Summary of Kopin (KOPN) FY Conference Call - August 13, 2025 Company Overview - **Company**: Kopin Corporation (KOPN) - **Industry**: Optical display solutions, semiconductor manufacturing - **CEO**: Michael Murray Key Points and Arguments 1. **Transformational Stage**: Kopin is currently in a transformational stage, focusing on application-specific solutions for tier one customers [5][8] 2. **Microdisplay Profitability**: No semiconductor manufacturer in the microdisplay sector is currently profitable, including major players like Sony, Samsung, and LG [6] 3. **Yield Challenges**: The yield rates in microdisplay manufacturing are significantly lower than in other semiconductor sectors, with 25-50% considered good [7] 4. **Partnership with Theon**: Kopin has formed a partnership with Theon International, a $1.7 billion corporation, to enhance production capabilities and profitability [9][11] 5. **Financial Impact of Theon Partnership**: The partnership is expected to add $15 million to Kopin's balance sheet, increasing cash reserves to over $40 million [13] 6. **ESG Strategy**: Kopin has initiated its first ESG strategy, which is crucial for attracting passive ETF flows and aligns with its recent inclusion in the Russell 2000 and 3000 indices [16] 7. **Innovative Microdisplay Technology**: Kopin has developed a new AI-enabled microdisplay that adjusts brightness and contrast dynamically, enhancing user experience [17][22] 8. **Defense Contracts**: Kopin is involved in significant defense contracts, including the Stinger missile program, which could lead to substantial revenue [27][31] 9. **Revenue Projections**: The company anticipates reaching $100 million in revenue by 2027-2028, with 25% expected from international markets [52] 10. **Soldier Borne Mission Command (SBMC)**: Winning the SBMC contract could yield $500-$750 million in revenue over ten years, contingent on successful prototype development [31][56] Additional Important Information 1. **Market Size**: NATO countries are projected to spend over $1 trillion on defense, with the U.S. Department of Defense spending $1.3 billion [41] 2. **R&D Orders**: Kopin is tracking $20 million in research and development orders expected in the current quarter, which is critical for revenue generation [46] 3. **Leadership Transition**: CFO Rich Schneider is retiring, and Eric Manns will take over, marking a significant leadership change [47] 4. **Quality Improvement**: The company has achieved a quality rate of 97%, indicating significant operational improvements [44] 5. **Patents and Technology**: Kopin holds six patents in AI-enabled microdisplays, positioning itself as a leader in this niche technology [42] This summary encapsulates the key insights from the conference call, highlighting Kopin's strategic direction, financial outlook, and technological advancements in the optical display and semiconductor industry.

Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $8.5 million, down from $12.3 million in the prior year, primarily due to government budgeting processes impacting orders [18] - Product revenues decreased to $7.5 million from $11.1 million in Q2 2024 [18] - Funded research and development revenues fell by $900,000 to $300,000, attributed to the completion of the CR3 medical headset development [19] - The net loss for Q2 2025 was $5.2 million or $0.03 per share, compared to a net loss of $5.9 million or $0.05 per share in Q2 2024 [21][22] Business Line Data and Key Metrics Changes - R&D expenses increased to $1.9 million, up approximately $100,000 from the previous year, with internal R&D expenses rising by $300,000 [20] - SG&A expenses were $7.9 million in Q2 2025, compared to $7.3 million in Q2 2024, primarily due to a decrease in legal fees [20] Market Data and Key Metrics Changes - The European nations and NATO allies are projected to spend over $1 trillion in defense spending, making this region critical for growth [6] - The partnership with Theon is expected to drive increased revenue and market share in Europe, Southeast Asia, and with NATO allies [5][6] Company Strategy and Development Direction - The company is focusing on application-specific solutions and has a strategic partnership with Theon International to enhance its market position [5][9] - A three-year strategic plan has been developed with Theon for revenue growth and technology sharing [9] - The company aims to capitalize on macro trends in defense spending and technology advancements [7][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q2 2025 did not meet expectations due to government budget uncertainty but noted that the order book is recovering [10] - The company is optimistic about future revenue recognition from delayed orders and expects significant R&D awards soon [11] - Management emphasized the importance of their technology in enhancing soldier safety and the evolving nature of warfare [16][47] Other Important Information - The company introduced its first phase of optical inspection, which is expected to save significant operating expenses and improve throughput [11] - The new AI-enabled neural display hardware prototype is a significant technological advancement for the company [12] Q&A Session Summary Question: Size of the opportunity with Theon - Management indicated that there are multiple opportunities, including internal spending on microdisplays and application-specific solutions like DayVAS and DarkWave [27][28] Question: Book to bill number for Q2 - Management confirmed a positive book to bill ratio for Q2, although it was lower than expected, with a significant amount of funded R&D orders anticipated [32] Question: Automation and gross margin advantages - Management reported that the introduction of optical inspection solutions is expected to yield operational expense recovery and further automation is planned for Q4 [36][37]

Financial Data and Key Metrics Changes - Total revenues for Q1 2025 were $10.5 million, a 5% increase from $10 million in the prior year [20] - Product revenues were $9.2 million, essentially flat compared to $9 million in Q1 2024 [20] - Funded research and development revenues increased by 37% to $1.2 million from $900,000 in Q1 2024 [20] - The net loss for Q1 2025 was $3.1 million or $0.02 per share, compared to a net loss of $32.5 million or $0.27 per share in Q1 2024 [22] Business Line Data and Key Metrics Changes - Cost of product revenues decreased to $7.6 million or 83% of net product revenues, down from $8.5 million or 95% in Q1 2024, attributed to improved manufacturing quality [21] - R&D expenses were $2.1 million, a slight increase from the previous year [21] - SG&A expenses decreased to $4.7 million from $7.2 million in Q1 2024, primarily due to a reduction in legal fees [22] Market Data and Key Metrics Changes - The company is focusing on defense as a primary market, with significant increases in global defense budgets due to rising geopolitical tensions [7][8] - The U.S. administration plans to spend $1 trillion on defense next year, with similar commitments from Europe, Japan, and Korea [8] Company Strategy and Development Direction - The company aims to achieve $75 million in revenue by 2027, with expected revenue for 2025 between $52 million and $55 million [10] - Strategic initiatives include the implementation of AI-assisted factory and process automation to improve manufacturing efficiencies [13] - The company is transitioning from being a microdisplay supplier to a trusted partner for leading defense firms, focusing on application-specific solutions [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a strong pipeline of opportunities and improvements in operations and manufacturing [16][24] - The company anticipates a stronger second half of 2025 compared to the first half, with expectations for increased orders and revenue [57] Other Important Information - The company announced approximately $28 million in new contract wins in Q1 2025, with a book-to-bill ratio of better than 2.8 to 1 [15] - The CR3 medical headset is entering full production, aimed at improving patient outcomes in surgical practices [17] Q&A Session Summary Question: Can you provide more detail on international opportunities? - Management highlighted Europe as a critical growth area, with significant spending and opportunities in the UK and Europe, followed by Korea and Japan [27][28] Question: What is the timeline for automation activities to impact gross margins? - Management expects new automation systems for quality control to be online by June, which should improve gross margins significantly [30][32] Question: Can you clarify revenue guidance for 2025? - Management indicated a conservative approach to guidance due to geopolitical trade issues but expects double-digit growth [36][38] Question: What progress has been made on Neuralink? - Management is working on a demonstrable neural display and expects to have updates in the near future [41][43] Question: What is the current quoting activity and order patterns? - Management noted improved order flow in Q2 after initial struggles in Q1, with several new orders expected soon [47][49]