Kopin Corporation

Good day, everyone, and welcome to the Copen Corporation's first quarter 2025 earnings call. Please note that this event is being recorded. At this time, I'd like to turn the conference over to Brian Prinevo, Investor Relations for Copen. Please go ahead.

Thank you, and good afternoon, everyone. Before we get started, I'd like to remind everyone that during today's call, taking place on May 13, 2025, 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 their 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's CFO, Rich Snyder, will review the company's first quarter 2025 financial results. I would now like to turn the conference over to Michael Murray. Michael?

Thank you, Brian. Good evening to everyone and welcome to our first quarter earnings call. I'm actually visiting customers and speaking at SID tomorrow in California, which is why our call is this evening instead of usually in the mornings. For our first call of the calendar year 2025, I'd like to take a few moments to discuss Copen's big picture opportunities. and how we see our business and landscape evolving over the coming few years. As a leading provider of the world's most advanced micro displays and application specific optical solutions for high performance and mission critical virtual reality and augmented reality applications, we have a unique and truly significant opportunity in front of us. While our products and technology can be applied to a variety of industries across the landscape, We've chosen to focus on a few, which we think will have the greatest growth opportunities aligned to our core competencies and provide the clearest path to profitability. The industry we initially narrowed our focus on is defense. We believe we are the only manufacturer in the world offering four different types of micro displays, which put us in a unique position to capitalize on macro trends across the globe and grow our business. Furthermore, Copenazan invented a fifth type of micro-display called neural display, which integrates human responses as feedback loops into the dynamic control of the display itself to optimize brightness, contrast, increase comfort, while reducing size, weight, and power consumption of currently fielded defense and consumer AR systems. To the increased global tensions, defense budgets across the globe are increasing significantly. at significant rates. In the United States, the administration has mentioned spending a trillion dollars on defense next year alone. Europe has also pledged to spend over a trillion dollars as well, while Japan and Korea are committing to increase defense spending as well. In short, we are seeing increased budget rates at all nations across the globe, while COPEN has experienced a higher rate and exponential increase in the volume of quote requests, bids, and research and development projects driving our pipeline of qualified and capturable opportunities into several hundreds of millions of dollars. We believe this shift provides us with increased global opportunities and a diversified pipeline for growth. During my recent visits to Korea, Taiwan, and Europe, it is evident that a significant technology refresh with regards to soldier vision systems, thermal weapon sites, and helmet-mounted displays is a priority for these nations specifically as well, since their ability to view tactical information, control drone movements, all while keeping their eyes on the battlefield to see their adversaries before they are seen is critically important to a positive outcome. This capability is highly sought after and it is called our DAVAS and dark wave technology. Now today, defense departments and contractors are looking for more than simple commodity products to plug into systems. They want application-specific solutions tailored to individual needs and products. This is where Copen has a distinct advantage. Customers want ergonomically designed systems that utilize custom optics and require less weight and less battery power. Whether the application is a thermal weapon site, a helmet-mounted display, or a high refresh rate display in armored vehicles, the goal is the same, to increase the effectiveness and safety of the soldier using it. We take that responsibility seriously, and that's one of the reasons we have focused on partnering with tier one defense contractors. And that's why we are the sole source provider of micro displays for several programs of record within the Department of Defense as a key provider of technologies built right here in the United States and or with our allies. With these advantages in mind, we aim to get COPEN to at least 75 million of revenue in 2027. This is an ambitious goal based on 2024 revenue of $50 million and expected 2025 revenue of between $52 and $55 million. We believe we can achieve this milestone with our existing products, our new technologies we are developing, production investments to increase throughput, and expected project awards we have high confidence in winning. Furthermore, we are working on several strategic developments with market leading and domestic firms in each of the highest growth markets, which we believe will greatly accelerate our growth and market penetration. We're also focusing much of our resource on the largest of opportunities in each region, with the largest clearly being the IVAS or SBMC program here in the United States and others like it. Within the United States, this is a $22 billion Army program and it's all encompassing from a standpoint of software, hardware, and networking elements. As warfare evolves and increases in complexity, having tools that deliver the right information quickly and intuitively becomes much more urgent. This is not only evident in the United States, but other countries are also investing in similar technologies which Copen can support. Beyond providing a technological superior product, we need to be consistently a higher quality supplier. We have made tremendous strides in this area and department, and our customers recognize this tremendous improvement we've made. Our initial actions to improve, streamline, and improve overall manufacturing were all part of our one Copen strategy, which we reorganized our Copen Virginia and Copen Europe teams to unify our focus, our strengths, and capabilities while reducing redundancies. We also formed new business development program management and quality teams. With our Fab Light strategy, we brought online new OLED and micro LED vendors to strengthen our source of supply for U.S. DOD applications while keeping our consumer supply strategy intact. This manufacturing strategy was positively validated due to the recent geopolitical trade and tariff issues we've seen in the market as of late. In 2025, To meet our growth and profitability goals, our top strategic initiative is the implementation of AI-assisted factory and process automation. Improving manufacturing efficiencies, increasing automation and reducing redundancies are critical areas of improvement for the company. We are making these improvements to increase our manufacturing capacity without significant headcount increases or decreases. Again, considering the recent tariff news and geopolitical tensions, It is important to note that our top three programs are built right here in the United States, and much of our active opportunity line will also be built here as well, whilst our NATO and European demands can be supported through our Scottish facility. This does not mean we are immune to tariffs, but we believe we remain better off than many companies and only have experienced minor tariff issues thus far. In the first quarter of 2025 we announced approximately 28 million of new contract wins and awards and our book to bill at the end of the first quarter was better than 2.8 to 1. Given the long-term nature of many of our existing programs and the contract wins so far in 2025, Our current pipeline is very strong, and it continues to grow with the recent addition of new customers, new research and development projects, and a broader application base, which is much, much healthier. As a reminder, several of our programs have congressional budget demands through 2030, and several of the program contracts we supply into are indefinite demand, indefinite quantity, or IDIQ, which allows for even greater revenue potential than we currently have on our order book. Now, I am very excited, if not more excited about our future at Copen today than when I first became CEO a few years ago. We have great people that are doing great work at the company with the improvements in our operations and manufacturing. We are much, much better positioned today than we were even just last year to win new contracts with new customers that demand the highest quality bespoke capabilities, and long-term partnerships. We have clearly moved from merely being a supplier of micro displays to a trusted partner to several of the world's leading defense firms. We are also now an integral semiconductor and optics technology partner on several defense programs that demand specific solutions worth hundreds of millions of dollars and are approaching even billions of dollars in total spend. Although unfortunate, increasing geopolitical tensions mean the world is not likely to become a safer place in the near term. But our products and our technologies can help make our soldiers and the soldiers of our allies safer, meaning more men and women in uniform will make it home. Furthermore, our CR3 medical headset is also entering into full production, which will help improve patient outcomes and the most difficult of surgical practices as well. We also continue to engage with select consumer companies who are interested in helping cope and manufacture and mature specific areas of our technology, which focus upon higher brightness and refresh rate displays and architectures than that of the current technologies in use today. Furthermore, our technology that advances our human in the loop or neural display platform, which we collectively believe will increase the adoption rates of current AR glasses due to its AI-enabled backplane architecture, which can also support OLED and micro-LED depositions, is gaining tremendous traction. Now, to summarize, the global market demand for COPEN and our current solutions has increased by hundreds of billions of dollars, and we are developing strategies to access and capture more of that market more quickly through partnerships, teaming agreements, and other more strategic activities Our fab-like strategy brings continuity and flexibility of supply, advantageous cost structures, and the ability to leverage technology-leading offerings to help us solve our customers' most difficult technology challenges. Our focus on AI-assisted automation in our factory, process, and business. will enable Copen to grow at a much quicker pace while keeping our OpEx at a more stable and less linear rate to increase production output, which will fuel greater profit margins on current and future products and services. Our one Copen initiative has reduced costs and redundancies, improved alignment and focuses our energies on growth markets. Our team is truly passionate about what we do, and we've been able to retain and attract the best talent in the world to help us achieve our goals. I'll now turn the call over to our CFO, Rich Snyder, to review our results from the first quarter in further detail.