Kopin Corporation

Good day and welcome to the Copen Corporation First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Snyder, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Welcome, everyone, and thank you for joining us this morning. I will begin today's call with a discussion about strategy, technology, and markets. I will go through the first quarter results at a high level, John will conclude our prepared remarks, and then we'll be happy to take your questions. I would like to remind everyone that during today's call taking place on Tuesday, May 5th, 2020, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs, and estimates, and are subject to a number of risks and uncertainties that could cause actual results The company undertakes no obligation to update the forward-looking statements made during today's call. With that, I'll turn the call over to John. Good morning.

and thank you for joining us to discuss our first quarter results. Given the unprecedented circumstances we are facing, I want to start by expressing my hope that all of you and your families are staying safe and well. Before I discuss our strong start to the year, I first want to review our response to COVID-19 and how he has impacted our business. Like all companies, in March, we quickly shifted our employees to remote work where possible. Our teams adjusted quickly and that structure has worked well. But as a defense-related company, we have many employees are considered essential, and they have continued to work every day. I cannot tell you how grateful I am to this group, their positive attitude and their commitment to see COVID succeed. While our EMLCD products are making a Class 10 clean room, which provides an inherent level of safety and protection with masks, gloves, and gowns. We did take extra precautions. The COVID team has rallied and are directly responsible for a strong first quarter and the momentum we have carried into the second quarter. We have had a very good start to the year with demand holding steady. Our suppliers keep us in stock with only a few minor bumps and interruptions. Our dedicated employees keeping the business on track and output flowing. We are very pleased with the results. In particular, our defense business is strong, with product revenues increasing 144%. In the enterprise sector, while some applications area has slowed recently, others have remained strong, particularly in the public safety. Our total revenue increased about 42% compared with the first quarter of 2019. In addition, we have reduced our R&D and SG&A expenses by 49% and continue to look at ways to streamline our cost structure. We expect our momentum to continue in the second quarter, barring any surprises for either customers or suppliers, or unless there's some unexpected change in the circumstances with our workforce related to the virus. We continue to shift under our two defense production programs, the FWSI program and also the F-35 Joint Strike Fighter program. We recently announced another fall on order for the F-35 program, which now includes shipments into 2021. The 500th F-35 jet was delivered in the past March with the DOD expected to purchase a minimum of 2,400 jets over the life cycle of the program. And there are also international markets for the F-35. U.S. allies are expected to purchase hundreds of jets in the coming years. So it is still really early days and Coping's monetization of F-35 opportunity. We also see continued progress of defense-related development programs, where we have more than 10 programs in various stages of development. While some of them may not contribute significantly to prior revenues for the next year or two, In fact, not all were rich production after moving through development. It is by far the strongest defense program portfolio in our history. And obviously, our interest here is for the programs to evolve into full-scale production programs that utilize our technologies. In almost all these programs, our micro-displays are the only displays chosen. As previously mentioned, we have streamlined our internal R&D activities to focus on our core micro-display business. In particular, our current R&D investments are primarily focused on our organic light-emitting dial, or ONET in short, displays. As the Consumer Electronics Show in past January, we demonstrated the world's first monochrome double-step ONET, which emits more than 20,000 nits. We also demonstrated are early samples of the world's first full-color 2.6, 1.3-inch diagonal OLED displays using our proprietary double-step tonology. In addition, in the first quarter, we'll receive our first production order for our OLED backplane wafers, which we expect to begin shipping in late second quarter of 2020. An interesting effect of the COVID-19 situation, wearable headset customers see their products being used in hospitals and in areas of high infection by medical and public safety responders. Enterprises are accelerating their use of AR as companies looking for ways to train people and work collaboratively in a socially distant environment. Remote collaboration and remote training are all gaining acceptance.