Enovix Corp (ENVX) FY 2023 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contain forward-looking statements based upon our current expectations, estimates and projections that involve risks and uncertainties. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The management of Enovix Corporation are referred to as the “Company,” “we,” “us,” “our” and “Enovix.”

Business Overview

We design, develop and have started to commercially manufacture an advanced silicon-anode lithium-ion battery using our proprietary cell architecture that increases energy density and maintains high cycle life. This enables us to use silicon as the only active lithium cycling material in the anode whereas industry incumbents have historically combined only a modest amount of silicon with graphite. We have applied an equally innovative approach to develop proprietary roll-to-stack production tools for existing lithium-ion battery manufacturing lines and increase megawatt hour capacity. Our silicon anode battery architecture allows lithium-ion batteries to be produced smaller, cheaper and more efficiently at scale than current alternatives.

To date, we have concentrated our operational effort on researching, developing and commercializing the cutting-edge technology behind our silicon-anode lithium-ion battery. Over the past several years, we have signed agreements to provide engineering and proof of concept samples to blue-chip companies in the consumer electronic industry (smartwatches, augmented reality/virtual reality, smartphones, fire/life/safety radios, laptops). In addition to those industries, we are pursuing the deployment of our technology for the electric vehicle (“EV”) market.

We currently lease our headquarters in Fremont, California. In 2020, we started procuring equipment for our first production line (“Fab1”). The first of this equipment began arriving in early 2021. Fab1 is now operational, and we commenced our planned principal operations of commercial manufacturing and recorded our first product revenue as scheduled in the second quarter of 2022. In 2023, we announced the strategic realignment of our Fab1 in Fremont, which is designed to refocus the facility from a manufacturing hub to “Center for Innovation,” focused on new product development.

In 2023, we identified a facility in Malaysia (“Fab2”) for high-volume production utilizing our second generation (“Gen2”) manufacturing lines and acquired Routejade, a battery manufacturer in Korea that has allowed us to vertically integrate electrode coating and battery pack manufacturing.

We anticipate that at 80% overall equipment effectiveness (“OEE”), our Gen2 manufacturing line would be able to produce at least 9.5 million batteries annually, depending on cell size. We plan to place our first Gen2 line into 2024 with additional lines placed into service based on the status of customer qualification and demand. Our options for expanding our capacity also include placing lines at customer sites or joint ventures. We expect that certain customers may require up to several months to qualify the Gen2 line before accepting product that is manufactured on that line. Additionally, we plan to install a Gen2-compatible pilot line (“Agility Line”) for accelerated product development and qualification in Fab2 in 2024.

Fiscal Year

Our fiscal year is the 52 or 53-week period ending on the Sunday closest to December 31. Our fiscal years 2023, 2022, and 2021 ended on December 31, 2023, January 1, 2023, and January 2, 2022, respectively. All period references are to the fiscal periods unless otherwise indicated.

Routejade Acquisition

On October 31, 2023, we closed a transaction to purchase Routejade, Inc. (“Routejade”), a battery manufacturer incorporated under the laws of Republic of Korea. This acquisition allowed us to vertically integrate electrode coating and battery pack manufacturing. The total consideration of such transaction consisted of cash consideration in the amount of approximately $15.8 million and 5,923,521 shares of common stock of the Company, par value $0.0001, for the purchase of substantially all of the outstanding shares of Routejade (the “Routejade Acquisition”). Please refer to Note 3 “Business Combinations” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details of this acquisition.

48

Table of Contents

Key Trends, Opportunities and Uncertainties

We generate revenue from payments received from our customers in connection with (a) the sale of silicon-anode lithium-ion batteries and battery pack products (“Product Revenue”) and (b) executed engineering revenue contracts (“Service Revenue”) for the development of silicon-anode lithium-ion battery technology. We commenced shipment of commercially manufactured batteries in the second quarter of 2022. Our performance and future success depend on several factors that present significant opportunities, but also pose risks and challenges as described in Part I, Item 1A of this Annual Report on Form 10-K.

Fiscal Year 2023 Highlights:

•During the first quarter of 2023, we announced that we would locate Fab2 in Penang, Malaysia at an existing facility operated by YBS International Berhad (“YBS”), a Malaysia-based investment holding company that would also serve as a manufacturing partner.

•During the second quarter of 2023, we announced that we received a purchase order to produce commercial cells for use within U.S. Army soldier’s central power source, called the Conformal Wearable Battery (“CWB”).

•During the third quarter of 2023, we announced our intent to acquire privately-held Routejade, an established battery manufacturer in Korea. The acquisition provides us with vertical integration of electrode coating and battery pack manufacturing while adding an established lithium-ion battery business with factories in Korea, along with complementary products, customers, and suppliers. We completed the Routejade Acquisition in October 2023. Please refer to Note 3 “Business Combinations” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details of this acquisition.

•During the fourth quarter of 2023, we announced a strategic realignment of our Fab1 in Fremont, (the “Fab1 Strategic Realignment”), which is designed to refocus the facility from a manufacturing hub to its “Center for Innovation,” focused on new product development, including a plan of workforce reduction. This strategic realignment allowed us to stop 24/7 manufacturing, reduce our burn rate and free up space for enhanced research and development and prototyping for automotive original equipment manufacturers (“OEMs”). See Note 15 “Restructuring Costs” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

•During the fourth quarter of 2023, we announced that our battery cell exceeded the requirements of a global wearable apparel company and outperformed all competitive cells, including other advanced silicon batteries tested by Polaris Battery Labs, an established testing lab based in Beaverton, Oregon.

Product Development

We have developed and delivered standardized sample (i.e., prototype) lithium-ion batteries to multiple, industry leading consumer electronics manufacturers with energy densities higher than industry standard batteries of similar size. “Energy density” is measured as the product of the power a battery puts out in watts times the number of hours the battery can put out that power, divided by the volume (size) of the battery measured in liters. The units of energy density are thus watt-hours per liter or Wh/l. Additionally, we estimate that our batteries can deliver higher storage capacity (measured in milliampere/hour, or mAh) compared to industry standard batteries of similar size.

Our product development strategy is tightly aligned with the goals of meeting the market needs of higher energy density, cycle life, and fast charge while delivering breakthroughs in safety. In the fourth quarter of 2023, we gained confidence in the quarter of achieving 1,000 cycles on our smartphone-class silicon battery. We plan to begin sampling high cycle life smartphone batteries, which we call EX-1M, beginning in the second quarter of 2024.

Commercialization

We approach our commercialization strategy by identifying customer requirements and determining where our battery architecture will offer the greatest value. In 2023, we added a product management team to interface with customers, collect these requirements, and feed these learnings into our technology roadmap.

Prior to 2023, our go-to-market strategy was to sample many customers across a broad set of end markets with a standard size battery while selectively considering customized batteries by size for certain customers. This is referred to as a horizontal business strategy. In 2023, we shifted our go-to-market strategy to a vertical business strategy based on

49

Table of Contents

our determination that it is more efficient to work with a smaller number of large customers and build highly customized batteries to their needs. Through this shift we have put a particular emphasis on the largest end markets for portable electronics batteries such as smartphones and computing devices.

Associated with this shift, we announced in the fourth quarter of 2023 a strategic realignment of Fab1 designed to refocus the facility from a manufacturing hub to a facility focused on new product development. This is also supportive of our strategy to location high-volume manufacturing in Asia near customers and suppliers.

Market Focus and Market Expansion

Within the portable electronics market, we have simplified our market focus to three categories: IoT (wearables, AR/VR, medical, industrial, power tools, etc.), Mobile (smartphones, land mobile radios, enterprise devices, etc.), and Computing (laptops, tablets). We estimate the total addressable market (“TAM”) for lithium-ion batteries in our targeted portable electronics markets to be $23 billion in 2026.

We believe focusing on these categories ahead of EVs is the right strategy for any advanced battery company because of the economic and time-to-market advantages. Entering the EV battery market requires billions of dollars of capital to build Gigafactories, offers lower prices per kWh than mobile electronics and demands long qualification cycles. We believe the best approach is to start in premium markets where we can leverage our differentiated technology and solidify our manufacturing process while driving toward profitability. At the same time, we are seeding our entry into the EV battery market by sampling batteries to EV OEMs and continuing work on our three-year grant with the U.S. Department of Energy to demonstrate batteries featuring our silicon anode paired with EV-class cathode materials. Our goal is to translate this work into partnerships (e.g., joint ventures or licensing) with EV OEMs or battery OEMs in order to commercialize our technology in this end market. We have entered into an agreement with a major automaker to validate our battery in an EV.

Access to Capital

Assuming we experience no significant delays in the R&D of our battery nor any deterioration in capital efficiency, we believe that our cash resources are sufficient to fund the continued build-out and production ramp of our Fab2 manufacturing facility in Malaysia for growth.

Tax Legislation

On August 16, 2022, the U.S. enacted the Inflation Reduction Act (“IRA”) that includes a new alternative minimum tax based upon financial statement income, an excise tax on stock buybacks, tax incentives for energy and climate initiatives and other tax-related provisions. At this time, we do not anticipate that IRA tax provisions will have a material impact to our consolidated financial statement for the fiscal year 2024.

Components of Results of Operations

Revenue

In June 2022, we began to generate revenue from our planned principal business activities and, in October 2023, we acquired Routejade, a manufacturer of electrode coating and battery pack for customers worldwide. We recognize revenue within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. We generate revenue from manufacturing our batteries and developing lithium-ion battery technology.

Product Revenue is recognized once we have satisfied the performance obligations identified in the contract and the customer obtains control of the goods at a point in time under the revenue recognition criteria. Product Revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the lithium-ion batteries or battery pack products transferred.

Service Revenue contracts generally include the design and development efforts to conform our existing battery technology with customers’ required specifications. Consideration for Service Revenue contracts generally becomes payable when we meet specific contractual milestones, which include the design and approval of custom cells, procurement of fabrication tooling to meet the customer’s specifications, and fabrication and delivery of custom cells from our pilot production line. Within the existing Service Revenue contracts, the amount of consideration is fixed, the contracts contain a single performance obligation, and revenue is recognized at the point in time the final milestone is

50

Table of Contents

met (i.e., a final working prototype meeting all required specifications) and the customer obtains control of the deliverable.

Cost of Revenue

Cost of revenue includes materials, labor, depreciation and amortization expense, inventory, freight costs and other direct costs related to manufacturing our products and service contracts. Labor consists of personnel-related expenses such as salaries and benefits, and stock-based compensation. We anticipate that cost of revenue will continue to increase as we optimize and bring-up our production lines.

Capitalization of certain costs are recognized as an asset if they relate directly to a customer contract, generate or enhance resources of the entity that will be used in satisfying future performance obligations, and are expected to be recovered. If these three criteria are not met, the costs are expensed in the period incurred. Deferred costs are recognized as cost of revenue in the period when the related revenue is recognized.

Inventory is stated at the lower of cost or net realizable value on a first-in and first-out basis. Determining net realizable value of finished goods and work in process inventories involves projecting average selling prices. When the estimated net realizable values are below the manufacturing costs, a charge to cost of revenue is recorded.

Operating Expenses

Research and Development Expenses

Research and development expenses consist of engineering services, development expenses, materials, allocated facilities costs, depreciation, labor and stock-based compensation related primarily to our (i) technology development, (ii) design, construction, and testing of preproduction prototypes and models, and (iii) certain costs related to the design, construction and operation of our pilot plant that are not of a scale economically feasible to us for commercial production. Research and development costs are expensed as incurred.

To date, research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering and manufacturing facilities, including the material and supplies to support the product development and process engineering efforts. As we ramp up our engineering operations to complete the development of batteries and required process engineering to meet customer specifications, we anticipate that research and development expenses will continue to increase for the foreseeable future as we expand hiring of scientists, engineers and technicians and continue to invest in additional plant and equipment for product development, building prototypes and testing of batteries. We established a research and development center in India that initially focuses on developing machine learning algorithms.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses consist of personnel-related expenses, marketing expenses, allocated facilities expenses, depreciation expenses, travel expenses, and professional services expenses, including legal, human resources, audit, accounting and tax-related services. Personnel related costs consist of salaries, benefits and stock-based compensation. Facilities costs consist of rent and maintenance of facilities.

We are expanding our personnel headcount to support the commercial manufacturing and being a public company. Accordingly, we expect our selling, general and administrative expenses to increase in the near term and for the foreseeable future.

51

Table of Contents

Impairment of Equipment and Restructuring Cost

Impairment of equipment was a result of our disposal of machinery and equipment that were identified to have no future or alternative usage.

Restructuring cost was a result of our strategic realignment of our Fab1 in Fremont, which included a restructuring plan with workforce reduction. Please refer to Note 15 “Restructuring Costs” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details.

Other Income (Expense)

Other income and expenses, net primarily consist of fair value adjustments for the convertible preferred stock warrants and fair value adjustments for the common stock warrants, interest income, interest expense, gain or loss from foreign currency transactions and loss on early debt extinguishment.

Income Tax Expense (Benefit)

Our income tax provision consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not. Since our acquisition of Routejade and our establishment of operations in Malaysia, we became subject to taxation based on the foreign statutory rates in the countries where the sales or income took place.

52

Table of Contents

Results of Operations

Comparison of Fiscal Year 2023 to Prior Fiscal Year 2022

The following table sets forth our consolidated operating results for the periods presented below (in thousands, except percentages).

N/M – Not meaningful

Revenue

Revenue for the fiscal year 2023 was $7.6 million, comprised of $7.3 million of Product Revenue from the Routejade Acquisition in October 2023. For the fiscal year 2023, a single customer, a military subcontractor in South Korea, accounted for approximately 75% of our total revenue.

Revenue for the fiscal year 2022 was $6.2 million, comprised of $6.2 million of Service Revenue and an immaterial amount of Product Revenue. Service Revenue was primarily attributed to the satisfaction of our final performance obligations for and our deliveries of (a) pilot cells and (b) battery packs to two customers under our Service Revenue customer contracts. A single customer represented $5.0 million of our total revenue for the fiscal year 2022. A portion was previously recorded as deferred revenue on our Consolidated Balance Sheet.

As of December 31, 2023 and January 1, 2023, we had $10.5 million and $3.8 million, respectively, of deferred revenue on our Consolidated Balance Sheets.

Cost of Revenue

Cost of revenue for the fiscal year 2023 was $63.1 million, compared to $23.2 million for the prior fiscal year 2022, an increase of $39.8 million or 171%. $8.0 million of the increase in cost of revenue was attributable to the cost of revenue associated with the newly acquired business from Routejade, which included $2.4 million of inventory step-up

53

Table of Contents

amortization and manufacturing equipment fair value adjustment in connection with the Routejade Acquisition. In addition to the increase associated with the newly acquired business, the increase in cost of revenue included $6.3 million increase in labor costs, $9.3 million increase in scrap and absorption costs, $8.2 million increase in inventory reserve in connection with higher standards costs than the selling prices for some of our products, and $13.2 million increase in depreciation expense, which is partially related to the acceleration of depreciation expense in connection with the Fab1 Strategic Realignment in 2023 as well as the ramp up of our Fab1 production to a full year production in 2023 instead of mid-year in 2022. A full year of depreciation expense was recognized in 2023 compared to seven months of depreciation expense recognized in 2022 since we placed our first production line in service at the beginning of June of 2022. These increases were partially offset by a $5.2 million decrease in expenses incurred related to service revenue contracts that were completed in the fiscal year 2022.

In addition, we anticipate our factory overhead expenses will continue to increase as we continue to hire additional personnel to support the build-out of Fab2 production lines and our Fab2 manufacturing facility.

Research and Development Expenses

Research and development expenses for the fiscal year 2023 were $88.4 million, compared to $58.1 million during the prior fiscal year 2022. The increase of $30.3 million, or 52%, was primarily attributable to a one-time severance, benefits and stock-based compensation expense of $10.6 million in connection with the departures of our former Chief Technical Officer, certain other executives and employees during this fiscal year. In addition, there were increases in our research and development employee headcount and compensation costs resulting in a $6.1 million increase in salaries and employee benefits and a $8.8 million increase in stock-based compensation expenses. Furthermore, there were $14.7 million increase in depreciation expense, which was partially related to the acceleration of depreciation in connection with the Fab1 Strategic Realignment, and $1.4 million increase in travel expense as well as other increases in material and freight costs and amortization of newly acquired intangible assets. These increases were partially offset by $12.7 million decrease in research and development expenses as some of the overhead costs were period costs and recorded as cost of revenue in the current year instead of research and development expense in the fiscal year 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the fiscal year 2023 were $79.0 million, compared to $52.0 million during the prior fiscal year 2022. The increase of $27.0 million, or 52%, was primarily attributable to a one-time severance, benefits and stock-based compensation expense of $17.9 million in connection with the departures of our former President, Chief Executive Officer and Director, former CFO and certain other executives during this fiscal year. The remaining increase of $9.1 million was primarily due to an increase in our selling, general and administrative employee headcount resulting in a $2.8 million increase in salaries and employee benefits and a $3.2 million increase in stock-based compensation expenses, $1.3 million of acquisition costs in connection with the Routejade Acquisition, a $1.5 million increase in setting up Malaysia office and a $1.3 million increase in information technology cost and utilities. These increases were partially offset by a decrease in professional fees.

We anticipate that our overhead expenses will continue to increase as we continue to hire additional personnel to support our operation growth.

Impairment of Equipment

Impairment of equipment for the fiscal year 2023 was $4.4 million, which was related to the disposal of machinery and equipment that were identified to have no future or alternative usage and these impaired assets were previously capitalized as “Machinery and equipment” category of property and equipment, net on the Consolidated Balance Sheets.

Impairment of equipment for the fiscal year 2022 was $4.9 million and it was incurred when we determined to cease constructing certain automation for a small portion of our equipment in the fourth quarter of 2022. This equipment was previously capitalized and categorized as “construction in process” in property and equipment, net on our Consolidated Balance Sheets.

Restructuring Cost

On October 3, 2023, we initiated the Fab1 Strategic Realignment in Fremont, which included a restructuring plan with workforce reduction. We recorded $3.0 million of restructuring costs during the fiscal year 2023, which consisted of

54

Table of Contents

$2.4 million of severance and termination benefits and stock-based compensation expense and $0.6 million of inventory raw material expense. No restructuring cost was incurred in the fiscal year 2022.

Change in Fair Value of Common Stock Warrants

For the fiscal year 2023, the change in fair value of common stock warrants of $6.2 million was attributable to a decrease in the fair value of the 6,000,000 Private Placement Warrants (as defined in Note 4 “Fair Value Measurement” of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K).

For the fiscal year 2022, the change in fair value of common stock warrants of $75.2 million was attributable to a decrease in the fair value of the 6,000,000 Private Placement Warrants.

Interest Income

Interest income for the fiscal year 2023 was $14.1 million, compared to $5.2 million during the fiscal year 2022. The increase of $8.8 million was primarily due to the fact that we received higher dividend income and interest income from our money market accounts and our investments for the fiscal year 2023 as compared to the fiscal year 2022.

Interest Expense

Interest expense for the fiscal year 2023 was $4.5 million, which primarily incurred with the Convertible Senior Notes issued in the second quarter of 2023. No interest expense was incurred for the fiscal year 2022.

Non-GAAP Financial Measures

While we prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), we also utilize and present certain financial measures that are not based on GAAP. We refer to these financial measures as “Non-GAAP” financial measures. In addition to our financial results determined in accordance with GAAP, we believe that EBITDA, and Adjusted EBITDA, and Free Cash Flow (each as defined below), are useful measures in evaluating our financial and operational performance distinct and apart from financing costs, certain non-cash expenses and non-operational expenses.

These Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP. We endeavor to compensate for the limitation of the Non-GAAP financial measures presented by also providing the most directly comparable GAAP measures.

We use Non-GAAP financial information to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes. We believe that Non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies. You should review the Non-GAAP reconciliations, but not rely on any single financial measure to evaluate our business.

EBITDA and Adjusted EBITDA

“EBITDA” is defined as earnings (net loss) attributable to Enovix adjusted for interest expense; income tax benefit; depreciation expense and amortization expense. “Adjusted EBITDA” includes additional adjustments to EBITDA such as stock-based compensation expense; change in fair value of convertible preferred stock warrants and common stock warrants; inventory step-up; impairment of equipment and other special items as determined by management which it does not believe to be indicative of its underlying business trends. EBITDA and Adjusted EBITDA are intended as supplemental financial measures of our performance that are neither required by, nor presented in accordance with GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing our financial measures with those of comparable companies, which may present similar Non-GAAP financial measures to investors.

However, you should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, the presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Our computation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA and Adjusted EBITDA in the same fashion.

55

Table of Contents

Free Cash Flow

We define “Free Cash Flow” as (i) net cash from operating activities less (ii) capital expenditures, net of proceeds from disposals of property and equipment, all of which are derived from our Consolidated Statements of Cash Flow. The presentation of non-GAAP Free Cash Flow is not intended as an alternative measure of cash flows from operations, as determined in accordance with GAAP. We believe that this financial measure is useful to investors because it provides investors to view our performance using the same tool that we use to gauge our progress in achieving our goals and it is an indication of cash flow that may be available to fund investments in future growth initiatives.

Liquidity and Capital Resources

We have incurred operating losses and negative cash flows from operations since inception through December 31, 2023 and expect to incur operating losses for the foreseeable future. As of December 31, 2023, we had cash, cash equivalents, restricted cash, and short-term investments of $308.8 million, working capital of $262.2 million and an accumulated deficit of $598.8 million.

On April 20, 2023, we issued $172.5 million aggregate principal amount of 3.0% Convertible Senior Notes, pursuant to an indenture, dated as of April 20, 2023 (the “Indenture”), between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The offerings and sale of the Convertible Senior Notes were made by us to the initial purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for resale by the initial purchasers to qualified institutional buyers (as defined in the Securities Act) pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The issuance includes the exercise in full by the initial purchasers of their option to purchase an additional $22.5 million aggregate principal amount of Convertible Senior Notes and the issuance of $10.0 million principal amount of Convertible Senior Notes (the “Affiliate Notes”) to an entity affiliated with Thurman John “T.J.” Rodgers, the Company’s Chairman, in a concurrent private placement.

The Convertible Senior Notes are unsecured obligations and bear interest at a rate of 3.0% per year from April 20, 2023, and will be payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2023. The Convertible Senior Notes and the Affiliated Notes will mature on May 1, 2028 unless earlier converted, redeemed or repurchased.

The net proceeds from the Convertible Senior Notes were approximately $166.6 million. We used approximately $17.3 million of the net proceeds from the offerings to pay the cost of the capped call transactions entered on April 20, 2023 in connection with the offerings. In addition, we will use the remaining net proceeds to build out a second battery cell manufacturing facility, fund the acquisition of production lines of our second-generation manufacturing equipment, for working capital and other general corporate purposes. See Note 9 “Borrowings” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Following the issuance of Convertible Senior Notes, we invested in marketable securities. As of December 31, 2023, we had $73.7 million of short-term investments on the Consolidated Balance Sheet. We did not have short-term investments as of January 1, 2023.

In addition, we continue to build our facility in Malaysia and purchase property and equipment during the year. As of December 31, 2023, we had higher accrued expenses, including accrued interest associated with Convertible Senior Notes, as compared to January 1, 2023.

Material Cash Requirements

As of December 31, 2023, we had cash, cash equivalents, restricted cash, and short-term investments of $308.8 million. We currently use cash to fund operations, meet working capital requirements and fund our capital expenditures. In fiscal year 2024, we expect that our spending in cost of revenues and operating expenses will continue to increase as we ramp up our operations.

For the fiscal year 2023, we purchased $61.8 million of property and equipment. We will continue to increase our property and equipment purchases in the near future to support the build-out of our manufacturing facilities and our battery manufacturing production. See more discussion on contractual obligations and commitments section below.

In the second quarter of 2023, we entered into a manufacturing agreement (the “Agreement”) with YBS International Berhad (“YBS”), a Malaysia-based investment holding company with segments including electronic manufacturing and assembly, high-precision engineering, precision machining and stamping, among others. YBS assigned Orifast Solution Sdn Bhd (“OSSB”), a subsidiary, to manufacture lithium-ion batteries for Enovix under the terms and conditions of the Agreement. OSSB obtained $70.0 million of foreign currency term loan (the “Term Loan”)

56

Table of Contents

in financing for manufacturing operations under the Agreement from OCBC Bank (Malaysia) Berhad (“OCBC”). On September 13, 2023, we entered into a cash deposit agreement with OCBC to collateralize the Term Loan and the deposit will be placed in an interest-bearing account with an interest rate on par with the loan rate of the Term Loan. We will deposit sufficient collateral for the Term Loan. As of December 31, 2023, there is no outstanding balance of the Term Loan and no deposit was applied as a collateral for the Term Loan. See Note 16 “Variable Interest Entity” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Based on the anticipated spending and timing of expenditures to support operational development and market expansion, we currently expect that our cash will be sufficient to meet our funding requirements over the next twelve months from the date this Annual Report on Form 10-K is filed. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash, cash equivalents and future debt financings, and access to other public or private equity offerings as well as potential strategic arrangements. We have made our estimates on historical experience and various other relevant factors and we believe that they are reasonable. Actual results may be differ from our estimates, and we could utilize our available capital resources sooner than we expect.

Summary of Cash Flows

The following table provides a summary of cash flow data for the periods presented below (in thousands).

Comparison of Fiscal Year 2023 to Prior Fiscal Year 2022

Operating Activities

Our cash flows used in operating activities to date have been primarily comprised of operating expenses. We continue to increase hiring for employees in supporting the ramping up of commercial manufacturing. We expect our cash used in operating activities to increase significantly before we start to generate any material cash inflows from commercially manufacturing and selling our batteries.

Net cash used in operating activities was $104.6 million for the fiscal year 2023. Net cash used in operating activities consists of net loss of $214.1 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include a decrease in fair value of the Private Placement Warrants of $6.2 million, stock-based compensation expense of $69.5 million, depreciation and amortization expense of $34.0 million and impairment of equipment of $4.4 million.

Net cash used in operating activities was $82.7 million for the fiscal year 2022. Net cash used in operating activities consists of net loss of $51.6 million, adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments primarily include the change in fair value of common stock warrants of $75.2 million, stock-based compensation expense of $30.4 million, depreciation and amortization expense of $8.0 million and impairment of equipment of $4.9 million.

Investing Activities

Our cash flows used in investing activities to date have been primarily comprised of purchases of property and equipment. Starting in the second quarter of 2023, we began to purchase short-term investments. We expect the costs to acquire property and equipment to increase substantially in the future as we continue to build-out our Fab2 and develop our battery manufacturing production lines in Malaysia. Net cash used in investing activities, which were primarily related to equipment purchases, were $61.8 million and $36.2 million for the fiscal years 2023 and 2022, respectively. During the fiscal year 2023, we purchased $138.3 million of investments. No investments were purchased in the fiscal year 2022. In addition, we had $67.2 million of investments mature during the fiscal year 2023. In October 2023, we

57

Table of Contents

used cash, net of cash acquired, of $10.0 million and 5,923,521 shares of common stock of the Company to purchase substantially all of the outstanding shares of Routejade.

Financing Activities

Net cash provided by financing activities was $159.6 million for the fiscal year 2023, which primarily consisted of $172.5 million of gross proceeds from the Convertible Senior Notes, $11.9 million of proceeds from the exercise of stock options to purchase our Common Stock and $2.4 million of proceeds from our employee stock purchase plan (“ESPP”) to purchase our Common Stock, partially offset by $17.3 million of capped call transaction costs, $5.9 million of debt issuance costs, and $3.9 million of payroll tax payments for shares withheld upon vesting of restricted stock units.

Net cash provided by financing activities was $56.5 million for the fiscal year 2022, which primarily consisted of $52.8 million of proceeds from the exercises of common stock warrants, $2.4 million of proceeds from the exercise of stock options to purchase our Common Stock and $1.9 million of proceeds from our ESPP to purchase our Common Stock.

Contractual Obligations and Commitments

As of December 31, 2023, we had $172.5 million aggregate principal amount of 3.0% Convertible Senior Notes outstanding, which will mature on May 1, 2028 unless earlier converted, redeemed or repurchased. Please see Note 9 “Borrowings” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

We lease our headquarters in Fremont, California and Malaysia, and offices in Asia Pacific region. For the lease payment schedule, please see Note 7 “Leases,” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

We expect to enter into other commitments to support our product development, the build-out of our manufacturing facilities, and our business development, which are generally cancellable upon notice. Additionally, from time to time, we enter into agreements in the normal course of business with various vendors, which are generally cancellable upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of service providers, up to the date of cancellation. As of December 31, 2023, our commitments included approximately $62.5 million of our open purchase orders, including equipment purchase orders, and contractual obligations that occurred in the ordinary course of business. For contractual obligations, please See Note 10 “Commitments and Contingencies” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

As previously discussed, we are party to the Agreement with YBS. Pricing under the Agreement is set on a cost-plus basis and is subject to a minimum commitment on behalf of Enovix. At any time during the first seven years of the Agreement’s term, we reserve the right to purchase the Gen2 Autoline 1 by repaying the equipment cost, net of depreciation, as defined in the Agreement net of depreciation and we shall also bear the early repayment penalty fee imposed by OCBC, if any. The term of the Agreement is for ten years and automatically extends for an additional five years. In addition, we entered into a cash deposit agreement with OCBC to collateralize the Term Loan. We will deposit sufficient collateral for the Term Loan. As of December 31, 2023, there is no outstanding balance of the Term Loan and no deposit was applied as a collateral for the Term Loan. See Note 16 “Variable Interest Entity” of the notes to our condensed consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Off-Balance Sheet Arrangements

As of December 31, 2023 and January 1, 2023, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. These estimates and assumptions include but are not limited to: depreciable lives for property and equipment, impairment of equipment, the valuation allowance on deferred tax assets, valuation for assets

58

Table of Contents

acquired and liabilities assumed in business combinations, valuation of goodwill and intangible assets, assumptions used in stock-based compensation and estimates to fair value the Private Placement Warrants.

A summary of our significant accounting policies are included Note 2 “Summary of Significant Accounting Policies” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. The following is a summary of some of the more critical accounting policies and estimates.

Revenue Recognition

We determine revenue recognition through the following five-step framework:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, we satisfy a performance obligation.

Product Revenue is recognized once we have satisfied the performance obligations and the customer obtains control of the goods at a point in time under the revenue recognition criteria. Product Revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the lithium-ion batteries or battery pack products transferred.

Service Revenue contracts generally include the design and development efforts to conform our existing battery technology with the customer’s required specifications. Consideration for Service Revenue contracts generally becomes payable when we meet specific contractual milestones, which include the design and approval of custom cells, procurement of fabrication tooling to meet the customer’s specifications, and fabrication and delivery of custom cells from our pilot production line. Within the existing Service Revenue contracts, the amount of consideration is fixed, the contracts contain a single performance obligation, and revenue is recognized at the point in time the final milestone is met (i.e., a final working prototype meeting all required specifications) and the customer obtains control of the deliverable.

Common Stock Warrant Liabilities

In connection with the Business Combination on July 14, 2021, we assumed outstanding warrants of 17.5 million to purchase Common Stock at a price of $11.50 per share. The warrants expire five years from the completion of the Business Combination and are exercisable starting December 5, 2021. The assumed warrants consisted of the Private Placement Warrants and the Public Warrants. The Public Warrants met the criteria for equity classification and the Private Placement Warrants are classified as liability. As of December 31, 2023, there were 6,000,000 outstanding shares of the Private Placement Warrants and no Public Warrants outstanding.

We use the Black-Scholes option pricing model to determine the fair value of the Private Placement Warrants as of December 31, 2023 with assumptions and estimates. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of our Common Stock, risk free interest rate, expected dividend yield, expected volatility of the price of the underlying Common Stock and a probability weighted expected term of the warrants. The most significant assumptions impacting the fair value of the Private Placement Warrants are the fair value of our common stock as of each re-measurement date and expected price volatility of our Common Stock, which included consideration of the most recent sales of the Public Warrants, expected price volatility of our Common Stock that is primarily based on historical observed volatility, and other additional factors that were deemed relevant. The initial liability recorded is adjusted for changes in the fair value at each reporting date and recorded in the Consolidated Statement of Operations. The Private Placement Warrants are subject to re-measurement at each balance sheet date until they are exercised or expired. For further information, see Note 4 “Fair Value Measurement” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Inventory

Inventory is stated at the lower of cost or net realizable value on a first-in and first-out basis. Inventory costs include direct materials, direct labor, and manufacturing overhead. Determining net realizable value of finished goods and work

59

Table of Contents

in process inventories involves projecting average selling prices. When the estimated net realizable values are below the manufacturing costs, a charge to cost of revenue is recorded. Currently, the Company is selling product below the manufacturing costs. Accordingly, the Company recorded an allowance to reduce certain inventories to net realizable value of approximately $1.3 million as of December 31, 2023.

The cost basis of the Company’s inventory is reduced for any products that are considered excess or obsolete based upon assumptions about future demand and market conditions. As of December 31, 2023, we did not have excess or obsolete inventory reserve. See Note 6 “Inventory” of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

Business Combinations

We account for our acquisition at fair value under the acquisition method of accounting. The assets acquired, liabilities assumed and non-controlling interests are valued at fair value at the acquisition date. The purchase price exceeding the fair values of the assets acquired and liabilities assumed is recognized as goodwill. The measurement of the fair value of assets acquired and liabilities assumed requires significant judgment. The valuation of intangible assets requires that we use valuation techniques, such as the income approach. The income approach includes the use of a discounted cash flow model to determine the fair value, which requires significant estimates and assumptions as to cash flows, such as revenue, expenses and other costs, royalty rate, long-term growth rates and discount rates. Intangible assets consist of customer relationships, developed technology and trade names and trademarks. We expense the acquisition-related costs in the period incurred.

Intangible Assets

We perform periodic reviews of significant finite-lived identified intangible assets and indefinite-lived goodwill to determine whether facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and forecasts for specific products. Periodically, we also evaluate the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Since we completed the Routejade Acquisition in October 2023, there were no subsequent events or changes in circumstances that may indicate an impairment to our intangible assets and goodwill as of December 31, 2023.

Stock-Based Compensation

Accounting for stock-based compensation is a critical accounting policy due to the broad-based equity awards provided to our employees at all levels and the use of equity awards as part of the strategy to retain employees as a result of change of control events. We issue stock-based compensation to employees and nonemployees generally in the form of stock options or restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”). We also offer employee stock purchase plan (the “2021 ESPP”) to our employees. For further information, see Note 14 “Stock-based Compensation” to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Stock-based compensation cost is measured at the grant date for all stock-based awards made to employees, consultants and directors based on the fair value of the award. We generally recognize stock-based compensation expense for stock options and RSUs on a straight-line basis over the service period of the awards, which is generally the vesting period. For PRSUs and ESPP shares, we use the graded vesting method to calculate the stock-based compensation expense. Forfeitures are accounted for when they occur.

We determine the grant date fair value of the equity awards as follows:

•The grant date fair value of RSUs and PRSUs is the last reported sales price of our Common Stock on the grant date.

•The fair value of shares to be purchased under the ESPP is based on the grant date fair value using the Black-Scholes option pricing model with several assumptions and estimates, including our stock price volatility, projected employee stock purchase contributions, and others.

60

Table of Contents

•The fair value of stock options is based on the grant date fair value using the Black-Scholes option pricing model with several significant assumptions and estimates, including the grant date fair value of Legacy Enovix common stock prior to the Business Combination, our stock price volatility, expected life and others.

Impairment of Long-Lived Assets

We evaluate the carrying value of long-lived assets when indicators of impairment exist. The carrying value of a long-lived asset is considered impaired when the estimated separately identifiable, undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value is determined based on the estimated discounted cash flows discounted. If we cease to develop and automate certain equipment or our equipment is underutilized or idled, the carrying value of such equipment may be lower than its estimated fair value, which could result in future impairment loss.

Recent Accounting Pronouncements

See section “Recently Adopted Accounting Pronouncements” of Note 2 “Summary of Significant Accounting Policies” within our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.