Research Frontiers - Earnings Call - Q1 2025

Transcript

Operator (participant)

Hello and welcome to the Research Frontiers Investor Conference Call to discuss the first quarter of 2025 results of operations and recent developments. The company will be answering many of the questions that were emailed prior to the 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 the call or will do so afterwards in order to answer more questions of general interest to shareholders on this call. 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 detailed in our SEC filings. Research Frontiers assumes no obligation to update or revise these statements.

Today's call is in listen-only mode with a Q&A session to follow. To ask a question, press star one. The call is being recorded and will be made available for replay on Research Frontiers' website at smartglass.com for the next 90 days. If you find that your question has been substantially answered, as a courtesy and to allow time for other shareholders to ask their question, please remove yourself from the queue by pressing pound one. Also, we ask that you keep your question brief in the interest of time. I will now turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Joe Harary (President and CEO)

Thank you, Erica. Hello, everyone, and welcome to our first quarter of 2025 investor conference call. Let's start with our financial results. I'm pleased to report that the first quarter of 2025 marked another strong period of revenue growth and momentum for Research Frontiers, driven by increased demand for SPD-SmartGlass, particularly in the automotive sector and also in the aircraft sector, with growing interest in new projects in the architectural market. Our royalty revenues in Q1 2025 were up over 79% to $560,000. This was an increase of more than $246,000 over the first quarter of 2024. Also, significantly, royalty income was up 214%, or up $382,000 sequentially from the previous quarter, Q4 2024. This increase was primarily the result of higher royalties from the automotive market, up 128% compared to Q1 2024, and up 267% compared to our previous quarter, Q4 2024.

Revenues from the aircraft market were also up sequentially in Q1 2025 compared to the prior quarter, Q4 2024. We expect revenue in all market segments to increase further as new car models and other products using the company's SPD-SmartGlass technology are introduced into the market. As a consequence of these factors, our net loss was $177,687, or $0.01 per common share, for the three months ended March 31, 2025. This was $265,000, or 60% lower than the first quarter of last year. Turning to our financial condition and liquidity, we continue to manage our resources effectively. As of March 31, 2025, our cash and cash equivalents stood at approximately $1.4 million, and our working capital was approximately $2.3 million. We continue to be debt-free.

Based upon our current operations, we believe our current cash and cash equivalents would fund our operations for more than the next five years. We do not need to raise capital at this time and do not anticipate doing so unless there's a strategic reason to do so. We continue to see progress and significant developments across our markets. Our SPD smart technology is currently licensed or used by many major companies serving five major application areas: aerospace, architectural, automotive, marine, and display products in almost every country of the world. I've been asked about other technologies being used. You know, when I first joined Research Frontiers, the head of LBNL Laboratories in charge of the Smart Window project told me to keep an eye on two companies who were the most advanced in the world: Asahi and Isoclima.

At the time, both were focusing on electric chromics, a competitive technology to SPD. It's telling that both are now active licensees of ours for SPD smart glass. You know, along the way, many other companies became, frankly, roadkill on the side of the smart glass road. Some crossed over to us, like Asahi and Isoclima. Some asked us to bail them out. I won't name names. Some stubbornly stuck to losing technologies with the hope of breakthroughs and miracles that have eluded them for decades. Two companies in our industry filed for bankruptcy this past year: Vue and Helio, while another has gone relatively quiet in the market and is yet to come out with even a rudimentary smart product. Throughout these industry challenges, Research Frontiers never wavered from our mission.

Our success stems from having the best-performing smart glass technology paired with a low-risk business model that preserves our upside while encouraging diversification and a robust global footprint. A recent example of the benefits of our approach was highlighted in Gauzy's recent press release about the lack of any meaningful impact of tariffs on their business. This is something I had also indicated with our business on the last conference call in March. We have received a number of questions about this that were emailed to us. This also further demonstrates the logistical advantage of our film technology. It certainly reinforces the strength of our business model and of the strategic partnerships we have built. We have spoken in the past about key developments in the automotive market. Royalty increases in this sector were a major driver of our Q1 growth.

We continue to see significant momentum in automotive, with new car models expected to be introduced in 2025 using our SPD-SmartGlass technology. Q4 saw the introduction of the SPD-SmartGlass for the Cadillac Celestiq, and Q1 2025 showed somewhat higher sales to Cadillac. The production callouts by Cadillac point to significantly higher royalties from General Motors in our current second quarter of 2025 as production ramps. Similarly, we had strong sales from Ferrari in Q1 2025 and expect strong sales from Ferrari for the current quarter, Q2 2025, based upon their production callouts to our licensee. Also, I think everyone was pleased to see from our press release in April and also Gauzy's that Mercedes is back in the picture with their luxury van that debuted at the Shanghai Motor Show.

What's unique here is, one, that it is in an area other than the sunroof, and two, it is unique in that it uses in the side windows a combination of SPD PDLC on 75% of the van's glass. Now, let me take a question that was emailed to me from Mr. Erdman. What is the advantage of a dual-stack smart glass combining SPD and PDLC over SPD only? SPD by itself works fine for shading and privacy. When you want privacy with light coming in, and remember, we're dark in privacy, you might want to use a combination of the two. Also, in areas where you're projecting an image, it's somewhat more like a movie scene in a theater with PDLC. It is a visual effect sometimes with displays that you want.

That becomes less relevant, by the way, in a world where most of the displays are embedded inside the glass and things like transparent OLEDs, which is a very interesting market for us. On prior calls, I mentioned new car models in Asia, Europe, and in the U.S. These are still on track. While I can't discuss the details yet, we have also landed another European car model to the mix since our last conference call together in March. Revenues from this are not reflected in our first quarter royalties. Yesterday, I received several email questions about the electric chromatic roof on the new 2026 Corvette. I can't provide any details about that at this time. It's up to GM to decide to what extent they want to talk about this. In the architectural market, we're excited about the potential for growth.

We have begun work on private projects utilizing SPD-SmartGlass. We are looking forward to the launch of the retrofit application, and our licensee in this area has projected a strong second half of this year. We also believe what we believe is a game changer for the industry is the retrofit application by significantly simplifying installation, reducing costs, and minimizing disruption while upgrading building envelopes to make them smarter and more energy efficient. Supplying government buildings is a very large opportunity, and regulatory support such as the Dynamic Glass Act, which offers substantial tax credits of between 30-50%, should help the private sector adopt SPD-SmartGlass in buildings and homes as well. Jeff H. emailed me, "What is Research Frontiers doing to tell a story? Because it sounds like you have one to tell." We certainly do.

One thing is we've been working very closely, and that's increasing with Gauzy to get the word out. They have substantial sales and marketing resources, and we coordinate with them. They're also quite good at social media and other digital marketing, and we coordinate with them as well on this as well as business development. We recently had some high-level discussions about doing even more together. We also know we needed to update our website, and we did more than that. It's been totally redesigned, and we'll be working on the final pre-launch steps this weekend and expect to go live by early next week. I think you all are going to love it and find it a great tool for sharing information with others.

Several share—and by the way, our web address is smartglass.com, if anyone wants to check it out or peek in maybe over the weekend. Several shareholders have asked about what catalysts we see for our company, our revenue, and our stock price. Jared asked, "Do you see a catalyst or a combination of price, performance, and availability that finally meets the value proposition, or does success remain out of reach?" I think that the steady improvement, Jared, that we've made in the growing revenues and approaching breakeven, while others in our industry have failed, certainly means that we are on the right track and nothing is out of reach. I'll talk more about this in my closing remarks later. Certainly, the catalysts are happening in terms of price, performance, and availability of the product.

As I mentioned, we've included some of the questions previously sent in by our shareholders in the presentation today. With that, I look forward to answering the questions that I've not already answered in the course of my presentation. We ask that you keep your questions limited to questions of general interest. We can always talk about specifics after the call. If you want to get into more specifics, you can do so by email or calls offline. I'll now ask our operator, Erica, to open up the conference to any additional questions people participating today might have that we haven't already covered.

Operator (participant)

If you would like to ask a question, please press star one on your telephone keypad now. You'll be placed into the queue in order to receive. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star one on your phone now. Our first question comes from Francis Cotturba. Please state your question.

Yeah. Hello, Joe. How's it going?

Joe Harary (President and CEO)

Hey, how's it going?

Pretty good. You didn't mention anything about the Black Particle.

Why do you define it?

Oh, yeah. Thank you.

Why do you define it as the Holy Grail? Number two, whenever it is available and it's used in various different products, will it be a combination of just the black dark particle and PDLC, or will it just be the dark particle? That's a great question.

That's a great question.

When might it be available?

Okay. These are all great questions, and I'll answer what I can. Also, we got similar questions from John Nelson and Mike White. Thanks for asking about the Black Particle. We announced together with Gauzy the Black Particle in January at the Consumer Electronics Show in Las Vegas. We demonstrated a film using it behind closed doors to key people in the industry, and it was very, very well received. Since then, we and Gauzy have done a significant amount of work together on advancing it towards commercialization. I hope to be able to share some very good news about that. I think the way you're going to hear that news is we'll announce the final product is in production. You asked, "Why is it the Holy Grail?" Some of it is technical, and some of it is aesthetic.

The aesthetic would be that it's more of a neutral color. If you are not just looking through a sunroof, but let's say you're looking through a side window of a car, you may not want to see blue as much as you would through a sunroof where people are used to seeing blue sky. The other is technical. The reason that our current particle looks like a sapphire blue is because it blocks in all areas of the spectrum except one, which is the dark blue. The dark blue in sunlight gets transmitted, thus giving it a blue color. If you can also block in the dark blue, then you're going to have far less light coming through.

While in the dark state of a current SPD, there is 99.5% of the light being blocked. That half of 1% is still coming through and making it look blue. If you are able to close up that gap, it is going to look opaque. You will not see any image or any colors through that. You asked about would it be used in combination with PDLC, and it depends on what you are trying to achieve. For the most part, SPD by itself or PDLC by itself are good at achieving privacy. Maybe there would be a slight advantage in the black with more privacy, but not a meaningful amount where it would be the reason you would go black versus blue.

If you recall the question I answered earlier, with PDLC, a lot of times it's when you want to have privacy with light coming through because PDLC doesn't block light. It scatters it. It allows light to come through, but it does achieve privacy. It does have some advantages in terms of getting that movie theater-type screen look when you're going for that in a display application. For the most part, I think a black would be a significant development in the industry. I think that it would give architects and designers the ability to have a more neutral color. I think that would be useful, especially in things like vertical windows on the side of cars or buildings. Other than the timing issue, which I can't answer at this point, I've answered that. If I forgot anything, let me know.

Has there been any projects that have been put on hold waiting for the commercialization of the dark particle?

No. No. It is certainly an improvement in performance. We always are striving for better and better performance.

The upcoming shareholders' meeting, is that going to be open or?

It's open to everybody. It's open to everybody to attend. It's at Research Frontiers. Unlike in ever since we've started to do quarterly conference calls with investors, it used to be that the annual meeting was the main opportunity to get a report on the operations of the company. Given the fact that it's only a few weeks away, the different quarterly calls are really where we've chosen to give more fuller updates. It is probably mostly going to be an administrative meeting where officers are elected, and I'm sorry, directors are elected, and the agenda items are put up for a vote. It's not going to be one where there's going to be a new report unless, of course, something happens, in which case we'll announce it regardless of whether there's an annual meeting or not. Everyone is encouraged to attend. Please vote.

It's important to vote.

Do you have any products to demonstrate there?

We have a whole design center here. If you're in the Woodbury area and you want to see some really cool smart glass that's operated by Amazon Alexa or automatically through sensors or through a whole variety of things, you're welcome to come and experience that. You don't have to wait for the annual meeting. Come anytime you want. I'm here. Are any of the products have the Black Particle?

No. We're not showing that until it's commercial.

Okay. Except the people that are developing products based on it.

Okay. Thanks. While I'm at it, there was another question from John Nelson. And John, by the way, I appreciate the fact that you've substantially increased your ownership even beyond what's listed in our proxy statements. So thank you. Your question was, are you seeing any effects of the U.S. trade tariff policy on your business? Are there any changes in strategy because of this? I think we went into some detail last conference call about how the premium market is not really affected. Ferrari is not really affected by this. Rolls-Royce today got some sort of relief from the U.S. on tariffs. I think Trump made the point that you're probably not going to build a Rolls-Royce factory here in the United States, so we'll give you a break.

For the most part, volume manufacturers are going to deal with the tariff situation, and it looks like they're all negotiating for reasonable trade deals. It hasn't really affected us. I think more specifically, if you look at the announcement that Gauzy made in April, they said that it hasn't affected them either. It's because we all have worldwide footprints. It's not like we're really isolated and only exporters or only importers of product. We have a presence all over the world, and that's been helpful, especially in a world of tariffs.

Operator (participant)

Our next question comes from Leonard Lizzo. Please state your question.

Hey, Joe.

Joe Harary (President and CEO)

Hey, Lynn.

Hey,

I had a question when you mentioned that one of the areas would be the display areas. I know you've been working with LG and all of that sort of thing. I'm just wondering, is there anything that is going to come soon in that area?

I guess the best way to answer that without directly answering your question because I don't want to speak for LG or for the customers of their product. There's been a lot of public visibility, especially in the area of train windows in terms of embedding OLED displays inside of windows. I think if you just look in general at what's been happening, even let's just take the Cadillac sunroof. It's a four-quadrant sunroof, and it has all sorts of things embedded in there besides SPD, such as LED lighting and other things. The glass itself is becoming more functional as part of the car. I think you'll continue to see that trend with OLEDs combined with SPD so that you can get really good displays and good information presented on glass surfaces.

That extends to things like heads-up displays too.

Okay. Thank you for that. I also noticed that in heavy equipment, it's being used in the windscreens and that. Is that a trend that means visors are not going to be needed inside of most cars?

Yes. You're beginning to see things happen in that shade band above the AS line on your windshield. You mentioned also heavy equipment. A lot of construction equipment has a lot of glass, and they become ovens. You can't schlep around huge air conditioners in your harvester or whatever. Being able to control the heat coming in with the glass doing the work becomes very significant. Yeah, I expect these trends to continue. Gauzy's subsidiary Vision Systems has always been in the forefront of that market with specialty equipment uses for SPD as well as the bread-and-butter aircraft and boats and things like that and airplanes.

We're very close to profitability now, so we'll probably cross over that by the end of the year.

If we stay on the track that I expect, we can have a very good year.

Bless you, and I hope we get there.

Okay. Thank you, Lynn.

Operator (participant)

Our next question comes from Jeff Harvey. Please state your question.

Hi, Joe. I got a couple of accounting questions. Under current assets, you've got royalty receivable net of a $1.2 million reserves. What are the reserves for?

Joe Harary (President and CEO)

Reserves are for once something goes over a certain level of time, we put a reserve in there. Some of that is very old. Some of it is also on receivables, just timing. At the end of the quarter, especially as our sales have ramped up, at the end of the quarter, money is due. The licensee does not necessarily get invoiced or pay it until a short period of time after that. You are going to see at the end of every quarter, and that is going to become an ever larger number as revenues grow, something that is in transit.

Under cash flows, you've got a royalty receivable of a negative $310,000. What's that?

Yeah. Say that again.

I said under cash flow from operating activities, you have royalty receivables of a negative $310,000.

Yeah. Basically, you would add that back in.

You'd add that back in. Okay. Right.

Now, Gauzy, sometime last year, in fact, you and I had talked about this, announced that they were talking about 50,000 cars a year. What's happened to that? Is that still on track?

That 50,000 car per year was not an SPD project. As far as I know, it's still on no. They have things that are much larger than that for SPD that are on track, though.

Are you still?

I'm not allowed to talk about that. Sorry.

No, I understand. You're still on track for the new Asian car model that you were talking about?

Yeah. Yeah. As I said earlier, we've mentioned in the past an Asian project, a couple of European projects, and a U.S. project, and they're all on track. Since then, we've added another European one. Between the early March call and the early May call, we've actually added another project in Europe.

Yeah. You brought up a good point today. I hadn't thought about it, but companies like Caterpillar and Deere make a lot of equipment where the guy is going to pry inside. I would think that would be a really good market for this. I hope Gauzy or somebody, I mean, do you have any other company that helps you market this stuff to companies like that?

Sure. Every one of our licensees is marketing their products through their sales and distribution network. Gauzy happens to have a very large footprint in all the major areas of the world. They bought Vision Systems, and Vision Systems was doing that work for the specialty equipment market quite successfully. Things like container handlers at ports and things like that also use a lot of glass. They're huge cranes. You can't even get them to drive by a port.

Is there anything in the works where potentially one of these companies is going to adopt SPD for this?

Oh, sure. Oh, sure.

Okay. Because it makes a lot of sense to any of this private tractor.

It does. Yeah. It does. Yeah. And those are things where they're workhorses. You can't sit there and put a huge air conditioner in there and take up all your cabin space. That's where the glass becomes important.

Okay. Thank you very much.

Thank you, Jeff.

Operator (participant)

Our next question comes from Mike Kay. Please state your question.

Mike Kay (Professor)

Hello.

Joe Harary (President and CEO)

Hi, Professor. How are you?

Mike Kay (Professor)

Oh, boy, it could be better. I just want to comment on something you said regarding having people being aware of Research Frontiers. I read all of the Gauzy reports. And even if SPD is used in one of the Gauzy products, it's buried deep inside. If you want to make the investment community aware of Research Frontiers, I respectfully submit that you cannot rely on Gauzy. They have their own agenda, and in their press release. If you ask most people, they would not know that Research Frontiers is connected to SPD and has all these applications. I feel you should consider, given the fact that the company has no debt and seems to be on the cusp of being profitable, to hire a decent investor relations company to make its story known to the investment community.

Gauzy has a lot of other things to do than to try and publicize Research Frontiers. Okay. Also, I'm not clear, Joe, and I know you could elucidate. And I follow this quite closely regarding tariffs, that when the tariffs go through, it's going to make the if you have a tariff on parts of cars or cars themselves, that it's going to significantly increase the cost of the product, whatever the product is. Now, if you want people to add SPD to it, that, of course, will be an additional cost. Am I correct in your saying that the tariffs will not have any significant effect on the sales of various kinds of automobiles?

Joe Harary (President and CEO)

Right. Yeah. What I said last time on the conference call is that typically, if you're talking about a price-sensitive market, like mid-level cars or below, it might have some impact. I don't expect that to have any practical impact on our revenue in that market. Also, these Asian cars are sold in their home market primarily. It's not like they're going to be affected by U.S. tariffs. In the premium market, take the Ferraris and the Cadillacs. It doesn't make a difference. People are going to buy them, and it's not going to matter. I think Ferrari announced a 10% price increase. I don't think anybody canceled an order because of that. I think that and then the other thing is just to understand that because we have a worldwide footprint, that also helps too.

If you look at how some of these trade deals are going, Michael, you look at US content of cars, for example, and they've gotten some relief. We are considered a US content component of a car.

Mike Kay (Professor)

Right. Yes, that's right. Because if people come to.

Joe Harary (President and CEO)

Because we're here, Gauzy is here, and all the glass companies have facilities here. So it's not like it's not as dramatic as some of the things where you have to build a $500 billion chip factory in the United States. That production's already here.

Mike Kay (Professor)

I see. Yeah. If people have enough money to buy a Rolls-Royce or a Ferrari, these premium cars, a few thousand more isn't going to make much of a difference to them. What I really had in mind, and you once said this is really where the revenues are going to come from, would be from the low-priced or mid-range types of automobiles, especially if.

Joe Harary (President and CEO)

It is where the volumes are coming from. I'm not saying that's where our profits are. And certainly, within the time horizon that I'm looking at for this, it's not going to impact things.

Mike Kay (Professor)

Are the sun visors, what's the status of that? When will that be available?

Joe Harary (President and CEO)

I'm not going to pre-announce what customers are doing. I think you just have to wait on that. Some of them will be built into the car, and some will be aftermarket items.

Mike Kay (Professor)

Oh, if it's by Sage & System.

Joe Harary (President and CEO)

Okay. Michael, I think in the interest of time, we need to move on because there's other people in the queue with questions. But we can talk offline. We can talk offline.

Mike Kay (Professor)

Okay. Thank you.

Joe Harary (President and CEO)

Thank you.

Operator (participant)

Our next question comes from Todd Brady. Please state your question.

Todd Brady (CEO)

Hi, Joe. Art Brady here. There's some kind of a trend going on where you have text, but a lot of the manufacturers and the display people, they now want to have that text converted to speech so that you have text and speech combined. Do you see any of that developing, and can you expand on it?

Joe Harary (President and CEO)

Not directly with SPD, but my windows in my office here in Woodbury, I could talk to and tell them to clear up or darken, and they do. Voice control is something I think very important, especially for safety and driving. There has been a lot of work done there. Yeah, it's pretty easy for us to, and whatever is developed there, Art would work with us.

Todd Brady (CEO)

Okay. Thank you.

Joe Harary (President and CEO)

Thanks.

Operator (participant)

Once again, if you would like to ask a question, please press star one on your phone now. We have follow-up questions from Francis Cotturba. Please state your question.

I believe you have, Joe. One last question. Are there any prospects of anyone else manufacturing the emulsions and film other than Gauzy?

Joe Harary (President and CEO)

I'd rather not comment on open call. We always get interest from companies that want to expand into SPD, and that's a bigger strategy. Right now, we're very happy with the investment that Gauzy has made in terms of expanding production worldwide. They've significantly invested in the SPD facility in Germany and in establishing sales and marketing arms throughout the world, and then increasing emulsion production both in Israel and in other areas of the world. They are doing exactly what a good partner they are for us would do. That's expanding and thinking long-term and cooperating and collaborating.

But the plant in Sittard, they're only capable of making 7,800,000 square meters of film?

With their current line, they built in redundancy there, so they could actually have a line right next to the one that's there and double the capacity. My guess, Frank, is that they are going to locate the next filmmaking plant somewhere else in the world that's closer to the major customer. Sitard is near a lot of obvious premium car makers. There is a lot of business in other areas of the world too, in North America and in Asia, where they may also locate it. I don't think anyone's going to locate it in China, for intellectual property reasons, but also for other reasons as well.

Okay. Thanks.

Thank you.

Operator (participant)

Our next question comes from Charles Michael. Please state your question.

Yes. Hi, Joe.

Joe Harary (President and CEO)

Hey, Jack.

Yeah. I wanted to ask about you mentioned the Dynamic Glass Act, but there really hasn't been much discussion about office windows. What progress are we making on those sorts of products?

That's a great question. I think a very significant development in the SPD office window market is coming from the retrofit. I mentioned that we expect the second half of the year to be much more visible there. If you think about an office, let's say you have an office and you want to make it smart. If you're doing a traditional installation, you got to get landlord approval. You got to get permits. You got to build scaffolding underneath if you're anywhere above the first floor so that debris and glass and things do not fall on people that are walking by there. It is very disruptive. You may have to move out of certain areas of your office while that kind of work is being done. Now, let's flash forward to a world where there's a retrofit from the inside of the building.

You don't need scaffolds. It's more like a Venetian blind or a shade where you don't need approvals, right? You could come in over the weekend. We've discussed the capacity to do this, and it's quite doable. You can retrofit floors at a time without disrupting anyone's work. We are very excited about that because it minimizes tenant disruption or occupant disruption, and it minimizes cost.

Yeah. I think you make a good case for it, but I'm just wondering, what about what's been the results in terms of purchases so far?

We have projects underway. We have projects underway even without the retrofit application being finalized. There is the retrofit coming. The progress is there are architectural installations, plus there is, I think, what I consider a game changer, which is the ability to retrofit an existing window into an SPD smart window. It is not something other people can do either. I think it is very meaningful in terms of competitive advantage that not only do we have the best performing technology, but I think we have the best delivery system for that to get it more easily into your home or office.

I'm not clear. Who has to approve of this for us to be able to do these retrofits?

The customer has to want it. Just like any buying decision, it's the customer. There's product development that goes into it that we're doing. There's data generation for the architects so they know that if they retrofit a building, what are the expected benefits likely to be?

I see.

All that's being worked on now. Thanks a lot.

Yeah. Thank you, Rick. Bye-bye.

Bye-bye.

Operator (participant)

Once again, to ask a question, please press star one on your phone now. At this time, we have no further questions. I'll turn it back over to your host for some closing remarks.

Joe Harary (President and CEO)

Okay. Thank you. If you believe in smart glass done right, stick with us and our licensees. They have already accomplished more with SPD than any other smart glass company in the world. They have far more in the pipeline than ever before. As a company, quarter after quarter and year after year, we have steadily grown revenue, streamlined operations, and advanced our technology. The reasons for these positive results are easy to understand. We have a highly desirable and the best performing smart glass technology in the world. By increasing revenues, managing our expenses, and preserving the best aspects of our asset-light business model, we are steadily moving towards being cash flow positive and profitable. Our Q1 2025 results demonstrate this trajectory. Royalty revenues are up over 79%, 214% if you are comparing us to the fourth quarter sequentially. It is primarily driven by higher royalties in the automotive market.

This growth builds on our successful integrations of SPD-SmartGlass in vehicles from Ferrari, McLaren, Mercedes, and Cadillac. Mercedes' debut of their luxury van this past month also shows that SPD-SmartGlass in automotive is not just for sunroofs, but also has meaningful benefits in other areas of the car, such as side windows. There are also other unannounced projects in automotive out there that will also show this. We expect revenues in all market segments to increase further as new products are introduced. We're excited about and continue to see significant potential in the architectural market, especially with the anticipated launch of the retrofit application. Regulatory support, such as the Dynamic Glass Act, which offers substantial tax credits, should further encourage the adoption of our SPD-SmartGlass in buildings. Our relationship with Gauzy, our licensee and strategic investor, remains very strong.

We work very closely with them, hand in hand on a daily or weekly basis on various projects throughout the world, sharing information and ideas in business development. Their SPD film sales are a very good leading indicator of our royalties, and their recent IPO this past June has brought greater transparency and resources to the industry, which should greatly benefit our entire SPD-SmartGlass industry. Research Frontiers and our shareholders also will benefit from that. Together, we are reinforcing the market position of SPD-SmartGlass as the premier smart glass technology and further expanding our footprint and capacity throughout the world. I look forward to listening to their investor conference call this coming Tuesday morning. Financially, we remain debt-free with low and predictable expenses and are approaching break-even in profitability.

Our strong cash position projected to fund operations for more than the next five years, and no debt means we are in a position of strength and do not need to raise additional capital at this time. The outlook for the smart glass industry remains extremely promising, and we stand at the forefront, leading this industry, driven by our superior technology, increasing demand and regulatory support, and continuous innovative breakthroughs. We're not just advancing the state of smart glass. We're shaping the future of how people experience what they see and feel through that ubiquitous material, glass. This coming year, based on the momentum and catalysts we see, we expect you to see even better results. We remain intently focused on execution, innovation, and driving significant shareholder value.

Your support, dedication, and belief in our vision have been instrumental in our success, and we appreciate your trust and support in this exciting and important journey together. Thank you, and please remember to vote at our annual meeting coming up on June 12th. Thank you all.

Operator (participant)

This concludes today's conference call. Thank you for attending.

The host has ended this call. Goodbye.