Enovix Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter ended October 3, 2021, and 39-week period ended October 3, 2021. Comparatives are the three and nine months ended September 30, 2020. Enovix changed its fiscal calendar to 13-week quarters; its current fiscal year ends January 2, 2022.
Business context
Enovix designs and develops silicon-anode lithium-ion batteries using proprietary 3D cell architecture. Commercial manufacturing had not commenced, and the company had generated no product revenue from its planned principal business. It reported no recognized service revenue in the periods presented because customer prototype milestones had not yet been completed. The July 14, 2021 business combination with Rodgers Silicon Valley Acquisition Corp. was accounted for as a reverse recapitalization, with Legacy Enovix as the accounting predecessor.
Financial results and liquidity
| Metric | Q3 2021 | Prior comparable period | 39 weeks 2021 | Prior comparable period |
|---|---|---|---|---|
| Revenue recognized | $0 | $0 | $0 | $0 |
| Operating expenses | $19.2 million | $6.4 million | $44.8 million | $15.6 million |
| Operating loss | $19.2 million | $6.4 million | $44.8 million | $15.6 million |
| Net loss | $10.8 million | $13.5 million | $41.3 million | $26.3 million |
| Basic loss per share | $0.08 | $0.16 | $0.38 | $0.35 |
| Diluted loss per share, as corrected in this filing | $0.14 | $0.16 | $0.45 | $0.35 |
| Cash used in operating activities | — | $34.5 million | $15.5 million | |
| Capital expenditures | — | $31.5 million | $18.9 million |
Quarterly R&D expense rose 171% to $10.3 million, and selling, general and administrative expense rose 492% to $8.8 million, primarily reflecting added personnel and higher facility, tooling, professional-service, insurance and public-company costs. The quarter’s lower net loss versus 2020 reflected a favorable $8.5 million change in warrant fair value; operating loss increased materially. No meaningful revenue margin was reported because there was no recognized revenue.
At October 3, 2021, cash and cash equivalents were $338.7 million, working capital was $331.4 million, accumulated deficit was $248.6 million, and stockholders’ equity was $323.7 million. Enovix reported no outstanding debt; it repaid a $15.0 million secured note, including interest, in July. The company recorded a $64.4 million liability for private placement warrants. Cash provided by financing activities was $375.7 million for the 39-week period, including net business-combination proceeds of approximately $373.7 million. The company reported $7.8 million of deferred revenue and $4.4 million of deferred contract costs.
Material changes and outlook
- Business-combination and PIPE proceeds substantially increased cash and funded manufacturing-facility investment. Property and equipment, net, rose to $61.6 million from $31.3 million at December 31, 2020; construction in progress was $56.7 million.
- Management said cash was expected to cover funding requirements for at least the next 12 months under its spending and timing assumptions, while noting that further financing may be needed for expansion.
- Enovix was completing Fab-1 in Fremont and pursuing a second manufacturing site. Management expected operating losses to continue and R&D and SG&A to increase; the risk-factor discussion said significant production was not expected until 2023 or later. No specific revenue or earnings guidance was provided.
- Management cited customer engineering and prototype programs, but noted that design wins do not necessarily result in purchase orders. Certain customer contracts include an exclusive right to purchase batteries for augmented- and virtual-reality applications through 2024.
- Key risks include scaling and qualifying a new manufacturing process, production yield and cost, customer qualification and demand, supplier availability and material prices, battery performance and safety, competition, and the need for capital to build additional capacity.
- Disclosure controls and procedures were deemed ineffective as of October 3, 2021 because of continuing material weaknesses related to insufficient qualified accounting resources and lack of independent technical-accounting review. Remediation was ongoing.
- Two lawsuits related to the business combination were voluntarily dismissed. The filing reported no current material legal proceedings. Lease liabilities had a present value of $9.8 million.
Important facts for investors to verify
- Whether Fab-1 is completed, qualified and capable of achieving planned throughput, yield, cost and product specifications, and whether a Fab-2 site is secured.
- Whether prototype milestones are completed, deferred revenue converts to recognized revenue, and customer design wins become binding purchase orders.
- Cash burn, capital spending and financing needs against management’s 12-month liquidity expectation, particularly if manufacturing expansion is delayed or costlier than planned.
- The status and resolution of the disclosed material weaknesses and whether subsequent filings report effective controls.
- The diluted loss-per-share correction: the company said its earlier shareholder letter omitted the treasury-stock method for private placement warrants and corrected diluted loss per share to $0.14 for Q3 and $0.45 year to date.
- The filing’s risk-factor text says management identified substantial doubt about going concern, while the financial-statement liquidity note says cash was expected to meet requirements for the next 12 months. Investors should review the full filing and subsequent disclosures to reconcile these statements.