Q1 2025 Kopin Corp Earnings Call
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Speaker Change: Good day, everyone, and welcome to the Kopin Corporation's first quarter, 2025 earnings call. Please note that this event is being recorded. At this time, I'd like to turn the conference over to Brian Prennevo, investor relations for Kopin. Please go ahead.
Thank you and good afternoon everyone.
Speaker Change: Before we get started, I'd like to remind everyone that during today's call, taking place on May 13, 2025, we will be making forward-looking statements as to find in the Private Security's litigation reform act of 1995.
Speaker Change: 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.
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 10K and other documents filed with the Securities and Exchange Commission.
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 their results will be realized, the company undertakes no obligation to update the forward-looking statements made during today's call.
Speaker Change: In addition, references may be made to certain non-generally accepted accounting principles or non-GAAP measures , which you should refer to the appropriate disclaimers and reconciliation in the company's SEC filings and press releases.
Speaker Change: 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 , Rich Snyder, will review the company's first quarter, 2025 financial results. I would now like to turn the conference over to Michael Murray. Michael?
Michael Murray: Thank you, Brian . Good evening to everyone and welcome to our first quarter earnings call. I'm actually visiting customers and speaking at SID tomorrow in California, which is why our call is this evening instead of usually in the mornings.
Michael Murray: for our first call of the calendar year 2025. I'd like to take a few moments to discuss Kopin's big picture opportunities and how we see our business and landscape evolving over the coming few years.
Michael Murray: As a leading provider of the world's most advanced micro displays and application specific optical solutions for high performance and mission critical virtual reality and augmented reality applications, we have a unique and truly significant opportunity in front of us.
Michael Murray: While our products and technology can be applied to a variety of industries across the landscape, we've chosen to focus on a few which we think will have the greatest growth opportunities aligned to our core competencies and provide the clearest path to profitability.
The industry we initially narrowed our focus on is defense [inaudible]
Michael Murray: We believe we are the only manufacturer in the world offering four different types of micro displays which put us in a unique position to capitalize on macro trends across the globe and grow our business.
Michael Murray: Furthermore, Kopin has invented a fifth type of micro display called Neural Display.
Michael Murray: which integrates human responses as feedback loops into the dynamic control of the display itself, to optimize brightness, contrast, increased comfort, while reducing size, weight and power consumption of currently fielded defense and consumer AR systems.
Michael Murray: To the increased global tensions, defense budgets across the globe are increasing at significant rates.
Michael Murray: In the United States, the administration has mentioned spending a trillion dollars on defense next year alone.
Michael Murray: Europe has also pledged to spend over a trillion dollars as well, while Japan and Korea are committing to increased defense spending as well. In short, we are seeing increased budget rates at all nations across the globe, while Kopin has experienced a higher rate.
Speaker Change: An exponential increase in the volume of quote requests, bids, and research and development projects driving our pipeline of qualified and capturable opportunities into several hundreds of millions of dollars.
Speaker Change: We believe this shift provides us with increased global opportunities and a diversified pipeline for growth.
Speaker Change: During my recent visits to Korea, Taiwan and Europe , it is evident that a significant technology refresh with regards to soldier vision systems, thermal weapon sites.
Speaker Change: and Helmet Mounted Displays is a priority for these nations specifically as well since their ability to view tactical information, control drone movements, all while keeping their eyes on the battlefield to see their adversaries before they are seen, is critically important to a positive outcome.
Speaker Change: This capability is highly sought after and is called our DAVAS in dark wave technology.
Speaker Change: Now today, Defense Departments and Contractors are looking for more than simple commodity products to plug into systems
They want application specific solutions tailored to individual needs and products.
Speaker Change: This is where Kopin has a distinct advantage. Customers want ergonomically designed systems that utilize custom optics and require less weight and less battery power.
Speaker Change: Whether the application is a thermal weapon site, a helmet mounted display, or a high refresh rate display and armor vehicles, the goal is the same to increase the effectiveness and safety of the soldier using it.
Speaker Change: We take that responsibility seriously and that's one of the reasons we have focused on partnering with tier one defense contractors. Thank you very much.
Speaker Change: And that's why we are the sole source provider of micro displays for several programs of record within the Department of Defense as a key provider of technologies built right here in the United States and or with our allies.
Speaker Change: With these advantages in mind, we aim to get Kopin to at least 75 million of revenue in
Speaker Change: This is an ambitious goal based on 2024 revenue of 50 million and expected 2025 revenue
Speaker Change: We believe we can achieve this milestone with our existing products our new technologies we are developing production investments to increase throughput and expected project awards we have high confidence in winning.
Speaker Change: Furthermore, we are working on several strategic developments with market leading and domestic firms in each of the highest growth markets, which we believe will greatly accelerate our growth and market penetration.
Speaker Change: We're also focusing much of our resource on the largest of opportunities in each region, with the largest clearly being the IVAS or SBMC program here in the United States, and others like it.
Speaker Change: Within the United States, this is a $22 billion army program, and it's all encompassing from a standpoint of software, hardware, networking elements. As warfare evolves and increases in complexity, having tools that deliver the right information quickly and intuitively becomes much more urgent.
Speaker Change: This is not only evident in the United States, but other countries are also investing in similar technologies which Kopin can support.
Speaker Change: Beyond providing a technological superior product, we need to be consistently a higher quality supplier. We have made tremendous strides in this area and department and our customers recognize this tremendous improvement we've made.
Speaker Change: Our initial actions to improve streamline and improve overall manufacturing were all part of our one Kopin strategy which we were reorganized our Kopin Virginia and Kopin Europe teams to unify our focus our strengths and capabilities while reducing redundancies.
Speaker Change: We also form new business development, program management and quality teams [inaudible]
Speaker Change: with our Fab Light strategy. We brought on line new OLED and micro LED vendors to strengthen our source of supply for USDOD applications, while keeping our consumer supply strategy
Speaker Change: This manufacturing strategy was positively validated due to the recent geopolitical trade and tariff issues we've seen in the market as and late.
in 2025.
Speaker Change: to meet our growth and profitability goals. Our top strategic initiative is the implementation of AI-assisted factory hand-process automation.
Speaker Change: improving manufacturing efficiencies, increasing automation and reducing redundancies are critical areas of improvement for the company. We are making these improvements to increase our manufacturing capacity without significant headcount increases or decreases.
Again, considering the recent tariff news and geopolitical tensions,
Speaker Change: is important to note that our top three programs are built right here in the United States and much of our active opportunity line will also be built here as well whilst our NATO and European demands can be supported to our Scottish facility.
Speaker Change: This does not mean we are immune to tariffs, but we believe we remain better off than many companies and not only have experienced minor tariff issues thus far.
Speaker Change: In the first quarter of 2025, we announced approximately 28 million of new contract wins and awards and our book to bill at the end of the first quarter was better than 2.8 to 1.
Speaker Change: Given the long-term nature of many of our existing programs and the contract wins so far in 2025, our current pipeline is very strong and it continues to grow with the recent addition of new customers, new research and development projects and a broader application base which is much, much healthier.
Speaker Change: As a reminder, several of our programs have congressional budget demands through 2030, and several of the program contracts we supply into are in definite demand in definite quantity or IDAQ.
Speaker Change: which allows for even greater revenue potential than we currently have on our order book.
Speaker Change: Now I am very excited, if not more excited about our future at Kopin today than when I first became CEO a few years ago.
Speaker Change: We have great people that are doing great work at the company with the improvements in our operations and manufacturing. We are much much better position today than we were even just last year to win new contracts with new customers that demand the highest quality, the spoke capabilities and long-term partnerships.
Speaker Change: We have clearly moved from merely being a supplier of micro displays to a trusted partner to several of the world's leading defense firms.
Speaker Change: We are also now an integral semiconductor and optics technology partner on several defense programs that demand specific solutions worth hundreds of millions of dollars and are approaching even billions of dollars in total spend.
Speaker Change: Although unfortunate, increasing geopolitical tensions mean the world is not likely to become a safer place in the near term.
Speaker Change: But our products and our technologies can help make our soldiers and the soldiers of our allies safer.
Speaker Change: meaning more men and women in uniform will make it home. Furthermore, our CR3 medical headset is also entering into full production, which will help improve patient outcomes and the most difficult of surgical practices as well.
Speaker Change: We also continue to engage with select consumer companies who are interested in helping cope and manufacture and mature specific areas of our technology, which focus upon higher brightness and refresh rate displays and architectures than that of the current technologies in use today.
furthermore.
Speaker Change: Our technology that advances our human in the loop or neural display platform, which we were collectively believe will increase the adoption rates of current error glasses due to its AI-enabled backplane architecture, which can also support OLED and microLED depositions is gaining tremendous traction.
Now, to summarize, the global market demand for Kopin
Speaker Change: and our current solutions has increased by hundreds of billions of dollars. And we are developing strategies to access and capture more of that market more quickly through partnerships, gaming agreements, and other more strategic activities.
Speaker Change: Our fab-like strategy brings continuity and flexibility of supply, advantageous cost structures and the ability to leverage technology-leading offerings to help us solve our customers' most difficult technology challenges.
Speaker Change: Our focus on AI-assisted automation in our factory, process and business.
Speaker Change: will enable Kopin to grow at a much quicker pace while keeping our op-ex at a more stable and less linear rate to increase production output, which will fuel greater profit margins on current and future products and services.
Speaker Change: Our One Copa Initiative has reduced costs and redundancies, improved alignment and focuses our energies on growth markets.
Speaker Change: Our team is truly passionate about what we do, and we've been able to retain and attract the best talent in the world to help us achieve our goals.
Michael Murray: I'll now turn the call over to our CFO Rich Snyder to review our results from the first quarter and further detail. Over to Rich.
and Richard, you might be on mute.
Thank you, operator, and thank you, Michael.
Speaker Change: Turning to our financial results of the first quarter, total revenues for Q1 2025 or 10.5 million versus 10 million for the prior year, a 5% increase year over year.
Michael Murray: Product revenues for the first quarter ended March 29, 2025 were $9.2 million compared to $9 million for the first quarter of ended
March 30th, 2024, essentially flat
Michael Murray: Primarily because of an increase in funding for U.S. defense programs.
Michael Murray: Cost of product revenues for the first quarter of 2025 with $7.6 million or $83% of net product revenues compared with $8.5 million or $95% of net product revenues for the first quarter of $24 [inaudible]
Michael Murray: The decrease in product revenues, cost of product revenues, was primarily the result of improving manufacturing quality in less waste.
Michael Murray: R&D expenses for the first quarter of 2025 were 2.1 million, an increase of 15,000 from a year ago.
Michael Murray: customer funded R&D decreased approximately 200,000, essentially offsetting the increase internally funded R&D.
Michael Murray: SG&A expenses were $4.7 million in the first quarter of 2025 compared to $7.2 million in the first quarter of 2024. The decrease was primarily due to a decrease in legal fees of $2.9 million.
Michael Murray: Turning to the bottom line, the net loss of the first quarter 2025 was 3.1 million or 2 cents per share, been paired with net loss trivial to Kopin of 32.5 million or 27 cents per share for the first quarter 24.
Michael Murray: Keep in mind, the first score of 24 includes the 24.8 million reserve for litigation damages.
Michael Murray: Net cash used in operating activities was 3.4 million in the first quarter of which approximately half was the result of changes in working capital items.
Michael Murray: Listen, it should review our form 10Q for the coordinated March 29, 2025 for additional disclosures, and with that I'll turn it back over to Michael.
Michael Murray: Thanks Rich. I'd like to take a moment to thank our employees at Kopin for their hard work and dedication. The improvements the team has made in a relatively short period of time is truly commendable.
But we believe the growth trajectory is just beginning .
Michael Murray: As we continue to mature our advanced technologies like our color micro LED portfolio and our aerobus clay architecture coupled with our existing products, technologies, and customers.
Michael Murray: We believe we are in a great position to support the defense medical and industrial consumer markets globally and I believe the best years are yet to come. So with that operator, we want to open up the quality questions.
Speaker Change: Absolutely, at this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the question and queue at any time by pressing star and two. Again, it's star and one, if you'd like to ask a question today.
Speaker Change: and we'll take our first question from Glenn Mattson with Landon Bergthalman. Please go ahead, your line is open.
Speaker Change: Hi, thanks for taking the questions. Mike, will you talk a bit more than usual on the international?
Speaker Change: Opportunity. Maybe you can give a little more color and detail about...
Speaker Change: You know, just which regions or it can go as deep as the countries, you know, all for the long-term potential and how long, you know, what's your time frame thoughts on how to turn some of that pipeline into revenue?
Sure. Thanks, Glenn.
Speaker Change: Apparently we see Europe as a critical area for our growth.
Speaker Change: As you know, we have a location in Scotland that we've just converted into the one Kopin strategy where they're able to support defense applications and other applications throughout Europe and the UK Okay.
Speaker Change: the amount of spending and opportunity that we're seeing in the UK and Europe Global are...
Speaker Change: on math is quite large. So we're seeing near term opportunities to convert to research and development contracts in Europe , as well as some early stage production opportunities in Europe as well. So Europe is, I'd say, our primary focus.
Speaker Change: Secondly, we see tremendous opportunities in Korea. I was just there meeting with several leading companies in defense in Korea and one of our partners there and
Speaker Change: We've seen fairly significant opportunities in Korea as well. Japan would say would be number three for us.
Speaker Change: But these are near-term opportunities where we can secure research and development contracts.
as well as some near term production contracts.
Speaker Change: and we're looking forward to partnering with several firms in more of a flywheel strategy where we can partner with companies that are in local situ, meaning they have facilities there that we can work with them. We may even consider doing some joint venture work.
Speaker Change: to capture some of this opportunity while it's there for us. So, we're very engaged in it. We see the opportunity and we're working very hard to capture it.
Speaker Change: Very helpful. And then, secondly, you dimension some of the automation activities that you're putting into place, gross margin on the product.
Speaker Change: Paul Pyle, a little bit. I imagine you're trying to kind of get that to a nice level and get it more consistent. Could you just give us a sense of when that stuff can kick in and maybe what level of gross margin we could expect one at all is in place?
Speaker Change: Yeah, a great question. So where we see the biggest value and benefit for our new automation is actually an inbound and outbound inspection.
We've invested in new systems in both of those areas.
Speaker Change: that are going to help our quality control be done more effectively quickly and through greater rates. So we're looking forward to that coming online. The last briefing I had, Glenn, that new camera-based system will be online in June .
Speaker Change: and we expect to see several significant points of gross margin, or at least op-ex reduction through using that system. And we're going to retast the people into more valuable...
Rawls within the company, so.
Speaker Change: But as you can imagine, inspecting lenses and polarizers and glass is very difficult for the human eye.
Speaker Change: So adding this level of automation is going to be much welcome news for us. So we see several points of gross margin that that will improve.
Speaker Change: Great, thanks. That's it for me. I'll jump back into the queue.
Thanks, Colin.
Speaker Change: We'll take our next question from George Gianarikas with Canacord Genuity. Please go ahead, your line is open.
George Generakis: Hi, all. Thank you for taking my question. A little bit of a housekeeping for us. I just want to make sure my words to the guidance. So when you last report, you talk about revenue in the 52 to 55 million range.
George Generakis: He just talked about reiterating double-digit growth. I just wanted to make sure that we had that revenue number appropriately calibrated that you're thinking of for this year.
Speaker Change: Yeah, we ended up taking our guidance down somewhat based on the geopolitical trade issues that we were seeing. We still expect to see double digit growth in our view.
uncertainty.
Speaker Change: becomes more known and reasonable. So we believe there's more growth in 2025 and we're being conservative in the first half.
Speaker Change: Yeah, Hi, this is Schneider, just to echo Michael's comments, as we've indicated, we have significant book business, and we have the ability to execute on that book of business, our customers will take product as we can make it, but we want to do it in an expeditious manner and a cost effective manner.
Speaker Change: So, between knowing when the automation is kicking in and where these tariffs are going to land, we're bringing somewhat, we'd think judicious in this year's revenues.
Speaker Change: Okay, thanks. Maybe second question regarding neural link. Can you just talk about any progress and bringing that to commercialization? Thank you.
Sure, a neural display. We have, I don't think any of you are.
All right.
Speaker Change: Yeah, I understand, I understand. It's interesting, you know, neural display when you think about it is a neural link it has a human and the loop capability.
We're not talking to those folks to be cleared, but-
George Generakis: We do think that's the way the market is going, specific in consumer George.
George Generakis: where you don't necessarily want to have hands on your technology. Your technology should be able to adapt to you and that's what we think.
Speaker Change: You know, the biggest ARVR companies in the world are trying to accomplish, including the folks who were at NeuralLink, but our goal is to have a demonstrable Neural display in a headset that very shortly, and we expect to have...
Speaker Change: Simpress, and potentially a road show with it very soon here, ideally in the next quarter.
Great. Thank you so much.
Thanks for the question.
Speaker Change: We'll take our next question from Jaeson Schmidt with Lake Street. Please go ahead, your line is open.
Speaker Change: Yeah, thanks for your time, my questions. Just given all the dynamics in the macro, just curious what you're seeing from a quoting activity and order pattern standpoint so far here in Q2.
A great question there, so...
Speaker Change: We were struggling in the first part of the quarter to get orders placed.
Speaker Change: That is since freed up so we're seeing good order flow now Jaeson but it definitely causes some concerning Q1 we weren't seeing the order flow and the timeliness of orders that we would have liked but now that is [inaudible]
Speaker Change: Definitely improved. We're seeing the orders that we thought we were going to see. We're tracking several new orders that will be released by the government very shortly here that are in the tens 20 million dollar type of range.
Speaker Change: So we're definitely seeing it free up in Q2 and we hope that's going to continue through Q3 once the budgets are ratified and expelled. So we're hopeful that the second half will be even better than the first half. Thank you very much.
Speaker Change: Okay. No, that's really good to hear. And you're obviously seeing some nice traction with some new R&D awards. Can you just discuss what's driving this momentum and how we should think about these eventually translating into contract awards? Yes.
Speaker Change: Great question. So many people, investors have asked me why we don't put the amount of the contract in our press releases.
Speaker Change: when it comes to research and development, specifically with the Army, Navy, or the government at large, and the reason is they've asked if not to. Most of the R&D contracts that we get are in the several million to million dollar range, I can give ranges. [inaudible]
Speaker Change: and if we mention the Army or Navy or the branch of the military by name, just...
Beeeee
confident in that.
Speaker Change: We've had to check and validate those releases with those government agencies before we announce them, but we do not put the amount in their research and development awards, even though the amount of the award might be modest, maybe a million to two and a half million, it's the opportunity that it locks Jason.
Speaker Change: As an example, our Off the Viser Award that we recently announced, it's a decent award a few million dollars, however, what's important is what it could unlock. If this technology works and our design works...
Speaker Change: This is a design that is for the rest of the soldiers that are out there, an optical design that can come off of a helmet of any soldier that's using it. So very strategic and significant opportunities can be unlocked by these research and development awards.
Speaker Change: So even though the revenue might be modest, the opportunity that they create is very significant specific when we start talking about the off the visor technology or a new micro display investment like we just announced some research that we're going to do on a color micro LED for soldier based systems.
Speaker Change: That can unlock a tremendous opportunity pipeline in the future. And what we're seeing right now in the industry is telling us...
Speaker Change: that the applications that are out there, whether be consumer, medical, or military, require a much brighter display for the same amount of power. And that just spells micro LED to me, but it's got to be a color micro LED. I'm going to be talking about it tomorrow at SID here in California, and we're investing heavily and focused in that area. But those small research and development contracts that really starts that funding vehicle and drives the technology forward, and they're very important for our future.
Speaker Change: Gotcha, I appreciate the color. I'll jump back in the queue. Thanks guys.
Thanks, Jason.
Speaker Change: and there are no further questions on the line at this time. I'll turn the program back to management for any additional or closing remarks.
Speaker Change: Wonderful. Thank you, operator. Again, we're tremendously excited about our future. I think 2025 is going to be another growth year for Kopin. We do expect that we're going to have a stronger second half and first half. We're going to have a stronger second half.
Speaker Change: not only for orders but also for revenue and gross margins. So we look forward to updating you as we progress this year. Thank you all for joining and thank you for and thank you to the team at Kopin for delivering another great quarter. Thanks very much.
Speaker Change: It does conclude today's program. Thank you for your participation and you may now disconnect.