Q3 2024 Gauzy Ltd Earnings Call
Good morning and welcome to the Gallery Limited 3rd Quarter 2024 Earnings Conference Call.
Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Dan Scott, Investor Relations. Thank you. Please begin.
Dan Scott: Thank you, operator, and thank you, everyone, for joining us today. Hosting the call today are Gowzy's CEO and co-founder, Eyal Peso, and CFO, Meir Peleg.
Dan Scott: 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.
Dan Scott: 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.
Dan Scott: and the comments made during this conference call or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.gauzy.com. We do not undertake any duty to update any forward-looking statements.
Please see the complete disclaimer at https://sites.google.com
Dan Scott: This call contains time-sensitive information that is accurate only as of today, November 12, 2024.
Speaker Change: You should refer to the information contained in the company's third quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable financial measures. With that, let me turn the call over to Eyal.
Eyal Peso: Thank you very much Dan and good morning everyone. Thank you for joining. This is our second quarterly earnings call as a public company following our June IPO and I want to express my deepest appreciation to our exceptional team for their hard work, dedication and continued professionalism and to our investors for your strong support.
Eyal Peso: Throughout 2024, we've achieved impressive growth driven by both exciting new commercial opportunities and the expansion of existing relationships with our loyal customer base. This strong performance reflects just the beginning of what our talented team can accomplish.
Eyal Peso: and we remain focused on executing our strategic vision and delivering on our commitments.
Eyal Peso: I'm going to focus my opening remarks today on three topics. First, the strong and growing demand across our four business divisions along with some highlighted strategic new customers and contracts.
Eyal Peso: Second, I'll give a high-level summary of how we performed in the third quarter and year to date, including actions we have taken to expand our production output to meet continued accelerating demand while maintaining our short-term goals to reach profitability.
Eyal Peso: And finally, I'll discuss how we are positioned to deliver on our strong backlog while advancing our pipeline of innovation to achieve our positive outlook for the business in the fourth quarter and in 2025.
Eyal Peso: Following that, I will turn it over to Gauzy's Chief Financial Officer, Meir Peleg, who will provide financial highlights from the third quarter, as well as give details on our initial fourth quarter guidance.
Eyal Peso: The third quarter was an important one for our company in many ways. One where we demonstrated the underlying strength and agility of our platform as we balanced accelerating demand with our focus on steadily improving profitability.
Eyal Peso: Case in point was demand on our aeronautics division that outpaced our ability to deliver based on labor constraints and typical seasonality at our production facilities in Europe.
Eyal Peso: Rather than rapidly adding new staff at a high cost that would require additional training and a much higher cost in the long term, we worked closely and diligently with our unions to add a second shift in France, a first for Gauzy.
Eyal Peso: This support and partnership with our unions allows us to, one, more effectively manage our fixed labor costs, and two, efficiently and quickly ramp up production without sacrificing profitability.
Eyal Peso: as that's a key point that speaks to how we operate and scale our business.
Eyal Peso: We are adding products and technologies constantly, fueling accelerating demand from our customers across our four business divisions But we won't sacrifice profitability in the pursuit of
of Outside the Grove.
Eyal Peso: As you can see in our narrowing net losses, we are continuing on our trajectory of improving profitability as we stay laser focused on driving the business towards EBITDA positive followed by operating cash flow and eventually pre-cash flow and net income.
Eyal Peso: The growing demand we talk about is real and tangible. You can see it in some of the largest companies and brands in the world. They choose us not just for a single order but for multi-year deliveries of key technologies that are fundamental for the products they make.
Eyal Peso: In the third quarter, we announced new business with Ferrari, one of the most iconic auto OEMs and fourth largest by market cap in the world.
Eyal Peso: Yutong, the largest bus manufacturer in the world, a major international airline and one of the largest cruise ship manufacturers in the world.
Eyal Peso: So now let me expand upon some of those and other key demand drivers across our four business divisions.
Eyal Peso: In our safety tech division, Yutong, who I mentioned is the world's largest bus manufacturer, increased orders for Q3 by 250% compared to the previous year.
Eyal Peso: You can see some of the impact of that order in our 68% revenue growth in the division year over year.
Eyal Peso: This growing relationship with a major OEM positions us to expand our already market-leading global position on passenger buses as they expand installation of our smart vision ADAS system on both single and double-decker models.
Eyal Peso: That system is now installed on tens of thousands of buses
Eyal Peso: In this quarter alone, we delivered on a record number of buses in Australia, reflecting 100% growth year-over-year. Both of these are testaments to how our relationships with OEMs and regional transportation authorities are a driver of growth.
Eyal Peso: Gowzee is still the only company in the world today covering complete cities with ADAS, no mirrors, on public transportation.
Eyal Peso: In the same division in September, we unveiled our next-generation AI-powered Advanced Driver Assistance Systems, or ADAS, for commercial trucks.
Eyal Peso: Ford Trucks is among the first OEMs to select this exciting technology.
Eyal Peso: and assigned us for a minimum of 10 years of serial production on their trucks.
Eyal Peso: Our Smart Vision ADAS for trucks replaces traditional mirrors with high-definition cameras and displays that deliver real-time audio-visual alerts based on image analysis and predictive learning.
Eyal Peso: In our Aeronautics Division, we signed an agreement with a major international airline to provide cabin shading systems with our LCG or Light Control Smart Glass products.
Eyal Peso: for their business class cabins on both new and existing 737 MAX fleets. This is an important development as it represents penetration into the cabin shading market in commercial aircraft where we grow rapidly.
Eyal Peso: As we disclosed before, we have reached 95% market share globally in cockpit shading for commercial and private aircraft, and we announced during the quarter how we expect that to represent a minimum of $240 million in revenues.
Eyal Peso: in aggregate for Gauzy over the next 10 years. This win is an example of how we leverage our strong business relationships and presence with OEM to expand into additional applications that represent high volumes.
Eyal Peso: In our automotive division, we landed our largest auto contract to date. Earlier this year, we signed a nine-year contract to deliver our product into an average of 50,000 cars per year.
Eyal Peso: with a major European OEM. Activity to support this contract is ramping up right now and we expect to realize first revenues from this contract in early 2025.
Eyal Peso: Additionally, we announced recently that Ferrari has selected Galaxy as a strategic supplier to provide SPD SmartGlass technology for serial production for their new 4-seater.
Eyal Peso: This is the first time Ferrari has implemented smart glass technology on a mass production level for any of its designs, and we are proud to be part of this exciting offering for the next eight years committed.
Eyal Peso: And in our architecture division, we had a number of new awards.
Speaker Change: First, a large cruise ship maker has selected Gowzee for their new terminal in Miami, Florida, which will host over 11,000 square feet of Gowzee PDLC to enable a transparent display facade. We also expect our technology to be implemented into current and future vessels of that manufacturer.
Speaker Change: Additionally, one of India's largest developers in the commercial sector has signed with Gauzi for multiple new buildings in the country, starting with over 5,000 square feet in a new establishment in the center of New Delhi.
Speaker Change: We have further orders in the pipeline to address the hospitality sector with this customer and we are excited about the opportunities to come in this region. And finally, we revealed the first ever solar-powered LCG smart glass at GlassTech, supporting sustainability initiatives in built environments.
Speaker Change: We expect to commercialize this revolutionary offering in 2025 and capitalize on a growing market. Next, allow me to provide some high-level thoughts on our performance in this quarter.
Speaker Change: and year to date. We grew our total revenue 24.6% in the third quarter and 29.2% year to date versus the same period of 2023.
Speaker Change: Our third quarter strength was particularly impressive considering we were late on certain shipments that we now expect to ship in the fourth quarter. This was primarily in our aeronautics division as we worked with our unions to add additional ships to meet increasing demand.
Speaker Change: Importantly, the demand for our products was already there and just continues to accelerate.
Speaker Change: With a second shift now staffed, we are already shipping that backlog and are well positioned to fulfill increased demand into 2025 and beyond. As we shared in our pre-announcement, approximately 4 million U.S.
Speaker Change: of Orders, scheduled for the third quarter, will now ship in the current quarter, Q4. Our results for the quarter featured particular strength in safety tech and architecture. The increase in revenues was the primary driver of higher gross profit in the quarter.
Speaker Change: When you look at our performance on a trillion 12-month basis, our revenues is up an impressive 29.8%.
Speaker Change: A helpful reminder would be that in a typical year, our first quarter is our weakest, our fourth quarter is our strongest by far, and the middle two quarters are typically similar largely due to vacation patterns in Europe.
Speaker Change: We have been very busy in the few months since our IPO. We have increased our labor output utilizing a second shift with the support of our unions. We have introduced new offerings like the next generation of our Ada Smart Vision for commercial trucks and we continue winning key business.
Speaker Change: Our end markets are growing fast, our backlog is ramping, and our products are winning market share.
Speaker Change: The demand is there, the orders are there, and we are fully confident we will deliver on our goals. With that, I will turn it over to Meir for an update on Gauzy's financial results.
Meir Peleg: Thank you Eyal. For the third quarter we generated revenues of 23.3 million which was up 24.6% from the prior year period and in line with our pre-announced levels.
Meir Peleg: Demand for our products across safety tech, architecture, and automotive were strong. Revenues from these divisions more than offset a decline in aeronautics that reflected the timing of deliveries on a full-year contract.
Speaker Change: As Eyal said, our typical contracts involve full year order quantities and there can be a variability in those shipments across the quarters based on customer demand and in the case of this quarter, our ability to ship.
Speaker Change: As such, quarter-to-quarter results can vary, but when you look at us on a full-year basis, the strengths of our model become far more apparent.
Speaker Change: Gross profit for the third quarter was $5.6 million and 11.5% increase from $5 million in the prior year period.
Speaker Change: This equated to a gross margin in the third quarter of 23.9% compared to 26.8% in the prior year period. This was mainly due to the mixed revenues from divisions.
Speaker Change: Amongst our divisions, Ergonautics produces our highest margins, which held up well during the quarter. However, a lower mix of Ergonautics in gross profit resulted in an overall lower gross margin due to the mix of gross profit from divisions.
Speaker Change: SG&A for the quarter was $4.8 million, up 18.1% from the prior year quarter, mainly to support higher revenues and investment in growth.
Speaker Change: R&D expenses in the quarter were $4.6 million, up 5.5% from the prior year quarter, and reflective of our strong commitment to innovation.
Speaker Change: Net loss for the quarter was $5.5 million compared to a net loss of $21.3 million in the prior year period.
Speaker Change: Adjusted Net Income excludes amortization of intangibles, stock-based compensation, and other non-core items. Please see the Adjusted Net Income table presented in our third quarter press release.
Turning to our division results starting with aeronautics.
Speaker Change: The 7.6% decrease was mainly driven by delays in shipments as the company worked with its European unions to add a second shift to meet increasing demand. As Eyal said, we expect the majority of those shipments, representing approximately 4 million, to occur in the fourth quarter.
Speaker Change: Gross profit in aeronautics was $2.6 million, a decrease of 15.2% year-over-year.
Speaker Change: This equated to a gross profit margin of 34%, down from 36.9% in the year-ago quarter. Lower gross margin was primarily the result of lower revenues across a fixed cost base.
Speaker Change: Now, turning to our architecture division's results, revenue in the division was $3.8 million in the quarter, compared to $3.2 million in the prior year quarter.
Speaker Change: The 21% increase reflects our growing demand in this division worldwide.
Speaker Change: Gross profit in architecture was $1.2 million, an increase of 37.2% year-over-year. This equated to a gross profit margin of 31.4%, up from 27.6% in the year-ago quarter.
Speaker Change: The higher gross margin reflected higher revenues, a favorable product mix, and operating efficiencies.
Now turning to Automotive Division.
Speaker Change: Revenue in the automotive division was $0.5 million in the quarter, compared to $0.4 million in the prior year quarter.
Speaker Change: We are proud of our continued growth in this division, which does not yet reflect the rapidly expanding committed backlog for our customers.
Speaker Change: One example we just announced today is our biggest ever science-theory production program to deliver our product into an average of 50,000 cars per year on average for 9 years, starting in 2025 with a large European OEM.
Speaker Change: The 68.1% increase was largely driven by strong demand for our ADAS Smart Vision 2.
Speaker Change: Gross profit in the safety tech was $2.1 million, an increase of 39.1% year-over-year.
Speaker Change: The 400 basis point decline was mainly a result of product mix.
Moving to our balance sheets.
Speaker Change: On our last call, we told you how early in the surge quarter we completed a number of actions to simplify our balance sheet and capital resources for the long term.
Speaker Change: As a reminder, the provider of our original $60 million credit line, of which $25 million was previously drawn, chose to participate in our IPO while reducing total availability of their credit line to the undrawn $35 million amount.
Speaker Change: As a result, we used a portion of our IPO process to repay what we had drawn plus fees.
Speaker Change: We have a highly supportive lending group and we expect to add additional borrowing capacity under favorable terms by year-end, further enhancing our liquidity.
Speaker Change: We ended the quarter with $9.4 million of cash on the balance sheet, which, when combined with our unzoned $35 million credit line, results in total liquidity of $44.4 million, which provides us with ample financial flexibility to execute our growth objectives and achieve profitability.
Speaker Change: Before I turn it back to Eyal, let me give you some color on our expectations for the fourth quarter.
Eyal Peso: We are off to a strong start in the quarter and we are reiterating our previously announced guidance for $28 million to $34 million.
Eyal Peso: We continue to expect gross margin in the second half to be higher as compared to the first half, based on the timing of revenues and associated operating leverage.
Eyal Peso: Finally, we expect adjusted net loss to narrow in 2024 as compared to 2023.
Speaker Change: Now I will turn it back over to Eyal for closing remarks.
[inaudible]
Eyal Peso: Thank you, Meir. Our outlook for the fourth quarter and beyond is exceptionally strong, driven by robust demand across all four of our divisions, and the continuous introduction of game-changing technologies that we expect will accelerate our growth trajectory.
Eyal Peso: In particular, our automotive division is experiencing rapid expansion through growing OEM orders globally as we ramp up serial production, demonstrating the scalability of our business model.
Eyal Peso: Simultaneously we're seeing exciting momentum across our other divisions from the ongoing expansion from airline cockpits to advanced cabin shading solutions in commercial aircraft.
Eyal Peso: to expanding deployments of our innovative building facade with marquee clients to massive adoption in bus fleets and truck OEMs worldwide.
Eyal Peso: We are confident that investors will increasingly appreciate the intrinsic value of Galsy the same way that companies such as Ferrari and Ford, Yutong or Boeing and many others have entrusted us with an important part of their future growth.
Speaker Change: Thank you for your time today. Now we will open up the line for questions.
Speaker Change: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touchtone phone. You will then hear a prompt that your hand has been raised. And if you wish to decline from the polling process, please press star followed by 2.
Speaker Change: And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you do have any questions.
Speaker Change: First, we will hear from Matt Sheeran at STIFO. Please go ahead, Matt.
Yes, thank you and good morning.
A couple questions from me, Eyal. First,
Speaker Change: In terms of profitability, I know you've been talking about getting to sort of break even from an EBITDA standpoint in Q4.
Speaker Change: with that sequential growth, do you still expect that or are there some other issues there? So let's start there in terms of the profitability.
Speaker Change: Hi Matt, good morning, thanks for the question. So yes, I'd like to reiterate that we're on track, I mean on track for EBITDA. I'll break even and positive as previously mentioned in our previous calls and talks together with you.
Speaker Change: What we have announced, and this comes to show that this is a main and major focus for us, is that the delayed or late shipments that we had to ship in Q3 and were pushed into Q4, because of, really because of manpower, and what we have done to resolve that is add a second shift.
Speaker Change: rather than hiring more production teams that would be then more heavy on that break-even point.
Speaker Change: As mentioned before, to reach that break-even point and positive, we're doing that based on our current expenses, both on cost of goods and both on OPEC, so that my answer to that is yes.
Speaker Change: and if we're delivering on our targets in Q4, I believe this is exactly where we're going to be.
Speaker Change: Okay, thank you for that. And then in terms of your outlook, it sounds like an automotive, it sounds like you're...
More bullish, you talked about some wins.
Speaker Change: When should you start to really gain traction in terms of revenue run rate? Should it be first half of next year or second half? And then in terms of capacity, obviously you have to prove to your customers that you can ramp.
Speaker Change: You've had some labor issues in other parts of your business, so how are you positioned to ramp capacity as those orders come on?
Speaker Change: That's a very good question, Matt. I'd like to say that the capacity issue is, again, very important to note that it's not production lines and machinery, it's only HR, and moving to a second shift resolves that in the aero business. It's very different in the automotive where we are shipping product on roll-to-roll basis, where our current capacity, extending it just a little bit, is well enough to support the 25 numbers that we're projecting. So different production lines require different needs. Currently, I'm stating this again, we are well-positioned.
Speaker Change: Demand that we have you are not seeing it and in q3 and And you'll be seeing it
Speaker Change: I expected towards the end of the first half of 2025, our bookings are growing dramatically and I'd like to reiterate again the point where our serial production programs signed with, for instance, with Ferrari and this big European OEM are eight and nine years respectively committed commitments with a minimum take rate per year. Ferrari we already started this year ramping up next year heavily and the other OEM is initiating its serial production next year. You do not see it in the $38 million backlog. That is really what we need to ship in the coming quarter, maybe quarter and a half.
Speaker Change: We do not apply all the minimum commitments, minimum per year commitments that we get into the backlog, only those that are actually on purchase orders.
Speaker Change: So, to answer your question, it's going to be mid-25, later in, first half of 25, towards Q2, you're going to see all this demand kicking in, also on shipments.
Speaker Change: and the others. But the booking is there on these agreements signed and sealed for as we said many years.
Okay, that's very helpful. Thank you very much.
[inaudible]
Thank you. Thank you.
Next question will be from Dan Levy at
Dan Levy: Hi, good morning. Thank you for taking the questions. I wanted to first just ask a question on the free cash flow dynamics. Maybe you can just provide us with, you know, some further color on
on the dynamics.
Dan Levy: You know, you talked about, you know, some working capital, perhaps you could just address, you know, the working capital trajectory there, timing of reaching EBITDA breakeven.
Dan Levy: And then maybe you could just remind us, you mentioned something about improving the liquidity position, perhaps further color on that. Thank you.
Thank you, Dan. Good morning.
Speaker Change: working capital difference as we said that many of the IPO expenses will be paid in Q3 rather than when we accrued them in Q2 so this is 3.5 and this is a major changes from EBITDA to free cash flow.
Additionally, we spent capex at $2.7 million, and this is...
We present our full free cash flow.
Speaker Change: Regarding liquidity, as you said, and I want to remind that the provider of the $60m credit line, which we'd ruined out of it $25m, participated in the IPO, and we repaid his facility beginning of July.
Speaker Change: And we are in the process of adding landing capacity by year-end, which we expect would be at a favorable turn.
Speaker Change: And together with what Eyal said regarding improvement on Q4 results EBITDA-wise, and being the 2025 full-year EBITDA positive, we are well-funded in our pursuit to our business objectives.
Speaker Change: I'd like to just add to that, if it's okay, Dan, that we have the $35 million of credit undrawn, which adds to the liquidity and gives us everything we need on top. We are supposed to be closing that extra financing that we talked about until year end, and that will give us some more liquidity.
Speaker Change: is instead of CapEx projected for 25. So we're going to reduce the amount of CapEx we plan to spend in 25. So it's really instead. We had to complete our production line for the Smart Vision 3 ahead of time. We announced the product release with four trucks on IAA and that was early, so it was already in Q3. And we expect to start to ship this product already in Q1.
Speaker Change: So we advanced a little bit CAPEX from $25,000. We're going to remove that from our budget in $25,000. So it's not on top, it's instead. That's important to say as well.
Speaker Change: So if we were to look at sort of the the pro forma free cash just considering that you've paid down some interest, you have sounds like a reduced capex, what is a better rate to consider going forward?
for the additional bordering.
i
Speaker Change: Maybe we're looking at each other just to understand the question better. You talk about, I mean,
It doesn't change our plans.
at all with the becoming...
Hey, but a positive on the short term.
for the full year for next year.
Speaker Change: We reiterate the message that even now with no extra funding we were offered by our lenders with favorable terms, we still have enough liquidity to get to EBITDA positive and to cash flow positive the following year.
Speaker Change: If you ask regarding the current quarter free cash flow, if I'll take all those one-time cash flow topics, so it's...
3.6
Speaker Change: would be reduced a pro forma basis. And of course, we were affected by the lower gross profit this quarter so this hit us by an additional 1 000 000 PLAYING MODE.
Speaker Change: Great, thank you. And then maybe if I could just follow up to Matt's question on the revenue side and the booking.
Speaker Change: Appreciate the color that you've provided here on some of the wins, but maybe you could give us a sense of sort of, the level of commercial activity or discussions that you're having that we don't see in what's disclosed today, but that maybe gives confidence that there's future revenue acceleration coming in future commentary, hopefully.
of additional bookings activity ahead.
Speaker Change: Really, I'd like to say that they put a very big bet on Gauzy's tech.
Speaker Change: I like to say invested, not invested money, but invested in us, in our product.
Speaker Change: on one of their most important growth engines for the next eight years.
Speaker Change: They committed for a minimum take rate, which is a very, very high number right now. They did not expect to be as high as it is because it was first an option.
eight times bigger than what we would ship.
Speaker Change: between Q2 to Q1 of 2025. That's the real order book we have, which is committed.
Now, usually, the minimums that they make...
Speaker Change: that they commit on, they never hit a minimum. They always hit at least 15, with 15% we usually find a 15% uptake that we're committed to deliver, but it's usually even more than that. A good way, another good,
Speaker Change: Good opportunity that we made public and announced to try and give a good answer to what you asked.
Speaker Change: We have right now in our increasing backlog of $38 million that we're supposed to ship next quarter, maybe a little bit into 2025. We have about $10 million of cockpit.
Speaker Change: We have announced last month that we have right now an order book committed to us of $240 million.
Speaker Change: How do these things live together exactly like I mentioned with Ferrari? We have signed, committed minimum orders for 5, 10 and more years in the aero business with how many of cockpit with every model we have to ship.
Speaker Change: But the POs on which we base the $10 million within the backlog, they come in every month or two and then we ship and employees get paid.
So to reflect if you'd like
How big and healthy our business is.
Speaker Change: 125, and then you have to multiply it by the 24 figure you saw to realize how much of that product...
Speaker Change: We have in our committed order book in the coming years, so aeronautics is, you know, ten years is not even a long period. Automotive would average seven, eight years. I'd say with safety tech and ADAS, it's also going to be an average of ten years of science year production programs. With four trucks, we have ten.
Speaker Change: So that's why I'd like you to maybe get confidence on the very big order book. And when I say order book, it's not in the air. It's signed serial production programs with minimum commitments.
Speaker Change: that we must be ready to ship. Okay, so that's, I hope that answers the question, Dan.
Great, thank you.
Thank you. Next question will be from
www.youtube.com.au
Speaker Change: Thank you. Good morning. A lot's been answered, but just a couple questions here. Meir, how should we think about the OPEX run rate? There's been a lot of focus on the questions around margin mix, cash, EBITDA, but looking ahead, do you anticipate a meaningful uptick in OPEX over the next quarter or two?
Ciao.
Speaker Change: If I compare the OPEX during 2024 along the quarters, we're quite stable, of course I'm adjusting the one-time expenses we had for the IPO.
Thank you.
Speaker Change: compensation and DNO insurance and also a bit of PwC and other legal expenses that we didn't have as a private company.
Speaker Change: Having much more revenue and gross profit will bring us, as we expect in 2025, to be EBITDA positive.
Speaker Change: Got it and then maybe just the final line of questioning is on the new European OEM that you mentioned, Starts Revenue.
Speaker Change: towards the tail end of the first half. I assume the OEM itself, is that a 2026 model year car that you would then rent shipments, you know, over the summer aggressively to meet that launch cadence? Or how do we think about the OEM's positioning of that vehicle?
Yes, exactly.
late 25, early 26, but for us...
Speaker Change: to be ready for, we wrote an average of 50,000 cars per year, these are all glass roofs.
for EVs. We're starting to ship
Speaker Change: I'd say heavily is going to be, real heavy is going to be a late 25, but it's already a sizable amount towards Q2, Q3, like you said, to make sure they have enough inventory because it takes time until they, you know, we're a tier 2 provider here with a very, very big and well-known tier 1 glass manufacturer that has selected us for this.
Speaker Change: So, you're right. I'd say a little bit before August, but...
Yes.
Speaker Change: Yeah, it's an LC. It's an LC, it's a, yeah, it's a special autograde LC product.
Speaker Change: I cannot, there are other features to this that are very interesting I cannot disclose at this point but once we you know we announced the OEM itself will provide more details.
Speaker Change: Can you share, is it an option for the car that we need to monitor, or is it a standard feature? And then any kind of content per vehicle, it's helpful, the 50,000 ranges.
Sound impressive, but how should we think about the content?
It's 50,000 between four models, it's important to say.
Speaker Change: I'd like to say that, you know, it looks like it might be a mix.
Speaker Change: Some would be a 100% take rate, kind of not an option, and some it would be an option. I'd like to say that also with Ferrari, our announcement was an option, but...
Speaker Change: The take rates are at a point where it became fundamental for them to sell the car.
Speaker Change: How should we think about the content per vehicle for that?
Speaker Change: I'd like to say that the 50,000 average per year, this is a minimum take rate. This is what we have a financial commitment on. This is not a wishful thinking. It could be either that or more between the four models.
Speaker Change: Got it. That's all I had. I appreciate the detail. Thanks much.
Thank you.
Speaker Change: Once again, ladies and gentlemen, as a reminder, if you do have any questions, please press star followed by one on your touchtone phone.
Next is Joshua Nichols and Bea Riley.
Joshua Nichols: Just wanted to clarify. I think you touched on a point. The aeronautics revenue in the quarter was down a bit relative to last quarter, but I think you mentioned in the backlog there's $10 million of aeronautics revenue. Is it fair to assume that
Joshua Nichols: That business is going to get back to that kind of $10 million plus per quarter run rate in the fourth quarter as you deliver on that backlog overall.
Hi Josh, good morning. I'll take it.
To answer your question simply is yes.
Joshua Nichols: that we didn't ship on time, meaning, because we just didn't, you know...
Joshua Nichols: because of vacation patterns in Europe and having the second shift approved by our unions only late in the quarter, most of it comes from Aero. So I'd say that is also very conservative.
Joshua Nichols: If we're on track, like we claim, to ship all these late shipments in Q4, you should be seeing us back on track with, relatively, much more than the 10 that we already shipped quarters before. Okay? So, yes.
is going to be significantly higher.
with the Lake Hibbins, yeah.
Yep, got it.
Speaker Change: over the trend in the first half that you guys saw them. I think we've talked a lot about the automotive opportunity. Good to see some of the new ones there. I was just curious, like the margin profile as you start to ramp up?
Speaker Change: Let's call it like the second half of next year with some of these customers. What's the expectation in terms of the gross margin contribution and how we think the automotive revenue could drive some expansion there potentially?
So, um
Speaker Change: It's a good point because on the figures that we've been showing the market, you know Jeff, we've taken ourselves a big task to break down our business into four as a young public company and we're happy to do that because we want you and everyone to have as much transparency that's the kind of company we want to be. And that, you know, that creates fair questions like you just asked.
Speaker Change: because the numbers are not representative of the massive automotive scale that we have.
Speaker Change: What I can tell you is, one, margins are going to be very healthy towards helping the average that we announced previously as a gross margin in the long term. I expect automotive...
Speaker Change: very soon to help that margin from the top, so averaging better than other business divisions.
and obviously that is a matter of scale.
Speaker Change: I'm saying this with conviction because both in Ferrari and also in this European OEM and in others
Especially in SPD where a single source applied.
So, I mean...
Speaker Change: It's going to be in scale helping us on our average margins from above.
Speaker Change: Thanks and then last question for me. I think in one of your press releases you touched on that you expected to hit the hundred million dollars in aggregate revenue received from your CMS offering by the end of next year. I'm just curious like how much of that hundred million dollars revenue is expected to be generated like next year relative to what you've generated so far.
yeah
so
Speaker Change: I'm trying to be careful with future guidance on specific business but I'm reiterating that message. When we said that we had that in our backlog it's you know if you take four trucks Josh as the case that we announced
We haven't announced all the business that we have yet.
Speaker Change: Towards the end of the year, towards the beginning of next year, we have tremendous and tremendous traction on our Smart Vision 3 platform that we announced in IAA.
Speaker Change: But if you only take four trucks and you take a fair share of their 25,000 trucks they're selling per year on the one truck that we are offered beginning of next year for 10 years, you'd see that these numbers ramp up.
Very very fast
Speaker Change: And that's just one model of six in one OEM, which is not the biggest one in the truck industry. And we're really, today, replying on RFPs.
Speaker Change: for quantities of hundreds and thousands of trucks per year per OEM.
Because ADAS in trucks
I claim, and many do, that it's becoming a must.
Speaker Change: My regulation, also because of ROI, because it's going to become a must in the next platforms.
Speaker Change: 27, 28, 29, and you look at the production, the scale of production for OEMs reported. So, you know, Volvo trucks are gonna be making 300,000 trucks per year. Mine, between the three brands, they have 240,000 trucks.
Speaker Change: And I believe they're going to select one platform for ADAS, which is really how you drive a truck.
Speaker Change: If you take an ADA system, I can't disclose exact figures of how much it costs, you know, we're selling it, but we're a truck and multiply it, you're going to get...
Speaker Change: to the figures that we mentioned as 100 million on our order book very quickly. I think that two models of one OEM covers that, and we're talking about much more.
Speaker Change: Okay, so my short answer is, we're reiterating that message. I'm hoping to provide more input once we start shipping in Q1 our Smart Vision 3 and to announce more wins like for trucks that we are working on.
Appreciate it. Thanks.
Speaker Change: Thank you. At this time I would like to turn the call back over to Mr. Peso.
Eyal Peso: Thank you for joining us today. We look forward for future discussions and announcements to update you on our progress. Have a great rest of the day. Thank you everyone.
Speaker Change: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time we do ask that you please disconnect your lines.
Thank you for watching!