Good afternoon. My name is Bill Peterson, U.S. Cleantech analyst, and we're really pleased to have the team here from Enovix. We have Raj Talluri and Farhan Ahmad here with us today. Thanks for supporting our tech conference. First, starting out, maybe as part of the introductory question, maybe start off with where do you see the most demand for better batteries today? And how are recent discussions around AI, for example, shaping your view of the battery funnel? And you can, of course, introduce the company along with that.
Yeah, sure. Okay. Yeah, thank you, Bill. Thank you all for joining. Really my pleasure to be here. And before I get started, let me just say that, you know, we'll be making some forward-looking statements today. You know, for risks associated with that, please look at our formal filings with the 10-K and 10-Q, and so on. Okay, so where do I see the... First, let me say a little bit about Enovix. Enovix is a company where we are basically re-engineering and reimagining the lithium-ion battery. We have a very unique technology, where we are able to replace the graphite in the battery with 100% active silicon. That gives us much higher energy density while keeping other requirements like fast charge and cycle life and so on.
And it's been a company that's been there for about 16 years and, you know, went public in, like, few years ago. And I've been the CEO since, I guess it's, like, a year and a half or so now. Okay, as far as demand, where we are seeing. You know, it's, it, it's really amazing to see how much all the portable devices need better and better battery. I mean, I. You know, just to give you a feel for, and anecdotally, you know, I was just in a meeting with a, you know, investor just a little while ago, and he came in with this nice, fancy laptop, and he said he just got this laptop, and he was super excited by it, and all the apps can run on it.
As soon as he came to the room, he was looking for a way to charge it. He said it lasted 45 minutes before it ran out. So, I think what has been happening is the applications that we're running now have gotten more and more demanding in terms of, of, everything that they do. Even, even regular applications like Zoom, for example. When they first came, we used it, but now a simple thing like removing the background and putting a blur uses so much of AI, to do that, that all these applications have now suddenly been a lot more demanding. And maybe you guys saw the announcements from, Microsoft this morning and all the, you know, Copilot+ and AI PCs. Tremendous amount of demand. Smartphones, actually, now, when I see smartphone announcements... I was at Mobile World Congress.
Most of the smartphone companies had announcement that talk about AI at the edge. And again, this is not like some fancy use cases. This is just like running your ChatGPT on the phone or just running, you know, video editing or gaming, and so on. So those are we are seeing. We are seeing a lot of demand in, for our batteries in applications where there is a display, where there's heavy amount of compute, and when there is things like gaming and AI-based applications running. That's where we are seeing a lot of demand.
Yeah. So I guess maybe you're talking about the competitive landscape and more about your approach. You're taking an architectural approach, materials agnostic. You can use advanced, you know, new materials that can offer some really nice, energy density advantages. But I already got a couple questions here also coming, too. How does your approach vary or differ from those who may use, like, a silicon carbide or a silicon carbon approach that claim to be just, you know, plug and play? How do—Just compare and contrast your competitive, moats, if you will.
Yeah, yeah, absolutely. So, you know, when I say we are material agnostic, what that basically means is that in our architecture of how we make the batteries, where we you know, dice the anodes and the cathodes into really thin strips and stack them, and then put a constraint around them to stop the silicon from swelling, we can replace the anode by some other—Today, we use one form of silicon anode. It's 100% active silicon, but it's a silicon oxide of some kind. We've also used other forms of silicon, like compounds of silicon, silicon carbon compounds, for example. There is many different suppliers that are coming to us with different forms of silicon anodes, if you will, and also different cathodes. We...
Our intellectual property is in taking those kind of cathodes and anodes, finding the right electrolyte that matches with both of them, and putting them inside our unique architecture, so it stops it from swelling, and we get the energy density increase and the advantage. What I've seen in the market is people have kind of taken traditional graphite batteries, like graphite anode, and sprinkled 5%, 8%, kind of, some form of silicon carbon material, and, you put any more than that, the battery starts swelling. You know, in fact, we, last year, acquired a graphite battery company, because they had this coating, capacity that we needed to make our batteries. And we actually took some of this, silicon carbon-based powders, and we put them in the graphite battery ourselves to see how much we can put in.
We find that after 8%... after 5%, it starts swelling. At 10% it's just not even usable. So all these new materials we are finding, they improve, but very small percentage. And as far as I know, the only architecture that allows a 100% active silicon is the architecture we have.
Okay. So you guys made a lot of progress with the Malaysia site. Can you share the latest progress on site acceptance testing for each of the remaining zones at the Fab 2 facility, you know, since your call, you know, earlier in the month?
Yeah. You know, I'm really excited by the progress we've made in Malaysia. You know, we've got a lot of help from the government of Malaysia and the whole infrastructure there. It's been just a fantastic experience for us. You know, when we went to Malaysia last year, in about 100 days, the team there was able to take a site that's, you know, like, just a big shed, and turn it into this beautiful factory, where all our machines are already there. We hired close to 100 people, and it's, you know, clean room, dry rooms. It just come up so quickly. I mean, I'm amazed by the infrastructure that country has provided for building nice world-class manufacturing, and everybody who's gone there has been super excited.
One of our investors went there recently and came back with glowing reviews. And we're actually going to have an opening, a grand opening, like in August timeframe, with a lot of our investors and some customers visiting that. Where the factory is now, we've built these machines that actually make the battery in Asia, in different countries actually, and there's two kinds we built. One is the machines that what we call make up the Agility Line, which is a line that runs like 100 UPH, but produces different size batteries so that our customers can evaluate and test them. Then there's a High Volume Line, which actually produces, can produce up to 1,350 UPH, which is a really fast one that comes right after.
We decided to prioritize the Agility Line first because giving samples to the customers is the number one thing, 'cause it takes them some time to qualify these. All the machines that are needed for the Agility Line, we've done the factory acceptance testing, which means all the yields are where we need to be, throughput is where it needs to be, and we've shipped them. They're all in our factory in Malaysia now. And we're putting them all together, and you know, we expect to produce batteries in Q2, test them, get them to the right level of quality, and give it to customers in Q3.
The High Volume Line is right behind that, and the important point I wanna make is, the machines that are in the Agility Line, they're basically the exact same machines that will be in the HV- High Volume Line. They're just more of them and run faster.
Mm.
So getting, you know, the factory acceptance and site acceptance of the Agility Line pretty much guarantees that we can do the same thing with the high-volume line, and the high volume line is right behind the Agility Line. So I'm very comfortable with the manufacturing. This is something that a lot of times people have said, "Hey, can Raj, can you guys make these machines? You know, Fremont didn't work like how you we thought." Today, I feel like we totally understand the manufacturing, and it's in a good place.
Mm-hmm. So to be clear, you still remain on track to sample out of the Agility Line by within this quarter, and then you say soon after, well, I guess within a few months for the High Volume Line. Is that the right way to think about it?
Yeah. I mean, the High Volume Line samples will be based on what the customer dimensions is. What happens is, when we give samples from the Agility Line, they'll give us different shape of the battery they actually want and whatever the lead time that is to make that and which customer comes first, and that's what that is, but that will be sometime this year, too.
Yeah. Question coming online here. So, just maybe just to be clear, what is your core IP? Do you have-- What kind of patent protection do you have, and is there concerns that your technology could be basically stolen, for lack of a better word?
Yeah, we get this question a lot. The core IP consists of, I would say, two broad things, and we have a lot of patents. I mean, the company has been working on this technology for 16 years. We have over 400 patents, you know, in the various stages of some many granted, some being in application stage, and so on. And we continues to, you know, keep filing patents to, you know, build a strong intellectual property presence. The core IP is in, one, how we actually manufacture the batteries. You know, that is one aspect of it, which is our method of taking batteries and completely different from how people do it. The way people did batteries is to actually make them into jelly rolls or stack big sheets.
We cut them into really fine, thin strips and stack them together and then put the mechanical constraint on it, and there's some stuff like pre-lithiation and formation and so on that are also very specific to what we do. So our manufacturing of this kind of special batteries are core IP, and the IP not only translates to manufacturing of the battery, but designing the machines that actually manufacture the battery, which is actually the very important part. We have our suppliers build the machines that then build the battery. So we also own all the intellectual property of the machine itself, right? So I think that is the main one. And there's a lot of trade secrets here.
You know, we've been doing this for a while, so there's a lot of little nuances, how to do it, to get the yields up, to get the quality up. So that I think we feel pretty good about it. The other very important aspect of it is the... You know, no one has actually put 100% active silicon anode in a battery. So when you do that, how the cathode and the electrolyte and the anode, how to balance the entire cell, what kind of electrochemistry goes in there? We have, many, many PhDs in electrochemistry in our company that perfect that recipe, and that's other area we have a lot of IP in.
Yeah.
I would also add that in addition to the patents and the IP, there is a tremendous amount of know-how in everything that Raj described. When you have a manufacturing process with 40 steps, all of which custom, and you have invented things to do a certain way to manufacture the battery, then, you know, there is a lot of knowledge that goes into integrating the whole thing together. And because everything is custom, not much can easily leak out as well.
Mm-hmm. Okay. I guess moving to product qualification, so assuming you're gonna sample here later this quarter, and then from the high volume line soon after that, can you, I guess, speak to the different stages that occur between customer interest, followed by, you know, sampling, and then ultimately, when a customer launches their product, and maybe delineate between smartphone, wearables, or what other products you may be sampling.
Yeah, absolutely. You know, I, I've spent, you know, I guess over 20 years, building processors and memories for smartphones and, you know, wearables and IoT devices. Pretty much all those businesses, I'm intimately familiar with the qualification cycles and how to interact with customers and how that works. So I can give you a little bit more insight into how that typically works. Typically, what happens. Let's talk about smartphones. In smartphones, there are technology teams at our customer side, and these are technology teams that could be battery technologists, you know, camera technologists, processor technologists, memory technologists, and these companies have formed large tech teams. So the first thing that typically happens when we get a new battery into one of these markets is the customer first looks at what it takes to...
The battery guys first look at it and say, "Okay, let us take your battery and test it, and here are the series of tests we would do. What tests, you know, do they need to be like? How fast do they need to cycle? How fast do they need to charge? You know, what the different temperature performances and so on." And we get all that from the customers, and we've got all those test cases. And once we get those test cases, we validate that in our own factory, and we give it to them. When it passes the qualification stage of this technology, you know, kind of teams at the customer side, then typically, we get involved with the people who actually make the decisions for which smartphone it goes into.
These are the business unit people that actually have the decisions on it. And then you get the feedback on exact size of the battery and what shape it should be and where it should fit, which model it's gonna go into, which region will it go into, and so on. And then we have to optimize for that. So, as I said, you know, we expect to get batteries out of our Agility Line second quarter. We'll do some of this testing that our customers are gonna do, and then we give those tested batteries in third quarter. Around the same time, we will be getting from them what is the size of the battery that they want and which model of the phone it would be.
Then we need to make the battery to those specifications, and then they will test them in the phones, and then they go to manufacturing, into high volume production. So that whole time takes between nine and 12 months, as I've said before. So we are expecting to get to production in second half of next year, but a lot of work between now and then. But once we are in those phones, once the product has passed the gates of these technology platforms and it's in the market, the next models take much shorter, because now you're, you're a approved vendor, you've got the battery working, so we can then go much quickly from there.
Mm-hmm.
In IoT and compute, compute takes even longer, actually. Typically, it takes maybe more like two to three years. Some of the IoT markets can go much faster, because we may not have to completely re-engineer the shape of the battery. The batteries we have can fit as it is. But one thing I'll say is that if you look at the IoT market, if you look at the compute market, if you look at the smartphone market, some of the top makers, you know, like OPPO and Vivo and Xiaomi and Huawei and Lenovo and Honor, Samsung, Apple, they all also make IoT devices and compute devices.
So getting qualified for the phone is a huge thing because that is actually the toughest bar, and when you get a battery that qualifies that, the rest of the markets can also be addressed by the same technology.
Mm-hmm. I guess speaking of your roadmap, you know, you've talked about EX-1M, kind of, you know, more on the current time frame, followed by EX-2M with better energy density, other improvements. First of all, what are the key technical differences? What are you, you know, what are you doing internally to, to optimize the, the product? What do you have beyond that? But given that some of the advantages that EX-2M may have, do you see any people pushing out to just wait on that type of product?
Yeah. So firstly, we had a technology called EX-1, which our teams developed here in Fremont, which went up to 500 cycles, and it had energy density performance increase over existing batteries. But what I found out when I came as a CEO of this company was that that was... In addition to energy density, there are other parameters that are very important in launching into smartphones or IoT devices or compute, and two of them were: How many cycles can it go? So charge, discharge, charge, discharge, and you have to get that much higher than 500. Because particularly nowadays, you know, with all the AI coming in, people are having to charge their phone multiple times, you know, sometimes.
So we had to improve our cycle life, and we improved that now, and we also had to have the ability to charge really fast. So when I say charge really fast, I mean, a lot of the phones, you plug them in, and in, like, 15, 20 minutes or, like, five, 10 minutes, they go up to, like, enough charge that you can go through the rest of the day. So we had to build that capability. So the EX-1M builds on those two capabilities on top of having the energy density increase. So that's why customers are so excited, because the product we had before had the energy density but didn't hit these other parameters. So now that we got those, you know, the people are, people are excited about using this product. What EX-2M does is continue to advance on all those vectors.
So make the fast charge even faster, you know, quick, get there faster, and make the cycle life go even more, but more importantly, increase the energy density even higher. Now, I get asked the question: How do you get that? So most of it is based upon our ability to now harness newer cathodes, newer anodes, newer electrolytes, thinner separators. So we haven't pushed on all of those in our EX-1M because we first wanted to get it out with the ED increase we already had. Now, we're gonna catch up and push the envelope on, and get to the cutting edge on anodes and cathodes and electrolytes. That's how we believe the EX-2M will give us that, you know, 30% energy density increase over, you know, what's commercially available in the broad, you know, base of the graphite batteries. Super excited by that....
Then, of course, then we have EX-3M coming in right after that, where we can do even more advances on that. Typically, our view is that we probably will make a node change, if you think of these as a node, like in semiconductor, maybe once a year. But what we find our customers is that they launch new products every year, so they want to take the best technology we have, launch it in 2025. When 2M comes, they'll launch it in 2026. When 3M comes, I expect them to launch it in 2027, and so on. So it's not a case of waiting for the next best one, because there's always gonna be a better one a year after, you know?
Mm-hmm. I'm gonna pause and see if there's any questions from the audience before. We've got plenty online as well. All right, maybe I'll tie one online with another one. So you're, you know, you've kind of pivoted. Well, the company was talking about IoT before.
Mm
... smartphones, and then you came on and maybe more focused on smartphones-
Right
... versus IoT, but you just described how smartphones can drive IoT. But I guess, what drove that decision originally? And, you know, but then now with IoT sort of coming back in the fold, are you still on track? I think you've talked about potential revenue within this year.
Yeah, so, think about it this way. You know, what I found out when I came here is that lithium-ion batteries are very different from, let's say, AA batteries. There is no standard form factor to which you can make a battery. A pouch cell in every single electronic in a consumer device is custom-made to a particular shape. A battery that goes into watch is different in shape and size from a battery that goes into a phone, battery that goes into a laptop, battery that goes into AR/VR headset, battery that goes into an industrial device, versus a battery that goes into a medical device, for example. We had customers in all these aspects that had tested our batteries.
But what I felt was, to make a custom-sized battery, custom shaped battery, first for some of these IoT devices, would take us a lot longer to get to volume. Because each battery, each of those customer units only ships, you know, a few hundred thousand units. It doesn't ship in the millions. Whereas in the cell phones, each cell phone model ships minimum, you know, one to three million units. Some ship tens of millions. So in terms of return on investment, when you make a custom shape battery, going after units that take a lot of volume on one particular shape, is financially the right thing for the company.
Plus, what I also found is the requirements in performance, in terms of energy density, in terms of cycle life, in terms of fast charge, the bar is really set by the cell phone battery, and when you can hit that, the other ones are much easier, and you can take them along the way, because the same customers actually make those, too. So that was two reasons, and the third one is, I have great relationships with all the key people at cell phone space. I've been in this space for 20 years.
When I was able to visit them, they were able to give me precisely, exactly what kind of testing we need to do, what the requirements of the battery are, so that we were able to then use that to really tailor our technology, because the company had great technology, really make it a lot more customer-focused and really a lot more targeted, and I was able to get the R&D to really focus on that. So now, not only we have great technology, it's actually solving the precise customer problem. I think that was, you know, the third case. And the fourth one was, I always thought the place where we can get highest premium for our battery is places where higher energy density is most needed.
I felt products with bigger display, product with higher processing, product with more memory, are the areas where AI is gonna happen most fastest, and that's where most energy density is required. Because AI is consuming so much of it, I felt that's where we'll get the highest premium, and that's kind of what we are feeling validated by now.
Yeah. So last quarter, you announced a development agreement, you know, with the top 5 smartphone OEM, as well as the intent to sample to basically the, you know, the majority of the smartphone OEMs-
Yeah
... at this point. I guess, can you share what difference they-- differentiates the development agreement from the other customer engagements? Have any resources been committed as a result yet? And I guess, you know, tying into a question online, has this agreement led to a decrease in time to production? And, you know, I guess finally, when do you expect to announce more, if at all?
Yeah, I mean, let me put it this way: I think this is the progression of the natural progression of the interactions we've been having with the customers for a long time, right? We've been sampling them EX-1, and now we are making the EX-1M. We were able to share this data with them. What this agreement does is it formalizes how we are gonna work together. And it also provides the framework in which they're able to share a lot more information with us. They're able to share with us what their testing is, how it should operate at different temperatures, how fast should it charge, what the exact shape and size of the battery is, what smartphone are we targeting first, which technology node, and when.
So this is very, proprietary information for our customers, and to have an agreement with us, to actually share with us, really makes us shape and point our technology more specifically to the customer. Will it, you know, accelerate the time to market? It has the potential to, but the most important thing is batteries, when people put batteries in phones or other consumer devices, they have to be super safe, 100% safe. So no one... And we don't want them, and they don't want to make any shortcuts in the qualification, the testing. When we put them, they'll be great high-energy density batteries that are very safe and pass all the tests. So, and that takes the time it takes, and we got to make sure we don't cut any corners on that.
The other thing you got to remember is that when you're talking about increased cycle life, like 500 cycles to 800 cycles to 1,000 cycles, to run that many cycles in a phone takes months. So there is just a natural timeline of how long it takes to get a battery to be qualified, and that is something people need to realize, is that you have to charge and discharge, charge and discharge 1,000 times. That takes months, you know?
Mm-hmm. Makes sense. Kind of pivoting to manufacturing and scale, and I, you know, it's somewhat—it's gonna be dependent obviously on the demand, but how should we think about the pace in which, you know, you'll strategically bring on additional lines at Fab 2 and beyond over the next few years?
Yeah, so that's a great question. So what we have done in Malaysia is actually built a facility and facilitated it to hold up to four lines. You know, electricity, you know, dry room, all of that. We've put an Agility Line in there, and we're putting a High Volume Line, and that line can produce, you know, I'd say between nine and 10 million batteries based on the shape of the battery. Now we are sampling to our customers, and we're gonna get to different stages of qualification. As and when that qualification progresses, and as and when we bring more and more customers, we will start, you know, doing what we need to do to get to scale with other lines.
But we do have the ability to and the space to get that done. But we're gonna get that, and we're gonna pace that with the speed of the customer qualifications to make sure we have enough supply for all our customers.
Yeah. On the last call, you actually just, you know, shared that you have the ability to increase the throughput per line in the future, gave some sort of framework around the CapEx.
Yeah.
I guess, first of all, what have you done to kind of identify that sort of debottlenecking? What have you done to improve that? Will this have an impact on how fast you expand as well?
Yeah, we've done a few things. You know, firstly, as we have built out this line, and we got the machines, our R&D teams and our manufacturing teams have looked at it, and then they're like, "We can improve this part more, you know, we can improve this part more, and we can change this particular way of, you know, cutting electrodes to use a different method," and so on. Our goal in building the line one was really to make sure what we were doing in Fremont, all the learnings from there went in, so we could make that transition seamlessly and get to very high yields very quickly, which we are getting to.
I think with the next line, we now have the ability to cost reduce the cost of the first line because we can change some pieces of it and make them a lot more efficient and get them. That is kinda like, you know, improvement in manufacturing as we saw. The other thing we found is that the first line we built is a very flexible line. It can make very small batteries and make very big batteries so that we could address the needs of the IoTs, compute, and smartphones. Now, as we get closer to, you know, smartphones now, we can now reduce some of the flexibility we built in, so the line can actually run much faster. So our throughput goes up, and we give up some of the flexibility.
It'll still be flexible enough to address multiple things, but maybe not all the way from this small battery to that bigger battery. So we reduce the flexibility, so that improves the throughput. So those are the two big ones, improvement of the throughput, reduction of the cost, and that's what leads us to, to those better economics. So one thing I do wanna tell is that while we're making these changes, the technology changes we're making in going from EX-1M to EX-2M, where we are changing anodes and cathodes and separators, has very little impact on the machines. So the machines can actually cut EX-1M materials and also EX-2M materials, and we'll make sure as we work through it, to make sure the EX-3M materials also fit there.
The reason for that is now we can amortize these lines over multiple generations of our tech nodes, which actually doesn't happen in semiconductors. Semiconductors, every time you need a process node, you've gotta buy new machines. That is one advantage we have here, right?
Mm-hmm. Yep. I'm gonna pivot in a bit to some auto and then financial models, but I wanna pause and see if there's any questions before moving on. So wait for the microphone, please.
Thank you.
When you do the factory acceptance test and you're talking about high yields, is that at the 1,350 units per hour, or is it at a slower speed, and there will still be a learning curve when you put it on site?
We did it at 1,350 UPH, the actual-
Is that with all the modules together?
Zone at a time.
Zone-
Zone at a time. But, but the good news is that we were able to do it zone at a time because we still had our Fremont factory, where we produced rolls, we produced stacks, so we were able to feed them to each zone and run it at that speed.
Thank you.
Anything else? Okay, great. Wanna pivot to... Actually, one quick question that was sort of related to Routejade. First of all, how's that integration going? Second of all, what have you learned that you've been able to take internally, and I guess, how do you think that this can impact maybe lines down the line or maybe just a commercial opportunity more broadly in Korea?
Yeah, I mean, you know, it's been a. I'm very pleased with the acquisition. I think we were fortunate to find this company and get it done quickly. Fantastic team. I've been there. I met all the people. They. It's a very close collaboration. You know, again, for those of you who don't know too much about it, they've been making graphite batteries for 20 years. Pretty amazing. They did one of the very first coin cells on lithium-ion. They have deep understanding of how batteries are made. They have some unique technology that they're able to make very high-rate batteries, which means that not high energy density, but high rate.
That means the discharge rate can be that high, much higher, which means they're able to do things like drones and things like other moving things, because that need a lot more current coming out. So it's very complementary to the high-energy density batteries we make. So that market is very promising. And they sell to Korean military, and that's been a good business, high-margin business, and we hope to be able to expand that into other parts of the world. More important, well, another-
... Most importantly, the reason we acquired them was because of their coating capability, and I wanna spend a few minutes on coating. Coating is where we take a thin metal foil, and we coat cathode powder on top of that, or anode powder, and then we calender it. That means we roll it into really thin rolls, and then we bring it to our factories, and then we dice them. Now, before, what used to happen was, we had to buy the coated rolls from third parties, which would actually happen to be battery makers. They were not standard coaters. So they did it when we wanted them, how much ever they could, but they never could do it to our specifications and exactly what we want. Because, you know, we don't take coated rolls and just make rolled batteries.
We take coated rolls and cut them with lasers into really thin. So the quality of the roll, in terms of waviness of the roll and so on, had to be managed very carefully to get very high yields. This is something we didn't have control over last before. With Routejade now, we can precisely control how those are rolled, and now our yield has gone up much higher, as you can see on the factory acceptance test. Because now we are able to coat them and calender them to how we would use them in our special way of making batteries. So it's been a tremendous strategic acquisition that's really helped our yields and throughput.
The other thing is, I think we can grow the business more, because they've traditionally been only sold, selling into a small part of Korea and a few other markets. But with our sales teams, we are now finding new design wins for those batteries, and we are also now looking at making those batteries better by putting some amount of, you know, silicon in that. That's where we are finding out that you put any more than 5% and, you know, get even close to 8%-10%, it just swells up like crazy.
Yeah.
So it validated our value proposition, but at the same time, it gives us an opportunity to expand the base and gives us the ability to get higher, higher yields because we're now able to coat the rolls like how we want.
Yeah. Still a lot of questions come online, but I wanna talk about-
Yeah
... a little bit about the financial model.
Yeah.
I guess, how should we think about the path to positive gross margins in light of your cost-down opportunities, your premium pricing?
... and, you know, what's the progression to your target model?
Yeah, I'll take this one. So, the company is very focused on getting to profitability and getting to profitability with minimum amount of dilution possible. We are taking a very disciplined approach on financing, and we are focused on making sure that the cash that we have, we can make it last longer. So, you know, the cost reductions that you saw are a big part of that. We are targeting to get profitable sometime in 2026. And it'll require us to get to multiple lines. It'll require us to bring the cost down, and that requires volume purchases and multiple lines are needed.
We need to get premium pricing, which we expect to hit the target model, we need to get to EX-2M type of product, maybe or after that, because that's where we will get, like, enough of a differentiation to command as much pricing premium as is needed to get to our targeted profitability. The batteries that we are thinking in terms of 2026 time frame, we are looking at price points at $13-$14 because the batteries keep getting larger. And at that point, we expect pricing. We expect margins to be north of 50% cash gross margin. And the cost reduction will be dependent on getting to multiple lines.
And to get to that target model, we require about eight lines, but even at four, we get fairly close to that target model in terms of getting the cost down. And we have said that, you know, even with no additional capital raise, we can get to, we have runway into 2026. And the board did authorize a little bit of capital raise for using the ATM because, as you know, we have been making progress on the customer side. The customers are looking at our balance sheet closely, and they wanna see a long runway. And we wanted to say that, "Hey, we have a pretty long runway into 2026, and well into 2026." So we got a small authorization from the board.
We executed it in Q1, and in Q2, we also executed. But now I can tell you that we are done with it, and we don't expect to raise any more capital in any time soon. We have used all our authorization, and we don't have any plans whatsoever to raise any equity financing in the near term.
Okay.
And we think, like, you know, like, with financing well into 2026 and getting to profitability sometime over there, towards the late 2026 time frame, we think we are in a very good position and, you know, the team is executing very well.
Okay, so ATM did get used in the second quarter, but no plans, at least right now?
We are done.
Okay. Well, we are run out of time. There was a lot of questions, a lot of questions from the audience. Sorry I couldn't get to everything, but thanks for supporting our tech conference, and good luck to you.