Gauzy Ltd (GAUZ) 2024 Q3 法說會逐字稿

Good morning and welcome to the Galaxy Limited third quarter, 2024 earnings conference call.

Today's call is being recorded and we have allocated one hour for prepared remarks.

And Q&A at this time, I would like to turn the conference over to Dan Scott Investor relations.

Thank you.

Please begin.

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 Pelle 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 which 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 dot gous dotcom.

We do not undertake any duty to update any forward-looking statements.

This call contains time sensitive information that is accurate only as of today.

November 12th 2024 except as required by law Gazi 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 third quarter.

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.

This is our second quarterly earnings call as a public company following our June idea and I want to express my deepest appreciation to our exceptional team for their hard work, dedication and continued professionalism and to our investors for your strong support.

Throughout 2024 we've achieved impressive growth driven by both exciting new commercial opportunities and the expansion of existing relationships with our loyal customer base.

This strong performance reflects just the beginning of what our team can accomplish and we remain focused on executing our strategic vision and delivering on our commitment.

I'm going to focus my opening remarks today on three topics.

First, the strong and growing demand across our four business divisions along with some highlighted strategic new customers and contract.

Second, I'll give a high level summary of how we performed in the third quarter and year-to-date including actions we have taken to expand our production output to meet continued accelerating demand while maintaining our short term goals to reach profitability.

Finally, I'll discuss how we are positioned to deliver on our strong backlog while advancing our pipeline of innovation to achieve our positive outlook for the business in the fourth quarter.

And in 2025 following that, I will turn it over to Gauzy's Chief Financial Officer, Maya Petti who will provide financial highlights from the third quarter, as well as give details on our initial fourth quarter.

Guidance, the third quarter was an important one for our company in many ways.

One where we demonstrated the underlying strength and agility of our platform as we balanced accelerating demand with our focus on steadily improving profitability.

Case in point was demand on our aeronautic division that outpaced our ability to deliver based on labor constraints and typical seasonality at our production facilities in Europe rather than rapidly adding new staff at a high cost that would require additional training and a much higher cost.

In the long term, we work closely and diligently with our unions to add a second shift in France.

A first for Goau this support and partnership with our unions allows us to one more effectively manage our fixed labor costs and two efficiently and quickly ramp up production without sacrificing profitability.

As that's a key point that speaks to how we operate and scale our business.

We are adding products and technologies constantly fueling accelerating demand from our customers across our four business divisions.

But we won't sacrifice profitability in the pursuit of outsized growth.

As you can see in our narrowing net losses.

We're continuing on our trajectory of improving profitability as we stay laser focused on driving the business towards the EBITA positive, followed by operating cash flow and eventually free cash flow and net income.

The growing demand we talk about is real and tangible.

You can see it in some of the largest companies and brands in the world.

They choose us not just for a single order but for multi year deliveries of key technologies that are fundamental for their products they make.

In the third quarter, we announced new business with Ferrari, one of the most iconic OO Ems and fourth largest by market cap in the world.

Utah, the largest bus manufacturer in the world, a major international airline and one of the largest cruise ship manufacturers in the world.

So now let me expand upon some of those and other key demand drivers across our four business divisions.

In our safety tech division, Ong who I mentioned is the world's largest bus manufacturer, increased orders for Q3 by 250% compared to the previous year.

You can see some of the impact of that order in the in our 68% revenue growth in the division year over year.

This growing relationship with a major OEM positions us to expand our already market leading global position on passenger buses as they expand in solution of our smartvision data system on both single and double decker models.

That system is now installed on tens of thousands of buses in more than 80 cities worldwide.

In this quarter alone, we delivered on a record number of buses in Australia reflecting 100% growth year over year.

Both of these are testament to how our relationships with OEMs and regional transportation authorities are a driver of growth.

Yz is still the only company in the world today covering complete cities with Adas, no mirrors on public transportation.

In the same division in September, we unveiled our next generation A I powered advanced driver assistance systems or Adas for commercial trucks for trucks is among the first EMS to select this exciting technology and assigned us for a minimum of 10 years of serial production on their trucks.

Our smartvision aos for trucks replaces traditional mirrors with high definition cameras and displays that deliver real time audio visual alerts based on image analysis and predictive learning, increasing safety by eliminating blind spots and increasing ro I through fleet efficiency.

In our Aeronautics division, we signed an agreement with a major international airline to provide cabin shading systems with our LCG or light control, smart glass products for their business class cabins on both new and existing 737 max fleet.

This is an important development as it represents penetration into the cabin shading market in commercial aircraft where we grow rapidly as we discussed before, we have reached 95% market share globally in cockpit shading for commercial and private aircraft.

And we announced during the quarter, how we expect that to represent a minimum of $240 million in revenues in aggregate for Gauzy over the next 10 years.

This win is an example of how we leverage our strong business relationships and presence with OEM to expand into additional applications that represent high volumes.

In our automotive division.

We landed our largest auto contract to date.

Earlier this year, we signed a nine year contract to deliver our product into an average of 50,000 cars per year with a major European OEM activity to support this contract is ramping up right now and we expect to realize first revenues from this contract in early 2025.

Additionally, we announced recently that Ferrari has selected Gauzy as a strategic supplier to provide SPD smart glass technology for serial production for their new four seater.

This is the first time Ferrari has implemented smart glass technology on a mass production level for any of its design.

And we are proud to be part of this exciting offering for the next eight years committed.

And in our architecture division, we had a number of new awards.

First, a large cruise ship maker has selected YSI for their new terminal in Miami Florida which will host over 11,000 square feet of Yaze PDOC to enable a transparent display facade.

We also expect our technology to be implemented into current and future vessels of that manufacturer.

Additionally, one of India's largest developers in the commercial sector has signed with GSI for multiple new buildings in the country starting with over 5,000 square feet in a new establishment in the center of New Delhi.

We have further orders in the pipeline to address the hospitality sector with this customer and we are excited about the opportunities to come in this region.

And finally, we revealed the first ever solar powered LCG smart glass at last deck supporting sustainability initiative in built environments.

We expect to commercialize this revolutionary offering in 2025 and capitalize on a growing market.

Next, allow me to provide some high level thoughts on our performance in this quarter and year-to-date, we grew our total revenue 24.6% in the third quarter and 29.2% year-to-date versus the same period of 2023.

Our third quarter strength was particularly impressive considering we were late on certain shipments that we now expect to ship in the fourth quarter.

This was primarily in our aeronautics division as we work with our Unions to add additional shifts to meet increasing demand.

Importantly, the demand for our product was already there and just continues to accelerate with the second shift now staffed, we're already shipping that backlog and are well positioned to fulfill increased demand into 2025 and beyond.

As we shared in our pre announcement, approximately 4 million us of orders scheduled for the third quarter will now ship in the current quarter.

Q4.

Our results for the quarter featured particular strength in safety, tech and architecture.

The increase in revenues was the primary driver of higher gross profit in the quarter.

When you look at our performance on a trilling 12 month basis, our revenues is up an impressive 29.8%.

A helpful reminder would be that in a typical year, our first quarter is our weakest.

Our fourth quarter is our strongest by far and the middle two quarters are typically similar largely due to vacation patterns in Europe.

We have been very busy in the few months since our IPO, we have increased our labor output utilizing a second shift with the support of our unions.

We have introduced new offerings like the next generation of our Ata smartvision for commercial trucks and we continue winning key business.

Our end markets are growing fast.

Our backlog is ramping and our products are winning market share.

The demand is there, the orders are there and we are fully confident we will deliver on our goals with that.

I will turn it over to Meir for an update on Gauzy's financial results.

Thank you Eyal for the third quarter.

We generated revenues of 23.3 million which was up 24.6% from the prior year period.

And in line with our pre announced levels demand for our products across safety, tech, architecture and automotive were strong revenues from these divisions more than offset a decline in aeronautics that reflected the timing of deliveries on a full year contract.

As you all said, our typical contracts involve full year order quantities and there can be a variability in those shipments across the quarters based on customer demand.

And in the case of this quarter, our ability to ship as such quarter to quarter results can vary.

But when you look at us on a full year basis, the strength of our model becomes far more apparent.

Gross profit for the third quarter was 5.6 million and 11.5% increase from 5 million in the prior year period.

This equated to gross margin in the third quarter of 23.9% compared to 26.8% in the five year period.

This was mainly due to the mix of revenues from division amongst our divisions.

A agona produces our highest margins which held up well during the quarter.

However, a lower mix of Aals in gross profit resulted in an overall lower gross margin due to the mix of gross profit from divisions LG and A for the quarter was 4.8 million.

Up 18.1% from the prior year quarter mainly to support higher revenues and investment in growth R&D expenses in the quarter were 4.6 million.

Up 5.5% from the prior year quarter.

And reflective of our strong commitment to innovation, net loss for the quarter was 5.5 million.

Compared to a net loss of 21.3 million in the five year period.

Adjusted net loss for the quarter was 7.8 million compared to adjusted net loss of 9.8 million in the five year period.

Adjusted net income exclusive authorization of ad stock based compensation and other noncore items.

Please see the adjusted net income table presented our third quarter press release.

Turning to our division results starting with aeronautics revenue in this division was 7.8 million in the quarter compared to 8.4 million in the prior year quarter.

The 7.6% decrease was mainly driven by delays in shipments as the company worked with its European Union to add a second shift to meet increasing demand.

As I said, we expect the majority of those shipments representing approximately 4 million to occur in the fourth quarter.

Ross profit in ATIC was 2.6 million.

A decrease of 15.2% year over year.

This equated to a gross profit margin of 34% down from 36.9% in the year ago quarter.

Lower gross margin was primarily the result of lower revenues across a fixed cost.

Base.

Now, turning to our architecture division's results revenue in the division was 3.8 million in the quarter compared to 3.2 million in the prior year quarter.

The 21% increase reflects our growing demand in this division.

Worldwide.

Gross profit in architecture was 1.2 million.

An increase of 37.2% year over year.

This equated to a gross profit margin of 31.4% up from 27.6% in the year ago quarter.

The higher gross margin reflected higher revenues and favorable product mix and operating efficiencies.

Now turning to our automotive division revenue in the automotive division was 0.5 million in the quarter compared to 0.4 million in the prior year quarter.

We are proud of our continued growth in this division which does not yet reflect the rapidly expanding committed backlog from our customers.

One example, we just announced today is our biggest ever sign here production program to deliver our product into an average of 50,000 cars per year on average for nine years starting in 2025 with a large European OEM.

Gross loss in automotive was approximately 0.1 million in both periods.

And in our safe tech division revenue was 11.2 million in the quarter compared to 6.6 million in the prior year quarter.

The 68.1% increase was largely driven by strong demand.

For our Adas Smartvision two gross profit in safety tech was 2.1 million.

An increase of 39.1% year over year.

This equated to a gross profit margin of 90% compared to 23% in the prior year quarter.

The 400 basis point decline was mainly a result of pull ups.

Moving to our balance sheet.

On our last call, we told you how early in the third quarter, we completed a number of actions to simplify our balance sheet and capital resources for the long term.

As a reminder, the provider of our original 60 million credit line of which 25 million was previously drawn, chose to participate in our IPO while reducing total availability of their credit line to the undrawn 35 million amount.

As a result, we use the portion of our IPO process to repay what we had drawn plus fees.

We have a highly supportive lending group and we expect to add additional borrowing capacity under favorable terms by year end.

Further enhancing our liquidity, we ended the quarter with 9.4 million of cash on the balance sheet which when combined with our undrawn 35 million credit line results in total liquidity of 44.4 million which provide us with ample financial flexibility to execute our growth objectives and achieve profitability.

Before I turn it back to a Yalo, let me give you some color on our expectation for the fourth quarter.

We are off to a strong start in the quarter and we are reiterating our previously announced guidance for 28 million to 34 million.

We continue to expect gross margin in the second half to be higher as compared to the first half based on the timing of revenues and associated operating leverage.

Finally, we expect adjusted net loss to narrow in 2024 as compared to 2023.

Now, I will turn it back over to EYAL for closing remarks.

Thank you, Meir.

Our outlook for the fourth quarter and beyond is exceptionally strong, driven by robust demand across all four of our divisions and the continuous introduction of game changing technologies that we expect we will accelerate our growth trajectory.

In particular, our automotive division is experiencing rapid expansion through growing OEM orders globally as we ramp up serial production demonstrating the scalability of our business model simultaneously.

We're seeing exciting momentum across our other divisions from the ongoing expansion from airline cockpits to advanced cabin shading solutions in commercial aircraft to expanding deployments of our innovative building facade with marquee clients to massive adoption in bus fleets and truck O ems worldwide.

We are confident that investors will increasingly appreciate the intrinsic value of G the same way that companies such as Ferrari and Ford Ong or Boeing and many others have entrusted us with an important part of their future growth.

Thank you for your time today.

Now we will open up the line for questions.

Thank you, sir.

Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone.

You will then hear a prompt that your hand has been raised.

And if you wish to decline from the polling process, please press star followed by two.

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Before pressing any keys.

Please go ahead and press star one.

Now, if you do have any questions first, we will hear from Matt Sheron at steel, please go ahead Matt.

Yes.

Thank you.

And good morning, a couple of questions for me.

A I first, in terms of the profitability, I know you've been talking about getting to sort of break in break even from an Ebida standpoint in Q4.

With that sequential growth, you still expect that or there's some other issues there.

So let's start there in terms of the profitability.

Hi, Matt, good morning.

Thanks for the question.

So, yes, I'd like to reiterate that we're we're on, on track.

I mean on track for EBITA up break even and positive as, as previously mentioned in our previous calls and, and talk together with with you what we have announced and this, this comes to show that this is a main and major focus for us is that the delayed or late shipments that we had to ship in Q3 and were pushed into Q4 because of, really because of, manpower, that, and, and, and what we have done to resolve that is add a second shift rather than, hiring, more production, teams that would be then more heavy on that break even point.

So our, our focus is, is that, as, as mentioned before, to reach that break, even point and positive we're doing, we're doing that based on our current expenses both on the cost of goods, and both on OPEC, so that my answer to that is yes.

And if we are, if we're delivering on our on our targets in Q4, I I believe you'd be, this is exactly what we're going to be.

Okay.

Thank you for that.

And then in terms of your outlook, it sounds like an automotive.

It sounds like you're more bullish.

You, you talked about some, some wins.

When should you start to really gain traction in terms of revenue run rate?

Should it be first half of next year or second half?

And then in terms of capacity, Obviously, you have to prove to your customers that you can ramp, you've had some labor issues in other parts of your business.

So how are you positioned to ramp capacity as, as those orders come?

On.

That's a very good question, Matt.

I'd like to say that the capacity issue is again, very important to note that was not, it's not a, it's not a production lines and machinery.

It's only hr and moving to a second shift, resolves that in the aero business, it's very different in the automotive where we are shipping product on roll to roll basis.

We've had to fit where our current capacity extending it just a little bit is, is well enough to support the 25 numbers that we're we're projecting.

I'm so, so it's a, it's a different, a different different production lines require different needs.

Currently, I'm saying this again, we are well positioned to, to support all of this automotive demand that we have.

You are not seeing it in, in Q3 and and you'll be seeing it.

I, I expected towards end of the first half of 2025.

Our bookings are growing dramatically and I, I'd like to reiterate again, the point where our serial production programs signed with, for instance, with Ferrari and this big European OEM are eight and nine years respectively, committed commitments with a minimum take rate per year.

Ferrari, we already started this year ramping up next year heavily and the other OEM is initiating its production next year, you do not see it in the $38 million backlog.

That is really what we need to ship in the coming quarter, maybe quarter and a half.

We do not apply all the minimum commitments, minimum per year commitments that we get into the backlog.

Only those that are actually on purchase orders.

So, so II I so to answer your question is going to be mid 25 later in the first half, 25 towards Q2, you're going to see all this demand kicking in also on, on shipments.

But the booking is the booking is there on, on, on these agreements signed and sealed for for, as we said, many years.

Okay.

That's very helpful.

Thank you very much.

Thank you.

Thank.

You.

Next question will be from Dan Levy at Barclays.

Please go ahead, Dan.

Hi, good morning.

Thank you for, for taking the questions.

Wanted to first just ask with a question on the free cash flow dynamics.

Maybe you can just provide us with, you know, some further color on, on the dynamics.

You know, you, you talked about you know, some working capital, perhaps you could just address, you know, the working capital trajectory there.

Timing of of reaching ebitda break even.

And then maybe you could just remind us, you know, you, you, you mentioned something about improving the liquidity position, perhaps further color on that.

Thank you.

Thank you and good morning.

So the free cash flow for the for the quarter was minus 17.5 million.

It is mainly driven if I want to bridge from EBITA to the free cash flow, it's mainly comes from interest paid in the quarter mainly for the repaid facility.

We we repaid beginning of July and disclosed in our Q2 financials.

This is 4.3 altogether interest payment, working capital difference.

As we said that many of the IPO expenses will be paid in Q3 rather than when we accrue them in Q2.

So this is 3.5 and this is the major changes from EBITA to a free cash flow.

Additional, additionally, we spend CapEx at 2.7 million and this is we our full free cash flow regarding liquidity, as you said.

And I want to remind that the provider of the 60 million credit line participated, which we drawn out of the 25 we participated in the IPO and we paid his facility beginning of of of, of July, sorry.

And we are in a, in a process of adding lending capacity by year end with which we expect would be at a federal terms.

And together with, with what you said regarding improvement on Q4 results, ebida wise and being the 2025 4 year ebida positive, we're well funded in our pursuit to our business objectives.

I'd like to just add to that if it's okay, then that we have we have the $35 million of credit undrawn, which adds to the liquidity and gives us you know, everything we need.

On top, we are supposed to be closing that extra financing that we talked about until year end and that will give us some more liquidity.

And I want to add that the CapEx invested about $1.3 million more in Q3 is instead of CapEx projected for 25.

So we're going to, we're going to reduce the amount of CapEx we plan to spend in 25.

So it's really instead we had to complete our production line for the smartvision three ahead of time.

We announced the product release with four trucks on IA A and that was early.

So it was already in Q3.

And we're, we expect to start ship to ship this product already in Q1.

So we advanced a little bit CapEx from 25.

We're going to remove that from our budget in, in 25.

So it's not on top, it's instead that's important to say as well.

So if we were to look at sort of the, the pro form free cash, just considering that you paid down some interest you have, sounds like a reduced CapEx, what is a better rate to consider going forward.

For the for the additional boarding.

Just trying to get a, yeah, trying to get a yes, a better run rate of free cash flow going forward.

Pro Forma, the, the items that you've talked about here.

No.

Excuse me.

No, I, maybe I'm, I'm, do you maybe, down, we're looking at each other just to understand the question better you talk about.

I mean, again, we have enough liquidity.

We, we adjusted the CapEx is adjusted.

It's, it doesn't change our plan at all with the becoming a bit of positive on the short term of quarter on a quarter basis and also for the full year for next year.

We reiterate the message that even now with no extra funding, we were offered by our lenders with a favorable terms.

We are still, we still have enough liquidity to get to a bit of positive and to cash flow positive the following year.

So maybe.

Maybe if you ask you in the current quarter, free cash flow, it will take all those one time cash flow topics.

So it's 3.6 for the for the facility.

We paid the big one and additional 3.5 working capital totals to about $7 million which would be reduced in a proforma basis.

And of course, we were affected by the lower gross profit this quarter.

So this hit us by additional 11 million as well.

Great.

Thank you.

And then maybe if I could just follow up the math question on on the revenue side and, and the, and the booking appreciate the, the color that you provided here on, on on some of the wins that maybe you could give us a sense of sort of, you know, the the the level of commercial activity or discussions that you're having that we don't see in what's disclosed today, but that maybe gives confidence that there's future revenue acceleration, coming and future commentary, hopefully of additional bookings activity ahead.

Sure.

Then I'll, I'll take that.

So, and we're trying to reiterate this again and again, our when we book when we book a serial production program with Ferrari for eight years.

Really, I, I, I'm, I'd like to say that they, they they put a very big bet on gws' Tech.

I like if they invested, not invested money but invested in us in our product on their one of their most important growth engines for the next eight years.

They they committed for a minimum for a minimum take rate, which is a very, very high number right now.

They did not expect to be as high as it is because you can it was the first an option, but they have invested.

So we, we have a signed a contract with them, like with others for eight years on a minimum take rate.

So, you know, if I, if I would put this in a, in a number of a committed order book, it would be, it would be, eight times, eight times bigger than what we would ship.

Between Q2 to Q1 of 2025.

That's the real order book we have, which is committed.

Now, usually the minimums that they make, that they commit on, they never hit a minimum, they always hit at least 15%.

We usually find a 15% uptake that we're committed to deliver.

But it's usually even more than that.

A good, a good, a good way.

A good, another good, good, you know, good opportunity with that.

We, we, we, we, we made public and announced to try and give a good answer to what you asked.

We have right now in our, increasing backlog of $38 million that we're supposed to ship the next quarter, maybe a little bit into 25.

We have about $10 million of Cockpit.

We have announced last month that we have right now where an order book committed to us of 240 million.

How does the, how do these things live together?

Exactly.

Like I mentioned with Ferrari, we have signed, committed minimum orders for 5, 10 and more years in the aero business with how many of cockpit, with every model we have to ship.

But the P OS on which we base the 10 million within the backlog, they come in every month or two and then we ship and get paid.

So to reflect if you'd like how big and healthy our business is and for how long you take the 10 million that we right now have in our backlog for cockpit and within the 38 that we have to ship, you know, this four and a little bit into Q125 and, and, and you know, and then you have to multiply it by, by the 24 figure you saw to realize how much of that product we have in our committed order book in the coming years.

So aeronautics is you know, 10 years is not even a long period.

Automotive would average 78 years.

I'd say with safety tech and Ada it's also going to be an average of 10 years of science, zero production programs with four trucks, we have 10.

So that's, that's why I'd like you to maybe get get, you know, confidence on the very big order book.

And when I say order book, it's not, it's not in the air, it's signed zero production programs with minimum commitments that we must be ready to ship.

Okay, so that's, that's, I hope that answer the question then Great.

Thank you.

Thank you.

Next question will be from Jeff Osborne at TD Cowen.

Please go ahead, Jeff.

Thank you.

Good morning.

Oh, that's been answered, but just a couple questions here.

Mayor, how, how should we think about the OpEx run rate?

It's been a lot of focus on the questions around margin, mix cash, ebita.

But looking ahead, do you anticipate a meaningful upt pick in OpEx over the next quarter or two?

So, if I compare the OpEx during 2024 along the, the quarters, we're quite stable.

Of course, I'm adjusting the onetime expenses we have for the IPO.

Of course, we have to consider that now being a public company, this is the full first full quarter that we are a public company.

We have expenses as a co as a, as a public company, meaning directors compensation and D&O insurance and also a bit of PWC and other legal expenses that we had.

We didn't, we didn't have as a private company.

We do expect that OpEx next quarter mainly and also along 2025 will be a bit reduced in a way of R&D, okay.

But become stable but having much more revenue as ROSS profits will bring us as we expect in 25 to be a beta positive.

Got it and then maybe just the final line of questioning is on the, the new European OEM that you mentioned, starts revenue towards the tail end of the first half.

I assume the, the, the OEM itself.

Is that a 2026 model year car that you would then ramp shipments, you know, over the summer aggressively to meet that, that launch cadence or how, how do we think about the o ems positioning of that vehicle?

Yes, exactly.

So, they need, they, they're starting to ship their product to customers.

It's for EV, the new EV models and, and, and, late 25 early 26 but for us to be ready for, we have, we wrote an average of 50,000 cars per year.

These are all glass roofs, for, for evs, we're starting to ship, I'd say, he heavily is, is going to be real heavy, is, is going to be a late 25 but it's already a bit a sizable amount, towards Q2, Q3, like you said, to make sure they have enough inventory because it takes time until they, you know, we're a tier two provider here with a very, very, very big and built, well known, tier one glass manufacturer that has selected us for this, together with the OEM.

And they need to build up inventory so that they can, embed these roofs on cars and start shipping it to customers.

So, you, you're right.

I, I'd say a little bit before, August.

But, yes.

Got it.

Maybe just a couple other nitpick ones on the, if you're willing to share is, is the first of all, is it AP DLC or SPD solution or a combination?

Yeah, it's an LC.

It's an LC.

It's a, yeah, it's a, it's a special autograde LC product.

I I cannot, there are other features to this that are very interesting.

I cannot disclose at this point.

But once we you know, we, we announced the, the OEM itself will provide more detail on the deal.

Can you got it and then can, can you share, is it an option for the car that we need to monitor or is it a standard feature and then any kind of content per vehicle?

It's helpful.

The 50,000 ranges sounds impressive.

But how should we think about the content?

Especially given it's a specialized.

It's a, it's a yes, it's 50,000 between four models.

It's important to say.

But I, I'd like to say that you know, it's, it's it looks like it's it might be a mix of some would be 100% take rate, kind of not an option and some, it would be an option.

I'd like to say that also, with Ferrari, our announcement was an option but, the take rates are at, at a point where, you know, it's, it became, it became fundamental for, for them, to sell the car.

And then just lastly to follow up is, is there any kind of range or how we think about the content per vehicle for that?

I'd like to, yeah, I'd like to keep that for for related disclosure permission.

Jeff, I do want to say I do want to say that.

Yeah, I'd like to keep that for further.

I'd like to say that the 50,000 average per year, this is a minimum take.

This is what we are.

We have a financial commitment on this is not a wishful thinking.

It could be either that or more between the four models.

Got it.

That's all I had.

Appreciate the the detail.

Thanks so much.

Thank you.

Once again, ladies and gentlemen, as a reminder, if you do have any questions, please press star followed by one on your touchtone phone.

Next is Joshua Nichols at B Riley.

Please go ahead.

Joshua.

Yeah, thanks.

Just wanted to clarify.

I think you touched on the point.

The, the aeronautics revenue in the quarter was down a bit relative to last year or the last quarter.

But I think you mentioned in the backlog there's $10 million of aeronautics revenues.

Is it fair to assume that that business is going to get back to that kind of $10 million plus per quarter run right in the, in the fourth quarter.

If you deliver on that backlog overall.

Hi, Josh.

Good morning, I'll, I'll take it, to answer your question simply is, yes.

I'd like to say that most of our late shipments that we have announced at last quarter, that we were not, that we didn't ship on time, meaning because we just, you know, because of vacation patterns in, in, in, in Europe, and having the second shift and approved by our unions only in late in the quarter, most of it comes from arrow.

So I'd say, that is, that is also, very conservative.

We wish we, yeah, we, we're, if we're on track, like we, we claim to ship all these late shipments in Q4, you should be seeing us back on track with, relatively much more than, than the 10 that we already shipped the quarter before.

Okay.

So, yes.

It's, it's, is going to be significantly, higher with the late shipments.

Yes.

Got it.

So, over, over, over the, the trend in the first half that you guys sounded.

I think we've talked a lot about the automotive opportunity.

Good to see some of the new ones there.

I was just curious, like the margin profile as you start to ramp up.

Let's call it like the second half of next year with some of these customers.

What's the expect our expectation in terms of the gross margin contribution and how we think the automotive revenue could, could drive some expansion there potentially.

So, it's a good, a good point because on the, on the figures that we've been showing the market, you know, we, we're, we're taking ourselves a big task to break down our business into four as a, as a, you know, as a kind of a young public company.

And we're happy to do that because we want you and everyone to have as much transparency, that's the kind of company we want to be and that, you know, that creates fair questions like you just asked.

Because, because the numbers are not representative of, of the massive you know, automotive scale that we have.

What I can tell you is one margins are going to be very healthy towards helping the average that we announced previously as a grows margin in the long term.

I I expect auto very soon to help that margin from the top.

So averaging better than other business divisions.

And obviously that is a matter of scale.

And, and we have, I'm saying this with conviction because of both in, you know, both in Ferrari and also in this European Oemn and others, especially in SPD, we're a single source supply.

So, I mean, of course, we're working closely with our customers to make sure everyone is profitable with our products embedded in their, in their, in their vehicles.

But, but we have a very strong position, because single so supplies, you know, it's a unique kind of opportunity for us as, as a, as a tier two, tier one for this industry.

But I'd like to reiterate this, that it's, it's going to be in scale helping us on our average margins from from above.

Thanks.

And then last question for me, I think in one of your press releases, you touched on that you expected to hit the the $100 million in aggregate revenue received from your, your C MS offering by the end of next year.

I'm just curious like how much of that $100 million revenue is expected to be generated like next year relative to what you generated so far.

Yeah.

So I'm trying to be careful with the future guidance on specific business, but I'm reiterating that message when I, when we said that we had that in our backlog.

It's, you know, if you take four trucks, Josh, as the case that we announced, we haven't announced all the business that we have yet, but we will you know, with time towards the end of the year towards the beginning of next year, we have a tremendous and tremendous traction on our smartvision three platform that we announced in IA A.

But if you only take four trucks and you take them, you know, you take a fair share of their 25,000 trucks, they're selling per year on that, on the one truck that we are offered beginning of next year for 10 years.

You'd see that these numbers ramp up very, very fast.

And that's just one model of six in one OEM, which is not the biggest one in, in truck, in the truck industry.

And we're really today replying on RPS for for quantities of over, you know, of hundreds and thousands of trucks per year per OEM because Aos and trucks I claim and many do that is becoming a must by regulation also because of Roy, because of it's going to become a must in the next platforms of 27 28 29.

And and you look at the production of the production, the scale of production for O Ems reported.

So, you know Volvo trucks are making going to be making 300,000 trucks per year.

Mine between the three brands, they have 240,000 trucks and I, I believe, I believe they're going to select one platform for A US, which is really how you drive a truck if you if you take you know, if you take a an ATA system, I can't disclose exact figures of how much it costs.

You know, we're selling it, but per truck and multiply it, you're going to get to the figures that we mentioned as 100 million on our order book very quickly.

I think that in two models of one OEM covers that and we're talking about much more.

Okay.

So my short answer is we're reiterating that message.

I'm hoping to provide more input once we start shipping in Q1, our smartvision three and to announce more wins like four trucks that we are working on.

Appreciate it.

Thanks.

Thank you.

Thank you.

At this time, I would like to turn the call back over to Mr Peso.

So thank you for joining us today.

We look forward for future discussions and announcements to update you on our progress and have a great rest of the day.

Thank you, everyone.

Thank you, sir.

Ladies and gentlemen, this does indeed conclude your conference call for today once again.

Thank you for attending.

And at this time, we do ask that you please disconnect your lines.