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CE

Crown Electrokinetics Corp. (CRKN)·Q3 2021 Earnings Summary

Executive Summary

  • Crown remained pre‑revenue and reported a net loss of $5.7M for the quarter ended September 30, 2021; EPS was $(0.39), essentially flat q/q vs $(0.38) and slightly improved y/y vs $(0.67) due to lower other expenses vs prior year .
  • The company signed its first commercial customer (MetroSpaces) via a Master Supply Agreement to retrofit a 70,000 sq ft Houston office building and is coordinating installations with strategic investor Hudson Pacific Properties (two California sites and a potential third in the Pacific Northwest) .
  • Liquidity stood at $9.7M cash; management also agreed terms for a $10M standby letter of credit (8% interest, two‑year maturity) and changed fiscal year‑end to December 31 to better align operations and financial calendars .
  • Management continues to target initial deployment/shipments of Smart Window Inserts next quarter (calendar Q1 2022), with engineering refinements (new framing design) and manufacturing ramp underway; supply chain issues were not yet impacting Crown as of the call .
  • Key near‑term stock catalysts: confirmation of additional purchase orders, first installations with Hudson Pacific and MetroSpaces, and validation data from the second field test improving on ~26% HVAC cost savings indicated in the initial test .

What Went Well and What Went Wrong

What Went Well

  • First commercial customer signed: “Signed first commercial customer agreement in late September with MetroSpaces…to install Smart Window Insert in 70,000 square‑foot Houston, Texas office building.”
  • Strategic partnership momentum: “Working closely with our strategic investor Hudson Pacific Properties to install…in two locations within their California office portfolio, with possible extension to a third location in the Pacific Northwest.”
  • IP portfolio expansion and engineering leadership: “Acquired 10 patents from IBM…Crown has a total of 34 patents and applications…Appointed Mindy Hamlin as Vice President of Engineering.”

What Went Wrong

  • Ongoing losses and high non‑cash OpEx: Net loss $(5.7)M with $3.1M non‑cash stock‑based compensation; OpEx $5.7M (SG&A $4.865M, R&D $0.787M) reflect heavy investment ahead of revenue .
  • Cash burn and lower quarter‑end cash: Cash declined to $9.7M from $12.5M in the prior quarter, driven by operating activities and investment in patents/equipment .
  • Estimates context unavailable: Wall Street (S&P Global) consensus EPS and revenue data were unavailable this period, limiting beat/miss analysis (values could not be retrieved from S&P Global).

Financial Results

MetricQ3 2020Q2 2021Q3 2021
Revenue ($USD Millions)$0.0 $0.0 $0.0
Loss from Operations ($USD Millions)$(2.082) $(5.396) $(5.652)
Net Loss ($USD Millions)$(5.767) $(5.398) $(5.703)
Diluted EPS ($USD)$(0.67) $(0.38) $(0.39)
R&D Expense ($USD Millions)$0.423 $0.435 $0.787
SG&A Expense ($USD Millions)$1.659 $4.961 $4.865
Total Operating Expenses ($USD Millions)$2.082 $5.396 $5.652
Cash & Equivalents ($USD Millions)$0.601 $12.478 $9.701
Weighted Avg Shares (Millions)8.549 14.315 14.511

Notes:

  • Crown stated it is still pre‑revenue .
  • Other expense was “nominal” in Q3 2021 vs $3.7M in Q3 2020, driving y/y EPS improvement despite higher OpEx .

KPIs and Cash Flow (context):

  • Stock‑based compensation in Q3 2021: $3.101M (R&D $0.113M; SG&A $2.988M) .
  • Cash used in operating activities: $(5.236)M for six months ended Sep 30, 2021; cash end of period $9.701M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Product deployment timingInitial rolloutTargeting first shipments in calendar Q1 2022“Target next quarter for deployment of our first Smart Window Insert.” and “targeting Q1 of calendar 2022 for our first product shipment.” Maintained timeline; operational readiness updates
Fiscal year‑endFY calendarMarch 31 fiscal year endChange to December 31 effective 2021 Maintained operational guidance; calendar alignment
Liquidity facility2‑year facilityNone disclosed previouslyAgreed terms for $10M SLOC at 8% interest, two‑year maturity; interest payable quarterly New facility enhances liquidity
Financial (revenue/EPS/margins)Q3 2021 and forwardNoneNone provided (no quantitative revenue/EPS/margin guidance) Maintained “no guidance” stance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2021)Trend
Commercialization timelineMVP complete; targeting first shipments Q1 2022 “Target next quarter for deployment” reiteration; installations planned with Hudson and MetroSpaces Progressing toward initial deployments
Customer tractionActive discovery with ~two dozen REITs; no signed contracts yet First commercial agreement (MetroSpaces); Hudson rollout plan (LA, Bay Area, Seattle/Vancouver) Positive inflection from pipeline to initial deals
Field test and product performancePreliminary ~26% HVAC cost savings from initial field test Second field test underway with new framing design to improve insulation and aesthetics Product refinement supports ROI narrative
Supply chainNot seeing issues yet; risks monitored “We are not having supply chain issues yet…hasn’t reached us yet.” Neutral, watchful given broader macro
Manufacturing strategyPivot to in‑house film manufacturing; 6” moving to 12” width; capacity seen as adequate “Able to make our own film”; gearing up assembly; exploring expansion Building capability for scale
Regulatory/ESG driversTenants/boards/ESG charters key motivators beyond regulation (e.g., NYC local laws) Continued emphasis on carbon reduction and ROI for adoption Stable; ESG tailwinds supportive
IP and patentsBuilding portfolio; HP originAcquired 10 IBM patents; potential licensing opportunities; purchase price ~$225k Strengthening defensibility

Management Commentary

  • “We are the only retrofit products in the marketplace. Crown Smart Window Insert is priced comparatively [to] window blinds…a very competitive ROI and payback period.” — Doug Croxall, CEO
  • “With Hudson’s lead, we are identifying two buildings in California…with a potential third building in the Northwest…this is a real customer contract.” — Doug Croxall
  • “As of September 30, 2021, our cash and cash equivalents were $9.7 million…we’ve also recently agreed terms…for $10 million [standby] letter of credit.” — Joel Krutz, CFO
  • “Our second field test [framing redesign] is more insulative…covering the mulling…[and] looks exactly like the existing framing system.” — Doug Croxall
  • “Net loss for the quarter ended September 30, 2021 was $5.7 million which included $3.1 million of non‑cash stock‑based compensation.” — Press release

Q&A Highlights

  • Hudson rollout specifics: Not a trial; phased rollout to LA, Bay Area, and Seattle/Vancouver; intent to expand across portfolio in 2022 .
  • Customer discovery and funnel: Multi‑functional buyers (operations, engineering, ESG, leasing); strong interest in demos/prototypes; announcements expected over 2–4 months .
  • Manufacturing capacity and supply chain: In‑house film production; ramping assembly; “not having supply chain issues yet,” but monitoring risks .
  • Framing design improvement: New design enhances insulation and aesthetics; aiming to quantify incremental savings once weather conditions allow comparison .
  • Patent acquisition rationale: $225k purchase; mix of offensive/defensive claims aligned with future product directions and potential competitor licensing .
  • Installation model: Initially Crown crews, later hybrid with local labor under Crown leadership to scale installations .
  • Leasing economics: Total ownership cost marginally higher than upfront purchase due to residual value at lease maturity .

Estimates Context

  • S&P Global Wall Street consensus EPS and revenue estimates for the quarter were unavailable; a direct beat/miss comparison cannot be provided (values could not be retrieved from S&P Global).
  • Crown remains pre‑revenue, so revenue‑based margin comparisons are not meaningful for this period .

Key Takeaways for Investors

  • Execution turning point: First commercial agreement and planned Hudson installations indicate the pipeline is converting to revenue opportunities, a key de‑risking event before full commercialization .
  • Near‑term milestones: Watch for product deployment/shipments in calendar Q1 2022, second field‑test results (framing redesign), and additional purchase orders—each a potential stock catalyst .
  • Liquidity runway: $9.7M cash plus a $10M SLOC supports initial production ramp; monitor cash use vs installation cadence to gauge financing needs .
  • Cost discipline vs investment: High non‑cash comp drove OpEx; y/y EPS improved on lower other expenses—focus on OpEx mix as commercialization advances .
  • Product differentiation: Retrofit, solar‑powered insert (no hardwiring) addresses existing building stock with ROI/ESG benefits, broadening addressable market vs traditional smart glass .
  • Risk watch‑items: Supply chain visibility, manufacturing scale‑up, installation capacity, and timing of customer rollouts remain critical; management notes no current supply chain impact but remains vigilant .
  • Medium‑term thesis: If initial deployments validate energy savings and installation economics, Crown can leverage REIT relationships (Hudson lead) to accelerate portfolio‑wide adoption and begin scaling revenues .