Q2 2024 Research Frontiers Inc Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen. Welcome to the Research Frontiers Investor Conference Call to discuss the second quarter of 2024 Results of Operations and Recent Developments. During today's presentation, all parties will be in a listen-only mode, and following the presentation, the conference will be opened for questions by pressing Star 1. This conference is being recorded today.
Operator: A replay of this conference call will be available starting later today on the investor's section of Research Frontier's website at www.smartclass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information. The words expect, anticipate, plans, forecast, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995.
Speaker Change: A replay of this conference call will be available starting later today in the Investors section of Research Frontiers website at www.smartclass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information. The words expect.
Operator: These statements reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those expressed. Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC. Research Frontiers undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The company will be answering many of the questions that were emailed to it prior to this conference call, either in its presentation or as part of the Q&A session at the end.
Speaker Change: Anticipate.
Speaker Change: Plans, forecasts, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions,
Speaker Change: that are part of the Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs and a number of important factors could cause actual results for future periods to differ materially from those expressed.
Speaker Change: Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC.
Speaker Change: Research Frontiers undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.
Speaker Change: 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&A session at the end.
Speaker Change: 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 this call.
Speaker Change: If you find that your question has been substantially answered, as a courtesy, and to allow time for other shareholders to ask their questions, please remove yourself from the queue by pressing star 2.
Speaker Change: Also, we ask that you keep your questions brief in the interest of time.
Operator: 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 this call. If you find that your question has been substantially answered, as a courtesy, and to allow time for other shareholders to ask their questions, please remove yourself from the queue by pressing star 2. Also, we ask that you keep your questions brief in the interest of time. I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.
Joe Harary: I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.
Joseph Harary: Thank you, Paul, and hello, everyone, and welcome to our investor conference call to discuss the second quarter of 2024. On our last conference call, we anticipated higher royalty income for the second quarter based on leading indicators. Indeed, compared to the same quarter last year, our royalty income increased by 165%. The first quarter of 2024 was very dynamic, and the second quarter saw royalty income rise by over 56% from those elevated levels. For the first half of this year, royalty income surged by over 85 percent compared to the same period last year, driven by substantial growth in our two largest markets, automotive and aircraft.
Joe Harary: Thank you Paul and hello everyone and welcome to our investor conference call to discuss the second quarter of 2024.
Joe Harary: On our last conference call, we anticipated higher royalty income for the second quarter based on leading indicators.
Joe Harary: Indeed, compared to the same quarter last year, our royalty income increased by 165 percent.
Joe Harary: The first quarter of 2024 was dynamic, and the second quarter saw royalty income rise by over 56% from those elevated levels.
Joe Harary: For the first half of this year, royalty income surged by over 85% compared to the same period last year, driven by substantial growth in our two largest markets, automotive and aircraft.
Joseph Harary: This impressive revenue growth builds on the strong performance from 2023, where fee income increased by 69% over 2022, and overall revenue was up by 109% from the prior year. The second quarter of 2024 marked our sixth consecutive quarter of revenue growth compared to the prior year. Looking ahead to the second half of this year, we expect Q3 and Q4 royalty income to surpass last year's levels, further solidifying our growth trajectory. We expect our growth this year will come from growth in our existing markets and from new product introductions. Expenses this quarter were about $105,000 lower, bringing our net loss for the second quarter to just $94,000, or 0 cents per share.
Joe Harary: This impressive revenue growth builds on the strong performance from 2023, where fee income increased by 69% over 2022, and overall revenue was up by 109% from the prior year.
Joe Harary: The second quarter of 2024 marked our sixth consecutive quarter of revenue growth compared to the prior year.
Joe Harary: Looking ahead to the second half of this year, we expect Q3 and Q4 royalty income to surpass last year's levels, further solidifying our growth trajectory.
Joe Harary: We expect our growth this year will come from growth in our existing markets and from new product introductions.
Joe Harary: Expenses this quarter were about $105,000 lower, bringing our net loss for the second quarter to just $94,000, or 0 cents per share.
Joseph Harary: Our average cash burn rate has been steadily decreasing. Based on projected revenue growth, I do not anticipate the need to raise additional capital in the foreseeable future unless a strategic reason arises. We continue to be free of debt and are in strong financial shape.
Joe Harary: Our average cash burn rate has been steadily decreasing. Based on projected revenue growth, I do not anticipate the need to raise additional capital in the foreseeable future unless a strategic reason arises.
Joseph Harary: And as of June 30th, 2024, the company had over one point nine million dollars in cash and cash equivalents, and our working capital was two point eight million dollars. We currently expect to have sufficient working capital for more than the next five years of operation. Now, let's look underneath these numbers so we can all better understand where we are and what we can expect. Sales of cars using our SBD smart glass technology at Ferrari and McLaren remain quite strong.
Joe Harary: We continue to be free of debt and are in strong financial shape. And as of June 30, 2024, the company had over $1.9 million in cash and cash equivalents, and our working capital was $2.8 million.
Joe Harary: We currently expect to have sufficient working capital for more than the next five years of operations.
Joe Harary: Now let's together look underneath these numbers so we can all better understand where we are and what we can expect.
Joe Harary: Sales of cars using our SBD smart glass technology at Ferrari and McLaren remain quite strong.
Joseph Harary: Ferrari has stated that in order to maintain the exclusivity of the Puro Sangre, which uses our SPD Smart Glass, they will voluntarily limit production to 20% of their total unit production for all Ferrari cars. Based on these numbers, an extremely high percentage of Ferrari customers are opting for the SPD smart glass roof option. Ferrari just reported an excellent second quarter in terms of sales. Additionally, third quarter production at Ferrari is typically their highest. So, if these trends continue with Piro Sangre, we can expect higher royalties from it next quarter as well.
Joe Harary: Ferrari has stated that in order to maintain the exclusivity of the Purosangue, which uses our SPD Smart Glass, they will voluntarily limit production to 20% of their total unit production for all Ferrari cars.
Joe Harary: Based on these numbers, an extremely high percentage of Ferrari customers are opting for the SPD Smart Glass Roof option.
Speaker Change: Ferrari just reported an excellent second quarter in terms of sales. Additionally, third quarter production at Ferrari is typically their highest. So if these trends continue with the Piro Sangre, we can expect higher royalties from it next quarter as well.
Joseph Harary: Remarkably, even though we are only halfway through the current 2024 year, these roofs have almost equaled the total number of roofs from all of last year. The popularity and high take rates of the McLaren models using SPD Smart Glass are also evident. Even though we're only halfway through 2024, the total number of routes on just one model of McLaren puts us on track to triple the number of SPD routes this year as compared to last year.
Speaker Change: Remarkably, even though we're only halfway through the current 2024 year, these roofs have almost equaled the total number of roofs from all of last year.
Speaker Change: The popularity and high take rates of the McLaren models using SPD Smart Glass are also evident.
Speaker Change: Even though we're only halfway through 2024, the total number of roots on just one model of McLaren puts us on track to triple the number of SPD roots this year as compared to last year.
Joseph Harary: I also want to take this opportunity to congratulate our licensee, Issa Klima, on the introduction of SPD Smart Glass on the panoramic roof of the Jumeirah by Koenigsegg Automotive, a beautiful car made even more beautiful and comfortable by SPD Smart Glass. Isoclima announced this new program in June.
Speaker Change: I also want to take this opportunity to congratulate our licensee, Issa Klima, on the introduction of SPD Smart Glass on the panoramic roof of the Jumeirah by Koenigsegg Automotive, a beautiful car made even more beautiful and comfortable by SPD Smart Glass.
Speaker Change: Isa Klima announced this new program in June .
Speaker Change: In our last conference call, we noted with anticipation the IPO of our licensee, Gaussi, and the introduction of a retrofit application by our licensee, LTI, at the AIA show in Washington, D.C. Both took place in early June .
Joseph Harary: We also highlighted the successful development of an SPD smart glass sunroof for a flagship, relatively lower priced, mid-sized model from an Asian auto manufacturer. This program is still on track for introduction, and we, along with GALSI, are eagerly awaiting the OEM's launch announcement to share more details. There is a meeting about the launch of this car scheduled for later this month.
Speaker Change: We also highlighted the successful development of an SPD smart glass sunroof for a flagship relatively lower priced mid-sized model from an Asian auto manufacturer.
Speaker Change: This program is still on track for introduction and we, along with GALSI, are eagerly awaiting the LEM's launch announcement to share more details.
Speaker Change: There is a meeting about the launch of this car scheduled for later this month.
Joseph Harary: What's particularly exciting is that the manufacturing cost of products using our technology has decreased significantly, making it feasible for use for the first time in moderately priced vehicles like the one I just mentioned. This creates opportunities for higher volumes of SPD smart technology in middle market cars worldwide. Moving to our second largest royalty-generating market aircraft, we also once again had higher revenues there in the second quarter. And there's been a fundamental improvement in that market for us as well. This stems from the way that decisions are made.
Speaker Change: What's particularly exciting is that the manufacturing cost of products using our technology has decreased significantly, making it feasible for use for the first time in moderately priced vehicles like the one I just mentioned.
Speaker Change: This creates opportunities for higher volumes of SPD smart technology in middle market cars worldwide.
Speaker Change: Moving to our second largest royalty generating market aircraft, we also once again had higher revenues there in the second quarter.
Speaker Change: And there's been a fundamental improvement in that market for us as well. This stems from the way that decisions are made.
Joseph Harary: For general aviation aircraft, private jets mostly, we are on the HondaJet and the King Air and a number of other models. In those and other cases, the OEM made the decision to put our high-performing SPD technology on their aircraft. The significant shift is that in larger aircraft made by Boeing and Airbus, now it's the customer that decides. This has been tremendously beneficial for our licensees selling SPD electronically dimmable windows, or EDWs, because the performance in terms of switching speed being instantaneous, and the wide change in tint also being uniform, has made it an easier choice by the customer to pick SPD.
Speaker Change: For general aviation aircraft, private jets mostly, we are on the HondaJet and the King Air and a number of other models.
Speaker Change: In those and other cases, the OEM made the decision about putting our high-performing SPD technology on their aircraft.
Speaker Change: The significant shift is that in larger aircraft made by Boeing and Airbus, now it's the customer that decides.
Speaker Change: This has been tremendously enabling for our licensees selling SPD electronically dimmable windows or EDWs.
Speaker Change: Because the performance in terms of switching speed being instantaneous and the wide change in tint also being uniform has made it an easier choice by the customer to pick SPD.
Joseph Harary: And apart from the obvious benefits of improving the passenger experience by giving them more control over their environment and reducing noise in the aircraft cabin, there are temperature benefits as well. Half of heat comes from infrared and the other half from solar heat gain from visible light.
Speaker Change: And apart from the obvious benefits of improving the passenger experience by giving them more control over their environment and reducing noise in the aircraft cabin, there are temperature benefits as well.
Speaker Change: Half of heat comes from infrared and the other half from solar heat gain from visible light.
Joseph Harary: IR has always been relatively easy to block. It is the visible light, where the other half of heat comes from, that historically has been challenging. We block 99.5% of that visible light. Heat inside the cabin has always been a known issue, and until takeoff, aircraft had to hook up expensive terminal or auxiliary power electricity or run their engines and waste fuel to generate power while on the tarmac.
Speaker Change: IR has always been relatively easy to block.
Speaker Change: It is the visible light where the other half of heat comes from that historically has been challenging.
Speaker Change: We block 99.5% of that visible light.
Speaker Change: Heat inside the cabin has always been a known issue, and until takeoff, aircraft had to hook up expensive terminal or auxiliary power electricity or run their engines and waste fuel to generate power while on the tarmac.
Joseph Harary: I'll give you one example of what was observed. Our licensee in SPECTEC had done a SPD-EDW installation on a Learjet. One day, there were two Lears parked next to each other on the ramp, so they were in the same environmental condition. Both layers were being worked on that day for maintenance. One of them had InSpecTex SPD-EDW, and the other didn't.
Joseph Harary: The maintenance crew said the cabin in the Lear with SPD was 26 degrees Fahrenheit cooler than the one right next to it. Now remember, in cars, Mercedes tests show that there's an 18 degree Fahrenheit reduction in temperature. Once, we had a NASA scientist at our offices at Research Frontiers, and I asked him why it would be higher in an aircraft. And he went to the whiteboard, and showed seven different equations and three diagrams of the fuselage. Later, he stopped talking and said, "And that's why."
Speaker Change: I'll give you one example of what's been observed. Our licensee in SPECTEC had done a SPD-EDW installation on a Learjet.
Speaker Change: One day there were two Lears parked next to each other on the ramp. They were in the same environmental conditions.
Speaker Change: Both LIRs were being worked on that day for maintenance. One of them had Inspectex SPD-EDW and the other didn't.
Speaker Change: The maintenance crew said the cabin in the Lear with SPD was 26 degrees Fahrenheit cooler than the one right next to it.
Speaker Change: Now, remember, in cars, Mercedes tests show that there's an 18-degree Fahrenheit reduction in temperature.
Speaker Change: Once we had a NASA scientist at our offices at Research Frontiers, and I asked him why it would be higher in an aircraft.
Speaker Change: And he went to the whiteboard and seven different equations and three diagrams of the fuselage and later he stopped talking and said, and that's why, and I told him that I simply was glad it worked well.
Joseph Harary: And I told them that I simply was glad it worked well. The first line of defense against heat right now while an aircraft is sitting on the ground is trying to prevent the cabin from becoming excessively hot to begin with, according to Charles Horning, who's a professor of aviation maintenance science at Embry-Riddle Aeronautics University. He says many of us have been on flights where the flight attendants have all asked passengers to close the sliding windows before they get off the aircraft. That's probably the best thing that could be done to try to keep the cabin from heating up.
Speaker Change: The first line of defense against heat right now, while aircraft is sitting on the ground, is trying to prevent the cabin from becoming excessively hot to begin with, according to Charles Horning, who is a professor of aviation maintenance science at Embry-Riddle Aeronautics University.
Charles Horning: He says, many of us have been on flights where the flight attendants have all asked passengers to close the sliding windows before they got off the aircraft. That's probably the best thing that could be done to try to keep the cabin from heating up.
Joseph Harary: But here's the problem with that. It's been historically difficult to get passengers to close their shades, and flight attendant unions have balked at directing their passengers to do that. And rather than simply closing the shades, SPD-EDWs have proven to be more effective at blocking light than closed shades. And I think it's noteworthy that other technologies, such as electrochromic technology, can actually create unwanted heat. They can actually generate heat, and this sometimes has been shown in videos to cause the window to crack in mid-flight because they operate a lot like your cell phone battery.
Speaker Change: But here's the problem with that approach.
Speaker Change: It's been historically difficult to get passengers to close shades, and the flight attendant unions have balked at directing their passengers to do that.
Speaker Change: And rather than simply closing the shades, SPD-EDWs have proven to be more effective at blocking light than closed shades are.
Speaker Change: And I think it's noteworthy that other technologies, such as electrochromic technology, can actually create unwanted heat.
Speaker Change: They can actually generate heat, and this sometimes has been shown in videos to cause the window to crack in mid-flight, because they operate a lot like your cell phone battery. So...
Joseph Harary: Electrochromic EDWs automatically switch to their maximum heat-transmitting state when a plane is at the gate. And notably, SPD EDWs automatically switch to their maximum heat-blocking state when at the gate. So it's a much more preferable Environment and Effects. It was recently reported that cabins were so hot sitting on the tarmac that passengers were taken off the plane, and some passengers were hospitalized.
Speaker Change: Electrochromic EDWs automatically switch to their maximum heat transmitting state when a plane is at the gate. And notably, SPD EDWs automatically switch to their maximum heat blocking state when at the gate, so it's a much more preferable
Joseph Harary: This has caused some to call for more stringent government and FAA regulations about heat in the cabinet, and we are in an excellent solution now. And customers themselves are now picking SPD for the larger aircraft. Comlux and Airbus just delivered another ACJ220 in late June and have another one expected to be delivered later this year. And next year they're targeting four to six of these large aircraft with SPD-EDW. Even bigger is the international airline referred to in Gauzy's IPO registration statement. In this case, it's for part of their Boeing fleet, so we have Boeing and Airbus.
Speaker Change: Environment and Effect.
Speaker Change: It was recently reported about cabins being so hot sitting on the tarmac that passengers were taken off the plane and some passengers were hospitalized.
Speaker Change: This has caused some to call for more stringent government and FAA regulations about heat in the cabinet, and we are in an excellent solution there.
Speaker Change: And the customers themselves are now picking SPD for the larger aircraft. Comlux and Airbus just delivered another ACJ220 in late June , and have another one expected to be delivered later this year. And next year they're targeting four to six of these large aircraft with SPD EDWs.
Speaker Change: Even bigger is the international airline referred to in Gauzy's IPO registration statement.
Speaker Change: In this case, it's for part of their Boeing fleet, so we have Boeing and Airbus.
Joseph Harary: Now, let's discuss the architectural glass market. In our last conference call, we highlighted the cost and logistical benefits of an architectural retrofit application for SPD's SMART Lab. AIT, the parent of our licensee, LTI Smart Glass, launched this publicly at the American Institute of Architects, or AIA, show in Washington, D.C. That was in early June. The General Services Administration of the U.S. government, or the GSA, is the world's largest customer for energy-efficient glass and has new mandates and programs to upgrade government buildings for energy efficiency and security.
Speaker Change: Now let's discuss the architectural glass market.
Speaker Change: today. It's about the challenge of science. We have not been able to address it. We have not been able to address it. We have not been able to address it. We have not been able to address it.
Speaker Change: In our last conference call, we highlighted the cost and logistical benefits of an architectural retrofit application for SPD Smart Glass.
Speaker Change: AIT, the parent of our licensee, LTI Smart Glass, launched this publicly at the American Institute of Architects, or AIA, show in Washington, D.C. That was in early June .
Speaker Change: The General Services Administration of the U.S. government, or the GSA, is the world's largest customer for energy-efficient glass and has new mandates and programs to upgrade government buildings for energy efficiency and security.
Joseph Harary: These initiatives are positive drivers for our business, and since the AIA show, we've identified and are working to scope out some initial government projects for SPD SmartLight. Additionally, the Dynamic Glass Act offers substantial tax credits of between 30 and 50 percent for adopting smart glass and putting it into service, encouraging its adoption in all types of buildings and homes. This legislation will help the private sector adopt SPD's SMART class.
Speaker Change: These initiatives are positive drivers for our business.
Speaker Change: And since the AIA show, we've identified and are working to scope out some initial government projects for SPD Smart Glass.
Speaker Change: Additionally, the Dynamic Glass Act offers substantial tax credits of between 30 and 50 percent for adopting smart glass and putting it into servicing, encouraging its adoption in all types of buildings and homes.
Speaker Change: This legislation will help the private sector adopt SPD Smart Glass.
Joseph Harary: We have also begun work on private projects utilizing SPD Smart Glass as well. Now, in the interest of time and to cover as much ground as possible, I've taken a number of the questions that we have received by email and incorporated them into my presentation today. I'd now like to open up the conference to additional questions, and first, I'll read and answer some of the questions we received by email. I encourage people to email their questions before the conference call so we can tailor our presentation to cover the most ground for the benefit of all shareholders and cover all of the topics of interest.
Speaker Change: We have also begun work on private projects utilizing SPD Smart Glass as well.
Speaker Change: Now, in the interest of time, and to cover as much ground as possible, I've taken a number of the questions that we have received by email and incorporated them in my presentation today.
Joseph Harary: So here are some of the additional questions that were emailed to us, and in some cases, I'm combining several related questions into one. Can you please talk about some of the developments with your competitors in the smart glass industry? Well, as many of you know, Vue recently filed for bankruptcy, and Crown Electric Kinetics dodged another delisting bullet on NASDAQ by effectuating a second reverse stock split.
Speaker Change: I'd now like to open up the conference to additional questions, and first I'll read and answer some of the questions we received by email, and I encourage people to email their questions before the conference call so we can tailor our presentation to cover the most ground for the benefit of all shareholders and cover all of the topics of interest.
Speaker Change: So here are some of the additional questions that were emailed to us, and in some cases I'm combining several related questions into one.
Speaker Change: Can you please talk about some of the developments with your competitors in the smart glass industry?
Speaker Change: Well, as many of you know, VIEW recently filed for bankruptcy.
Speaker Change: and Crown Electric Kinetics dodged another delisting bullet on NASDAQ by effectuating
Joseph Harary: This time, it's a 150 to 1 reverse stock split. So if anyone's keeping track, they've done a cumulative of 9,000 for 1 reverse stock split during the past year or so. And pre the reverse split, Crown would have been trading at 3.1 hundredths of a penny as of yesterday's close. That's why they did the split. And they've yet to produce their long-promised smart window inserts after many years of it being just around the corner. And I actually welcome the day, if it ever comes, when they finally do that.
Speaker Change: A second reverse stock split. This time it's 150 to 1 reverse stock split.
Speaker Change: If anyone's keeping track, they've done a cumulative of 9,000 for one reverse stock split during the past year or so, and pre the reverse split, Crown would be trading at three one-hundredths of a penny as of yesterday's close.
Speaker Change: That's why they did the split. And they've yet to produce their long-promised smart window inserts, after many years of it being just around the corner. And I actually welcome the day, if it ever comes, when they finally do that, because I think their product, in a side-by-side comparison, may actually be our best salesperson.
Joseph Harary: Because I think their product, in a side-by-side comparison, may actually be our best salesperson. Another company, Haleo, which used to be known as Kinestrol and has received substantial Glass Company investments, is in the process of liquidation. We and our licensees have actually been approached to see if we want to buy any of their equipment or hire some of their senior executives. And the severe negatives in the smart glass world, fortunately for our shareholders, not for the other companies, are all related to other technologies. SPD is doing quite fine in comparison.
Speaker Change: Another company, Halio, which used to be known as Kinestrol, and has received substantial glass company investments, is in the process of liquidation.
Speaker Change: We and our licensees actually have been approached to see if we want to buy any of their equipment or hire some of their senior executives.
Speaker Change: And the severe negatives in the smart glass world, fortunately are all, fortunately for our shareholders, not for the other companies, are all related to other technologies. SPD is doing quite fine in comparison.
Joseph Harary: And on a positive note for our industry, and squarely in the SPD Smart Glass column, our licensee Gowsey had a successful and traditional IPO rather than trying to go public using the SPAC route and raised their targeted $75 million. They'll be using this money to expand production lines, further R&D, and increase their sales and market. All of this helps Research Frontiers and the SPD Smart Glass industry.
Speaker Change: And on a positive note for our industry.
Speaker Change: and, you know, squarely in the SPD smart glass column, our licensee, Gauzy, had a successful and traditional IPO, rather than trying to go public using the SPAC route, and raised their targeted $75 million. They'll be using this money to expand production lines, further R&D, and increase their sales and marketing.
Speaker Change: All of this helps Research Frontiers and the SPD Smart Glass industry.
Joseph Harary: And if you remember my comments on our last conference call together, I noted that to do the smart glass industry correctly, if you're a manufacturer or a marketer, and Gauzy is both, you need production capacity, factories, people, and a diverse geographic footprint to cover the world and the industries that SPD Smart Glass serves. And now, with their IPO, Gaussi has expanded resources to do all of that. I would also pay attention to their actual quarterly financial filings and investor calls. They'll be a good source of information, not only about GALSI but about Research Frontiers as well.
Speaker Change: And if you remember my comments on our last conference call.
Speaker Change: Together, I noted that to do the smart glass industry correctly, if you're a manufacturer or a marketer, and Gauzy is both, you need production capacity, factories, people, and a diverse geographic footprint to cover the world and the industries that SPD Smart Glass serves.
Speaker Change: And now with their IPO, Gaussi has expanded resources to do all of that.
Speaker Change: I would also pay attention to their actual quarterly financial filings and investor calls.
Speaker Change: There will be a good source of information not only about GALSI but about Research Frontiers as well. And as I noted last time, our shareholders now have the benefit of two leading players in the SPD industry, Research Frontiers and GALSI.
Joseph Harary: And as I noted last time, our shareholders now have the benefit of two leading players in the SPD industry, Research Frontiers and GALSI, as public companies releasing information and announcing developments. And while we're on this subject, I wanted to address another shareholder question we received. As we noted many times, GALSI film cells are a leading indicator of sales of SBD smart products and products. Gowsey sells their SPD film to our end product licensees, such as glass laminators, who then fabricate them and sell the finished product to customers such as automakers, the airlines, and aircraft manufacturers.
Speaker Change: as public companies releasing information and announcing developments.
Speaker Change: And while we're on this subject, I wanted to address another shareholder question we received.
Speaker Change: As we noted many times, GALSI film cells is a leading indicator of sales of SPD's smart products, end products.
Speaker Change: Gowsey sells their SPD film to our end product licensees, such as the glass laminators, who then fabricate them and sell the finished product to the customers, such as the automakers, the airlines, and the aircraft manufacturers.
Joseph Harary: One of our shareholders, Sam Finta, emailed us this question. It's good to see the Ferrari Puro Sangre showing up all over the place with a very high percentage having the SPD Smart Glass. Sam, if you knew how high it was, you'd be amazed.
Speaker Change: One of our shareholders, Sam Finta, emailed us this question.
Sam Finta: Good to see the Ferrari Puro Sangre showing up all over the place with a very high percentage having the SPD Smart Glass.
Joseph Harary: The Cadillac Celestique has also been spotted on the road, in addition to the McLaren that has offered SPD for years. All three of these are very high-end vehicles, ranging from $400,000 to $700,000. Can we assume that the royalty on these vehicles is much higher versus a $50,000 to $100,000 vehicle such as the Mercedes, where it was a $2,500 option? The Ferrari smart glass roof is a $20,000 option. It would seem that we collect a far bigger royalty than we used to on a $2,500 option. Well, thanks for that question.
Sam Finta: And Sam, if you knew how high it was, you'd be amazed. The Cadillac Celestique has also been spotted on the road, in addition to the McLaren that has offered SPD for years.
Speaker Change: All three of these are very high-end vehicles ranging from $400,000 to $700,000.
Speaker Change: Can we assume that the royalty on these vehicles are much higher versus a $50,000 to $100,000 vehicle such as the Mercedes, where it was a $2,500 option? The Ferrari smart glass roof is a $20,000 option.
Speaker Change: It would seem that we collect a far bigger royalty than we used to on a $2,500 option.
Joseph Harary: And as many of you know, we get our royalty based on the selling price from the glass laminator or the end product licensee to the car manufacturer. So it's the selling price of the glass to the car manufacturer. And we can only collect the royalty once. So we currently collect it on the highest practical value area of the supply chain, which is the end product sale, rather than on the SPD film sale.
Speaker Change: Well, thanks, Sam, for that question, and as many of you know, we get our royalty based on the selling price from the glass laminator or the end product licensee to the car manufacturer.
Speaker Change: So it's the selling price of the glass to the car manufacturer. And we can only collect the royalty once. So we currently collect it on the highest practical value area of the supply chain, which is on the end product sale, rather than on the SPD film sales.
Joseph Harary: And, as you would expect, this royalty could be higher on more expensive cars because the bells and whistles that go along with the SVD smart glass roof are often part of that selling price by the laminator to the customer. As a practical matter, the higher-priced cars can put more of those bells and whistles and additional functionality into their roofs because of the price point that they sell at. So the higher the price of the smart glass roof. The higher our royalty and the higher the price of the car, the more features that can be put on the roof. Oh, that's clear.
Speaker Change: And, as you would expect, this royalty could be higher on more expensive cars because the bells and whistles that go along with the SVD smart glass roof are often part of that selling price by the laminator to the customer.
Speaker Change: As a practical matter, the higher-priced cars can put more of those bells and whistles and additional functionality into their roofs because of the price point that they sell at. So the higher the price of the smart glass roof, the better.
Speaker Change: The higher our royalty, and the higher the price of the car, the more features that can be put into the roof systems.
Joseph Harary: So it's still only on the selling price from the laminator to the car manufacturer, but usually, that's a much higher-end piece of glass that they're selling, so it's selling for a higher price, and the royalty should be higher per car. Now for high volume cars such as the upcoming Asian auto manufacturer in the mid-price range that we talked about. As you would expect, the economies of scale and also just higher sales volumes and purchasing power would result in a lower selling price for the SPD roof from the licensee to that automaker.
Speaker Change: I hope that's clear.
Speaker Change: So it's still only on the selling price from the laminator to the car manufacturer, but usually that's a much higher end piece of glass that they're selling, so it's selling for a higher price, and the royalty should be higher per car.
Speaker Change: Now, for high-volume cars, such as the upcoming Asian auto manufacturer in the mid-price range,
Speaker Change: As you could expect, the economies of scale and also just higher sales volumes and purchasing power would result in a lower selling price for the SPD roof from the licensee to that automaker.
Joseph Harary: And there we'll get a lower royalty per car but presumably much higher overall royalties based upon the higher expected volume. But getting back to Gauzy, whose SBD film sales are a leading indicator for activity for research frontiers and for sales buyers and product licensees, where we generate our royalty. Gowsey gave guidance about their second quarter revenues about two weeks ago, and their second quarter 2024 revenues are expected to be in the range of $24 to $24.5 million, which is up 22% compared to the prior year quarter.
Speaker Change: And there we'll get a lower royalty per car, but presumably much higher overall royalties based upon the higher expected volumes.
Speaker Change: So getting back to Gauzy, whose SBD film sales are a leading indicator for activity for research frontiers and for sales buyer and product licensees where we generate our royalties.
Speaker Change: Gowsey gave guidance about their second quarter revenues about two weeks ago.
Speaker Change: And their second quarter 2024 revenues are expected to be in the range of $24 to $24.5 million, which is up 22% compared to the prior year quarter.
Joseph Harary: First half 2024 revenues are expected to be in the range of 48.7 to 49.2 million, which is up 31% compared to the prior year. This basically puts Gaussi on a target to generate almost $100 million in revenues this year.
Speaker Change: First half 2024 revenues are expected to be in the range of 48.7 to 49.2 million, which is up 31% compared to the prior year.
Speaker Change: This basically puts GALSI on a target to generate almost $100 million in revenues this year. And I'm going to read a quote from Eyal Peso, who is...
Joseph Harary: And I'm going to read a quote from Eyal Peso, who is the Gaussi co-founder and CEO, and he's also one of our newest and esteemed directors. He noted that our exceptional start to 2024 extended into the second quarter with revenue that is expected to exceed expectations. As expected, the robust pace of revenue growth in the first half is driven by a number of key customers that accelerated a portion of their full-year purchasing commitments to earlier in the year to meet robust demand. We believe we are poised to produce strong double-digit revenue expansion in the second quarter. And then, even more notably, Mr.
Eyal Peso: The Gowsey co-founder and CEO , and he's also one of our newest and esteemed directors, he noted, our exceptional start to 2024 extended into the second quarter with revenue that is expected to exceed expectations.
Speaker Change: As expected, the robust pace of revenue growth in the first half is driven by a number of key customers that accelerated a portion of their full-year purchasing commitments to earlier in the year to meet robust demand.
Eyal Peso: We believe we are poised to produce strong double-digit revenue expansion in the second quarter. And then even more notably, Mr. Peso continued in this press release.
Joseph Harary: Peso continued in this press release. Since our IPO, we continue to be laser focused on executing against our goals. We are seeing OEMs expand utilization of our smart glass technologies, major cities replacing mirrors on their bus fleets with their IDAS and CMS systems, and our products being incorporated into iconic new commercial and hospitality projects. We are highly excited about the future and the progress we are making to fully deliver against our plan for 2024 and beyond.
Mr. Peso: Since our IPO, we continue to be laser-focused on executing against our goals.
Mr. Peso: We are seeing OEMs expand utilization of our smart glass technologies, major cities replacing mirrors on their bus fleets with their IDAS and CMS systems, and our products being incorporated into iconic new commercial and hospitality projects.
Eyal Peso: We are highly excited for the future and the progress we are making to fully deliver against our plan for 2024 and beyond.
Joseph Harary: Okay, so here's some more questions that were emailed to us from Steve Azar. Also, can you update on Hyundai, and did they pull out of their investment in REFR Gauss? And I saw a confusing report on one of the websites that talked about a Hyundai exit from their investment in Gauss. But I think that's because they consider an IPO an exit event, but I asked, and I found out Hyundai did not sell its Galsy stock before or during the IPO and is still a strategic investor in Galsy, so they didn't sell anything.
Speaker Change: Okay, so here's some more questions that were emailed to us.
Speaker Change: From Steve Azar.
Steve Azar: Also, can you update on Hyundai and did they pull out of their investment in REFR GALSY?
Speaker Change: Well, as many of you know, Hyundai was a strategic investor in Gaussi, and I saw a confusing report on one of the websites that talked about a Hyundai exit from their investment in Gaussi.
Speaker Change: But I think that's because they consider an IPO an exit event. But I asked, and...
Mr. Peso: I found out Hyundai did not sell its Galsy stock before or during the IPO and is still a strategic investor in Galsy, so they didn't sell anything.
Joseph Harary: Also, next question from Steve Azar: GALSI also had a higher revenue forecast; will this be tied to future REFR sales? Yes, as I noted earlier in my presentation, Steve, SBD film sales are a very good leading indicator of our royal. Finally, my concern is still the lack of any new positive news releases over the last few years as it seems there is less business coming in. We had more press releases years ago, but it seems now there are fewer news.
Speaker Change: Also, next question from Steve Azar, also GALSI had higher revenue forecast, will this be tied to future REFR sales?
Speaker Change: Yes, as I noted earlier in my presentation Steve, SBD film sales are a very good leading indicator of our royalties.
Speaker Change: And if you start tracking things, you'll probably see a correlation.
Speaker Change: Finally, as another question from Steve, finally my concern is still the lack of any new positive news releases over the last few years as it seems there is less business coming in.
Speaker Change: We had more press releases years ago, but it seems now less news. Thank you
Speaker Change: I wouldn't say there's less business coming in, if you look at the revenues there's actually a lot more business coming in. And Steve, you've been a long term and loyal shareholder and never just a cheerleader, so I really appreciate all of that.
Steve Azar: But I think the fact that we've moved...
Speaker Change: From being a technology company in the development stage to one where products are used by many different large companies like Ferrari and General Motors and Mercedes, McLaren and Boeing and Airbus and Bobcat and others, has maybe paradoxically reduced our ability to make announcements.
Joseph Harary: In the past, we could announce the entry of new license agreements, and this type of announcement was in our control. But now, we basically have the who's who of the major companies in the glass industry and their customers as licensees and customers. That may change somewhat in the architectural industry because there's less keeping things close to the vest by the customers there. But until then, we must wait for the customers in the automotive and aircraft industries to speak first. And those are our two biggest industries right now. So that's the world we live in.
Speaker Change: In the past, we could announce the entry of new license agreements, and this type of announcement was in our control. But now that we basically have the who's who of the major companies in the glass industry and their customers as licensees and customers.
Speaker Change: We have less new licensees that need to be signed on board. And with the major companies as customers, industry practice by us and by our licensees, such as Galsy, is that we must wait for the customer to announce.
Speaker Change: That may change somewhat in the architectural industry because it's less keeping things close to the vest by the customers there.
Speaker Change: But until then, we must wait for the customers in the automotive and aircraft industries to speak first. And those are our two biggest industries right now, so it's the world we live in. And as I noted, that might change as we move to architectural.
Joseph Harary: And as I noted, that might change as we move to architecture. But in the meantime, the numbers will do the talking. And I think this quarter and last quarter have spoken loudly. Both we and GALSI have had high growth, especially in the first and second quarters of this year, as we all gain more and more traction.
Speaker Change: But in the meantime, the numbers will do the talking and I think this quarter and last quarter they've spoken loudly. Both we and GALSI have had high growth, especially in the first and second quarters of this year as we all gain more and more traction.
Joseph Harary: So we've discussed a lot of exciting topics so far today, and now I'll ask our operator, Paul, to please open up the conference to any additional questions people participating today might have that we have not already covered. And some of our largest shareholders have suggested trying to keep these conference calls much shorter, so I'm going to ask your assistance with this. If your question was substantially answered, but you need more details, feel free to email us.
Speaker Change: We've discussed a lot of exciting topics so far today, and now I'll ask our operator, Paul, to please open up the conference to any additional questions people participating today might have that we have not already covered.
Speaker Change: and some of our largest shareholders have suggested trying to keep these conference calls much shorter. So I'm going to ask your assistance with this. If your question was substantially answered, please let me know. Thank you. Thank you.
Joseph Harary: And as you've done in the past, we've had very productive conversations as a result. And today, you know, please try to keep your questions short and focused. And Paul, if you wouldn't mind opening up the queue for questions, I would like to ask a question. Press.
Speaker Change: but you need more details feel free to email us and as you've done in the past we've had very productive conversations as a result and today you know please try to keep your questions short and focused
Operator: My pleasure. If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed in the queue in order received. Please be prepared to ask your question when prompted. Once again, to ask a question, please press star 1 on your phone now. And our first question comes from Neil Goldman of Goldman Capital Management. Mr. Goldman, please go ahead.
Speaker Change: Paul, if you wouldn't mind opening up the queue for questions.
Paul: My pleasure. If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed into the queue in order received. Please be prepared to ask your question when prompted.
Speaker Change: Mr. Goldman, please go ahead.
Speaker Change: Neil, you may be on mute. Okay, is that good? Oh, there we go. Hi. Okay. Now we can. How you doing? First question. Good. I'm doing great.
Neil Goldman: The first question is, Gowsey was up 22%. We were up 56% in royalties. Who are the other...
Speaker Change: The first question is, Gowsey was up 22%.
Speaker Change: We were up 56% in royalties. Who are the other key distributors for us?
Joseph Harary: Well, they're supplying the film, and then it depends on the markup. So Ferrari is a substantial portion, McLaren, Cadillac is a small contribution by one of the same licensees that's doing the Ferraris, and then you have the aircraft market. You know, which is, you know, vision systems and InSpecTec primarily. So, you know, those are the things where the film price is basically the same for all the industries. The end product price can change dramatically, you know, depending on who the customer is. The bells and whistles, like I talked about before, can also contribute. And, you know, it's all good.
Speaker Change: Well, they're supplying the film, and then it depends on the markup.
Speaker Change: So Ferrari
Speaker Change: is a substantial portion, McLaren, Cadillac is a small...
Speaker Change: Contribution by one of the same licensees that's doing the Ferrari. And then you have the aircraft markets.
Speaker Change: You know, which is you know vision systems and inspect deck primarily
Speaker Change: So, you know, those are the things where you have, the film price is basically the same for all the industries. The end product price can change dramatically, you know, depending on.
Speaker Change: Who the customer is, the bells and whistles, like I talked about before, can contribute also. And, you know, it's all good.
Joseph Harary: Before Gauzy does a major expansion with the incremental funds they got from the IPO,
Speaker Change: Before OGAWSI does major expansion with the incremental funds they got from the IPO,
Speaker Change: If they were operating at capacity today, if the demand was there, what kind of incremental revenues would they be receiving from GOWSI?
Joseph Harary: Well, it's a hard question to answer. If they were at capacity, it would probably be about a million square meters. And figure the average Ferrari sunroof is, you know, 1.267 square meters, or roughly 1.3 square meters; a typical sunroof, maybe one meter. And then if you have the front and back panoramic, it could be, you know, a meter and a half to 1.8 meters. So that'll give you kind of an idea of the number of sunroofs.
Speaker Change: Well, it's a hard question to answer. So if they were at capacity, it would probably be about a million square meters.
Speaker Change: And figure the average Ferrari sunroof is, you know, 1.267 square meters or roughly 1.3 square meters. A typical sunroof may be one meter. And then if you have the front and back panoramic, it could be, you know, a meter and a half to 1.8 meters.
Speaker Change: So that'll give you kind of an idea of the number of sunroofs, but if they're at a million square meters capacity, I imagine that the royalty per car, because of the volumes, will be lower for us.
Joseph Harary: You know, $25, $50, $75, $100, $150, or even $200 per car, depending on the dynamics. If that same film is going to aircraft, you know, a million square meters could produce a couple hundred million dollars in revenue for them.
Speaker Change: So, you know, it could be...
Speaker Change: $25, $50, $75, $100, $150, or even $200 per car, depending on the dynamics. If that same film is going to aircraft, a million square meters can produce a couple hundred million dollars in revenue.
Speaker Change: To them.
Speaker Change: or what would be our share.
Joseph Harary: No, to us. Right. So it really depends on the market it goes to. The same 1.2 square meter, square foot window, for example, would sell for a lot less if it was put into a sunroof than if it was put into an aircraft window just because the selling price to the public would be, What did you say the price would be if they were all?
Speaker Change: But no to us
Speaker Change: Right. So it really depends on the market it goes to. Like the same 1.2 square meter, square foot window, for example, would sell for a lot less if it was put into a sunroof than if it was put into an aircraft window, just because the selling price to the...
Speaker Change: And what did you say the price would be if they were all, all aircraft?
Unknown Attendee: Unknown Attendee Probably about $100 million. I'm not predicting that because, you know, there's a wide range. But that'd be the high end of the market.
Speaker Change: Time to us.
Speaker Change: Probably about $100 million. I'm not predicting that because, you know, there's a wide swing. But that'd be the high end of the market.
Joseph Harary: Yeah, that would probably be the highest price per square foot we were getting. Yeah, $3 a share in earnest. Okay.
Speaker Change: Okay, but that would be.
Speaker Change: Yeah, that would be probably the highest price per square foot we were getting.
Speaker Change: Yeah, $3 a share in their extras from that.
Joe Harary: Okay, right. Thank you, Joe.
Neil: Thanks, Neil.
Joe Harary: And our next question comes from Michael Kay of Kay Associates.
Michael Forrester: Hey Michael, how are you?
Speaker Change: Your line is open.
Joseph Harary: Okay, let me just, okay. Yeah, just a dissenting voice about something. One of the reasons I'm still at Research Frontiers, and haven't sold a share in the last 25, 50 years, is because your conference calls are so detailed, you entertain questions, and you don't put any time limits on them, compared to some other companies where I'm a shareholder, where I can't even get on the line. Of course, they have very strict timeframes.
Speaker Change: Hello, Joe.
Joe Harary: Hey Michael, how are you?
Michael K.: Okay, let me just... Okay. Yeah, just a dissenting voice about something. One of the reasons I'm still in Research Frontiers, never sold a share for the last 25, 50 years, is because your conference calls...
Speaker Change: are so detailed you entertain questions and you don't put any time limits compared to some other companies where I'm a shareholder where I can't even get on the line. Of course they have very strict time frames and so I think that's a tremendous plus.
Michael Forrester: And so I think that's a tremendous plus. I don't even care. Thank you. And it's a self-serving plus because, you know, sometimes the only way to really get information when you see the noise of a stock price that fluctuates is to actually listen to what's going on. And when you have a company that happens to be in industries where you can't always talk about everything, sometimes these conference calls are the best, you know, venue for doing it. So it's our pleasure to do that. Thank you. Yeah And I really appreciate the fact that you don't put, you know, time limits on things, take email questions and give everyone a chance.
Speaker Change: Thank you. It's a self-serving plus because sometimes the only way to really get information when you see the noise of a stock price that fluctuates is to actually listen to what's going on. And when you have a company that
Speaker Change: happens to be in industries where you can't always talk about everything sometimes these conference calls are the best you know venue for doing it
Speaker Change: So it's it's our pleasure to do that. Thank you. Yeah, and I really appreciate the fact that you don't put, you know, time limits to take email questions and give everyone a chance.
Michael Forrester: Regardless of how many shares they own to answer questions, what I want, I think now we have now a consistent earnings, the last few quarters, an uptrend, things were gousy. The fact that any technology, given the climate change, which now I think even the most ignorant individuals who thought it was a Chinese hoax must agree, just by, you know, reading the newspapers or listening to the news, that any technology that could prove to decrease interior temperatures certainly is a major plus.
Speaker Change: regardless of how many shares they own to answer questions.
Speaker Change: We have now a consistent earnings, the last few quarters, uptrend.
Speaker Change: things with Gauzy, the fact that any technology
Speaker Change: Given the climate change, which now I think even...
Speaker Change: the most ignorant individuals who thought it was a Chinese hoax.
Speaker Change: must agree, just by reading the newspapers or listening to the news, that any technology that could show to decrease interior temperatures certainly is a major plus. And I'm wondering, what is the company doing to
Michael Forrester: And I'm wondering, what is the company doing to inform institutions, money managers, there are mutual funds, and microcap funds about the existence of research frontiers because even if they buy a car with SBD, they may not realize that that is, you know, has been developed by research frontiers. So will you be initiating any systematic program to inform money managers about the existence and prospects of the company?
Speaker Change: to inform.
Speaker Change: institutions, money managers, there are mutual funds, micro cap funds
Speaker Change: about the existence of Research Frontiers, because even if they buy a car with SPD, they may not realize that that is, you know, has been developed by Research Frontiers. So will you be initiating any systemic program to inform
Joseph Harary: Okay, excellent question, Michael. So, you know, first of all, let me say that regardless of whether climate change exists or doesn't, it's always good to be energy efficient and increase comfort and security and all of the things that SPD does. You know, back in 1965, I'm not really sure that the world was thinking so much about those things, and now they are, you know, fortunately. But it's always a good thing. So we would be doing it whether there is climate change or not because, you know, conserving resources is always a good thing.
Speaker Change: Money Managers about the existence and prospects of the company.
Speaker Change: Okay, excellent question, Michael. So, you know, first of all, let me say that, regardless of whether climate change exists or doesn't, it's always good to be energy efficient and increase comfort and security and all of the things that SPD does. You know, back in 1965,
Speaker Change: Yeah, I'm not really sure that the world was thinking so much about those things and now they are, you know, fortunately, but it's always a good thing. So we would be doing it whether there was climate change or not, because, you know, conserving resources is always a good thing.
Joseph Harary: In terms of making this known, I'll tell you what we won't do and what we will do, okay? If I could do that. Yeah, there's been a number of companies that do what the SEC refers to as ESG washing, where they basically just tout ESG, you know, and they've gotten into big trouble because there's nothing underlying. We're probably the opposite.
Joseph Harary: We've been a green company since day one, before the term green was even coined. And that's fine. What are we going to do to bring this to the attention of money managers? Well, the message is very, very consistent. Okay.
Speaker Change: Okay, and now it's being amplified by another licensee that is even dealing with larger money managers And that's Gowsey is you talk about
Speaker Change: The benefits of the technology and what you're doing.
Speaker Change: Electric vehicles, we're increasing the range of the driving range. Cars, we're increasing fuel economy. Buildings, we're increasing energy efficiency.
Joseph Harary: And now it's being amplified by another licensee that is even dealing with larger money managers. And that's Gauzy, you talk about. Readers should consult with a professional financial advisor before making any financial decisions. Please see the complete disclaimer at www.sites.google.com or in the description of this video.
Joseph Harary: You know, and we were talking about CO2 reduction in vehicles before it became fashionable to do that, you know, because it is the right thing to do. So we'll continue to do that, but now we have kind of a partner with a megaphone next to us. A lot of the noise that used to be in the market is dropping away. What do I mean by that?
Speaker Change: doing the same thing. And what you're having also is
Speaker Change: A lot of the noise that used to be in the market dropping away. What do I mean by that? Well, you had a public company view that, you know, is now no longer public.
Joseph Harary: Well, you had a public company view that, you know, is now no longer public. You have a company, you know, Crown that was promising smart window technology but hasn't yet delivered it. You had companies like Haleo that got a lot of very favorable publicity probably right up until the day they liquidated. So there are a lot of these players that have tried and failed, tried and failed, and you're going to see more of them.
Speaker Change: was promising a smart window technology and.
Speaker Change: as a yet delivered it you had companies like Helio which we're getting a lot of.
Speaker Change: We've tried and succeeded, and we've done it in a way where it allowed us to remain in the game as the markets developed around our technology. It allowed us to remain in the game to have the resources to help our licensees.
Speaker Change: It allowed us to remain in the game so that these licensees can build their businesses like Gauzy did and some of our other licensees around our technology.
Speaker Change: you know, carrying that same message as we are. And, you know, if you look at the...
Joseph Harary: Post-Gauzy IPO, Research Frontiers did well just based on the attention they got, because you don't have to be a genius to look at a company like Galsy, look at the reliance they put on SPD Smart Glass as a key technology, and come to us.
Speaker Change: Post-Gauzy IPO, Research Frontiers did well just based on the attention they got.
Speaker Change: because you don't have to be a genius to look at a company like Galsy, look at the reliance they put in SPD Smart Glass as a key technology.
Speaker Change: and come to us.
Joseph Harary: Well, remember, they bought Hitachi's SPD business from them. So, yeah, that was in their registration statements. That's a very positive development because now they've expanded capacity through acquisition, and they've also expanded expertise through that process because, you know, Hitachi was a very smart company, I could tell you. And, you know, they developed a lot of good know-how around SPD technology, which is now, you know, residing with Gauzy and allows them to really accelerate what they're doing even further.
Speaker Change: or is like it's Hitachi or some other company, is it Klima? Well, remember they bought, they bought Hitachi's SPD business from them. Oh. So yeah, that was in their registration statement. So that's a very positive development because now...
Joseph Harary: Does ESO Clima make film?
Speaker Change: They've expanded capacity through acquisition, and they've also expanded expertise through that process because, you know, Hitachi was a very smart company, I could tell you. And, and, you know, they developed a lot of
Speaker Change: Good know-how around SPD technology, which now is, you know, residing with with Gauzy and allows them to Really accelerate what they're doing even further
Unknown Attendee: They didn't make a film.
Speaker Change: Does Iso Klima make film?
Unknown Attendee: Unknown Attendee. Unknown Attendee.
Joseph Harary: Thanks, Michael. I hope to see you soon.
Operator: As a reminder, if you do have a question, please press star 1 on your phone now. And our next question comes from Jeff Harvey, a private investigator.
Speaker Change: And our next question comes from...
Speaker Change: Jeff Harvey, a private investor.
Jeff Harvey: A couple of things. First of all, I have to say the Gauzy IPO was one of the worst IPOs I've ever seen in my 35 years in business. I don't know what happened, level car that's going to be introduced from Asia. When do you expect that to happen?
Speaker Change: The underwriters are supposed to support the market after the initial offering, and they certainly didn't do that very well.
Speaker Change: I think I missed what you talked about, the middle.
Speaker Change: level car that's going to be introduced from Asia. When do you expect that to happen now?
Joseph Harary: Okay, great. Thank you very much.
Joseph Harary: Okay, great.
Speaker Change: Okay, great. Thank you very much.
Alan Ginsberg: And our next question comes from Alan Ginsberg, a private investor. Your line is open.
Speaker Change: Thanks.
Speaker Change: Yeah, hi Joe, how are you? Hey Alan, how are you? Okay, is there going to be a breakdown at some point between what Gauzy does with PDLC as opposed to SPD? Because, you know, that would be helpful to see what Gauzy is doing with both technologies.
Joseph Harary: I doubt it because the SEC rules kind of require companies to lump things into what they call business units. So, you know, Galzi. If you look at their business units, they have ADAS, and they have other things like that, and they have SmartFilm.
Speaker Change: I doubt it because the SEC rules kind of require companies to lump things into what they call business units. So, you know, Galzi, if you look at their business units, they have ADAS and they have other things like that and they have SmartFilm.
Speaker Change: So I think this would be probably combined with SmartFilm.
Speaker Change: Okay, because that would be helpful.
Joseph Harary: Okay, because that would be helpful, possible, but sure, but remember they also have much higher margins on the SPD business, so they and we have a vested interest in more of their business being that if their interest is revenue growth and profitability, you know.
Joseph Harary: You know, I read the quote from the Alpes, so I think you could.
Speaker Change: and, you know, I read you the quote from Iape, so I think you could see the same thing.
Joseph Harary: Just as a follow-up to a question that was just asked about good. I hope.
Speaker Change: Just as a follow-up to a question that was just asked about
Speaker Change: We've been interviewing, we've been interviewing, yes.
Joseph Harary: Thanks. Thank you.
Leonard Litzau: And we have a question from Leonard Litzau, a private investor. Your line is open, sir.
Speaker Change: And we have a question from Leonard Litzau, a private investor. Your line is open, sir.
Joseph Harary: Joe, since they raised their 75 million.
Speaker Change: S1
Speaker Change: where they had contracts on all of the SPD film for this year.
Speaker Change: that they could make.
Speaker Change: I would assume that they're expanding their line.
Speaker Change: I think they could put a second line right next to the one they got right now. That's exactly right. They've laid out the second line.
Speaker Change: If they wanted it to be in Germany right next to the first one in the Stuttgart area or you know they may decide they're going to do it in Asia near the other customer or the US depending on
Speaker Change: Yeah, you know, we saw this, you know, we've seen this now twice where
Speaker Change: and how to configure it, which is another part of it, because...
Speaker Change: you know, there's a whole system of...
Speaker Change: you know, becomes very important in keeping yields up.
Speaker Change: It's not hard to replicate it.
Speaker Change: Assuming you had the building permits, you know, or the factory line or the warehouse was already there.
Speaker Change: Okay, because that's the only way we can continue to grow revenue is to be able to sell more film.
Unknown Attendee: Unknown AttendeeRight. And as long as Dalsey
Speaker Change: Right.
Speaker Change: Right, and as long as Galzi is making money on that film, they have every incentive to keep making more and more factories.
Speaker Change: So...
Speaker Change: Okay, thank you.
Operator: And seeing no further questions in the queue, I'll turn the call back over to our host.
Speaker Change: Yeah, thanks.
Speaker Change: Okay, I'm seeing no further questions in the Q&A.
Speaker Change: Thank you.
Speaker Change: I'll turn the call back over to our host.
Speaker Change: okay well look as a reminder if we haven't fully answered any questions that are either emailed to us or in our presentation today or in the live Q&A please feel free to call or email us and now I'm just going to make a few closing remarks
Speaker Change: bolstered by growing revenues in automotive and aircraft and increasing regulatory support like the Dynamic Glass Act providing substantial tax credits for adoption that should bring other markets like the architectural market more mainstream for us as well.
Speaker Change: Research Frontiers is a recognized leader with an innovative, high-performing, and reliable solution. And we and our licensees are seeing increasing demand from respected, iconic brands worldwide and from their customers.
Speaker Change: and in some industries where the customer can choose.
Speaker Change: They are selecting SPD as shown by the new Airbus and Boeing programs.
Joseph Harary: Our close strategic partnership with Gauzy continues to create opportunities in multiple sectors as we continuously work together on business development and product innovation. [inaudible] and their expanded production and marketing will further reduce the cost of using SPD SmartGlass and highlight the immense potential of SPD technology to an ever-widening audience of customers and investors.
Speaker Change: Our close strategic partnership with Gauzy continues to create opportunities in multiple sectors as we continuously work together on business development and product innovation. Matter of fact, we have a meeting on Monday coming up.
Speaker Change: together.
Speaker Change: other.
Speaker Change: and their expanded production and marketing will further reduce cost of using SPD Smart Glass and highlight the immense potential of SPD technology to an ever-widening audience of customers and investors.
Joseph Harary: And in our last conference call, we predicted higher royalty income for the second quarter based on the leading indicators that we saw at that time, and we were right. We achieved this, and we saw a 165% increase compared to the same quarter last year. And we had a great first quarter this year, and our second quarter royalty income rose over 56% from those elevated levels. Our royalty income increased by over 85%. And this growth, just to put it in context, builds on a very strong 2023, where fee income increased by 69% over 2022.
Speaker Change: Our royalty income increased by over 85%.
Joseph Harary: driven by significant growth in our automotive and aircraft markets.
Joseph Harary: And this growth, just to put it in context, builds under a very strong 2023 where fee income increased by 69% over 2022 and overall revenue is up 109%.
Joseph Harary: And in the second quarter of 2024, it marked our sixth consecutive quarter of revenue growth compared to the prior year. The momentum we've built over the past six quarters, evidenced by our consistent revenue growth and successful strategic initiatives, positions us strongly for current success and future opportunities. And our industry itself has become stronger, at least the SPD part of it, with our licensees gaining more resources to expand and our technology being adopted across diverse industries and for new uses, for our shareholders, and for our end. I want to thank you all for being part of our effort, and we look forward to sharing more milestones with you in the near future. Thank you all very much.
Speaker Change: and in the second quarter of 2024 it marked our sixth consecutive quarter of revenue growth compared to the prior year.
Speaker Change: So you've got this now sustained...
Speaker Change: Revenue growth and I think I mentioned in prior calls
Speaker Change: As we get further and further along, revenues are going to look less choppy. You're not going to have a lot of up and down quarters.
Speaker Change: you know, in one direction, and we all...
Speaker Change: and work towards it being up and we got it.
Speaker Change: And looking ahead, we expect automotive and aircraft revenues to continue rising in the coming quarters, and that's driven by new product introductions.
Speaker Change: the introduction of new automakers, offering SPD Smart Glass on their new car models, and increasing penetration at existing customers.
Speaker Change: And, of course, the retrofit market for buildings also represents a significant new growth catalyst as we work to enable smarter, more sustainable infrastructure worldwide.
Speaker Change: So as we conclude today's call, I want to thank our shareholders for their steadfast support. It's really helped us all.
Joseph Harary: The momentum we've built over the past six quarters, evidenced by our consistent revenue growth and successful strategic initiatives, positions us strongly for current success and future opportunities.
Joseph Harary: Our SPD smart glass technology is increasingly recognized as a standard of excellence in the smart glass world, further validating our leadership in the industry.
Speaker Change: So we're constantly gaining more traction, leveraging our innovative, energy-efficient light control technology and our strong partnerships to drive further advancements in value creation.
Joseph Harary: for our shareholders and for our industry.
Joseph Harary: And I want to thank you all for being part of our efforts, and we look forward to sharing more milestones with you in the near future.
Joseph Harary: Thank you all very much.