NASDAQ:GAUZ Gauzy Q1 2025 Earnings Report $8.49 +0.32 (+3.92%) Closing price 05/23/2025 04:00 PM EasternExtended Trading$8.39 -0.10 (-1.22%) As of 05/23/2025 07:52 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Gauzy EPS ResultsActual EPS-$0.54Consensus EPS -$0.35Beat/MissMissed by -$0.19One Year Ago EPSN/AGauzy Revenue ResultsActual Revenue$22.37 millionExpected Revenue$26.91 millionBeat/MissMissed by -$4.54 millionYoY Revenue GrowthN/AGauzy Announcement DetailsQuarterQ1 2025Date5/13/2025TimeBefore Market OpensConference Call DateTuesday, May 13, 2025Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Gauzy Q1 2025 Earnings Call TranscriptProvided by QuartrMay 13, 2025 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good morning and welcome to Gossilenisen First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q and A. At this time, I would like to turn the conference over to Dan Scott, Investor Relations. Thank you. You may begin. Speaker 100:00:23Thank you, operator, and thank you everyone for joining us today. Hosting the call today are Gauzy's CEO and Co Founder, Eyal Peso and Chief Financial Officer, Mayer Pellig. On this call, 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. Speaker 100:01:20We do not undertake any duty to update any forward looking statements. This call contains time sensitive information that is accurate only as of today, 05/13/2025. 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 first quarter press release for definitional information and reconciliations of historical non GAAP measures to the comparable financial measures. Speaker 100:02:00With that, let me turn the call over to Eyal. Speaker 200:02:03Thank you very much, Dan, and good morning, everyone. Thank you for joining us today as we discuss our first quarter twenty twenty five results. For today's call, I'd like you to focus on three key takeaways. First, our solid first quarter performance in the face of global uncertainty for our customers, which underscores the strength of our business model and the growing demand for our technologies. Second, the significant business milestones we've achieved during the quarter and subsequent to its end that will drive our growth in 2025 and beyond. Speaker 200:02:39Third, we have signed the first ten million out of a previously announced 20,000,000 planned debt financing under significantly more favorable terms as compared to our borrowings as a private company. And finally, our reaffirmed 2025 guidance supported by strong backlog of purchase orders and enhanced balance sheet. We delivered a solid start to the year despite a two three week period in March 2025 of market uncertainty as customers attempted to assess tariff impact and risks. Revenue growth in the automotive and safety tech divisions was offset by some timing shifts in delivery in the aero and architecture divisions, which we expect to revert to a more normal cadence across the balance of the year. This view is supported by the record spike in the backlog of purchase orders to be shipped in the next few months. Speaker 200:03:39We're excited to execute against the backlog after a quarter in which we demonstrated our ability to deliver significant gross margin expansion as we accelerate revenues into the back half of twenty twenty five. Now, let me highlight some of the key business milestones we achieved during the first quarter and subsequent period. On our last call, we told you about our new Black SPD SmartLabs technology introduced at CES. Our partnership with Journeo to enhance London's Eight Thousand Five Hundred bus fleet with ADAS. Our partnership with Umbrella to enhance ADAS for customers such as Ford trucks and our FMCSA exemption renewal to accelerate adoption of ADAS in commercial vehicles across The U. Speaker 200:04:29S. I'll now focus my comments on three recent announcements. First, we announced that Air France KLM Group has selected our advanced shading system for the new La Premiere first class seats in the Boeing seven seventy seven aircraft. These five window suites represent a significant opportunity in the airline shading market valued at $600,000,000 annually with 6.4% projected growth through 2028. Gauzy has captured over 95% of the cockpit shading market and works with OEMs including Embraer, HondaJet, Daher and others. Speaker 200:05:13The double pleated system allows passengers to choose between translucent and blackout settings while providing centralized control for crew members. This is another example of our goal of transferring our cockpit shading success to cabin applications. Second, we announced that Mercedes Benz has implemented our smart glass technologies in 75% of the glazing in the new Vision V show car, which premiered in the auto show in Shanghai Twenty Twenty Five. This marks Mercedes Benz's first use of Gauzy's dual technology windows, combining SPD and PDLC for enhanced shading, privacy and digital application. Mercedes previously used SPD in its Magic Sky Control. Speaker 200:06:03In Division Z, these technologies allow transitions between transparent, shaded and private states while creating projection surfaces. The solution reduces glare and cabin temperature while maintaining visibility. A segmented PDLC partition provides flexible privacy between cabins. And importantly, today we're excited to announce the ramp up of shipments for the serial production of the Cadillac Celestiq EV with four zone SPD sunroof, marking the continuation of business with GM. These collaborations with Cadillac and Mercedes are yet another example of growing demand for our automotive smart glass technologies, with the market projected to reach $25,000,000,000 by 2028. Speaker 200:06:53Before I turn it over to May, I want to emphasize that our backlog of purchase orders, which was below $31,000,000 at year end twenty twenty four, expanded to almost $36,000,000 at the March, indicative of the strong continued demand for our products. As a reminder, purchase order backlog represents orders we have in hand and expect to ship in the next few months. The entire Gauzy organization is excited to deliver on this tremendous momentum. With that, I will turn it over to Mel for an Speaker 300:07:30update on Gauzy's financial results. Thank you, Eyal. I'd like to begin by providing a detailed overview of our first quarter twenty twenty five financial results, which highlights the strength of our customer relationships and the fast improvement in operational efficiency as we progress towards our long term financial objectives. For the first quarter, we generated revenues of $22,400,000 compared to $24,700,000 in the prior year period. We saw growth in both automotive and safety tech as compared to prior year period. Speaker 300:08:08This was offset by aero and architecture where we experienced a momentary pause towards the end of the quarter as customers sought to determine any potential tariff impacts. Importantly, we saw no cancellations and in certain cases by the end of the quarter and subsequent to its end, customers placed orders above their contractual minimums. Even with the revenue dynamic, our gross margin increased to 25.6 compared to 25.1% in the prior year period. This 50 basis points expansion was primarily the result of improved operational efficiencies, which continues our progress towards profitability. Total operating expenses for the first quarter were $14,400,000 down 9% compared to $15,800,000 in the prior year quarter. Speaker 300:09:04This decrease was mainly due to lower R and D, G and A and sales and marketing expenses, partially offset by higher D and A. Adjusted EBITDA in the quarter was negative $5,500,000 compared to negative $4,800,000 in the prior year quarter. This decrease was primarily driven by the factors already discussed for gross profit and operating expenses. Now turning to our segment results, starting with SafetyTech. Revenue in the segment was $10,800,000 in the first quarter, up 1.5% compared to $10,700,000 in the prior year quarter. Speaker 300:09:43The growth was driven by continued demand across the segment's product lines. Gross margin improved dramatically to 19.7% compared to 12.8% in the prior year period, primarily due to the benefit of scale. In Aero, revenue was $7,600,000 in the first quarter, up 24.6% compared to $10,100,000 in the prior year quarter. Gross margin was 33.9% compared to 44.1 in the prior year period. This decline reflects momentary pauses as customers sought to determine any potential tariff impact and the resulting shifting of some shipments to second quarter. Speaker 300:10:28In architecture, revenue was $2,400,000 in the first quarter, down 8.2% compared to $2,600,000 in the prior year quarter. As we have said before, architecture revenues can be particularly lumpy throughout the year, though this quarter was also impacted by macro uncertainties similar to what I just discussed in Aero. Gross margin expanded to 32.1, up from 48.9% in the prior year period, driven primarily by the benefit of scale and operational efficiencies. In automotive, revenue was $1,500,000 in the first quarter compared to $1,300,000 in the prior year quarter. The dramatic gross margin improvement we delivered is aligned with the broader operational improvements we are making across Gauzy. Speaker 300:11:19We expect our Automotive segment to continue showing improved results in 2025 as our new programs with major OEMs begin to ramp up as well as the beginning of recent serial production wins. Turning to our balance sheet and liquidity position, we ended the quarter with total liquidity of 36,200,000.0 including $1,200,000 of cash and cash equivalents and $35,000,000 of available capacity under our undrawn credit line. Total debt at quarter end was $37,300,000 including $12,500,000 of short term receivable financing. In terms of cash flow, our first quarter results included cash used in operating activities of 600,000.0 a significant improvement from a use of 6,900,000.0 in the prior year period. The result was free cash flow of negative 2,300,000.0 compared to negative 8 point 4 million in the prior year quarter. Speaker 300:12:21We're excited today to announce that subsequent to quarter end, we signed a new $10,000,000 debt facility with Mizrahi, the third largest bank in Israel. This is important because it's the first step in securing a total of $20,000,000 of debt financing as previously announced. We obtained this debt financing at a much more favorable churn as compared to our pre IPO lending facility. The improvements include a three seventy basis point interest rate reduction and no prepayment penalties. This increased liquidity enhances working capital that in turn supports our full year goals. Speaker 300:13:00I'm also pleased to announce that we are reiterating our guidance for full year 2025. We continue to expect revenue to be in the range of $130,000,000 to $140,000,000 representing more than 30% growth at the midpoint compared to 2024. Based on the benefit of scale, favorable operating leverage and strong recurring revenue base that we have, we also reaffirm adjusted EBITDA to be positive for the full year 2025. Given our typical seasonality related to visibility into our end markets, we expect the second half to be stronger than the first half and drive a full year growth and profitability. This guidance reflects the strong demand we're seeing across all of our segments, the growing adoption of our technology by leading OEMs and an expanded production capacity we're putting in place to meet this demand. Speaker 300:13:54Now I will turn it back over to Eyal for closing remarks. Speaker 200:13:58Thank you, Mehran. As we look across the balance of 2025, we remain incredibly excited about the opportunities in front of us. Even with the uncertainty in the market, the momentum in our business continues to build. Direct impact from tariffs on Gauzy has been minimal and customer purchase orders remain strong. We're excited for what this year holds for us. Speaker 200:14:24The resilience of our long term backlog, growing pipeline of innovation and enhanced liquidity position with our new debt facility reinforce our confidence in our growth trajectory. We'll continue investing in innovation, expanding our leadership in light and vision control technologies. Our future product roadmap includes promising developments across all four business divisions that we expect to accelerate adoption and expand our markets. Operationally, we're focused on scaling efficiently, balancing growth with margin expansion and progress toward profitability. We remain well positioned to deliver our reiterated 2025 guidance, accelerating growth and deliver outstanding value. Speaker 200:15:17In closing, I want to express my gratitude to our employees, customers, partners and shareholders for their continued support and confidence in Gauzy. Thank you for your time today. Now we'll open up the line for questions. Operator00:15:35Thank you. Ladies and gentlemen, we will now begin the question and answer session. Speaker 300:15:54And Operator00:16:01we now have our first question. This comes from Dan Levy from Barclays. Your line is now open. Please go ahead. Speaker 400:16:11Hi, good morning. Thank you for taking the questions. Wanted to first just start with a question on the cadence and appreciate the commentary that there were some delays in architecture, aerospace and that second half is more is going be stronger than the first half. But what's the line of sight on second quarter? And what's the line of sight on converting that backlog order book that you have into firm revenue? Speaker 400:16:46Should we expect a sharp step up in the second quarter on revenue quarter over quarter? Speaker 200:16:54Hi Dan, this is Eyal. Thanks for joining and thanks for the question. Let's start with the end, basically yes. I think that if you look at what we have reported shipping in Q1 and then add that to our POs in the backlog to be shipped soon. So yeah, you should expect Q2 to always, as always, but also to be as strong as expected. Speaker 200:17:28And we reiterated and reaffirmed the guidance for the full year right now mid Q2 because even though last two weeks or last three weeks of March, there was some hesitance among customers by, you know, in matters of shipments, where are there going to be any tariffs? Let's just wait and see. And if you remember April 2 was liberation day wherein there was determination about tariffs, there's a lot of questions and you know, some hesitation in March, but nothing affected the business. It's important for me to say this again and again, nothing affected the real business is all there. We had no cancellations. Speaker 200:18:12It's a little bit of push in the last two weeks of March. There was a lot of uncertainty, especially with things that were just ready for shipment and okay, just wait a second. Maybe we'll ship it from here, ship it from there to U. S. Customers. Speaker 200:18:30So, but all the businesses there and we're more than anything, I'd like to say that the cadence right now within Q2 and the POs that we have now to ship is exactly, if not better than what we saw in late December or beginning of twenty five. So that's why we're very confident that we're gonna deliver on our guidance for the full year. Speaker 400:18:59Okay, thank you. The second, if we could just go into the free cash flow. So you did EBITDA of roughly negative $5,000,000 negative $6,000,000 but the free cash flow was substantially better. So could you just talk about what the offsets were? It onetime benefits on working capital, some versus there and how sustainable that is? Speaker 300:19:29So as you can see, good morning, The Mayor is here. As you can see the cash flow, the main, I would say impacts on the cash flow is the working capital. Part of it is timely, but it comes from a strong and continuous working on the cash management improving for instance our payment terms with suppliers, financing invoices which gives us cash much more fast and then be able improve our cash flow although growing in general the working capital. I'd like to Speaker 200:20:14maybe add to that that a big part of this and we should expect that throughout the year towards being cash flow positive in '26 is that every thirty days that we can get from our suppliers net 30 to net 60 or cash in advance to net 30 or net 60 to net 90 gives us while we're factoring about 80% of our invoices today gives us a much more healthy inflow outflow of cash. And that's a big, big focus for this year for a while we're still factoring. So that also has a big effect on the improvement in operational cash flow for this quarter. Speaker 400:21:02Okay, thanks. If I could just squeeze in one more, what's the line of sight on that additional $10,000,000 financing that you talked to? Speaker 200:21:13So it's basically we're signed off, it's all signed. Between signing and closing, there are a few deliverables that we need to provide like, you know, liens, but I see no, there's no risk here. It's gonna close hopefully even this week, maybe next week, but it's really, it's done. It's a done deal. Operator00:21:38If that's the question done, it's Speaker 200:21:40not, there's no maybe here. You're talking about the second million? I'm sorry. Sorry about The 10, again, I don't want to give a commitment to Dana. It's going to look like guidance, but it should be, we're trying our best to do, to sign that off even if not before end of Q2, somewhere in early Q3. Speaker 200:22:12We don't have that signed off, but that's you know, expectations. Speaker 400:22:20Okay, thank you. Operator00:22:24Thank you. And the next question comes from Josh Nichols from B. Riley Securities. Your line is now open. Please go ahead and ask your question. Speaker 500:22:36Hi, this is Matthew on for Josh Nichols. Thanks for taking my questions. I guess to start off, touching on the macro uncertainty that caused the hiccup in Q1, would you say it's just mainly off of peak uncertainty on Liberation Day and from there things just looked more smoothly in terms of orders and timing? Or should we look out for in terms of possible additional hiccups in the future? Speaker 200:23:04Hi Josh, this is Eyal. Thanks for the question. So I to say this just again loud and clear. There is no effect to the real business in Gauzy by the tariff. But if you put yourself as a production company importing into or that its products are imported into The US in March, there was simply a lot of patient and a lot of question marks. Speaker 200:23:35Where do I take this product from? Even a Boeing where their cockpit shade is manufactured that the only aero product we're actually manufacturing for US customer outside The US had no issues. If you have enough inventory, can just wait a minute, maybe I won't be taking this from France. Maybe we'll just wait to see what's going to be the actual tariff that was only on the April 2. So I'm saying hesitation caused some delays, but if you just add up what we have reported shipped and then recognize and for us recognition remember is approval of the customer at his site many times of our products. Speaker 200:24:18So that has to be shipped even though it was ready. If you just look at what we had finished goods at March 31, if you add that to our reported revenues and our POs in the system, which were reported as spike of about more than $5,000,000 You're looking at together with the POs March '60, about a little bit shy of $60,000,000 that has been shipped or is going to be shipped very soon. So I'd like to say again, is with some hesitation, but we had reported mid April about week after separation day that it had minimal effect to our business to no effect. And today we can say with much more confidence that it's mostly we get exempt because of different reasons. So we're in a much better place. Speaker 200:25:13So it's just that there was a little bit hesitation and that's what caused some shifting, a shift in timing of delivery, but nothing at all has changed from our overall business that we have reported we're going to do this year. Actually, in some cases we had increases and we had customers ordering more than expected that had nothing to do with The US specifically in other places around the world. So I'm very confident that you're going to see our guidance met throughout the year. This is why we're not also giving quarterly guidance. It's hard for us to be accurate. Speaker 200:25:55These kinds of events are extreme, but you know, it comes together. But within a full year, even these events are kind of washed away. And so we're reiterating here, reaffirming our guidance for the full year. Speaker 500:26:10Got it. Very helpful. And regarding the large spike in purchase orders, which segment would you say is getting most of those orders or what is the split there? Speaker 200:26:22Yeah, out of the backlog, think we have a very good, Speaker 300:26:28it's a very Speaker 200:26:29good mix of $15,500,000 is Arrow just to show that if you look Q2Q on last year, you're to see a difference of $2,500,000 but it's all in the POs, it's all there. It's all going to be shipped in Q2 and in Q3, Q4, it's all in the book. So there's no issue there. There was another 17, I think, $18,000,000 with safety tech, which we're experiencing, the significant growth we expected, but even more in some cases. So, know, these are the main two. Speaker 200:27:05I think we had about quite extraordinary, about $6,000,000 of POs. Some of it really was already manufactured, just not recognized in Q1. So it's still a PO in the backlog, but it's really done. So we have about $6,000,000 in automotive, which is quite unique. We have a very good visibility for the smart glass portion of our business in automotive. Speaker 200:27:32We also announced for the first time by name GM, the catalyst starting to ramp up its production this year. We reported to start shipping cars very, very soon to their customers. So I mean, I think that's the takeaway the backlog. The rest is architecture about $2,200,000 of POs for architecture to be shipped well, April and May, if you look at March. Speaker 500:28:05Got it. Thank you. And I guess last one for me, it's somewhat of a related question. I guess to get to the to your guide of full year EBITDA profitability or to get a positive on that side, what would you say is in terms of segments or maybe even products that you're most excited about, what do you see getting you there? Speaker 200:28:30So what would contribute to the EBITDA positive? Just to see if I understood the question, if I'm looking now towards for the full year, what would be the contributor of the EBITDA positive that we have guided for the full year '25? So I think that, you know, just very easy to, I'd say just bridge Q4. I'd say just people bridge Q4. You see that if we double for Q4, you're at 125,000,000 for the year. Speaker 200:29:04We're guiding on a midpoint $10,000,000 more and we're now reaffirming it. And you see if we hit numbers like Q4, let's say on average for the full year, we're in a gross margin of 50% in aero. We're on a very healthy 20 plus in safety tech, we're bigger portions of the business. If you see what we're doing in auto, I know it's small numbers and it's insignificant, but it's even harder to jump 16 points per quarter, every quarter when you're only doing shipping a million and a half or 2,000,000, three million kind of cadence of quarters. But we're doing it because we're working very closely with the OEM to improve yield. Speaker 200:29:49So, I I'd say that, if you, Operator00:29:53it's going to come, it's going Speaker 200:29:54to come every, every business division has its own contribution, but as long as we meet top line and we're now reaffirming that for Aero, it's going to have a huge impact on our gross margin because every dollar up on top line is improving our gross margin significantly. Same with safety tech, if you see the comparison between Q1 and Q1, '12 to 19% in gross margin shows you how well we have improved our cost of sales, bill of materials because the big contributor this quarter for safety tech SmartVision two is our ADAS product, which traditionally had lower gross margins, but we've improved that significantly. So I'd say that just if you bridge Q4, you look at the gross margins there. That's where our EBITDA is going to be coming from. We're very, very disciplined in our OpEx. Speaker 200:30:49If you see our OpEx in Q1, we're as we targeted, as we budgeted and we're going to be very, very careful with our expenses to make sure that our guidance is going to be met. And anyway, EBITDA positive for the full year is the guidance. Speaker 500:31:18Got it. Thanks. That was really helpful. That was it for me. Operator00:31:23Thank you. And the next question comes from Ittai Michele from Citi Cowan. Your line is now open. Please go ahead. Speaker 600:31:44Great. Thank you. Good morning, everybody. I just had two follow ups. First, maybe to pick up off the last question. Speaker 600:31:51Maybe you could just talk a little bit about what you expect for OpEx directionally the rest of the year, I say did come down in Q1. Just curious how you're thinking about that for the rest of 2025? Speaker 200:32:05Ty. Good morning. Thanks for the question. But was a little bit breaking off at the beginning of the question. Can you just repeat? Speaker 200:32:13I'm sorry. Speaker 600:32:14Yes, no, Sorry about that. Yes, just hoping you can hear me now. Just maybe you could comment a bit more on what you expect for OpEx, the rest of the year. I see it come down in Q1. Just curious how you're thinking about that for the rest of the year. Speaker 400:32:26Okay, got it. Speaker 200:32:27So I think you should see a very steady OpEx. And as I just to follow-up on my last answer is that we're going to be very, very disciplined in our OpEx. I mean, we have a big portion of that kind of set for the year. There are things we need to do to be able to ship if it's 135 on midpoint of the guidance or more. And but we're going to be very, very careful with that. Speaker 200:32:59And I think it shows for in Q1 on any expense to make sure that we keep that guidance of EBITDA positive for the full year intact. We have set up the SG and A expense structure beginning of the year to much, much bigger quarters throughout the year. So what would you see on OpEx in Q1 is that of what will support also, and as always, our strongest quarter in Q4 and a much stronger quarter in Q2. So that's already said. So you should consider the OpEx in Q1 as a base for the full year guidance. Speaker 300:33:47As they all said, it's more or less will be stable at the same as Q1 a bit more mainly in sales and marketing to support the growth. But you should expect about the same OpEx a bit higher than in Q1. Speaker 200:34:05Yeah. Well, sales and marketing sometimes goes up because you have to pay Speaker 300:34:10a Speaker 200:34:10chose for in the numbers being commissions and things like that. We're trying A little bit higher but it's mainly for sales and marketing and it's not just high numbers there. Speaker 600:34:23Terrific. Very helpful. Thank you. And as a follow-up, as your revenue kind of grows in the next three quarters towards your guidance, how should we think about working capital? You were able to actually release a fair amount this quarter in Q1, but as revenue grows, is there more opportunity in working capital or could actually become a use as you support growth? Speaker 300:34:44So as I said before, of course, when the business is growing, the working capital grows as well and the need of cash is also growing but in order to phase this we're doing continuous work in order to better our payment terms with suppliers and that's part of what you can see in Q1 results. In addition, we're financing and again working to increase this to other locations. We're financing part of our invoices in order to make the cycle of this working capital much faster. So of course when growing the working capital will grow as well but we're trying to reduce this growth by what I just mentioned. Speaker 200:35:31And I'd like to add to that just for the sake of everyone very quickly, but a very simple math equation. If Gauzy has, let's say just $49,000,000 of sales a quarter or $30,000,000 of sales like Q4. That means cash in as factoring 80% or financing invoices 80%, eighty five %. So that is like 8 to 7 to $10,000,000 cash in every 30. It just think of if we, and that's a big target. Speaker 200:36:09If we push, if we get the health of our suppliers to get us another thirty days on their net, if it's net 30, make it net 60, if it's net 60, make it net 90. If we just average better on supplier terms net 30, that's working capital of $89 10,000,000 of cash for our working capital every month. So that's how, you should think about improving cash flow, operational cash flow. It seems easy, it's not easy, but that very simple shift thirty days, that's how much influence it has on our working capital. That's what we're, that's our main target for this is a big target of us. Speaker 200:36:48I want Speaker 300:36:49to add that we don't expect 2025 to be a positive free cash flow. Okay. We only expect it in 2026. So it's important to understand that we're still we'll have a negative free cash flow in 2025. Speaker 600:37:04Absolutely. That's all very helpful. Thank you. Operator00:37:08Thank you. And no further questions that came through at this time. I will now turn the call over to Lial Peso for closing remarks. Please go ahead, sir. Speaker 200:37:20Thank 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 your day. Thank you everyone. Operator00:37:31Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.Read morePowered by Key Takeaways Solid first-quarter performance despite global uncertainty, with revenue of $22.4 M, gross margin expanding to 25.6%, and purchase order backlog spiking to nearly $36 M. Major contract wins include Air France KLM’s selection of advanced shading for Boeing 777 La Premiere seats, Mercedes-Benz’s use of dual-technology smart glass in the Vision V show car, and the ramp-up of Cadillac Celestiq EV SPD sunroofs with GM. Improved liquidity through signing the first $10 M of a $20 M debt facility at 3.7% lower interest and no prepayment penalties, raising total liquidity to $36.2 M. Cost and cash-flow efficiencies drove a 9% reduction in operating expenses to $14.4 M, while working-capital improvements and invoice financing cut Q1 cash use to $0.6 M. Reaffirmed 2025 guidance targets $130 M–$140 M in revenue (>30% Y/Y growth) and positive adjusted EBITDA, with stronger second-half momentum backed by a record backlog. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallGauzy Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Gauzy Earnings HeadlinesHead to Head Review: Gauzy (GAUZ) and The CompetitionMay 23 at 3:23 AM | americanbankingnews.comHead-To-Head Analysis: Gauzy (GAUZ) vs. Its CompetitorsMay 23 at 1:33 AM | americanbankingnews.com52 Money Mondays for $7 (This Weekend Only)Right now, for a limited time… You can get up to 52 Money Monday trades for just $7! Thanks to Wall Street’s “Most Wanted” trader, who just put the finishing touches on his brand-new Money Monday algorithm.May 24, 2025 | Timothy Sykes (Ad)B. Riley Cuts Gauzy (NASDAQ:GAUZ) Price Target to $13.00May 17, 2025 | americanbankingnews.comGauzy (NASDAQ:GAUZ) Price Target Cut to $13.00 by Analysts at BarclaysMay 17, 2025 | americanbankingnews.comGauzy Ltd. Resilient Amidst Revenue Challenges in Q1 2025May 15, 2025 | tipranks.comSee More Gauzy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Gauzy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Gauzy and other key companies, straight to your email. Email Address About GauzyGauzy (NASDAQ:GAUZ) Ltd. is a fully-integrated light and vision control company which focused on the research, development, manufacturing and marketing of vision and light control technologies. It operates principally in Germany, France, the United States, Canada, China, Singapore and Dubai. 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There are 7 speakers on the call. Operator00:00:00Good morning and welcome to Gossilenisen First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q and A. At this time, I would like to turn the conference over to Dan Scott, Investor Relations. Thank you. You may begin. Speaker 100:00:23Thank you, operator, and thank you everyone for joining us today. Hosting the call today are Gauzy's CEO and Co Founder, Eyal Peso and Chief Financial Officer, Mayer Pellig. On this call, 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. Speaker 100:01:20We do not undertake any duty to update any forward looking statements. This call contains time sensitive information that is accurate only as of today, 05/13/2025. 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 first quarter press release for definitional information and reconciliations of historical non GAAP measures to the comparable financial measures. Speaker 100:02:00With that, let me turn the call over to Eyal. Speaker 200:02:03Thank you very much, Dan, and good morning, everyone. Thank you for joining us today as we discuss our first quarter twenty twenty five results. For today's call, I'd like you to focus on three key takeaways. First, our solid first quarter performance in the face of global uncertainty for our customers, which underscores the strength of our business model and the growing demand for our technologies. Second, the significant business milestones we've achieved during the quarter and subsequent to its end that will drive our growth in 2025 and beyond. Speaker 200:02:39Third, we have signed the first ten million out of a previously announced 20,000,000 planned debt financing under significantly more favorable terms as compared to our borrowings as a private company. And finally, our reaffirmed 2025 guidance supported by strong backlog of purchase orders and enhanced balance sheet. We delivered a solid start to the year despite a two three week period in March 2025 of market uncertainty as customers attempted to assess tariff impact and risks. Revenue growth in the automotive and safety tech divisions was offset by some timing shifts in delivery in the aero and architecture divisions, which we expect to revert to a more normal cadence across the balance of the year. This view is supported by the record spike in the backlog of purchase orders to be shipped in the next few months. Speaker 200:03:39We're excited to execute against the backlog after a quarter in which we demonstrated our ability to deliver significant gross margin expansion as we accelerate revenues into the back half of twenty twenty five. Now, let me highlight some of the key business milestones we achieved during the first quarter and subsequent period. On our last call, we told you about our new Black SPD SmartLabs technology introduced at CES. Our partnership with Journeo to enhance London's Eight Thousand Five Hundred bus fleet with ADAS. Our partnership with Umbrella to enhance ADAS for customers such as Ford trucks and our FMCSA exemption renewal to accelerate adoption of ADAS in commercial vehicles across The U. Speaker 200:04:29S. I'll now focus my comments on three recent announcements. First, we announced that Air France KLM Group has selected our advanced shading system for the new La Premiere first class seats in the Boeing seven seventy seven aircraft. These five window suites represent a significant opportunity in the airline shading market valued at $600,000,000 annually with 6.4% projected growth through 2028. Gauzy has captured over 95% of the cockpit shading market and works with OEMs including Embraer, HondaJet, Daher and others. Speaker 200:05:13The double pleated system allows passengers to choose between translucent and blackout settings while providing centralized control for crew members. This is another example of our goal of transferring our cockpit shading success to cabin applications. Second, we announced that Mercedes Benz has implemented our smart glass technologies in 75% of the glazing in the new Vision V show car, which premiered in the auto show in Shanghai Twenty Twenty Five. This marks Mercedes Benz's first use of Gauzy's dual technology windows, combining SPD and PDLC for enhanced shading, privacy and digital application. Mercedes previously used SPD in its Magic Sky Control. Speaker 200:06:03In Division Z, these technologies allow transitions between transparent, shaded and private states while creating projection surfaces. The solution reduces glare and cabin temperature while maintaining visibility. A segmented PDLC partition provides flexible privacy between cabins. And importantly, today we're excited to announce the ramp up of shipments for the serial production of the Cadillac Celestiq EV with four zone SPD sunroof, marking the continuation of business with GM. These collaborations with Cadillac and Mercedes are yet another example of growing demand for our automotive smart glass technologies, with the market projected to reach $25,000,000,000 by 2028. Speaker 200:06:53Before I turn it over to May, I want to emphasize that our backlog of purchase orders, which was below $31,000,000 at year end twenty twenty four, expanded to almost $36,000,000 at the March, indicative of the strong continued demand for our products. As a reminder, purchase order backlog represents orders we have in hand and expect to ship in the next few months. The entire Gauzy organization is excited to deliver on this tremendous momentum. With that, I will turn it over to Mel for an Speaker 300:07:30update on Gauzy's financial results. Thank you, Eyal. I'd like to begin by providing a detailed overview of our first quarter twenty twenty five financial results, which highlights the strength of our customer relationships and the fast improvement in operational efficiency as we progress towards our long term financial objectives. For the first quarter, we generated revenues of $22,400,000 compared to $24,700,000 in the prior year period. We saw growth in both automotive and safety tech as compared to prior year period. Speaker 300:08:08This was offset by aero and architecture where we experienced a momentary pause towards the end of the quarter as customers sought to determine any potential tariff impacts. Importantly, we saw no cancellations and in certain cases by the end of the quarter and subsequent to its end, customers placed orders above their contractual minimums. Even with the revenue dynamic, our gross margin increased to 25.6 compared to 25.1% in the prior year period. This 50 basis points expansion was primarily the result of improved operational efficiencies, which continues our progress towards profitability. Total operating expenses for the first quarter were $14,400,000 down 9% compared to $15,800,000 in the prior year quarter. Speaker 300:09:04This decrease was mainly due to lower R and D, G and A and sales and marketing expenses, partially offset by higher D and A. Adjusted EBITDA in the quarter was negative $5,500,000 compared to negative $4,800,000 in the prior year quarter. This decrease was primarily driven by the factors already discussed for gross profit and operating expenses. Now turning to our segment results, starting with SafetyTech. Revenue in the segment was $10,800,000 in the first quarter, up 1.5% compared to $10,700,000 in the prior year quarter. Speaker 300:09:43The growth was driven by continued demand across the segment's product lines. Gross margin improved dramatically to 19.7% compared to 12.8% in the prior year period, primarily due to the benefit of scale. In Aero, revenue was $7,600,000 in the first quarter, up 24.6% compared to $10,100,000 in the prior year quarter. Gross margin was 33.9% compared to 44.1 in the prior year period. This decline reflects momentary pauses as customers sought to determine any potential tariff impact and the resulting shifting of some shipments to second quarter. Speaker 300:10:28In architecture, revenue was $2,400,000 in the first quarter, down 8.2% compared to $2,600,000 in the prior year quarter. As we have said before, architecture revenues can be particularly lumpy throughout the year, though this quarter was also impacted by macro uncertainties similar to what I just discussed in Aero. Gross margin expanded to 32.1, up from 48.9% in the prior year period, driven primarily by the benefit of scale and operational efficiencies. In automotive, revenue was $1,500,000 in the first quarter compared to $1,300,000 in the prior year quarter. The dramatic gross margin improvement we delivered is aligned with the broader operational improvements we are making across Gauzy. Speaker 300:11:19We expect our Automotive segment to continue showing improved results in 2025 as our new programs with major OEMs begin to ramp up as well as the beginning of recent serial production wins. Turning to our balance sheet and liquidity position, we ended the quarter with total liquidity of 36,200,000.0 including $1,200,000 of cash and cash equivalents and $35,000,000 of available capacity under our undrawn credit line. Total debt at quarter end was $37,300,000 including $12,500,000 of short term receivable financing. In terms of cash flow, our first quarter results included cash used in operating activities of 600,000.0 a significant improvement from a use of 6,900,000.0 in the prior year period. The result was free cash flow of negative 2,300,000.0 compared to negative 8 point 4 million in the prior year quarter. Speaker 300:12:21We're excited today to announce that subsequent to quarter end, we signed a new $10,000,000 debt facility with Mizrahi, the third largest bank in Israel. This is important because it's the first step in securing a total of $20,000,000 of debt financing as previously announced. We obtained this debt financing at a much more favorable churn as compared to our pre IPO lending facility. The improvements include a three seventy basis point interest rate reduction and no prepayment penalties. This increased liquidity enhances working capital that in turn supports our full year goals. Speaker 300:13:00I'm also pleased to announce that we are reiterating our guidance for full year 2025. We continue to expect revenue to be in the range of $130,000,000 to $140,000,000 representing more than 30% growth at the midpoint compared to 2024. Based on the benefit of scale, favorable operating leverage and strong recurring revenue base that we have, we also reaffirm adjusted EBITDA to be positive for the full year 2025. Given our typical seasonality related to visibility into our end markets, we expect the second half to be stronger than the first half and drive a full year growth and profitability. This guidance reflects the strong demand we're seeing across all of our segments, the growing adoption of our technology by leading OEMs and an expanded production capacity we're putting in place to meet this demand. Speaker 300:13:54Now I will turn it back over to Eyal for closing remarks. Speaker 200:13:58Thank you, Mehran. As we look across the balance of 2025, we remain incredibly excited about the opportunities in front of us. Even with the uncertainty in the market, the momentum in our business continues to build. Direct impact from tariffs on Gauzy has been minimal and customer purchase orders remain strong. We're excited for what this year holds for us. Speaker 200:14:24The resilience of our long term backlog, growing pipeline of innovation and enhanced liquidity position with our new debt facility reinforce our confidence in our growth trajectory. We'll continue investing in innovation, expanding our leadership in light and vision control technologies. Our future product roadmap includes promising developments across all four business divisions that we expect to accelerate adoption and expand our markets. Operationally, we're focused on scaling efficiently, balancing growth with margin expansion and progress toward profitability. We remain well positioned to deliver our reiterated 2025 guidance, accelerating growth and deliver outstanding value. Speaker 200:15:17In closing, I want to express my gratitude to our employees, customers, partners and shareholders for their continued support and confidence in Gauzy. Thank you for your time today. Now we'll open up the line for questions. Operator00:15:35Thank you. Ladies and gentlemen, we will now begin the question and answer session. Speaker 300:15:54And Operator00:16:01we now have our first question. This comes from Dan Levy from Barclays. Your line is now open. Please go ahead. Speaker 400:16:11Hi, good morning. Thank you for taking the questions. Wanted to first just start with a question on the cadence and appreciate the commentary that there were some delays in architecture, aerospace and that second half is more is going be stronger than the first half. But what's the line of sight on second quarter? And what's the line of sight on converting that backlog order book that you have into firm revenue? Speaker 400:16:46Should we expect a sharp step up in the second quarter on revenue quarter over quarter? Speaker 200:16:54Hi Dan, this is Eyal. Thanks for joining and thanks for the question. Let's start with the end, basically yes. I think that if you look at what we have reported shipping in Q1 and then add that to our POs in the backlog to be shipped soon. So yeah, you should expect Q2 to always, as always, but also to be as strong as expected. Speaker 200:17:28And we reiterated and reaffirmed the guidance for the full year right now mid Q2 because even though last two weeks or last three weeks of March, there was some hesitance among customers by, you know, in matters of shipments, where are there going to be any tariffs? Let's just wait and see. And if you remember April 2 was liberation day wherein there was determination about tariffs, there's a lot of questions and you know, some hesitation in March, but nothing affected the business. It's important for me to say this again and again, nothing affected the real business is all there. We had no cancellations. Speaker 200:18:12It's a little bit of push in the last two weeks of March. There was a lot of uncertainty, especially with things that were just ready for shipment and okay, just wait a second. Maybe we'll ship it from here, ship it from there to U. S. Customers. Speaker 200:18:30So, but all the businesses there and we're more than anything, I'd like to say that the cadence right now within Q2 and the POs that we have now to ship is exactly, if not better than what we saw in late December or beginning of twenty five. So that's why we're very confident that we're gonna deliver on our guidance for the full year. Speaker 400:18:59Okay, thank you. The second, if we could just go into the free cash flow. So you did EBITDA of roughly negative $5,000,000 negative $6,000,000 but the free cash flow was substantially better. So could you just talk about what the offsets were? It onetime benefits on working capital, some versus there and how sustainable that is? Speaker 300:19:29So as you can see, good morning, The Mayor is here. As you can see the cash flow, the main, I would say impacts on the cash flow is the working capital. Part of it is timely, but it comes from a strong and continuous working on the cash management improving for instance our payment terms with suppliers, financing invoices which gives us cash much more fast and then be able improve our cash flow although growing in general the working capital. I'd like to Speaker 200:20:14maybe add to that that a big part of this and we should expect that throughout the year towards being cash flow positive in '26 is that every thirty days that we can get from our suppliers net 30 to net 60 or cash in advance to net 30 or net 60 to net 90 gives us while we're factoring about 80% of our invoices today gives us a much more healthy inflow outflow of cash. And that's a big, big focus for this year for a while we're still factoring. So that also has a big effect on the improvement in operational cash flow for this quarter. Speaker 400:21:02Okay, thanks. If I could just squeeze in one more, what's the line of sight on that additional $10,000,000 financing that you talked to? Speaker 200:21:13So it's basically we're signed off, it's all signed. Between signing and closing, there are a few deliverables that we need to provide like, you know, liens, but I see no, there's no risk here. It's gonna close hopefully even this week, maybe next week, but it's really, it's done. It's a done deal. Operator00:21:38If that's the question done, it's Speaker 200:21:40not, there's no maybe here. You're talking about the second million? I'm sorry. Sorry about The 10, again, I don't want to give a commitment to Dana. It's going to look like guidance, but it should be, we're trying our best to do, to sign that off even if not before end of Q2, somewhere in early Q3. Speaker 200:22:12We don't have that signed off, but that's you know, expectations. Speaker 400:22:20Okay, thank you. Operator00:22:24Thank you. And the next question comes from Josh Nichols from B. Riley Securities. Your line is now open. Please go ahead and ask your question. Speaker 500:22:36Hi, this is Matthew on for Josh Nichols. Thanks for taking my questions. I guess to start off, touching on the macro uncertainty that caused the hiccup in Q1, would you say it's just mainly off of peak uncertainty on Liberation Day and from there things just looked more smoothly in terms of orders and timing? Or should we look out for in terms of possible additional hiccups in the future? Speaker 200:23:04Hi Josh, this is Eyal. Thanks for the question. So I to say this just again loud and clear. There is no effect to the real business in Gauzy by the tariff. But if you put yourself as a production company importing into or that its products are imported into The US in March, there was simply a lot of patient and a lot of question marks. Speaker 200:23:35Where do I take this product from? Even a Boeing where their cockpit shade is manufactured that the only aero product we're actually manufacturing for US customer outside The US had no issues. If you have enough inventory, can just wait a minute, maybe I won't be taking this from France. Maybe we'll just wait to see what's going to be the actual tariff that was only on the April 2. So I'm saying hesitation caused some delays, but if you just add up what we have reported shipped and then recognize and for us recognition remember is approval of the customer at his site many times of our products. Speaker 200:24:18So that has to be shipped even though it was ready. If you just look at what we had finished goods at March 31, if you add that to our reported revenues and our POs in the system, which were reported as spike of about more than $5,000,000 You're looking at together with the POs March '60, about a little bit shy of $60,000,000 that has been shipped or is going to be shipped very soon. So I'd like to say again, is with some hesitation, but we had reported mid April about week after separation day that it had minimal effect to our business to no effect. And today we can say with much more confidence that it's mostly we get exempt because of different reasons. So we're in a much better place. Speaker 200:25:13So it's just that there was a little bit hesitation and that's what caused some shifting, a shift in timing of delivery, but nothing at all has changed from our overall business that we have reported we're going to do this year. Actually, in some cases we had increases and we had customers ordering more than expected that had nothing to do with The US specifically in other places around the world. So I'm very confident that you're going to see our guidance met throughout the year. This is why we're not also giving quarterly guidance. It's hard for us to be accurate. Speaker 200:25:55These kinds of events are extreme, but you know, it comes together. But within a full year, even these events are kind of washed away. And so we're reiterating here, reaffirming our guidance for the full year. Speaker 500:26:10Got it. Very helpful. And regarding the large spike in purchase orders, which segment would you say is getting most of those orders or what is the split there? Speaker 200:26:22Yeah, out of the backlog, think we have a very good, Speaker 300:26:28it's a very Speaker 200:26:29good mix of $15,500,000 is Arrow just to show that if you look Q2Q on last year, you're to see a difference of $2,500,000 but it's all in the POs, it's all there. It's all going to be shipped in Q2 and in Q3, Q4, it's all in the book. So there's no issue there. There was another 17, I think, $18,000,000 with safety tech, which we're experiencing, the significant growth we expected, but even more in some cases. So, know, these are the main two. Speaker 200:27:05I think we had about quite extraordinary, about $6,000,000 of POs. Some of it really was already manufactured, just not recognized in Q1. So it's still a PO in the backlog, but it's really done. So we have about $6,000,000 in automotive, which is quite unique. We have a very good visibility for the smart glass portion of our business in automotive. Speaker 200:27:32We also announced for the first time by name GM, the catalyst starting to ramp up its production this year. We reported to start shipping cars very, very soon to their customers. So I mean, I think that's the takeaway the backlog. The rest is architecture about $2,200,000 of POs for architecture to be shipped well, April and May, if you look at March. Speaker 500:28:05Got it. Thank you. And I guess last one for me, it's somewhat of a related question. I guess to get to the to your guide of full year EBITDA profitability or to get a positive on that side, what would you say is in terms of segments or maybe even products that you're most excited about, what do you see getting you there? Speaker 200:28:30So what would contribute to the EBITDA positive? Just to see if I understood the question, if I'm looking now towards for the full year, what would be the contributor of the EBITDA positive that we have guided for the full year '25? So I think that, you know, just very easy to, I'd say just bridge Q4. I'd say just people bridge Q4. You see that if we double for Q4, you're at 125,000,000 for the year. Speaker 200:29:04We're guiding on a midpoint $10,000,000 more and we're now reaffirming it. And you see if we hit numbers like Q4, let's say on average for the full year, we're in a gross margin of 50% in aero. We're on a very healthy 20 plus in safety tech, we're bigger portions of the business. If you see what we're doing in auto, I know it's small numbers and it's insignificant, but it's even harder to jump 16 points per quarter, every quarter when you're only doing shipping a million and a half or 2,000,000, three million kind of cadence of quarters. But we're doing it because we're working very closely with the OEM to improve yield. Speaker 200:29:49So, I I'd say that, if you, Operator00:29:53it's going to come, it's going Speaker 200:29:54to come every, every business division has its own contribution, but as long as we meet top line and we're now reaffirming that for Aero, it's going to have a huge impact on our gross margin because every dollar up on top line is improving our gross margin significantly. Same with safety tech, if you see the comparison between Q1 and Q1, '12 to 19% in gross margin shows you how well we have improved our cost of sales, bill of materials because the big contributor this quarter for safety tech SmartVision two is our ADAS product, which traditionally had lower gross margins, but we've improved that significantly. So I'd say that just if you bridge Q4, you look at the gross margins there. That's where our EBITDA is going to be coming from. We're very, very disciplined in our OpEx. Speaker 200:30:49If you see our OpEx in Q1, we're as we targeted, as we budgeted and we're going to be very, very careful with our expenses to make sure that our guidance is going to be met. And anyway, EBITDA positive for the full year is the guidance. Speaker 500:31:18Got it. Thanks. That was really helpful. That was it for me. Operator00:31:23Thank you. And the next question comes from Ittai Michele from Citi Cowan. Your line is now open. Please go ahead. Speaker 600:31:44Great. Thank you. Good morning, everybody. I just had two follow ups. First, maybe to pick up off the last question. Speaker 600:31:51Maybe you could just talk a little bit about what you expect for OpEx directionally the rest of the year, I say did come down in Q1. Just curious how you're thinking about that for the rest of 2025? Speaker 200:32:05Ty. Good morning. Thanks for the question. But was a little bit breaking off at the beginning of the question. Can you just repeat? Speaker 200:32:13I'm sorry. Speaker 600:32:14Yes, no, Sorry about that. Yes, just hoping you can hear me now. Just maybe you could comment a bit more on what you expect for OpEx, the rest of the year. I see it come down in Q1. Just curious how you're thinking about that for the rest of the year. Speaker 400:32:26Okay, got it. Speaker 200:32:27So I think you should see a very steady OpEx. And as I just to follow-up on my last answer is that we're going to be very, very disciplined in our OpEx. I mean, we have a big portion of that kind of set for the year. There are things we need to do to be able to ship if it's 135 on midpoint of the guidance or more. And but we're going to be very, very careful with that. Speaker 200:32:59And I think it shows for in Q1 on any expense to make sure that we keep that guidance of EBITDA positive for the full year intact. We have set up the SG and A expense structure beginning of the year to much, much bigger quarters throughout the year. So what would you see on OpEx in Q1 is that of what will support also, and as always, our strongest quarter in Q4 and a much stronger quarter in Q2. So that's already said. So you should consider the OpEx in Q1 as a base for the full year guidance. Speaker 300:33:47As they all said, it's more or less will be stable at the same as Q1 a bit more mainly in sales and marketing to support the growth. But you should expect about the same OpEx a bit higher than in Q1. Speaker 200:34:05Yeah. Well, sales and marketing sometimes goes up because you have to pay Speaker 300:34:10a Speaker 200:34:10chose for in the numbers being commissions and things like that. We're trying A little bit higher but it's mainly for sales and marketing and it's not just high numbers there. Speaker 600:34:23Terrific. Very helpful. Thank you. And as a follow-up, as your revenue kind of grows in the next three quarters towards your guidance, how should we think about working capital? You were able to actually release a fair amount this quarter in Q1, but as revenue grows, is there more opportunity in working capital or could actually become a use as you support growth? Speaker 300:34:44So as I said before, of course, when the business is growing, the working capital grows as well and the need of cash is also growing but in order to phase this we're doing continuous work in order to better our payment terms with suppliers and that's part of what you can see in Q1 results. In addition, we're financing and again working to increase this to other locations. We're financing part of our invoices in order to make the cycle of this working capital much faster. So of course when growing the working capital will grow as well but we're trying to reduce this growth by what I just mentioned. Speaker 200:35:31And I'd like to add to that just for the sake of everyone very quickly, but a very simple math equation. If Gauzy has, let's say just $49,000,000 of sales a quarter or $30,000,000 of sales like Q4. That means cash in as factoring 80% or financing invoices 80%, eighty five %. So that is like 8 to 7 to $10,000,000 cash in every 30. It just think of if we, and that's a big target. Speaker 200:36:09If we push, if we get the health of our suppliers to get us another thirty days on their net, if it's net 30, make it net 60, if it's net 60, make it net 90. If we just average better on supplier terms net 30, that's working capital of $89 10,000,000 of cash for our working capital every month. So that's how, you should think about improving cash flow, operational cash flow. It seems easy, it's not easy, but that very simple shift thirty days, that's how much influence it has on our working capital. That's what we're, that's our main target for this is a big target of us. Speaker 200:36:48I want Speaker 300:36:49to add that we don't expect 2025 to be a positive free cash flow. Okay. We only expect it in 2026. So it's important to understand that we're still we'll have a negative free cash flow in 2025. Speaker 600:37:04Absolutely. That's all very helpful. Thank you. Operator00:37:08Thank you. And no further questions that came through at this time. I will now turn the call over to Lial Peso for closing remarks. Please go ahead, sir. Speaker 200:37:20Thank 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 your day. Thank you everyone. Operator00:37:31Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.Read morePowered by