Enovix Corporation (ENVX) CEO Harrold Rust on Q1 2022 Results – Earnings Call Transcript

Enovix Corporation (NASDAQ:ENVX) Q1 2022 Earnings Conference Call May 11, 2022 5:00 PM ET

Company Participants

Harrold Rust – President, Chief Executive Officer and Co–Founder

Steffen Pietzke – Chief Financial Officer

Cameron Dales – General Manager & Chief Commercial Officer

Ashok Lahiri – Chief Technical Officer & Co-Founder

Conference Call Participants

Gabe Daoud Jr – Cowen Inc.

Colin Rusch – Oppenheimer & Co. Inc.

Gus Richard – Northland Securities, Inc.

Ananda Baruah – Loop Capital

Marc Cohodes – Private Investor

Operator

Welcome to Enovix Corporation First Quarter 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. As a reminder, today’s conference will be recorded. And now I’d like to introduce your host for today’s program. Charles Anderson, Vice President of Investor Relations. Please go ahead.

Charles Anderson

Thank you. Hello everyone and welcome to Enovix Corporation ‘s First Quarter 2022 Results Conference Call. With us today are President, Chief Executive Officer, and Co–Founder, Harrold Rust, and Chief Financial Officer, Steffen Pietzke. We will also be joined today by Chief Commercial Officer, Cam Dales, and Chief Technology Officer and Co–Founder, Ashok Lahiri for the Q&A portion of the call. Harrold and Steffen will review the operating and financial highlights, and then we’ll take your questions. After the Q&A session, we’ll conclude the call.

Before we continue, let me kindly remind you that we released our First Quarter 2022 shareholder letter after the market closed today. It’s available on our website at ir.enovix.com. A replay of this conference call will be available later today on the Investor Relations page of our website. Please note that the shareholder letter, press release, and this conference call all contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are based on current expectations and may differ materially from actual future events or results due to a variety of factors.

For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today’s shareholder letter and our filings with the Securities and Exchange Commission. All our statements are made as of today, may 11th, 2022, based on the information currently available to us.

We can give no assurance that these statements will prove to be correct and we do not intend and undertake no duty to update these statements except as required by law. During this call, we will also discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. You can find a reconciliation of the GAAP financial measures to non-GAAP financial measures in our shareholder letter, which is posted on the Investor Relations page of our website. I will now turn the call over to Harrold to begin. Harrold?

Harrold Rust

Thank you, Charlie. Hopefully, everyone had a chance to review our shareholder letter, which detailed our first quarter. I’ll keep my comments high level, around our progress in technology, manufacturing and commercialization. And Steffen will cover our financials and we’ll take your questions. As Charlie mentioned, we’ll be joined by Cam and Ashok for that portion of the call. Let’s dive in. Most important, our first production line of Fab-1 in Fremont is up and running, and we began shipping qualification cells in Q1. We expect to make our first shipments for product revenue to a technology leader in the Wearable category in Q2.

This marks a significant milestone and delivers on a commitment that we made over a year ago, highly differentiating us from other advanced battery companies still working to develop and bringing new battery technologies to market. Moving into commercialization has not gone unnoticed by our customers. We have engagements with leading companies that want our revolutionary battery, in order to enable features, functions, and form factors not previously available. Last week, we announced that we received an order from one of the largest consumer electronics companies in the world for our Smartwatch battery.

What makes this engagement so exciting, is the potential for our technology to proliferate across this customer’s broad consumer electronics product portfolio. After touring our Fab-1, a senior leader at this customer told us, “We need to move this technology into our mobile products quickly. ” The line proves you can scale. Bolstering our value proposition to industry-leading customers was our announcement in March of BrakeFlow, a breakthrough technology in advanced lithium-ion battery safety. This innovation is enabled by our unique 3D architecture and allows us to add to significant layer of safety as we boost energy density.

All of us are aware of the restrictions we face, checking luggage with lithium-ion battery when flying, and we’ve all seen the headlines of battery fires and the terrible impact they’ve had on our industry and consumers. With BrakeFlow, we are pioneering a new path in battery safety. Customer response has been extremely positive and we look forward to making BrakeFlow available in our battery cells next year. Now let’s talk about scaling our capacity beyond Fab-1.

Many of you have been wondering where we stand on Fab-2, our second plant production facility. We recognize that we’ve taken longer than we previously communicated to announce a Fab-2 location, but it’s for a very good reason. Our engineering team has taken the learnings from Fab-1 and designed a significantly improved production line we call Gen2, that is designed to be faster and require far less space than our current generation. Major portions of the Gen2 line will occupy half the space of Gen1 with significantly higher output.

This gave us the opportunity to reevaluate the optimum size for Fab-2 and caused us to shift gears and focus on smaller facilities than we had been considering. On that note, I’m pleased to share today that we have begun placing orders for our Gen2 equipment and expect to have the full-line ordered over the next several weeks. That will allow us to take delivery at a Fab-2 location in the first half of 2023 and we are confident in our ability to close on a site selection later this year that meets our needs. Our overriding goal remains the same.

Install capacity to scale to $1 billion in annual revenue with leading margins and serve the tremendous demand we see forming at our funnel. We intend to further augment our direct capacity with strategic joint venture or licensing deals that allow us to capture battery markets that require more capacity than we can put it on our own. Now I’ll turn the call over to our CFO, Steffen, who will discuss our financials. Steffen?

Steffen Pietzke

Thank you, Harrold. Our detailed financials can be found in our shareholder letter, so I will spend my time covering a few high level topics. First, starting this quarter in addition to our GAAP reporting, we’re providing a non-GAAP income statement that excludes third base compensation, mark-to-market adjustment, and other non-cash and one-time items. We use non-GAAP financial information to evaluate our ongoing operations and for internal planning purposes. We believe that non-GAAP financial information may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies.

You can find a full reconciliation between our GAAP and non-GAAP metrics in our shareholder letter. Now turning to the results. We closed the first quarter of 2022 with net cash of $408 million, up from $385 million in the fourth quarter of 2021, due to proceeds from the exercise of our public warrants of $52.8 million, partially offset by $19.7 million of cash used operationally and $10.5 million of cash used on capital expenditures. We expect higher capital spending the rest of the year as we make payments for our Gen2 production line and our new automated pilot line, which we refer to as the agility line. We did not recognize product revenue in the first quarter of 2022, consistent with our expectations.

As Harrold mentioned, we continue to expect to begin recognizing product revenue from the sale of our batteries in the second quarter of 2022, consistent with our previously reported goal. Our operating expenses in the first quarter were $25.1 million. Excluding stock-based comp, our non-GAAP operating expenses in the quarter were $19.9 million, down from non-GAAP operating expenses of $20.8 million in the fourth quarter of 2021, which also excludes stock-based comp. I want to highlight that once we begin shipping for product revenue, we will shift our factory headcount costs to cost of goods sold from R&D and start appreciating our production equipment also within cost of goods sold. Now let’s discuss our expectations for 2022.

For full-year 2022, our outlook is unchanged. We expect to use between 190 million and $210 millions of cash, of which we expect roughly 55% will be capex. We expect to generate revenue between $6 million and $12 million. As a reminder, our revenue will consist of both product revenue and non-recurring engineering, or NRE service revenue. To summarize, our balance sheet is strong and we are investing in our commercialization engine technology roadmap and production capacity for scaling. I will now turn it back to Harrold for closing remarks.

Harrold Rust

Thanks, Steffen. To summarize, the first quarter was one of excellent progress for Enovix. A little over a year ago, we told you we would bring up a first-of-a-kind factory making an industry-leading lithium ion battery for shipment in the first half of 2022. We delivered on that promise and are hard at work ramping our production this year in Fab-1 and moving forward with our Gen2 equipment destined for Fab-2. What we didn’t tell you about a year ago, where all the other innovations enabled by our unique architecture beyond just energy density. Our first example of this is BrakeFlow, which we believe is a game changer in advanced lithium ion battery safety.

Before we close, I thought I would pass along comments from some industry leaders that have recently tested our batteries. One said, “The best advanced battery we have seen. ” And, “We are ecstatic with the cycle life. ” Another said, our battery is, “The best silicon -enabled cell we’ve tested by far. ” And, “Most silicon cells fail after 100 to 200 cycles. ” As you can see, this is really an exciting time at Enovix and for our customers. With that, I’d like to turn it back to the Operator for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Please stand by while we compile the Q&A roster. Our first question comes from Gabe Daoud with Cowen. Your line is now open.

Gabe Daoud Jr

Thank you. Afternoon, everyone and thanks for all the prepared remarks. Maybe, Harrold, just starting with the consumer electronic company that placed an initial order. What are the steps to get that into an active design win? And then what has to happen to have your battery be designed into other products across the portfolio?

Harrold Rust

Yeah, let me — I’ll comment that briefly and then I’ll have Cam give you a little bit more color. We’re super excited about this customer. It’s an industry leader behind the space and I think this first product they’re working on with them is really a leader into a bunch of other opportunities and markets have that customer and is something that’s very exciting for the company and I’ll let Cam add a little bit more color to that.

Cameron Dales

Happy to do that. So yes, as Harrold mentioned, this is one of the largest consumer products company in the world. They have a very sophisticated product development process and it’s a multi-step process, as you can imagine. It’s a company that has one of the premier brands in the world, and they take great care in making sure they protect that with the quality products that they launch. So from our perspective, we think this is a major step for us because the first part of their process is really technology verification.

So we’ve been working with them for significantly more than a year. We’ve sampled them multiple times, both out of our pilot lines and they’ve essentially tested those cells, verified our claims and given it the stamp of approval that meets their product requirements. That’s a big deal. The next step in this particular product, they’ve purchased batteries from our Fab-1 that will go into prototype watches of their design.

They’ll run them through their paces, do the integration with their electronics, at which point they’ll then move towards customized cells for their volume product.

And they’ll start over the next step of building thousands to tens of thousands of products, what they would likely keep in-house for testing purposes. At which point, when you pass that hurdle, they move into full-scale, high-volume production. It’s a fairly extended program. But we’ve gone through one of the key hurdles. And at this point, we’re now actively moving towards the commercialization process.

Gabe Daoud Jr

Cool. Thanks, Cam. That’s helpful. And then maybe just of a follow-up. Shifting gears a bit to manufacturing scale, you obviously mentioned all the great learnings from the first line and comfortable now ordering Gen2 equipment for Fab-2, and I think you’ve mentioned this before, if you can maybe just remind me, what’s the output improvement with the Gen2 equipment on the second-line? Either on a meters per minute, or number of units, or gigawatt hour improvement, wherever you want to disclose it, but just curious, what’s that output improvement look like?

Harrold Rust

I mean, I think about it calling and kind of two axes. One is just the absolute space efficiency, right? If you look at the line major portions of it, or twice as efficient from a space standpoint in terms of how many units you can get out for a certain amount of square foot, which is obviously a huge factor when we think about our expansion plans and Fab-2. And then beyond that, there are elements of the line which actually just have higher throughput in general on top of the space improvement and that varies. I think in some cases, that could be a small significant number and in other cases that can be quite large.

One point, I’ll just make specifically as we’ve, as a key part of our processes, some Laser Patterning we do at the front end of our process and we’ve been developing some strategic relationships with some of the industry leaders in the laser space to really leverage their know-how, get early access to new technologies, and in some cases, that’s driving well beyond double-digit improvement in throughput for some of those processes, right? So it can be very significant and we want to really harness all that advantage to build the most profitable line going forward.

Gabe Daoud Jr

That’s really very helpful. Thanks, Harrold. And then just one more for me and then I’ll have again, but just where are we on getting to 900 [Indiscernible] hours per liter? I think the roadmap has that hitting that number this year. Is that’s the case? Thanks, guys.

Harrold Rust

Yeah. Thanks for that question. Maybe I will ask Steffen to talk about his since you driving the R&D efforts?

Steffen Pietzke

Sure. Let me comment on that. Yes, that continues to be our goal. We plan to hit 900-watt hours per liter in a product this year, coming out of Fab-1.

Operator

Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is now open.

Colin Rusch

With the changes in the process for Gen2, can you talk a little bit about your Capex number implications there? It seems like you should be able to get some savings out of that, as well as the site selection. You talked a little bit about having some diverse sites for Fabs here in factory, but it seems like you might be able to consolidate some of that. Just want to understand one that cost numbers for your past expansion into the geographic footprint that are being able to buy the Gen2 process.

Harrold Rust

Yeah, maybe answer those in reverse sequence and ask Steffen to comment a bit on the CapEx. From a site selection standpoint, obviously, having a much more efficient footprint for a fair amount of equipment has a significant benefit on the sites. We were looking at a quite large, close to a million square foot building earlier this year for Fab-2. And as we were working through these Gen equipment designs and looking at what these vendors are capable of, we realized that we could do much better than we were thinking. That allowed us to not move forward with that one building, because we thought it was much too large for what we needed.

And then on top of that, we’ve realized that as we’re looking at the customer funnel, that we’re going to need more of a global presence, both from domestic manufacturing and overseas manufacturing over the next several years. And between those two things, it’s shaping what we need out of Fab-2, and it’s something quite a bit smaller than the million square feet. We’re actively working with one of the largest global real estate firms now, and we’re actively looking at buildings.

The good news of being a bit smaller in the building size is that it just gives you a lot more opportunities for buildings that meet our needs. And we see a number of them based on the requirements we’ve given for that search that can head our timeline to be ready for equipment for Fab-2. And then I’ll ask Steffen to talk a bit about the CapEx, obviously efficiency of the Gen2 line as an important factor there as well.

Steffen Pietzke

Sure. Colin, in terms of CapEx, we finished the quarter with $408 million of cash so we’re fortunate to have sufficient funds here to put initial capacity into Fab-2. As a reminder, from a guidance perspective, we’re guiding around midpoint of the range $110 million of CapEx for this year, and going back we are reiterating spending capital on building our Fab-1, investing into Fab-2 Gen2 line and then also putting capital to work for our agility line that helps us to move customer quicker to the funnel.

In terms of long-term plan and accelerating our plan, we have multiple avenues to do that more efficiently in a way of taking opportunity on the joint venture partnership that we alluded to in outer years, certainly we use our free cash flow to put more capacity in. And one point to mention here, strategic partnerships. The company has a history of having strategic partners or customers stepping up and then the fourth point in that area, you all have read a lot of initiatives in the U.S. to bring U.S. manufacturing back. There are certain vehicles that we can tap into and we have internal initiatives going on in that area.

Colin Rusch

Okay. That’s helpful. And then with the BrakeFlow technology, it seems to me that you’re able to potentially eliminate some of the extra weight and functionality of parts, sometimes like a vehicle pack design. I’m just curious about some of the efficiencies and some of the monetization that you guys can target with that technology for safety and elimination of some of the fire returns on other elements that go into packs.

Harrold Rust

Did you say monetization? Did l hear you say that?

Colin Rusch

Yes, and then [Indiscernible], simply [Indiscernible]

Harrold Rust

Yeah. Maybe I’ll start off and Ashok can talk a little bit about technology side and Cam can maybe talk about it from the customer perspective. At high level, I’m super excited about BrakeFlow because as we all know, battery safety has been a huge issue in the past. It’s kind of played the industry that we’re all acutely aware of. As you think about the demand of adders going forward, we’re all wanting more energy, which just raises the bar on the safety equation and our architecture just gives us a remarkably unique opportunity to have a true safety differentiator.

The changes that playing field. So we’re super excited about that and we think it has benefits technology-wise, but also certainly as we talk with customers, it’s a super attractive thing for them that very much supportive of our premium pricing amount on. Cam could talk about that first. Maybe Ashok, you can talk a little bit about — from a technology standpoint first to his question.

Ashok Lahiri

Sure. I’d be happy to. So I think we’re all aware of how battery fires are a critical factor that people are aware of, that cause all kinds of damage to property and potentially to people. The BrakeFlow technology essentially addresses at the cell level. It adds a layer of safety protection that prevents what most of these incidences start off with an internal short that leads to a thermal runaway. And this protection prevents that internal short in many cases, to turn into a situation where the battery catches fire. And it’s very unique and it is really a direct application of our architecture to solve a problem in a way that would be difficult for others to copy.

And to answer your question on pack design, sure. It adds huge layer of additional advantages in improving the pack design, as a result of having a cell that is more resistant to go into runaway. I should also explain that our cell has many other properties that make the pack a much better potential for it to be designed in a much better way. For example, the thermal properties of our cell are significantly better than a traditional cell and that plays a huge role in making the pack design more efficient and potentially cheaper. I can hand it over to Cam and he can talk more about the impact from a customer standpoint.

Cameron Dales

Yes, sure. Just to add add to what you’ve said, I think the feedback from customers is universally positive and I would say that amongst the different categories where we’re active, the larger the battery pack or the larger the batteries, the more important they believe that BrakeFlow technology is. So we’ve gotten some really great feedback from our automotive OEMs for instance. These guys are evaluating multiple options to try and get to higher energy densities.

Of course, looking across the technology range from silicon anode companies to solid-state and we think this differentiates us really quite dramatically relative to that competition as people try to build higher and higher energy cells. Of course, the hurdle for safety goes up and up, and the question is, what can you do about it? One way is to try and handle it at the pack. The way I think about the question of ASP and value is that the Enovix cell by its architecture, including the safety aspects, is really pulling functions out of the pack and embedding it into the cell, essentially without any additional cost. And so we think there’s a real value there to our solution.

Colin Rusch

Alright. Thanks so much, guys.

Operator

Thank you. Our next question comes from Gus Richard with Northland. Your line is open.

Gus Richard

Thanks for taking the questions. Just on Fab-2 with your ability to shrink your footprint. Do you expect the revenue output of that Fab to be the same as you originally thought? And also, if you just give the timing of first revenue of Fab-2, that’d be helpful.

Harrold Rust

Yes. Thanks for that question Gus. I would think about it on two axes, right. We are working as fast as possible to get Gen2 equipment in. We stated that’ll be in the first half of this next year, and that will start producing revenue next year as well. To your question about, will we put – does that mean Fab-2 will be larger from a capacity [Indiscernible]? We think about that more of an aggregate. We’re committed to still get to our billion dollar revenue run rate as quickly as we can. But I would think about it more in terms of our global footprint.

We strongly believe that over the next several years, we’re going to need both the domestic presence as well as a [Indiscernible] presence. And the exact mix of how much is in each one, is not determined yet. But it is most likely at this point that it will not be a single Fab-2 servicing the a billion dollar run rate along with Fab-1, there will be a Fab-3 as a key component of that as well.

Gus Richard

Got it. And then with the new Gen2 equipment, you add in lines, and how much do you estimate the incremental revenue is for each line and how much CapEx is required for a line?

Harrold Rust

Yes. I think as we mentioned, there’s increased output, there’s increased efficiency. It’s probably a bit late — I’m sorry, a bit early to be giving specific guidance on what’s the nameplate revenue capacity for each line. It obviously is dependent on the products we’re making. I think as we get a bit further along this year with those lines coming up and seeing that we’re hitting our capacity numbers, we can start giving some more similar guidance around those things, but I think we just like to be a bit further along before we’re talking about those things.

Gus Richard

Got it. And then last one for me. Any update on your program with the DOE and automotive in general? How is that development program going and how was your initial [Indiscernible] discussions with the auto guys going?

Harrold Rust

Yeah, I think that’s a great story. We’re proceeding along three different angles there. As we mentioned before, we’ve been actively sampling batteries into the consumer set over the last six, nine months, that’s continuing. The DOE program you talked about, we’re halfway through that three-year program and I’d have to say the results on that continued to be pretty stellar in terms of our demonstration of our architecture with EV-Class Cathodes pair growth, our silicon anode, that’s been very good.

Then the last piece I think is that we’ve put in place a new unit within the company called [Indiscernible] ability and we’ve hired some key resources on the outside in that group and we’ve got some really strong leadership across EV space to kind of drive that We’re having pretty regular conversations with EV players today and I think the excitement’s there with those guys. Obviously, there’s a work ahead to do that, but that’s a big focus for doing this. Progress going forward and we think long-term big growth opportunity for the company.

Gus Richard

Okay, thanks for the update.

Operator

And our next question comes from Ananda Baruah with Loop Capital. Your line is open.

Ananda Baruah

Good afternoon, guys. Thanks for taking the questions. Appreciate it. Just a couple if I could. Maybe Harrold just to stick there on the conversations about the different Fabs. In the shareholder letter, you make mention a Fab-3, and I think say a future facility will likely be needed after that to the localized production. Is that any different than what you’ve told us in the past? It sounds like it could be similar, but you guys also highlighted it in the shareholder letter, just your lines after that in the incremental context on that. Can I have a quick follow-up. Thanks.

Harrold Rust

I think we’ve discussed in the prior calls, our need to have local capacity close to our customers, right? Both domestically and Asia. So I don’t think that’s probably not not new information. I would say from a location standpoint where we’ve been searching for Fab-2 facilities and Fab-3 at the same time, that are through this global real estate firm. And so our plan is to basically identify those optimum locations. So we’re ready to act on them as quickly as as we can, and as quickly as the demand requires we do it.

Ananda Baruah

Interesting, l got it. Any context around — I mean, I don’t want to put you on this, I know you can’t commit now, that wouldn’t be responsible, but if you identified — I guess, I’m trying to stitch this together, I guess the question, Harrold, is any sense of where you may begin to settle on factory facilities. And I’m asking it this way, if the foreign helps you identify it now, how long could you wait to actually [Indiscernible]

Harrold Rust

I look at it from a milestone perspective. I mean, we’re ordering our Gen2 lines right now, destined for Fab-2. The focus initially we’ll be getting those lines up in Fab-2 working and then once we’re at a point where we’re satisfied with the performance, I think we’re going to want to move forward with Fab-3 as quickly as we can. We’re not waiting though, right? We’re actually doing some of that searching now, right, so that we know where that would be, but I think we’ll — we want to just make sure we’re not cutting any corners on the learning on the Gen2 equipment before we start trying to expand into two locations, before we get the first one running right.

Ananda Baruah

That’s very helpful. Thanks for that. And then — super helpful and a quick follow-up, can you remind us how much of the $6 to $12 million this year will be product revenue versus NRE revenue, or at least relative representation?

Steffen Pietzke

This is Steffen. And then from a breakout, the service revenue, the non-recurring engineering revenue is certainly like a significant component. As due to specific break out, we’re not guiding to a specific breakouts. Maybe as a reminder, these services revenue, they’re milestone base, right, so they’re more lumpy and we — at the end of the day, make delivery from the production line, but because of those milestones, it’s to be seen how it’s going to unfold over the year, and as Howard alluded to from the product revenue we’re anticipating to ship first this quarter.

Ananda Baruah

All right, thanks. That’s helpful. Just real quick on that, any — can you give us any context on — for the NRE revenue, what types of applications may be contributing to that coming this year. That’s it for me. Thanks a lot.

Cameron Dales

This is Cam, I’ll take that one. Not necessarily just for this year, but we have programs kind of across the various categories that we’re active in. Everything from ARVR to the just more generic wearables, to mobile communications, to laptop, computers, all of these have development programs associated with them. So it’s pretty broad-based.

Ananda Baruah

Cool. Thanks, guys, appreciate it.

Operator

Next question comes from Marc, a private investor in your line is open.

Marc Cohodes

Thank you very much. First a couple of comments, is I like to say, there is no greater motivator than disrespect. And at 750, the stock is ridiculous, and the market doesn’t really give a rat’s ass of what you’re preaching. So as the window opens, its going to be very telling of who on the management team and who at the board is going to buy or not buy stock. And I know I’ll be watching and I’m sure others will. So I think Harrold you are the CEO and you’re the leader.

I would take this as a director frontier leadership, and I would just think, snapping. My question is for Cam. Now at CES, there was a lot of talk about goggles and wearables and how from some people, that your battery is enabling a product to be introduced, and without the battery, the product wouldn’t come to market. Could you talk about that a little bit? Is that same [Indiscernible].

Harrold Rust

Sure. Yeah. Happy to address that and I can put it in the broader context as well. I mean, specific to AR/VR, there’s a huge amount of investment that’s going into what many of the leaders in the technology space consider potentially to be the next computing platform, right? Kind of went from mainframes to PCs, to laptops to the computer in your pocket, which is a phone and the question is what’s next? A lot of people think that maybe in the AR/VR space, some companies have changed their name to recognize how important that is.

When you think about the engineering challenge there, what you’re really trying to do is take all the functionality of a smartphone and make it small enough that you can wear it on your face without significant weight and bulk to it and that’s a massive engineering challenge, and probably, and at least in our opinion, one of the largest challenges of that is dealing with the power budget. All these components, the modems, the RF, the display, the compute, all that stuff takes power and of course it’s a mobile device. You don’t want this thing tethered to the wall.

It requires battery power to power it. And so we think this is an ideal application for an Enovix battery. As we’ve mentioned in the past, we have two of the leaders in this space who have, who’ve invested significant dollars into the company, both on the equity basis and in indirect product development.

Cameron Dales

In order to be well-positioned with us to power their products as they come on the market. So from a bottom line perspective, we think battery is actually the gateway or the bottleneck to the entire application. If you look at the products that are in the market today, in the space, they’re very rudimentary. Some of them have battery life that’s measured in kind of tens of minutes. Not really ready for a primetime product. And we think our solution to that is a big part of moving the industry forward.

Harrold Rust

That said on AR/VR, we think this is true from an application perspective in a number of the applications that we’re active in. So you think about Wearables and Smartwatches. One of the big application drivers there is monitoring of your health. And of course this means you need to have sensors that are always on. If you’re taking your device and plugging it in and because it needs to be recharged or you can’t wear it through the night. That’s a very big limitation. So again that’s battery challenge ultimately. Even for things that are more mature, devices that are more mature for phones, if you actually use the 5G networks in your phones today, your phone would not last through the day. In order to really get the benefit of that, you need better batteries. We talked a little bit earlier on the call that laptop computers, these devices are trying to move towards being more like your mobile phone.

Always on, ability to last through an entire day without plugging in. Again, what does that point to? It’s the battery challenge. And so from an Enovix perspective, we think that having a breakthrough product here, it’s a way for companies to be able to invest across the whole stack of their applications. This is an investment that they can make that impacts essentially all the functions and all the components that go into their device. So it’s a great place to be strategically within the ecosystem.

Marc Cohodes

Did you say that the two companies in goggles or equity holders to do — if that — did I hear that right?

Harrold Rust

What I said is that they’ve both made significant investments into the company historically, both in equity and in direct product development.

Marc Cohodes

Okay. I appreciate that. And my final comment is, it would be very helpful to the people who hold the stock that the company is not quiet for the next 90 days til we have another one of these updates. Given your technology understanding in your industry, I would expect hope. And it’s unacceptable to be as quiet as you guys have been. So I hope there is change there and I’ll be watching to see who buys and doesn’t buy the stock. But thank you and I’m glad we finally have Fab-2.

Operator

Thank you. And this concludes the Q&A portion of the conference call. I’d like to hand the conference back over to Mr. Harrold Rust for any closing remarks.

Harrold Rust

I just want to thank everybody for their attendance on the call today. We’re really pleased and excited with the progress this quarter. And also on the future this year and executing the rest of our plan, including Fab-2. And we’re super excited about the Gen 2 equipment and what that represents. So with that, I think I’ll say thank you again, and we look forward to updating in the future.

Operator

And this concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.

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