KOPN - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Kopin Corporation Third Quarter 2020 Earnings Call.

As a reminder, today’s conference is being recorded. At this time, I would like to turn the conference over to Richard Sneider, Chief Financial Officer. Please go ahead.

Richard Sneider

Thank you, operator. you us thank morning. and everyone, for this joining Welcome, strategy discussion call market our John activity our today’s a technology progress the about development. and executing and will begin see with the sales we environment in includes that third go a high results will I quarter at the through level. to John our happy and questions. then remarks, conclude your will we prepared take private we’ll would Securities defined Tuesday, November on like taking call place as of Act to I Reform statements XXXX Litigation remind be and XXXX. today’s in forward-looking everyone the that during making X, These are statements cause from are uncertainties of estimates, based differ on is statements. could expectations, subject risks projections, beliefs, actual that number materially forward-looking and results to to a those and market but to, documents discussed not limited factors Exchange include, annual products, in demand our risks most operating the on with are Commission. other and our and conditions Form XX-K recent other our Potential and subsidiaries, Securities report filed of results for no statements. obligation forward-looking to the The company undertakes update And to with that, I over John. will turn it

John Fan

Thank you start by Good time. to discuss your you this hope that safe well quarter our families during want for and third and to morning. unprecedented to I expressing stay results. joining us continue our

many Looking are into we pleased of very after business. our with quarter, aspects

increasing, are Our current program averting that are XXX product sales our development stronger.

to maintaining major cost tight We product continue while make improvements expense yields and our in control.

In addition, we next-generation development. are in display strides making great EVAS our

our quarter year-over-year. which product straight double-digit momentum compared through XXXX. in strength and with look we asset XX% far. which revenue into third strong fifth growth, three in for revenues one-time quarter the the the excluding XXXX. continue quarter been increased It to revenue total year Our a product top and quarter good sales very so line our XXX% to XXXX, And represents us has fourth year-on-year grew growth, third quarter of Leading defense forward

quarter contract the September, were for we have a $XX.X jet FWS-I announced F-XXX follow-on Our recent programs program. helmet with million awarded to-date this of one, Sight deliveries XXXX. Family orders two fighter million approximately for Weapon and we the Including that primary we of program, are $XX of third the total production FWS-I program. In received this through

that clip-on sole discussed weapon FWS-I release the contract sight source identify announcing that that the thermal news is with is the to a win, provides program on contract Kopin targets circumstances. most in F-XX. the As the is users in as it ability extreme in

for many expect We the years future. continue both to programs into

program XXX% of including as a development which programs Our revenues the funded These funded development. over strength by potential. our future year-over-year, our growth technology advanced grew micro-display as is development indication customers, new well of clear product-specific both

of new is fact, for the development. micro-display In R&D advanced much growth fund

two programs current development currently XX further the programs to our of up programs our in build helmets, various adding production to of We history. in start These production programs, aircraft [indiscernible] wing over development expect which stages development, will these programs. including in the next on have years. vehicles, current business our production development coming the the of defense We in our these systems, is different rotary Three sign are products our [indiscernible]. year, expected use stronger

their from see very who enterprise incorporated coming to We AR our modules orchestration are excited also have customers into growth products.

as was are and the we shown to to first adoption enterprise of rollout seeing COVID-XX approach power The social has solid the by driven devices a work distance workforces. are technology our

for ecosystem micro-displays. Kopin as will enterprise to solutions, AR positioned adoption. markets, expect lineup and market help enterprise elements accelerate and module with traction and XG, such including demands adoption. of consumers, micro products from a necessary And enterprise benefiting to continue RM we the AR those the ideally debate already mass-market infrastructure broad market in and are meet gain of We both the is to for the defense VR LCD the this

larger of consists micro-display fact, in of to has sealed and here electronics Kopin importance sophisticated emphasize turn area optics It be many this solution, which micro-display for the the used offered to it’s within their is it solutions. must important be a margin, why customers In deep [indiscernible] to housing. Kopin a in experience and practice.

we We recent or highlight of to in shared also emitting We industry patent webinar assets to our are Media, of the achieve diode, sponsored [indiscernible] leading micro-displays. the high excited about by the OLED OLED a opportunity light technical benefits these Insight OLED had where brightness micro-displays. results

maintaining webinar, high we [indiscernible]. micro-display, while color mentioned power to color with described this fidelity that power bandwidth previously achieving level obstacle low was pricing. the brightness As create with X,XXX the XXXp of much our nits second as consumption, of to AR/VR lower in quarter, the achieve In OLED

and color our mixing to OLED as color among in performance in ColorMax color or as due outlined our individual [indiscernible] also technical RF for a huge as mixing wider We of not duo-stack of even We up lower is which significant market which took the that color AR/VR. microdisplay [indiscernible], the is a of We normally is note this greater It micro-displays poor color the for expanding to path XXX% for in Technology, approach step achievement controls on recognized to opening coming very architecture. OLED manufacturable micro-displays. is brightness important nits breakthrough. OLED achieve result and an XX,XXX our years. ColorMax It [indiscernible] innovative a up color important cost use OLED among high Technology challenge is enables to duo-stack introduced displays. competitive. much [indiscernible] mixing practical calming the structures the color in now the pigment our It believe

starting that to is long-awaited adoption AR/VR market begin. is the system of the view Our

all As we said, are enterprise related our AR/VR being these followed defense systems and applications. defense, adopted first of in to industrial Almost are consumer application. by programs

growing meet gain to As VR feel to very new traction in world, this and demand. we AR continue well this are we positioned remote

applications executing in our well is making The positioned to market in favorable and progress beyond performance. it QX aiming products [indiscernible] future. and and in we our and our strategy have and AR/VR technology are In showing capitalize Our we very for are our great are these short, conditions been solutions.

like would growing continuing employees the again through unprecedented thank Kopin’s working and I who reason this of to our are are Finally, environment success. once Kopin

will turn to call I Now Richard. this

Richard Sneider

Thank you, John.

at Turning September revenues manufacturing quarter or of September development cost to to were revenue as compared million XX% XXXX quarter decrease to XX, our our efficiencies the months lower reduced year. XX, Funded financial prior improved XXXX fixed a per XX% of unit $X.X for last to results, $X.X quarter product XXXX XX, for gained of primarily cost were million XXXX product X September $X with third product increase due which the the XXXX XX, $X.X along was XX, ended of X third XXXX, with revenue with XXXX in the percent $X.X the higher million the September for U.S. XX% months $X.X million goods $X other for third versus million quarter revenues QX plants. sales, net for the million due million third The a revenues Cost quarter or quarter costs, ended year-over-year. XXXX, product the of tax September increase were of revenues XX, research for an with and and ended compared of compared for compared significant ended year. material the yields million third XXX%. September Total as for $X.X sold was over third

the an scrap information than were third production quarter compared expense XXXX. XXXX. quarter programs. was In SG&A several to the we to R&D million normal due products to decrease support third of XXXX. higher third $X.X compared higher $X.X have XXXX of externally prior of costs The million R&D The in months third development customer-funded were and XXXX of internal and of for in X quarter million $XXX,XXX expenses approximately in the for $X.X the in as lower of expenses in as of fared commencing quarter primarily compared XXXX addition, the year of third to certain $XXX,XXX for was third income of expense increase period we same compensation including compared $XX,XXX quarter of the expenses, quarter result with first of of Combined, XXXX X technology and are a compensation, travel debt compared Other the R&D expenses, XXXX. funded the approximately third loss quarter professional was of for XXXX the fees, the income $X.X of a and stock-based for of million with bad expenses.

September XX, to of $XX,XXX During currency XXXX, months as gains months losses X the of September XX, compared for ended the currency XXXX. we foreign $XXX,XXX X foreign ended recorded

XX, $XX.X $XXX,XXX, compared share and or approximately for share approximately $X.XX net with to XX, loss December $XX.X $X.X and which million Turning third managing XXXX, of $X operations a was million as ended million loss at was XX%. the bottom activities to were third September XX, approximately marketable Net the an was of quarter capital. XXXX $X.XX for operating attributable provided cash interest quarter securities the by XXXX. result September or improving cash working per Kopin’s the our at controlling compared a quarter of per in line, million XXXX to

four third granted. patents the had quarter, During we

the should based third the expense and above the for on review questions. comp amounts Operator, changes quarter take are release. of press and amounts in Third depreciation XXXX quarter Form estimates The for QX XX-Q possible additional now attached our will tables we stock listeners for disclosures. and are discussed any current

Operator

our Mattson Thalmann. Instructions] ahead. will We you. Thank [Operator now go Glenn Please from from question Ladenburg first take

Your line is open. now

Glenn Mattson

quarter. congrats Hi, on and a thanks taking great for question the

the on production, mentioned curious am So for two to the military systems production addition in in three first, in talked three you year the John, potential have about, next side, I you now. you going products

I next a So these in you to over build when you begun give side us on these of kind little but or – a the when basis think bit? basis opportunity sense the military programs think things year a kick you time, on that recognize quarterly what have annual is of will can revenue

Richard Sneider

want give tell you expect XXXX $XXX million years, over I am to several we range sure of the not I we but the So to today $XX on to go these guidance can next annual into revenues, revenues. million

John Fan

and at Fan but programs. the when then just they the slow programs, are Glenn, will think, speaking. this are other beginning John but I this it all like [indiscernible] this we now, Those programs two up ramps, [indiscernible] we have Yes, is does starts ramping the of programs know

Glenn Mattson

the Great. to that Election no and been And outcome, that administration obviously continue it’s knows your confidence the have would programs advance Day what’s they way these but going? being either one that under

John Fan

months, XXXX from budget, next XXXX well, for is tell I everything you not the we are right for going purposes Well, can much the X, now, to doing change. as is X so

budgets have that think ago. [indiscernible] it The new lot. so question, XXXX defense of we And second Glenn. this before military most literally, a Yes, long ago especially a system determining so very year defense good time for by decided January, budgets, decided a election, is soft now, are is a systems a are I long a and programs time okay,

maybe today’s – brand-new years from affected, elaborate testing. ago So very but can systems many many, which programs through process conventional those so soft now, gone X, decided and be in programs, XX coming we [indiscernible] have have a years weapon are we

those [indiscernible]. So programs usually are are

Glenn Mattson

That’s Thanks. helpful. Great.

for And pandemic so as because right, should moving ought a the side, there, industrial enterprise the travel the demand reasons, much. lot on can’t of people accelerate to side,

kind what is And longer. obviously, on consumer live one side was no see to drivers thing. side, remote – that of consumers like that on key So go longer then of industrial is the even can for maintenance-type event the

around So the that. on going home things lot brainstorming to the there’s like a would into how a maybe experience ARVR well for bring application that. better And and do obviously, of

now So about on just you’re innovation to segment months? big in spur the maybe, maybe progress like John, that if of will the there’s that XX XX help period a can next you talk seeing, going

John Fan

never a been are very effect, for a increase traffic phenomenon remote lot think, out, going in we home, now we higher. as see towards Yes. working It’s I of learning, interesting tech all this

sectors, sectors. to enterprise well Even year But those products must I’m the you So take cautioned go a designed will take get year. from it’s sectors products will today the consumer come to a consumer at things from products. into as when the all least as

bit further are we high-traffic never a as current before. those but little out, So seeing are

I after will sectors, is this mean consumers sectors, defense In on this positive area, than I very programs, XX of things from So in a programs and defense. sectors. defense as about happen going lot have enterprise more coming all world, encouraging. in talk funded all we

here the we’re provide provide time assembly in And went And They a will will the we because of the of lot electronics solution. right whole seeing to We’re will away provide around. because to have they optics five. provide top traffic. no people want displays provide we shop pool the the

Glenn Mattson

And products little and to a maybe be side, workflow quieter. particular, industrial them the XXXX some but big people maybe been their on year like adopted and the work things, a lot has into where in tried seems a XXXX of to

played So that pick period kind out? to the little back do term? digestion expect And itself up medium of in of a you bit that

John Fan

Yes.

I is to for to to, provide benefits think have users. and day, that have what happened you still value you every

how think last fields. they lot So are time, software customers there’s Rich of customers making coming of customers, testimonials And are I testing I many being out. our a and mentioned part built well – mean, are

so is they much than ROI return the bigger expected. So

happening. And in our think orders release enterprise pulling So I a the we’re think significant I customers increase for as also those actually mentioned is well. in seeing

all this using people these are So it really whole are led are the is things idea, people significant. benefits into the designing, find and

Glenn Mattson

the color. for Thanks Great.

Just a unexpected. in better where quarters me, row been margin, Rich, it’s just on for last the two thing gross than it��s

get these of is is kind products and high So margin something so mature So of a expect or processes getting more should line? gross advanced? we XXs little the a as little perhaps in function that total more the the that a

Richard Sneider

That’s that’s our XX% to goal. XX%,

being then built. getting go that X we’ve experience got unit we so the smarter – And solid and curve, as obviously, you’ve through we’re now

able so continue programs to go power to to We’re gross off and which multiple happening, margin And year. now you vendors next we are on vendors, allows more all which those more qualifying things pricing are expect these to improvements. that being driving

John Fan

Yes, as more not the to out like and we’re thing one those it’s dust glenn, [indiscernible] display thing we would this go tax and today, really found is that lens especially like in to case assembly say say the but clear. in are you is a is through be because But I actually trying a and larger projections, to we has [indiscernible] as with production that free optics. important taking

those all know-how. So, are of

you we [indiscernible], we yield now can of very get So – improvement know like margin. we learn reduce once can gross and in a a cost see rapid goods, high-yield better

useful to. they how know learned. was become for consumer enterprise I things, and those Who’s very all So

Glenn Mattson

Great.

you much. Okay, very thanks for the clarification. Thank

Operator

Kevin Thank you. We’ll now Please Wainwright. Dede take our next from H.C. question ahead. go from

open. now is line Your

Kevin Dede

John, Hi, for taking Rich. questions. my Thanks. Thanks

John Fan

Hi, Kevin. morning. Hi, good

Kevin Dede

on of key them about and that? working are sequentially, you’re year, that on was next how specifically guess, that I color. talked – development pretty there So, in more strongly lot know it on you XX say the any of are look defense? about was talked can maybe touched little that both a and Rich remarks, drivers his I’d Glenn you specifically a research up but and side of programs these of versus the has things. obviously, The much I for And commercial prepared that what

Richard Sneider

So revenue, talking funded expense. you’re about not I assume R&D the

quarter, it changes programs. drives given who any in by So

programs that for their we of while and then sent test a then off some to doing customer, we’re do program. kind of the outsourced they development, another as So we to course, it it a through run of and lot

various based all through. are upon no that’s really program bigger month-to-month now. one It there’s where driver are where a per than just changes resources program particular right in rest se the coming the So significantly they

no, big driver. particular So guy no one there’s one

John Fan

Yes.

I’d now is really comment I this increase think R&D at year-to-year is in make over to care, like XXX%. fund a activities

increasing to very new depends develop from – continuing us those activities be from increase technologies advanced activities, display useful in for in now. which so this years different lot for arm, sectors of right sectors, And for later it’s fact, our macro a In come lot a of very will production.

rest interest So very these are the mentioned tax. we

into which value part, funded these For usually production, and think Yes. and activities all into we also to first have better right say, now. very are the design, we I designing as activities, result those trying us protection,

Kevin Dede

growth Okay. And But couple Can their there. products was a bit up dollars sequentially. use think revenue speaks know, John. drove thousand still specific that your I don’t is hear it little to of the I third of we The commentary hundred revenue, about and industrial a about enterprise, more the just that defense was increase?

John Fan

Yes.

in waiting and programs There well this that are actually know, wave that is And one not waves the been we and As we is also world. two. the Kevin, years. started, see thought, noticed defense variable it’s we’ve the for you transformation handsfree away some for And what XX more. first when it actually, we like but never

to In doing world, some, understand and begin very [indiscernible]. two one occurs enterprise companies the seen or we we when So well. we’ve see transformation especially the are

value I’m think like And still I think at The be defense they once occur, still recognized. I it. fully looking and the it’s benefits probably [indiscernible]. are just to world, consumer I

world, I we’re are where in think provide AR think still whole the still to the consumers. the people that for how the pace going looking with are it and for benefits I consumer

Kevin Dede

Okay.

So stick, well. mix hockey I so guess, yes, a a but not

John Fan

maybe expect, couple years not now. now, We a of right right

Kevin Dede

Okay.

driving Okay. you’re mix guess, terms of But to you’re the is guess, now? seeing what in what I it’s really, wearables of revenues I pointing a

John Fan

like us. very in and growth think defense be I interesting. very surprising revenue interesting It’s the will Well, to it’s is indeed not very

Kevin Dede

I John, what and ColorMax or that your if I duo-stack that OLED decreasing guess, in just press colors to mixing design? you keep specifically Okay. you’re the referenced that fact to, your fidelity, that release. references in the from wondering refer And does was able

John Fan

the for than brighter direct and what See to we situation, ore very would solve they is be in high, well, to applications, have like the very, ways is to one RX it, And especially people AR very more that small much so which today, manufacture. Yes. in two to the in are described display webinar pistols it. happening, course, of the difficult have

okay, do but So what stack. double did we is, we

one junction to product. two say you junction So

Now each a not other and try the small we they sale business to micro-display, away. cross to will talk begin so small, the be are pole to true cost trade because in going a and color to

did in our different some spreading a basically a wafer between there So in control to what we’re structures we spreading OS. of plan, current the bad is doing

that. So what allow goes go the double out not good. you in and color we very did to it back Do

And say, step. On the brighter. double like get of double a the I much staff too, can fact is fact, in that

already go single than we brighter Now over Xx And that. in stack. it’s think can best

it So And this I’d sort our first have released shocking it, And and we the water shock is target. when why it really has actually say, out to explain a world thing. is. we we will

I think better. you how absolutely was setting, seeing we it get it explain than different double, how can got more Xx works, double to

we it’s it explain So significant and not it’s that, to very and improvement. And hits. we And can go we think people it, a explained what we XX,XXX with the though go true, higher. even can it’s that’s people, understand now. We

is whole world, on now. different Michael, the So

Kevin Dede

XX,XXX brightness next your or it do might take you longer? year – target your So is year-end think for John, mid

John Fan

Well, there is a say development we need years. few to to

know, that even you’re X would are you crazy. nobody months even it’s been the say If that say ever will achieved. people has that something not ago, saying,

it say will but years. not is a few say we’ll will So take something we possible,

Kevin Dede

recognize follow much How – million you year that Family bit, The think both and I this next? know individual a to balance the of sight $XX.X on you gentlemen, Weapon of Okay. of order. the you spoke little do

Richard Sneider

So, going into details I a to on program. we’re particular don’t go think

probably remainder steady the this by ratable we for Our are but end the be a state increasing, should production should and of of period. rates reach year,

steady-state end The for probably a of little X call contract will and will over then a next it increase year, for quarters previous contracts the be rate, the bit QX. months. it in run XX the the hit And quarters. over this ratable we’ll – So by XX X months,

Kevin Dede

something think is the think do that you Do army beyond switches Okay. else? to there or you more

Richard Sneider

that TWS program XX The went No. is this replacing years.

long has a we life it. And think to this so

Kevin Dede

If John, I go ahead. correctly, am I understand sorry,

John Fan

Yes. Go I Go before a your ahead. ahead and make finish comment. question

Kevin Dede

Okay, okay. Yes.

it a correctly, I if into remember against what Is production life it’s time XX-year true? about And if to year. program, you last replacing. So comp this were went that

John Fan

happened is learn total Lifetime Yes. think Yes, way what TWS customer to from the well time. around XXX,XXX the we cost, program, shipment can last units. we are I

Okay.

we TWS. the still units are, of is give course, part a not how shipped So of very units order, for will that every small we say XXX,XXX many

Kevin Dede

am okay. production, Okay, But FWS-I about a year is started at right I right? that ago, that assuming mean, in I

John Fan

Yes.

Kevin Dede

Okay, commentary? much but estimates go I’m And gross asked which if I you I’m think can of okay. as are product about their, you Glenn from you customers? your sort haven’t where pushback start recognize is at higher, just all? be a to start do production margin improvement. with some your they yield see Rich, it I’m little revenues given where customers stuck wondering nudge but getting what already, do from going I your able guess know levels my if bit wondering is you you’ll the pretty increase, that pushback of will some getting Or

Richard Sneider

said, John competitively are sourcing was programs. these as programs, these Well, big whole

we customer in did that. any to I anything cases, ask and or about right most has the And so us our it. government cost And either – like

what can we and the that the on agrees assuming to competitively government it. make price, it’s So bid

John Fan

curve this way. so customer so the some so knows enterprise you cases, programs, defect is not any Kevin, same use because big mint law, those In you money maybe Yes. go the a programs in start making investment. learning first and when you The in

So turn some later able into do wanted harvesting. be to to on, as actually the investment goes, they we some harvesting

next support program. again the So

out everybody that is to many, even understood some trial no the do of at recover beginning and So not them. they

right program this on period harvesting now. this through going we’re So

Kevin Dede

good it’s wondering question mentioned that guess sort for wondering, color, account? your you appreciate of gains. kind you I’m in how know just really Thank for other I of at the me, to it. last look it’s John. I it. just I happens Okay. But way a inconsequential. currency Rich, I’m

Richard Sneider

dollar subsidiary. U.S. for yes, the pound Europe our it’s in A against BD lot of – British

Kevin Dede

didn’t you’re too interesting it employees. speak I of your of this. of Okay, much you’re safety get that I’m really you to be in location just for how some about handling And handling sites. how sort in guess know other I around Massachusetts. wondering just careful your would my arm alright. sort you’re Listen, manufacturing mean, manufacturing I

Richard Sneider

sites, CEC mean and government have I we have required the sense on implemented our in common is we at all procedures have In more yes, our heavy in all. we also little wood, a knock no own Well, bit had FDD, Scotland, issues and handed.

So they – as otherwise, believe we mentioned they an in for QX, they in time, back and been online. then some April, were allowed was not come really shut were I to issue. down But it has

air do course, or are and up, comment wells lot the we log of We excuse touch things possible tables then, the to a more benefit folks far walls on in. non are and far can you the our gone forth. now through on the of me, and so its elevators run building. how There certainly apart we’ve floor Class everything just down, distance at and and so walk pressure gloves, we down on one we at the we is – have X, the a on table. so we we clean environment and socially stair made flow how XX the the using a best forth. plays Kopin flow clean the so positive on stay today, approach as has That of room, so, And have all is ceiling room fully the the and And change the other if all as check in done that fact certain to Just than as and in their came the have as are has in XXX major that on at smartphone. they masks, cafeteria person Class his

big a to And our a most room clean also facility in is states our benefit vis-à-vis environment. companies. done theme So is

is again. So all of on success so Talk to that our far. depleted really that

Kevin Dede

they of do here Francisco? restaurants temperatures taking San considering Are in way kind in you employees like the

Richard Sneider

there’s that don’t No. of We if people somewhat come We well. last work, nervous all did tested, you don’t had week. couple them it. Obviously, into they If were of set issue, a we look with feel to fine. employees, any off it were

we step. gone no, through haven’t the temperature taking So

again, far it. have someone and contributed We number looked they’re doing of people what to as so even be get at workers, certain the if so confined as skilled similar havening to did we in cohorts to But on. room a separate and schools and

Kevin Dede

Okay. Well thank you and the gentlemen. again. Congratulations results thanks on

Richard Sneider

Thank much, Kevin. you very

Operator

you. Thank

We question our next will Please comes from Jeff This from now take go Bernstein the queue. Cowen. ahead. from

Your is open. now line

Jeff Bernstein

Congratulations.

from off and XXXX? on you positive the operations it to positive be Do are like cash positive First free think flow we are on seems going a here. track we flow cash for

John Fan

Correct.

cash say peak flow We expect I want to XXXX breakeven whole don’t exit positive. break to for the year now. right

Jeff Bernstein

have sure already I you have missed just of that million what don’t was Okay, so I things. wanted top million already of a awarded? make the awarded? FWS-I did on follow the might on I said with $XX million couple I I think that $XX.X was connection, apologize great. And $XX best total Or order, to

Richard Sneider

includes It $XX a million. is the total. $XXmillion

Jeff Bernstein

Got it.

Okay.

that’s talking I sure and R&D then to make Alright. the it’s that want not about And military. just you were it. funded So externally

So are you have some actually you R&D? who commercial some customers to paying for do money

Richard Sneider

Yes.

Jeff Bernstein

think the then XX big I looking with to And I next in fourth on economy you at end rebounding forward going on the to What XD seems months? and we to are here machine what’s Great. version, touch market. Chinese be wanted dimension

Richard Sneider

that aligned equipment closely down. capital XD, and been very the market with So with has

very automobile in particularly probably second but spike at so was big forecast. that looking being And as it’s showing Because our not is. possible it’s Backlog rebounds the customers the are normally industry, to other not – portfolio on weakness, it I their think there issue a the as of It’s products. is concern, is tight COVID.

is here big as sitting our and not conservative. it was time last we’re backlog year today, forecast this So the are more getting

really following same the market, and trends. it’s So the capital take it’s

But in are. safety is those that the in COVID the The some and offsetting budgets wearables place is municipal programs. of there on impact and some public those where other because defense increases other are and

Jeff Bernstein

then Got it, commercial just so us can remind And current for the – okay. customers space? AR you in are the who

Richard Sneider

we the that three who are. are boundaries customers about their we big Chinese with working So, really and can’t so talk

John Fan

Yes.

world, also will there real I Gramaltoe, are now now. think right usual way definitely of a Google the for there the is enterprise you suspect lot clear so know, obviously as will on traffic and it’s

are about, talk yes. we So pet on

Jeff Bernstein

families? are saying additional that Chinese you you So customers customers of the are have some

John Fan

definitely The more Chinese of there for that, go interesting. have but not there. let’s than cannot I’m year. activities Yes. lot is a recovered very most a that a on touch they And upon lot say Richard we

So a that not to year. say are things, about an age much face-to-face we we don’t people a try have lot of too I this to for because

tend they cautious sell-through are lot recover. and of activity we brought There’s everything to going about more how So until they a are quite to and the staff. we

Jeff Bernstein

those are the And now? Okay. it Is we technology? where that that ColorMax, that in a on prototype then on foundries produced just scale is or being anode basis is a or

John Fan

ColorMax is manufacturable.

now. we customers from them using sampling fact, are displays and it are manufacturing In are the are and machine people them and out coming

Jeff Bernstein

one margin. more just gross the terrific. to guys. then That’s just beat That’s time great, up on And

incremental have the XX% been quarter. the gross So margins this crazy,

military new incremental gross some helping written that’s kind that are are inventory that down there some in off margins tamp come or with programs right or telling margin prior us reversals that now? So from you will something that lower of

Richard Sneider

Yes.

you a anything I that combination mentioned. So think of

design really were first on low getting quarters going, so and of a of forth. changes FWS-I of associated just artificially because XXXX scrap couple of had lot and we the so So with and was

both to now stride, we make improvements, continuing and how we in its manufacture. so And hitting are it’s

So get and vendors pricing multiple being and our materials lower on. for going having are by able up yields to so

So yield. knock nice our a continue right in to on doing been wood FWS-I now and really F-XX nice, move state, and a a we F-XX has improvements just make is steady sale. display well. is the

additional gross unit of next of And sheer going just products then broad So manufacturing whole programs that they on, is fixed have new steady per it’s the some lower these the volume as cost and year, base. come really over suck state, these but to efficiencies. will will margins are ultimately having indicated, more up John

XX% that And continue our It XX%. helps grow to margins will everything. increase the so we of on think towards ultimately goal to us

Jeff Bernstein

great. That’s

million was And it new Rich, something for of next did year, some total Okay. then, of or potential I missed that? the of programs, you $XX revenues a say

Richard Sneider

X, talking was I X years out.

Jeff Bernstein

Okay, so Thank you great. okay guys. much

Operator

Thank you from next ahead. I-bankers Metcalf from Please we our Direct. will go now take Patrick question

Your is now open. line

Patrick Metcalf

for not And the on Good quarter, I but unrecognized flow morning contract only on very you guys. thankful great quarter am very announced cash excited. guys just last a military unappreciated that that. went Congratulations positive,

always doing stack fabs I believe, color after many I’ve you see a said, marketplace? the your John, to me, supply the paper these players yourself you to some want in can similar a wafers the after follow-up on want. players. as be about to webinar, you you a white being today, me LG agnostic That quarter, last Samsung, couple almost OLED to conference last ask Sony stack. architecture you will on can you X the double where I a nature Secondly, someone that a Jeffrey, other as or kitchen, how viewed no as quarter you But you’re type have question being in me year. as told, call of and that. to to I in to competitor BOE to to give the competitor to agnostic Is

John Fan

understand what is I tried to correct.

understand I it’s less the at obviously, to very meaning your mass, think trying call, I – question. of mean, am I that

if we from the we on connect we has way of a do business you wafers, design we with very and beginning us our it’s very get obviously on really, are the ColorMax then only a sample structure if already foundry reduce now they nobody Doing that. use that, able good our yet. will stack. world with two One wafer such that our now should hundreds is models. the benefit Our stack. Except that wafer, wafer provide they put benefit lot in really the And in. samples they another and and which inside way a design plane, lot say of the people, does to any silicon to Remember, now for now foundries modules. in used ColorMax can on bad difficultly, right cannot depart the you results we can providing have working are the do and little if from deposition, they all be to our who wafers, And is structure

we with fairly getting ColorMax. right early into now So is actually, yes, it sampling

really think a work result I yes. now shocking So people is into, far through

Richard Sneider

is, COVID that reason the in case come I ask has unexpectedly. why Because Yes.

the double And business us where pipeline. be now the be want am a AR/VR I in has have that more that players in these efficient. to hopper, we our think had possible Xs believe to X don’t interesting. in a have I if come even ATA in? out Tier have Is the And you not COVID double-stack to stacked, family. should because thinking brighter, quicker you found think now And fabs result speck that push these for. parties people wish products Xx you at I faster. We Kopin double numerous Tier is could able our reached Maybe will It’s very door win display, power what possible? And

down doesn’t the not may but high brightness, much VR really it because the consumption you lifetime. such lower much matter, need and case, power people can a soon turn and power you have For longer

you either display efficient So is when make good. way, the always

don’t carry want it. on recognize to body. you your wearable to battery the begin then people And much yes, too So

all So, benefits. are these

protection, things a and remember, full later. year But product go people try to see. just it take and time out see time we to I So by go

for project, our an sometime growth now, growth immediate for be years production. see and been to these revenue defense for are going from are to activities with around, is working some going them out. current large has which to these we not going we’re So they Right how

growth So then them a the will X those of years the come from rest and year, are now. revenue

Patrick Metcalf

then And to Okay, lastly, goes this Rich, great. guess. I John,

HND So equity assets us, Realwear, on guys analysts I assets, see these value off-balance would or the but there represent agreements. I investments bit would can think, Solos have because you and are sheet on coverage because things like vision, seen more guys and a or contain represent stakes. new stakes talk little licensing they in add new that off-balance like updates to know, these four our just that way a the about in developments never out equity, lot think I you I I if doesn’t more sheet some Lenovo You will? it. add initiated all you any to than could know color And value the our our How some if these of anything bring competitors? you stock on equity can these they

Richard Sneider

Yes.

But to Just one Lenovo not correction, as progress. an We it. in investment continues we them mark-to-market with and financial needed. have statements, we the get working the equity stake MDMD, do are make we

are indicate a they new really launching obviously, I in aware new they’re are have real put being think bullish. having with dealing think that to you how a they I is But Solos company, And to out they a over in they’re COVID press China. talked product, about pretty doing.

Patrick Metcalf

guys. to luck. Look road. you Okay you quarter. down the alright. Good Thank talking forward Great

Richard Sneider

Pat. you, Thank

Operator

back this room. queue would to There in pass I are time. no like at the the to more questions

John Fan

talking for to you Thank and Thank quarter. forward much again next you. the joining morning safe. Stay to this us you we look in very

Operator

this call. and you Thank participation. Ladies for today’s gentlemen, your concludes

now may You disconnect.

Kopin (KOPN) 4 Nov 202020 Q3 Earnings call transcript