Gauzy (GAUZ) Q2 2025: Backlog Surges to $43M, Setting Up 70% Second-Half Revenue Ramp
Gauzy’s Q2 revealed a record $43 million order backlog, positioning the company for an aggressive second-half ramp as management reaffirmed full-year targets despite shipment delays and margin compression. Execution risk rises with 70% of annual revenue now weighted to H2, but operational scaling and liquidity actions provide a clearer path to EBITDA positivity. Investors should watch segment cadence, working capital discipline, and the durability of demand as Gauzy enters its most consequential delivery window yet.
Summary
- Order Backlog Spike: $43 million in backlog underpins full-year guidance and signals sustained demand.
- Operational Scaling: Management is activating dual shifts and streamlined operations to deliver record H2 volume.
- Execution Watchpoint: 70% of annual revenue now hinges on second-half delivery and margin recovery.
Performance Analysis
Gauzy’s second quarter was defined by timing-driven shipment delays and margin contraction, with revenue declining year-over-year due to deferred deliveries—primarily within the high-visibility aeronautics segment. Gross margin compressed to 21.4% from 27% as fixed costs weighed heavier on a lower top line, especially within the aeronautics division, where product mix and underutilization drove segment margin to 23% from 37% last year. Operating expenses rose to $16.8 million, reflecting public company costs, R&D investment, and higher D&A, all budgeted to support future growth.
Despite these pressures, free cash flow outflow improved to $5.2 million from $11.5 million in the prior quarter, reflecting tighter operational discipline. Liquidity remains an area of scrutiny, with just $1 million in cash at quarter end, but management points to a $35 million undrawn credit line and recent $15 million in new debt as buffers. The company’s production facilities are now set to more than double run-rate output, supporting management’s confidence in a sharp H2 revenue ramp.
- Segment Mix Shift: Aeronautics backlog now dominates, representing $21.3 million and providing revenue predictability for H2.
- Margin Compression: Fixed cost absorption and vacation liabilities weighed on Q2 EBITDA, but higher Q4 volumes should lift profitability.
- Cash Management Gains: Factoring covers 80% of receivables, allowing immediate cash conversion on invoicing and supporting working capital needs for the ramp.
With 70% of annual revenue now expected in H2, execution on backlog conversion and margin recovery is the critical near-term driver for investors.
Executive Commentary
"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 results can vary from quarter to quarter, which is why we encourage investors to consider our results on an annual basis."
Eyal Faisal, CEO & Co-Founder
"Our production facilities across all divisions are sized to cover more than double the current run rate of production, so we are well positioned to execute the order ramp up and deliver it in the coming quarters."
Mayer Pelley, CFO
Strategic Positioning
1. Automotive Smart Glass Expansion
Gauzy’s SPD (Suspended Particle Device) technology, a dynamic dimmable glass solution, is gaining traction with global OEMs. The first delivery for GM’s Cadillac Celestiq, featuring the industry’s largest serial production smart glass roof, and expanded orders from Asia’s largest bus maker, Utah, signal rising adoption. The launch of a pre-laminated smart glass stack product further accelerates OEM integration, supporting a business-to-business model with predictable, high-margin growth.
2. Diversification into Marine and Architecture
Marine sector wins now span nine cruise programs, leveraging Gauzy’s PDLC (Polymer Dispersed Liquid Crystal) and SPD products for privacy, solar control, and energy efficiency. The company’s presence in architectural glazing is validated by high-profile clients like Moderna, while a new airline cabin shading product—set for CES 2026—positions Gauzy for commercial aviation growth as airlines gain more influence over cabin fit-outs.
3. Operational Realignment and Capacity Build
Production teams have been centralized under global operations, streamlining procurement and best practice sharing. Dual shifts and weekend work are ready to support $45–50 million quarterly output, matching the cadence required to meet full-year revenue targets. Leadership’s recent share purchases reinforce conviction in the company’s ability to execute at scale.
Key Considerations
Gauzy’s Q2 sets up a high-stakes second half, with both operational and financial levers in play. Investors should focus on:
- Backlog Conversion Pace: Timely delivery of the $43 million backlog, especially in aeronautics, is crucial for hitting guidance.
- Margin Recovery: Gross margin rebound depends on higher fixed cost absorption and favorable segment/product mix in H2.
- Liquidity Buffer: Reliance on credit lines and new debt raises scrutiny, but factoring and customer mix provide working capital flexibility.
- Execution on Segment Ramps: Automotive, marine, and aero divisions each face unique delivery and integration risks as volumes scale.
- Leadership Alignment: Recent insider share purchases and governance changes signal strategic commitment, but execution remains the litmus test.
Risks
Execution risk is elevated with 70% of full-year revenue now dependent on second-half delivery, exposing Gauzy to supply chain, production, and customer acceptance hurdles. Liquidity remains a watchpoint, as the company’s cash position is thin and ongoing reliance on debt and factoring could limit flexibility if order timing slips. Margin recovery is not guaranteed given fixed cost sensitivity and potential for further mix headwinds.
Forward Outlook
For Q3 and Q4, Gauzy expects:
- Accelerated revenue ramp, with Q4 historically strongest and expected to outpace Q3.
- Gross margin improvement as higher volumes drive better fixed cost absorption and segment mix normalizes.
For full-year 2025, management reaffirmed guidance:
- Revenue of $130–140 million, representing over 30% growth at the midpoint.
- Adjusted EBITDA positive for the full year, with break-even at $31–32 million quarterly run rate.
Management cited strong order cadence, expanded production capacity, and improved operational discipline as key enablers for guidance delivery, while flagging Q4 as the pivotal quarter for both revenue and margin realization.
- Backlog conversion in aeronautics and auto segments is critical for H2.
- Working capital discipline and liquidity access remain necessary for scaling output.
Takeaways
Gauzy’s Q2 sets the stage for a consequential H2, with execution on backlog and margin recovery as the main catalysts.
- Backlog-Driven Visibility: Record $43 million backlog and customer order growth provide rare near-term revenue clarity, but conversion is now the gating factor.
- Operational Scaling in Focus: Production and working capital systems are being stress-tested as the company targets unprecedented quarterly output.
- Margin and Liquidity Watch: Investors should monitor gross margin trends and liquidity draws as indicators of sustainable scaling and risk management.
Conclusion
Gauzy’s strategic wins and order momentum are clear, but the second half will test the company’s operational maturity and balance sheet flexibility. Execution on delivery and margin expansion will determine whether the company can translate backlog into lasting financial performance and shareholder value.
Industry Read-Through
Gauzy’s results underscore broadening demand for dynamic glazing and smart materials in automotive, marine, and aerospace sectors, with OEMs accelerating adoption in pursuit of sustainability and passenger experience goals. The shift of airline cabin decision-making to individual carriers broadens the commercial aviation addressable market, while the marine sector’s focus on ESG and design innovation signals further growth for advanced materials suppliers. Order timing volatility and supply chain resilience remain key themes for peers, as the industry navigates rapid scaling and evolving customer requirements.