Welcome to today's program, a special presentation by Enovix Corporation Executive Chairman, T.J. Rodgers. After the presentation, there'll be a Q&A session featuring Enovix management. With that, I'd like to turn over the call to T.J. Rodgers to begin. Please go ahead, sir. Hi, my name is T.J. Rodgers. I'm the Chairman of Enovix, and I'm here to make a special presentation to shareholders that was promised about a month and a half ago. I have two guests today. three guests today. In order from the far side, Ralph Schmitt is their VP of Marketing and Sales. Ajay Marathe, who's the new COO, and Raj Talluri, who's the will be the CEO shortly. I'm gonna introduce them in detail in the talk, so I won't do more than say hello now. Ready? Okay. Okay. If I had one symbol that would picture why we're here today, it would be this one. This is off my cell phone. It is a reaction, you know, at 8:00 on November 2nd, the day after we made our November 1st Q3 earnings call. This is about as perfect a picture as the investors are unhappy as you can come up with. Yeah, I'm here to talk about that today. It started out, I asked our CFO, "What did you say? I want the exact words from the transcript. I don't want to get some text." I got this: "We expect Fab-1 improvement activities to extend into 2023, but at a slower rate given the decision to redirect resources to Gen2. Given this, we expect to exit 2023 at a run rate of under 1 million battery cells produced from the Gen1 equipment in Fab-1. There is opportunity for significant outperformance depending on the timing of the completion of ongoing Fab-1 improvement projects." I read that and I said, "I don't get it." I read it again and I didn't get it. I finally was saying, "Okay, what did you say?" It started to make it clear one of the reasons why we had this precipitous drop. The next thought I had was, I often say this, inglés por favor, and we will do inglés in the future on these calls. No more scripts, no more lawyers, people in a room telling you what's going on. Okay. One thing I've got, when you see a box like this in this presentation, it's a quote from a shareholder. This is a quote that I picked to represent this image here. People are openly questioning if the product is manufacturable." Indeed, you know Charlie Anderson, he's our IR guy. I asked him to give me a memo on accurate shareholder feedback, he withheld names so I could use quotes. By the way, this goes on for 7 pages. The first page is interesting. After that, it gets a little wearing on you. "People are openly questioning if the product is manufacturable." These are from top 10 institutional shareholders, big guys. "We're lucky to be at $10. Revenue in 2023 is supposed to be $176 million. Now it's $8 million." "When you can't name where Fab -2 is going to be, it appears you have no plan." "This should be like a biotech. There's a set schedule that everyone can understand with identifiable milestones, and you can update us on the milestones as they are met or not met." From another shareholder, "The problem with your message is that we don't know how to walk, but trust us, we can run." Okay, well, let's say the shareholders challenged us here. Frankly, I don't disagree with any of these, and that's what I'm here to talk about today. Shortly after the crash, I was appointed Executive Chairman. As chairman, I would come here once a month plus other meetings and sit in the boardroom and complain. As the Executive Chairman, now I come in every day and complain. I'll do that for about another few weeks and then I'll go back to my old job. I came in and said that the board was gonna help. Our board has, by design, several successful operating executives who are committed to spend whatever time is required at Enovix to ensure the company's operational success. We are Silicon and Moore's Law operations people and comprehend a sea change opportunity in Enovix that its technology offers. I'd like to point out that the three gentlemen I just introduced here are all Silicon executives. Former Silicon executives. We're going to infuse Enovix with a Silicon industry mindset. I think that industry has been exemplary in the way it has transformed the entire world and grown, you know, over $300 billion. The mindsets that is required to survive in the Silicon industry will be in the future, required to survive in batteries. Okay, I outlined in that same press release, I outlined three problems. The lack of clear and transparent investor communications. I do wanna point out that I've worked with Enovix for 10 years and Harold and his team, and it's always been honest. I'll show you where the problems are in communication that led some of our investors to say we're outright dishonest with them. I don't think that's true. I think they were reasonably misled, but I don't think it was deliberate. Problem 2, the delay in projected underperformance of Fab-1. That was that 1st quote I gave you. I said here for the record in this bold press release, Fab-1 is going to work and ship a lot of batteries to our customers, period. The third problem, the delay of the Gen2 auto line, that's our engine of copy exact, to use the Intel term, of how we're gonna scale the company up. The Gen2 line is that line. Gonna discuss those three things. I'd like to make a couple other points. We've got $349 million of your dollars left in the bank, and that money's going to produce world-record batteries out of Fab-1, and it's gonna create the first Gen2 auto line. We don't need any more help to get at least that far. At the end, I reread the press release, and I put in a line. I said, "By the way, the next battery ship from Fab-1 will be serial number 4163 with 0 returns, and I'm proud of that." my days when you got first silicon and then you got your first samples, and then you sold them to your first customers, all those were bragging events. For some reason, I don't know why, that's the very first time we ever said how many cells we have shipped. I'll tell you why in a few minutes. It is pretty evident. Today, as I sit here, the cumulative number of batteries now shipped is 8,812 through Q4, and we expect to double our shipments every quarter. You can say that's small, they're twice as small, but I can tell you start doubling 88 12 and you see how long it takes you to get to a number that does have meaning at $10 a battery. We took Enovix public with a SPAC, I've got a few slides from the SPAC investor presentation here, in order to tell you about us and how we think about Enovix. First of all, the crash to $10.74 is our fault too. After all, our SPAC sold you stock, although it's up, our investors are, some of them, quite unhappy, and I think they have good reason. We'll talk about that today. Again, this is the SPAC S1 presentation. Our SPAC bragged about Enphase, our success at Enphase. In this case, the stock price graph of Enphase over the last few years with a market cap of $18 billion. I came on the board of Enphase as a favor to Kleiner Perkins that then invested in my company in 2017. A few months later, I took this ex-Cypress guy, silicon guy, and asked him to be COO, and he accepted. Almost a year later, the same guy who'd done an outstanding job as COO was promoted to president. That's kind of the story. Get a good silicon guy and get him in there and start changing the culture. I'm trying to replicate that story here. We bragged about our Cypress chip auto lines to investors to sell stock that eventually went to Enovix. Here we see an auto line. These are wire bonders. That's die attachers, wire bonders. That's a mold in that machine there. This machine is 50 meters long. It goes through the wall to the other side. This was my personal project. That is, I ran the weekly meeting for this, and we built 10 fully automated lines that took chips on blue tape and took them all the way out to put them on tape and reel with a shipping label on them. We built 10 of those lines, and that was the back end of Cypress. I was tired of dealing with manual assembly in Asia. Line 1, just for your information, ran 3,600 UPH. By the time we got Line 10 done about 2 or 3 years later, it was up to 10,000 UPH. What we're doing has been done before. This is the first example. We also bragged in our SPAC about SunPower. SunPower, the company that made black panels at a higher wattage than its competitors. That, by the way, is my schoolmate, Dick Swanson, who's the CEO of SunPower, and that's the roof of Cypress Semiconductor there. We bragged about the second set of auto lines. These are the auto lines that ran silicon wafers. It took us only 5 months from install to silicon. It took us only 11 months to go from 10% to 90% yield. This was a good record, and we actually modeled. Perhaps one of our problems. We actually modeled our plan at Enovix after this plan. We also bragged about the complexity of the SunPower auto line, having to include diffusion and in this case right there, sputtering aluminum ti-tungsten and copper. So this was a complex auto line. We also told people about SunPower's low-cost plant they got in Manila to house the auto lines and the people that did it. Minh Pham, we'll talk about later, but ran manufacturing at Cypress Semiconductor Corporation and did the silicon auto lines I showed you. Manny Hernandez, who was the IPO CFO of SunPower, and Greg Reichow, who's the Cypress Semiconductor Corporation engineer who we transferred to run the auto lines at SunPower. We deployed four silicon industry executives to watch over Enovix. This is at the beginning. So the board included me, Manny, Dan McCranie, and Greg Reichow. I'll talk about these guys later. Then we gave the S-1 criteria for the target company, meaning this was an official document submitted to the SEC. What were we trying to find? At that time, Enovix had not been identified as the target and was one of several. I'll go quickly through the grading. Public company readiness. To me, that one's still, that one's still out to vote. A technically dominant product. We absolutely have it. Customer endorsements, we have them. I'll give you some more data today. We've been too sparing, I think, on data about customers. Where did we run into problems? Decision-making, making decisions and moving on. Taking responsibility for problems. These are cultural problems that we're working on that is one of the reasons I'm talking about a silicon shift here. A culture that speaks and writes precisely. You know more about that than I do 'cause you've been on the wrong end of it. A culture that is passionate about delivering results, which they are, world-class batteries, but not necessarily on time. Every fuel cell and/or battery company I've ever dealt with, and that's been four now, have the attitude, we're working on something that's very hard to do, and therefore takes a little more time, and we always get surprised. We'll, we'll get there when we get there, and of course, that doesn't work for a public company. A culture that respects capital. Enovix is a tight company. They don't spend money. They don't fly first class or anything stupid like that. They're not tight with capital, and they don't have the respect for capital they should. I failed to get ground there. Talk more about that later. A company that is impatient with delays in new products or initiatives. We won't tolerate being late with our new product. We won't tolerate being late on the yield curve. These are the things that we're working to change right now. Finishing that list, we were looking for somebody with a dominant share in a growing medium-sized market. Check. We've got it. We don't wanna be a tiny player in a huge market. We wanna dominate a market, in this case, for portable electronics. We're looking for a second product on schedule, so you don't get a one-product wonder company. They've done that. Silicon Valley company and a formal plan to meet street expectations. Okay, this is the formal plan to meet street expectations. It was. This is the s-merger with the SPAC. This meant, this meant that it was the PIPE plan, the plan that we gave to investors. Harold signed it. This is back in 2021, in February 2021, I signed it. Then in a relatively formal ceremony, we dragged everybody into the boardroom, all the VPs, anybody that had an important number in this plan, and we said, "We want you to sign it, and we're gonna bring this plan out with your signature on it later if it doesn't work out." In retrospect, that maybe is a little bit too heavy-handed. Worked in the silicon world. What happened, it created fear of failure. Oh, my God. What if we don't make the plan? It's really gonna happen. That led to a slowdown of decisions and defensive communication, which you're all aware about, aware of. My fingerprints, my method of making people accountable are on this culture problem we have as well. It's not just their problem. This is the PIPE plan that we gave to investors, exact copy of the plan. All you have to do is look at a few numbers on here to understand what the problem was. First of all, 2021 revenue NRE, we footnoted it, non-recurring revenue. We told everybody we would get that. By the way, I don't wanna, I'm not gonna talk about NRE revenue today because we will become real by making and shipping product. NRE revenue is very important 'cause that means some company's giving us $1 million or $2 million or $5 million to make batteries for them, a custom battery, or to guarantee future capacity. It's important, but not at the expense of shipping product revenue. We had a debate. I remember the debate well in the boardroom when we said, "Should we put the footnote in 2022? Should we say it's gonna be a mix of product revenue?" At that time, we felt it would be more product revenue than not. We decided not to put the footnote in and simply to report revenue as an aggregate. It was against my advice. I, again, was the chairman, not the executive chairman. If I had my life to go over again, that little 2 would be in the 11, and we'd not be having this meeting right now. Okay, bam, revenue growth of $176 million. That was in the quote. The assumption there is Fab-1, where I'm sitting right now, people making batteries behind me, would have 4 lines running, and they would run at a certain efficiency, and that efficiency would ramp, et cetera. When you're sitting back in February this year, and you're looking forward and say, "Gee, that's 2 and a half years away, before the 3rd and 4th quarter of 2023, we should be able to get that done." We signed up for that, and that was that blue plan I just showed you. What happened? The lines didn't work. They became manual. We have 194 operators, way above our plan. We have over 80 yield engineers, again, above our plan. We spent $80 million instead of $34 million. I'm not apologizing for that. We're doing what we have to do to be successful. This is the first obvious big problem after this one. The benefit was on CapEx, we're supposed to spend $117 million, we spent half of that. The reason we spent half of that is the machines didn't work the way we wanted, and I refused to replicate the equipment that wasn't gonna make the standard required for us to be successful. That simple. There we had a problem, I call money poisoning. When startups that have been grubbing for money for years, all of a sudden get a few hundred million in the bank, they sometimes think they can buy their way out, and they can't. You cannot replicate equipment that doesn't work perfectly and spend a lot of money and hope it's gonna happen. I hope investors. I get asked, "When are you gonna take money? You need money. You may have a liquidity problem." I keep getting pushed by investors. We'll ask you for money. I'll tell you when we're gonna ask you for money later on. Right now, money is not our problem. Execution's our problem. The, the quote I've got there is, "You can't buy your way in. If you wanna be a company, you have to be a company. You can't buy one. You can buy a company, but you can't buy your way into being one." By analogy, we have to walk into the ring alone for a 51 heavyweight fight, and we have to walk out of that ring. That's what we have to do. The best analogy I know for that is this one right here. You have to get up at 4:00 A.M. You have to have your breakfast in 3 minutes, have your eggs, get your protein, and get out and run and start working at 4:00 A.M. That's what we have to do as a company. Not get more money from our investors and spend it. This is what we're working on right now that I've been talking about. SPAC provided a good board with relevant knowledge. Greg Reichow built and ran the solar cell plant at SunPower, the one I showed you. He built and ran the Tesla Fremont plant. Obviously a great guy to have on your board. Dan McCranie. Again, I've got a, this is a slide from our SPAC pitch. I've only outlined a couple critical points. McCranie has been on 10 semiconductor boards. He averages 6 years of tenure, and 6 of his boards involve significant restructuring, so he tends to go to companies that need help and help fix them up. Manny Hernandez was the CFO of both Cypress and SunPower at their IPO. He ran their IPO and created their financial structure, so he obviously is a great guy to have on the board. He also, by the way, de-SPAC'd us in record time. For me, if I go through my resume, the things that matter, we did our IPO 37 months after a Series A funding, 3 years and 1 month, and we built the Fab and got it running and got to profitability during that period of time. What I bring here is an insistence of getting things done quickly, and that is countercultural in some cases to where I am. I also wrote a book called No-Excuses Management, it was a book on the business processes that were used at Cypress to build a $100 million company from scratch. It's got a whole lot of stuff in it of how to make a system cheaply with Excel and PowerPoint to get something done before you can afford Oracle or whatever bigger system you're gonna have. I wanna point out to you that the board was active. A lot of people wrote me letters, some of them pretty hot. I want everybody to know that we were active. We started addressing the pipe plan, this, the big one, on August of 2022. On 8/5, we discussed the CEO change. I've always had an open relationship with Harold, I went in and told him, I said, "Harold, the board talked about what if, you know, what if you don't make it?" First time ever, I kept open with him for the entire process. We launched the COO hiring. I first tried to get Minh Pham, that didn't work out. Ajay was a great catch, I'm equally happy. We discussed on 10/3, we discussed the mechanism for a CEO change. I talked again to Harold. I took over the COO search, which was going slowly through the bureaucracy, and I went through my first interview on the telephone to an offer, to an acceptance, to a press release, which I wrote myself, getting AJ, Ajay here. Again, I'll show you his resume later. We had the big drop, we launched a formal search for a CEO. In that case, the board said, "Look, our job is to do what's right for our shareholders, and we obviously have to look at our options now." I agreed to that, and Harold and I worked on that. In my case, when I became the executive chair, I looked at it as the beauty contest. Harold was my candidate. McCraney was out looking at external candidates, and we were trying to find the best option for the company. Now, some of you may be saying, "Well, you know, really? That does sound credible." It is credible as I'll show you in a minute. We got Ajay landed, okay? That was in October, in November 10th. Just a few days, Christmas Eve, actually, we got a vote to hire Raj as CEO. In the beauty contest, this guy's resume, as I'll show you, glows in the dark. It was really fortunate for us to find him. Harold was one candidate. Let me just remind you, if I showed you his resume and said, "Would you work with this guy?" BS in mechanical engineering, MS from Stanford. Ran a company called. He was in a company called FormFactor, ran operations in FormFactor. They IPO'd, they got big, they were the premier probe card maker in the world out of Livermore. Comes from IBM, ran a disk drive fab, real engineer, 94 patents, 63 more patent. Co-founded Nanovate, raised $789 million. The current market cap of our company, which we'd like to raise, is still $1.9 billion. Like, I just tell you, if this resume floated down Sand Hill, it would get grabbed before it got to the Stanford Shopping Center. I came out as the Executive Chairman, with a set of principles, like, I want a plan, and I want the plan to follow this format. I wasn't trying to dictate the plan, but I was trying to make sure the plan fit into what the company needed. Pretty straightforward. I was ripe, and it was late, and I said, "I want to review the plan on the 1/26 board meeting." We are on schedule for that, and we're actually through a couple of drafts. By the way, I revised this a couple of times, and the gray font here is from the revision. The major assumptions, the AOP must be clearly stated in writing. It turns out that was more difficult than I thought because that clear thinking committed to writing is, it hadn't happened. The AOP financials and milestones should have 80% achievability. This is your meet and beat number where I don't want an AOP that is great the day you put it out, then it's the most dreaded thing in the world, like that plan I showed you before when you actually get there. Okay, EPR-PCR system, 1 bit of jargon. Equipment Procurement Review, Process Change Review. This is how you develop equipment, and this is how you measure the process. They're co-developed. This is a Cypress system that was used to develop Moore's Law technology. Again, you go back to semiconductors. Every 2 years, your technology becomes obsolete in Moore's Law. You live in a culture that says, "I have to be somewhere in 2 years." The other cultures, it's not just batteries and fuel cells, go, "Well, you know, we've been working 4 years, and this technology is really great." This is. The, and the thought that the Grim Reaper is only two years out there doesn't cross their mind. That's one thing I find about silicon people in my other companies. This system is a formal system that turned multiple turns to develop multiple generations of Moore's Law. It really does work. It's complex. It takes a lot of time. That's because you gotta do a lot of stuff to build a new generation fab. I said the EPR. I'll call it EPR in this presentation. I want it specified and signed by me before any more POs are placed. I put the kibosh on POs. All manufacturing equipment must be compliant with EPR- PCR. I warn people because there had been some gaming. People not here anymore. There had been some gaming. Gaming the EPR-PCR spec, going through the actions and the form, but not doing the substance, will result in termination. Fab-1 must become economically important. Not necessarily profitable. We have a small Fab in Fremont, California. It has to be economically important. I define that as $1 million or more in revenue. I want a customer to disclose that our batteries enable the product. Our watch, cell phone, whatever, couldn't do what it does without the Enovix battery in it. It wouldn't be as safe as it would be otherwise without the Enovix battery with BrakeFlow in it. I want some customer to like us enough that they'll come out publicly that. That's a guideline for the plan. Fab-1 must create and remain on a detailed board-approved annual operating plan, AOP, manufacturing plan. We're working on that now. Fab-2 must demonstrate economic viability to the board before it's launched. There are many, many comments about you don't know Fab-2, you haven't said where Fab-2's gonna be. We bounced around between Utah and Arizona and Texas. Just to give you a foreshadowing of what I'm gonna say, it's because we couldn't find a way to make batteries in the United States to make a company that had 20% profit. That was never our plan. Our original plan was like SunPower. SunPower put its wafer fabrication plant in the Philippines, Southeast Asia. That was our original plan. We decided we're gonna put Fab-1 here, engineers being close, all the standard arguments. We're now talking about the production fab. We'll talk more about that later, but the point is, that is gonna be life or death, and it better work right, and it better be cheap, and it better have high yield and make a lot of batteries. Gen 2, this is our second generation line, must work, and there again, I'm saying compliant to the system, as agreed in writing by Minh Pham. He's a real stickler on this 200-page spec. Must follow the spec line by line. I did not have enough time to literally spend the weeks here it would have taken to go over EPR-PCR. Besides that, he's better at it than I am. We've hired him. That's what he's doing for us. Before the board approves any POs, Gen2 equipment owners will prove to the board that they've embedded all the learning from Gen1. Gen1's not working the way we want it to. I'm gonna explain that in detail in a few minutes. Gen2 can't have any of those problems, and you have to prove to the board that. The company will prioritize putting BrakeFlow. You may have seen the video, it's on our website, of our, of our safety device, which prevents or at least limits greatly battery fires as quickly as possible and on the Gen2 line. I added that in later. Finally, something that looks arcane, it's really quite important. All R&D projects must have specified new technology plans and be currently on schedule and fully staffed. A new technology plan is a silicon thing. All silicon companies have. It's a chip plant. I wanna make a chip. It's gonna cost $8 million. Here's how many people I need. Here's how long it's gonna take. Here's my phase gate plan for milestones. Here's the ROI. No chip company would launch a chip without that. I wanna get all of our projects here, we only have 5 right now, all of our projects here on a new technology plan. So they're all lined up and linked up, and that's a problem. Short form, make Fab-1 start shipping, get Gen2 line to work for real, and make R&D more productive with new technology plans. I put the afterburner on getting Ajay Marathe in. Master's degree in IE from Texas Tech. AMD, 22 years. I met him at AMD. I actually tried to hire him out of AMD, and they promoted him to an equivalent job to the one I was using to hire him, and I didn't get him at Cypress. Ran the Thailand plant, which is 6 million units a week, and we wanted a guy who does 6 million units a week and thinks that's normal in the company. VP of ops for computation products. They had him run a business. This is the one that competed head-up with Intel. VP of ops for Asian assembly and tests. That was all of Asia, 4 plants. His last job there was CEO of AMD India, which is their LLC that was the representative in India. After a bunch of time at AMD, he was 10 years at Lumileds, as COO, the lighting company, and at Western Digital, also running operations at the big data storage company. One of the best manufacturing guys I've run into for a long time, comparable to my guy that I bragged about earlier. We were very happy to get him. That's why I accelerated his offer. Ajay has come. This is his 49th day. I explained to him yesterday that the 49 days are the free days when he inherits other people's problem. On day 50, they become his problem. In his last day of freedom, here's what he's found in his first 49th days. Thank you, T.J. Very quickly, I've, in the 38 years I've been in the industry, here mostly and all in silicon, working for AMD, many of you might have forgotten we started that 82, 86, which is the heart of any personal computer. I've handled that ramp all the way from there to its generation microprocessor exceeding the 1st GHz. All those ramps were similar in nature, vertically straight up, yields not looking good, focus on all the elements, you know, which is not rocket science, which are given here. Ownership and accountability. Every rejected units, every down machine needs to have an owner. That's, you know, we have already started this. These are list of 8 or 10 initiatives which we have already begun on. Machine-centric yield plans. Again, not rocket science. Specific actions with co-owners. This is all about maintenance, engineering, operations coexisting, working on problems real-time with full ownership and accountability and transparency. Cost of non-quality program. This is something you detect problems early so that they don't accumulate cost and later on get rejected with a much higher cost. Drive down the value of the scrap units. Again, you might say not rocket science, but operations is not about rocket science. Neither it is about battery science. It is about discipline. It is about hard-nosed blocking, tackling, and working on these issues. Design for manufacturability. Balance the yields with tolerances without compromising performance, without having quality issues. Whip count, discipline on MES. MES is the manufacturing execution system. Every unit is accounted for. It's either gets shipped to a customer or scrapped and accounted for with the owner. The Japanese 5S cleanliness order program. Again, nothing rocket science. It's very well documented. The 5S as in sort, straighten, standardize, shine, and then sustain. Added to that is safety, obviously. As I was walking up the stairs today, I forgot to add the sixth S. Actually, it should be 6S program. That's what we are implementing full-blown. World-class supplier program, again, not new to the semiconductor industry. Having senior executives on speed dials from the suppliers who you depend on every day to supply you good parts, so that you never run into a problem after what they supply is here in our premises. I'm a huge not a fan of incoming quality inspection. Those are gates which are unnecessary, but for that, you need a really good supply network which you can depend on. The limited remote work as much as possible. In this day and age, we are getting used to that back again, but I'm a huge fan of everybody comes to work every day. We are a manufacturing operation. You don't work remotely and be effective. We'll be working on that very rigorously. While we are at it, we reorganized manufacturing already, removed one of the layers, re-reduced the number of managers who had the title of managers, but really didn't manage anybody, or maybe one or two people, we combined that. This is not just to take care of cost, structure, infrastructure. This has to be all about, you know, significantly improved communication between the top and all the way to the bottom. Every single operator needs to feel responsible for the goals that, you know, T.J. just highlighted in the initial part of his presentation. While we are doing this, we're gonna double the output, as T.J. said, from last quarter to this quarter and keep doubling it and exceeding that every quarter thereon. Those are my first 49 days. Again, like T.J. said, these are all my problems starting today. Actually, what I've been brought up with, they're once, day one, they're my problems, so. We have a great team here, which is working well together. Thank you. Okay, continuing on. I did some manufacturing guiding principles also. This is an important slide for investors because it's got a lot of the answers to questions in it that you've been asking. First, a couple of terms. Proof Of Concept, PoC. It's a process to make equipment heads. Heads are the steel things that touch the product, and you have to show they work with proof of concept. They have to be validated that they do stacking and laser, et cetera. Then they get automated. You can think of a machine as being heads, like, over 100 of them, in automation, for example, a conveyor belt, and I'll talk about that later. Some terms we've used and not with enough definition in our press releases. Quote, R&D line. It's an existing Fremont line. It's actually down below us here. Makes 20 batteries today, and it uses Line 1 PoC proof of concept equipment. That is the very same heads used in manufacturing is used in the R&D line. Line 1 is the one we brought in in the airplane. It's a Fremont wearables line, meaning makes small batteries, uses the same heads, but it's non-functional for automation point of view. That means this rated capacity of 550 UPH is really more like 100, and obviously that wreaks havoc with output and promises. Line 1 is going to make 180,000 full production revenue quality units in 2023. There'll be a mixture of the TAM cells, the wearable cells that sell for $5, and the bigger cell phone batteries that sell for $10. We will continue. Line 1 will continue to be used for pro-production in the future. This is a shareholder comment. Again, I thought it was very relevant, so I brought it in here. I would actually like to see you run all out for Gen 1, no matter what it costs to get higher volume. So be it. Even if you did it in a terrible cost structure, you could prove you can manufacture. I don't care if you have to build them by hand. You're absolutely right. Matter of fact, board quality comment, send me your name, and make an application. Yield in Line 1, 0 for 4 months. Scary. I'll talk about this later. It's 42.5% as we sit here, that's a real number, a rolling average, we're gonna get to 60% by the end of the year. Line 2 is in Fab -1. It's only a partial line. We only built half the line. This is the cell phone battery line, different size battery. We've got the laser cut and stack with PoC equipment, it doesn't have the back end, the bagging. We did that because we didn't wanna commit to the second half of the Line 2 until Line 1 worked. That was the savings of money I showed earlier. Line 2 units will be sealed and tested in the existing Fremont facility. Line 2 will be activated to make 5,600 units this year. When Gen2 turns on, Line 2 will be obsoleted. We will pull the plug and move the next thing into Fab-1 that we need to work on at that time. The Gen2 line uses mainly the same PoC heads that Line 1 does, but it's more parallel and faster. 1,350 UPH. I'll talk more about the credibility of that in a minute. Its nameplate capacity is 9.5 million units a year at 80% OEE. 80% OEE means 80% of the theoretical output if it ran perfectly 24 by 7 every day. That's an achievable number in a good manufacturing line. I've bolded when ramped. One of the problems I have, some investors think, you know, we sign a PO 1, not 1, more like 30, and then a quarter later, you get the machine, and a quarter later, you start printing $100 bills. Not the way it works. These ramps, the first one's gonna take a year. I just bragged about a 50-week ramp for SunPower, and after that, they'll turn on a lot faster. The Gen2 line will go to a new Fab-2 in an existing Southeast Asian low-cost site. It's gonna be offshore because we need to make money in the long haul. That's new and different from what you've seen before. It's consistent with our original plan. We will announce to you what that site is by July 2023. We're having negotiations right now with the various countries in order to get the best deal. By the way, this is the reason right here, this thing hanging over us, that we kept waffling on the Fab-2 site. Design is completed and the Gen 2 line design is completed and will be board approved by March 15th, period. That's the day you're gonna see the approval or earlier. The Gen 2 line will be delivered to Fab-2 in November 2023. I validated that number twice today. There will be four Gen 2 lines in Fab-2 by Q4 2024. In other words, that right now we don't know if that's a 4 line site or an 8 or 12 line site. It will be at least 4, and these things will be coming out 1 a quarter. By the way, that's the first time we're gonna need money, 'cause those 3 new lines will be $150 million. There's a thing called the Agility Line. It's pretty simple. It's a new, faster, and Fremont R&D line. It'll be downstairs. It uses the Gen 2 components, so it looks like Gen 2. It can make things quickly, and it'll obsolete our R&D line, which is, you know, old now. On this quote, 'Selecting the Fab-2 location is a powerful thing.' You're absolutely right. By the way, we can wait until July because that July will not delay money. Okay. This is a picture of the line running and we are explaining the line running. This is from our PIPE presentation. Shareholder comment, "The real problem is execution. By my math, Fab-1 is doing less than 10% of what it should be doing." Absolutely right. I wanna explain right now. Fab-1 will make a 3D battery every 2 seconds, and that's 4 lines, meaning 1 every 8 seconds, for 2 lines, for example. Excuse me, 8 seconds for 1 line. Okay, what happens? If you wanna ask which slide you showed in the PIPE presentation exemplifies what went wrong the most, here it is. First of all, the 2 seconds went to 4.1 because we only had 2 lines. I'm giving the second half line, it'll run, it'll make its capacity if we run at high OEE and high UPH. It then goes to 22.5 seconds when we lost the automation and the UPH dropped from 550 to 100. It then went to 72 seconds when the OEE dropped because of the lack of automation and the need to do manual stuff and yield problem. What we started out as a battery every 2 seconds, ended up battery every 72 seconds, a battery a minute, roughly. That's been the problem, and it's got multiple causes. We'll address those in the plan to fix them in a minute. Investor said, "You need to articulate the exact changes between Gen1 and Gen2 and why it doesn't require a miracle to deliver much higher throughput with high yield." You're absolutely right, sir. This is a head. These are anodes. You can tell because there's copper there. The black stuff is silicon. These are stripes that get stacked into a battery. This head is punching them out of the strip where they got made and stacking them. This is a stacker head here. In this case, they're putting. The stacker is putting on the white stuff is the separator piece of plastic. You stack the battery, anode separator, cathode separator, anode separator, et cetera, 100 high. That is one head. After you stack it, there it is, and this is its fixture. When this stack gets moved around the factory, it gets moved in a fixture. I showed you electrode stacking. This is constraint application. Here's where the stack gets the stainless steel wrapped around it. That is part, the integral part of the battery. In interconnect, where in effect, the edges are finished and connected to the leads on the outside. You can see how the heads, one after the other, produce the battery. Heads are what make the battery. Gen2 versus Gen1 is about how many heads there are and how they are transported, not redesigning the heads. That is, Gen2 is not a from scratch redesign for the Gen1 system. Gen2 is about more heads in parallel. There is a little bit of redesign. I'll talk about that in a minute. There's the fixture and the stack. There's the conveyor belt. This is how it moves around the factory. This is a common fixture that handles the battery in the machine, and this is how it moves. By the way, the precision of this belt after what's called a preciser is 100 microns, meaning 0.1 mm is how accurate this belt can place something, and that's not quite good enough for a battery. Here's Gen2 versus Gen1, some parameters. Placement, conveyor belt goes to linear motors, little things that move along and grab on to distancing markers, taking the accuracy from 100-20 microns. Gen2 is wider. In the case it's 3 wide for the laser, 5 wide on Gen2, and up to 12 wide on the baking station, where the bake takes some time, and we need to get through it at speed. Not enough metrology on Gen1. That got fixed on Gen2. Cost on Gen1 was low. Gen2 is higher. The UPH was rated at 550 nameplate. We don't think that machine, if we worked on it forever, would be over 200. We have 1,350 and an obvious question is that real? This means the depreciation per unit is higher on Gen1 than on Gen2. This will be the benefit. The real benefit is Gen2 is gonna work and Gen1 doesn't. Gen1's a manual system. Gen1 has 45 heads on it. Gen2 is 120. Here's the key, is, are you gonna start all over? Only 13 of the 120 heads are completely redesigned. Of those 13 heads, there's only three different types of head. They're used multiple times. This is a graph of Gen2 heads and versus Gen1 heads. Here you see the zones. Let's take the first zone, cathode, anode, separator, laminator. This is cutting the materials before it goes to the battery. We go from three to five lasers on Gen2, and we're also changing the laser power to 1 kilowatt, but it's the same laser from the same vendor with a suped up engine inside of it. We think this is not a big change. Yellow indicates a minor change, but a change. Red indicates a major redesign. In this section, zone 1 and zone 2 of the machine, these are all the steps. The big one is the busbar, VSR. I don't know that one, a slot fill. This is the section where the waves of the battery, the sections of the battery are connected. That's been redesigned. There was nothing in Gen1. The Gen1 equipment, we didn't know how to do it. We didn't order it. That's why we didn't order the second half of Line 2. Now we're doing it. This is obviously a big risk and a big focus. Here's the second half of the line, zone 3, zone 4, zone 5. You can see almost nothing has changed in the second half. The conclusion is, or the request was, you could have a slide that shows all the steps are the same and that this doesn't require total recalibration. I think this illustrates that, but obviously this is a risk. It's gotta work. Okay, I got a quote now. This is from the book The Right Stuff, which changed my life. It was about test pilots and eventually the space program. This particular quote is when the Russians beat us to space for the first astronaut. The relevance of this is, well, Soviet's chief designer was what they were worried about. He had to keep smiling, he being, John Glenn, had to keep smiling and awe-strucking and playing Mr. Modest, just as if it might in fact be he who was going in the top of the rocket on May second, as the first man in the world to risk the mighty shot to space. Then, early in the morning of April 12th, the fabulous but anonymous building of the integral chief designer of Sputnik struck another as cruel but dramatic blows. Just 20 days before the first scheduled Project Mercury flight, he sent a 5-ton Sputnik called Vostok 1 into orbit around the Earth with a man on board. The first cosmonaut, a 27-year-old test pilot named Yuri Gagarin. Vostok 1 completed one orbit, then brought Gagarin down safely on land near the Soviet village of Smelovka. It was as if the Soviet's chief designer, that invisible genius, was toying with them. I'm not gonna pretend that Line 1 didn't have some component in it of design. I felt that, and it wasn't developed right. We hired our chief designer. When he came into the boardroom, he'll remember, I got out my cell phone and I pulled up a song from 1969, the keywords of which were, "Where were you when we needed you?" I played it for him in the boardroom. The guys were smiling. I'm gonna give you our unnamed chief designer because I don't want anybody to know who he is. That's our guy right there. He's a former member of Romanian Naval Special Forces, and he is not going to fail. He's a good designer, anonymous. Milestones. This is 1 thing that will be signed in the plan, all 3 of us. I checked on this thing 4x today. I think it's right. If we change this from what you have, by the way, we're gonna give you this copy, we will let you know. Haven't got time to go through the milestones, design of the equipment. Here's why we can't just say, "Here's the purchase order." 7 purchase orders. Factory acceptance test, we go to their plant with a team. Installation. Site acceptance test, their team comes to our site, makes sure it runs at speed to spec. Line functionality, this is, this is the spec EPR-PCR I told you about before. Make sure it works. We finally do samples, and this engineering samples 10. We have production. PCR 3 is production. We have the qual samples, and then we have production. These are the numbers of these things, and these are the numbers as they happen. For example, an engineering design review on the line Gen2, we've got 17 done. We'll have 17 done at the end of Q2 and 17 at the end of Q3, and so on and so forth. What does that mean? Installation, 16 lines will be installed this year. 16 machines will be installed this year, 18 in the first quarter of next year. That's when it'll be done. We're gonna have samples. Our first samples, 1,000 of them, in i t's actually in April, but I have a mistake there. This slide in perfect shape will be in the deck we attach. I wanna talk about yield. People are worried about yield. Is the product makeable? This is our unnamed yield manager. He's pretty good. I looked at this weekly yield review frequently. This is what 1 page looks like. Stacking. I showed you the stacking module. Well, there's yield by week, there's the number of failed units by week, and then there's the Pareto of code and cause of the lost units in the last 7 days. This is a close-up of the Pareto. What this team of engineers does is they work on the big bars, and they beat on it. 10 Pareto graphs. This is 1 of 10. 10 teams of about 8 people each, cross-functional engineers, mechanical engineers, battery experts on each team, and we got these guys beating on 10 Paretos. The overall yield for this in this report, there's 10 yield panels. You can see some of the yields are consistently high. You can see some. This is the one we dug our way out on the integration. You can see which ones they have high risk. They're worried about these 2. Medium risk, low risk. Here's their learning curve. This is extremely important. Up here, the yield is 0. The failures are 100%. You always graph defects in a yield curve. 40% yield and 100% yield. Here's the yield. These are actual weekly data points. You can see for 4 months we're shut out. We couldn't get the sucker to run. We finally got it turned on, and we started improving at the rate of 3.1 percentage points per week. Once you get the engine running, this classic, then you start learning faster. That was 11 percentage points per week. In the future, this curve is well known in silicon. It's the S curve, it'll flatten out as you start, you know, having fewer and fewer defects to work on. This is a good yield effort. This is a silicon yield effort. This is the effort that would typify any top silicon semiconductor company. Our yield team is very confident, making good progress. That's the only point I wanna leave with you. Okay. I'm talking about requirements for safety and accelerated testing. This is the specification. That's its number and revision. I just wanna make one point. Our Fab-1 return rate is 0 out of 8,812 so far. By the way, I got notified today. The level of honesty here is great. We have a letter from one customer about one unit, and they say they have one unit that has got, it's swelling. Okay? It's still 0. We haven't gotten that as return. We probably will. Just be honest with you. This is spec, the section 513. I'm trying to illustrate what a spec looks like inside of this company. We do electrical testing, high temperature, overcharge, drop, pinch, press, impact, nail pen. You've seen my picture on the nail pen. Here's the number of cells our spec says we need. We need 600 units. This is not the only spec. This is accelerated lifetime. We also have accelerated lifetime margin, where you do all this to extreme. We have UN 38.3, which is required to get in an airplane. Needs 40 units for that. We have UL, we have IEC, which is European equivalent of UL, and most countries have a set of specs. The point is, every time we change the battery, this is what our requirement is for what we have to do and do testing. I'd like now to talk about sales a little bit. You guys know Ralph. He's been here for over a year. Comes out of Rutgers VSWE. He joined us 2 years ago, or last year, really. He was the turnaround CEO for 16 years, was the various companies. Before that, he was at Cypress. He was the EVP of sales, marketing, biz dev at Cypress. I know him quite well, especially as new market development and customer acquisition. I brought Ralph here in case I get asked a detailed question about a customer I can't answer. I'm into this, you'll see, to the level I'm into it, but I wanted him here. Ralph and I created some new customer funnel metrics that we're gonna share with customers for the first time. Our shareholders say design wins translating to customer purchase contracts would be useful value drivers, which give investors a better line of sight on revenue going forward. You're right. That's what we're gonna do right now. This is the funnel. Well, we eventually fill in this graph. The milestones in the funnel are ES10 engineering samples. We stand behind them. They work. They'll meet the data sheet. Custom samples. We made your battery to your specs, so it's your size, maybe uses some component you want. These are the beginning points. You start here with a standard battery or here with a custom battery. You go to production cell qual. Qual samples 100. Now instead of one Z, two Zs, you're dealing with 100 to 1,000. By the way, 3-9 months, 6-9 months, 4-6 months. Here's the duration of each of these. You move on to product integration, where they buy 1,000 cells because they're gonna make 1,000 watches or cell phones or whatever. That takes months to do 'cause they gotta do their drop, kick, pinch, crush test as well. They finally buy pre-production and, you know, 10,000 units. This is a hefty number, but these guys are in consumer electronics, and they consume that much. Pre-production units, this is when they start shipping to customers. Finally, this is the first $1 million. These are the milestones in our funnel that describe where customers are. I'm gonna tell you some of our customers to an 80% approximation. We're not allowed to use their name, but I'm gonna tell you some of them and where they are in the funnel. This is the funnel as of the beginning of last year or the year before last actually, now. Forty-three accounts had been a sample from the pilot line. Most of them were doing ES10, and several of them were customers, custom samples. What is the key? Take this guy right here, S14. What does that mean? S means a strategic account. S star means a mega cap strategic account. A key account, which a strategic is top 3 in its business. A key is top 10 in this business. A lead, first application in a new area or venture. These are our keys for what type of customer. S star is a mega cap customer in the top three. The color signifies where they are. In this case, it's wearable. We also have colors. You can see them over here for mobile phone, laptop, and other. We have all of these customers, 43 of them, and that's where we were a little bit over a year ago, like a year and 3 weeks ago. By the way, this customer is Samsung. We thank Samsung. Appreciate the fact they let us put out a press release. You can see them. They're right there. They were one of our early customers. Okay, other customers. This slide will not be in the deck we hang on, but today, LiteOn, Milwaukee, Canon, Panasonic, Sonos, Casio, Nintendo, Samsung, United States Army, Braun, Genius, and Oppo. Genius is a watch company, and Oppo is a cell phone company in China. These are companies that for which we do not have an NDO, and we just let you know that these names are real. When you see a high number, like 49, that means that's number 49. Okay, now what have changed? December 21, moving forward to December 22. Fab-1 enabled a progression to go to qualification samples. This is where you qualify the fab, not just the technology. 1,000 samples, then 10,000 samples. We moved up to 78 accounts, and here's what the map looks like now. We've now got one account, LO 5, that's out of 10,000 units. Here's our plan for 2023. You start out where we are today, and the question is, what will it look like at the end of this year? This is our plan. You can see it's shifted some. We've got more people coming in. We move through the funnel, and LO 5 is our plan to go to $1 million. That's gonna be our biggest customer. The way this works is this gray arrow says salesman number 1 in the United States is responsible for keeping track of this customer on the customer side and watching this movement. Salesman number 1, light gray, also has these other actions he's got to achieve. These are part of his plan, his what we call critical success factors. Salesman number 2 is Asia and United States. There's his plan. Salesman number 3 is Asia only, and there's his plan. This graph is kind of messy, but it gives you down to the customer name and the customer milestone and the change in the customer milestone, the center of sales plan this year. Ralph has done a good job organizing sales. We spend so much time talking about other things, we don't really know it. I'd like to thank one of our investors, Gregory Reyes, who sent a letter 9 months ago and said, "You ought to use codes like this." We did it. Ralph and I did it. This, this now is the Reyes format, if you wanna call it that, for sales. VO one has taken 3,000 cells, 1,600, 1,100. People have taken five cells. The number of customer cells add up to 8,812. Here's what we ship by quarter. Last quarter was 4, 4, 2. Next quarter, we forecasted 9, which is doubling. Now you can say, well, those are small numbers, but 9 doubles to 18, doubles to 36, doubles to 72, doubles to 144. That's a curve about as steep as any company can do. If you put the data I just gave you into ordinary funnel statistics, we have a $13 million TAM by 2025. ES10 engagements, the other engagements further down the pipe are 750 and 669. They're equally divided. These two added together $1.42 billion. We've touched, dealt with, have connections to about 11% of our TAM. Our sales effort's working well, and they really badly need those 180,000 batteries that come out of Fab-1. Fab-1 needs to deliver 'cause Fab-2 doesn't exist yet. It's that simple. Here's the new CEO. His name is Raj Talluri. He will be here on the 18th, and I will gladly go back to being a director. Raj's got a PhD in electrical engineering from UT Austin. He worked at Micron for four years, Senior Vice President and General Manager of the mobile business unit that is taking Micron's standard DRAMs and flash memories and customizing them for mobile cell phones and wearables, to get better ASP and better customer lock-in. That's a $6 billion division. He did the same kind of job at Qualcomm on their IoT line and the CDMA line before that. Before that, he worked at TI for a bunch of years doing the product lines, OMAP, their DSP processor, their wireless product line, imaging, audio, digital still cameras, and came up through the technical ranks. I said before, it's a resume that glows in the dark. He specializes in new products, business unit management, and business processes to achieve the above. I'd like to introduce Raj. Now, he's been here. This is the second time he's been in the building. Don't ask him any questions. No, thank you very much, T.J. Really my pleasure to be here. Super excited to be joining the Enovix team on 18th. As T.J. mentioned, I have 30 years in the industry. I worked on many, many different products from concepts to, you know, early stages to ramping millions of units a month. I understand what it takes, the discipline, the structure, the processes to go from early samples to high volume production, great quality with no returns. I'm super excited to take this technology, you know, with partnering with Ajay to the next level and ship millions of units. I have great customer relationship with almost, you know, all the cell phone and also the consumer electronics companies over the past 30 years that I've built. It's gonna be a lot of fun to build this. One thing I'll say, you know, why I'm super excited by the batteries is, you know, in this portable electronics and even cell phones and PCs and so on, if you look at the last, I don't know, decade or two that I've been associated with them, the processors, the memory, and almost every semiconductor component has grown leaps and bounds in terms of the performance, in terms of clock speed, in terms of, you know, user experience. The batteries haven't kept up. If the batteries actually kept up at that rate, you can imagine what the user experience of these products would be. Even now, in many of these products, the memories throttle the performance because they don't have enough battery capacity. I feel like building great batteries like we are, you know, about to at Enovix will really not only create great value and business for Enovix, but I think it'll also do a phenomenal job of great user experience for all the people who buy these devices. Thank you very much. Super excited to start here soon. Okay. Last slide. Second last slide. Fab -1 is finally working. 8,812 units shipped. Yields at 40% and rising. We got a great new COO, Ajay. We'll ship 180,000 units in 2023. Gen2 will be board approved on that date, come hell or high water. It's faster in automation than Gen1. It will be installed in a Fab -2, will be in Southeast Asia, where we plan to put four lines, quarterly in 2024. We'll have samples on 4/15/2024. Here I got the date down to a day because these days are too important to talk about quarters. We have a stellar new CEO, will refine our strategy, install R&D processes, and instill a P&L mentality in the corporation. We plan on winning, folks. We played that music there. I found out my Escape size had 40 seconds to swallow that time. It's supposed to be an inspirational moment, remembering the other experience, but it didn't take off. Are we all ready for questions? We'll 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, press star 9. Questions will be answered in the order that they are received. We will now pause for a moment to assemble the queue. Our first question comes from Bill Peterson from JP Morgan. You may unmute and ask your question. Yeah, thanks for doing this, T.J. Nice to see you in your Packers, green and yellow there. You know, you brought Ajay back, you know, as CEO back in November. The new CEO, obviously last week you announced, nice to see Raj there. I guess what other areas do you see as important areas to focus and scale production? Any particular areas you see you need to bolster from here? I guess what other resources do you have from your past experiences in areas like Cypress or prior ventures that you could bring on board or, you know, consult with? You good? Go ahead. Yeah. If I can repeat the, just real quickly, the question, with me on board as a COO and Raj on board as a CEO, the question really was, who else are we or what is the other, what are some of the other team members who would come from T.J.'s prior experience or mine? Actually, we definitely we are gonna assemble a team. We're gonna continuously look for the talent that we can trust and, you know, who we have worked with in the past who have been in similar ramps. As I mentioned, you know, I have, you know, a lot of experience ramping, you know, vertically straight up, especially last 10 years at Lumileds. We were ramping for a cell phone company not too far away from here. You know, and the ramps, as you know, are pretty crazy. In there we have, you know, a talented group of people who helped actually do that. Yes, I'm definitely I'm gonna bring more people, as we go along here, in terms of, you know, talent. Raj, you can, you wanna add some? I mean, you know, again, I'm looking forward to starting here, and once I start, you know, I think I'll understand what else is needed. Clearly 30 years spanning many, many, you know, TI, Qualcomm, Micron, been in the industry for a long time, I do know a lot of people, but just depends upon the gaps, depends upon what we need, what we have here. Maybe at the next time we have this call, I'll have a better answer. If I can sneak one more in, and really that was also kind of a question for T.J. as he, as he sees it in his seat. The next question I have is, I think when you looked at the timeline you put forth, it looks like there's now another maybe one or two quarter delay versus at least maybe our prior expectations. We kind of thought that the tools are gonna be arriving, I think, towards the end of next year, maybe some early revenues in early 2024. Just wanna make sure if that's the case. Is that a delay? If so, what is the sort of nature of the one to two quarter delay as you see it today versus maybe a quarter ago when you mentioned it? The primary difference is the new unnamed designer, the fact that he's checking every single module, the fact that he's got to run at 1,350 UPH, and frankly, a more careful scheduling process. I called the designer himself 4 x in the last 2 days. I called Ajay 6 x in the last 2 days. All of the calls were, "Tell me that this number is right. Tell me why I should believe that number." Nobody can ever promise that a plan is gonna happen, but I can tell you this is a carefully done plan, and we're behind it. Why the old plan was what it was, I don't know. You know, I approved it. Somebody presented a plan. I was in the board meeting. I approved it. I have my fingerprints on it. I'm giving you my plan. That's the best I can give as Executive Chairman and with personal work into it. Yes, there's a delay. No, appreciate the candidness. Yes. No, appreciate the candidness in this, and I'll pass it along. Our next question comes from Gabe Daoud from Cowen. You may unmute and ask your question. Hey, thanks, T.J., for doing this great detail. Nice to meet you, Raj and Ajay. Maybe following up T.J. on Fab-2, expecting 4 lines to be there by Q4 2024. You kinda noted the first line to get ramped up may take about 50 weeks or so. Just curious, what kind of incremental improvement can we expect to get the additional lines ramped up to full capacity? Does it go from 50 weeks to 30 weeks? Just how do we think about that timing and improvement? Okay. Let me have Ajay answer that one because he'll be fully in charge of that at that time. Yeah. As we alluded earlier, actually, there's an EPR-PCR process, which is, you know, the equipment, you know, as well as process certification process that, you know, we go through, making sure every process capability has, you know, a value of more than 1.3. All that strict discipline of following the process will let us learn very quickly on the Gen2 Line 1. You can imagine the 50 weeks, you know, that T.J. talked about for the first line of that kind at a high UPH, 1,350, high availability, that will shrink rapidly from Line 2 onwards. The schedule we have put in here is our best estimate from that learning, what we could do, you know, from Line 2 to 4, as we see it today. Let me make one other comment, and that is, we've already got a down payment on that yield curve. Since the heads and the lines are highly similar, errors you have in placement or some other error head related, we've taken our yield from 0. We suffered through 4 months of 0 yield. We're now at 42%. By the end of this year, we'll be at 60%. I expect Line 2 to turn on very near 60%. It may have a few weeks below that, but that line is not gonna start at 0 and work its way up. That line is gonna start at a significant yield. In a 1,350 UPH, it's gonna crank volume. Even if its yields are uneconomic in the very beginning, it's gonna be able to crank volume. Got it. Thanks, guys. That's helpful. Maybe just going back to Fab-1, you'd mentioned the units out of there for 2023, the second line ultimately will become obsolete. Just, I guess, just curious though, in terms of wearables, what will the capacity be out of Fab-1 ultimately? As far as just EV cells and qualifying those, will that be made on the auto line? Just also trying to figure out where that fits into the mix. Thanks, guys. Yes, I'll take that. The total Fab-1 output, as we are expecting as it ramps up, you know, after a certain point, I think T.J. showed the S-curve, you know, where the learning kind of plateaus and we, you know, kind of sustain at that point. It will basically take us right around 200,000 cells a year, 200-250, somewhere in there. Those are all wearable cells, small cells, as we call it. All the larger cells, the laptop or, the cell phone cells, will be mostly all done on the Gen2 line, which will be getting installed, you know, towards the end of 2023, beginning of 2024. Thanks, Ajay. Yeah, just curious, the EV cells, the 270 milliamp cells that you're making, I guess for those, is that in Fab-2 or will that be on the Agility Line at Fab-1? EV? He's talking EV. Oh, he's talking about EV. Was he talking about EV? What batteries were you talking about? Excuse me, the EV cells that you're sending to customers. Okay. We didn't talk about EV today. Those cells are made in the R&D line here. The technology for making EV cells, the methodology is different. We will be in the sampling cooperative mode on EV. We have a separate division on EV. It's small, but it's quite effective in gaining traction. We can't really afford right now a lot more than that. That'll be the topic of a different meeting of what's happening with EV. I already went an hour today, and if I had bragged about our EV stuff, it would have gone even farther. Yes, we're still doing it. A five-person team will cooperate with partners working on doing that right now. This is about where Enovix was in electronics batteries two and a half years ago on the EV side. Got it. Very helpful. Thanks, guys. Our next question comes from Colin Rusch from Oppenheimer. You may unmute and ask your question. Thanks so much, guys. Can you hear me? Yes. Great. You know, you talked a lot about corporate culture and accountability here, and bringing in some new management is an important step towards that. Can you talk a little bit about your expectation for the transformation of the organizational culture and how long that's gonna take? Just let him do that. We'll, we'll let the new guy do that 'cause he's been here exactly 2 x for 3 hours each. No, I mean, I, you know, I think my, my experience, you know, as I moved from different companies, the culture is different in each company. I feel like what I've learned over the years is that transformations can happen pretty quickly. I mean, the key thing is to understand what's working, what's not working, put together the right processes, the right discipline and the right structure and the right people in place. You know, I think when a company moves from a stage of making early prototype sampling to high volume production, it's been done many times. I mean, it's not new, and we do it all the time, but it's just a change process. Really, it's the structure, the discipline and right people in the right roles. I expect to get it done pretty quickly, but I'll have a much better answer after I start, but I'm not worried about it. So, uh- Okay. Perfect. Let me add a little bit to that, actually. Just a little color, actually. After 49 days, I'm a lot more senior than my, than the CEO. I will say this, that the culture really starts with the management team and how we are leading by example, right? The accountability, transparency, urgency, which I think T.J. talked about a little bit. You know, we are moving, we are transforming the company, obviously, from a research development, small, very small volume, you know, a fewer customers being sampled, et cetera, to a what you saw today. You know, we are talking about big numbers, 100, you know, even all the way to 10K samples per customer, important customer. You saw the customer list. The culture will begin with us, with the management team, right? I, you know, I've changed cultures. I have, you know, I've done a lot of that in the, in the 38 years of wherever we, you know, have the management team leading by example, it always ends in the right culture. Okay. Thanks, guys. You talked a bit about the capital need for Fab -2 and how much these lines are going to cost. Certainly, I'm sure you've thought about where that capital is coming from. Certainly, the customers are concerned about that and potentially can put some money up to help that process along. Can you just give us an update in terms of the current thinking around the financing plan between now and the end of 2024 to get those lines up and running to the point where we'll see some operating cash flow? Okay. Let me talk about that one. I appreciate the way the question was asked, between now and 2024. We've got all the money we need to get through 2023. If we want to get a line per quarter in 2024, one is we're gonna have a little bit of a staircase, a building effect where Line 1 will start creating cash. That will help with Line 2. We won't need to, in effect, get all of the money up front in order to buy those lines. Having said that, we will need to raise money. It will be something around the fourth quarter of 2023. If we are raising money, it'll be because we need machines. If we need machines, it's because their batteries are ahead, and we need to make more of them. I don't anticipate that being a problem. Right now, we don't need money. We'd like people to follow the company, and we'll give an opportunity to invest. Great. I'll take the rest of it offline. Thanks, guys. Our next question comes from Ananda Baruah from Loop Capital Markets. You may unmute and ask your question. Yeah, thanks, guys. Thanks for doing this. Really appreciate it. Thanks so much, T.J. Rodgers. Obviously very helpful, all the details. Raj and Ajay, great to meet you. I guess the question is, with all that's occurred and the changes, you know, and sort of with the scrutiny you're bringing to Gen2, has there been and the changes to Gen1, any impact to the strategic account production qualification process, that we should be aware of? Very good question. We've been progressing our strategic accounts along pretty much as planned because most of the volume that they've been expecting is relatively low at this point. What has really been accelerating is actually the products out of the production line, out of Fab- 1, has been very high quality and very good results in the qualifications that we've been driving with those. You know, we feel like we're right on schedule with those major accounts, strategic accounts. That's great, Ralph. Just maybe as a quick follow on, do you also then anticipate, Ralph, that you have an opportunity to ramp to what you had anticipated production volumes might be, say, you know, whatever your expectation was four months ago for production volumes for big strategic accounts, whenever they were to start to ramp, do you still envision being able to, you know, hit similar volume ramps, or has that, has that changed as a result of Gen1? I'm not gonna let Ralph answer that. We're gonna enjoy a small victory. We shipped 44.42 cells last quarter. We're gonna go out and have a drink and celebrate it. We told you when we're gonna buy the equipment. We believe we'll be manufacturing limited all the way up. As fast, faster we can turn on the machines to make it, the better off we're gonna be. One thing I wanna stop. I don't wanna stop this. I love speculation. You know, it drives interest in a corporation. One thing I don't wanna participate in is the speculation when you're gonna be a billion-dollar company. We are gonna get big. You can calculate the revenue from four lines. I gave you enough data to calculate it. I deliberately did not calculate it for you because, frankly, as the guy who ran the SPAC, I feel that's one of the problems with SPACs. I feel that SPACs put in too much money too early. On the company side, there's a rush of capital that causes a lack of respect for capital. On the investor side, everybody's looking for the next Google two quarters from now. We've got 2023. If you watch your trajectory in 2023, every time we build batteries, we'll put more people in that funnel. That funnel is over a year long. It's 1 to 3 years long. The other guys can bullshit all they want about we got this battery, you know, we grow silicon nanowire. Great. Grow them, baby, because you got about 100 customers to put through a three-year funnel. That's what we're doing, that's what matters, and that's what builds value. yes, we will be big and important in the future. this is my get 'em back on track, get a beat, meet and beat kind of plan going. I'm not gonna allow Ralph to speculate on billionaire city today. Not today. All right. That's great. Thanks so much. Appreciate it. Our next question comes from Alex Potter from Piper Sandler. You may unmute and ask your question. Great. Thanks, guys. I appreciate it. One question that I did have, you mentioned these targets that people put in SPAC decks that they disavow almost immediately after publishing them. Is there anything in that SPAC deck regarding what you think the company is capable of doing from a margin standpoint long term, given, you know, updated thoughts regarding where the second Fab is gonna be located, or anything else that would lead you to believe that the gross margin or the EBITDA margin expectations that you originally had may require revision? Thanks. That's the only question. Okay, let me answer that one. I've been concerned about eventual profitability for a long time. You know, I ran a company. We had our honeymoon for 3 or 4 years, and then all of a sudden, we hit head on into Korea, Inc., Japan, Inc. Frankly, you know, companies like Micron in the United States are, they're animals, difficult to deal with. I know eventually you only make your way in the world if you make something cheaper such that you can make a good gross margin. Pay for your R&D to move to the next thing and still put something on the bottom line. My feeling about profit is if it ever gets to be 20%, and if I'm still on the board, I'm gonna ask, "Why aren't you guys investing and taking a lead with more new products faster or more new technologies faster?" To me, 20%. Anybody claiming more than 20% profit just hasn't been out there yet, unless they're making software and their cost is really low. We don't have the data yet. That data will come from, in effect, unit economics, where you take a machine, use a Gen2 machine, and you look at how much it costs. That's why it's gonna be in a low cost area. I want a high speed machine that also gets run by people who earn $2 an hour. That's what you gotta have to be competitive. We will look at those unit economics. We haven't gotten there in their plan yet, so we don't have a good answer for you. I do believe this company can be quite profitable with automated equipment in a low cost area in the electronic segment, the $13 billion electronics, portable electronics segment of the market. Don't have an answer today, but we're headed in the right direction, and the strategic decisions we've made absolutely are the best for that. Very good. Thanks a lot. Our next question comes from Derek Soderberg from Cantor. You may unmute and ask your question. Yeah. Hey, everyone. Thanks for taking the questions. This was a phenomenal presentation so far. So just piggybacking off the last question, you know, just looking at the last estimates from the SPAC deck, T.J., is there any revision to the timeline for the EX-2 or the EX-3 or any changes made to Gen2 that would, you know, lead you to change that timeline at all? Anything Anything to point to there? That's a really good question. You guys are pretty good. If you looked at my guiding principles, and they'll be published, so you can look at them again on the bottom. It says new technology plan. It says, "We're gonna have new technology plans for every product." That's a code word for we're gonna have the discipline of manufacturing, specifications, schedules, execution of the schedule in R&D that we have to have manufacturing even to be around. That I won't call it revamping, but the putting discipline into R&D is, this is my second major project before I go back to being a venture capitalist, which is the factory, and AJ is gonna do that. Then fixing up R&D. I'm gonna fix up a couple methods for developing things. I'm not talking about do they have a battery? Can they make it? They're very smart guys. I'm talking about can they make it on schedule? Can they predict how many people they need to do it? Can they refrain, like all startups do, from starting too many projects and then getting none of them done? That process, a rudimentary form of it, I'm gonna get in place. I'm working. I'm right halfway through that right now. New technology plan. I talked to Raj about it yesterday, and this is what he's done before in his companies. To answer your question then, when we do that, we're gonna do a few things right. I can tell you number two on the list is EX-1.5. Taking our technology to the next node is there. We've analyzed the projects we need to work on. That's a big one. It will get funded, we're gonna watch it like a hawk. I think the main thing that upper management can do is make sure it's staffed properly and we spend enough money on it, and we demand through weekly meetings and attention that it stays on schedule. We don't have the, you know. It's every company, you know, as reason for being behind schedule. We've got to change that here. EX-1.5 will not be one of the casualties, I'll tell you that. Got it. Well, that was my only question. I appreciate all the detail. Thanks, guys. Our next question comes from Gus Richard from Northland Securities. You may unmute and ask your question. Yes. Thanks for letting me ask a question. I was just wondering, you gave us, you know, the feedback from investors. What has been the feedback from your customers so far? We've received excellent feedback from the Fab -1 samples in particular. Again, as T.J. pointed out, that is a key aspect, is we're giving them production units to do their, you know, integration testing and final qualifications. You know, those tests take somewhere around 3+ months to get done, and we started shipping those products about the middle of the year, you know, this 2022. We're, you know, partially through that process. We've been meeting all the specs and, you know, working through, you know, the applications that these customers are gonna be using these products in. Just on a follow-up, when should we expect to see products with Enovix batteries in them in the market? It's really dictated by the release schedules of our customers. You can look at the funnel and the, any customer that's sort of in the QS100 and beyond phase is close to releasing a product. We have to be reliant on what their product release schedules are. We've been saying that in 2023 you will see, you know, tangible evidence of that. Got it. The last one for me, in terms of the competitive landscape, you know, you're a little bit behind where you thought you would be at this point. Are your competitors catching up? Are you seeing other novel batteries in the market that could give you a run for the money? That was one of the comments on competitors catching up that I tried to put in here, but I didn't focus enough on the actual R&D projects to find a use for it. That is an important question. The other battery companies we see typically have an anode. They have a competing way to use silicon in the anode, which you pretty much have to do, except for QuantumScape. Their competing way is they have nothing in the anode except for lithium. Our competitors use silicon, and they have different ways of cleverly getting it in there. They can all claim what's good. The point is, that's all like an electrochemical society meeting, including us. We can go in and debate with them and talk about why ours is better, why theirs is better. Where were your 9,000 batteries last quarter? Where's your 18,000 batteries next quarter? Couple quarters from now, the men will be separated from the boys. I can't think of an area that I've ever looked at in silicon. I used to laugh. There used to be an article a quarter on gallium arsenide. Gallium arsenide will make much faster chips than silicon, blah, blah. Now there's silicon carbide, and it's basically professors talking about their projects as if they were brought to market. What we're doing now and what you're seeing is how hard it is to bring something to market. I'm talking technologically hard. The 1,000 little problems you never even thought about that all of a sudden smack you in the face and prevent you from shipping. That's the barrier separating us from the other guys right now. Everybody's got some plan for silicon. We're shipping it, and that's gonna differentiate us. Got it. Thank you so much. That's it for me. Our next question comes from Chris Souther from B. Riley. You may unmute and ask your question. Hey, thanks so much for taking my question and providing so much detail on the call here. you know, maybe just one kind of quick one. On your letter that you wrote kind of in November, when you joined as Executive Chairman, T.J., you described part of the challenge being travel restrictions for Fab-1 equipment violating EPR guidelines. It sounds like, you know, the Gen2 lines now are completed, you know, as far as design. I just wanted to get a sense what really needs to go down between, you know, now where the design's completed and the board approval as far as, you know, confirming some of those, you know, slight changes it sounded like you made would be finished. Yeah. A good question, actually. Repeat the question. Let me repeat the question. The question that you asked was when T.J. wrote that letter in November talking difficulties about not being able to travel to the equipment vendor site or for the vendors to come here. Absolutely, those were true statements. We are beyond that now. We, I can tell you anecdotally, our engineers and the photo of the engineer that you saw himself, he has made already six trips in the last, I would say four months to the vendor site and working diligently on the proof of concepts. This time, instead of just saying, "Okay, let's give you the PO and hope for the best and let them, you know, give us a machine which kind of works, and we'll go see it or not." This time we are building proofs of concepts, which means smaller machines that represent the heads, as T.J. Mentioned, which are actually working in action. We have seen those. You see the videos of those. Our engineers are over there many, many times, and many of them actually. I'm going there personally also this month where I'll be visiting these guys and establishing relationships with the CEOs myself. A lot has changed since that time, and this COVID is, you know, becoming a part of the, you know, what we are living with now rather than, you know, unknowns about the pandemic, et cetera. That's helping us a lot. Thank you. Our next question comes from Tony Stoss from Craig-Hallum. You may unmute and ask your question. Thanks, T.J., for hosting this. I appreciate your bare knuckle approach in the years covering Cypress going way back. My question was regarding one of the slides where you had very heavy on the wearable side, maybe less on the mobile handset side than I was expecting in terms of kind of designs in queue. Is that because your customers want to see if you can walk before you run? You know, I'm just curious your thoughts on clearly the handset space is a lot more volume than the wearable space and your expectations on kind of the handset side. Let's have Ralph do the buy answer, and I'll do the make answer. Yeah, I think it's fairly simple to see. You know, when we went to market first, we went to market with a wearable cell, and that is what we've been ramping. We have a second cell, which is primarily for the mobile applications, and you'll see some customers within the funnel just a little further behind, essentially just in timing and similar with laptop. It's literally just a timing question. It's not a problem of engagement. We have plenty of significant, you know, strategic customer engagement in each of those, you know, those application areas. From my perspective, I've always liked making stuff, and I've always liked design, and I've always had guys like Ralph and Dan McCranie that sold everything we made. That, that was, that was cool for me. First answer is I see more red ones on my, on my chart than I see blue ones and green ones. We're working on a red one. Second answer is, the red ones are about this big, and the other ones are about this big. I can make more of these than I can make the bigger ones. Third thing is in the mobile sector, it turns out you have physically a small battery. It turns out our technology has an advantage which increases as the battery gets smaller. We go from, like, 30% more energy, let's say, in a cell phone sized battery, to, like, double the energy, 100% more in a very small battery. That's because of the efficiency of packing and the great mechanical engineering job the company has done. I look. That, and that sector needs batteries badly 'cause they don't have very good batteries. I see that as a marketing opportunity where if you're in wearables and you don't have one of our batteries, you've got a watch or some other appliance, a medical appliance, for example, that lasts half as long or even less than half as long. Also with BrakeFlow, that will differentiate us. You can have heated batteries and burns from any size battery all the way down to the smallest battery. I just see a huge opportunity in wearables to be king of the hill. It doesn't mean we're not doing the others. We sample every other battery. We sample batteries from super cell phone-sized batteries that are bigger than a typical cell phone and might be used three wide in a laptop, all the way down to batteries that are smaller or oddly shaped, for other applications. Right now, the guys that need us the most, that run the highest volume, that are wearables, and we can make a bunch of them. We got a line here ready to rock and roll. Thanks for the detail, T.J. Appreciate it. Our next question comes from Sean Milligan from Janney Montgomery Scott. You may unmute and ask your question. Hey, guys. Thanks for taking my question, and thanks for the call. I just wanted to clarify a little bit about the Gen2 ramp. You talked about delivering first qual and production cells in the third quarter of 2024 from the first Gen2 line. You mentioned that you expected 4 Gen2 lines in Fab -2, I think it was by the end of 2024. Just trying to get a read on-- obviously you have a lot of confidence about the initial Gen2 line, and if I understand that correctly, you'll be adding or starting to add, like Line 2, Line 3, Line 4 before production volume from that first line hits the market. That's again, a very good observation and the right one actually. As you saw, we have broken the schedule down into very defined milestones, right? In there you would see factory acceptance test. It starts with a PoC, design approval PoC, factory acceptance test, EPR, PCR 2, then the production run. The confidence is building in this milestone as by design, right? It becomes at a very high point when we finish doing the factory acceptance test. When we are actually at the vendor, the machine is working, it's running. It's running both the sprint UPH, it's running the uptime, it's running those types of things in proof, actually seeing it. That's when typically the confidence is high and you start triggering the long lead time items. We have to manage the long lead time items in this whole timeline and so that the delivery of the machines gets nicely compressed to your liking. If you wait all the way until then and then trigger the long, then obviously it'll get stretched out. We are not doing that. As we build confidence, that's when we are triggering. Okay, great. To build on that, I understand the initial, you know, Gen2 line is maybe pushed to the right 2 quarters. T.J., you also mentioned that you would expect subsequent lines to come on at a higher kind of initial capacity utilization. Can you kind of clarify that? I think like, you know, in the model, if you're running or building one line a quarter and you kind of prorate them out on the ramp up, there's obviously a, you know, big capital need. If they come on higher than expected initially, maybe that shrinks that need. I'm just trying to understand some of the gives and takes on the kind of I guess the extension of the initial Gen2 line, but then the compression of when subsequent lines could come online. Right now, we put in 1 line a quarter in 2024, the fourth line going in in Q4. Frankly, that is a reasonable rate that we've all experienced in our past life. We need a chance to refine that. They certainly will come online faster. You know, the fourth line is gonna come in and be making in the mid-quarter that it comes in, it's gonna be making units because the problems will have been solved. The first line is gonna be faster because of our experience on Line 1 that I already talked about. We're comfortable that we can do 1 line a quarter once we get going. That's been our experience for putting equipment online. Okay. some of the CapEx, I think, Gen2, the initial line was quoted like $50 million-$70 million. just curious if there's, you know, bias downward on reorders and what we can expect there. The $50 million-$70 million was $55 million for the equipment and then $15 million to hook it up. The incremental machines will be $55 million. I'll point out that hasn't made it through the board yet, and I'm the chairman. I plan to have another whack at capital costs. I've been a capital cost hawk, since we got going. I compromised on a real tight scrutiny of capital costs on the first machine because it was more important to us economically to get it running than it was to make it, $5 million or $10 million cheaper. My experience is that as you learn, you also learn how to make things cheaper. We have ways right now, I could articulate them, where chunks of that machine disappear. Like, some of those steps I showed you in that chart just go away. We're not ready to talk about them yet, but we will make this thing cheaper per manufacturing unit over time. There's no doubt in my mind about that. All right. That's all. Thank you guys for the call. Our next question comes from Chip Moore from Roth. You may unmute and ask your question. Thanks. T.J., you talked about trying to get BrakeFlow into production on the Gen2 line as soon as possible. Can you expand on that a little bit maybe? Are there any limiting factors in terms of any risks of delays as you focus on ramping up initially, or how should we think about that? This goes back to my comment, the gray comment, meaning added later, new technology plans. Every new technology plan will have a schedule, and it'll have a project management officer looking at the schedule and tracking it, that's what keeps companies on schedule. Right now, this is an active debate in the company, just like you can't spend money to get something done, the Executive Chairman can't say, "We will do this," then, you know, it actually happens. You've got to get people to agree that it's gonna happen. My own view is Gen2 itself limits BrakeFlow. We're not gonna try to put BrakeFlow on Line 1, because we all that work would be obsoleted or best case would come out slowly at a low on a low UPH line. I see BrakeFlow as being limited by Gen2. There's debate on BrakeFlow right now, whether or not there's a bunch more R&D to get done. We're not ready to talk about that yet. I can tell you there's one page of guiding principles, and BrakeFlow is written there in big letters. It's gonna get attention, and we're gonna bring it to market. That's gonna be a differentiator, is the differentiator for this company. I think when the Chinese are making super cheap batteries, if they're high energy batteries, they got a problem because high energy batteries burn, and the worse they get, the worse they burn. For example, automotive batteries, although they do have fires, are less fire prone than the high energy batteries that we're talking about. They'll have a choice, high energy, low energy. If they pick high energy, they'll be on the worst part of the curve for risk, we're gonna be on a second or third generation BrakeFlow. We think. We're hoping, you know, if you wanna pick the marketing campaign that did the best of anybody, it's Intel Inside, right? We think BrakeFlow Inside is gonna be something you have to talk about or you have to talk about the equivalent of from some competitors. They're gonna have to stay up with us on this. BrakeFlow is enabled, I'll just remind you, by your architecture. We can get into every single leaf or every single wave on that battery. They can't because they got this roll. We think it's gonna be a differentiator, and we're gonna push it. Got it. Perfect. I could sneak in one last one more, I guess, like, clarification. Great to see Samsung, you disclose them. Are you able to confirm if they're the MOU announced, last quarter? You've, you've gotten beyond my depth. You're asking a legal question when you ask MOU. I'm old enough to know that when you get asked a question you don't understand, you just say, "I don't know." I'll pass on that one. I do know- Had to try. Thanks. I do know, I thank Samsung for allowing us to tell the world they're interested in our stuff enough to get samples. That's a big deal of validation. Absolutely. Thank you. There are no further questions at this time. With that, I'd like to turn it over to T.J. Rodgers for closing remarks. Thank you very much for being so patient with a long presentation. We're very enthusiastic about the company. We're starting to ship. Our ship rate is doubling quarter-over-quarter. Our technology does work. Stay tuned on Gen2. We're very confident about it. We've got the design that the other guys don't have. We've got a design. You know, March 15th, you're going to find out if it passes scrutiny, which means days in the boardroom looking at box by box and not just waving your arm at a PO. We think Gen2 will be a big deal, and we're very enthusiastic about the company right now. I got some new guys to run it, so I can go back and do my job.