Crown Electrokinetics Co., Ltd. (Nasdaq:CRKN) 2024 First Quarter Earnings Conference Call May 15, 2024, 12:00 PM ET
Participating companies
Jason Assad – Director of Corporate Communications
Doug Croxall – Chief Executive Officer and Chairman
Joel Krutz – Chief Financial Officer and Chief Operating Officer
Conference call participants
operator
Hello everyone. Welcome to the Crown ElectroKinetics Q1 2024 Conference Call. At this time, participants are in listen-only mode. There will be no question-and-answer session regarding statements made by management. This conference call is being recorded. A replay of today’s conference call is available on the Investor Relations section of Crown’s website.
I’ll now turn the call over to Jason Assad, our Director of Corporate Communications, to provide an introduction and read the Safe Harbor Statement. Please go ahead.
Jason Assad
Thank you, operator. Hello. Welcome to his Q1 2024 call on Crown. Also appearing on today’s conference call are Crown Chief Executive Officer and Chairman Doug Croxall and Chief Financial Officer Joel Klutz. Before we begin, today’s conference call includes certain forward-looking statements made by management within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-A of the Securities Exchange Act. We would like to remind you that it contains a description of Amended version of the 1934 Act.
Words such as “should,” “plan,” “expect,” “intend,” “project,” “believe,” “anticipate,” “hope,” “estimate,” and such Variations of words such as and similar expressions are intended to identify forward-looking statements. These statements are subject to a number of conditions, many of which are subject to the Company’s control, including those set forth in the Risk Factors section of the Company’s Quarterly Report on Form 10-Q for the first quarter ended 2024. exceeds.
Copies of these documents are available on the SEC’s website at sec.gov. Although actual results may differ materially from those expressed or implied, Such a positive statement. We undertake no obligation to update these statements for revisions or changes after the date of this call, except as required by law.
It is my pleasure to introduce Doug Croxall, CEO and Chairman of Crown. Doug?
Doug Croxall
Thank you, Jason.Hello everyone, welcome to the first page. 2024 Quarterly Financial Results Announcement. As many of you may know, Crown is made up of two divisions: the Film Division and the Fiber Division. Today we’ll start by talking about the film department.
In late February of this year, the Crown Electrokinetics film team announced that they had solved the 12-inch mastering challenge for the first generation Alpha Smart Window insert. We are well-positioned to begin shipping our first products in small quantities later this summer.
Following this technical milestone, Crown recently announced that Sheldon Davis, who previously served as a consultant to the company, has been appointed president of its electrokinetic film division. Looking at Sheldon’s career history, he is the perfect fit for Crown’s development stage. Sheldon and I have known each other since 2016 when he worked at Guardian Industries, a Koch Industries Company.
His knowledge of our ink forming and glazing manufacturing, as well as various glass technologies such as electrochromic, SPD and liquid crystal, makes him the perfect person for this job. We are excited to have him take on a leadership role at this important time. Crown feels very lucky.
Unfortunately, Crown plans to provide more detailed information about product features, timing, customer acquisition, pricing, and expected revenue and margins in the future. Now, what I want to talk about is how we roll out what we call 1st Generation Alpha, 1st Generation Beta, 1st Generation Charlie.
As I mentioned earlier, the first generation Alpha is a smart window insert that will be introduced to the market in very small quantities from August to September. Our goal is to roll 4 to 10 inserts per building, or approximately 10 to 20 buildings, covering the largest cities in the United States.
The purpose of the first generation alpha is to obtain customer feedback. As we gather that feedback, we plan to build a first-generation beta in parallel and roll it out toward the end of the calendar year. We plan to do the same, take customer feedback and customer direction, and launch the first generation Charlie early next year.
Gen 1 Alpha, Gen 1 Beta, and Gen 1 Charlie will help build what will be the first mass-produced smart window inserts next spring and summer.
Transferred to optical fiber division. As you know, a little over a year ago, Crown made its first investment in the fiber optic construction market. The past 19-20 months have been some pretty tough lessons, and we’ve learned a lot about the market, how to operate within it, and how not to operate within it.
Crown Fiber has been profitable in multiple markets under the leadership of Corey Boaz, who was named president of construction in early February. Projects are currently underway in Idaho and Nevada, and will soon begin in California and Mexico. Not only did Corey increase revenue and customers for the company, he also helped Crown change its operating model so that projects were cash flow positive from day one.
Rather than employing hundreds of employees, we now partner with other subcontractors. This allows Crown to not only secure profits but also control costs on a project-by-project basis. Corey has the credibility and connections in the market to build a significant pipeline of revenue-generating projects. With a pipeline leveraging his proven business model, Crown will generate revenue and will soon reach positive net income.
Most recently, Crown announced it had secured a major flagship project in Nevada involving horizontal drilling and plowing. The long-haul fiber project was recently launched and is expected to be completed by the company’s third quarter. Currently, Crown has accepted his two clusters of this project, with total proceeds of approximately $5.7 million. We look forward to additional stages as the project continues into California.
We also recently announced that we have secured a horizontal drilling project in Idaho as the prime contractor. A large-scale fiber-to-home project has begun and is expected to continue throughout the calendar year, likely resulting in additional construction with the same customers in California, Arizona, and Oregon.
On March 6, Crown announced that it had signed a contract with the Twin Dolphin Club in Los Cabos, Mexico. The Twin Dolphin Club is a master-planned development of 1400 resorts. Crown’s fiber optic division will build angled wells for desalination plants that will supply fresh water from seawater to hotels and surrounding housing developments.
The project is expected to begin later this spring and be completed in early fall. The project is expected to generate approximately $3.5 million in revenue. This opportunity was created and managed by Corey. A new approach to constructing angled wells should lead to new revenue opportunities in Mexico, Central America, and the Caribbean. Importantly, the deal provides an upfront payment and is expected to lead to other opportunities.
Understood. Now, I will hand over to Joel and I will be in charge of the final remarks. Joel?
Joel Kurtz
Thank you, Doug. Hello everyone. Today, we will discuss Crown’s financial results for the first quarter of 2024. A quick update on current NASDAQ bid price non-compliance.
As you know, we received a notice from Nasdaq on October 19th. As a result, the Crown was initially set to have 180 days in which it would trade at $1 for 10 consecutive days. We recently met with the NASDAQ Public Hearings Committee and requested an additional 180-day extension and are awaiting the committee’s direction on next steps.
As discussed during the panel discussion, the company’s increased production levels and improved financials and overall fundamentals should help improve Crown’s market value, but the company also expects the company to remain listed on the Nasdaq. We will make sure that you have the other options you need.
First Quarter Financial Performance: Crown’s net loss for the quarter ended March 31, 2024 was $4.6 million, which included non-cash and other charges of $0.9 million primarily related to the final write-off of the Company’s credit facility that expired in the first quarter.
Net operating loss was $3.7 million compared to $4.1 million in the first quarter of 2023. Crown recorded $700,000 in revenue for its fiber division in the quarter, with most of that coming from the back end. The company also recorded $1.2 million in deferred revenue late in the second quarter, primarily prior to the start of work scheduled to begin in the third quarter.
Total operating expenses for the quarter were $4.7 million and revenue was $1.6 million. This is primarily due to its Arizona operations, which the company has now completely scaled back. The quarter included film research and development expenses of $800,000 and depreciation, amortization and selling, general and administrative expenses of $2.0 million.
For the quarter ended March 31, net cash decreased $800,000 as the company spent $2.7 million on operating activities. The Crown primarily derived his $2 million from financing activities at ELOC, and his cash and cash equivalents as of March 31, 2024 were $300,000.
In terms of access to finance, the company still has $42 million available in its ELOC, as well as access to a revolving credit facility to support the working capital needs of its fiber operations. Scale production across multiple markets.
Looking forward, we expect second-quarter earnings to be in line with guidance, but we will provide an update soon and take a look at the third quarter for the first time. Finally, today he is ready to submit his 10-Q aftermarket.
However, our auditor has informed us that there is a backlog in our quality control process and we may have to submit a simple submission today, past the deadline. We are obviously working closely with our auditors and will do everything we can to avoid such a situation.
This concludes updating financial information. Doug, back to you.
Doug Croxall
Okay. Thank you, Joel. The great Chicago Bears coach Mike Ditka once said, Only losers and cowards live in the past. In his honor, I would like to point out one thing. Compare what this company was a year ago to where we are today. We had great leadership in the film department with Sheldon.
Along with Corey, he provided excellent leadership in the fiber sector. We have contracts with customers in both the film and fiber sectors. We certainly have some pretty good revenue compared to this quarter, compared to last quarter, compared to the same period last year, which was non-existent.
The company expects to have a positive net income by the end of the year. The company is in a great position, we are growing and have good financial resources that allow us to de-dilute the textile sector. We are very excited about our second quarter results and look forward to talking with you. Mid-August.
thank you. Return to operator. thank you.
operator
This meeting is now over. Thank you for participating in today’s presentation. All that’s left to do is connect the line.
Question and answer session
Q&A ends
