Q2 2025 Enovix Corp Earnings Call

And thank you all for joining us for this presentation and the thank you T J for joining us today.

Ferro shareholders the company made.

Great progress in Q2 on all fronts, we launched our <unk> product platform.

Key milestones with many of our strategic customers, we launched de watering dividend do simultaneously reward our shareholders and also fund our future growth.

Fab two in Malaysia had made the first Evan batteries and all of our high volume manufacturing line now.

Now with our product sampling to two major smartphone Oems and 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's a few highlights and I'm going to walk you through some of them.

Using their shareholder letter in the backdrop here and I'll point, you to the things I'm talking about.

Revenue, we delivered Q2 revenue of $705 million above the guidance range.

It's up 98% year on year, and this was driven by strong demand for our products and our non-GAAP gross margin reached 31%, reflecting the higher margin of the different products that we get from our Korean factory.

And we launched the <unk> platform. The <unk> platform is the leadership platform.

Core battery architecture. It has some all the advanced materials Micron learn design rules and it meets all the requirements of the smartphone market.

And it is in our opinion the highest watt hours per liter 900 watt hours per liter battery with <unk> charge rate and now we feel it goes up to thousand cycles.

This is the first platform that has 100% active silicon anode and it's in commercial qualification with our customers now.

And again, we have ordered over 400 patents on top of this the technology that we have built.

Doing this high energy density with long cycle life and fast charging.

Really the key value of this platform and our customers are.

A lot of interest from our customers to qualify this product.

In a small battery like this we have 26 point III, one offs, but later and I'm going to have TJ talk a little bit about what that number means.

Thank you.

I decided.

Press release with SaaS.

Sure.

We will keep work on this thing.

All the battery news.

One eight cubic inches.

And then he will how much energy is $26 three watt hours and that will that's.

As Rollie answer is if you do a calculation.

It's an uplift of 5000 pump trucks hydro working either $4 70.

Three times and a little better.

And we're actually working right now on a demonstration to do that for real.

I'm going to use the Lamborghini instead of a truck.

Thank you.

So a couple of other highlights I wanted to talk about.

Here, we have now sampled this battery lead smartphone OEM and Theyre doing all.

All of the different tests that they do to make sure. These batteries working well in the form that they want to launch in and.

This testing takes time.

<unk> thousand cycles takes multiple months to test because when you when they put a new supplies battery and they go through the full cycle life test and we started assembling them in July so in three months, because we have weekly meetings with them to see how the tests are growing and we expect the test completed in three months' time, if everything goes well we should be getting.

Orders from them to get this to mass production.

We've also made a lot of progress in our smart eyewear.

One battery and smart eyewear is also a tremendous.

Because in smart eyewear, what happens is there is not much space to put a big battery. So typically as you can see here the batteries really small it fits in this legs here, sometimes people put two batteries one on each side.

One of the key things about.

Smart glasses is AI is having a huge impact on the usability of these classes because now you can talk to this one and most of them have cameras that look at the world. So they are able to detect what's going on in the real World and then and then use that information to change how the how the glasses experiences.

So which means you need tremendous amount of energy density small package to actually do that and it's a real advantage for us and we have.

We have sampled us to multiple customers.

Customers and the amount of samples we did also increase this year and the other.

The important thing to remember is that I believe that the AI use cases will only continue to grow in this market and as these use cases grow the process have run faster at the memory sector and faster there's a lot more data that needs to be computed there'll be more centers, there, which means we need a roadmap of product technology here, where we continued to increase energy density.

Ryan Benton: All of our statements are made as of today, July 31st, 2025, based on information currently available to us. We can give no assurance that these statements will be proven 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'll also discuss non-GAAP financial measures, which are not required in accordance with generally accepted accounting principles. All of our statements are 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. With that, I'll turn the call over to Raj. Raj.

Ally 31st 2025 based on information currently available to US we can give no assurance that these statements will be proven to be correct and we do not intend and undertake no duty to update these statements except as required by law.

The small size and you can see it on the right side, we have a roadmap of different technologies that will continue to increase that.

During this call. We'll also discuss non-GAAP financial measures, which are not Andrew yard in accordance with generally accepted accounting principles all of or you can find a reconciliation of today of the guidelines for measures to nonbank financial writers in our shareholder letter, which is posted on the Investor Relations page of our website with that I'll turn the call over to Raj.

Yeah.

Now a few other things one thing I find about this.

Markets like <unk> when they first start is that it's very important to be the battery of choice for the ecosystem and what I mean by ecosystem ecosystem is people, who make processors people who make.

Rush.

They have data optics people, who make different sensors and we are now working with the people who actually make this process a sample is battery swim.

Raj Talluri: Thank you, Rob, and thank you all for joining us for this presentation, and thank you, TJ, for joining us today. So to our 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. FabTwo in Malaysia had made the first A1 batteries now of 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.

Thank you.

Thank you all joining us for this presentation and thank you D J joining us today.

Sure that the batteries has the performance they need in the various use cases because in these markets. The use case, a little bit different than smartphones that decided it is a little bit different and so on so it's very important to have a battery.

Third our shareholders the company made.

Great progress in all fronts, we launched our one product platform.

Key milestones with many of our strategic customers will launch de watering dividend do simultaneously reward our shareholders and also fund our future growth.

First the ecosystem and will be in reference designs than any number of customers that can actually take the reference design and intermix battery has a potential of becoming the standard for that.

Fab two in Malaysia had made the first even matter is now off our high volume manufacturing line.

So we're making a lot of progress on that this quarter.

Now we've got a 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.

The other I think 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.

Of our journey.

Fast charge that is the toughest battery to make that battery can then be used in many other markets and we are seeing that now with the Iot market and recently, we've had a customer and one of the leading customers in industrial handheld markets signed an agreement with us so that they can actually get these batteries and test them in the next generation.

Raj Talluri: Now, in terms of highlights for the quarter, there's 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. And this was driven by strong demand for our products, and our non-GAAP gross margin reached 31%, reflecting the higher margin of the defense products that we get from our Korean factory. And we launched the A1 platform. The A1 platform is the leadership platform with the core battery architecture. It has all the advanced materials, micro-enabled design rules, and it meets all the requirements of the smartphone market.

Now in terms of highlights for the quarter.

A few highlights and I'm going to walk you through some of them.

With using their shareholder letter in the backdrop here and I'll point, you to the things that I'm talking about.

Revenue, we delivered Q2 revenue of $705 million above the guidance range and up 98% year on year and this was driven by strong demand for our products and.

The products that one of the launch.

Now I also mentioned that with the recent.

And our non-GAAP gross margin reached 31%, reflecting the higher margin of the different products that we get from our Korean factory.

In the last call with the recent.

In a tariff situation.

Anyone in defense and defense market as people really want batteries made from.

And we launched the Avon platform. The <unk> platform is the leadership platform. The core battery architecture. It has some all the advanced materials, Michelangelo and design rules and it meets all the requirements of the smartphone market.

Countries with more advantageous status situation and 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 from sort of outage.

Raj Talluri: And it is, in our opinion, the highest watt-hours per liter, 900 watt-hours per liter battery with 3C charge rate, and now 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. And again, 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, and 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, and I'm going to have TJ talk a little bit about what that number means.

That is now helping us grow this market into some of the other U S defense companies and we started sampling to multiple customers now.

And it is in our opinion the highest watt hours per liter 900 watt hours per liter battery with three C charge rate and now we feel it goes up 1000 cycles.

Now our factory in Penang is really coming up together well and in Q2, we accelerated our customer qualification efforts multiple customers have come now and built a factory.

This is the first platform that is 100% active silicon anode and it's in commercial qualification with our customers now.

And again, we have over 400 patents on top of this the technology that we have built.

And as I mentioned in this space of making lithium ion batteries, making custom battery is very important.

Doing this high energy density with long cycle life and fast charging is really the key value of this platform and our customers.

We've now reduced the time it takes to make a custom battery down by 50% from before.

I mentioned before our factory our machines are able to big matrix of different sizes, but we have to reconfigure them and we're able to do it much faster now.

A lot of interest from our customers to qualify this product.

In a small battery like this we have 26 131 offs, but later and.

Leather factory.

One.

I'm Gonna have TJ talk a little bit about what that number means.

Smartphone battery and also know passed the Unhcr recertification, which is very important for airline safety certification for our <unk> battery and now we are able to ship these to our customers.

TJ Rodgers: Thank you. I decided in a prior press release, which I asked them to put in here, to do a little deep work on this thing. The battery is 1.8 cubic inches. And then you ask, well, how much energy is 26.3 watt-hours in that little package? Well, the answer is, if you do a calculation, it's enough to lift a 5,000-pound truck. This is the height of, this is a working height of 4.7 feet, three times in that little battery. And 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.

Thank you.

He decided.

The press release.

Yeah.

You're a little geek work on this thing.

And as we build confidence in the customers. We are sampling in the qualification thats going on we now started placing purchase orders in Asia, what just orders for adding more capacity in the factory and building.

Oh the battery.

<unk>.

One eight cubic inches.

And then he will how much energy is $26 three watt hours.

He answers.

Population.

Some of the long lead time items on a secondary swim lane.

As you know with the 5000 pounds.

But I'll tell but to do that in the last quarter.

This is working out of $4 70.

What I actually wanted to know is I know, we put a little teaser for video before I actually wanted to show you. A video we just recently did of the entire factory producing the <unk> smartphone batteries that we are sampling to customers. So let's say, let's play the video.

Three times.

And we're actually working right now on a demonstration to do that for real except I'm going to use the lamborghini instead of a truck.

Raj Talluri: Thank you, TJ. So 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. And, you know, this testing takes time. You know, 1,000 cycles takes multiple months to test because when they put a new supervised battery in, they go through the full cycle life test. And we started sampling them in July, so in three months. Of course, we have weekly meetings with them to see how the tests are going, and we expect the tests 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've also made a lot of progress in smart eyewear.

Thank you again.

So a couple of other highlights I wanted to talk about.

As a reminder.

Here, we have now sampled this battery lead smartphone OEM and Theyre doing all the different tests that they do to make sure. These batteries working well in the form that they want to launch it and.

Okay.

No. The two films for one reason to manufacture the world's highest energy density batteries at scale.

At our core is a breakthrough in design.

<unk> stacked architecture.

This testing takes time.

Cycles take multiple months to test because when you when they put a new surprise battery and they go through the full cycle life test and we started assembling them in July so in three months, because we have weekly meetings with them to see how the tests are growing and we expect the testing to be completed in three months' time, if everything goes well.

Tighter stronger more reliable under stress.

Our structural leaf that redefine how a modern batteries actually operate.

The result of 100% active silicon anode battery that marks a generational advancement in energy density.

We start with laser cut electrodes and micron level precision.

You'd be getting orders from them to get this to mass production.

Each cut drives consistency.

We've also made a lot of progress in our smart eyewear, the I wouldn't battery and smart eyewear is also a tremendous.

Sales are stacked under pressure locked in place with constrained place enjoined by a bus bar setting seven millimeter tolerances automated <unk>.

Raj Talluri: The AI1 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. So typically, as you can see here, the battery is really small. It fits in these legs here, and 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, and 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 glass's experience is. So which means you need a tremendous amount of energy density, you know, small package to actually do that, and it's a real advantage for us.

Volume because in smart eyewear, what happens is there is not much space to put a big battery. So typically as you can see here the batteries really small it fits into his legs here and sometimes people put two batteries one on each side.

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.

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 and 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 and then use that information to change how the how the glasses experiences.

Even the smallest steps have been reinvented.

Our proprietary flag bonding process for copper meets lithium design.

Designed in house to stretch the lifespan and raised performance beyond but legacy systems can reach.

Fully automated and built to produce millions of cells with exceptional precision.

<unk> battery capacity per unit volume from one of the most abundant elements on our silicon.

So which means you need tremendous amount of energy density in a small package to actually do that and it's a real advantage for us and we have.

No trade offs no shortcuts. This is what it means to scale a breakthrough.

Raj Talluri: And we have sampled this to multiple AR customers, and the amount of samples we did also increased this year. And the other important thing to remember is that I believe that the AI use cases will only continue to grow in this market. And as these use cases grow, the processes 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 the energy density in the small size. And you can see here on the right side, we have a roadmap of different technologies that will continue to increase that. Now, a few other things.

We have sampled us to multiple customers.

Customers and the amount of samples we did also increase this year.

This is <unk>.

And the other important thing to remember is that I believe that the AI use cases will only continue to grow in this market and as is U S cases grow the process have run faster at the memory sector and faster there's a lot more data that needs to be computed there'll be more centers, there, which means we need a roadmap of product technology here, where we continued to increase energy density.

Yeah.

Awesome.

Hope you guys got.

See that video and we are super excited by by the factory and really Thats, what our state of the art and that will make the and factory needs to look like and you could see yourselves being produced there.

No.

In July we also issued a special shareowner watering dividend rewarding all of our shareholders and giving us an opportunity to raise additional capital because we wanted to build out the rest of that factory that I showed in that video.

And the small size and you can see it in that I've said, we have a roadmap of different technologies that will continue to increase that.

Now a few other things one thing I find about this.

Raj Talluri: 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. And what I mean by ecosystem, ecosystem is people who make processors, people who make, you know, the waveguide optics, you know, people who make different sensors. And we are now working with the people who actually make these processors. We've sampled these batteries to them to make sure that the batteries have the performance they need in the various use cases. Because in these markets, the use case is a little bit different than smartphones. The discharge rate is a little bit different and so on.

Now the asset we acquired in in Korea to add to our <unk>.

Markets like a or when they first start is that it's very important to be the badgley of choice for the ecosystem and what I mean by ecosystem ecosystem is people, who make processors people who make.

These are defense capabilities essentially battery capabilities also came with additional coating equipment and it's a really important asset that we acquired because its newly acquired coating equipment is going to help us ramp the batteries in fab two and we start building out the factory and start getting higher and higher volume production.

They have data optics people, who make different sensors and we are now working with the people who actually make these processes sample is that risk to them to make sure that the batteries have the performance that need in the various use cases because in this market. The use case, a little bit different in smartphones that decided it is a little bit different and so on so it's very.

Now I want to say a little bit about coding coating is a very important part of battery making.

Raj Talluri: So it's very important to have a battery that supports the ecosystem and VBE in reference designs, then any number of customers that can actually take the reference design and the Enovix battery has the potential of becoming the standard for that. So 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, you know, 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. And we are seeing that now with the IoT markets.

What we do is we take this giant comp.

Wanting to have a battery that support the ecosystem and VB in reference designs than any number of customers that can actually take the reference design and intermix battery has the potential of becoming the standard for them. So.

Copper and Alan.

Aluminum rose and I see you had like a 105 millimeter wide and 500 million in long rows of copper and aluminum foil and we get this latest annual powders and catalog powders that they keep changing in the market as people make more advances and record them on top of visuals.

So we're making a lot of progress on that this quarter.

The other I think 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.

Very important to be able to call. This to the position we need where the density we need and so on because.

Fast charge that is the toughest battery to make that battery can then be used in many other markets and we're seeing that now with the Iot market and recently, we've had a customer and one of the leading customers in industrial handheld market signed an agreement with us so that they can actually get these batteries and test them in the next generation of.

The way, we make the imagines the baby dice dice rolls and put them together in a very different from people, who just make you a little nowadays so it's important that we controlled. According so this ability that we acquired is really helping us and its helping us in many ways is helping us reduce cost is helping us.

Raj Talluri: Recently, we've had a customer in 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. Now, I also mentioned that with the recent, you know, in the last call with the recent, you know, tariff situation, people really want in defense and defense markets, people really want batteries made from, you know, countries with, you know, more advantageous tariff situations. And 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, you know, some of the other US defense companies, and we started sampling to, you know, multiple customers now.

Is the battery performance. 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 are not where all our own coding and this is the power of being vertically integrated in this battery manufacturing.

The products that more of a lunch.

Now I also mentioned that with the recent.

In the last call with the recent.

In a tariff situation.

People really want in defense and defense market as people really want batteries made from.

Countries with more advantageous status situation and we had this Korean asset that we acquired and we added to that.

No I'm not this isn't the investor letter I am not going to go through all of that but I just wanted to say something which I mentioned when I first joined the company.

A lot more capacity last time with the acquisition we made from from.

The battery is the bottleneck and it is becoming even more of a bottleneck, but people to really realize the full power of the devices. They buy and this has become even more and more evident now.

<unk>.

That is now helping us grow this market into some of the other U S defense companies and we started sampling to multiple customers to now.

As the AI and AI applications have become even more prevalent in the phones and in other consumer electronic devices now recently and I'll show a little anecdotal evidence here, we saw a smartphone a M launch.

Raj Talluri: Now, our factory in Penang is really coming up together well. And in Q2, we accelerated our customer qualification efforts. Multiple customers have come now and visited our factory. And as I mentioned, in this space of making lithium-ion batteries, making custom batteries 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 bake batteries of different sizes, but we have to reconfigure them, and we're able to do it much faster now. Now, the factory in this AI1 smartphone battery has also now passed the UN 8.3 certification, which is very important for airline safety certification for our first battery. And now we are able to ship these to our customers.

Now our factory in Penang is really coming together well and in Q2, we accelerated our customer qualification efforts multiple customers have come now and we'll start at the factory.

Unlike a mixture and maybe even a little bit lower tier phones, which is 100 $200 for 200 $300 phone have like an 8000 million bought battery.

And as I mentioned in this space of making lithium ion batteries, making custom battery is very important we have 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 big batteries are different sizes, but we have to reconfigure them and we're able to do it much faster now.

Why is that important and 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 and $1000 smartphone the.

The battery is becoming bigger and bigger percentage of that and in that space is not getting any bigger. So energy density is at a premium and for us having been able to produce the ion battery the strong roadmap even higher energy density is a nice tailwind for us to get higher asps over time and to access a much larger market.

Leather factory in this.

One more.

Smartphone battery is also now past the Unhcr recertification, which is very important for airline safety certification for our <unk> battery and now we're able to ship these to our customers.

Raj Talluri: And as we build confidence in the customers we are sampling and the qualification that's going on, we now started placing purchase orders, initial purchase orders for adding more capacity to the factory and building, you know, some of the long lead time items for the second HPM line. We were also able to do that in the 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, you know, did of the entire factory producing the AI1 smartphone batteries that we are sampling to customers. So let's play the video.

And as we build confidence in the customers who have sampling in the qualification thats going on.

Good point.

We now started placing purchase orders in Asia, which is orders for adding more capacity of the factory and building.

Yes. Please.

One quick point.

On the batteries bottleneck.

That makes it.

Thank obvious.

Some of the long lead time items for the second atrium line, we outgrow wholesale but to do that in the last quarter.

Typical AI chip.

He is bigger than PC chips used to be.

What I actually wanted to know is I know you put a little teaser for video before I actually wanted to show you a video of it just recently did of the entire factory producing the E. One smartphone batteries that we are sampling to our customers. So let's say, let's play the video.

And it contains today 100 billion transistors, so you're looking at a chip the size of a commemorative postage stamp with 100 billion transistors on it.

And that sucker, even though it draws.

<unk> nano watch a node by node basis draws amperes of current and that is the state of the art chip that's already made they're making now done at three three nanometers to get it done so to do AI requires a lot of power because you're using giant chips with a lot of transistors and thats.

Okay.

[music].

Enovix Corporation: Enovix was built for one reason: to manufacture the world's highest energy density batteries at scale. At our core is a breakthrough in design: 3D stacked architectures. 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 busbar 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.

For one reason to.

To manufacture the world's highest energy density batteries at scale.

At our core is a breakthrough in design.

Three D stacked architecture.

Tighter stronger more reliable under stress.

Unavoidable right now.

Thanks, Okay Im going to turn it over to Ryan now to talk about the financials. Thanks, Ross. Thanks T. J first a quick housekeeping point on July 7th we issued preliminary results. The final point Youll see here, which includes a few positive adjustments.

Our structural leaf that redefined how a modern battery factory operations.

The result of 100% active silicon anode battery that marks a generational advancement in energy density.

First we'll talk about the Q2 results. So revenue seven 5 million well above our guidance range of $4 five to 6.6 dollars five as Raj mentioned up 98% year over year.

We start with laser cut electrons and micron level precision.

Each cut drives consistency.

Sales are stacked under pressure locked in place with constrained place enjoined by a bus bar threading seven millimeter tolerances automated it seems.

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 turn positive, 31% really strong quarter.

Every unit is tracked in real time.

State of the art machine vision, X-ray inspection quality and reliability.

It leaves our factory it pass every extensive tests, we built into the line.

Basically on the back of great product mix with the defense sector.

Enovix Corporation: 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. It's 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 trade-offs, no shortcuts. This is what it means to scale a breakthrough. This is Enovix.

Even the smallest steps have been reinvented.

As we move to operating expenses you can 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 continuing to execute on meeting the mission of building out fab, two and continuing with our R&D efforts.

Our proprietary flag bonding process, where copper makes 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.

Hi, its battery capacity per unit volume from one of the most abundant elements on our silicon.

Loss of a loss of operations you can see there as a result of that so an improvement year over year.

No trade offs no shortcuts. This is what it means to scale a breakthrough.

Next slide.

A couple of points here as well so.

This is <unk>.

On the in terms of the net loss per share.

Okay.

Quarterly basis 13 sense again also improved from our guidance range of 15% to 21%.

Raj Talluri: Awesome. So I hope you guys got to see that video, and we are super excited by that factory. And really, that's what a state-of-the-art battery making factory needs to look like. And you can see the cells being produced there. Now, in July, we also issued a special shareholder rewarding dividend, you know, rewarding all our shareholders and, you know, 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 add to our, you know, increase our defense capabilities, defense battery capabilities also came with additional coding equipment.

Awesome.

Hope you guys got.

See that video and we are Super excited by the factory and really Thats, what our state of the art and actually make the factory needs to look like and you could see yourselves being produced there.

A couple of points on cash we finished Q2 with 203 four.

$4 million and that included the after making payments completing the acquisition and additional capital expenditures related to fab two.

No.

In July we also issued a special shareowner watering dividend rewarding all of our shareholders and giving us an opportunity to raise additional capital because we wanted to build out the rest of that factory that I showed in that video.

Another point that we have here on the bottom is that the board authorized which we previously announced a $60 million share by share buyback program as of today, we have not made any purchases under the program, but we standby it already especially in the face of market volatility.

Now the asset we acquired in in Korea to add to our debt.

Okay.

And finally here you see our promises for Q3 in terms of the outlook revenue on a topline basis, we do see growing sequentially and well above where we were last year net operating loss, we see increasing slightly.

These are defense capabilities defense battery capabilities also came with additional coating equipment and it's a really important asset that you acquired because its newly acquired coating equipment is going to help us ramp the batteries in fab two and we start building out the factory and start getting high.

Raj Talluri: And it's a really important asset that we acquired because this newly acquired coding equipment is going to help us ram the batteries in Fab 2 as we start building out the factory and as we start getting, you know, higher and higher volumes into production. Now, I want to say a little bit about coding. You know, coding is a very important part of battery making. In coding, what we do is we take this giant, you know, copper and, you know, aluminum rolls. And I see here like 105 millimeter wide and 500 millimeter long rolls of copper and aluminum foil. And we get these latest anode powders and cathode powders that we keep changing in the market as people make more advances. And we code them on top of these rolls.

Really two things less favorable product mix, we see in Q3 and increased operating expenses related to the manufacturing readiness Scheller you see in the net loss per share we see a range of 14 to 18 18 cents compared to <unk> 13 cents in Q2, and the midpoint of that range right on par with the 16th sensor we posted last year.

At a high volume production.

I wanted to add a little bit about coding quoting is a very important part of battery making.

What we do is we take this giant cough.

Copper and.

Aluminum rose and I see it like a 105 millimeter wide and 500 million in lung draws of copper and aluminum foil and we get this latest annual powders and catalog powders that they keep changing in the market as people make more advances and we called them on top of visitors.

Okay.

Thank you.

And go for Q&A.

We will now begin the Q&A session. Please note that this call.

Is being recorded.

Before we go to live question, we are going to lead the team that is highly basic questions submitted by shareholders.

Raj Talluri: Now, it's very important to be able to code these to the precision we need, for the density we need, and so on. Because 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. So it's important that we control the coding. So this ability that we acquired is really helping us. And it's helping us in many ways. It's helping us reduce cost. It's helping us improve the battery performance. It's 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 coding. And this is the power of being vertically integrated in this battery manufacturing. Now, I'm not, this is an investor letter.

No, it's very important to be able to call. This to the precision we need where the density we need and so on because.

During the call registration.

The first question.

The way, we make the batteries the baby dies dies the roles and put them together is very different from people, who just make you a little batteries. So it's important that we controlled. According so this ability that we acquired is really helping us and its helping us in many ways is helping us reduce cost is helping us increase the battery performance. It is also helping us prototype new materials.

<unk> ex factory.

Thanks.

Yes, thank you for that question.

I think as I mentioned, we are superb.

Sampling our AI, one battery now to multiple customers and particularly in the smartphone space is where we expect our first products to launch.

Really really fast it used to take US 20 weeks to prototype a new material now we can do it under seven because we on our own where all our own coding and this is the power of being vertically integrated in this battery manufacturing.

Using our battery.

And.

They are in cycling that in doing different tasks. So like I said that takes about at.

At least three months for them to do all the tests and after that monthly pass all of those tests, we expect to get a purchase order from them and I expect the phones to launch so it's now in the hands of our customers and we expect them to come out.

No I'm not this isn't the investigator I'm not going to go through all of that but I just wanted 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, thereby.

Raj Talluri: I'm not going to go through all of that, but 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. And this has become even more and more evident now as AI and AI applications have become even more prevalent in the phones and in other consumer electronic devices. Now, recently, and I show a little anecdotal evidence here, we saw a smartphone OEM launch a mid-tier and maybe even a little bit lower-tier phone, which is a $100, $200 phone, $200, $300 phone, have like an 8,000 milliamp-hour battery. Why is that important? And that used to be like 6,600. Of course, they made the battery bigger to get that.

As soon as the personnel qualifications is done by them.

The second question is can you explain the need for the woman what will the money be useful for the new line or a new facility. How many lines can you say in your facility.

And this has become even more and more evident now.

<unk>.

AI and AI applications have become even more prevalent in the phones and in other consumer electronic devices now recently and I show a little anecdotal evidence here, we saw a smartphone a M launch.

Okay.

Yes, no the proceeds from the warrants.

Unlike a mid tier and maybe even a little bit lower tier phone, which is 100 $200. One 200 $300 phone have like an 8000 million bought battery.

If exercised will be used to complete the build out of fab. Two so we have one high volume line.

Operational now and the facility is sized to support for four full lines of course, the funds will be used for general working capital purposes, and supporting our strategic initiatives such as continued R&D development and I can report in term so little progress on the warrants. So again, we're pleased with the result as of yet.

Why is that important and that used to be like 6600, Afghans amid the battery bigger to get deck, that's important because the bill of materials in a smartphone and a thousand dollars smartphone the.

Raj Talluri: 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. So energy density is at a premium. And for us, having been able to produce the AI1 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.

The battery is becoming bigger and bigger percentage of that and in that space is not getting any bigger. So energy density is at a premium and for us having been able to produce the ion battery with a strong roadmap even higher energy density is a nice tailwind for us to get higher asps over time and to access a much larger market.

Sturdy, we had roughly $34 million worth of or so of exercises I believe it was was the data that our change of money that essentially has come into the company soon.

We will now go to the key if you would like to ask a question. Please use the raise some detail on your screen. If you have dialed in via phone. Please install nine to raise your hand and Stasik Amit yourselves.

TJ Rodgers: Can I make a point?

Good point, yes.

Raj Talluri: Yeah, please.

TJ Rodgers: One quick point on the battery as a 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. So you're looking at a chip that's the size of a commemorative postage stamp with 100 billion transistors on it. And that sucker, even though it draws nanoamperes or nanowatts on node-by-node basis, draws amperes of current. And that is the state-of-the-art chip that's already made. They're making now down at three nanometers to get it done. So to do AI requires a lot of power because you're using giant chips with a lot of transistors, and that's unavoidable right now.

One quick point on the batteries a bottleneck.

That makes it.

I think obvious typical AI chip.

Questions will be answered in the order. They are received please ask one question and one follow up question.

He is bigger than PC chips used to be.

And it contains today 100 billion transistors, so you're looking at a chip that's the size of a commemorative postage stamp with 100 billion transistors on it.

We will now pause a moment to assemble the queue.

Our first question comes from Colin Leash Oppenheimer. Please on mute your line and ask two questions.

That sucker, even though it draws.

Nano amperes nano, what's a node by node basis draws amperes of current.

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.

And that is the state of the art chip that's already made they're making now done at three three nanometers to get it done so to do AI requires a lot of power because you're using giant shifts with a lot of transistors and that's unavoidable right now.

Specs getting finalized for some of these some of these new products I know you've talked about the one customer getting launched here later this year, but I would assume that you're making some meaningful progress with other folks as well and when we can start seeing some of those incremental.

Raj Talluri: Yeah, thank you, TJ. Okay, I'm going to turn it over to Ryan now to talk about the financials.

Yes.

Okay, I'm going to turn it over to Ryan now to talk about the financials. Thanks, Ross. Thanks T. J first a quick housekeeping point on July 7th.

Announcements and product organizations.

Ryan Benton: Thanks, Raj. Thanks, TJ. First, a quick housekeeping point. On July 7th, we issued preliminary results, the final print, and you'll see here, which includes a few positive adjustments. So first, we'll talk about the Q2 results. So revenue, $7.5 million, well above our guidance range of 4.5 to 6.5. As Raj mentioned, up 98% year over year. Fifth straight quarter that we've beat the midpoint of the guidance that we've provided. 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.

<unk> getting finalized.

Next several quarters.

Yes, Thank you Colin so.

We issued preliminary results the final print and you'll see here, which includes a few positive adjustments so.

That's why it is.

The first customer we had the specs and that suspects to which we made the battery and we send them the south and testing them now different that youre doing cycle I guess.

So first of all we will talk about the Q2 results. So revenue seven 5 million well above our guidance range of $4 five to 6.6 dollars five as Raj mentioned up 98% year over year.

I said this is judd discharge at various times.

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 turn positive, 31% really strong quarter.

We signed up as I mentioned in the call. Our batteries now we feel are projecting now that it can go up the housing cycles.

Last time, when we announced we.

We thought it would be like up to 800 now we progress further along now and so we feel good about our technology and our customers are testing that.

Basically on the back of great product mix with the defense sector.

We've just sent.

As we move to operating expenses you can 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 continuing to execute on beating the mission of building out fab, two and continuing with our R&D efforts.

<unk> samples out of our factories in the second customer now second smartphone OEM and those will.

Ryan Benton: The company maintains 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 is a result of that. So an improvement year over year. Let's go to the next slide. A couple of points here as well. So in terms of the net loss per share on a quarterly basis, 13 cents, again, also improved from our guidance range of 15% to 21%. And a couple of points on cash. We finished Q2 with $203.4 million. And that included after making 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, a $60 million share buyback program.

Again, I've been holding them back a little bit because I wanted to make sure that we satisfied all of that equipment in the first one before we send them the second one.

And we send them now and we got the stats from them on exactly what cycle of what performance trade offs that they want and we feel our current technology you can meet those.

Lots of lots of operations you can see there as a result of that so an improvement year over year.

My expectation is that they will test these batteries.

Next slide.

A couple of points here as well so.

And then.

They will give us the exact dimensions, just like how the highest customer did on the size of the battery that they want for the launch next year because next year funds will have a slightly different battery based on the display they chose based on the camera they chose and so on and once we get that we will make batteries did that and we expect that to go to production sometime later part of next.

On the in terms of the net loss per share on a quarterly basis, 13th again also improved from our guidance range of 15% to 21%.

A couple of points on cash we finished Q2 with $203 four.

$4 million and that included the after making payments completing the acquisition and additional capital expenditures related to fab two.

Yes.

And then also how much theyre getting a lot of industrial more customers and we will start sampling them through the year TJ wanted to Colin I would like to.

The other point that we have here on the bottom is that the board authorized which we previously announced a $60 million.

<unk> share buyback program as of today, we have not made any purchases under the program, but we stand by it already especially in the face of market volatility.

Ryan Benton: 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. Let's go there. And 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. And you see the net loss per share, we see a range of 14 to 18 cents compared to the 13 cents in Q2. And the midpoint of that range is right on par with the 16 cents that we posted last year.

I'll make a comment from a board perspective, so I come here for a full day board meeting once a quarter I also come here for three other.

Got it.

And finally here you see our promises for Q3 in terms of the outlook revenue on the topline basis, we do see growing sequentially and well above where we were last year net operating loss, we see increasing slightly.

Six we show our meetings, including manufacturing and R&D.

And to me the process by which you get the spec is more important.

If my level than the spec itself do you have 1000 cycles as some new spec bigger that's the sausage, making but what we failed at I feel there.

Two things less favorable product mix, we see in Q3 and increased operating expenses related to the manufacturing readiness Scheller you can see the net loss per share we see a range of 14 to 18 18.

The old pre Raj <unk> was we had a satisfactory and we went out and made them like engineers.

Compared to the 13 cents from Q2, and the midpoint of that range right on par with the 16th sensor we posted last year.

And I'll give you. An example, there is a video of me on the website, where I'm poking a nail through battery.

Raj Talluri: Okay, awesome. Thank you. And I'm going to go for a Q&A.

Okay.

It's really true our battery doesn't light up and turn on fire when you're focused stainless steel mill through it and that's really true in our rollout we have Aneel poker machine Scott Fireproof chamber in it. It's also really true and cell phone guys don't care and we were working on something that was kind of an engineering abstraction for real.

Thank you.

And go for Q&A.

Operator: We will now begin the Q&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?

We will now begin the Q&A session. Please note that this call is being recorded.

Before we go to last question, we're going to reap the tumors highly basic questions submitted by shareholders.

During the call registration.

When when our customers were doing things different so when raws game here.

The first question.

When will he knows ex factory point products.

Once the customers loved.

Loved him literally I was shocked.

Raj Talluri: Yeah, thank you for that question. You know, I think, as I mentioned, we're sampling our AI1 battery now to multiple customers. And particularly in the smartphone space is where we expect our first products to launch using our battery. And they're in cycling, they're in doing different tests. So like I said, that takes about at least three months for them to do all the tests. And after that, once we pass all those tests, we expect to get a purchase order from them and expect the phones to launch. So it's now in the hands of our customers, and we expect them to come out, you know, as soon as the tests and all qualifications are done by them.

Yes, thank you for that question.

He would send back pictures of Boardrooms in Asia.

I think as I mentioned.

We're sampling our AI, one battery now to multiple customers and.

20th smiling people waving at the camera.

And Raj Vig in the middle granting so we got their stack in their spec wasn't.

Particularly in the smartphone space is where we expect our first products to launch.

The kind of spec I'm talking about it was a book and these guys are world class users of batteries and then they sent US some people and they said no you Gotta do this though you gotta do that this spec is interpreted this way and they actually did some of the work to validate our spec.

We're using our battery.

And.

This data in cycling that in doing different tasks. So like I said that takes about.

At least three months for them to do all the tests and after that once we pass all of those tests, we expect to get a purchase order from them and I expect the phones to launch so it's now in the hands of our customers and we expect them to come out.

I will just back in my example, the state of the art way to set a battery on fire and make sure it doesn't get on fires you crushed it.

That's another person all qualification is done by them.

Actually crush it down and grind it together to start mixing the things inside the battery and thus.

Operator: 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?

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 new facility. How many lines can you say in your facility.

More deadly way of starting a fire then poking a nail through it.

And we now do that test. We just finished that just last week in any one battery. So point of all this is.

I'll take that.

Raj Talluri: Yeah, no, the proceeds from the warrants, if exercised, will be used to complete the build-out of Fab 2. So we have one high-volume line that's operational now, and the facility is sized to support four full lines. Of course, the funds will be used for general working capital purposes, so supporting our strategic initiatives such as continued R&D development. And I can report in terms of a little progress on the warrant. So again, 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. So money that essentially has come into the company soon.

Yes, no the proceeds from the warrants.

Rise 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. The most bits and you can meet their price you win.

If exercised will be used to complete the build out of fab. Two so we have one high volume line.

Operational now and the facility is sized to support for four full lines of course, the funds will be used for general working capital purposes of supporting our strategic initiatives such as continued R&D development and I can report in term so little progress on the warrants. So we're again, we're pleased with the result as of yet.

And in this case these things are pretty complicated systems, and we're building to their specs working with their engineers. So my apprehension that.

If you build it will they buy it is way lower.

Going to buy it.

We're going to build it the way they want it and then I'm talking books worth of data on what they want that's the difference in the old and new <unk> pre Raj post Raj.

Yesterday, we had roughly $34 million worth of ortho of exercises I believe it was was the data that I've seen some money that essentially has come into the company soon.

That's really helpful. Appreciate it thank you Jay.

Yes.

Operator: 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 star 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 Rouge with Oppenheimer. Please unmute your line and ask your question.

Just thinking about capital equipment and the potential for expansion here can you talk about preparedness.

We will now take the key if you would like to ask a question. Please use the raise some detail on your screen. If you have dialed in via phone. Please dial nine to raise your hand and statistics on mute yourself questions will be answered in the order. They are received please ask one question and one for.

Your your capital equipment suppliers to support an expansion in 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.

Yeah, So I think I.

Blow up question.

I had mentioned that couple of weeks ago I was I was in Asia, and I visited some of our equipment suppliers.

We will now pause a moment to assemble the queue.

Yes.

Our first question comes from Colin Rusch Oppenheimer. Please on mute your line and ask your question.

This time around we're actually.

As I said, I mean compared to what we used to build in Fremont to what we're building menasha.

Suppliers now that we're using are actually people, who are used to making very complex semiconductor equipment. This is people I mean I saw a supplier.

Colin Rusch: Thanks so much, guys, and congrats on all the progress. You know, can you talk a little bit about where you're at with the customers in terms of, you know, specs getting finalized for some of these new products? I know you've talked about the one customer getting launched here later this year, but 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, you know, product finalizations or product specs getting finalized, you know, over the next several quarters.

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.

That's getting finalized for some of these some of these new products I know you've talked about the one customer getting launched here later this year, but assuming you're making some meaningful progress with other folks as well and when we can start seeing some of those incremental.

They kind of figured out how to put really thin copper pins into the die like Submicron transition I mean, it's crazy and these are the people that are using and and Theres. Some very exciting new technology, there and I visited a few of them.

Announcements in prior.

Utilizations are prospects getting finalized.

And we have some new interesting ways to actually continue to digest, the electrodes and make them even faster and.

The next several quarters.

Raj Talluri: Yeah, thank you, Colin. So 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 tests, which, like I said, is charged and discharged at various times. You know, like we saw in the, as I mentioned in the call, our batteries now we feel are projecting now that it can go up to 1,000 cycles. And, you know, last time when we announced AI1, we thought it could be like up to 800. Now we've progressed further along now, and so we feel good about our technology and our customers are testing that. We've just sent shipped samples out of our factory to the second customer now, second smartphone OEM.

Yeah. Thank you collyn so.

Why is.

So we started some.

The first customer we had the specs and that suspects through which we make the battery and.

Proof of concept systems and I saw some of the systems being built that's what I meant when I said, we start we are now making some initial batches at us towards that.

We send them the south and testing them now.

Different that Youre doing cycling past, because like I said discharge to discharge.

So yeah, I think I think we are telling them and that's what we need and some of the suppliers have actually visited our factory in Penang and they know where these missions that are going to be put in so in terms of readiness.

At various times.

We signed up as I mentioned in the call. Our batteries now we feel are projecting now that it can go up to thousands of vehicles and <unk>.

<unk>, we thought it would be like up to 800 now we progress further along now and so we feel good about our technology and our customers are testing that.

Yes, absolutely we are starting to work now and really exciting to see the latest advances in semiconductor manufacturing that we're now able to use to make batteries I think thats the key.

We've just sent shipped samples out of a factory for the second customer now second smartphone OEM.

Youll see because we make submicron like micron spaces.

Raj Talluri: 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 sent 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.

And those will.

Yeah.

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 them the second one.

Precision.

Cutting and stacking so the equipment. We use is very precise and this is what is being done in semiconductor industry and we're using the same suppliers.

And we send them now.

We got the specs from them on exactly what cycle, what performance trade offs that they want and we feel our current technology can meet those.

Excellent. Thanks, so much guys.

Our next question comes from Jeff Osborne with TD Securities Pete Amit Your line and ask your question.

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 for them to have a slightly different battery based on the display they chose based on the camera. They have chosen so on and once we get that we will make batteries did that and we expect that to go to production sometime later part of next.

Yes. Thank you just two questions on my side.

If you were to win the two phone.

Engagements as well as the eyewear.

Raj Talluri: And once we get that, we will make batteries to that, and we expect that to, you know, go to production sometime later part of next year. And then, of course, they're getting a lot of interest from more customers, and we will start sampling them, you know, through the year. TJ, I want to make a comment.

And it sounds like those were launched three four months after the standpoint started last or this month.

How do we think about the need for sort of working capital growth are you already operating as if youre going to win what are the lead times for the materials that we need to.

Here.

And then also how much theyre getting a lot of industrial more customers and we will start sampling them through the year TJ want to make comment Collyn I would like to.

TJ Rodgers: Tong, I'd like to make a comment from a board perspective. So I come here for a full-day board meeting once a quarter. I also come here for three other six-hour meetings, including manufacturing and R&D. And to me, the process by which you get the spec is more important at my level than the spec itself. Do you have 1,000 cycles? Is the new spec bigger? That's the sausage making. But 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. And I'll give you an example. There's a video of me on the website where I'm poking a nail through a battery. And it's really true, our battery doesn't light up and turn on fire when you poke a stainless steel nail through it. And it's really true.

So by to ramp up line one in fab two.

I'll make a comment from a board perspective, so I come here for a full day board meeting once a quarter I also come here for three other.

Gentleman there, yes, I mean, I think I will answer the last part first we're certainly operating to win.

Yes.

Our how we're operating.

Six or so or meetings, including manufacturing and R&D.

Obviously, the balance sheet, we finished the quarter with over 200 $200 million.

And to me the process by which you get the spec is.

Q2, and so we're sufficiently capitalized and were and were.

More important.

At my level than the spec itself do you have 1000 cycles as some new spec bigger that's the sausage, making but what we failed at I failed at.

Preparing for the manufacturing ramp.

Good to hear and then just maybe another question on the balance sheet side, just given the warrant structure was a big accretive and not.

The old pre Raj <unk> was we had a satisfactory and we went out and made them like engineers.

Familiar with most investors I've had several people asked.

And I'll give you. An example, there is a video of me on the website, where I'm poking a nail through a battery and it's really true our battery doesn't light up and turn on fire. When you focus stainless steel mill through it and that's really true in a row lab, we have a nail poker machine.

In the event that only a portion.

The warrants were to be exercised is there sort of a minimum level that would avoid the need for a future capital raise I think you mentioned $34 million as of yesterday it was done.

TJ Rodgers: In our rel lab, we have a nail poker machine that's got a fireproof chamber in it. It's also really true the cell phone guys don't care. And we were working on something that was kind of an engineering abstraction for real when our customers were doing things different. So 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. And Raj, big in the middle, grinning. So he got their spec. And their spec wasn't the kind of spec I'm talking about. It was a book. And these guys are world-class users of batteries. And then 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.

As you look at the ramp into the middle of next year. If you were to win these engagements and maybe more.

Got fireproof chamber in it. It's also really true cell phone guys don't care and we were working on something that was kind of an engineering abstraction for real.

How do you contemplate building out the fab two completely.

As has the weren't enough to do that or maybe just walk us through that.

When when our customers were doing things different so when raws game here.

Seven in Arizona, I don't think cap the warrant would be sufficient capital completely build out all four lines, we've talked about and we've provided publicly our estimate of how much those lines cost, which was $50 million to $60 million, but certainly even adding one additional line, which again, we're our balance sheet as strong as it is right now.

He went to customers.

Loved him literally I was shocked.

He would send back pictures of Boardrooms in Asia.

Smiling people waving at the camera.

Raj Vig in the middle granting so we got their stack in their spec wasn't.

What are the kind of spec I'm talking about it was a book and these guys are world class users of batteries and then they sent US some people and they said no you Gotta do this though you gotta do that this spec is interpreted this way and they actually did some of the work to validate our spec.

$34 million is helps.

That's going to get us to substantial capacity to two lines running that factory, we talked about nameplate capacity of $9 million to $10 million.

As per year, so that's going to go a long way to helping the company meet important milestones.

TJ Rodgers: And they actually did some of the work to validate our spec. I'll just back on 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. And that's a more deadly way of starting a fire than poking a nail through it. And we now do that test. We just finished that test last week in the A1 battery. So the point of all this is Raj is a world-class guy working with customers. And the semiconductor industry was different. If you've got Moore's law and you've got the fastest memory with the most bits, and you can meet their price, you win. And in this case, these things are pretty complicated systems.

Thank you.

I'll just back in My example, the state of the art waves set of battery on fire and make sure. It doesn't get on fires you crushed it you actually crushed it down and grind it together to start mixing the things inside the battery and thus.

Our next question comes from Mark <unk> from William Blair.

Please on mute your line and ask two questions.

Hi, Jamie.

I was hoping that as you guys get closer to commercialization, we could revisit some of the numbers that we're talking about regards for asps.

A more deadly way of starting a fire then poking a nail through it.

And we now do that test we just finished their tests last week in any one battery so point of all this.

We've seen that batteries are increased so much since you guys first started talking about pursuing the smartphone market in terms of building up hours. So what are you seeing now in the market for Asps as we approach 10000 million borrowers and how do you see the AI, one being able to get.

Is.

Rise 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 of 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. So my apprehension that.

TJ Rodgers: And we're building to their specs, working with their engineers. So 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. And I'm talking books' worth of data on what they want. That's the difference in the old and new Enovix, pre-Raj, post-Raj.

Pricing power against the incumbents.

Yes.

Good question, Mark as I mentioned right.

If you build it will they buy it is way lower.

Two years ago, we said three years ago, even last year, we said hey, the next smartphone batteries won't have that $10 million or battery I don't think most people would have believed.

They're going to buy it.

We're going to build it the way they want it and I'm talking books worth of data on what they want and that's the difference in the old and new <unk> pre rise posterize.

But today, that's true and the other interesting thing is it's not that the battery is getting that big its a battery is getting that big across the tiers and this is something I saw when I was at Qualcomm and we started launching smartphone process and we said we're going to use <unk>.

Colin Rusch: That's incredibly helpful. Appreciate that, TJ. You know, just thinking about capital equipment and the potential for expansion here, can you talk about, you know, preparedness of your capital equipment suppliers to support an expansion, you know, 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?

That's incredibly helpful. Appreciate it thank you Jay.

Thinking about capital requirement and the potential for expansion here can you talk about preparedness.

Your your capital equipment suppliers to support an expansion in any sort of tweaks that you're thinking about on the on the line now that you've been able to do a fair amount of work on each of the systems.

High megapixel camera.

<unk> hundred 60 megapixel in the premium tier smartphone.

And everyone said, okay premium data will have a high megapixel I mean today $200 phone has like or like $50 $60 77 to 100 megabit slopes. So the cameras have just kind of.

Raj Talluri: Yeah, so, you know, 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, we're actually, you know, as I said, I mean, compared to what we used to build in Fremont to what we're building in Malaysia, the equipment suppliers now that we're using are actually people who are used to making very complex semiconductor equipment. This is people, I mean, I saw a supplier, you know, they kind of figured out how to put really thin copper pins into the die at like sub-micron precision. I mean, it's crazy. These are the people we're using, and there's some very exciting new technology there. And 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.

Yeah, So I think I.

I mentioned that a couple of weeks ago I was I was in Asia, and I visited some of our equipment suppliers.

And we talked about.

Multiple cameras being on the very high end now multiple cameras are across the board.

We're actually as I.

I said, I mean compared to what we used to build in Fremont to what we're building menasha. The equipment suppliers now that we're using are actually people who are used to making very complex semiconductor equipment. This is people I mean I saw a supplier.

I see the same thing happening on batteries now.

What used to be a premium tier battery.

7000.

6000 million bars, we're now seeing that in the $200 phones, and probably go down even more and then we see even higher energy higher capacity matters at the top.

They have figured out how to put really thin copper pins into the diet like submicron position I mean, it's crazy and do that.

And that clearly.

Just like it happened with drams.

The people that are using and.

It's a it's a dollar store.

And there's some very exciting new technology, there and I visited a few of them.

And Power's right. So 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 bigger batteries take more capacity to make them. This is a great thing that good situation and I actually think that.

And we have some new interesting ways to actually continue to dice, the electrodes and make them even faster and.

Raj Talluri: And so 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. So yeah, I think we are telling them that what we need. And some of these suppliers have actually visited our factory in Penang, and they know where these machines are going to be put in. So in terms of readiness, yes, absolutely. We're starting the work now, and very exciting to see the latest advances in semiconductor manufacturing that we are now able to use to make batteries, right? I think that's the key that you will see because we make sub-micron, like micron precision cutting and stacking. So 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.

So 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.

We will continue to go up and the premium we get for producing.

We are now making some initial batches at us towards that.

Higher capacity battery in the same space.

So yeah, I think I think we are.

Which is really the key because you can just keep making points bigger which means you need higher energy density and.

Telling them and that's what we need and some of the suppliers have actually visited our factory in Penang and they know where these missions that are going to be put in so in terms of readiness.

Not only higher energy density, but have that higher energy density with fast charge with thousand cycles and high temperature storage.

Yes, absolutely we are starting to work now and really exciting to see the latest advances in semiconductor manufacturing that we're now able to use to make batteries I think thats the key.

We benchmark a lot of acreage out there and the other one is the only battery iron off that can meet all those requirements right now and we have a strong roadmap, making that go higher so to your point, we do think that the Asps will go up and we do think that the.

You will see because we make submicron like micron spaces.

Precision.

We can come on we will go up if you add one as we start making.

Cutting and stacking so the equipment. We use is very precise and this is what is being done in semiconductor industry and we're using the same suppliers.

Energy density reality in this once.

Okay, great. Thanks for that color Raj.

Colin Rusch: Excellent. Thanks so much, guys.

Excellent. Thanks, so much guys.

The next market that you guys are excited about is the AR VR and AR smart glass market. So.

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

Our next question comes from Jeff Osborne with TD Securities Pete on your line and ask your question.

In the last quarter, we're seeing a few more products come to market or at least start to ramp and I'm wondering if there is any increase engagement going on there I know you had mentioned in the shareholder letter with the sampling but.

Jeff Osborne: Yeah, thank you. Yeah, 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 or 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 were going to win? What are the lead times for the materials that you need to buy to ramp up line one and Fab 2?

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 were launched three or four months. After the sampling started last or this month.

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.

How do we think about the need for sort of working capital growth are you already operating as if youre going to win.

What hours later.

So crucial for the Dr Smart glasses opportunity.

Lead times for the materials that you need.

So by to ramp up line one in Tennessee.

Yes.

Good question, So two things first.

Ryan Benton: 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 the Q2. And so we're sufficiently capitalized, and we're preparing for the manufacturing ramp.

Maybe I'll jump in there, yes, I mean, I think I'll answer the last part first we're certainly operating to win.

People have always tried to make another smart device.

<unk> smartphone people are tight for a long time people died watches people things. They were trying to do many things, but not enough to really watch it took us 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.

<unk>.

Our how we're operating.

Obviously, the balance sheet, we finished the quarter with over 200 $200 million Q2.

And so we're sufficiently capitalized and were and were.

Preparing for the manufacturing ramp.

As of the first ones that have the potential to do that because.

Jeff Osborne: Good to hear. And then just maybe another question on the balance sheet side, just 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 a future capital raise? I think you mentioned $34 million as of yesterday was done. You know, 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 the Fab 2 completely? Is half the warrant enough to do that, or maybe just walk us through that?

Good to hear and then just maybe another question on the balance sheet side, just given the warrant structure was a big creative and not.

A huge percentage of the population, including people like me wearing glasses. So if we can get more functionality into something you already where it's a huge benefit the other thing is.

Familiar with most investors I've had several people asked us.

In the event that only a portion.

The glasses have cameras that can look into the world. So now with <unk>. When you look into the world when you see what's out there and with the ability to.

The warrants were to be exercised is there sort of a minimum level that would avoid the need for a future capital raise I think you mentioned $34 million as of yesterday was done.

Also have microphones you can just do a lot more and the micro display as you know we haven't really seen.

As you look at the ramp into the middle of next year. If you were to win these engagements maybe more.

Glasses in high volume production right now that have a very good augmentation right I mean, the glasses today is still right now that are in high volume, mostly have cameras in audio and some pharma speech recognition, but they don't really they're not really.

How do you contemplate building out fab two completely.

As has the weren't enough to do that or maybe just walk us through that.

Ryan Benton: 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. But 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've talked about nameplate capacity of 9 to 10 million units per year. So that's going to go a long way to helping the company meet important milestones.

Yeah, all seven areas well I don't think cap the warrant would be sufficient capital completely build out all four lines, we've talked about and we've provided publicly our estimate of how much those lines cost, which is $50 million to $60 million, but certainly even adding one additional line, which again were our balance sheet as strong as it is right now.

Not creating that experience and.

And when you create that experience what happens is you have a display inside your glasses that people can't see but you can see and we've seen the most of those at CES in other markets, but we are now seeing that the customers. We are sampling to our building things like that and when you do that here's what happened.

On the $34 million is helps.

Processor has to be on and then more.

That's going to get us to substantial capacity to two lines running in that factory, we talked about nameplate capacity of nine to 10 million units per year. So that's going to go a long way to helping the company meet important milestones.

More importantly, the GPU has to be on to create that image on that argument and display.

That consumes a lot of battery and the memory has to be on that consumes a lot more batteries. So the amount of energy density you need with through augmented reality glasses. When there is a secondary display that you see inside your eyes.

Jeff Osborne: Good stuff. Thank you.

Thank you.

Operator: Our next question comes from Mark Sheeta from William Lair. Please unmute your line and ask your question.

Our next question comes from Mark Cheetah from William.

Please on mute your line and ask your question.

Is much much more and that's where we are seeing a lot of traction for our batteries.

Colin Rusch: Hi, team. I was hoping that as you guys get close to commercialization, we could revisit some of the numbers that we were talking about in regards to 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. So what are you seeing now in the market for ASPs as we approach 10,000 milliamp hours? And how do you see the AI1 being able to get price and power against the incumbents?

Hi, Jamie.

Is the next generation of those and Thats kind of where I believe that you can see so important in the smartphone sector. Okay.

I was hoping that as you guys get closer to commercialization, we could revisit some of the numbers that we're talking about regards for asps.

Yes.

Okay, Let me.

At the risk blowing this thing up.

We've seen that batteries have increased so much since you guys first started talking about pursuing the smartphone market in terms of Adobe empowers. So what are you seeing now in the market for Asps as we approach 10000 million powers and how do you see the AI, one being able to get.

What else in engineering point to make.

So this is.

And the notebooks picture.

Oh, sorry.

Mark of smart glasses, and all of the systems. He is talking about are there now.

Pricing power against the incumbents.

Raj Talluri: Yeah, I mean, great question, Mark. As I mentioned, right, I mean, if two years ago, if we said, three years ago, 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. And 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. And this is something I saw when I was at Qualcomm when we started launching smartphone processors, and we said we're going to use a high-megapixel camera, you know, like a 50 megapixel, 60 megapixel in the premium tier smartphone. And everyone said, OK, premium tier will have a high megapixel. I mean, today, a $200 phone has like over like 50, 60, 70, even 100 megapixels.

Yes.

If you look at the side of the glasses on the left.

Good question, Mark as I mentioned right I mean, two years ago, We said three years ago, even last year, We said hey, the next smartphone battery is going to have there.

You can see.

You can see.

Small battery compartment and then if you look over here you can see a small battery.

10000 million bought battery I don't think most people would have believed.

And then the <unk> are.

But today, that's true and the other interesting thing is it's not that the battery is getting that big its a battery is getting that big across the tiers and this is something I saw when I was at Qualcomm and we started launching smartphone process and we said we're going to use <unk>.

Battery and so it's kind of a long skinny weird shape.

So one thing the way, we make batteries, but laser cutting anode and cathode and separator and stacking them.

High megapixel camera like a 50 megabit fell 60 megapixel in the premium tier smartphone.

You can make that thing right away.

Second thing is think about a small battery like that one shown in the skin. That's on there is three layers thick.

And everyone said, okay premium data will have a higher megapixel I mean today 200 dollar foreign has like or like 50, 60, 70, 8100 megabit close so the cameras have just kind of and we talked about.

And it prevents the electrolyte, which is the flammable liquids from getting out.

Raj Talluri: So the cameras have just kind of, and 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, you know, 7,000, you know, 6,000 milliamp hours, we're now seeing that in the $200 phones and probably go down even more. And then we see even higher energy, higher capacity batteries at the top. You know, and that clearly, you know, just like it happened with DRAMs; it's a dollars per, you know, amp hours, right? So 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.

Tough mineralized.

<unk> Sig.

Multiple cameras being on the very high end now multiple cameras are across the board.

So when you have the skin think about making a smaller so the skin gets smaller and smaller and if you go through it the skin gets more and more of the volume of the battery and at some point when their battery still it's about that big but it's really super soon.

I see the same thing happening on batteries now what.

What used to be a premium tier battery, which is 7000.

6000 million bars, we're now seeing that in the $200 phones, and probably go down even more and then we see even higher energy higher capacity batteries at the top.

Yes.

Nothing left in sight no none of the anode cathode stuff that makes a battery.

And that clearly.

So all I'm, saying is all batteries as they get smaller because of the overhead of connecting to them.

Just like it happened with drams.

It's a it's a dollar store.

Get lower in energy density like these numbers are lower than the cell phone is 900 because of that effect.

And Power's right. So 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 and this is a great thing to have good situation and I actually think that the.

Point is this.

Battery.

We can Jim a lot of what hours per liter into that battery because we have compression the material in their batteries compressed and theres 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 the point to point to us.

Raj Talluri: I mean, this is a great thing to have, a great situation. And 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 AI1 is the only battery I know of that can meet all those requirements right now. And we have a strong roadmap for making that go higher. So to your point, we do think that the ASPs will go up.

We will continue to go up and the premium we get for producing Ah ha.

Higher capacity battery in the same space.

Which is really the key because you can't just keep making points bigger which means you need higher energy density and.

It's got metal on it which means the heat coming out of that battery.

Not only higher energy density, but have that higher energy density with fast charge with thousand cycles and high temperature storage.

Comes out across the entire wide face the notebook space of that battery and radiates into the air and if you try to make a battery just stacking battery junk inside of a bag.

We benchmark a lot of batteries out there and.

And the other one is the only battery iron off that can meet all those requirements right now and we have a strong roadmap, we're making that go higher so to your point, we do think that the Asps will go up and we do think that the premium we can command will go up at <unk> as we start making these.

Thing is a bag.

Spec and stuff inside of a bag you generate a bunch of heat.

Yes.

Lithium ion batteries can get hot and work fine, except you don't exactly want something.

Raj Talluri: And we do think that the premium we can command will go up with the AI1 as we start, you know, making this higher energy density reality in these phones.

50 degrees Fahrenheit against your temple.

Higher energy density reality in this once.

So the batteries are kind of naturally aligned to make high quality.

Colin Rusch: Great. Thanks for the call, Raj. The next market that you guys are excited about is the AR, VR, and the smart glass market. So 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?

Okay, great. Thanks for the color rush.

Batteries and safe batteries as well for this application this always.

The next market that you guys are excited about is the AR VR and AR smart glass market. So.

Actually was a better application and that's why we tried for watches.

In the last quarter, we've seen.

This always was better applications for our technology.

A few more products come to market or at least start to ramp and I'm wondering if there is any increase engagement going on there I know you've mentioned in the shareholder letter with the sampling but.

Sweet spot if you will for our technology.

Thank you.

Our next question comes from Ananda Baruah from loop capital. Please mute your line and ask your question.

Can you go over a little bit more color of why you can command more ASP or gross margin in those products and why.

Yeah. Thanks, guys. Good afternoon, thanks for taking the question.

What hours later is so crucial for the VR AR smart glasses opportunity.

Two if I could.

Raj can you.

Raj Talluri: Yeah, so good question. So 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, you know, a huge percentage of the population, including people like me, wear glasses. So 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.

Can you remind us how we should think about when you will.

Yes.

The question so two things first.

People have always tried to make another smart device.

When when the volumes.

You guys.

Outside of smartphone people have tried for a long time people died watches people tried pins. They were tagged on many things, but not enough to really watch it took us 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.

We will give 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.

And then you start to get along with the second smartphone OEM just walk us back through how you guys are anticipating gain visibility.

A huge percentage of the population, including people like me wearing glasses. So if we can get more functionality into something you already where it's a huge benefit the other thing is.

Production volumes and they have a quick follow up as well.

Yeah, absolutely I mean, I think that is.

Important question and I had it on every earnings call base.

Basically the way the battery industry works is a little bit different from the semiconductor industry, we first sampled standardized batteries and like.

The glasses have cameras that can look into the world. So now with Jenny I. When you look into the world when you see what's out there and with the ability to.

Raj Talluri: So now with Gen AI, when you look into the world, when you see what's out there, and with the ability to, you know, also have microphones, you can just do a lot more. And the micro displays, you know, we haven't really seen glasses in high-volume production right now that have very good augmentation, right? I mean, 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. And 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. And 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.

Also have microphone you can just do a lot more in the micro display as you know we haven't really seen.

Rectangular batteries that we believe is the right.

Size, not exact size, but right sized in terms of capacity and the customers test them and they give us a series of tests that they would like to do and we do those.

Glasses in high volume production right now that have a very good augmentation right I mean, the glasses today is still right now that are in high volume mostly of cameras in audio and some pharma speech recognition, but they don't really they're not really.

And we do that in our factory to make sure that.

Passenger beating and we give it to them and they're tested quite a few months typically and then they give us the exact dimensions of the battery and they've given one customer who's giving it to US right now and then we make the batteries that dimension, then theyre going to take it put it into their phone and then theyre going to do with the cycle life test as I mentioned 1000 cycles that takes months to that and that's what they do.

Not creating that experience and when you create that experience. What happens is you have a display inside your glasses that people can see but you can see and we've seen demands of those at CES in other markets.

But we are now seeing that the customers. We are sampling at building things like that and when you do that here's what happens.

Raj Talluri: And 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. So the amount of energy density you need with true augmented reality glasses where there is a secondary display that you see inside your eyes is much, much more. And that's where we are seeing a lot of traction for our batteries is the next generation of those. And that's kind of where I believe that the energy density is so important in a small form factor.

And then as TJ mentioned, there's a lot of past like cash cash dropped test and so on that they do and that takes that takes some time.

The processor has to be on and.

More importantly, the GPU has to be on to create that image on that argument and display.

And then what they do is typically a particular model offer.

That consumes a lot of battery and the memory has to be on that consumes a lot more batteries. So the amount of energy density you need through augmented reality glasses, where there is a secondary display that you see inside your eyes.

Our phone has multiple skus that the launch into different parts of the world Some launch in India some launching.

In Europe, some launch in U S and so on.

And then.

It take a new supplier like us and put us in.

Is much much more and that's where we are seeing a lot of traction for our batteries.

One SKU and start with that and make sure that they feel comfortable introducing new technology and very quickly going into second SKU and a third SKU in that model. Then once you are qualified and we are a valued supplier.

Is the next generation of those and that's kind of where I believe that Dan and you can see so important in a small form factor.

He quickly it moves into multiple modules right and again this is not that different.

Yes.

TJ Rodgers: OK, let me, at the risk of blowing this thing up, let me, what else an engineering point to make? So this is in Enovix's picture of a smart glasses, and all the systems he was talking about are there now. If you look at the side of the glasses on the left, you can see the small battery compartment. And if you look over here, you can see a small battery. And then this is a picture of our battery. And so it's kind of a long, skinny, weird shape. So 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. The second thing is, think about a small battery like that one shown. And that skin that's on there is three layers thick.

Okay, Let me.

At the risk blowing this thing up.

With any other supplier I know the micron same thing we produce it you are fast.

Yes.

Chip's got into one SKU than do give us multiple skus before you know it.

What else in engineering point to make.

Finally, sometimes led him to be shipping millions right and that's exactly what I expect should happen in this case. So we are in the middle of that with one customer.

So this is.

And then the overall picture.

Oh, sorry.

Mark how smart glasses and all of the systems. He is talking about are there now.

We've gotten a lot of interest after we launched the AI.

If you look at the side of the glasses on the left.

Platform launch because now.

We have the technology.

You can see.

By the way I don't think people quite realize I think DJ and they are one press release.

You can see that.

Small battery compartment and if you look over here you can see a small battery.

<unk>.

Complex R&D work, we had to do to take 100% active silicon anode, putting it under pressure what did under the temperature stress.

And then there's a picture of our.

Battery and so it's kind of a long skinny weird shape.

So one thing the way we make batteries.

And for the first time get a 900 watt hours per liter with precision fast charge and cycles and storage at high temperatures and what got crushed competitor and it has never been done before with 100% active silicon. So as soon as we launch that I've got a lot of request from any customers and a couple of weeks some of them are back in Asia.

You're cutting in 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 in that skin. That's on there is three layers thick.

TJ Rodgers: And it prevents the electrolyte, which is a flammable liquid, from getting out. It's a tough, metalized three layers thick. So when you have that skin, think about making it smaller. So the skin gets smaller and smaller. And if you go through it, the skin gets more and more of the area volume of the battery. And at some point, when that battery still is about that big, but it's really super thin, that there's nothing left inside, none of the anode-cathode stuff that makes the battery. So all I'm saying is all batteries, as they get smaller because of the overhead of connecting to them, get lower in energy density. Like these numbers are lower than the cell phone at 900 because of that effect. The point is this. That battery, we can jam a lot of watt-hours per liter into that battery because we have compression.

And it prevents the electrolyte, which is the flammable liquids from getting out.

And we will sample this to other customers and the same process will happen. They will test this battery and they'll give us exactly I mentioned that they need and we're going to test them internally.

Tough mineralized.

Three layers thick.

So when you have the skin think about making a smaller so the skin gets smaller and smaller and if you go through it the skin gets more and more of the volume of the battery and Theres. Some point when their batteries stores about that big but it's really super thin.

You're going to put them on the phone and then we expect the production to happen next year, that's the same process and.

The second time around it will be much faster because we are a valued supplier now and not the financial plan.

But the first one will take some time.

Yeah.

Nothing left inside no none of the anode cathode stuff that makes a battery.

Okay. Let me can I ask you this C J.

P J, if you'd like to jump in also really really in that Raj.

So all I'm, saying is all batteries as they get smaller because of the overhead of connecting to them.

Any context would be good to the extent that you're you can like responsibly answered his question.

Get lower in energy density like these numbers are lower than the cell phone is 900 because of that effect.

So, let's like let's say the first call happens.

Point is is that.

Can you kind of wrap it up and like three or four months and then you get inclusion into the first SKU.

That battery.

We can jam a lot of what hours per liter into that battery because we have compression the material in their batteries compressed and theres a lot more of it any given volume because we have a compression system a patented compression system, which happens to be made out of steel leading the point to point to is.

And then so let's say that's kind of going through the fall and then maybe going into next year you get on like what you said right like the second Steve third SKU going into next year is it is it.

TJ Rodgers: 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 0.2. 0.2 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. And if you try to make a battery just stacking battery junk inside of a bag, that thing is a bag. You're 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. So the batteries are kind of naturally aligned to make high-quality batteries and safe batteries as well for this application.

And let me know if this is off base is it reasonable to think that like going into spring.

It's got metal on it which means the heat coming out of that battery.

Comes out across the entire wide face you know big space of that battery and radiates into the air and if you try to make a battery just stack and battery junk inside of a bag that that thing is a bag.

Could be.

What you call I think you said like a.

Sort of like a valid supplier.

And then you could go across more Skus is that is that reasonable or is that the right way to think about the timing as distinct from the volumes that you get with that.

Stack and stuff inside of a bag you generate a bunch of heat.

Yes.

Lithium ion batteries can get hot and work fine, except you don't exactly want something this.

Yeah.

Do you think about it and like I said I think the most important thing is.

50 degrees Fahrenheit up against your temple.

This particular ship with a battery how many skus that had satisfied if we need to change the battery shape and it'll take us a few months to which I said in the prepared remarks, reducing the amount of time it takes to make different sizes. So we will need to make a different size of purchase skewed that needs a different size battery there'll be some some lead time associated with that but that's just the way the foundation.

So the batteries are kind of naturally aligned to make high quality.

Batteries and safe theatres as well for this application.

TJ Rodgers: 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.

Case in this always.

Actually was a better application that's why we tried for watches.

As always was better applications for our technology words sweet spot if you will for our technology.

When you say, but the thing you got to remember that this is a huge market I mean, we're talking about.

100 million units plus market and we are talking about selling a few million batteries. So the opportunity is clearly there. The first one is a hard one but once we get there it will start moving.

Thank you Dave.

Operator: Our next question comes from Ananda Barua from Loop Capital. Please unmute your line and ask your question.

Our next question comes from Ananda Baruah from loop capital. Please mute your line and ask your question.

Thank you appreciate it thanks guys.

Ananda Baruah: Yeah, thanks, guys. Good afternoon. Thanks for taking the question. Too, 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, you know, sort of finalization of the qualification with the first smartphone OEM, you know, and then you start to go in with the second smartphone OEM. Just walk us back through how you guys are anticipating getting visibility to production volumes. And may I have a quick follow-up as well? Thanks.

Yeah. Thanks, guys. Good afternoon, thanks for taking the question.

Our next question comes from tiny Josh from Craig Hallum.

Two if I could.

Please.

Raj can you can.

Ask your question.

Can you remind us how we should think about where your well.

Hi, guys. This is <unk> 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 shrinking volume to that first smartphone customer and then I had a follow up.

When when the volumes are there.

You guys.

We 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.

Yes, so the certification of a Dr. <unk> is a very important certification because without that it's hard to ship batteries in a plant. That's the first thing you got to remember you have to take all kinds of exceptions do get bad news out there.

And then you start to go in with a second smartphone OEM.

Walk us back through how you guys are anticipating gain visibility.

So production volumes and they have a quick follow up as well thanks.

Second one is.

Raj Talluri: 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-sized batteries and like, you know, rectangular batteries that we believe is the right size, not exact size, but right size in terms of capacity. And the customers test them, and they give us a series of tests that they would like to do. And 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. And then they give us the exact dimensions of the battery. And one customer has given it to us right now. And then we make the battery to that dimension.

Yeah, absolutely I mean, I think that is an important question and I get it on every earnings call.

When you make a battery for the first time in our factory costs in certain ship passing that gives us the confidence.

Basically the way the battery industry works is a little bit different from the semiconductor industry.

This is an extremely safe battery and and.

First sampled standardized batteries and like.

We're able to pass that there's other certifications, we need to do on top of that.

Rectangular batteries that we believe is the right.

And we are in the middle of that but this is a huge step for us to be able to pass that on a giant new battery like we made.

Size not exact site right size in terms of capacity and the customers test them and they give me the series of tests that they would like to do and we do those.

For the first time in our factory so it's a very important step.

Like I said the other qualifications are not the <unk>.

And we do that in our factory to make sure that that.

Customers do not just.

It passes have been doing and we give it to them and they test it for a few months typically and then they give us exact dimensions of the battery and they've given one customer who's giving it to US right now and then we make the battery did that dimension than they'd want to take it put it into their phone and then they're going to do with the cycle life test as I mentioned 1000 cycles, and where that takes months today and that's what they do.

Industry based certifications, but very specific test that <unk> was mentioning we got books that big on how they will test. The battery for example, one of the test. They would do is take the battery and put it in a phone and drop it from a certain height multiple times. The other one they do is they put it into like a big.

Raj Talluri: Then they're going to take it, put it into their phone. And then they're going to do the cycle life test, as I mentioned, 1,000 cycles. And that takes months to test. And that's what they do. And then, as TJ mentioned, there's a lot of tests like crush test, drop test, and so on that they do. And that takes some time. And then what they do is typically a particular model of a phone has multiple SKUs that they launch into different parts of the world. You know, some launch in India, some launch in Europe, some launch in the US, and so on. And then they take a new supplier like us and put us in, you know, one SKU and start with that and make sure that they feel comfortable introducing new technology.

Washing machine like thing and it's been the battery for many many times and then they also started in high temperature. So there are lots of different tests that they do and every customer is a little bit different but we do have all of those test with us and we try to do them ahead of time, so to make sure when they get samples data pass them, but then they will do it again on their own so it's a pretty rigorous process.

And then as TJ mentioned, there's a lot of past like cash stash dropped test and so on that they do and that takes that takes some time.

And then what they do is typically a particular model offer.

Our phone has multiple skus that the launch into different parts of the world Some launch in India, some lunch and.

Yes.

In Europe, some launch in U S companies and so on.

Got it. Thank you and then as a follow up.

So you're just going to add something to it.

And then there.

It take a new supplier like us and put us in.

I just wanted to talk about.

One SKU and start with that and make sure that they feel comfortable introducing new technology and very quickly go into the second SKU and a third SKU in that model. Then once you are qualified and we are a valued supplier.

Okay.

Background ramping the factory.

Raj Talluri: Then very quickly, it's going to the second SKU and the third SKU in that model. Then once we are qualified and we are a valid supplier, very quickly, it moves into multiple models, right? And again, this is not that different with any other supplier. I know that Micron, same thing. We produced the UFS, you know, chips, got into one SKU, then two SKUs, multiple SKUs before you know it. Finally, you know, sometime later, we're shipping millions, right? And that's exactly what I expect should happen in this case. So we are in the middle of that with one customer. Now, we've gotten a lot of interest after we launched the AI1 platform launch because now, you know, we have the technology.

I remember when we started Cypress we started two runs a week through 25 wafer runs 50 wafers are weak.

Very quickly it moves into multiple models right and again this is not that different with any other supplier I know the micron same thing we produce it you are fast.

And it took us a year to ramp our first fab.

So this fab has got new and it's new equipment.

We learned the hard lesson with our first fab or the equipment wasn't what I would call semiconductor quality equipment.

Chip's got into one SKU than Duke use multiple skus before you know it.

Finally, sometimes let anybody shipping millions right and that's exactly what I expect should happen in this case, though we are in the middle of that with one customer now.

And we were in a place that doesn't make semiconductors anymore, we were in Fremont, California.

We call it quote silicon Unquote valley, but they haven't put a new fab here in 30 years. So you can't hire people at work in the neighboring company and want to race come over to your company. So.

We've gotten a lot of interest after we launched the <unk> one platform launch because now.

We have the technology.

Raj Talluri: By the way, I don't think people quite realize, you know, I think TJ wrote in the AI1 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 1,000 cycles and storage at high temperatures and work across temperature range. It has never been done before with 100% active silicon. So 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. Then they'll give us the exact dimensions that they need. Then we're going to test them internally.

The way I don't think people quite realize I think D J.

What we've got going for US is we're in planning and zoning Boise is the center of the epicenter of semiconductor Assembly and test. So when you look at semiconductors today, and you see modules that big Wood chips integrated at the end of them ship stacked vertically with each other and those are the kinds of dimensions that dose.

<unk> press release.

The amount of <unk>.

Complex R&D work, we had to do to take a 100% active silicon anode put it under pressure put it under the temperature stress.

And for the first time.

900 watt hours per liter with Tracey fast charge, and thousands cycles and storage at high temperatures and walk across temperature and it has never been done before with 100% active silicon. So as soon as we launch that I've got a lot of request from any customers and a couple of weeks some of them are back in Asia.

People live with.

We have people from the semiconductor industry and our plan.

Really impressed with the quality of people and in our plant. So we've got good equipment from a good manufacturer cost more money than I wanted and good people. So we will ramp.

And we will sample it 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.

Now, we're not ramping to our own guests guests specs, we're ramping to their specs and Theyre looking at stuff real time, you can send them stuff and say does this past fire test and they'll give you a quick quick read.

We're going to test them internally.

Raj Talluri: We're going to put them in the phone. And then we expect the production to happen next year. That's the same process. And the second time around, it'll be much faster because we are a valid supplier now. We're not the first supplier. But the first one takes some time.

You're going to put them on the phone and then we expect the production to happen next year, that's the same process and.

The second time around will be much faster because we are a valued supplier now.

So I don't expect we're going to have a catastrophic problem like we had in Fremont fab.

But the first one to take some time.

Ananda Baruah: And OK, let me, can I ask you this, TJ? I mean, not, well, TJ, if you'd like to jump in also, really, really I meant Raj. But any context would be good. To the extent that you can like responsibly answer this question. So if, let's say the first call happens, you kind of wrap it up in like three or four months, and then you get inclusion into the first SKU. And then, so let's say that's, you know, kind of going through the fall, and then maybe going into next year, you get on, like what you said, Raj, like the second SKU, the third SKU going into next year. And let me know if this is off base.

But ramping of ramping a.

Okay. Let me can I ask you this T J.

Fab.

Well TJ, if you'd like to jump in and also really really isn't that Raj.

A big deal.

And there will be a surprise or two but when you are really close with ultra high tolerances, some good manufacturing quality habits.

But any.

Any context would be good to the extent that you're you can like responsibly answer this question.

So that's like let's say the first call happens.

Those are those are things you can you can accommodate all I'm, saying is don't expect this is like make an ice cream and I say, if I buy more ice cream makers were just going to ramp up we've got available we'll have more people.

To wrap it up and like three or four months and then you get inclusion into the first.

And then so let's say that's kind of going through the fall and then maybe going into next year you get on like what you said right like the second Steve third SKU going into next year is it is it.

In the plant that we have in the rest of the company.

And we've got we've but we've got good people. So I just wanted to.

We got to do that but this little pre testing, we do when we get data from them and they tell us about the crush test as opposed to the neo penetration says.

And let me know if this is off base is it reasonable to think that like going into spring you could be with.

Ananda Baruah: Is it reasonable to think that like going into spring, you could be what you call, I think you said like a sort of like a valid supplier, you know, like, 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.

What you call I think you said like a.

That's that's going to make the probability that we get through it much.

Sort of like a ballad supplier.

Much higher.

And then you could go across more Skus is that is that reasonable or is that the right way to think about the timing as distinct from the volume that you get with that.

Not much 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.

Thanks for the color T J, if I could just sneak.

Raj Talluri: Yeah, it's the right way to think about it. And like I said, I think the most important thing is, you know, this particular shape of the battery, how many SKUs does it satisfy? If we need to change the battery shape, then it'll take us a few months to, which I said in the prepared remarks, we're now reducing the amount of time it takes to make different sizes. So we'll need to make a different size if it's a SKU that needs a different size battery. And there'll be some lead time associated with that. But that's just the way, you know, the progression continues, right? But the thing you've 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. So, you know, the opportunity is clearly there.

Yeah.

And one more follow up just related to the eyewear customer.

Do you think about it and like I said I think the most important thing is.

Raj a few of the eye.

But it will ship with a battery how many skus that had satisfied if we need to change the battery shared and it'll take us a few months due which I said in the prepared remarks, reducing the amount of time it takes to make different sizes. So we will need to make a different size of parts. The skew that needs a different sized battery there'll be some some lead time associated with that but that's just the way the progression.

Where companies that are launching now the ones that are expected to be high volume over the next several years how difficult since the <unk>.

Secured other battery suppliers already how difficult will it be for you to displace those folks you have to wait for many generations or could it be.

And the next year or two how quickly before you think that turns into real revenue for you.

But the thing you got to remember that this is a huge market I mean, we're talking about 200 million units plus market and we are talking about selling a few million batteries. So the opportunity is clearly there. The first one is a hard one but once we get there it looks like moving.

Yes.

Sampling now right I mean, we're sampling batteries now and they are testing them and.

I think if I think about the eyewear.

Raj Talluri: The first one is a hard one. But once we get there, it'll start moving.

Sure.

It's a market that I am.

Ananda Baruah: Thank you. Appreciate it. Thanks, guys.

Thank you appreciate it thanks guys.

Very familiar with the whole ARV, our space I used to run that that group and that was at Qualcomm.

Operator: Our next question comes from Tony Soss from Crade Hallam. Please unmute your line and ask your question.

Our next question comes from tiny shocks from Craig Hallum.

That's a market that's just happening now and there are many many more iterations to go before we see very high volume of that product.

Amit your line and ask your question.

Jeff Osborne: Hi, guys. Nice to see you again, TJ. 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? And then I had a follow-up.

Hi, guys. This is <unk> T J.

There'll be with different versions of it by the way I mean, I think if you think about now.

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 and then I had a follow up.

It can be sold at an electronics device. It can be told as hold as a fashion device. It can be sold as a medical device.

It can be sold as an industrial anyway. So it's in the very early stage of that so I believe that there'll be many many versions of that and there will be products that enable lifestyle that enable productivity that enable.

Raj Talluri: Yeah, so the certification of 8.3 is a very important certification because without that, it's hard to ship batteries on a plane. That's the first thing you've got to remember. You've got to take 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. Now, there's other certifications we need to do on top of that. And we are in the middle of that. But 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. So it's a very important step.

Yeah. So the certification of a Duck Creek 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 have to take all kinds of exceptions do get bad news out there.

Utility and so on so.

I believe that the heart of all of them is higher energy density because as you mentioned they are very small batteries and the demands are high.

One is.

When you make a battery for the first time in our factory costs in certain ship passing that gives us the confidence.

So I believe that when we produce a battery that's got much higher energy density than anything else and much safer.

This is an extremely safe battery and and.

We're able to pass that now there's other certifications, we need to do on top of that.

It shouldn't be that hard to convert because it's very early stage and people love It and it's people who have given samples to allow the batteries to begin.

And we are in the middle of that but this is a huge first step for us to be able to pass that on a giant new battery like we made for the <unk>.

So long.

So long way to go on to get into a multimillion units, but we're happy with that.

Last time in our factory so it's a very important step.

Raj Talluri: 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, you know, washing machine-like thing, and they spin the battery for like, you know, many, many times. And then they also store it at high temperature. So there are lots of different tests that they do. And every customer is a little bit different. But we do have all those tests with us.

Like I said the other qualifications are not that the customers do not just.

With the technology and we're happy with the position we have and the feedback we're getting from the people we have samples right.

Industry based certifications, but very specific test that <unk> was mentioning we got books that big on how they would test the battery for example, one of the test. They would do is take the battery put it in a phone and dropping from a certain height multiple times. The other one they do is they put it in a like a big washing.

Our next question comes from Derrick settle back from Cantor Fitzgerald. Please on mute your line and ask your question.

Yeah, Hey, guys two questions for me quick ones.

How much of a smartphone Oems paying for batteries for the flagship smartphones today.

Washing machine like thing and it's been the battery for like many many times and then they also started at high temperature. So there are lots of different tests that they do and every customer is a little bit different but we do have all of those test with us and we tried to do them ahead of time, so to make sure when they get samples days have passed them, but then they will do it again on their own so it's a pretty rigorous process.

Second on the industrial handheld opportunity it sounds like maybe an RFID scanner label printer.

Raj Talluri: And we try to do them ahead of time so that to make sure when they get samples, they have passed them. But then they will do it again on their own. So it's a pretty rigorous process.

This opportunity sort of in the millions of devices per year is that the best way to characterize that that's all for me. Thanks guys.

Yeah.

Yes.

Jeff Osborne: Yeah, thank you. And then as a follow-up.

Got it. Thank you and then as a follow up just so you're just going to add something to it.

How much they are paying it depends upon what the energy density is.

Raj Talluri: TJ's going to add something to it. Go ahead, TJ.

Jeff Osborne: I just want to talk about, given my background, ramping the factory. I remember when we started Cyprus, we started two runs a week, 225 wafer runs, 50 wafers a week. And it took us a year to ramp our first fab. So this fab, it's 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. And we were in a place that doesn't make semiconductors anymore. We were in Fremont, California. And we call it quote silicon, unquote valley. But they haven't put a new fab here in 30 years. So you can't hire people that work in the neighboring company and want a raise to come over to your company. So what we've got going for us is we're in Penang.

I just wanted to talk about.

Actually disproportionate.

If you then you increase the energy density and the same volume the premium actually goes up higher so what I mean is.

Given my.

Background ramping the factory.

I remember when we started Cypress we started two runs a week through twenty-five wafer runs 50 wafers are weak.

If you're producing 900 watt hours per liter battery was 701 hour per liter battery.

You get a different price par empower right hope that makes sense. So so so.

And it took us a year to ramp our first fab.

So this fab has got new and it's new equipment.

Rough numbers I would say $1.50 to $2 is probably what people pay a part but.

We learned a hard lesson with our first fab or the equipment wasn't what I would call semiconductor quality equipment.

Empower.

If you've got eight empower thats, probably you can think about anywhere between.

And we were in a place that doesn't make semiconductors anymore, we were in Fremont, California, and we call. It quote silicon Unquote valley, but they haven't put a new fab here in 30 years. So you can't hire people that work in the neighboring company and want to raise to come over to your company. So.

15 to $16 right, that's probably roughly what you can think about.

Thank you.

Sure.

I am sorry, let me answer the second question. The second question I will jump in on the on the <unk> opportunity that's absolutely.

What we've got going for US is we're in planning and.

Jeff Osborne: And Penang, Malaysia, is the center, the epicenter of semiconductor assembly and test. So when you look at semiconductors today and you see modules that big with chips integrated into them, chips stacked vertically with each other, those are the kind of dimensions that those people live with. And we have people from the semiconductor industry in our plant. I'm really impressed with the quality of people in our plant. So we've got good equipment from a good manufacturer that costs more money than I wanted and good people. So we will ramp. And we're not ramping to our own guest specs. We're ramping to their specs. And they're looking at stuff real time. You can send them stuff and say, does this pass wire test? And they'll give you a quick read.

Our customer engagement, we think there's potential for multiple 1 million units on an annual basis.

<unk> believes is the center of the epicenter of semiconductor Assembly and test. So when you look at semiconductors today, and you see modules that big chips integrated at the end of them.

Yes, one other thing I'll say about that market.

IHS Markit is again, a market I am quite familiar with to do the same process as smartphones.

Stack vertically with each other and those are the kinds of dimensions that those people live with and we are we have people from the semiconductor industry in our plant.

Is that data is also an opportunity selling replacement batteries, because that's a market where people can launch a product and last one for five years, but people also buy batteries to replace the existing battery because they work on contra.

Really impressed with the quality of people.

Contract I think about the UBS portion that comes to your house and you signed something so there is it the size of the market and the size of the replacement batteries for the market and that's the millions of units.

So we got good equipment from a good manufacturer it costs more money than I wanted and good people. So we will ramp.

Now, we're not ramping to our own gifts gifts specs, we're ramping to their specs and theyre looking at stuff real time, you can send and stuff and say does this past fire test and they'll give you a quick quick read.

Our next question comes from Gus Richard from Northland.

Amit yourself and ask your question.

Jeff Osborne: So I don't expect we're going to have a catastrophic problem like we had in the Fremont fab. But ramping a fab is a big deal. And there will be a surprise or two. But 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. And 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. And we've got, but we've got good people. So I just want to warn you, we've got to do that.

So I don't expect we're going to have a catastrophic problem like we had in Fremont.

Yes, thanks for taking the question I was just wondering.

As you get closer to volume production.

But ramping ramping a.

Will you wait for a purchase order to start building inventory or what.

Fab.

It's a big deal.

Will you stay some inventory.

And there will be a surprise or two but when you are really close with ultra high tolerances and good manufacturing quality habits.

I know because these are each custom devices in terms of dimensions.

Okay.

Those those are things you can you can accommodate all I'm, saying is don't expect this is like making ice cream and I say it bye bye bye more ice cream makers were just going to ramp up we've got a battle, we will have more people.

Yeah, no it's a yes.

Some people have a little bit of misconception in terms of the sampling that we're doing now I mean these are not onesie twosies units. These are these are pretty substantial volumes in terms of what it takes for us to produce.

Could you go through the qualification.

Application process with the customer so we have substantial inventory that we use now in terms of what we're doing for for both that process as well as the R&D process and so I think all of those muscles are pretty well exercise and we have obviously, we have a great team in terms of logistics and planning and the operation side.

And the plant that we have in the rest of the company.

And we've got we've but we've got good people. So I just want to.

Warranty, we gotta do that but this little pre testing, we do when we get data from them and they tell us about the crush test as opposed to the nail penetration says.

Jeff Osborne: But 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. Well, not much higher. It's going to work. You put your head down and you make it work. We've got this much money involved. We're going to get there. Thanks for the color, TJ. And 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?

That's that's going to make the probability that we get through it.

Fully in lockstep and meets with US multiple times a week in terms of forecasting demand from all of the other demand sources and so the process is well underway.

Much higher.

Not much it's going to work.

Put your head down and you make it work you've got this much money involved.

We're going to get there.

Great.

Thanks for the color T J, if I could just.

Just a little bit to it yes, well my comment on that is from aboard slickest money perspective.

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 you have to wait for many generations or could it be.

You can't pile up inventory first of all.

Beauty of this machine is Ottawa.

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.

Jeff Osborne: Do you have to wait for many generations, or could it be, you know, in the next year or two? How quickly before you think that turns into real revenue for you?

And the next year or two how quickly before you take that turns into real revenue for you.

So so.

This thing will have a cycle time less than 30 days and if a purchase orders have 30 day pay take or pay window, which would be a typical purchaser in the semiconductor industry, we never could get that we never could start a wafer and ship product in 30 days in this industry, you'll be able to do that especially.

Raj Talluri: Yeah, I mean, you know, look, we are sampling now, right? I mean, we're sampling batteries now, and they're testing them. And 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. You know, that's a market that's just happening now. And 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 mean, 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. So it's in the very early stage of that.

Yes.

We are sampling now right I mean, we're sampling batteries now and they are testing them and I I think if I think about the eyewear.

It's a market that I'm.

Very familiar with the whole ARV, our space I used to run that that group and I was at Qualcomm.

That's a market that's just happening now and there are many many more iterations to go before we see very high volume of that product.

The equipment, that's automatic automated linear equipment.

Especially because it's a custom stuff so no we're not going to eat the inventory <unk> inventory.

There'll be with different versions of it by the way I mean, I think if you think about now.

It can be sold at an electronics device. It can be told as solid fashion device. It can be sold as a medical device.

Yes, no further questions at this time with that I'd like to turn it over to Raj <unk> for closing remarks.

It can be sold at an industrial device. So it's in the very early stage of that so I believe that there'll be many many versions of that and there will be products that that enable lifestyle that enable productivity that enable.

Yeah. 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.

Raj Talluri: So I believe that there'll be many, many versions of that. And there'll be products that enable lifestyle, that enable productivity, that enable, you know, utility, and so on. So 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. So 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. And the people we've given samples to, you know, love the batteries we give. It's a long way to go to get into multimillion units. But 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?

Utility and so on so.

I believe that the heart of all of them is higher energy density because as you know as you mentioned they are very small batteries and the demands are high.

So 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 and it's people who have given samples do love the batteries we gave.

It's a long long ways to go to get into multimillion units, but we're happy with that.

With the technology and we're happy with the position we have and the feedback we're getting from the people we have samples right.

Operator: Our next question comes from Derek Soderbergh from CAMTA Fitzgerald. Please unmute your line and ask your question.

Our next question comes from Derrick subtle back from Cantor Fitzgerald. Please on mute your line and ask your question.

Jeff Osborne: Yeah, hey, guys. Two questions from me, quick ones. Raj, how much are smartphone OEMs paying for batteries for the flagship smartphones today? And then second, on the industrial handheld opportunity, sounds like maybe an RFID scanner, a label printer. Is this opportunity sort of within the millions or so of devices per year? Is that the best way to characterize that? That's all for me. Thanks, guys.

Yeah, Hey, guys two questions for me quick ones Raj, how much of a smartphone Oems paying for batteries for the flagship smartphones today.

Second on the industrial handheld opportunity it sounds like maybe an RFID scanner label printer is this opportunities sort of in the millions or so devices careers at the best way to characterize that that's all for me. Thanks guys.

Raj Talluri: Yeah, I mean, how much they're paying depends upon what the energy density is. It's actually disproportionate. When you increase the energy density in the same volume, the premium actually goes up higher. So 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? I hope that makes sense. So rough numbers, I would say $1.50 to $2 is probably what people pay per amp-hour. So if you got, you know, 8 amp-hours, that's probably, you know, you can think about anywhere between, you know, $15 to $16, right? That's probably roughly what you can think about.

Yeah.

How much they are paying it depends upon what the energy density is it's actually disproportionate.

If you then.

When you increase the energy density and the same volume the premium actually goes up higher so what I mean is.

If you're producing 900 watt hours per liter battery versus 701 hour per liter battery.

You get a different price par empower right I hope that makes sense. So so so.

Rough numbers I would say dollar 50 to $2 is probably what people pay up for but.

Empower so if you've got eight empower that's probably you can think about anywhere between.

15 to $16, that's probably roughly what you can think about.

Operator: Our next question comes in.

Our next question.

Raj Talluri: I'm sorry. Let me answer that second question. The second question.

I'm sorry, let me answer the second question the second question.

Jeff Osborne: Yeah, I'll jump in on the IHH opportunity. That's absolutely a customer engagement we think has potential for multiple million units on an annual basis.

And in the on the Iot opportunity that's absolutely.

Customer engagement, we think there's potential for multiple a million units on an annual basis.

Raj Talluri: Yeah, one other thing I'll say about that market, the IHH market is, again, a market I'm quite familiar with. It uses the same process as smartphones. Is that there is also an opportunity to sell replacement batteries because that's the 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 a contract. I mean, think about the UPS person that comes to your house and you sign something. So there's a size of the market, and then there's a size of the replacement batteries for the market. And that's the millions of units.

One other thing I'll say about that market. The IHS Markit is again, a market I am quite familiar with it uses the same process as smartphones.

Is that data is also an opportunity selling replacement batteries, because that's a market where people can launch a product in last four five years, but people also buy batteries to replace the existing battery because they work on a contract I mean think about the UBS person that comes to your house and you signed something so there is it the size of the market and the size of.

The replacement batteries for the market and that's the millions of units.

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

Our next question comes from Gus Richard from Northland. Please on mute yourself and ask your question.

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

Yes, thanks for taking the question.

Just wondering.

As you get closer to volume production.

Will you wait for a purchase order to start building inventory or.

You staged some inventory.

I know because these are each custom devices in terms of dimensions.

Ryan Benton: Can I jump in and say first? Yeah, 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. So 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. And so I think all those muscles are pretty well exercised. And we have, obviously, 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. And so that process is well underway.

Okay.

Yeah, no it's a.

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 twosies.

These are these are pretty substantial volumes in terms of what it takes for us to produce in <unk>.

We go through the qualification qualification process with the customer. So we have substantial inventory that we use now in terms of what we're doing for for both of that process as well as the R&D process.

So I think all of those muscles are pretty well exercise and we have obviously, we have a great team in terms of logistics and planning and the operation side, that's fully in lockstep and meet with US multiple times a week in terms of forecasting demand from all of the all the demand sources, and so where that process is well underway.

Jeff Osborne: Great.

Okay.

Great.

Raj Talluri: I think you gave your hand a little bit to it. Yeah.

We can hear you.

Jeff Osborne: Well, 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 an auto line. It's linear. If this part stops, everything in front of it stops. You can't pile crap up. And in semiconductor fabs for a long time, that was the problem. So this thing will have a cycle time less than 30 days. And 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 and ship product in 30 days. In this industry, you'll be able to do that, especially with the equipment that's automated, automated linear equipment, and especially because it's custom stuff. So no, we're not going to eat any inventory.

Yes, well my comment on that is from aboard slash money perspective.

Yeah.

You can't pile of inventory first of all.

Judy This machine is Ottawa.

It's linear.

If this part stops everything in front of it stops you can't pile crap up in semiconductor fans for a long time that was a problem.

So so.

This thing will have a cycle time less than 30 days and if our purchase orders are.

30 day.

Take or pay window, which would be a typical purchased soared in the semiconductor industry, we never could get that we never could start a wafer and ship product in 30 days in this industry, you'll be able to do that especially with the equipment that's automatic automated linear equipment.

Basically because it's it's.

It's a custom stuff so no we're not going to eat in the inventory.

Sorry.

Operator: There are no further questions at this time. With that, I'd like to turn it over to Dr. Raj Talloori for closing remarks.

Yes, no further questions at this time with that I'd like to turn it over to Raj <unk> for closing remarks.

Raj Talluri: Yeah, 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.

Yes. Thank you all for joining us and thank you all for your support a really good quarter and look forward to seeing you again next quarter. Thank you.