Gauzy Ltd (GAUZ) 2024 Q4 法說會逐字稿

Good morning, and welcome to the Gauzy Limited fourth quarter and full year 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 Daniel Scott, Investor Relations. Thank you. You may 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, Meir Peleg.

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.gauzy.com., 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, March 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, we've 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 across 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 $31.1 million, representing growth of 41.8% compared to the fourth quarter of 2023. This impressive growth was driven by particularly strong performance in Safety-Tech, Aeronautics and Architecture.

For the full year, our revenue reached a new record level of $103.5 million, up 32.8% compared to 2023, including record revenue from all four segments. A staggering 80% of our 2024 revenue was recurring from existing customers. This repeat business is what gives us confidence in our strong growth outlook in 2025 and beyond.

We made significant progress 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 quarter. For the full year, gross margin improved to 28.7%, a 310-basis point increase from 25.6% in 2023. This groundbreaking achievement reflects 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 $0.2 million compared to negative $6 million 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 leadership positions across our core technologies. Our commitment to innovation and operational excellence has strengthened our relationship with global OEMs such as MSC Cruise Lines, Ambarella, 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 developments continue to come in our Safety-Tech division, especially from Gauzy's Advanced Driver Assistance System.

Our ADAS was chosen to fully replace traditional side mirrors on Capital District Transportation Authority of New York's 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 ADAS.

In addition, we recently announced that we have secured renewal of our FMCSA exemption, which allows us to be the only company in the US to fully remove mirrors on municipal buses and replace them with our Smart-Vision system in all 50 states. This is an opportunity to retrofit over 900,000 buses today, representing a multibillion-dollar market annually.

In addition, we initiated a multiyear serial production program with Ford trucks with our new Smart-Vision 3 AI-based ADAS platform, representing an additional multibillion-dollar opportunity with OEMs in new production.

In our Automotive division, our serial production program with Ferrari to supply our SPD 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 roofs. 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 all-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, D.C. These projects provide tremendous recognition of Gauzy's unique offerings in architecture.

We are a global provider in architecture building materials and seeing the fastest growth in the US, 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 facades and skylight showcased for the first time at Glasstec 2024.

Finally, I'm extremely proud to announce that our team secured an order to deliver 5,000 windows per year to a major US manufacturer of recreational vehicle cabins with the potential to grow in 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 this accelerating demand.

As a reminder, we are already roughly 95% market share in cockpit shading, 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 cabin shading as well, the new partnerships with two aircraft manufacturers and a number of major international airlines.

We've made significant progress with our product development and in expanding our strategic partnerships. We partnered with Ambarella to harness AI for breakthroughs in ADAS, with road safety enhancing technology already operational in Ford 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 averages over 255,000 commercial vehicle sales per year.

Before I turn it over to Meir, I want to emphasize that we are introducing our 10-year committed and contracted backlog for the first time. This reflects accelerating long-term demand across all our segments. Our current customers' serial production programs indicate a projected revenue pipeline exceeding $1 billion, of which a minimum of $409 million is contracted and committed backlog.

We will continue to disclose our purchase orders currently at $31 million, which we expect to ship in the next few months. This new metric, 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 Meir for 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 towards our long-term financial objectives.

For the fourth quarter, we generated revenues of $31.1 million, which was up 41.8% from $22 million in the prior year period. This impressive growth was primarily driven by a particular strength in Safety-Tech and Architectural divisions, as well as strong performance in Aeronautics, following the addition of second shift at our production facilities.

Gross profit for the fourth quarter was $11.4 million, an increase of 81.4% compared to $6.3 million in the prior year quarter. This equated to gross margin in the fourth quarter of 36.5%, an 800-basis point improvement from 28.5% in the prior year period. This substantial margin expansion was primarily due to the benefit of scale and operational efficiencies.

Total operating expenses for the fourth quarter were $15.8 million, up 5.5% compared to $15 million in the prior year quarter. This increase was mainly due to increases in share-based compensation expenses, offset by decrease in sales and marketing costs.

Net loss for the fourth quarter narrowed significantly to $11.4 million compared to $20.7 million in the prior year quarter, mainly due to an increase in gross profit and a decrease in financial expenses. Non-GAAP adjusted net loss for the fourth quarter of $3.7 million compared to $11.2 million in the prior year quarter, with the improvement primarily due to the higher gross profit.

As Eyal mentioned, we achieved a significant milestone in the fourth quarter by generating positive adjusted EBITDA of $0.2 million compared to negative $6 million 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 $103.5 million compared to $78 million in 2023. Gross profit for the full year was $29.7 million, up 49.1% from $19.9 million in 2023. Full year gross margin expanded 310 basis points to 28.7% compared to 25.6% in 2023.

Net loss for the full year was $53.2 million, a significant improvement from the net loss of $79.3 million in 2023. Non-GAAP adjusted net loss for the full year was $29.3 million, an improvement from $36.8 million in the prior year. Adjusted EBITDA for the full year improved to negative $14.2 million from negative $20.7 million in 2023.

Now turning to our segment results, starting with Safety-Tech. Revenue in the segment was $13 million in the fourth quarter, up 73% compared to $7.5 million in the prior year quarter. This strong growth was driven by robust demand across the segment's product lines. Gross profit in Safety-Tech was $3 million, up from $1 million 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 Aeronautics segment, revenue was $13.4 million in the fourth quarter, up 26.7% compared to $10.6 million in the prior year quarter. Gross profit increased 62.2% to $6.8 million compared to $4.2 million 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 deliveries from the third quarter to the fourth quarter as we added operational capacity to meet strong demand.

In our Architecture segment, revenue was $4.1 million in the fourth quarter, up 31.8% compared to $3.1 million in the prior year quarter, driven by growing worldwide demand. Gross profit increased 54.8% to $1.5 million compared to $1 million 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 $0.7 million in the fourth quarter compared to $0.8 million in the prior year quarter. We expect our Automotive segment to show improving results in 2025 as our new programs with major OEMs begin to ramp up.

Turning to our balance sheet and liquidity position. We ended the year with total liquidity of $40.6 million, including $5.6 million of cash and cash equivalents and $35 million of available capacity under our undrawn credit line. Total debt at year-end was $38.4 million, including $13.2 million of short-term receivables financing. As of December 31, 2024, we had basic and diluted ordinary shares outstanding of 18,720,287.

I'm also pleased to announce that we are providing initial guidance for the full year 2025 revenue. We expect revenue to be in the range of $130 million to $140 million, representing approximately 30% growth at the midpoint compared to 2024. Based on the benefit of scale, the favorable operating leverage, the strong recurring revenue base that we have, we expect adjusted EBITDA to be positive for the full year 2025.

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 have put in place to meet this demand.

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

Thank you, Meir. As we look ahead to 2025, we are incredibly excited about the opportunities in front of us. The momentum in our business continues to build, especially with our Smart-Vision ADAS system gaining significant traction in transportation systems across major global markets. 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 10-year committed and contracted backlog, which currently stands at $409 million, provides unprecedented visibility into our long-term growth potential. This matrix demonstrates the strategic nature of our relationships with customers who are increasingly committing to multiyear 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 road map 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 efficiently, balancing strong growth with continued margin expansion and progress towards sustained profitability. The operational improvements we've implemented, including the additional production 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 building, improved fuel efficiency in transportation and enhance 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 Gauzy. We have built a strong foundation as a public company in 2024. 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.

(Operator Instructions) Josh Nichols, B. Riley.

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. It's 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 $409 million 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 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 capped it for 10 years. 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 $409 million 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. We thought as we have long-term contracts, it's worth giving this information to investors and 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 it 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 Meir. Thank you 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, maybe a bit lower due to vacation patterns in Europe. And then Q4 is our strongest quarter ever -- not ever, in the year. During -- we've made it for the last year as well.

Some more insight into that, Josh, from me is also, you should expect, as it's always been in Gauzy to have the second half of the year drive -- we gave guidance that we're going to be EBITDA positive, adjusted EBITDA positive for the full year. You should expect that H2, the second half is going to drive that metric.

Fair enough. And then just one follow-up for me and then I'll pass the torch. When you're looking at the different revenue segments, I assume that you would expect Safety-Tech to 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.

So you're right. I mean, this year, we expect, and you see it in the figures of '24, the Safety-Tech division, which is really what we also consider part of the Automotive segment. But on the ADAS side is going to be probably the biggest segment this year. However, I'd like to say that margin-wise, and it's going to be 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 growing significantly within the guidance we gave. But you're right, Safety-Tech is probably going to be the bigger of the four, contributing to the top line.

Dan Levy, Barclays.

I wanted to continue with the questioning on the revenue. And I appreciate the comment that you gave that the backlog of that $409 million, less than half of that's going to get shipped in '25. 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's 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 as planned. So just what are the different variables to consider on backlog and more broadly on revenue for 2025?

This is Eyal. Thanks for the question. We want to be clear; we're now providing that committed and contracted backlog capped by 10 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. But 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 $409 million and that part of it that's going out in '25, which is a little less than half of our guidance for this year is 100% going out. We have many other customers, which have recurring revenues with us during the year, one example is Yutong, which we have not subscribed into the $409 million because it's not a production multiyear annual commitment, but they provide us projections with, until now, 100% statistics or more that they eventually order. That, for instance, does not go into the $409 million. And also, it's only based on the minimum take rates 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're taking out of it in '25, obviously, but we're winning more long-term contracts that we're going to add to that figure, but only what's 100% committed to us.

Great. 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 could give us an initial sense of what free cash flow will look like in 2025? How much CapEx and what the cash draw?

You have $5 million of cash on the balance sheet. I 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? So any comments on that would be appreciated.

Thank you, Dan. This is Meir. First of all, we expect to be EBITDA positive in 2025, and we expect to be cash flow positive in 2026. As we mentioned in the 20-F, the company is currently finalizing a debt financing arrangement with an Israeli commercial bank for $10 million, and we expect to enter into definitive agreements with the bank in the first half of 2025. Of course, we cannot -- there could be no assurance that definitive agreements will be entered into.

And yes, so as disclosed before, Dan, we opt for, and by the way, the $10 million is now disclosed in the 20-F with the cautionary notes that Meir gave. We could expect to take more in that facility, up to $20 million, as disclosed in previous quarters. And that will be disclosed further. But right now, we disclosed the $10 million.

And I think that if you look at -- I want to give a note on CapEx, which is really -- if you look at the 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 doing in '25.

Also to be better ready, that we need to be better ready for the guidance we gave if we're looking at $130 million to $140 million that we want to ship by year-end. So we're very careful with 2025 CapEx expenses. As we want to provide the guidance, we want to meet the guidance we're providing on EBITDA and cash flow for '26. But I think that within this revolve, within this credit -- unused credit line between the unused credit line and the cash of more than $40 million, right?

$40.6 million.

$40.6 million. 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.

Just maybe if I could squeeze in the last one. Any comments on the EBITDA positive target in '25, what 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?

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, Dan, that -- and guide the market that it's going to be positive. The difference within the guidance of $130 million to $140 million can have a big impact on -- positive impact on how much that EBITDA would be. We'd like to be careful about the exact number, but we're looking at single digit -- low single digit to be careful on positive EBITDA.

The company, what we're trying to show as we mature as a public company, there are more quarters to look at. We'd like to say that the biggest effect on our gross margin, which is the KPI for understanding the profitability scheme for this company is that the top line as it grows, it can grow exponentially with slight growth on OpEx. So our SG&A in the businesses that we have in Aeronautics, long term; Automotive, long term. Automotive includes also Safety-Tech with ADAS long-term contracts.

The incremental increases in sales and marketing and G&A is rather small, and that's what we've proved in Q4. So you should expect that based on somewhat -- of course, we need to increase some expenses to ship $130 million, $140 million 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 you to look at 2025.

Just kind of bridge Q4, and you'd see that we walked the talk of crossing the EBITDA with $31 million. We're guiding well above four times Q4, and we'd like you to get that confidence that we can be a healthy bottom-line end of '25.

Itay Michaeli, TD Cowen.

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

I'd like to just note that we have -- 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 and Ferrari or McLaren models or GM.

And then there's the Safety-Tech division, which is really within the automotive business. I just want to make sure that everyone follows the same guidelines. And that's where we serve the commercial vehicle market mainly with our ADAS, Smart-Vision 2 and now Smart-Vision 3, it's AI-based.

Both serial production with Ford trucks removing mirrors and the only company to be able to do that on buses in the US, for instance, retrofitting complete cities like London with public transportation with ADAS. So when I'd like to answer the gross margin, I'd separate the Automotive into these two.

So you're going to see a very significant, and we showed that through '24. We also guided on it that within the Light Control and SPD, for instance, we've moved from minus 30% on gross margin, 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 Safety-Tech, which delivers the ADAS, we have announced the Smart-Vision 3 with Ford trucks. We're shipping this the first year in serial production to Ford. And that is going to improve this platform, which has much better margins. It's 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 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 all of the Automotive segment to have, I'd say, even a dramatic improve in gross margin and gross profit in '25.

Meir will take the CapEx.

Yes. Regarding the free cash flow, you have asked. First of all, I want to echo again what I've said before, we expect EBITDA positive in 2025 and free cash flow positive in 2026. Regarding the CapEx, we expect to invest about $10 million in CapEx next year -- this year, actually, 2025.

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.