Thank you for standing by, and welcome to today's program, the Enovix Corporation First Quarter 2023 Earnings Call. After the presentation, there will be a Q&A session featuring Enovix management. With that, I'd like to turn it over to your host for today's program, Charles Anderson, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to Enovix Corporation's first quarter 2023 financial results conference call. With us today, are President and Chief Executive Officer, Dr. Raj Talluri, Chief Financial Officer, Steffen Pietzke, Chief Operating Officer, Ajay Marathe and Chief Commercial Officer, Ralph Schmitt. Raj will give an overview and then we will take your questions. After the Q&A session we'll conclude the call. Before we continue, let me kindly remind you that we released our first quarter 2023 shareholder letter after the market closed today. It's available on our website at ir.enovix.com. A replay of this video call will be available later today on the investor relations page of our website. Please note that the shareholder letter, press release and this call all contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are based on our current expectations and may differ materially from actual future events or results due to a variety of factors. For discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's shareholder letter and our filings with the Securities and Exchange Commission. All our statements are made as of today, April 26, 2023 based on information currently available to us. We can give no assurance that the statements will prove to be correct, and we do not intend and undertake no duty to update these statements except as required by law. During this call, we will also discuss non-GAAP financial measures which are not prepared in accordance with Generally Accepted Accounting Principles. You can find a reconciliation of the GAAP financial measures to the non-GAAP financial measures in our shareholder letter. I will now turn the call over to Raj to begin. Raj?

Thank you, Charlie, and thank you, everyone, for joining our call today. I'm delighted to communicate to you that at Enovix, we are executing really well, and it's been a solid quarter. We did hit a lot of key milestones this quarter. Firstly, we produced 12,500 batteries in our Fab-1 here in Fremont. This is ahead of our forecast of 9,000 batteries that we talked about last time. Now we also completed a rigorous design approval of our Gen2 Autoline, and we did this ahead of schedule. We completed the purchase orders for both the high-volume Gen2 Autoline, and also the agility line, which we will use for sampling our customers for qualifying their products. Now we also chose a site in Malaysia for our fab two, and we did this also ahead of schedule. Now I'm super excited also to tell you that we hired a leadership team there and 25 engineers already and we see a path for non-dilutive financing of our first production line. Now I'll expand on that in a moment, as we go through the presentation. Then after the quarter, we closed $172.5 million convertible debenture, which is intended to fund our Gen2, 3 & 4 autolines. We did at a very minimum dilution to our shareholders, super excited by that offering that we closed. Lastly, this quarter, we made a number of leadership additions very excited by some really strong people that joined our teams from our previous associations. And now I believe we are totally set up to scale. Now we are already seeing the impact of the people that we have hired with strong progress in all our R&D programs and also in the manufacturing that we are making. Now format-wise, I really wanted to cover two topics today. And then, we'll…

We will now begin the Q&A session. Please note that this call is being recorded. [Operator Instructions]. Our first question comes from Bill Peterson from JPMorgan.

Yes. Hi, thanks for taking my question. I noticed you said you sample to 106 customers. I don't recall what the number was in the fourth quarter or even if you stated it, but I look back and it was like 25 in the third quarter of last year. So I guess based on that, how many of your customers you have qualified? How many of you expect to be qualified later this year? And I guess how many of you waiting for post, I guess, line two readiness before the qualification will be finished?

Yes, absolutely. The question is about customers and customers sampling and qualification. I think Ralph is on the call and he's closest to this. So Ralph, if you want to take that.

Thank you for the question. So yes, we've seen even a bigger acceleration of the number of customers looking at our product and evaluating the technology. We haven't laid out the exact numbers as you asked for them, Bill. But as you saw in the release both the active and the design category that we have in our funnel has increased to about $718 million. All the cells we've been shipping over the last few quarters are now in qualification and take numerous quarters till those qualifications are done. But we're still on schedule exactly how we thought that in the back half of this year we'll start seeing customers put products into the market with our batteries in them.

Okay, thanks for that. My follow-up question is related to new product development, and somewhat related to prior questions. I guess, when do products such as EX-1 to 1.5 and EX-2. When do those intercepts and I guess can move to Fab-2? And I don't think you mentioned great flow, but similar type of questions. When do these get qualified in Fab-2 and then send the customers through their qualification? Or I guess, ultimately, most importantly, for high-volume production and revenue?

Yes, sure. I can talk about that. As I mentioned in my opening remarks, it's really exciting, our manufacturing strategy that we can continue to improve our process technology and continue to improve the energy density with, as some of you may or may not know, EX-1, EX-1.5, EX-2 are our various recipes or process technologies that actually improve energy density and cycle life and so on. We're on target on all of those EX-1.5. We expect to sample towards the end of the year, and we expect to run all those in our factories in Malaysia. Malaysia factory, as I mentioned, will produce samples like in April, next year, and get into high-volume manufacture towards the end of the year. We will continue to run as we make progress in our process technology, we will run them through our Malaysia factory. And as for brake flow, I'm very excited by brake flow. It's a phenomenal piece of technology where, as you put more and more energy density into batteries, safety is just paramount importance. And brake flow is a technology that Enovix has, that really provides great safety by not allowing the battery to go into thermal runaway, and outlined in Malaysia will help brake flow integrated when we make these batteries. And in fact, we are sampling batteries with brake flow now.

Our next question comes from Colin Rusch from Oppenheimer. Please go ahead.

Thanks so much, guys. You are separate from the engagement and design activity. Can you speak to the incremental specificity that you’re being able to gain on customer needs and adequacy of the current product roadmap to meet those needs as you've gone through the last four months or so?

Yes. I will make a few comments. And again, I will ask Ralph to comment on this because he is just a lot closer to it. One thing I found as I visited a lot of customers, as I've been spending more and more time here, and as you guys know, the customers we're now talking to, are the same customers that I've shipped for many, many years when I was at TI and Qualcomm and Micron and so on. I've got solid feedback from many of them that the battery technology that we have is superior and it produces higher energy density than anything they have today. Now the requirements we are getting are actually a lot more specific. I did mention that we hired more people, hired Samira, who's actually used to work at Qualcomm before, who is the Head of Products, reporting to me. Now she's able to, along with Ralph and his team, meet the customers and get more precise requirements on how is the battery charged, for example, what voltage it is charged at? What are the different waveforms that are used to charging? Cycle life versus energy density trade-off, getting more specific on the shape and size of the batteries that fit in wearables versus computers versus phones. So we are getting a lot more detailed specific requirements that is really helping us drive a much stronger product roadmap. Ralph, do you want to add more to it, please do?

Yes. I think you covered it well. But what I'll say is our expectation has been that the current technology that we have in the line that we're running is really meant to be targeted towards the IoT space and the wearable products. And so we're very, very well aligned with that, because we're way down the path. The other markets that Raj mentioned, both mobile and laptop, we've been engaged for multiple, almost years at this point with those customers and have their needs as well in their requirements. And we continue to add or slightly change things as we move forward to better address those market requirements. But it's still the same strategy and we're very well aligned with the market needs in each of those kind of in different stages. Wearables were frankly close to the production stage, mobile and laptops are just after that.

Maybe I will add a little bit more to that. The fact that we're able to sample and give a lot more batteries now is really helping us get much better feedback too, because now they're running hundreds of -- they have hundreds of batteries from us that they're testing. So the feedback is just much, much more -- much stronger. So it's so important to be able to make these batteries now and sample customers.

Excellent. And then just looking at the ecosystem of equipment suppliers. As you start playing for lines two and four, can you talk about how much opportunity you're seeing for CapEx reduction, optimization, second suppliers, things like that? So that there's -- your de-risking and shortening the timeframe on the ramp and install that equipment?

Yes. Let me ask Ajay to comment on that. He's right here.

Okay. So a very good question indeed. Actually, as we start our ramp, as we go into higher volume production, even here in Fab-1 in Q3, Q4, we have a lot of second sources lined up under qualification right now. But that's just for the 180,000 batteries. But going forward for the Malaysia factory, we have yet big list of second, third sources, which we have lined up actually, which we will be qualifying going through a rigorous qualification process. And then for equipment, you mentioned equipment as well as. Equipment, what we are doing is, we are relying really on the semiconductor value chain, if you will, rather than just a battery value chain again, bringing in that mindset, and we localize a lot of that in Malaysia, as we set up the high-volume operation there. So both are in works.

Our next question comes from Derek Soderberg from Cantor. Please go ahead.

Raj wanted to start with you. Maybe this one's for Ralph. But I'm curious whether or not you guys have funding now in place for the four production lines, with a more or less certain timeframe in place, does having that allow for certain customer orders or negotiations to move forward that otherwise wouldn't have?

I mean, I think what actually has always been, in the path of customer orders has been getting enough samples for them to qualify, getting them to be able to test it and say, yes, it looks good in our product, and then getting feedback from them on the right sizes of the batteries, right, dimensions, if you will. And that's really been what's in the critical path. And again, that, as I mentioned, we have the agility line coming in November, this year, November, December, is when we will be able to sample them, then we get samples from our high-volume manufacturing line in April. And that will go through the process of qualification to our customers. And we expect those products to go to manufacture late '24 and through '25. So in that sense, that's really the timeline that we've laid out. This fundraise, and getting the capital is to, for us to make sure that we are ready, and we have the funding in place to meet that rather than accelerate anything else, the timeline will be the natural order of things.

Got it. That's helpful. And then as my follow up Steffen, you guys have put out a range of estimates for battery production up to four lines, you've got an agreement with your manufacturing partner, wondering if you can update us on how we should think about the longer-term gross margin outlook.

So, Derek, thanks for the question. We really don't think it has changed on long range outlook, we still think the 50% high profitable business, that is what we are aiming for.

Yes. Just to add a little bit more color to that. I mentioned this last time, I think it's worth mentioning it again, because I get this question quite often and I want to add a little color. The cost of the battery, 60% to 70% is actually in the materials, I think that's important to understand. And as Ajay mentioned, as we get multi sourcing in place, as we get to scale, we are making millions of batteries, we see that costs coming down. The cost of the constraint we add on top of that is actually a small piece of it. But with local manufacturing capability in Malaysia and Sohan will bring that cost down to. And another very important thing I think for everyone to see, as I mentioned, my talk is that the factories we're building will last for quite long time. Because we can amortize those over millions of batteries because it is like the backend and test and I've seen people run the backend as test machines for 10 years even. So it's important to understand that this will be a profitable business. And as Steffen said, we're not changing our outlook on that. It's just really a question of getting to scale.

Our next question comes from Gabe Daoud from Cowen. Please go ahead.

Thanks for all the remarks so far, maybe just going back to the mobile phone and laptop batteries. You noted in the shareholder letter, the focus or go-to-market strategy for majority of this year and next year is on the wearable side and the IoT market. So just curious when could we expect first revenue being generated by mobile phone and laptop batteries? And could you just remind us where we are on the tech roadmap in terms of cycle life, I think maybe the larger phone and laptop batteries had higher cycle life requirements.

Yes. So I think the most important thing to remember here is the timeline, which I laid out, which is, we will get samples end of this year from our agility line in the right form factor, because the current batteries we make don't fit into laptops, or phones in form factor, the small ones, and the big ones that we make, they really fit in the IoT space. As we make the batteries that are more specific to phones and laptops, we will get that capability by end of this year, and sampling again in April next year, and then starts the process for our customers to actually start validating them in their own product lines. And in their own phones and laptops, and so on, that will take us through -- that will be end of next year. And '25 is when we expect to see revenue from those kind of high-volume applications, because that's the time it takes to actually make these batteries in the right form and get the validation and get the qualification from our customers. Now we will continue to improve energy density, we will continue to improve our cycle life and that will naturally intersect with the latest technology we have in '25, when they get to production.

Thanks, Raj. That's helpful. Okay. And then, if we could just maybe, or just I want to say, makes sure I'm thinking about the timing correctly. So Gen2 Autoline begins to arrive in Malaysia in November this year. So I guess, with factory acceptance, taking maybe a quarter or twos started production is 2Q '24. And then still expecting four lines in Fab 2 by 4Q '24 is that how we should be thinking about the ramp.

I know the way I mentioned that is, we ordered one line. And that's the line that will be there. As you said, actually the first two pieces, we ordered one line but we ordered one part of that line twice. So what is called the agility line, which will come here to Fremont in November, December. And the same stuff will go to Malaysia too. The agility line here will help us sample our customers with custom sized batteries. Meanwhile, the Malaysia build out happens in parallelly. And the Malaysia build out happens in such a way that April next year, we'll be able to get samples to the Malaysia line. Now we only committed on building one line through '24. We have the ability to build more, now that we have the CapEx stuff sorted out. But we will pull the trigger on those as and when we see the right customer demand come in. And the most important thing in running a manufacturing company is to match the supply and the demand. And as the customer qualifications progress, we'll have better and better visibility into when to build that. Now the one thing that Ajay and team have done is to make sure that the facility that we are doing in Malaysia, with YBS has the ability to host all four lines and has the facilitation run them. So we have set-up. And we also talked to our suppliers that, hey, we will probably need much more than one line and so please be ready for it. But we're not making any commitments and when exactly, we'll pull the trigger on that.

Our next question comes from Alex Potter from Piper Sandler.

So I had a question, regardless of how long it takes to ramp, I guess once we're up and fully scaled in Malaysia, I know that there is some nuance here about what exactly “unit” is. But in the shareholder letter from today, you mentioned between 38 million and 75 million batteries per year in the aggregate coming out of Fab-2 in Malaysia. If you divide that by four, right, it's between 9.5 million cells and almost 19 million cells per line. So this could be semantics. I know because are small cells, there are big cells, but to me, when I first saw those numbers, it seemed like an upward adjustment versus your expectations for per line output versus what you historically said. Is that correct or am I reading that incorrectly?

Ajay, I want to let you answer that.

Yes. Again, good observation and good calculations, but let me just direct you towards, the small -- the way we are designing our lines is the first line is more for universal line. Because we have so many engagements with multiple customers, first line will be able to do small and large, both, form factor. In other words, the corner cases are pretty wide in terms of what can be done on the first. So for that we give up a little bit of capacity on the first line. But second line onwards will be highly optimized towards narrower window of the dimensions and therefore will have a lot more capacity per line, which is why when Raj said, in the investor letter between 9.5 million to 19.5 million batteries per line. So you can -- depending on again, the demand, and how we match the supply to the demand. That's how you will get to the number of lines required for the volume that you just stated. That's how I would look at it.

Okay. That's very helpful. And then maybe the follow up question to that, then if I wanted to take those unit numbers, and translate that into revenue capacity to the extent you're comfortable talking about this, right, if I don't know -- I know that $5, I've always historically assume $5 for a wearable and maybe $10 for a cell phone size battery or something like that. Could you take those $5 to $10 unit ASPs and multiply it by the range of those unit numbers and get to something in the neighborhood of 375 million, 380 million of annual revenue capacity out of Fab02, is that in the ballpark?

Yes. That's a good first order approximation. Again, it just depends on which ones we sell how much but that's a good first order approximation.

Our next question comes from Gus Richard from Northland Capital Markets. Please go ahead.

Yes. Thanks for taking my questions. What run rate do you have to hit in manufacturing before one of your customers commits to production?

I mean, it's not that simple as run rate, that's not the only factor that decides. I think the most important thing for our customers is that we be able to -- let me remind a little bit. There's a lot of customers today that are actually Ralph is sampling that are comfortable going into production with our small cells and big cells, and we'll see revenue from them this year and next year. So in that sense, we already have customers who are comfortable going to production with what we're producing. The key was to give them enough samples and show that we have enough backlog enough inventory that we can actually meet their demand as they start ramping the product. Now, it depends on the volume of the product, if the product goes in millions of units, we clearly don't have the capacity this year. But next year, we aim to be able to produce millions of units. So I think then customers are more comfortable. So large volume customers are more comfortable. So it really depends upon the run rate of a particular product, right? If the product run rate is in the millions, we need to have that capability. If it's the 10s of 1000s, we are ready today. So that's kind of like how I look at it. And the other variable is, we need to give them the battery in the right form factor and shape that they can test it in the product that they're putting it in, to be able to say, okay, you know what, I think we should go with this. Right? Those are the two big variables.

Okay, I got it. And then, on the first half, you can produce 30k batteries, if I can add two numbers together. And for the full year, you can do 180k batteries. It's a pretty big jump in the second half. Could you just talk about what's going to accelerate that volume just so, what needs to happen?

Yes. I'll have Ajay comment on that. He lives it every day.

Absolutely. Again, very good question. And, yes, as you saw in the Q1 we did 12,500, we're saying we'll do 18,000 in Q2, the quarter we are in already. And the ramp is pretty steep. The ramp is driven mostly in the confidence that we are going to get to that ramp is doing a couple of things, right? One is the yields. And while we don't talk in detail about our yields which nobody really announces their yields. All I can say is we are making significant improvements in yields throughout the year. And it is the proof points are sort of behind us. So that gives us confidence about the second half. That's one. Second is uptime, and mean time between failures of the equipment, right? So essentially, is the equipment getting a little bit more predictable. And though both those things we are making good, solid progress day after day after day, which is what is giving us. So between now and end of the year. We feel very, very strong that our assumptions are actually fairly accurate. And we are going to do the 180,000.

Our next question comes from George Gianarikas from Canaccord.

Hey, everyone. Thanks for taking my question. I'd like to ask about the slides that TJ presented in January that talked about they had red, yellow and green and in terms of just the issues that were needed to be fixed going from Gen1 to Gen2, some of those included like I see a red line here for [indiscernible] insert, slot fill. And I'm curious if there's any update on any progress that you've made in turning those reds, to yellows and those yellows to greens? Thank you.

Yes. I mean, I'll give you a high-level color. We made significant progress on those. And in fact, I was looking back at that presentation the other day when someone asked me a question. And we're actually on track to almost everything that was said there. And that's the reason why we were able to get the approval to make the purchase order for the Gen2 equipment, because we made solid progress in each of those. And so I think, clearly, the team has worked really hard, I mean, Ajay with all his experience, and the team he has brought in, we're able to solve most of those issues. So we feel pretty confident about that. Ajay, anything else you want to add?

Yes. Just very quickly, the way we kind of test that, are we making progress? Are we solving real root causes of what was stopping us from feeling a whole lot more confident? What we're doing is, we're building proofs of concept, right? We introduced that last time, in the January third meeting, called a POC, there are several POCs, in upwards of three dozen POCs, which were in motion, all the way from January, literally January 4, until yesterday, I can give you the update. Most all those POCs are doing extremely well showing us that whatever we are assumed to confirm the UPH that we're expecting, are all being met. So that's how we progress. It's a pretty rigorous way of approving the next step and the next step, et cetera, in that approval cycle, as Raj mentioned. So we're feeling pretty good after the POCs.

Thank you. And then, just next question is on the -- I noticed that you have these two silos that you have in your revenue funnel, and one of them is engaged opportunities. That was slightly down sequentially. Is that because engaged opportunities moved into active designs? Is that the right way to think about it?

Yes. Ralph, you want to take that? That's kind of my understanding but Ralph can cover.

Thanks for the question. And that's the simplest way to think about it is that we're trying to progress these customers into more active and real design wins. And then, that was moving faster than getting new customers into the front-end of that funnel, the engaged part. Really, exactly what you want to happen in order for us to get them to a revenue state.

Our next question comes from Ananda Baruah from Loop Capital Markets.

Yes. Just a couple if I could, I guess the first is on sort of processing and getting, Gen2 mobility lines stood up, will you be giving us any updates on equipment delivery, and any updates, kind of through the year on the way to getting them through, you want to be around particular metrics or anything of that nature? And then, I have a quick follow up? Thanks.

Yes. We will continue to give you updates in these meetings, as we move forward in the different stages and where that is. I think the next big milestone for us is the factory acceptance test, which will come up like in August, I believe. And then after that, we'll have site acceptance when it actually be delivered to our site. So we'll give you updates on both those milestones. But so far, we are very pleased with the progress. And our teams are visiting, our suppliers come here, Ajay, and I see this all the time. And even yesterday, I saw a video of one of our Gen2 machines, the newest one working, it's pretty exciting to see the progress being made by the team.

Awesome, Raj. Thanks. That's helpful. Yes, we look forward to that. And then, I guess the follow up question is, what like, how would you like us to think about incremental capacity? I know you just got Malaysia, okay, like in place. And you're just starting to get to sort of get the purchase orders in waiting for the equipment. But I'm sure we'll start all getting asked as we move forward about incremental capacity plans, and at some point, incremental funding plans like that. So anything you can help us out with context wise around that, will be grateful. Thanks.

Yes. I mean, as I mentioned, I have a lot of experience in high volume manufacturing businesses. So, the most important thing is to make sure your supply and demand are tied out, and you don't have too much supply or too little supply and line the demand, which takes a lot of planning, by the way, it takes a lot of planning in the demand side with the customers, a lot of planning and when we order the equipment, what are the long lead times once and facilitation. So it's a complex problem, both Ajay and I have a lot of experience running this. So the way we're going to do this is, first, we secured the funds to make sure that we have the capability to buy them as we need them. Second thing and we now we secured the site, and in the middle of getting the facilitation done with our partner. And then, we give heads up to our suppliers and when they need to come. And then we start sampling our customers. And like I said, we are set up for the first four lines now. And as we get to that stage, we will see the progress in the next couple of years, both on the customer side and both our machines are running. And we will continue to optimize the machines. And we'll continue to look to how to expand beyond those four as the demand shows up.

[Operator Instructions]. Our next question will come from Marc Cohodes from Alder Lane. Marc, your line is open. Feel free to unmute.

So Raj, you've been there for three months, and Ajay a little more than five months. What gives you guys the incremental confidence that you can actually manufacture these batteries at speed? Because everyone constantly hears it's hard to do, it's impossible, fly in the sky. But you guys are sounding more and more confident. So what has exactly happened that gives you that confidence? That's question one. And question two is, when are you guys going to start building batteries for inventory to actually ship commercially for these new products? Thank you.

Yes. Thank you for that question, Marc. Firstly, I think as I mentioned, the reason that we are increasingly getting more and more confident, the more time we spend here is really because of the couple of things I mentioned in the call. The way Enovix manufactures batteries, is really like the backend semiconductor manufacturing. It is a backend assembly test kind of technology that we have to master and do. And that technology is there. And many people have done it. And even then, the tolerances to which we need to make is an order of magnitude less stringent than what's done in chips. And you can see the progress we're making in the number of batteries we're producing over the last few quarters. I mean, we went from almost nothing to 4000, something to 9000 to now 12,500. And we are committing to 18,000 next quarter. So progress we are making in producing batteries as we learn that. Our understanding of the actual mechanisms and the machines that produce this and the tolerances to which they need to do. I think those are two things that really give us a lot of confidence. And thirdly, all these proof-of-concept experiments that we've been running, where targeted at what went wrong with the Fab-1, when we did it, where did we lose yield? Where did we lose the throughput? Where did we lose machine up times? And we created a target experiments to make sure that those don't happen in Gen2 and those experiments proved out and we are confident now. We picked a new set of suppliers who are actually very capable of producing machines like this. And we are not paying them all the money upfront. So there's a lot of skin in the game on their side,…

Just very quickly on the Gen2, I think Raj alluded to it, but just from my personal, how I feel confident, I'm an operations guy, data is the only thing that matters. So yield uptime of the Gen1 is what is giving us the confidence, as I told you earlier. But more so in the Gen2, I personally have visited all the suppliers, all of them who are making these POCs, these machines, spend good time with them. Look through each of these suppliers, the methodology that they're using to build the machine. Looked at the POCs myself. That is what is giving us a confidence. And exactly as Raj said, this is all about backend of semiconductor type of technology, tolerances, et cetera. And now we are seeing the ramp -- upswing of the ramp that we are producing, that gives us the confidence.

Our next question comes from Sean Milligan from Janney. Please go ahead.

First, I get asked a lot about who is YBS and what is the background there? And so, I know you touched on it earlier, Raj, and that they're used a lot in backend semi-processing. But can you kind of maybe touch a little bit more on kind of how that relationship came to be about? And what gives you confidence in YBS's ability to execute on financing?

Yes. So a couple of things. Look, I mean, I think if you look at Southeast Asia, there's a lot of contract manufacturers. And we -- Ajay has decades of experience in Malaysia, and I came from Micron that built the last factory in Malaysia on an assembly test of SSDs. So we understand the ecosystem. We understand who the people are that do it well. And YBS has got a good track record of actually supplying, and manufacturing for many top tier OEMs. And they have that capability. And again, they have the strong connections to the key people in Malaysia. And Ajay visited them and they came here, we talk to them, and they're a solid company, and we feel very strongly that they will be successful. And so, based on our experience, and what everything we've done, I feel very good that this will get done. And it's not something that's obvious to everybody who doesn't live in that part of the world. But we spent a lot of time in Southeast Asia. So we feel good that that will get done. But maybe I can come a little bit more because he goes there a lot often than me.

Yes, sure. So YBS is a company I've known now, actually, for quite some time. They are indeed, exactly as you said, in the backend manufacturing, sub-contracting business. I know the CEO and the team there, which [indiscernible] runs. So I've been kind of studying them actually, for some time even in my previous life. They have a very good -- the uniqueness about them is they have exactly the talent that we would need to localize some of our supply as in constraints, as in few other mechanical things. They're really good at that. So when I localize them to where I can make them right next door. That is where I will get my cheapest, total cost, and cost will be reduced. So YBS brings a lot more value than just being a contract manufacturer, they're also going to help us with our ecosystem of various components that go into the battery.

Okay, great. Noted. That's great feedback. And then, my follow up would just be, Raj, I just wanted to clarify something you said earlier, and it kind of relates to Gen2 line 2, 3, 4, the execution on those. You mentioned that. Were previously I think that that conversation talked about those being there by or ordered or delivered in Malaysia by the end of next year, you were looking to line those up more with demand. Obviously, the pipeline that you have is robust. So I just wanted to clarify, is that lining up, making one all wearables to optimize margins that line or is it really just filling the demand funnel needs to fill to have those lines come in?

Yes. I mean, again, if that's what we want to make happen, which is pull the trigger and get them all out next year, if that's what makes most business sense, we will do that. I'm not saying we won't do that. I'm just saying, I'm just in general, a more of a supply demand matching kind of guy. So the way I look at it is, we have various customers that are actually qualifying our product in IoT devices. They're qualifying it in smartphones. They're qualifying them in variables. They are qualifying them in laptops. And when we pull the trigger on a line, you want to make sure you're pulling the trigger on the right line. And that produce the right kind of batteries for the right customer. So it's not all in it. This is beginning of this year. It's not all absolutely clear to me which one will be the first one, which will come next? And what timeframe it will come. As you guys know that the demand for batteries in the total time is huge. But we just want to make sure we build the right one at the right margin at the right thing that makes money for the company. And that's kind of where I was talking about matching supply and demand.

And our next question comes from Chip Moore from EF Hutton.

Actually wanted to go back to YBS real quickly. I imagine seeing the equipment orders. And the recent financing probably helped them in their discussions around localized financing and tax incentives and things like that. And based on your commentary around revising CapEx next quarter sounds like, we should expect something fairly soon. So just curious anything to bear in mind there, and then my follow up would be, have you seen any more interest in similar type of [indiscernible] conversations? Thanks.

Yes. I didn't hear it fully well, but I think the question was on, how are we feeling about YBS financing. And like I said, in my prepared remarks, we talked to them constantly, and they're making good progress. It's going through the approval process that they need to go through, they're a public company. And it's going like how we thought it would so no cause for concern on our side. We are in close contact with them. We are just going through the due diligence, and we're going through all the right step to make sure it's done right. There are other options like that. And we've thought this was the best one that we should pick now. And that's about all I want to comment at this point is that we do have what we need for the next four lines with this one, once this one gets worked out. And I still reiterate the comment I made before, which is there is a lot of interest from customers, as we begin to scale these batteries where they want surety of supply, there is interest from other parties, like we talked about YBS, and so on, and we will explore all of them. And I also mentioned that we'll be opportunistic about capital markets, and we were and we were able to accomplish that. So I'm just continuing to execute to what I told you guys, I would last quarter.

There are no further questions at this time. With that, I'd like to turn it over to Raj Talluri for closing remarks.

Yes. I really want to take just a couple of minutes to thank you all for joining in and for all the great questions. Phenomenal team at Enovix. We've done really well this quarter and a lot of work ahead of us but we are committed to executing this and really appreciate all the support of our partners and investors to allow us to do what we are trying to do. Thank you.