We are focused on categories where delivering an improved battery drives a high value to the product, resulting in premium pricing for our solution and supportive of strong long-term margins. We are pleased to see validation of our thesis playing out in our customer engagements.

Our task now is to execute and prove our ability to scale manufacturing of leading batteries that usher in the next era of products for our customers.

Business Update

Manufacturing. Fab2 in Malaysia has begun to take shape with the Agility Line having completed SAT and now producing EX-1M batteries. We also made great progress with our high-volume Gen2 Autoline, which has completed FAT for all key modules and is in the process of being fully shipped and installed. We expect the last module of equipment to arrive in Penang in the coming weeks.

Our operations team additionally took on the task of 1) setting up a test and safety lab in Penang and 2) moving R&D pilot line equipment from Fab1 in Fremont to Fab2 in Penang. Our safety lab is operational, and we expect our R&D pilot line to become operational at Fab2 in the third quarter of 2024.

Commercialization. During the second quarter of 2024, we built, tested, and shipped initial samples of our breakthrough EX-1M battery from our Fremont facility. We did this prior to our Malaysia cutover to begin initial customer evaluation. As we complete production of samples from the Agility Line in Malaysia, we plan to replicate the intensive testing protocols we obtained from our customers before shipping out samples from Fab2.

During the quarter, we made progress with the leading smartphone OEM customer announced in May, completing an important strategic milestone within the development agreement. We also signed an MOU with Elentec Co., Ltd., a leading consumer electronic battery pack manufacturing company in Asia.

We also, during the quarter, identified incremental growth opportunities for the conventional battery business we acquired last year in Korea. Specifically, we see the unique high-rate capability of these batteries that is well-suited for Korean military applications today as also applicable for other allied military customers in addition to markets such as power tools.

Technology and Products. During the second quarter of 2024, we continued to work on our EX-1M and EX-2M technology nodes for customer sampling. This included achieving targeted yield on Fab1 equipment for EX-1M for large cells ahead of the move to enhanced Gen2 equipment in Fab2. On EX-2M, we already have built early prototype batteries that have validated our targeted high-energy density by utilizing next generation chemistries.

We have grown our R&D team significantly in the last year. Excluding our acquisition of Routejade, our core R&D headcount nearly doubled from the second quarter of 2023 to the second quarter of 2024. Including Routejade, our R&D headcount is up 167% year-over-year.

Our lab in India is operational and continues to evaluate many next-generation battery materials for future technology nodes. We have also established a core R&D team in Malaysia that we intend to more than double by year-end.

Financials. Total revenue in the second quarter of 2024 was $3.8 million.

Our GAAP cost of revenue of $4.4 million in the second quarter of 2024 was down from $7.1 million in the first quarter of 2024. Our non-GAAP cost of revenue of $4.3 million in the second quarter of 2024 was down from $5.2 million in the first quarter of 2024.

Our GAAP operating expenses of $88.1 million in the second quarter of 2024 were up from $68.3 million in the first quarter of 2024 and included $38.1 million in restructuring expenses associated with the actions we took to shift our manufacturing operations from the U.S. to Malaysia while reducing our fixed expenses. Our non-GAAP operating expenses of $30.9 million in the second quarter of 2024 were down from $54.4 million in the first quarter of 2024.

Our GAAP net loss attributable to Enovix of $115.9 million in the second quarter of 2024 was up from $46.4 million in the first quarter of 2024, which included $38.1 million in restructuring expenses, of which $35.1 million were noncash charges. Our GAAP net loss attributable to Enovix for the second quarter of 2024 also included $33.7 million of expense due to an increase in the fair value of our common stock warrants during the quarter.

Adjusted EBITDA in the second quarter of 2024 was a loss of $23.1 million compared to an adjusted EBITDA loss of $26.3 million in the first quarter of 2024.

Earnings per share in the second quarter of 2024 were a loss of $0.67 on a GAAP basis and a loss of $0.14 on a non-GAAP basis compared to a loss of $0.28 on a GAAP basis and a loss of $0.31 on a non-GAAP basis in the first quarter of 2024.

We exited the second quarter of 2024 with $249.9 million of cash, cash equivalents, and short-term investments due to cash used in operating activities of $26.9 million and capital expenditures of $25.2 million during the quarter, partially offset by cash proceeds of $34.2 million from utilizing an ATM offering during the quarter.

A full reconciliation of our GAAP to non-GAAP results is available later in this report.

Outlook

For the third quarter of 2024, we expect revenue between $3.5 million and $4.5 million, a GAAP EPS loss of $0.30 to $0.36, an adjusted EBITDA loss of $23.0 million to $29.0 million, and a non-GAAP EPS loss of $0.17 to $0.23.

Summary

We made substantial progress in the second quarter of 2024 as Fab2 went operational, and we took actions to lengthen our runway while striking agreements with multiple leading customers. We are focused on continuing this strong execution and look forward to initiating multiple customer qualifications in the second half of the year.

Conference Call Information

Enovix will hold a video conference call at 2:00 PM PT / 5:00 PM ET today, July 31, 2024, to discuss the company’s business updates and financial results. To join the call, participants must use the following link to register: https://enovix-q2-2024.open-exchange.net/registration. This link will also be available via the Investor Relations section of Enovix’s website at https://ir.enovix.com. An archived version of the call will be available on the Enovix website for one year at https://ir.enovix.com.

About Enovix
Enovix is on a mission to deliver high-performance batteries that unlock the full potential of technology products. Everything from IoT, mobile, and computing devices, to the vehicle you drive, needs a better battery. Enovix partners with OEMs worldwide to usher in a new era of user experiences. Our innovative, materials-agnostic approach to building a higher performing battery without compromising safety keeps us flexible and on the cutting-edge of battery technology innovation.

Enovix is headquartered in Silicon Valley with facilities in India, Korea and Malaysia. For more information visit www.enovix.com and follow us on LinkedIn.

Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, and other non-GAAP measures are intended as supplemental financial measures of our performance that are neither required by, nor presented in accordance with GAAP. We believe that the use of non-GAAP measures provides an additional tool for investors to use in evaluating ongoing operating results, trends, and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors.

However, you should be aware that when evaluating the non-GAAP measures, we may incur future expenses similar to those excluded when calculating these measures. In addition, the presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Our computation of EBITDA, Adjusted EBITDA, and other non-GAAP measures may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate the non-GAAP measures in the same fashion. Reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in the tables at the end of this report.

While Enovix provides third quarter 2024 guidance for adjusted EBITDA loss and non-GAAP EPS loss, we are unable to provide without unreasonable efforts at this time a GAAP to non-GAAP reconciliation of any forward-looking figures. Such qualitative reconciliation to the corresponding forward-looking GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted, including but not limited to warrant liabilities and stock-based compensation. For the same reasons, we are unable to assess the probable significance of the unavailable information, which could have a material impact on our future GAAP financial result.

Forward-Looking Statements

This letter to shareholders contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and can be identified by words such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, possible, potential, predict, project, should, would and similar expressions that convey uncertainty about future events or outcomes. Forward-looking statements in this letter to shareholders include, without limitation, our expectations regarding, and our ability to respond to, market and customer demand; our expectations regarding the level of customers’ interest in our batteries, the demand for more energy dense batteries and the suitability of our products to address this demand, and the impact of artificial intelligence (“AI”) features on the foregoing; our financial and business performance; projected improvements in our manufacturing, commercialization and R&D activities at Fab2, including the operational capabilities of our safety line and R&D pilot line; our expectations regarding EX-1M sample production on the Agility Line following the completion of site acceptance testing; our ability to meet goals for yield and throughput; our expectations regarding the Malaysia factory buildout and its capacity to support multiple customer qualifications; the anticipated contributions of and benefits of our growing R&D teams in Malaysia and India; our revenue funnel; our efforts in the portable electronics and EV markets, including the IoT, smartphone and virtual reality categories; our ability to meet milestones and deliver on our objectives and expectations, including our ability to test and sample batteries from our Agility Line to customers; the implementation and success of our business model and growth strategy, including our focus on the addressable market categories in which we believe an improved battery drives a high value to the product and premium pricing for our solutions; our ability to manage our expenses and realize our annual cost savings goals; our ability to manage and achieve the benefits of our ongoing restructuring efforts; our ability to effectively leverage our Routejade acquisition to take advantage of incremental growth opportunities in the conventional battery business by targeting complementary customer segments; and our forecasts of our financial and performance guidance and metrics.

Actual results could differ materially from these forward-looking statements as a result of certain risks and uncertainties, including, without limitation, our ability to improve energy density among our products, establish sufficient manufacturing and optimize manufacturing processes to meet demand, source materials and establish supply relationships, and secure adequate funds to execute on our operational and strategic goals; the safety hazards associated with our batteries and the manufacturing process; a concentration of customers in the military market; certain unfavorable terms in our commercial agreements that may expose us to liability and/or limit our ability to market our products; market acceptance of our products; changes in consumer preferences or demands; changes in industry standards; the impact of technological development and competition; and global economic conditions, including inflationary and supply chain pressures, and political, social, and economic instability, including as a result of armed conflict, war or threat of war, or trade and other international disputes that could disrupt supply or delivery of, or demand for, our products.

For additional information on these risks and uncertainties and other potential factors that could affect our business and financial results or cause actual results to differ from the results predicted, please refer to our filings with the Securities and Exchange Commission (“SEC”), including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q and other documents that we have filed, or that we will file, with the SEC. Any forward-looking statements in this letter to shareholders speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

For investor and media inquiries, please contact:

Enovix Corporation
Charles Anderson
Phone: +1 (612) 229-9729
Email: [email protected]

Enovix Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands, Except Share and per Share Amounts)

Enovix Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Share and per Share Amounts)

Enovix Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)

Net Loss Attributable to Enovix to Adjusted EBITDA Reconciliation

While we prepare our consolidated financial statements in accordance with GAAP, we also utilize and present certain financial measures that are not based on GAAP. We refer to these financial measures as “non-GAAP” financial measures. In addition to our financial results determined in accordance with GAAP, we believe that EBITDA and Adjusted EBITDA are useful measures in evaluating its financial and operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses.

These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP. We endeavor to compensate for the limitation of the non-GAAP financial measures presented by also providing the most directly comparable GAAP measures.

We use non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing its operating performance and comparing its performance with competitors and other comparable companies. You should review the reconciliations below but not rely on any single financial measure to evaluate our business.

“EBITDA” is defined as earnings (net loss) attributable to Enovix adjusted for interest expense, income tax benefit, depreciation and amortization expense. “Adjusted EBITDA” includes additional adjustments to EBITDA such as stock-based compensation expense, change in fair value of common stock warrants, inventory step-up, impairment of equipment and other special items as determined by management which it does not believe to be indicative of its underlying business trends.

Below is a reconciliation of net loss attributable to Enovix on a GAAP basis to the non-GAAP EBITDA and Adjusted EBITDA financial measures for the periods presented below (in thousands):

_{⁽¹⁾ $1.1 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended June 30, 2024.}

Free Cash Flow Reconciliation

We define “Free Cash Flow” as (i) net cash from operating activities less (ii) capital expenditures, net of proceeds from disposals of property and equipment, all of which are derived from our Consolidated Statements of Cash Flow. The presentation of non-GAAP Free Cash Flow is not intended as an alternative measure of cash flows from operations, as determined in accordance with GAAP. We believe that this financial measure is useful to investors because it provides investors to view our performance using the same tool that we use to gauge our progress in achieving our goals and it is an indication of cash flow that may be available to fund investments in future growth initiatives. Below is a reconciliation of net cash used in operating activities to the Free Cash Flow financial measures for the periods presented below (in thousands):

Other Non-GAAP Financial Measures Reconciliation
(In Thousands, Except Share and per Share Amounts)

_{⁽¹⁾ $1.1 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended June 30, 2024.}

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_{⁽¹⁾ $1.1 million of stock-based compensation expense is included in the restructuring cost line of the table above for the quarter and fiscal year-to-date ended June 30, 2024.}