Q4 2023 Crown ElectroKinetics Corp Earnings Call
Good morning, everyone and welcome to the Crown Electrokinetics Corporation's fourth quarter and yearend 2023 conference call. At this time all participants are in a listen only mode.
This conference call is being recorded.
A replay of today's call will be available in the Investor Relations section of the crowds website.
I'll 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 morning, everyone and welcome to clouds for fourth quarter year end 2023 call with US today on the call are Doug Crocs, All Cross Chief Executive Officer, and Joel crushed 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 27.
Jason Assad: Eight of the Securities Act of 1933 as amended and section 21 E of the Securities 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.
Jason Assad: 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 Dot FCC Dot Gov actual results may differ materially from those expressed.
Jason Assad: Rest 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's my pleasure to introduce Dr. Crocs, all CEO and chairman of Crown Doug.
Douglas B. 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.
Douglas B. Croxall: Then I'll talk about our fiber optics division.
Douglas B. Croxall: As many of you know brown has been working towards achieving a path to develop it's in Boston Master for 12 inch wide film.
Douglas B. Croxall: The path to crown embarked on quite some time ago involved combining its internal techniques with the efforts of one of our European vendors.
Douglas B. Croxall: Attempting to create something that has never been done before.
Douglas B. Croxall: Technical discovery can often be inherently unpredictable found is that many factors that delayed our mastering development.
Douglas B. Croxall: But with the delays came critical learning and eventually leading to progress.
Douglas B. Croxall: As you May recall in February 27th of this year, we announced the crowds Ek film team had solved the 12 inch mastering challenge for its Gen. One smart window insert alstom.
Douglas B. Croxall: While some minor refining is required including some tooling replication, we remain in a great position to start shipping the first product in small quantities in July August time frame of this summer.
Douglas B. Croxall: With this technical milestone behind US Crown recently announced Sheldon Davis.
Douglas B. Croxall: Has joined as a senior advisor if you look at Shelton's work history, you will immediately see that he is well positioned for crowns exact stage of growth.
Importantly, Sheldon I have known each other since 2016, while he was working at Guardian industries Koch Industries company.
He's knowledgeable of our ink formations, he's knowledgeable about windows black manufacturing and different blazing technologies like electrochromic.
Douglas B. Croxall: SPD and liquid Crystal tunnel is excited to have Sheldon working with us at this important time, where he will lead our efforts towards launching our gen. One smart window insert found.
Brownfields very fortunate to have such an experienced proven skilled executive now spearheading the commercialization process I think it's safe to say that if crown wasn't now with this advanced stage in its technical development. It would find it difficult to attract executive talent like Sheldon.
Douglas B. Croxall: Going forward and expect to provide more details on product capabilities timing customer wins, as well as pricing and expected revenue and margins.
Douglas B. Croxall: Our Gen one product roadmap will start immediately.
Douglas B. Croxall: We'll start shipping small quantities in the July August timeframe, the objective to discern approximately.
Douglas B. Croxall: 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 Gen. One what we call Gen. One alpha products again in the July August timeframe, we will be expanding the gen.
Douglas B. Croxall: One alpha products to cities to buildings located in cities like Dallas, Chicago, and New York City.
Douglas B. Croxall: Our Gen. One alpha smart window insert will have limited product features but we will introduce gen. One data towards the end of the summer early fall and Gen. One Charlie.
Douglas B. Croxall: Towards the end of October early November timeframe, each Gen. One alpha beta and Charlie will have additional product features added to each of those releases. The gen. One approach allows us to gather feedback from our customers. So that we can better design our gen. Two smart window insert for scale production.
Douglas B. Croxall: Also during the six to seven month Gen. One process will be exploring the best ways not only manufacture our film, but also assemble our smart window inserts. The gen. One phase rollout with Sheldon guidance, we will be meeting in exploring the possibility of using existing thin film manufacturing lines and existing window manufacturing.
Douglas B. Croxall: Any heart to partner with so we can accelerate the gen two product rollout.
Douglas B. Croxall: Moving to the fiber optics division.
Douglas B. Croxall: As you know a little over a year ago Crown made its first investment in fiber auction construction market. The last 15 months have provided some very hard lessons and talk a great deal about not only the market, but also how to operate within it.
Douglas B. Croxall: Many of you were curious its white Crown decided to initially move in this direction, while crown was always confident that he could solve the mastering issue with the Ek film Division crowds do not we could not ultimately predict exactly when that would occur.
<unk> to bi directional drilling assets in the fiber optics construction market in January of last year. It was done so in an effort to generate eventual revenue and earnings benefiting our shareholders. While crown reached the recent technical milestone sounds.
Described earlier.
Douglas B. Croxall: I'm happy to let you know the crown is generating revenue in both our Arizona market and our recently announced Florida market, while Crown start serving Arizona market with its micro trenching in hers that horizontal directional drilling crown has also been given opportunities to grow outside of the Arizona market. The.
Douglas B. Croxall: The opportunity in Florida is a direct result of the efforts of our recently announced president of Crown fiber Cory Boaz.
Douglas B. Croxall: He is not only positively affected crowds immediate revenue generation, but it has also brought crown jewel and operating model that allows crown to be cash flow positive on a project from day one.
Douglas B. Croxall: There's also a crown also has market credibility and connections has allowed him to build a significant pipeline of revenue generating projects the pipeline leverage within his proven business model is expected to generate positive cash flow in the very near term.
Douglas B. Croxall: Analyzing the recent recently announced Florida opportunity Brown has been awarded 300 miles of horizontal directional drilling as its first phase with an estimated revenue of $11 million problems has already begun to work and promising Lee have been meeting and surpassing production and margin targets every day brown expects that can scale.
Without the need to significantly higher more people, rather carefully selecting and leveraging known subcontractors at a guaranteed rate of production.
This outsourced model allows crowds lock in returns based on daily production and by adding more subcontractors crown can generate more revenue and earnings with the work on the initial 300 miles underway. There remains an additional 800 miles. They crowd are expected to be awarded later, Brian will provide an update when appropriate.
Douglas B. Croxall: On March six 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.
Douglas B. Croxall: Sounds fiber optic division led by Cory will construct slant wells for the desalination plant that provides freshwater from ocean water to the hotel and surrounding land residential development.
Douglas B. Croxall: Project is expected to start later this spring and conclude in the early fall timeframe. The agreement calls for $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.
Douglas B. Croxall: <unk> opportunity was generated and will be managed by the company's president Corey.
Douglas B. Croxall: Your disagreement illustrates crowds crown fiber optics personnel and equipment are able to expand beyond traditional fiber work and it's a 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 and importantly, the agreement generates.
Douglas B. Croxall: Upfront cash and as anticipated.
Douglas B. Croxall: The lead to other opportunities.
Douglas B. Croxall: With this agreement closed and more in the pipeline, we anticipate providing financial guidance.
Douglas B. Croxall: Joel will actually give you the financial guidance here towards the end of this call.
With that I'm going to turn it over to Joel and I'll close with some some comments at the end Joel.
Thanks, Doug and good morning, everyone.
Joel Krutz: Today I'll be walking through crowds 'twenty to 'twenty, three financial results, but especially I wanted to provide an update on our current NASDAQ bid price noncompliance status.
Joel: And we received a noncompliance notification from NASDAQ on October the 19th which gave crowd of 180 days straight above $1.10 consecutive days.
Joel: We now have the May meeting scheduled with the NASDAQ hearings panel to extend the process for a further 180 days, which would put us into Q4 of 2024.
Joel: We're confident with the Companys current production growing pipeline and improving financials and another couple of quarters, we'll see crown's bid price progressing much closer to the compliance threshold.
We will of course also need to ensure that the company has other options to ensure we retain our NASDAQ listing and we'll keep the keep you updated.
Joel: Now onto the financials for the year ended December 31 2023.
Joel: Net loss was $29 million. This included $9 7 million of noncash other expense related primarily to the balance sheet restructuring, which crown executed in the first half of 2023.
Joel: Eliminating all debt.
Joel: Net losses from operations were $19 3 million compared to 2022 is $15 1 million net loss. This loss consisted of five 8 million related to investment in the new fiber optics business.
Joel: And $35 million for the film Division, which also includes the corporate cost base.
Joel: Total 2023 revenues with point 2 million, which were all attributable to the Florida Division and the majority of which were booked in the fourth quarter.
Joel: Total operating expenses for the year ended 2023 with $19 4 million with <unk> 9 million related to five as cost of revenues $1 6 million of depreciation amortization and impairment and $2 2 million, that's still research and development.
Joel: Which was $1 9 million lower than 2022.
Joel: Finally, there was $14 7 million of SG&A expense, which was $4 1 billion higher year on year. This is all due to investment in establishing the cyber division.
For the year ended December 31, 2023, net cash increased by $2 million with company deploying $16 7 million of cash for operations and $2 3 million to capital investment in the fiber business.
Joel: Brown raised $19 2 million from its financing activities was $14 eight coming from common equity issuance $3 1 million coming from preferred stock issuance and $1 3 million from dead nuts, which was subsequently extinguished.
Joel: As of December 31, 2023, cash and cash equivalents were $1 1 million.
Joel: Just a quick note on crown's working capital and a capitalization instruction.
Joel: So after successfully restructuring their balance sheet, eliminating dead and allowing the company to recapitalize, we have been heavily reliant on equity financing to fund the company.
Joel: We should soon however have access to a revolving line of credit with a new lending partners. This will help support the company's growing working capital needs as we deploy and scale operations across multiple markets.
This will serve to rebalance the capital the company's capital structure reduce our reliance on equity financing and importantly, lower levels of dilution until we turn cash flow positive, which we projected to do in the back half of this year.
Joel: Finally.
Joel: As a reminder, we recently issued guidance, indicating Q1 revenues would range between 7 million and <unk> 9 million and net losses would land between three three and $3 5 million due.
Joel: Due to improved production levels in our recently established Florida business and I'm pleased to announce that we now expect Q1 2020 for revenues of between nine and $1 million.
Joel: This would represent a tenfold sequential topline increase compared to Q4 2023 and exemplify the momentum that we now have.
Joel: We also still expect second quarter revenues to be in line with the recent guidance of between seven and $8 million as we further ramp up at Florida operations and mobilize into new markets with new customers. We look forward to providing updates as we continue to make progress against our strategic goals.
None: That concludes the financial update.
None: I'll pass you back to Doug.
Thanks, Joe So just to comment on guidance the way that we're going to handle guidance going forward as it will provide guidance with our next.
Paul will be mid May when we provide.
Douglas B. Croxall: And when we do our earnings call for Q1 at that time, we'll likely give revised guidance not only for Q2, but we'll provide guidance for Q3 and then we'll do the same in mid August we will provide updated guidance for Q3 and will provide guidance for Q4.
Douglas B. Croxall: As we build our pipeline and as we build our fiber construction business.
Douglas B. Croxall: We'll have more predictability towards the end of this year for calendar 2025.
But our pipeline is growing it's growing significantly and with the new working capital revolver that Joel mentioned, we think we'll be in a great position to take advantage of some of the opportunities in the market.
None: And with that I'll hand, it back over to the operator.
None: Thank you this concludes today's call.
None: <unk> you for attending today's presentation you may now disconnect your lines.