Thank you for standing by and welcome to Enovix Corporation Second Quarter 2022 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 conference will be recorded. And now I'd like to introduce your host for today's program. Charles Anderson, Senior Vice President of Investor Relations. Please go ahead, Sir.

Thank you. Hello everyone and welcome to Enovix Corporation's second quarter 2022 financial results conference call. With us today are President, Chief Executive Officer, and Co-Founder, Harrold Rust, and Chief Financial Officer, Steffen Pietzke. We will also be joined today by Chief Commercial Officer, Cam Dales, and Chief Technology Officer and Co-Founder, Ashok Lahiri for the Q&A portion of our call. Harrold and Steffen will review the operating and financial highlights, and then we'll 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 second quarter 2022 shareholder letter after the market closed today. It's available on our website at ir.enovix.com. A replay of this conference call will be available later today on the Investor Relations page of our website. Please note that the shareholder letter, press release, and this conference call all contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are based on current expectations and may differ materially from actual future events or results due to a variety of factors. For a 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, August 10, 2022, based on the information currently available to us. We can give no assurance that these 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 non-GAAP financial measures in our shareholder letter, which is posted on the Investor Relations page of our website. I will now turn the call over to Harrold to begin. Harrold?

Thank you, Charlie. The second quarter was a great quarter for Enovix and a major milestone in our evolution as a company. I want to start today by going back to the beginning. When we started Enovix in 2007, we did so with the belief that there must be a better way to make the modern battery, one that advanced architecture over materials. On paper, we felt we could improve energy density by as much as 100% and deliver the best product in an industry that would have enormous strategic importance. We knew we had the people that could pull it off from prior companies where the architecture of our product was our core competency, but we also knew it wouldn't be easy to change the fundamentals of how something had been made for over 50 years. In the spring of 2020, we started ordering the equipment for our first production line and gutted the building I'm sitting in to prepare for the production of our battery. A few months later, COVID brought the world to a stop. We could have used that as an excuse for failure. We didn't. We just figured out how to get the job done knocking down one challenge at a time. Resilience was one of the core values of our people. In February 2021, when we announced plans to become a publicly traded company, we set an ambitious goal to bring up and qualify our first-of-its-kind battery production line in the US at what we call Fab-1 and then to deliver our first commercial products and recognize product revenue in the second quarter of this year. Today, I'm pleased to report that we accomplished that goal and have since delivered batteries from Fab-1 to multiple customers and distributors. It turns out that we were right about batteries becoming strategically important. Industry leaders have taken note of Enovix moving into production with a revolutionary product and have become increasingly aggressive in moving forward. Specifically in the second quarter, we completed tech qualifications with three mega-cap technology companies, which we refer to as strategic accounts. Two of these are the same companies that told us we have the best advanced battery they have tested, and the third told us their goal is to move our technology across their product portfolio quickly. And we all know that in this business, the best product wins. On top of that, we completed the initial phases of our product development program in the second quarter with a fourth strategic account after shipping commercial sales from Fab-1 and recognized $5 million in revenue from this customer. Equally important strategically is the US Army, which has a critical need for high-energy batteries manufactured in the US. I'm proud to announce that we received a follow-on evaluation contract in the second quarter to build and test custom cells for wearable battery packs that US Army soldiers carry into the field. This opportunity is very large. Our estimate is that the total US wearable military battery market is approximately $350 million annually based on currently established military programs. We believe our battery can deliver considerable operational advantages for our soldiers while at the same time providing resiliency of domestic requirement. While we continue to work on moving customers through our funnel towards orders, we are focused on improving the output of our factory to meet future demand. We made solid improvement in output and yield during the quarter, but we need to increase our manufacturing yield metrics. There is no easy path when bringing up a first-of-its-kind manufacturing line. It is a relentless effort of continuous improvements. I'm an operations person at heart. I have ramped multiple high-volume factories in my career, and I'm super confident we'll get the job done. We are prioritizing Fab-1 improvements in the third quarter. This includes taking the line down for portions of the quarter to improve individual process modules and install planned battery conveyance. Our goal is to do the needed work in Q3 to position us for the start of our production ramp to close the year. We're putting all this learning into our Gen-2 production line design. Major portions of Gen-2 are designed to be half the footprint of Gen-1 with increased output. We had hoped to have finished our Gen-2 ordering in Q2, but we extended the design activities to incorporate all the latest learnings from Fab-1, as well as our BrakeFlow™ technology. We now expect Gen-2 to be installed in Fab-2 in the second half of 2023. As previously discussed, we expect to have both a domestic and an Asian Fab location in the next several years. I also want to reemphasize that we have multiple paths to grow the company, including capital-light options, such as joint ventures or licensing. This is the likely path for the Electric Vehicles market and it may also be a viable option to support the capacity requirements of our roster of strategic accounts. Now let me turn the call over to Steffen who will discuss our financials and after that, I'll make some closing remarks.

Thank you, Harrold. Our detailed financials can be found in our shareholder letter. I will spend my time covering a few high-level topics. We recognized $5.1 million of total revenue in the second quarter with one customer accounting for $5 million of service revenue as a result of us completing the initial phases of a product development program. Our adjusted EBITDA loss in the second quarter was $18 million compared to an adjusted EBITDA loss of $19.4 million in the first quarter of 2022. Excluding stock-based compensation, our non-GAAP operating expenses in the quarter were $19.5 million, up from non-GAAP operating expenses of $19.4 million in the first quarter of 2022, which also excludes stock-based compensation. We closed the second quarter of 2022 with net cash of $385 million, down from $408 million in the first quarter of 2022, due to $20.6 million of cash used operationally and $4 million used on capital expenditure due to the timing of capital equipment purchases. We expect higher capital spending the rest of the year as we make initial payments for our Gen-2 production line and continue to outfit Fab-1 for higher output. Now let's discuss our guidance. For full year 2022, we now expect to use between $160 million and $180 million of cash, of which we expect roughly half will be CapEx. As Harrold mentioned, we have extended our timeline to complete the design of our Gen-2 line, which impacts the timing of our cash use. Core revenue, we now expect to recognize between $6 million and $8 million for the full year 2022. We have lowered the top end of the range given prioritizing improvements in Fab-1 over shipments in the third quarter. We are also incorporating our latest view on the cadence of service revenue. To summarize, we achieved our target of recognizing product revenue in the second quarter. We are being thoughtful about spending and continue to possess a very strong balance sheet. I will turn it back to Harrold for closing remarks.

Thanks, Steffen. What excites me about our future is not just the massive growth opportunity that lies ahead of us with our breakthrough energy density; equally exciting to me are the other attributes and features we can deliver that we didn't fully realize when we started because we changed the battery architecture so radically. Problems that are difficult for others are not for us having a 100% active Silicon anode with good cycle life is an example of this, but there are other advantages that could be equally, if not more valuable. We announced several of these over the past quarter. Our architecture by its design delivers exceptional rate and thermal performance, important in portable electronics and critical in EV applications where fast charging is a significant concern. It also enables compelling safety advancements, the first of which we announced early this year called BrakeFlow™ technology. We announced that our BrakeFlow™ cells passed the nail penetration test at Inventus Power, our partner in the U.S. Army program. Safety is critical for our soldiers who typically carry 15 to 20 pounds of batteries into the field. The Inventus CTO stated that "Enovix batteries are the only next-generation high-energy density cells to pass our nail penetration test." These are just the start of what we can do with architecture. Stay tuned to see what else we can do. As a final note, as many of you are aware, our chairman, TJ Rogers is legendary in Silicon Valley for his love of technology and explaining it in layman's terms. If you want to understand why BrakeFlow™ is so important, we invite you to check out a video we posted today on our website, featuring TJ's explanation of BrakeFlow™, check out the fireworks at aic.com/from the lab. With that, I'd like to turn it back over to the operator for your questions.

And our first question will come from Gabe Daoud of Cowen. Your line is open.

Thanks for all the prepared remarks, guys. Just, I know maybe what you do in revenue next year isn't really all that important in the grand scheme of things, but could you maybe just talk a little bit about the Gen-2 equipment and just kind of elongating that design process and I guess expecting that equipment to arrive now in the second half of next year. So when should we expect that line to be generating some revenue? Is it really like the first half of '24? Just trying to think through the timing there.

Yeah. Thanks Gabe. This is Harrold. Thanks for that question. So, just kind of some perspective, right? We're very focused on improvements around Fab-1 this year. That line will be the workhorse of our output next year. We have made sure we put all of the learning from Fab-1 and our Gen-1 lines into Gen-2. The way we think about Gen-2, it's really the innovation of profitability and growth for this company. And we got to make sure we get that exactly right. We've actually been working on those tools pretty deep and designed for over six months. So they progressed a long way, but we want to make sure we capture kind of that last learning on Fab-1. So you're right. Our current outlook is that those tools will land in the second half. There's a chance those could come into production at the end of the year, but I think the safer assumption is they start producing revenue in the first half of '24. That's kind of our current view. Obviously, we'll be working as much as we can to try to pull that in, but I would think about next year as really being more of a Fab-1 event from a revenue standpoint.

Got it. Thanks, Harrold. That's helpful. And then maybe just shifting gears a bit, obviously looks like there's a lot of demand for your batteries, which is obviously a great thing. And you mentioned you completed the tech qualifies with those three strategic accounts, so could you maybe just give us a little bit of color regarding what happens next with those three strategic accounts? When can we maybe see that kind of move into the active design or design win bucket?

Yeah, sure. I'll talk a little bit and then maybe have Cam come in. One of the things that may have been a bit startling to us is kind of Fab-1 has come up as how strongly these large strategic companies have been wanting to push the ball forward. So we've been really thrilled with that progress and engagement at the highest levels with some of these companies. During the quarter, we actually shipped cells from Fab-1 to two of those large strategic companies, which we think is a great omen, and each one of these in principle could generate enough demand to fill us up for a number of years. So it's a tremendous opportunity. It's great to see them really pulling. And then, also in their mind, kind of getting through the tech qualification part and then realizing we've got a functioning factory. It really puts us on a whole new conversation with them. And I'll let Cam talk a little bit about how he thinks those relationships move forward.

Yeah, sure. Thanks, Harrold. So, Gabe, if you recall last quarter, we announced a pretty important announcement with one of these strategic accounts. I think the story with the other three is similar. These companies are, I would say, very sophisticated about how they evaluate technologies and the hurdles they set up to then move forward into product and then ultimately into production. And so we view these tech qualifications as being essentially the major technology validation point for these companies. What that means is that they've been testing our cells, some of them for years actually, and we've reached a point where we meet their requirements and essentially their requirements and their business process to move forward into kind of product development. So as you follow the progress of those accounts forward, we expect those to move into the active design win categories over time. And then ultimately if we're successful there, into production. Just a kind of a note on the overall environment, Harrold alluded to this in his comments, but there's definitely been a real acceleration in the urgency of these potential customers and how they're behaving with respect to the programs we're working with them on. We think that's probably triggered by the commercial milestones that we've met because to reach that stage, you have to really go through essentially all the pieces of your business. The technology has to work, the product has to work, it has to be reliable, you have to meet certifications, you have to meet quality, and you have to be able to manufacture it. And so as they see that happening, it makes them move with increased urgency towards capturing the value that a battery like this can produce. We're definitely seeing a mentality shift where these large companies are thinking about batteries as being a strategic lever in their businesses. It can affect everything that their products ultimately do in terms of performance, form factor, etc. For the longest time, there hasn't really been a way to compete on batteries, and we think it's an exciting time for us because this is really, to our knowledge, kind of the first real breakthrough battery to make it to market, and it's being recognized as such by these companies.

And our next question will come from Bill Peterson of JPMorgan. Your line is open Bill.

Yeah. Hi. Thanks for taking my questions. If I could first start off with the throughput and yield improvements that you have going on. Can you shed some more light on what's going on? Is it for example, cell-to-cell repeatability and reliability, or meaning, I guess, consistency metrics such as energy density or cycle life, just trying to get a feel for what's needed to be improved. I guess maybe most importantly is what the issues are so that we have a good line of sight that maybe just here in the next quarter or so you can get past these issues.

Sure. Thanks, Bill. Yeah, let me talk about that. So I don't, some of you may or may not know I'm kind of a manufacturing guy at my core. It's kind of what I've done my whole life. So kind of, because of that, I've got pretty high expectations for what I think manufacturing, where it needs to be. And I'll be frank, we're not to those expectations yet. That said, I'm encouraged by our trajectory. We've been making good progress. If you think about our line one, first of all, I want to start off by saying we don't have reliability problems with our devices. We have yield issues that we're working on, right? And these end up being primarily things where you're working on tweaking equipment throughout the line to make the product run better and to reduce fallout throughout the line. But the stuff that we get out is 100% meets customer specs. So let me maybe give a little bit of color just as an example on that. There's a point in our process where we apply what we call our constraint on our cell. That's a critical thing that makes the Silicon work and that's a welded part of our device. I would say when we started up that equipment last year, that equipment was running somewhere below 80% in terms of yield. So 20% of the parts at that step didn't make it through because we have a very high threshold for all those wet-looking good. Over the last several quarters, we have successfully driven that yield up to 90%, 95%, and then the current quarter to 98%. And in some ways, maybe I'd love to tell you just one thing. At the end of the day, it has ended up being probably 20 small incremental things we had to do to make that process better. None of which were magic, none of which were science. It’s just a bunch of tweaks. And that's really what yield improvement in manufacturing is about. My experience in manufacturing has shown me that it's kind of this long game of just fixing one thing after another. And I'm seeing we're making those improvements. It's just going to take several quarters' time to get that stuff done. So I'm super optimistic. I don't see anything out there as a showstopper; we just have to keep our heads down and make those improvements. It's something that I pay a lot of personal attention to because it's just kind of in my DNA. I think we've got exactly the right people here that are going to get that pulled off. So I'm super bullish on that path forward. And I think we'll see quarter-over-quarter improvements as we move forward.

That's helpful color, sounds more, I don't know, blocking and tackling versus discovery or development, so that that's encouraging. I guess the second part is, if we look at the next sort of call a year and a half, we'll be relying on Fab-1 to know to support these strategic customers of which, obviously it sounds like there's strong demand. I guess, how do you balance that demand across these customers with clearly limited supply here at the next, like I said, maybe, year-over-year plus, and then how should we think about the potential? I don’t know if it's unit opportunity or kilowatt-hours or revenue, but try to understand what you could supply in this interim phase before the next two fabs?

Yeah. You're right. We're very focused on Fab-1 and improving its output as we get into next year. That's one of the reasons we're super focused on how, when it's early days. I think you a couple questions in there in terms of kind of balancing customers, these are kind of early days. So we're actually, we're trying to engage with customers that we want to grow with. Right? And there's always some balancing in there, and we consciously look at that on a day-to-day basis. I think at this point, we're able to make those engagements. We want to; there may be some point in the future we have to do some down selection, but I don't think we're there yet. Your second question is kind of what does that output look like? I think we'll give some official guidance as we get into our Q4 call about next year. But our current thinking is Fab-1 on its own between the couple of lines we have here is producing something in the single-digit million units this next year. And depending on the product, there's a range of revenues that could be. And so we'll give some more clarity in that in the future, but we're going to maximize Fab-1 get that learning into Gen-2 and get that Gen-2 line up as soon as we can.

Thank you. And our next question will come from Colin Rusch of Oppenheimer.

Can you talk a little bit about the impact of the BrakeFlow technology on pack cost, volume, weight, and safety, and especially what that means for your entrance into the EV market?

Yeah, sure. Maybe I'll start on that and then hand it over to Ashok for some comments. We're super pumped about this BrakeFlow technology. I think the industry is starting to catch on as well as investors. One of the big highlights this last quarter is we sent cells with BrakeFlow to our partner for the US Army program. You can imagine their experts at abusing cells, right? They subjected ourselves to nail penetration tests, which is a proxy for other types of impairments, I would say, and I don't remember the exact quote, but the basic quote from them was this is the only high-energy density cell they've ever tested that's passed this test, which is a pretty compelling statement, obviously in that field where people are getting shot at features like that are super important. I think also if you think about even in the consumer space and some of the history, BrakeFlow is also super valuable. Our customers are very excited about that. We posted this video on the website so that people can get a little sense of how that works, that TJ kind of narrated for us. I encourage people to look at that. But I'll let Ashok talk a little bit about the technology piece.

Thanks, Harrold. So, Harrold talked about the impact and the consumer and the army of course safety is of primary consideration into other markets. I think your question was specifically about EV cells, and yes, this technology is really interesting to EV customers also because, as everybody knows, that is a primary factor in consideration on how these customers look or how these OEMs look at safety. So they are, I think, equally interested in this technology, and really it is something that is uniquely enabled by our technology, by our architecture. As for another part of your question, it has really a negligible impact on the cost and productivity of the line. There are some minor modifications that have to be made.

Okay. Yeah. My question was really wondering about cost reduction at the pack level, but we can take that offline. I'm assuming that you're going to be able to save your customers some cost at the pack level. So that's helpful, but thanks for that. Just in terms of the things that you guys are balancing and the timeframes around this. So if I understand, right, it sounds like you're working through some engineering re-engineering on the line. You're also talking to a number of customers and looking at how you serve the relatively large flow of demand and thinking about what those contract terms are. I guess it's, if you look at identifying the final locations for the capacity expansion and, and work through timing on some of those engineering plans, as well as some of those contractual elements, which may include some prepayments, how should we think about getting that information? Is that something that you'll make an announcement on? Is that something you'll just give updates on around the quarterly call, and when can we expect things to get a little bit clearer here? Is that have a three Q event or is that more by the end of the year?

Thanks for the question. You need to think about it on product revenue science. These are early days and we are living with PO arrangements, which we really like because obviously that gives us a lot of flexibility. From the service revenue perspective, these are complex development programs, which we typically don't disclose terms. As we progress through our strategic accounts, we will update you as we go along through those terms when we get to more substantive contract arrangements that are outside of like a PO based arrangement. The timeframe for finishing the engineering for the following plants, is that something that you guys feel like you're closing in on, wrapping that up, or is that going to be more closer to the end of the year?

No, I think Colin, this is Harrold. We've been in detailed design mode on some of the Fab-2 equipment probably for at least a quarter. So they are pretty far along. Maybe they were kind of polishing the apple, but we want to get some of these last improvements in from Fab-1 into that. So, I would view that we're going to move forward with Gen-2 in the next several weeks. It's not that far off. That would allow us to land that equipment in the second half of next year. So it’s pretty mature already, but we want to make sure this is perfect, right? It's really our engine and growth going forward.

And our next question will come from Gus Richard of Northland Capital Markets.

Yes. Thanks for taking my question. Congratulations on the tremendous progress you made in the quarter. My first question is on the revenue split in the quarter. Was that $5 million milestone payment from your first strategic customer? That's was that $5 million milestone payment from your first strategic customer that's using your battery in the watch and how many other customers made up the other $100,000 of revenue? And why don't you take that?

Thanks for the question. From a product revenue perspective, that amount is immaterial, pretty small. We shipped to a couple of customers. The majority is service revenue, and from a design perspective, we finished design and delivered production units that closed out a large development program for that one strategic customer. So I can jump in a little bit too on that. Total, we shipped to 10 different customers and four distributors, Gus, sorry. Among those, two of those were two strategic accounts. One of those strategic accounts was the one that was closing out the $5 million that if that answers your question directly.

Got it. And is the $5 million from the watch company?

No. So we announced last quarter a strategic that you're pointing out that their first product with us would be a smartwatch. The $5 million is a separate company, separate project and we're actually not at liberty to really talk about what the application is there. But based on how we define a strategic, each of these companies has multiple applications that they could put our battery into.

Got it. I understand that. Thank you very much. And then Harold, as you think about getting the single million units exiting 2023 run rate, how do you think about that ramp? Is it going to be a linear ramp? Is it going to be exponential? Is it going to be a little start-stop? How do you think about ramping up the volume and sort of what that looks like as you progress?

Yeah, I think I would view that starting in Q4, but it's still early days on the ramp. I think if you look throughout next year, I wouldn't view it as exponential. I would view it as kind of linear bit through the year. See, I think you'll see some slope there, but not nothing I would call exponential throughout the year. I don't think.

Okay. That makes complete sense. And if I could just sneak one more in, given some of these major security customers want we'll need a lot of volume. Have you guys had any discussions with them in terms of licensing or joint ventures, where might that be?

I think it's still pretty early days in that. I think for all of these guys, what's critical to them initially is validating the technology, convincing themselves we have a production line that's working. So we're kind of through that. Our view is the first step for a lot of these guys is going to be putting our product in one of their products, our battery, right? Is the first point, and then we'll see where that takes us. Some of those things may happen in the future. But right now, we're trying to be a product company. Cam can give a little bit more color on that as well.

Yeah, I think that's about right in terms of the stage, but it's certainly fair to say that pretty much across the board with these types of strategic accounts, that is part of the discussion with them. It’s part of how they view that as a fairly normal course of business. We've positioned ourselves both from a technical and a production, sort of how we've designed our manufacturing process. We've specifically positioned ourselves to be in a situation where we can enable that to happen. If you think about large run smartphones or laptops, these are hundreds of millions of units and none of those large products really have a single source ever. We expect that in fact, it's part of our long-term business model. It's not necessarily in our financial projections, but strategically it's in our model. We think it can really leverage the technology we built.

Thank you. And our next question will come from Anthony Stoss of Craig Hallum. Your line is open.

I'm sorry, operator cut off. You cut off. Hopefully it's Anthony Stoss, Craig Hallum. Harold, just to follow up on your comment about ordering the equipment in the next several weeks, kind of give an indication that you think the tweaks you're going to do here in Q3 and the production line will be over. Should we assume that there will be some production revenue in Q3 or zero it out and just assume it's in Q4? And then second question is, lots of traction with potential customers. Where are you seeing that most traction? And is it watch size batteries, phones, laptops, across the board? Any color would be appreciated.

Yeah. So thanks for that question. From your first question, I would view that the production output is pretty low in Q3. We really are focused on getting all the improvements done to start the ramp in Q4. What we're shipping out of Fab-1 right now is kind of our wearable cell that we've designed to fit into a lot of sockets that's what's out there. So I think that's what you're going to see early in the year. That's going to get traction. There’s a lot of interest; we shipped that cell out to 10-plus customers in the second quarter. That said, we're also going to be working on larger cells out of our second line. Cam can talk a little bit about how some of those things are progressing.

Yeah, sure. Happy to do that, Tony. So we've always sort of thought about how the business grows going from wearable cells to mobile communication to laptops. That's kind of the logical progression in terms of our product development and launch, and I think that's how we'll see it roll out. Harrold's correct; in the near term, in terms of numbers of companies and products, it's heavily weighted towards wearables today because that product is ready to go, it's on the market, and it's qualified. So we're seeing a lot of activity there, but as we think about, and as I think about the strategies that the strategics are taking with us, they really all are kind of taking the similar approach where they start with one product category to essentially prove not so much the technology but our ability to produce it with quality. Each of the companies we're working with, interestingly enough, has chosen kind of a different product to go after first. We like that approach; we think it's great. It really diversifies where the business is going. In the long run, we expect and our goal is to develop multiple products with these guys, and each one of them could probably take essentially all of our volume for the foreseeable next couple of years if they wanted to do that and we allowed that to happen, which probably wouldn't be in our direct interest to be so concentrated. So we're trying to spread it out.

Thanks, Cam. If I could actually direct a follow-up last question to you, are you still able with the pausing of the plant, the optimization here in Q3, are you still able to satisfy demand for your customers for both Q3 and core Q4 units?

No, we can't satisfy demand for customers at all now or even next year or the year after. Right, there's definitely an allocation that has to happen. That said, can I meet my goals out of what I need to do in Q3 and Q4? Yes, and my goals really are around primarily around qualifications and setting us up for volume as the production capacity comes online.

And our next question will come from Ananda Baruah from Loop Capital. Your line is open, Amanda.

Hey, yeah, thanks. Good afternoon guys. And congrats on all the good news today. Just a couple, if I could, going back to the remarks you guys have made about strategic accounts seeing a real acceleration and urgency. The commercial milestones that you said were the catalysts for that, are those their own commercial milestones in the work with you? Or does that also include you guys, any commercial milestones and non-strategic accounts? Are they now seeing the efficacy of the product?

Yeah, I think there's probably some both of that there, like all at Cam kind of give some color. Yeah, hey, that's a good question. The way we see it is each of these companies have their own rigorous process for testing our cells and convincing themselves of the validity of the technology and the products, right? That's kind of its own business process that moves along. What we mean by an acceleration is it kind of triggers them when they see the company go commercial; that was the big milestone for this last quarter: commercial product going out of the factory. When they see that, it makes them realize that this thing is going to fly, and then everybody's worried about maintaining a competitive advantage. You get into this competitive dynamic where people start to get a fear of missing out, because there's a limited amount of capacity relative to the opportunity, and that's going to be true for, I think, some time now. So that's kind of what we meant by it being a trigger. It’s really, I think, battery technology is always very difficult to understand all the little nuances and caveats and details of how does it work. When you actually get commercial units out the door to real customers, you've essentially answered all of those questions, and that's a big deal. That's absolutely how many of our customers view the achievement of those milestones.

Okay. That's helpful context. And so, I guess, would it be based on what you guys have experienced internally in conversation sort of in the context of that call, like acceleration and urgency, would it be also your opinion that there's a possibility that they sort of like, I don't know what the right description is here, but like move at a faster pace now, given that urgency to complete some of these production qualifications?

Yeah. That's what we're saying by acceleration. We think that the engagements are moving at a faster pace, and I think Ananda also mentioned maybe in the prior call that, or we had a press release where one of these large companies said they want to try to move us across their entire product line as soon as possible right. So they're going to be probably pulling on us pretty hard, I would say. Yeah, definitely sent the urgency. That said, of course, none of those companies will short circuit their quality and process for developing quality products. But there's motivation to go as fast as possible.

That's helpful. Understood. And then just a quick follow-up here on the Army now to make congrats on that. So what would be now the key milestones remaining from where you are right now to going into production volume with them?

Yeah, sure. So what we announced today was what's called phase three and phase four of the overall program. Phase one and two, we announced that I guess about a year ago. The purpose of phase one and two was for the Army to test our standard products and verify our claims on performance in terms of energy density, cycle life, safety. Harrold mentioned the nail penetration testing that they do. Given the results of those tests, they chose to move forward with this follow-on contract. The purpose of this contract is for us to configure basically our cells in the right form factor and design to fit into the conformal wearable battery pack. This is the multi-cell pack that goes into a soldier vest. So, we build cells that fit into that, then do the integration with the pack, and then do some pack level testing. So that's kind of this phase. Next, we would move into field trials with real packs going out in the field on a trial basis with soldiers, and then beyond that would be, essentially volume production.

Awesome. Any care to guess what the next two phases and next few steps, how long that could take roughly?

Our expectation is that it's a few years. The Army has a rigorous process of going through and we'll start to see what we consider to be meaningful revenue though and before we're in full-scale production, because there's a lot of work that goes into the field trailing and there's some volume associated with that now. That all said, it's not necessarily normal times, I would say with respect to this type of a program. A part of the reason why they're really excited about what we're doing is the product. But another part of the reason is that this would be domestically produced and there really are very limited choices for companies, battery cell production companies in the United States. We're very well positioned there. If you just kind of think about what's happening in the world around security supply and where our current supply chains for lithium batteries are coming from, that's not necessarily the most stable part of the world today. You can rest assured that there's smart people on both sides of the aisle, at the highest level who are really worried about this and trying to figure out ways to accelerate it.

That's super helpful context. Thanks a lot. I'll leave before there. Thank you.

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