Q4 2023 Enovix Corp Earnings Call

Participants

Colin William Rusch; Analyst; Oppenheimer & Co. Inc.

Bill Peterson; Analyst; J.P. Morgan

George Gianarikas; Analyst; Canaccord Genuity Corp

Jed Dorsheimer; Analyst; William Blair

Derek John Soderberg; Analyst; Cantor Fitzgerald & Co.

Tony Stoss; Analyst; Craig-Hallum

Gabriel Daoud; Analyst; TD Cowen

Ananda Prosad Baruah; Analyst; Loop Capital Markets LLC

Christopher Curran Souther; Analyst; B. Riley Securities, Inc.

Timothy Moore; Analyst; EF Hutton

Presentation

Operator

Thank you.
Hello, everyone, and welcome to Enovix Corporation's Fourth Quarter and Full Year 2023 financial results conference call. With us today are President and Chief Executive Officer, Dr. Raj Tillery, Chief Financial Officer for Hana mode and Chief Operating Officer, RJ Marotta.
Rajan for Khun will provide an overview and then we'll thank you.

Hello, everyone, and welcome to Enovix Corporation's Fourth Quarter and Full Year 2023 financial results conference. With us today are President and Chief Executive Officer, Dr. , I'm here in Fab two.As you can see in Malaysia. Yes, thank you for standing by, and welcome to the Enovix full year 2023.
Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program will be recorded. And now I'd like to introduce your host for today's program, Charlie Anderson, Senior Vice President of Investor Relations and Corporate Strategy. Please go ahead, sir.
Thank you.

Hello, everyone, and welcome to Enovix Corporation's Fourth Quarter and Full Year 2023 financial results conference call. With us today are President and Chief Executive Officer, Dr. Raj Hilary, Chief Financial Officer for Hana mode and Chief Operating Officer, and Jim Marrotte, Raj and for Han will provide an overview and then we'll take your questions after the Q&A session will conclude our call.
Before we continue, let me kindly remind you that we released our fourth quarter 2023 Shareholder Letter after the market close today. It's available on our website at ir dot anavex.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 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 of our statements are made as of today, February 20, 2024, based on 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 the 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 Raj, to begin. Raj.

Thank you, Charlie, and thanks to everyone for joining us today. I'm going to kick off with a few high-level remarks, and then we're actually going to show you some new video of our SAP do featuring Ajay, I guess, is actually now in Malaysia, and he's going to show you some update on manufacturing there after that for Han will cover some financials and the outlook before closing and then look forward to your questions.
Okay.
We had a we had a strong finish to 2023, and now we have laid the groundwork on how to scale up in 2024. First, we reported record revenue of $7.4 million in Q4, well above our expectations. And secondly, we are in the process of completing our factory acceptance testing and a good amount of our Gen two equipment is now in Fab two in Malaysia ready to produce the first batteries in April, and it's very exciting to see that progress.
Third, we made significant progress with our customers, both in smartphones and in EVs. Last quarter, we hosted them the executive management teams from two of the top smart smartphone OEMs from China at our Fremont headquarters, and very good discussions on how to collaborate and making batteries for their for their phones. Additionally, we entered into a development agreement with a leading automaker to validate the advantages of the Intermec cell architecture for an EV battery.
Now this significantly increases the addressable market for MMX technology, and we have a strong pipeline of additional opportunities in this space. And last, we've gained significant confidence in reaching the 1,000 cycles on a smartphone class badly and we look forward to sampling it next quarter.
As I look back at our accomplishments last year, which were substantial, we began the year as a new management team in operating at an expensive, lower-yielding California factory with a product portfolio that frankly was not very well aligned to the key large customers and end markets that we wanted to go after or in contrast to that, we exited this year with a manufacturing base in Malaysia ready to produce industry leading batteries, a seasoned team in Korea than a ship batteries over 20 years that we acquired and close alignment with our customers that led us to gain a really in-depth knowledge and detailed product specifications that is helping us build category leading products targeted at the largest portion of the market, which is the smartphones. Now we are engaged actively with the world's largest smartphone OEMs at various levels. These companies are eager to harness. It's our architecture to keep up with the demand for more and more power-hungry applications by just a megatrend. I'll show some data and touch upon this in a minute. But first, let's take a look at our goals, what we need to do this year is to position ourselves for the large inflection revenue. Smartphone launches is very simple. First, we need to demonstrate high volume manufacturing on our Gen two equipment in our Fab two in Malaysia. Now I'm not seeing is believing. So we're going to show you a video of the fab to featuring IGA and that we just made in the last the last couple of days that speaks to our progress. And of course, Ajay will join us for Q&A.
From Manish, I think it's pretty early for him there, but he's online, they're standing by.So Operator, go ahead and let's run the video.

Operator

And here in Fab two, as you can see in Malaysia, we are standing in the clean tech index plus 10 gig clean room. And right here, which I'm going to show you right now is a zone one, one of the lasers in Zone one, which is the annual laser and now will give you a closer look, as you can see that our four laser sources here, two for cleaning and two for the cutting and then the web go through, as you can see the rollout. So the ones which come from full quarters get loaded on this machine, go through these lasers and here we can show you the little bit closer look in terms of the laser firing. This machine is operating at 1350 UPH or close to it. And we are producing actually cells for FET, the sales, as you can see, the electrodes are getting better. And as you can see from here, when it finishes all the process here, it goes through what is called in-line inspection system, which is really the gamut as we looked at the 27 different clinical parameters, critical to quality parameters, which then get logged as we see and it will move correction system, which gets, you know, triggering the lasers for position and dollarization. And this is the and what we call airless averages that are lasers.
Next, I will show you the the other to the cathode and February. That leaves us now I'm standing in front of the SLSR., which is a separate laser where I can show you the rules that get loaded here, as you can probably see on the film and truly resources to people leaders, which are basically creating the pattern and putting the separated it goes through the same type of system and we can do a little bit more close up here in terms of how the patterning is being done. Again, this one is running at 13, 50 UPH in the middle of SAP. And the in-line inspection system, again is very similar to ones which I just showed you on the on the anode, it captures roughly 38 different parameters out of which 25 are critical to quality and the others are more for productivity. We see it, et cetera. That's all captured here in line. Again, feedback loop back to the latest adjustments will position into anything and you get better certainly does that now I'm standing here in front of the sector zone to the Zone two, and there's going to be 11 cycles here total or eight cycles for the edge we have and you can see the staggered in action here now it is merging up and then the four layers, as you can see, and it is stacking creating six stacked at a time quenching, multi on-the-fly vision systems right there and making sure that the stack is accurate and properly positioned in this Q. So this is this is the output of the staggered. We have six beautiful looking stacks, which were created by this machine. Now we are standing in front of the final formation cabinets, which is also called Zone four. And we will assure you now you can see have changed into a class 100,000. downing protocol, which is just a smoke and not the bunny suit, which I will in the class 10,000. And you can see now the loader automatic loader, which is one of which is loading the trade directly into the final formation, Kevin, and you can see how that is working.
Okay.
As you can see, we are standing here in the zone four area. Again, I'm blessed for down four plus 100 days, and this is the final step after the sales go through the final formation. They go through OCV. test. And now the batteries are semi industries of being fed to the sort of fully then automatically. This will be a nearly lights-out operation where the trees are loaded from the all the way from final formation of CV into the sorter business order area, which is the final step of sorting and putting batteries in bins to be sold to the final customer. So that's this operation. As you can see, thank you for watching keep following our journey to scale at analytics.com for updates as we post them.

That is awesome. As you can see, our confidence is very high on Feburary, 2 and we accomplished a great deal in a very short amount of time. And I'm really proud of everything the team has done. In addition to proving out manufacturing at this year, we will need to deliver samples of batteries around the to the smartphone specification fire, fast charge and very high cycle life. I'm happy to report that our global R&D teams have made significant progress in the recent months, and we're looking forward to sending our first samples of what we call EX. one m. for mobile next quarter by the end of the year will have an enhanced version of this technology called EX2M., which will also be ready to sample. Now these two will be truly revolutionary products and they will be the first smartphone batteries in the world that we are aware of that will have a 100% active silicon anode while also delivering 1,000 foot charge and discharge cycles, along with the ability to really fast charge and increase energy density or the batteries that are shipping in the market today, the need for high energy density is critically important. The smartphone industry. It's a huge $10 billion-plus addressable market, not to give you a greater appreciation for why smartphones need a higher energy density batteries.
Last quarter, we asked the tedious research team I'm familiar with from my days at Qualcomm to analyze the impact of the looming applications on smartphones that the results of the study are actually staggering. I want to show this to you in a slide here. What I what you see here is in the lab side, the global JNI output forecast of the amount of video and image fans in billions. You can see in 23, 15, 24, 59 to 28 we expect expected to be a staggering 2,500 billions of frames generated.
And these are I'm going to be on mostly battery-operated devices on phones, PCs, laptops and so on and what you see in the middle is actually very interesting data. What we did here is actually Trofile how much battery consumption in terms of how much capacity is used per hour and million bars, but different applications. On the left side, you see non-high base, conventional applications and the right side, you see the air-based applications. So things like 4K video. When you go to eight k. video, a lot of up sampling is done using AI applications, things like YouTube that you're all familiar with on the lab side, but on the right side, things like charge EBITDA are lower to chat bots. It's staggering that Chad GPT actually consumes more battery than running YouTube on your phone. It's pretty amazing. And it is just the beginning. And this is very important because this is what we are hearing from all our customers that they just need a much higher energy density battery. In fact, I just saw a couple of new funds launched by by some of our Chinese OEMs. And actually the flyers for the phone is actually all about the applications that run how you got to see something similar for the Samsung Galaxy Entertainment. So the trends are clear with our product roadmap and our customer relations, we are well positioned to enable the smartphone industry to really Usher a new era of mobile computing. In addition to that, we have now drilled our first deal done in EVs. And with that, I'm going to turn over to Fran, who will provide a recap of the financials and then the outlook.

Thanks, Ike. So all the relevant financials that in our quarterly report, so I won't go into the deep into the details, but I'll just do a quick recap of the results and outlook for Q4. Now, we delivered revenue of $7.4 million, well ahead of our expectation. We ended the quarter with about $307 million of cash and equivalents. Our Q4 CapEx was about $29 million. About $27 million was used in operation and about $10,000 million of cash was used in acquisition of Logica net of the cash that we acquired as part of Project. As a reminder, we are accelerating the depreciation of Fab one equipment post our decisions up to stop manufacturing in our Feburary 1 up and as we decide to convert it for product development purposes, our Q4 results included $18.5 million of accelerated depreciation of $6.2 million of this was in COGS, $12.2 million of this was in R&D and $0.1 million was in SG&A. In Q1, we expect a similar amount of accelerated depreciation, but most of it will be in R&D expenses.
And now turning to our guidance for the first quarter of 24, we are expecting revenue in the range of $3.5 million to $4.5 million. Now there's some impact or meaningful impact to our Q1 guidance because of the water in Middle East, which is causing a longer time for the ships to go from Korea to Europe. And we expect for Q1 adjusted EBITDA loss of $24 million to $31 million and expect non-GAAP EPS of between $0.29 loss and $0.35 loss. I would like to note that our non-GAAP EPS loss does include the impact of the accelerated depreciation, the write-off term, which is about $0.1.
And with that, I'll now turn correct.

Okay. Thank you for one. In closing, I'm super excited by all the work we've done in '23 and we set set the framework for our business to scale in the years forward. And we have significant proof points to deliver in '24. And I'm super excited by, as you can tell by all the stuff we have going on in our manufacturing fabs and executing to these key milestones. And so with that, I'll open up for questions.

Question and Answer Session

Operator

We will now begin the Q&A session. Please note that this call is being recorded. Before we go to live questions, we are going to read the two most highly, but any questions submitted by shareholders ahead of this call during the call registration?
First question is Will management address the current and future status of government contacts for batteries, is there still a near term eight digit revenue opportunity or have management fully again?

Yes. So very good question. And you know, as I as we did last last quarter. We continue to deliver batteries to the OEM Army contract that we have with. These are breakthrough enables safe batteries that the Army will use and vests and so on. And we expect to continue to do that through this year. As we do that, these batteries are put into different kinds of tests by the by the Army in and a lot of qualification process and so on. Once that's done, we do expect that there will be and up in high volume production and we will have a good business opportunity there also with the acquisition of this company that get it. They have a very good batteries that are actually being sold to the Korean military. And we see opportunities to actually market those batteries to the US Army also. So yes, we do expect to continue to do that.

Operator

Second question is what is happening with the former production space in Fab one now that the Gen one line has been shut.
Bahram?

Yes. Thank you for that question. So Fab one, so we are not doing high-volume manufacturing Fab one, but we are using it right now to make samples to give like EX. one and EXTUM. and so on to give it to our smartphone customers to sample to validate the technology before our Fab two is ready. And as I mentioned, we expect to produce cells from Fab two in Malaysia and April timeframe. So we are actually using the current fab in Fremont for that. Also with this new EV opportunity we have, which we expected that we will need a clean room and the dry room in the facility to make ourselves here which we are going to do here in Fremont. So it continues to be a good R&D facility for us.

Operator

We will now go to the Q&A questions will be answered in the order they are received. Please ask one question and one follow-up question at most. We will now pause a moment to assemble the queue. Our next question comes from Colin Rusch with Oppenheimer. Please unmute your audio and ask your question.

Colin William Rusch

Thanks so much because as you've gotten deeper into the customer conversations and testing on the smartphone side, can you talk about the number of SKUs you're expecting to have to make in the next 18 months to 24 months to serve those customers?

Yes. Thank you for the question, Colin. So what's happening right now. I'll give you a little bit of color taking that opportunity of the question. So what's happening right now is that we've got the very detailed specifications from multiple customers. I mean, these are 2030 page documents on how the batteries tested different temperatures, different size requirements, fast-charging requirements, safety requirements and so on from multiple smartphone OEMs. So we are now building samples and sampling, and we will be sampling them soon. And these customers with the requirements that they've given. And what we do is we test the batteries to those requirements so that when we give them the cells, we're pretty confident that they will pass. It's something that I've always done in my past is to make sure we understand the customers' testing requirements, test them and then give it to them. And then what we expect to happen is after they pass the technology qualification, we expect to get different dimensions and capacities. So 5,000 amperes or 6,000 amperes based on what smartphone it's going into. And each customer has a slightly different size, like if it's going to flip phone it's one side. We've got a candy bar phone. It's going to be slightly different size. And then and then we will make those particular form factor batteries from our Malaysia fab get them, those samples they go, they go through the rest of the qualification and when get to high-volume production next year, it's hard to tell exactly how many, Sam, how many different shapes will need to do because we are sampling to multiple customers and based on how quickly those those evaluations on their side go, it'll it'll it'll drive that. I say probably in the single digits is what I think it should or shouldn't be too many because I do think that a lot of customers will tend to use a similar kind of cell because the phone form factor is kind of very similar between customers.

Colin William Rusch

Yes, both super-helpful And then given the opportunity in mobility, there's certainly a lot going on in terms of vehicle design pack design and given safety profile that you guys have and the potential for fast charger, can you talk a little bit about your expected pack size and how that might look for some of these vehicles as they look to optimize both space and the energy density in the vehicles, are we talking about 60 kilowatt hours per vehicle are we talking something more like 80 or 90?

Yes. A good question, Colin. But so what just to be clear, what we're doing now is working with one of what we talked about is one OEM that's interested and there's others we're talking to on proving out the value proposition by proving out that we can control swelling proving out that we can charge fast exactly what kind of sales that would be, how many there would be, what kind of EVs there would be?
It's too early to tell and we will continue to update you on milestones as we get there at this point, we're just proving out the technology.

And yes, the only thing I would add legislation, they will have our architecture, our unique architecture. What's common is that all of these so that we are working with automotive makers are with our unique architecture and will have fast charge as a unique differentiator.

Colin William Rusch

Thanks. So much, guys.

Operator

Our next question comes from Bill Peterson with JP Morgan. Please unmute your audio in.

Bill Peterson

Yes, thanks for taking the question. Maybe maybe just to piggyback off that last question it sounds like you said the key focus area will be fast charging. But can you just shed some light on some of the key milestones and time lines for this? What are the committed contribution in commitments from Nova X in terms of sampling test? And I guess is there further appetite for genomics as well as resources as well to actually ink any additional agreements? Or just should we just think of this is the single agreement for now?

Yes, I am. We hope to get samples out this year. That's our goal. We are working with the other OEMs do, but I can't really comment much further than that. It's kind of early stage and we'll keep you updated as we make progress.

Bill Peterson

Okay. Second question. So when we think about EXYTXPNMNEX. to, I guess, what are the key changes you're making on the materials side? I mean are there other formulations and process manufacturing process fix for EX. one M. and EX. two? And I guess if not, I guess the formulations reacts to if they haven't been fix whatever the issues are, performance gaps you're looking to address before locking in the materials choices in process. Just trying to get a sense for how much are these are at this stage?

Yes, good question. So basically, if I if I am look at the X. one m., it's built on top of what we have done in the X1 which is adapt that technology to meet the requirements of the smartphone market. And when I say the requirements or smartphone market, there is a few key requirements in one is clearly safety people really care about safety, safety influence. As you know, we have we have spent a lot of time on that, and that's one area we address.
The second area is cycling our previous EX. one batteries ran up to 500 cycles. Our target and the EX1M is thousand cycles, which is basically doubling that. And that's a significant increase and the third one is the ability to charge really, really fast. So if you think about a smartphone, you know, when you have a smartphone, what a lot of customers do is particularly with these AI applications a whole day battery life is getting harder and harder. So when the battery life goes down, they would like to be able to charge and get to a 15%, 20%, 30% charge, so they can go through the rest of the day. So that is a very important care about our to do that safely and to do that in a way that it doesn't hurt the battery longer term is a very key care about. And that's one thing that we feel good about.
Now and the third one is increasing energy density. So we have now looked at all the different forms out shipping in the market, and we believe that we can provide an advantage compared to that while keeping fast charge, while keeping increasing the cycle life and also at different temperatures. I mean that's the other thing you need to worry about in these markets is what temperature you operate before. I will operate the battery at what top of the cycle charges looks like and so on. So those are all the things that the X1 and mattresses. And again, these are slightly different based on each customer. Some customers want more cycle life and maybe a little less needy, some customers, one more ED and less localized so we are now in the middle of basically at Target specification, which we'll finalize now on the X1M. And those are the batteries that we expect to sample from our Malaysia factory in April. What do you have to end as on top of that is actually continued to increase energy density. And you've seen us put out a slide before and where we expect to get there with that while keeping the increases and cycle life while keeping the increase in fast charge, while keeping all the safety parameters now to be able to accomplish that. We have finalized a set of materials for EAFs1M cathodes, anodes, electrolyte separators and so on. And we have shortlisted what they will be for EX. two m. and in short order, we'll decide which ones have some very promising results. So we're pretty optimistic of being able to get there.

Bill Peterson

Thanks, Raj.

Operator

Our next question and then Marcus Can you with Canaccord, please unmute your audio and ask request everyone.

George Gianarikas

Thanks so much for taking my question. I'd like to ask about your materials supply chain earlier in the quarter. You announced an agreement with group 14, and I'm curious, first of all, how diversified your your silicon supply chain is and how how extensive are the choices by handset vendors for device vendors into making that decision? Or is that purely a decision that innovation will make in terms of which silicon they put it?
You put into your batteries?
You?

Yes. So you know, if you look at producing a battery that increases energy density, but also meets all these other requirements. And I can't emphasize enough of that because ultimately a battery has to meet the requirements that are required by the end product, which our customers make cycle life fast charge swelling, the end of life and so on. It's a function of not just the anode, but it's the function of the silicon anode, a function of the cathode and more importantly, the electrolyte because you know in a battery, the electrolyte when it interfaces that cathode has a certain properties, certain rate needs to behave, but interested because they are the other side, just what we have said. And we all at the same time being able to pass lithium ions and the separators make big big role as to how sticky the separator and how to handle this type pressure and so on. So the recipe of choosing the right cathodes, write down or write separators and putting them together is really the intellectual property that we have at innovation and experience we have here. So we like I said, there's multiple choices on anodes, multiple choices and cathodes, multiple choices and electrolytes. And that is the intellectual property that we have. We are constantly looking for new materials. We were very excited by the results we got from the grew 14 material and that team has been super supportive. We are also talking to other people. Supply diversity is also important and ultimately, what we're going to do is to find the right recipe for the right and applications based on the customer feedback. So that's kind of the best way to answer that question.

George Gianarikas

Thank you. And just as a follow-up, I'd like to ask about your time lines here on the FAT. and SAT. testing. With your confidence level in terms of getting out samples for the Agility line in the second quarter? I know that on our recent podcast you discussed, is this a little bit of a pushout in some of the time lines there. If you just kind of reiterate that and give us confidence that you can get those samples out in the second quarter? Thank you.

I'll answer a little bit high level. And I just feel free to add in Malaysia, I'm not sure how the line is, but basically, we feel very confident that we're going to get samples out in April timeframe to our customers and what we did, we did announce some delays on SAT of one of the zones. And again, you got to remember these are very very complicated things we are doing. These are tens of machines, all working in tandem together. One thing about Jay and myself and the leadership team we've done is we're not going to cut corners, right? We're not going to cut corners in the requirements of FIT in the requirements of SAT. How much material we need to run, what will they need to come up with before we take acceptance of any of these missions for our customers from our suppliers. So that has caused some amount of back and forth with our suppliers. But we feel good now that it's within reach and we feel good about emissions we received and we do expect all of them too. We work together and some of them have been shipped there in Malaysia somewhat, and therefore they are shipping, but we are holding the date for getting the samples to customers, although some of the zones have pushed a little bit.

Yes, just to add to that, we are feeling clearly, but I'm here calling in from that I'm feeling pretty confident about the how the machines, some of the data as well as the early data on equity during the in the apart from the Q2, we will definitely get samples out of from the agility. Sorry.

Operator

Our next question comes from Jed Simon with William Blair. Please unmute your audio and ask your questions.

Jed Dorsheimer

Hi. Thanks for taking my question here, guys. Raj, and you've talked about some of the performance trade-offs between EX. one EX. one M. and EX. two. I was wondering how should we think about the value creation in terms of some of those trade-offs and what I'm really trying to get to is ASP. differences between the different data products?
And then I have a follow-up.

Yes.
I mean, Jet is really really based on the end markets I think our view is that when you go into things like smartphones where they're going to laptops, you've got to get to 800,000 cycles in that range. You think about it. If you have a phone, you're going to charge it every day. So you're looking at three and 50 charges discharge cycles a year, or let's say you keep this one for 2.5 to 3 years, you're quickly at the thousand range, right? So you pretty much. And to be able to do that, if you look at it available ours and maybe some other IoT devices, you might keep it for less than a number of years. Maybe you don't charge it every day, so you can go get away with less number of cycles, right? When we decided to go after smartphones as a big market and then laptops thousand cycles, 800,000 cycles became a must and we aim at thousand as a target. If some customers wanted to take a cycle device. That's good. We can do that, but we set the goal aggressively. Now the ASP is going to depend upon what the value most right. I mean, ultimately, there is must meet requirements, which is fast charge, which is cycle life, which is not so well at the high temperatures when you store the battery safety and so on. Once you meet those, the amount of E. we provide on top of that is what's going to change the ASP premium that we command in some other markets maybe cycle as is not that important, we can index more insight on ED and then we can get a premium for that. So it really depends on the end market are somewhat must-have requirements and some requirements that once you do them, you can get more premium for holiday as a follow up.

Jed Dorsheimer

I know on wearables, we've talked about Apple watch in terms of value where the value of the additional battery life is not as great as that of the phone, but I'm curious some and when we look at Apple vision or when we look at, it's something that only has two hours of battery life and it's certainly gating the adoption of that of that product.
How do you think about the value in terms of the and therefore the the gating function of the battery to was to kind of help those markets some open up to larger volumes Thanks.

Yes, absolutely. I mean, that is the delta. There are more and more applications like that coming out that absolutely need much higher energy density. And I'm one of those proud owners of Apple vision Pro. I love the device and I head the two hour battery life is the single biggest problem with the devices, the battery life. So but it's a phenomenal device. And, you know, I mean, I think the reason the devices so great is because of the performance that's in there with the memories and the process and the displays I mean, there's an Amex app by trade on it, and it just feels like you're in a movie in IMAX theater. But you know, the battery goes on pretty fast. So I think there's the premium is is there in those markets because, you know, that's I think all told 4,100 product. And I mean people will be willing to I mean what if you could double the battery life that we are some.
So I think a lot lot. I mean, I actually think that is just the first of the many products that are coming. And this is what I mentioned when I first came to this job is that performance and the end user experience that great processors, great memory devices great displays, great cameras can deliver is huge. I mean, we haven't seen how good that can be. And now we are seeing with early products coming out. There'll be a lot more like that that'll come out. And you'll see that too deliver the experience that these advances in chips and cameras and memories as really delivered you can't really realize them until you have better battery. And that's why I think that once we produce this battery, there'll be a lot of opportunity for us, but a differentiated ASP.

Operator

Our next question comes from Derek Soderberg with Cantor. Please unmute your audio.

Derek John Soderberg

Yes, yes.
Hey, everyone. Thanks for taking the questions. I wanted to start with on the slide deck. It looks like you guys have the goal of multiple smartphone launches in 2025. I'm wondering what you're going to need from a production capacity standpoint to achieve this? And can you do that with a single line. Do you need to once any detail on that would be great.
Thanks.

Yes. So you know, I think it's important for me to like explain how the process works I know I get asked this question a lot. So if you if you think about where we are in our journey, we now have a recipe with the X. one m. that we feel pretty good about that actually meets the requirements of the market. We are factory coming up now and we feel pretty good that we'll be able to get some samples in in April from that. And so what happens next, right? We're going to give this to our customers. We are going to test them and they are going to give us some feedback and they're going to give us feedback on maybe some optimization on dimensions of how big the battery should be and so on, we're going to make those changes because we have an equity line that can actually do different sized batteries. We're going to give those back to them and they're going to test them again. And like I said, we are sampling multiple cell phone customers. And when you do that, typically it's nine to 12 months, as I mentioned, and how long it takes them to qualify the battery because you remember, we're talking about a thousand cycle battery, which means they're going to charge decide for 1,000 cycles to make sure it's okay. And that will take some time to take the nine to 12 months and then you know, we get designed into if things go really well, maybe multiple models, they'll start with one model, I think, really well, maybe you'll have multiple OEMs. And so the amount of volume that we need is going to depend upon how these qualification cycles go. And that's going to get how much capacity we need to build. We do have one line now that can produce, as I mentioned, around 9 million batteries or so a year, and we're going to be watching those customer qualifications closely and making decisions on how to make sure we have enough capacity based on how the design wins are going. And that's something that the as this year goes through, we'll continue to update you on that.

Derek John Soderberg

Got it.
And as my follow-up, R.J., you spoke a bit about yield on the last podcast on you mentioned a bit about throughput. Just now on the video, you know, from your perspective, how is the equipment as a whole? I know you guys did a bunch of proof-of-concept tests, but I'm just curious your thoughts and confidence level around everything together hitting of that 13, 50 UPH metric and share. Any incremental details on how throughput is tracking as well or?

Yes, the yields are in a part as Rod mentioned, we are a company you're going to have. I'd just take one example of laser. For example, we have about '25, '26 because of all the parameters doing that in equity, making sure the CP and the keeping pace of that is good. It would no more than 1.0. Our EBITDA levels. We'll further fine-tune that to 1.33, but we are fairly looking very good when we are the equity that the yield on certain critical processes products we're learning from Fab one. Our goal will not only hold. But without the start-up at the right time, you know, kind of more and more confident we are gaining equity as it POC has helped us design the group, but right now, the equities are held, the yields are going to hold. It's going to happen here. Some of it has already started, but the machine behind me are going to have the right, we are going to assure that the fine-tuning will help us get there when you are at a better place. So that we are UPS was Zone two and two it really the battery life. She runs that ore, which will run at 1350. You get you're wondering owning it Aparup, we'll do the 1350, but we can see will that be an automaker instead of the water, what and for R-PA, December 13, we won three out of the ones which are kind of locked in, and we're feeling good about both what

Operator

Our next question comes from Anthony Stoss with Craig Hallum.
Please unmute your audio and ask your the rise of a lot of my questions were asked and maybe now that you've had wrote Jade under your belt for a while. Can you update us what you've learned from route, Jade? And then also just to get far on the action here, on just your view on OpEx for March and were up trends through the rest of the year?

Yes, Rajat, I visited the factory, I think a few months ago in our we are super thrilled by the acquisition. It's really phenomenal. I mean, this company has been making production. Battery is shipping for over 20 years, and it's an expertise that that really complements what we have in the company and they understand battery manufacturing, they understand safety, they understand different end markets. And more importantly, their coding expertise is phenomenal. So it went well the thing I want to mention is that when you quarter roll properly to the right specifications, it makes it much easier to cut it on the laser and the stack. It so it's very important you on the incoming material quality and specification and which is one of the problems we had when we were running in Gen one that we were relying on a third party all quarters who wasn't that motivated really recorded like how we wanted to because you know you got to remember we don't just take roles and make them really rolls like other people that they used to supply to Calumet laser. So they're very different and we stack them. So it's a you know, I realized when I came in last year that it was a key piece of the manufacturing process. We absolutely needed. And now we are using that capacity to even for us to do is FAT and SAT and so on. So when the material comes out, we're able to quickly go back and forth between making sure its coating is right and the laser cutting is right. And so on. So it's like a end-to-end optimization.
The second thing we found is that the team at Roger has two things that they do really well. In addition to the things I mentioned, they know how to make high high current batteries. So these are batteries that can actually propel things like run electric motors, run drones, not on military applications at that center very unique value proposition that actually we are able to now looking at how to extend the customer breadth there. And the second one is they can make our ship batteries. They can make the batteries that can make different ship batteries because of their ability to the way the laminate and the various tank batteries. So we have some customer base that actually overlap and that we're able to now go in and also present some of the some of the silicon anode based batteries and but some customer base where we are able to sell route jet, mid graphite batteries. And so we will continue to spend more time and grow the revenue of that company that we acquired. I mean, it's one team now. So super exciting and it's very fortuitous that we were able to get that acquisition done quickly.

Yes.
Touching on the OpEx side from Q4 to Q1, that should be similar level from Q1 to Q2, there should be a decline because of $18.5 million of the depreciation that we talked about. And also because of the actions that we've taken, Fremont, some of those benefits will come through. So you should get additional low-single digit kind of a benefit like that should also decline. And then for the year after that, we should be holding it steady or maybe go up slightly towards the end of the year for the full year, like, you know, like if you look at the EBITDA of the company, you should kind of think of it for the full year, very similar to what we had in '23. And you know what fairly steady through the years previous best of luck guys.

Tony Stoss

Thank you.

Operator

Our next question comes from gold Arnold with Cowen. Please unmute your audio and ask.

Gabriel Daoud

Thank you, and thanks, everyone, for all the prepared remarks.
And actually for the for the great video.
Raj was hoping we can maybe just go back to EX. one MNEXI. two M.
There's already been a lot of discussion around it. But just curious if you can maybe quantify what the energy density targets are for each and just how that compares to leading edge mobile phones in the market today?

Yes. With UBM, we haven't put out exactly a precise target, mainly because we are making the right, I would say, trade-off between energy density, cycle life, fast charge, safety and then and then also the and that shows up and that's very important. It will definitely be higher than what is in the market today, I think and we put some slight we put in our investor deck, what we expect to get to NEX 2M, what exactly EX. one of them will land is a decision we're going to make together with our customers as I mentioned, it's not just one parameter that drives it doesn't drive design wins. It's a sum total of all those five parameters that we need to be thinking about. And that's where we are focused on. It will definitely improve the over what's in the market for sure. We just want to make sure that we did it right with our customers because they also are involved now in the trade-offs that they actually want to make to get the right battery in time.

Gabriel Daoud

Okay.
Okay. Got it.
That makes sense.
Certainly a lot of parameters you need to solve for depending on the customer.
Okay.
Then just as a follow-up, very clear on when it's one M. and EX. two m. or expected to be a shift for customers to a shift for customers to sample, but when will the cells actually becoming of the high volume manufacturing line? I guess I'd imagine that some customers want to see sales of that line as part of the qualification process to is that within the nine to 12 month window that you talked about?

The short answer is yes. The good news is our agility line and the high volume manufacturing line use the exact same modules. So in that sense and also from the same place they're bought in Malaysia in the same factory that you see that RJs right now. So in that sense that it's a lot of similarity. So our expectation is that once they get samples from one moving to the other one should be a short cycle time call because they're really the same machines. It's just the scale is different, which is actually a very key part of our strategy to reduce that cycle time. But ultimately, look, we'll get them the samples. But the exact qualification time, like I said, is going to depend upon a phone level qualification and when I talk to my customers, they basically tell me look, Roger, depending upon how good you have a sample set and where we put it anywhere between nine and 12 and that's kind of what we are looking working towards.

Gabriel Daoud

Okay. Got it.
Got it. Great.
Thanks, Russ.

Operator

And certain question.
Our next question comes from Ananda Baruah with Loop Capital Market.
Please unmute your audio and Asha.

Ananda Prosad Baruah

Yes, good afternoon, guys. Thanks for taking the questions. Really appreciate it. And I guess the first one maybe is for Ajay. If you saw a line of Jay, just to the earlier question about about yield. Is there a useful way to think about where you guys think yields in phase two will be in April, May we start start putting out legitimate samples, another yield target through the year as well.
And I guess I have a quick follow-up. Like what's the value of the yield targets that you guys have as well? And kind of a quick follow-up after that.
Thanks.

Good, good question. So the all the learnings and all the root cause analysis that we have done on the GEN-1, I would argue that we offer our platform ramping up, ramping it up where we ended in one. That's where we will be. And then two, all the learnings have been it goes into the Gen two, the design and what GEN-1 could not provide. We have figured out we have to make sure the design accommodated that here and then I will start a pretty decent yield. What we all see the new windows are the process driven more than 1.1, 1.2 EBITDA kind of bang for every process step viewpoint during the, but again, we'll be global when you get a pretty decent yield after that, all the fine-tuning and given the three quarters, we are going to deliver upwards of bless you like that's how we are thinking and that of your branding actually, and these are supported.

Ananda Prosad Baruah

That's super helpful. Thanks.
Yes, super helpful. And I guess the follow-up is maybe for Raj and far on as well, like what in terms of your margin model, right? So let's say you hit the the 90% plus yield toggles that that as you just spoke of what is that at scale margins? Is that in the margin model? I guess, where are you in the margin model when you start shipping, you kind of volumes, those kinds of deals to initial customers, production and production?

Yes, that's right number. The right number to think about I mean, look, this is consumer products, right? I mean, we've all done this with the processors and memories NIJ, and I've done it for I don't know how many decades, but you got to get to 90 plus percent yields. I mean high 90s is where we really need to get to. But we have premiums that we believe we can come in because of what we're able to provide and that will help us for a while, but ultimately, we got to get to those numbers. And I think we we factored that in into how the asset is done, unless it is done and that's kind of the important part here is that the acceptance criteria for the machines used to be running at that level of CPGA so that when we get them mastering them altogether shouldn't take a hopefully shouldn't take a lot of optimization to get to target deals, kind of what we're planning.

Ananda Prosad Baruah

Okay, awesome. Thanks a lot.
Appreciate it.

Operator

Our next question comes from Chris Speller with B. Riley. Please unmute your audio and ask your questions.

Christopher Curran Souther

Hey, guys.
Thanks for taking my question. I just wanted to follow up on you talking about nine to 12 months to qualify for some of these wins?
Is that after?
Yes, one of them is already in customers' hands. Are we already in that like nine to 12 months, some of the samples of our prior sales, you've acquired some of these customers. And then should we think about is there a kind of a lead time out here between design it and kind of a launch that's a good kind of rough what timeframe we should expect. I just wanted to kind of get a little bit more on the cadence there?

Yes, that is what after we delivered the samples from for in April from our factory, right? I mean what we have done previously has really helped them understand our technology and how it works and so on. But the product that's actually targeted to go into the cellphone is 1,000 cycles fast charging product, which is one we want to sample in April, and that's when you can think of the clock starting from now, all in all, you know, typically my experience in these kind of things is that the we will get to a model that we are going to be in Delphi Technology Evaluation there that just evaluating the battery in isolation in terms of the tests and so on, then they'll actually passed that, then they'll actually put it an actual phone model and that will go on for for some time and then they get the precise one is will go into is the one that happens next. So that's the total period of nine to 12 months. The actual design win of what model we are on will come just a few months before high-volume typically doesn't they don't decide way ahead. But but the good news is once you pass the technology qualification, once you are in the in their vendor list, subsequent models can come much faster because you're now insight, right? And that's what my experience has been in previously with memories and process. The first one takes a little longer once we get in follow-on models can come faster interested.

Christopher Curran Souther

And maybe just on the route shade contribution in the fourth quarter, can you update us on what the run rate is for that for that legacy business seemed a little bit stronger than I am expecting at least.

Yes, no, I guess I can talk about that. So in the fourth quarter, Roger business tends to be stronger. There's normally seasonality associated with it. So be for the year, the seasonality is that the second quarter is kind of the low point. The fourth quarter is the strong point, generally speaking, this year in '23, what we saw was that there was a bunch of business that was at the end of the year and beginning of 2024 end of '23 beginning of '24 and a lot of that got shipped and and '23. So that was a factor where the revenue came in stronger and also like you know, quarter-on-quarter decline also, it contributed to it. So generally speaking, though, for the first three quarters, you should think of it of about $18 million annualized run rate. And then fourth quarter are stronger end like Canada, fourth quarter of '23 being somewhat exceptionally stronger.

Operator

Our next question comes from Tim more with a question. Please unmute your audio and.

Timothy Moore

Yes, thanks, and most of my questions are already answered. But regarding you mentioned the 90% yield goal commentary two questions ago. Can you maybe give us a rough better sense? I mean, bondholder to hold you to it have a timing roadmap maybe for potential revenues run rate. And when you look out to maybe the December quarter or the March quarter next year, from the Feburary 2 sample production, if that goes pretty well, any rough thoughts on maybe what the revenue tied to that could be a year from our quarterly?

Yes, it is the right word for now is just saying that we are guiding one quarter at a time and so we'll get to it when we get to it. But you kind of talked about the timing of the production ramp and you talked about we gave you some good color on that. And we have given like, you know, '25 that we will be in smartphones and you also you will have a revenue ramp associated with that?
I don't know.

Yes, I mean I absolutely. I mean, look, we are going to sample products from our Feburary 2 in April. And we hopefully will be some some IoT type customers that can go to production earlier in '24. But the smartphone months will really be in '25. So and I think that's just the way you guys should be thinking about this. And again, super excited by the technology and the acceptance of the customer base once we qualify, it's just the it's going to be a lot more fun.

Timothy Moore

That's good. Yes.
I think you were pretty clear on that 2025 timing for the smartphones but the IoT actually pretty promising maybe towards the end of the year.
And the other question I had just on smartphone, I mean, I mentioned it was a sum total of parameters and there's trade-offs. If you could ask during qualifications and maybe pilots, you think you could get out to do an exclusive contract for a major OEM customer. I think you do unique specification exclusively for them for them? Is that something you would consider?

Yes. I mean, you know, look, it's just a business case, right? I mean served as guaranteed volumes and good ASP totally open to it. But by the way, the nature of this business is that what I expect to happen is that we'll probably sign some joint development agreement or something like that. And then they'll talk about, you know, what size battery they want, what's a battery, we make, what time is it yield, and that's how these things go typically from my experience, but am I in some way, it will become a little bit exclusive because of the shape of the battery, not the technology itself like data that makes sense for.

Timothy Moore

Thanks and good luck with the April sampling, and that's it for my questions.

Operator

Thank you very much.
There are no further questions at this time. With that, I'd like to turn and over to you, Dr. Ross Aleris and closing remarks.

Yes, thank you all. Have been a really great year in '23 recap, super excited by where we are in '24. So look forward to talking to you guys next quarter. Thank you for all your interest.