Dragonfly Energy Q1 2025 Earnings Call Transcript

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May 15, 2025

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Dragonfly Energy's First Quarter twenty twenty five Earnings Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. I'll now turn the call over to Simon Teravieczki, Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. I appreciate you joining us for today's call. Joining me here are Jeff and Dennis Farris, Dragonfly Energy's Chairman, President and Chief Executive Officer and Wade Sieberg, Chief Commercial Officer. Before turning the call over to Dennis, I'd like to make a brief statement regarding forward looking remarks. During this call, the company will be making forward looking remarks within the meaning of The United States Private Securities Litigation Reform Act of 1995 based on current expectations.

Speaker 1

These forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward looking statements. Actual results may differ due to factors noted in the press release and in periodic SEC filings. Management will reference some non GAAP financial measures. Reconciliations to the nearest corresponding GAAP measures can be found in today's release on the company's website. Please note that all comparisons will be discussed today on a year over year basis unless otherwise noted.

Speaker 1

I'll now turn the call over to Dennis.

Speaker 2

Thank you, Simon, and thank you everyone for joining us today. We were pleased to report revenue growth of 6.8 in the first quarter, exceeding our guidance and representing our second consecutive quarter of year over year revenue growth. While the RV market continues to navigate headwinds, adoption trends within our product portfolio remain healthy. This is evidenced by the 10.8% growth in net sales from OEM customers, driven by broader integration of our solutions at the factory level across more models with within existing partnerships. Partially offsetting OEM growth was a slight decline in net sales from DTC customers as the segment continues to be impacted by macroeconomic pressures.

Speaker 2

While we remain committed to serving our valued DTC customers, we expect long term growth to be led by our OEM channel as we expand our strategic partnerships and accelerate our product development and rollout efforts. As we discussed in the prior quarter, we successfully launched our corporate optimization program to more precisely focus the organization and its priorities on near term revenue generating opportunities, accelerating our path to growth and profitability. This strategic initiative is already delivering tangible operational improvements, strengthening our ability to execute across key target markets. As part of this initiative, we reallocated resources to prioritize product development with near term revenue potential. A strong early example of this strategy is the accelerated launch of our battle born dual flow power pack for the heavy duty trucking market, a practical hybrid electrification solution.

Speaker 2

In today's uncertain market, we believe many fleets are looking to adopt partial electrification strategies that balance short term cost control with long term sustainability and performance goals. As Wade will discuss shortly, the dual flow solution is already gaining traction among fleets navigating these operational challenges. The optimization program has also enabled us to implement several targeted enhancements across our manufacturing operations, resulting in increased production capacity without the need for any additional headcount. Under the leadership of doctor Vic Singh, our chief operating officer, we have increased the use of automation on our product lines, standardized user interfaces, and implemented new accountability frameworks. Along with recent consolidation into our new 400,000 square foot facility, these operational enhancements are strengthening our ability to serve and grow our diverse customer base while maintaining our focus on cost discipline and organizational efficiency.

Speaker 2

Ultimately, we believe our corporate optimization initiative combined with our stronger financial position following our recent debt restructuring and capital raise provides the foundation for continued revenue growth as we drive towards profitability. Turning to the broader market environment, I'd like to highlight Dragonfly Energy's unique strategic position amid today's volatile tariff landscape. First and foremost, our growing US based production capabilities provide a significant competitive advantage over companies relying on overseas production. We have been investing in domestic battery production since 2012, well before onshoring became a national priority. While we continue to source certain components such as battery cells from overseas suppliers, we complete all final assembly at our Nevada based facility, an approach that not only strengthens quality control, but also reflects our long standing commitment to US manufacturing.

Speaker 2

We view this strategy as an interim step on our path to becoming a complete domestic producer, including production of our own lithium iron phosphate cells. We believe our domestic operations allow us to add substantial value through design, assembly, testing and integration, resulting in greater flexibility, improved quality assurance and key cost advantages. With a larger portion of our cost structure tied to U. S. Labor and overhead rather than imported finished goods, we are better positioned to absorb tariff related impacts.

Speaker 2

In addition, our vertically integrated approach lays the groundwork for further domestic expansion. We've accelerated efforts to transition select components to North American based sourcing where feasible, and we remain committed to expanding our domestic footprint as market conditions and regulatory factors evolve. In addition, Dragonfly Energy holds a lithium supply agreement with Pioneer positioning us ahead of the curve as The US works to localize critical mineral supply chain. Located in Nevada, Pioneer's rhyolite rich lithium boron project offers both logistical and strategic advantages. With lithium development recognized as a priority industry by state leadership, we believe this agreement supports our long term vision of building a more sustainable and resilient US based battery ecosystem as we continue working towards full vertical integration of our battery manufacturing within the state.

Speaker 2

In direct response to tariff developments, we've taken proactive steps to help mitigate potential impacts. First, we've leveraged our position as a long term strategic customer to secure favorable terms with key foreign suppliers, helping to offset potential cost increases. And second, we're working closely with our customers to manage pricing adjustments and ensure minimal disruption to their operations. We continue to evaluate additional strategies to enhance our flexibility and efficiency as the trade environment evolves. Looking ahead, we believe our domestic manufacturing foundation combined with our strategic diversification into adjacent markets positions Dragonfly Energy to navigate this volatile environment while continuing to deliver high quality energy storage solutions to a diverse and growing customer base.

Speaker 2

Now I would like to pass the call to Wade, who will discuss trends we are seeing in the heavy duty trucking industry.

Speaker 1

Thank you, Dennis. I'd like

Speaker 3

to take a few moments to provide an update on what we are seeing across the heavy duty trucking market, where we continue to engage with both fleet owners and OEMs offering unique value add solutions. In response to market uncertainty, fleets are increasingly focused on extending the life of existing trucks and unlocking real world operational savings today, not years down the line. We believe our product portfolio is uniquely positioned to meet those needs, delivering cost effective, practical solutions that reduce idling, lower maintenance burdens and improve system reliability across aging fleets. This trend plays directly into Dragonfly Energy's strengths. Grounded in years of experience developing advanced battery technology and power system innovations, we believe our deep technical expertise, combined with a flexible U.

Speaker 3

S.-based manufacturing foundation, enables us to deliver practical application specific solutions that align with the evolving needs of our customers. A strong example of this approach is our Battleborn Dual Flow PowerPack, a practical and cost effective solution for fleets seeking idle reduction benefits without the complexity or cost of an all electric APU system. Many fleets are either dealing with the common failures of diesel APUs or simply aren't ready to transition to a fully electric system for climate control. With capital expenditures under pressure, the dual flow addresses these challenges head on by powering hotel loads, such as HVAC, lighting and electronics, during rest periods allowing fleets to significantly reduce engine idling. In addition to fuel savings, the system also helps extend the life of the truck starter batteries by isolating and supporting parasitic loads.

Speaker 3

With seamless integration into both new and existing vehicles, a compact footprint and an ROI typically under one year, the dual flow is gaining traction as a smart, dependable option for fleets looking to cut operating costs without overhauling their current systems. The strength of our value proposition is reflected in the increased fleet engagement we've seen over the past few months, marking meaningful progress as we work to establish ourselves within the heavy duty trucking industry. At recent trucking industry events, we believe Dragonfly Energy Solutions have emerged as a priority for attendees, with many high profile potential customers making Dragonfly their first point of contact. As battery related challenges and fleet operations become more visible, our solutions are being recognized as practical, high impact tools that deliver immediate cost and performance benefits. Even in a challenging market, operators see that our offerings are purpose built to address their real world needs supported by compelling ROI.

Speaker 3

We believe Dragonfly Energy is uniquely positioned to capitalize on this industry shift. Our ability to deliver practical lithium powered solutions that directly address fleet needs continues to resonate with operators navigating today's cost and reliability challenges. We're excited to work alongside our partners to drive meaningful performance improvements and support their long term sustainability and operational goals. I'll now turn the call back to Dennis.

Speaker 2

Thank you, Wade. I will now provide a review of our first quarter results as well as a more detailed outlook for the second quarter of twenty twenty five. First quarter net sales of $13,400,000 were up 6.8% led by continued strength from our OEM customers. OEM net sales increased 10.8% to $8,100,000 as we continue to see healthy adoption trends within our product portfolio. Net sales growth was partially offset by the DTC segment, which saw revenue decline approximately 3.6% to $5,000,000 reflecting continued macroeconomic uncertainty.

Speaker 2

First quarter gross profit increased 12.5% to $3,900,000 and gross margin increased 500 basis points to 29.4%, primarily driven by higher volume. Operating expenses were $9,800,000 above the $8,900,000 reported in the prior year period, primarily due to expenses related to patent litigation and the February capital raise, both of which are one time in nature. Net loss was $6,800,000 with a diluted loss per share of $0.93 compared to net loss of $10,400,000 with a diluted loss per share of $1.55 Adjusted EBITDA was negative $3,600,000 compared to negative $5,200,000 Looking ahead to the second quarter, we expect net sales to be approximately $14,800,000 representing year over year growth of 12% and we expect an adjusted EBITDA loss of approximately $3,500,000 To conclude, we believe Dragonfly Energy is well positioned to navigate ongoing market volatility while continuing to deliver high quality energy storage solutions to our diverse customer base. By prioritizing near term revenue opportunities, optimizing our manufacturing operations and reinforcing our financial position, we have established a clear path toward profitability and sustained growth. Our domestic manufacturing capabilities provide a strategic advantage in today's complex environment, allowing us to respond quickly and effectively to evolving customer needs.

Speaker 2

We look forward to building on this momentum throughout 2025 and driving long term value for our shareholders. Operator, we would like to open the call to questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2.

Operator

If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from George Gianarriquez from Canaccord Securities. Your line is already open.

Speaker 4

Hi. Good afternoon, everyone. Thank you for taking my questions.

Speaker 1

I'd like to

Speaker 4

ask about the commercialization opportunities around your dry electrode manufacturing technology? Any updates there, any developments would, any news, would be very much appreciated. Thank you.

Speaker 2

Hi, George. Thank you for your question. I will say that development is ongoing. We're obviously still working on developing the the scale up equipment, and we do have interest from commercial partners. I would like to say that, you know, we've been devoting a significant amount of resource to that, but that is not the case in the last quarter.

Speaker 2

We've we've been really focusing on near term revenue and getting back to profitability. That's been our number one priority. But we're certainly continuing, progress on the dry electrode, as fast as we can.

Speaker 4

Thank you. And maybe a follow-up. I just like to focus on, the balance sheet and profitability. First, just thoughts on the cash balance as reported as of the March. And also, I saw your EBITDA guidance for the quarter, and I would have expected a little bit of an improvement sequentially based on the increased revenue.

Speaker 4

Just any thoughts on those two Thank you.

Speaker 2

Sure. Well, in terms of the cash balance, we did just complete the preferred equity deal. It came in two tranches. One, the initial tranche came in the first quarter and the second tranche came in the second quarter. And we do feel that we have the cash, to get us back to profitability at the end of the year.

Speaker 2

We in terms of the cash at the end of the first quarter, we did pay down some AP. So we feel very good about the fact that we're able to catch up on on some of those expenses. And, you know, moving forward, we have been really focused on investing in near term revenue growth, and that's really where the spend has gone. Although we had some reductions in our research and development, the fact that we were able to accelerate the development of a, highly anticipated heavy duty trucking product like the dual flow was entirely made possible by, the enhanced investments that we made in this near term opportunity. You know?

Speaker 2

And I can't stress enough that the importance for us to get back to cash flow positive, to get back to profitability is gonna open up a lot of doors in terms of our of our ability to to really produce in, not just the the dry electrode, but also getting back to the solid state development, which we're all still very excited about. But, you know, the frustration in in the recent history is the fact that we've been having to focus on cash flow and our ability to really, give ourselves some breathing room, especially through this preferred equity deal and some debt relief that we got, is gonna make all this possible.

Speaker 4

Thank you. And maybe just the follow-up on the EBITDA in q two that you're talking a loss of of of 3 and a half million, I think it was. But why

Speaker 3

isn't there a little bit

Speaker 4

of a sequential improvement in q two based on the fact that revenues are ramping a little bit? Thanks.

Speaker 2

That's that's because of some continued investment in in, as I said, the the near term product development and the new products that we have coming out and driving the business that is going to get us back to the, you know, to the to the profitability to the profitability that we expect. The other thing that I have to say is we're also incorporating the effect of tariffs. And that's been difficult to predict. It's obviously something that's been in flux. But given the fact that we have been allowing the situation to evolve and allowing ourselves to plan for that accordingly and try to hold on as best as we can to the very important customers that we have, we've been able to incorporate that in the the projections for this quarter.

Speaker 4

Thank you.

Speaker 2

Thank you, George.

Operator

There are no further questions at this time. I would hand over the call to Dennis Farris for closing remarks. Please go ahead.

Speaker 2

Thank you for everyone joining us today. We look forward to sharing additional details with all of you in the coming quarters. Have a great day.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

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Key Takeaways

  • Dragonfly Energy reported first quarter net sales of $13.4 million, up 6.8% year over year, with OEM revenues rising 10.8% while DTC sales declined 3.6%, and they guide Q2 net sales of ~$14.8 million (12% growth).
  • First quarter gross profit increased 12.5% to $3.9 million with a 500 basis-point margin expansion to 29.4%; net loss narrowed to $6.8 million (-$0.93/share) and adjusted EBITDA loss improved to $3.6 million.
  • The company’s corporate optimization program has reallocated resources toward near-term revenue, accelerated the launch of the Battleborn Dual Flow PowerPack, and driven manufacturing gains through automation and a new 400,000 sq ft facility.
  • Dragonfly’s US-based production and vertical integration strategy—including final assembly in Nevada and a lithium supply deal with Pioneer—positions it to absorb tariffs and work toward domestic cell manufacturing.
  • In the heavy-duty trucking market, the Battleborn Dual Flow PowerPack is gaining traction by reducing idling, lowering maintenance, and delivering under-one-year ROI, driving increased fleet and OEM engagement.
A.I. generated. May contain errors.
Earnings Conference Call
Dragonfly Energy Q1 2025
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