KOPN - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Kopin Corporation Fourth Quarter and Full-Year 2020 Earnings Conference Call. Today’s conference is being recorded. At this time, I like to turn the conference over to Chief Financial Officer, Richard Sneider. Please go ahead sir.

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 fourth go a high results will I quarter at the through level. be John our will and your take then remarks, conclude to questions. will I prepared happy Securities be I'd Litigation in March X, Tuesday, taking place like on defined XXXX. of to remind Act as we Reform everyone making will that the statements during Private today's call forward-looking XXXX; These estimates, statements statements. forward-looking that differ a risks based beliefs, are to on current those uncertainties and number projections, expectations, and could and results from to cause actual are subject materially of results in Commission. for factors documents subsidiaries, and include, other most and Form Securities conditions, our and our are Exchange Potential to, risks demand operating but market discussed annual limited with the other XX-K not report recent filed on for products, our update company during to The statements no call. made today's undertakes obligation the forward-looking call with I’ll And that, over turn to John. the

John Fan

Good our stay results. this fourth us start and quarter to and that your to during time. morning. well discuss families by you safe XXXX like to continue I'd joining pandemic and you Thank our expressing hope for

finished have are delighted operations. strong with both results of top with We to and revenue of XXXX efficiencies XX% our increased in very growth our full-year line bottom year-over-year and

particularly was growth year-ago into million. XX% $XX.X going revenue strong XXXX fourth-quarter Our a to from

XXXX. net cost of of in our production our progress structure, great the resulting use make streamlining for fourth $X.X efficiency, income with also a along and We private million in quarter increasing

proud very achievement. are We this of

is achieve to works focus company the these longer-term. wonderful hard results, the While on our

company will the a handheld decade the spending, hands-free in R&D devices for well AR This era to of could which about of thing we position believe demonstrated and [killing] transformation one VR. and increase radical devices. for be topic coming As the

let's detailed go business. of discussion more Now, a our back to

by of sight fourth across driven two the system our weapon the again multiple FWS-I significant of the increased was very segments production defense product This and quarter was which and led the quarter F-XX XXX% in XXXX. now the thermal fighter displays our revenues, for programs: with for program display sub-assembly fourth business jet strong by program. increase Our compared XXXX,

announced third FWS-I awarded $XX.X quarter XXXX, September As in through a scheduled follow-on we the year. million this for with were of contract shipments program, the

We expect years. programs these continue two in to production strong the generate will revenue coming

expected track second products, XXXX believe low-rate on this this provide also momentum are initial a three currently will of dozen beyond. and production, We with transition to out revenues programs to ramping programs to year. begin accelerated for in growth more in these development, We the of year half

programs the In with sole activities XD to using saw increasing and flight with rotary-wing we Our led systems, assemblies. targeting to applications. our rifle wearable’s we scopes, quarter, dust-free along fourth in most solid ability our metrology Washington sophisticated RealWear automatic active in industrial to our The also and to programs. experts seeing all believe this sales sales targeting of are to utilizing pipeline day are the in includes of supplier these growth helmets], products located We are and advanced AR/VR related vehicle collaborate applications. [aircraft State source we electronics, systems, by remote and segment. advanced and optical armored microdisplays, increasingly among systems, using and our other in development programs display are semi-automatic These

macro company, these modules that display has For Iristick, as for optical designed example, smart QX, European products. in a glass we announced

XD being Due now automatic of XG the form, we of is the growth. machines optical generation increasing replaced by This XD still coming in machines. suited complex call using and of early vehicle microdisplays For electric the applications, very the AOI FLCoS inspection stages box equipment. which XD AOI of quality metrology tri-circuit are our are unique the industrial to ferroelectric requirements inspection, XD market for inspection

Our micromirror two The is similar main leaders currently share. have in Instruments, Texas device. market market competitor DMD, these digital applications

at both their we metrology, to beyond. XXXX industrial in XG With wearable revenue continue and grow

However, quarter revenue COVID-XX impact from XXXX, sales to in products public we which of safety municipal applications down believe the were our budgets. negative the attributable for fourth of of was on

segment this year. this the will in expect second half We recover

an a fourth quarter, announced we with high-performance a duo-stack, shipments received fidelity major located consumption. ColorMax precision power fidelity that for AR in medical surgery of high In brightness HMDmd specialized headset entries patent-pending AR, Kopin technology agreement are and also into Diego, low entered the medical for company. the XXXp with recently color mixed develop and San our California, use of are our and brightness microdisplays, began first production critical expanding combined order and We High headsets color reality applications. and headsets. initial VR, have OLED for to These

the X.XK writing, games. display offer content, amazing a ultra-high high-dynamic-range slim smaller display micro first XM in glasses commonly The and with have to for bulky creating images. headset traditionally micro lighter VR display, Panasonic Kopin, and – used see combined truly a small of We assigned making life-like should audio has offering amazing glasses, and ultra-high-definition super-high sensory standard fidelity by Panasonic glasses The resolution VR. and much stunning The to OLED which announced glasses optics than factor. and also feature viewing X.XK advanced our – using developed and experience Thanks a or large OLED sports, capable integrate VR We our are world's pancake XXXX. VR proprietary our microchip. a you which X.X-inch incorporated form rare at eyeglasses for

believe excited innovative all these always consumer have been beyond. products a and and wins Kopin are and which very XXXX very of defense, medical, in We grown in industrial, our company. we AR/VR has

monochrome of our Bird Jade multi-year in with Under Display to Jade leader of super-bright Display microdisplay in the is a Bird announcement Kopin-designed LED a wafers leader the Jade LED LED hybrid most We this agreement Shanghai, example the microdisplays. technology. recent a bonding based be applications. AR displays. microLED silicon of and Bird the diagonal the monolithic continue in generation China display provide wafers will for next to promise useful and x develop collaboration, An advanced world. backplane the MicroLED displays X-inch be super-high of service provide microLED on many will for Display microdisplays. microdisplays, in XK This XK supplied brightness especially is

products our of for microdisplay With leading We the microLED and consumer enabler, for see largest all now red being the applications. AR/VR developed. Kopin AR LED defense, enterprise, in color range is a have world and and five technology of the displays coming in offers wave VR. key we maps

of this our performance system expected, to different enterprises, quarter programs As then full aspects medical, all improve Almost We XXXX. Rich industrial of strategy XX of followed cover is the applications. AR/VR year to will adopted the can applications. related our great the are and the consumer developed company. make progress the in by executing with and details in all financial

our However, sharing quarter how I to am I end increasing line significant revenue still want to pleased significantly by strong by activities. match growth improvement R&D our with

convey we revenue will achieved in fact, by quarter the to convey, that remain we remain possibility will do throughout In we want I profitable XX%. cash, to blackballing generating in XXXX. I want profitable. fourth

strength. their specialized financial micro we'll ramping our aggressively It continue we and OLED achieved our and progress microLED are well in our we and trend is as as As to programs to operations, several in to invest our protection encouraging the board, optics very displays, up and We in new see for in this continue. electronics. have the defense across look technology,

Rich to reveal return will the I call the financial details. to Now,

Richard Sneider

Thanks, compared R&D as in defense-related approximately an in income of expenses In program. quarter of for $XXX,XXX to in XXXX, the contracts increase impairment and million revenues quarter year. with compared quarter revenues, in Weapon to XXXX, foreign sales of XXXX, $XX.X $XXX,XXX $X.X we increase. fourth million fourth quarter as fourth by fourth fourth of to XXXX, defense for million to due The of $X.X an we number the of quarter of of Product of million as an reduction Sight of compared or revenue XXXX, Beginning were shipments a charge $XXX,XXX last as $X.X XXXX, year fourth in by to bad equity XX% our of was quarter on quarter higher of million a expenses the the a in XX% the compared XXXX. increase the quarter volumes XXXX product million an fourth non-cash awarded. in primarily compared quarter in the fourth XXX%. XXXX, quarter quarter of compared a increased results XXXX, $X.X fourth for fourth XXXX XXXX in year-over-year. with Other the of sales XX%. investments been XXXX the of revenues XXXX. the improvements Individual SG&A was currency expense. fourth $X.X Cost to FWS-I was decreased with percentage million recorded $XXX,XXX Total for we've the quarter of revenues XXXX compared an increase compared that was John. million, gains million increased in to currency product in the $X.X of $X.X XX% as due of XXXX. due increase due $X.X fourth XXXX, to XXXX, for of XXXX XXXX with FWS-I expense fourth quarter fourth approximately $X.X in to XX% in for [indiscernible]. decreased million, XX%, and over Family recorded the SG&A investment. the to in compared the customers the quarter in XXXX, equity of quarter the In to Funded decrease in of R&D fees fourth foreign on the were compared expenses debt a gains, fiscal offset professional primarily of of of

income of fourth of compared for Turning material $X.X million, was to XXXX. net approximately our the with share, share loss or to per a $X.XX the quarter million, $X.XX bottom controlling interest $X.X line, for the quarter per

revenues manufacturing from XXX% XX% were for Fighter the a to Total Joint an XXXX for XXXX process. product in of XXXX and results decreased by XXXX, increase. of XXX% increased of revenues compared Fighters as as for XX% sold for XXXX the goods customers product and XXXX. and in Strike defense revenues, revenue in revenues XXXX to with respectively. percent $XX.X increase Strike FWS-I improve yields product to due primarily shipments product from million, compared Joint XXX% $XX.X compared the XXXX, our are FWS-I Product program. of of XXXX, million Cost in of to to the Here with program increased over Cost full-year. compared a for was XXXX revenues sales

recorded our and was XXXX as in XXXX, for to recorded XXXX million prior $XXX,XXX to million XXXX million on initial we $XXX,XXX expense initial we investment. $XX.X $X.X R&D investments million as million yield of awarded. on number $XX.X XX% in was yield XXXX of – an $X.X related and a non-cash and for to foreign as stock-based product decreased decrease of expense million expense, XXXX, and contracts bad production compared a SG&A addition, in an SG&A products professional of primarily were expense charge currency due with program debt expenses. in in of XXXX. compared non-cash in was program. expense expense, of experienced primarily compared $X.X of million In low programs promotion as or for $X.X with decrease, XXXX XXXX. Internal for due XXXX curtailed. licensing XXXX, compared currency $XXX for Other impairment as increase XXXX, foreign XXXX, being certain marketing we $XXX,XXX gain million compared on earn XXXX. the in compared for a increased $X.X $XXX,XXX gains FWS-I gains, R&D income million, $X.X XX% defense-related million with to the year decrease, expenses XXXX. an stock R&D for $XX.X In million expense In the income due and Funded travel decreased we primarily in compensation, compared equity a with of an $X.X to fees, record equity in of

to line. Turning bottom our

million $XXX,XXX. were million, fourth per or DRS Our per per with the net XX% amount disclosures. depreciation LLC of $X.X our at-the-market, program. are that, million and XX, at year share, XX-K with issued customers our equity $X.X to review additional Systems possible ATM approximately of In This sale expenses XXXX And including controlling we'll our broker loss purposes, of and common of $X.XX share, before XXXX should share, corporate before operator, in The common the XX%. current XXXX. shares changes, proceeds above XXXX under for deducting for listeners net shares $XX.X press general XXXX, and compared or us our proceeds, or Form are The any was of share, X.X In proceeds loss approximately net $X.XX the gross Collins attributed to January million. per for deducting gross of X.X for the take $X for we the on million, estimates XX%, XXXX, discussed completes $X.XX for we release. and Imaging compensation shares a or sold program from Aerospace ended amount at course, or table working interest $X.XX Fourth used our expenses are million, quarter ATM, of the year-end based of Network stock quarter the broker million stock, $XX stock attached at by capital. of paid of year-end common questions. December for

Operator

Thank from Mattson question Glenn first And we'll take Thalmann. our Ladenburg you. [Operator Instructions] from

Glenn Mattson

congrats thanks morning, for taking results. the on good question the and Hi, and

John Fan

you. Thank

Glenn Mattson

you So, a QX. of much into through budget mentioned defense you we here that on was FWS-I, sense of contract? a ship from business left But first related the give Can there going that's go $XX how award is bit the to million XXXX for to deal? that as us flush the a

Richard Sneider

the But we under due. through actual October current a disclose don't balance have deal. think schedule we'll I shipping No, the

Glenn Mattson

then give maybe big beyond. us – scope And the the you as like how then said but think in a far refresh scope? and you Can Okay, highlighted general collectively programs be it the the size that Can just great. a as of likely give begin that of to and the day would on half could seems us you just three before, ramping You've what it reminder are are and you be? us they program biggest. maybe size second

Richard Sneider

Well, as to it's year and half into be come low-rate initial it of affects XXXX they'll going second production. the the results,

give total just you I about understand asked you XXXX the So, program, the results.

off. release from initial So we're be designed the And those this in – production possibly remarks, to not One to revenues XXXX John propel growth. programs of there be prepared with could our expecting really but significant meaningful said as low-rate exception all year, one. they'll and start they're press a

Now, of specific turning you to if day the and programs, bigger, are programs significantly the could benchmark, use kind the probably be FWS-I scope other then less. as slightly

John Fan

Yeah, that areas. programs Hi, comment a really like to divided several this, in John. I on make our is this are is would

performance rotary For pilot's very both the avionics low. very like aircraft, helmets F-XX The expensive. our are sophisticated, is quite or

year. enterprise are or dollars scope their of applications. the the so day for many similar in the They for thousands talking quantities a for tens about However, FWS-I soldiers, ways, quantities, are to

quantities. The I significant lower, is of but large. will assume be normally, are lower. types would So, very very these kinds are

pick there high-quality sides And for may for learn a so the samples to equation. both soldiers. high ourself samples Also, avionics. volume had we of of allows that be So to

Glenn Mattson

moment many it Great, thanks does the and the how at have right? thought be And it for over industrial has you written feel many like but a step for are come highlighted for consumer obviously, the metrology. that, not you're perhaps shifting those most guess consumer, and – I a device, VR wearables inroads perhaps those But a John. have consumer consumer. programs where is in would the general, impressed headset look how – the games, at before made in with What been a XD taken to – bit. many significant then like that, the would it the me just, Oculus we're that industrial to with when device, process know how I quality I has does And side, up seem there's seems

my iPhone significant could an out be over here? like like shift the really off take you do maybe significant VR years, see guess the market devices John, where where market of moment this a moment is, I next from as few of and lot So, the maybe a there'd kind coming question a in and

John Fan

question. very, It's good correct. very Yeah,

our you bunch is specialty high-end and I But keep know Then now I also and people not we display performance. will to were good have glasses, build very optics, first Glass think very about it's market will VR Panasonic how – electronics They high related. a We actually want amazed in they RealWear just say begin only is lot. Google but Quest of time the the they good and to now. quite the good but glasses. whole good It's know, assume will see I'm right like smart type to they're but really example. not enterprise And included. defense. because, would in And they we oculus assume device. strategy The see medical or then – but price, also higher is economics. we Oculus – the that replacement, worthwhile, And align really X replacement, a we glass were They a used pay AR of all glass. medical. get they AR are. selling with

image. they latency. have It sold about a but million good It the units they too heavy, fast, too pretty I problems, fourth Basically, quarter, is too. quarter. better big. has think want people image. last I mean But are they has still

Okay.

on jump million very market would it. would quantum market The that. other to And And quarter that's you it you see why other they're I are far put big. trying a prediction a going that will be several targeting some maybe doing jump, X My – a be be Panasonic and next Panasonic obviously, could a maybe not number we think playing definitely this there. So of And now. for year is now And things it year. beginning away. year I be next companies don't out improve. a where who think the or there But to are end knows. are the it's is –

will game-changer come. the So,

Glenn Mattson

Thanks. John. great That's back queue. in the color, I'll step

Operator

Kevin And right. our question will from take All from HCW. next we Dede

Kevin Dede

questions. Thanks Good gents. taking for my morning,

you of you to some think add us maybe color that I more expect hear the is elephant the positive three to I that Could to, I – of year, give did and happen this for revenue? understood think new given balance be that you're half where room, that you on correctly? the and to big new the speaking in boundaries programs, Kopin John, regarding are coming will correctly, revenue I some how think XXXX second the bolster stuff on you most

John Fan

it. Yeah, XXXX. really I it and new full to have comment, only mean curve paid. will I have production [stopped] have a be FWS-I, is to which go I leave year, local then Rich we in. to last to There production about to XXXX From the experience in few the talk three program coming we actually, going then on are learning

we new process equipment and in now So, there. putting new are in

Glenn for AR/VR back brought First, asked. to been consumer, the really adoption cycle, question in. going has especially that That

brought about We because in between years three of pandemic. – these really are talking

So actually increased accordingly, R&D. we our

continue these get Rich. about certain take make better we're feeling We to year. things against would that. think much year. on still think not And to I I I'm this people. last all comment And to Rich – have use entirely told better, that still

Richard Sneider

most number pretty the These and strong. expecting of a a of very of that for where understand kind our he not P&L. are we've one to very expensive. was And came is strong. QX it's now. development R&D very, programs, little customer-funded bit of for profitability indicated clarify. And with That's it’s on that right Yeah, light and announced, that is the a of year. going that in I to it just products. revenue collaborations little forecast the as on them we the But the have revenue issues out was are. technologies not John develop Surface, new

invoices could approve up to As we We essentially customer, our us. that have fills invoice, and our the said, subcontractor tap as revenue.

– a was vendors number created so a of who it invoices. we had and of number year-end, since And significant

of dollars So, frankly, was that couple expected. than would But contractors. really their million from revenue we of a have higher revenue was half probably

that inflation. help do profitability which we margin on number a Now, get could

efforts. with still learning these that So time-to-time, the work of a on one We new John’s this result factors to that margin on learning And programs we to chain. have same the type was with we down. was efficiency in year supply our a slowing FWS-I drove that notice the profitability. improvement of risk tells the a because be pandemic The of supply situation partners ago. we curve to are we us curve according that our our to get and actually have some is still From do continue issues point, saw

were. And our impressive which they be we're money But results even results in are the being to in make in that's is significantly so, going and the MicroLED we that, as actually where MicroOLED were indicated, And that able so – to the more John we investing because big still future. cautious. – pandemic, produce does

John Fan

the people And before good efficiently are is pursuing. R&D and one a We're think point now that on hottest of make MicroLED is it. right some I are get. things involved we Yeah, to obviously

We also many that are tools putting still these have developing out. contractors

Kevin Dede

Could there. you're programs thanks and a it's commentary you're in technology John. think I bit the remarks. I'd to using understand improvement? on, the to to little of Because about that for little you FWS-I. translate enterprise Okay, of understand apologize But to on improvement side. Obviously, the like I've lost like some you in the tied color. your working for dive And track misunderstanding regarding it. bit prepared Appreciate I'd primarily the expect a I how more other yield that into which

John Fan

deliver most there is eyepiece, are F-XX a our that full program. a they display. very FWS-I a really different it's program question. Yeah, is entirely FWS-I product are basically. is from – I F-XX the good The think in is

from We have to display, They optics. are there assembly. [indiscernible]

to have of this whole different unit also a a to we different. makes is control, F-XX very type year. a So few and thousand go profit, R&D

we Now, for year a spend thousand FWS-I. a

process done. So, we of be to have different types

color barely – Now, coming the the in mystery are mostly are in like FWS-I.

lessons, of and So, the they them same. are none but products, are different the we have learned

So there different at – that would test looking are to we valuable start to FWS-I. and different product But learning [indiscernible] products we and be believe It's test curves the today. some in classes, here, have by design.

Kevin Dede

Okay. LCOS Is technology? to guess maybe get to to I FWS-I going. I on try where best based was way that's the

John Fan

Yeah, our process. LTG the FWS-I is candidate using proprietary

Kevin Dede

but you in that Okay. makes about Jade – do bit how the Can more technology emerging maybe feel talk Bird. feel a industry? And foremost about a bit I'm MicroLED, John, strongly you little or makes what little you so as I more understand MicroLED? it see about sorry, the supplanting what you

John Fan

we're in It the situation very like Kevin. question a now. asked, is Looks insightful also

slim to about the in the My personal AR/VR VR people extremely part, fast. you this Oculus eyeglass, and that on bright, in so Okay, X consumer display – would be should the perfect. no VR. the be indicate beautiful head. be Quest screen. also of will come is light, they want view. And That be In The perfect. least latency, thing I to glass MicroOLED should that. describe look next can can MicroOLED what the VR the again, display These color generation It's case my your fast, in a of need, wear super they VR. the At feeling big are first will but be like

go – our up. light. is MicroOLED you AR, if you to activities, so to outside, going So, especially I duo-stack a ColorMax it am go and is want once

buy efficient. much must especially the price, usually And for the looking higher You in that not color. AR is people specs. are optics The on

the maybe of So requires the do. can MicroOLED what brightness at margin the color requirement

they very with there's this, same Facebook – China, activity, based are So, [indiscernible]. And Facebook leading a in they aggressive. are on 'cause now, but person of and now everybody's lot the

Potentially, So designs the we in unique. speed, the frame, have place, best technology. color, with that the our all high are

and cost much so LED And [indiscernible] [indiscernible]. too

there I the think all in this key real. AR is come

with I think for [indiscernible]. still think for consumer – it's MicroLED And I leader Jeff, just answer AR you AR. be need will

Kevin Dede

Okay, helps, John. that

John Fan

Yeah.

Kevin Dede

Yeah.

ICs I your concerned property? you are your concerned – control maintaining all over at mean that backplane about in are So, about using you environment, intellectual

John Fan

That's design – once as the why for design know, that. easily it people IC with so no layers it. really and County very I – the was became but That's you let you make give to Well, to foundries way engineer. will deliver That FMC to the the as people process like – a IC, Kevin, do it some you – design well. deposit why they process all the reverse [indiscernible] to the very, engineer designed very wafer, once this on – and you to invested hard they even study. it's There's

Kevin Dede

then bit – Okay. little about a talk can we And

John Fan

wafers I whether So, Kopin. countries it's or is already bit Japan? think made any Asia, a little redesigned or China, wafer by it's The to

Kevin Dede

Right. Right.

John Fan

even States, United designed States. United outside it was In

Kevin Dede

Okay. Yeah.

make how see that know, displays for you give you you ship I, had maybe Can going? the you I me. to you'll think You beta know, wafers so I wasn't to indication do an it, development you know, us thank it’s you get path tests? How customers you for that on clarifying. thank have for I long reminding intended sure, could you you there. before maybe, exactly know, you –

John Fan

the Yeah. For LED?

Kevin Dede

Correct.

John Fan

program just about take you I'll interesting as it's very years. we the For I reiterate five micro-LED, get – mean, we thing. saw like a

customers no, of our kind no, and say, So, we – they no, want it earlier.

not to we on some of person to ourself the So, about doing functions had In panels doing we pass pass IT our would into that's activities. which [indiscernible]. time which that critical think why that so, increased which we is

last might or So, speed down up whole in years so. well, two to thing, if get we the hopefully, it

Kevin Dede

Wow.

Okay. on Well, that. congratulations

you sort other second or of account post-pandemic that's the that think second budgets. half well? of – I down safety as you think of the general do of year next to sort resurgence municipal demand on thing of Do year enterprise. within I this half a be is until the or just back come sorry, talked think you sort doesn't the mean,

John Fan

the We major I the But domestic obviously here. I think we activities they're have, that think up But people really companies. other back predicted budget can through cool it half. right been heard. and we're – municipal for so, which selling other second on this the account would – in that down, now slows I think come It seeing has other countries area they

grow, to So, especially I continue this think will XXXX by and beyond.

to very yeah. So, focus segment this is still on, good

Kevin Dede

give a from break, and the the to me. in is going the Can end you you of they designing I'm you talk and products, see the projections? that success their some John. Okay. having RealWear market end are about question Last how

Richard Sneider

contact is do talk you RealWear to their about What business. just

John Fan

Yeah. are them. know the They're their We with successful they're website newsletters. and right we in obviously now to very good and active very right work now. the supply They full

Let's cheer them. for

Kevin Dede

gentlemen. Okay. appreciate Fair you entertaining very enough. much, Thank I questions. you my

John Fan

Yes.

Operator

Company. Thank Needham our [Operator you. from instructions] Denis We'll Pyatchanin from & next question take

Denis Pyatchanin

Good question. few ask [Raj of to Gill]. wanted morning. I a taking behalf Thank my you on for

to for? of the out would and likely what one a use most applications adopter a you be I be industrial, the and VR you So, would pick think kind first do initiatives group kind which they progress, medical and guys of would you these three, mean, regarding if of enterprise, the – be in one the of of of kind kind had AR to adopters mentioned products that first

John Fan

Sorry, make repeat want exactly the to question? answer right. can you I sure just I

Denis Pyatchanin

Sure.

you customers. to group, had of big what press AR basically first think first or three, enterprise, the of release technologies VR I of be looking terms which be pick think kind – kind of the use you of adopter mentioned the VR those they Could one one medical industrial, and likely kind the would adopters applications do in in and most you of of you that in you'd if at would for? of So, first would them and AR – out kind the

John Fan

Okay.

for that coming side is first, Okay? AR, Google AR The most and first definitely the is provide first all the answer in productivity we RealWear That one one mobile and social especially Google will I expert So, out Glass' on have are coming we know workers. also say Glass [indiscernible]. would I workers, applications to is software-hardware card focused that. the with Yeah, definitely you were

become how it. really more believe I second The desperately a I there. actually medical. now, maybe want is doubt, thinking couldn't need surgeons one, There's

So, know that there, surprised – we certification this Okay? the There's is I requirements go. So, will definitely some better, be now. don't so But of FDA-kind don't see advantages it. definitely long how process

yet consumer I see until Apple did the later. the for for something that Hopefully, for maybe to Now, not do side, will us. act consumer honestly

very it's that been pilot clear. We training, were, you have VR, Okay? always On know, training, training. using We for the military

education, and games. – So spot lot once the it is are world. my – job's fantasy this for people also workers. watching, Games, IMAX to And a of soldiers contents, education. But for training. And theater, really soft a achievements the the for training for between sports, using

that is consumer and big think military. the the real I the and after training applications enterprise

– is to as in not you are cellphones the were Yes, ago a on know, has a it's the the game-changer. have well – years The It's hence, hand-held lot here trying years computer. Apple's – I cellphones. now. second I we So, help ago probably many transformation And we [computer right can for transistors for hand], time and applications. was it head, wearable. think fully in holding two a XX products their really

it. love You'll

Denis Pyatchanin

provide Great. you for? Is will a could bit more Is of there can kind what specifically? of surgeons there AR products color out on about use – exactly you anything kind the more the of talk little applications

John Fan

about obviously, they be, how major these the few last announced medical months time, you style the A we know, initial actually that – surgeons company Well, do cannot set we we're to trial the ago, We will identified. working there. actually a and XX-day try obviously, build products. that because, we identify I and before talk of a

period, gone about we obviously I have if is it proprietary and least reasons. through at it, So, can't it talk trial for

Denis Pyatchanin

Understood.

– think I

Richard Sneider

the a in lot can the literally What at applications, fairly of looking though we a medical you that monitor. doctor – tell is up is

head you're tasks. the obviously at patient be focus specific able system And where – wearing a head-mounted and on to be then looking to very system idea so, the a is the head-mounted to using

doctor looking would They when is to Hey, patient. it. we're the does So, it at, studies tell of at numbers good as that. The but actually benefits you. it that is the that find

John Fan

focus to you of all one this that Well, everybody. before new solid some I type with will satisfy denied technology have functions think on style can

medical – in So, one that the surgery. best will especially even figure something is which out medical area way – satisfy to medical to

Denis Pyatchanin

have And are by you is, kind Understood. question of on that to then, you your you guess, color profile able all last was any provide I margin for Thank category. are – gross I helpful. the That that.

know is kind like, or is above categories kind average? Which So, you of corporate kind of that? details of your like of which below any

Richard Sneider

reach historically consumer programs mid-XXs, XX% of Consumer the then can absolute-dollar-versus-percentage-type and of low-XXs the It the depends you anywhere. size know, really XXs. and Military, can Industrials into market the It or when go of really segment. the better. situation. defense, the go our – in steady-state, on

a know, you much lower greater. take and percentage, is we'll, So, dollar you the so absolute

John Fan

[place]. with Apple-changing And Apple. The

a it's interesting. very hand-held is still of hands-free. like It whole from to going new So, area, the area

again. design there's So, our the it – not five you worth try beginning, or methods, and proceed investment. pivot you that at them a see the to medical trying – for the and could even they headset. for repeat it a technology exactly And surgery device, what you and last them But clear. of not some final large they And years, to may can two several We make we're image market are is we do could do. we're trying to and become in

company's other So, market.

entry optics, and our I It's and same [HMD-X], designed it's situation with the for all a licensed the very We electronics. good. think here they're – I we them – designed The successful. its way. display win-win They very in use will with wear everybody.

So, we and to how the we the half company, we to many build have it and I but you – know Which military to it, want license how and we are is display. ergonomics, don't so keep already I not and now sell us just to of used we'll that that How because great, as optics, whole. electronics, make rig can we a That it. have to use whole hey, our know say, it display have people it, – reasons, also, come are done a know just display ship people is thing, long. and you why be everybody

Denis Pyatchanin

Got it, John. Thank you for that.

really So Richard just – and follow-up quickly. a

that on R&D the licensing in margins works, think pure of for profit, So, or XXX% that's all I those? close to almost the

Richard Sneider

broke question? the up repeat you you little bit. Could sorry, a I'm

Denis Pyatchanin

Yeah, sure.

margins. gross would licensing royalty all in around will – and so, almost follow R&D up the to Just on That the margin pure be then XX%-plus.

Richard Sneider

try pure The by the margin know, varies our There technology contracts profit. R&D fit along for that you on are contract. royalty is to the margins look We contracts. And, roadmap.

contract know, technology. because right most for you so, enough that's sometimes, Because as providing technology us developed. cases, long And good for what's the itself, retain as pays in the to we just valuable it's

we're essentially, it free. getting funded So, for

John Fan

Yeah.

Denis Pyatchanin

Perfect. Got It's Thank looking was definitely it. for. what I you, gentlemen.

John Fan

– Yeah, I

Denis Pyatchanin

ahead. Go

John Fan

Yeah, we business I think our did pick model.

for As we'll them help people design more to to asking see we to – them. us begin, design

royalties. maybe even Those government have yeah, head or And – And with the we equities actually, same the sticky. headset. to very computer and our also usually programs R&Ds products But times, and we whole have is way. are have they're or even So, computer them, new with [indiscernible]. when they're very, selling eyepieces the device, together many

So, therefore almost also we are soft now.

Denis Pyatchanin

I in questions Those Got will the back the it, all that I are had. John. Thank you. queue. jump Thanks.

Operator

question our take Axiom. Rose we'll from And Instructions] Craig next from [Operator

Craig Rose

Solos, John. advancements about you you made then product product in the future? that Craig progress recently introduced? And of Hello, trajectory you've us you the tell there, What how see can the of Axiom. that the do the from

John Fan

it part have mind? in Which you We had – so

Richard Sneider

Solos.

Craig Rose

glasses. Solos, the the the smart The know, – You AR glasses.

John Fan

making – Zoom at everything this team I of I been I music, good listening as to generation, for And home. It's Apple longer hard. to I Zoom calls, calls. hate to no the use generation AirPod, wearing say, Apple very my I If and calls. have day I for I'm [indiscernible] I And don't Zoom have use very And first it. grateful I it Solos every the use phone making say, have actually I've – Solos anymore. of AirPod, calls.

They sold But then it's generation, down first six last pandemic the is product Asia the in in a that Asia a market. test slowed test down anyway, But few and a thousand months. marketed few X,XXX it summer slowed them come it has So, out months. – for units.

yet. of which second we've feedbacks and we got see market lot can and test the reveal Just can't one, I

like product that. like is three Nothing a be in market two of going the everybody. years or A game-changer. ahead ever second is The one to

Solos. So, about I'm very excited

understand unit. just And I is of understanding Solos can a think Solos, licensed I – RealWear. we like now course.

fairly for we Solos them. we significant are cheering we license – with and them, got the for equity

Craig Rose

– Would – we would we

John Fan

you. will Oh, Actually, I generation it. the I everybody tell to second come out, use think

Craig Rose

it expect the we the I such would product introducing I discussed next-generation Would steps idea a go lines? mean, of have to baby the product. new screens or along you've still know

that do think forward? you how So, moves

John Fan

of because – good. this very learned had the right? display, with we're and it speak Think everything, three is occur you a we found too then that we us. product first screen And from stripped once our type. and mean, we a house was This would is Glass I aggressive can And It’s remember – and beginning. with we read to something you the do a faster out. you hear a than at display And times that, or Google house never

So, voice next is screen. the

are allows at So, And that, lots there, them do all you search product look out the everything. to you AI now. to the of voice-driven

need You and get by invisible. XX% what with voice, it's you

would wow. So, say, we

Sooner years that's for of or a the it, couple audio get right. and but away later, you on will screen

house at may display want or yeah, – too. think So, I speaking I a you sooner later,

go think I for off three voice years. will So, the the next

Craig Rose

Gen would or be, you event? you Okay. is it a do XXXX event And know, a is product think X that XXXX

John Fan

months. couple of next the In

you catch on will We Christmas.

Craig Rose

Okay. And last question.

equity shares round? like on based more of others. an If in company funding is the issue. update required Could those accounting bunch companies go know, of in value as funding you a and are companies and if interest the your rounds, have companies You lot they or have to out of newest of – out RealWear interest and that you your just off, it Lenovo, RealWear, go a equity the spun such

Richard Sneider

do We the an and price, to update length we to real the equity our the as mark-to-market round Yeah. at arm's investments would then evaluation. extent

Craig Rose

Okay.

John Fan

Yeah.

treasure. it's a Yeah, a like hidden I hidden think it's treasure.

Craig Rose

Okay. All the Thanks questions. answering right. for

John Fan

Thank you.

Operator

And it appears there questions are at time. no further this

John Fan

we joining very next forward Thank all. Well, today. you, for with meeting And for looking us are thank you you. much the

Operator

And you. Thank that does today’s call. conclude

You may disconnect. now

Kopin (KOPN) 5 Mar 212020 Q4 Earnings call transcript