Earnings Call Transcript
Research Frontiers Inc (REFR)
Earnings Call Transcript - REFR Q2 2021
Operator, Operator
Good afternoon, ladies and gentlemen. Welcome to Research Frontiers investor conference call to discuss the second quarter 2021 results of operations and recent developments. This conference is being recorded today. A replay of this conference call will be available starting later today in the Investors section of the Research Frontiers' website at www.smartglass.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, 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 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. 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 their presentation or as part of the Q&A session at the end. 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. 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, President and CEO
Thanks, Paul, and good afternoon, everyone. I appreciate you joining us today. We have many developments to discuss, including new information and a recap of details that may be familiar to our long-term investors but beneficial for those new to the smart window industry, especially given the recent public offerings of View and Crown. Our financials are thoroughly covered in our 10-Q filing and press releases. Apart from noting that we have made significant reductions in costs, let's get right into the new business developments for the company. This year has seen major progress across the industries utilizing SPD-SmartGlass, particularly in automotive, architectural, aircraft, trains, and other mass transit sectors. I want to provide context for these developments, starting with the automotive sector. There is a strong trend towards electric vehicles, with the U.S. government announcing a target for 50% of vehicles sold to be zero-emission by 2030. Since our last call, several automotive manufacturers have committed to going all-electric, nearly weekly. This is vital for Research Frontiers because our SPD-SmartGlass can enhance the driving range of electric vehicles by up to 5.5%, significantly extending their range alongside advancements in battery technology. Many companies have set carbon-neutral goals, and our product can help reduce CO2 emissions by up to 4 grams per kilometer. As the industry shifts from internal combustion engines to electric and zero-emission vehicles, SPD-SmartGlass benefits all vehicles by providing carmakers with environmental advantages and helping them avoid regulatory fines in Europe. This translates to savings of EUR 380 per vehicle, or about $450. In a few weeks, the IAA Auto Show in Munich will showcase SPD-SmartGlass in various locations. We will share more details as the event approaches. Cadillac recently launched the all-electric Celestiq with a four-segment SPD-SmartGlass roof, providing occupants greater control over light. The benefits of SPD-SmartGlass in sunroofs have been demonstrated since 2011 with Mercedes, and test data indicate that it can lower cabin temperatures by 18 degrees, allowing for reduced air conditioning system size, which leads to weight reduction and increased driving range. Bentley has noted that utilizing SPD-SmartGlass in a full panoramic roof can lower roof weight by 13 pounds and eliminate 54 components, improving overall vehicle stability. Our business is strengthened by our approximately 250 patents on a highly functional material, and customers are continually discovering new applications for it. I expect that attendees at the Munich Auto Show will see not just traditional applications but also innovative uses for SPD-SmartGlass from various car manufacturers and suppliers. Another noteworthy trend alongside electrification, energy efficiency, and lightweighting is the emphasis on enhancing passenger experience. This focus is becoming increasingly significant as we advance toward self-driven vehicles, affecting not only cars but also trains and aircraft, including traditional and rotary aircraft as well as new projects in electric vertical takeoff and landing (VTOL) aircraft. Recently, our licensee, Gauzy, announced supplying SPD glass for the Deutsche Bahn Idea Train, a significant advancement for the train industry. SPD-SmartGlass has been successfully integrated into luxury trains and sightseeing options. This collaboration opens up new markets for commuter and regional rail transport, and we expect more information on this soon. Our licensees are competing with View and Sage for SmartGlass projects in the architectural sector. However, there are notable performance distinctions between electrochromic technologies and our SPD-SmartGlass. For example, electrochromic solutions can take over 40 minutes to change tint, while SPD-SmartGlass can switch in just 2 seconds and provides a darker tint and more uniform light transition. Architects now seek large samples of electrochemical glass to evaluate speed and consistency. SPD-SmartGlass stands out in terms of responsiveness, light transmission, and uniformity. With Gauzy's facility in Germany producing wide SPD light control films, we have overcome size constraints present in electrochromic manufacturing. Moreover, because electrochromic glass must be sputter-coated directly onto glass, there are limitations regarding size and shape fabrication. SPD-SmartGlass has been successfully utilized in diverse shapes for architectural projects, while competitors have had to decline similar projects due to manufacturing limitations. Last quarter, View incurred significant losses, and it will be revealing its second-quarter results soon, which should be quite revealing. Now, I would like to address some questions from our shareholders. John Nelson asked about any progress in reducing costs with film producers. Absolutely, John. The facility in Stuttgart, Germany that Gauzy operates can produce film at a considerably lower cost compared to the former Hitachi Chemical production facility, and it's 11 years more advanced. In fact, new equipment delivered this week will enhance both the efficiency and production capacity of that facility. Recall that I previously mentioned Gauzy expanding their emulsion production capacity in Israel, and now they are also increasing the coating capacity in Stuttgart. As announced during the inauguration, this factory can coat one million square meters of SPD film annually. Chuck Michaels inquired about the status of SPD film being incorporated into future vehicles and the timeline for that. I noted that there will be several instances showcased at the Munich Auto Show, so I encourage everyone to look out for related announcements. We previously discussed Cadillac, and as many of you may know, Hyundai has invested directly in our licensee Gauzy. While they haven't disclosed their timeline yet, it's reasonable to infer some conclusions from their investment. Sam Finta pointed out the recent mentions of PDLC in the automotive industry and speculated about the potential for a combined SPD and PDLC product. However, he questioned the feasibility of a vehicle featuring only PDLC without a roller shade. Should we expect to see this combined product in the automotive sector? And is it feasible for vehicles to use only PDLC without a roller shade? Jared Albert raised a related question about whether, once an auto OEM incurs the cost of integrating PDLC into a sunroof, the only additional expense to switch to SPD would be the difference in costs between SPD and PDLC, considering that even the lamination and pneumatic seals would be the same cost? Additionally, there were past critiques regarding the greenhouse effect associated with the LCD roof systems in the 1957 and 1962 Mybox models. Aside from the advantage of light-blocking versus scattering that SPD offers compared to PDLC, is the greenhouse effect from visible light still a significant advantage for SPD over PDLC? These questions are interconnected because I don't think there will be a combination product. In terms of a sunroof, the primary function of PDLC is privacy, which is less of a need for a sunroof, especially since the current 90-micron SPD film can block 99.5% of the light. Additionally, it's important to note that when the auto industry has utilized PDLC alone, they've encountered issues with the greenhouse effect, where light enters the vehicle, generates heat, and becomes trapped inside, essentially contradicting their objective to eliminate unwanted heat, light, and glare. Nonetheless, car manufacturers may experiment with various technologies, sometimes without thorough testing or engineering data, which can lead to discrepancies with actual performance. Our technology has been validated in serial car production since 2011, and testing by Mercedes demonstrates that we can lower the internal vehicle temperature by 18 degrees Fahrenheit. This represents a substantial decrease in heat within the vehicle. Mr. Clair Hottent had asked this question for the meeting, what is the cost differential, if any, between View's technology and Research Frontiers' SPD? That's a great question. We have not seen unsubsidized pricing in the electrochromic industry. So whatever pricing is being quoted out there is highly subsidized. Now we can infer from some of the data we see in the public filings from View, for example, that for every dollar of revenue, it's costing them $4. So there's at least a 5:1 subsidy going on there in terms of how much they're spending for a project versus their revenue. And unless that relationship changes, it means that they're going to lose a lot of money on every project. Our licensees are able to be cost-competitive on the projects that we bid against View on without having to incur those kinds of subsidized expenses. And another question from Mr. Shah. What is the role of Gauzy in Research Frontiers? Do Research Frontiers shareholders have a chance to invest in Gauzy? Gauzy is licensed by us, primarily to make SPD film, and they've built a state-of-the-art facility in Germany to do that, Mr. Shaw. They're a licensee. We have a very strong working relationship with them. We collaborate on projects like, for example, the Rehau project and others, and that's become a very good working relationship together. As far as direct investments in Gauzy, I believe that most of their investors are large institutional investors. They're not a public company, so you can't just invest in them directly unless you're a fund or a money manager of some sort. But I know that there's been a lot of interest in direct investments in Gauzy. They're an excellent company that does great work. So we handled a number of the questions we got by email. I just want now to ask our operator, Paul, to open up the conference to any additional questions people participating today might have that we haven't covered, and then I'm going to make a few closing remarks that I think will be helpful to people.
Operator, Operator
And we have a question from Jared Albert.
Unidentified Analyst, Analyst
I'm not sure if you answered my question. If car companies go with PDLC, is it just the performance difference over this...
Joe Harary, President and CEO
You're right, and I didn't mean to overlook that part of your question. I was focused on the benefits and drawbacks of PDLC. If a car is prewired, the electronics for both PDLC and SPD are quite similar, as they both use AC voltage stepped up from a 12-volt battery. Essentially, it's just a matter of replacing the glass. We actually consume less power, sometimes even more than one-seventh of what PDLC uses, so that extra power isn't an issue for our system. You can easily swap it in. Additionally, as I mentioned earlier regarding project bidding, there's a notable cost difference between electrochemical glass like View’s and SPD from Research Frontiers. Architects are telling us that while the glass itself may seem priced attractively due to subsidies, the cost of the electronics is comparable to the price of the electrochromic glass. In contrast, SPD can utilize standard control systems and basic electronics, which means we don't have to manage power in the same way that electrochromics do. They tend to be highly sensitive and can be damaged by minor voltage spikes, so installations need to be careful with their wiring and electronics. We don't face that issue; in fact, I've seen an SPD connected directly to a wall outlet.
Unidentified Analyst, Analyst
Yes, mine is 20 years old and plugged right into the wall socket. Mine is just a reset, going back to the PDLC. Am I correct in thinking that it is a laminated system with matched glass and the PTITO? But it really is...
Joe Harary, President and CEO
Right. That is the direction the industry is heading. One reason for this is that some tempered glass sunroofs have been known to shatter unexpectedly, which is clearly an issue when driving, and it poses a challenge for car manufacturers. Additionally, as the industry shifts from internal combustion engines to electric vehicles, road noise at higher frequencies has become more prominent. Previously, the engine noise would mask some of these higher frequency road sounds, but now that the engine is quieter, these higher pitches are more noticeable. Consequently, there is a trend towards using laminated glass in vehicles for its acoustic benefits, as it effectively blocks road noise. The SPD light control layer also offers significant noise-deadening properties due to its chemical composition, enhancing the overall sound insulation in cars.
Unidentified Analyst, Analyst
Can you provide an idea of the price difference between SPD and PDLC film? Is it significant or just a minor factor? Are we in the appropriate range? I'm considering the BMW iX and how easy it would be to switch them once they realize it.
Joe Harary, President and CEO
It's not an order of magnitude. It's a single digit and probably a low single-digit factor. Some of the pricing I see coming out of Gauzy's factory makes the price comparable in high volumes. So...
Unidentified Analyst, Analyst
That's incredible because PDLC is a true commodity at this point. I mean it's about as commoditized as it gets. So that's incredible.
Joe Harary, President and CEO
Yes. And we just have to get to the volumes to achieve that price parity with PDLC, but that's part of the business plan that Gauzy has.
Unidentified Analyst, Analyst
Is Gauzy currently more focused on cost and process improvement, or have they taken additional steps to widen their capabilities? I noticed they hired a senior process engineer with an interesting background on LinkedIn. Can you clarify whether their efforts are simply about improving costs and processes, or if there are further developments needed to expand their operations?
Joe Harary, President and CEO
No, it's more cost and process improvement. And obviously, there are things that are driving that. Some of the projects that they're working on can greatly benefit from even slight reductions in cost and things like that because you're talking about pretty high volumes.
Operator, Operator
Our next question comes from Francis Cortera.
Unidentified Analyst, Analyst
I was wondering, can you tell me how far along Gauzy is in developing a dark particle?
Joe Harary, President and CEO
They had announced their R&D on that when they initiated the factory because there were a number of people from the automotive industry in attendance. There is a timeline that we're approaching now. I can't give you more of an update than what they've said in the past, which is they're working on it and it's on their radar. And by the way, Research Frontiers also has a number of existing techniques to work on the color and also new materials in development. But one of the things that we won't do is talk about vaporware. So when we have it, you'll know. But it's a priority for us as well.
Unidentified Analyst, Analyst
Once it is developed, will it need to go through a testing phase?
Joe Harary, President and CEO
Everything should. Some of the choices you make in the development process can minimize the differences between existing materials and new materials, and that's something that we certainly have kept in mind in the work we've been doing at Research Frontiers, and so we feel comfortable.
Unidentified Analyst, Analyst
Once it is developed, and it might be several years before it's rolled out or...
Joe Harary, President and CEO
Or it could be that it's so comparable to the existing materials that you only need to kind of put it through some quick paces to make sure that there is nothing unanticipated going on. So it may not take that long for validation is what I'm saying based on the nature of what we're working on.
Unidentified Analyst, Analyst
And Hyundai, their investment in Gauzy, how would they actually benefit from that?
Joe Harary, President and CEO
Well, that's an important question. Why would you make an investment in a supplier unless you were trying to strengthen that supplier because you had a strategic need for the material it's making. That's kind of how I see the Hyundai investment, is it's a strategic investment in a strategic material for them.
Unidentified Analyst, Analyst
And I'm still waiting for the royalty collecting dividend paying machine.
Joe Harary, President and CEO
A royalty-collecting dividend paying machine. Very much in our plans, my friend.
Unidentified Analyst, Analyst
Is it getting closer?
Joe Harary, President and CEO
Well, if you look at the fact that we've reduced costs continuously for the past 6 or 7 years. Last year was our lowest loss in 26 years, and we've had further cost reductions this year versus last year. We're definitely driving the company towards being as efficient as possible so that we can pay out more in dividends. Because one of the nice things about our company is that unlike the other types of business models, we're a licensing company with very, very predictable expenses. So for us to look at what our cash needs are and predict them quite accurately is much easier for us than other companies. Because of that, the ability to pay dividends, I think, will be a lot clearer to us. Now it's a decision for the Board of Directors, but all of our directors are long-term shareholders of the company, and I think we all see eye to eye. It would be nice for us to be able to keep our stock and monetize it as well as dividends. You have to do a tax balance plan. You can't pay everything out in dividends. But on the other hand, it would be nice to...
Unidentified Analyst, Analyst
Yes, but that only comes after revenues.
Joe Harary, President and CEO
Sure. And with the things in the pipeline, we're well on our way towards that. So we pay attention to the cost and we pay attention to the revenues, both.
Unidentified Analyst, Analyst
Patience do better than patents, right?
Joe Harary, President and CEO
Determination is better than patents, and we are very determined to become a very successful company and not make some of the mistakes that others in the industry are making.
Operator, Operator
Our next question comes from Art Brady.
Unidentified Analyst, Analyst
I was wondering about Nippon Glass. We thought that around the time of the Olympics, they might discuss some of their activities, and I was curious about the status of that.
Joe Harary, President and CEO
Sure. Excellent question. So Panasonic is their customer has usually a very, very, very strong relationship with the Olympics, historically going back decades. As everyone knows, this year, the Olympics were a storied event, to say the least. And I think that a lot of that had an impact also on the publicity surrounding launch plans and things like that. My understanding, though, is that product is coming out and you'll be seeing it quite soon. But I don't think...
Unidentified Analyst, Analyst
Is that this year or early next year or what?
Joe Harary, President and CEO
I know the answer. I'm just not allowed to say. Look, it's Panasonic that does their marketing, not Joe Harary.
Unidentified Analyst, Analyst
Another question is about Dubai. Many companies from Israel have gone to Dubai, and there is significant enthusiasm for Israeli technology. Can you provide some insight into your relations with Dubai or what Gauzy's connections might be with the city?
Joe Harary, President and CEO
I can tell you what my relationship is. I was in Dubai in December. It's an amazing place. The civil engineers there are doing incredibly interesting projects. The economic activity and development there is ripe for SPD. The glass companies are also quite capable of handling anything high-tech like this. I know from first-hand experience that Dubai is a very, very good market with great companies that we're already working with. Gauzy also has very, very strong relationships in Dubai. So when you have enough people pushing something forward, it usually happens.
Unidentified Analyst, Analyst
Another question I have is as follows. There is a company in Israel, it's called REE automotive, and they were just taken over by a SPAC, and they have got quite an amount of funding. Basically, what this company does is it's an electric vehicle base. They just build a base and anyone who wants to develop an electric vehicle, they build on top of that base.
Joe Harary, President and CEO
Right, they call that the skateboard. Yes.
Unidentified Analyst, Analyst
Exactly. Exactly. Are you doing anything with them because it seems like it would be terrific if you could develop a kind of a model that you just put on top of that board as an enclosure, though? Have you...
Joe Harary, President and CEO
We're working with many, many electric vehicle companies. I can't comment on individual ones, obviously, because we need to keep business relationships...
Unidentified Analyst, Analyst
Are you working with these skateboard company?
Joe Harary, President and CEO
Well, the skateboard is an interesting concept, but that's the drivetrain. Usually, you want to work with the people that are putting the body on it because that's where the glass is going. But it doesn't hurt to be friendly to everybody. Because of the nature of our business, Art, we can be friendly to everybody, even if they're not a direct customer. It doesn't cost us a lot of money to do that.
Unidentified Analyst, Analyst
Because it sounds like it will be perfect if you set up a module that you just plug into it as a standard product that Gauzy would develop.
Joe Harary, President and CEO
Yes, the electric vehicle market is definitely something we are keeping an eye on. However, I can't provide more specific details at this time.
Unidentified Analyst, Analyst
Another question I have is how would your product benefit a hydrogen car? Would hydrogen cars benefit from...
Joe Harary, President and CEO
The same way that an electric vehicle would. By reducing the air conditioning loads that are required, we're increasing the driving range of every zero-emission vehicle as well as internal combustion. So we're somewhat agnostic as to what the car is; we can use our glass to benefit from the heat load benefits without regard to what kind of drivetrain it has.
Operator, Operator
And our next question is from Chuck Michaels.
Unidentified Analyst, Analyst
I have two areas of questions. One is regarding your press release, which mentions that the Mercedes models currently using SPD are being phased out. Can you share any information about Daimler's plans to incorporate SPD in new models?
Joe Harary, President and CEO
Well, we have a good relationship with Daimler. Right now, they're in this period where they're almost oversimplifying their vehicles in terms of product offerings and entrants. There are some reasons underlying that are totally unrelated to SPD. But I'm pretty confident that because of the benefits that SPD has and their familiarity with the reliability and performance of SPD, that we’ll be on future vehicles there.
Unidentified Analyst, Analyst
Okay. And second area was I don't think it's been in discussion on this call as to SPD in buildings. Can you tell us what in that area is...
Joe Harary, President and CEO
Yes, I kind of backed into it with the discussion of our licensees going head-to-head with View and Sage on architectural projects. I'll give you a little more detail and color, though. One of the things that I'm pleased to see out there is that architects are getting a lot more sophisticated in how they view SmartGlass. It used to be something that they thought they knew about, but they were kind of lumping in PDLC and SPD and electrochromic and thermochromic and photochromic and everything into the same kind of batch. Judging from the questions that we get when we talk to the architects, it's a much more sophisticated understanding between SmartGlass that's out there. One of the things that I was considering doing for today’s call is actually giving a primer on the different types of SmartGlass, the advantages and disadvantages. I chose just to kind of focus on electrochromic because now it's the closest in terms of appearance to us, but not in terms of performance. But the projects that we're working on are nice poster-children for SPD, really cool designs, very hard-to-shade types of glass that were just shading would solve a lot of problems. Those are the kind of the things or the lower-hanging fruit in that industry.
Operator, Operator
And we have a question from Bruce Denny
Unidentified Analyst, Analyst
I have a couple more questions about the architectural market. In the last conference call, you mentioned that we had already been included in some architectural projects. Can you provide an idea of the scale of these markets or projects? Have they already started construction? I'm not looking for specific details about whether work has begun or if we're dealing with a skyscraper or a storefront, but I'm interested in the general scope.
Joe Harary, President and CEO
We're primarily discussing large-scale projects like skyscrapers and corporate headquarters. While there are some retail spaces and storefronts, my main focus is on these larger projects. Glass is typically installed later in the construction process, so I prefer not to make any premature statements. However, being specified in is a significant advantage, particularly when the architect fully understands what is required for the installation. In our case, there's not much that needs to be done to the electrical system. On the other hand, with electrochromic glass, there can be substantial time and costs involved to ensure compatibility with the electronics. These projects are progressing, although there can always be unforeseen issues. View learned, perhaps through difficult experiences, that just having a letter of intent doesn't guarantee a solid backlog, as high-cost materials like expensive glass are often the first to be cut when budgets tighten. During their last conference call, they mentioned their backlog and seemed to reconsider its reliability as an indicator of future revenues, suggesting an understanding that you can't assume success just because you're specified in.
Unidentified Analyst, Analyst
Right. So have any of these projects started already?
Joe Harary, President and CEO
They are still in the early stages. Unfortunately, some projects could start soon because glass can be installed at any time.
Operator, Operator
And we have a question from Dennis Lavoie.
Unidentified Analyst, Analyst
I got like 3 different areas. One area is in Brazil. You mentioned a year ago or so that you had armored plating glass. They were going to use your technology. Has anything become of that? Or has the pandemic kind of squashed that opportunity down in Brazil?
Joe Harary, President and CEO
The pandemic has certainly had a significant impact on Brazil. However, even after the pandemic, I noticed some demonstration vehicles featuring armored SPD glass for a major OEM. It's difficult to provide a clear assessment without being on the ground in Brazil, and currently, that’s challenging. Nonetheless, what I observed was quite promising.
Unidentified Analyst, Analyst
Okay. You answered many questions about architectural sheet glass. My question is regarding the numerous projects you're bidding on. View has announced a consistent flow of projects they are working on.
Joe Harary, President and CEO
Yes. Usually, it's the week before their conference call.
Unidentified Analyst, Analyst
Well, if I were you, I might do the same thing. If you were them, you may or may not do...
Joe Harary, President and CEO
Absolutely. Absolutely.
Unidentified Analyst, Analyst
Okay. The current River North project, put in 235,000 square feet Class A office building, is that the square footage that they're going to pay rent on? Or is that the glass area of that building? Do you have any idea of what's going on?
Joe Harary, President and CEO
Yes. Yes, it's not the glass. The fact that they're quoting these projects in terms of how much rentable square feet makes me think that the amount of glass is not as significant.
Unidentified Analyst, Analyst
What does that have to do with anything?
Joe Harary, President and CEO
I agree. I did say I'm in $10 billion worth of Mercedes cars. But my glass content is not that.
Unidentified Analyst, Analyst
Okay. I've done some research that nobody typically conducts on a conference call, but let's move on. You mentioned that you've been involved in the architectural sheet glass market.
Joe Harary, President and CEO
Yes.
Unidentified Analyst, Analyst
Okay. And what's the reason why you're losing it because if I understand correctly.
Joe Harary, President and CEO
We're not experiencing losses; we're simply not giving anything away. If you look at the research...
Unidentified Analyst, Analyst
At these calls, all they want is to praise their product. But at the end of the day, you're bidding just for Gauzy projects, and you're not getting them. I also heard you mention that apples to apples is very close, you're only off by...
Joe Harary, President and CEO
We're close to achieving our goals, and I believe our product offers superior performance. Recently, a research analyst released a report on View, which included interviews with former executives who confirmed that they were giving away glass for some of their earlier projects. If you're curious about where the hundreds of millions of dollars they've lost each quarter or each year went, much of it is attributed to situations like that. In any emerging industry, there is often a need to stimulate growth, but there are also limits to what is reasonable, and I'll leave it at that.
Unidentified Analyst, Analyst
Okay. So you're within striking distance as far as price, but at the end of the day, you're mum's the word, but there – there is percolating in the percolator, so to say.
Joe Harary, President and CEO
Yes. Yes. And historically, in every industry that we've been in, there have been entrants mostly in the electrochromic field that have lost money on each piece of glass. Saint-Gobain lost reportedly between $2,500 and $5,000 per roof when they were in the Ferrari Superamerica. But there's only 600 of those cars made, so it's a marketing expense. If you do it on a larger scale, you're talking about real money, and our licensees prefer to make money on the projects they're on.
Unidentified Analyst, Analyst
Is there any need for this technology in the truck market?
Joe Harary, President and CEO
Yes, there are several reasons. Firstly, truck drivers often have a higher risk of skin cancer because their arms are exposed to UV rays while hanging out of the window. Implementing UV-blocking SPD technology in side windows would help address this issue. Additionally, professional drivers on long-haul trips face challenges like road glare, which can turn into a significant problem during extended shifts, unlike the typical annoyance it is during short commutes. Therefore, utilizing this technology in sun visors and windshields is crucial. Lastly, in sleeper cabs where drivers might need to sleep during the day, switching to a setup that offers privacy and complete darkness would be an effective solution.
Unidentified Analyst, Analyst
Okay. Final question. Gentex did some work on, I believe, the Dreamliner on many years ago, which ultimately they have an issue with it. But could you give us a lay of the land with the airplane market today as far as what you have, what the other people have, and what technologies the other manufacturers are using if you have time or care about it?
Joe Harary, President and CEO
Up until this year, we were primarily known as the first commercially flying switchable window, having been installed in Airbus A380 planes used by Qantas Airlines since around 2008. This made us the first and longest flying switchable window. Most of our experience, however, is in general aviation, including aircraft such as King Airs and Honda Jets. Recently, we also entered the Airbus A220 market, which depends on the cash flow within the airline industry. Gentex has worked on the Dreamliner, and while they faced some issues, it seems they are beginning to restart production or slow it down to address those concerns. They also have an option on the 777, but it hasn't been utilized yet.
Unidentified Analyst, Analyst
Okay. Okay. So what question, if you were me, would I ask you?
Joe Harary, President and CEO
Yes. I wish people would realize that certain issues are becoming more apparent, and there will be a gap between when some Mercedes models are phased out and when new cars are introduced. However, we are actively engaged with various original equipment manufacturers, both in electric and internal combustion engine vehicles, and some of these developments are truly exciting. I have a strong desire to drive a car equipped with SPD-SmartGlass, and I anticipate having several options from different manufacturers.
Operator, Operator
And we have a question from August Berman.
Unidentified Analyst, Analyst
I had a couple of questions. First, I think you had intimated earlier that we're not going to see a combination between SPD-PDLC roof?
Joe Harary, President and CEO
Not in automotive. You see it in yachts and planes because there are times when you want to bring in natural light, such as in your main cabin, while still maintaining privacy. You may want light to enter but not have exterior views into private areas like the main bedroom of your yacht. In planes on the tarmac, you also might wish to let in natural light while preserving privacy. We've observed these preferences. If you visit us, we can show you aircraft and yacht windows; the yacht window is from Dyson's yacht, and the aircraft windows will feature combination products. They're impressive. However, I don't see this being applicable to car roofs, as there is generally less need for privacy there, and the focus is instead on rejecting heat and light.
Unidentified Analyst, Analyst
I mention this because Continental has an impressive video on their engineering website showing a combination of SPD and PDLC technology, and I believe we might start seeing that in the future. It seems more applicable to side glass rather than a sunroof, but do you envision it becoming a reality?
Joe Harary, President and CEO
Right. Side glass could function as a privacy feature if desired.
Unidentified Analyst, Analyst
Secondly, there's been some interesting discussion on message boards. We came across an impressive YouTube video by Doug DeMuro, who is well-known in the auto industry, showcasing the McLaren, which received 1.7 million views. His enthusiasm was evident. It made me wonder if there’s a way to present a neutral comparison, highlighting SPD, PDLC, and EC alongside their performance to raise awareness about them. For example, I once visited a Mercedes store to learn more about their products, but not everyone there was knowledgeable. It's clear that someone within the industry who can effectively share this information could be beneficial. I'm curious if there have been any marketing strategies considered for promoting this technology, especially given the wide audience you have in these markets.
Joe Harary, President and CEO
Yes. At one point, we worked with dealers to educate them about the options and their benefits. Since Mercedes prices options in a way that makes dealers relatively indifferent, we often heard from dealers that if a customer sees a car with the Magic Sky Control feature and they don't have it, they would come back saying they weren't informed about the feature. Generally, dealers are focused on selling what they have in stock. If they have an orange car with pink polka dots, that's what they will promote. We found that trying to get Mercedes and others to adjust the make rate proved to be a more effective strategy. McLaren has experienced significant success with the SPD roof, as their customers show very high interest in it and appreciate it. This enthusiasm from McLaren fans often leads to other owners purchasing it as well. In contrast, Mercedes attracts a diverse range of buyers, from those who are not active on social media to younger individuals who are, which can influence their purchasing interests.
Unidentified Analyst, Analyst
Well, also just to differentiate it. Again, the common notion is that when an investor who's invested in Research Frontiers knows that's certainly not EC or SPD, whatever it is. So just from the performance breakdown, I thought that would be interesting.
Joe Harary, President and CEO
We've tried to get the industry to use the term correctly. A lot of times, we'll refer to it as electrochromic glass, and we try to get reporters to refer to us as suspended particle device for SPD so that there is a difference, obviously.
Unidentified Analyst, Analyst
Well, Cadillac did, which is great.
Joe Harary, President and CEO
We've tried to get the industry to use the term correctly. A lot of times, we'll refer to it as electrochromic glass, and we try to encourage reporters to call us suspended particle device for SPD, because there is a clear difference.
Unidentified Analyst, Analyst
Last question, I saved the best for the last. Any way to say whether yes or no, that next month at IAA, we're talking about demonstrations in terms of showing up the technology or are you talking about talking about series production with SPD next month at IAA?
Joe Harary, President and CEO
I'm not allowed to say, but I think you're going to see a number of demonstrations that are going to be very cool and feasible near term. I think what you don't see usually until it's ready to be launched is the actual series production line. When they're going to put in series production, you'll see the car with the SPD. I think that given the time frames and the marketing plans that the automakers have, it won't be at IAA that you will see series production. But I have been wrong before. I have showed up at other car shows and seen launches when nobody, including our contacts within the automaker, thought there would be.
Operator, Operator
And our final question comes from Michael Kay.
Unidentified Analyst, Analyst
I wanted to ask, in the past, you said the main barrier to getting SPD in major architectural projects was cost. But now that costs are down, it's in that...
Joe Harary, President and CEO
No, the main barrier wasn't cost; it was width. For architectural purposes, you need 1.2, 1.5, or 1.8 meter wide film, and Hitachi was only producing 1 meter wide film. That was the barrier. The factor that is opening up that market isn't just the cost, although lower costs are certainly easier to manage, and Gauzi's price per square meter is indeed lower than Hitachi's. But it was the width that presented the issue. That's why I am enthusiastic about the architectural possibilities now that we have both of these factors addressed.
Unidentified Analyst, Analyst
And do you think the sweet spot in terms of cost for all of the different markets has been achieved? Or do you think...
Joe Harary, President and CEO
You're never going to achieve a sweet spot because no matter what the price is, someone wants it lower. What happens if price goes down? This is typical supply and demand growth. Your price, your cost matches the projects that can benefit from your product at that cost. That means not selling cars for $20,000, that's not their market. And we're not selling glass for $10 a square foot, like regular glass goes for or View sells theirs at because that's not our market.
Unidentified Analyst, Analyst
Would you say that Gauzy is now the major producer of SPD film, or do you think Isoclima and Hitachi still play significant roles? Is Gauzy essentially taking over?
Joe Harary, President and CEO
Well, Isoclima is an end product manufacturer, not a filmmaker. Your 2 filmmakers are Hitachi Chemical and Gauzy. I can't comment on who's bigger than who; that wouldn't be fair to either of them. But Isoclima is not a filmmaker, but they make end products. I think we have one more question; I see that popped into the queue.
Operator, Operator
And our final question comes from William Berg.
Unidentified Analyst, Analyst
First as an investor, Joe, the adoption of SPD in the auto industry hasn't been as hoped. But in regards...
Joe Harary, President and CEO
We're in between vehicles. So I think that's something that is frustrating. That is something we have to understand is that there are development timelines, and a car comes out when it comes out even if you want it.
Unidentified Analyst, Analyst
Okay. Thanks for saying that. But with the regards to the architectural side, with these energy codes as a requirement on the building industry, glass is a very important part of the code in the light and ventilation and energy. So it's not an insignificant part of the building envelope. So can you comment on whether or not our technology in the glass has been specified into any plans, so we can clearly know yes or no?
Joe Harary, President and CEO
Are you talking about building codes? Or are you talking about projects?
Unidentified Analyst, Analyst
No, projects.
Joe Harary, President and CEO
We're specked in. Yes, what I was trying to say before, though, is just because you're specked in, it does mean that you make it in at the final cut. Usually, the first thing to go is the bells and whistles. When someone does a building and they realize that they're over budget because of X, Y, and Z, once they put the shovel in the ground, often, the trims and the glass and things like that are things that can suffer. That's something that I think we learned the hard way.
Unidentified Analyst, Analyst
Well, my point is because it's such an integral part of the building envelope, once you speck in, it's very hard to redo it because that takes a lot of time. So you're saying that the architects are where the owner is willing to take more of the time to resubmit with another bells and whistles, as you say that's kind of...
Joe Harary, President and CEO
It's not an ideal replacement. When you remove SmartGlass and replace it with regular glass, the process can go smoothly at times, but it can also be challenging. You certainly don’t want these issues to arise, yet they often do when plans deviate from expectations. For example, a contractor might dig in and discover the soil isn't as stable as anticipated, which could require additional funding for a solid foundation, forcing them to make cuts elsewhere. This unpredictability is a reality. While we hope these problems don’t occur, they do occasionally happen. With regard to View, now that they've adjusted their definition of backlog, they acknowledge these frequent discrepancies between intent and execution. You can't fully count on something until it's solidified. However, once an order is placed, production of the glass begins. One advantage of our business model is that it poses less risk to the customer compared to the current practices.
Operator, Operator
And we have no further questions in queue.
Joe Harary, President and CEO
Okay. I'd like to maybe make a couple of closing remarks briefly. I think today, new investors getting into the smart window industry, it is something that's getting a lot of attention now because of the public offering, and View, and maybe to some extent Crown. They probably know a lot more today about the performance cost and also the manufacturing and other limitations of other technologies, such as the electrochemical or electrochromic glass. SPD is a roll-to-roll film-based process, and that allows SPD-Smart light control rolls of film to be shipped where they're needed, cut and laminated to size with a minimum of weight. This really helps, I think, ultimately, with the logistics and the cost, roll-to-roll and being able to cut at the size and to do a lot more with it. The technology itself also has the best performance in terms of switching speed and range and manufacturing yields and logistics. All these things that are kind of coming together nicely for us now that the size issue has been dealt with. It's also a proven technology. It's been put into some of the most demanding locations on a car and other uses with over a decade of real-life testing in probably some of the harshest environments in the world. It's been used without one reported problem in tens of thousands of cars that have been on the road for years. We have this technology that may appear to be cutting edge and magic, but it's cutting edge, not bleeding edge. It's also nice to see that even though some of the original car models, because we've been around for over a decade that your products are coming off their product life cycle, new cars are coming back online with SPD-SmartGlass. We talked about some of these today or alluded to them. Some of the other uses are expected to be shown in a few weeks at the Munich Auto Show, and even more car models are expected to be announced after that. New aircraft will also be announced, new train applications, and now that Gauzy can coat film that's 1.8 meters wide to be used in architectural projects. So things are moving forward. I also want to highlight, as maybe a sign of times to come, is our licensees have expanded production capacity in all areas with the supply chain, from the chemistry production, to the film coating, to the fabrication of the end products for all industries, including the architectural, automotive, aircraft, marine, transit, and even consumer electronics industries. And as today's announcements and this call has shown, more and more uses for SPD-SmartGlass are becoming public. I want to take this time to appreciate the hard work that our team at Research Frontiers and other licensees have been doing, and I really want to thank our loyal support of our investors as we continue to lead our industry and move it forward. Thank you all for being part of such an important part of that effort, and thank you for participating on today's call.
Operator, Operator
This concludes today's conference call. Thank you for attending.