Kopin Reports Financial Results for the Third Quarter of 2010
"Driven by the continued strong demand for smart phones and other advanced mobile devices, our III-V revenue has increased 50% to $47.1 million through the first nine months of 2010 from $31.5 million for the same period last year as a result of a combination of an expanding market and, we believe, increasing our market share at several of our power amplifier circuit partners during the year," said Dr. John C.C. Fan, the Company's president and chief executive officer. "III-V continued its momentum in the third quarter, increasing 16% year-over-year. These results reflect the strength of key end markets and reinforce the value proposition of our III-V transistor technology." "We have continued to broaden our III-V product portfolio with the addition of new advanced manufacturing systems and structures that further enhance device performance and improve power efficiency," Dr. Fan said. "Furthermore, during the third quarter, we received a two-year, $750,000 contract through the Missile Defense Agency to develop Aluminum Indium Nitride (AlInN)-based high electron mobility transistors. This award enables us to leverage our proven success in III-V materials and nanoengineering, advancing toward our long-term goal of commercializing AlInN-based electronic materials." "Despite a softness in defense spending, military display revenues were solid in the third quarter, improving slightly from the second quarter," Dr. Fan said. "On the commercial display front, we saw double-digit percentage growth in revenue, which climbed approximately 26% for the third quarter and through the first nine months of 2010." "Within the industrial end market, we continue to make excellent progress on our proprietary Golden-i concept, the world's first hands-free mobile computing experience," Dr. Fan said. "The new concept is creating a tremendous amount of excitement throughout the industry, and it has been honored by various technical organizations. Our business model for Golden-i focuses on building a strong industrial partnership to bring this game-changing product to market." In October of this year, Golden-i was displayed at a number of conferences, including Technology Services World in Las Vegas, the Police and Public Safety Conference in Orlando and the Microsoft Professional Developer Conference in Redmond, Washington. In the coming weeks Kopin plans to roll out a number of new Software Developer Kits. Operating Results The Company's overall gross margin was 32.3% in the third quarter of 2010, compared with 32.6% in the same period of 2009. Year-to-date through September, the gross margin was 28.1%, compared with 29.3% for the same period in 2009. The lower year-to-date gross margin reflects delays in receipts for government programs in the first quarter, which resulted in manufacturing inefficiencies. Research and development (R&D) expense was $4.8 million for the third quarter of 2010, compared with $3.5 million for the same period in 2009 and $4.9 million for the second quarter of 2010. "As we discussed at the beginning of the year, we have been increasing our R&D investments for new III-V products targeting smart phones and tablet computers, and for advancing Golden-i to market," Dr. Fan said. "Golden-i is a hardware and software platform that we believe has an addressable market in the billions and provides us with an opportunity to establish a substantially profitable business model." Net income for the three months ended September 25, 2010 was $1.4 million, or $0.02 per diluted share, compared with $8.5 million, or $0.13 per diluted share, for the three months ended September 26, 2009. For the first nine months of 2010, net income was $4.3 million, or $0.06 per diluted share, compared with $14.1 million, or $0.21 per share, for the 2009 period. The year-over-year decrease in the Company's net income is related to a number of items in the 2009 period related to gains on the sale of patents and the Company's investment in its Taiwan subsidiary, KTC. Excluding these items from the 2009 results of operations, net income for the third quarter of 2010 was $1.4 million, or $0.02 per diluted share, compared with $3.8 million, or $0.06 (1) per diluted share for the third quarter of 2009, while net income for the first nine months of 2010 was $4.3 million, or $0.06 per diluted share compared with $5.3 million, or $0.08 per diluted share, for the first nine months of 2009. The decrease in net income for the nine-month period of 2010 is primarily attributable to increased R&D expense. Business Outlook "III-V revenue growth continues to be strong and we do not expect the normal seasonal decline in the fourth quarter," Dr. Fan said. "Although we expect military display revenues to remain solid in the fourth quarter, on a full-year basis these results have been affected by a weak first quarter related to delays in the procurement cycle. Accordingly, we expect to achieve the low end of our annual revenue guidance of $120 million to $130 million for 2010. Although we have invested $9.7 million in capital equipment and repurchased $5.4 million of our stock during 2010, our balance sheet has remained very strong. We had $110.5 million in cash and marketable securities at September 25, with no long-term debt."
