Earnings call transcript: Research Frontiers Q2 2025 sees stock rise despite EPS miss

Research Frontiers released its second-quarter 2025 earnings report on August 7, revealing an earnings per share (EPS) of -0.03 USD, which fell short of market expectations. Despite this, the company’s stock saw a 2.61% increase in after-hours trading, closing at 1.57 USD. According to InvestingPro data, the company has shown impressive revenue growth of 62.28% over the last twelve months, though it continues to face profitability challenges. The company remains optimistic about future revenue growth, particularly in the architectural and automotive markets.

Key Takeaways

• Research Frontiers reported an EPS of -0.03 USD, missing forecasts.
• Stock price increased by 2.61% in after-hours trading.
• Company expects revenue growth across all market segments.
• Focus on architectural retrofit market and ongoing automotive projects.
• Maintained a debt-free status with cash reserves of 1.3 million USD.

Company Performance

Research Frontiers continues to navigate challenges in the smart glass industry, particularly with the impact of a European licensee’s bankruptcy affecting royalty income. InvestingPro data reveals the company maintains strong liquidity with a current ratio of 11.96x and operates with moderate debt levels. The launch of the Cadillac Celestique and Mercedes’ introduction of SPD/PDLC technology underscore its commitment to innovation, though the company’s gross profit margin remains weak at -35.09%. For detailed analysis of REFR’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Cash and cash equivalents: 1.3 million USD (down 100,000 USD from the previous quarter)
• Working capital: 1.7 million USD
• Revenue forecast for FY2025: 1.6 million USD

Earnings vs. Forecast

Research Frontiers reported an EPS of -0.03 USD for Q2 2025, missing analyst expectations. The market had anticipated better performance, but the shortfall was attributed to the bankruptcy of a European licensee, which impacted royalty income. Despite the miss, the company’s strategic initiatives and market expansion plans contributed to a positive investor sentiment.

Market Reaction

Following the earnings announcement, Research Frontiers’ stock price increased by 2.61% in after-hours trading, closing at 1.57 USD. Based on InvestingPro analysis, the stock appears to be trading above its Fair Value, with a concerning P/B ratio of 21.77x. The stock’s performance reflects investor optimism about the company’s future prospects, particularly in light of its new product launches and market expansion strategies. The stock remains within its 52-week range, with a high of 2.39 USD and a low of 0.93 USD. InvestingPro subscribers have access to 7 additional key insights about REFR’s valuation and growth prospects.

Outlook & Guidance

Research Frontiers is forecasting revenue growth in the third quarter and plans to launch its architectural retrofit market in the latter half of 2025. The company is focusing on reducing production costs and expanding its presence in the automotive and architectural sectors. Revenue projections for FY2026 are set at 1.8 million USD, with an EPS forecast of -0.05 USD.

Executive Commentary

CEO Joe Harari emphasized the company’s leadership in the smart glass industry, stating, "Research Frontiers created the smart glass industry, and our leadership role has helped shape it and we will continue to do so." He also highlighted the company’s high-performance positioning against competitors, noting, "We’re not the low-cost alternative to these other technologies. We’re the high-performance alternatives."

Risks and Challenges

• Dependency on licensees: The bankruptcy of a European licensee highlights potential risks in revenue streams.
• Market competition: Facing competition from PDLC and electrochromic technologies.
• Economic factors: Economic downturns could impact luxury automotive and architectural markets.
• Supply chain disruptions: Potential challenges in transitioning supply chains for automotive projects.

Q&A

During the earnings call, analysts inquired about the impact of the European licensee’s bankruptcy and sought clarity on ongoing automotive projects, including the Cadillac Celestique and potential collaborations with General Motors. The company addressed these concerns, emphasizing the potential of the architectural retrofit market and the performance advantages of its SPD technology compared to PDLC.

Full transcript - Research Frontiers Incorporated (REFR) Q2 2025:

Erica, Call Moderator/Operator, Research Frontiers: Afternoon, and welcome to Research Frontiers’ investor conference call to discuss the Second Quarter twenty twenty five Results of Operation and Recent Developments. The company will be answering many of the questions that were emailed to it prior to this conference call either in their presentation or as part of the Q and A session at the end. In some cases, the company has responded directly to email questions prior to this call or will do so afterwards in order to answer more questions of general interest to shareholders on the call. Some statements today may contain forward looking information identified by words such as expect, anticipate, and forecast. These reflect current beliefs, and actual results may differ materially from those expressed due to various risk factors, including detailed in our SEC filings.

Research Frontiers assumes no obligation to update or revise these statements. Today’s call is in listen only mode with a q and a session to follow. To ask a question, press 1. The call is being recorded and will be available for replay on Research Frontiers website at smartglass.com for the next ninety days. During the question and answer portion of today’s call, if you find that your question has been substantially answered as a courtesy and to allow time for other shareholders to ask questions, please remove yourself from the queue by pressing 1.

Also, we ask that you keep your questions brief in the interest of time. I will now turn the conference over to Joe Harari, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Thank you, Erica. Hello, everyone, and welcome to our 2025 investor conference call. From an accounting perspective, the 2025 results look disappointing, but much of this relates to onetime and noncash charges and expenses that we elected to take in the second quarter. I’ll go into this in more detail. From an operational perspective, things were actually much better with higher economic activity and sales of SPD SmartGlass during the half the second half of this year and lower cash expenses.

But when you back out onetime accounting charges from the bankruptcy and replacement of one of our licensees supplying Ferrari and noncash accounting charges from options issued last year that were approved for issuance by our shareholders this year, expenses would be essentially the same or lower than last year, and royalties would be up compared to last year. Deliveries of the Cadillac Celestique to GM customers have started. Sales of SPD SmartGlass sunroofs to Cadillac in Q2 twenty twenty five were substantial multiples higher than Q4 twenty twenty four and Q1 twenty twenty five combined. Ferrari roof sales were strong in the 2025. However, because of the bankruptcy filing of the European licensee that was supplying Ferrari, with the bankruptcy coming from this licensee’s loss and from other customers, not Ferrari, This licensee shut down operations in q two twenty twenty five, so we did not book any royalty income from them for q two and wrote off some amounts.

This is why royalty income was down this quarter. Also, this bankruptcy filing was anticipated by Ferrari, Gauzy and Research Frontiers, and another existing licensee of ours in Europe was successfully transitioned to supply Ferrari, and additional production for Ferrari has already started by this licensee. Now we get into a little bit of the accounting. Because we don’t book additional royalty income until a licensee meets its minimum annual royalties, We have not yet seen additional royalty income from this additional supplier to Ferrari yet. So we booked nothing for the second quarter from the licensee that went bankrupt, and we weren’t able to include any royalty income from the replacement licensee.

Based upon the way our royalties under our license agreement were accounted for and the ramp up of sales to Ferrari, we expect to see additional income from this licensee recorded in the 2025 relating to the Ferrari business. We also expect additional royalty income from other automotive projects starting in Q3 twenty twenty five. Continued sales of SPD Smart Glassers from Mercedes and McLaren also occurred in the 2025. Also, as I mentioned, we elected to make in the second quarter certain accounting charges and treatment relating to the bankruptcy file in the second quarter by one of our licensees. Backing out these, royalty income would be up compared to last year.

Also, I note this comes off of a very strong 2025 with 79% revenue growth from Q1 over the prior year and 214% from the prior quarter. This growth in momentum for Research Frontiers was driven by increased demand for SPD SmartGlass, particularly in the automotive sector and also in the aircraft sector with growing interest in new projects in the architectural market. We continue to expect revenue in all market segments to increase further as new car models and other products using the company’s SPD SmartGlass technology are introduced into the market. And apart from these blips in accounting treatment, our net loss would have been lower this quarter, and we are moving forward towards being cash flow positive. Turning to our financial condition and liquidity.

We continue to manage our resources effectively. As of 06/30/2025, our cash and cash equivalents stood at approximately $1,300,000 to $100,000 less than last quarter, and our working capital was approximately $1,700,000 We continue to be debt free. We continue to also see progress and significant developments across our markets. Our SPD Smart technology is currently licensed or used by many major companies serving five major application areas: aerospace, architectural, automotive, marine and display products in almost every country in the world. As I mentioned earlier, we included some questions previously sent in by our shareholders in our presentation today.

I’ll now answer some questions that have been emailed to us. So the first question comes from John Nelson. There’s a number of questions here. SPD black development update. Okay.

I’m happy to report, John, that Gauzy may go into more detail on this on their call next week on August 13. But everything is going well and faster than I anticipated. I was recently in, Israel visiting their factory and saw the latest SPD film, and it looks really, really, great. Looks far better than what I saw in January at CES. And I think even more important than what I think the key OEMs really like it as well.

You asked me about how the architectural window product project is going and has it officially launched. Well, it’s launched on the development side. We’ve submitted samples to testing for energy efficiency. We’ve worked out all of you know, the details in terms of wiring and installation and and production and things like that. And you ask, can you identify the licensee for us?

Yes. It’s LTI SmartGlass, which is in Massachusetts, and AIT, which is their affiliate in Largo, Florida. And you asked about some of the projects. They’re definitely in the works. And you asked the last question, any effects on your business from ongoing U.

S. Trade and tariff policy? No effect that we could see. Basically, general automotive industry, for example, was shaken up quite a bit by tariffs, but they seem to have settled in now and have stabilized. The areas that we’re in weren’t affected at all, but the general market in automotive was affected.

Okay. Next question is from Steve A. With world opinion turning against Israel, how is Gazi managing this situation? And are they losing business opportunities from this situation? And is it affecting reefer?

Well, first of all, Steve, I disagree that world opinion has turned against Israel, and neither we nor they have seen any business loss from this. So, thankfully, everything is in good shape there. And now that the markets that we’re in are starting to stabilize as people get used to things like the tariff regime and the negotiations there are pretty much done in most major markets, I think everything is approaching back to normal again. They weren’t affected directly because they have worldwide operations. Your second question, Steve, was with the stock market broadening out, including small caps, you have a great opportunity to present good news to get the stock price moving in much higher.

This opportunity should not be lost. We have been stuck in this pattern for so many years. We need to get out of this present cycle. First of let me say amen to that. I’m not sure that I would say that the stock market is broadening out to include small caps.

If you look at, for example, a comparison of the Russell two thousand relative to the Nasdaq one hundred, that relationship hit an all time low last week. So small caps still, know, continue to lag behind the Magnificent Seven and in participating. So small caps haven’t really, you know, rebounded yet from that. And as far as being stuck in this pattern for so many years, I looked at that same chart and this decline in the Russell two thousand compared to the the Russell one hundred really has been in a downturn for the past five years. Hopefully, that will turn itself around.

However, in our case, you know, our plan is to become so big that they can’t ignore us no matter where we are in that market. Rick Sarells asks, is the Chevrolet Corvette using SPD in their tinting roof system? And you also asked a question about the architectural retrofit market, which I’ve already answered. Getting to the Corvette, it’s somewhat of a mystery. I’ve heard mixed things around the industry about whether, you know, it’s gonna appear.

I haven’t seen in any of our licensee royalty reports any report of supplying that market. And I can’t say much about it other than regardless of what they put in there, may have other business within GM outside of the Cadillac that we’re currently in, that I know of already. But it’s not something I could talk about on this call, but hopefully more details later. Terry Christie asked, what happened with the DWI seven, another PDLC roof win for a major player, not reefer? Why is SPD used in multiple prototypes and production is given to another competitor?

SPD is supposed to be a superior product at a competitive price. Well, let’s take one part of that first, and I think this explains a lot. The competitive price. While our prices have come down quite a bit based you know, increased volumes, and they could come down quite a bit more within, you know, additional projects coming online. Right now, PDLC is much cheaper than SPD.

So my guess is if somebody puts it in a car, it’s because they’re comparing apples to oranges, not understanding that they taste different. And the VWI seven was talked about three to five years ago, but, it doesn’t change the nature of what I’m saying, which is VW has been focused on PDLC in all of their cars and even it spilled over to Rivian because they invested VW invested about 10,000,000,000 in in Rivian. So I imagine they they’re trying to use the same platforms and and other products. That’ll change. I sat in the Rivian the other day, and the car is beautiful.

The roof really left a lot to be desired. You can clearly see whether the roof was in the clear or the frosted state that a lot of light was coming through. You could clearly see things like light bulbs in the showroom ceiling and things like that that were coming through. So it’s not really doing much at all to block the heat, light, and glare that’s coming in. And that’s really the reason you put this in there.

Maybe turning to something else, which is future projects for SPD. We’re beginning to see more and more of those come on board. So while some projects may go to PDLC due to momentum within an automaker, I think a lot of companies are waking up to the fact. And now they’re actually even telling us explicitly that they know that SPD has better performance than PDLC. So that kind of confirms once again that the price is still being offered at lower price.

It could be that they’re being subsidized to get market share. Whatever the reason, subsidizing to get market share only works to a small extent, and eventually, they’re going to need to have economic pricing. Another one question from Elliot. How should we think about royalties for the retrofit windows? On on sunroofs, you had mentioned royalties of about a $100 per sunroof depending on size.

What do you hope to collect on architectural window replacements? Our licensee in this area is actually projecting sales in the first year in the high tens of millions of dollars. And if we have a 10% or 15%, right now, it’s a 15% royalty, but I imagine in high volume, they’re gonna ask me to reduce the royalty to 10%. And depending on the volumes, they certainly would consider it. You’re talking about royalty levels that can make us clearly profitable even in the first year of the retrofit being on the market.

After that, we expect multiples of that. When I say we, the licensee that is producing and marketing this. And if you want their marketing materials, you can see it on the LTI AIT website. Okay. We met we answered the email questions.

You know, now I’d like to maybe open up the questions and answer session, Erica, to additional questions people may have that haven’t been answered already. And we ask that you keep your questions limited to questions of general interest. If there’s something specific that you wanna talk about, a project for your home or something like that, let’s talk offline. But if it’s of general interest to shareholders, please ask. Also, we can certainly answer any questions by email or calls afterwards.

Erica, Call Moderator/Operator, Research Frontiers: If you would like to ask a question, please press star one on your telephone keypad now. You’ll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, to ask a question, please press star one on your phone now. Our first question comes from Bill Denny.

Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Oh, hello, sir. Thanks for taking the call. I think you may have answered it a little bit ago. I recently drove the new Audi s five, and they have the, tinting technology in their sunroof. I assume that is not from REFR?

No. Since Audi is part of VW, they tend to consistently have been trying to introduce PDLC. It’s not getting a very good reaction, but, you know, I think that’ll change over time. Thank you. I I I was not impressed with it, and I I kinda figured it wasn’t from your company.

So, thank you. I really appreciate you clearing that up. Sure. Thank you.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Bruce Denny. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hi, Joe. On a recent conference call, you said that we have future project that will dwarf all our previous revenues. And I was wondering if you could at least give us what category it’s in, architectural or whatever. Domestic and automotive. Great.

Okay. Thank you. Thanks a lot.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from John Nelson. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hi, Joe. My question is replay of prior quarters. The auto sun visor update built in and aftermarket. Sure. We I I sent you an email about this last night, which you might have missed.

But Oh. But basic but, basically, the licensee in that has been somewhat distracted by other events in the automotive industry, including general tariffs and moving their factories from overseas to North America. So I don’t have much to report on that yet, but but, you know, there’s a little more detail on what I had sent you last night. Okay. Thank you.

Thanks a lot.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Chuck Michaels. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Yes. Hi. Hi, Joe. Hey, Chuck. Had two really.

One was, actually, would be, like, architectural, you know, office windows. I I haven’t mentioned anything about that today. And, you know, I thought we were gonna make some progress through that domestic as the the the law was passed on that, And so I haven’t heard anything. So if you could comment on that, first of all. Okay.

I just wanted to understand about the architectural. I spoke a bit about it in terms of the retrofit being, you know, moving forward, and that’s being spearheaded by LTIAIT or, you know, our licensee in Massachusetts and Florida. Oh, that’s that’s the architectural? Okay. Right.

That’s the architectural. Yeah. Okay. I guess I didn’t pick that one up. Everyone’s benefit for everyone’s benefit, we think the reason that the retrofit application is gonna be a game changer first of no one else could do it.

It’s been one of the holy grails, the other being the black SPD, which, you know, we talked about also is being close to fruition here. But the retrofit, we believe, will substantially change the way people introduce smart glass into their homes and offices. What we mean by that is you can actually install an SPD window from the inside of a building. So you don’t have to put up scaffolding. You don’t have to get landlord approval.

It’s a lot more like a a window shade, but it’s not a window shade. It’s a, you know, sturdy piece of glass that actually adds an extra layer of insulation to the building. And not having to do that means that you can, you know, measure measure and produce windows for, you know, any building or home and come in over the weekend so you’re not disrupting tenants and, you know, installing these in the in the in the building. And you that’s in the private sector, and that’s somewhat driven by the Dynamic Glass Act because you also get a tax credit. In the government market, it’s even bigger, because the GSA has a mandate to upgrade the energy efficiency of their windows.

Right right now, most government buildings have monolithic, you know, glass, not insulated glass even. And this is a great way to upgrade that to be much more energy efficient. And we’ve actually, in the past, done types of retrofits in government buildings, and they like it. So it’s it kinda proved out that this is not a disruptive process. Okay.

And the the second one is, I think it’s different from what you’ve described before today. But in in several conference calls recently, you’ve mentioned or you’ve hinted that, I guess you can’t say too much, but about a a new manufacturer coming out with a vehicle soon. And do have an update on the number. Yeah. We we have a number.

So the Asian automaker is still on track to come out. The car hasn’t come out. So so we’re you know, that really is related to when the car comes out, but it’s very much on track, and there’s activity between us and them and and Gauzy as well. So that’s moving. I mentioned some new other projects in Europe and in North America, and those also are moving forward.

So we continue to move forward in all fronts with everything. Sometimes the customer gets delayed for other reasons, including moving factories or adjusting to the reality of constantly shifting tariffs that now have settled in. So think things are stabilizing there, and we’ll start to see things start to move. Okay. Thank you very much.

Thanks.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Art Brady. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hi, Joe. Art Brady here. I know in the past, you used to do a lot of work with Lincoln. And as a matter of fact, you used to have a car, a Lincoln car, where we had the annual meetings. And now we hear zoos from them.

What’s happening with the Lincoln? Well, I don’t know if you remember, but even the CEO of Ford got on CNBC and said that the SPD SmartGlass roof was definitely gonna be in the Continental, and then it wasn’t. So, you know, it’s I don’t wanna go into too much details, but it it didn’t have anything to do with us or the supply chain. I think it had more to do with the car itself, and you don’t you don’t see the Continental on the road anymore. But we do have relationships with Ford.

Some are you know, there’s some projects going on there. And, also, I might say that Gauzy has publicly stated that they have good relations with Ford and projects going on. So, you know, so I think it’s just that these things have to percolate into into cars on the road. You think that’ll happen in the next twelve to eighteen months? I don’t wanna put a time frame.

It could happen sooner. It could take longer. You know? I would’ve I would’ve thought when they announced it when the CEO announced that we were gonna be in the car that it would’ve happened in the next week, but it didn’t. So and and this was their CEO, not me.

Can you also talk a little bit about the the whole concept of when you have direct sunlight and you you don’t have a SPD, you you really can’t use it when there’s, like, sunlight, very strong glare, and six feet away, you cannot read the time. I think we’ll talk about that offline, Art. It sounds like a very specific idea or or application you have, and I’m happy to talk to you about it offline. But, yeah, controlling heat line glare is what we do best. So I’m sure that we can be a benefit to what you’re thinking about.

And, you know, right now, more not questions. Alright. I’m sorry. Why don’t we why don’t we continue our discussion at another time?

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Leonardo Ledsoe. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Good afternoon, Joe. I was just reading at the last conference call, you said you had a couple of new things coming out this year, new OEMs and several more right behind it for next year. Right. So, you know Still moving forward, and I’ll do yeah. We’re still moving forward.

I think that since that call, we’ve had other models introduced as well to the mix. So, you know, it’s, you know, it’s something that we and Gauzy aggressively have been pursuing in the automotive market together. Oh, I’m sure you’re pursuing it. Yeah. Do you think we’ll do that in the next six to nine months?

I’m hopeful. Yeah. We are too. Thanks.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Francis Coturbo. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Afternoon, Joe. How’s it going? Good. How are doing? Pretty good.

The Asian card that hasn’t been released yet, was that the reason why the prediction for 2023 was gonna be good for the shareholders collapsed and we didn’t see that come forward? Yeah. We expected the car to come out. We were told Gauzy was sold. The r and d people within the Asian carmaker were sold, and it just didn’t happen.

Oh, they’re going through the I I think it had something to do with other things in the car. Are they going with a different technology? Or that’s still Not that no. I we’re having active discussions about not only the our current SPD, but the new SPD as well.

Okay. In the architectural market, what’s gonna be the main driving force for someone to install it? Savings, energy savings. I I I you know, one one thing I must say, our website has now become really effective at bringing in large projects. I noticed the I I noticed the the new updated website has has attracted very, very large companies and projects and things like that.

And on those, it’s energy efficiency. On on the smaller ones, you know, high end homes and things like that, a lot of times, it’s view preservation, heat management, privacy. There’s a lot of different things that are driving why people have been asking us to retrofit their windows with with SPD. For a large application? The Large and and small.

Large and small. But for the large ones, it’s mostly, you know, crunching the numbers, nuts and bolts, energy efficiency, you know, ease of facility management. There’s a lot of different things that have gone into the decision making on that. For example, if you don’t if if if you don’t have to, for example, you know, put window shades in a building or if you can replace motorized window shades, which are very, very prone to jamming and error and and things like that with something that’s very reliable like SPD and give centralized control to the facility manager, these buildings become much easier to optimize for energy efficiency. And if you look at some of the studies that were done, there was a Saudi Arabian study that talked about the optimal place and tint for SPD windows in different parts of different types of buildings and things, and there was other studies as well.

You know, you’re starting to see architects really drill down now into what I call the nuts and bolts of why you would use it. That’s good because the data is very favorable to us. Mhmm. Are there reductions in temperatures? Yes.

Some of the studies that have been done, you know, show a 20% reduction in electrical usage in zones that use SPD. In cars, we can reduce the temperature by 18 degrees Fahrenheit. So instead of getting in a car and it being 90 degrees at 72 and you haven’t used your air conditioning, each application kinda has its own, you know, footprint, if you will, and and benefit. And then it also depends on where the building is and what it’s used for. And being that there are no competitors in that market, price really might not be that much of an issue?

Well, everything competes with everything. I mean, you know, we may not have smart glass competitors in the architectural market with Vue and Helio going bankrupt. But but, you know, we we still compete with window shades and and vertical blinds and curtains and, you know, the more traditional ways of controlling light and shading. Mhmm. So so everything everything has a competitor.

We can’t go crazy. But on the other hand, you know, there’s really demonstrable benefits to use this. What type of voltage is needed to switch? In the architectural applications, we’re using it it maximizes transparency at around 80 volts. 80 volts.

We can actually reduce And then you AC. AC. And then and what you’re doing is using milliamps per square foot. So the power draw is negligible even at eighty and ninety volts, you know, from a home application. In cars where you’re buying off the 12 volt battery.

Which probably goes to a converter to AC because they always switch these on AC. Okay. Exactly. Yep. You got it.

Thanks. Thanks a lot. Bye.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Jared Sherman. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Who is the licensee that went bankrupt? We’re not naming the name, but it was a European licensee that was supplying Ferrari. And What what’s the secret here? Like, why

Erica, Call Moderator/Operator, Research Frontiers: is it so top secret? I

Joe Harari, President and Chief Executive Officer, Research Frontiers: don’t understand. Well, I think if you do a search, you’ll see which glass companies have gone bankrupt. I just don’t feel comfortable revealing private information that, you know, I’ve been given. And, you know, to the extent it’s been public, you’ll find it. It doesn’t really matter though because we’ve moved that over to another European licensee, as I said earlier on.

So it’s not But

Erica, Call Moderator/Operator, Research Frontiers: but how do you guys have

Joe Harari, President and Chief Executive Officer, Research Frontiers: a licensee go bankrupt? How do

Erica, Call Moderator/Operator, Research Frontiers: you don’t get them? Like like, now it says, you don’t think it’s

Joe Harari, President and Chief Executive Officer, Research Frontiers: a big deal, but but now we’re out a quarter. We have we made a $100,000 worth of you.

Erica, Call Moderator/Operator, Research Frontiers: It’s a disaster. An absolute disaster.

Joe Harari, President and Chief Executive Officer, Research Frontiers: It’s a disaster. Alright. Hey hey. Well, excuse me. Okay?

And I understand your frustration, and I’m as frustrated as you because on June 30, when they filed their bankruptcy, that’s when we had to take the accounting action we did. We did get paid, by the way. Now we do vet them. They’re a well established company. And, unfortunately, they overextended themselves with other customers.

The Ferrari business was a good business. The rest of the business they had wasn’t so good, and the customers left them. And and if you know what’s happening in the automotive industry, there’s always changes in suppliers. This was something that, you know, with their overextension, they weren’t able to handle. Has nothing to do with SPD.

The SPD business was probably the crown jewel of what they had. But, you know, given the size of the company and the weight of these other, you know, loss of these other customers, they weren’t able to sustain it. This is just not a good look. It’s just not if there’s one more thing that goes wrong with you guys over, you know, thirty years and the same thing with Sure. And and and let me

Let me ask you. If you have a well established company that’s been in the glass business for decades that goes bankrupt, what do you expect? Well, they’re not that established then. How well established are they if they went bankrupt? They’re not that established.

And whatever the galaxy, how’s galaxy? Like, whatever the galaxy goes selling off, what do we do then? You could you could start chasing shadows. You could start chasing shadows, but you should understand that one of the benefits of our business model is when somebody goes bankrupt, we were able to move the business with you know, seamlessly to another supplier. We didn’t lose the Ferrari business, and that’s, I think, the important thing.

Okay? One licensee, because of of activities unrelated to SPD, went bankrupt. I don’t run their business. Okay? I I get it.

I get you don’t run their business, but it just seems like we we can’t move forward at all. You know, we are making no progress. I mean, it

Erica, Call Moderator/Operator, Research Frontiers: sounds like you always gonna get something next quarter. We’re doing well, but it doesn’t there’s there’s never any revenue associated with it, Joe. It’s it’s it’s ridiculous.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Okay. Look. If if you’re not happy with the state of affairs, then nobody is forcing you to be a shareholder. But I’m telling you that we we we got paid in full. We got paid in full for what we were owed.

Okay? They went bankrupt, and we weren’t able to book additional revenue for the second quarter. And the way that our accounting systems are set up under ASC six zero six is that the new licensee that took over that business in the second quarter, you know, didn’t exceed their minimum royalties because of the timing. So we didn’t book additional revenue from them, and we lost the revenue from one. It’s just an accounting issue.

Okay? From a cash flow standpoint, we’re basically whole.

Erica, Call Moderator/Operator, Research Frontiers: So can we expect any guidance for

Joe Harari, President and Chief Executive Officer, Research Frontiers: the third quarter that you’re gonna show that you’re gonna have a bump in guidance from, you know, the original third quarter? Well, I can’t I can’t tell you until I get the royalty reports what it is, but I think, yeah, we’re definitely gonna be up from the second quarter. Yeah. Yeah. I would hope I would hope so.

Yeah. Alright. Well, thanks for your time. I’m sorry. I appreciate no.

No. I I look. I share your frustration. Nobody likes to pick pick up pick up an email and see that this happened. You know?

Yeah. But fortunately, we but but fortunately, we’re able to plan for it. Okay. Alright. Thank you.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Allen Ginsberg. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Yeah. Hi. Hi, Allen. On the same on the same topic, you know, that the previous caller just talked to you about. Yeah.

About the bankruptcy. Well, not really. It’s more like multiple suppliers. Isn’t there for example, in this promising area in architectural where you have retrofits, do you just have one supplier? I mean, what would happen if if they had a problem?

Why wouldn’t you have multiple suppliers? We do. And that’s exactly why we were able to transition the business with Ferrari seamlessly because of that. So you are you telling me you have multiple I mean, why I think I I think one of I think one of the things and and I’ll talk about this more in my closing remarks, but I think one of the things that we were very successfully able to do is minimize risk to investors in our company. K?

If you if this happened to one of our if this happened to one of our competitors, View or Sage or, Haleo, where they lost a major major either source of supplier customer. That’s it. It’s came over. Nothing happens. They go bankrupt.

And they did. Last year, two of them went bankrupt. Okay? But that doesn’t have anything to do with Research Frontiers. You always bring that up.

And No. But I’m saying that our business companies. But Alan Alan but our but our business model model and the fact that we do have a diversified group of licensees allows us to adjust to these things that would kill other companies. That I understand. We moved we we we were able to shift this, you know, over so that there was no supply disruptions.

It may have an accounting blip and not a cash flow blip for us, but we were able to do it. And I think that’s one of the hallmarks of our technology and our company is that it’s a low risk way of investing in the smart glass market. And if you look at the history, look at the last thirty, forty years, okay, All of these companies that have tried to do what View and Sage and, Alio did are roadkill on the side of the road. Okay? They don’t have the same, you know, risk management approach that we do.

We’re very good at this. But what how are But you only have one supplier of film, Gauzy. Why wouldn’t you get another one to mitigate what you’re talking about in that area? If I thought there was a need for it, just like when I thought there was a need to find a replacement for the licensee that went bankrupt, we would act on it. Okay.

Thank you. Yeah. Thank you.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Bruce Denny. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hi, Joe. Hey, Bruce. Saudi Saudi Arabia, as you probably know, is has a has a gigantic project called the Thousand Mile City. I would love to get into that, and we’ve tried, and we are trying. It’s a it’s a cool project.

It would be very interesting to see that. I think it’s gonna be one of the seven wonders of the world at some point. Yeah. Well, they they’re saying they want it done by 2030. So If you throw enough money at it, you can do that.

And if we have a retrofit, you can make it smart. Well, I think you should try and get in on the Ground Floor. Absolutely. And the Top Floor. Yeah.

Well, Boot down the ground. Let’s see some We have we have a we a we have a presence in Saudi Arabia. Okay. Very good. Thanks, Joe.

Thanks a lot.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Neil Goldwyn. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Couple of questions, Joe. First of all, will the third quarter have a bump up because of the new licensee since you didn’t lose any sales, but they didn’t meet the minimum number? Yeah. To the extent that they exceed their MAR for the year and they have a pretty high MAR, so I’m not sure, you know, how much of a bump that it would be because they still have to exceed it. But if they exceed it, it’ll it’ll definitely bump it up there.

And then we have other projects too that, you know, we’ve already been some licensees report early. We know that there’s Q3 revenue coming from automotive too. Okay. And in terms of the architecture, when you’re dealing with large commercial buildings and you don’t have to use the scaffolding, is there a major even cost savings separate from the heat issue and and and Sure. You know?

Sure. So yeah. So anybody who’s lived in a major city, and Neil is, you know, alluding to the scaffolding that you have to put up anytime you work above the sidewalk so that, you know, windows, bricks, and other things and tools don’t fall on pedestrians, it’s expensive to put that up. You know? First of there’s materials and there’s labor unions, and there’s disruption to the business.

If you’re a retail outlet on the Ground Floor of one of these buildings, your business suffers. The only people that like these scaffolding is me when it’s raining because I could take my dog outside and he doesn’t get wet. But other than that, we haven’t figured out any benefit to it and it’s very disruptive. So being able to avoid it by being able to put the smart glass from the inside, you know, is a huge huge benefit. You don’t need In the you’ve indicated that the second half, you’ll start seeing revenues from architectural Right.

From the retrofit specifically. Yeah. Yeah. And you’re starting to see that? Yeah.

And, you know, what we what we’re seeing, Neil, is that they’re, like like just like investors have a different entry point into anything. Architects and designers and facility managers also have different entry points. Some are gonna want, you know, full energy data and things like that. And some are saying, intuitively, think this is gonna make a big difference, and I’m gonna put it in now without that. And you’ll start to see those are the early adopters.

And I think the government also will see it as a as an early adoption thing, and that could be a huge customer. I mean, the GSA is, I think, the largest customer in the world. Capacity of your supplier in the of that in in in dollars? They can do, you know, their projection is high tens of millions in in year one in in sales. And I know they have expansion room to to do more if they needed to.

And, you know, the profit on this is high enough where they can easily replicate what they’re doing. Okay. So you’re saying you’re saying that it starts it’s starting now, you’re getting some orders, and this is the first year. So let’s say the ’25 is the first half of the first year. So you’re saying tens of millions between now and and June of of twenty six, and then it ramps from there significantly.

Yeah. Although, I wouldn’t count now as the starting gate because we still like I said, there’s a continuum of invest of adopters that are gonna want my energy data in, which takes several months to get and things like that. So you’ll start to see, you know, early adopters come in probably now. But I think when we when we look at that, you know, high tens of millions in sales that are being projected by the licensee, you know, he’s talking about when when they have everything kind of wrapped up in a bow. So you’ll see you’ll see revenues this year, I believe, but you’ll see the big revenues start when we have it all tied up, and that may be several months before that starting gun happens.

Okay. Because that’ll you know, I I assume you’ll announce the first, you know, you know, meaningful architectural wins in in using the retrofit. Yeah. And I think that unlike automotive where they’re very secretive, I think in architectural, they’d be very proud to to talk about smart windows because it becomes a building feature that helps them sell or rent space. Right.

Okay. Alright. Thank you. Thanks, Neil.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from Bill Denny. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hey, Joe. It’s my second question today. I’m a I’m a shareholder. Hello. And I I did hold shares about twenty six years ago for some time, so I’m I’m back.

Welcome back. Thank you. My quick question is regarding the automotive industry, I hear a lot about the sunroof. Is the FPD technology also being used in, like, windows and the doors and around the car? Yes.

So that’s a great question, Bill. The primary market up until now has been sunroofs because you have a really demonstrable benefit. You know? 18 degree difference in temperature just by putting it in the sunroof and getting a couple of extra inches of headroom so that by avoiding the pull across shade and all these other things that increase the comfort, stability and energy efficiency of the car because of just the sunroof. Now Mercedes this quarter, this past quarter introduced, a combination SPD, PDLC in their luxury van, and that’s on the side windows.

And some of the things that we have in development at other automakers, you know, are in different areas of the car than even that. So Mhmm. It’ll be interesting. I mean, I’ve I’ve I’ve made the analogy in the past, but it’s maybe becoming a little bit more close to reality But I view what we have almost as, having 250 patents on stainless steel. You haven’t figured out all the things that stainless steel is gonna be used in, but having the patents on the material is very, very valuable.

And I see SPD Smart Glass is just like stainless steel. It’s a material that enables people to do things, and and that becomes a very valuable, you know, asset to have as a company. Okay. Great. And one quick follow-up.

The residential market, I’m a real estate agent, what’s what’s the growth like on residential homes across the country? Well, we’re getting we’re getting inquiries from some really, really high end homes. We’re also getting lower end not lower end, but smaller projects. But in terms of focus, if we’re gonna put it in residential homes, it’ll probably be the bigger ones first, you know, and then and then it’ll move itself there. It’s not a cost issue.

It’s really just a focus issue because if you have office buildings where there’s one decision maker but thousands of windows, you’re gonna pursue that first. If you have large homes that are somewhat billboards for the technology because of, you know, how nice they are, you know, you you would focus on that as well to some extent, and then you work your way into the mainstream. Our

Erica, Call Moderator/Operator, Research Frontiers: next question comes from Jared Albert. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: How are Hey, Jared. How are you? I’m okay. I got a couple real quick questions. I don’t wanna go on and on, but the one q twenty five was a nice bump.

The four q twenty four was was pretty bad. And this quarter, obviously, we see that it has to do with the EGP bankruptcy, at least in part. How much of one q was stockpiling by Ferrari ahead of this bankruptcy? I think they started long before that. You know, we’ve been talking to them for quite a a while about what the contingency plans would be if something like that happened.

Gotcha. Because I think that we we keep our we keep our ears to the ground with with everybody that’s important to, you know, to try to make sure that there aren’t disruptions. And I think up until a week before the bankruptcy, they thought they were gonna reorganize and sell the company. So with, you know, it just with the customers pulling out, it became, you know, something that wasn’t practical for them. So the current automotive mix kind of set us out of this in terms of architecture, somewhere between 4Q and 1Q is kind of the steady state run rate for fee income.

That’s kind of where we’re at now. I don’t know if you could say there’s a steady state. Know, fourth quarter is always low for automotive because you kinda clear things out of the showroom. I don’t think Ferrari had that problem, by the way. I think they sold anything that they put out there, and it wasn’t an issue.

And, you know, some car makers I don’t think Ferrari had to do this, but some car makers stopped production. You know, Jaguar, for example, wasn’t selling into The US for a while until the tariff situation stabilized, but we’re not it didn’t affect us. But Ferrari, you know, they they were merrily selling this roof and making a good profit on it. Okay. In terms of the Corvette, I was glad you wanna mention it, it has an intermediate speed.

I noticed the Toyota Crown now has an intermediate PDLC speed, but it looks like it’s just various behaves. Is it Yeah. It sounds from what you’re saying that you’re guiding against the Corvette even though it’s a General Motors product. Is that is that the takeaway that we should not expect the Corvette to be using SPD? You’d already You know, it’s us, I would think.

Like I said like I said, it’s like I said, it’s a mystery. I’m hearing different things out in the industry about it. The GM authority had a had an article where they said it’s a technology similar to what’s in the Cadillac, which can mean it’s the same thing or it can mean it’s a different one, but sorta looks like it. You know? Yeah.

It’s like the difference between kosher and kosher style. You know? Or the or the July SPD. It’s it’s hard to know. Right.

And then the and I guess the other part of it is, probably, I would have seen in our royalty reports some mention of this, you know, unless it’s such a small amount that it didn’t hit the reporting threshold. But, you know, I don’t think it’s us. I think that will be another cars outside of Cadillac within GM, but I don’t think that’s us. And as far as the intermediate states yeah. Just to go back to the other question, the the you can do intermediate states with with PDLC too.

It doesn’t look good at all because what you’re doing with PDLC is increasing the haze levels and the light scatters. So an intermediate state would look like dirty window and then I see. Right. You know what I mean. Pictures.

Yeah. I understand. But but moving on to LTI AIT Retro Wall, should I be concerned that their website is still down in terms of putting in orders for this stuff? No. Well, I’m not alone.

The the link the link in the PR is dead, and the link from the LTI site doesn’t really go anywhere. Yeah. Don’t think you should read anything into that. I I don’t know. But I but I think that the initial projects are gonna be direct sales from people they know and, like, the government.

They already supply Gotcha. You know, the US government. So I think that, you know, when they when they have everything ready with the data and everything’s tied up in a bow, they probably will reactivate that. Okay. Last question, Joe.

Very last question. Like the other Jared, you know, we’re all disappointed he called in. But my question is at this point, not not your not your insight from being the CEO, but your personal opinion. My personal opinion is SPD is not yet good enough to be PDLC is good enough to get into these models. But we have That’s not my personal opinion.

No. That’s my personal opinion. Yeah. Okay. Let let me let me finish, and and I will get off the phone to let the big guys have their time.

But I lost my train of thought. My my basic point is it was a sole supplier. Yeah. We talked about them building a sole supplier and they have to protect their margins. But you look at a project like the CLA Shooting Brake, and you think there’s probably a good, better, best, upsell, downsell kinda model internal to them.

And so Yeah. Let me tell you. Let let me yeah. I’m glad you mentioned that. Because I think it may I I I think no.

No. No. No. I think I I’d like to actually I and maybe is where you were going with your question. If not, I apologize for adding more information to the mix, but I think and for more information is always good.

So with the CLA shooting brake, we’ve actually had specific discussions with Mercedes, And they were trying to get that in at a particular price point, which wasn’t gonna happen with SPD. The car itself had to be, yeah, at a certain price point because of who they’re competing against. It also was very strategically important because the high end electric vehicles within Mercedes, and I’m not sharing anything that hasn’t been talked about in automotive news or anything like that, the high end electric vehicles at Mercedes, the EQS, you know, the replacement for the s class on the electric basis, wasn’t very successful. And and and they’ve said that. And what Mercedes told us is, you know, Joe’s gonna be disappointed, but we know that SPD is a better technology.

We know that it performs much better, and it’s gonna do what we need it to do. But it’s not gonna come in at the price point that it’s gonna allow us to achieve our strategic objectives with the shooting brake because of the price. And, you know, I was told that PDLC for that, and maybe it was a subsidized price because someone is trying to get either volume business or something or get their foot in the door at Mercedes was 75% less than the SPD. So I mean, it’s So so going back to your question about it yeah. Is at at that price differential, if it’s sustained, yeah, it’s gonna be it’s gonna be tough for somebody to put SPD in when they don’t know if the PDLC will kind of perform what it’s supposed to do in a general way, if I could be very vague.

Because they’re very wishy washy about why they put PDLC in these cars. You know, Rivian put it in. If you sat in one, you’d be unimpressed. Doctor Denny, I think, mentioned before he sat in an Audi, and he was unimpressed with the PDLC. I sat in in the, you know, the ID four and the ID seven, and it didn’t look very good.

It’s not something that I’ve been in I x and I’ve been in that class. So I I understand. Right. But my my point is and this I I know I said last question, but I’m gonna leave you with this thought because the issue is not price. The issue is the Venn diagram of that leads to value.

And at this point, SPD is too expensive. It doesn’t offer enough performance advantage over PLC, or it’s just too difficult to sort for a variety of reasons to Not difficult to source. Equation. Not not difficult to source. But But I know you just put out a Yeah.

The price, I think, is the issue here. But, like, for example, Gauzy’s put out a a pre land stack that I assume Yeah. Reduces some of the issues around refraction and makes it cheaper. So you kinda keep chipping away at the various issues. Maybe you’ll get there.

And that was really what I was gonna ask you about. That that was actually the the the thrust of my question. That but that that’s besides the answer, is that there’s an incremental improvement to get down to a price where this thing can actually go into stuff. I I don’t think it’s that I don’t think it’s that rational. I think that there, every time you land a high end car, you get your cost down on the low end cars.

So Okay. I think that’s just we just keep approaching that that point where the performance differential between SPD and PDLC becomes much more important favoring SPD as we get the price down. So Okay. Something we’re all working on. Yeah.

Well, I mean, we’re the same stable of cars all these years. But okay. Thanks, Joe. Okay. Bye bye.

Okay. Bye bye.

Erica, Call Moderator/Operator, Research Frontiers: Our next question comes from John Nelson. Please state your question.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Hi, Joe. I again, I might have missed this, but is the retrofit expected to launch in the third quarter or the second half of this year? Second half. And when I say launch, you know, you’ll probably have a soft launch with some key customers and then, you know, a bigger launch when you have the data all tied up in a bow. Okay.

Great. Thanks it. Thank you. Thank you.

Erica, Call Moderator/Operator, Research Frontiers: At this time, we have no further questions. I’ll turn it back over to our host for some closing remarks.

Joe Harari, President and Chief Executive Officer, Research Frontiers: Okay. Thanks, and thanks, Erica. And if we haven’t fully answered any questions that were either emailed to us or in our presentation or in the Q and A, just call or email us. We’re happy to talk to you. I’m going to make a few closing remarks.

I think it’s pretty clear, not only from us, but from the history of what’s happened to our competitors. We’re in a tough industry, but also as history has shown, we’re tougher. We know that there’s never a straight line to success. And because of this, we built our business model to reduce risk to our shareholders as new projects for our technology come online and generate more revenue. We have the staying power.

We buttressed this by invest by investing and having a robust and high performing technology that controls light and that has been proven itself in tens of thousands of cars, aircraft, boats and buildings. We face competition from the Chinese market, mostly from PDLC, which has inferior performance characteristics when used for anything other than privacy or projection applications. We face competition from electrochromics and small surface application areas such as rearview mirrors and to some extent, aircraft windows. Although, you know, we’re in Boeing and Airbus now, so I think we’re starting to do very well there. But we also have superior performance head to head in every high volume area such as sunroofs, panoramic glass roofs, windows for homes, offices, apartment buildings, yachts, and cruise ships and museums.

High volume, high surface area where electrocomics are just gonna get too slow to work work well. We’re not the low cost alternative to these other technologies. We’re the high performance alternatives. We don’t have to be the low cost alternative, although lower the cost, the better for everybody. And if you look at many technology based products, there are low performance, low cost alternatives that exist.

I’ll give you some examples, you know, near and dear to my heart, the automotive industry. Take tires, brakes, headlights, infotainment systems or in the consumer electronics, smartphones. History in all these categories show that the high end is the most profitable and also the most enduring because high performance products are more likely to withstand inevitable competition from new entrants. We also have efficiently managed our capital expenditure requirements by keeping operational expenses low and licensing our SPD SmartGlass technology to larger companies who make these capital expenditures and build factories, establish sales networks, employ people and cast a wide footprint worldwide. Through their efforts, we benefit from these activities.

And this quarter showed the importance of diversification. We have a number of licensees. Sometimes they overextend themselves. Sometimes the industries they serve go up to ups and downs that they cannot weather, and sometimes they lose key customers. When this has happened to our competitors such as Vue and Halo, they went bankrupt.

When this happened to one of our licensees such as the one in Europe supplying Ferrari, we simply diverted this business to another one of our many fine licensees and production continued. And with a 10% to 15% royalty based on revenues from SPD SmartGlass products by our licensees in diverse industries, we’re able to capture profitable business and weather the cyclical nature of the industries we’re in. Research Frontiers created the smart glass industry, and our leadership role has helped shape it and we will continue to do so. We appreciate everyone’s support as we move forward and continue to expand the use of products using our SPD’s light control technology to make the world better, more energy efficient, safer and enjoyable. Thank you all very much.

Erica, Call Moderator/Operator, Research Frontiers: This concludes today’s conference call. Thank you for attending. The host has ended this call. Goodbye.

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