Yahoo Finance Enovix Corp (ENVX) Q1 2024 Earnings Call Transcript Highlights: Surpassing Revenue Expectations ...
Q1 Revenue: $5.3 million, exceeding forecasts.
Non-GAAP Gross Margin: Positive for the first time in company history.
Net Income: Non-GAAP EBITDA loss of $26.3 million.
Earnings Per Share (EPS): Non-GAAP loss of $0.31 per share.
Cash and Equivalents: Ended the quarter with $262 million.
Capital Expenditures (CapEx): $15 million for the quarter.
Operational Cash Use: $35 million for the quarter.
Q2 Revenue Forecast: Between $3 million to $4 million.
Q2 Adjusted EBITDA Forecast: Loss of $26 million to $32 million.
Q2 Non-GAAP EPS Forecast: Loss of $0.22 to $0.28.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Enovix Corp (NASDAQ:ENVX) reported Q1 revenue of $5.3 million, surpassing forecasts due to strong IoT category performance.
Achieved positive non-GAAP gross margins for the first time in company history.
Completed factory acceptance testing of Gen2 agility line, with the majority of machines already in Malaysia, indicating readiness for increased production capacity.
Announced a development agreement with a top five smartphone OEM, highlighting progress in customer engagement and technology validation.
Manufacturing yields have reached upwards of 95% on Gen2 machines, demonstrating efficiency and effectiveness in production processes.
Negative Points
Reported a non-GAAP EBITDA loss of $26.3 million, though it was better than the midpoint of guidance.
Anticipates a seasonally low Q2 for revenue, with forecasts between $3 million to $4 million.
Faces a lengthy qualification process for smartphone batteries, typically 9-12 months, which could delay revenue realization from new products.
Incurred $18.5 million in accelerated depreciation related to restructuring, impacting financial results.
Despite reducing fixed costs, the company still used $35 million in operations during Q1, indicating ongoing cash burn.
Q & A Highlights
Q: It's Jim. This is Mark on for Jed Dorsheimer. Congrats on the JDA. That's great news. A nice surprise for us. And speaking of them. I know that the target is for 2025 launch, but does that give you any indication on when you'll need to see a PO to achieve that time? A: Raj Talluri - Enovix Corp - President, Chief Executive Officer, Director: Yes. The question is on the PO for a launch in 2025. Consumer electronics, typically the POs and I've been in this business for a long time. Typically the appeals are placed a couple of months before production. And so from now, we're going to give them samples. They're going to qualify the samples, then give us some feedback. And then we're want to get from them the exact battery size that actually need to go into a phone. But once they decide the phone model than when you give them samples in that exact size and they go through some rounds of qualification within that phone. And then the foreign passes, all the EBIT, PBT, all the tests and it gets closer to production. That's when we actually get the PO. So I'd say it really depends upon the launch a couple of a couple of months before lunchtime. So I'd say second half of next year, early to I mean, I guess it's how much the second half.
Q: Got it. Thanks for the color and for the follow-up, I'll ask another one here is so it seems as though you're using a land-and-expand land-and-expand model with these customers, right? And they all have many different tiers of performance. Do you think that the customer is looking to get you into a trial in the top top tier form? Or is there you think you can be in multiple models by the end 2026 at this customer? A: Raj Talluri - Enovix Corp - President, Chief Executive Officer, Director: Yes. Again, like I said, I think we are sampling multiple customers. We've just closed the JDA with one of what I see at JDA with one of them that development agreement, one of them. But there. We're working with multiple one of multiple ones are typically my experience in what happens in smartphones. You know, from what I've done in other companies is that they put you in a model, see how that is. And before they put you in the model, there is a battery evaluation team that makes sure that they're comfortable the battery and where it goes, you know, become one of the chosen battery vendors for a platform.
Q: Thanks so much, guys. As you've gone through the equipment testing and done everything installed and you've talked about you're kind of starting out at roughly a 65% yield sort of ratio. Can you talk about any surprises or on positive incremental movement as you've gotten through the exception process and gotten everything installed? A: Raj Talluri - Enovix Corp - President, Chief Executive Officer, Director: I'll let Jay handle that.
Q: Yes, hi, good afternoon. Thanks for taking the questions. In the Technology Products section of the shareholder letter, you mentioned you're working with two leading smartphone OEMs on launch for next year. I'm wondering, is actually the interest in this development agreement? Or is that a separate thing? A: Raj Talluri - Enovix Corp - President, Chief Executive Officer, Director: Yes. I mean, so I'll speak to it from my experience and how these things typically work typically in smartphones. And we mentioned one of the top OEMs that we're working with, then we're sampling another one and another one. So we will sample in like six of the top eight so far that we have planned. And again, these conversations are going. So people keep asking us for more and more as we get get the samples out. And what happens then is it's a, you know, some customers may decide may the qualification may go faster because they may decide to put us in a particular form, they can qualify faster. Some customers may be a little bit later. So it's hard to tell exactly how many we'll be in production next year. But you also have to realize we have limited capacity. So we have to modulate that a little bit with how many we can sell to. And so I think it's possible it could be more than two. It just depends on how the qualifications go.
Q: Yes, hey, guys. Thanks for taking my questions. So just I've got a question on the shareholder letter. You guys were talking about the two smartphone customers in April when you produce first internal samples I'm curious beyond sort of the FAT. and SAT. associated with the equipment, do you still need to pass internal battery cell qualification before shipping samples? Or is it a scenario where once you get SAT. for or the Agility line, you're ready to ship samples. I'm just wondering what what else you have to do on the battery side to start shipping samples? A: Raj Talluri - Enovix Corp - President, Chief Executive Officer, Director: Yes, absolutely. So look, there is two aspects of qualification. One aspect of qualification is making sure the machines are working right? Like FTS. yesterday, D and so on. But then there is the testing of the battery to make sure that it is safe and it goes through all the other consumer, all the testing of safety and it meets the cycle life and it meets the performance requirements and meets the fast charge and so on. So we are doing that now in parallel and once we do that. That's when we will ship the batteries because what you don't want to do is ship the batteries that are being fully tested to the customers because you don't want to see any surprise at the customer side when they tested. So you want to test it like how the customers tested, which is what's been really interesting for me is that we are now able to get all this test criteria of how they would actually test into genomics. So now we are testing them exactly like how they would test after the Guardian once we have that are looked at and everything is good from the main manufacturing line, they can go without that. But we first need to make sure the early samples go through all of that test.
Q: Got it. I mean, as my follow-up, I'm curious what the reasons were to sign a development agreement with you guys. What were the reasons that that specific OEM. had for signing today, was it something they finally felt comfortable with on the production side? Was it just a little bit more time working West your battery technology. I'm curious if you could talk about that. And then do you think there's some potential for this customer to provide funding for production someday if you guys were to sort of hit a certain criteria with
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
