Enovix Corporation (ENVX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Enovix Corporation Special Investor Conference Call. [Operator Instructions] As a reminder, today's program will be recorded. And now I'd like to introduce you to your host for today's program, Robert Lahey, Head of Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to the special investor call from Enovix Corporation. With me today are President and Chief Executive Officer, Dr. Raj Talluri; and Chief Financial Officer, Ryan Benton. Raj and Ryan will deliver prepared remarks regarding today's announcement of a planned special dividend to our shareholders in the form of tradable warrants. After their remarks, we will open the line for a live Q&A session. We respectfully request that you limit the questions to our recent announcements. Before we begin, please note that this 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 find these materials on our website at ir.enovix.com. All statements made on this call are as of today, July 7, 2025, and we undertake no obligation to update them, except as required by law. I would also highlight that earlier today, we published select preliminary and unaudited financial results. Final results remain subject to completion of the company's standard quarter end close procedures and potential adjustments. Enovix will host its 2Q '25 earnings call and webcast in late July or early August, and details will be announced separately. Additionally, 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. Raj?

Good afternoon, everyone, and thank you for joining us. Today, we are excited to announce a strategic capital initiative that reinforces our alignment with our shareholders and positions Enovix for its next phase of growth. This afternoon, we issued a press release announcing that our Board of Directors has declared a special dividend in the form of warrants expected to be tradable upon distribution. Each shareholder of record as of July 17, 2025, will receive 1 warrant for every 7 shares of Enovix common stock held as specified in today's press release. In addition, holders of our 3% convertible notes will receive warrants on an as-converted pass-through basis in accordance with the terms of the notes. We expect to distribute these warrants on or around July 21, and for the warrants to trade on NASDAQ under the ticker symbol ENVXW shortly after. Each warrant entitles the holder to exercise their warrants to purchase 1 share of common stock at a fixed exercise price of $8.75 per share at any time prior to expiration. Importantly, there is no cash outlay required from our shareholders to receive the warrants and no dilution associated with the distribution for shareholders of record. Shareholders can choose to hold, sell or exercise their warrants and equity is only issued if holders choose to exercise. We have chosen this strategic capital initiative because we believe the timing is right for Enovix and our shareholders. We are reaching a critical inflection point in the smartphone industry, where leading smartphone OEMs are now prioritizing higher energy density batteries because of demands of AI-enabled applications on the smartphone batteries. This morning, we announced a major company milestone with the launch of the AI-1 platform, our first artificial intelligence class batteries for the next generation of mobile smartphones that require significantly higher total energy storage and power to perform AI functions locally. We have validated that this revolutionary silicon-anode smartphone battery has energy density of over 900 watt hours per liter based on our initial testing. Last week, we shipped 7,350 milliampere-hour AI-1 batteries to a leading smartphone OEM for qualification for the anticipated first-ever 100% active silicon-anode battery smartphone launch. We believe this makes these the highest energy density batteries that are currently commercially available in the smartphone segment. In addition to achieving this benchmark energy density, these batteries also meet the stringent smartphone performance requirements of fast charge, high cycle life and performance across temperature ranges. Our manufacturing teams at Fab 2 in Malaysia in cooperation with our worldwide R&D teams have made significant progress in delivering these batteries from our first high-volume manufacturing line. The entire Enovix team is truly energized by the prospect of having our battery in a commercially available smartphone. This recent milestone achievement represents a pivotal step in our journey to deliver the highest energy density silicon batteries, unlocking significant long-term growth potential and positioning us to lead the next era of energy storage. On the heels of this milestone, we're announcing this warrant dividend distribution to our current shareholders. All Enovix investors as of record date will have the opportunity to participate in the future growth of Enovix on beneficial terms. I will now turn it over to our CFO, Ryan Benton, to expand on the mechanics and implications. Ryan?

Thanks, Raj. Good afternoon, all. As a reminder, earlier today, in addition to announcing AI-1, we also released select preliminary unaudited financial results for the second quarter of 2025. Final results remain subject to completion of the company's standard quarter end close procedures and potential adjustments. In the release of our preliminary results, we announced that revenues were approximately $7.5 million, exceeding our guidance range of $4.5 million to $6.5 million due to the growing demand for the company's products. Cash, cash equivalents and short-term investments were approximately $203 million at quarter end after completing the SolarEdge asset acquisition in South Korea and making other capital expenditure payments principally related to Fab 2. We will share the final results and have a more fulsome discussion on our second quarter 2025 earnings call that we will host in late July or early August. Now let me walk through some details of the special dividend and some of the reasons why we believe this structure is not only innovative but shareholder-friendly. First, this is a nondilutive transaction. All of our shareholders of record on July 17 will receive their pro rata share of these warrants. They will receive the warrants at no cost to them. This gives our existing shareholders the ability to participate in an equity issuance at a fixed price and on what we believe are attractive terms. No new shares will be issued unless investors choose to exercise the warrants for cash. Second, the structure is both flexible and controlled. The warrant terms provide that they expire at the earlier of October 1, 2026, or at such time that our share price trades at the early expiration price condition of $10.50 per share for 20 out of 30 consecutive trading days. Thus, if our stock continues to reflect performance, the company would expect to gain access to growth capital without diluting our shareholders or needing to time the market. Third, as Raj referenced, in our opinion, this dividend rewards and empowers our current shareholders with choice and liquidity. Shareholders can hold, sell or exercise at any time prior to expiration as they see fit for their individual circumstances. Let me also emphasize that this dividend gives our shareholders meaningful flexibility. No immediate dilution, no obligation to act. We are fully funded to execute on our near-term milestones with existing cash, which is currently above $200 million. This dividend gives us potential future access to capital. If exercised, proceeds would be used for general corporate purposes, including supporting scale-up of Fab 2, accelerating customer ramps and advancing our strategic priorities. We truly believe this is a thoughtful way to strengthen our balance sheet while rewarding our current shareholders. To further investors' understanding, we have contemporaneously published a detailed set of frequently asked questions on our website this afternoon. At the time of the warrant distribution in July, we will file a prospectus supplement to register the shares of common stock that may be issued upon the exercise of the warrants as well as the warrant agreement itself. I encourage all holders to review those materials carefully. And with that, operator, we are ready for questions.

[Operator Instructions] Our first question will come from George Gianarikas with Canaccord.

First, I'd like to ask about the road map, the AI-1 road map. Can you just sort of talk about -- a little bit about how this works with [ EX-1M, EX-2M, EX-3M ], whether they're different or there -- now this replaces the EX platform?

George, yes. So what we did here to define a platform, if you will, EX-1M, EX-2M were basically technologies that we were doing to define our battery road map internally. What we launched today is actually a branding of a platform. And when I say a platform, you can think about it this way. It will have a certain electrochemistry that's in it, anodes, cathodes and things like that. But AI-1, for example, the first platform we launched, I'd say, in terms of energy density and features, it's probably somewhere between EX-1M and EX-2M, if you will. But it's actually tailored towards the applications, the requirements of the lead smartphone OEM we are working with. We expect to have multiple sizes of batteries in this particular platform, if you will, for different applications. And this is probably the nomenclature you'll see us use moving forward because really, we feel like the real need for higher energy density batteries is coming from a lot of the AI applications, whether they're in smart glasses, whether they're in smartphones and so on. So you'll see us use this nomenclature more moving forward.

And maybe as my follow-up, just in terms of the potential capital raise, assuming all warrants are exercised, can you just sort of give us a road map as to how far the capital being raised will take you?

Yes, certainly. Thanks for the question. So as we kind of published in our preliminary results, we have $203 million we finished up the quarter. If all the warrants are exercised, obviously, that brings in, we published that figure as well, $253.8 million. There are some fees, of course, associated with that. But collectively, we think that gives us sufficient capital to build the factory, kind of finish the build-out of Fab 2 and give us the runway to bring the fab up and get the company to profitability.

Our next question comes from Colin Rusch with Oppenheimer.

Given some of the conversation that you've had in the past around multiple sources of capital for expansion, can you just talk a little bit about how much leverage this structure gives you in terms of conversations with folks that may prefund a line, a dedicated line as they get more comfortable with it and how much flexibility it gives you to accelerate the ramp as you get a little bit more comfortable with some of the manufacturing processes being at the yield levels that you need?

Yes. Thanks for the question. I think, look, since I've been with the company, we've had a great dialogue with the management and the Board in terms of trying to be really thoughtful in terms of capital structure as one of our core tenets. The other one is making sure we reward the current shareholders. This is the approach that ultimately we thought gives us the most -- the best surety of outcome in terms of being able to have the capital we need to be able to react quickly. I think it's my experience and Raj will share it certainly, T.J., who's our Chairman, will share the opinion that inflection points happen quickly, and we want to be prepared to react and respond. So we think it was the friendliest way that we could go about making sure that we could really move quickly and basically act on the incredible opportunity we have that's obviously demonstrated by the product release today and the huge market that we're going after. Raj, do you want to add to that?