Crown ElectroKinetics Corp. (NASDAQ:CRKN) Q4 2023 Earnings Call Transcript April 1, 2024
Crown ElectroKinetics Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, everyone, and welcome to the Crown ElectroKinetics Corporation Fourth Quarter and Year End 2023 Conference Call. At this time, participants are in a listen-only mode. This conference call is being recorded A replay of today’s call will be available on the Investor Relations section of the Crown’s website. I will now hand the call over to Jason Assad, Director of Corporate Communications for introductions, and the reading of the Safe Harbor statement. Please go ahead.
Jason Assad: Thank you, operator. Good afternoon, everyone, and welcome to Crown’s fourth quarter, year end 2023 call. With us today on the call are Doug Croxall, Crown’s Chief Executive Officer and Joel Krutz, its Chief Financial Officer. Before we begin, I’d like to remind you that today’s call contains certain forward-looking statements from our management made within the meaning of the Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. Words such as may, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company’s quarterly report on Form 10-Q for the fourth quarter ended 2023 filed with the SEC.
Copies of these documents are available on the SEC’s website at www.sec.gov. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements for revisions or changes after the date of this call, except as required by law. Now, at this time, it is my pleasure to introduce Doug Croxall, CEO and Chairman of Crown. Doug?
Doug Croxall: Thanks Jason and welcome everybody to our fourth quarter and year end 2023 earnings call. I’d like to start today’s call by talking about our film division first and then I’ll talk about our fiber-optics division. As many of you know, Crown has been working towards achieving a path to develop its embossing master for 12-inch wide film. The path that Crown embarked on quite some time ago involved combining its internal techniques with the efforts of one of our European vendors. Crown is attempting to create something that has never been done before. Technical discovery can often be inherently unpredictable. Crown is at many factors that delayed our mastering development, but with the delays came critical learning and eventually leading to progress.
As you may recall, in February 27 of this year we announced the Crown’s EK film team had solved the 12-inch mastering challenge for its Gen 1 smart window insert. Also minor refining is required including some tooling replication. We remain in a great position to start shipping first product in small quantities in July, August timeframe of this summer. With this technical milestone behind us, Crown recently announced that Sheldon Davis has joined as a Senior Advisor. If you look at Sheldon’s work history, you will immediately see that he’s well positioned for Crown’s exact stage of growth. Importantly, Sheldon and I have known each other since 2016, while he was working at Guardian Industries, a Koch Industries company. He’s knowledgeable of our ink formations.
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Q&A Session
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He’s knowledgeable about windows, glass manufacturing, and different glazing technologies like electrochromic S — SPD and liquid crystal. Crown was excited to have Sheldon working with us at this important time where he will lead our efforts towards launching our Gen 1 smart window insert. Crown feels very fortunate to have such an experience proven skilled executive now spearheading the commercialization process. I think it’s safe to say that if Crown wasn’t now at this advanced stage in its technical development, it would find it difficult to attract executive talent like Sheldon. Going forward, Crown expects to provide more details on product capabilities, timing, customer wins, as well as pricing and expected revenue and margins. Our Gen 1 product roadmap will start immediately.
We will start shipping small quantities in the July-August timeframe. The objective is to send approximately four to six inserts to 10 to 20 building — buildings with limited quantities in each. We have buildings already lined up in Los Angeles, San Francisco Bay Area, and we expect to ship what we call Gen 1 Alpha product again in the July-August timeframe. We’ll be expanding the Gen 1 Alpha product to cities, to buildings located in cities like Dallas, Chicago, and New York City. Our Gen 1 Alpha smart window insert will have limited product features, but we will introduce Gen 1 Beta towards the end of the summer early fall and Gen 1 Charlie product towards the end of October, early November timeframe. Each Gen 1 Alpha, Beta and Charlie will have additional product features added to each of those releases.
The Gen 1 approach allows us to gather feedback from our customers, so that we can better design our Gen 2 smart window insert for scale production. Also, during the six to seventh month, Gen 1 process, we will be exploring the best ways to not only manufacture our film, but also assemble our smart window inserts. The Gen 1 phase rollout with Sheldon’s guidance, we will be meeting and exploring the possibility of using existing thin-fill manufacturing lines and existing window manufacturing company part — to partner with, so we can accelerate the Gen 2 product rollout. Moving to the fiber-optic division, as you know a little over a year ago, Crown made its first investment in the fiber-optic construction market. The last 15 months, it provided some very hard lessons and taught Crown a great deal about not only the market, but also how to operate within it.
Many of you were curious as to why Crown decided to initially move in this direction. While Crown was always confident that it could solve the mastering issue with its EK film division, Crown could not — we could not ultimately predict exactly when that would occur. The decision to buy directional drilling assets in the fiber-optic construction market in January of last year, has done so in an effort to generate eventual revenue and earnings, benefiting our shareholders while Crown reached the recent technical milestone described earlier. I’m happy to let you know that Crown is generating revenue in both our Arizona market and our recently announced Florida market. While Crown starts serving Arizona market with its micro-trenching and horizontal directional drilling, Crown has also been given opportunities to grow outside the Arizona market.
The opportunity in Florida is a direct result of the efforts of our recently announced president of Crown fiber, Corey Boaz. Corey has not only positively affected Crown’s immediate revenue generation, but has also brought Crown to an operating model that allows Crown to be cash-flow positive on a project from day one. Crown is also — Crown also has market credibility and connections that has allowed him to build a significant pipeline of revenue-generating projects. The pipeline leveraged within his proven business model is expected to generate positive cash-flow in the very near term. Analyzing the recently announced Florida opportunity, Crown has been awarded 300 miles of horizontal directional drilling as its first phase with an estimated revenue of $11 million.
Crown has already begun the work and, promisingly, have been meeting and surpassing production and margin targets every day. Crown expects it can scale production, without the need to significantly hire more people, rather carefully selecting and leveraging known subcontractors at a guaranteed rate of production. This outsourced model allows Crown to lock in returns based on daily production and by adding more sub-contractors, Crown can generate more revenue and earnings. With the work on the initial 300 miles underway, there remains an additional 800 miles that Crown expects to be awarded later. Crown will provide an update when appropriate. On March 6, we announced it — we announced that we’d expand, we executed an agreement with the Twin Dolphin Club, located in Los Cabos, Mexico.
The Twin Dolphin Club is a 1400-acre resort master plan development. Crown’s fiber optic division, led by Corey, will construct slant wells for the desalination plant that provides fresh water from ocean water to the hotel and surrounding planned residential development. The project is expected to start later this spring and conclude in the early fall time frame. The agreement calls for a $1.2 million upfront payment, which we’ve already received, with a total value of $3.5 million, and is expected to lead to other projects of a similar nature. This opportunity was generated and will be managed by the Company’s President, Corey. This agreement illustrates Crown’s — Crown Fiber Optics personnel and equipment are able to expand beyond traditional fiber work and into complementary verticals like electrical and irrigation work.
The new approach to building slant wells should lead to new revenue opportunities in Mexico, Central America, and the Caribbean. Importantly, the agreement generates upfront cash and is anticipated to lead to other opportunities. With this agreement closed and more in the pipeline, we anticipate providing financial guidance. Well, Joel will actually give you the financial guidance here towards the end of his call. With that, I’m going to turn it over to Joel and I’ll close with some comments at the end. Joel?
