Research Frontiers Q1 2026 Earnings Call Transcript

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May 7, 2026

Key Takeaways

  • Negative Sentiment: Payments and revenue recognition were temporarily slowed by ongoing French rehabilitation proceedings involving licensee Gauzy, and a May 12 French court hearing could produce outcomes ranging from continuation to liquidation, creating short-term uncertainty.
  • Positive Sentiment: Management reports the flow of funds is beginning to normalize (including a meaningful payment from Vision Systems), and they view approval of Gauzy Vision Systems' continuation plan as the most likely and constructive outcome.
  • Positive Sentiment: Research Frontiers strengthened its balance sheet in Q1—cash and cash equivalents rose to approximately $1.28 million (from ~$664k at year-end 2025), the company remains debt-free, and operating and R&D expenses declined.
  • Neutral Sentiment: Q1 reported revenues were weaker year-over-year largely due to ASC 606 timing effects and the non-recurrence of an upfront 2025 license payment, while GAAP royalty recognition rules smooth minimum royalties across quarters.
  • Positive Sentiment: Underlying commercial activity remains active with sequential increases in automotive and aircraft royalties, ongoing aerospace deliveries, advancing architectural retrofit initiatives, and encouraging progress on black SPD technology that could expand addressable markets.
AI Generated. May Contain Errors.
Earnings Conference Call
Research Frontiers Q1 2026
00:00 / 00:00

Transcript Sections

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Operator

Afternoon, welcome to Research Frontiers investor conference call to discuss the Q1 of 2026 results of operations and recent developments. The company will be answering many of the questions that were emailed to it prior to this conference call in their presentation. In some cases, the company has responded directly to email questions prior to this call or will do so afterwards. Some statements today may contain forward-looking information identified by words such as expect, anticipate, and forecast. These reflect current beliefs and actual results may differ materially from those expressed due to various risk factors, including those detailed in our SEC filings. Research Frontiers assumes no obligation to update or revise these statements. The call is being recorded and will be available for replay on Research Frontiers website at smartglass.com for the next 90 days.

Operator

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
Joe Harary
President and CEO at Research Frontiers

Thank you, Paul, and good afternoon, everyone, and thank you for joining us on our Q1 2026 investor conference call. I was informed a little after 4:00 P.M. that the SEC website was down. I'm not sure if it's up yet or not, but our 10-K should be filed once everything gets straightened out and whatever backlog they have is cleared. As always, I appreciate the time and interest of our shareholders, customers, licensees, and industry partners joining us today. Today, I want to talk about Research Frontiers, our business, our markets, and also address the question I've been asked most frequently over the past six months, "What's happening with our licensee, Gauzy." I'm going to give you an honest, informed, and candid assessment of the situation and explain why I remain optimistic about their future and ours.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Before discussing our operations and recent developments, I want to briefly address our Q1 financial results and some of the factors affecting the quarter. First, Q1 reported revenues compared to the same period last year were affected by the timing of revenue recognition under our license agreements, as well as the non-recurrence of upfront revenue recognized from a new license agreement entered into during the Q1 of 2025. Typically, royalties in the Q1 are almost always lower than the underlying economic activity taking place in our business because GAAP accounting requires that additional royalty revenue is not recognized until a licensee exceeds their minimum annual royalty obligation for the year. Until it exceeds that level, minimum annual royalties are basically spread out roughly evenly over each of the four quarters of the year.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Another factor affecting the comparison was ASC 606 accounting treatment associated with a new license agreement entered into during the Q1 of 2025. Under generally accepted accounting principles, or GAAP, much of that revenue was front-loaded into the Q1 of last year. As a result, from an accounting perspective, the quarter looked weaker than the underlying economic activity taking place across several areas of our business. Sequentially, royalties from the automotive and aircraft markets increased from the fourth quarter of 2025 to the Q1 of 2026. The quarter was also affected by what we believe to be temporary operational and liquidity impacts relating to the ongoing French rehabilitation proceedings involving French subsidiaries of our licensee, Gauzy. The processing of payments to us and revenue recognition slowed because of the French proceedings and the liquidity constraints that resulted from them.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Since both Gauzy and Vision Systems are strategic licensees with meaningful businesses in multiple industries relevant to us, those issues also temporarily affected our own liquidity and financial strength. Not knowing exactly how long the situation in France would take to resolve, we took steps during the quarter to strengthen our balance sheet through a focused financing with long-term accredited investors. As of March 31st, 2026, cash and cash equivalents increased to approximately $1.28 million compared to approximately $664,000 at year-end 2025, while the company remains debt-free. Our operating expenses and R&D expenses also declined compared to the same period last year. We run a tight ship. Let me turn in more detail to the subject many of you have asked about, Gauzy. There's been a tremendous amount of hard and focused work taking place there.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Things have been improving, and they have been actively working through the situation. The liquidity issues affecting Gauzy have certainly impacted us temporarily. Funds sitting in France were subject to oversight as part of the rehabilitation proceedings, and both Gauzy and Vision Systems needed approval from the French administrator for many financial transactions during the process. That naturally slowed payments to Research Frontiers as well as other companies. Importantly, the flow of funds has already begun loosening up. A few weeks ago, we received a meaningful payment from Vision Systems that was authorized by the French monitor. While things have not yet fully normalized, they are beginning to normalize, and we remain optimistic that they will continue to do so. This Tuesday, May 12th, 2026 there is a court hearing in France to determine the next steps.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

The range of possible outcomes include liquidation of the French subsidiaries, a sale process, approval of Gauzy's plan of continuance, or potentially an extension of the monitoring period. We currently believe that the most likely outcome, fortunately, is approval of Gauzy Vision Systems' continuation plan. As a lawyer, I know you can never predict the outcome of a court proceeding with certainty. Based on what has been shared with me, I believe the best outcome, not only for Research Frontiers, but also for Gauzy, Vision Systems, their employees, suppliers, lenders, customers, and the SPD industry overall, is approval of Gauzy's continuation plan. The details underlying the continuation plan have been described to me. The plan eliminates unprofitable, non-SPD business lines and provides enough capital for Gauzy to emerge from the process substantially healthier, leaner, and better capitalized.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Importantly, based on the information shared with me, the reorganized company could emerge with stronger working capital, lower overhead, and without the drag of unprofitable legacy operations outside of the SPD business. Gauzy would have substantial working capital, suppliers, lenders, and employees would be paid in full, not only in France, but worldwide. In other words, if the continuation plan is approved, Gauzy could emerge from this process as a much healthier and stronger strategic partner for us and for the SPD industry overall. We have also worked on contingency plans in case the court approval does not approve Gauzy's continuation plan or decides to delay decision. Amid the mostly public silence from Gauzy, many of the things I've discussed today have been referred to in their SEC filings. Hopefully, I've helped connect some of the dots for you with additional color, context, and details.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Throughout this period, Gauzy has kept me informed, and we have had many in-person meetings and many late-night and early-morning conversations. At times during the height of the war involving Iran and its proxies, conversations literally started with, I just got out of the bomb shelter, or ended with, I have to call you back because sirens are going off. Travel became extraordinarily difficult at times, with executives operating from multiple countries and dealing with severe transportation disruptions throughout the region. I mention this because it illustrates both the operational challenges they were facing outside of France and also the determination of the people there to keep their business moving forward. These circumstances also temporarily slowed some of the R&D work involving next-generation SPD products, including black SPD and certain specialized SPD film being developed primarily for automotive and architectural applications and for specific customers.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Some of these projects are now getting very close to completion. You know, if you step back and look at the last 12 months objectively, we have seen two licensees liquidate, another licensee, key licensee go through restructuring proceedings in France, and a highly volatile military environment in the Middle East. Despite all of that, SPD production has continued, development work has continued, customer programs and customer engagement remain active, and plans are now in place that could allow Gauzy to emerge stronger, healthier, and better capitalized. That resilience says a great deal about the determination of the people involved and their belief in our SPD technology. A number of shareholders emailed questions primarily relating to Gauzy. I'll answer them now. John Nelson asked whether Gauzy continues to produce and deliver SPD film on schedule and whether the current situation is limiting new business opportunities.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

John, while there's certainly been delays and distractions associated with the French proceedings and broader operational challenges, SPD production activity has continued and multiple automotive, aerospace, and architectural programs remain active. Turning now to questions mailed to me about some of the other markets, starting with automotive. Automotive projects in North America, Europe, and Asia continue moving forward during the Q1 and into the second quarter of 2026. When Ferrari business transitioned from AGP to another European licensee, this transition required the successor licensee to purchase and install new specialized advanced equipment. That equipment has now been installed. Activity and investment in the SPD ecosystem continues at multiple levels, from the licensees to OEMs to end customers. We continue to see strong interest in SPD because of its ability to instantly and uniformly control light, glare, and heat while improving comfort, energy efficiency, and the user experience.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Several shareholders had submitted questions regarding the previously discussed Asian vehicle program and black SPD technology. Jared asked whether the mid market Asian vehicle program may involve black SPD technology, while Rick Corrales asked whether the Asian program remains active since it was not discussed in our last call. Last call was kind of long, so I didn't have a chance to catch, you know, everything, but the Asian program remains active, and it does involve black SPD. I point out that is often the case with large automotive programs, timelines and launch schedules can shift because of platform timing, integration testing, design changes, supply chain coordination, and other factors. We're pretty good at dealing with that. We've been in four different OEMs with products put in series production, so I don't think anybody else in the world could say that.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

We're actively working with multiple parties on these programs, including projects involving black SPD technology currently under development. Regarding black SPD specifically, we're making encouraging progress. Black SPD has the potential to significantly expand the design flexibility and addressable market for SPD technology, particularly in automotive and architectural applications where darker neutral aesthetics are important. Several shareholders also asked about the large volume quotations we discussed on previous conference calls and whether any have been awarded. At this stage Well, first of all, the awards go to our licensees. We just collect the royalties from those licensees. At this stage, we remain limited in what we could publicly disclose regarding customer programs and quotations, but discussions and evaluations remain active in multiple areas, including ultimate supply licensee selection.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

As I've noted in the past, the two biggest challenges to wider adoption in the automotive industry were color, especially in vertical glass applications, and cost. As I said on previous conference calls, we were given aggressive price targets to match competitive technologies, and we and our licensees were able to meet those targets. Cost and color are being addressed nicely between that and the black SPD. Turning to aerospace, deliveries of SPD-SmartGlass for aircraft applications continued during the Q1 and Q2 of 2026. Just today, I saw an announcement of another ACJ TwoTwenty being delivered by Airbus to one of its customers. As you may know, Vision Systems handles this business.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Aerospace remains an important long-term market for SPD technology because of the operational, passenger comfort, weight maintenance, and performance advantages that SPD offers compared to traditional mechanical shading systems, and also compared to competing technologies. We are also advancing development efforts in specialty transportation and other applications where dynamic light control and energy management are becoming increasingly important. On the architectural side, we continue advancing our retrofit initiatives with our licensee, AIT LTI. Judy McKay asked whether AIT's SPD RetroWAL system may qualify under certain low carbon building standards. Thanks, Judy, I apologize for the delay in responding. Retrofit applications like these are becoming increasingly attractive because they improve energy efficiency and occupant comfort without requiring full window replacement.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

They also can meaningfully reduce the carbon footprint of a building and allow the SPD-SmartGlass to work symbiotically with the other systems in the building, such as HVAC and lighting systems. That is particularly important in government buildings, transportation hubs, historic structures, commercial retrofits, and other projects where replacing exterior glazing is expensive, disruptive, or impractical. We believe architectural retrofit applications represent an important and near-term growth area for SPD technology. Another shareholder asked whether there have been renewed discussions with General Motors regarding SPD following the previously reported issues with the Corvette Targa Roof involving another company's electrochromic glass technology. That's a well-known competitor of ours. As you may know, like other automotive industry suppliers, we don't comment on specific OEM discussions unless programs become public.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

SPD remains one of the most capable technologies available for large area automotive glazing applications because of its switching speed, uniformity, heat management, and overall user experience. It is also the only switchable shading technology that has been reliably commercialized in serial production. Frankly, our public profile in automotive smart glass is second to none, and I mean to none. I recently served as keynote speaker at North America's Premier Automotive Glass Conference with many OEMs, licensees, and prospective new licensees in attendance. We're also the only company that has successfully worked with four different OEMs to incorporate switchable glass into multiple production vehicle platforms. That's multiple models and multiple spec standards and procurement systems, and we were able to succeed in all of them. No one else has been able to do that as recently exhibited by one of our competitors.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

To answer your specific question, I think that the recent negative experience that GM had with the Corvette and another supplier's technology and execution has helped us tremendously. It has shown them the strength and resiliency of our supply chain and the dominant and superior performance of SPD-SmartGlass technology. We also received questions regarding sun visor development. SPD remains very well-suited for dynamic visor applications because of its ability to instantly manage glare and light transmission while maintaining visibility and user comfort, and we had been approached specifically about that. Development discussions and evaluation in this area remain active. Because sun visors have relatively small surface areas, this market, similar to aircraft, also has several technologies that try to compete against us. However, none of them have the combination of switching speed, range of light transmission, and logistical and performance benefits that we have with SPD technology.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

Before concluding, I want to briefly address today's format. As many of you know, our conference calls are normally very open and often include extensive live Q&A. They also tend to run much longer than most typical quarterly conference calls at other companies. However, because of Gauzy's ongoing legal rehabilitation proceedings, as well as ongoing discussions involving strategic opportunities and alternative paths forward, we decided not to conduct a live Q&A session today. I'm glad that we received so many mail-in questions because it allowed me to cover them earlier. Given the circumstances and the sensitivity surrounding Tuesday's court proceedings in France regarding Gauzy Vision Systems, I wanted to avoid saying anything that could potentially interfere with a successful outcome there. At the same time, I also wanted to share as much meaningful information and context with our shareholders as I responsibly could.

Joe Harary
Joe Harary
President and CEO at Research Frontiers

As you heard today, we incorporated many shareholder questions directly into this presentation. I want to stress we remain available following the call by email and telephone. In closing, as we look forward, we believe the long-term opportunities for SPD technology remain significant. Despite the disruptions of the past year at some of our licensees, the overall platform supporting SPD technology today is broader, more diversified, and more mature than any previous point in our company's history. We see opportunities across automotive, aerospace, architecture, specialty transportation, and other emerging applications. Our focus remains straightforward, supporting our licensees and customers, advancing next generation SPD technologies, executing carefully, and positioning Research Frontiers for long-term and sustained growth. Thank you again for joining us today and for your continued support of Research Frontiers.

Operator

The meeting has now concluded. Thank you for joining, and have a pleasant day.

Executives
    • Joe Harary
      Joe Harary
      President and CEO
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