Enovix (US:ENVX)2025-07-31 21:09PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Enovix Corporation's unaudited condensed consolidated financial statements for the quarter ended June 29, 2025, including balance sheets, statements of operations, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes on accounting policies and specific financial items Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Metric | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $135,978 | $272,869 | | Total current assets | $228,340 | $295,006 | | Total assets | $469,112 | $527,169 | | Total current liabilities | $52,275 | $53,701 | | Long-term debt, net | $169,441 | $169,820 | | Total liabilities | $262,460 | $277,766 | | Total equity | $206,652 | $249,403 | - The company's cash and cash equivalents significantly decreased from $272.9 million at the end of 2024 to $136.0 million as of June 29, 2025, reflecting cash used in operations and investing activities12 Condensed Consolidated Statements of Operations Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $7,468 | $3,768 | | Gross profit (loss) | $1,942 | $(655) | | Loss from operations | $(43,733) | $(88,750) | | Net loss attributable to Enovix | $(44,528) | $(115,872) | | Net loss per share (basic and diluted) | $(0.22) | $(0.63) | - Revenue nearly doubled year-over-year, leading to a gross profit of $1.9 million in Q2 2025, a significant improvement from a gross loss of $(0.7) million in Q2 2024, with the operating loss narrowing due to the absence of a large restructuring cost present in the prior year's quarter14 - A gain on bargain purchase of assets of $4.8 million was recognized in Q2 2025, contributing to other income14 Condensed Consolidated Statements of Cash Flows Cash Flow Summary - Year-to-Date (in thousands) | Metric | YTD Ended June 29, 2025 | YTD Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(42,766) | $(61,993) | | Net cash provided by (used in) investing activities | $(91,089) | $19,512 | | Net cash provided by (used in) financing activities | $(2,685) | $45,081 | | Change in cash, cash equivalents, and restricted cash | $(136,642) | $1,852 | - Cash used in investing activities was $91.1 million for YTD 2025, primarily due to $14.2 million in property and equipment purchases, a $10.0 million payment for a business acquisition, and $85.5 million in investment purchases27 - Financing activities provided significant cash in YTD 2024 ($45.1 million), mainly from stock issuance, compared to a small cash usage in YTD 202527 Notes to Condensed Consolidated Financial Statements - On April 1, 2025, the company acquired battery cell manufacturing assets from SolarEdge in South Korea for $10.0 million in cash, resulting in a recognized gain on bargain purchase of $4.8 million as the fair value of assets acquired exceeded the purchase price5056 - In May 2024, the company initiated a restructuring plan, recording pre-tax charges of $38.1 million in Q2 2024, which included a $35.1 million non-cash loss on the disposal of Fab1 long-lived assets, with no restructuring costs recorded in Q2 2025127128 - Subsequent to the quarter's end, on June 30, 2025, the board authorized a share repurchase plan for up to $60.0 million of common stock, and on July 7, 2025, the company declared a warrant distribution to stockholders132134 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the second quarter of 2025, highlighting strong revenue growth driven by defense products, progress in manufacturing readiness, and key product development milestones like the launch of the AI-1 platform, covering results of operations, liquidity, capital resources, and critical accounting policies, while also noting macroeconomic trends and the company's strategic focus on markets like smartphones, IoT, and defense Business Overview and Q2 2025 Highlights - Revenue for Q2 2025 was $7.5 million, nearly doubling from the prior year's quarter, primarily driven by strong demand for defense products143 - Launched the AI-1 product platform and produced the first smartphone battery achieving over 900 Wh/L energy density, which is now undergoing formal qualification with a lead OEM customer143142 - Acquired battery cell manufacturing assets from SolarEdge in South Korea for $10.0 million, which is expected to expand manufacturing footprint and support demand from the defense industry151 - In July, declared and issued a warrant dividend to shareholders, which could provide up to approximately $248.5 million in proceeds if all warrants are exercised, intended to support the scale-up of the Fab2 facility in Malaysia151 Results of Operations Comparison of Fiscal Quarter Ended June 29, 2025 to June 30, 2024 (in thousands) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $7,468 | $3,768 | $3,700 | 98% | | Gross profit (loss) | $1,942 | $(655) | $2,597 | N/M | | Research and development | $28,148 | $29,065 | $(917) | (3)% | | Selling, general and administrative | $17,527 | $20,884 | $(3,357) | (16)% | | Restructuring cost | $0 | $38,146 | $(38,146) | N/M | | Loss from operations | $(43,733) | $(88,750) | $45,017 | (51)% | - The $3.7 million increase in quarterly revenue was primarily driven by increased sales to South Korea defense contractors, with sales to one specific South Korean defense contractor accounting for $4.8 million in Q2 2025, up from $1.2 million in Q2 2024168 - Operating expenses decreased significantly year-over-year, mainly because Q2 2024 included a $38.1 million restructuring charge related to the relocation of Fab1 manufacturing operations, which was not present in Q2 2025174 Liquidity and Capital Resources - As of June 29, 2025, the company had cash, cash equivalents, restricted cash, and short-term investments of $205.5 million, with working capital of $176.1 million and an accumulated deficit of $889.1 million189 - Management expects that current cash will be sufficient to meet funding requirements for the next twelve months194 - A warrant dividend was issued in July 2025, with potential proceeds of approximately $248.5 million if fully exercised, intended to support the Fab2 scale-up192 - On June 30, 2025, the board authorized a stock repurchase plan for up to $60.0 million, expiring December 31, 2026193 Item 3. Quantitative and Qualitative Disclosure about Market Risks This section outlines the company's exposure to market risks, primarily interest rate and foreign currency risk, with management believing that interest rate risk is not material due to the fixed-rate nature of most of its debt, and foreign currency risk is not considered material to historical operating results, though the company will continue to monitor its exposure as international operations grow - The company does not believe it is exposed to material interest rate risk, as its $172.5 million of Convertible Senior Notes have a fixed 3.0% annual interest rate, accounting for approximately 94% of its total debt215 - Foreign currency risk is not considered material, as a hypothetical 10% adverse change in exchange rates would not have a material effect on the company's financial condition or results of operations as of June 29, 2025217218 Item 4. Controls and Procedures This section addresses the company's internal controls, with management, including the CEO and CFO, concluding that disclosure controls and procedures were effective as of June 29, 2025, and no material changes to internal control over financial reporting occurred during the quarter - Management, including the CEO and CFO, concluded that as of June 29, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level221 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls222 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section provides an update on legal matters, referring to Note 9 of the financial statements, with the primary ongoing matter being a securities class action complaint filed in January 2023, for which the company has not recorded a liability as the potential loss cannot be reasonably estimated - The company is defending against a securities class action complaint filed in January 2023 alleging material misstatements related to manufacturing scale-ups, for which a motion to dismiss the second amended complaint was granted in part and denied in part in July 202499100 - A hearing on a subsequent motion to dismiss is scheduled for September 5, 2025, and the company has not recorded a liability for this matter as of June 29, 2025101102 Item 1A. Risk Factors This section details the significant risks and uncertainties that could materially affect the company's business, financial condition, and operating results, highlighting challenges in scaling its complex manufacturing process, reliance on international operations and supply chains, customer concentration in the defense sector, competition in the evolving battery market, and the need to raise additional capital to fund growth - Manufacturing & Scale-Up Risk: The company relies on a new, complex manufacturing process and faces significant risks in scaling to volume production, improving yields, and controlling costs at its Fab2 facility in Malaysia231237 - International & Supply Chain Risk: Operations in Malaysia, South Korea, and India expose the company to geopolitical tensions, trade policy changes, and potential disruptions in sourcing necessary raw materials and components244252 - Customer & Market Risk: The company has a high concentration of revenue from a limited number of customers, particularly a single defense subcontractor in South Korea, making it vulnerable to changes in their purchasing behavior266 - Financial Risk: The company has a history of financial losses, expects to incur significant future expenses, and may need to raise additional capital to fund its operating needs and growth, which may not be available on acceptable terms278314 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section reports on the company's purchases of its own equity securities, noting that no shares were repurchased during the quarter ended June 29, 2025, but a new repurchase program was authorized by the board of directors on June 30, 2025 - No shares were repurchased by the company during the quarter ended June 29, 2025413 - On June 30, 2025, the board of directors authorized a new plan to repurchase up to $60.0 million of the company's common stock413 Item 5. Other Information This section discloses information on insider trading arrangements, specifically that the Chief Operating Officer adopted a Rule 10b5-1 trading plan during the quarter for the potential sale of vested restricted stock units - On May 9, 2025, Ajay Marathe, Chief Operating Officer, adopted a Rule 10b5-1 trading arrangement for the potential sale of up to 268,338 shares of common stock from vested RSUs, with the plan effective until January 31, 2026416 Item 6. Exhibits This section provides an index of the exhibits filed with or incorporated by reference into the Quarterly Report on Form 10-Q, including corporate governance documents, debt agreements, and officer certifications