Vuzix Corporation 2026 Q2 Earnings Call

Thank you, operator, and thank you everyone for joining us today. Welcome to the Vuzix Corporation Second Quarter 2026 Financial Results Conference Call. With us today are Vuzix CEO, Paul Travers, and our CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that management's prepared remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question and answer session. Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements due to factors including general, economic, and business conditions, competition, changes in business strategy or development plans, our ability to attract and retain qualified personnel, changes in legal and regulatory requirements, and other risks described in our SEC filings.

Any projections represent management's estimates as of today, August 13, 2026. Vuzix assumes no obligation to update them except as required by law. This afternoon, the company issued a press release announcing its 2Q 2026 financial results and filed its 10-Q at the SEC. Participants may wish to review those documents as we will provide a summary of the results on today's call. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable GAAP measures can be found in the company's SEC filings. I will now turn the call over to Vuzix CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the company's financial results. After that, we will move on to the Q&A session.

Paul? Thank you, Ed, and thanks to everyone for joining us today.

With the first half of 2026 behind us, Vuzix is focused around our three core growth pillars: enterprise smart glasses, OEM products and solutions, and waveguides. They're connected by the technology manufacturing capabilities, intellectual property, and customer relationships we have built over many years. The business opportunities in front of us look very different from a year ago. Across all three pillars, we are seeing expansion in both the number and quality of opportunities involving major enterprise customers, defense organizations, OEM partners, and technology companies. AI is a game-changing driver as enterprises look for practical ways to bring AI-powered intelligence to their frontline workforce and into the physical workplace. These are not early-stage discussions. A growing number of programs have cleared development and validation and are heading toward commercialization.

As that work converts into production volumes, it has the potential to change both the size and the mix of Vuzix revenue. Two things in particular have changed to get us here. Customer requirements have converged around optically see-through, self-contained glasses, and the software work required to deploy a solution is getting easier as AI takes on much of the integration. I will come back to both of these. Let me begin with enterprise smart glasses. AI is profoundly changing the relationship between people and computers, and that is game-changing for wearable smart glasses. AI will automate many tasks, but skilled tradespeople, technicians, and frontline workers operating in the physical world are not going away. The opportunity is to dramatically augment those workers by connecting them directly to the intelligence and capabilities of AI. Put simply, AI does not eliminate the frontline worker.

It makes connecting that worker to the digital world far more important and valuable. During COVID, remote support drove significant interest and sales in smart glasses, but it addressed a relatively narrow need created by temporary circumstances. AI enterprise smart glasses are fundamentally different from a basic remote support application, and we believe AI represents a lasting change in how people interact with computers and how work gets done. The opportunities we are seeing today are tied to ongoing productivity, operational efficiency, and augmenting the frontline workforce. Needs that will persist and grow as AI becomes more deeply embedded across the enterprise. All-day wearable smart glasses are a natural interface for making that connection. With AI that can see what workers see, understand what they are asking, and access relevant enterprise knowledge, the glasses can understand the task and provide real-time information or guidance while leaving the workers' hands free.

Unlike a phone, tablet, or laptop, they stay with the worker and task at hand throughout the day, turning smart glasses from primarily a communications tool into an always available AI-enabled productivity platform. It's worth a brief discussion on what customers are asking for. In nearly every new program we are engaged in today, the customer wants optically see-through smart glasses. The worker sees the real world directly with information presented within their natural field of view rather than through a camera or on a screen off to the side. A growing number want that in a self-contained pair of glasses with no tethered compute unit. That is a demanding combination.

The display has to be bright enough for real work environments, efficient enough to run a full shift on a battery, light enough to wear on your face, and yet small enough that the product still looks and feels like eyewear. Those are exactly the constraints waveguide optics exist to solve, and they are a large part of why our optical and wearable systems capabilities are being pulled into so many customer conversations at once. There is one more change worth calling out. For years, the practical barrier to enterprise smart glasses was not mainly the hardware, it was the software. Every deployment needed custom integration into a customer's existing systems, and that work was slow, expensive, and scarce. AI is changing that. A great deal of the integration work that used to require a dedicated development team can now be done with AI doing much of the coding.

We use AI this way in our own development, and we think it should meaningfully lower what it takes for an independent software vendor or even an end customer's own team to stand up a deployable solution. That matters because the software effort has historically been one of the barriers sitting between customer interest and customer deployment. As AI-enabled smart glasses can understand what the worker saw, said, and accomplished during the job, it can easily help automate much of the administrative work that follows. Documenting the work performed, preparing service reports, identifying and ordering replacement parts, scheduling follow-up visits, updating enterprise systems, and even identifying additional work that may be required. For frontline workers, this is transformative and allows the worker to focus on the physical work while AI handles the digital work around it. Amazon is a good example of an innovation leader in this space.

Its reliability and maintenance engineering teams have been using Vuzix M400 smart glasses to support robotics, conveyors, and automation equipment within fulfillment centers for several years now. More recently, Amazon expanded its usage of Vuzix smart glasses to our next-generation Ultralite Pro smart glasses. Amazon has developed their own AI-driven applications to support maintenance and other operational activities inside its AI data center infrastructure. We are seeing similar AI-driven interest across logistics, warehousing, manufacturing, and other frontline environments from other Fortune 500 companies looking to use AI both to assist workers while they perform their jobs, and to automate the digital workflows surrounding that work. Our second pillar is OEM products and solutions. Vuzix brings together optics, electronics, wearable product design, manufacturing experience, and real-world enterprise deployment knowledge. Our OEM products and solutions business is designed to take customers from product concept through design, engineering qualification, and ultimately production.

One example is the waveguide-based smart glasses platform we have been developing with a leading global automotive manufacturer. We've delivered the initial systems and worked through adjustments from there. Feedback has been very positive, and discussions are proceeding around formal factory floor rollouts. These smart glasses were designed around a live manufacturing requirement, combining our enterprise wearable experience with our waveguide display technology. At the same time, development of Vuzix's next-generation Ultralite Pro smart glasses continues. They were designed from the outset for enterprise and industrial users looking to bring AI into the hands-free workplace. Its lightweight, standalone, waveguide-based design combines with a wide field of view camera that can provide AI with visual context. The high-performance audio with noise-canceling microphones and integrated speakers provide for natural voice interaction. The all-day wearability, safety certification, prescription support, and enterprise-grade performance all combine for the ultimate AI user experience.

We continue to work with a growing list of prospective customers and partners around validating the platform before we complete the tooling. Our approach to new products has also become more disciplined. Our development decisions are tied to identifiable customers, validated use cases, and commercial opportunities. Customer-driven OEM programs can take longer than launching a Vuzix-branded product ourselves, but they carry lower commercial risk because development is anchored to a defined customer requirement and real-world use case. This lets us invest behind demonstrated customer needs rather than anticipated demand, while retaining the opportunity to turn successful programs into broader Vuzix platforms. Our objective is to move more of these OEM programs into production programs while maintaining discipline around the capital we commit. Defense and security agency activity spans all three growth pillars and continues to build, with more substantive engagements and clearer pathways from development towards production.

Drones and unmanned systems have become core operational tools, while wearable displays and HUDs provide a natural interface for situational awareness, coordination, maintenance, medical information, and secure data delivery. U.S.-based design and manufacturing of critical optical technologies is also becoming more relevant to defense customers and primes. Our Collins Aerospace program has moved from development into initial production for waveguide-based AR display systems supporting drone applications. In parallel, we are putting the required systems in place for the launch of a U.S. government-funded next-generation waveguide development effort, including work aimed at larger fields of view and other performance improvements for future defense requirements. Additionally, we're engaged with the U.S. government securities agencies around custom wearable solutions. One of these customer opportunities has progressed through the proposal stage with the customer currently targeting a contracting decision later this year.