Thank you for standing by and welcome to the Enovix Corporation second quarter 2026 earnings conference call. Currently, all participants are in a listen only mode. After the speaker's presentation, there will be a question- and- answer session. As a reminder, today's program will be recorded. I would like to introduce your host for today's program, Monica Gould, Investor Relations for Enovix. Please go ahead. Thank you, operator. I would like to welcome everyone to Enovix Corporation's second quarter 2026 financial results conference call. Joining me today are President and Chief Executive Officer, Dr. Raj Talluri, and Chief Financial Officer, Ryan Benton. Raj and Ryan will be speaking to the slide presentation displayed on today's webcast, which will also be posted, along with our press release on our Investor Relations website at ir.enovix.com. They will provide prepared remarks and we will then open the call for questions. Before we begin, please note that today's call contains forward-looking statements that are subject to risks and uncertainties. These statements are based on current expectations and may differ materially from actual future results due to a number of factors. For a discussion of these risks, please refer to the disclosures in today's press release and our filings with the Securities and Exchange Commission. You can also find these materials on our IR website. All statements made on this call are as of today, August 12, 2026, and we undertake no obligation to update them except as required by law. During the call, we may also reference non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are included in the materials posted on our IR website. With that, I will turn the call over to Raj. Good afternoon, everyone, and thank you for joining us. The second quarter showed momentum across all three of our primary target markets. In smartphones, we reached an important qualification milestone. Our lead customer confirmed that our cells passed more than 1,000 cycles on the 0.2C discharge cycle test. We have one final cycle life test and it is already well underway. We expect to finish the remaining testing by the end of 2026, with the customer acceptance and smartphone field testing to follow. In smart eyewear, the production ramp of our lead customer has begun. We shipped approximately 2,100 batteries to a tier 1 customer, recorded our first smart eyewear product revenue from this customer, and expect to deliver roughly nine times that volume in the third quarter. In drones, defense, and industrial, we grew the pipeline by 41% from the first quarter. Drones led the way. We advanced product development and the drone pipeline alone exceeds over $100 million now. Revenue for the quarter came in at the high end of our guidance, and we expect continued sequential growth in the third quarter. What is increasingly clear is that Enovix has multiple paths for growth that reinforce one another. Our 100% silicon anode AI Platform is progressing towards smartphone deployment, while smart eyewear has entered commercial production. That sequencing is by design. From the start, my strategy has been to go after the hardest market first, smartphones, because meeting the most demanding energy density requirements forces us to build the best product. Everything we prove at the smartphone level then flows naturally into adjacent categories. Smart eyewear is the clearest example where the same platform is now shipping commercially. Meanwhile, our MX Platform takes that same silicon know-how and manufacturing discipline and aims it at defense, a big, fast-growing, high-value market. Our established South Korea operations are serving defense and industrial customers today, and their extensive experience with drones in particular is opening substantially larger opportunities. Briefly on the two platforms. The AI Platform uses our proprietary 100% silicon anode architecture for space constrained applications where the volumetric energy density and cycle life are most critical. While the MX Platform blends silicon with graphite for greater gravimetric energy density and high power performance manufactured at our proven facility in South Korea. These are not isolated businesses, they are mutually reinforcing. We are seeing this convergence translate into new areas for growth today. We are working on silicon blended opportunities beyond our traditional drone, defense, and industrial markets. Drilling down a bit further, first on smartphones, we moved materially closer to completing qualification with our lead customer. The customer has now confirmed the cells passed more than 1,000 cycles under the 0.2C discharge cycle test. This is the same test our internal testing indicated when we shared it with you in February. The customer's own data has now borne it out. Fundamentally, this is a customer confirmed evidence that our silicon anode batteries can perform at high levels. Remaining work to be done is an accelerated cycle life test built around a hybrid protocol we defined in close collaboration with our customer to replace the traditional 0.7C testing approach for legacy graphite batteries. Testing is now live across several combinations of charge and discharge conditions, as well with an enhanced cell design. The same progression is underway. The enhanced cells are now showing stronger capacity retention on our internal work, and the data is now with our lead customer's hands for evaluation, along with multiple variants of the hybrid protocol. We anticipate completing this final test in 2026. Our second smartphone OEM is also moving towards a similar qualification framework, and we expect to begin sample deliveries in the fourth quarter. As we look towards 2027, we see the pattern repeating and expanding. Our lead customer moving into commercial interaction with our second OEM advancing through qualification and additional leading OEMs with whom we are in active dialogue entering the qualification pipeline behind them. We pioneered the qualification testing pathway for silicon batteries and smartphones, so every customer after the first gets a faster, clearer path to execution and deployment. I'm especially proud of our progress in smart eyewear, which has now moved from initial production into early commercial revenue with a tier 1 customer. Recently, we completed a key international safety certification for our cells and battery packs, as well as a full suite of customers' reliability test. We shipped approximately 2,100 AI-1 batteries in Q2 and recognized our first smart eyewear product revenue. We have now delivery orders in hand for approximately 19,000 packs, which we are planning to deliver in the third quarter, a roughly nine-fold increase from Q2. Those delivery orders are part of the customer's 50,000-unit pack order. We expect to ship the remaining balance in the fourth quarter. Beyond 2026, we expect shipment volumes to grow as our customers' downstream deployments expand. Turning to our defense sector, I'm proud of the team's execution from initial product launch in the first quarter, to a substantial increase in our drone pipeline in the second quarter, to customer sampling beginning now in the third quarter. The pipeline for products manufactured in South Korea increased 41% to approximately $183 million from the $130 million at the end of first quarter. As a reminder, this figure represents the estimated peak annual production value. The lifetime opportunity is often many multiples more. More than half the growth came from drone opportunities, which now exceed $100 million on their own. Let me walk through what's inside that number. Because the funnel you see on the slide, more than $40 million in this pipeline is at stages where customers are actively evaluating and testing our cells or designing them into products. The breadth is striking, including some of the most recognized names in defense technology and consumer electronics. We also introduced MX-1 to a broader set of customers at industry events in U.S. and Europe. At approximately 360 Wh/kg while supporting high continuous and pulse discharge, MX-1-B01 is designed to improve mission execution, flight time, range, and payload capability. We've already ordered additional production equipment for the MX-1-B01, and we expect it to be operational by mid-2027, with initial commercial shipments and revenue expected to follow as that capacity comes online and customer programs complete qualification. This pipeline growth is also a commercial execution story. For the past two quarters, we've been deliberately building out our commercial organization, adding application engineers and product management talent, and we then brought in Steve Bakos, a seasoned sales veteran with more than 35 years in the global semiconductor industry, with most recently running large global accounts at Infineon to lead our sales and application engineering teams under Samira Naraghi, our Chief Business Officer. You're seeing the early results in that funnel. Our South Korea operation is a meaningful advantage in pursuing these programs. It combines an established history serving defense customers with in-house manufacturing, quality, and supply chain capabilities in a TAA-designation country. Our South Korea supply is TAA compliant today and ready for the expected mid-2027 capacity ramp, and we expect NDAA compliance across multiple product SKUs. In July, our drone battery completed UN 38.3 transportation testing, clearing an important step for commercial shipment, and we are commencing sampling with numerous customers in the third quarter. The next phase of Korea capacity is expected to come online in mid-2027. A very capital-efficient expansion utilizing existing land and buildings we own and using readily available equipment. The economics are attractive as well. ASPs are healthy, and because we own our own manufacturing, we believe the scaled volume can support solid margins. Beyond the current product, MX-2 remains targeted for 2027 with the goal of reaching 400 Wh/kg. Let me now come back to the AI technology platform. We produced the first AI-2 engineering samples in the first quarter. AI-2 is expected to provide approximately 20% higher volumetric energy density than AI-1 by combining thinner materials, better packaging efficiency, and higher cathode voltage through our EX-3M technology node. We sampled cells to one tier 1 smart eyewear customer in Q2. Many of the same EX-3M innovations are expected to carry into the future smartphone batteries and support another meaningful step forward in performance in that area as well. I want to give you some insight into how our pace of innovation is also accelerating, as it is something I am particularly focused on. In batteries, the grading factor on development speed is cycle life testing. A full cycle life test has historically taken four to five months. That sets the tempo of learning in the entire industry. We are developing AI models that can predict cycle life outcomes much earlier in the cycle life test than has historically been the case. Our models for eyewear cells are getting close, and we are making very good progress on smartphone cell modeling as well. To be clear, customer qualification will always be the physical test, but this is about how fast we can learn and iterate internally. If we get this right, every design generation ramps faster, and that speed itself becomes a durable competitive advantage. Turning to manufacturing, the second quarter showed continued improvements across Fab2, with particularly strong results through most of the smart eyewear production flow. In fact, our smart eyewear cell output came in well ahead of our internal plan for the quarter, and our integral yield, the cumulative yield across the entire production line, has now improved for three consecutive quarters. Outside Zone 1, all but one process step operated yields of at least 95%, with individual steps as high as 99.6%. Zone 1 dicing remains our primary throughput bottleneck and a top focus, but the yield has improved to approximately 84% from 80% in the first quarter. Zone 1 has been a stubborn constraint for a long time. This is exactly why we changed approach rather than simply tuning it. The hybrid dicing configuration uses laser and mechanical processes where each is most effective and is designed to lift Zone 1 throughput to multiples of today's rate. The step change we need to support the production volumes we are planning for 2027. Several of the key mechanical dicing steps are expected to come online around the year-end. Supporting all of this execution is our growing team in India. A team, in addition to conducting advanced research, directly supports manufacturing execution at both Malaysia and South Korea factories. Finally, I want to spend a moment on leadership because I am thrilled to have Michael Vyvoda on board as the Chief Operating Officer. Michael brings decades of operations experience, including at Apple. He has a full scope mandate across manufacturing, supply chain, quality, and customer delivery. His immediate priorities are increasing Smart eyewear output, preparing manufacturing for smartphone field test builds, and driving the cost, yield, and delivery output improvements underway. Adding Michael gives me even more confidence that we have the right team for the next phase of scale. With that, I will turn the call over to Ryan to review our financial results and outlook. Thanks, Raj. We delivered another quarter of revenue growth and positive gross profit. We came in better than our operating loss guidance, and we ended the quarter with over $550 million in cash on the balance sheet, all while continuing to invest in the customer programs and manufacturing work that support the next phase of commercialization. Second quarter revenue was $9 million, up 21% year-over-year and 19% sequentially, at the high end of our guidance. Our fifth consecutive quarter of year-over-year revenue growth. Defense shipments from South Korea remained the largest contributor, while Smart eyewear generated its first product revenue. Modest in amount, but an early proof point of contribution from AI-powered wearable devices. GAAP gross profit was $1.3 million, and non-GAAP gross profit was $1.8 million, representing GAAP and non-GAAP gross margins of 14.4% and 19.9%, respectively. The year-over-year decline in quarterly margin primarily reflected the mix of battery products sold through our South Korea operation rather than a change in underlying execution. Even with that change in mix, this was our seventh consecutive quarter of positive gross profit on both a GAAP and non-GAAP basis, and the first half non-GAAP gross margin was up year-over-year to 22.8% from 21.3%. Non-GAAP operating expenses were $30.6 million, compared with $28.8 million a year ago. The increase reflects continued spending on smartphone qualification, product development, and manufacturing readiness, including support for the Smart eyewear ramp. Non-GAAP loss from operations came in at $28.8 million, better than our guidance range of a loss of $29 million and $32 million. Adjusted EBITDA was negative $18.9 million, compared with negative $20.1 million in the second quarter of 2025, and non-GAAP net loss per share was $0.13, at the favorable end of our guidance range of a loss of $0.13- $0.17, and unchanged year-over-year. Turning to cash flow, net cash used in operating activities was $21.8 million, down from $25.9 million in the second quarter of 2025. Free cash flow was an outflow of $31.4 million versus $33.8 million a year ago, both better year-over-year despite higher capital expenditures supporting our manufacturing scale-up. The operating improvement primarily reflected favorable working capital changes. Capital expenditures were $9.6 million, principally supporting manufacturing readiness and capacity expansion. We ended the quarter with approximately $552.1 million in cash equivalents, and marketable securities, including restricted cash. That liquidity allows us to fund the qualification and commercialization milestones already underway while preserving flexibility for selective strategic investments. We did not repurchase any shares during the quarter. Our capital deployment priorities remain unchanged: product qualification completion, disciplined manufacturing investment, and commercial execution. For the third quarter, we expect revenue between $9 million and $10 million, up approximately 13%-25% year-over-year. The range assumes continued defense and industrial shipments from South Korea and a significant sequential increase in Smart eyewear deliveries. We expect non-GAAP loss from operations between $29 million and $32 million and non-GAAP net loss per share between $0.13 and $0.17. We expect capital expenditures between $8 million and $12 million, primarily for Fab2 initiatives and South Korea capacity expansion Raj discussed. As always, quarter-to-quarter revenue and gross margin can vary based on product mix, customer delivery timing, and the pace of qualification and commercial program ramps. For the third quarter specifically, two factors will shape gross margin: product mix in our South Korea business and the early costs of the Smart eyewear ramp before volumes reach scale. We will continue to manage spending with discipline and align our investments with measurable customer product and manufacturing milestones. With that, let me turn the call back over to Raj for some closing thoughts before we open the call up for questions. Thank you, Ryan. This quarter, all three of our markets moved forward at the same time. Smartphone silicon batteries passed a critical milestone. Smart eyewear entered its revenue generation stage, and our drone and defense pipeline is growing rapidly. The milestones to watch from here are just as clear: completing the final accelerated smartphone qualification test, initial sample deliveries to our second smartphone OEM, the smart eyewear ramp, converting drone and defense opportunities into design wins, and continued improvement in manufacturing throughput and cost. With that, operator, we are ready to take questions. We will now begin the Q&A session. Please note that this call is being recorded. If you would like to ask a question, please use the raise hand feature on your screen. Questions will be answered in the order they are received. Please ask one question and one follow-up at most. We will now pause a moment to assemble the queue. Our first question will come from Colin Rusch with Oppenheimer. Your line is open. Please go ahead. Thanks so much, guys. I just want to get a sense of volumes. As you start to ramp the eyewear business line, how do we want to think about total volumes to get to that optimal margin level, and how many quarters do you think it will take to get there? Yeah. Thank you, Colin. I can take a shot at it, and then Ryan will add some more commentary on margins and so on. Firstly, we are actually very pleased with the progress in manufacturing on these small cells. Going from a few thousand packs to now roughly 19,000 next quarter and on the way to fulfilling a 50,000-pack order. This shows our confidence in manufacturing of this cell on our technology platform in our Penang Fab, and I am really proud of what the team has done there. Look, the market itself, as I said the last quarter, the market is multiple millions of units and expected to grow year after year. We are sampling now to different customers who are in various stages of building the products. Exactly how much we will ship will depend upon how successful their products are and what share we win. But I can say this, the feedback we have got from the customers is the cell has been very strong, mainly driven by the energy density we provide in this small form factor, and it is translating into much longer battery life, particularly with AI running on these glasses. So maybe, Ryan, you want to take on margins and Yeah. No, that is fair. Look, not to be repetitive, but we shipped 2,100 units in Q. The absolute revenue from that is nominal, of course. On pricing specifically, I am not going to quote a number there, particularly because we are dealing with one single important customer, and so I cannot really go into those economics. But what matters for us really, I consider most important is that we build scale, is that we get into a position of incumbency into the growing market. We want to be the default battery of choice for smart eyewear. Specifically, kind of finishing off on margins, of course, even at the 50,000 unit level for the year, that can absorb the overhead burden that it will face as those costs start to move in geography from operating expenses up above the gross margin line. We expect it to be negative margin for the balance of the year. It really, as we ramp, ultimately, as we get to some version of scale, and I am not going to quote a specific number of where the break-even point is. Raj talked about the market growing. As the customer adoption, the pull-through starts to happen, we do expect to have healthy gross margins. Okay, excellent. In the drone market, obviously there is a lot of different applications, and so I want to get a sense of how you are sitting within that opportunity and which applications you are competing well on and what are the key drive, which products are really driving some of that progress that you are making in that end market? Yeah. On the drone market, we are seeing tremendous amount of interest from many customers. One of the main reasons is we now have an extremely competitive cell. There, the main metric is watt-hours per kilogram. And that cell actually is made fully in our own factories. And it is a TAA compliant country in South Korea, and we expect it to get to NDAA compliant path across multiple SKUs in 2027. And this factory, you might remember, Colin, has more than a decade of production history on this site, so into military applications. The main markets we are getting into there are markets where they want a few hundred cycles, for example, of flying time and also safety, public safety, interceptor drones, ISR, and markets like that. These are the markets that I feel like have a good margin profile and a lot of demand. Our expectation is that the demand is actually going to outstrip the supply here very quickly, with many customers wanting that. And we are super excited that we have our own factory that we are able to make it in, where the margin profile will be really good. And we are adding more capacity there. As I mentioned in the prepared remarks, we expect that capacity to come online in mid 2027. Yeah. If I could chime in as well. As we go through the names of the pipeline and look at it, these are some of the best companies in the world, so some really exciting opportunities. Of course, drones is a big portion and majority of that funnel that's building right now, and we expect that to be strong for many years to come. There's other technologies that we think will build right on top of this. I think robotics is another example that we look a few years out, we think it's going to be a big market as well. Your next question will come from Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead. Ruplu, your line is open if you could unmute and please ask your question. Hi, can you guys hear me now? Yes, sir. All right. I had two questions. Raj, now that both the lead smartphone customer as well as the second smartphone OEM, they have moved to a silicon-specific qualification framework, how standardized do you think this will become in the industry, and what steps are you taking to enable that? Does the second OEM now have essentially the same qualification path as the lead customer? When do you expect POs from the first customer as well as the second customer? I have a follow-up. Yeah. So, good question. Yes, I think what has happened is, over the work we have done over the last couple of quarters, we have really been able to convince the customers that when you move from graphite anodes to 100% silicon anodes, some of the legacy tests are not very representative of how the battery will actually perform in real life. Which is, I think, a huge step forward that we have been able to accomplish. As I mentioned, in February, we talked about this 0.2C cycle life test, where we are internally seeing that we should be able to go past 1,000 cycles. Now the customer has confirmed that on their own test. So we are very happy about that. The one test that is left is really the accelerated cycle life test, where, if you just do at a normal cycle life 0.2C, it just takes a long time, so people really need an accelerated test. We have now worked with the customers to come up with a hybrid protocol, which is some combination of the different rates of discharge, and that is what the customers are running, my lead customer is running now. There are two or three different protocols that we work with them on. Our expectation is one of them will meet the requirements that they have in fourth quarter. Then we expect to get to a small build of, they will put the battery inside the phone to see how it performs. Then we start getting into volume production in 2027 and so on. We do continue to talk to our other customers, too. Then we talk to them about, we have a good engineering relationship where we talk about these protocols. I do expect in time that the market will adapt and change to these kind of protocols because silicon behaves differently than graphite in accelerated tests. Okay. Thanks for the details there. As a follow-up, can I ask, you've made many manufacturing improvements in Fab 2. What is the manufacturing capacity now as it stands today of HVM 1 as well as the Agility Line? Can you give us a sense for how much max units of smartphones and eyewear that each of these lines can support? Thank you. Yeah, look, like I said, when we first said what the lines were, we have continued to keep that. 1,350 UPH was what the nameplate capacity of the line was. We haven't really staffed to all of that because we are managing that through the qualification timeline with the customer, so that when the demand is there, we are there. Again, it's not really a question of how much capacity we have, it's more a question of pacing the line with the right number of people and working on the yields and working on the ramp in line with as the customer qualifications are going. So that's where we are on that. Your next question will come from Mark Shooter with William Blair. Your line is open. Please go ahead. Hey, guys. You can hear me, right? Yes, sir. Awesome. Thanks, Ryan. Raj, congrats on passing the 1,000 cycles. That is a big accomplishment. I do think that we thought that this would be the last milestone, the stage gate, though. Can you walk us through what the last test, what are we trying to prove there? I know it is a hybrid approach, but is there something that your lead smartphone customer saw that required a little bit more digging in? Any color there would be helpful. Yeah, the last test basically is what I call accelerated test, which basically means that they would like to discharge at a faster rate, as I mentioned, but not just all the way at the high rate, but some combination of a faster rate and some combination of a slower rate, which is more representative of what a phone might actually do in the real world. We are working with them on the protocol that actually will get that done, and they have a number that we need to meet to get to that, and that is what we are working on. The next stage after that is to actually do the test inside a phone, right? These are bench tests on the battery on the table. So that is the next step to it. Like I said, the main gating item right now is an accelerated cycle life test so they can complete the test in time. We have multiple protocols that we are working jointly with the customer, and they are all underway. By fourth quarter, we expect to see some good results. Mark, at the risk of being repetitive again, it's like, go back to the February print, and we showed in the presentation and talked about how we passed the 0.2C test internally. We were waiting on the customer to run that test themselves, and that's what we've put in the headline here today, and we're very proud of that. We've got that independent verification from the customer. What we also talked about in the February print, and follow up in the May print, was the 0.7C test, and that's the traditional graphite test that we need to define a proxy or a substitute. Now we've got the framework in place. We mentioned last quarter, and now we have cells running under a handful of separate variant protocols. We expect one or more of those to pass by the end of the year. Okay, got it. Thanks, guys. Switching over to the drone opportunity, which is increasing here with the $100 million pipeline. That's a big number. It's an exciting business. What I'm interested in is, can you walk us through maybe some of the timeframe of what that engagement looks like with a customer? So you have $5 million in wins already. Can you walk us through how long it may take to move somebody from a pipeline opportunity to down subsequent steps? Is it 9- 18 months? When do you see some of a decent conversion from that pipeline opportunity in the backlog? Yeah. As I mentioned, I think we have a pipeline that has grown significantly. The $5 million is only just the design win awarded one. The better number is there's $40 million already in active testing and design wins in the customers who are cells right now. Defense qualification cycles are shorter than smartphones, because just of what they need to get to production faster. The revenue and scale aligns with our Korea capacity coming online in mid-2027. So we start to expect to see a ramp of some of this pipeline in mid-2027. Again, this capital expansion is very capital efficient because it's on the land and buildings we already own. Yeah. If I could comment as well, because I sit through those same pipeline reviews. There are some splits within that group as well. The drone companies themselves, they are all trying to move really fast in my opinion, so it is six to nine months, and we are sampling those, and quite frankly, within our internal teams, the cell teams, everyone is fighting over samples in terms of how we prioritize. Then there is the separate split of the defense primes. As we start to focus on supporting those type of activities, those tend to be a little bit longer runway. So, 18 months, I think is not an unfair number to say what we think the average time is to get to production with some of those. But those represent some enormous opportunities. In both of these areas, it is really about us putting capacity in place, and the equipment that we have ordered and is in flight right now, pardon the pun, is just hopefully the beginning. Your next question will come from Derek Soderberg with Cantor Fitzgerald. Your line is open. Please go ahead. Yeah. Hey, guys. Thanks for taking the questions. Just a clarifying question here first, Raj. You were talking about the testing earlier. Just wanted to confirm the second smartphone OEM is accepting the 0.2C testing standard. I think you had said there are sort of a few different options. But just wanted to confirm that second smartphone customer is sort of accepting the 0.2C. Yeah, look, we are focused on the first one first, and when that one gets to the right stage, we will sample the second one. But we have talked to all of them about silicon being different, and they all understand that. And I think some of them have launched some amount of silicon-doped batteries already. So they do understand that they behave differently. So I think my expectation is the whole market will move towards that in time. And it is fair to say each one should be easier and easier. We are not planning to- Yeah, because once you do first time, right. Yeah. Yeah. Got it. That is helpful. And then just on the Zone 1 yields, improved quite a bit since Q1. I was wondering if that was mostly the dicing configuration. And then just kind of a high-level question on yield. Where do you guys feel like you need to get before you can really ramp up production? Maybe a yield number that gives you the confidence to invest in additional capacity, just with the assumption that demand is not the issue. Maybe I'll take first a stab at that one. Raj has talked for several quarters, and I've emphasized as well in terms of we're making steady progress, and we're doing things in kind of an orderly fashion, in order to kind of meet our customer commitments. I think it has been time to put a lot of steady progress and a lot of focus on just kind of grinding out this blend yield wins. There's a lot of tactical things that go in to represent and be reflected in that 4 percentage point increase. So there's mechanical changes, there's process changes, there's a lot of different things. The team in Malaysia has done just a fantastic job grinding out those wins. Michael, who's joined as COO, we think is a great addition and adds to the team, and he's over there in Malaysia this week and reporting good things. I think he's going to just help with the momentum of progress. In terms of yield to be able to start a ramp, we're starting the commercial ramp with smartware, so we feel good about it. We feel good that we're on a glide path, and we've got a path to the gross margins that we want to need. I don't think the margins that we would target as baseline margins in order to start a real high volume ramp is going to be any different than any other typical manufacturing concern. Yeah, and just continuous improvement. Yeah. Thank you. Fewer words. Yeah, that's better. Your next question will come from Bill Peterson with JPMorgan. Please unmute your line and ask your question. Yeah, good afternoon. Thanks for taking the questions. Maybe picking up on that last topic. So you have the new COO, Michael. Do you expect that he'd be probably more focused on Malaysia, improving the areas that you just spoke to, or Korea or somewhere in the supply chain? Just kind of any sort of tangible area where you think that you can get the most continuous improvement, using your words. Yeah. I think we mentioned last time with K.H., who came to us with the tremendous experience from our Routejade acquisition, is now responsible for manufacturing of both the factories. So Michael will be responsible for both the factories in addition to advanced manufacturing machines that we need to build, in addition to supply chain, getting the right materials in place. So the entire operational side will be under him. I said in the prepared remarks, our Malaysia Factory is benefiting quite a bit from our learning in Korea because we've done that battery manufacturing knowhow, and with KH being there, the cross-pollination is happening tremendously. Also our Korea factory is benefiting tremendously from our silicon knowledge and how that's actually helping us make a very competitive drone cell. Our India team is actually helping both of those. We have tremendous R&D team in India, so it's a kind of a holistic set of teams that are all working together, and we don't separate that much as Malaysia and Korea as much as battery knowhow across both those. Thanks for that, Raj. Yeah. The next one, I guess maybe probably for Ryan, but gross margin took a step down in the second quarter. You called mix primarily sold from South Korea. Can you provide some more color on that? I guess it sounds like you didn't really have any impact yet from the small volumes of the eyewear, but it sounds like based off your expectations, that might be a bigger impact. So how should we think about gross margin trajectory based off the prior comments around eyewear and maybe other mix ramifications from South Korea? Yeah, good question. Look, first I'd caution against reading one quarter as a trend. I think more appropriately, if you look at the first half on a first-half basis, non-GAAP gross margin was 23%, I think, versus 21% in the prior year. So year to date, actually up 2 points. Q2 specifically, again, reflects the product mix and principally in the Korea base business, which can be lumpy. Some SKUs carry better margins than others. It's just the case. Looking forward, obviously we don't guide gross margins. But the shape to understand is that the base business is there. Last year, if I recall, 2025 Q4 ended up being a stronger margin quarter than Q3. But there's no doubt, smart eyewear as we ramp, it won't be big numbers, but it will be a drag on margins as we move into that ramp, as the overhead gets moved into gross margins, again, from an operating income, from a cash flow basis, it's largely geography moving and really, again, as we scale to 2027 and beyond, we expect that to rationalize as we scale. Your next question will come from Ananda Baruah with Loop Capital. Your line is open. Please go ahead. Hey, guys. Thanks a lot for taking the questions. Really appreciate it. I apologize if this has been asked already. To Raj Talluri, memory availability, does that have any impact just because of the prolonged tightness, on any of the SKU qualifications on smartphone or PCs, that you guys are targeting? Then I have a quick follow-up. Thanks. Not much for us yet. We're not in high volume, so we are really in a qualification stage. So I think we don't see too much impact right now. The customers are worried about it, but not impacting us. And there's a component of what's going on where low-end phones, low-end SKUs are unable, they're just exiting the market to some degree. Would that impact you at all? Where exactly would you consider yourselves to be positioned inside of sort of that heat map, that SKU heat map? Really we're in technology qualification stage and people really want to use us in the leadership products because that's where they see most advantage of our technology and differentiation and that's where we are being qualified. But I do expect that to waterfall down and, like I said, at this point, the SKU mix is not impacting us that much because we are working in the qualification stage. That'll come in time, but not right now. Cool. If you, this is for our benefit, but if you thought about what your revenue mix is three years out, five years out, like that, different product segments, what do you think is a useful way for us to envision what the rev contribution is to the company? Maybe sort of anecdotal percentage, percent this, percent that, not necessarily a rev outlook. Maybe I'll try and approach. Yeah, please, yeah. Of course, we can't necessarily quote a number or a specific. I will say, it's going to be, I think, a pretty good horse race. A year ago, if I think you asked that question, we were talking principally about smartphone, it'd be the obvious answer. I think the way that the drone market and the defense market has developed and the progress that we've made with product development, customer qualifications and building the team, that has an opportunity to be a really big business really fast. Yeah. Raj. Again, smart eyewear could take off and become huge and that could be good too. So it's hard to call the mix, but I think all three markets for us are attractive and where our technology provides clear benefit to our customers. So that probably the best way I'll say it. It's exciting times because everybody wants better batteries. Awesome. That's helpful. That's helpful, guys. Thanks. Appreciate it. Thanks, sir. As a reminder, if you would like to ask a question, please use the raise hand button at the bottom of your screen. Your next question will come from Jeff Osborne with TD Cowen. Your line is open. Please ask your question. Thank you. Just a quick one, Ryan. Could you update us on where annual production capacity is at the South Korea facility now and then Raj mentioned that you would be expanding, and that would be up and running, I think by the middle of 2027. So just curious, where is it now, annual revenue capacity, where are you headed and then how much will it cost? Okay, I think I got all the sub-part. Okay, thanks for the question. In terms of capacity there, we are not operating at full capacity, so there is some headroom there. There is some complexity a layer down because there is different sets of equipment, so each different equipment line has different. Some are at capacity, some are not. That is the reality of the current building. In terms of the capacity for the drone business, we have minimal right now. We have placed orders for new equipment that gets us what we think is significant material capacity coming on in the summer. That equipment is going to be tailored and customized to standard equipment, but configured for our specific product SKUs. I guess, just are you preparing for this to be like a $100 million business 18 months from now? Is there any flavor or sense of- Yeah, I can answer. The capacity of that equipment, I guess I can quote that number, is roughly 1 million units. It is all embedded in the CapEx forecast that we are starting to make payments on. You see, I think it is 8- 12 million that we guided, so it is, as Raj cited, capital efficient. We have additional buildings and land there in South Korea, so we can add incremental capacity beyond that. Hopefully, this is just the first inning of that baseball game. Yeah, our goal is to make sure that as Samira and the team converts the pipeline into opportunities into wins, we do not get capacity limited, right? We are staging it in that way, we are building the factory in that way, so that incrementally, we can add capacity quickly. But up to 1 million units a year as Ryan mentioned, we are already on track. So we can keep driving more on that as we see the design wins come in. We have the space and the building, so it is really not a problem. Got it. Thank you. That is all I had. Okay. Thanks. Thank you. There are no further questions at this time. With that, I would like to turn the call over to Dr. Raj Talluri for closing remarks. Yeah, thank you all. Really great quarter. We are happy with all the progress we have made and look forward to seeing you next quarter.