Gaussy reports $20.1 million Q2 revenue, anticipates stronger second half backed by $43 million order backlog and new strategic milestones.

OPERATOR - (00:02:17)

Good morning ladies and gentlemen and welcome to the Gozi second quarter 2025 earnings call conference. At this time all lines are in listen mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 13, 2025. I would now like to turn the conference over to Don Scott. Please go ahead.

Don Scott - Moderator - (00:02:52)

Thank you operator. Thank you everyone for joining us today. Hosting the call today are Gauzy's CEO and co founder Eyal Peso and CFO Mayor Pelle. On this call, management will be making forward looking statements, not historical facts which are based on management's current expectations, beliefs, projections and assumptions, many of which by their nature are inherently uncertain. These forward looking statements, which are subject to risks and uncertainties, actual results could differ materially from our forward looking statements if any of our key expectations, beliefs, projections or assumptions are incorrect because of other factors discussed in today's earnings news release and in 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.gaussy.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, August 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 second quarter press release for definitional information and reconciliations of historical non GAAP measures and comparable financial measures. With that, let me turn the call over to am.

Eyal Peso - CEO and Co-founder - (00:04:30)

Thank you very much Dan and good morning everyone. Thank you for joining us today. As we discuss our second quarter 2025 results. For today's call, I'd like you to focus on five key things. First, the significant sequential increase in our backlog of orders we shipped in 25 confirms our customers support and demand for our technology, which I will highlight with an example momentarily. Second, our full year expectations remain intact in light of certain changes in the timing of shipments during the second quarter that are reflected in our results. As a reminder, our business can vary from quarter to quarter, which is why we encourage investors to consider our results on an annual basis. Third, we continue to achieve new technological and business milestones that will drive our growth in 2025 and beyond. Fourth, since the beginning of the second quarter we have closed on $15 million of debt financing under favorable terms as part of our plan to strengthen our balance sheet and finally our reaffirmed guidance forwarded by a strong backlog of purchase orders to be shipped in 25 and an enhanced balance sheet. Our teams worked hard in the quarter to execute despite the momentary disruption of the business caused by the conflict with Iran. This included supply chain and operating disruptions for the majority of the month of June which resulted in some shipping delays into the back half of 2025. I'm pleased to say that in light of this and tariff announcements earlier in the year, the strong demand we see from our customers continue as evidenced by our record jump in near term backlog to $43 million to be shipped in 2025. An example of this is our largest customer in Asia today, Utah, the world's largest bus manufacturer more than doubled its orders for the year during this quarter. These factors resulted in lower revenues as compared to Q2 2024, which we again view as an issue of timing and doesn't impact our full year outlook for the business. We expect the second half to be significantly stronger than the first half, supported by a record spike in the backlog of purchase orders to be shipped in 2025. Now let me highlight some of the key business milestones we achieved during the second quarter and subsequent period. We achieved a major milestone with the first customer delivery of General Motors Cadillac Celestiq featuring the industry's largest piece of dimmable smart glass ever used in serial production. Powered by our SPD (Suspended Particle Device) technology, this multi zone independently controlled panoramic roof demonstrates our ability to bring advanced materials to serial production at scale. This long term contract with GM represents significant leap forward in bringing dynamic glass from concept to reality. Building on our SPD (Suspended Particle Device) integrations with Ferrari, McLaren, Mercedes Benz, the Cadillac program expands our presence in the EV segment and positions us to capitalize on the global automotive smart glass market. Projected to grow from 16 billion in 2024 to to over US$25 billion by 2028. Next we launched our breakthrough prefabricated smart glass dab, a turnkey solution that accelerates OEM adoption of dynamic glazing in the automotive market, this fully industrialized product combines our dimmable smart glass film conductive elements and adhesive interlayers into a single unit that eliminates costly post processing steps and enables tier one suppliers and OEMs to integrate smartlass at scalele with speed. Our annual production capability of more than 1.9 million square feet positions us to capture significant market share through predictable high margin business to business channels. Multiple tier one suppliers and vehicle programs are evaluating our prefabricated stacks for integration into late 2025 through 2027 production platforms. These two announcements better position Gauzy to win in the Automotive One Lab market projected to reach $25 billion by 2028 and growing at over 11% gain. We're excited about our strategic expansion into the marine sector where we see significant opportunity within the $6.2 billion Global Marine Lab market. Following our successful implementation at the new MSC Cruise Terminal in Miami, the biggest terminal in the world, our PDLC and SPD (Suspended Particle Device) Smart Lab technologies are gaining strong traction with cruise line and seeking sustainable experience driven vessel design. We've now secured nine programs in the maritime sector validating demand in these high margin segments. With over 50 ships on board globally and the cruise industry's aggressive focus on reimagining the onboard experience, our dogs deliver the privacy, solar control and energy efficiency that operators need to meet their ESG goals while enhancing passenger experience. In our Architecture division, we continue to be selected by some of the biggest companies in the world to outfit their commercial spaces, including most recently Moderna for their corporate headquarters in our airlines division. We're pleased to share that we will be revealing a new commercial airline cabin shaving product at CES early 2026. This is expected to serve as our main growth engine in this segment as we move from cockpit into commercial cabins. As a reminder, the decision on how to control light in commercial aircraft has moved from the OEM to also include the airline. This opens our business to more than 700 individual airlines, both new production and retrofitting their existing seats and in our safety tech business. I'm excited to announce that Yazi Smart Vision Advanced Driver Assistance Systems (ADAS) is now installed also its buses across the big metropolis of Strasbourg, France in Manchester in the United Kingdom. We will also be launching our new AI based ADAS product Smart Vision for Buses in October at the premier event for the bus industry in Brussels called busworld. This follows the successful and ongoing deployment of Smart Vision for trucks with customers like Ford trucks like previously announced. With regard to governance, subsequent to quarter end, we announced important board changes aligned with our public company evolution. Following our first annual shareholder meeting, we welcomed back longtime investor and former director Alejandro Weinstein to the Board of Directors. His expertise in global expansion, M and A and public company leadership will be invaluable as we scalele operations and advance our market leadership. Before I turn it over to Mayo, I want to emphasize that we ended the quarter on exceptionally strong footing to accomplish our full year objectives. Our first half performance together with our record purchase orders backlog of $43 million to be delivered in 2025 are in cadence with our expected sales performance to meet the guidance. The entire GALV organization is excited to deliver on this tremendous momentum, but with that I will turn it over to Maeve for an update on Gaussi's financial results.

Mayor Pelle - CFO - (00:12:32)

Thank you Eyal. I'd like to begin by providing a detailed overview of our second quarter 2025 financial results. For the second quarter we generated revenues of 20.1 million at the segment level, all our divisions experienced shifts in timing dynamics as Eyal discussed at core growth level. At the same time, the improvement that we noted across the board in our record backlog was represented within our earnings division due to the lower top line over the same fixed cost base. Our Gross margin was 21.4% compared to 27% in the prior year period. Gross margin variance was primarily attributed to dynamics within our ergonomics division which reported a gross margin of 23% during the quarter compared to 37% in the prior year, reflecting lower segment revenue across a relatively fixed cost base and a change in product mix typically. Our highest margin category also had a compounding effect of bringing down our overall margin for the quarter. The remainder of segments collectively experienced more stability and margin performance. Total operation expenses for the second quarter was 16.8 million compared to 14.5 million in the prior year quarter. The change was mainly due to higher corporate expenses associated with being a public company versus a private company during the same quarter last year. Additionally, there was higher depreciation and amortization accounting for third of the difference and higher R and D expenses this quarter as compared to Q2 2024. The difference between the operating expenses of this quarter compared to the same quarter last year was planned, budgeted and executed to support dramatically strong quarters in the near term. Based on these factors, Adjusted EBITDA this quarter was negative 8.7 million compared to negative 3.9 million in the prior year quarter. Importantly, our production facilities across all divisions are citing coverage more than double the current run rate of production, so we are well positioned to execute the order ramp up and deliveries in the coming quarters. Turning to our current resources during the quarter our free cash flow improved to an outflow of 5.2 million compared to negative 11.5 million in the prior year quarter. This is reflective of the operational discipline and cash management strategies we have implemented to accelerate our path toward cash flow positivity later in the quarter. With only 36.2 million including 35 million of available capacity under our undrawn trade line. Total debt at quarter end was 53 million including 9.2 million of short term receivable financing. Since quarter end we have raised an additional $5 million of plain vanilla debt with banking drafting under federal tariffs. This brings our total borrow rate with exactly 15 million. We have received approval from our board to raise an additional 10 to 15 million dollars of debt and are in the process of working with new and existing lenders to expand our board range. We are committed to funding our business through non dilutive capital sources and will continue to pursue landfill debt as our primary focus until we achieve cash flow productivity. This is consistent with our previously announcement to strengthen our balance sheet. We believe we are well positioned to meet our goals as we enter the second half of the year with a strong backlog and energized operations. We continue to expect revenue to be in the range of 130 million to 140 million, representing more than 30% growth at the midpoint compared to 2024 based on the benefits of scale, the favorable operating leverage and the strong recurring revenue base that we have. We also continue to expect adjusted EBITDA to be positive for the full year 2025. This guidance reflects the strong demand we're seeing across all our segments, our record backlog at quarter end, the growing adoption of our technology by leading OEMs and the expanded production capacity we put in place to meet this demand. Now I will turn it back over to Eyal for his remarks.

Megan - (00:17:13)

Thank you Megan. Looking ahead to the remainder of 2025, our enthusiasm for the opportunities before us continues to grow. Our business momentum keeps building with our record order backlog delivering full year revenue visibility from an operational standpoint, we're in a position to deliver on tremendous order and delivery growth. We're excited about recent enhancements we have made inside our organization. We have promoted a new Executive Vice President with the Aeronautics Division. We have also moved each division's production teams from the business divisions to the global operations team reporting to the coo. This streamlines procurement, supply chain and best practice sharing across the organization. I am more confident than ever in Gauzy, as reinforced by my recent significant purchase of additional shares in June. Mr. Weinstein, our newly elected director and longtime investor, joined me in this purchase of 560,000 shares, underscoring leadership's strong conviction in the company's strategic direction and future growth. We are energized by the adoption of our light and vision control technologies across industries. We have a strong innovation pipeline across all four business divisions. We're expanding our addressable markets and remain committed to delivering our goals to increase shareholder value. In conclusion, I extend heartfelt appreciation to our dedicated employees, valued customers, strategic partners and committed shareholders for their unwavering support and trust in Galvin. Thank you for your time today. Now we'll open up the line for questions.

OPERATOR - (00:19:01)

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. Your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. First question comes from Dan Levy with Barclays. Please go ahead.

Dan Levy - Equity Analyst - (00:19:38)

Hi, good morning. Thank you for taking the questions first. Wanted to ask if you could just double click on some of the timing dynamics that drop the revenue. If you could just unpack what went on there and what is the comfort that these dynamics won't occur in the future?

Eyal Peso - CEO and Co-founder - (00:20:03)

Hi, Dan, Good morning. This is Eyal. Thanks for the question what we have announced and my answer is that we had some shifts in timing of deliveries and you know, we repeat this every quarter and it's still the case that we can have shifts between quarters, but we're very comfortable and confident still in our annual guidance. It's shifting from H one to H two of deliveries that we have in the book. And I'd like you to refer to the backlog, the backlog that were reported of for tables, $2.9 million. The spike there is. It shows the numbers are there. So we had a few deliveries move into H 2 from H 1. Sometimes hard to predict, and mostly it's because of Aero, where we always have also the best projection for the business, by the nature of the business. So if you look at the, at the per segment, what we've done in H one, then you'd see the big differences in Aero. And that's also our biggest part of the backlog that has to be shipped in 2025. So I'd like to say the following. First of all, if you add H one delivery plus the backlog 30th of June, you reach about 86 million that we've done, or we have orders to ship in 80 and that in 25, and that is in cadence within the expectations that we had. So there are a few million dollars that could have been in H 1 and are going to be delivered in H2. These are purchase orders (POs) in the system that well within the cadence of sales orders that we expect and within and certainly within the expectation that we have for the full year. There were a few reasons for shipment delays, mainly in the aeronautics segment and also some due to our production stop. We had two or three weeks in June. As you know, there was a conflict that was kind of surprising. End of the quarter we had to be shutting down the production in Tel Aviv for two, three weeks. That of course and that we said that a few times. We're very happy. That did not affect at all the business itself. Customers support us and those things shift a little bit into Q3 and into H 2. I'd like to say that again, it's timing and not taking away anything from the confidence we have for the full year guidance.

Dan Levy - Equity Analyst - (00:23:15)

Okay, so related to that and I think you've been addressing this, the first half, the second half ramp is aggressive. That would put 70% of your full year revenue in the second half. So maybe like what's the timing? What's the confidence that there won't be timing issues in the second half? And then also given that would be a dramatic increase over anything you've ever delivered in a half, the implied second half, what's the confidence that the execution will be there to meet that demand?

Eyal Peso - CEO and Co-founder - (00:23:52)

So that's a great question. I'd like to say that from when we budgeted 2025 approved in the board the quarters we have prepared the company to deliver 45 and $50 million quarters. That was always the case. That's how we, that's the budget we approved the board. So the company is set both hr, meaning we have two shifts across all the business division when we need it approved to work also on weekends when we need. So the company has the capacity to ship 45 and $50 million quarters. And if you align that with the fact that we have the sales order cadence to reach our targets, then yes, execution is possible. It's what we really from the get go for Q4. It's then also going to be a bigger Q3. But we have designed the company this year to be delivering 45 and $50 million orders. So that is as we planned. So I'd like to say that as long as the sales orders are coming in the cadence they should. And again you see the delivery in H1 plus what we needed 30th of June, the backlog, it's completely within the expectations of what we had expected in the beginning. We could have had 2, 3, $4 million already delivered and would go down from the backlog, but it's still within that world of expectations. So that's where investors should get. We have prepared ourselves for 45 and $50 million deliveries per quarter.

Dan Levy - Equity Analyst - (00:25:52)

Okay, thanks. If I could just squeeze one more in. And it's about the liquidity. So you ended the quarter with a million dollars on the balance sheet. And I know there's a note here that you're supposed to get $5 million of debt financing in the third quarter in July, but can you just talk about the liquidity dynamics and just what's the comfort that there's sufficient liquidity going forward? Thanks.

Eyal Peso - CEO and Co-founder - (00:26:20)

Sure. So we're doing our best, of course, liquidity of you. Right, Dan? We're adding cash. If you see we ended Q1 and Q2 with the same level of cash in the bank and but we have the $35 million credit line that we are. We can tap on in any time Mayor and I will withdraw money. However, as we always mentioned, we'd like if we can get better debt financing, simple debt, I mean plain vanilla, no, no equity involved. So we do that to better perform our cash flow performance. We have received from our own main bank that has been accompanying us for 15 years since we initiated a company, Mizrahi was received a much better terms debt on 10 million that we got in Q2 and we have additional 5 from them in Q3. And I'd like to say that we always said that we need more simple debt financing in order to get to cash flow positive. We are on good terms to receive the rest that we need. But again, as long as everyone understands that the $35 million are as good as cash, we can tap on them anytime we want. And that provides us visibility with regards to liquidity all the way through to end of 26 where we have guided the market and we still reaffirm that we're going to be cash flow positive. And as we go through H2, the business is balancing and we reaffirmed that we are going to be EBITDA positive for the full year. So also kind of balancing the business, the inflow and outflow should give a lot of comfort with regards to liquidity. So I'd like just to mention that again we always have these 35 in place if we need. If we get better terms from for instance, like Mizrahi, we take it. But it's there for us to use if we need. So I'd like really to again mention again that the 35 is part of our liquidity for financing the total cash flow positive.

Dan Levy - Equity Analyst - (00:29:01)

Okay, thank you.

OPERATOR - (00:29:04)

Thank you. The next question comes from Josh Nichols with B. Riley. Please go ahead.

Matthew - (00:29:13)

Hi, this is Matthew on for Josh Nichols. Thanks for taking my questions. I guess just to start off, I mean, you just reiterated your expectation for positive EBITDA this year. Can you walk us through the levers you expect to get there? Is it mainly just from ramping revenue in the second half or how should we expect you to get there? Thanks.

Eyal Peso - CEO and Co-founder - (00:29:37)

Thanks, Matthew. I'd like, I'd like to refer, always refer Back to our Q4 24 where we walked the talk of getting to Adjusted EBITDA positive. We've done that with $31.1 million of revenue. And I confirm, I mean, I'd like to reiterate the messH, the following messH. As long as we have more than 31, $32 million revenues, we're Adjusted EBITDA positive. So if you'd like to just averH out, as long as we are going to averH the full year at 31, 32, the full year is going to be EBITDA positive. That's why I'd like investors to analyze that's the point of break even. And if you look at the guidance we have towards year end and the order book that we need to deliver, so you'd see that in H2 we're much stronger. We're reaffirming the guidance we gave. So it's leaving us in Q3, Q4 a top line that would improve our gross margin dramatically and that we showed that also in Q4 24, our fixed cost is a big, big lever on our, on our gross margin. The more we have on top line, then the gross margins improve dramatically. So if you look at the Q4 24 bridge that you'd see how we why we are reaffirming EBITDA positive for the full year on guidance of the top line that we gave and why we feel so confident that that's achievable and balancing H2 would balance H one as we expected from the beginning.

Matthew - (00:31:39)

Got it. Thank you. And in terms of the mix and the backlog, does it lean more towards a certain segment and which segment should we see as a key contributor for hitting that full year guidance?

Eyal Peso - CEO and Co-founder - (00:31:52)

Yeah, thanks. So, and that goes to again, adding some more comfort level to the guidance that we provided. So the biggest contributor to the backlog 30th of June is aeronautics, where that's also the business we always had the best projections of because these things tend to not change much. They're not there no, during the year there are not many, you know, many, many, many changes within their customers projections. You don't suddenly make more jets or less jets. It's usually things that within the year don't change. So if you look at the backlog in pH seven of our deck, 21.3 million is associated to Aero. And that's also where we, if you, if you compare H 124, let's say to H 1, 25 where we had, you know, if you compare these two, and we had the biggest miss, but the miss is only again with timing of shipments. And then, and then you're gonna, you're gonna see that bouncing back in H2. And we are 100% confident that for Aero, for the Aero business, we're going to hit the target. And, and it's also the biggest part of our backlog. And this adds into our confidence for, for the guidance we gave for the full year.

Matthew - (00:33:27)

Thank you. And I guess last one for me, you mentioned the company having the capacity to ship quarters in the second half. So how should we expect working capital items to change in support of that?

Eyal Peso - CEO and Co-founder - (00:33:41)

Yeah, that's a great question. I'd like to say that today, Mayor, 80 or 85% of our business is factored.

Mayor Pelle - CFO - (00:33:52)

Right?

Eyal Peso - CEO and Co-founder - (00:33:53)

80%. Yeah. So the good thing about our business, I mean, it's something we'd like one day to get, you know, to get rid of. But the fact that we're serving companies like Boeing and airbus, the tier one, we're serving tier two to Ferrari and McLaren and automotive, Ferrari and McLaren, Airbus helicopters. We're serving customers that are very easily and very cheaply factored. It means that we're financing the invoices. So the working capital structure that we need, of course it has to be healthier to support quarters of 40 and 50 million dollars. But the way we're doing it is the fact that we have this engine of working capital in gaussy can support itself. Due to the fact that we're financing today 80% of our business, it means that we're getting paid once we invoice that payment immediately. We don't need to wait for payment terms so that we can always get cash once we invoice and that can support the production of next week or the next week and the next week. So when you factor 80% of your business and you're getting your money day one, it's so much easier to plan growth relations to working capital. Good question, but, and I hope I.

Matthew - (00:35:16)

Answered.

Eyal Peso - CEO and Co-founder - (00:35:18)

Doesn'T make sense. So I'm just saying that the growing working capital is growing and the world supporting it is by factoring more and more of our invoices to get money day one that can support the production of the following week and the following months and so on and so forth.

Matthew - (00:35:36)

Got it. Thank you. That was all for me.

OPERATOR - (00:35:39)

Thanks. Thank you. As a reminder, if you wish to ask a question, please press Star one. Again, if you wish to ask a question, please press Star one. The next question comes from Itaya Michele with Chidi Cohen. Please go ahead.

Itaya Michele - (00:36:04)

Great. Thank you. Hi everybody. Just two follow ups on the second half outlook. I was curious if you can comment on how we should think about the cadence between Q3 and Q4. Should we expect roughly a similar level of revenue in each quarter or will there be skewed one quarter to another?

Eyal Peso - CEO and Co-founder - (00:36:25)

Hi Ty, thanks for the question today. I mean, again, we don't want to, don't want to say, you know, it is again, quarterly projections are not as accurate and I'd like to be careful here. But I can say that roughly around Q4, if you look back three, four, five years, it is always our strongest quarter. So you should expect that to be the case this year and maybe even a little bit more than years before. So you're going to see stronger Q4 than Q3, especially with the vacation patterns in Europe less so much within Gaussy. But with our customers still 65% of our business is in Europe in August. In many cases, customers are actually shutting down. Back Q3, I'd say I'd be careful and say about 40%, 60% is what you can expect. But I'd like to say that this is again, this is a very rough estimation, not something that to be taken very accurately.

Itaya Michele - (00:37:35)

Thanks Ayat, that was helpful. And then going back to the kind of bridging to positive EBITDA, if we take the second quarter starting point of 20 million revenue and roughly 9 million EBITDA loss, it does still imply a very, very strong incremental margin to get back to where you were in the fourth quarter of last year. So I'm curious whether that's mostly under utilization of fixed costs. Is there some OPEX to think about just to help us in terms of the implied incremental margin, first half to second half on your guidance.

Eyal Peso - CEO and Co-founder - (00:38:11)

So thanks, Itai. It's really, I'd like to refer when you look at Gauzy, we need to see an annual kind of things straighten out on an annual, on an annual level. So if we say we claim when we did that before. We did it in Q4. 24 if we claim that $31 million is where we're breaking even on EBITDA, the cost structure of the company hasn't changed much. It's in some cases actually improved. You should expect the same on averH to get to EBITDA. Positive also that our top line improves $40 million quarter would also dramatically improve our gross margin. So that's where you can analyze your leftover EBITDA. But we already showed that on 31.1 where EBITDA break even are a little bit positive. So that's where I'd like you to get comfort from in the reference. Also it's very important to say that there is also quite a big effect of when you look at the EBITDA of Q2, there's quite a bit of effect on vacation. We are 700 and something employees. A lot of the employees are located in Europe where vacation, you know, vacation patterns change quite dramatically between Q2 and Q3. You can see that in former years. So you should expect also and it is significant enough to mention that there's going to be vacation liability dropping in the second half both because of the fact that the year ends in Q2 for European employees on vacation. And it's quite a big of a liability.

Itaya Michele - (00:39:54)

What was the liability and total liability.

Eyal Peso - CEO and Co-founder - (00:39:57)

Was 4.8 so $4.8 million of vacation liabilities only that we had end of Q2. You should expect to see a big change that in Q3 and onwards for two reasons. And that's also something worth knowing about. Gaussian that most of our employees, that's a cutoff date for accumulating vacation and it goes to zero end of Q2. And also there's a big, there's usually a big drop in August because that's when they take their annual vacation. And it is a big liability if you can see out of our EBITDA. But also just always remember that 31 million, that's where we break even. Anything above that with much improved gross margins because of the top line is going to contribute significantly to the ebitda.

Itaya Michele - (00:40:53)

That's very helpful. Thank you for all that detail.

OPERATOR - (00:40:58)

Thanks. Thank you guys. Thank you. There are no further questions at this time. I would now like to turn the conference over to Eva Alpezzo, CEO. Please go ahead. S.

Eyal Peso - CEO and Co-founder - (00:41:18)

So thanks everyone for joining in today. Excited about what's coming and looking forward to talking to you soon again.

OPERATOR - (00:41:29)

Thank you. Ladies and gentlemen. This concludes today's conference call. Thank you for your participation. You may now disconnect.