Kopin Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 9 speakers on the call.

Operator

Good morning, everyone, and welcome to the Kopan Corporation Second Quarter 2024 Earnings Call. Please note this event is being recorded. At this time, I'd like to turn the conference call over to Brian Prenevo, Investor Relations for Kopin. Please go ahead.

Speaker 1

Thank you, Cindy. Good morning, everyone. Before we get started, I'd like to remind everyone that during today's call, taking place on Thursday, August 8, 2024, we will be making forward looking statements as defined in the Private Securities Litigation Reform Act 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 ks and other documents filed with the Securities and Exchange Commission.

Speaker 1

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 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. Kopin Corporation's Chief Executive Officer, Michael Murray, will begin today's call with an overview of Kopin's progress within the company's strategy. Following Michael, Kopin's CFO, Richard Snyder, will review the company's Q2 2024 financial results.

Speaker 1

I would now like to turn the call over to Michael Murray. Michael?

Speaker 2

Thank you, Brian. Good morning to everyone and welcome to our Q2 2024 earnings call. I'm going to spend much of the time on this call updating you on the strong progress we made operationally on our strategic initiatives. I'm very proud of the significant progress we are making on our transformation plan. We have received over $55,000,000 in orders for 2024 and beyond, including repeat or follow on orders from our existing customers and programs and importantly, orders from new customers within the U.

Speaker 2

S. And now Europe, which demonstrates that we are actively expanding our revenue and customer base. The 2nd quarter was highlighted by continued sales momentum with $12,300,000 in revenue. Notably, our products for defense applications delivered year over year growth of 106% to $10,400,000 This progress has been validated and validating our strategy to reset the course within Kopin to focus on defense products that we began last year. Every month in Q2 and in July, incoming inspection rates at our top customers reached 97%, up from 86% the previous quarter, which positively and significantly impacted product gross margins.

Speaker 2

We now expect Q3 revenues to increase cautiously above analyst guidance and we are expecting a much stronger second half of 2024 than the first half. During the quarter, we demonstrated combat use helmet worn daytime and nighttime readable heads up displays or HUDs. These concepts during the Special Operations Forces Week or Soft Week in Tampa, Florida. We also expanded the focus of our 3 d AOI sales team based in Europe to sell the full breadth of Kopin products and capabilities to European and Southeast Asian defense customers. This reorganization has already begun to produce orders and increased opportunities.

Speaker 2

Now just to recap our 2nd quarter order activity, 5 new customers placed development orders, which when completed, we believe will fuel multimillion dollar per year production orders and significant revenue growth. From an international perspective, we received a 1200 unit production order for OLED microdisplays for the Indian Armed Forces with deliveries taking place over a 6 month time span. Now from a domestic perspective, we received a development contract from a new defense customer to support the integration of our OLED microdisplay with a power efficient, low latency, digital night vision sensor referred to as PEB NVIS for use in next generation warfighter integrated visual acuity systems also known as IVAS. Furthermore, the U. S.

Speaker 2

Army awarded Cope in a Phase 1 SBIR contract to research optical approaches for visual augmentation systems to improve performance and lessen cognitive dissonance and nausea. This is critical research for the military and we are honored to be able to be trusted to do this work. The U. S. Army also awarded Kopin a contract to develop a high resolution eyepiece assembly for the new Commander's Launch Assembly or CLLA, used in next generation short range interceptor or NGSRI system.

Speaker 2

The NGSRI system and program was won by Lockheed and it is expected to replace over 100,000 Stinger missiles and launchers. These new projectiles are expected to be faster, drone enabled and have radio frequency jamming capabilities. Copenet has been selected to design, develop and produce the targeting eyepiece for the new launchers. We believe the program will require just as many launchers as there are missiles. When production starts in 2027 and we estimate this contract will provide Kopin tens of millions of revenues in peak annual production.

Speaker 2

Now I would like to remind folks of some of the other notable items that we have been working on in 2024. Copen has developed its integrated visual acuity system or IVAS now solution, which allows war fighters both a night and daytime solution today that works with their currently fielded systems like the current versions of night vision goggles or NVG goggles and popular helmet worn systems like those from Wilcox. This allows Cope an immediate access a significant market potential. There are millions of NVG goggles in use today, which require the additional information sources to be visible through the goggles during operation. Copeland's OLED solutions provide the real time digital overlay to the analog world in a unique, easy to use, lightweight, adaptable and lesser cost than the high end systems, which are cost prohibitive.

Speaker 2

We've also demonstrated our Neural Display, a highly advanced OLED bidirectional display that includes embedded sensors to track eye movement, position and gaze while simultaneously processing the tracking data in Kogan's proprietary software integrated within an AI engine that resides in the back display. The system adjusts the displayed information in real time to optimize user experience and performance in high stakes use cases. This innovative software platform has now reached the alpha testing stage of development, marking a significant milestone in our neural display development efforts. We believe that this display system will be a great fit for the next generation of defense visual augmentation systems, and it's also receiving significant interest from consumer spatial computing manufacturers due to its ability to reduce size, weight, power consumption, while still offering a great image quality, eye and pupil tracking and dynamic image control. In addition to our efforts, Kopin is also benefiting from overall market trends.

Speaker 2

Our pipeline of opportunities is being fueled by U. S. DoD refreshing its current capabilities, investing in new targeting and next generation of visual acuity systems, and now NATO pushing member countries to spend the required 2% of GDP required by the membership mandate. Furthermore, consumer, medical and industrial companies are reevaluating their spatial computing architectures and realizing that not only do customers want a great display, but they're demanding reductions in size, weight, power consumption and cost. We anticipated these market signals with our patented AI enabled neural display architecture.

Speaker 2

As a result of this strategy, focus and the reorganizations, we believe our opportunity pipeline has now expanded over $500,000,000 of which $350,000,000 of the total resides within the defense market and has high probabilities for contractual awards, while the remaining $150,000,000 dollars of new opportunities are in other markets and in the early stages of formation. On the expense side of the ledger, in January, we launched our One Koppen initiative to enhance synergies, expand capabilities, gain efficiencies, decrease costs and increase accountability across our three sites. As a reminder, that's Westborough, Massachusetts, Reston, Virginia and Dalgety Bay, Scotland, which previously operated autonomously. We have made substantial progress against our goals, including sharing engineering resources, initiating purchasing efficiencies and cross training our sales organizations. Having reviewed our quarterly progress, let me turn to the longer term and our strategic initiatives, which are the foundation of our future success.

Speaker 2

Turning to our first strategic initiative, building the backlog. Our backlog remains ahead of plan for the year thus far, and we are pleased with the new customer adoption, which will bring a stronger, wider and deeper foundation for Kopin's long term growth. Based on our current purchase orders, Kopin could potentially ship triple the volume of weapon sites as 2023 within the calendar year of 2024, while our quality rates continue to improve and are stabilizing at the targeted levels. With respect to our fixed and rotary wing aircraft orders, we have recently announced that our OLED display reached the final milestone of production readiness, which is a significant milestone for Kopin and our fab light strategy, which supports the need for a U. S.

Speaker 2

DoD approved deposition source for this technology. This highly customized display will run concurrently with the current AMLCD offering within pilot helmets for several years, potentially doubling our revenue in that application space. Our monochrome microLED product for cockpit heads up display applications will also enter its next phase of production shortly as well. Now turning to our armored vehicle program. As discussed previously, the SEP-four upgrade was canceled.

Speaker 2

However, we reaffirm that our weapon site program will continue as planned and be added to previous upgrade packages and new developments alike. We are pleased to report that part production approval process or PPAP program continues to progress on schedule and we are now receiving early forecast for production demands from General Dynamics. We are unable to share these early volume estimates due the sensitivities of that program. However, the outlook is starting to form to our original expectations. As a reminder, Kopin will supply 4 integrated weapon site systems per vehicle.

Speaker 2

The system sells for over $10,000 each and our understanding is that there will be that there are over 10,000 vehicles in service today. We expect to retrofit 10% to 20% of these vehicles while also being designed into new versions, also making this a significant revenue generation program for many years to come. We've also increased our presence in the medical and biomedical space with design wins at the world's most advanced laboratories, universities and hospitals, which are using our ferroelectric liquid crystal on silicon displays, as we announced previously. Our CR3 headset also begun to receive interest as we are now supporting production orders for customers who are putting the product through their testing and through their paces. We are hopeful to announce a new strategic partner in this space later on this year, which will greatly accelerate our go to market plans and product adoption.

Speaker 2

Lastly, I spoke about our Stinger missile replacement order, which is significant for Kopin and there are several other opportunities like it. We understand the U. S. Army will seek to replenish and replace over 100,000 missiles and we believe that they may also refresh the launching systems for other surface to air projectiles, which are active opportunities we are pursuing both in the United States and in NATO countries. Over the long term, we believe Kopin has the technology, product solutions, customers and confirmed contracts to grow yearly revenues to $100,000,000 or beyond.

Speaker 2

We are now deeply embedded within several U. S. And NATO countries' Department of Defense programs that have multi year demands of reoccurring revenue scheduled out to 2,030 in some programs. We have a strong pipeline of qualified opportunities, newly received research and development orders and a solid production contract, which offers a clear line of sight to increase revenue in 2024 over 2023, while setting the expectation for further double digit revenue increases in 2025 compared to this year with the aim to achieve and sustain over $100,000,000 in yearly revenue in the next 3 years or so. I'll now turn the call over to our CFO, Rich Snotter, to review our results from the Q2 in further detail.

Speaker 2

Over to you, Rich.

Speaker 3

Thank you, Michael. Turning to our financial results for the Q2. Total revenues for Q2 2024 were $12,300,000 versus $10,500,000 for the prior year, an 18% increase year over year. Product revenues for the Q2 ended June 29, 2024 were $11,100,000 dollars compared to $6,000,000 in the Q2 of July 1, 2023. The increase in product revenues is the result of higher defense product revenues, which increased by $5,400,000 year over year.

Speaker 3

In the Q2 of 2024, funded research and development revenues were $1,200,000 a decrease of $2,700,000 as compared to Q2 2023 due to the completion of several programs. Cost of product revenues for the Q2 of 2024 was $8,700,000 or 79% of product revenues compared to $5,700,000 or 95 percent of net product revenues for the Q2 of 2023. The decrease in cost of product revenues was the result of a decrease in expected program costs because of lower estimate of rework costs. We estimate that the lower estimated rework costs improved gross margins by approximately $1,300,000 for the 3 months ended June 29, 2024. R and D expenses for the Q2 of 2024 were $1,800,000 compared to $3,100,000 in the year ago quarter.

Speaker 3

This was primarily due to a decrease in funded R and D expense of approximately $1,500,000 on U. S. Defense programs that were that we previously noted were completed, partially offset by an increase of $200,000 in internal R and D expense for process improvement. SG and A expenses were $7,300,000 in the Q2 of 2024 compared to $6,500,000 in the Q2 of 2023. The increase was primarily due to an increase in legal fees of $1,200,000 partially offset by a decrease in credit loss expense of 200,000 dollars Total legal fees associated with Blue Raiders expense in the Q4 of 20242023 were $3,100,000 $1,900,000 respectively.

Speaker 3

Other expense includes approximately $700,000 $3,300,000 of impairment losses on equity investments for the Q2 of 20242023. Turning to the bottom line, the net loss for the Q2 of 2024 was $5,900,000 or $0.05 per share, compared to a net loss of $8,200,000 or $0.07 per share for the Q2 of 'twenty 3. The amounts discussed above are based on current estimates and listeners should review our Form 10 Q for the quarter ended June 29, 2024 for any possible changes and of course any additional filing. And with that, I'll turn the call back over to Michael for closing remarks.

Speaker 2

Rich, as evidenced in our Q2, our focus remains strengthening our record order book, pushing on time and full rates higher, cost controls and making the strategic investments in products and people, which in the aggregate will improve cash flow and provide long term sustainable profitability and growth. We are focusing on bringing our customers up the value chain to gain more share of their system and spending. Furthermore, we continue to add new strategic partners and customers to work with and remain focused on new opportunities and projects which support our strategic plan. To this end and due to our focus upon application specific strategies, our qualified opportunity pipeline has now grown exponentially in the past few quarters due to recent geopolitical issues and increased sovereign and foreign NATO spending. We expect to continue to add new customers, partners and projects, which will not only add to our order book, but fuel larger returns in the future as these new projects move into full rate production.

Speaker 2

I'd like to thank everyone for your time today and for showing interest in Kopin. I'd like to thank our employees, customers and stakeholders for their continued hard work, support and dedication. And with that operator, we'll now offer time to take some questions.

Operator

Our first question comes from Jaeson Schmidt of Lake Street. Go ahead please.

Speaker 4

Hey guys, thanks for taking my questions and congrats on the really strong momentum in Q2. That's really where I want to start. I mean, obviously, defense was up strongly. Curious if that strength was broad based or driven by 1 or 2 programs?

Speaker 2

Great question. And thanks, Jason. Thank you for your write up recently. Well done. It was across the board really.

Speaker 2

Our thermal weapon set program obviously leads the way in terms of total revenue. However, we have seen increases across the defense market, whether it's weapon sites or projectile thermal imagers and eyepieces to rotary wing and fixed wing orders. So we see across the defense marketplace an increase in spending. And for Kopin, I think one of the big things to take away from this call is now we're getting more interest and focus from European companies and customers. And we're very much in those conversations now and that spending will be significant.

Speaker 2

So it's across the board.

Speaker 4

Okay, perfect. And then looking at sort of the gross margin line, obviously a nice snap back here in Q2. How should we think about gross margin trending the rest of this year?

Speaker 3

It should continue to trend up. So I think you have to adjust the current gross margin by the 1.3. As you know, or maybe you don't, in our military products, we use a percent completion. And so when we have to figure out the total cost of program, we estimate rework costs and so on. But as Michael indicated, our quality has gone up significantly over the last 12 months.

Speaker 3

Rework costs have come down, leading to gross margin expansion. And you do get somewhat of a little catch up as you lower your estimates on a total contract. So that's why we gave you the number, the 1.3, the little catch up in there. So you really ought to deduct that, start from that point and then move forward and they should continue to expand.

Speaker 4

Got you. And then just last one for me and I'll jump back into queue. Just a clarification on your commentary regarding Q3. Did I hear correctly that you think it could be up sequentially?

Speaker 2

We do. We do.

Speaker 5

Okay, perfect. Thanks a lot guys.

Speaker 2

Jason.

Operator

The next question comes from Glenn Mattson of Ladenburg Thalmann. Go ahead please.

Speaker 5

Hi guys. Thanks for taking the questions and congrats on a great quarter. First, you mentioned the Ives Now strategy, you talked about the night vision goggle piece. I think in the past, you talked about having completed that product and shipped it and kind of or shipped it for testing and we're kind of starting to get a feel for uptake or and whatnot. Can you give us any expansion on that?

Speaker 5

Has there been any feedback yet from the purchasers?

Speaker 2

So we have 2 different partners, 3 actually different partners for that technology, which we call IVAS now. To recap, it's a daytime product as well as a nighttime product for night vision goggles. And we partnered with a company called Wilcox Industries who owns about, I think, 60% of the U. S. DoD helmet market.

Speaker 2

And I think they're pretty significant worldwide actually. We partnered with them. We're working with them to productize those 2 technologies as well as another partner and the U. S. Army.

Speaker 2

So that's ongoing, Glenn. We do have a feedback loop that we're listening to and developing those technologies for production. We do expect them to enter production in 2025, and we believe we'll have immediate revenue. How much revenue? We're still trying to figure out because this is a new entrance.

Speaker 2

But the key point here is that these technology will work with what the soldier has in their pack and on their head today. So there's no new adoption rate that needs to happen in terms of connectivity or what have you. So it's a pure SAM or serviceable available market entrant that we can have revenue for next year.

Speaker 5

Great. That's helpful. Curious on the armored vehicle program, the PPAT that you're working through. I believe in the past you've alluded to either in prior calls or in maybe product demo days or something, but along the way you've talked about the ability to use that technology for consumer applications in the auto space in particular. Maybe perhaps could you expand on that and just give us an update?

Speaker 2

Sure. Great question. So, yes, we have received inbound requests from 2 electric vehicle manufacturers here in the United States that are looking for a very high refresh rate, liquid crystal on silicon device that's automotive qualified. And that's what we developed for General Dynamics under the PPAP program. What a PPAP is, is basically an automotive quality standard that you need to have for any moving vehicle in the United States.

Speaker 2

But once you have it, Glenn, you can then sell that product into other automotive applications. Now we're not signaling that we're going to get into the automotive market right now, but we will have an automotive qualified ferroelectric liquid crystal on silicon device available for sale. And we're getting pulled from the market to have conversations about it. And it will be automotive qualified. So it's something we're monitoring.

Speaker 2

We are getting some inbound customer requests to have conversations for an in cabin application for liquid crystal on silicon. So, it's something that we're considering very carefully. But the one thing I will say in automotive, in my experience from Analog Devices, you have to have great quality, just like in defense, you have to have great quality. That is how you make money in automotive and defense. And we're gaining confidence that that's something that we could potentially do in the future.

Speaker 2

So, great question. Hope that helps.

Speaker 5

Yes, very helpful. One more product one and then a quick model one. But the product one on the 3 d AOI and some of the other industrial stuff that's been that market has been down for a while for you guys now. Is there outlook for a bounce back there at some point? Yes.

Speaker 2

Due to the geopolitical issues in China, specifically where many of our top 3 d AOI customers are as well as Korea, The geopolitical issues with Chips Act and EVs moving around has really hurt that business. We do see it rebounding shortly and marginally, quite frankly. But we also have been working on a new product to introduce into that market that's a little bit lower cost that

Speaker 3

I think will put us in

Speaker 2

a better position to gain more traction. And we're also seeing some uptick in Europe from the 3 d AOI customers there. So right now, as we sit here today, the 3 d AOI market for us is somewhat de minimis. So anything that we have next year is just complete upside for the company at this point.

Speaker 5

Great. It's helpful. And Rich, just quick on the sales and marketing, what should we bottle now post the trial? I've had a number that I thought that since it was going to come down a little faster, but what should we think about now that all that kind of noises we're moving through that or whatever?

Speaker 3

So, this we hope knock on wood is the last this being Q3, the last tough quarter of expense. We mentioned before we filed motion 50 whatever they're called to the judge explaining why we think that the verdict doesn't make any sense. And so all of that work has been done in July August. And now we're just waiting for the judge. And depending on how that goes, we may or may not appeal.

Speaker 3

If it goes to our favor, obviously, we won't. Do we have to, I'm told the actual appeal process is very inexpensive relative to the amounts that we've been spending. So, we think once we get through this month, again, knock on wood, the expense should drop dramatically.

Speaker 5

And what so what would a norm like assuming no legal, what would the sales and marketing number be if you had nothing or ballpark kind of?

Speaker 3

Yes. So as I mentioned in my prepared remarks, in the Q2 of 2024, we spent 3,100,000

Speaker 5

dollars

Speaker 3

or we had $3,100,000 of expense associated with the Blue Radios. Yes. Okay. Great. Thank you.

Speaker 3

So if you just break that down, you're down to 4,000,000. Yes. Okay.

Operator

Next question comes from Matt Sheerin of Stifel. Go ahead please.

Speaker 6

Good morning guys. This is Victor on for Matt. To follow-up actually on the Blue Radius lawsuit, do still plan to fund any damages through the sale of assets or IP? And so kind of how is that process going?

Speaker 2

Hey, Victor. Yes. So we are actively pursuing sales of some of our assets specific to investments that we have in other firms. We have made pretty significant progress in that area with signed term sheets, etcetera, but we don't have cash in the bank just yet. So we're not reporting on it.

Speaker 2

But we are making some pretty good progress there and it's several $1,000,000 But again, until the cash is in the bank, we're not going to report on it, but we are making progress.

Speaker 6

Got it. Thank you. And then just on the consumer segment, it looked like you guys didn't record any revenue in the quarter. Should we just continue to expect a little to no contribution through the year? And also, I guess, what kind of drove the no revenue in the quarter?

Speaker 2

Consumer, I think, is going to be de minimis throughout this year. We are going to see some sample orders, I believe in the next couple of quarters. And then we are negotiating in a couple of areas, some funded research and development with consumer companies and that takes a long time, taking much longer than we expected on the consumer front. But we are working with several multinational companies to develop those potential contracts for funded research and development specifically.

Operator

Our next question comes from Kevin Dede of H. E. Wainwright. Go ahead, please.

Speaker 2

Yes, that's what I was afraid of. Short,

Speaker 7

the I think the thing that's most curious to me is the Abrams cancellation. I was wondering if you understood why and whether or not there might be a replacement behind it?

Speaker 2

Well, so for us, Kevin, the SEP-four upgrade was canceled by the U. S. Army. And there are several reasons why. And but essentially, our program will still continue.

Speaker 2

The reason why our program will continue is the Cope and weapons site reduces size, weight, cost and improves lethality. So our program will continue, but the SEP-four upgrade was canceled, I think, due to feedback from the folks in Ukraine, some of the other issues that that armored vehicle is going through and also the request from the Army to have a new version of that vehicle by 2,030, which we're also engaged on right now. So our weapon site will still continue, but that upgrade package has been canceled and our product will be available through the other upgrade packages as well as for the new vehicle program that we're expecting to see out in 2,030. So we continue on, but the SEP-four upgrade was canceled just due to feedback from customers. That's my understanding.

Speaker 2

No, I appreciate the color. Thank you, Michael.

Speaker 7

And have they offered you development money

Speaker 2

for that or is that pretty much off the shelf product too at this point? If I understood your question, Kevin, you're coming in and out. But yes, the current contract that we have with Lockheed is a development contract and we're developing the IPs for the launcher under that contract. Production will follow thereafter. The development contract is around $1,500,000 roughly speaking.

Speaker 7

Okay. Fair enough, gentlemen. Thank you. I appreciate

Speaker 5

the

Speaker 3

effort

Operator

Our next question comes from Jeffrey Bernstein of Silverberg Bernstein Capital. Go ahead please.

Speaker 8

Hi, good morning guys. It's a nice progress in the quarter here. Just a couple of quick follow ups. On the medical side, I think it sounded like you were talking about having a larger distribution partner coming in. Can you just flesh out what you were saying there?

Speaker 2

Sure. So our go to market strategy is very unique in that market. We can't expel our own resources to call surgeons and they're basically going to white label our CRT. Surgeons and they're basically going to white label our CR3 headset and sell it as their own. So, we have active negotiations ongoing right now.

Speaker 2

We're at the term sheet level. We're hopeful to announce that this year. And that partner, I think is either 1 or 2 in that marketplace from a standpoint of overall revenue and market penetration. So that's our go to market strategy there for the simple fact that we don't want to expel our own resources to call on hospitals and surgeons and what have you. So, we'll have a partner that is already in that space and has a delivery channel and distribution channel, and they'll white label our technology and sell through.

Speaker 2

So, we're hopeful to have that announcement very shortly.

Speaker 8

Fantastic. That's great. And then just wanted to clarify on the F-thirty 5. Can you just talk about the sequence of what's going on there with the advanced displays that you're developing? And I think you talked about it resulting in a larger revenue opportunity.

Speaker 8

I just wanted you to flesh that out.

Speaker 2

Sure. So it's basically four lines of technology. Our first, everyone knows we ship our current AMLCD technology into the helmet. We announced finally that we are now production ready and entering the last phase, which is production of our OLED display. And that is something that we've been working on for many years.

Speaker 2

And Kopin was the only company that was able to actually meet the requirements and the full specification for that application. So very proud of the team and also the transition to our U. S. DoD friendly deposition partner took over a year and a half. So great job by that team.

Speaker 2

So those two lines of business will continue to run concurrently for several years, at least 3, we believe, or more. Also, we have our microLED line of business that we're bringing up in terms of our monochrome display, which is now also reaching the production readiness level that goes into a different application within the aircraft. And then we still have ambitions around our micro LED color program, albeit that's we're struggling with that currently as is everybody in the world to create a very strong color microLED. So those are the four lines of business, microdisplays for our fixed wing aircraft. Whether it's F-thirty 5 or not, those technologies are being uptaked into other planes by the way.

Speaker 2

We're seeing some planes in the UK and NATO countries that are also uptaking that technology through our great customer in Collins and others. So, that's where we're at with that business.

Speaker 8

Got you. And then the revenue increase is part of the addition of a new application within the airframe?

Speaker 2

Exactly right. Yes. So we have our helmet business and we also have a heads up display light engine, which is the micro LED. So it basically compounds if you think of it that way. Our current AMLCD business will continue to ship OLED filters on top of that, microLED on top of that, and they seem to be around the same amount of revenue per year, around $3,500,000 per year.

Speaker 2

So if you do that simple math, you're into the $6,000,000 to $9,000,000 mark per year starting next year for that application space.

Speaker 8

Got you. Okay. And then just wanted to see if you could provide any additional detail on the rotary craft helmets, which also took quite a while to get to production, I guess, but it sounds like you're in production now.

Speaker 2

We are, in some cases. There are other programs that we're developing for our customer, Elbit. As you can imagine, Elbit has been distracted of late of what's going on within Israel. So that program is behind for that reason only, but we do see them catching up and we are in active negotiations to bring that technology to market and into production. And there's several other iterations of display architecture for rotary wings, specifically being the Chinook and the Apache that we're working with Elbit on.

Speaker 2

So we wish them all the best and hopefully they're safe and we look forward to working with them getting that into production over the course of the second half here.

Speaker 7

That's great. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Michael Murray, CEO for any closing remarks.

Speaker 2

Thank you folks. Thank you for your questions, your interest and your focus on Kopin. We look forward to delivering our results in the second half here and we hope you all have a great day. Thank you for joining.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Kopin reported Q2 revenue of $12.3 million, an 18% year-over-year increase, led by a 106% jump in defense product sales and improved gross margins from higher incoming inspection rates.
  • The company has accrued over $55 million in new and follow-on orders for 2024+, including repeat U.S. business and inaugural European clients, and expects Q3 revenue to exceed guidance with an even stronger second half.
  • Major defense awards include a 1,200-unit OLED microdisplay production order for the Indian Armed Forces, IVAS development contracts for enhanced night-vision integration, a Phase I SBIR optical research grant, and an eyepiece assembly contract for Lockheed’s NGSRI missile launcher.
  • Product innovation milestones feature combat helmet-worn HUD demos at SOF Week, the IVAS now solution for existing NVG systems, and the Neural Display eye-tracking OLED entering alpha testing, alongside forthcoming OLED and microLED displays for fixed- and rotary-wing aircraft.
  • With its One Kopin cost-synergy program underway and a qualified opportunity pipeline exceeding $500 million—$350 million in defense—the company targets sustainable profitability and aims to surpass $100 million in annual revenue within three years.
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