Q4 2024 Enovix Corp Earnings Call
earnings conference call. Currently, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, today's program will be recorded. And now I'd like to introduce your host for today's program. Robert Leahy, Head of Investor Relations. Please go ahead, sir.
Thank you.
Speaker Change: Hello everyone, and welcome to the Novix Corporation's fourth quarter and full year 2024 financial results conference call. With us today are President and Chief Executive Officer Dr. Raj Talluri, Chief Accounting Officer Christina Truong, and Chief Operating Officer Ajay Marathe.
Speaker Change: Raj and Christina will provide an overview, and then we'll take your questions.
After the Q&A session, we'll conclude our call.
Speaker Change: Please note that the shareholder letter, press release, and this conference call all contain forward-looking statements that are subject to risks and uncertainties.
Speaker Change: For a discussion of those factors that could affect our future financial results in business, please refer to the disclosures in today's shareholder letter and our filings with the Securities and Exchange Commission.
Speaker Change: All of our statements are made as of today, February 19th, 2025, based on information currently available to us.
Speaker Change: We can give no assurance that these statements will prove to be correct, and we do not intend and undertake no duty to update these statements except as required by law. During this call, we will also discuss non-GAAP financial measures, which are not prepared in accordance with the generally accepted accounting principles.
Speaker Change: You can find a reconciliation of the GAAP financial measures to non-GAAP financial measures in our shareholder letter, which is posted on the investor relations page of our website. I'll now turn the call over to Raj to begin. Raj.
Raj Talluri: Thank you, Rob, and thanks to everybody for joining us today. For our format today, I'm going to start with a recap of our recent results and some of our recent milestones before I turn it over to Christina for financials and outlook.
Speaker Change: I'll have a few closing comments and then we'll take your questions.
Speaker Change: We had a very productive 2024, especially Q4. To recap our recent achievements. First, our revenues in the fourth quarter were $9.6 million near the high end of our guidance range. For the year 2024,
Speaker Change: Total revenues were $23.1 million, up $7.6 million, up from $7.6 million in 2023.
Speaker Change: Second, we completed our top manufacturing and product objectives for the quarter by completing site acceptance testing of our high-volume manufacturing line and shipping our first samples of EX2M to customers.
Speaker Change: Third, we shipped early engineering samples of our leads to our lead smartphone OEM with the results confirming the critical safety tests are all passing.
Speaker Change: Additionally, we received the cell dimensions as a continuation of the agreement we made with them.
Speaker Change: These dimensions are actually of the cell that they expect to be shipping in 2025. Now, we're on track now for commercial smartphone launches in 2025, pending successful completion of the customer qualification.
Speaker Change: Fourth, in line with the agreement we announced in June 2024, we also delivered our first battery packs of our first custom cells from Malaysia with packs built in our Korea facility.
Speaker Change: In addition, we secured a purchase order from a custom battery from a second marquee smart eyewear customer.
Speaker Change: The ramp of Fab 2 in Malaysia in 2024 stands out as a pivotal accomplishment for the company. We managed to complete SAT of our HVM line in just one year after our first tools arrived.
Speaker Change: Yields are now well beyond the final levels we achieved in Fab 1 and we have incremental targets in place throughout the year and we believe
Speaker Change: that we believe will ensure readiness for smartphone mass production in the fourth quarter of twenty five.
Speaker Change: We now have multiple customer audits going on, serving as a strong testament to our manufacturing readiness and our customers' interest in using our products.
Speaker Change: While we remain focused on smartphones, we're also prioritizing segments where major battery constraints or supply chain requirements are creating a strong competitive advantage for our technology. Recently, smart eyewear emerged as one of the segments, and we're now in the process of developing custom cells for marquee customers in this space.
Speaker Change: Another market that recently emerged as a unique growth opportunity for us is the defense industry, where we recognize a significant portion of our 2024 revenues with conventional graphite battery products.
Speaker Change: Since the U.S. elections last November, we observed an increase in inbound interest from drone manufacturers and defense suppliers seeking battery solutions that comply with allied country supply chain requirements. Earlier this year, we secured a sample purchase order from one of these suppliers for autonomous AI systems.
Speaker Change: While these developments are still evolving, we are optimistic about the potential upside from these.
Speaker Change: And on the product front, it's also been a very productive 2024 and Q4 for us. We successfully completed testing of EX1M and performance results indicate that we're on track to meet targets of energy density, cycle life and fast charging.
What do you have to add?
Speaker Change: We delivered early engineering samples to OEMs across both smartphone and IoT markets and we received positive feedback that the X2M energy density is meeting customer targets.
Speaker Change: And looking ahead, we've officially kicked off the design phase of EX3M, incorporating feedback from our lead OEMs to ensure alignment with their evolving requirements. Now, with that, I'll turn it over to Christina for the financials. Christina.
Christina Truong: Thank you Raj. All the relevant financials are in our quarterly report and our shareholder letter. So I will speak from a high level and then provide outlook.
Christina Truong: We deliver Q4 2024 revenue of 9.7 million above the midpoint of our guidance.
Non-GAAP IPADA came in at a loss of $11.7 million.
Christina Truong: above our guidance of a loss of $19 million to $25 million. And our non-GAAP EPS came in at a loss of $0.11, also above our guidance of a loss of $0.15 to $0.21.
Christina Truong: We ended the quarter with roughly $273 million of cash and cash equivalents.
Christina Truong: CapEx in Q4 was $16.4 million and cash use and operation total $16 million. Our balance sheet is strong, giving us a runway and optionality for funding additional HVM lines.
Christina Truong: Now for our guidance. For the first quarter of 2025, we forecast revenue of $3.5 million to $5.5 million.
Raj Talluri: An adjusted EBITDA loss of $21 million to $27 million, and a non-GAAP EPS loss of $0.15 to $0.21. Now I'll turn back to Raj for close, Raj.
Raj Talluri: Thanks, Christina. As you can see, 2024 was a big year for us. We made significant strides by launching new high-volume manufacturing line in Malaysia.
Raj Talluri: with custom battery cells already shipping from the agility line and high volume production slated for 2025.
Raj Talluri: We also focus on building strong customer demand across key markets, including smartphone and IoT OEMs, while we continue to drive innovation and operational excellence. With that, we can go to the questions, operator.
Speaker Change: We will now begin the Q&A session. Please note that this call is being recorded.
Raj Talluri: 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, regarding policies and tariffs implemented by the new administration, what are the potential implications for Inovix's current and future business operations and prospect?
Raj Talluri: Yeah, thank you for the question. As I mentioned in the prepared remarks, we are actually getting increased interest since last November for our batteries.
from Defense and other industrial customers in the U.S.
Raj Talluri: As a reminder, we, our factories are actually in in Korea and and also in Malaysia, which is actually a very favorable to shipping batteries into the US. So it's been a, we don't see much effect on the tariffs at this point.
Raj Talluri: And the second question is, can you lay out the current guidance for adding lines? What is the current capacity? When will you begin ordering equipment and how long will it take to install any additional lines?
Raj Talluri: Yeah, I'll take a shot at the question and I'll have Ajay add more color to it. You know, firstly, we are super excited that we completed the SAT for high volume manufacturing line. The factory we have in Malaysia, we have the ability to add up to four lines there, and we put in one line. And that's the one we completed SAT on.
Raj Talluri: In terms of current capacity, I'll let Ajay comment and then I'll talk about how to add additional lines.
Thanks, Raj. Good question.
Raj Talluri: The current line 1, gen 2 line 1, which is installed in our Malaysia fab is running and was bought off in SAT at 1350 UPH, just as a reminder, which is equivalent of roughly nine and a half to 10 million batteries a year.
Raj Talluri: Now this is fed by what we call farms in the zone 1 which is dicing and zone 4 which is testing. Now we're adding capacity to zone 1 as we see the indications from the market as to how much volume do we need to support.
Raj Talluri: So that's where the capacity lies. And the way we are looking at adding lines is basically
Raj Talluri: Long lead time items, such as, you know, various different items in the line.
Raj Talluri: which are on the, you know, used as control systems on the manufacturing line.
Raj Talluri: We are ordering and keeping them as inventory at our suppliers. So this, you know, makes us, gives us the ability to shrink the timeline as to when we can add second, third, fourth line. So that's how we are looking at this capacity. Yeah. Thank you, Ajay. Nothing else to add.
Speaker Change: 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 nine to raise your hand. 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.
Speaker Change: Our first question will come from Jed Dorsheimer with William Blair. Your line is open. Please go ahead.
Speaker Change: Hi, thanks. Congrats on the quarter. And thanks for taking my question. I guess, first one, just the
Speaker Change: The drone purchase order, I'm curious, just trying to get a better understanding of the growth profile of this customer. I think you mentioned it's a billion dollar that they're doing a billion in revenue.
Speaker Change: And I think if memory serves, they just hit that. So I just want to make sure that that customer is kind of on that S curve of inflection. Am I thinking about that customer in the right way? And maybe you can comment on is the defense is coming in better than expected how you're thinking about that. And then I have a follow up to
Speaker Change: and the market is growing. It's hard to put an exact number on it. It's early stage in terms of qualification, but hopefully as the qualifications go through, we'll be able to add more color on how we see the business going. But we are getting multiple inquiries for those batteries from different customers now in the U.S.
Speaker Change: Great. And then just as my follow up, just pivoting to the commercial smartphone, you're now starting to build, you know, a backlog of that customer base. I was wondering if you could just rank order the cell phone customers in terms of the pipeline in the commercialization stage, if you could just remind us of that. Thanks.
Speaker Change: Yeah, I mean, we had mentioned that we have sampled, you know, seven of the top eight customers.
Speaker Change: And another one just placed an order for samples from us, clearly showing, you know, interest is building up in our products and what we can build. We talked about two agreements that we have with two customers, and they're both progressing. One of them, we actually received the.
Speaker Change: We got the exact dimensions of the battery that will be in the phone this year. So that is a
Speaker Change: Huge step because now we understand exactly what it is. Just to remind the viewers what we sampled with a standard battery that we made here of a standard size.
Speaker Change: But now we got dimensions of the battery and this is north of 7,000 milliamp hours. So sizable battery.
Speaker Change: But again, the space is still constrained in the phone. So our energy density clearly adds a value there.
Speaker Change: And next stage is, you know, we expect that to, you know, get qualified with with our technology in their phone and we expect to get other custom cells from the following customers, you know, in that order. And again, this one particular battery that we are making, you know, for this customer.
Speaker Change: It could go into multiple models. Typically, you know, these batteries go into multiple models within the segment of the market. So, super excited by the progress we're making. It's a study and, you know, gradual and thought through. So,
Thank you.
Speaker Change: Our next question will come from Ananda Barua with Boop Capital. Please go ahead.
Speaker Change: Hey guys, yeah, thanks for taking the question. Really appreciate it. I guess Raj and Ajay is sort of sticking right there. Can you remind us for EX2M and you mentioned Raj EX3M,
Speaker Change: of each each model. And, and then when do you think each of those models, like get into the marketplace and get the volume and and anything you can say about the volume that each of those can bring to the company would be awesome. Thanks.
Speaker Change: and so on. We are now optimizing that to meet the customer requirements.
Speaker Change: Meanwhile, we make a step forward in choosing a newer set of materials that give increased energy density, and that's the X2M.
Speaker Change: And then we make more advances in terms of both materials and also our architecture in terms of, you know, reducing the amount of inactive materials so that we can get more energy density. And that's, you know, the extreme, which we just started in terms of volumes.
Speaker Change: It will depend upon which customers go to production first, how many models we get designed into, how quickly we can ramp that. And that, I think, towards the later part of the year, we'll be able to comment more because at this stage, they're all in different stage of qualification and we have visibility into one of the models, but there's a lot more behind that. So,
Speaker Change: It just takes time to be able to answer that question more precisely.
Speaker Change: Okay, that's awesome. And I guess just as a follow up, just Ajay, just make sure we fully understand the context around, you know, sort of the four lines.
Line one, you mentioned nine and a half to ten.
Speaker Change: Is there anything implied in in your description of that that
Speaker Change: The nine and a half to 10 can get filled in a sort of a reasonable amount of time.
Speaker Change: You know, and then you're sort of sort of speaking to the expansion of the lines, then you said you're sort of Sort of your ramp ride ramp lines as things progress or is it?
Speaker Change: You know, you can do sort of nine and a half, ten to start per line. I think you'll probably tweak that up from there just with efficiency gains. But even inside of that line is sort of as things progress, is that also wrapped into the line one as well? Just context around that. Thanks.
Speaker Change: Absolutely. Thanks, Ananda. Yes, line one, as just a reminder, is what we call the universal line. So it is a line which is capable of...
Speaker Change: Running equally efficiently the smaller cells, you know, which we are also feeding into the AR VR market I think Raj alluded to that in his prepared remarks
Speaker Change: As well as, you know, the large cell which we are now working on, you know, custom cell which is more than 7,000 milliamp hours.
Speaker Change: So it can handle all of it. The capacity kind of remains the same line 234.
Speaker Change: When we would order that all you know depends on the customer qualifications cycles as a Roger also said
Speaker Change: and whatever improvements we do, actually the focus from line 2 to 4 is going to be optimizing the line.
Speaker Change: for also CAPEX spend per line, as well as the speed. And we will do the learnings and backward, make it backward compatible to also the line one. So universally, we can ship and make and ship from any of the four lines that Raj talked about.
Raj Talluri: Yeah, the one other thing I don't know, maybe just to remind us, you know, as I mentioned, when we built the first line, we built what is called a universal line, which can go from very small batteries to much bigger batteries. That's a more expensive line, but gives us the flexibility because.
Raj Talluri: We're not sure exactly where the demand would be when we build that line.
Raj Talluri: As we get more and more visibility into, you know, like, these kind of custom cells, we can optimize our lines more to that size cells and not have so much flexibility in it, which optimize the cost of the line, which increase the throughput of the line. So, which is kind of like a natural evolution of how you do manufacturing as you understand the product.
Raj Talluri: you know, demand better, we optimize it for both cost and speed, right? And that's kind of how this is going to go.
Thank you guys. Appreciate that.
Speaker Change: Our next question will come from Colin Rush with Oppenheimer. Please go ahead.
Colin Rush: Thanks so much guys. You know, getting to the 7000 mAh cell, it seems like a bit of an acceleration on some of the roadmaps. Can you talk a little bit about how quickly those specs are changing and how you're seeing that translate into potential pricing appreciation for the company?
Raj Talluri: Yeah, I mean, it's a really good question, Colin. I mean, I, you know, I mentioned, I think maybe I probably think like 2023 when I mentioned we are seeing a lot of
Raj Talluri: AI coming to the edge that will drive a lot higher demand for battery.
Raj Talluri: because those applications consume a lot of a lot of energy.
Raj Talluri: and I'm pleased to say that that's coming true today. You know what is happening now is the Gen-AI applications consume so much battery and every app and there's so many apps now running on the phone that consume that that the customers are having to put higher and higher capacity batteries.
Much higher than we expected.
Raj Talluri: 7,000 plus that we saw today that we are working on. I see that, you know, getting even larger over time.
Raj Talluri: and clearly is a good tailwind for us in ASP because when you you have to deliver that kind of capacity on a limited form factor because the phone can't get bigger.
Speaker Change: It's super helpful. And then I guess my follow up here is really about the competitive landscape. Obviously, there's been a lot of capital invested in materials and along with different electrolytes and rebalancing different cell structures. Just curious how quickly you're seeing competitors move and how intense that environment is for you guys as you go through this qualification process with all of these smartphone makers.
Speaker Change: Yeah, our competition continues to be incumbent graphite batteries, which have
Speaker Change: you know, kind of dope the graphite with some amount of silicon. You know, I think we mentioned we saw 5 to 10%.
Speaker Change: but in a big cell like 7000 milliamp hours kind of range, if you put more than that.
Speaker Change: We are seeing that the swelling is, it becomes becomes too much.
So you can't really keep doing that.
Speaker Change: Our constraint and our innovative architecture, we use 100% active silicon. And as far as I know, we are the only ones that were able to put 100% active silicon.
Speaker Change: and this is validated by our customers and also validated by the people who supply this silicon material. They're excited to work with us because we're able to use 100% of their material.
Speaker Change: It's a competitive advantage we have in with our architectural approach and and I hope hope to get this into product soon
Thanks guys.
Speaker Change: Our next question will come from Bill Peterson with JPMorgan. Please unmute and ask your question.
Bill Peterson: Yeah, hi, thanks for taking the questions and recognizing your focus on smartphones and maybe some of these emerging IoT applications. But I wanted to come back to this defense opportunity. Can you speak more on the format or the size of the batteries? And I guess, how much can the Korean site support in terms of
Bill Peterson: I don't know whether it be megawatts or revenue, just trying to get a sense for how fast you can grow into this market. And I guess if it were to be of interest, how fast can you expand your capacity?
Bill Peterson: Yeah, you know, we have capacity now in our Korean factory, you know, to support some of these for now.
Bill Peterson: and we have space available nearby and we can expand that.
Bill Peterson: and and build more capacity. I mean, the good news is that as these things start getting qualified, we get visibility into into what this demand could be like, you know, in next year, because it takes.
Bill Peterson: in a year or so to get these things really qualified into production. And as we start getting into quals in these opportunities, we will and we can expand in our facility there. It's a very nice site. It's in Nansan and we have opportunity to grow there. So we're excited by that.
Speaker Change: Yeah, thanks for that. And you added in your press release about the EV, your advancing development agreements with the two customers.
Speaker Change: I had a sense that that would have already been done. So I guess
Speaker Change: What areas remain to be resolved, I guess, before anything official happens? And I guess maybe to that point, has any of the joint development work happened thus far? I know that these are long dated, but are there any milestones we should be looking for this year? Or is the work really going to begin in earnest in 2026 and beyond?
Speaker Change: No, absolutely. I mean, work is ongoing. I mean, you know, we have some, we're able to now get the materials from the from these EV makers, and we have them in our Malaysia factory, because, you know, as you remember, we shut the factory down here. Originally, we were thinking of doing some of that work here, but we moved all to Malaysia and IJ was able to.
Unknown Executive, Charles Anderson, Farhan Ahmad
Unknown Executive, Charles Anderson, Farhan Ahmad
Thanks Raj.
Speaker Change: Our next questions will come from George Shannarikas with Canaccord. Please go ahead.
George Shannarikas: Hey, good afternoon, everyone. Thank you for taking my questions. I just had a question about the
George Shannarikas: Smart Glasses business. I think you mentioned in your press release that you expect
Commercial shipments to commence mid-year.
George Shannarikas: and in 2024, you had a couple of press releases, one that mentioned a California company where you had a
George Shannarikas: Yeah, these are for actually from both the companies. We have we have purchase orders.
And in fact, I do have the.
George Shannarikas: Sal here, if you know, I was going to show this to you guys, since we are on video, this is actually the, the cell that we made that goes into the legs like that.
Unknown Executive, Charles Anderson, Farhan Ahmad
George Shannarikas: Tremendous progress from the time we got the purchase order to actually, you know, get some early samples out from our new factory. Um, so, and, and the results look really good. Um, and, you know, like I said, we're gonna continue to make that and I, I'm, I'm kind of.
bullish on this market as a market that
that has a lot of potential in the out years.
Particularly because of the, of the.
George Shannarikas: You know, the user interface problem has been really solved well with Genia. You can speak to these devices.
George Shannarikas: There's always clunky how to interact with a pair of glasses before that problem, you know, I think is is all pretty well.
and and also.
George Shannarikas: You know, I was at this conference, I think last month or earlier this month, you could see the advances made in the waveguide optics and and the brightness of the projectors and the miniaturization.
George Shannarikas: You know, I've been in this space since I was at Qualcomm, I don't know, maybe a decade ago, but it looks like a lot of progress here. So we are pretty optimistic about that. And also the sales we make are a huge advantage because there is not that much space to put batteries in these glasses and the applications demand a lot of.
George Shannarikas: performance from the battery to go for an all-day use. That's the reason we are seeing tremendous interest on our technology in this space. It'll take some time to get to, you know, multiple tens of millions, but it's a good place to start.
George Shannarikas: Thank you. And also, on manufacturing, you said the last time we spoke, you've
George Shannarikas: Completed your site acceptance test and you expect to begin production in earnest in the fourth quarter this year for smartphones, some point this year for the devices you just mentioned. What
are the bottlenecks to being confident.
George Shannarikas: from here, that you can scale that production? What? Obviously, you've been, I'm assuming, tinkering with some of the lines. And so I'm curious as to what has to be solved between now and then to really gain confidence that you can make these, the batteries in the millions. Thank you.
Speaker Change: I'll take a quick shot at it and then I'll let Ajay speak.
Speaker Change: We are very pleased with the progress that Ajay and his team has made. You know, we see sales coming out, we're shipping them to the customer. And, you know, now the factory is going through ISO audit, which will be a big step when it's done in the next few months.
You know, I think really the
Speaker Change: The work now is, you know, reducing these at volume and scale and, you know, getting the UPH and yields up. I guess maybe I can comment. Absolutely, Roger. So, yeah, the proof points, obviously, are yields and how fast can we ramp on this line? The line is qualified. There's really no.
Raj Talluri: Unknown Technological bottleneck, if you will, we are, you know, doing this with different material sets, as Raj pointed out, EX-1M, EX-2M at the same time, depending on what the customers are needing in terms of performance, which one is more important for them versus the other.
Raj Talluri: and therefore working with all these materials and getting the yields higher.
Continuously learning and, you know, getting into a ramp mode.
and yeah, we are well on our way.
Raj Talluri: for the ramp to happen in the second half, which is exactly when we are expecting some of these things to come to fruition in terms of customer qualifications.
Raj Talluri: One other thing I'll add is that as we see this demand now, these are for slightly different shaped cells. So, you know, big cell of certain form factor, a small cell like this. So, so some of the work I just team is doing is how to get the cycle time down. So, we can quickly make different cells on the same machine, but what's the tooling to be done that that's going to be something that we'll continue to work on.
Speaker Change: Our next question will come from Derek Soderberg with Cantor. Please go ahead.
Derek Soderberg: Yeah, hey guys, thanks for taking the questions. Roz, did you say that you had two purchase orders from AR companies? I know the first one, you guys said you're going to commence shipments midway through this year. Is the second one for a commercially planned device? Was that for
Speaker Change: Sample Orders. And then just given the density benefit that you can deliver with, you know, these AR devices, what's the average selling price you think you can get for this one factor?
Speaker Change: Yeah, yes, we do have purchase order from both the both the customers and and again, we are, we are in the process of.
Speaker Change: Getting the exact dimensions and making those exact dimensions because they're both slightly different in, in, in shape, the premiums are actually very nice in this market because of the, of the.
How much of
Speaker Change: How important the battery is to the life of the of the products. I mean, we, you probably see an investor that we put some material on the advantages of our product versus what's commercially shipping. So you can see that that translates to a nice premium. I can't exactly comment on the numbers, but we're quite pleased with that business.
Unknown Speaker. Thank you.
Speaker Change: And the other thing is our ability to make full packs. I mentioned this when we acquired the company that this is going to be important to us. And because when you make a full pack, there's also an ASP premium of instead of just selling the cell. That is something that also is is playing out nicely, which is the reason I think I mentioned at the time why we acquired that company.
One of the reasons in addition to the coating capability.
Speaker Change: Can you talk about sort of in months how long it would take to procure and install kind of that second HPM line to feel like the demand for some of these AR devices could be You know coming in pretty pretty soon here. You know, how fast can't you order a second high-volume line and turn it on?
Speaker Change: So before we answer that, let me tell you this, the demand will come in in in next year, right? So again, we will make some cells and give it to them. But the qualification timeline takes the timeline it takes. So it's kind of important to understand. We are talking about 26 demand now. And, and we will plan capacity accordingly. And Ajay is doing that. Yeah, just to just to add to that. As I mentioned earlier, right, we are taking the approach of taking the all the long lead time items because not all the components that make up the model.
Speaker Change: have the same amount of lead time. So there are some longer lead time items, which we are working with our suppliers. We have started
Speaker Change: Stockpiling them at their place on on their dime, but you know, they're taking the risk on us, which is you know, really
Unknown Executive, Charles Anderson, Farhan Ahmad
Speaker Change: Second one will be significantly lesser and our ability to you know quickly ramp that into the production is also going to improve over time.
God, thanks, man.
Speaker Change: Our next question will come from Mukhtar Sehsar with Northland Capital Markets. DAS star six will allow you to unmute.
Yes, sir.
Powers.
Speaker Change: moving things, you know, like drones and so on. So when you have a mechanical object that's moving, you need to discharge at a much higher rate. And that's one of the things they can do, this part of company can do for us. And they can also do different shape and size cells that can go into some of the consumer electronics. So they have two, three different variations of products that we can do there. The military ones are high rate, big cells.
Speaker Change: Got it. Very helpful. And then just on line one, you said that the UPH is 1350. You know, that's a, I believe an instantaneous throughput. You know, can you talk about capacity utilization with with just one line, you can't
Speaker Change: Commit that volume to your customers. How how should we think about the utilization in the first year until, you know, line two comes up and you can bring that up?
and others. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Yeah, good question. That will depend on how quickly the qualification cycles are running through with several customers now in play. And we, I mean, a good manufacturing company would look at it, you know, in terms of
Speaker Change: How much are you filling the line up so that you can start ordering those longer lead time items first?
Speaker Change: followed by the other components to make up the line. So it's all like, you know, gradual feedback directly coming from our customers qualifications actually. So that's where I would, you know, I would leave it.
Got it. Thanks so much.
Speaker Change: Our next question will come from Sean Milligan with JANI. Please go ahead.
Speaker Change: Yeah, we don't really give the full guidance for the year, but maybe Krishna if you want to comment on that a little bit.
Raj Talluri: So, as Raj said, a lot of the long lead time items are ordered by our equipment vendors and on their dime due to relationship and whatnot. But for our 2025 CapEx, we have about between 30 to 40 million currently budgeted.
Raj Talluri: Okay. And then, Ajay, on the next line, like line two, do those economics fit the slide deck, the 1650 UPH that's in the back of the slide deck? Is that sort of the expectation on the next lines?
Ajay Marathe: Yes, that's correct. That's the UPH is always measured in equivalent of a cell size. So as Raj alluded, you know, we are now obviously getting cell sizes, which are significantly larger, which is really good for, you know, the value that we bring, and ASV and everything attached to that.
Ajay Marathe: But yeah, 1650 is the goal for a Diablo-sized cell, which we have talked about. So it'll vary based on, you know, which size cell it goes through the line.
Okay, and then Raj, I know.
Ajay Marathe: still qualifying some of those early samples with the cell phone customers. But there's this, there's a slide in your presentation that talks about
Ajay Marathe: You know, the top cell phone OEMs, the average model size is around 3.5 million units per year. Just curious, like in the two that you're in advanced stages with, do you have visibility into the potential models that you'd be in? And just curious if those programs are expected to be
Ajay Marathe: Below, at, above that kind of average model size that's mentioned in that slide.
Ajay Marathe: Yeah, so one of them, like I said, we actually got the specific spell dimension. So we have a little bit more visibility into where it would possibly go. But one thing to remember is that, you know, in the, in the Android market that we're going after initially.
Ajay Marathe: Each cell phone model, when you talk about a model, the model
Ajay Marathe: has a certain, how shall I say, features for you, if you will, certain cameras and display, certain process, certain memory configuration, so on. But there are variants within that.
Ajay Marathe: You know, for example, the customers may choose to take that model, change some software features and ship that into India, for example, and maybe change a few other things, ship that into Europe and maybe some other features and ship that into, you know, Gulf. So, so.
Ajay Marathe: So we don't have clarity yet on which exactly product we will be in. And that will come in time as we get closer to production. And that's typical and I've done this many, many years. That's quite typical in how it works. So that clarity will come closer to production time.
Ajay Marathe: Okay, and then just one last one. Can you remind everyone like how the
Ajay Marathe: The sales cycle works for cell phones. So like you, you start to get in qualification kind of early in the year and that's for commercial volumes that ship later in the years. That's sort of the same thought process for 2026. Also, or because you're
Speaker Change: Sampling more cells in 2025, would you be in earlier programs in 2026? I'm just trying to understand maybe cadence in terms of seasonality.
Speaker Change: Yeah, so good question. So, just for, I mean, since I get this question quite a bit, I'll just talk one more time about how this works.
Speaker Change: We typically work with the customers to get from them requirements on what this particular product and the launch timing is like, for example, in twenty twenty four, we talked to them about what's the kind of phone model that would launch in late twenty twenty five and we get requirements in terms of.
Speaker Change: You know, cycle life, you know, energy density in terms of size in terms of fast charge capability and so on. At the same time, they give us these requirements. They're also working on what process they should pick. How much memory should I watch display? They're using what camera they should use.
Speaker Change: and we give them a certain standard size cell, the cell that we, we've made internally, they test them and then they extrapolate from that, what the performance will look like and what performance they need when they fix all the other components in the phone, right?
Speaker Change: And then they give us the exact dimensions of the cell, which is what we just got now. And then we make that cell and we give it to them and then they test it along with all the other components, which are now frozen.
Speaker Change: And if everything passes, you know, and everything looks good, then they give us a purchase order to make, you know, multiple, you know, volume production of that cell. Now, that one particular cell could now go into multiple models in 25 and in 26 too. So it's not like it's only stops at 25.
Speaker Change: Because, like I mentioned, there could be different phone models that can be launched in different parts of the world. And that could continue through 26, for example.
Speaker Change: and then when they start thinking about what's going to launch at 26.
Speaker Change: You know, if there's some changes to that cell, they'll give us those and we start working on them. So this is going to be a continuum. If you will. It's not like we make this salad goes 25 done to make another salad goes 26 done. It doesn't work like that. It's usually a continuum. There'll be some overlap between the phone launches based on the regions. They're launching based on the volume. They're launching. That's typically how this works.
Speaker Change: As a reminder, if you would like to ask a question, please use the raise hand button, which can be found on the black bar at the bottom of the zoom interface. This may also be found under more or reactions. And if you've joined by phone star nine will allow you to raise your hand.
Speaker Change: There are no further questions at this time. With that, I'd like to turn it over to Dr. Raj Talluri for closing remarks.