Dragonfly Energy Holdings Corp. Q3 FY2025 earnings call

Financial Performance - Net sales grew 26% to $16 million, gross margin expanded 710 basis points to nearly 30%, and adjusted EBITDA improved by $3.3 million. ### Balance Sheet - Successfully raised approximately $90 million in gross proceeds through equity offerings and finalized a debt restructuring, reducing total debt principal to $19 million with lower interest rates and extended covenants. ### Business Execution - Strong OEM partnerships in the RV space with companies like Airstream, Awaken RV, and Ember RV; progress in heavy-duty trucking with pilot programs leading to production orders; expanded intellectual property portfolio with two new patents; and received a $300,000 grant for domestic manufacturing modernization.

In the third quarter, net sales grew 26% year-over-year to $16 million. The OEM segment saw net sales increase 44% year-over-year, with healthy adoption trends in the RV market as existing partners integrated solutions across more model lineups and new manufacturers were added. The DTC segment had net sales of $5 million compared to $5.2 million, impacted by macroeconomic headwinds. The OEM segment contributed significantly to the overall revenue growth, while the DTC segment faced challenges due to external factors.

Q4 Outlook - Cautious due to seasonality in the OEM segment (slowest quarter) and uncertain DTC segment affected by macroeconomic headwinds and government shutdown impact on industrial customers. ### 2026 Expectations - Confident in growth, particularly in the trucking segment as it expands from a low base, expecting normalization and expansion into new segments like oil and gas.

• Macroeconomic uncertainty impacting the DTC segment due to low consumer sentiment and government shutdown effects on industrial customers. - Trade volatility posing potential risks despite domestic manufacturing advantages. - Ongoing risks related to economic conditions affecting the company's long-term viability as previously influenced customer decisions.

Q: Focus on Q4 guidance, which segment is dragging revenue?

A: Denis Phares stated Q4 is typically the slowest quarter for OEM due to seasonality, and the DTC segment has low visibility because of macroeconomic conditions and government shutdown impact on industrial customers.

Q: Early feedback from customers post-debt restructuring?

A: Denis Phares mentioned conversations have shifted from the company's balance sheet to focusing on the product's ROI, driver comfort, and efficiency, with more focus on moving forward with projects.

Q: Thoughts on EBITDA breakeven and growth areas?

A: Denis Phares noted volume is needed to reach EBITDA breakeven, with gross margins and efficiency improved; top priority is increasing volume for profitability, and while making progress on dry electrode and other technologies, profitability is the immediate focus.

Q: Government shutdown impact abated?

A: Denis Phares said it's early to tell, but some customers were unable to proceed with projects due to the shutdown, which was considered in the Q4 guidance.