Enovix Corp Q1 FY2026 earnings call

Commercialization Progress

• Commenced commercial production of the A1 smart eyewear battery, with initial shipments underway and ramp planned for H2 2026, validating Inovix's ability to produce 100% silicon anode batteries at commercial scale
• Aligned with Honor (lead smartphone customer) and a second major smartphone OEM on an updated silicon anode-specific qualification framework, removing the artificially stressful 0.7C discharge test designed for graphite batteries and replacing it with a 0.2C cycle test that reflects real-world smartphone usage; cycle life testing under the new framework is progressing toward required thresholds, with targeted system-level field testing planned for H2 2026 ahead of a 2027 commercial launch
• Secured new design wins across drone, defense, and industrial segments in Q1 2026, with deployments expected in 2027, growing the total Korea manufacturing pipeline to over $130 million, majority driven by rapidly expanding drone demand for high-performance batteries that outstrips current Western supply

Manufacturing and Yield Improvements

• Yields in most production zones are now at or above 90%, with Zone 1 Dicing (the current throughput bottleneck) delivering step-level yields of ~80%, showing continued progress with laser-based dicing equipment
• Implemented a new hybrid dicing strategy combining laser and mechanical dicing, which will deliver higher throughput, lower equipment costs, and lower per-unit processing costs; the mechanical dicing system is on track to come online in 2026 to support 2027 demand
• Inovix owns its manufacturing operations (Korea and Malaysia facilities), providing vertical integration that avoids third-party contract manufacturer margin sharing, supports competitive pricing, and addresses Western supply chain security requirements; there is existing vacant factory space in Korea to support incremental capacity expansion as demand grows

Product and R&D Advancements

• Delivered first engineering samples of AI2, the next-generation 100% silicon anode platform, which achieves 20% higher volumetric energy density than AI1 through reduced inactive material and higher cathode voltage, enabling more power in space-constrained form factors; customer sampling of AI2 for smart eyewear is planned for Q2 2026, with the technology roadmap to roll out to smartphone batteries in 2027
• Launched MX1-B01, the first product in the MX silicon-enhanced platform, with 360 watt-hours per kilogram energy density, NDAA compliance, and a material cycle life advantage over competing high-density drone battery solutions; the next generation MX2 is targeted for 2027, with a goal of reaching 400 watt-hours per kilogram
• The two platforms are mutually reinforcing, sharing technology, supply chain, and commercial infrastructure: the AI platform leverages Korea manufacturing strength, while the MX platform benefits from Inovix's silicon anode expertise and global commercial reach

Organizational Updates

• Appointed Steve Bacos, a 35-year veteran of global semiconductor sales leadership (most recently from Infineon), as Senior Vice President of Worldwide Sales to build out commercial infrastructure and support pipeline conversion to revenue

Inovix operates two complementary battery technology platforms: 1) AI Platform: 100% silicon anode platform targeted at smartphones and fast-growing smart eyewear. This quarter, commercial production of the A1 battery for lead smart eyewear customers commenced, with initial shipments underway and production ramping planned for H2 2026. The first engineering samples of next-generation AI2, delivering 20% higher volumetric energy density than AI1, have been produced, with customer sampling planned for Q2 2026. For smartphones, Inovix has aligned with Honor on a silicon anode-specific updated qualification framework, with a second major smartphone OEM also adopting this updated framework, and cycle life testing is progressing toward required thresholds. 2) MX Platform: silicon-enhanced graphite anode platform focused on defense, drone, and industrial markets. This quarter, Inovix formally launched the MX1-B01 high-performance drone cell at the Michigan Defense Expo, with a 360 watt-hours per kilogram energy density. New customer design wins were secured across drone, defense, and industrial segments in Q1 2026, with deployments planned for 2027. Total global pipeline for Korea-manufactured MX products exceeds $130 million, with over 60% of the pipeline coming from new drone opportunities. Total company Q1 2026 revenue was $7.6 million, up 49% year-over-year, driven by Korean military contractor shipments, with non-GAAP gross margin of 26.3% (the sixth consecutive quarter of positive gross profit on both GAAP and non-GAAP bases).

• Q2 2026 revenue guidance is set at $8 to $9 million, reflecting continued growth in defense and industrial shipments plus initial smart eyewear revenue from lead customer deliveries
• Q2 2026 non-GAAP loss from operations is expected between $29 and $32 million, while non-GAAP net loss per share is projected between $0.13 and $0.17
• Q2 2026 capital expenditure payments are expected between $9 and $13 million, including deferred Q1 payments and initial investments for Korea capacity expansion
• Management maintains a disciplined approach to capital allocation, with top priorities being completion of customer qualification, scaling smart eyewear and defense production, and selectively pursuing high-fit, high-return strategic opportunities; no share repurchases have been executed under the previously authorized repurchase program to date
• The long-term product roadmap confirms MX2 (400 watt-hours per kilogram) targeted for 2027 launch, with AI2 technology rolling out to smartphone applications in 2027

• Forward-looking statements are inherently subject to risks and uncertainties, and actual future results may differ materially from current expectations due to unforeseen factors, as detailed in SEC filings and the company's public disclosures
• Smartphone qualification timelines have been extended by the shift to the new 0.2C testing framework, as the lower discharge rate takes longer to complete than the old accelerated 0.7C test
• The hybrid mechanical dicing implementation is still in progress, with remaining technical development required to bring the new process online in 2026 and address potential challenges including mechanical stress, particle generation, and material compatibility
• Silicon anode batteries behave differently than graphite batteries at very low temperatures, requiring additional development work to meet customer requirements for cold-temperature performance that was not part of traditional graphite battery qualification standards
• Global smartphone shipment volumes are currently depressed, which could impact near-term demand if market weakness persists through Inovix's planned 2027 commercial ramp
• Conversion of the $130 million Korea pipeline to revenue depends on customer qualification timelines and design win close rates that are uncertain, with commercial volume dependent on growing but unproven demand for Western-sourced high-performance drone batteries

Q: What is the most promising pathway to meet final smartphone qualification targets, and what progress has been made? / A: The most promising pathway is the updated silicon anode-specific qualification framework aligned with Honor and other leading customers. The legacy 0.7C discharge test designed for graphite batteries, which artificially understated silicon anode cycle life, has been removed as a gating requirement. The new 0.2C test, which reflects real-world smartphone usage, is already more than halfway complete at the lead customer and on track to meet required thresholds. This alignment represents meaningful progress convincing the smartphone industry to update testing standards for the new technology.

Q: What are the expected 2026 and 2027 unit volumes for smart eyewear batteries, and how will revenue progress? / A: Inovix expects to produce 50,000 units in 2026, and volume is projected to scale to millions of units in 2027. AI2 with 20% higher energy density will start sampling for smart eyewear in Q2 2026 and enter production in 2027, matching growing market demand for longer battery life in display-equipped smart eyewear.

Q: What is the silicon content of the MX1 drone battery, and what is the roadmap to the 400 watt-hours per kilogram MX2? / A: MX1 currently has 60% silicon content in the anode. Because drone applications allow greater swelling than space-constrained smartphones, Inovix can increase silicon content further to boost energy density. The 400 watt-hours per kilogram target for 2027 will be achieved by tuning tradeoffs between cycle life, discharge rate, and allowed swelling, leveraging existing silicon expertise and qualified Korean manufacturing to deliver competitive products quickly.

Q: What is the status of the M&A pipeline, and what are the priorities for any acquisitions? / A: Management reports a robust pipeline of potential opportunities, but remains disciplined: only acquisitions with strong strategic alignment at attractive price points will be pursued. Multiple opportunities have already been declined due to unfavorable pricing, and the company will continue to act as responsible stewards of shareholder capital.