Thank you for standing by. Welcome to the Enovix Corporation fourth quarter 2022 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. As a reminder, today's program will be recorded. Now, I'd like to introduce your host for today's program, Charlie Anderson, Senior Vice President of Investor Relations. Please go ahead, sir. Hello, everyone, and welcome to Enovix Corporation's fourth quarter 2022 financial results conference call. With us today are President and Chief Executive Officer, Raj Talluri, and Chief Financial Officer, Steffen Pietzke. We'll also be joined today by our Chief Operating Officer, Ajay Marathe, and our Chief Commercial Officer, Ralph Schmitt, for the Q&A portion of our call. Raj and Steffen will review the operating and financial highlights, and then we'll take questions. After the Q&A session, we'll conclude our call. Before we continue, let me kindly remind you that we released our fourth quarter 2022 shareholder letter after the market closed today. It's available on our website at ir.enovix.com. A replay of this video call will be available later today on the investor relations page of our website. Please note that the shareholder letter, press release, and this call all contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are based on current expectations and may differ materially from actual future events or results due to a variety of factors. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's shareholder letter and our filings with the Securities and Exchange Commission. All our statements are made as of today, February 22nd, 2023, based on information currently available to us. We can give no assurance that these statements will prove to be correct, and we do not intend and undertake no duty to update these statements except as required by law. During this call, we will also discuss non-GAAP financial measures, which are not prepared in accordance with Generally Accepted Accounting Principles. You can find a reconciliation of the GAAP financial measures to non-GAAP financial measures in our shareholder letter, which is posted on the investor relations page of our website. I will now turn the call over to Raj to begin. Raj? Good afternoon. Thank you, Charlie Anderson, and thank you all for joining us today. I'm really pleased to report a very strong fourth quarter for Enovix Corporation. We accomplished a number of things in this quarter. We significantly improved our yield of the batteries that we are producing. We made record progress of our customers progressing through our funnel. We explained last time the way we work with our customers is to get them samples of our batteries, which then they test, and then they, you know, put them in products that they're actually going to launch and move them along the product realization cycle. Through that funnel, you know, we have got a lot of new customers and a lot of progress that we've made to date, and we'll talk more about that. Just over $1 million in revenue ahead of the consensus for this quarter. We ended the year with over $322 million in cash. More importantly, our Fab1, which is our Fab in Fremont, is working, and we are focused on rapidly increasing its output now. The trajectory I see for Enovix is incredibly promising in 2023 and beyond. Before Steffen talks about financials, I wanted to spend a little bit of time talking to all of you about me and my background, why I joined Enovix, and what are the near-term actions that I'm taking to position the company for success. You know, for nearly 30 years, you know, I've been fortunate to have worked in and led teams in some of the best semiconductor companies in the world. Texas Instruments, Qualcomm, Micron. I worked on products that actually revolutionized the mobile device experience. These mobile devices are devices from, you know, consumer electronic devices like digital cameras, MP3 players, DVD players, smartphones, tablets, and so on. The products I worked on included, you know, digital camera chipsets, you know, MP3 player chipsets, the OMAP application processor, which is one of the very successful application processors in the industry at Texas Instruments, that actually transformed our phones from just calling devices to true multimedia devices. From there on, I joined Qualcomm, where I was fortunate to lead the team that did the Snapdragon application processor, which actually powers majority of the Android cell phones today. It really ushered the era of the modern smartphone. More recently, for about the last five years or so, you know, before I joined Enovix, I was at Micron, and I was leading the mobile division. It's a division that actually one of the larger divisions at Micron and, you know, $7 billion of revenue in 2022, with over $2 billion of operating profit for that fiscal year. Now, having been in all these different companies, I understand what it takes to launch products at scale, to launch products at mobile devices, to launch them at very high volume. It's given me a unique insight to both the customers, the care about to the customers, the care about to the end users when they use these products. One important insight it gave me is actually the importance of battery technology in portable devices. What became obvious to me, but may not be obvious to all the average person who actually buys these products, is that the performance of these products, you know, whether you bought a digital camera or whether you bought a smartphone or a laptop, the performance is actually throttled because of the constraints of the battery. This is something that's not so obvious to everybody. You know, for example, if you take a smartphone and you run things like an Android Bench and so on, you get Great performance numbers. When you get those performance numbers, the CPU, the GPU, the camera, the memory, they're all running full speed to give you that benchmark number. When you actually use the phone, the process and the memories are not running at that speed, because if they did, they would consume the battery really, really fast. In other words, end users are not realizing the full potential of the devices that they bought because the battery is limiting the performance. The number one problem I believe to be solved now in the consumer electronic devices is the portable battery. When this opportunity arose for me to actually lead this team, I did a lot of due diligence on different battery companies out there that could actually help solve this problem so the users can get great end products that they paid for. I felt Enovix is perfectly positioned to solve this problem, and that is the reason I'm here. I've been here for about a month. I've been unbelievably impressed by the company and the talent and the resources here. It's really groundbreaking technology. It's highly differentiated across many metrics in the battery. These are metrics like performance, you know, energy density, you know, capacity, you know, thermal performance, longevity of the battery, how fast it charges, how safe is the battery. What I also found is the technology in this company that have been done by tremendous number of people working for over 16 years in this space. We have significant technology in our laboratories here that has a lot of headroom to even increase its performance metrics way beyond what we are actually now able to sample. I see here the foundation for a high-growth, highly profitable business with differentiated products that I can spend the next, you know, part of my career scaling to new heights. As you get to know me better, you'll actually see that I always start with the customer first. When I talk about the customer, I talk about the customers who buy our products and also our customers' customers who actually enjoy these products. I think about the user experience those customers are having with these products, and then I work backwards. What does that mean? I try to imagine how is a wearable device used? How is a smartphone being used? What's the limiting the performance of smartphone? What's limiting the performance of a laptop? What's limiting, you know, car from charging to full battery capacity very quickly? It gives me clarity on what products we should be working on for those things to happen. I work on with my team to build the right products to send it to our customers so the end users can benefit from all these technology innovations that we make. We are undergoing a transformation at Enovix. You know, we are an R&D-focused company so far. You know, tremendous amount of R&D has gone in over the past many years to actually make these fantastic batteries that we are sampling. We need to transform this company into a customer-focused organization that focuses on morphing and tailoring this great technology that we have into high volume production very quickly and very profitably. Thankfully, that is not the hard part of the job. A lot of us that have joined Enovix here know how to ramp products quickly to scale. The core technology development is behind us. We really owe the founders of Enovix, who actually worked tirelessly for a long time, a great debt of gratitude for getting us there. Now, I do recognize that high volume production area that we have more work to prove. We have not ramped as fast as much as we would have liked to by now. My commitment, my personal commitment to investors is I will take you through the journey, and I'll be transparent about our progress on unit production, important milestones, things like yields, and also what we're doing to de-risk our Gen2 line, which actually is gonna produce high volume batteries. Scaling is hard. You know, I've done this many times in my career over the last 30 years in large companies with very, very complex products. It won't be perfect, it won't be like exactly how we want it, but we know how to do it, and we'll be clear about where we are and how we are doing it and where we are going. I can tell you this: what I see today is unbelievably promising. You know, our new Chief Operating Officer, Ajay Marathe, he's got 38 years in the industry from some of the top companies. He was most recently the CEO of Lumileds, where their team has pulled off a tremendous job to make, you know, a huge amount of improvements in production. Here, he's his team has already made solid progress just in the short time that he's been here. We expect to make very strong gains quarter-on-quarter throughout this year. Now, it's clear to me that we know how to make batteries. You know, I see is we have factories right here. I see the batteries coming off the line. We just need to do it faster. With Gen2 line, we will make them faster, and we will make them in high volume. Now, I want to close with a comment about funding and our capacity expansion. Now, we've had, like, numerous conversations with our customers. The battery technology is so compelling. The energy density we are able to provide and the quality we are able to provide is so compelling that we are now finding many of our customers and also strategics and the government entities where we're that we are working with to build our Gen2 line, are interested in infusing capital into the company to help us build the capacity. This is a common practice in the battery industry, and given the advanced stage of our technology, a lot of our partners see this as a fairly low risk for them to help us scale. We plan to explore all these options and find out the most advantageous one to our shareholders. Now, I want to turn the call over to Steffen, who will give you some feel on the guidance and then, you know, then we'll take any questions you have. Thank you, Raj. Our financials are available in our shareholder letter, which includes like a GAAP to non-GAAP reconciliation. I will focus my commentaries on some high-level guidance comments. For 2023, we are going to guide units produced as opposed to revenue guidance. Our annual revenue are highly influenced by the timing of our episodic service revenue. We don't believe that it's necessarily a strong read on a progress on a scale-up. As an example, for Q1, we don't expect to recognize service revenue. For 2023 full year, we expect to produce 180,000 revenue quality units in Fab1. For Q1, we expect to produce 9,000 units. Our plan is to at least double that production each quarter sequentially for a full year. For CapEx, for 2023, we expect to spend $120 million. Three components of CapEx are first Gen2 line, facilitization for Fab 2 in Southeast Asia. We are going to bring in an Agility Line, which is an automated R&D line to Fremont. That line will help us faster qualifying customers and focus on custom cell development. Additionally, for 23, we expect to spend $120 million of cash operationally. While we keep the operational spend OpEx flat, we will shift more cost into cost of revenue as we support the increased production volume in Fab 1. In later part of the year, we will start Fab 2 in Asia. Now, for everyone that runs financial models, I would like to give a couple of pointers for the models. One is we are anticipating here to increase cash and non-cash expenses that we recognize in cost of goods sold versus operating expenses, primarily as we shift the resources from R&D into manufacturing. The shift in higher cost of revenue will take shape in Q1, and you can see here and expect around $4 million of sequential increase in cost of revenue, whereas only $2 million decrease in operating expenses, both on a non-GAAP basis. Closing out, we have made really good progress on the manufacturing side. We have a strong balance sheet, and our experienced team is really committed to build shareholder value. With that, operator, we can start the Q&A session. We will now begin the Q&A session. Please note that this call is being recorded. If you have joined via the Zoom application, please use the raise hand functionality to ask a question. If you have joined via the audio line, please press star nine. Questions will be answered in the order they're received. Please ask one question and one follow-up question at most. We will now pause a moment to assemble the queue. Our first question comes from Ananda Baruah. Please unmute yourself and ask your question. Hey, thanks, guys. Good afternoon. Raj, good to hear from you. Thanks for, thanks for the remarks. Yeah, I guess quick two, if I could, just piggybacking off of your Gen2 remarks. Can you remind us when we, can first expect Gen2 revenue, Gen2 volume and what we might expect, at least the first couple of few quarters of that ramp to look like? I have a quick follow-up. Appreciate it. Yeah, absolutely. The question is about Gen2. Thank you for that question. We are now in the process of completing the design of the Gen2. As TJ mentioned last time, and as you see in our shareholder letter, mid-March is when we will approve the design at the board meeting, and we'll start placing the POs, and the pieces of equipment will start coming in. We expect the build-out to start happening by early next year. In the mid-next year is probably when we'll start seeing revenue from some parts of Gen2. Got it. Got it. Very helpful. Didn't hear EV mentioned yet. Can you just give us, you know, a thought process on what some of the milestones are for EV for this year and where some of your EV investment might be pointed to? Appreciate it. Yeah. Thank you for the question. The question about EV. EV is, as many of you know, a very exciting market for our technology. A few things about Enovix battery technology, particularly for the EV market. You know, in addition to the energy density, which we have much better than our competition, much higher than our competition, we also have some other advantage, such as how fast it charges and also the amount of heat the battery actually dissipates. You know, if you know, guys have, you know, Teslas or car like that, when you start charging them, you'll see that the batteries get hot in these environments. Our battery, because of the way it's constructed mechanically, has the ability to dissipate that heat much faster than our competition. We are also kind of material agnostic in the technology. An EV will use slightly different materials. We've been talking to different companies in the automotive space. There's a lot of interest, you know, for our technology in that space. We are now figuring out the right strategy to partner, to have a joint development agreement with multiple partners. As we make those milestones, we'll absolutely communicate to you. We've given them some of our consumer batteries, and actually all the EV companies, all the automotive companies love what we can show. Thanks so much. Appreciate it. Our next question is from Bill Peterson. Yeah. Hi. Sorry about that. I was, I think I was on mute. Yeah, thanks for the overview. Maybe, I'm not sure this one's for Raj. I wanted to talk about how you're gonna be progressing to, I guess, 180,000 units. I think in the special presentation you talked about trying or hoping to achieve around 60% yields. I guess in the early part of this year, how are those progressing, and is that still the right way to think about yields as we, I guess, exit Q4 of 2023? Yeah, absolutely. I'll take a shot at the question and, you know, if Ajay, if you feel like there's something else you want to add on top of it, please jump in. You know, as we mentioned, our yields are progressing nicely, steadily improving from where we presented last time. We're on track to where we expect to be by end of the year. We are quite pleased with that. We are, as we said, more than doubling the number of batteries that come out, you know, every quarter. Again, a lot of these batteries. We feel very confident, we're gonna hit this 180,000 number. No issues there. In fact, we produce more than that sometimes because, you know, we have to give batteries for qualification to our customers and so on. These are revenue producing batteries that we are talking about. Yeah, things look good there. Okay. Thanks for that. I guess, the second question I have is it was sort of, I guess, briefly mentioned by TJ in the last call, and you didn't speak to it here, but he alluded to, I guess one potential return due to swelling. I wanted to clarify, is that truly an issue? Is it only one product that was returned? If not or maybe it was something else entirely. Just trying to get a feel for if that's something we should be on the lookout for. Yeah. There's only one. I can. Ajay, go ahead. Yeah. Yeah, I can handle that question. Yeah. Yeah. There was one particular cell which came back from a customer. In fact, we saw the pictures of it and concluded that, yeah, the results was due to the... The swelling was due to the mechanical damage to the cell, which we are trying to understand where it could have happened, you know, post-shipments from Enovix. Yeah. But that's the only cell that we have seen so far, which is out there in the field, which has been reported with the swelling. We are doing a lot of QRT work, you know, reliability testing ourselves and, you know, trying to find, you know, different causes of what could be problems. We haven't seen the a rchitecture is very robust, so we haven't seen anything like that. Thanks. Our next question is from Gabe Daoud. Hey, good afternoon, everybody. Thanks for all the prepared remarks. I was hoping to maybe just go back to the tech side. You'd mentioned the 1,000 Wh per liter battery scale to a mobile phone and laptop size. You're just kinda optimizing for cycle life. Could you just remind us maybe where you are today on that tech roadmap and where do you have to get to? Yeah. That's actually a great question. You know, I, as I came here in the last month or so, what I've kind of realized is that, you know, we are clearly where we thought we would be in terms of our cycle. We have a lot of innovations along the way on materials, on the way we, you know, develop the technology to continue to increase that and get ahead of it and energy density, you know, continue to get ahead of the competition and also improve our cycle life. The main important thing here is that, both in energy density and cycles, I somehow feel like people are characterizing batteries by just simple one number. As we get into more advanced stages where we actually have our batteries at our customers, and I talk to many, many of these customers, what I find is that how the battery is used in the device and the use cases that the battery goes through is actually just as important. For example, when you talk about a cycle, people talk about charging all the way to the peak and bringing it down, but nobody actually does that. I mean, if you have a mobile phone, you'll probably start charging it before ever it goes to fully zero. Also if you think about energy density, when it's fully charged is one thing, but the use cases, you know, of how a watch is used versus the phone is used, versus a laptop is used, has a lot of bearing. We have kind of evolved a little bit more in how we actually measure the value of the battery to our customers to more than just those two numbers. That's not to say we are not making progress on those. We are absolutely on track on that. What you'll find from us moving forward is actually talk more and more about the customer experience of using the battery than just one or two numbers, because I don't think those numbers fully capture all the aspects of the differentiation that's built into our technology. Thanks, Raj. That's super helpful. Then maybe as a follow-up, we'll pivot back to EVs. I guess, could you maybe shed a little color around how those conversations are progressing, whether with cell manufacturers or just traditional auto OEMs? Like, is there any concern, I guess, with performance maybe not scaling to an EV size capacity battery? Then also form factor. What are the thoughts or latest thoughts on around form factor, just given some of the headlines around potential OEMs or OEMs potentially going towards cylindrical? Thanks, guys. I mean, first I want to make one general comment about form factor, not just specific to EVs. Something that I think if it's not clear to, you know, everyone here, what I've learned over the time here is that the form factor of the battery is different in watches versus, you know, digital cameras versus other IoT devices versus smartphones versus laptops. Because everyone needs a battery to be of a certain shape to fit in the cavity that's allocated to it after all the electronics and the displays have taken their space. Similarly, in EV, it's a different form factor. Our technology now, we are building manufacturing lines that actually have the ability, what we call Agility Lines, to customize the battery to different form factors very quickly. Our Gen2 line will have the ability to do that and produce at different form factors. That's something I just wanted to put it out there. It's a core technology and a core competency we are building, and we will need to build to be successful. Our architecture is very amenable to that. In terms of EVs, the conversations are going really well. The consumer batteries that we've given them to test, you know, they really like it. It's too early to tell how exactly the business model would be in terms of we manufacture or they manufacture, we do a joint development, we license the technology. Quite a few of those options are open and they are kind of early stage of development. I'll continue to comment on that as the year goes by. Great. Thanks a lot, everyone. Our next question comes from Colin Rusch. Please unmute yourself and ask your question. Sorry about that, you guys. I think I'm good. Wanted to just get a little bit more color in terms of the design activity and the design wins, in terms of the target customers, the process and how that's cycling and how quickly you're moving through those cycle times with the design ins, because that may, you know, be very, very crucial for some of our estimates as we get into late 2024 and 2025. Yeah, absolutely. I'll add, I'll say a little bit at a general level, and I'll ask Ralph, who actually deals with this every day, to comment a little bit more on that. Our designing activity has been so much better than what it was before. The last quarter was actually fantastic. What we are finding is that as we are able to produce more cells in our Fab1, we are able to give more samples to customers, and that is helping them test our battery versus their current batteries that they're using. It's really giving them the confidence that what we are talking about is real and they're able to do it, use, you know, test it in their own way. Of course, we understand how they test, and we put those tests back into our testing, so the next time when we give the battery, it already meets their requirements. You know, in terms of samples we've given out, in terms of customer pipeline, I think there is some data in the shareholder letter that actually shows the progress. Super pleased with the progress so far. Many of them have actually progressed from initial testing where they have samples and said, "Yeah, this looks good," to actually putting it in their own form factor and then testing and saying it's much better. Now at this point, we actually know what products we will go into. Ralph, you want to add more color to that? Thanks, Raj. Yes, you know, everything Raj said is exactly on point. As we showed you last time in TJ's presentation in January, we're now tracking these to sell milestones. Those sell milestones are showing that we increased sort of our active designs and design wins by about $200 million in this last quarter, which is by far the biggest jump and really shows that these customers are now fully engaged because they've taken essentially the batteries off of our production line and have done their own full qualification. This is their tests in their products. That's a very important milestone for us and just shows kind of the progression we're making. You know, I'll state cautiously is I don't expect to see a $200 million improvement every quarter. It was because we've, you know, we've now shipped enough units, thousands of units to these customers to be able to make, you know, those progressions in the funnel. We're right on track, and you'll see, you know, the 2024 revenue will grow fairly substantially based off of, you know, these early qualifications from our customers on these existing, cells out of Fab 1. As a follow-up, I want to hear a little bit more about the tool set that you guys are looking at for the Gen2 line. Obviously, you're coming close to being finalized on that design. Curious about how many vendors you're able to go to in terms of having backup vendors on some of these things. You know, your ability to, you know, access what you need in terms of all the different pieces of equipment in a timely way, given the relatively compressed timeline you guys are looking at for this ramp on the next factory. Great question. The question about Gen2 line. I'll make a quick high-level comment, and I'll let Ajay talk to you about it. Ajay is actually in Asia right now as we speak, talking to all the vendors there, so that's why he's not here in person. He can give you a live update on where he is. I think he's met just some vendors yesterday too. It's going actually very well. The designs look very good. We've done a lot of proof of concept experiments to make sure that whatever issues we saw on Gen1 are actually resolved in Gen2. We know what we're gonna get is gonna be at the high throughput. Ajay, you want to comment on vendors and specifics more specific. Yeah. Free to. Sure. absolutely. Thanks, Raj. yeah, good question. yeah, we have several. Suppliers, in the whole supply chain of this Gen2, right? Now what we've learned through the, you know, this last Gen1 experience, and since then, you know, designing specific tools which address the, you know, real problems that Gen1 showed us, you know, in the early days, is that, you know, there's battery companies and then there's semiconductor companies. Semiconductor companies. Our architecture, which, you know, mechanical tolerancing and placement tolerancing, et cetera, is a lot more lending itself, you know, going to semiconductor suppliers out there who are very, very familiar with, you know, plus or minus five microns, 10 micron placements. Imagine the, you know, Ball Grid Array, you know, of thousands of balls in a PGA or, you know, array package and doing something like that. We actually engaged with those guys, very early on, about nine, 10 months ago, and now we are seeing these proofs of concepts which are coming through. We also need to complement that battery experience as well, right? Because there is very peculiar stuff which is going on. They, you know, these semiconductor vendors have been working with the battery counterparts which we brought together. This is a big ecosystem, yeah, we wanna make it hard, you know, so that it doesn't get replicated, by just saying this about anybody else, at the same time, you know, have a good design. I saw very encouraging results actually. I was in Korea, a couple days, and then I'm here in other parts of Southeast Asia, you know, going through that. In some cases we tripled row, you know, certain areas which were higher risk. We are coming down to now working with one set of suppliers who have given us tremendous confidence in the Gen2, you know, both the schedule and the cost. That's very helpful. Very good. Sure. Thanks so much, guys. Our next question comes from Alex Potter. Perfect. That's actually a really good segue into what I wanted to ask. You mentioned the cost. I know that Gen2, some of the numbers that I seem to recall were something in the neighborhood of $70 million of CapEx per line, and you were looking to put four lines or so in the Fab1 there in Southeast Asia, I guess the Fab2. Are those numbers all still ballpark in the neighborhood, or have your conversations led you to believe that those numbers should be revised in any way? Yeah, good question. No, actually. Yeah, go ahead. Go ahead, Raj. Just give me a second. Maybe I'll make a comment and then you can add on top of that. Yeah. Basically, you know, Ajay and team are looking at making sure that we have enough space so we can put four lines or even more as needed. We are going to make sure that we have enough you know, capacity. What we're gonna do is we are going to start first with an ability to quickly make a custom cell using the pieces of the line that we're gonna use in Gen2, right? This won't have full automation, but all the same machines that will be in the Gen2 will come here. That'll come earlier, what we call the Agility Line. That'll give us a lot of confidence that we can make different custom-sized cells. We'll scale up the line and, I mean, we still believe that with the demand and the customer pipeline that we have, we will need to get to, you know, at least four lines and maybe more in time. We're gonna do it in a staged manner. We're gonna do it in a staged manner because as Raj mentioned, different customers are at different stages of qualification. As those products get qualified, we wanna be able to scale quickly, but also in sync with the customer demand. What's gonna happen is, for example, a customer needs a smaller cell may qualify faster than a customer needs a big cell, or maybe a customer needs a big cell and a smartphone qualifies sooner. We need to make sure that the equipment we are building is tightly in sync with that. We are kind of evolving to that stage of capacity planning, which is matching the actual customer demand with actual supply, and we are on track to do that. Ajay, anything else you want to add on that? Yeah, just very quickly. Actually, no change, no revisions to the original numbers. The cost per line question that you asked is roughly in line with what we are seeing now. As we do replicate second, third, fourth line, et cetera, you know, those costs will obviously go down with economies of scale and our ability to negotiate better with various supply chain members. Yeah, not much change from the numbers we already gave you. Okay, that's perfect. Maybe one more, financial-oriented question, referencing the flat, generally flat OpEx guide for 2023. I hear you on shifting some of the R&D cost into cost of revenue as you move more toward production, was also somewhat surprised. Presumably, you're gonna need to be staffing up in Asia, and a lot of that would hit OpEx in the G&A line. Maybe, maybe none of that hits in 2023, but at some point, there would presumably be an upward inflection in that line, unless correct me if I'm wrong. I'll take a shot at it and then we'll see if Steffen maybe can add a little bit more color. What I found when I came here is that we are actually fairly well-staffed on OpEx. The company was at subscale on manufacturing in terms of output. That's one of the reasons why I feel like I can hold OpEx flat from last year to this year. There was a lot of expenses also with, you know, coming from, you know, SPAC into the company and so on, which are really one-time last year. Moving forward, the mix of investments is changing from my perspective. I think we're investing a little bit more, bringing in a lot of good talent, actually, in the electrochemistry side and in the manufacturing discipline, in the mechanical engineering, and so on. Some of the other operating expenses that we had last year were really some kind of one-time, so we were able to reduce that. Moving forward, I feel, you know, we will add more in Malaysia, but at the same time, we have a lot of, you know, cost in Fremont, which will actually slowly come down also because of our current manufacturing. In that sense, you know, it might actually balance out. You know, at any other, for example, it could be, you know, any other Asian country that we look at, costs are actually much lower that we have seen. Our goal is to actually manage the transition so the OpEx actually doesn't become too high. Excellent. Let me, add, Alex, a couple, like, numbers, one for 2023 and one for the outer years. In 2023, I mentioned we spent $120 million planned for cash on operationally side. There's around $20 million of depreciation and amortization on cash. Keeping OpEx flat is around $80 million OpEx for 2023. On a cost of goods sold side is around 60/40, cash, and $20 million is non-cash. In the outer years, as Raj alluded to, right, the business model hasn't changed. We still expect to have around 20% on operating expenses, runway at, beyond, like, 2024, 2025. Very good. Thanks a lot, guys. Our next question comes from Gus Richard. Yes, thanks for taking the question. Just you wrote off, you know, and took an impairment charge for a piece of equipment, and I'm just wondering, what was the rationale and, you know, how is that related to the ultimate output of line one? Yeah, maybe, Steffen can take that call. Thanks, Gus. Yes. That $4.8 million charge that we took is for a piece of the equipment that we ceased to develop. It has a high, higher UPH than the balanced line has. The line runs here in Fremont is 100 UPH, and that equipment was 600. We don't develop that small portion. We don't expect there's anything to reoccur. Got it. Thanks. Raj, you mentioned in your prepared remarks you had a number of customers that were interested in, you know, either doing JVs or building a factory together or what have you. I was just wondering, you know, as you evaluate those opportunities, what, you know, what are your criterion? You know, is it who you get to bed with? Is it just, you know, purely economics, you know, your percentage of output? How, how are you thinking about those opportunities? Yeah. That's a very good question. Actually, it's the strategic decision for the company that my team and I are focused a lot on. You know, there is customers, there is different governments in Asia that we are actually, as we start thinking about putting lines there that are interested in supporting us. You know, that's a model that they're quite familiar with, without there. We are evaluating multiple countries and, you know, multiple customers. Ultimately, we have to make the decision of the partners, based on what is in line with the strategic direction of the company. The strategic direction of the company is, for me, the way we think about it is, we have now, two standard-sized cells, which are small cell and a big cell, that are going really into Internet of Things market. I think that is something that you will hear us talk more and more because there in those markets, it's not as critical that we are be optimal in size and shape and all that. Our next target is, you know, within that, wearables is a big part of that market, you know, health monitoring and so on. Then there is smartphones, then there's laptops, then there's EV. That's the direction and order in which, we feel our technology will scale. When we pick our partners, we want to pick them in that particular in line with that strategy and not deviate from that. That will take us, you know, away from what's core to us. That's kinda how we are looking at it. Again, I think, it's more about, you know, making sure our technology is a good fit based on where our current technology is, and it's a good fit for the markets where we're going into. Got it. Thank you. Our next question is from George Gianarikas. Hi. Good afternoon. Thanks for taking my question. you know, Raj, I'd like to just ask you, like, you've been now at the firm for a month or so, and, curious as to if you could share any detail on the things that you've seen that you can improve upon or any processes, any methodologies that were implemented in the past that you're bringing, fresh eyes to, through your experience. Thanks. Yeah, absolutely. I think, you know, firstly, I'm actually unbelievably impressed with the technology and how differentiated the technology is. You know, it's not often you find a technology where you're that much better than the competition in terms of performance numbers and that much unique in the architecture that is hard to replicate. It took us a long time to get here, almost 16 years. You know, it took us a lot of effort to actually get these mechanical constraints done. We have sustainable differentiation, I feel, and there's a lot of stuff in the pipeline that will make the technology even better in terms of, you know, we talked about energy density, we talked about cycles, and so on. That part has been very pleasantly surprising. The parts that I bring is really the external and the customer focus. Because I've my whole career has been working with customers who make varying kinds of products, you know, cameras, you know, MP3 players, DVD players, smartphones, wearables, IoT devices, laptops, cars. I bring that customer-first mindset. What I find is that when you're able to understand what the customer is trying to do with this technology, it gives you a view of what exactly our product should look like to fit in their product, right? You know, we're not making, you know, AA batteries, right? That's not what we are making. This business is not about making one-size-fits-all batteries. We really have to, you know, have the structures and processes in place. When there's so much interest from different customers, which ones do we pick? Which markets do we go after first? Which ones do we go after next? How do we scale up? How do we build manufacturing capability, which is tightly you know, matched to the supply and the demand we are getting? That's the areas that I'm really focused on. That's where I feel the company really needs more strategic direction. Particularly when the demand is so secular for batteries, it's important, just as important what we don't do first as what we do first, you know? Thanks. As a follow-up, speaking of those customers, you know, as you engage with them further, as you had conversations, I'm sure, with them before you got to Enovix, what are the competitive products, if any, that you're bumping up against? I mean, is there anyone out there that offers anything close to what you do in terms of performance characteristics and potential for ramp? I mean, what I've learned is pretty much we are competing with the traditional battery technologies that exist today, standard lithium-ion batteries. There is no one that I've bumped into that our customers have talked about that would use something like a silicon anode, for example, that we are doing or the energy density that we are providing. It's very, very unique in its capability. Most of the places, we are actually, you know, trying to replace an incumbent that's the standard lithium-ion battery that exists today, which, you know, was invented some time back. It's truly revolutionary in that sense. You know, we have to adapt our technology to that particular customer form factor to get it to production. Thanks. Our next question comes from Anthony Stoss. Please unmute by pressing star six. Thank you. Anthony Stoss, when you're ready, please unmute by pressing star six. We will move on to Derek Soderberg. Please unmute and ask your question. Yeah. Hey, guys. Thanks for taking my questions. Raj, I wanted to touch on yield. I think that number exiting the year was 42.9. Can you give us a yield number today? You know, in the January presentation, you talked about yield sort of following the S-curve. Just looking at the yield today, is it still on that curve? Is it tracking better or worse? Any detail on, you know, how yield is tracking since January would be helpful. Yeah. As we mentioned, the yields are tracking down the S-curve, and absolutely, they are in line, with where we expected it to be, and we are steadily making progress in that front. I'm pretty confident that, you know, at the rate at which we are making progress, we will get to our 180,000 batteries number. Clearly, again, I'm not gonna break down yields at this factory this month and so on, because a lot of factors involved in that. Really, what I'm super excited by is we will be able to hit the number of cells we want. The learning from that, will actually make sure that the Gen2 we build will be at much, much higher yield right off the bat, which is really the number that matters because that's where we're really gonna ramp majority of our production. So far, I'm pretty happy with what I see. Ajay and his team have done a very nice job. Got it. As my follow-up, on the shareholder letter, there was some commentary around enhancing cycle life. I think you guys are at 500 cycles for the consumer applications batteries. You know, you talked about working with new electrolytes and things like that. I'm wondering how we should interpret that commentary. Is this something that your customers are asking for? How should we think about that? Thanks. Yeah. You know, I think different products need different cycle lives. Like for example, battery in a wearable needs certain cycle life, batteries in, you know, phones need a different cycle life, and batteries in laptops, different cycle life. We have to continue to improve that, and we are working on improving that. We have a lot of ideas, a lot of techniques, a lot of experiments going on to do that. I do also want to say the important thing is, you know, as I come into this business, you know, to me, cycle life, and also like, you know, energy density is kinda like asking, what is the clock speed of your Snapdragon processor? You know, it's just one number. That doesn't really translate to how good is your camera, for example. Because, you know, nobody. The way we measure cycle life is to charge it fully to the top and take it all the way down and fully to the top, and nobody actually does that. If you actually only charge it halfway, because most of us, when you use a phone or a watch or whatever, when you see it running low out of charge, you start charging it. Sometimes you may not charge it all the way. We do have to continue to improve the cycle life, and we are. More importantly, to me, the exciting part is as we work with the customers, they're actually telling us how they use the battery and the test they're performing to make sure the battery fits their application, and we are customizing to meet that requirement. I think that is kind of the key. We will now come back to Anthony Stoss. Please unmute by pressing star six. Sorry, all my questions have been answered. Thank you. We will then move on to Marc Cohodes. Please unmute yourself. Thank you. Thanks for taking my question. He doesn't have any questions, I guess I'll add a few. First of all, Raj, congratulations. You're gonna become a very, very, very wealthy man over the next decade. My real question, since it was such a big issue on TJ's call about having to raise money, can you elaborate on interest from your partners in helping you build facilities and governments? I assume Ajay's over in Asia speaking with governments as well as customers in building a facility. Can you get into a little more detail, Raj, about the interest of helping you fund this? Yeah. Thank you. Thank you for your question, and thank you for your comments. You know, it's a little early to precisely comment on that because, you know, we are in the middle of these negotiations and multiple ones, and I really don't want to, you know, get in the middle of that negotiation that Ajay is doing. I'll give you a couple of comments on how these things usually work with my past experience in building these set of factories in Asia and so on. Many governments actually like to help companies build out manufacturing facilities there, either by helping with the facility, facilitization or paying for a line or two. Because, you know, it provides employment, and they also get a, you know, great return on their investment later on. There's multiple opportunities for that. For the customer side, typically what customers want is they like our technology and they feel it's very exciting, but they worry whether they'll have enough volume for production when they go to high volume, because some of these are high volume lines. They like to reserve some capacity, for example. That's where they like to help us build, but they want some, you know, reserved capacity. Those are the kind of the variables that we are looking at, and that's why it's very important that we make this decision carefully because there's a lot of interest in the technology, and we want to pick the right partner. Hopefully I'll be able to comment on that more in time. What do you think is behind the dynamic of your design wins and your backlog going up with production being below where initially it was stated? It seems like people are more excited than less excited, even as these push outs have occurred. Can you square that a little bit on what you see? Absolutely. It's actually very simple. We've had... This company has had great technology and a few batteries that we were able to give, and what everybody saw was super exciting. We gave, like, a, you know, couple of cells here, half a dozen cells to somebody, and they're all super happy. For them to really consider designing, they needed hundreds and thousands of cells, which we've never been able to do. You know, as Ajay and his team and as all our investments in Fab1 are starting to, you know, materialize, we're able to produce thousands of batteries. Now as we produce thousands of batteries, the customer are able to put them in their products and test them, and that is increasing the design. It's really a question of just satisfying that early sample requirement, that's helping us. You're able to satisfy everyone now? I wouldn't say everyone, but as many Ralph wouldn't be too happy if I said everyone. There's still a lot of demand, but definitely much better than we were. Ralph's got more happy customers than he's done in a long time. Okay. Thank you very much. Yeah, my pleasure. Next up, we have a question from Christopher Souther. Hey, guys. Thanks for taking my question here. I'm just curious, with the 180,000 batteries for revenue this year, can you give a split between, you know, they're going into kind of end products versus, you know, testing with different customers? Just wanna get a sense of, you know, what the full year demand is for, you know, the testing, if you have any sense of that. Yeah. I mean, I, we're not really breaking them exactly that way because all of them, I can say this much, all of them are actually products that customers are paying for. Sometimes they'll be in high volume production, sometime maybe in the early stage of production, pre-production lines and so on. Those are basically production cells. Ralph, you wanna comment on that? Is that accurate? Yeah. I think that's fairly accurate. Is, you know, we've got some products we believe will launch this year, and they're fairly lower volumes, you know, in the, in the grand scheme of things. We've worked closely with customers to try to, you know, say prime the pumps effectively so that we go into 2024 and start really ramping into much higher volumes. You know, if I were to put a slight on it is, you know, probably about half the cells are gonna at least be in some sort of product that you're, you know, hopefully gonna be able to get in the market. Of course, you know, it's always reliant on when a customer can actually release those products. Yeah. Thank you. No, understood. That's helpful. And then maybe just last one. You know, in the letter you talk about, you know, proof of concept demonstrations. You know, can you talk through confidence of the 13 head changes you highlighted on the January call? I'm just curious if, you know, there were any changes since the, that call to those, you know, different pieces that seem to be the higher risk areas. And, you know, what, if anything, do we really need to do to validate the plans between now and mid-March? Thanks. Absolutely. Maybe Ajay, you should take this one. You're living and breathing this every day. Absolutely. Good question again. Yes, we are currently absolutely right on track for that UPH that you just talked about, 1350 UPH, and all the equipment. There were some high-risk areas which we had pointed out, you know, earlier. We double drove them in some cases. Most all of the proofs of concepts now are leading to believe that, you know, we are gonna get that UPH. That's great. Thanks. Our next question comes from Sean Milligan. Hey, guys. Thanks for taking my question. I guess Marc asked earlier about outside funding or funding from customers and governments. Trying to understand here, obviously you have a lot of confidence in the Gen2 design, with the idea that you're gonna add additional lines next year. You know, what do customers or funding, you know, parties need to see in terms of Gen2 design, to be willing to fund that? Do they need to see the production coming off the line first, or are they willing to do that ahead of time? Yeah. Good question. I think different funding partners are in different stages of that. Like I said, in some cases, if it is kinda like governments, then they just want to know that, you know, we do have the demand and, you know, we will be successful with this, they want to invest ahead. They're okay. If it's more like customers, then they'd like to see some piece of equipment running or get some samples from it and so on. Different people have different stages of that, and I really hope that I'll be able to communicate better next time. I'm kind of cautiously trying not to say much about it because we are in the middle of these negotiations, and it's never good to talk about it now. Okay, great. Thank you. There are no further questions at this time. With that, I'd like to turn it over to Raj for closing remarks. Yeah, I mean, absolutely. Thank you all for this, time, and thank you for, listening to us and your support of Enovix. Fantastic company. Super excited to be here. I want to, you know, take a few seconds to thank all the employees at Enovix. I mean, it's a fantastic place to work. People come in real early and work really hard and long hours. A big shout-out to the founders who built this company. You'll hear more and more from me in every quarter and as I get to see you guys more as I travel. Thank you.