong pipeline of qualified opportunities, newly received research and development orders, and a solid production contract which offers a clear line of sight to increased revenue in 2024 over 2023, while setting the expectation for further double-digit revenue increases in 2025 compared to this year, with the aim to achieve and sustain over $100 million in annual revenue in the next three years or so. I'll now turn the call over to our CFO, Rich Snodder, It's over to you, Rich.
Speaker Change: Over the long term, we believe <unk> has the technology products solutions customers and confirm contracts to grow yearly revenues to $100 million or beyond.
Speaker Change: Now deeply embedded within several U S and NATO countries Department of defense programs that have multiyear demands of reoccurring revenue scheduled up to 2030 in some programs.
Speaker Change: We have a strong pipeline of qualified opportunities newly received research and development orders and a solid production contract, which offers a clear line of sight to increased revenue in 2024 over 2023, while setting the expectation for further double digit revenue increases in 2025.
Speaker Change: To this year with the aim to achieve and sustain over $100 million of yearly revenue in the next three years or so.
Richard Snyder: I will now turn the call over to our CFO, Rich Schneider, to review our results from the second quarter in further detail. Over to you, Rich.
Speaker Change: I'll now turn the call over to our CFO Rich Sneider to review our results from the second quarter in further detail over your rich. Thank you Michael.
Richard Snyder: Thank you, Michael. Turning to our financial results to the second quarter, total revenues for Q2 2024 with $12.3 million versus $10.5 million for the prior year, and 18% increase year-over-year. Product revenues for the second quarter ended June 29, 2024, were $11.1 million compared to $6 million in the second quarter of July 1, 2023. The increase in product revenues result of higher defense product revenues, which increased by $5.4 million year-over-year.
Richard Sneider: Turning to our financial results for the second quarter, total revenues for Q2 2024 were $12.3 million versus $10.5 million for the prior year, an 18% increase year over year. Product revenues for the second quarter ended June 29, 2024 were $11.1 million, compared to $6 million in the second quarter of July 1st, 2023. The increase in product revenues is the result of higher defense product revenues, which increased by 5.4 million year-over-year.
Rich Sneider: Turning to our financial results for the second quarter total revenues for Q2, 2024, with $12 3 million versus $10 5 million from the prior year and.
Speaker Change: An 18% increase year over year.
Speaker Change: Product revenues for the second quarter ended June 2009, 2024 were $11 1 million.
Speaker Change: Two 6 million in the second quarter of July one 2023.
Brian Prenoveau: The increase in product revenue is the result of higher defense product revenues, which increased by 5.4 million year over year. R&D expenses for the second quarter of 2024 were $1.8 million compared to $3.1 million in the year-ago quarter. This was primarily due to a decrease in funded R&D expenses of approximately $1.5 million on U.S. defense programs that we previously noted were completed. SG&A expenses were $7.3 million in the second quarter of 2024 compared to $6.5 million in the second quarter of 2023. The increase was primarily due to an increase in legal fees of $1.2 million.
Speaker Change: Increase in product revenues as a result of higher defense product revenues, which increased by $5 4 million year over year.
Richard Snyder: In the second quarter of 2024, funded research and development revenues were $1.2 million, a decrease of $2.7 million as compared to Q2 2023, due to the completion of several programs. Foss of product revenue for the second quarter of 2024 was $8.7 million or 79% of product revenues compared to $5.7 million or 95% of net product revenues for the second quarter of 2023. The decrease in cost of product revenues is the result of a decrease in expected program costs because of lower estimates of re-work costs. We estimate that the lower estimated re-work costs improve gross margins by approximately $1.3 million for the three months ended June 29, 2024.
Richard Sneider: In the second quarter of 2024, funded research and development revenues were $1.2 million, a decrease of $2.7 million as compared to Q2 2023 due to the completion of several programs. The cost of product revenue for the second quarter of 2024 was $8.7 million, or 79% of product revenues compared to $5.7 million, or 95% of net product revenues for the second quarter of 2023. The decrease in product revenues was the result of a decrease in expected program costs because of a lower estimate of rework costs.
Speaker Change: In the second quarter of 2024 funded research and development revenues were $1 2 million a decrease of $2 7 million as compared to Q2 2023 due to the completion of several programs.
Speaker Change: Cost of product revenues for the second quarter of 2024 was $8 7 million or 79% of product revenues compared to $5 7 million or 95% of net product revenues for the second quarter of 2023.
Speaker Change: The decrease in cost of product revenues was the result of a decrease in expected program costs because of lower estimate of rework costs.
Richard Sneider: We estimate that the lower estimated rework cost improved growth margins by approximately 1.3 million for the three months ended June 29, 2020. R&D expenses for the second quarter of 2024 were $1.8 million compared to $3.1 million in the year-ago quarter. This was primarily due to a decrease in funded R&D expense of approximately 1.5 million on U.S. defense programs that we previously noted were completed, partially offset by an increase of $200,000 in internal R&D expense for process improvement.
Speaker Change: We estimate that the lower estimated rework cost improve gross margins by approximately $1 3 million for the.
Speaker Change: The three months ended June 29 2024.
Richard Snyder: R&D expenses for the second quarter of 2024 were $1.8 million compared to $3.1 million. This was primarily due to a decrease in funded R&D expense of approximately 1.5 million on US defense programs that we previously noted were completed, partially offset by an increase of 200,000 in internal R&D expense for process improvements. FG&A expenses were 7.3 million in the second quarter of 2024, compared to 6.5 million in the second quarter of 2023. The increase was primarily due to an increase in legal fees of 1.2 million, partially offset by a decrease in credit loss expense of 200,000.
Speaker Change: R&D expenses for the second quarter of 2020 for $1 8 million compared to $3 1 million in the year ago quarter.
Speaker Change: This was primarily due a decrease in funded R&D expense of approximately $1 5 million.
Speaker Change: On U S defense programs that would that.
Speaker Change: We previously noted were completed.
Speaker Change: Partially offset by an increase of 200000 and internal R&D expense for process improvement.
Operator: Following Michael, Kopin CFO, Richard Snyder will review the company's second quarter, 2024 financial results.
Richard Sneider: SG&A expenses were $7.3 million in the second quarter of 2024 compared to $6.5 million in the second quarter of 2023. The increase was primarily due to an increase in legal fees of $1.2 million, partially offset by a decrease in credit loss expense of $200,000. Total legal fees associated with Blue Radio's expense in the fourth quarter of 2024 and 2023, with $3.1 million and $1.9 million, respectively. Other expenses include approximately $700,000 and $3.3 million of impairment losses on equity investments for the second quarter of 2024 and 2023.
Speaker Change: SG&A expenses were $7 3 million in the second quarter of 2024 compared to $6 5 million in the second quarter of 2023.
Operator: I would now like to turn the call over to Michael Murray. Michael?
Speaker Change: The increase was primarily due to an increase in legal fees of $1 2 million, partially offset by a decrease in credit loss expense of 200000.
Michael Murray: Brian, good morning to everyone and welcome to our second quarter, 2024 earnings call. I'm going to spend much of the time on this call updating you on the strong progress we made operationally on our strategic initiatives. I'm very proud of the significant progress we are making on our transformation plan. We have received over 55 million in orders for 2024 and beyond, including repeat or follow-on orders from our existing customers and programs and importantly orders from new customers within the US and now Europe, which demonstrates that we are at actively expanding our revenue and customer base.
Richard Snyder: Total legal fees associated with blue radius expense in the fourth quarter of 2024 and 2023 were 3.1 million and 1.9 million, respectively. Other expense includes approximately 700,000 and 3.3 million of impairment losses on equity investments for the second quarter of 2024 and 2023.
Speaker Change: Total legal fees associated with blue wages expense in the fourth quarter of 2024 and 2023.
Speaker Change: With $3 1 million and $1 9 million respectively.
Speaker Change: Other expense includes approximately $700003 3 million of impairment losses on equity investments for the second quarter of 2024 and 2023.
Richard Snyder: The increase in the bottom line, the net loss for the second quarter of 2024 was 5.9 million or 5 cents per share, compared to a net loss of 8.2 million or 7 cents per share of the second quarter of 2023. The amounts discussed above are based on current estimates, and listeners should review our form 10-Q for the quarter ended June 29th, 24-Q for any possible changes and, of course, in these different filings.
Richard Sneider: Here's the bottom line. The net loss for the second quarter of 2024 was $5.9 million, or $0.05 per share, compared to a net loss of $8.2 million, or $0.07 per share, for the second quarter of 2023. The amounts discussed above are based on current estimates, and listeners should review our Form 10-Q for the quarter ended June 29, 2044, for any possible changes and, of course, any additional filings. And with that, I'll turn the call back over to Michael for closing remarks.
Speaker Change: Turning to the bottom line the net loss for the second quarter of 2024 was $5 9 million or <unk> <unk> per share compared to a net loss of $8 2 million or <unk> 70 per share in the second quarter of 'twenty three.
Michael Murray: The second quarter was highlighted by continued sales momentum with 12.3 million in revenue. Notably, our products for defense applications delivered year over year growth of 106% to 10.4 million dollars. This progress has been validated and validating our strategy to reset the course within Kopin to focus on defense products that we began last year. Every month in Q2 and in July, incoming inspection rates at our top customers reached 97% up from 86% the previous quarter, which positively and significantly impacted product growth margins.
Speaker Change: The amounts discussed above are based on current estimates and listeners should review our Form 10-Q for the quarter ended June 29, 2004 for any possible changes and of course any additional filings.
Michael Murray: And with that, I'll turn the call back over to Michael for closing remarks. Church, as evidenced in our second quarter, our focus remains strengthening our record order book, pushing on-time and full rates higher, 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. We are focusing on bringing our customers up the value chain to gain more share of their system and spending. Furthermore, we continue to add new strategic partners and customers to work with and remain focused on new opportunities and projects with support our strategic plan.
Speaker Change: With that I'll turn the call back over to Michael for closing remarks.
Speaker Change: Search as evidenced in our second quarter, our focus remains strengthening our record order book pushing on time in full rates higher 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.
Michael Murray: As evidenced in our second quarter, our focus remains strengthening our record order book, pushing on-time and full rates higher, cost controls, and making strategic investments in products and people, which, in the aggregate, will improve cash flow and provide long-term sustainable profitability and growth. We are focusing on bringing our customers up the value chain to gain more share of their systems and spending. Furthermore, we continue to add new strategic partners and customers to work with and remain focused on new opportunities and projects that support our strategic plan. To this end, and due to our focus on application-specific strategies, our Qualified Opportunity Pipeline has now grown exponentially in the past few quarters due to recent geopolitical issues and increased sovereign and foreign NATO spending.
Michael Murray: We now expect Q3 revenues to increase cautiously above analyst guidance and we are expecting a much stronger second half of 2024 than the first half. During the quarter, we demonstrated combat use helmet worn daytime and nighttime readable heads-up displays or hugs. These concepts during the special operation forces week or sock week in Tampa, Florida. We also expanded the focus of our 3D-AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers.
Unknown Executive: We are focusing on bringing our customers up the value chain to gain more share of their systems and spending. Furthermore, we continue to add new strategic partners and customers to work with and remain focused on new opportunities and projects that support our strategic plan.
Speaker Change: We are focusing on bringing our customers up the value chain to gain more share of their system and spending. Furthermore, we continue to add new strategic partners and customers.
Speaker Change: We work with and remain focused on new opportunities and projects would support our strategic plan.
Michael Murray: To the send, and due to our focus upon application specific strategies, our qualified opportunity pipeline is now grown exponentially in the past few quarters due to the recent geopolitical issues and increased sovereign and foreign NATO spending. We expect to continue to add new customers, partners, and projects, which will not only add to our order book, but fuel larger returns in the future, as these new projects move into full rate production.
Speaker Change: To this end and due to our focus upon application specific strategies are qualified opportunity pipeline has now grown exponentially in the past few quarters due to the recent geopolitical issues and increased sovereign and foreign NATO spending we expect to continue to add new customers partners and projects, which will not only add to our order book, but fuel larger rig.
Operator: We expect to continue to add new customers, partners, and projects, which will not only add to our order book but fuel larger returns in the future as these new projects move into full-rate production. I'd like to thank everyone for their time today and for showing an interest in Kopin. I'd like to thank our employees, customers, and stakeholders for their continued hard work, support, and dedication. And with that, Operator, we'll now have time to take some questions. We will now begin the question and answer session. To ask a question, you may press the star, then 1 on your touch screen.
Michael Murray: This reorganization has already begun to produce orders and increased opportunities. Just to recap, our second quarter order activity, five new customers place development orders, which when completed we believe will fuel multi-million dollar per year production orders and significant revenue growth. From an international perspective, we received a 1200 unit production order for OLED micro displays for the Indian Armed Forces with deliveries taking place over a six month time span. Now from a domestic perspective, we received the development contract from a new defense customer to support the integration of our OLED micro display with a power efficient low latency digital night vision sensor referred to as P-E-B-B-N-B-I-S for use in next generation warfighter integrated visual acuity systems also known as IBAS.
Speaker Change: Turns in the future as these new projects move into full rate production.
Michael Murray: I'd like to thank everyone for your time today and for showing interesting coping. I'd like to thank our employees, customers, and stakeholders for their continued hard work, support, and dedication.
Speaker Change: I'd like to thank everyone for your time today and for showing interest in coping I'd like to thank our employees customers and stakeholders for their continued hard work support and dedication and with that operator, we will now offer time to take some questions.
Operator: And with that operator, we'll now offer time to take some questions. We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jaeson Schmidt of Lake Street. Go ahead, please.
Speaker Change: We will now begin the question and answer session.
Speaker Change: You ask a question you May press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pass momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Michael Murray: Furthermore, the US Army awarded Kopin a Phase I SBIR contract to research optical approaches for visual augmentation systems to improve performance and less incognitive dissonance and nausea. This is critical research for the military and we are honored to be able to be trusted to do this work. The U.S. Army also awarded Kopin a contract to develop a high-resolution eyepiece assembly for the new commander's launch assembly or CLLLA, the U.S, in next-generation short-range interceptor or NGSRI system.
Jaeson Schmidt: Our first question comes from Jason Smith of Lake Street.
Speaker Change: Our first question comes.
Speaker Change: Joseph Smith of Lake Street. Please.
Michael Murray: Go help, please. Hey guys, thanks for taking my questions, and congrats on the really strong momentum in Q2. That's really where I want to start. I mean, obviously, defense was up strongly. Curious if that strength was broad-based or driven by one or two programs?
Quinn Callanan: Hey guys, thanks for taking my questions and congrats on the really strong momentum in Q2. That's really where I wanted to start.
Jaeson Schmidt: Hey guys, thanks for taking my questions and congrats on the really strong momentum in Q2. That's really where I wanted to start.
Joseph Smith: Hey, guys. Thanks for taking my questions and congrats on the really strong momentum in Q2.
Quinn Callanan: I mean, obviously, defense was up strongly. Curious if that strength was broad-based or driven by one or two programs?
Jaeson Schmidt: I mean, obviously, defense was up strongly. Curious if that strength was broad-based or driven by one or two programs?
Joseph Smith: Really where I wanted to start I mean, obviously defense was up strong late curious if that strength was broad based are driven by one or two programs.
Michael Murray: Good question. And thanks, Jaeson. Thank you for your write-up recently. Well done. It was across the board, really. Our thermal weapon set program obviously leads the way in terms of total revenue. However, we have seen increases across the defense market, whether it's weapon sites or projectile thermal images and eyepieces to rotary wing and fixed wing orders. So we see across the defense marketplace an increase in spending.
Michael Murray: Great question. And thanks, Jaeson. Thank you for your recent write-up. Well done.
Joseph Smith: Great question.
Speaker Change: Thanks, Jason Thank you for your write up recently well done.
Michael Murray: The NGSRI system and program was won by Lockheed and it is expected to replace over 100,000 Stinger missiles and launchers. These new projectiles are expected to be faster, turn on enabled, and have radio frequency jamming capabilities. Kopin has been selected to design, develop, and produce the targeting eyepiece for the new launchers. We believe the program will require just as many launchers as there are missiles. When production starts in 2027 and we estimate this contract will provide Kopin tens of millions of revenues in peak annual production.
Michael Murray: It was across the board, really. Our thermal weapons program obviously leads the way in terms of total revenue. However, we have seen increases across the defense market, whether it's weapons sites or projectile thermal imagers and eyepieces to rotary wing and fixed wing orders. So we see an increase in spending across the defense marketplace. And for Kopin, I think one of the big things to take away from this call is that now we're getting more interest and focus from European companies and customers, and we're very much in those conversations now, and that spending will be significant. So it's across the board.
Speaker Change: It was across the board really our thermal weapon sight program, obviously leads the way in terms of total revenue. However, we have seen.
Speaker Change: Increases across the defense market, whether it's a weapon sights or.
Speaker Change: Projectile thermal imagers and IP says.
Speaker Change: Our rotary wing and fixed wing orders, so we see across the defense marketplace, an increase in spending and for Copa in I think one of the big things to take away from this call is now we're getting more interest and focus from European companies and <unk>.
Michael Murray: And for Kopin, I think one of the big things to take away from this call is now we're getting more interest and focus from European companies and customers. And we're very much in those conversations now. And that spending will be significant. So it's across the board.
Michael Murray: Now, I would like to remind folks of some of the other notable items that we have been working on in 2024. Kopin has developed its integrated visual-acuity system or iVAST-NOW solution, which allows war fighters both in night and daytime solution today that works with their currently fielded systems like the current versions of night vision goggles or NVG goggles and popular helmet-worn systems like those from Wilcox. This allows Kopin immediate access to a significant market potential there are millions of NVG goggles in use today which require the additional information sources to be visible through the goggles during operation.
Speaker Change: Customers and.
Speaker Change: We're very much in those conversations now in that.
Speaker Change: Spending will be significant.
Speaker Change: So it's across the board.
Richard Snyder: Okay, perfect. And then looking at sort of the gross margin line, obviously a nice snap back here in Q2. How should we think about gross margin trending the rest of this year? It should continue to trend up. So I think you have to adjust the current gross margin by the 1.3.
Richard Sneider: Okay, perfect. And then looking at sort of the gross margin line, obviously, a nice snap back here in Q2, how should we think about gross margin trending for the rest of this year?
Speaker Change: Okay, perfect and then looking at sort of the gross margin line.
Speaker Change: Obviously, a nice snap back here in Q2, how should we think about gross margin trending the rest of this year.
Richard Sneider: It should continue to trend up. So I think you have to adjust the current gross margin by 1.3. As you know, or maybe you don't, in our military products, we use a percent completion rate. And so when we have to figure out the total cost of the program, we estimate rework costs and so on. But as Michael indicated, our quality has gone up significantly over the last 12 months.
Speaker Change: Yes, it should continue to trend up so I think you have to adjust the current gross margin by the 1.3.
Richard Snyder: As you know, or maybe you don't, in our military products, we use a percent completion. And so when we have to figure out the total cost of the program, we estimate rework costs and so on. But, as Michael indicated, our quality has gone up significantly over the last 12 months; rework costs have come down, leading to gross margin expansion. And you do get somewhat of a little catch up as you lower your estimates on total contracts. So that's why we gave you the number of 1.3, the little catch up in there. So you really ought to deduct that, start from that point and then move forward, and they should continue to expand.
Speaker Change: As you know well.
Speaker Change: Or maybe you don't.
Speaker Change: In our military products.
Speaker Change: Use a percent completion.
Speaker Change: And so when we have to figure out the total cost of the program, we estimate rework costs and so on but as Michael indicated our quality has gone up significantly over the last 12 months. We were cost has come down leading to gross margin expansion and you do get somewhat of a little catch up as you lower your estimates on it.
Michael Murray: Kopin's OLED solutions provide the real-time digital overlay to the analog world and a unique easy-to-use, lightweight, adaptable, and lesser cost than the high-end systems which are cost-prohibitive. We've also demonstrated our neural display, a highly advanced OLED bidirectional display that includes embedded sensors to track eye movement, position, and gaze while simultaneously processing the tracking data in Kopin's proprietary software integrated within an AI engine that resides in the back plane of the display.
Richard Sneider: Rework costs have come down, leading to gross margin expansion. And you do get somewhat of a little catch-up as you lower your estimates on a total contract. So that's why we gave you the number, the 1.3, the little catch-up in there. So you really ought to deduct that, start from that point, and then move forward. And they should continue to expand. Thank you.
Jaeson Schmidt: Gotcha. And then just the last one for me, and I'll jump back into Q, just a clarification on your commentary regarding Q3. Did I hear correctly that you think it could be upped sequentially?
Michael: <unk> contracts. So that's why we gave you the number the $1 three there's a little catch up in there. So you really got to deduct that start from that point and then move forward and they should continue to expand.
Jaeson Schmidt: Gotcha.
Speaker Change: Gotcha, and then just last one for me and I'll jump back into queue. Just a clarification on your commentary regarding Q3 did I hear correctly that you think it could be up sequentially.
Jaeson Schmidt: And then just the last one for me, and I'll jump back into Q. Just a clarification on your commentary regarding Q3. Did I hear correctly that you think it could be up sequentially? We do. Okay, perfect.
Michael Murray: The system adjusts the displayed information in real time to the optimized user experience and performance in high-stakes use cases. This innovative software platform has now reached the alpha-testing stage of development, marking a significant milestone in our neural display development efforts. People believe that this display system will be a great fit for the next generation of defense visual augmentation systems, and it's also receiving significant interest from consumer spatial computing manufacturers due to its ability to reduce size, weight, power consumption, while still offering a great image quality, eye, and pupil tracking, and dynamic image control.
Unknown Executive: We do. We do. Okay, perfect. Thanks a lot, guys.
Michael Murray: We do. We do. Okay, perfect. Thanks a lot, guys.
Speaker Change: We do.
Speaker Change: We do.
Speaker Change: Yeah, Okay perfect. Thanks, a lot guys.
Jaeson Schmidt: Thanks a lot, guys.
Speaker Change: Jason.
Glenn Mattson: The next question comes from Grand Matching of Rainbowberg Salmon. Go ahead, please.
Operator: The next question comes from Glenn Mattson of Ladenburg Thalmann. Go ahead, please.
Speaker Change: The next question comes from Glenn Mattson of Ladenburg Thalmann. Please.
Glenn Mattson: Hi guys, thanks for taking the questions and congrats on a great quarter. First, you mentioned the let me I bet now strategy and talked about the night vision goggle. He's I think in the past you talked about having, you know, completed that product and shifted and kind of shifted for testing, and we're kind of starting to get a feel for the uptaker or whatnot. Can you give us any Transcripts provided by Transcription Outsourcing, LLC, from the purchasers
Michael Murray: Hi, guys. Thanks for taking the questions, and congrats on a great quarter. First, you mentioned the, let me, I bet now strategy talked about the night vision goggle piece. I think in the past, you talked about having, you know, completed that product and shipped it in kind of, or shipped it for testing and we're kind of starting to get a feel for uptake or whatnot. Can you give us any expansion on that? Has there been any feedback yet from the, from the purchasers?
Glenn Mattson: Hi, guys. Thanks for taking the questions and congrats on a great quarter.
Speaker Change: First the <unk>.
Speaker Change: Mention the.
Speaker Change: Let me now strategy you talked about the night vision Goggle piece I think in the past you've talked about having having completed that product and shifted in kind of our ship different testing and we're kind of starting to get a feel for.
Michael Murray: In addition to our efforts, Kopin is also benefiting from overall market trends. Our pipeline of opportunities is being fueled by USDOD refreshing its current capabilities, investing in new targeting and next generation of visual augmentation systems, and now NATO pushing member countries to spend the required 2% of GDP required by the membership mandate. Furthermore, consumer, medical, and industrial companies are re-evaluating their spatial computing architectures and realizing that not only do customers want a great display, but demanding reductions in size, weight, power consumption, and cost.
Unknown Executive: uptaker and whatnot. Can you give us any...
Speaker Change: Uptake or whatnot can you give us any.
Speaker Change: Expansion on that has there been any feedback yet from the.
Speaker Change: From the purchasers.
Michael Murray: Sure. So we have two different partners, three actually different partners for that technology, which we call I Vast. Now to recap. It's a date time product as well as a nighttime product for night vision goggles. And we partnered with a company called Wilcox Industries, who owns about, I think, 60% of the USDOD helmet market. And I think they're, they're pretty significant worldwide, actually. So we partnered with them. We're working with them to productize those two technologies as well as another partner. And the US Army. So, so that's ongoing, Glenn. We do have a feedback loop that we're listening to and developing those technologies for production.
Glenn Mattson: All right. So we have two different partners, three actually, different partners for that technology, which we call iVast now. To recap, it's a daytime product as well as a nighttime product for night vision goggles.
Speaker Change: Sure. So we have two different partners three actually different partners for that technology, which we call I've asked now to recap it's a daytime.
Speaker Change: <unk> product as well as a nighttime product for night vision goggles, and we partnered with a company called Wilcox industries, who owns about I think.
Michael Murray: And we partnered with a company called Wilcox Industries who owns about, I think, 60% of the U.S. DoD helmet market. And I think they're pretty significant worldwide, actually. So we partnered with them, and we're working with them to productize those two technologies as well as another partner and the U.S. Army. So that's ongoing, Glenn.
Speaker Change: 60% of the U S. Dod helmet market and I think they're pretty significant worldwide actually so we partnered with them, we're working with them to product ties those two technologies as.
Michael Murray: We anticipated these market signals with our current AI-enabled neural display architecture. As a result of this strategy, focus and the reorganizations, we believe our opportunity pipeline has now expanded over $500 million, of which $350 million of the total resides within the defense market and has high probabilities for contractual awards, while the remaining $150 million of new opportunities are in other markets and in the early stages of formation.
Speaker Change: As well as another partner.
Speaker Change: And the U S Army, so so thats ongoing Glenn.
Speaker Change: We do have a feedback loop.
Speaker Change: We're listening to and developing those technologies for production, we do expect them to enter production in 2025, and we believe we'll have immediate revenue how much revenue, we're still trying to figure out because this is a new entrance.
Michael Murray: We do have a feedback loop that we're listening to in developing those technologies for production. We do expect them to enter production in 2025, and we believe we'll have immediate revenue. How much revenue? We're still trying to figure out because this is a new business.
Michael Murray: We do expect them to enter production in 2025. And we believe we'll have immediate revenue. How much revenue we're still trying to figure out because this is a new entrance. But the key point here is that these technologies will work with what the soldier has in their pack and on their head today. So there's no new adoption rate that needs to happen in terms of connectivity or what have you.
Michael Murray: But the key point here is that this technology will work with what the soldier has in their pack and on their head today. So there's no new adoption rate that needs to happen in terms of connectivity or what have you. So it's a pure SAM, or serviceable available market entrant, that we can have revenue for next year.
Speaker Change: But the key point here is that this technology will work with what the soldier has in their pack and on their head today.
Michael Murray: On the expense side of the ledger, in January, we launched our one-copen initiative to enhance synergies, expand capabilities, gain efficiencies, decrease costs and increase accountability across our three sites. As a reminder, that's Westboro, Massachusetts, Rest in Virginia, and Delgetty Bay, Scotland, which previously operated as home autonomously. We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies and cross-training our sales organizations.
Speaker Change: So theres no new adoption rate that needs to happen in terms of connectivity or what have you. So it's a pure sam or serviceable available market entrant that we can have revenue for next year.
Michael Murray: So it's a pure, same or serviceable available market entry that we can have revenue for next year.
Glenn Mattson: Great, that's helpful. Here's on the Armored Vehicle Program, the P-PAP that you're working through. Believe in the past, you've alluded to either on prior calls or in maybe product demo days or something, but along the way, he's talked about the ability to use that technology for consumer applications in the auto space in particular. Maybe, perhaps, could you, can you stand on that and just give us an update? Sure, great question. So yes, we have received inbound requests from two electric vehicle manufacturers here in the United States that are looking for a very high refresh rate, looking crystal on silicon device that's on a mode of qualified.
Glenn Mattson: Great, that's helpful. I'm curious about the armored Vehicle Program, the PPAP that you're I believe in the past you've alluded to, either in prior calls or in maybe product demo days or something, but along the way you've talked about... The ability to use that technology for consumer applications in the auto space, in particular, maybe, perhaps could you could you expand on that and just give us an update?
Speaker Change: Great that's helpful.
Speaker Change: Curious on the on.
Speaker Change: On the armored vehicle program the <unk>.
Pat: Pat that you're that you are.
Speaker Change: Working through it.
Speaker Change: In the past you've alluded to either on prior calls, our and maybe product demo days or something but along the way you've talked about.
Michael Murray: Having reviewed our quarterly progress, let me turn to the longer term and our strategic initiatives, which are the foundation of our future success. Turning to our first strategic initiative, building the backlog, our backlog remains ahead of plan for the year thus far, and we are pleased with the new customer adoption, which will bring a stronger, wider and deeper foundation for Copen's long-term growth. Based on our current purchase orders, Copen could potentially ship triple the volume of weapon sites as 2023, within the calendar year of 2024, while our quality rates continue to improve and are stabilizing at the targeted levels.
Speaker Change: The ability to use that technology for.
Speaker Change: Consumer applications in the in the auto space in particular, it may be perhaps could you could you expand on that and just give us an update.
Michael Murray: Sure. A great question.
Speaker Change: Sure Great question so yeah.
Speaker Change: Yes, we have received inbound requests from.
Speaker Change: Two electric vehicle manufacturers here in the United States that are looking for a very high refresh rates liquid crystal on silicon device.
Michael Murray: So, yes, we have received inbound requests from two electric vehicle manufacturers here in the United States that are looking for a very high refresh rate liquid crystal on silicon device that's automotive-qualified. And that's what we developed for General Dynamics under the PPAP program. What PPAP is, is basically an automotive quality standard that you need to have for any moving vehicle in the United States.
Speaker Change: That's automotive qualified and that's what we developed for general dynamics under the Pee Pap program. What are Pee Pap is basically an automotive quality standard that you need to have for any moving vehicles in the United States, but once you have it Glenn you can then sell that product into other automotive applications now where.
Michael Murray: And that's what we developed for General Dynamics under the P-PAP program. What a P-PAP is, is basically an automotive quality standard that you need to have for any moving vehicle in the United States, but once you have it, Glenn, you can then sell that product into other automotive applications. Now, we're not signaling that we're going to get into the automotive market right now, but we will have an automotive qualified, ferroelectric, liquid crystal, on silicon device available for sale, and we're getting pulled from the market to have conversations about it. And it will be automotive qualified.
Michael Murray: With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display reached the final milestone of production readiness, which is a significant milestone for Copen and our fab light strategy, which supports the need for a USDOD-approved deposition source for this technology. This highly customized display will run concurrently with the current AMLCD offering within pilot helmets for several years, potentially doubling our revenue in that display applications will also enter its next phase of production shortly as well.
Michael Murray: But once you have it, Glenn, you can then sell that product for other automotive applications. Now, we're not signaling that we're going to get into the automotive market right now, but we will have an automotive-qualified ferroelectric liquid crystal on silicon device available for sale. And we're getting pulled from the market to have conversations about it.
Glenn Mattson: Not signaling that we're going to get into the automotive market right now, but we will have an automotive qualified ferro electric liquid crystal on silicon device available for sale.
Speaker Change: We're getting pulled from the market to have conversations about it.
Michael Murray: And it will be automotive-qualified. So, it's something we're monitoring. We are getting some inbound customer requests to have conversations about an in-cabin application for liquid crystal on silicon. So, it's something that we're considering very carefully. But the one thing I will say, in automotive, in my experience with analog devices, you have to have great quality, just like in defense. You have to have great quality.
Speaker Change: It will be automotive qualified so so it's something we're monitoring we are getting some inbound customer requests to have conversations for an in cabin.
Michael Murray: So it's something we're monitoring. We are getting some inbound customer requests to have conversations for an in-cabin application for liquid crystal on silicon. So it's something that we're considering very carefully. But the one thing I will say in automotive, in my experience, we have a lot of devices; you have to have great quality, just like in defense, you have to have great quality. That is how you make money in automotive and defense. And we're gaining confidence that that's something that we could potentially do in the future. So a great question. Hope that helps.
Michael Murray: Now, turning to our armored vehicle program, as discussed previously, the set for upgrade was cancelled. However, we reaffirm that our weapon site program will continue as planned and be added to previous upgrade packages and new developments alike. We are pleased to report that part production approval process for PPAT program continues to progress on schedule, and we are now receiving early forecasts for production demands from General Dynamics. We are enabled to share these early volume estimates due to the sensitivities of that program, however, the outlook is starting to form through our original expectations.
Speaker Change: Application for liquid crystal on Silicon. So it's something that we're considering very carefully but the one thing I will say in automotive in my experience from analog devices.
Unknown Executive: You have to have great quality, just like in defense. You have to have great quality.
Speaker Change: You have to have great quality, just like in defense you have to have great quality that is how you make money in automotive and defense and we're gaining confidence that thats something that we could potentially do in the future. So great question I hope that helps.
Glenn Mattson: That is how you make money in the automotive and defense sectors. And we're gaining confidence that that's something that we could potentially do in the future. So great question. Hope that helps. Yeah, very helpful.
Unknown Executive: That is how you make money in the automotive and defense sectors. And we're gaining confidence that that's something that we could potentially do in the future. So, great question. Hope that helps.
Glenn Mattson: Yeah, very helpful. One more product one and then a quick model one, but the product one on the 3D AOI and some of the other industrial stuff that's, the market's been down for a while for you guys now. Is there an outlook for a bounce back there?
Michael Murray: Yeah, very helpful. One more product one, and then a quick model one with the product one on the 3D-AOI and some of the other industrial stuff that's been a market's been down for a while for you guys now. Is there an outlook for a bounce back there at some point? Yeah, few of the geopolitical issues in China specifically where many of our top 3D-AOI customers are, as well as Korea. The geopolitical issues with Chips Act and EVs moving around has really hurt that business. We do see it rebounding shortly and marginally, quite frankly.
Speaker Change: Yeah very helpful. One.
Speaker Change: One more product one and then a quick model one product one on the <unk> and some of the other industrial stuff.
Speaker Change: That's been a market has been down for a while you guys know as their outlook for a bounce back there.
Michael Murray: As a reminder, Copen will supply four integrated weapon site systems per vehicle, the system sells for over $10,000 each, and our understanding is that there are over 10,000 vehicles in service today. We expect a retrofit 10 to 20% of these vehicles while also being designed into new versions, also making this a significant revenue generation program for many years We've also increased our presence in the medical and biomedical space, with design winds at the world's most advanced laboratories, universities and hospitals, which are using our ferroelectric liquid crystal on silicon displays, as we announced previously.
Michael Murray: Due to the geopolitical issues in China, specifically where many of our top 3D AOI customers are, as well as Korea, the geopolitical issues with the Chips Act and EVs moving around have really hurt that business. We do see it rebounding shortly and marginally, quite frankly, but we also have been working on a new product to introduce into that market that's a little bit lower cost that I think will put us in a better position to gain more traction.
Speaker Change: Due to the geopolitical issues in China, specifically, where many of our top <unk> customers are as well as Korea.
Speaker Change: The geopolitical issues with chips Act in Evs moving around is it really hurt that business, we do see it rebounding shortly.
Speaker Change: And marginally quite frankly, but we also have been working on a new product to introduce into that market. That's a little bit lower cost that I think will put us in a better position to gain more traction and we're also seeing some uptick in Europe from the <unk> customers. There. So right now as we sit here today, the <unk> AOI market for us is somewhat.
Michael Murray: But we also have been working on a new product to introduce into that market that's a little bit lower cost that I think will put us in a better position to gain more traction. And we're also seeing some uptick in Europe from the 3D-AOI customers there. So right now, as we sit here today, the 3D-AOI market for us is somewhat de minimis. So anything that we have next year is just complete upside for the company at this point.
Michael Murray: And we're also seeing some uptick in Europe from the 3D AOI customers there. So right now, as we sit here today, the 3D AOI market for us is somewhat de minimis. So anything that we have next year is just complete upside for the company at this point.
Michael Murray: Our CR3 headset also begun to receive interest, as we are now supporting production orders for customers who are putting the product through their testing and through their cases. We are hopeful to announce a new strategic partner in this space, later on this year, which will greatly accelerate our go-to-market plans and product adoption. Lastly, I spoke about our Stair and Missile Replacement Order, which is significant for Kopin, and there are several other opportunities like it.
Speaker Change: De Minimis so anything that we have next year is just complete upside for the company at this point.
Richard Snyder: Great. So one rich this quick on the sales and marketing.
Glenn Mattson: Great. Rich, just quick on the sales and marketing. What should we bottle now, post-trial? I had a number that I thought Spencer was going to come down a little faster. But what should we think about now that all that kind of noise is we're moving through that or whatever?
Speaker Change: Great. It's helpful. Rich just quick on the sales and marketing what should we bottle now post the trial.
Richard Snyder: What should we bottle now post the trial? I had a number that's going to come down a little faster. But what should we think about now than all that kind of noises moving through that or whatever?
Speaker Change: Okay.
Speaker Change: Number.
Speaker Change: So this is going to come down a little faster, but what should we think about now that all that kind of noise as we're moving through that or whatever.
Richard Sneider: So this, we hope, knock on wood, is the last, this being Q3, the last tough quarter of expenses. We mentioned before that we filed Motion 50, whatever they're called, to the judge, explaining why we think that the verdict doesn't make any sense. And so all of that work was done in July and August.
Richard Snyder: So this we hope, knock on wood, is the last, this being Q3, last tough quarter expense. We mentioned before we filed Motion 50, whatever they're called, to the judge, explaining why we think that the verdict doesn't make any sense, and so all of that work has been done in July and August, and now we're just waiting for the judge, and depending on how that goes, we may or may not appeal, and it goes our favor, obviously, we won't, we have to, I'm told the actual appeal process is very inexpensive relative to the amounts that we've been spending, so we think once we get through this month, again, knock on wood, the expense should drop dramatically, and what, so what would a norm, like assuming no legal, what would a sales or marketing number be, if you had nothing or ballpark kind of, yeah, so as I mentioned my prepared remarks in the second quarter of 2024, we spent 3.1 million, or 3.1 million of expense associated with the blue radios, yeah, okay, so I'll be going to cut that down there.
Michael Murray: We understand the US Army will seek to replenish and replace over 100,000 missiles, and we believe that they may also refresh the launching systems for other surface-to-air projectiles, which are active opportunities we are pursuing both in the United States and in NATO countries.
Speaker Change: So.
Unknown Executive: So this, we hope, knock on wood, is the last, this being Q3, the last tough quarter expense. We mentioned before we filed Relative to the amounts that we've been spending. So we think once we get through this month.
Speaker Change: This we hope knock on wood is the last this being Q3.
Speaker Change: Last tough quarter of expense.
Speaker Change: As we mentioned before we filed.
Speaker Change:
Speaker Change: The motion.
Speaker Change: Posted 50, whatever they are called.
Michael Murray: Over the long term, we believe Kopin has the technology, product solutions, customers, and confirmed contracts to grow yearly revenues to $100 million or beyond. We are now deeply embedded within several US and NATO countries, Department of Defense programs, that have multi-year demands of reoccurring revenue scheduled up to 2030 in some programs. We have a strong pipeline of qualified opportunities, newly received research and development orders, and a solid production contract, which offers a clear line of sight to increase revenue in 2024 over 2023, while setting the expectation for further double-digit revenue increases in 2025 compared to this year with the aim to achieve and sustain over 100 million year-revenue in the next three years or so.
Speaker Change: So the judge explaining why we think that the verdict doesn't make any sense and so all of that work has been done.
Speaker Change: In July and August and now we're just waiting for the judge.
Richard Sneider: And now we're just waiting for the judge. And you know, depending on how that goes, we may or may not appeal, and if it goes our favor, obviously we won't. If we have to, I'm told the actual appeal process is very inexpensive, relative to the amounts that we've been spending. So we think once we get through this month, Again, knock on wood, the expense should drop dramatically.
Speaker Change: And depending on how that goes we may or may not appeal and vehicles. Our favorite obviously wont do we have to I'm told the actual appeal processes very inexpensive.
Speaker Change: <unk> to the amounts that we've been spending so we think once we get through this month.
Speaker Change: Again knock on wood.
Speaker Change: The expense should drop dramatically.
Glenn Mattson: Assuming no legal liability, what would the sales and marketing number be if you had nothing or ballparked?
Speaker Change: And in what.
Speaker Change: Assuming no legal what would what would the sales and marketing number be.
Speaker Change: Yes, nothing or ballpark kind of.
Richard Sneider: Yeah, so as I mentioned in my prepared remarks, in the second quarter of 2024, we spent $3.1 million. Right, right. We had $3.1 million in expenses associated with the blue line.
Speaker Change: Yes, so as I mentioned in my prepared remarks in the second quarter of 2024, we spent $3 1 million right right. Okay.
Richard Sneider: I will now turn the call over to our CFO Rich Schneider to review our results from the second quarter in further detail over your Rich. Thank you, Michael. Turning to our financial results to the second quarter, total revenues for Q2 2024 with $12.3 million versus $10.5 million for the prior year, and 18% increase year-over-year. Product revenues for the second quarter ended June 29, 2024 were $11.1 million compared to $6 million in the second quarter of July 1, 2023.
Speaker Change: One 1 million of expense associated with the Blue radios.
Operator: Transcripts provided by Transcription Outsourcing, LLC.
Operator: Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: Yes, okay. So it'd be great. Thank you sat down and you're down to four yes. Okay.
Speaker Change: Excellent okay.
Operator: Okay, the next question comes from Matt Sheerin of Stiefel. Go ahead, please.
Speaker Change: Next question comes from Matt Sheerin of Stifel Go ahead. Please.
Victor Santiago: Go ahead, please. Good morning, guys. This is Victor on from Matt, to follow up actually on the blue radios lawsuit. Do you still plan to fund any damages through the sale of assets or IP, and so kind of how that, how's that process going? Victor, yes, so we are actively pursuing sales of some of our assets specific to investments that we have in other firms. We have made pretty significant progress in that area with signed term sheets, et cetera, but we don't have cash in the bank just yet, so we're not reporting on it. But we are making some pretty good progress there, and it's, you know, several million dollars. But again, until the cash is in the bank, we're not going to record on it, but we are making progress.
Victor Santiago: Morning guys, this is Victor on behalf of Matt. Just to follow up on the Blue Radios lawsuit. Do you still plan to fund any damages through the sale of assets or IP, and so kind of how is that process going?
Speaker Change: Good morning, guys. This is victor on for Matt.
Richard Sneider: The increase in product revenues result of higher defense product revenues, which increased by $5.4 million year-over-year. In the second quarter of 2024, funded research and development revenues were $1.2 million, a decrease of $2.7 million as compared to Q2 2023, due to the completion of several programs. Foss of product revenue for the second quarter of 2024 was $8.7 million or $79% of product revenues compared to $5.7 million or $95% of net product revenues for the second quarter of 2023.
Victor: To follow up actually on the the Blue radios lawsuit do you still plan to fund any damages through through the sale of assets or IP, and so kind of how that how is that process going.
Michael Murray: Hi Victor. Yes, so we are actively pursuing sales of some of our assets specific to investments that we have in other firms. We have made pretty significant progress in that area, with signed term sheets, etc., but we don't have cash in the bank just yet, so we're not reporting on it. But we are making some pretty good progress there, and it's, you know, several million dollars. But again, until the cash is in the bank, we're not going to report on it, but we are making progress.
Speaker Change: Hey, Victor Yes, so we are actively pursuing sales.
Victor: Some of our assets specific two investments that we have in other firms.
Victor: We have made pretty significant progress in that area with signed term sheets et cetera, but we don't have cash in the bank just yet so we're not reporting on it but we are making some pretty good progress there and it's.
Richard Sneider: The decrease in cost of product revenues is the result of a decrease in expected program costs because of lower estimates of re-work costs. We estimate that the lower estimated re-work costs improve gross margins by approximately $1.3 million for the three months ended June 29, 2024. R&D expenses for the second quarter of 2024 were $1.8 million compared to $3.1 million This was primarily due a decrease in funded R&D expense of approximately 1.5 million on US defense programs that we previously noted were completed, partially offset by an increase of 200,000 in internal R&D expense for process improvements.
Victor: Several million dollars, but again until the cash is in the bank, we're not going to report on it but we are making progress.
Victor Santiago: Got it, thank you then. Just on the consumer segment, it looks like you guys didn't record any revenue in the quarter. Should we just continue to stack a little to no contribution through the year? And also, I guess we're kind of drove the revenue in the quarter. You know, it's a consumer, I think, is going to be diminished throughout this year. We are going to see some sample orders, I believe, in the next couple of quarters, and then we are negotiating in a couple of areas, some funded research and development with consumer companies, and that takes a long time, taking much longer than we expected on the consumer fronts, but you are working with several multinational companies to develop those potential contracts for funded research and development specifically.
Victor Santiago: Got it, thank you. Then just on the consumer segment, looks like you guys didn't record any revenue in the quarter. Should we just continue to expect a little to no contribution through the year? And also, I guess we kind of drove the no revenue in the quarter.
Speaker Change: Got it. Thank you and then just on the consumer segment looks like you guys Didnt record any revenue in the quarter should we just continue to expect a little to no contribution through the year and also I guess, what kind of drove the net revenue in the quarter.
Victor: Yeah.
Michael Murray: So consumer, I think, is going to be de minimis throughout this year. We are going to see some sample orders, I believe, in the next couple of quarters. And then we are negotiating in a couple of areas some funded research and development with consumer companies. And that takes a long time, taking much longer than we expected on the consumer front. But we are working with several multinational companies to develop those potential contracts for funded research and development specifically.
Victor: So the consumer I think is going.
Speaker Change: We're going to be de Minimis throughout this year, we are going to see some sample orders I believe in the next couple of quarters.
Victor: And then where we are negotiating in a couple of areas.
Victor: Funded research and development with consumer companies and that takes a long time, taking much longer than we expected on the consumer front, but we are working with several multinational companies.
Richard Sneider: FG&A expenses were 7.3 million in the second quarter of 2024, compared to 6.5 million in the second quarter of 2023. The increase was primarily due to an increase in legal fees of 1.2 million, partially offset by a decrease in credit loss expense of 200,000. Total legal fees associated with blue radius expense in the fourth quarter of 2024 and 2023 were 3.1 million and 1.9 million respectively. Other expense includes approximately 700,000 and 3.3 million of impairment losses on equity investments for the second quarter of 2024 and 2023.
Victor: To develop those potential contracts for funded research and development specifically.
Victor Santiago: Got it, thank you. That's all I had.
Victor Santiago: Got it. Thank you. That's all I had.
Victor: Got it. Thank you that's all I had.
Victor Santiago: Thanks, Victor.
Victor: Thanks Victor.
Kevin Dede: Our next question comes from Kevin D. D. of H.E. Wayne Wright, go ahead, please.
Kevin Dede: Our next question comes from Kevin Dede of H.E. Wainwright. Go ahead, please.
Operator: Our next question comes from Kevin Dede of H.E. Wainwright. Go ahead, please.
Speaker Change: Our next question comes from Katherine <unk> of H C. Wainwright go ahead. Please.
Kevin Dede: Welcome. Can you hear me? Smile. Thanks. Now, you're fading in now. Yeah, that's what I was afraid of, sure.
Kevin Dede: How come you can't hear me, man?
Katherine <unk>: Can you hear me.
Victor: Okay.
Victor: Okay.
Operator: Now you're fading in and out.
Speaker Change: You faded out.
Kevin Dede: Yeah, that's what I was afraid of. Short. Then I think the thing that's most curious to me is the Abrams cancellation. I was wondering if you understood why and whether or not there might be a replacement behind it.
Speaker Change: Yeah, that's what I was afraid of.
Richard Sneider: The increase in the bottom line, the net loss for the second quarter of 2024 was 5.9 million or 5 cents per share, compared to a net loss of 8.2 million or 7 cents per share of the second quarter of 2023.
Speaker Change: Sure.
Speaker Change: The I think the thing that's most curious to me is the Abrams cancellation and I was wondering if you understood why and whether or not there might be a replacement behind it.
Michael Murray: I think the thing that's most curious to me is the Abrams cancellation. I was wondering if you understood why and whether or not there might be a replacement behind it. Well, so for us, Kevin, the set for Upgrade was canceled by the U.S. Army. And there are several reasons why, but essentially our program will still continue. The reason why our program will continue is the Kopin weapons site reduces the size, weight, cost, and improves lethality. So our program will continue, but the set for Upgrade was canceled. I think due to feedback from the folks in Ukraine, some of the other issues that that armored vehicle is going through, and also the request from the Army to have a new version of that vehicle by 2030, which we're also engaged on right now.
Michael Murray: The amounts discussed above are based on current estimates and listeners should review our form 10Q for the quarter ended June 29th, 24Q for any possible changes and, of course, in these different filings. And with that, I'll turn the call back over to Michael for closing remarks. Church, as evidenced in our second quarter, our focus remains strengthening our record order book, pushing on time and full rates higher, 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.
Unknown Executive: Well, so for us, Kevin, the SEP 4 upgrade was canceled by the U.S. Army, and there are several reasons why, but
Michael Murray: Well, so for us, Kevin, the SEP4 upgrade was canceled by the U.S. Army, and there are several reasons why, but
Speaker Change: Gosh, well so for us Kevin.
Speaker Change: The set for upgrade was canceled by the U S Army.
Speaker Change: And there are several reasons why.
Speaker Change:
Speaker Change: But.
Michael Murray: Essentially, our program will still continue. The reason why our program will continue is that the Kopin weapons site reduces size, weight, cost, and improves lethality. So our program will continue, but the Set-4 upgrade was canceled, I think, due to feedback from the folks in Ukraine, some of the other issues that that armored vehicle is going through, and also the request from the Army to have a new version of that vehicle by 2030, which we're also engaged on right now.
Speaker Change: Essentially our program will still continue the reason why our program will continue as the coping weapons sight reduces size weight cost and improves lithology. So our program will continue but the set for upgrade was canceled I think due to feedback from the.
Michael Murray: We are focusing on bringing our customers up the value chain to gain more share of their system and spending. Furthermore, we continue to add new strategic partners and customers to work with and remain focused on new opportunities and projects with support our strategic plan. To the send, and due to our focus upon application specific strategies, our qualified opportunity pipeline is now grown exponentially in the past few quarters, due to the recent geopolitical issues and increased sovereign and foreign NATO spending. We expect to continue to add new customers, partners, and projects, which will not only add to our order book, but fuel larger returns in the future, as these new projects move into full rate production.
Speaker Change: The folks in Ukraine, some of the other issues that that armored vehicle is going through and also the request from the army to have a new version of that vehicle by 2030.
Michael Murray: So our weapons site will still continue, but that upgrade package has been canceled, and our product will be available through the other upgrade packages, as well as for the new vehicle program that we're expecting to see out in 2030. So we continue on, but the Set-4 upgrade was canceled just due to feedback from customers. That's my understanding. No, I appreciate the colors. Thank you, Michael.
Speaker Change: We're also engaged on right now so.
Michael Murray: So our weapon site will still continue, but that upgrade package has been canceled, and our product will be available through the other upgrade packages, as well as for the new vehicle program that we're expecting to see out in 2030. So we continue on, but the set for upgrade was canceled just due to feedback from customers. That's my understanding. No, I appreciate the colors.
Speaker Change: Our weapon site will still continue but that upgrade package has been cancelled and our product will be available through the other upgrade packages as well as for the new.
Speaker Change: Vehicle program that we're expecting to see out in 2030. So we continue one but the set for upgrade was canceled just due to feedback from customers.
Speaker Change: That's my understanding.
Michael Murray: I'd like to thank everyone for your time today and for showing interesting coping. I'd like to thank our employees, customers, and stakeholders for their continued hard work, support and dedication.
Speaker Change: No I appreciate the colors. Thank you Michael.
Kevin Dede: Thank you, Michael.
Speaker Change: Yeah.
Michael Murray: The version of their track to work with Lockheed, and have they offered you development money for that? Or is that pretty much a self-product due at this point? So if I understood your question, Kevin, you're coming in and out, but yes, the current contract that we have with Lockheed is a development contract, and we're developing the by piece for the launcher under that contract. Production will follow thereafter. Okay. The development contract is around a million and a half dollars, roughly speaking. Okay.
Kevin Dede: Unknown Speaker 0.5 hours, track direct with Lockheed, and have they offered you development money for that, or is that pretty much an off the shelf product to you at this point?
Speaker Change: I appreciate that.
Operator: And with that operator, we'll now offer time to take some questions.
Speaker Change: Attract a ric.
Speaker Change: He'd.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Speaker Change: They offer new development.
Speaker Change: Money for that or is that pretty much.
Speaker Change: The shelf product for you at this point.
Michael Murray: So if I understood your question, Kevin, you're coming in and out, but yes, the current contract that we have with Lockheed is a development contract, and we're developing the eyepiece for the launcher under that contract. Production will follow thereafter. Alright, the development contract is around a million and a half dollars, roughly speaking.
Speaker Change: So if I understood your question Kevin.
Speaker Change: You're coming in and out but.
Speaker Change: Yes, the current contracts that we have with Lockheed is a development contract and we're developing the buy piece for the launch or under that contract production will follow thereafter.
Operator: At this time, we will pass momentarily to assemble our roster.
Kevin: Okay. The development contract is around $1 million and $5 roughly speaking.
Speaker Change: Okay.
Kevin Dede: Thank you.
Kevin Dede: Fair enough, gentlemen. Thank you. I appreciate it.
Kevin: Fair enough gentlemen, thank you I appreciate it.
Kevin Dede: I appreciate the effort.
Speaker Change: Yes.
Jeffrey Bernstein: Kevin. Our next question comes from Jeffrey Bernstein, a Silverberg Bernstein Capitol. Go ahead, please. Hi, good morning, guys. It's a nice progress in the quarter here. Just a couple quick follow-ups. On the medical side, I think it sounded like you were talking about having a larger distribution partner coming in. Can you just flesh out what you were saying there? Sure. So our go-to-market strategy is very unique in that market. We can't expel our own resources to call on hospitals and surgeons, and we'll have you. So our go-to-market strategy is we're going to partner with a very large market leader in that space that already instruments surgeons.
Speaker Change: Kevin.
Jaeson Schmidt: Our first question comes from Jason Smith of Lake Street.
Operator: Our next question comes from Jeffrey Bernstein of Silverberg Bernstein Capital. Go ahead, please.
Speaker Change: Our next question comes from Jeffrey Bernstein of Sanford Bernstein Capital go ahead. Please.
Michael Murray: Go help, please. Hey guys, thanks for taking my questions and congrats on the really strong momentum in Q2. That's really where I want to start. I mean, obviously defense was up strongly. Curious if that strength was broad-based or driven by one or two programs? Good question. And thanks, Jaeson. Thank you for your write-up recently. Well done. It was across the board, really. Our thermal weapon set program obviously leads the way in terms of total revenue.
Michael Murray: However, we have seen increases across the defense market, whether it's weapon sites or projectile thermal images and eyepieces to rotary wing and fixed wing orders. So we see across the defense marketplace an increase in spending. And for Kopin, I think one of the big things to take away from this call is now we're getting more interest and focus from European companies and customers. And we're very much in those conversations now. And that spending will be significant. So it's across the board.
Jeffrey Bernstein: Hi, good morning guys. It's a nice progress in the quarter here.
Jeffrey Bernstein: Hi, good morning, guys.
Jeffrey Bernstein: It's a nice progress in the quarter here.
Speaker Change: Just a couple quick follow ups.
Speaker Change: On the medical side I think it sounded like you were talking about having a larger distribution partner.
Speaker Change: Coming in can you just flesh out what you were saying there.
Jeffrey Bernstein: Just a couple quick follow-ups. On the medical side, I think it sounded like you were talking about having a larger distribution partner coming in. Can you just flesh out what you were saying there?
Speaker Change: Sure So our go to market strategy.
Speaker Change: <unk> is very unique in that in that market, we can't expel our own resources to call on hospitals and surgeons and what have you. So our go to market strategy is we're going to partner with a very large market leader in that space that already instruments surgeons.
Michael Murray: Sure. So our go-to-market strategy is very unique in that market. We can't expend our own resources to call on hospitals and surgeons and what have you. So our go-to-market strategy is we're going to partner with a very large market leader in that space that already instruments surgeons, and they're basically going to white label our CR3 headset and sell it as their own. So we have active negotiations ongoing right now. We're at the term sheet level.
Michael Murray: And they're basically going to white label our CR3 headset and sell it as their own. So we have active negotiations ongoing right now. We're at the term sheet level. We're hopeful to announce that this year. And that partner, I think, is either. One or two in that marketplace, from a standpoint of overall revenue and market penetration. So that's our go-to-market strategy there for the simple fact that we don't want to expel our own resources to call in hospitals and surgeons and what have you. So we'll have a partner that is already in that space and has a delivery channel and distribution channel, and they'll white label our art technology and sell through.
Speaker Change: And they're basically going to white label, our CRD III headset and sell it as their own. So we have active negotiations ongoing right now we're at the term sheet level.
Michael Murray: We're hopeful to announce that this year, and that partner, I think, is either number one or two in that marketplace from a standpoint of overall revenue and market penetration. So that's our go-to-market strategy there for the simple fact that we don't want to expel our own resources to call on hospitals and surgeons and what have you. So we'll have a partner that is already in that space and has a delivery channel and distribution channel, and they'll white label our technology and sell it through. We're hopeful to have that announcement very shortly.
Speaker Change: We're hopeful to announce that this year and that partner.
Speaker Change: It's either.
Jeffrey Bernstein: Fantastic! That's great.
Speaker Change: One or two in that marketplace from a standpoint of overall revenue and market penetration. So so that's our go to market strategy there.
Speaker Change: For the simple fact that we don't want to expel our own resources to call in hospitals and surgeons and what have you. So we will have a partner that.
Richard Sneider: Okay, perfect. And then looking at sort of the gross margin line, obviously a nice snap back here in Q2. How should we think about gross margin trending the rest of this year? It should continue to trend up. So I think you have to adjust the current gross margin by the 1.3. As you know, or maybe you don't, in our military products, we use a percent completion. And so when we have to figure out the total cost of the program, we estimate rework costs and so on.
Speaker Change: It's already in that space and has a delivery channel and distribution channel and Bill White label, our technology and sell through.
Michael Murray: So we're hoping to have that announcement very shortly.
Speaker Change: So we're hopeful to have that announcement very shortly.
Jeffrey Bernstein: And then I just wanted to clarify on the F-35; can you just talk about the sequence of what's going on there with the advanced displays that you're developing? And I think you talked about it resulting in a larger revenue opportunity. I just wanted you to flesh that out.
Jeffrey Bernstein: Fantastic. That's great. And then just wanted to clarify on the F-35.
Speaker Change: Fantastic that's great and then just wanted to clarify on the F. 35 can you just just talk about the sequence of what's going on there with the advanced displays that you're developing and I think you've talked about it resulting in a larger revenue opportunity I just wonder if you could flesh that out.
Michael Murray: Can you just talk about the sequence of what's going on there with the advanced displays that you're developing? And I think you talked about it resulting in a larger revenue opportunity. I just wanted you to flesh that out. Sure. So it's basically four lines of technology. Our first everyone knows we we ship our current AM LCD technology into the helmet. We announced finally that we are now production ready and entering the last phase, which is production of our OLED display. And that is something that we've been working on for many years. And Kopin was the only company that was able to actually meet the requirements and the full specification for that application.
Richard Sneider: But as Michael indicated, our quality has gone up significantly over the last 12 months, rework costs have come down leading gross margin expansion. And you do get somewhat of a little catch up as you lower your estimates on total contracts. So that's why we gave you the number of 1.3, the little catch up in there. So you really ought to deduct that, start from that point and then move forward and they should continue to expand. Gotcha.
Speaker Change: Sure.
Michael Murray: So it's basically four lines of technology. Our first, everyone knows we ship our current AM LCD technology into the helmet. We announced that we are now production ready and entering the last phase, which is the production of our OLED display. And that is something that we've been working on for many years. And Kopin was the only company that was able to actually meet the requirements and the full specification for that application. I'm so very proud of the team. And also, the transition to our US DOD friendly deposition partner took over a year and a half. So, great job by that team.
Speaker Change: Basically for lines of technology.
Unknown Executive: Our first, everyone knows we ship our current AMLCD technology into the helmet. Finally, we announced that we are now production ready and entering the last phase, which is the production of our OLED display. And that is something that we've been working on for many years, and Kopin was the only company that was able to meet the requirements and the full specification for that application. So, very proud of the team. And also, the transition to our U.S. DoD friendly deposition partner took over a year and a half. So a great job by that team.
Speaker Change: Our first everyone knows we ship our current am LCD technology into the helmet, we announced finally that we are now production ready and entering the last phase, which is production of our OLED display.
Speaker Change: And that is something that we've been working on for many years.
Speaker Change: And Copan was the only company that was able to actually meet the requirements and the full specification.
Jaeson Schmidt: And then just the last one for me and I'll jump back into Q. Just a clarification on your commentary regarding Q3. Did I hear correctly that you think it could be up sequentially? We do. Okay, perfect. Thanks a lot, guys.
Speaker Change: For that application so very proud of the team and also the transition to.
Michael Murray: So very proud of the team and also the transition to our US DOD-friendly deposition partner took over a year and a half. So great job by that team. So those two lines of business will continue to run concurrently for several years. At least three we believe or more. Also, we have our micro LED line of business that we're bringing up in terms of our monochrome display, which is now also reaching the production readiness level that goes into a different application within the aircraft. And then we still have ambitions around our micro LED color program. I'll be it that we're struggling with that currently as it's everybody in the world to create very strong color micro LED.
Speaker Change: Our U S D O D friendly deposition partner took over a year and a half so great job by that team. So those two lines of business will continue to run concurrently for several years at.
Unknown Executive: So those two lines of business will continue to run concurrently for several years, at least three, we believe, or more. Also, we have our micro LED line of business that we're bringing to the market in terms of our monochrome display, which is now also reaching the production readiness level that goes into a different application within the aircraft. And then we still have ambitions around our micro LED color program, albeit that we're struggling with that currently, as is everybody in the world, to create very strong color micro LEDs.
Michael Murray: So those two lines of business will continue to run concurrently for several years, at least three, we believe, or more. Also, we have our micro LED line of business that we're bringing to the market in terms of our monochrome display, which is now also reaching the production readiness level that goes into a different application within the aircraft. And then we still have ambitions around our micro LED color program, albeit that we're struggling with that currently, as is everybody in the world, to create very strong color micro LEDs.
Glenn Mattson: The next question comes from Grand Matching of Rainbowberg Salmon. Go ahead, please. Hi, guys. Thanks for taking the questions and congrats on a great quarter. First, you mentioned the, let me, I bet now strategy talked about the night vision goggle piece. I think in the past, you talked about having, you know, completed that product and shipped it in kind of, or shipped it for testing and we're kind of starting to get a feel for uptake or whatnot.
Speaker Change: At least three we believe or more.
Speaker Change: So we have our micro OLED line of business.
Speaker Change: That we're bringing in terms of our monochrome display which is now also reaching the production readiness level.
Speaker Change: That goes into a different application within the aircraft.
Speaker Change: And then we still have ambitions around our micro led <unk> color program.
Speaker Change: That's we're struggling with that currently as it's everybody in the world to create very strong color micro Leds. So so those are the four lines of business micro displays for our fixed wing aircraft.
Unknown Executive: So those are the four lines of business micro displays for our fixed wing aircraft; whether it's F-35 or not, those technologies are being adopted into other planes. By the way, we're seeing some planes in the UK and NATO countries that are also adopting that technology through our great customer, Collins, and others. So that's where we're at with that business.
Michael Murray: So those are the four lines of business micro displays for our fixed wing aircraft; whether it's F-35 or not, those technologies are being adopted into other planes. By the way, we're seeing some planes in the UK and NATO countries that are also adopting that technology through our great customer, Collins, and others. So that's where we're at with that business.
Glenn Mattson: Can you give us any expansion on that? Has there been any feedback yet from the, from the purchasers? Sure. So we have two different partners, three actually different partners for that technology, which we call I Vast now to recap. It's a date time product as well as a nighttime product for night vision goggles. And we partnered with a company called Wilcox Industries who owns about, I think, 60% of the USDOD helmet market.
Michael Murray: So, so those are the four lines of business micro displays for our fixed wing aircraft. Whether it's F 35 or not, those technologies are being uptaked into other planes by the way. We're seeing some planes, and can the UK and NATO countries that are also up taking that technology through our great customer and Collins and others.
Speaker Change: Whether it's at 35 or not.
Glenn Mattson: And I think they're, they're pretty significant worldwide actually. So we partnered with them. We're working with them to productize those two technologies as well as another partner. And the US Army. So, so that's ongoing, Glenn. We do have a feedback loop that we're listening to and developing those technologies for production. We do expect them to enter production in 2025. And we believe we'll have immediate revenue. How much revenue we're still trying to figure out because this is a new entrance.
Speaker Change: Those technologies are being uptake into other planes by the way, we're seeing some planes and in the U K and NATO countries that are also up taking that technology through our great customer in Collins and others. So that's where we're at with that business.
Michael Murray: So that's where we're at with that business. Gotcha.
Jeffrey Bernstein: Gotcha. Then the revenue increase is part of the addition of a new application within the airframe.
Speaker Change: Got you and then the revenue increase is part of the addition of a new application within the airframe.
Michael Murray: And then the revenue increase is part of the addition of a new application within the airframe. Exactly right. Yeah. So we have our helmet business. We also have a heads-up display light engine, which is the micro LED. So it basically compounds if you think of it that way. Our current AMLC LCD business will continue to ship OLED filters on top of that, micro LED on top of that. And they seem to be around the same amount of revenue per year, around three and a half million per year. So if you do that simple math, you're into the, you know, six to nine million mark per year starting next year for that application space.
Michael Murray: Exactly right. Yes. So, we have our helmet business, and we also have a heads-up display light engine, which is the micro-LED. So, it basically compounds, if you think of it that way, our current LCD business will continue to ship OLED filters on top of that, and micro-LEDs on top of that. And they seem to be around the same amount of revenue per year, around $3.5 million per year. So, if you do that simple math, you're into the $6 to $9 million mark per year starting next year for that application space.
Speaker Change: Exactly right, yes, so we have our helmet business and we also have a heads up display.
Speaker Change: Light engine, which is the micro Leds so it basically compounds. If you think of it that way our current MLC.
Mike: LCD business will continue to ship OLED filters on top of that Mike really deal on top of that and they seem to be around the same amount of revenue per year around $3 $5 million per year. So if you do that simple math you're into the <unk>.
Glenn Mattson: But the key point here is that these technology will work with what the soldier has in their pack and on their head today. So there's no new adoption rate that needs to happen in terms of connectivity or what have you. So it's a pure, same or serviceable available market entry that we can have revenue for next year.
Mark: $6 million to $9 million Mark per year, starting next year for for that application space.
Michael Murray: Gotcha. Okay.
Jeffrey Bernstein: Gotcha. Okay. And then just wanted to see if you could provide any additional detail on the rotary craft helmets, which also took quite a while to get to production, I guess. But it sounds like you're in production. We are, in some cases. There are other programs.
Unknown Executive: Gotcha. Okay. And then I just wanted to see if you could provide any additional detail on the rotary craft helmets, which also took quite a while to get into production, I guess. But it sounds like you're in production now.
Speaker Change: Gotcha, Okay, and then just wanted to see if you could provide any additional detail on the rotary craft helmets, which which also took quite a while to get to production I guess, but it sounds like you are in production now.
Glenn Mattson: Great, that's helpful.
Michael Murray: And then just wanted to see if you could provide any additional detail on the rotary craft helmets, which also took quite a while to get to production, I guess, but it sounds like you're in production now. We are. In some cases, there are other programs that we're developing for our customer, Elbit. As you can imagine, Elbit has been distracted of late of what's going on within Israel. So, that program is behind for that reason only, but we do see them catching up, and we aren't acting negotiations to bring that technology to market and into production.
Glenn Mattson: Here's on the Armored Vehicle Program, the P-PAP that you're working through. Believe in the past, you've alluded to either on prior calls or in maybe product demo days or something, but along the way, he's talked about the ability to use that technology for consumer applications in the auto space in particular. Maybe perhaps could you can you stand on that and just give us an update? Sure, great question. So yes, we have received inbound requests from two electric vehicle manufacturers here in the United States that are looking for a very high refresh rate, looking crystal on silicon device that's on a mode of qualified.
Michael Murray: We are in some cases. There are other programs that we're developing for our customer, Elbit. As you can imagine, Elbit has been distracted of late by what's going on within Israel. So that program is behind for that reason only. But we do see them catching up, and we are in active negotiations to bring that technology to market and into production. And there are several other iterations of display architecture for rotary wings, specifically the Chinook and the Apache that we're working with Elbit on. So we wish them all the best, and hopefully they're safe. And we look forward to working with them to get that into production over the course of the second half year.
Speaker Change: We are in some cases there are other programs that we're developing for our customer elbit.
Speaker Change: You can imagine that Elbit has been distracted of late of what's going on within.
Speaker Change: Israel, So that program is behind.
Speaker Change: For that reason only.
Speaker Change: But we do see them catching up and we are in active negotiations to bring that technology to market and into production.
Michael Murray: And there's several other iterations of display architecture for rotary wing specifically being the Chinook and the Apache that we're working with Elbit on.
Speaker Change: And there are several other iterations of display architecture for rotary wing, specifically being the Chinook and the Apache.
Speaker Change: That we're working with Elbit on so.
Michael Murray: So, we wish them all the best, and hopefully they're safe. And we look forward to working with them, getting that into production over the course of the second half here.
Speaker Change: We wish them all the best and hopefully they are safe and we look forward to working with them getting that into production over the course of the second half year.
Michael Murray: That's great. Thank you.
Glenn Mattson: And that's what we developed for General Dynamics under the P-PAP program. What a P-PAP is is basically an automotive quality standard that you need to have for any moving vehicle in the United States, but once you have it, Glenn, you can then sell that product into other automotive applications. Now, we're not signaling that we're going to get into the automotive market right now, but we will have an automotive qualified, ferroelectric, liquid crystal, on silicon device available for sale and we're getting pulled from the market to have conversations about it.
Speaker Change: That's great. Thank you.
Operator: This concludes our question-and-answer session.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Michael Murray, CEO, for any closing remarks.
Speaker Change: This concludes our question and answer session.
Michael Murray: I would like to turn the conference back over to Michael Murray, CEO, for any closing remarks. Thank you, folks. Thank you for your questions, your interests, and your focus on Kopin. We look forward to delivering our results in the second half here, and we hope you all have a great day.
Operator: I would like to turn the conference back over to Michael Murray, CEO, for any closing remarks. Thank you, folks. Thank you for your questions and your interest.
Speaker Change: I would like to turn the conference back over to Michael My CEO for any closing remarks.
Michael Murray: Thank you, folks. Thank you for your questions, your interest, and your focus on Kopin. We look forward to delivering our results in the second half here, and we hope you all have a great day. Thank you for joining us.
Michael Murray: Thank you, folks. Thank you for your questions, your interest, and your focus on Kopin. We look forward to answering it.
Speaker Change: Thank you folks. Thank you for your questions your interest and your focus on Copan, we look forward to delivering our results in the second half year and we hope you all have a great day. Thank you for joining.
Operator: Thank you for joining.
Speaker Change: Yeah.
Glenn Mattson: And it will be automotive qualified. So it's something we're monitoring. We are getting some inbound customer requests to have conversations for an in cabin application for liquid crystal on silicon. So it's something that we're considering very carefully. But the one thing I will say in automotive, in my experience, we have a lot of devices, you have to have great quality, just like in defense, you have to have great quality. That is how you make money in automotive and defense. And we're gaining confidence that that's something that we could potentially do in the future. So a great question. Hope that helps. Yeah, very helpful.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may not disconnect.
Michael Murray: One more product one, and then a quick model one with the product one on the 3D-AOI and some of the other industrial stuff that's been a market's been down for a while for you guys now. Is there a outlook for a bounce back there at some point? Yeah, few of the geopolitical issues in China specifically where many of our are top 3D-AOI customers are as well as Korea. The geopolitical issues with chips act and EVs moving around has really hurt that business.
Michael Murray: We do see it rebounding shortly and marginally quite frankly. But we also have been working on a new product to introduce into that market that's a little bit lower cost that I think will put us in a better position to gain more traction. And we're also seeing some uptick in Europe from the 3D-AOI customers there. So right now as we sit here today, the 3D-AOI market for us is somewhat de minimis. So anything that we have next year is just complete upside for the company at this point.
Glenn Mattson: Great.
Richard Sneider: So one rich this quick on the sales and marketing. What should we bottle now post the trial? I had a number that's going to come down a little faster. But what should we think about now than all that kind of noises moving through that or whatever? So this we hope knock on wood is the last this being Q3 last tough quarter expense. We mentioned before we filed Motion 50, whatever they're called, to the judge, explaining why we think that the verdict doesn't make any sense, and so all of that work has been done in July and August, and now we're just waiting for the judge, and depending on how that goes, we may or may not appeal, and it goes our favor, obviously, we won't, we have to, I'm told the actual appeal process is very inexpensive relative to the amounts that we've been spending, so we think once we get through this month, again, knock on wood, the expense should drop dramatically, and what, so what would a norm, like assuming no legal, what would a sales or marketing number be, if you had nothing or ballpark kind of, yeah, so as I mentioned my prepared remarks in the second quarter of 2024, we spent 3.1 million, or 3.1 million of expense associated with the blue radios, yeah, okay, so I'll be going to cut that down there.
Victor Santiago: Go ahead, please. Good morning guys, this is Victor on from Matt, to follow up actually on the blue radios lawsuit, do you still plan to fund any damages through the sale of assets or IP, and so kind of how that, how's that process going? Victor, yes, so we are actively pursuing sales of some of our assets specific to investments that we have in other firms. We have made pretty significant progress in that area with signed term sheets, et cetera, but we don't have cash in the bank just yet, so we're not reporting on it, but we are making some pretty good progress there, and it's, you know, several million dollars, but again, until the cash is in the bank, we're not going to record on it, but we are making progress.
Victor Santiago: Got it, thank you then, just on the consumer segment, look like you guys didn't record any revenue in the quarter, should we just continue to stack a little to no contribution through the year, and also, I guess we're kind of drove the revenue in the quarter. You know, it's a consumer, I think, is going to be diminished throughout this year. We are going to see some sample orders, I believe, in the next couple of quarters, and then we are negotiating in a couple of areas, some funded research and development with consumer companies, and that takes a long time, taking much longer than we expected on the consumer fronts, but you are working with several multinational companies to develop those potential contracts for funded research and development specifically.
Victor Santiago: Got it, thank you, that's all I had. Thanks, Victor.
Kevin Dede: Our next question comes from Kevin D.D, of H.E. Wayne Wright, go ahead, please. Welcome. Can you hear me? Smile. Thanks. Now, you're fading in now. Yeah, that's what I was afraid of, sure. I think the thing that's most curious to me is the Abrams cancellation. I was wondering if you understood why and whether or not there might be a replacement behind it. Well, so for us, Kevin, the set for Upgrade was canceled by the U.S. Army.
Kevin Dede: And there are several reasons why, but essentially our program will still continue. The reason why our program will continue is the Kopin weapons site reduces the size, weight, cost, and improves lethality. So our program will continue, but the set for Upgrade was canceled. I think due to feedback from the folks in Ukraine, some of the other issues that that armored vehicle is going through, and also the request from the Army to have a new version of that vehicle by 2030, which we're also engaged on right now.
Kevin Dede: So our weapon site will still continue, but that upgrade package has been canceled, and our product will be available through the other upgrade packages, as well as for the new vehicle program that we're expecting to see out in 2030. So we continue on, but the set for upgrade was canceled just due to feedback from customers. That's my understanding. No, I appreciate the colors. Thank you, Michael. The version of their track to work with Lockheed, and have they offered you development money for that?
Kevin Dede: Or is that pretty much a self-product due at this point? So if I understood your question, Kevin, you're coming in and out, but yes, the current contract that we have with Lockheed is a development contract, and we're developing the by piece for the launcher under that contract. Production will follow thereafter. Okay. The development contract is around a million and a half dollars, roughly speaking. Okay. Thank you. I appreciate the effort. Kevin.
Jeffrey Bernstein: Our next question comes from Jeffrey Bernstein, a Silverberg Bernstein Capitol. Go ahead, please. Hi, good morning, guys. It's a nice progress in the quarter here. Just a couple quick follow-ups. On the medical side, I think it sounded like you were talking about having a larger distribution partner coming in. Can you just flesh out what you were saying there? Sure. So our go-to-market strategy is very unique in that market. We can't expel our own resources to call on hospitals and surgeons, and we'll have you.
Jeffrey Bernstein: So our go-to-market strategy is we're going to partner with a very large market leader in that space that already instruments surgeons. And they're basically going to white label our CR3 headset and sell it as their own. So we have active negotiations ongoing right now. We're at the term sheet level. We're hopeful to announce that this year. And that partner, I think, is either. One or two in that marketplace, from a standpoint of overall revenue and market penetration.
Jeffrey Bernstein: So that's our go-to-market strategy there for the simple fact that we don't want to expel our own resources to call in hospitals and surgeons and what have you. So we'll have a partner that is already in that space and has a delivery channel and distribution channel and they'll white label our art technology and sell through.
Jeffrey Bernstein: So we're hoping to have that announcement very shortly. Fantastic. That's great.
Michael Murray: And then just wanted to clarify on the F-35. Can you just talk about the sequence of what's going on there with the advanced displays that you're developing? And I think you talked about it resulting in a larger revenue opportunity. I just wanted you to flesh that out. Sure. So it's basically four lines of technology. Our first everyone knows we we ship our current AM LCD technology into the helmet. We announced finally that we are now production ready and entering the last phase, which is production of our OLED display.
Michael Murray: And that is something that we've been working on for many years. And Kopin was the only company that was able to actually meet the requirements and the full specification for that application. So very proud of the team and also the transition to our US DOD friendly deposition partner took over a year and a half. So great job by that team. So those two lines of business will continue to run concurrently for several years.
Michael Murray: At least three we believe or more. Also we have our micro LED line of business that we're bringing up in terms of our monochrome display, which is now also reaching the production readiness level that goes into a different application within the aircraft. And then we still have ambitions around our micro LED color program. I'll be it that's we're struggling with that currently as it's everybody in the world to create very strong color micro LED.
Michael Murray: So so those are the four lines of business micro displays for our fixed wing aircraft. Whether it's F 35 or not, those technologies are being uptaked into other planes by the way. We're seeing some planes and can the UK and NATO countries that are also up taking that technology through our great customer and Collins and others. So that's where we're at with that business. Gotcha. And then the revenue increase is part of the addition of a new application within the airframe.
Michael Murray: Exactly right. Yeah. So we have our helmet business. We also have a heads up display light engine, which is the micro LED. So it basically compounds if you think of it that way our current AMLC LCD business will continue to ship OLED filters on top of that micro LED on top of that. And they seem to be around the same amount of revenue per year around three and a half million per year. So if you do that simple math, you're into the you know six to nine million mark per year starting next year for for that application space. Gotcha. Okay.
Michael Murray: And then just just wanted to see if you could provide any additional detail on the rotary craft helmets, which also took quite a while to get to production, I guess, but it sounds like you're in production now. We are. In some cases, there are other programs that we're developing for our customer Elbit. As you can imagine, Elbit has been distracted of late of what's going on within Israel. So, that program is behind for that reason only, but we do see them catching up and we aren't acting negotiations to bring that technology to market and into production.
Michael Murray: And there's several other iterations of display architecture for rotary wing specifically being the Chinook and the Apache that we're working with Elbit on. So, we wish them all the best and hopefully they're safe. And we look forward to working with them getting that into production over the course of the second half here. That's great. Thank you.
Operator: This concludes our question and answer session.
Michael Murray: I would like to turn the conference back over to Michael Murray, CEO, for any closing remarks. Thank you, folks. Thank you for your questions, your interests, and your focus on Kopin. We look forward to delivering our results in the second half here and we hope you all have a great day. Thank you for joining.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: You may not disconnect.