Earnings call transcript: Enovix Q2 2025 reports strong revenue growth

Enovix Corp reported a robust year-over-year revenue growth of 98% for the second quarter of 2025, reaching $7.5 million, surpassing its guidance range. Despite this performance, the company’s stock saw a decline in aftermarket trading, with a decrease of 1.31%, closing at $12.85. With a market capitalization of $2.54 billion, InvestingPro analysis indicates the stock is trading near its Fair Value. Enovix also announced a $60 million share buyback program and highlighted significant advancements in its battery technology and manufacturing capabilities.

Key Takeaways

• Q2 revenue of $7.5 million exceeded the guidance range of $4.5-$6.5 million.
• Gross margin improved to 31%, while operating expenses decreased by 5%.
• Enovix launched the A1 battery platform, boasting a 100% active silicon anode.
• The company ended Q2 with $203.4 million in cash and announced a $60 million share buyback.
• Stock price fell 1.31% in aftermarket trading despite strong financial performance.

Company Performance

Enovix demonstrated significant progress in Q2 2025, with revenue surging 98% year-over-year, driven by strong demand for its innovative battery solutions. The company managed to cut operating expenses by 5% and maintained a healthy cash position, with a strong current ratio of 4.37. InvestingPro data reveals the company holds more cash than debt on its balance sheet, though it currently faces challenges with weak gross profit margins of 9.82%. Enovix’s strategic focus on high-energy-density batteries positions it well in the competitive landscape, especially as smartphone and AR/VR markets continue to expand.

Financial Highlights

• Revenue: $7.5 million, up 98% year-over-year
• Gross margin: 31%
• Operating expenses: $28.8 million, down 5% year-over-year
• Cash on hand: $203.4 million

Outlook & Guidance

Looking ahead, Enovix expects sequential revenue growth in Q3 2025 and anticipates securing its first smartphone design wins in 2024. The company is targeting expansion in multiple SKUs and customer bases, with a continued emphasis on AR/VR and industrial handheld markets. Future revenue forecasts project significant growth, with expectations of $100.4 million by FY2026. Analysts maintain a strong buy consensus, with 4 analysts recently revising their earnings estimates upward. For deeper insights into Enovix’s growth potential and comprehensive analysis, access the detailed Pro Research Report available on InvestingPro.

Executive Commentary

Raj Talluri, CEO of Enovix, highlighted the company’s technological advancements, stating, "Having been able to produce the A1 battery with a strong roadmap to even higher energy density, these are nice tailwinds for us to get higher ASP over time and access a much larger market." This underscores Enovix’s commitment to innovation and market leadership.

Risks and Challenges

• Market competition in battery technology may impact pricing and market share.
• Dependence on smartphone and AR/VR markets could pose risks if these sectors face downturns.
• Supply chain disruptions could affect production timelines and costs.
• Economic conditions and fluctuating demand in key markets could impact financial performance.

Enovix’s Q2 2025 earnings call highlighted the company’s strong financial results and strategic initiatives, setting a positive tone for future growth amid a dynamic market environment.

Full transcript - Enovix Corp (ENVX) Q2 2025:

Raj Talluri, CEO, Enovix: Thank you, Rob. And thank you all for joining us for this presentation, and thank you, TJ, for joining us today. Fellow shareholders, the company made great progress in Q2 on all fronts. We launched our A1 product platform. We hit key milestones with many of our strategic customers. We launched a warrant dividend to simultaneously reward our shareholders and also fund our future growth. Fab 2 in Malaysia has made the first A1 batteries now off our high-volume manufacturing line. Now, with our product sampling to two major smartphone OEMs and a leading eyewear company and strategic IoT customers, we are truly now moving into the commercialization phase of our journey.

Now, in terms of highlights for the quarter, there are a few highlights, and I’m going to walk you through some of them using the shareholder letter in the backdrop here, and I’ll point you to the things I’m talking about. Revenue. We delivered Q2 revenue of $7.5 million, above the guidance range, and it’s up 98% year on year. This was driven by strong demand for our products, and non-GAAP gross margin reached 31%, reflecting the higher margin of the defense products that we get from our Korean factory. We launched the A1 platform. The A1 platform is a leadership platform with the core battery architecture. It has all the advanced materials, micron design rules, and it meets all the requirements of the smartphone market. It is, in our opinion, the highest watt hours per liter—900 watt hours per liter battery with 3C charge rate.

We feel it goes up to 1,000 cycles. This is the first platform that has 100% active silicon anode, and it’s in commercial qualification with our customers now. We have over 400 patents on top of this technology that we have built. Doing this high energy density with long cycle life and fast charging is really the key value of this platform. Our customers are, you know, a lot of interest from our customers to qualify this product in a small battery like this. We have 26.3 watt hours per liter. I’m going to have TJ talk a little bit about what that number means.

T.J., Board Member, Enovix: Thank you. I decided to, in a prior press release which I asked him to put in here, do a little geek work on this thing. The battery is 1.8 cubic inches. He asked, how much energy is 26.3 watt hours in that little package? The answer is, if you do a calculation, it’s enough to lift a 5,000 pound truck the height of this working height of 4.7 ft three times in that little battery. We’re actually working right now on a demonstration to do that for real, except I’m going to use a Lamborghini instead of a truck.

Raj Talluri, CEO, Enovix: Thank you, DJ. A couple of other highlights I want to talk about here. We’ve now sampled this battery to our lead smartphone OEM and they’re doing all the different tests that they do to make sure this battery is working well in the phone that they want to launch in. This testing takes time, thousand cycles, takes multiple months to test, because when they put a new supply battery in, they go through the full cycle life test. We started sampling them in July. In three months, we have weekly meetings with them to see how the tests are going. We expect the test to be completed in three months’ time. If everything goes well, we should be getting orders from them to get this to mass production. We also made a lot of progress in smart eyewear.

The A1 battery in smart eyewear is also a tremendous value, because in smart eyewear, what happens is there is not much space to put a big battery. Typically, as you can see here, the battery is really small. It fits in these legs here. Sometimes people put two batteries, one on each side. One of the key things about these smart glasses is AI is having a huge impact on the usability of these glasses because now you can talk to these ones. Most of them have cameras that look at the world, so they’re able to detect what’s going on in the real world and then use that information to change how the glasses experience is. This means you need tremendous amount of energy density in a small package to actually do that. It’s a real advantage for us.

We have sampled this to multiple AR customers and the amount of samples we did also increased this year. The other important thing to remember is that I believe that the AI use cases will only continue to grow in this market. As these cases grow, the processors have to run faster, the memories have to run faster. There’s a lot more data that has to be computed. There’ll be more sensors there, which means we need a roadmap of product technology here, where we continue to increase energy density in the small size. You can see here on the right side, we have a roadmap of different technologies that will continue to increase that. One thing I find about these markets like AR when they first start is that it’s very important to be the battery of choice for the ecosystem.

What I mean by ecosystem is people who make processors, people who make the waveguide optics, people who make different sensors. We are now working with the people who actually make this process. We’ve sampled these batteries to them to make sure that the batteries have the performance they need in the various use cases. In these markets, the use case is a little bit different than smartphones, the discharge rate is a little bit different and so on. It is very important to have a battery that supports the ecosystem. We be in reference designs than any number of customers that can actually take the reference design. The Enovix battery has a potential of becoming the standard for that. We’re making a lot of progress on that this quarter.

The other thing I’ve said before is that when you make a battery that can meet the requirements of the smartphone market, high energy density, long cycle life and fast charge, that is the toughest battery to make. That battery can then be used in many other markets. We are seeing that now with the IoT markets. Recently we’ve had a customer and one of the leading customers in industrial handheld markets sign an agreement with us so that they can actually get these batteries and test them in the next generation of the products they want to launch. I also mentioned that in the last call, with the recent tariff situation, people really want in defense and defense markets, people really want batteries made from countries with a more advantageous tariff situation.

We have this Korean asset that we acquired and we added to that a lot more capacity last time with the acquisition we made from SolarEdge that is now helping us grow this market into some of the other U.S. defense companies. We started sampling to multiple customers now. Our factory in Penang is really coming up together well. In Q2, we accelerated our customer qualification efforts. Multiple customers have come now and visited our factory. As I mentioned, in this space of making lithium-ion batteries, making custom battery is very important. We’ve now reduced the time it takes to make a custom battery down by 50% from before because as I mentioned before, our factory, our machines are able to make batteries of different sizes, but we have to reconfigure them and we are able to do it much faster now.

The factory, this A1 smartphone battery, has also now passed the UN 38.3 certification, which is very important for airline safety certification for our first battery. We are now able to ship these to our customers. As we build confidence in the customers, we are sampling and the qualification that’s going on. We have now started placing initial purchase orders for adding more capacity to the factory and building some of the long lead time items for the second HVM line. We were also able to do that last quarter. What I actually want to do now is, I know we put a little teaser of a video before. I actually want to show you a video we just recently did of the entire factory producing the A1 smartphone batteries that we are sampling to customers. Let’s play the video.

We know that this was built for one reason: to manufacture the world’s highest energy density battery at scale. At our core is a breakthrough in design: 3D stacked architecture. Tighter, stronger, more reliable under stress, a structural leap that redefines how a modern battery factory must operate. The result: a 100% active silicon anode battery that marks a generational advancement in energy density. We start with laser-cut electrodes and micron-level precision. Each cut drives consistency. Cells are stacked under pressure, locked in place with constraint plates, and joined by a bus bar. Threading 7 millimeter tolerances, automated at speed. Every unit is tracked in real time. State-of-the-art machine vision, X-ray inspection, quality, and reliability. If it leaves our factory, it’s passed every extensive test we built into the line. Even the smallest steps have been reinvented, like our proprietary flag bonding process where copper meets lithium.

Designed in-house to stretch the lifespan and raise performance beyond what legacy systems can reach. Fully automated and built to produce millions of cells with exceptional precision. Highest battery capacity per unit volume from one of the most abundant elements on earth, silicon. No tradeoffs, no shortcuts. This is what it means to scale a breakthrough. This is Enovix.

Awesome. I hope you guys got to see that video. We are super excited by that factory. That is what a state-of-the-art battery manufacturing factory needs to look like. You can see the cells being produced there now. In July, we also issued a special shareholder warrant dividend, rewarding all our shareholders and giving us an opportunity to raise additional capital because we want to build out the rest of that factory that I show in that video. Now, the asset we acquired in Korea to increase our defense battery capabilities also came with additional coating equipment. It is a really important asset that we acquired because this newly acquired coating equipment is going to help us ramp the batteries in Fab 2 as we start building out the factory and as we start getting higher and higher volume into production.

Now, the anode—I want to say a little bit about coating. Coating is a very important part of battery making. In coating, what we do is we take these giant copper and aluminum rolls, and I see here like 105 millimeter wide and 500 meter long rolls of copper and aluminum foil, and we get this latest anode powders and cathode powders that keep changing in the market as people make more advances. We coat them on top of these rolls. It is very important to be able to coat these to the precision we need for the density we need and so on. The way we make the batteries, the way we dice the rolls and put them together, is very different from people who just make jelly roll batteries. It is important that we control the coating.

This ability that we acquired is really helping us, and it is helping us in many ways. It is helping us reduce cost, it is helping us increase the battery performance, and it is also helping us prototype new materials really, really fast. It used to take us 20 weeks to prototype a new material. Now we can do it under seven because we own our own coating. This is the power of being vertically integrated in this battery manufacturing. This is the investor letter. I am not going to go through all of that. I just want to say something which I mentioned when I first joined the company. The battery is the bottleneck, and it is becoming even more of a bottleneck for people to really realize the full power of the devices they buy.

This has become even more and more evident now as AI and AI applications have become even more prevalent in phones and in other consumer electronic devices. Recently, and I show a little anecdotal evidence here, we saw a smartphone OEM launch, like a mid-tier and maybe even a little bit lower-tier phone, which is a $100-$200 phone, $200-$300 phone, have like an 8000 milliamp hour battery. Why is that important? That used to be like 6600. Of course, they made the battery bigger to get that. That’s important because the bill of materials in a smartphone, in a $1,000 smartphone, you know, the battery is becoming a bigger and bigger percentage of that and the space is not getting any bigger. Energy density is at a premium.

For us, having been able to produce the A1 battery with a strong roadmap to even higher energy density, these are nice tailwinds for us to get higher ASP over time and access a much larger market.

T.J., Board Member, Enovix: Can I make a point?

Raj Talluri, CEO, Enovix: Yeah, please.

T.J., Board Member, Enovix: One quick point on the battery’s bottleneck. That makes it, I think, obvious. A typical AI chip is bigger than PC chips used to be, and it contains today 100 billion transistors. You’re looking at a chip that’s the size of a commemorative postage stamp with 100 billion transistors on it. That sucker, even though it draws nanoamperes or nanowatts on a node by node basis, draws amperes of current. That is the state of the art chip that’s already made. They’re making now down to 3, 3 nanometers to get it done. To do AI requires a lot of power because you’re using giant chips with a lot of transistors. That’s unavoidable right now.

Raj Talluri, CEO, Enovix: Yeah. Thank you, D.J. Okay, I’m going to turn it over to Ryan now to talk about the financials.

Ryan, Financial Executive, Enovix: Thanks, Roz. Thanks, T.J. First, a quick housekeeping point. On July 7th, we issued preliminary results. The final print you’ll see here includes a few positive adjustments. First, we’ll talk about the Q2 results. Revenue $7.5 million, well above our guidance range of $4.5 to $6.5 million. As Raj mentioned, up 98% year over year. Fifth straight quarter that we beat the midpoint of the guidance that we’ve provided. Nice, nice result. Also nice result in terms of gross profit and gross margin. As you can see, gross margin year over year turned positive, 31%. Really strong quarter, basically on the back of a great product mix with the defense sector. As we move to operating expenses, you can see as well $28.8 million for the quarter, down 5% year over year.

The company maintained discipline in terms of spend even while it’s continued to execute on meeting the mission of building out Fab 2 and continuing with the R&D efforts. Loss in operations, you can see there as a result of that. An improvement year over year. Let’s go to the next slide. Couple points here as well. In terms of the net loss per share on a quarterly basis, $0.13, again, also improved from our guidance range of $0.15 to $0.21. A couple points on cash. We finished Q2 with $203.4 million, and that included the aftermaking payments, completing the acquisition, and additional capital expenditures related to Fab 2. Another point that we have here on the bottom is that the board authorized, which we previously announced, the $60 million share buyback program.

As of today, we have not made any purchases under the program, but we stand by at the ready, especially in the face of market volatility.

Raj Talluri, CEO, Enovix: Let’s go.

Ryan, Financial Executive, Enovix: Finally, here you see our promises for Q3 in terms of the outlook. Revenue on a top line basis we do see growing sequentially and well above where we were last year. Net operating loss we see increasing slightly. Really two things: less favorable product mix we see in Q3 and increased operating expenses related to the manufacturing readiness scale up. You see the net loss per share, we see a range of $0.14 to $0.18 compared to the $0.13 in Q2, and the midpoint of that range right on par with the $0.16 that we posted last year.

Raj Talluri, CEO, Enovix: Awesome. Thank you. Can I go for a Q and A?

Call Moderator: We will now begin the Q and A session. Please note that this call is being recorded. Before we go to live questions, we are going to read the two most highly voted questions submitted by shareholders ahead of this call during the call registration. The first question is when will Enovix batteries appear in products?

Raj Talluri, CEO, Enovix: Yeah, thank you for that question. I think as I mentioned, we are super. We are sampling our A1 battery now to multiple customers, and particularly in the smartphone space is where we expect our first products to launch using our battery. They’re in cycling, they’re doing different tests. Like I said, that takes about at least three months for them to do all the tests. After that, once we pass all those tests, we expect to get a purchase order from them and expect the phones to launch. It’s now in the hands of our customers, and we expect them to come out as soon as the tests or all qualifications are done by them.

Call Moderator: The second question is can you explain the need for the warrants? What will the money be used for? Is it for the new lines or a new facility? How many lines can you fit in your facility?

Raj Talluri, CEO, Enovix: I’ll take that. Right, yeah.

Ryan, Financial Executive, Enovix: No, the proceeds from the warrants, if exercised, will be used to complete the build out of Fab 2. We have one high volume line that’s operational now, and the facility is sized to support four full lines. The funds will be used for general working capital purposes, supporting our strategic initiatives such as continued R&D development. I can report in terms of a little progress on the warrant. We’re pleased with the result. As of yesterday, we had roughly $34 million worth of exercises, I believe was the data that I’d seen. Money that essentially has come into the company soon.

Call Moderator: We will now go to the queue. If you would like to ask a question, please use the Raise Hand feature on your screen. If you have dialed in via phone, please use Star 9 to raise your hand and 6 to unmute yourself. Questions will be answered in the order they are received. Please ask one question and one follow-up question at most. We will now pause a moment to assemble the queue. Our first question comes from Colin Rusch with Oppenheimer. Please unmute your line and ask your question.

Colin Rusch, Analyst, Oppenheimer: Thanks so much, guys, and congrats on all the progress. Can you talk a little bit about where you’re at with the customers in terms of specs getting finalized for some of these new products? I know you’ve talked about the one customer getting launched here later this year. I assume that you’re making some meaningful progress with other folks as well and when we can start seeing some of those incremental announcements and product finalizations or product specs getting finalized over the next several quarters.

Raj Talluri, CEO, Enovix: Yeah, thank you, Colin. Specs wise, the first customer, we’ve had the specs and that’s the specs to which we made the battery and we sent them the cells and they’re testing them now. They’re actually doing cycle life test, which like I said is charge discharge at various times. Like I mentioned in the call, our batteries now, we feel, are projecting now that it can go up to 1,000 cycles. Last time when we announced A1, we thought could be like up to 800. Now we’ve progressed further along and we feel good about our technology and our customers are testing that.

We’ve just shipped samples out of our factory to the second customer now, second smartphone OEM, and those will, you know, again, I’ve been holding them back a little bit because I wanted to make sure that we satisfied all the requirements of the first one before we send to the second one, and we sent them now and we got the specs from them on exactly what cycle life, what performance trade-offs that they want, and we feel our current technology can meet those. My expectation is that they will test these batteries and then they will give us the exact dimensions just like how the first customer did on the size of the battery that they want for the launch next year because next year phones will have a slightly different battery based on the display they chose, based on the camera they chose and so on.

Once we get that, we will make batteries to that and we expect that to go to production sometime later part of next year. Of course, we’re getting a lot of interest from more customers and we will start sampling them through the year. T.J., wanna make a comment?

T.J., Board Member, Enovix: Colin, I’d like to make a comment from a Board perspective. I come here for a full day Board meeting once a quarter. I also come here for three other 6-ish hour meetings, including manufacturing and R&D. To me, the process by which you get the spec is more important at my level than the spec itself. Do you have a thousand cycles? Is the new spec bigger? That’s the sausage making. What we failed at, I failed at in the old pre-Raj Enovix was we had a set of specs and we went out and made them like engineers. I’ll give you an example. There’s a video of me on the website where I’m poking a nail through a battery. It’s really true our battery doesn’t light up and turn on fire when you poke a stainless steel nail through it. It’s really true.

In our rel lab we have a nail poker machine that’s got a fireproof chamber in it. It’s also really true cell phone guys don’t care. We were working on something that was kind of an engineering abstraction for real when our customers were doing things different. When Raj came here, he went to customers that loved him. Literally, I was shocked. He would send back pictures of boardrooms in Asia with 20 smiling people waving at the camera there and Raj in the middle grinning. He got their spec. Their spec wasn’t the kind of spec I’m talking about, it was a book. These guys are world-class users of batteries. They sent us some people and they said, no, you got to do this, no, you got to do that. This spec is interpreted this way. They actually did some of the work to validate our spec.

Back in my example, the state-of-the-art way to set a battery on fire and make sure it doesn’t get on fire is you crush it. You actually crush it down and grind it together to start mixing the things inside the battery. That’s a more deadly way of starting a fire than poking a nail through it. We now do that test. We just finished that test last week in the A1 battery. The point of all this is Raj is a world-class guy. Working with customers in the semiconductor industry was different. If you got Moore’s law and you’ve got the fastest memory with the most bits and you can meet their price, you win. In this case, these things are pretty complicated systems and we’re building to their specs, working with their engineers. My apprehension that if you build it, will they buy it is way lower.

They’re going to buy it and we’re going to build it the way they want it. I’m talking books worth of data on what they want. That’s the difference in the old and new Enovix pre-rise, post-rise.

Colin Rusch, Analyst, Oppenheimer: That’s incredibly helpful.

Raj Talluri, CEO, Enovix: Appreciate that.

Colin Rusch, Analyst, Oppenheimer: T.J., just thinking about capital equipment and the potential for expansion here. Can you talk about preparedness of your capital equipment suppliers to support an expansion, and any sort of tweaks that you’re thinking about on the line now that you’ve been able to do a fair amount of work on testing each of the systems?

Raj Talluri, CEO, Enovix: Yeah, so I think I may have mentioned that a couple of weeks ago I was in Asia and I visited some of our equipment suppliers. This time around, as I said, compared to what we used to build in Fremont to what we’re building in Malaysia, the equipment suppliers now that we are using are actually people who are used to making very complex semiconductor equipment. These are people I saw—a supplier, they kind of figured out how to put really thin copper pins into the die at like sub-micron precision. It’s crazy. These are the people we’re using and there’s some very exciting new technology there. I visited a few of them and we have some new interesting ways to actually continue to dice the electrodes and make them even faster. We started some proof of concept systems and I saw some of the systems being built.

That’s what I meant when I said we are now making some initial purchase orders towards that. I think we are telling them what we need. Some of the suppliers have actually visited our factory in Penang and they know where these machines are going to be put in. In terms of readiness, yes, absolutely. We are starting the work now and it’s very exciting to see the latest advances in semiconductor manufacturing that we are now able to use to make batteries. I think that’s the key that you will see because we make sub-micron, like micron-specific precision cutting and stacking. The equipment we use is very precise and this is what is being done in the semiconductor industry and we’re using the same suppliers.

Ananda Baruah, Analyst, Loop Capital Markets: Excellent.

Colin Rusch, Analyst, Oppenheimer: Thanks so much, guys.

Call Moderator: Our next question comes from Jeff Osborne with TD Securities. Please unmute your line and ask your question.

Jeff Osborne, Analyst, TD Securities: Yeah, thank you. Just two questions on my side. If you were to win the two phone engagements as well as the eyewear, and it sounds like those would launch three, four months after the sampling started last or this month, how do we think about the need for sort of working capital growth? Are you already operating as if you’re going to win? What are the lead times for the materials that you need to buy to ramp up line one and Fab 2?

Ryan, Financial Executive, Enovix: Maybe I’ll jump in there. Yeah, I mean, I think I’ll answer the last part first. We’re certainly operating to win. That’s how we’re operating. Obviously, the balance sheet, we finished the quarter with over $200 million in Q2. We’re sufficiently capitalized and we’re preparing for the manufacturing ramp.

Raj Talluri, CEO, Enovix: Good to hear.

Jeff Osborne, Analyst, TD Securities: Maybe another question on the balance sheet side. Given the warrant structure was a bit creative and not familiar with most investors, I’ve had several people ask, just in the event that only a portion of the warrant were to be exercised, is there sort of a minimum level that would avoid the need for future capital? I think you mentioned $34 million as of yesterday was done. As you look at the ramp into the middle of next year, if you were to win these engagements and maybe more, how do you contemplate building out Fab 2 completely? Is half the warrant enough to do that or maybe just walk us through that?

Ryan, Financial Executive, Enovix: Yeah, I’ll step in there as well. I don’t think half the warrant would be sufficient capital to completely build out all four lines we’ve talked about, and we provided publicly our estimate of how much those lines cost, which is $50 to $60 million. Certainly, even adding one additional line, which, again, our balance sheet is strong as it is right now, and the $34 million helps. That’s going to get us to substantial capacity, two lines running in that factory. We talked about nameplate capacity of 9 to 10 million units per, so that’s going to go a long way to helping the company meet important milestones.

Jeff Osborne, Analyst, TD Securities: Good stuff. Thank you.

Call Moderator: Our next question comes from Mark Shooter from William Blair. Please unmute your line and ask your question.

Mark Shooter, Analyst, William Blair: Hey, team. I was hoping that as you guys get close to commercialization, we could revisit some of the numbers that we were talking about. Regarding ASPs, we’ve seen that batteries have increased so much since you guys have first started talking about pursuing the smartphone market in terms of milliamp hours. What are you seeing now in the market for ASPs as we approach 10,000 milliamp hours? How do you see the A1 being able to get pricing power against the incumbents?

Raj Talluri, CEO, Enovix: Yeah, I mean, great question, Mark. As I mentioned, if two years ago, if we said three years ago or even last year, we said, hey, the next smartphone battery is going to have a 10,000 milliamp hour battery, I don’t think most people would have believed, but today that’s true. The other interesting thing is it’s not that the battery is getting that big, it’s the battery is getting that big across the tiers. This is something I saw when I was at Qualcomm and we started launching smartphone processors. We said, we’re going to use high megapixel camera, you know, like a 50 megapixel, 60 megapixel in the premium tier smartphone. Everyone said, okay, premium tier will have a high megapixel. I mean, today $200 phone has like over 50, 60, 70, even 100 megapixels. The cameras have just kind of.

We talked about, you know, multiple cameras being on the very high end, now multiple cameras are across the board. I see the same thing happening on batteries now. What used to be a premium tier battery, which is 7,000, 6,000 milliamp hours, we’re now seeing that in the $200 phones and probably go down even more. We see even higher energy, higher capacity batteries at the top. That clearly, just like it happened with DRAMs, it’s a dollars per amp hours. The ASPs will continue to move up and we probably have to redo our models now, but I do believe, and also redo the factory loading because, you know, bigger batteries take more capacity to make. This is a great thing to have. Great situation.

I actually think that the ASP will continue to go up and the premium we get for producing a higher capacity battery in the same space, which is really the key, because you can’t just keep making phones bigger, which means you need higher energy density and not only higher energy density, but have that higher energy density with fast charge with 1,000 cycles and high temperature storage. You know, we benchmark a lot of batteries out there and the A1 is the only battery I know of that can meet all those requirements right now. We have a strong roadmap to make it go higher. To your point, we do think that the ASPs will go up. We do think that the premium we can command will go up with A1 as we start making this higher energy density reality in these phones.

Mark Shooter, Analyst, William Blair: Great. Thanks for the color, Raj. The next market that you guys are excited about is the AR/VR and the smart glass market. In the last quarter we’ve seen a few more products come to market or at least start to ramp, and I’m wondering if there’s any increased engagement going on there. I know you mentioned in the shareholder letter with the sampling, but can you go over a little bit more color of why you can command more ASP or more gross margin in those products and why the watt hours per liter is so crucial for the AR/VR smart glasses opportunity?

Raj Talluri, CEO, Enovix: Yeah, good question. Two things. First, you know, people have always tried to make another smart device outside smartphone, right? People have tried for a long time. People tried watches, people tried pins, people tried so many things, but none of them really, the watches took off a little bit, but none of them really took off to a point where you don’t have to pull out your smartphone to do something and you can use this new device. Glasses are the first ones that have the potential to do that because a huge percentage of the population, including people like me, wear glasses. If you can get more functionality into something you already wear, it’s a huge benefit. The other thing is the glasses have cameras and that can look into the world.

Now with GenAI, when you look into the world, when you see what’s out there, and with the ability to also have microphones, you can just do a lot more. The micro displays, we haven’t really seen glasses in high volume production right now that have very good augmentation. The glasses today still right now that are in high volume mostly have cameras and audio and some form of speech recognition, but they’re not really AR, right? They’re not creating that AR experience. When you create that AR experience, what happens is you have a display inside your glasses that people can’t see, but you can see. We’ve seen demos of those at CES and other markets, but we are now seeing that the customers we are sampling to are building things like that. When you do that, here’s what happens.

The processor has to be on and more importantly, the GPU has to be on to create that image on that augmented display. That consumes a lot of battery and the memory has to be on that consumes a lot more battery. The amount of energy density you need with true augmented reality glasses, where there is a secondary display that you see inside, inside your eyes is much, much more. That’s where we are seeing a lot of traction for our batteries, is the next generation of those. That’s kind of where I believe that the energy density is so important in a small form factor.

T.J., Board Member, Enovix: At the risk of blowing this thing up, let me make an engineering point. This is an Enovix picture. Smart glasses. All the systems he was talking about are there. If you look at the side of the glasses on the left, you can see the small battery compartment. If you look over here, you can see a small battery. This is a picture of our battery. It’s kind of a long, skinny, weird shape. One thing, the way we make batteries, by laser cutting anode and cathode and separator and stacking them, you can make that thing right away. Second thing is, think about a small battery like that one shown, and that skin that’s on there is three layers thick. It prevents the electrolyte, which is a flammable liquid, from getting out. It’s a tough, metalized, three layers thick.

When you have that skin, think about making it smaller. The skin gets smaller and smaller. If you go through it, the skin gets more and more of the area volume of the battery. At some point, when that battery still is about that big, but it’s really super thin, there’s nothing left inside. None of the anode, cathode stuff that makes a battery. All I’m saying is all batteries, as they get smaller because of the overhead of connecting to them, get lower in energy density. These numbers are lower than the cell phone at 900 because of that effect. Point is this. That battery, we can jam a lot of watt hours per liter into that battery because we have compression.

The material in that battery is compressed and there’s a lot more of it in a given volume because we have a compression system, a patented compression system, which happens to be made out of steel, leading to point two. Point two is it’s got metal on it, which means the heat coming out of that battery comes out across the entire wide face, the Enovix face of that battery, and radiates into the air. If you try to make a battery just stacking battery junk in a stack of a bag, that thing is a bag. Just stacking stuff inside of a bag, you generate a bunch of heat. Lithium-ion batteries can get hot and work fine, except you don’t exactly want something that’s 50 degrees Fahrenheit up against your temple. The batteries are kind of naturally aligned to make high quality batteries and safe batteries.

For this application, this always actually was a better application. That’s why we tried for watches. This always was a better application for our technology where it’s a sweet spot, if you will, for our technology.

Raj Talluri, CEO, Enovix: Thank you.

Call Moderator: Our next question comes from Ananda Baruah from Loop Capital Markets. Please unmute your line and ask your question.

Ananda Baruah, Analyst, Loop Capital Markets: Yeah, thanks guys. Good afternoon. Thanks for taking the question. Two if I could, Raj, can you remind us how we should think about when you’ll, when the volumes that you guys will get visibility to, how that whole dynamic starts to layer in as you go through sort of finalization of the qualification with the first smartphone OEM, you know, and then you start to go in with a second smartphone OEM. Just walk us back through how you guys are anticipating getting visibility to production volumes. I have a quick follow up as well. Thanks.

Raj Talluri, CEO, Enovix: Yeah, absolutely. I mean, I think this is an important question and I get it on every earnings call. Basically, the way the battery industry works is a little bit different from the semiconductor industry. We first sampled standard size batteries and, like, you know, rectangular batteries that we believe is the right size, not exact size, but right size in terms of capacity. The customers test them and they give us a series of tests that they would like to do. We do those and we do that in our factory to make sure that it passes everything, and we give it to them and they test it for a few months typically. They give us the exact dimensions of the battery and they’ve given, one customer has given it to us right now, and then we make the battery to that dimension.

They are going to take it, put it into their phone, and then they are going to do the cycle life test. As I mentioned, 1,000 cycles, that takes months to test. That is what they do. As TJ mentioned, there are a lot of tests like crash test, drop test, and so on that they do. That takes some time. What they do is typically a particular model of a phone has multiple SKUs that they launch into different parts of the world. Some launch in India, some launch in Europe, some launch in the U.S., and so on. They take a new supplier like us and put us in one SKU and start with that and make sure that they feel comfortable introducing new technology. Very quickly, it is going to second SKU and the third SKU in that model.

Once we are qualified and we are a valid supplier, very quickly it moves into multiple models. This is not that different with any other supplier. When I was at Micron, same thing, we produced UFS chips, got into one SKU, then two SKUs, multiple SKUs. Before you know it, finally, sometime later we are shipping millions, right? That is exactly what I expect should happen in this case. We are in the middle of that with one customer now. We have gotten a lot of interest after we launched the A1 platform launch because now we have the technology.

By the way, I don’t think people quite realize, I think TJ wrote in the A1 press release, the amount of complex R&D work we had to do to take 100% active silicon anode, put it under pressure, put it under the temperature stress, and for the first time get a 900 watt hours per liter with 3C fast charge and thousand cycles and storage at high temperatures and work across temperature range. It has never been done before with 100% active silicon. As soon as we launched that, I got a lot of requests from many customers, and in a couple of weeks I’m going to be back in Asia and we will sample this to other customers and the same process will happen. They will test this battery and they’ll give us the exact dimensions that they need.

We’re going to test them internally, going to put them in the phone, and we expect the production to happen next year. That’s the same process. The second time around it’ll be much faster because we are a valid supplier now, we’re not the first time supplier, but the first one takes some time.

Ananda Baruah, Analyst, Loop Capital Markets: Okay, let me ask you this, TJ. TJ, if you’d like to jump in also. Really, really a mitt, Raj. Any context would be good to the extent that you can responsibly answer this question. If, let’s say, the first qual happens, you kind of wrap it up in three or four months and then you get inclusion into the first SKU. Let’s say that’s going through the fall and then maybe going into next year you get on, like you said, Raj, the second SKU, the third SKU going into next year. Is it reasonable to think that going into spring you could be what you call, I think you said, sort of like a valid supplier, you know, and then you could go across more SKUs? Is that reasonable?

Is that the right way to think about the timing as distinct from the volumes that you get with that?

Raj Talluri, CEO, Enovix: Yeah, it’s the right way to think about it. Like I said, I think the most important thing is this particular shape of the battery. How many SKUs does it satisfy? If you need to change the battery shape, then it will take us a few months, which I said in the prepared remarks. We’re now reducing the amount of time it takes to make different sizes. We’ll need to make a different size. If it’s a SKU that needs a different size battery, there’ll be some lead time associated with that. That’s just the way the progression comes. The thing you got to remember is that this is a huge market. I mean, we’re talking about 1,200 million units plus market and we’re talking about selling a few million batteries. The opportunity is clearly there.

The first one is a hard one, but once we get there, it’ll start moving.

Ananda Baruah, Analyst, Loop Capital Markets: Thank you. Appreciate it. Thanks, guys.

Call Moderator: Our next question comes from Tony Stoss from Craig Hallum. Please unmute your line and ask your question.

Tony Stoss, Analyst, Craig Hallum: Hi, guys, nice to see you again. T.J., I wanted to follow up on the investor letter where you talked about you’ve passed the airline safety certification. How important was that, and is there any additional hurdles that you need before you can start shipping in volume to that first smartphone customer? I had a follow up.

Raj Talluri, CEO, Enovix: Yeah. The certification of UN 38.3 is a very important certification because without that, it’s hard to ship batteries on a plane. That’s the first thing you got to remember. You’re taking all kinds of exceptions to get batteries out there. The second one is, you know, when you make a battery for the first time in our factory of a certain shape, passing that gives us the confidence, you know, that this is an extremely safe battery and we’re able to pass that. There are other certifications we need to do on top of that, and we are in the middle of that. This is a huge first step for us that we’re able to pass that on a giant new battery like we made for the first time in our factory. It’s a very important step.

Like I said, the other qualifications that the customers do are not just industry-based certifications, but very specific tests that they have. As TJ was mentioning, we got books that big on how they would test the battery. For example, one of the tests they do is take the battery, put it in a phone, and drop it from a certain height multiple times. The other one they do is they put it in like a big washing machine-like thing and they spin the battery for many, many times and then they also store it at high temperature. There are lots of different tests that they do and every customer is a little bit different.

We do have all those tests with us and we try to do them ahead of time to make sure when they get samples they pass them, but then they will do it again on their own. It’s a pretty rigorous process. Got it. Thank you.

Tony Stoss, Analyst, Craig Hallum: As a follow up, DJ’s going to.

Raj Talluri, CEO, Enovix: Add something to it. Okay.

T.J., Board Member, Enovix: I just want to talk about.

Ananda Baruah, Analyst, Loop Capital Markets: Given.

T.J., Board Member, Enovix: My background, ramping the factory. I remember when we started Cypress, we started two runs a week, two 25 wafer runs, 50 wafers a week. It took us a year to ramp our first fab. This fab has got new and it’s new equipment. We learned a hard lesson with our first fab where the equipment wasn’t what I would call semiconductor quality equipment. We were in a place that doesn’t make semiconductors anymore. We were in Fremont, California, and we call it, quote, Silicon Valley. They haven’t put a new fab here in 30 years. You can’t hire people that work in the neighboring company and want a raise to come over to your company. What we’ve got going for us is we’re in Penang. Penang, Malaysia is the center, the epicenter of semiconductor assembly and test.

When you look at semiconductors today and you see modules that big with chips integrated into them, chips stack vertically with each other. Those are the kind of dimensions that those people live with. We have people from the semiconductor industry in our plant. I’m really impressed with the quality of people in our plant. We got good equipment from a good manufacturer, cost more money than I wanted, and good people. We will ramp. We’re not ramping to our own guest specs, we’re ramping to their specs. They’re looking at stuff real time. You can send them stuff and say, does this pass fire test? They’ll give you a quick read. I don’t expect we’re going to have a catastrophic problem like we had in the Fremont fab. Ramping a fab is a big deal and there will be a surprise or two.

When you’re really close with ultra high tolerances and good manufacturing quality habits, those are things you can accommodate. All I’m saying is don’t expect. This is like making ice cream. Now you say if I buy five more ice cream makers, we’re just going to ramp it. We’ve got a battle. We’ll have more people in the plant than we have in the rest of the company. We’ve got good people. I just want to warn you, we got to do that. This little pre testing we do and we get data from them and they tell us about the crush test as opposed to the nail penetration test, that’s going to make the probability that we get through it much higher. It’s going to work. Put your head down and you make it work. We got this much money involved. We’re going to get there.

Tony Stoss, Analyst, Craig Hallum: Thanks for the color, TJ. If I could just sneak in one more follow-up, just related to the eyewear customer, Raj. A few of the eyewear companies that are launching now, the ones that are expected to be high volume over the next several years, how difficult, since they’ve secured other battery suppliers already, how difficult will it be for you to displace those folks? Do you have to wait for many generations or could it be, you know, in the next year or two? How quickly before you take that turns into real revenue for you?

Raj Talluri, CEO, Enovix: Yeah, I mean, you know, look, we are sampling now, right? I mean, we’re sampling batteries now and they’re testing them. I think, if I think about the eyewear, it’s a market that I’m very familiar with, the whole AR/VR space. I used to run that group when I was at Qualcomm. That’s a market that’s just happening now. There are many, many more iterations to go before we see very high volume of that product. There’ll be different versions of it, by the way. I think if you think about now, it can be sold as an electronics device, it can be sold as a fashion device, it can be sold as a medical device, it can be sold as an industrial device. It’s in the very early stage of that.

I believe that there’ll be many, many versions of that and there’ll be products that enable lifestyle, that enable productivity, that enable utility, and so on. I believe that the heart of all of them is higher energy density because as TJ mentioned, they’re very small batteries and the demands are high. I believe that when we produce a battery that’s got much higher energy density than anything else and much safer, it shouldn’t be that hard to convert because it’s very early stage and people love it. These people we’ve given samples to love the batteries we give. It’s a long ways to go to get into multi million units. We’re happy with the technology and we’re happy with the position we have and the feedback we’re getting from the people we have sampled. Right.

Call Moderator: Our next question comes from Derek Soderberg from Cantor Fitzgerald. Please unmute your line and ask your question.

Ananda Baruah, Analyst, Loop Capital Markets: Yeah.

Tony Stoss, Analyst, Craig Hallum: Hey guys, two questions for me.

Ryan, Financial Executive, Enovix: Quick ones. Raj, how much are smartphone OEMs paying for batteries for the flagship smartphones today?

Raj Talluri, CEO, Enovix: Second, on the industrial handheld.

Ryan, Financial Executive, Enovix: Opportunity sounds like maybe an RFID scanner, label printer. Is this opportunity sort of in the millions or so of devices per year?

Raj Talluri, CEO, Enovix: Is that the best way to characterize that?

Ryan, Financial Executive, Enovix: That’s all for me. Thanks, guys.

Raj Talluri, CEO, Enovix: Yeah, I mean, how much they’re paying depends upon what the energy density is. It’s actually disproportionate. When you increase energy density in the same volume, the premium actually goes up higher. What I mean is if you produce a 900 watt hour per liter battery versus a 700 watt hour per liter battery, you get a different price per amp hour. Right. Hope that makes sense. Rough numbers, I would say $1.50 to $2 is probably what people pay per amp hour. If you got 8 amp hours, that’s probably you can think about anywhere between, you know, $15 to $16. Right. That’s probably roughly what you can think about.

Call Moderator: Our next question comes.

Raj Talluri, CEO, Enovix: I’m sorry, let me answer the second question. The second question.

Ryan, Financial Executive, Enovix: Yeah, I’ll jump in on the IHH opportunity. That’s absolutely a customer engagement. We think that has potential for multiple million units on an annual basis.

Raj Talluri, CEO, Enovix: Yeah. One other thing I’ll say about that market, the IHH market is again a market, I’m quite familiar with it. Users use the same process as smartphones. There is also an opportunity to sell replacement batteries, because that’s a market where people can launch a product, it lasts for four or five years, but people also buy batteries to replace the existing battery because they work on contract. Think about the UPS person that comes to your house and you sign something. There’s a size of the market and then there’s the size of the replacement batteries for the market, and that’s the millions of use units.

Call Moderator: Our next question comes from Gus Richard from Northland. Please unmute yourself and ask your question.

Jeff Osborne, Analyst, TD Securities: Yes, thanks for taking the question. I was just wondering, as you get closer to volume production, will you wait for a purchase order to start building inventory, or will you stage some inventory? I know these are each custom devices in terms of dimensions.

Raj Talluri, CEO, Enovix: Can I jump in?

Call Moderator: Yes.

Ryan, Financial Executive, Enovix: No, it’s. I think some people have a little bit of misconception in terms of the sampling that we’re doing now. I mean these are not onesie twosie units. These are pretty substantial volumes in terms of what it takes for us to produce and to go through the qualification process with the customer. We have substantial inventory that we use now in terms of what we’re doing for both that process as well as the R&D process. I think all those muscles are pretty well exercised and we obviously have, you know, a great team in terms of logistics and planning and the operations side that’s fully in lockstep and meets with us, you know, multiple times a week in terms of forecasting demand from all the demand sources. That process is well underway.

Call Moderator: Great.

Raj Talluri, CEO, Enovix: a little bit to it.

T.J., Board Member, Enovix: My comment on that is from a board/money perspective, you can’t pile up inventory. First of all, the beauty of this machine is auto line. It’s linear. If this part stops, everything in front of it stops. You can’t pile crap up in semiconductor fabs for a long time. That was the problem. This thing will have a cycle time less than 30 days. If our purchase orders have a 30-day take or pay window, which would be a typical purchase order in the semiconductor industry, we never could get that. We never could start a wafer in and ship product in 30 days. In this industry you’ll be able to do that, especially with the equipment that’s automated, linear equipment, and especially because it’s custom stuff. No, we’re not going to eat in the inventory. We can’t afford to eat inventory.

Call Moderator: There are no further questions at this time. With that, I’d like to turn it over to Dr. Raj Talluri for closing remarks.

Raj Talluri, CEO, Enovix: Thank you all for joining us and thank you all for your support. Really good quarter and look forward to seeing you again next quarter. Thank you.

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