Kopin Corporation

Good morning, everyone, and welcome to the Copen Corporation third quarter 2024 earnings call. Please note that this event is being recorded. At this time, I would like to turn the conference over to Brian Penineau, Investor Relations for Copen. Please go ahead.

Thank you, Operator, and good morning, everyone. Before we get started, I'd like to remind everyone that during today's call taking place on Tuesday, November 12, 2024, 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. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proven inaccurate, and there can be no assurances that the results will be realized. The company undertakes no obligation to update the forward-looking statements made during today's call. In addition, references may be made to certain non-generally accepted accounting principles or non-GAAP measures for which you should refer to the appropriate disclaimers and reconciliation in the company's SEC filings and press releases. Copen Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Copen's progress within the company's strategy. Following Michael, Copen CFO, Richard Schneider, will review the company's third quarter 2024 results. I would now like to turn the conference over to Michael Murray. Michael?

Thank you, Brian. Good morning to everyone and welcome to our third quarter 2024 earnings call. We'd like to take a moment to express our gratitude to all the veterans, both within and outside of our organization, as well as those currently serving in the armed forces. Their dedication and service are invaluable to COPEN's ongoing mission to save lives and enhance human performance through advancements in optical solutions. We are proud of the substantial progress we've made on our transformation plan, which is gaining momentum and achieving key milestones. We now project over 75 million in orders for 2024 and beyond, potentially the highest annual order total in our company's 40-year history. This order book includes repeat orders from existing customers, as well as significant new orders from both U.S. and international clients demonstrating our growth in revenue, customer base, and market reach. In the third quarter, we achieved $13.3 million in revenue, a 26% increase over Q3 2023, with continued sequential revenue growth. Defense products delivered $10.4 million in revenue, a 109% year-over-year increase. Notably, five new customers placed development orders, which we expect will drive multimillion-dollar production orders in the years ahead. given these are multi-year indefinite demand and quantity, or IDIQ, contracts secured by our customers. In defense, our order book has shown significant strategic progress. We reached the final production qualification milestone for our high-performance organic light-emitted diode on silicon display, designed for Collins Aerospace F-35 Lightning II helmet-mounted display system, or HMDS. As the sole source supplier of high-brightness AM LCD displays for this system, we are fulfilling a multi-year agreement that should continue on for several more years. Recently, we received a $2 million follow-on production order for these AM LCD displays, extending our backlog and preparing us for next-generation OLED on silicon micro-display production. We anticipate both display types will be in production for an extended period of time. We also secured a $1.3 million follow-on order for our Emerald micro-display module for a major weapons site product as part of a multi-year production program. This positions us for strong revenue growth, especially as our larger thermal weapons site program and subsequent production is expected to increase into fiscal year 2025. In the industrial market, we secured a $1.5 million follow-on contract for our near-eye thermal imaging system integrated into firefighters' masks. This system featuring a miniaturized AMLCD and optics within the face piece enhances safety and effectiveness for firefighters. Turning to our 3D AOI automated optical inspection segment, we launched our next generation SXGA FL-COS microdisplay system called the R15. MirTech, a leading provider of 3D AOI technology in South Korea, secured our first purchase order for this device. This affordable, compact solution positions us well to meet growing demand in Asia and globally. Additionally, we received a production order for our high-resolution 4-megapixel 2K SLM system, also for 3D AOI integration. With the global 3 AOI market projected to grow from 700 million, to 3 billion by 2030, Copen is positioned to serve various segments, budget sensitive with the R15, midrange with our SXGA model, and high resolution with the 2K-R11 model as well. In the medical market, our growth continues with another production order for the CR3 wearable surgical monitor from HMDMD. Supported by positive feedback from surgical equipment manufacturers, we expect adoption to increase as more surgeons try the CR3 through HMDMD's Tier 1 partnerships. Overall, our book-to-bill ratio has exceeded expectations, and we are negotiating additional substantial orders anticipated by year end. This progress reaffirms our strategy to focus coping on defense and high-performance integrated products. Notably, our new internal processes aimed at enhancing return on investment for internally funded research and development are showing promise and early results. Internal R&D investments have led to initial purchase orders and strong demand signals for our new products, which are robust, offer broader functionality, and command higher average selling prices due to the value they provide. Quality improvements also continue. Incoming inspection rates at our top customers reach 94% in Q3 and October as well, up from 86%. in the previous quarter, positively impacting product gross margins and customer satisfaction. We're making significant strides in quality and organizational evolution with more progress to come. As our quality standards continue to improve, becoming more stable and predictable, we also need to innovate our systems, design processes, and manufacturing workflows to meet the rising demand and higher volume production expectations. A new strategic focus for 2025 will be enhancing manufacturing and systems automation. Now, turning to other key initiatives, including our One Copen initiative, in response to increased defense spending in Southeast Asia, Europe, and NATO countries, we have expanded the scope of our European-based 3D AOI sales team. They now promote the full range of Copen products and capabilities to defense customers in Europe and Southeast Asia as well. Early indicators show this strategy is succeeding as we're seeing new opportunities and foreign customers entering our pipeline. One of our foundational strategic initiatives, the Fab Light strategy, remains on track. Copen continues to partner with multiple fabrication facilities across Asia, Europe, and the United States, specifically for U.S. DOD applications and our four display types. Our decision to strengthen OLED on silicon and our micro LED capabilities for U.S. Department of Defense applications has been proven timely, given the possibility of further supply chain security requirements and potential tariffs under the new administration. Additionally, we're collaborating closely with government and industry partners to build a long-term, higher volume, and more innovative manufacturing approach within the United States. Now I'd like to highlight a few additional notable accomplishments from the quarter. This quarter we expanded our medical technology portfolio by introducing proprietary high resolution fast spatial light modulators, or SLMs, for use in fluorescent super resolution microscope systems for biomedical research. These advanced SLMs enhance image resolution, often down to the molecular level, significantly advancing research capabilities at leading biomedical institutions worldwide. In the defense sector, we partnered with Wilcox Industries on the Fusion Claw, a cutting-edge head-borne information system offering integrated day and night heads-up display solutions. This partnership is the cornerstone of our iVAS Now strategy, which introduces an integrated visual acuity system for warfighters supporting day and night capabilities compatible with current night vision goggles and helmet-mounted systems. With millions of night vision goggles in use today, this solution provides immediate market potential by enhancing telemetry and thermal imaging in a heads-up configuration, improving situational awareness. Additionally, at AUSA, we were featured in the Kinetics Suite to showcase our neural display technology platform. Neural Display is a sophisticated OLED or micro-LED hardware and software system that includes embedded sensors for eye tracking, position, and gaze detection with the ability to process this tracking data in real time through Copen's proprietary AI-powered software within the display's backplane. This real-time data adjusts, optimizes user experience in high-stakes environments. The platform has now reached alpha testing marking a major milestone in the development of our neural display architecture. We believe this display system will be an ideal fit for the next generation of defense visual augmentation systems. It also has attracted significant interest from consumer spatial computing manufacturers thanks to its ability to reduce size, weight, and power consumption while maintaining high image quality, eye and pupil tracking, and dynamic controls. We are extremely excited about this new technology Currently, we are collaborating with several defense and consumer companies on innovative design approaches, software integration strategies, and exploring potential new business models. As we look to the future and see our business fundamentals strengthening, we're experiencing favorable market dynamics in the AR and VR sector that align with our mission and technology roadmaps. Additionally, geopolitical factors and the new administration have created strong tailwinds for our business. Given these factors, we're increasingly optimistic about our financial trajectory for 2025 and beyond. With that, I'll now turn the call over to our CFO, Rich Snyder, to review our results from the third quarter in further detail. Over to you, Rich.