Research Frontiers Incorporated (NASDAQ:REFR) Q4 2024 Earnings Call Transcript

Research Frontiers Incorporated (NASDAQ:REFR) Q4 2024 Earnings Call Transcript March 6, 2025

Alan Yakuboff: Hi Joe. First of all, the fourth quarter was about half the third quarter. What was the reason for that?

Joe Harary: A lot of our revenue comes from automotive and a lot of carmakers cut production in the fourth quarter to clear out what’s on the factory showroom for the next year.

Alan Yakuboff: Okay. Given the fact that you’ve gotten some airlines to put the windows in and Gauzy announced last time that’s 50,000 cars or something. The problem we have as an investor is nobody knows about this company because neither you nor Gauzy have been able to put out any press releases about new business. I mean, what can we expect going forward this year to let people know about Research Frontiers because there certainly aren’t any analysts that are going to follow this company until there’s something that’s worthwhile for them to take a look at. And I mean, we’ve been stuck in this mode for a long time and I realize that you have legal obligations with these companies. But can we expect if you get an architectural contract that you could announce something like that?

Joe Harary: Thanks for the question.

Alan Yakuboff: I’d like to see you go to some investor conferences and talk about your company.

Q&A Session

Joe Harary: Right. Well, we will start to do that and we’ve been lining some up. But getting back to your original point about trying to say things about projects. Obviously, we have to defer to the request of the customers, but we’ve been pretty good at getting information out. We talked about Ferrari for the last two years before the car was even introduced with McLaren and Mercedes and Cadillac, in some cases, they’ve done the talking, in some cases, we have. And Gauzy and Research Frontiers have it in our best interest to announce what we can. So, we’ve been working together on that as well. But thank you for the question.

Alan Yakuboff: [indiscernible] as much as you can.

Joe Harary: Thank you. We will. We want to do that, too. It makes it easier to sell more cars later, too. Operator And our next question comes from Michael Forrester, an investor.

Alan Yakuboff: Yes. My question has to do with the black SPD developed by Gauzy and I guess, Research Frontiers. Is Gauzy going to apply for a patent or is Research Frontiers going to apply for a patent on that black particle SPD?

Joe Harary: Since a lot of this work was done jointly, we obviously want to have as strong a patent protection as possible. But I’m not going to talk on an open call about IP strategy because most companies will do a combination of both, and that’s probably no exception here.

Alan Yakuboff: Well, the history, as I see it, is that the SPD film is part of the — what Gauzy refers to as solar-powered smart glass.

Joe Harary: That’s different. Solar-powered smart glass is the combination of photovoltaics with smart glass. So that would apply to any type of smart glass that they make, PDLC or SPD. It was demonstrated at CES. We’ve had other licensees develop a combination of transparent photovoltaics and SPD. And because our power requirements are so low, it’s very feasible to do that. And some of the retrofit applications are also using some proprietary systems to make these things self-powered. So if you think about what that means in a retrofit, you may not need an electrician to ever come to the site. You just pop this into the, into the window frame and you’re done. So it’s going to be an exciting time

Alan Yakuboff: Yeah. You mentioned that the patent expiration is 2037, which is only 12 years away. — when is..

Joe Harary: Yeah. And we always have new things coming online.

Alan Yakuboff: When is the last time Research Frontiers applied for a patent?

Joe Harary: We have a pretty extensive patenting effort. So we spent quite a bit of money protecting.

Alan Yakuboff: Most of them are before the year 2000.

Joe Harary: Michael, I’m not going to go into IP strategies. Sometimes you protect things with trade secrets and sometimes you protect it with patents.

Alan Yakuboff: But I asked a specific question. When is the last time Research Frontiers applied for a patent?.

Joe Harary: I’ll have to look that up. We have things in the works, too.

Alan Yakuboff: All right.

Joe Harary: Thank you. Operator And our next question comes from Chuck Michaels, an investor.

Alan Yakuboff: Yes. Hi, Joe.

Joe Harary: Hey, Chuck.

Alan Yakuboff: On your website, I looked on your website and I saw financials for the year, but I didn’t see this year versus 2024 versus 2023, but I didn’t see anything for the last quarter. Do you have quarterly financials somewhere I can look at?

Joe Harary: No. So the 10-K only reports yearly. You can derive the quarter from those numbers and comparing it to the nine months. But the 10-K and the financial press releases have to follow a certain format according to the SEC. So that’s what we did.

Alan Yakuboff: I see. So can you tell us what the loss was for the quarter?

Joe Harary: It was lower than last year this quarter.

Alan Yakuboff: Yes, But can you tell us what it was?

Joe Harary: I’d have to look it up because we don’t break it out that way. But if you want offline or you could derive it, you could derive it from comparing the nine-month loss and the 12-month loss

Alan Yakuboff: Okay.

Joe Harary: …to subtract one from the other. Our loss per share was $0.04 for the whole year, though, which is the lowest it’s been since we went public.

Alan Yakuboff: Yes, I saw that. That’s great. Also, I had a question — you had mentioned some hopefully, rather large sales coming through in 2026?

Joe Harary: Right.

Alan Yakuboff: How confident…

Joe Harary: That’s not to say, we won’t have — yes, that’s not to say we won’t have large sales in 2025. But in the context of what I said, what we’re expecting in 2026 may dwarf anything we’ve ever talked about or Gauzy has ever talked about.

Alan Yakuboff: Yes.

Joe Harary: And by the way, they have their conference call on Monday, so I urge everybody to listen to that as well. I’m looking forward to it.

Alan Yakuboff: Right. I am as well. Okay. So how confident are you on the timing on that? Do you have any — give us any information with regard to that?

Joe Harary: Well, I’ve mentioned it on the call, which means I’m relatively confident that what I say on these calls is going to happen. It doesn’t always happen. I mean, we had the CEO of Ford announced on CNBC that our glass was going to be in the Lincoln Continental and it didn’t. So, sometimes things happen between the cup and the lip. But for the most part, they happen on the — in the way that we expect. Not always on the timetable, though.

Alan Yakuboff: Right. I understand. And likewise, I know you’ve mentioned a number of quarters about a car — one or more cars coming out in the near future, and they don’t seem to come out either. I don’t know if that was the Lincoln or if that’s something else.

Joe Harary: No, no, this is something else. The Lincoln was many years ago when that — when they were rebranding their car. Yes. We expect these cars to come out, like I said earlier in the call. They just — they were delayed past 2024 when we thought they were coming out, but not because of SPD.

Alan Yakuboff: Okay. All right. Thank you very much.

Joe Harary: Thanks a lot, , Chuck. Operator And our next question comes from Avi Gross [ph], an investor.

Alan Yakuboff: On the topic of tariffs, royalty of like 10% or 15% paid sometimes on top of the tariff or not? Like if you’re shipping a module to a car company abroad.

Joe Harary: So typically — and that’s a great question, Avi. Thank you for asking it. So all of our license agreements have a definition of net selling price. And the net selling price is basically the revenues minus some minor things, but it’s basically revenues. It’s not profit. And you do exclude out things that don’t go into the licensee’s pocket, like, for example, shipping costs and things like that. But — and when you get down to tariffs, you would exclude taxes and sales tax and tariffs and things like that from the calculation of the royalty. However, there’s a sub-limitation that limits how much they can deduct for all of those things I just mentioned. So if you add up shipping costs and tariffs and other things, if they go above a certain level, the licensee cannot deduct that from the calculation.

So if we’re talking about a 25% tariff, a very small piece of that is going to be deducted, if any. So like I said, they’re not going to affect our royalty. It may affect at the lower-end cars, how many cars are sold in general. But when you’re in the premium market. And let me give you a simple example. In China, for example, which was the largest market for Mercedes and BMW and Audi, the cars would typically sell for a multiple of the MSRP, not because necessarily of tariffs, but because the distribution was set up to create certain market leverage so they could command charging a lot for these cars. And they still sold very well. So at the high end, I don’t expect there to be much movement in terms of what the tariffs are doing. And I also — as someone that’s a student of politics and a student of economics don’t think they’re going to be that long-standing.

I may be wrong. I don’t want to make the same mistake and say they’re transitory that they said about inflation because that didn’t happen. But I never said that either, and I never believed it was. But in this case, I do believe that they will be somewhat more temporary than people expect. Hope that answers your question?

Alan Yakuboff: Thank you. Operator [Operator Instructions] Our next question comes from John Nelson, an investor.

Alan Yakuboff: Hi, Joe, a couple of questions. First, one that I always ask is any progress on the Sun Visor development?

Joe Harary: There is both on the OEM side and in the aftermarket side, but I have to leave it to the licensees to continue their work, work with their customers and get the product out. But it’s something I believe a lot in.

Alan Yakuboff: Okay. Understood. And up and comer in the commercial jet market is Embraer. Have you — do you have any contacts with them? Are they aware of your product?

Joe Harary: Yes, very much so, very much so. Matter of fact, some of the early expansion that our licensee in the aircraft market, Vision Systems had done from being just European-based to being worldwide was because of Embraer. So — and their transport category, regional jets are great.

Alan Yakuboff: Yes. And do you expect any of the new vehicles for 2025 to be in the middle market for cars?

Joe Harary: Yes. Yes, I do.

Alan Yakuboff: Okay. Good. And then just lastly, last conference call, you mentioned work on Holy Grail patents. Are they related to the black particle? Or is this something…

Joe Harary: Well, black is certainly the Holy Grail. And when I talk about that, it’s what the whole industry has been trying to get. So we’re very excited about the black particle. We’re experienced enough to know that what we showed at CES was remarkable. I mean, if you saw this up close in personal, you would be extremely impressed with it. But we have to go through the — from R&D sample stage to engineering sample stage to mass production. And assuming the viscosity and the flow characteristics of the emulsion are similar to the blue, I don’t want to minimize it, but it may be simply as easy as pouring more — different material into the bucket and coating it. There’s always adjustments. So I wouldn’t expect that to be what really happens. But it shouldn’t be that difficult of a material to translate up into mass production.

Alan Yakuboff: Good. Very encouraging. That’s all are my questions. Thank you very much.

Joe Harary: Thanks John. Operator And our next question comes from August Berman [ph], an investor.

Alan Yakuboff: Hey, Joe, how are you?

Joe Harary: Hey, August. How are you? Dr. Berman, I must say.

Alan Yakuboff: Hey, Calling — just wanted to see with regards to the 2025, are we talking about introductions? Or do we know specific more — it’s more about revenues from the new vehicles?

Joe Harary: I kind of equate them for the following reason. In the early days, there would be several years lead time between when an automaker wanted to think about putting SPD-Smart Glass in a vehicle and when they would put it in, because there was testing. Mercedes went through what they told me, €5 million of testing and built special chambers and now they use it on all their materials. But in the case here of nowadays, there’s only a very short time period that’s often necessary between when you decide to put SPD-Smart Glass in a vehicle and when it goes in. It could be a year, 1.5 years, and we’ve been working with some of these companies for that period of time. So I think you’ll expect introductions in 2025.

Alan Yakuboff: Got it.

Joe Harary: That’s always the big assumption.

Alan Yakuboff: Right. Okay. And I think maybe part of the frustration last year, just looking at the 2000 filings and I’m mentioning Daimler, SPD and then I’m looking at the web and seeing that the 2020 S-Class had been delayed. So I always kind of put — connected the dots there. But are we still expecting the Asian automobile to come out as well in 2025?

Joe Harary: Yes, we are.

Alan Yakuboff: Okay. And that’s all I had, Joe. Thank you.

Joe Harary: Thanks a lot. Take care. Operator And our next question comes from Alan Ginsberg [ph], an investor.

Alan Yakuboff: Yeah. Hi, Joe.

Joe Harary: Hey, Alan.

Alan Yakuboff: Hi. One question. The structure of the royalty agreement regarding the black particles, do you expect it to be similar to the royalty agreements that you have in place right now?

Joe Harary: Yeah. I mean that’s something that we and Gauzy are going to determine, but I don’t see a real need to change the royalty arrangement. We get a 10% to 15% royalty from the customer with the blue material. And you would think that because the black is a better thing, we would get more. But on the other hand, they would probably sell a lot more of the product or sell it at a higher price. So our royalty could go up just with the same percentages in place.

Alan Yakuboff: Right. Your protection is similar with the black particle as it would be your intellectual property protection as it would be in your other products. Is that correct?

Joe Harary: Yeah. We’re very focused on protecting IP, as you could tell. We have 250 patents and equal number of patent applications. It’s quite a bit.

Alan Yakuboff: Okay. Thank you. That’s all I have.

Joe Harary: Thanks Alan.

Alan Yakuboff: All right. Operator And our next question comes from Alan Yakuboff of Kingsview Partners.

Alan Yakuboff: Joe, how are you doing today?

Joe Harary: Alan, how are you, and I’m sorry, we haven’t been able to hook up. I spoke to your partner when you had called, but wasn’t able to get back to you.

Alan Yakuboff: No problem. Just a quick question.

Joe Harary: You’re here, yes.

Alan Yakuboff: Can you hear me?

Joe Harary: Yes.

Alan Yakuboff: Can you hear me?

Joe Harary: Yes I can.

Alan Yakuboff: You were up 47% for the year, and that’s great. And you’re saying you have momentum in all the multiple — all the markets for this year.

Joe Harary: Right.

Alan Yakuboff: And if you duplicate that number, it’s terrific. I know you’re going to have some lumpy quarters from time to time, whatever reason. If you see momentum in all these markets, do you anticipate the possibility of a profitable quarter this year? Can you share that if you have?

Joe Harary: Yes, sure. Sure. We almost hit profitability this past year. So I’m certainly looking forward to achieving a truly profitable quarter in the coming year. A lot of it depends on the timing. If the car comes out at the end of the year versus the beginning of the year, that affects our royalties. But — and also, if the architectural retrofit comes out, that could significantly increase our royalties. So we’re very focused on that.

Alan Yakuboff: And the 2026 event that you mentioned or the potential for 2026 is something, any — can you give us any more detail as far which markets is that going to address? Or is it multiple markets?

Joe Harary: Well, I would say that the most predictable market we have is automotive. So if I’m projecting out to 2026, it’s probably on an automotive project and multiple ones actually.

Alan Yakuboff: All right. That’s all I have. Just wanted to be brief. Thank you very much.

Joe Harary: Thanks Alan. Appreciate it. Operator And our next question comes from William Brazzel [ph], an investor.

Alan Yakuboff: Yes. Good afternoon.

Joe Harary: Hi. How are you?

Alan Yakuboff: I’m good. But I want to go back three years ago, because back in February of 2021, the stock was at $3.96. Today, it’s up 4.72% to $1.33. And one of your earlier callers talked about the problem with the stock prices, nobody knows about Research Frontier. That’s not the problem. The problem is if you go out and do a roadshow now, you’d be wasting your time and the company’s money because these broker-dealers will not be interested until you have significant revenues, and they will contact you and want to have a dialogue. I mean, we need $500,000 to $1 million in revenue is not going to bring them to the table. I mean, I’m surprised that we’re not — based on what I knew three years ago, you’re not in the hundreds of millions of dollars and obviously, that would take care of the stock price.

And that’s why I’m disappointed and I’m wondering how much longer this is going to take to have that kind of significant revenue, if you can talk about it at this point.

Joe Harary: Sure, sure. Well, I appreciate it. And I’m also in agreement with you that the real money is going to come into Research Frontiers as an investment when we have much higher revenues.

Alan Yakuboff: That’s true. We need contracts and the problem is how to it’s hard to be confident in that when I’ve been waiting for these significant contracts for three years.

Joe Harary: Right. Now, and I’ve been — I’m very sympathetic to what you’re saying there. We are working and Gauzy is working as hard as we can to land these contracts sooner to be able to talk about them sooner so that the stock price appreciates sooner. And of course, the least thing I’m worried about is revenue. It’s really what can we say about it and what — and those are the things we’re working on right now. But I appreciate the question, and I am in agreement that our stock price will do much better when we could talk about more of this stuff and have higher revenue.

Alan Yakuboff: Because I know all these companies and you have a fiduciary responsibility as a publicly traded company to make those announcements on a timely basis when you do have a significant contract. So I’m not worried about that happening, but I do hope it does happen sometime soon.

Joe Harary: Yeah. Right, right. Well, we try to have as many things in the works so that we could have more and more of those.

Alan Yakuboff: Okay. Well, I’m hopeful, obviously, I’ve been hanging on.

Joe Harary: Thank you very much. And I appreciate the trust.

Alan Yakuboff: Okay. Thank you for your time.

Joe Harary: Thank you. Operator [Operator Instructions] End of Q&A Joe Harary I think we’ve answered a lot of the questions. And if we haven’t fully answered the question — anyone’s questions, please feel free to either e-mail us or call us. We’re happy to talk to you. I’d like to make a few closing remarks now, if I could. For the past several years, you’ve seen a constant increase in revenues year-over-year, and a steady reduction in operating expenses without a reduction in operational or other business accomplishments. The reason for this is simple. We have a highly desirable and the best performing smart glass technology in the world. And by increasing revenues, reducing expenses and preserving the best aspects of our asset-light business model, we’re steadily moving towards being cash flow positive and profitable.

Because of the nature of the industries we’re in, winning a project today often results in many years of business. The typical car model has a seven-year life and the typical aircraft model much longer. We go elephant hunting, and nobody is better at this than us and our licensees, and it creates steady revenues from each of the programs that last for years as we land these programs. In areas like architectural, the numbers can be even bigger by virtue of the sheer magnitude of the size of the glass market for buildings and homes. Also, the sales cycle can be much shorter than aircraft and automotive, especially now with the SPD- SmartGlass retrofit application. Several of our competitors who have raised massive amounts of money and inevitably spent even more than they raised, notably companies such as View and Halio went bankrupt this year.

Another company just got delisted. Part of this relates to the limitations in their technologies. And part of this is that they were only able to approach one market, and part of this was simply not paying attention to key areas of their business. But by preserving our asset-light business model all along the way, we’re well positioned to reduce risks, apply more of our resources towards technology and market enhancements and expansion. We can also leverage the expertise and production capacity and capital and technological resources of a large list of diversified licensees by working with them closely from a technological and business development perspective. This allows us to have a strong presence in multiple industries that others can’t, such as automotive, aircraft, architectural, marine and consumer electronics.

And with predictable and lower expenses, we can start to pay dividends to our investors more quickly. I thank you very much for your continued support as we travel together down this road together. And if you believe that the future is smart glass, and I believe all of us here do, and you like diversified asset-light companies and a management team focused on efficiency and driving the company towards profitability, then you’ve come to the right place! Thank you very much. Operator This concludes today’s conference call. Thank you for attending.