Kopin Corporation

Good day and welcome to the Copeland Corporation first quarter 2021 earnings call. Today's conference is being recorded. At this time, I will turn the conference over to Mr. Richard Snyder, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Welcome, everyone, and thank you for joining us this morning. John will begin today's call with a discussion on our strategy, technology, and market. I will then go to 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'd like to remind everyone that during today's call taking place on Tuesday, May 4th, 2021, we will be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, projections, beliefs, and estimates, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks include, but are not limited to, demand for our products, operating results of our subsidiaries, market conditions, and other factors discussed in our most recent annual report on Form 10-K and other documents filed with the Securities and Exchange Commission. The company undertakes no obligation to update these forward-looking statements made during today's call. And with that, I'll turn the call over to John.

Thank you, Richard. Good morning. And thank you for joining us to discuss our first quarter results. I want to start by expressing our wish that you and your families continue to stay well and safe as we hopefully are closer to the end of this awful pandemic. We are pleased with our strong start to the year reflecting continued increasing demand for our customers across multiple segments. Revenue increased approximately 40% in the first quarter of 2021 as compared to the first quarter of 2020, with growth led by our defense production programs and our funded development programs. We now have more than 10 programs in various stages of development. While some of them may not contribute significantly to product revenue for the next year or two, this is by far the strongest defense program portfolio in COVID's history. They set the stage well for the coming years. We continue to aggressively pursue additional opportunities in the defense market and expect to make some announcement regard these opportunities in the coming months. Our R&D activities have been increasing in the past several quarters, reflecting the significant opportunities we're seeing in the augmented and virtual reality space. In particular, our customer-funded R&D revenue jumped more than 80% year over year. primarily because of the interest in our next generation of displays and display technology activities. Additionally, we continue to see strength in our enterprise market segments with strong volume growth in enterprise AR and 3D automated optical inspection systems. which are recovering nicely following a slowdown in the early days of the pandemic. The growth in these areas was offset by a decrease in the public safety sector as municipal government budgets were affected by the pandemic. Our defense revenues in the first quarter of 2021 increased by 42% compared to the first quarter of 2020. Our defense revenues continue to be driven by FWSI thermal weapons site and the F-35 fighter jet program. With that, these two defense programs, which are still quite early in their product phases, to continue as core component of the revenue in the coming years. We also remain on track to transition several more products to early low rate production this year. We expect the revenues beginning in the second half. As mentioned, Coping has over 10 defense programs in various stages of development. These programs are all using our micro-displays and are increasingly utilizing our specialized optical systems and recognized assemblies. We believe we're the sole source supplier for most of these programs. All our defense programs are either AR or VR applications. and Coping continues to explore additional AR and VR applications in defense, industrial and consumer areas. One example is in the first quarter of 2021, we announced the Coping Cyber Display, why QBGA displayed that like the modules and 8233 and more. These 230 driver ICs are now incorporated into the Canadian-based, Canada-based, shearwater wearable near-eye remote display driving computer. These products are near-eye display for underwater divers and provide critical dive information including depth, dive time, and Brivobo Ghez Lavros. This is just one example of the many areas of the market finding a solution to a need using Copen micro-display products. It's the only micro-display company in the world with product and technology solutions utilizing each of the leading micro-display technologies, OLED. Micro-LEDs, LCDs, as well as LCOF. Coping is nearly proficient to offer the right technology solution for the expanding markets and applications for AR and VR. As mentioned last quarter, we received our first production order from a U.S.-based customer and began shipment of our 720p panning-panning dual-stack ColorMax OLED micro-display with high brightness and brilliant color fidelity, combined with very low power consumption. This new technology represents a milestone for coping, as we exhibit a record 7,000 nits of brightness with a much lower power than previous technologies. This is a huge achievement for the OLED micro-display. We continue to ship our 720p micro-OLED display to our customer in Q1. Meanwhile, we continue to innovate and improve further our OLED technology to meet the market demand. In addition to our customer-based R&D activities, we have been increasing our R&D spending to meet the requirement of AR and VR. We believe this is a once-in-a-decade opportunity as the device world expands from handheld to hands-free devices. We're hoping we'll be ready to meet the market demand. Finally, we are highlighting our long history and leadership in wearables in a three-part webinar series entitled AR and VR, The Paradigm Shift, The Smart Glasses, Starts Now, hosted by InSight Media. The first segment, called AR VR, The Path, was held on April 27th and now is available on YouTube. It was very well received with over 500 registrants. And I must apologize. We were oversubscribed for the last event, which was unfortunately limited to 300 attendees. Therefore, not everyone who wants to attend live connected. The webinar, however, was recorded right away, and we did provide a link to the recording to all the registration people shortly afterwards. We have since increased the capacity for live participation in the next two sessions. In part two of this trilogy, to be held on May 20th at Bell Trout. We'll focus on the present. We will tackle the current state of the art, analyze the interesting success stories today, and concluding that the tipping point has arrived for some markets to begin mass adoption. In part three, to be held on May 26th, We'll focus on the future. We'll look to the next stages of ARVR smart glass products, offering a roadmap to develop products with the right form factor, technology, performance, features, and cost to succeed in this exciting transformation. We'll present our views of the next three to five years We started grading from the lessons we learned for all these past and present AR and VR products in the marketplace. We would then speculate how to get to the ultimate consumer-based smartphone. This would be the whole regret. Really, one can learn so much from what the defense system have been doing. Do join us in the next two webinars. You will not be disappointed. Registration links and replays can be found on our website as well as on INSIGHT website. In short, we're continuing to make great progress in executing our strategy and is showing our performance. The market conditions are favorable as AR and VR are gaining strong traction throughout the past year. We believe Copay is in a good position to capitalize on this growing trend. With this, I will turn this call to Rich.