Q3 2025 Enovix Corp Earnings Call
Speaker #1: A quarter 2025 earnings conference call . Currently , all participants are in listen only mode . After the speaker's presentation , there will be a question and answer session .
Speaker #1: As a reminder , today's program will be recorded . And now I'd like to introduce your host for today's program , Robert Leahy , Head of Investor Relations .
Speaker #1: Please go ahead , sir .
Speaker #2: Thank you . Hello , everyone , and welcome to Enovix Corporation's Third Quarter 2020 financial Results conference call . With me today are President and Chief Executive Officer , Raj Talluri and Chief Financial Officer , Ryan Benton Raj and Ryan will provide remarks followed by Q&A .
Speaker #2: Before we begin , please take note that today's call contains forward looking statements that are subject to risks and uncertainties . These statements are based on current expectations and may differ materially from actual future results due to various factors .
Speaker #2: For a discussion of these risks , please refer to the disclosures in today's press release and our filings with the Securities and Exchange Commission .
Speaker #2: You can also find these materials on our web site at IRS . Com . All statements made on this call are as of today , November 5th , 2025 .
Speaker #2: And we undertake no obligation to update them except as required by law . Additionally , during the call , we may reference non-GAAP financial measures .
Speaker #2: You can find a reconciliation to the most directly comparable GAAP measures in the materials posted on our Investor Relations site . With that , I'll turn the call over to Raj .
Speaker #3: Good afternoon , everyone , and thank you for joining us . Enovix is expanding the limits of battery capabilities and transforming how the battery industry will evolve over the coming years with a silicon battery .
Speaker #3: During this quarter , our team made significant advancements in developing a silicon battery while strengthening our key partnerships , alliances . Today , I'll highlight our progress in Q3 and then provide updates on our initiatives in smartphones , smart eyewear , defense , and strategic initiatives .
Speaker #3: Before turning it over to Ryan for a financial update , we delivered strong execution and financial progress in Q3 . Revenue grew 85% year over year to $8 million .
Speaker #3: We achieved a non-GAAP gross profit of $1.7 million , or 21% margin , compared to a loss in the prior year . We also secured long term funding , which is expected to finance Fab2 and enable our path to positive cash flow .
Speaker #3: Completing a shareholder friendly Warren dividend and issuing a new convertible notes due in 2030 brings total cash and marketable securities to $648 million at the end of the quarter , allows us to execute from a position of strength .
Speaker #3: Our A1 smartphone battery was an independent testing firm , Polaris Labs , as the highest energy density battery reported for a smartphone battery in the industry , and in addition , having leading fast charge capabilities , a lead smartphone program with honor , a top eight mobile OEM has entered the final validation phase ahead of planned 2026 smartphone launch .
Speaker #3: Honor has been an outstanding partner and we appreciate their cooperation as we work tirelessly to bring this breakthrough technology to the mobile phone industry .
Speaker #3: Honors feedback on our product development and inputs into mobile battery needs has been instrumental in the execution of our roadmap as we advance towards commercialization .
Speaker #3: Besides , honor our second smartphone OEM development program is also accelerating with this additional customer . Also , now in qualification and we are continuing to sample to other top mobile OEMs .
Speaker #3: Our mobile partnerships offer us key market insights and reflect the strong commercial relationships we have today . In this market . In Smart Eyewear , we delivered over 1000 battery packs to our lead customer under our supply agreement .
Speaker #3: These packs are now undergoing customer qualification . Furthermore , we have delivered samples to nine other unique OEMs and Odms , and we expect to have some of them launch products using our batteries in 2026 .
Speaker #3: On the manufacturing front , we made significant progress in yield , throughput and cost optimization . We achieved yield improvements in fab two in Malaysia across all production zones , notably in zone one laser dicing .
Speaker #3: We optimized our battery formation process in zone four to increase the throughput materially . We believe zone four capability now exceeds the volume requirements for the second , and potentially the third high volume lines , significantly reducing future CapEx requirements .
Speaker #3: Shipments from our Korean factory accounted for the majority of our year to date revenue , with the largest contributions coming from defense and industrial customers , where we continue to benefit from strong demand .
Speaker #3: We completed the integration of our Q2 acquisition of SolarEdge assets, adding cell capacity, incremental coding equipment, and room for future expansion.
Speaker #3: Additionally , leveraging the capabilities of this team , we began building our first cell manufacturing capability for our 100% active silicon nanotechnology in Korea .
Speaker #3: Also, this will serve as a new product introduction line at the NPI line. Finally, I want to welcome Dan McCranie to our Board of Directors and Srikanth Q2 as Head of Enovix India, expanding our leadership team as we scale globally.
Speaker #3: Dan is a high impact operator , sales executive , and a and a broad leader with deep experience scaling complex technology businesses . His track record and Onsemi and other global semiconductor companies adds strength to our board as we expand commercialization and manufacturing .
Speaker #3: In 2026 and beyond . Our new head of India , Srikanth , will strengthen our world class R&D center in Hyderabad , which accelerates our R&D efforts and help ensure the success of scaling our Malaysia facility .
Speaker #3: Now , let's talk about smartphones . Since I started in 2023 , I focused the company on smartphones as the most financially attractive market to our batteries .
Speaker #3: After visiting key OEMs in April 2023 and getting an understanding of the key product requirements from them , we started developing our smartphone batteries to meet these stringent performance targets .
Speaker #3: As we developed our technology to meet these requirements , we entered into a development agreement with honor . As a lead customer in September 2024 .
Speaker #3: Over the last year , we made significant progress both in our product development and meeting their product qualification milestones . We passed the vast majority of honors qualification requirements and in several cases exceeded them .
Speaker #3: In order to consistently achieve thousand charge discharge cycles with their components . We have agreed to a design iteration which is already underway .
Speaker #3: We're on track to ship these samples in Q4 , enabling honor to . Complete full lifecycle testing . This additional cycle is part of a thoughtful , collaborative qualification process that's typical when introducing breakthrough .
Speaker #3: Breakthrough battery technology into flagship smartphones . This rigorous , collaborative process of building a leading edge smartphone battery with honor . We believe , enables us to launch products with the rest of the smartphone industry in relatively seamless fashion .
Speaker #3: Our second smartphone customer is now validating the AI one performance . The next milestone for this customer will be to provide us with the precise mechanical dimensions .
Speaker #3: The we need to supply and move to a qualification and an expected commercial launch in 2026 . Additional smartphone customers have similar requirements to our lead customer , and we expect their qualification process to go much faster .
Speaker #3: What's exciting about AI ? One is that it's not just a smartphone battery , it's a platform providing this level of performance . Can open the doors to a much wider set of markets .
Speaker #3: We started in smartphones at $12 billion . Opportunity , where our 900 watt hours per liter performance gives us a clear edge for on device AI .
Speaker #3: From there , the same technology moves naturally into smart eyewear , AR , VR , and IoT . About an $8 billion market today where success depends on getting high energy into the smallest possible space in defense , roughly a $3 billion market opportunity .
Speaker #3: Customers are choosing Enovix for a rugged , safe , machine ready designs and diversified supply chain with manufacturing in Korea and Malaysia and longer term .
Speaker #3: Our Silicon architecture scales across EVs and computing markets that should exceed $500 billion by 2040 . Now let's turn to smart eyewear specifically , which is proving to be a faster moving adjacent market than we previously expected .
Speaker #3: We currently have two cell designs for this market , as we see two distinct product classes emerging display smart eyewear designed for lightweight , voice driven experiences and display enabled AR eyewear , which carries much higher compute and battery demands .
Speaker #3: We expect this to be a broad market with many different consumer electronics and fashion brands launching products in 2026 . The AI one platform enables significantly longer runtime in this space , constrained application .
Speaker #3: We now have sampled the AR one platform to ten unique smartphone OEMs and Odms , and we expect to showcase the first and product with an OEM publicly in CES 2026 .
Speaker #3: In January . Turning to defense , momentum continues to build this quarter across multiple geographies in Korea , we combined seasoned manufacturing capabilities for conventional lithium ion batteries with our expertise in silicon anodes , our leading products .
Speaker #3: Now include silicon doped anodes and the customer response has been encouraging . Year to date , our Korea facility has shipped roughly $20 million of products .
Speaker #3: The majority of which went to domestic defense and industrial customers, including two of the major three contractors in the Korean military. With customers outside Korea, we are seeing strong progress in both aerial and subsea drone markets.
Speaker #3: These customers are increasingly diversifying their supply chains and our manufacturing footprint has opened doors with them based on customer feedback . Our products are meeting the demanding requirements of this segment , including high pressure tolerance , long cycle life , large capacity formats of up to 60 amp hours that operate reliably in low temperature environments .
Speaker #3: We a robust pipeline of opportunities in this segment , growing to over $80 million globally . Before I turn it over to Ryan for the financials , I want to provide an update on the M&A front .
Speaker #3: Our mission remains unchanged . Commercializing our 100% active silicon anode architecture for space constrained , high volume devices . Our conviction drove us to strengthen our balance sheet , giving us optionality to accelerate growth organically and inorganically through strategic M&A .
Speaker #3: This quarter , we began evaluating several opportunities that could advance commercialization through vertical integration and accelerating entry into complementary markets . A select few that meet our strategic financial criteria are under consideration , and our funnel of opportunities continues to grow .
Speaker #3: While we continue to evaluate opportunities that fit our strategy and financial filters . We have not entered into any agreements at this time , and there is no certainty that any such opportunities will result in completed transactions .
Speaker #3: Now I'll turn it over to Ryan to give a financial update .
Speaker #2: Thanks , Raj , and good afternoon .
Speaker #4: Everyone . Before I get into the financial results , I want to highlight the capital markets activity we executed during the third quarter .
Speaker #4: On the left side of the slide , you can see the summary of our warrant dividend program . We completed the program at the end of August with all warrants either exercised or expired .
Speaker #4: Roughly 26.5 million warrants were exercised , generating about $224 million in proceeds , net of fees and expenses . During the third quarter , we repurchased approximately $58 million of common stock .
Speaker #4: The net of these two programs resulted in $166 million in net liquidity , strengthening our cash position , enabling the funding of our fab two build out and other strategic initiatives .
Speaker #4: On the right side , we show the convertible notes offering , completed in September . We issued $360 million of 4.75% notes due in 2030 , which , after purchase discounts and capped call costs , added about $303 million in net liquidity .
Speaker #4: The notes convert at $11.21 per share , with a redemption trigger at approximately $14.57 per share . The capital overlay has the ability to substantially offset potential dilution , as shown on the slide .
Speaker #4: We structured the cap call using multiple tranches , which provides several interim payoff opportunities during the term rather than the typical all or nothing settlement at maturity .
Speaker #4: If Enovix stock price meets or exceeds one of these , price thresholds , there is a substantial payout . If we meet all the target specified , the company could receive cash proceeds of over $200 million .
Speaker #4: We believe that this structure lets us capture value as we execute while managing dilution responsibly over time. The net result of all this is that we closed the quarter with $648 million in cash, cash equivalents, and marketable securities.
Speaker #4: The goal wasn't just to raise capital , it was to remove what we perceived as a financing overhang to give Raj and the team the confidence to execute on our strategy without distraction , and to give our customers comfort in our financial strength .
Speaker #4: I believe, to a large extent, we have achieved these goals, and it's been impactful. We now have the resources we expect will allow us to fund Fab 2 to pursue select, strategic opportunities and to operate with confidence.
Speaker #4: It's exactly where a company at our stage should be . Now turning to the Q3 results . This was another strong quarter of execution for Enovix .
Speaker #4: Revenue came in at $8 million , up 85% year over year as we continue to deliver solid growth across defense and IoT programs .
Speaker #4: While simultaneously advancing sampling activities with our lead smartphone and smart eyewear customers . non-GAAP gross profit was $1.7 million , representing a 21% gross margin compared to a loss in the same period last year .
Speaker #4: The improvement was driven by higher sales, a favorable product mix, and continued cost discipline. Non-GAAP operating expenses were $31.5 million, an increase year on year.
Speaker #4: The majority of the increase was driven by higher depreciation and amortization , with modest increases in R&D and manufacturing readiness investments . As a result , non-GAAP loss from operations came in at $29.8 million versus $26.9 million in the same period last year .
Speaker #4: Adjusted EBITDA , however , which excludes depreciation and amortization , improved by $2.3 million , a 10% improvement year over year . non-GAAP net loss per share attributable to Enovix was $0.14 , an improvement of $0.02 from Q3 2020 .
Speaker #4: For overall , we delivered against our plan and continued building the foundation for scale and profitable growth . You just saw the detailed walkthrough of our Q3 results , so I'll focus here on guidance for Q4 and some context for the fourth quarter .
Speaker #4: We expect revenue between 9.5 and $10.5 million , up 25% sequentially at the midpoint . We expect non-GAAP loss from operations between 30 and $33 million .
Speaker #4: Reflecting continued investment in manufacturing readiness and product launch preparation . As we scale towards volume production for non-GAAP net loss per share attributable to Enovix , which includes the impact of interest expense on the new convertible notes , we expect between 16 and $0.20 .
Speaker #4: And finally , we've added a new metric for guidance . We are forecasting capital expenditures , which for the fourth quarter , we expect to be between 9 and $12 million , primarily tied to fab two equipment as well as the build out of the NPI production line in South Korea .
Speaker #4: Note our guidance does not include mass production for any commercial smartphone shipments . To honor in Q4 2025 . Importantly , however , we believe that the customer commitment and launch plans remain firmly intact .
Speaker #4: Our second smartphone OEM program is also progressing well in parallel . While we're not giving 2026 guidance today , investors should expect a more back weighted revenue profile next year , following in customer qualification and product launches .
Speaker #4: With $640 million in cash . We believe we are well positioned to continue executing on our plan and we remain prepared to pursue strategic opportunities where they meet both our strategic and financial criteria .
Speaker #4: And with that , operator , we're ready for questions .
Speaker #1: We will now begin the Q&A session . Please note that this call is being recorded . Before we go to the live questions , we're going to read two of the most highly voted questions submitted by shareholders ahead of this call .
Speaker #1: During the call registration , the first question is do you have just 1 or 2 smartphone battery customers at this point ? And do you have enough capacity to satisfy their needs ?
Speaker #1: Yeah .
Speaker #3: Thank you for the question . And thank you all for listening . We have agreements with two smartphone OEMs and , you know , both are in different stages of qualification .
Speaker #3: And of course , we also sampled seven of the eight top smartphone OEMs over the past period from with our batteries and we and we are getting positive feedback from all of them on on how they feel about the batteries .
Speaker #3: Different safety tests . They're performing on , the capacity front . You know , we as I mentioned , we have a line that when fully facilities can produce up to 9 million batteries a year .
Speaker #3: Next year . And we also started making some last call . I mentioned that we started making some initial payments towards augmenting the line two and so on .
Speaker #3: So we absolutely do have the capacity to support both the customers as the ramp and , you know , 20 2026 will be a breakout year and we'll continue to add capacity to support all our customer demand in 27 and so on .
Speaker #1: Thank you . And the second question is , Will Enovix pursue rapidly evolving drone manufacturers requiring improved batteries ?
Speaker #3: Yeah , thank you for that question . So this is a market that , you know , as you mentioned , is rapidly evolving .
Speaker #3: We are getting a lot of interest from many drone OEMs , both in both in aerial and subsea , like two , two class of drones that we're finding we've been shipping batteries .
Speaker #3: You know , high performance , you know , high rate batteries from our Korea facility to many different customers in in South Korea .
Speaker #3: We are now able to satisfy and sample those to other drone manufacturers that are asking us for those batteries . Now . And in fact , we just we just got another purchase order today from a , you know , high tech .
Speaker #3: You know , defense manufacturer here in the US to provide more samples for evaluation in their programs . So yes , this is a fast moving market .
Speaker #3: And we're getting a lot of interest for our already existing commercial batteries that we're making in Korea .
Speaker #1: Okay. And we will now go to the Q&A. If you would like to ask a question, please use the raise hand feature on your screen.
Speaker #1: If you've dialed in via phone , please use star nine to raise your hand and star six to unmute yourself . Questions will be answered in the order they are received .
Speaker #1: Please ask one question and one follow up question at most . We'll pause a moment to allow the queue to form our first question comes from Mark shooter from William Blair .
Speaker #1: Please go ahead .
Speaker #5: Hey guys , congrats on naming honor of your lead smartphone customer . This is a big name in China . Mark . Unfortunately though , it looks like they want a thousand cycles now .
Speaker #5: Is this correct ? And how much of this was a surprise to the team and ? And what's required in the design front to achieve that ?
Speaker #3: Yeah , yeah . Mark the requirement has always been 1000 cycles . As I mentioned in the last earnings call , we have is a development program that we're working together with them .
Speaker #3: And we gave them samples in July . And we were doing cycle life testing while they were doing cycle life testing on the same batteries .
Speaker #3: We provided . And you know , as we went along in this testing process , you know , we realized that we need to make one more small design change to get to the full performance that they want .
Speaker #3: And we validated that change . Now internally . And we have confidence that that change we made will actually go to the thousand cycles requirement .
Speaker #3: We're now making batteries to that that specification , and we expect to get those batteries and send them out to honor this quarter .
Speaker #3: And they will start the testing again . And , you know , as you know , you know , batteries are one of those things where when you give a new design iteration , you know , you've got to start the cycle life testing again .
Speaker #3: And it takes 3 to 4 months to do it , you know , because of the just the nature of the nature of the process .
Speaker #3: We expect that to get done in , you know , one . Q next year and then and then we expect to get to commercialization after that .
Speaker #3: But everybody happy with the progress we've made . It's been very collaborative and they've allowed us to mention their name , you know , giving us the , you know , with all the progress they've seen in what we've made and how good the batteries are .
Speaker #3: So I'm very , very confident with what the team has done . And it's going well . And we expect the batteries . And you know , I'm confident the batteries will be shipped in for Q will meet all the requirements .
Speaker #5: That's great . Thanks . The color Raj , appreciate that you touched on that timeline . I'm wondering if you could add any any more color there .
Speaker #5: Should you mentioned 3 to 4 months . Should we be expecting that first regional testing Po to happen in Q1 with a follow up ?
Speaker #5: Maybe in Q2 ? I mean , how are you guys looking at this now ?
Speaker #3: Yeah , I mean , look , we don't want to launch anything . They don't want anything together . We want to launch a battery that's fully tested , solid , safe meets all the requirements because the first battery to production .
Speaker #3: And we want to make sure we do everything right . So as I mentioned , it takes 3 to 4 months to validate it .
Speaker #3: After we shipped it . And then and then they'll need to put it in their phone and , and then the next model will intersect .
Speaker #3: So , you know , you should expect something in the first half of next year if everything goes well , great .
Speaker #5: Congrats again, guys. Thanks. Thanks, Mark.
Speaker #1: Thank you . And our next question will come from George Giannakis from Canaccord . Please unmute your line and go ahead everyone .
Speaker #6: Thank you for taking my questions . Good evening . I'd like to just continue on the path of the questions around honor again , congratulations and just trying to understand the cadence of production and orders that we should be expecting .
Speaker #6: You mentioned the first quarter . We should get more detail around an order . Then maybe ramping production in the second and just your level of confidence that this is sort of the last design change before achieving order status .
Speaker #6: And then production .
Speaker #3: Yeah . Look , I'm I'm very confident my team is very good . They've done tremendous work . And this has been a close cooperation with the customer .
Speaker #3: So we are seeing everything . They're seeing everything . They giving us solid feedback . You know again we are trying to launch everyone should understand 100% active silicon anode battery into a smartphone , which is never been done before with a brand new factory .
Speaker #3: So we've made tremendous progress . That's why I put the timeline out there . So for all the , you know , all our investors and , you know , for you guys to get a feel for what , how complex this is and how much progress we've made .
Speaker #3: I'm very confident . But you know , as I always mentioned , we don't want to launch anything that's not 100% solid . And we work closely with our customers .
Speaker #3: And if all the testing goes well, I think it will be fantastic to launch next year. And again, there's another customer right behind that's also testing in the same design iterations that you're making.
Speaker #3: That customer is also getting it. We got feedback from them that this is really a benchmark and energy density that they're seeing. So there's a lot of interest.
Speaker #3: But we want to make sure it's it's solid when it goes to production . And as as Ryan mentioned , we have a strong balance sheet and we are well capitalized .
Speaker #3: So we have what we have the resources we need . We have a factory that's running well to get it to full production at the right time .
Speaker #3: Next year .
Speaker #6: Thank you . And maybe as a follow up to Switch gears regarding an acquisition , obviously you have you've built up a incredibly strong balance sheet .
Speaker #6: I'm curious as to where you're looking . In other words , what opportunities are you looking to explore from an M&A perspective ? Just because you have this enormous opportunity in front of you , just with the cells that you're you plan to manufacture soon , what could you add to to the tool set that will make that addressable market even bigger ?
Speaker #6: Thank you .
Speaker #3: Yeah . Well , first thing I want to say is I want to be everyone . To be clear , our mission is to make these great technology .
Speaker #3: We have of 100% active silicon anode batteries into smartphones , AR , VR , IoT , compute , and in some aspects into some EVs .
Speaker #3: That's our number one goal . And we are squarely focused on that . But we do find as we go into that , that there are other aspects we could add to accelerate that growth in terms of channel , in terms of time to market , in terms of other components that help , you know , get that penetration of these great technology into market faster .
Speaker #3: But again , we will do it very thoughtfully . We're not we're going to do it in a way that is financially makes sense .
Speaker #3: And also does not distract us from our main goal . So that is probably all I can say at this point . And we are getting quite a bit of inbound interest , as you mentioned , because we are a very strong balance sheet , but we're going to be very thoughtful about how we use it .
Speaker #3: Ryan .
Speaker #4: I mean , I couldn't say it better . I mean , I think we'll pride ourselves on being good stewards of capital . It will have to make sense from a strategic standpoint , from a technology standpoint , in order to further the core mission .
Speaker #4: And then we'll apply discipline , financial and diligence filters to it .
Speaker #6: Thank you .
Speaker #1: Our next question comes from Jeff Osborne from TD Q1 . Please unmute your line and go ahead .
Speaker #4: Yeah . Thank you . Just two on my side . You mentioned Raj the the yield improvements in Malaysia . I was wondering if you could just level set us where were things .
Speaker #4: Where are things . Where do you need to be ? I think TJ touched on sort of a risk and ramping up aggressively next year to meet the customer demand .
Speaker #4: So relative to maybe where his expectations and yours are , what's left to do and what have you achieved so far ?
Speaker #3: Yeah , great . Great question . Look , this year , what has happened is we've had so much inbound interest on various markets .
Speaker #3: You know , as I mentioned , two cell phone OEMs that we have development agreements that we had to make batteries . And , you know , these are actually the batteries that you see here that that have been sampling to the customers .
Speaker #3: And then we had two different smart customers . And this is actually the batteries that we shipped from our factory that go right into the leg here , two different sizes of that .
Speaker #3: Then we had another IoT customer , which , you know , potentially very high volume . That's a slightly different size . We had to make that one .
Speaker #3: Then we were making the battery for the defense contract that we had. So, a lot of like five, six different cells that we've been making.
Speaker #3: And the reason I tell you that is when you're making so many different sized cells , you have to constantly adjust the lasers , adjust our stackers to and the tooling to make each of those .
Speaker #3: So and these are just samples , right ? We're talking hundreds and thousands of units . So we did not really spend that much effort and energy on optimizing for yields .
Speaker #3: Because by the time we got one done you just retooling it for the next one . Now we've given all the samples , the customers , we're focused on two markets , two products which are shorter term for production , like in 26 , which is a bigger smartphone cell .
Speaker #3: Because by the time we got one done you just retooling it for the next one . Now we've given all the samples , the customers , we're focused on two markets , two products which are shorter term for production , like in 26 , which is a bigger we This one .
Speaker #3: And the smaller AR VR cell . So these two cells is what we are focused on . Now . We have an agility line .
Speaker #3: We have an hvm line . And since the last couple of months the yields are coming up very nicely . And you know , I review this every week actually every week I have a meeting on execution and very pleased with the progress and particularly on the laser side and on the stacking side there where we expect it to be .
Speaker #3: And again , like I said , the high volume production now is is , you know , mid to late next year . So we we will be ready for , you know , benchmark yields by that time .
Speaker #3: So I'm I feel pretty good that that you know it's headed in the right direction and we're focused on it now .
Speaker #4: Great to hear! Maybe just as my second question to follow up on Mark's prior question, can you just be more specific as it relates to whether there was a scope change with Honor in terms of their expectations? Or was there a form factor change or a chemistry change?
Speaker #4: I'm just trying to understand better the tweak that you made , that then now has to go through this new validation testing cycle .
Speaker #4: I get that there was a change , but what was it driven by and what was the nature of the change ?
Speaker #3: Yeah , it was so . So when we when we send the samples to them , I think I mentioned last time we were doing cycle life testing while they were doing cycle life testing , which means we charge the battery discharge the battery , charge , the battery discharge the battery .
Speaker #3: You want to do it a thousand times now. We weren't—we hadn't completed cycle life testing before we shipped the battery.
Speaker #3: We had done some amount of cycle . We sent it to them . They started doing it along the way . We noticed that the trend line is now such that to get past 1000 cycles , we have to make a chemistry change , not a form factor change , not a scope change .
Speaker #3: So and we started validating that chemistry change . And we now have samples internally that we believe now will go 1000 cycles . And we are making batteries with that new chemistry .
Speaker #3: Now . And those should come out in Q4 . And this is , this is this is the normal process in building a battery for the first time .
Speaker #3: You know, things take a little bit longer initially than we expect, but once you get the first one done, it's a whole lot easier because all the other smartphone customers have very similar requirements.
Speaker #3: .
Speaker #4: Got it . Thank you .
Speaker #7: Appreciate it .
Speaker #1: Our next question will come from Colin Rusch from Oppenheimer . Please unmute your line and go ahead .
Speaker #8: Thanks so much guys . You know , can you talk a little bit about the supply chain . You know , in preparedness ?
Speaker #8: You know , certainly there's been a lot of innovation around some of the anode materials that you guys could potentially use . And can you talk a little bit about what that opportunity set looks like as you you work to advance some of the advanced applications that you're talking about here , both in the phone and the the military markets .
Speaker #3: Yeah , absolutely . So what we are finding now is , you know , I think maybe just for the broader audience , we we are an architecture first battery manufacturer in the sense that we can take advantage of , you know , higher capacity or higher voltage cathodes .
Speaker #3: We can take advantage of different kinds of silicon anodes . We can take advantage of the latest advances in in electrolytes to build a battery , because the battery , the materials get the better our battery and our energy density .
Speaker #3: We provide gets because we control the swelling and we have intellectual property on how to mix these different materials . So to your point , what we are finding is that there are quite a few now of silicon anode suppliers .
Speaker #3: We we were using before a silicon anode called Sio , which is some kind of a oxide , silicon oxide . Now we're using SIC , which is silicon carbon .
Speaker #3: But there's different variations of silicon carbon . For example , the size of the particle of the carbon or the shape of the particle is a little bit different .
Speaker #3: The way they're manufactured is different . So we we are testing quite a few of them . We are sampling with one , but we have second , first and third source on on various one of these things .
Speaker #3: So it's an exciting time to be a battery manufacturer because we can take advantage of all these tremendous material innovations and provide better and better batteries .
Speaker #3: .
Speaker #8: You know , can you talk a little bit about the laptop opportunity ? You know , you've heard a lot about the phones and and eyewear , but you know , certainly you guys have a fairly sizable opportunity in laptops as well .
Speaker #8: And as you get through some of the validation on the phones , how quickly could you transition into some of these other opportunities , given that it seems like once you get the first one done and dusted , a lot of folks are going to line up real quick for incremental demand .
Speaker #3: Yeah , I mean , it's a very good question . I mean , you know , I think you see now what AI is doing to all the edge markets , right ?
Speaker #3: I mean , you can see now all the AI pieces that are coming out , you know , we talked about AI applications and smartphones .
Speaker #3: AR market is just happening because of generative AI , because you're able to now , you know , talk to all these things .
Speaker #3: So almost all these end markets which use batteries at the edge , the demand is is increasing . And the performance requirements , the battery requirements are increasing .
Speaker #3: So laptops is a very exciting market . But again , for a small company like ours in early stage , we need focus .
Speaker #3: And I've been very focused on going after smartphones because I always believed that is the toughest battery to make . And we have very good relationship with customers who are giving us requirements that we need to meet .
Speaker #3: From then from there , once we make that battery , we'll be able to very quickly address other markets . Similarly , you you're seeing now how quickly you were able to address the the smart glasses market , because we have the smartphone technology and I see the computers coming .
Speaker #3: Similarly , once we get our smartphone battery ready and in production , we should be able to quickly go into the compute market , because in that market , basically what it is , is it's a it's a bunch of smartphone batteries put together .
Speaker #3: That's one way you can think about it . It's not like one giant battery . It's a bunch of five batteries packed together .
Speaker #3: So packaging , battery management systems , those are the kind of things that will partner to get our battery technology into those markets .
Speaker #3: So we are talking to some of those customers , but if anything , I'm holding back the team from getting too many samples out there because we don't have the scale to support all of them at once .
Speaker #3: I'd like to do 1 or 2 really well , and then expand .
Speaker #8: Perfect . Thanks so much .
Speaker #7: Guys .
Speaker #1: Thanks. Our next question comes from Ananda Baruah from Loop Capital. Please unmute your line and ask your question.
Speaker #9: Hey , thanks guys . Thanks for taking the question . Yeah , I guess a couple clarification for me . Was it that you said first half 2026 ?
Speaker #9: Expect initial production volumes with honor.
Speaker #3: Yeah . Again , it depends on how well the testing goes with them . I'm confident that this is what we're giving this time will be really good in in the sense of meeting the 1000 cycle requirement .
Speaker #3: And if it goes really well , we'll find the right phone intersect for first half .
Speaker #9: Got it . Awesome . Thanks for that . And then the second , the second smartphone customer , was it production in 2026 is the goal .
Speaker #9: And then and then part B of that question is you had mentioned that you're able to sort of go through the process more quickly with the second smartphone customer .
Speaker #9: Can you just give some context around that ? How much more quickly ? What parts of the process like that ? And I got a quick follow up .
Speaker #9: Thanks .
Speaker #3: Yeah , sure . Yes . It's also for targeted for second for next year's production , but probably be later half of next year because given where we are starting , because what we need to get from them , we given them some cells , they're not testing and next step from them is to get the exact dimensions of the cell that will launch into production next year , towards later part of next year .
Speaker #3: Fall is when typically they launch and we'll have some time to make the battery to the exact dimensions in the first half . Give it to them and they'll call and they'll put it through their phone and qualify it .
Speaker #3: Like for example , as I mentioned , this thousand cycles , you know , testing , right ? We've now figured out what it takes to get 1000 cycles .
Speaker #3: And we have that chemistry now that will be sampling . And of this quarter in fourth quarter this year , you can see now that the next customer will actually get samples that we would have validated for 1000 cycles .
Speaker #3: So you can see this problem that we are now addressing would have been solved . Right . Because we've now got ahead of that .
Speaker #3: And there's a lot of things we learned with our collaboration with honor , how they do the drop test , you know , how they do cycle life test .
Speaker #3: You know how they do fast charge test . You know how the battery management system is controlled by them . What temperatures they store , the batteries , how much swelling is allowed at various temperatures .
Speaker #3: So there's a tremendous amount of know-how in how batteries are tested to get into smartphones, which we now have thanks to our first customer.
Speaker #3: And that's , you know , helping us with the second one , because the second one also gave us the requirements . And we looked at it .
Speaker #3: We're like , wow , these look very similar to the ones we got from the first one . So we're now able to meet them much faster .
Speaker #3: And my expectation is that the rest of the market will have very similar requirements because they're all , you know , phones going to the similar markets .
Speaker #3: So that's why my comment on the first one is the hardest for the ones after that will be a whole lot simpler .
Speaker #9: I got it . That's that's good for me . I appreciate it guys . Thanks .
Speaker #7: Thank you . Thank you sir .
Speaker #1: As a reminder , if you would like to ask a question , please use the Raise Hand feature on your screen . If you've dialed in via phone , please use star nine to raise your hand and star six to unmute .
Speaker #1: Our next question will be from Derek Soderberg from Cantor Fitzgerald . Please unmute your line and go ahead .
Speaker #10: Yeah . Hey guys . Thanks for taking the questions . So , Raj , I'm a chemistry change . My understanding is the chemistry reformulation can take maybe multiple months .
Speaker #10: You know , depending on how big the change it is I guess . Can you share like the timeline from when you noticed the issue to actually solving and integrating the new chemistry ?
Speaker #10: And I guess what's maybe the risk that the new chemistry doesn't quite interact with the rest of the battery , and you might need to reformulate it again .
Speaker #3: Yeah . I mean , look , the way we operate is we have a bunch of different chemistries that we are constantly have as backups .
Speaker #3: If this one doesn't work , what do we do next ? What do we do next ? What is next ? My engineering team has been studying these .
Speaker #3: You know , again for the last over the last year , we picked one that we felt was the had the best chance , but we had backups running at the same time to see what it would be if that one , you know , had some challenges .
Speaker #3: And now the backup , you know , we've tweaked it and the results so far look very good . So I'm confident that the batteries we ship this quarter will meet .
Speaker #3: But we have other backups running to them . If those those need another tweak . I don't believe we'll need one more . But you know we always good to be prepared with with multiple chances right .
Speaker #3: The unfortunate thing about this , you know , as you know these are these are not like chips where we can do simulation and figure out what will happen , what will not like , for example , when I used to build processors , you know , you'd have a simulation model .
Speaker #3: We would do analysis , we'd know what to do and then tools will help you do it . And when you tape out , you're pretty much guaranteed to get it .
Speaker #3: Unfortunately , in batteries , you just have to run for thousand cycles before you , you know , before you know , if you got it .
Speaker #3: That's just the nature of it . But the good news is , once you get it , you have it . So the first one is hard , but I feel pretty confident .
Speaker #3: But , you know , let's see how it goes .
Speaker #10: No , I appreciate that . And that is my follow up . Ryan . You know , as you're looking into some of these potential agreements , I think ASPs have maybe changed since you guys have kind of last spoken about maybe a revenue breakeven point for the company .
Speaker #10: So as you guys sort of start to ramp to multiple customers , can you maybe share maybe what that revenue breakeven point is for you guys or anything else ?
Speaker #10: Maybe on the near term profitability model , you know , if you update , if you need to update margins or anything like that , can you share any of that detail now that you guys are sort of moving towards commercialization here next year ?
Speaker #7: Yeah , no , I think look , fundamentally , I think .
Speaker #4: We like where the market's going in terms of valuing our technology and our product . I'll stay consistent with what we said in the past that that an important milestone for us is to get multiple hvm lines in place , build out and tab2 .
Speaker #4: And that's why we've started that process . In addition to giving lots of operational benefits of being able to switch over lines and run multiple products , it helps get to a certain level of scale .
Speaker #4: And it's really beyond that point . So line two , line three that we think gets us to where we're gross margin positive and able to absorb the overhead .
Speaker #4: This is on a non GAAP basis . And then really it's as we march towards filling fab two with equipment and getting full utilization .
Speaker #4: There that we see as being adjusted EBITDA positive or a proxy for cash flow positive .
Speaker #10: Got it . Really appreciate it .
Speaker #4: Thank you sir .
Speaker #1: There are no further questions at this time . With that I'd like to turn the call over to Doctor Raj Talluri for closing remarks .
Speaker #3: Yeah . Thanks everyone for the thoughtful questions . And joining us today to close , I want to bring it back to the big picture .
Speaker #3: Like Enovix is entering one of the most important phases in our company's history , which is taking our breakthrough technology and scaling it to commercial production .
Speaker #3: We have a clear line of sight to that goal . Our A1 platform has been validated by third party Polaris Labs as the highest energy density battery ever reported in a smartphone .
Speaker #3: Our lead smartphone and smart IV programs are progressing towards launch . Our manufacturing capabilities at fab two are ramping steadily , and we've delivered .
Speaker #3: We have strengthened the balance sheet, and we secured the capital. We need to execute, and we built a team that knows how to deliver.
Speaker #3: You know , while qualifications can ramp cycles , take time , what matters most is that we're on the right path with the right partners , the right technology , and with the resources to see it through .
Speaker #3: I am incredibly proud of what the team around the world has accomplished , and I'm confident in the road ahead . Thank you once again for your continued support and for your interest in our .