Enovix Corp

Previous wording

The following discussion and analysis provide information that the management of Enovix Corporation (referred as to “we,” “us,” “our” and “Enovix”) believes is relevant to an assessment and understanding of Enovix’s condensed consolidated results of operations and financial condition as of September 29, 2024 and for the quarter and fiscal year-to-date ended September 29, 2024 and should be read together with the condensed consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contain forward-looking statements based upon our current expectations, estimates and projections that involve risks and uncertainties. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis provide information that the management of Enovix Corporation (referred as to “we,” “us,” “our” and “Enovix”) believes is relevant to an assessment and understanding of Enovix’s condensed consolidated results of operations and financial condition as of March 30, 2025 and for the fiscal quarter ended March 30, 2025 and should be read together with the condensed consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contain forward-looking statements based upon our current expectations, estimates and projections that involve risks and uncertainties. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Enovix is headquartered in Silicon Valley with facilities in India, South Korea and Malaysia.

Current wording

Enovix is headquartered in Silicon Valley, a region of California, with offices and facilities in Asia.

Previous wording

Following is a summary of the activities in the third quarter of 2024:

Current wording

Following is a summary of the activities in the first quarter of 2025:

Previous wording

We approach our commercialization strategy by identifying customer requirements and determining where our battery architecture will offer the greatest value. In 2023, we added a product management team to interface with customers, collect these requirements, and feed these learnings into our technology roadmap. In 2024, we added a product design team in Penang, Malaysia to support our high-volume manufacturing lines in meeting customer product requirements.

Current wording

We approach our commercialization strategy by identifying customer requirements and determining where our battery architecture will offer the greatest value.

Previous wording

Our product development strategy is tightly aligned with the goals of meeting the market needs of higher energy density, cycle life, and fast charge while delivering breakthroughs in safety.

Current wording

Our product development strategy is tightly aligned with the goals of meeting the market needs of higher energy density, cycle life, and fast charge while maintaining safety.

Previous wording

We operate in an industry that is subject to many established environmental regulations, which have generally become more stringent over time, particularly in hazardous waste generation and disposal and pollution control. Potential regulations, if adopted, could result in additional operating costs associated with compliance.

Current wording

We operate in an industry that is subject to many established environmental regulations, which have generally become more stringent over time. Additional regulations, if adopted, could result in additional operating costs associated with compliance.

Previous wording

In 2022, we began to generate revenue from our planned principal business activities and, in October 2023, we acquired Routejade, an electrode coating and battery pack manufacturer for customers worldwide. We recognize revenue within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. We generate revenue from our Product Revenue and Service Revenue for the development of lithium-ion battery technology.

Current wording

We recognize revenue within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Our revenue consists of product revenue, resulting from the sale of lithium-ion batteries. and battery pack products (“Product Revenue”), and service revenue, resulting from payments received from our customers based on executed engineering revenue contracts for the development of lithium-ion battery technology (“Service

Previous wording

Our Product Revenue is primarily generated from selling lithium-ion batteries or battery packs to commercial customers and military contractors. Product Revenue is recognized once we have satisfied the performance obligations as defined in the sales agreement, which is generally satisfied upon transfer of control of goods. Control is transferred upon delivery for our products. For certain customized products with customer acceptance criteria specified in the sales agreement, the performance obligations is generally satisfied upon our customer’s acceptance. Payment terms can vary depending on the contract and it is generally required within 90 days or less from the delivery date or the acceptance date of our product. The amounts of revenue recognized reflects the consideration for the product sold.

Current wording

Our Product Revenue is primarily generated from selling lithium-ion batteries or battery packs to commercial customers and defense contractors. Product Revenue is recognized once we have satisfied the performance obligations as defined in the sales agreement, which is generally satisfied upon transfer of control of goods. Control is transferred upon delivery for our products. For certain customized products with customer acceptance criteria specified in the sales agreement, the performance obligations are generally satisfied upon our customer’s acceptance. Payment terms can vary depending on the contract and it is generally required within 90 days or less from the delivery date or the acceptance date of our product. The amount of revenue recognized reflects the consideration for the product sold.

Previous wording

Cost of revenue includes materials, labor, depreciation and amortization expense, inventory, freight costs and other direct costs related to manufacturing our products and service contracts. Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation. We anticipate that cost of revenue will continue to increase as we optimize and bring-up our production line.

Current wording

Cost of revenue includes materials, labor, depreciation and amortization expense, freight costs and other direct costs related to manufacturing our products and service contracts. Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation. We anticipate that cost of revenue will continue to increase as we optimize and bring-up our production line.

Previous wording

To date, research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and manufacturing facility, including the material and supplies to support the product development and process engineering efforts. As we ramp up our engineering operations to complete the development of batteries and required process engineering to meet customer specifications, we anticipate that research and development expenses will continue to increase for the foreseeable future as we expand hiring of scientists, engineers and technicians and continue to invest in additional plant and equipment for product development, building prototypes and testing of batteries. We established a research and development center in India that focuses on developing machine learning algorithms. We also established an operations team in Malaysia.

Current wording

To date, research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and manufacturing facility, and materials and supplies to support the product development and process engineering efforts. As we ramp up our engineering operations to complete the development of batteries and required process engineering to meet customer specifications, we anticipate that research and development expenses will continue to increase for the foreseeable future as we expand hiring of scientists, engineers and technicians and continue to invest in additional plant and equipment for product development, building prototypes and testing of batteries. We have research and development teams in the U.S., Malaysia, South Korea and India.

Previous wording

We are expanding our personnel headcount to support the ramping up of commercial manufacturing. Accordingly, we expect our selling, general and administrative expenses to increase significantly in the near term and for the foreseeable future.

Current wording

We are expanding our personnel headcount to support the ramping up of commercial manufacturing. Accordingly, we expect our selling, general and administrative expenses to continue to increase in the near term.

Previous wording

Other income and expense primarily consists of dividends, interest income, interest expense, foreign currency transaction gain or loss and fair value adjustments for outstanding common stock warrants.

Current wording

Other income and expense primarily consists of dividend income, interest income, interest expense, foreign currency transaction gain or loss, one-time income resulting from import duty forgiveness, and fair value adjustments for outstanding common stock warrants.

Previous wording

Our income tax provision consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not. Since our acquisition of Routejade and our establishment of operations in Malaysia, we became subject to taxation based on the foreign statutory rates in the countries where the sales or income took place.

Current wording

Our income tax provision consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not. We are subject to foreign statutory taxation for our international operations.

Previous wording

Comparison of Quarter Ended September 29, 2024 to Prior Year's Quarter Ended October 1, 2023

Current wording

Comparison of Fiscal Quarter Ended March 30, 2025 to Fiscal Prior Year's Quarter Ended March 31, 2024

Previous wording

Research and development (“R&D”) expenses for the quarter ended September 29, 2024 were $24.2 million, compared to $13.5 million during the quarter ended October 1, 2023. The increase of $10.7 million, or 79%, was primarily attributable to $7.6 million of overhead costs being recorded as R&D expenses (previously recorded as cost of revenue) as there was no production generated from both Fab1 and Fab2 in the third quarter of 2024. In addition, there was a $2.3 million net increase in salaries, employee benefits and stock-based compensation expense due to an increase in headcount in Asia, a $1.5 million increase in technology and facilities costs with new office locations, a $1.5 million increase in material costs for factory acceptance and site acceptance testings and increases in other miscellaneous expenses. These increases were partially offset by a one-time severance, benefits and stock-based compensation expense of $1.7 million in the third quarter of 2023 and a $1.2 million decrease in salaries, employee benefits and stock-based compensation expense in U.S. mainly due to the 2024 Restructuring Plan in the third quarter of 2024.

Current wording

Research and development (“R&D”) expenses for the fiscal quarter ended March 30, 2025 were $25.9 million, compared to $48.8 million during the fiscal quarter ended March 31, 2024. The decrease of $22.9 million, or 47%, was primarily attributable to $18.3 million of a one-time accelerated depreciation in connection with the 2023 restructuring plan, which was recorded in the first quarter of 2024. There was no similar expense recorded in the fiscal quarter ended March 30, 2025. In addition, there was a $6.0 million net decrease in salaries, employee benefits and stock-based compensation expenses primarily due to lower headcount in the U.S resulting from cost reduction initiatives in 2024, the 2024 Restructuring Plan, and a $1.8 million decrease in materials and tooling, partially offset by a $1.4 million increase in machinery and equipment charges, $1.0 million increase in technology and facilities costs and increases in other miscellaneous expenses.

Previous wording

The change in fair value of common stock warrants of $17.4 million for the fiscal year-to-date ended September 29, 2024 was attributable to a decrease in the fair value of the 5,500,000 Private Placement Warrants. The decrease in fair value of Private Placement Warrants was primarily due to a decrease in our common stock price during the year.

Current wording

The changes in fair value of common stock warrants of $15.8 million and $21.1 million for the fiscal quarters ended March 30, 2025 and March 31, 2024, respectively, were attributable to a decrease in the fair value of the outstanding Private Placement Warrants. The decrease in fair value of Private Placement Warrants was primarily due to a decrease in our common stock price at the end of each respective quarter.

Previous wording

As of September 29, 2024, we had cash, cash equivalents, restricted cash, and short-term investments of $202.9 million. We use cash to fund operations, meet working capital requirements and fund our capital expenditures. For the remainder of fiscal year 2024, we expect that our spending in cost of revenues and operating expenses will continue to increase as we ramp up our operations.

Current wording

We use cash to fund operations, meet working capital requirements and fund our capital expenditures. For the remainder of fiscal year 2025, we expect that our spending in cost of revenues and operating expenses will continue to increase as we ramp up our operations.

Previous wording

For the fiscal year-to-date ended September 29, 2024, we used $59.8 million of our cash to fund our acquisitions of property and equipment. We will continue to increase our property and equipment purchases in the near future to support the build-out of our manufacturing facilities and our battery manufacturing production. For more information regarding our purchase commitments, please see the contractual obligations and commitments section below.

Current wording

For the fiscal quarter ended March 30, 2025, we used $6.3 million of our cash to fund our acquisitions of property and equipment. We will continue to increase our property and equipment purchases in the near future to support the build-out of our manufacturing facilities and our battery manufacturing production. For more information regarding our purchase commitments, please see the contractual obligations and commitments section below.

Previous wording

Based on the anticipated spending and timing of expenditures, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months from the date this Quarterly Report on Form 10-Q is filed. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash, cash equivalents and future debt financings, projected revenues and access to other public or private equity offerings as well as potential strategic arrangements. We have made our estimates on historical experience and various other relevant factors and we believe that they are reasonable. Actual results may differ from our estimates, and we could utilize our available capital resources sooner than we expect.

Current wording

We have incurred operating losses and negative cash flows from operations since inception through March 30, 2025 and expect to incur operating losses in the near future. Based on the anticipated spending and timing of expenditures, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months from the date this Quarterly Report on Form 10-Q is filed. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash, cash equivalents and future debt financings, projected revenues and access to other public or private equity offerings as well as potential strategic arrangements. We have made our estimates on historical experience and various other relevant factors and we believe that they are reasonable. Actual results may differ from our estimates, and we could utilize our available capital resources sooner than we expect.

Previous wording

Fiscal Year-to-date Ended September 29, 2024 Compared to Prior Year-to-date Ended October 1, 2023

Current wording

Fiscal Quarter Ended March 30, 2025 Compared to Prior Year Fiscal Quarter Ended March 31, 2024

Previous wording

Our cash flows used in operating activities to date have been primarily comprised of cost of revenue and operating expenses. We continue to increase hiring for employees in supporting the ramping up of commercial manufacturing. We expect our cash used in operating activities to increase before we start to generate any material cash inflows from commercially manufacturing and selling our batteries.

Current wording

Our cash flows used in operating activities to date have been primarily comprised of operating expenses. We continue to increase hiring for employees and materials in supporting the ramping up of commercial manufacturing. We expect our cash used in operating activities to increase before we start to generate any material cash inflows from commercially manufacturing and selling our batteries.

Previous wording

Net cash used in operating activities was $92.7 million for the fiscal year-to-date ended September 29, 2024. Net cash used in operating activities consists of net loss of $185.1 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of the Private Placement Warrants of $17.4 million, stock-based compensation expense of $48.6 million, depreciation and amortization expense, net of accretion of $37.4 million and impairment and disposals of Fab1 long-lived assets of $38.2 million.

Current wording

Net cash used in operating activities was $16.9 million for the fiscal quarter ended March 30, 2025. Net cash used in operating activities consisted of net loss of $23.5 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of the Private Placement Warrants of $15.8 million, stock-based compensation expense of $12.0 million, and depreciation and amortization expense, net of accretion of $8.4 million.

Previous wording

Net cash used in operating activities was $77.4 million for the fiscal year-to-date ended October 1, 2023. Net cash used in operating activities consists of net loss of $154.1 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of Private Placement Warrants of $4.1 million, stock-based compensation expense of $57.8 million, depreciation and amortization expense, net of accretion of $10.0 million and impairment of equipment of $4.4 million.

Current wording

Net cash used in operating activities was $35.0 million for the fiscal quarter ended March 31, 2024. Net cash used in operating activities consisted of net loss of $46.5 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of Private Placement Warrants of $21.1 million, stock-based compensation expense of $12.8 million, and depreciation and amortization expense, net of accretion of $25.0 million.

Previous wording

Our cash flows used in investing activities to date have been primarily comprised of purchases of property and equipment, as well as purchases of short-term investments. We expect the costs to acquire property and equipment to increase as we continue to build-out and develop our battery manufacturing production lines in Fab2. Net cash provided by investment activities was $15.0 million for the fiscal year-to-date ended September 29, 2024, which primarily consisted of maturities of $106.6 million of short-term investments, partially offset by $59.8 million of equipment purchases and $31.8 million of short-term investment purchases.

Current wording

Our cash flows used in investing activities to date have been primarily comprised of purchases of property and equipment, as well as short-term investment activities. We expect the costs to acquire property and equipment to increase in the future as we continue to build-out and develop our battery manufacturing production capabilities in Malaysia, including our Fab2 facility in Malaysia, and in South Korea. Net cash used in investment activities was $64.4 million for the fiscal quarter ended March 30, 2025, which primarily consisted of $6.3 million of equipment purchases and $58.1 million of short-term investment purchases.

Previous wording

Net cash used by investing activities for the fiscal year-to-date ended October 1, 2023 was $132.0 million, which primarily consisted of $33.0 million of equipment purchases and $115.7 million of short-term investment purchases, which was partially offset by maturities of $16.7 million of short-term investments.

Current wording

Net cash provided by investing activities for the fiscal quarter ended March 31, 2024 was $19.1 million, which primarily consisted of maturities of $51.3 million of short-term investments, which was partially offset by $15.1 million of equipment purchases and $17.1 million of short-term investment purchases.

Previous wording

Net cash used in financing activities was $157.4 million for the fiscal year-to-date ended October 1, 2023, which was primarily consisted of $172.5 million of gross proceeds from the Convertible Senior Notes, $9.2 million of proceeds from the exercise of stock options to purchase our common stock, and $1.2 million of proceeds from our ESPP to purchase our common stock, partially offset by $17.3 million of capped call transaction costs, $5.3 million of debt issuance costs, and $3.0 million of payroll tax payments for shares withheld upon vesting of restricted stock units.

Current wording

Net cash used in financing activities was $1.5 million for the fiscal quarter ended March 30, 2025, which primarily consisted of $1.8 million of payroll tax payments for shares withheld upon vesting of restricted stock units and $0.5 million of transaction costs related to a secondary offering in the fourth quarter of 2024, partially offset by $0.8 million of proceeds from the exercise of stock options to purchase our common stock.

Previous wording

Net cash provided by financing activities was $44.2 million for the fiscal year-to-date ended September 29, 2024, which primarily consisted of $4.6 million of gross proceeds from the loans, $40.0 million of proceeds from issuance of our common stock through an ATM offering, $4.3 million of proceeds from the exercise of stock options to purchase our common stock and $1.1 million of proceeds from our employee stock purchase plan (“ESPP”) to purchase our common stock, partially offset by $5.6 million of payroll tax payments for shares withheld upon vesting of restricted stock units.

Current wording

Net cash used in financing activities was $5.4 million for the fiscal quarter ended March 31, 2024, which primarily consisted of $1.8 million of gross proceeds from the borrowings of loans, $5.9 million of proceeds from the issuance of our common stock through an ATM offering and proceeds from exercise of stock options to purchase our common stock, partially offset by $2.2 million of payroll tax payments for shares withheld upon vesting of restricted stock units.

Previous wording

As of September 29, 2024, we had $172.5 million aggregate principal amount of 3.0% Convertible Senior Notes outstanding, which will mature on May 1, 2028 unless earlier converted, redeemed or repurchased. Please see Note 8 “Borrowings” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q for further information.

Current wording

As of March 30, 2025, we had $172.5 million aggregate principal amount of 3.0% Convertible Senior Notes outstanding, which will mature on May 1, 2028 unless earlier converted, redeemed or repurchased. In addition, we had $10.8 million of asset secured loans, of which $10.4 million are classified as short-term debt on our Condensed Consolidated Balance Sheet as of March 30, 2025. Please see Note 7 “Borrowings” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q for further information.

Previous wording

We lease our headquarters in Fremont, California and Malaysia, and offices in the Asia Pacific region. For the lease payment schedule, please see Note 7 “Leases” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q.

Current wording

We lease our headquarters in Fremont, California, our Fab2 production facility in Penang, Malaysia, and offices in India and China. For the lease payment schedule, please see Note 6 “Leases” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q.

Previous wording

We expect to enter into other commitments to support our product development, the build-out of our manufacturing facilities, and our business development, which are generally cancellable upon notice. Additionally, from time to time, we enter into agreements in the normal course of business with various vendors, which are generally cancellable upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of service providers, up to the date of cancellation. As of September 29, 2024, our commitments included approximately $24.6 million of our open purchase orders, including equipment purchase orders, and contractual obligations that occurred in the ordinary course of business. For contractual obligations, please See Note 9 “Commitments and Contingencies” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q for further information.

Current wording

We expect to enter into other commitments to support our product development, the build-out of our manufacturing facilities, and our business development, which are generally cancellable upon notice. Additionally, from time to time, we enter into agreements in the normal course of business with various vendors, which are generally cancellable upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of service providers, up to the date of cancellation. As of March 30, 2025, our commitments included approximately $3.5 million of our open purchase orders, including equipment purchase orders, and contractual obligations that occurred in the ordinary course of business. For contractual obligations, please See Note 8 “Commitments and Contingencies” of the notes to our condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q for further information.

Previous wording

The preparation of our condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. These estimates and assumptions include but are not limited to: depreciable lives for property and equipment, the valuation allowance on deferred tax assets, valuation for assets and liabilities assumed in business combination, valuation of goodwill and intangible assets, assumptions used in stock-based compensation and estimates to fair value of the Private Placement Warrants. Certain accounting policies have a more significant impact on our condensed consolidated financial statements due to the size of the financial statement elements and prevalence of their application.

Current wording

The preparation of our condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. These estimates and assumptions include but are not limited to: depreciable lives for property and equipment, the valuation allowance on deferred tax assets, valuation of goodwill and intangible assets, assumptions used in stock-based compensation and estimates to fair value of the Private Placement Warrants. Certain accounting policies have a more significant impact on our condensed consolidated financial statements due to the size of the financial statement elements and prevalence of their application.