Enovix Corporation — Q3 2022 Form 10-Q
Reporting period: Quarter ended October 2, 2022; fiscal year-to-date covers the first three fiscal quarters of 2022. Financial statements are unaudited. Enovix develops and manufactures silicon-anode lithium-ion batteries and began commercial manufacturing and generating revenue in 2022.
Financial performance and liquidity
| Metric | Q3 2022 | Fiscal YTD 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $8,000 | $5.109 million | None reported |
| Cost of revenue | $6.629 million | $12.883 million | $104,000 quarter; $1.847 million YTD |
| Gross loss | $6.621 million | $7.774 million | $104,000 quarter; $1.847 million YTD |
| Operating expenses | $27.058 million | $79.051 million | $19.092 million quarter; $42.913 million YTD |
| Operating loss | $33.679 million | $86.825 million | $19.196 million quarter; $44.760 million YTD |
| Net loss | $82.013 million | $40.441 million | $10.838 million quarter; $41.306 million YTD |
| Net loss per share | Basic and diluted: $0.53 | Basic: $0.27; diluted: $0.55 | Basic: $0.08 quarter; $0.38 YTD |
Q3 net loss included a $50.160 million non-cash loss from an increase in the fair value of private placement warrants. For fiscal YTD, the warrant remeasurement instead produced a $44.040 million gain, substantially affecting reported net loss in both comparisons.
- Revenue mix: Fiscal YTD revenue was primarily service revenue ($5.1 million); product revenue was immaterial. One customer contributed $5.0 million, indicating substantial customer concentration.
- Cash flow: Fiscal YTD cash used in operations was $60.903 million and capital expenditures were $31.366 million; reported free cash flow was negative $92.269 million. Financing provided $55.983 million, principally from public warrant exercises.
- Liquidity and debt: Cash and cash equivalents were $349.007 million; working capital was $338.0 million. The company reported no outstanding debt. Current liabilities were $17.529 million, while total liabilities were $109.276 million, including $80.220 million of warrant liabilities.
- Balance sheet and investment: Total assets were $467.559 million and stockholders’ equity was $358.283 million. Property and equipment, net, was $103.991 million; $39.832 million remained in construction in process. Open purchase orders and contractual commitments were approximately $21.2 million.
Material changes versus prior comparable periods
- Revenue began in 2022, but Q3 revenue remained immaterial. Fiscal YTD revenue rose to $5.109 million from zero in the prior-year period.
- Manufacturing start-up costs drove cost of revenue to $6.629 million in Q3, including labor, depreciation and other direct costs. The first production line entered service in June 2022, shifting depreciation and factory overhead into cost of revenue.
- Q3 R&D expense increased 35% to $13.948 million and selling, general and administrative expense increased 49% to $13.110 million. Fiscal YTD increases were 67% and 109%, respectively, reflecting headcount, stock-based compensation, subcontractors and professional fees.
- Operating cash use increased to $60.903 million YTD from $34.514 million in the prior-year period. Ending cash declined by $36.286 million from the start of fiscal 2022, compared with a substantial increase in the prior-year period that included business-combination and PIPE proceeds.
Outlook, management commentary and risks
- Management expected existing cash to fund requirements for at least 12 months from the filing date, while noting that additional financing may be needed for future operations and expansion. The company expects operating losses, R&D and SG&A expenses, and capital spending to continue or increase.
- Fab-1 production continued to face yield, throughput and equipment challenges. Metrology limitations hindered identifying equipment variability. Management redirected resources from improving Gen1 throughput toward yield and productivity learning for Gen2; Fab-1 improvement work was expected to continue into 2023 at a slower pace.
- Management targeted Gen2 equipment delivery and installation at Fab-2 in the second half of 2023, subject to technical design and Board approval expected in early 2023. It expected to order additional Gen2 equipment in Q4 2022. A complete Gen2 Autoline was estimated to require $50–$70 million of capital expenditures and, once fully ramped at 80% overall equipment effectiveness, to produce just over nine million cells annually. Customer qualification could take several months.
- During Q3, the company shipped production cells to 25 OEMs and reported nine design wins. Its stated $1.4 billion revenue funnel is potential full-production-year value—not reported revenue, firm orders or guaranteed sales. A non-binding MOU with a strategic account was announced in November 2022, after quarter-end.
- Key risks include scaling a new manufacturing process, achieving customer qualification and reliable battery performance, securing sufficient production capacity and suppliers, cost and supply-chain pressures, customer concentration, and the need for additional capital. The filing also identifies battery safety, product liability, competition, and delays in Gen2 development as risks.
- A putative California wage-and-hour class action was in mediation; the company recorded an estimated loss liability, but the amount is not stated in the provided filing text. A separate Business Combination lawsuit was closed after the court denied a fee request in August 2022.
- Management reported effective disclosure controls as of October 2, 2022 and no material weakness identified for fiscal YTD. The company expected to cease being an emerging growth company at fiscal year-end January 1, 2023, bringing additional reporting and auditor-attestation requirements.
Important facts for investors to verify
- Whether Fab-1 yield, throughput and production volumes improve, and whether Gen2 design approval, orders, delivery and qualification meet stated timelines.
- How quickly customer evaluations and design wins convert into binding purchase orders, product revenue and repeatable commercial sales—especially given the $5.0 million contribution from one customer.
- Actual Gen2 and Fab-2 capital requirements, cash burn and financing needs compared with management’s 12-month liquidity assessment.
- Battery performance, safety, warranty and field-reliability results as shipments and customer qualification progress.
- The outcome and potential cost of the wage-and-hour litigation, and the effect of stock-based compensation and warrant fair-value changes on reported results and dilution.