GAUZ

Business Context and Reporting Period

Gauzy Ltd. (Nasdaq: GAUZ) is an Israeli-based, fully-integrated light and vision control company. The company develops and manufactures smart glass technologies (Suspended Particle Device and Liquid Crystal) and AI-powered Advanced Driver Assistance Systems (ADAS) for the aerospace, automotive, architecture, and commercial vehicle markets. This Form 20-F covers the fiscal year ended December 31, 2024. The company completed its Initial Public Offering (IPO) on June 7, 2024, raising approximately $75 million in gross proceeds.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 32.8% year-over-year, driven primarily by a $15.9 million increase in the Safety-Tech segment (ADAS solutions) and a $7.6 million increase in the Aeronautics segment.
• Profitability Improvement: Net loss decreased by 32.9% to $53.2 million. This improvement was largely due to higher revenues and a significant reduction in financial expenses (down $24.8 million), primarily driven by decreases in the fair value of warrants and financial liabilities.
• Margin Expansion: Gross margin improved by 300 basis points to 29.0%, attributed to higher revenue volumes leveraging a fixed cost base.
• Capital Structure: Following the June 2024 IPO, all outstanding convertible preferred shares and convertible loan agreements converted into ordinary shares. The company also repaid a $25.0 million credit facility in full during the year.

Guidance, Outlook, and Risks

Outlook and Liquidity: Management believes current cash, cash equivalents, and anticipated cash flows from operations and credit facilities are sufficient to meet requirements for at least the next 12 months. The company is finalizing a $10 million debt financing arrangement with an Israeli commercial bank, expected to be finalized in the first half of 2025.

Key Risks and Contingencies:

• Geopolitical Instability: The company faces significant risks due to the ongoing conflict in Israel (Hamas, Hezbollah, Iran). While operations have not been materially impacted to date, escalation could disrupt supply chains, call up employees to military reserve duty, or damage facilities.
• Profitability: The company is an early growth-stage entity with a history of losses and expects to incur significant expenses and losses in the near to medium term.
• Customer Concentration: The top ten customers represented 51.4% of 2024 revenue, though no single customer exceeded 9.3%.
• Intellectual Property Litigation: The company is involved in litigation with Global Glass Technologies Inc. regarding patent infringement claims related to licensed technologies. The company has successfully moved to dismiss claims but awaits a ruling on attorney fees.

Investor Verification Checklist

• Geopolitical Exposure: Verify the current status of the conflict in Israel and its specific impact on the company's Tel Aviv headquarters and production lines.
• Liquidity Runway: Confirm the status of the pending $10 million Israeli bank loan and the company's ability to fund operations without further dilution.
• Debt Covenants: Review the restrictive covenants in the 2024 Note Purchase Agreement (OIC), specifically the requirement to maintain a minimum unrestricted cash balance of $1.5 million.
• Revenue Backlog: Note that revenue backlog decreased to $30.7 million in 2024 from $32.7 million in 2023, indicating a need to monitor future order intake.
• Non-GAAP Reconciliations: Review the reconciliation of Net Loss to Adjusted EBITDA, which excludes significant non-cash items such as equity-based compensation ($6.6 million in 2024) and fair value adjustments.