Enovix Corp Q2 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabe Daoud - Cowen and Company - Analyst : Afternoon, everyone. It's Gabe Daoud here. Thanks for all the prepared remarks, guys. Just I know maybe what you do in revenue next year isn't really all that important in the grand scheme of things, but could you maybe just talk a little bit about the Gen2 equipment and just kind of elongating that design process? And I guess expecting that equipment to arrive now in the second half of next year. So when should we expect that line to be I guess generating some revenue? Is it really like the first half of '24? Just trying to think through the timing there.

Question: Gabe Daoud - Cowen and Company - Analyst : Got it. Thanks, Harrold. That's helpful. And then maybe just shifting gears a bit, obviously it looks like there's a lot of demand for your batteries. It's obviously a great thing, and you mentioned you completed the tech qual with those three strategics. So could you maybe just give us a little bit of color or visibility into I guess what happens next with those three strategics? When could we maybe see that move into the active design or design win bucket?

Question: Gabe Daoud - Cowen and Company - Analyst : Awesome, Cam. Really helpful. Thanks, everyone.

Question: Bill Peterson - JPMorgan - Analyst : Yes, hi. Thanks for taking my questions. If I could first start off with the throughput and yield improvements that you have going on. I guess, can you shed some more light on what is going on? Is it, for example, cell-to-cell repeatability, reliability, or meeting, I guess, consistently metrics such as energy density or cycle life? Just trying to get a feel for what's needed to be improved. And I guess maybe most importantly is do you know what the issues are so we have a good line of sight that maybe just here share in the next quarter or so you can get past these issues?

Question: Bill Peterson - JPMorgan - Analyst : That's helpful color. It sounds more, I don't know, blocking and tackling versus discovery or development, so that's encouraging. I guess the second part is if we look at the next sort of, call it, year and a half, we will be relying on Fab-1 to support the strategic customers, of which obviously it sounds like there's strong demand. I guess, how do you balance that demand across these customers with clearly limited supply here in the next, like I said, maybe year, year-plus. And then how should we think about the potential -- I don't know if it is unit opportunity or kilowatt hours or revenue, but trying to understand what you could supply in this interim phase before the next two fabs?

Question: Bill Peterson - JPMorgan - Analyst : Okay, thanks for the additional color.

Question: Colin Rusch - Oppenheimer & Co. - Analyst : Can you talk a little bit about the impact of the BrakeFlow technology on pack cost, volume, weight, and safety? And especially what that means for your entrance into the EV market?

Question: Colin Rusch - Oppenheimer & Co. - Analyst : Okay. Yes, my question was really wondering about cost reduction at the pack level, but we can take that off-line. I'm assuming that you're going to be able to save your customers some cost at the pack level. So that's helpful, but thanks for that. You know, just in terms of the things that you guys are balancing and the timeframes around this, so if I understand right, it sounds like you are working through some reengineering on the line. You are also talking to a number of customers and looking at how you serve the relatively large volume of demand and thinking about what those contract terms are. I guess as you look at identifying the final locations for the capacity expansion and work through timing on some of those engineering plans as well as some of those contractual elements, which may include some prepayments, how should we think about getting that information? Is that something that you will make an announcement on? Is that something you will just give updates on around a quarterly call? And kind of when can we expect things to get a little bit clearer here? Is that kind of a 3Q event or is that more by the end of the year?

Question: Colin Rusch - Oppenheimer & Co. - Analyst : And the timeframe for finishing engineering for the follow-on plants, is that something that you guys feel like you are closing in on that and wrapping that up? Or is that going to be more closer to the end of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2022 / 9:00PM, ENVX.OQ - Q2 2022 Enovix Corp Earnings Call

Question: Colin Rusch - Oppenheimer & Co. - Analyst : Perfect. Thanks so much, guys.

Question: Gus Richard - Northland Capital Markets - Analyst : Yes, thanks for taking my question and congratulations on the tremendous progress you made in the quarter. My first question is on the revenue split in the quarter, was that $5 million milestone payment from your first strategic customer that's -- was that $5 million milestone payment from your first strategic customer that's using your battery in the watch? And how many other customers made up the other $100,000 of revenue?

Question: Gus Richard - Northland Capital Markets - Analyst : Got it. And is the $5 million from the watch company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2022 / 9:00PM, ENVX.OQ - Q2 2022 Enovix Corp Earnings Call

Question: Gus Richard - Northland Capital Markets - Analyst : Got it. I understand now. Thank you very much. And then, Harrold, as you think about getting the single-million units exiting 2023 run rate, how do you think about that ramp? Is it going to be a linear ramp? Is it going to be exponential? Is it going to be a little start-stop? How do you think about ramping up the volume and sort of what that looks like as you progress?

Question: Gus Richard - Northland Capital Markets - Analyst : Okay. That makes complete sense. And if I could just sneak one more in, given some of these major strategic customers want -- will need a lot of volume, have you guys had any discussions with them in terms of licensing or JVs? Where might that be?

Question: Gus Richard - Northland Capital Markets - Analyst : Perfect. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2022 / 9:00PM, ENVX.OQ - Q2 2022 Enovix Corp Earnings Call

Question: Anthony Stoss - Craig-Hallum Capital Group - Analyst : Harrold, just to follow up on your comment about ordering the equipment in the next several weeks, kind of give an indication that you think the tweaks you are going to do here in Q3 in the production line will be over. Should we assume that there will be some production revenue in Q3? Or can I zero it out and just assume it's in Q4? And then second question is lots of traction with potential customers. Where are you seeing that most traction? Is it watch-sized batteries, phones, laptops, across the board? Any color would be appreciated.

Question: Anthony Stoss - Craig-Hallum Capital Group - Analyst : Thanks, Cam. If I could actually direct a follow-up, last question, to you, are you still able with the pausing of the plan -- the optimization here in Q3, are you still able to satisfy demand for your customers for both Q3 and Q4 units? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2022 / 9:00PM, ENVX.OQ - Q2 2022 Enovix Corp Earnings Call

Question: Anthony Stoss - Craig-Hallum Capital Group - Analyst : All right. Thanks, guys.

Question: Ananda Baruah - Loop Capital Markets - Analyst : Yes, thanks. Good afternoon, guys, and congrats on all the good news today. Yes, just a couple if I could. Going back to the remarks you guys have made about strategic accounts seeing a real acceleration in urgency, the commercial milestones that you said were the catalyst for that, are those their own commercial milestones in the work with you? Or does that also include you guys hitting commercial milestones in nonstrategic accounts, are they now seeing sort of the efficacy of the product?

Question: Ananda Baruah - Loop Capital Markets - Analyst : That's helpful context. And so I guess, would it be -- based on what you guys have experienced internally in conversation sort of in the context of that call it like acceleration and urgency, would it be also your opinion that there is a possibility that they sort of like -- I don't know if the right description is here, but move at a faster pace now, given that urgency to complete some of these production qualifications?

Question: Ananda Baruah - Loop Capital Markets - Analyst : That's helpful. Understood. And then just a quick follow-up here. On the Army announcement, congrats on that. So what would be now the key milestones remaining from where you are right now to going into production volume with them?

Question: Ananda Baruah - Loop Capital Markets - Analyst : Awesome. Any care to guess what the next two phases, next few steps, how long that could take roughly? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2022 / 9:00PM, ENVX.OQ - Q2 2022 Enovix Corp Earnings Call

Question: Ananda Baruah - Loop Capital Markets - Analyst : That's super helpful, Cam. Thanks, thanks a lot. I'll cede the floor there. Thank you.