Research Frontiers' Q3 2025 Earnings Call: Contradictions Emerge on Automotive Revenue, Retrofit Launch, and Black SPD Production

Guidance:

• Expect revenue in all market segments to increase as several new car models and other products using SPD-SmartGlass are introduced.
• Ferrari royalties delayed by licensee accounting timing are expected to be fully recordable in Q4; Q3 exceeded MARs for that licensee.
• Architectural retrofit launch underway with government (GSA), embassies and commercial buildings targeted; major trade shows planned (CES, GLASSTEC).
• No current plan to raise capital assuming no repeat licensee bankruptcies; cash ~$1.13M and debt-free as of Sept 30, 2025.
• Black SPD is very far along and expected to enter production/usage shortly.

Business Commentary:

* Automotive Royalties and Licensee Changes: - Automotive and total royalties were up year-over-year and sequentially when backing out onetime events from 2024. - The decrease in reported automotive royalties was due to a shift of licensees, leading to prepaid minimum annual royalties absorbing Ferrari sales royalties.

• Architectural Retrofit System Launch:
• The architectural retrofit system debuted at GlassBuild 2025, receiving enthusiastic responses.

• The response was attributed to the ease of installation, elegance of design, and SPD's performance, with initial customers including government buildings and commercial office spaces.

• Financial Position and Liquidity:

• As of the end of Q3, Research Frontiers remained debt-free with over $1.1 million in cash and working capital of $1.4 million.
• The strong financial position was maintained despite earlier licensee bankruptcies, with no immediate plans for additional capital raises.

• Black SPD Development:
• The development of Black SPD is advancing, anticipated to be production-ready soon.
• The black version is expected to benefit the automotive industry, particularly for side windows, enhancing the potential adoption in various sectors.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly emphasized strong forward momentum: “we never had a more full pipeline of projects,” “expect revenue in all market segments to increase further,” retrofit debut had an “outstanding response,” and CEO described the company as “positioned for meaningful growth” with Ferrari transition and multiple new model introductions.

Q&A:

• Question from James Leo Carlisle (RBC): So I mean this call is kind of like Groundhog Day. I mean it's the same call over and over again. I look at the 5-year growth rate of the company at minus 3%. And I'm just curious where are all these car sales that you've been saying we're going to be coming?
  Response: Ferrari sales are increasing but recognition was delayed by a Q2 licensee bankruptcy and the successor licensee needing to meet minimum annual royalties; management expects full Ferrari royalties to be recordable in Q4 and will provide more automotive detail in closing remarks.

• Question from John Nelson (Independent Investor): Joe, just an idea kind of afterthought. Since the retrofit product is so, I would call it, revolutionary and since it is -- you've indicated it is production ready, would it make any sense to see if any of the new shows or podcast would be interested in profiling your product?
  Response: Yes—AIT/Gauzy/RFI are producing visual assets and pursuing podcasts/media; retrofit is production-ready, easy to install and demoed at GlassBuild, with plans to showcase autonomy/self-powered wiring and off-the-shelf remote integration.

• Question from Francis Altera (Independent Investor): The installation in the White House, what was the actual product that they installed?
  Response: It was an anti-eavesdropping, bullet-resistant laminated glass installation (Level ratings up to Level 10); such configurations can be combined with SPD as part of retrofit offerings.

• Question from Francis Altera (Independent Investor): Is that glass capable of having SPD on it?
  Response: Yes—SPD can be integrated with bullet-resistant and anti-eavesdropping options; AIT's GSA schedule will offer configurable retrofit 'menu' options combining SPD with various protective features.

• Question from Francis Altera (Independent Investor): How capable is the supply chain setup for the architectural market? And is it right now being focused on the blue tint or the black tint?
  Response: Supply chain capacity exists—AIT/LTI handle framing and in-house lamination with room to expand; current commercial production focuses on Sapphire Blue while Black SPD is 'very, very far along' and intended to be interchangeable via retrofit upgrades.

Contradiction Point 1

Automotive Revenue and Licensee Bankruptcy Impact

It involves the impact of a licensee bankruptcy on automotive royalty revenue, which directly affects the company's financial performance and investor expectations.

Why hasn't the company delivered the expected car sales growth, given its 5-year growth rate is -3%? - James Leo Carlisle (RBC)

2025Q3: We have seen a very high percentage of the vehicles that are built with our glass. In September, we had a licensee bankruptcy. ... So we expected our automotive sales to be much higher than they were. - Joseph Harary(CEO)

Who is the licensee that went bankrupt? - Jared Sherman (Analyst)

2025Q2: Ferrari is testing and working with different licensees right now, and we're not sure who their next licensee is going to be. - Joseph Harary(CEO)

Contradiction Point 2

Retrofit Product Launch Timeline

It involves the expected launch timeline for the retrofit product, which impacts the company's growth strategy and revenue projections.

Given the retrofit product's revolutionary nature, should we explore new shows or podcasts interested in profiling it? - John Nelson (Investor)

2025Q3: The automotive retrofit will be introduced to the market in the second half of this year. - Joseph Harary(CEO)

Is the retrofit expected to launch in Q3 or the second half of this year? - John Nelson (Analyst)

2025Q2: Retrofit product should be ready to go in the second half of the year. And when I say launch, you'll probably have a soft launch with some key customers and then a bigger launch when you have the data all tied up in a bow. - Joseph Harary(CEO)

Contradiction Point 3

Automotive Sales and Licensee Bankruptcy

It involves the company's automotive sales, which is a critical revenue source, and the impact of a licensee bankruptcy, affecting investor expectations.

Why has the company's 5-year growth rate remained at -3% despite promised car sales? - James Leo Carlisle (RBC)

2025Q3: Ferrari has been doing well, increasing sales. However, due to a licensee bankruptcy, reported automotive royalties have been reduced this year. - Joseph Harary(CEO)

Are there any effects of the U.S. trade tariff policy on your business or changes in strategy due to this? - John Nelson

2025Q1: The premium market is not really affected, so Ferrari is not really affected by this. - Joe Harary(President and CEO)

Contradiction Point 4

Black SPD Production Status

It involves the production status of the Black SPD, which is a key product expected to enhance revenue and market reach.

How far along is the black SPD? - Francis Altera (Investor)

2025Q3: The black SPD is very far along and expected to be in production and use shortly. - Joseph Harary(CEO)

Why is the dark particle considered the Holy Grail? And will it be combined with PLDC in various products? - Unidentified Analyst

2025Q1: We hope to announce its final production soon. - Joe Harary(President and CEO)

Contradiction Point 5

Automotive Royalties and Sales Projections

The inconsistency in the explanation of automotive royalties and sales projections may impact investor expectations and the company's financial outlook.

With a 5-year growth rate of minus 3%, where are the promised car sales? - James Leo Carlisle (RBC)

2025Q3: Ferrari has been doing well, increasing sales. However, due to a licensee bankruptcy, reported automotive royalties have been reduced this year. But, even with this, royalties for the 9 months are higher than last year. New models and products are expected to increase revenue. - Joseph Harary(CEO)

What caused the decline in Q4 compared to Q3? - Unknown Analyst

2024Q4: 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. - Joseph Harary(CEO)