Gauzy Ltd. Ordinary Shares Price & Performance (GAUZ)

Thank you, operator, and thank you everyone for joining us today. Hosting the call today are Gauzy's CEO and Co Founder, Eyal Peso and CFO, Mayor Pellig. On this call, management will be making forward looking statements. Not historical facts, which are based on management's current expectations, beliefs, projections and assumptions many of which by their nature are inherently uncertain. These forward looking statements are subject to risks and uncertainties. Actual results could differ materially from our forward looking statements. If any of our key expectations, beliefs projections or assumptions are incorrect, because of other factors discussed in today's earnings news release and the comments made during this conference call or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website www.gauze.com. We do not undertake any duty to update any forward looking statements. This call contains time sensitive information that is only as of today, 03/11/2025. Except as required by law, Gauzy disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Today's presentation also includes references to non GAAP financial measures, You should refer to the information contained in the company's fourth quarter and full year press release for definitional information and reconciliations of historical non GAAP measures to the comparable financial measures.

With that, let me turn the call over to Eyal. Thank you very much, Dan, and good morning, everyone.

Thank you for joining us today as we discuss our fourth quarter and full year 2024 results. 2024 was a transformative year for Gauzy. Following our successful June IPO, demonstrated strong execution across all facets of our business achieving record levels on all key financial metrics. Revenue, gross margin and EBITDA. While expanding our global footprint. I want to express my deepest appreciation to our exceptional team for their dedication and professionalism and to our investors for their continued support. For today's call, I will focus my remarks on three key topics. First, I'll discuss our impressive fourth quarter and full year 2024 performance. Which underscores the strength of our business model and growing demand of our technology. Second, I'll highlight the significant business milestones we've achieved our four business divisions, including major contract wins and strategic partnerships that will drive our growth in 2025 and beyond. And finally, I'll share our outlook for 2025 including the exciting innovation and expansion opportunities that will further accelerate our growth trajectory. Our fourth quarter performance demonstrated strong execution across our business segments. With robust demand driving revenue growth in Aeronautics Architecture and Safety Tech. We successfully addressed previous production constraints by adding a second shift at our French facility, which has significantly enhanced our ability to meet accelerating demand from our global customer base.

For the fourth quarter, we delivered record revenue of $31,100,000 representing growth of 41.8% compared to the fourth quarter of twenty twenty three. This impressive growth was driven by particularly strong performance in SafetyTech, Aeronautics and Architecture. For the full year, our revenue reached a new record level of $103,500,000 up 32.8% compared to 2023, including record revenue from all four segments. A staggering 80% of our 2020 full revenue was recurring from existing customers. This repeat business is what gives us confidence in our strong growth outlook 2025 and beyond. We made significant in improving our gross margin, which expanded to 36.5% in the fourth quarter up 800 basis points from 28.5% in the prior year For the full year, gross improved to twenty eight point seven percent three ten basis point increase from 25.6% both the benefits of scale and operating efficiencies. Importantly, we achieved our goal of producing positive adjusted EBITDA for the first time ever in the fourth quarter reaching $200,000 compared to negative $6,000,000 in the prior year quarter. This achievement marks a significant milestone in our journey towards sustained profitability and demonstrates our commitment to balancing strong growth with financial discipline. Looking back at 2024, I'm incredibly proud of what we accomplished in our first seven months as a newly public company.

We delivered consistent growth and achieved profitability during the year while expanding our market our core technologies. Our commitment to innovation and operational excellence has strengthened our relationship with global OEM such as MSC, Cruise Lines, Embraer, Ferrari, Yutong and Ford trucks who recognize the transformative value our technologies bring to their platform. Now let me highlight some of the key business milestones we achieved during the fourth quarter and subsequent period. Some of our most exciting development continued to come in our Safety Tech division, especially from Gauzy's advanced driver Our ADAS was chosen to fully replace transitional side mirrors on Capital District Transportation Authority of New York public buses. And that Yutong the world's largest bus OEM, had increased fourth quarter orders year over year positioning Gauzy to extend its global share of buses using our smart Vision eight. In addition, we recently announced that we have secured renewal of our FMCSA exemption, which allows us to be the only company in The U. S. To fully remove mirrors on municipal buses and replace them with our smart vision system in all 50 states is an opportunity to retrofit over 900,000 buses today representing a multibillion dollar market annually.

In addition, we initiated a multi year serial production program with four trucks with our new Smart Vision three AI based ADAS platform representing an additional multi billion dollar opportunity with OEMs in new production. In our automotive division, our serial production program with Ferrari to supply our S [indiscernible] or suspended particle device smart glass technology to support their first ever four seater in accelerating as the overwhelming majority of customers opt for the smart glass option over carbon moves. We also expect to ramp deliveries to two other large OEMs in 2025 and we're especially excited that we will be featured by Daimler at the Shanghai Auto Show this spring. In our architecture division, our exciting technology is now fully on display at three major iconic landmarks. As we alluded to last quarter, we are featured on the facade at the MSC cruise ship terminal in Miami, the largest terminal in the world. We are an integral part of the Dubai Frame an awe inspiring structure that stands at 150 meters tall one of the most recognizable tourist attractions in The Middle East. You can experience our exciting technology in the elevators that take you to the top of the Washington Monument in Washington DC.

These projects provide tremendous recognition of Gauzy's unique offriggers in our We are a global provider in and seeing the fastest growth in The U. S. Which now represents over half of our sales in the segment. As we look ahead to 2025, we expect to commence shipping our new BIPV technology which is a transparent PV solar cell integrated into facade and skylight showcased for the first time at Glastech twenty twenty four. Finally, I'm extremely proud to announce that our team secured an order to deliver 5,000 windows per year to a major U. S. Manufacturer of recreational vehicle cabins with the potential to grow the quarters ahead. In our Aeronautics division, the addition of our second shift in France helped us deliver the majority of our delayed shipments from the prior quarter and positions us to better serve As a reminder, we are already roughly 95% market share in top cheating, which we still see growth due to planes flying more hours per year which accelerates their maintenance and replacement cycle. We are rapidly growing in cap and shading as well. The new partnerships with two aircraft manufacturers and a number of major international airlines. We've made significant progress with our project development and in expanding our strategic partnerships.

We partnered with Umbrella to harness AI for breakthroughs in ADAS with road safety enhancing technology already operational in four trucks.

We bolstered our presence in South Korea through strategic collaboration with MABA Industrial positioning Gauzy well to capture adoption of smart vision camera monitoring systems in a market that averaged averages over 255,000 commercial vehicle sales per year. Before I turn it over to Mayo, I want to emphasize that we are introducing our ten year committed and contracted backlog for the first time. This reflects accelerating long term demand across all our segments. Our current customer's serial production programs indicate a projected revenue pipeline exceeding $1,000,000,000 of which a minimum of $4.00 $9,000,000 is contracted and committed backlog. We will continue to disclose our purchase orders currently at $31,000,000 which we expect to ship in the next few months. This new matrix along with our strong fourth quarter performance demonstrates the visibility and predictability of our revenue model which is increasingly characterized by a long term supply agreement with minimum annual commitments. With that, I will turn it over to Mayo an update on Gauzy's financial results. Thank you, Eyal. I'd like to begin by providing a detailed overview of our fourth quarter and full year 2024 financial results which demonstrate our strong execution and continued progress toward our long term financial objectives.

For the fourth quarter, generated revenues of $31,100,000 which was up 41.8% from $22,000,000 in the prior year period. This impressive growth was primarily driven by a particular strength in the SafetyTech and Architecture divisions as well as strong performance in our One Outix following the additional of second shift at our production facilities. Gross profit for the fourth quarter was $11,400,000 an increase of 81.4% compared to $6,300,000 in the prior year quarter. That's equated to gross margin in the fourth quarter of thirty six point five percent and eight hundred basis points improvement from 28.5% in the prior year period. This substantial margin expansion was primarily due to the and operational efficiencies. Total operating expenses for the fourth quarter were $15,800,000 up 5.5% compared to $15,000,000 in the prior year quarter. This increase was mainly due to increases in share based compensation expenses offset by decreases sales and marketing costs. Net loss for the fourth quarter narrowed significantly to $11,400,000 compared to $20,700,000 in the prior year quarter managing to an increase in gross profit and a decrease in financial expenses. Non GAAP adjusted net loss for the fourth quarter of 3,700,000.0 compared to $11,200,000 in the prior year quarter with the improvement primarily due to the higher gross profit.

Neil mentioned, we achieved a significant in the fourth quarter by generating positive adjusted EBITDA of $200,000 compared to negative $6,000,000 in the prior year quarter. This improvement was driven by our strong revenue growth margin expansion and operating leverage.

For the full year 2024, revenue increased 32.8% to $103,500,000 compared to $78,000,000 in 2023. Gross profit for the full year was 29,700,000.0 up 91% from $2,019,900,000.0 dollars in 2023. Full year gross margin expanded three ten basis points to 28.7% compared to 25.6% in 2023. Net loss for the full year was $53,200,000 a significant improvement from the net loss of $79,300,000 in 2023. Non GAAP adjusted net for the full year was $29,300,000 an improvement from $36,800,000 in the prior year. Adjusted EBITDA for the full year improved to negative $14,200,000 from negative $20,700,000 in 2023. [indiscernible] Now turning to our segment results starting with SafetyTech. Revenue in the segment was $13,000,000 in the fourth quarter up 73% compared to $7,500,000 in the prior year quarter. This strong growth was driven by robust demand across the segment's product lines. Gross profit in Safetec were 3,000,000 up from $1,000,000 in the prior year quarter. Gross margin improved to 23% compared to 12.7% in the prior year period primarily due to the benefit of scale. In our runout segment, revenue was $30,400,000 in the fourth quarter up 26.7% compared to $10,600,000 in the prior year quarter.

Gross profit increased 62.2% to 6,800,000.0 compared to $4,200,000 in the prior year quarter. Gross margin expanded significantly to 51.1% up from 39.9% in the prior year period. This improvement reflects the successful shift in delivery from the third quarter to the fourth quarter as we added operational capacity to meet strong demand. In our Architectural segment, revenue was $4,100,000 in the fourth quarter up 31.8% compared to $3,100,000 in the prior year quarter. Driven by growing worldwide demand. Gross profit increased 54.8% to $1,500,000 compared to $1,000,000 in the prior year quarter. Gross margin expanded to 37.6% up from 32% in the prior year period driven primarily by higher revenues driving the benefits of scale. In our automotive segment, revenue was $700,000 in the fourth quarter compared to $800,000 in the prior year quarter. We expect our Automotive segment to show improving results in 2025 as our new programs with major OEMs begins to ramp up. Turning to our balance sheet and liquidity position, we ended the year with total liquidity of $40,600,000 including $5,600,000 of cash and cash equivalents and $35,000,000 of available capacity under our undrawn trade line. Total debt at year end was $38,400,000 including $13,200,000 of short term receivables financing.

As of 12/31/2024, had basic and diluted ordinary shares outstanding of 18.722 hundred and 87. I'm also pleased to announce that we are providing initial guidance for full year 2025 revenue. We expect revenue to be in the range of $130,000,000 to $140,000,000 dollars representing approximately 30% growth at the midpoint compared to 2024. Based on the benefit of scale, the favorable operating leverage the strong recurring revenue basis we have we expect adjusted EBITDA to be positive for the full year to 1.25. Based on our typical seasonality and latest visibility in our end markets, we expect the second half to be stronger than the first half and to drive full year growth and profitability. This guidance reflects the strong demand we are seeing across all of our segments the growing adoption of our technologies by leading OEMs, and the expanded production capacity we've put in place to meet this demand. Now I will turn it back over to Yal for closing remarks.

Thank you, Mayel. As we look ahead to 2025, are incredibly excited about the opportunities in front of The momentum in our business continues to build, especially with our smart vision ADAS system gaining significant traction in transportation The strength of our long term backlog, growing pipeline of innovation and expanded production capacity give us confidence in our growth trajectory. Our introduction of the ten year committed and contracted backlog which currently stands at $4.00 $9,000,000 provides unprecedented visibility into our long term growth potential.

This metric demonstrates the strategic nature of our relationships with customers who are increasingly committing to multi year supply agreements as they recognize the transformative value of our technology.

We will continue to invest in innovation, expanding our technology leadership in light and vision control technology Our product roadmap includes exciting new developments across all four of our business divisions, which we believe will further accelerate adoption and expand our addressable markets. Operationally, we will maintain our focus on scaling a balancing strong growth with continued margin expansion and progress towards sustained profitability. The operational improvements we've implemented including the additional capacity position us well to capitalize on the growing demand of our products. We also recognize the importance of sustainability in driving adoption of our products. Our technologies enable significant energy savings in buildings improved fuel efficiency and transportation and enhanced public safety for drivers and passengers.

These benefits align perfectly with global sustainability initiatives and regulations creating additional tailwinds for our business. In closing, I want to express my gratitude to our employees customers, partners and shareholders for their continued support and confidence in Youtz We have built a strong foundation as a public We are well positioned to deliver accelerating growth and improving financial performance in 2025 and beyond. Thank you for your time today. Now we will open up the line for questions.

Thank you. We will now begin the question and answer session. And your first question comes from the line of Josh Nichols with B. Riley. Please go ahead.

Thanks for taking my question. Good to see the company hit EBITDA profitability. And when I'm digging in a little bit, just wanted to get a little bit more color good to see this long term backlog that you started disclosing. Looking at the 2025 revenue guidance, in terms of visibility, how much of that is like already in the backlog? That provides very good visibility for 2025?

Hi, Josh.

Thanks for the question. Thanks for taking the time today. This is Eyal speaking. So out of the four zero nine that we have disclosed and we will start to report on a yearly basis I'd say that less than 50% of that backlog is going to be shipped in '25. So that should give you kind of the cadence of of how much is actually committed and contracted and how much we're still making next year, which is also from recurring customers. Very solid So 50% of our guidance, yes. So we are providing guidance for the first time. Maybe it's worth saying. So I'd say less than 50%, just a bit less than 50% is going to go away from that backlog. That backlog is the contracted and committed supply agreements we have captive for ten years. So but we're doing a lot of business with recurring customers that provide us with orders on a quarterly basis. In all segments that are not included in that [indiscernible] contracted and committed. So, yes, so that's kind of to give you and that number is growing all the time, the contracted and committed. But we thought as we have long term contracts it's worth giving this information to investors to the market to understand kind of better how visible we are with our guidance.

No, I appreciate that for the context. I know you've touched on a before, but I know there's definitely a little bit of seasonality to the business. Second half is going to be stronger than the first half. If you could just provide a little bit more granularity since we're getting late in the quarter, In terms of what type of like typical quarter over quarter step down you see in terms of revenue for 1Q relative to 4Q?

Thanks, Josh. This is Amir. Thanks for the question. As we always said, we are a full year business that shows up some typical seasonality. Q1 is the slowest Q2 higher Q3 is mostly like Q2 and maybe a bit lower due to vacation patterns in Europe. In Europe and then Q4 is our strongest strongest quarter ever. Not ever in the year during this well, items for the last years Some more insight into that Josh for me is also you should expect as it's always been in Gauzy, have the second half of the year drive we gave guidance that we're going to be positive adjusted EBITDA positive for the full year. You should expect that H2, the second half is going to drive [indiscernible] that matrix. Fair enough. And then just one follow-up for me then I'll pass the torch. When you're looking at the different revenue segments, I assume that you would expect SafetyTech kind of take the lead in terms of its contribution to the growth followed by aeronautics to a lesser extent or a little bit more granularity on the breakout between the three segments would be helpful. [indiscernible] you're right. I mean, this year we expect and you see it in the figures of '24 the SafetyTech division, which is really what we also consider part of our automotive segment But on the ADA side, it's going to be probably the biggest segment this year.

However, I'd like to say that margin wise and it's going to be it's going to be well well contributed between the four segments. Also automotive, light control and smart glass, with much higher and healthier figures this year. And all four segments to be honest are going to are growing significantly within the guidance we gave. But you're right. SafetyTech is probably going to be the bigger of the four. Contributing to the top line.

Appreciate it. Thanks. I'll hop back in the queue.

Thank you, Josh.

Your next question comes from the line of Don Levy with Barclays. Please go ahead.

Hi, good morning. Thanks for taking the questions. Wanted to continue with the questioning on the revenue and I appreciate the comment that you gave that the backlog of the that $4.00 $9,000,000 than half that's going to get shipped in 2025. But maybe you can talk about sort of what variables there could be that would impact whether that's shipped? Obviously, we know that there is a macro concerns, but sometimes we've seen in the past companies where they have line of sight on the backlog and if something materializes, the backlog doesn't play out in as planned. So just what are the different variables to consider on backlog and more broadly on revenue for 2025? Hi, Dan. Good morning. Thanks. This is Ejal. Thanks for the question. We want to be clear we're now providing that committed and contracted backlog capped by ten years. Which is a must ship. This is not this is the minimum take rates that are subscribed on our annual supply agreements between the different segments. That is 100% committed to be shipped. It doesn't come in the form of a purchase order that we said we don't get a purchase order for year 2026, 2027 with Ferrari.

We have a minimum take rate, minimum commitment to us and we have to be ready and it's going to go out whatever happens. And so this four zero nine and that part of it that's going out in 2025, which is a little less than half of our guidance. For this year is 100% going out. We have many other customers which are have recurring revenues with us during the year. One example is Yudong, which we have not subscribed into the four zero nine because it's not a zero production multiyear annual commitment.

But they provide us projections that with until now 100% statistics or more that they eventually order. That for instance does not go into the four zero nine. And also it's only based on the minimum dayrates committed to us. So that's how we should see this backlog. It's really contracted committed, audited. It's 100%. And that number is growing. We are we're taking out of it in 2025. Obviously, but we're winning more long term contracts. We're going to add to that bigger but only what's 100% committed to us.

Great. Thank you. As a second question, I was hoping you could address the cash and liquidity on the balance sheet. You're saying you're going to be EBITDA positive but maybe I don't know if you give us an initial sense of what free cash flow will look like in 2025 How much CapEx and what the cash draw is? And you have $5,000,000 of cash on the balance sheet. Know you have some added liquidity. So presumably your free cash flow will be negative. How will you address that shortfall? Is it a draw on your revolver? Will you have to raise new debt? [indiscernible] any comments on those, appreciate it. Thank you.

Thank you, Dan. This is Maher.

First of all, we expect to be EBITDA positive in 2025 and we are expect to be cash flow positive in 2026. As we mentioned in the '20 F, company is currently finalizing a debt financing arrangement with the Israeli commercial bank for $10,000,000 And we expect to enter into definitive agreements with the bank in the first half of twenty twenty five. Of course, we cannot we cannot be no there could be no assurance that definitive agreement will be entered into.

Yes, so as disclosed before, Dan, opt for and by the way, the $10,000,000 is now disclosed in the twenty F. With the cautionary notes that Meyer gave. We could expect to take more in that facility up to 20 as disclosed in previous quarters. And that will be disclosed further. Right now, we're we're we disclosed the $10,000,000 And I think that if you look at I want to give a note on CapEx which is really if you look at a full year EBITDA, positive, it's going to be the main difference between us being cash flow positive We did drag some CapEx investments into Q4 because we felt we could. We were stronger than expected. So we did make that investment in CapEx that is going to be instead of the doing in 2025. Also to be better ready that we need to be better ready for the guidance we gave we're looking at hundred and $30,000,000 to $140,000,000 that we want to ship by year end. So we're very careful with 2025 capital CapEx expenses. We want to as we we want to provide the guidance we want to meet the guidance we're providing on EBITDA and cash flow for 2026.

But I think that within this revolver, within this credit unused credit line between the unused credit line and the cash of more than $40,000,000 What did you break? 40.6.

And coupled with the debt financing that we're hoping to finalize soon, That should take us with no extra we don't need extra financing all the way to cash flow positive. Okay. Thank you. Just maybe if I could squeeze in the last one. Any comments on the EBITDA positive target in 'twenty five with the different profit drivers are presumably, there's some operating leverage on the incremental revenue. And what should we expect on gross margin and OpEx? Thank you.

Yes.

So we're trying to be very careful on providing exact numbers, exact figures on adjusted EBITDA. We know to say and to guide you down that and to guide the market that it's going to be positive. The difference within the guidance of $130,000,000 $140,000,000 can have a big impact on positive impact on how much the EBITDA would be. We'd like to be careful about the exact number, but we're looking at low single digit to be careful on The company what we're trying to show as we grow as we mature as a public company [indiscernible] to look at We'd like to say that the biggest effect on our gross margin, which is the KPI for understanding profitability scheme for this company is The top line as it grows it can grow exponentially. With slight growth on OpEx. So our SG and A in the businesses that we have in Air and Outics long term automotive long term, automotive includes also safety tech with ADAS long [indiscernible] The incremental increase in sales and marketing and G and A is rather small and that's what we've proved in Q4. So you should expect that based on somewhat course we need to increase some expenses to ship $130,000,000 $140,000,000 next year.

But it's a slow it's a moderate change that should provide us a lot of leverage on the bottom line. So that's kind of how I want to look at 2025. Just bridge kind of bridge Q4 and you'd see that we walked the stock of crossing the EBITDA with $31,000,000 dollars We're guiding well above 4x and we'd like you to get that confidence that we can be we can be healthy bottom line end of 2025. Great. Thank you.

And your next question comes from the line of Itay Mikaeli with TD Cowen. Please go ahead.

Great. Hi. Thanks everybody. Good morning.

Just two follow-up questions from me. First, I was hoping you could talk a bit more about how to think about automotive gross margin as well aeronautics throughout the year, both maybe full year and cadence. And then secondly, Meyer, just to follow-up on the free cash flow. Can you share what you're expecting for CapEx in 2025?

Hi, Ittai.

Thanks for the question. Good morning. I'd like to just note that we have or this is important for us to note to educate the market on the following. When we speak about automotive, the automotive segment, we have two business divisions that are serving that segment. It's both what we call automotive which is light control and smart glass, And it's the rooftop of the Porsche, Honda and Ferrari or McLaren models or [indiscernible] And then there is the safety tech division, which is really within the automotive business.

I just want to make sure that everyone everyone is the same the same guidelines. And that's where we serve the commercial vehicle market with mainly with our ADAS Smart Vision two and now Smart Vision three is AI based.

Both serial production with Ford trucks removing mirrors, the only company to be able to do that on buses in The U. S. For instance, railrofitting complete cities like London, with public transportation with ADA.

So when I when I answer the when I'd like to answer the gross margin, I'd separate the automotive into these two. You're going to see a very significant and we showed that through 'twenty four, we also guided on it. That within the light control enhanced PD for instance, we've moved from minus 30% on gross margin It's a small numbers, but that's sometimes even much harder to zero margin gross margin end of the year. You should expect that light control smart glass division in automotive to have a very healthy gross margin in 2025. Even improving our total average of the company throughout the year. And then in SafetyTech, which delivers the ADAS we have we announced the Smart Vision three with four trucks. We're starting we're shipping this the first year in certain production to Ford That is going to improve this platform which has much better margins is going to improve the total margin that you have for Safety throughout the year? Quite significantly. So we're expecting in both segments, we have rather unique offerings and products that allow us still to be to have healthy margins. And it's really a matter of scale to improve it.

We've shown it in Q4. And we're going to show it in '25 But you should expect both all of the automotive segment to have I'd say, even a dramatic improve in gross margin and gross profit in 2025. May will take the capital. Yes.

Regarding the free cash flow, you have asked First of all, I want to echo again what I said before. We accept EBITDA positive in 2025 and free cash flow positive in 2026. Regarding the CapEx, we expect to invest about $10,000,000 in CapEx next year. [indiscernible] Terrific.

We appreciate all the detail. Thank you so much. You.

And I'm showing no further questions at this time. I would like to turn the call back to Eyal Peso for closing remarks.

Thank you very much for joining us today. We look forward to future discussions and announcements to update you on our progress. Have a great rest of the day. Thank you very much, everyone.

Thank you. And this concludes today's conference call. Thank you all for participating. You may now disconnect.