Kopin (KOPN) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

Date

Tuesday, May 12, 2026 at 8:30 a.m. ET

Call participants

- Chief Executive Officer — Michael Murray

- Chief Financial Officer — Erich Manz

Need a quote from a Motley Fool analyst? Email [email protected]

Full Conference Call Transcript

Michael Murray: Thank you very much, operator, and good morning to everyone, and welcome to our first quarter 2026 earnings call. The first quarter and subsequent weeks marks one of the most exciting stretches in Kopin's history. We continue to grow our defense order book across the United States and Europe. We also advanced our MicroLED technology platforms and announced a strategic collaboration with Fabric.AI that we believe meaningfully expands the long-term opportunity set and sustainable acceleration of revenue growth for Kopin. Today, I'll walk you through 3 areas: first, the Fabric.AI collaboration and the launch of our jointly developed Neural I/o optical interconnect technology for AI infrastructure.

Second, our continued momentum across all global defense markets, including new orders our entry into first-person viewer drone technologies and the major thermal imaging follow-on contract awarded subsequent to quarter end; and third, our strategic investments, including bringing OLED microdisplay manufacturing in-house at our Westborough headquarter facility here in the United States and how we're positioning the defense business for the long-term exponential and sustainable revenue growth at higher profit margins. First, let me start with the most consequential announcement we have made this year. Recently, we announced a strategic collaboration with Fabric.AI, an AI infrastructure development company, building the advanced core capabilities for AI factories that power large-scale artificial intelligence workloads.

Together, Kopin and Fabric.AI are joining development of a new product family we call Neural I/o that is designed to dramatically increase bandwidth speeds, decrease power consumption and importantly, lower overall operational costs of currently operating data centers and new data centers alike. Neural I/o is built on Kopin's proprietary MicroLED technology and our patented bidirectional neural display architecture. What we have done is repurpose programmable MicroLED pixels as ultra-high-speed optical transceivers, devices that move data at extremely high bandwidth using photons of light instead of electrons traveling through copper wires. This matters for one simple reason. Today, data center equipment and GPUs relies on dense copper interconnections to talk to each other.

And those copper interconnections are now the binding constraint on AI data center performance and power consumption. AI factories are running into the limits of what copper can do, both in terms of bandwidth and in terms of the energy required to push data and cool the systems. Neural I/o is designed to break through those limits. By using each MicroLED pixel as a high-speed optical transmitter, we are designing chip-to-chip, board-to-board and rack-to-rack communications that target the same functional outcome as copper while consuming a fraction of the power.

To use the words of Matt Kimball, principal analyst at Moor Insights and Strategy, well, the ability to enable connectivity that delivers the full throughput of an accelerator without taxing the power budget has been a persistent challenge in the industry. And Kopin and Fabric.AI's Neural I/o built on MicroLED technology presents a unique and compelling value proposition. Moreover, this marks a completely new era in data transmission, bandwidth and designing of electronic systems and [indiscernible]. Several recent articles estimate that the AI infrastructure optical transceiver market is expected to reach between $69 billion to $90 billion by 2030.

Of that total spending, the United States Department of Defense and Government Systems is the second largest consumer of this technology behind the traditional hyperscaler markets. This is why Kopin and Fabric.AI decided to focus on each of these individual markets separately. This relationship was forged with a clear intent of relentless focus on addressing this massive market in the right ways with the right people to promote exponential and profitable growth with the proper resources required. Kopin will support the absolute and clear requirements of the United States Government and Department of War for U.S. production of AI chips and chipsets.

With our U.S.-based MicroLED production line, we are installing as part of our Industrial Base Analysis and Sustainment Act Award, or IBAS award, this custom design production line will support the Neural I/o family of chipsets for the United States Department of War and government customers. Fabric.AI chipsets and our new color MicroLED products for programs like soldier-borne mission command and many others will also be produced on this production line, and I will expand on that more later.

Under our agreement with Fabric.AI and in addition to the $15 million initial purchase order to fund the demonstrable chipset, which we expect to be completed by the end of 2026, Kopin owns 19.9% of Fabric.AI and Kopin is their exclusive manufacturer of Neural I/o chipsets. The collaboration combines our deep expertise in MicroLED materials, process development, yield optimization and manufacturing with Fabric.AI's system-level design and go-to-market focus on hyperscaler AI infrastructure. We believe this is a true technology partnership. Kopin brings the enabling hardware. And together, we are building an infrastructure layer that AI data centers will require to scale for years to come.

In addition to our 19.9% equity stake in Fabric.AI, Kopin's shareholders have direct exposure to the upside of this opportunity beyond the manufacturing economics. Fabric.AI has raised the required capital to fund this development and staff the business appropriately as Kopin completes the Neural I/o prototypes. We will share more on the development road map and customer engagements as it advances in later calls. Infrastructure is being deployed at an unprecedented pace and the bottlenecks created by traditional copper interconnects are precisely the kind of problem our technology is well suited to solving.

We believe this collaboration dramatically expands Kopin's market opportunity and positions us as a strategic enabler in the next wave of AI acceleration, and it fits very well within our core skill sets and capabilities leading MicroLED development and manufacturing here in the United States. While there are competitors attempting to develop their own solutions like Kopin, most are start-ups and have never produced this technology previously. Others are established firms in the copper or fiber optic transceiver markets, which have not produced this technology previously either which provides Kopin a significant market advantage from a timing, yield and quality perspective since we are actively producing this technology today. Now turning to defense.

Our first quarter and the period since reflects continued strong order momentum across our core programs and meaningful expansion into new ones. Let me walk through the highlights chronologically. In January, our strategic partnership with Theon International produced its first order on DarkWAVE platform, a $1 million development order to bring the 960p OLED DarkWAVE module to production readiness. This is a significant opportunity and milestone because DarkWAVE enables users of traditional monochrome night vision goggles to upgrade them as a retrofit with full color, augmented reality, enabled symbology and full motion digital interface and interlacing feeds, including drone imagery. Our DarkWAVE module is the foundation of Theon's upcoming DARK-I eye product.

With more than 2 million estimated NVGs in use globally and a global NVG market projected to grow from $8.6 billion in 2025 to $12.9 billion in 2030, DarkWAVE targets a very large aftermarket opportunity. And because the system is ITAR-free, it opens up a new global market for both companies. In February, we announced 2 new European helmet-mounted display orders. First, a $2 million microdisplay production order from a Tier 1 European defense contractor for a rotary-wing helmet-mounted display system; and second, a $3.6 million purchase order from an advanced avionic helmet-mounted display system to be integrated into a rotary-wing military aircraft from yet another European defense customer.

Together, these awards bring our pilot helmet-mounted display order book above $10 million and underscore the strength of our display solutions across both U.S. and European defense aviation. Indeed, our European business plan and focus is starting to provide new customers and applications, which will only increase our order book, provide more global business independence and stability while increasing our European facility absorption rates. In March, we were awarded a Phase 1 SBIR contract from the United States government to advance new full color yet smaller format MicroLED display technology, purpose designed for soldier-borne and weapon sight applications. This is the second MicroLED-focused U.S.

Army award we received in the past 6 months, and it builds directly on the existing $15.4 million IBAS contract awarded in September of 2025, which is focused on developing domestic production capabilities for our MicroLED displays. The MicroLED architecture under development is engineered to deliver the brightness, ruggedness and power efficiency required for next-generation weapon sights, helmet-mounted visual information systems and other precise targeting devices, the kind of capability that scales across multiple defense programs. In April, we announced our entry into the first-person viewer drone market with the launch of our Sentinel FPV product.

Drone pilots need high-resolution headsets connected to the cameras on the drones to control it as if they were in "the pilot seat" of the drone. We received an initial $3.2 million order with potential delivery of up to 40,000 goggles by the end of 2028. What makes Sentinel unique is something we call Dual Situational Awareness or Dual SA. Like traditional FPV goggles that fully block out the operator's peripheral view, Sentinel is engineered to deliver high-definition drone imagery while preserving the user's peripheral awareness of their surroundings. No other FPV goggle on the market provides this level of hands-free integration awareness.

In field trials, drone pilots love the demonstrated dramatic improvements in survivability, mission effectiveness, pilot dexterity and safety that Sentinel provides. We believe this technology has potential to redefine what a tactical FPV system looks like. and we're actively engaged with additional drone and FPV companies to integrate Sentinel into their platforms. Further, this technology is built in the United States, which is mandated by the FTC and the Department of War. Also, subsequent to quarter end, we announced a $21.5 million follow-on production contract from a major U.S. prime to manufacture custom thermal-imaging eyepieces and assemblies for a manportable thermal weapon system.

This award expands our growing backlog and reinforces Kopin's role as a trusted U.S.-based supplier of mission-critical vision systems for the war fighter. With more than 400,000 mission-critical solutions delivered across multiple generations of defense programs, this contract is a strong vote of confidence in our manufacturing capability and our ability to deliver American-made technology that performs in the harshest of environments.

Taken together, the orders we've announced over the last several months, DarkWAVE with Theon, the European HMD awards, the SBIR for Soldier-Borne MicroLED, Sentinel FPV and the $21 million thermal-imaging follow-on award reflects both the durability of recurring order rates of our existing defense business and the confidence of our government, North American and new European prime contractor customers have in the new product lines we are bringing to market. As a reminder, many of our defense programs have congressional budget demands through 2030 and several of our contracts are sole sourced indefinite demand and indefinite delivery or IDIQ, which provides additional upside flexibility above what is currently on order, recurring revenue and forecastability and sustainability for several years.

Now I want to spend a few minutes in the third area, as I mentioned at the top of the call on our strategic investments and what they tell you about how we are deploying our cash. After quarter end, we announced the purchase of a state-of-the-art OLED Deposition System and related equipment to establish full-scale OLED microdisplay production at our Westborough headquartered facility. For the past several years, Kopin has operated under a fabless OLED production model, leveraging external partners. The reason we are bringing this capability in-house now is straightforward.

We are experiencing a substantial quantifiable and qualified surge in customer demand for fully U.S.-built OLED microdisplays, particularly for FPV systems like Sentinel, thermal weapon sights and other soldier-borne mission-critical defense applications. Bringing OLED manufacturing capability in-house gives us greater speed, flexibility and cost efficiency to respond to that demand. We will continue to leverage our established Asian manufacturing partners for consumer and medical applications that do not have a domestic production requirement, and we will continue to use our European OLED deposition partner for NATO-aligned defense programs as well. The U.S. OLED capability is additive, specifically to support the U.S. defense market.

I want to be very clear about the message this investment is intended to send, which is that we are comfortable with our cash position and our facility footprint to deliver this increased demand. The capital we raised in 2025 was raised with this level of growth and investment in mind. The OLED deposition decision is exactly the kind of investment that strengthens our defense business going forward. It expands sovereign supply chain options for our defense customers. It improves our control over quality, lead times and pricing, and it complements our existing U.S. manufacturing capabilities for AMLCD, FLCoS, MicroLED and now OLED.

Kopin remains the only company in the United States manufacturing 4 types of microdisplays, optics and soon photonics for the U.S. defense customers who are increasingly demanding and in some cases, must, by law, purchase from trusted domestic producers for critical components. Clearly, Kopin is answering that call. Turning to the operations side. Our investments in automation continue to deliver meaningful improvements in throughput, quality, consistency and cost efficiencies. Bo