Enovix Corp Q2 FY2025 earnings call

• Launched the A1 platform, a leadership battery architecture with high energy density, long cycle life, and fast charging. • Achieved Q2 revenue of $7.5 million, above guidance, up 98% year-on-year. • Non-GAAP gross margin was 31% due to defense products from the Korean factory. • Sampled A1 batteries to 2 major smartphone OEMs, a leading eyewear company, and strategic IoT customers. • Fab2 in Malaysia produced first A1 batteries, with factory in Penang accelerating customer qualification efforts, reducing custom battery time by 50%. • Acquired Korean asset and additional coating equipment to support defense market growth and sampling to multiple defense customers.

Revenue for Q2 was $7.5 million, which is above the guidance range and up 98% year-on-year. The non-GAAP gross margin reached 31%, driven by the higher margin of defense products from the Korean factory. The A1 platform, a key product, is a leadership battery architecture with high energy density (900 watt hours per liter, 3C charge rate, up to 1,000 cycles) and 100% active silicon anode, contributing significantly to the revenue growth.

• Q3 revenue expected to grow sequentially, above last year's levels. • Net operating loss expected to increase due to less favorable product mix and increased operating expenses related to manufacturing readiness scale-up. • Net loss per share range for Q3 is $0.14 to $0.18.

• Hurdles in ramping up production, including ensuring equipment readiness and meeting customer-specific test requirements. • Potential challenges in market adoption, as customers have specific and rigorous testing processes for battery integration into their products. • Uncertainties in scaling production to meet increasing demand, including lead times for materials and reconfiguring factory equipment.

Q: When will Enovix batteries appear in products?

A: Raj Talluri said A1 batteries are being sampled to customers, with smartphone OEMs in cycling tests. It takes about 3 months for customers to complete tests, and once qualified, phones are expected to launch.

Q: Can you explain the need for the warrant? What will the money be used for? How many lines can you fit in your facility?

A: Ryan A. Benton said funds from warrant exercise will be used to complete build-out of Fab2. The facility is sized to support 4 more lines after the current operational high volume line.

Q: Where are you at with customers in terms of specs getting finalized for new products?

A: Raj Talluri said specs are being finalized with customers, with first customer in cycling tests. Progress is being made with second smartphone OEM, and sampling to more customers throughout the year.

Q: How to think about volumes and visibility as you finalize qualification with first smartphone OEM?

A: Raj Talluri explained the battery industry process, with customers testing samples, providing exact dimensions, and moving to production. First qualification is key, with subsequent customers moving faster.

Q: How important was airline safety certification? Any additional hurdles before shipping to first smartphone customer?

A: Raj Talluri said 8.3 certification is important for shipping on planes. Additional customer-specific tests like crush tests and cycle life tests are still needed before shipping in volume.

Q: How difficult to displace existing battery suppliers in eyewear market?

A: Raj Talluri said the eyewear market is early stage, and with higher energy density and safer batteries, displacement is feasible as the market evolves.

Q: How much are smartphone OEMs paying for batteries for flagship smartphones?

A: Raj Talluri said payment depends on energy density, roughly $1.50 to $2 per amp-hour, so for an 8 amp-hour battery, around $15 to $16.

Q: What about industrial handheld opportunity?

A: Unidentified Participant said the industrial handheld opportunity has potential for multiple million units annually, including replacement batteries.