Enovix Corporation

Q4 2025 Earnings Call — February 25, 2026

Management: Before we go to live questions, we're going to read the two most highly voted questions submitted by shareholders ahead of this call during the call registration. The first question is, how does your current strategy differentiate NFX from competitors?

Thank you for that question. So in NFX, we use 100% active silicon anode. Most of our competitors use graphite for the anode. Silicon anodes can store much more lithium. So we are able to provide much higher energy density because of that. One of the problems with replacing graphite with silicon is that the silicon tends to swell when using a battery, when doing a charge and discharge. We've got an architectural advantage where we figured out how to enable the silicon anode from not swelling while maintaining the energy density advantage. That is our main advantage. That is how we differ from most of our competition because we provide much higher energy density due to using 100% active silicon anodes.

The second question is, at our current burn rate, how long is our cash runway? And under what conditions will we need to raise additional capital?

I'll take that one, of course. First, we ended the year with approximately $621 million in cash, cash equivalents and marketable securities. So we're operating from a position of strength, in my opinion. Second, I'd caution against thinking about runway purely in terms of static burn rate, because our spending is tied to a very specific qualification and commercialization milestone set. As those programs progress, the working capital and capital expense profiles will evolve as well. As we said in the prepared remarks, we believe we have sustained liquidity, substantial liquidity to execute on our commercialization strategy without needing to raise capital in the near term. That said, as we've discussed before, beyond that, we'll always evaluate capital allocation options, such as strategic M&A, opportunistically, but with process rigor.

We will now go to the queue.

Our first question comes from Mark Shooter with William Blair.

Analyst Mark Shooter (William Blair): Thank you, guys. So I appreciate you getting into the details and geeking out with us a bit on the smartphone C-rate test requirements. The 0.7 C-rate lifecycle test is definitely overkill for smartphones, but it's an incumbent standard, and they're notoriously sticky and difficult to change once established. So I am wondering, in your engagements with Honor, how receptive were they when you suggested the change? And given that, you know, cycle life and energy density are always paired trade-offs, would Honor take a formulation that hits that 0.7 rate cycle life spec with a slightly lower energy density?

Management: Yeah, thanks so much. Thanks for the question. Yeah, you know, I think the first thing is to, you know, the reason I showed some of the material in this talk is to actually show that most of the use cases in the smartphones, as the batteries get bigger and bigger and more and more capacity, are under 0.2C discharge, which basically means that we have a battery that now we believe under 0.2C average discharge rate goes over 1,000 cycles. So we essentially feel we have a battery that meets the requirements of the smartphone market.

Now, as I said, one of the challenges is if you want to test if the battery meets the requirements at how the normal battery is used in the phone, it's going to take you a year at least to run that. Because if you run it 0.2C, it takes a long time. So customers typically use a higher rate of discharge, like 0.7C, to cut the amount of time it takes to test. This is very similar to people used to use a burn-in test, for example, for chips, you know, high-temperature ovens, you know, try to find the early failures.

When you change technology from graphite batteries to silicon anode batteries, silicon anode batteries behave differently when you discharge them very fast in this 0.7C. So Honor and our other smartphone customers, we've talked to them. They understand that. They realize that this test is a proxy and an accelerated test and not a true test. But like you said, this is a test they have been using.

We are in discussions with them. You know, we see three pathways forward. You know, one is we're able to convince them that this is not a real-life test and the real-life test is really 0.2 C and we can get a waiver on less cycle life for 0.7 C, for example. By the way, this has got nothing to do with energy density. It's purely about cycle life testing. So it's not like they need to take a lower energy density. They just have to take a lower cycle life on 0.7C, which is not a real test, an accelerated test.

The second one is we have to find together with them another accelerated test that is more representative, if you will, for silicon anodes. And we have some ideas on what that is, and we are discussing with them on that. The third one is we'll just have to modify our electrochemistry just to pass this test at 0.7C. So we are working on all three of those. Ultimately, there is a lot of interest from our customers in wanting to use our batteries because of the higher energy density we provide.

And the roadmap to even higher energy density is because of 100% silicon anode. And those conversations are going well. But ultimately, we need to solve this passing of this test to a way where they and us both are comfortable that in the real-life use case, when ultimately the battery is put in the phone, it's going to do really well and everyone's happy with the performance.

Analyst Mark Shooter (William Blair): Thanks, Trash. I appreciate all the color there. If I can switch over to the opportunity in smart glasses. In the presentation, you gave a lot of information there on the TAM as well. The performance advantage with a node that's a cell and technology goes up, but the battery and the application requirements get easier. So I can see how this is a faster commercialization path, but, um, you did mention an initial production demand in your release statement. So I mean, should we think about that as a purchase order? Or is that a next step? And can you frame what the revenue opportunity might be for 26? Or is this a 27 story?

Management: Yeah, good question. So, you know, as you alluded, when the battery gets smaller, but still the energy requirements or capacity requirements are high, we have a disproportionate advantage because the smaller it is, you know, the efficiency we have is better compared to our competition because the additional stuff we put in there for holding the cell from not expanding is not as much of a penalty, right? So that's why I think we're much more competitive there.

And also the cycle life requirements are much, much lesser. You know, they don't need to go 1,000 cycles because people probably change their glasses much quickly. Those two are very good. Also, the battery in smart glasses is the limiting factor. If you guys actually buy some of the smart glasses in the market today and start using them, you'll find that almost none of them come all day. Smart phones come all day, but most of these things will die in multiple hours. A better battery makes the product. That's why there's a lot of interest from our customers on using our battery.

And also there's lots of different kinds of applications, lots of different kinds of products. This is what I mean by, you know, there could be sport glasses, there could be utility glasses, there could be fashion glasses. And, you know, as I mentioned, when Android XR ecosystem comes, you know, there'll be even more products using that. So that's why the TAM is now suddenly much larger. We expect it to be in the next few years than we ever thought before.

So I think that's why we are very excited by this market and the fact that we can get there. Yes, you absolutely should think of the question you asked as a purchase order. And we are manufacturing them now to our lead customer. We are very excited by that. The whole team, I was in Penang last week. The whole team is focused on executing that and building those products and setting it out. Initial volumes will be lower just because they're just starting. But I think that 27, 28, we expect the market to really grow and be meaningful for us.

Management: Yeah, if I can just jump in and chime in. Had an old boss used to say, all dollars are not equal. It's a very important order for us.

Analyst George Giannourakis (Canaccord Genuity): Hi, both of you. Thank you so much for taking my questions and for the incredible level of detail in the presentation. I appreciate it. So maybe first question, you pointed to sort of a little bit of an issue with the electrode dicing in the manufacturing process, getting yields up there. How much have you been talking with your potential piece of customers around fixing that issue maybe together in anticipation of bringing production towards the end of the show? Thank you.

Management: Yeah. I think, firstly, as I mentioned, the yields on almost all steps are above 80%, as you saw in our 80% and above, as I mentioned. On the dicing side, they're close to 80%, but not quite there in fourth quarter. But this quarter to date, we're at 80%. So we feel confident that as we make progress, it'll sort itself out. But that's because we just started making two batteries, right? We just started making a smartphone battery and a smart eyewear battery.

We've been sampling a lot of batteries last year. We're now focused on two of them, one on agility line, one on high volume line. And we'll continue to work on each state to get it better. Our customers have visited our factories. They have seen it. We've got men through multiple customer audits. We have enough supply to meet all the requirements for 2026, and we're looking at various options to increase the throughput and get even more cost-effective than laser dicing methods to actually get the volumes up. So, yeah, a lot of focus on that, and we are working with our customers on that.

Analyst George Giannourakis (Canaccord Genuity): And maybe with regard to the drone opportunity, can you sort of talk about the different variations of chemistries that you have to work with? I'm assuming these are silicon dope cells, not 100% silicon. I'm approaching the market with first. And so how many different chemistries do you need to approach that market? And do you need any additional salespeople to sort of attack it? Thank you.

Management: Yeah, great question. You know, this we have been making, you know, we haven't really talked about it too much in the past. We've been making very high performance, high rate of discharge cells because, you know, because we were selling into a lot into the Korean military from our Nansan facility. And some of the requests came from drone batteries, and we started making those.

What we find now is with the market expanding fast, because as you guys have seen in the more recent political situations, there's lots of drones being deployed, both in commercial and also in military. We have now combined, used some of our knowledge online, on using 100% silicon anodes with our non-sun team. And now we dope those batteries also with silicon anode, with silicon, the graphite with silicon, and to increasing amounts.

As I mentioned before, when we put more and more silicon, the cells, the batteries swell. So that problem hasn't gone away. But since they're inside things like drones, even if they swell 10, you know, swell 10, 15% or more, there's space inside to accommodate that. So we have now find that we can make, you know, high, gravimetric energy batteries that do swell a little bit, but still good within the application.

Whereas in a smartphone, if you swell, it's not acceptable because it's very space constrained. So in that sense, I think it's been a really good thing for us. As I mentioned, we have a strong roadmap now and you'll see us sampling much higher watt hours per kilogram cells this year and just continue to increase that through next year. And we have a lot of customers now helping us with that too.

Analyst Colin Rouge (Oppenheimer): Thanks so much. Can you guys hear me okay?

Management: Yes, sir.

Analyst Colin Rouge (Oppenheimer): So guys, exciting that you're moving into the drones. Can you talk a little bit about the form factors that you're working on there, as well as the diversity of electrolyte and binder materials and binder processes that you can use you feel comfortable talking about at this point, just wanna get a sense of the full ecosystem here and potential product, you know, diversification that you might see within that opportunity.

Management: Yeah, sure. You know, all drones, again, like I said, it's a pretty big market and all of them are not the same, right? There are subsea drones, there are aerial drones, there are big aerial drones that carry a lot of weight. There are smaller ones that carry some munitions and maybe one-time use or just use for a few times. So we have different chemistries and different electrolytes to address that market.

This is one of those areas where we can trade off cycle life for energy density, for weight, and so on. You don't need to charge them 1,000 cycles. That's really not a requirement here. 300 is plenty. Suddenly, a lot more opportunities open up for us in terms of the electrochemistries we use. Our team in Korea has been doing this for a long time. We have multiple chemistries going after that. Some purely graphite, some graphite doped with silicon, different kinds of cathodes.

So multiple form factors, multiple products, but we understand this market pretty well. And the other important thing is in this market, having your own factory is a really big deal because manufacturing, that's something that our customers tell us, that the fact that we own our factories and we can make them in Korea or Malaysia is a big advantage compared to some of our competition who actually have to use contract manufacturing in China and other places.

So these are sensitive areas where having our own captive manufacturing helps us quite a bit. And I'll add to it, and I think it's part of it.

Management: I do expect that we'll add to the sales and business development organizations to support that. So it's kind of the time to build that group out.

Analyst Colin Rouge (Oppenheimer): And given what's going on in the U.S. in terms of trying to migrate manufacturing and secure supply chains back into the U.S. over the next few years, even from Korea, can you talk about some of your capital planning on a multi-year basis as you enter that market? In terms of having to have some localized or regionalized supply in the Western Hemisphere to serve some of the U.S. military?

Management: At this point, as Ryan mentioned, we were fortunate to acquire this facility in Korea last year from SolarEdge that added 300,000 square foot of total capacity factory we have in Korea now with a very capable team that's been building batteries for defense for 20 years and industrial applications. We have a large footprint there and we are now going to invest more into that this year to get more capacity there and again, so far I think manufacturing in Korea, our manufacturing in Malaysia seems perfectly acceptable.

We'll continue to see if it makes sense to bring something into the U.S. but we are quite, our customers are quite comfortable right now with those two facilities.

Analyst Jeff Osborne (TD Cohen): Thank you. I appreciate all the detail on the call so far. I wanted to know, Raj, relative to the last earnings call three months ago or so, the 0.7 C metric that you mentioned, is that new? Because you referenced sort of a four-month testing period. I'm just curious, like when the parameters changed and then when that I think you referenced a four-month sort of shot clock to proceed through the testing process and procedures.

So did the four months start three months ago and you'll know next month? Or did you get that new homework assignment, so to speak, in the past few weeks?

Management: No, that's always been there as a requirement. And our thinking was that we will figure out a way to, I mean, we will pass that requirement also. But I think what we find now is with 100% silicon anode batteries, you know, 0.2C requirement is something we can pass because, you know, we have data now that shows that.

When you discharge a battery, like 100% silicon-ion battery at 0.7C rapidly, which is not a real use case, as I mentioned. You just do it for convenience. It doesn't behave like the graphite batteries do. It behaves differently. So in that sense, it's one of those cases where the accelerated test itself has to be adapted a little bit for the kind of battery we are using. And we showed this to our customers and they understand it.

So we're now discussing what the right way to resolve this is, right? So it's not a new homework assignment. The results is what we have now is we've solved the 0.2C problem, which I believe is a real problem in terms of how a battery is used in the phone. Now we are working on how to resolve the 0.7C accelerated test in a way that both us and our customers are comfortable.

Analyst Jeff Osborne (TD Cohen): And you think that can still be done in a four-month window that started at some point this quarter? I'm just trying to understand when you expect, knowing what you know now, to pass the honor test, so to speak.

Management: Yeah, like I said, I think there are three pathways for us. One is we have results now, 1.7C, that don't go all the way to the cycle life that they want. But we are talking to them about how real is this? Like, it's a proxy test. Can we get comfortable? And, you know, for example, get a waiver that you pass this many cycles, it's okay. As long as the 0.2C is holding to 1,000 cycles. That's one pathway.

That may be the shortest one. The second one, maybe we come up with a different accelerated test, which we believe is more representative or better, makes them comfortable that silicon anodes, if we accelerate tests like this, they behave like how they would in a real-world use case. We're working on that, which is a different testing protocol.

And the third one is they said, no, you just got to pass this, in which case we'll have to change the electrochemistry and find a way to pass this, which we have some ideas on how to do. The team is working on that. That might take longer. So depending upon which one we are able to convince them, we'll get how much the time is. So we do believe that one of these things will be able to convince them before the end of the year and get some volume.

Analyst Ryan: Got it. And maybe for Ryan, just given Roger's answer on the three different outcomes there, as it relates to sort of modeling the business over the next few quarters, I know you only give formal guidance one quarter out, but I assume we should think about eyewear as the main driver outside of the RouteJade facility for the next six months or so is part A of the question.

And part B, can you just remind us of what you expect seasonality to be for defense? You've got a pretty precipitous decline in Q1. But how should we think about that rebounding in Q2 through the rest of the year?

Management: Yeah, thanks, Chip. The first part of your question, the answer is yes. So for the first, the near term, you heard it right. So smart eyewear is the more near-term opportunity. And then the second part of your question in terms of seasonality, exactly right. So if you look at the same pattern in terms of revenue that we had last year, Q1 tends to be soft based on the order pattern of these long-term defense contracts. And then the back half of the year tends to be much stronger, kind of evidenced by our Q4 that we just printed, which was record quarterly revenue.

Analyst Jeff Osborne (TD Cohen): Got it. And then maybe last one quickly for you, just CapEx for the year. Should we think about 50 plus million or what's the expectation? Apologies, don't give guidance beyond the quarter.

Management: I think we gave guidance for just Q1 and just speak broadly about Q1 in general. We talked about the HVM2 line. We've already started placing some orders for some of the long lead, but we'll reevaluate all of our plans now with KH, who's in this new role of head of operations, who's wonderful to work with, and we'll just be smart and prudent how we phase those orders out over the year.

Analyst Bill Peterson (JPMorgan): Hi, good afternoon. Thanks for all the information. I wanted to come back to the question about your Korean operations. Can you give us a sense for what the combined, the two, Route Jade and the other one, can support in terms of megawatt hours or revenue? Just trying to get a sense of the run rate you could support at sort of max capacity. And then how much capacity do you plan to add? Can you give us any sort of sense on what investment you're considering?

Management: Sure. I'll go. Again, with that, we haven't given out specific numbers in terms of megawatts, but I think we've talked publicly about how this is a facility that will support significantly higher revenue streams, maybe 2x, and we're making decisions in terms of deploying capital right now, which would incrementally add to that. Again, I don't want to quote an exact number. But we recognize what a great opportunity we have here, some of these markets that we've talked to, and we've got a great team to support.

So we're starting to invest dollars. But again, I think you can see the type of numbers that we've invested in Korea over the last couple of years compared to the dollars that we're investing in PEP2. They're relatively small, but they're really important in terms of the ROI that they can return, both in terms of dollars and strategic return.

Management: Yeah, one other call I'd add is we have a much larger facility now. Like I said, we have a fairly large facility that we acquired with a lot of machines. So we will be adding incrementally and in a scalable manner. So some of it that we acquired is usable. For example, we have a huge quarter that we acquired from there that the coating, we don't have to add new capacity and quarter is very expensive. But then we can add more to the dicing and stacking in a scalable manner.

So we don't have to do it all at once. The facility is there so we can prudently add it as and when we see the demand and the qualifications materialize. So it's been very fortunate that we got this facility and now the demand is coming to us.

Analyst: I appreciate that. And then coming to the key, I guess, your first smartphone customer, trying to get a sense for the key learnings from the chemistry reformulation process. And how many more, I guess, options do you have with this customer? And you gave, I guess, a pretty clear example of cycle life. I guess, is there differences and requirements between cycles, the various customers, anything you can kind of give us to better understand what, I guess, opportunities you have ahead.

Management: Yeah, I mean, look, the learning here is this for me. I think the learning is, you know, we wanted to give a lot more color on this call, you know, and our report on exactly what it is. And what we've learned over this is the smartphone requirements are very, very difficult because this is the largest market for portable batteries and consumer electronics. Great margins because they provide clear value. Huge time.

But when you... When you make a battery for that, the rest of the markets are much easier because he's the toughest one. And to replace an existing graphite battery and existing graphite battery ecosystem with 100% silicon anode battery, one is meeting all the requirements. Second is helping and learning with the customers on accelerated tests or other tests that they've put together have to be updated a little bit for this particular kind of technology.

It's kind of like thinking about... When you started to add, I don't know, I remember in my past, we added fingerprint sensors to phones. So now you go to Face ID. It's completely different, right? So it's still a biometric authentication system, but the test cases are different and the way it uses is different. So whenever you introduce a new technology, you have to work with the customer in enabling that.

The reason that the customers are interested in, although it's different, is because we can provide an energy density roadmap that's not possible to do by just graphite batteries. And that is an absolute requirement. As I mentioned when I first took this job, the AI use case is only getting more and more, and the demands are getting higher and higher. Now, as I mentioned, I think a few calls ago that I expect these batteries to go to 10,000 milliamp hours, and now you see that.

And they can't keep getting bigger because the phones can't get any bigger. So the customers are highly motivated to help us get this technology to market. But when you totally change the graphite anode to silicon anode, we have to work with them to make that to qualify. So if you look at the progress we made, it's tremendous. I mean, I think we showed, we have specs of like 75 different specs and we pass most of them. So we are converging and, you know, it's been a fantastic learning, but at the same time, other markets like, like I wear are much easier to do because of this.

And there's so many other markets like that, that are much easier. Like, you know, if you think about wearable cameras and so many other markets where AI at the edge is really creating, they're great opportunities for us once we get this smartphone battery done or even before as we've gained a lot of technology advancements in the last few years working with our smartphone customers.

Analyst Derek Soderberg (Cantor Fitzgerald): Yeah. Hey guys, thanks for taking the questions. I was curious if switching out the dicing technology sort of resets any part of the battery qualification process. You know, obviously your customers want to make sure you guys can scale and, you know, putting aside any of the cycle life testing, you know, might the change to the dicing technology push back that qualification process at all?

Management: You know, look, anytime you have a customer qualify one particular product, if you change some steps within it, we will need to communicate what those steps are and what it changes, and we will need to run some form of qualification again. That's just the way it is, even when you move from one flap to the other, you got to do that.

But the way we would do it is these are all by different zones. For example, dicing is zone zero and then zone one, zone one, and then stacking is zone two. So there's many ways in my experience, we've done this. We established eco blends. We show similar performance. We can do a subset of the qual. So there's many different ways to do it, but it's still a little bit early right now.

You know, we're doing laser dicing on all of them. When we do some other form of dicing, we'll work with the customers to gradually phase it in.

Analyst Derek Soderberg (Cantor Fitzgerald): Got it. And then just a quick follow-up. Are there any remaining technical milestones to shipping commercial volumes in the back half of the year for the augmented reality market? Thanks.

Management: Any technical milestones, was there a question?

Analyst Derek Soderberg (Cantor Fitzgerald): Yeah, so, I mean, look, we now have seen the products from our customers with our battery in them. Very exciting. You know, we saw a few at CES. We saw a lot more in private demos. The performance is fantastic. They really like it. They really like what it's able to do and what the AI is able to do.

We don't see any big technical obstacles. But this is a new market. It's a new application. So the applications are evolving. So they're doing testing of different applications. And as and when they find them, we'll figure out how to adjust it. We did learn about one thing after we first sampled in terms of how to... different rates and different pulses and so on. And we quickly adapted that. And now we have a new battery that meets that.

So my team is very capable of quickly reacting to those now. But right now, the battery we have, we feel meets all the requirements. That's why we got a production PO.

Analyst Alec Valera (Loop Capital): Hey, guys. Thank you for taking my question. This is Alec on Fernanda. So my first question is, what is a good way to think about the cadence of testing and production over the next few years for smartphone, eyewear, PCs, and drones? Additionally, what do the capacity needs look like over that timeframe? I have a quick follow-up.

Analyst Alec Valera (Loop Capital): A cadence of testing. How do you mean by that? Maybe you can ask a little bit better in terms of timing, you mean, how long it takes or...

Management: Yeah, I guess what's the timing of the phases of testing?

Management: Yeah, so my experience in the last three years has been that typically we provide a standard size cell to the customers, that one we have, and they give us a set of requirements in terms of cycle life, energy density, you know, rate of charge, discharge, swelling requirements, and so on. And they'll do a bench level test of that. That takes a few months. When they're comfortable with that, they come back to us and ask us, hey, we w

Q3 2025 Earnings Call — November 5, 2025

Management: Before we go to the live questions, we're going to read two of the most highly voted questions submitted by shareholders ahead of this call during the call registration. The first question is, do you have just one or two smartphone battery customers at this point? And do you have enough capacity to satisfy their needs? Thank you for the question, and thank you all for listening. We have agreements with two smartphone OEMs, and both are in different stages of qualification. And of course, we've also sampled seven of the eight top smartphone OEMs over the past period with our batteries. And we are getting positive feedback from all of them on how they feel about the batteries, different safety tests they're performing. On the capacity front, as I mentioned, we have a line that when fully facilitated can produce up to 9 million batteries a year next year. And we also started making some initial payments towards augmenting the line two and so on. So we absolutely do have the capacity to support both the customers as a ramp. And, you know, 2026 will be a breakout year and we'll continue to add capacity to support all our customer demand in 27 and so on. Thank you.

Management: The second question is, will Enovix pursue rapidly evolving drone manufacturers requiring improved batteries? Yeah, thank you for that question. So this is a market that, as you mentioned, is rapidly evolving. We are getting a lot of interest from many drone OEMs, both in aerial and subsea, like two classes of drones that we're finding. We've been shipping batteries, high-performance, high-rate batteries from our Korea facility to many different customers in South Korea. We are now able to satisfy and sample those to other drone manufacturers that are asking us for those batteries now. In fact, we just got another purchase order today from a high-tech manufacturer, a defense manufacturer here in the US to provide more samples for evaluation of their programs. So yes, this is a fast-moving market and we're getting a lot of interest for our already existing commercial batteries that we're making in Korea.

Management:

Our first question comes from Mark Shooter from William Blair.

Mark Shooter (William Blair): Hey guys, congrats on naming Honor as your lead smartphone customer. This is a big name in China. Unfortunately, though, it looks like they want a thousand cycles now. Is this correct? And how much of this was a surprise to the team and what's required on the design front to achieve that?

Management: Yeah, Mark, the requirement has always been 1,000 cycles. As I mentioned in the last earnings call, it's a development program that we're working together with them. And we gave them samples in July. And we were doing cycle life testing while they were doing cycle life testing on the same batteries we provided. As we went along in this testing process, we realized that we need to make one more small design change to get to the full performance that they want. And we validated that change now internally. And we have confidence that the change we made will actually go to the 1,000 cycles requirement. We're now making batteries to that specification. And we expect to get those batteries and send them out to Honor this quarter, and they will start the testing again. And, you know, as you know, batteries are one of those things where when you give a new design iteration, you know, we got to start the cycle life testing again, and it takes three to four months to do it, you know, because of just the nature of the process. We expect that to get done in, you know, one queue next year, and then we expect to get the commercialization after that.

But they're very happy with the progress we've made. It's been very collaborative and they've allowed us to mention their name, you know, giving us the, you know, with all the progress they've seen and what we've made and how good the batteries are. So I'm very, very confident with what the team has done and it's going well. And we expect the batteries and, you know, I'm confident the batteries we shipped in 4Q will meet all the requirements.

Mark Shooter (William Blair): That's great. Thanks for the color, Raj. I appreciate that. You touched on that timeline. I'm wondering if you could add any more color there. You mentioned three to four months. Should we be expecting that first regional testing PO to happen in Q1 with a follow-up, maybe in Q2? I mean, how are you guys looking at this now?

Management: Yeah, I mean, look, we don't want to launch anything. They don't want to launch anything. Together, we want to launch a battery that's fully tested, solid, safe, meets all the requirements. Because the first battery to production, and we want to make sure we do everything right. So as I mentioned, it takes three to four months to validate it after we shipped it. And then they'll need to put it in their phone. And then the next model will intersect. So you should expect something in the first half of next year if everything goes well.

Mark Shooter (William Blair): Great. Congrats again, guys. Thanks.

Management: Thanks, Mark.

Management:

Our next question will come from George Gianarikas from Canaccord.

George Gianarikas (Canaccord): Hey, everyone. Thank you for taking my questions. Good evening. I'd like to just continue on the path of the questions around Honor again. Congratulations. And just try to understand the cadence of production and orders that we should be expecting. You mentioned the first quarter. We should get more detail around an order than maybe ramping production in the second. Just your level of confidence that this is sort of the last design change before achieving order status and then production.

Management: Yeah, look, I'm very confident. My team's very good. They've done tremendous work and this has been a close cooperation with the customer. So we are seeing everything and they're seeing everything. They're giving us solid feedback. You know, again, we are trying to launch everyone should understand 100% active silicon anode battery into a smartphone, which has never been done before with a brand new factory. So we've made tremendous progress. That's why I put the timeline out there. So for all our investors and for you guys to get a feel for how complex this is and how much progress we have made, I'm very confident. But as I always mention, we don't want to launch anything that's not 100% solid, and we work closely with our customers. And if all the testing goes well, I think it'll be fantastic. They'll launch next year. And again, there's another customer right behind that's also testing it. The same design iterations that we're making, that customer is also getting it. We got feedback from them that this is really benchmark in energy density that they're seeing. So there's a lot of interest, but we want to make sure it's solid when it goes to production. And as Ryan mentioned, we have a strong balance sheet and we are well capitalized. So we have the resources we need. We have a factory that's running well to get it to full production at the right time next year.

George Gianarikas (Canaccord): Thank you. And maybe as a follow-up to switch gears regarding an acquisition, obviously you've built up an incredibly strong balance sheet. I'm curious as to where you're looking, in other words, what opportunity set are you looking to explore from an M&A perspective? Just because you have this enormous opportunity in front of you just with the cells that you plan to manufacture soon, what could you add to the tool set that will make that addressable market even bigger? Thank you.

Management: Yeah, well, first thing I want to say is I want everyone to be clear. Our mission is to make this great technology we have of 100% active silicon anode batteries into smartphones, AR, VR, IoT, compute, and in some aspects into some EVs. That's our number one goal, and we are squarely focused on that. But we do find, as we go into that, that there are other aspects we could add to accelerate that growth in terms of channel, in terms of time to market, in terms of other components that help get that penetration of this great technology into market faster. But again, we will do it very thoughtfully. We're going to do it in a way that is financially makes sense and also does not distract us from our main goal. So that is probably all I can say at this point. And we are getting quite a bit of inbound interest, as you mentioned, because we have a very strong balance sheet. But we're going to be very thoughtful about how we use it. I mean, I couldn't say it better. I mean, I think we'll pride ourselves on being good stewards of capital. It will have to make sense from a strategic standpoint, from a technology standpoint in order to further the core mission, and then we'll apply discipline, financial, and diligence filters to it.

Management:

Our next question comes from Jeff Osborne from TD Cabin.

Jeff Osborne (TD Cabin): Thank you. Just two on my side. You mentioned, Raj, the yield improvements in Malaysia. I was wondering if you could just level set us, you know, where were things, where are things, where do you need to be? I think TJ touched on sort of a risk ramping up aggressively next year to meet the customer demand. So, you know, relative to maybe where his expectations and yours are, what's left to do and what have you achieved so far?

Management: Yeah, great question, Jeff. Look, this year, what has happened is we've had so much inbound interest on various markets. As I mentioned, two cell phone OEMs that we have development agreements that we had to make batteries. And these are actually the batteries that you see here that have been sampling to the customers. And then we had two different smart eyewear customers. And this is actually the batteries that we shipped from our factory that go right into the leg here, two different sizes of that. Then we had another IoT customer, which is potentially very high volume. That's a slightly different size. We had to make that one. Then we were making the battery for the defense contract that we had. So a lot of like five, six different cells that we're making. And the reason I tell you that is when you're making so many different size cells, you have to constantly adjust the lasers, adjust our stackers and the tooling to make each of those. And these are just samples, right? We're talking hundreds and thousands of units.

So we did not really spend that much effort and energy on optimizing for yields because by the time you got one done, you're just retooling it for the next one. Now, we've given all the samples to the customers. We are focused on two market, two products, which are shorter term for production, like in 26, which is a bigger smartphone cell, this one, and a smaller AR VR cell. So these two cells is what we are focused on now. We have an agility line. We have an HVM line. And since the last couple of months, the yields are coming up very nicely. And I review this every week. Actually, every week I have a meeting on execution and very pleased with the progress, particularly on the laser side and on the stacking side. They are where we expect it to be. And again, like I said, the high volume production now is mid to late next year. So we will be ready for benchmark yields by that time. So I feel pretty good that it's headed in the right direction and we're focused on it now.

Jeff Osborne (TD Cabin): Great to hear. Maybe just as my second question to follow up on Mark's prior question, can you just be more specific as it relates to, was there a scope change with Honor as it relates to their expectations or was there a form factor change or chemistry change? I'm just trying to understand better the tweak that you made that then now has to go through this new validation testing cycle. I get that there was a change, but what was it driven by and what was the nature of the change?

Management: So when we sent the samples to them, I think I mentioned last time, we were doing cycle life testing while they were doing cycle life testing, which means we charge the battery, discharge the battery, charge the battery, discharge the battery. You want to do it a thousand times. Now, we hadn't completed the cycle life testing before we shipped the battery. We had done some amount of cycle life. We sent it to them. They started doing it. Along the way, we noticed that the trend line is now such that to get past a thousand cycles, we have to make a chemistry change, not a form factor change, not a scope change. So, and we started validating that chemistry change and we now have samples internally that we believe now will go all thousand cycles. And we are making batteries with that new chemistry now and those should come out in Q4. This is a normal process in building a battery for the first time. Things take a little bit longer initially than we expect, but once you get the first one done, it's a whole lot easier because all the other smartphone customers have very similar requirements.

Jeff Osborne (TD Cabin): Got it. Thank you. Appreciate it.

Management:

Our next question will come from Colin Rush from Oppenheimer.

Colin Rush (Oppenheimer): Thanks so much, guys. Could you talk a little bit about the supply chain and preparedness? Certainly, there's been a lot of innovation around some of the anode materials that you guys could potentially use. And can you talk a little bit about what that opportunity set looks like as you work to advance some of the advanced applications that you're talking about here, both in the phone and the military markets?

Management: Yeah, absolutely. So what we are finding now is, you know, I think maybe just for the broader audience, we are an architecture first battery manufacturer in the sense that we can take advantage of, you know, higher capacity or higher voltage cathodes. We can take advantage of different kinds of silicon anodes we can take advantage of the latest advances in electrolytes to build a great battery because the better the materials get the better our battery and our energy density we provide gets because we control the swelling and we have intellectual property and how to mix these different materials so to your point, Colin, is that there are quite a few now of silicon anode suppliers. We were using before a silicon anode called SiOx, which is some kind of a oxide, silicon oxide. Now we're using SiC, which is silicon carbon, but there's different variations of silicon carbon. For example, the size of the particle of the carbon, the shape of the particle is a little bit different. The way they're manufactured is different. So we are testing quite a few of them. We are sampling with one, but we have second source and third source on various one of these things. So it's an exciting time to be a battery manufacturer because we can take advantage of all these tremendous material innovations and provide better and better batteries.

Colin Rush (Oppenheimer): And can you talk a little bit about the laptop opportunity? You know, you've heard a lot about the phones and eyewear, but, you know, certainly you guys have a fairly sizable opportunity in laptops as well. And as you get through some of the validation on the phones, how quickly could you transition into some of these other opportunities, given that it seems like once you get the first one done and dusted, a lot of folks are going to line up real quick for incremental demand?

Management: Yeah, I mean, it's a very good question. I mean, you know, I think you see now what AI is doing to all the edge markets, right? I mean, you can see now all the AI PCs that are coming out. You know, we talked about AI applications and smartphones. AR market is just happening because of generative AI, because you're able to now, you know, talk to these things. So almost all these end markets which use batteries at the edge, the demand is increasing and the performance requirements, the battery requirements are increasing. So laptops is a very exciting market. But again, for a small company like ours in early stage, we need focus. And I've been very focused on going after smartphones because I always believed that is the toughest battery to make. And we have very good relationship with the customers who are giving us requirements that we need to meet. From there, once we make that battery, we'll be able to very quickly address other markets. Similarly, you're seeing now how quickly we were able to address the smart glasses market because we have the smartphone technology. And I see the computers coming in similarly.

Once we get our smartphone battery ready and in production, we should be able to quickly go into the compute market. Because in that market, basically what it is, is it's a bunch of smartphone batteries put together. That's one way you can think about it. It's not like one giant battery. It's a bunch of 5m batteries packed together. So packaging, battery management systems, those are the kinds of things that will partner to get our battery technology into those markets. So we are talking to some of those customers, but if anything, I'm holding back the team from getting too many samples out there because we don't have the scale to support all of them at once. I'd like to do one or two really well and then expand.

Colin Rush (Oppenheimer): Perfect. Thanks so much, guys.

Management:

Our next question comes from Ananda Berua from Loop Capital.

Ananda Berua (Loop Capital): Hey, thanks, guys. Thanks for taking the question. Yeah, I guess a couple of clarifications for me. Raj, was it that you said first half 2026, expect initial production volumes with Honor?

Management: Yeah, again, it depends on how well the testing goes with them. I'm confident that this, what we're gaming this time will be really good in the sense of meeting a thousand cycle requirement. And if that goes really well, we'll find the right phone intersect for first half.

Ananda Berua (Loop Capital): Got it. Awesome. Thanks for that. And then the second smartphone customer, was it production in 2026 is the goal? And then part B of that question is, you had mentioned that you're able to sort of go through the process more quickly with the second smartphone customer. Can you just give some context around that? How much more quickly? What parts of the process like that? And I got a quick follow-up. Thanks.

Management: Yeah, sure. Yes, it is also for target for second, for next year's production, but probably be later half of next year, because given where we are starting, because what we need to get from them, we're giving them some cells, they're not testing. And next step from them is to get the exact dimensions of the cell that launch into production next year. Towards later part of next year fall is when typically they launch. And we'll have some time to make the battery to the exact dimensions in the first half, give it to them and they'll put it through their phone and qualify it. Like for example, as I mentioned, this thousand cycles testing, right? We've now figured out what it takes to get to 1,000 cycles. And we have that chemistry now that we'll be sampling end of this quarter, in fourth quarter this year. You can see now that the next customer will actually get samples that we would have validated for 1,000 cycles. So you can see this problem that we are now addressing would have been solved, right? Because we've now got ahead of that.

And there's a lot of things we learned with our collaboration with Honor, how to do the drop test, how they do a cycle life test, how they do fast charge test, how the battery management system is controlled by them, what temperatures they store the batteries, how much swelling is allowed at various temperatures. So there's a tremendous amount of know-how in how batteries are tested to get into smartphones, which we now have thanks to our first customer. And that's, you know, helping us with the second one because the second one also gave us the requirements and we looked at it. We're like, wow, these look very similar to the ones we got from the first one. So we're now able to meet them much faster. And my expectation is that the rest of the market will have very similar requirements because they're all, you know, phones going to the similar markets. So that's why my comment on the first one is the hardest for the ones after that will be a whole lot simpler.

Ananda Berua (Loop Capital): I got it. That's good for me. I appreciate it, guys. Thanks.

Management: Thank you, sir.

Management: Our next question will be from Derek Soderberg from Cantor Fitzgerald.

Derek Soderberg (Cantor Fitzgerald): Yeah. Hey, guys. Thanks for taking the questions. So Raj, on the chemistry change, my understanding is the chemistry reformulation can take maybe multiple months, you know, depending on how big of a change it is, I guess. Can you share like the timeline from when you notice the issue to actually solving and integrating the new chemistry? And I guess what's maybe the risk that the new chemistry doesn't quite interact with the rest of the battery and you might need to reformulate it again?

Management: I mean, look, the way we operate is we have a bunch of different chemistries that we are constantly have as backups. If this one doesn't work, what do we do next? What do we do next? My engineering team has been studying these, you know, again, for the last year. We picked one that we felt had the best chance, but we had backups running at the same time to see what it would be if that one had some challenges. And now the backup, we've tweaked it, and the results so far look very good. So I'm confident that the batteries we ship this quarter will meet. But we have other backups running to them if those need another tweak. I don't believe we'll need one more. But, you know, we always good to be prepared with multiple chances, right? The unfortunate thing about this, you know, Derek, as you know, these are not like chips where we can do simulation and figure out what will happen, what will not. Like, for example, when I used to build processors, you know, we'd have a simulation model. We would do analysis. We'd know what we'd do, and then tools will help you do it. And when you tape out, you're pretty much guaranteed to get it. Unfortunately, in batteries, you just have to run 4,000 cycles before you, you know, before you know if you got it. That's just the nature of it. But the good news is once you get it, you have it. So the first one is hard, but I feel pretty confident, but you know, let's see how it goes.

Derek Soderberg (Cantor Fitzgerald): Yeah, no, I appreciate that. And as my follow up, Brian, you know, as you're looking into some of these potential agreements, I think ASPs have maybe changed since you guys have kind of last spoken about maybe a revenue break even point for the company. So as you guys sort of start to ramp to multiple customers, can you maybe share that, you know, maybe what that revenue break-even point is for you guys or anything else, maybe on the near-term profitability model, you know, if you update, if you need to update margins or anything like that, can you share any of that detail now that you guys are sort of moving towards commercialization here next year?

Management: Yeah, no, I think... Look, fundamentally, I think we like where the market's going in terms of valuing our technology and our product. I'll stay consistent with what we've said in the past, that an important milestone for us is to get multiple HVN lines in place, build out in FAB2, and that's why we've started that process. In addition to getting lots of operational benefits of being able to switch over lines and run multiple products, it helps get to a certain level of scale. And it's really beyond that point. So line two, line three, that we think gets us to where we're gross margin positive and able to absorb the overhead. This is on a non-gap basis. And then really it's as we march towards filling FAB2 with equipment and getting full utilization there that we see as being adjusted to EBITDA positive or a proxy for cashflow positive.

Derek Soderberg (Cantor Fitzgerald): Got it. Really appreciate it. Thank you, sir.

Management: There are no further questions

at this time.

With that, I'd like to turn the call over to Dr. Raj Taluri for closing remarks.

Dr. Raj Taluri (Title): Thanks, everyone, for the thoughtful questions and joining us today. To close, I want to bring it back to the big picture. Enovix is entering one of the most important phases in our company's history, which is taking our breakthrough technology and scaling it to commercial production. We have a clear line of sight to that goal. Our A1 platform has been validated by third party, Polaris Labs, as the highest energy density battery ever reported in a smartphone. Our lead smartphone and smart programs are progressing towards launch. Our manufacturing capabilities at Fab2 are ramping steadily. And we have delivered, we have strengthened the balance sheet and we secured the capital we need to execute. And we built a team that knows how to deliver. While qualifications and ramp cycles take time, what matters most is that we're on the right path, with the right partners, with the right technology, and with the resources to see it through. I'm incredibly proud of what the team around the world has accomplished, and I'm confident in the road ahead. Thank you once again for your continued support and for your interest in Enovix. We look forward to updating you on our progress next quarter. Thank you.