Thank you. Hello, everyone, and welcome to Enovix Corporation's First Quarter 2026 Financial Results Conference Call.

With me today are our President and Chief Executive Officer, Dr. Raj Talluri, and Chief Financial Officer, Ryan Benton.

Raj and Ryan will provide remarks, followed by Q&A. Before we begin, please note that today's conference call contains forward-looking statements that are subject to risks and uncertainties.

These statements are based on current expectations and may differ materially from actual future results due to various factors. For a discussion of these risks, please refer to the disclosures in today's press release and our filings with the Securities and Exchange Commission.

You can also find these materials on our website at ir.enovix.com. All statements made on this call are as of today, May 13th, 2026, and we undertake no obligation to update them, except as required by law.

Additionally, during the call, we may reference non-GAAP financial measures. You can find a reconciliation of these to the most directly comparable GAAP measures in the materials posted on our Investor Relations website.

With that, I'll turn the call over to Raj.

Good afternoon, everyone, and thank you for joining us. This quarter marked another meaningful step in Enovix's transition towards commercialization and scale.

We advanced across the areas we believe are most important for long-term value creation: customer engagement, commercial deployment of our silicon-anode batteries, and manufacturing readiness. I'm very excited to share that, in the smart eyewear market, we commenced commercial production of our A1 battery for our lead customer's reference platform and have multiple customers in the process of launching smart eyewear products.

Initial shipments are underway, with production expected to ramp through the second half of the year. We believe this validates our ability to manufacture our 100% silicon-anode architecture at commercial scale.

On smartphones, we aligned with Honor on an updated qualification framework designed specifically for silicon-anode batteries. This framework, which includes revised specifications and testing protocols, better reflects real-world usage conditions.

We are pleased to have also aligned with our second smartphone OEM on the view that they too will need to adapt a similar testing framework in order to get their products to market on a competitive timeline. Beyond these lead customer engagements, we are in active dialogue with several additional leading OEMs regarding the silicon-anode battery qualification standards, and we are encouraged by the constructive cadence of our discussions with these OEMs as we work towards future qualifications and commercialization programs.

Importantly, we believe we are doing the hard work now that will enable our future OEMs to roll out their silicon-anode solutions more rapidly. The principal structural mismatch in qualification has now been addressed to align with silicon-anode performance while maintaining, and in some respects increasing, qualification rigor.

Cycle life testing at our lead customer for batteries that we shipped at the beginning of the year is progressing under the updated protocol, with results approaching required thresholds. The deep partnership and technical engagement we are seeing with multiple customers in the smartphone market reinforces our belief in the industry's interest in high-performance silicon-anode battery solutions.

We're encouraged to see growing demand across our drone, defense, and industrial applications, securing new customer design wins during Q1 2026 in each of these markets, with deployments expected in 2027. Our global pipeline for products manufactured in Korea now exceeds $130 million, with majority driven by rapidly expanding drone applications where demand for high-performance battery solutions continues to outpace the available supply.

This creates an opportunity for an additional scaled high-performance supplier. We believe Enovix is positioned to emerge as that differentiated supplier in this rapidly expanding market.

We continue to improve manufacturing execution at Fab2. Yields in most production zones are now nearing or exceeding 90%.

Zone 1 dicing, a key throughput driver, is delivering step-level yields of approximately 80%, demonstrating continued progress with our laser-based equipment. We recently appointed Steve Bakos as Senior Vice President of Worldwide Sales to support Samira Naraghi, our Chief Business Officer.

Steve brings more than 35 years of global semiconductor sales leadership from companies such as Infineon, where he served as Vice President of Corporate Account Sales for large global accounts, including Apple. This quarter, revenue was $7.6 million, driven by Korean military contractors above the high end of our guidance range and up 49% year-over-year.

Non-GAAP gross margin was 26.3%. Now, I'll walk through each of these areas in more detail, starting with manufacturing.

On that front, I want to give you an update on our Zone 1 dicing, which is our current throughput bottleneck. Since I joined, to improve the throughput of Zone 1, we've been working on a faster, cheaper way to dice our coated rolls.

We've been making great progress. Last week, I received a video from our equipment vendor showing this in action.

Rather than trying to describe it with another chart, let me just show you the actual process. What you saw was our mechanical dicing system processing silicon-anode strips directly from coated rolls.

We're implementing a hybrid dicing configuration strategy that combines both laser and mechanical dicing approaches. I continue to be encouraged by the substantial progress our global operations and advanced manufacturing equipment teams are making in this novel area for the silicon-anode batteries.

As we mentioned on the last call, legacy smartphone qualification protocols were originally developed around graphite-based batteries and relied on a 0.7C discharge requirement. That standard can artificially stress silicon-anode cells at discharge rates far above real-world smartphone usage, which typically remains well below 0.2C.

The consequence was important: silicon life testing under this framework systematically understated silicon-anode battery's longevity. We've aligned with Honor on a new silicon-anode specific qualification framework.

The updated framework prioritizes a version of the 0.2C cycle test that commenced in Q1. This methodology better reflects real-world usage for silicon-anode batteries while enhancing the rigor and visibility into performance.

We are seeing broader industry alignment around silicon-anode specific qualification standards. Our second smartphone OEM has joined our lead customer in removing the 0.7C test from their list of hard requirements, as is now progressing towards an updated framework similar to our lead customer.

Discussions with several additional top-tier OEMs are ongoing. We expect broad adoption of similar silicon-anode specific qualification approaches over time.

With this framework now established, the plan with Honor is a targeted system-level deployment in the second half of the year to confirm in-field performance ahead of the broader commercial launch in 2027. Importantly, we also recently received the battery form factor for their next-generation device to support readiness for the next major product launch.

Our commercial strategy centers on two complementary technology platforms that address large and, in some cases, rapidly expanding market opportunities. AI, short for Artificial Intelligence Class, is our flagship 100% silicon-anode platform.

It's targeted at smartphones and smart eyewear markets where volumetric energy density is a key requirement. Smartphones represent the largest battery market opportunity for Enovix.

However, smart eyewear is emerging as one of the fastest-growing new device categories. We think that the smart eyewear battery market opportunity could exceed $1 billion by the end of the decade.

More broadly, the AI platform is applicable to virtually any space-constrained device requiring high energy density and long cycle life, including future applications in wearables, computing, industrial handhelds, EVs, and humanoid robotics. Previously, we acquired an established business producing graphite-anode based products.

These products are in production today, generating revenue in defense, drone, and industrial markets through our Korea facility. We've been able to leverage these capabilities in combination with our silicon-anode technology know-how to create high-performance MX silicon-enhanced platform.

Our initial targets markets for MX represent more than $4 billion in opportunity, including approximately $2.4 billion in drones and $1.8 billion in defense technologies beyond drones. These applications prioritize performance and supply chain security with a greater focus on gravimetric energy density.

Over the longer term, we believe the MX platform is also well positioned for adjacent markets, including robotics, eVTOL, healthcare devices, transportation, agriculture, and broader industrial applications. The first product Enovix is launching on this platform is MX1, a ruggedized drone cell design requiring rapid discharge and high gravimetric energy density.

I want to highlight something important here. These are not separate bets.

They are mutually reinforcing platforms sharing technology, supply chain capabilities, and commercial infrastructure. We're increasingly seeing benefits flow in both directions, with the AI platform leveraging Korea manufacturing strength and the MX platform benefiting from our silicon expertise and global commercial reach.

Alongside qualification progress, our R&D efforts continue to advance the platform. This quarter, we produced the first engineering samples of AI2 for smartwear, delivering greater than 20% higher volumetric energy density compared to AI1.

This represents a meaningful architectural-driven improvement, potentially enabling product categories that require significantly more power within highly constrained form factors. We've achieved this improvement through two primary drivers: reducing inactive material to improve packaging efficiency and increasing the cathode voltage.

Together, these advances increase energy density within the same footprint and further demonstrate the advantages of our 100% active silicon-anode architecture. We believe this represents the first of many future advancements unlocking the full energy potential of our 100% active silicon-anode architecture on the future AI product roadmap.

Display-equipped smart eyewear is expected to become a rapidly growing battery market, and we believe increasing power requirements create a strong fit for our technology. Smart eyewear also represents an attractive initial commercialization opportunity for our silicon-anode platform.

Qualification cycles are generally shorter, more flexible, and durability requirements are lower, and the market is in the early adoption stage. Customer sampling of AI2 is planned for later this quarter.

We've already received initial sampling orders and engagement commitments from several leading smart eyewear companies. The 20% energy density improvement achieved with AI2 is important, not only for smart eyewear, but also because similar gains in the future smartphone batteries could materially extend our technology advantage.

The current AI1 smartphone battery delivers 935 watt-hours per liter and has been independently validated against graphite and silicon-doped alternatives. We believe this positions Enovix with a meaningful competitive advantage in high energy density mobile applications.

Competing approaches remain largely focused on conventional graphite-based designs with incremental silicon additions. These architectures continue to face swelling constraints that limit long-term performance and energy density improvements.

In contrast, our architecture is designed around 100% active silicon-anodes, which we believe provides a substantially higher long-term scaling opportunity. Now let's talk about our second platform, MX.

This week, at the Michigan Defense Expo, we formally launched MX1 B01, a drone battery cell delivering energy density of 360 watt-hours per kilogram, positioning us competitively within the high-performance drone battery market. We achieved this performance through targeted silicon content enhancements, leveraging an already-proven manufacturing platform.

MX1 is designed for applications requiring extended flight time, high discharge capability for power-intensive missions, and a secure supply chain. We believe the product compares favorably with similar leading high-density solutions currently available in the market and offers a material cycle life advantage.

We're manufacturing these cells from our South Korea factory, which has supported defense customers for years, and our commercial focus is on drone manufacturers globally, as well as their packaging partners. Following the Michigan Defense Expo, we plan to showcase MX1 at 11 additional conferences around the US and Europe over the next two quarters as we continue building customer engagements and commercial pipeline activity.

This slide shows how we see the MX platform evolving beyond the initial MX1 launch. Demand for high-performance drone battery supply continues to exceed currently available Western capacity, which we believe creates a meaningful opportunity for Enovix.

These applications prioritize performance, reliability, and supply chain security, supporting differentiated positioning relative to commoditized consumer battery markets. While drones are key near-term focus, we've also established product offerings for subsea, munitions, and industrial applications, expanding the MX platform across multiple high-performance end markets.

Our Korea and Malaysia manufacturing footprint directly addresses defense supply chain requirements, backed by years of production history supporting major contractors and deployed programs. A key structural advantage for Enovix is vertical integration.

Because we own our manufacturing operations, we're not sharing economics with third-party contract manufacturers, which we believe supports both competitive pricing and attractive long-term unit economics as volume scales. As product competitiveness becomes increasingly established, the gating factor becomes commercial conversion, which is why we recently appointed Steve Bakos as the Senior Vice President of Worldwide Sales.

He brings more than 35 years of global semiconductor and industrial sales leadership experience and will help build the commercial infrastructure required to support growth. Looking ahead, MX2 is targeted for 2027, with the goal of reaching 400 watt-hours per kilogram.

Over time, we intend for MX to evolve into a broader platform strategy spanning multiple product formats and defense and industrial end markets. Now I'll turn it over to Ryan to walk through our financial results.

Ryan?

Thanks, Raj. Our first quarter results reflect disciplined financial execution alongside continued commercialization investment.

First quarter revenue was $7.6 million, above the high end of our guidance range and up 49% year-over-year. These are largely batteries deployed in active programs with repeat demand.

Non-GAAP gross margin was 26.3%, our sixth consecutive quarter of positive gross profit on both a GAAP and non-GAAP basis. Non-GAAP operating expenses were $30.8 million, reflecting continued investment in customer qualification completion, research and product development, and smart eyewear production readiness.

Non-GAAP loss from operations was $28.8 million, better than the guidance range of $29 to $32 million. Non-GAAP net loss per share was 14 cents, at the better end of the guidance range, despite higher interest expense from the 2030 convertible notes issued last year in Q3.

Adjusted EBITDA was negative $20.3 million, roughly flat year-over-year. We ended the quarter with approximately $582.7 million in cash, cash equivalents, restricted cash, and marketable securities.

We believe this provides substantial liquidity to execute on our operating plan, to support commercial scale-up, and to pursue strategic opportunities from a position of strength. Free cash flow was an outflow of $36.3 million, increased from the same period a year ago, primarily driven by timing-related items, including the semiannual interest payment on the 2030 convertible notes and working capital movements, primarily higher inventory levels in Korea to support planned shipments.

Capital expenditure payments were $3.2 million in Q1, below guidance due to the timing delay of certain payments, the majority of which we expect to be paid in Q2. Turning to Q2 2026 guidance.

Revenue is expected in the range of $8 to $9 million, reflecting continued growth in defense and industrial shipments and initial smart eyewear revenue as deliveries to our lead customer begin. Non-GAAP loss from operations is expected between $29 and $32 million.

Non-GAAP net loss per share between 13 and 17 cents, and capital expenditure payments are projected in the range of $9 to $13 million, which includes the aforementioned deferred payments as well as initial payments for the investment to support capacity expansion in Korea. Last quarter, we approved a share repurchase authorization to provide additional capital allocation flexibility.

We have not made any purchases under that program. Our capital deployment priorities remain unchanged: qualification completion, scaling smart eyewear and defense production capabilities, and selectively pursuing strategic opportunities with a high bar on strategic fit and return.

With that, I think we're ready to take questions. Operator?

Thank you for the question, and thank you all for listening. Of the pathways we discussed, as I mentioned in the prepared remarks, we've now aligned with Honor a combination of different pathways that we could use.

The 0.7C legacy test requirement, that's been mainly based on graphite batteries, we've aligned with our customers that that is not a must-have requirement and it's been removed as a gating item. We're now working on a slightly different 0.2C test, which more better reflects the real-world usage of the smartphone, and that's been prioritized now.

Not just with Honor, but our other lead customer also agreed to the same thing. In general, I feel like the smartphone market now people are realizing that as silicon batteries become more and more popular, they should really change the requirements that have been in the market that have been used mostly for graphite.

It's really nice, really great result. I'm really pleased with my team being able to convince them.

Now the 0.2C test is more than halfway done at our customer, and it's continuing to go and we're tracking it.

As I mentioned in the remarks, we have engineering samples now inside and they look really good in terms of the 20% energy density increase from AI1, a great achievement by the R&D team, harnessing the full potential of silicon. These will continue to get better over time, but these samples we expect to sample this quarter to our customers.

Quite a few people have actually expressed interest in that, and we got a few sample purchase orders now.

Thank you. Hi, guys.

Congrats on the progress. My first question is just focusing in on Honor a bit.

I saw in the press release that you have some field testing looking at about second half, right, is when you're targeting. I'm wondering if you could give us an updated understanding of what unit volumes may be for that field testing with Honor, and if successful, do you have a better view on what a ramp would look like in 2027?

Again, as I mentioned, now we have a test methodology that aligned with Honor, we're in the middle of doing that. The next big step is to actually put the battery inside an existing phone, for which we made this custom size cell.

It's hard to predict the number of units. They'll be small because it'll be initial test just to make sure that everything is smooth and a limited launch, maybe.

The real volume will be in 2027. More importantly, we got the size for that particular battery that's going to be launched in 2027, and we're now working on how to make that battery after the field testing is complete.

Great. Thanks for the color.

Switching gears into drones, which is a very interesting opportunity, and congrats on the silicon-carbon composite, that mixed graphite cell. At 360 watt-hours per kilogram, that's going to put you well in the running against the current peer set.

I'm wondering if you could speak to maybe some of the customers that you're engaged with and sampling, and say you win all that business today, everyone you're engaged with, do you have an idea of what those qual times look like and your current unit volume and revenue capacity?

Firstly, thank you for that comment on the drone cell. We are also super proud of the engineering team that came up with it in a very short order, particularly because we have a well-established manufacturing facility that we own, we were able to quickly make that.

The product actually is extremely competitive with what's in the market today and is made totally within our factories, it's not contract manufactured. Actually, I have the phone battery here with me.

We have a bunch of these cells now. There's a lot of interest, and I just got a call from our sales team who's at that Detroit drone show right now about the tremendous interest they're seeing, because this is also a NDAA-compliant cell, which is actually a big deal for many of our customers.

The go-to-market of this works this way: typically, there are people who take this and put them in packs and put the BMS around it and the system around it, and that goes into multiple drone makers. It's hard to call the volumes right now, but the market is so fast and growing really fast that we think that the cycle times, the qualification times will be shorter than things like smartphones because of such a demand.

Also, the cycle life doesn't have to be that long in these. Our cell goes to 300 cycles, but even shorter cycles are okay in some of these markets.

Maybe I'll chime in, Mark, you asked about volumes, again we've talked about in the capex forecast and prepared remarks. We're already spending dollars to add equipment to one of the existing buildings in the Nonsan facility.

One of the great strange advantages that we have sitting on our balance sheet is we have a multiple empty buildings in that facility as well. We have numerous stages of additional expansion capacity there, and we're just going to do that in a methodical way as demand presents itself.

That's great. Thanks for the color, guys.

Thanks so much, guys. Could you talk a little bit about the mix of silicon material that you have in the new drone batteries and the pathway from the 360 to 400, how much of that is being driven by increased thickness or different form factor or increased concentration of silicon in the anode?

Great question, Colin. When we did this one, there's an existing requirement for a cell that's in the market today that many of the customers wanted us to provide something that is fully NDAA-compliant, made within our factories.

We made that one and we quickly got it to that performance. It actually performs really well, the cycle life is really good and the capacity holds.

We have about 60% SiC in that cell, but we now believe that we can get that to much higher percentage because, in this market, some amount of swelling is okay, because it's inside a drone and you could put pressure and put it in there. It's not a space-constrained situation like a smartphone.

Also, the discharge rate and the pulse discharge and the number of cycles are variables we can keep tuning. We mentioned 400 watt-hours per liter as something that we could produce.

I believe we can go much higher than that by just making the right trade-offs between cycle life and discharge rate and amount of swelling we'll allow. I think the good news is we've been working on silicon for a long time, we know exactly what electrolytes work well with silicon.

We've been working with graphite for a long time in Nonsan. We have that know-how, and we have a factory that's been supplying for defense for a long time.

Our quality of the products that we actually supply to defense is very, very high bar and that factory is actually qualified for that. That's why I think that you will see a pretty competitive roadmap from us for this market very quickly.

Great. Then, looking at the laser cutting, I just want to understand kind of the cadence of learning cycle on yield improvement and how we should think about kind of the engineering work that you're doing, and how quickly you can implement that to start getting a little bit better output on the overall facility.

As I mentioned, from last quarter to this quarter, we've improved our yield across multiple zones, well into the 90% range now in most of the zones. The laser is kind of in the 80% range, but that's improved quite a bit from last time.

As you guys saw in the video, we've been working on this for a while and today I thought was a good time to show you a combination of laser and mechanical dicing that actually cuts much, much, much faster and much cleaner. When you laser dice, there are also some challenges that we've been working on for a while, which is how to get to the yield and the throughput and so on.

It's an expensive way to do things, right when I started, we've been working on a different way to actually do this, and you saw the mechanical dicer now. We have enough lasers and we have enough throughput to meet the demand for this year, and our plan is to get it online this year, for the next year's demand, we can use the mechanical dicer with some combination of laser finishing it out.

Really exciting results, I hope you guys saw that video also, the throughput that we can produce with that.

Thanks so much, guys.

Thanks, Colin.

Thank you. Maybe just a quick two questions, but one quick follow-up on Colin's.

Can you get to 90% yields without that machinery intact, or do you need to add the lasers to get there? That's more of a 2027 event getting to 90%?

I think we're capable of getting into 90% yield, but again it goes hand-in-hand with throughput. Again you saw the video, really the mechanical dicer is just able to operate so much faster.

I'm the finance guy, ultimately it's about cost. We just think it's the most economical way eventually in some of the sub-process steps to operate.

Yeah. Cost of the machines, right?

It's a less expensive way to get throughput.

Yeah. Perfect.

Thanks, Ryan. My two questions is: one, Ryan, I was wondering if you can update us on the M&A pipeline.

I think you've been out there searching for a couple quarters now. Then just, Raj, a clarification.

You mentioned providing packs to Honor to put in a phone, small quantities in the second half of the year, but then you mentioned something about getting a second design. It was unclear, is there a second SKU that they've given you, or is the SKU that they gave you what they intend to produce in 2027?

I'm just trying to get a sense of your relationship is deepening with them, and they're giving you a glimpse of what they intend to commercialize after the first product launch.

It's exactly the latter. We actually have SKU that will launch in 2027, which is actually fairly large deal, and it shows the relationships we have with them.

Then

in terms of the packs to Honor, the quantities, any comments on that?

It'll be small volume. Again, it'll be just to test and make sure that the system-level stuff works okay, and we get small initial launch, and I think again, that's fine with us to just make sure everything is good before we get into high volume.

Was that thousands, friends and family type stuff?

Yeah. That's probably what you should think of.

Then,

on the first question in terms of the M&A pipeline, I'm really pleased with the pipeline. We have multiple opportunities that we're pursuing.

Again, as we've said and repeated time and time again, we're going to be disciplined. It has to meet a strategic fit, and we're going to be disciplined on price.

It's fair to say that we've looked at quite a few opportunities that we just didn't like the price tag, and we've moved on from, but I think we're excited about some of the opportunities we're pursuing. Again, we're not going to waver.

We think we're going to be disciplined stewards of the capital and make sure it makes sense, and it's something that Raj really sees a strategic fit and benefit, and it's something that I can be here on an earnings call and be proud of the price we paid for it.

Perfect. Thank you.

Hi, thanks for taking my questions. Raj, I wanted to ask the first question on smart eyewear batteries.

I think the press release says that you expect 50,000 units in 2026. How should we think that scales as we head into next year, and how should we think about the revenue progression from smart eyewear over the next few years?

Yeah. The 50,000 is this year.

Firstly, I wanted to say that with where the yields are and the throughput is and the way it's working, we're now able to manufacture this cell in our lines, and they've delivered to the customer, they're testing them, it looks good. Firstly, that's, I think, a great result.

As I mentioned, this is a huge market growing rapidly. It should be in the millions next year, it's hard to tell exactly how much.

We've sampled to many different customers now, because what we have is a battery that really makes the product, because energy density, right now as many glasses out there, they don't last the whole day. This one actually continues to improve on that.

Now that's why we decided to launch the next product using our AI2 in that space first, because the market was really asking for even more, because it's just very difficult to have the product last all day without that. We do think that the first product will launch this year, and next product, AI2, we're going to sample this summer, and that will go into production next year.

We expect it to be in the millions next year.

Thanks for the details there. For a follow-up, can I ask Ryan, as you ramp the smartphones later this year and next year, the smartphone batteries, how does that impact gross margin?

I think some opex might move into COGS. Can you just help us understand how we should think about gross margin progression as smartphones become a bigger part of the mix?

Certainly. Certainly as we ramp the smart eyewear and the smartphones, you're going to see some change.

You will see some of the costs right now that we have in operating expense will move up above the line into the cost of goods sold line. Really, whenever you think about our cost structure, the majority of our cost of sales is materials.

It's really about continuing to drive the bill materials cost down, and those will be materials that we purchased for those orders as we prepare to ship them. That's the vast majority of our COGS.

When you talk about direct labor, variable overhead, even fixed overhead to some extent, although we have some material costs as relates to the cost of the factory, as we get to a decent amount of volume, it ends up being a very small percentage of our costs.

Thanks for all the details. Appreciate it.

Yep.

Hey guys. Thanks for taking my questions.

I was wondering if there's any way you can segment that $130 million Korea pipeline, of drones and defense opportunities, how much of that is sort of legacy Routejade, and how much of that is drones?

Firstly, this is future-looking revenue, right? There's actually a lot of it is new designs that we are working with customers to get.

In some sense, some of it is continuation of the defense business that Routejade had, but majority of it is actually new stuff that we are winning, and drones is over 60% of that.

Got it, that's helpful. Then, just curious on the NDAA-compliance piece.

I was wondering how unique that is. I know there's a couple others that have that, but not too many at this point.

Might it be difficult for others to sort of achieve that over the next couple years? Then, within drones, what kind of drones are you getting interest in?

There's a wide variety of sea drones, air drones, heavy and light. Where do you guys think you can build a nice business in drones?

Yeah. NDAA-compliance is actually not that easy to achieve because there's multiple elements to that on where the cost of the things that are sourced, what percentage of them have to be from FIAC and non-FIAC countries, and then where the cells are actually manufactured.

For us, we manufacture them in Nonsan, South Korea, which is non-FIAC country, which is very very good there. Then, most of the material we have in there, majority of it is actually not sourced from FIAC countries either.

In that sense, it's a big advantage for us, and that we own our factories and we have the material. In terms of drones, we are seeing it in training, public surveillance, inspection, public safety, multiple markets like that.

What varies between these drones is kind of like a discharge rate, then it also depends upon how many cycles. The first product we made is, as I showed, 300 cycles, high discharge rate, this one that I talked about.

We have the technology and we have the know-how and we have the factory now to make different products optimized for slightly different lesser cycles, but more energy density and so on. We'll have a roadmap of products addressing various parts of the market, as we start building out that roadmap.

It's an opportunity that really grew very fast and came quickly.

I'll chime in, apology if you already mentioned it, but obviously we've got a long history of subsea drones,

and so the strength out of Korea, and so

that's something that I think will continue to be a strength for us as well.

Perfect. Thanks, guys.

Hey guys. Thank you for taking my question.

Just on smartphones, what impact is memory cost inflation having on your lower-end phone volumes?

We're not shipping much volume right now, right? I think not so much impact right now.

We do see that the number of units shipped this year will probably be much lesser in terms of the total number of smartphone units shipped. Hopefully, that will normalize over the next couple of years, by the time we get into higher volume, hopefully it'll be less of an impact.

Right now, not too much impact.

Thank you for clarifying that. Another clarification question, did you say that the 0.7C testing requirement was removed or you're hoping to remove it?

If so, what impact does that have on your smartphone qualification timeline?

Our customers agree to remove it as a must-do. They've agreed to actually have a variation of the 0.2C and 0.1C and so on, which is actually how the phone is actually used, as the gating requirement.

That does help. In terms of timelines, it'll probably take a little bit longer, because a 0.1C, 0.2C take longer to run.

The 0.7C is a faster discharge, it's an accelerated test, but it hurts the battery. They realize it's hurting the battery, it's not really helping.

In that sense, it may take a little bit longer to do 0.1C, 0.2C discharge because the time it takes to qualify is a little longer, at least on the first launches. Once we get to it, we understand what it is, we understand the trend, it should become normalized.

Got it. Thank you.

Hi. Good afternoon and thanks for all the details on the call thus far.

For AI2, the 20% increase in energy density, using this sort of the next-generation platform, can you speak about the trade-offs of this, including cycle life that we can consider? I realize this at least in the first stages for eyewear, but I'm assuming that AI1 will be your focus for your initial and second smartphone customer, but do you have a plan to sample AI2 for smartphones next year, or is this longer dated?

Basically trying to get a sense for what needs to be solved for the next gen to be used in smartphones, and basically it's a question we've asked in the past, but how should we think about your roadmap for smartphones beyond AI1?

Absolutely. Look, I think the advantages we showed with the 20% increase on the smart glasses, that's why we showed a little bit of color on how we got to that.

We increased the cathode voltage, we reduced the amount of inactive materials in there. We'll absolutely put those things into our smartphone battery, and you will see us improve it similarly.

There's a few other things that we will continue to improve: packaging efficiency is one of them, how we actually package this; there's slightly different electrolytes. We have a strong roadmap that will keep increasing the energy density.

The thing I've mentioned to you, Bill, is that as I mentioned before, we use 100% silicon, but we're not getting the full potential of the energy density increase that 100% silicon could and should provide, because we've been trying to solve these other problems like cycle life, 0.7C, accelerated testing, fast charge, and so on. Once we now work with our customers to get those things understood and how exactly to do the qualification, we will continue to improve our energy density.

First instance of our improvement in energy density, we showed in the AI2 in the smart glasses, but we'll quickly roll that into smartphones for next year.

I'll chime in as well here, the finance guy is happy to report that some of these key things on the roadmap not only improve the energy density, but also reduce cost of the bill materials and reduce the cost of manufacture. It's really kind of magic time when that happens.

One other thing, Bill, maybe since you asked about the energy density roadmap, I know it's a question that's come up, our batteries swell very little. The existing batteries, even with the ones with silicon-doped, still swell.

The most of the smartphone OEMs actually leave a space in the phone for the allow the battery to swell at end of life. We actually don't need that space.

If we get that space also, that's what we're working with our customers, they allow us to use that, our energy density will be even higher. Once we get to qualification, we will be able to take advantage of that piece also.

All right, thanks for that color. On the timeline for shifting or the general trend to move towards mechanical dicing, are there any new challenges that we need to be mindful of?

I'm wondering about particles or mechanical stress or other technical issues you need to overcome. Or maybe even set another way, why wasn't mechanical dicing the primary path for this relative to laser dicing?

Again, as you saw in the video, I wanted to show you guys a little bit of the machine. This is a complex machine that we've been working on building for a while.

It's not like you just take a roller and put a roll in it, right? We have to build roll-to-roll roller, we have to ablate, we have to dice it, we have to find the right kind of binders and materials to actually make the right kind of coating in the electrolyte so that, as you said, when you do it mechanically, it still holds.

There's a lot of R&D, a lot of know-how has gone into it. We've been working on it since I joined.

In that sense, I'm very excited by it. It's a great technology that our teams have advanced.

Again, there's still issues to be solved, right? We have to finish the dicing of it, we have to finish the anode, finish the cathode, and put it in a full cell.

We're going to take this year to actually do that because we have enough lasers to meet all the demand we have for this year. Absolutely, next year is when we'd like to roll that out.

Great, and if I can sneak one more in, on the part that TJ wrote, 75 72 to the 75 tests, two of cycle life and one below freezing power test. I'm not sure about the freezing power test.

I think you feel more confident about the cycle life, but what about this freezing power test? Is that something that I don't think I've heard much about in the past.

It's one of those corner use cases because what happens is silicon behaves differently than graphite at very low temperature. If you have phone with a silicon battery at extremely cold, when you start using the phone and you suddenly have a use case where you pull a lot of energy out of this very quickly, there are some challenges to how much energy battery can put out.

These are the kind of situations where we are working very closely with our customers to see at what use cases does this happen, how much does it pull in, and which parts of the world, and so on. It's again, like the 0.7C test, silicon is different from graphite.

The tests you had before don't quite work exactly the same. That's one of those things that we're working with them, and I do believe that we will slowly get past that also as we continue with the journey.

Thanks, Raj and Ryan, for the details.

Thanks, Bill.

Yes, thanks for taking the questions. You mentioned the $130 million pipeline for military projects.

Is that an annual number, or is that a lifetime opportunity, and how much capacity in Korea do you have to support that?

It's a total we keep in terms of what are the new designs that we are talking to customers and they're coming. We can update that every quarter.

It's not like annual, it's lifetime of those designs we have. They may take 1 year, they may take 2 years, time to launch.

We have enough capacity right now, but we are adding capacity now, as Ryan mentioned. We are building out that factory more.

Fortunately, in the last acquisition we made, we got almost 300,000 square feet of factory with lots of buildings and power and dry rooms, and so on. Very good acquisition we were fortunate to get from SolarEdge.

We are now fitting it to keep increasing the capacity in line with the demand, because the qualifications take a little time, we're going to work on the capacity increased in line with that demand.

On a relative basis, of course, this is relatively standard equipment. It's just blocking and tackling.

Got it. Then, when you mentioned the eyewear customer, I believe you said it was a reference design.

I was wondering if that's an OEM or a chip company's reference design.

Yeah. Again, because of confidentiality, I can't really exactly comment more than who that is.

One thing I'll say is eyewear, maybe I'll add a little color to it, if you actually think of things like eyewear, they're things people wear on their personality, it's a very style-based thing. Most of the eyewear things we buy, as are come from fashion brands, right?

You can think of Guccis and Pradas and Ray-Bans and so on that you buy from Sunglass Hut. Most of the tech companies or even chip companies and so on will actually make a reference platform, the ultimate product is actually branded as a fashion product, right?

That's why it's very key to get a reference design with one of those leading technology providers, so that then the channel to market can be through the fashion brands.

Got it. Thanks so much.

Thanks, Gus.

Yeah.

Thank you, everyone, and thank you for all the questions. Over the past year, much of the discussion has been on validation of the technology and its commercial readiness.

We believe this quarter we provided additional evidence and the conversation can increasingly shift towards disciplined execution against commercialization milestones. The markers to watch over the coming quarters are clear, right: continued progress on qualification, targeted system-level deployments, initial smartphone production ramp, and conversion of this drone pipeline into revenue.

Now, we view these as tangible operation milestones that we expect will demonstrate progress methodically over time. Thank you all for your support.