Dragonfly Energy Holdings Corp. Q1 FY2026 earnings call

End Market Conditions

• The RV market continues to face meaningful headwinds, with Q1 2026 industry new retail sales down over 20% YoY and wholesale shipments also declining. Management sees early signs of market stabilization entering Q2 2026.
• The heavy-duty trucking market is seeing improving demand dynamics: rising diesel prices have shortened payback periods for Dragonfly's idle-reduction solutions, and the upcoming 2027 NOx emission engine transition is driving pre-buying of 2026 trucks and increasing demand for idle reduction technologies.

Commercial Milestones

• After the end of Q1, Stevens Transport, a top North American temperature-controlled freight carrier, placed Dragonfly's largest trucking order to date: a $3 million+ order for nearly 500 trucks, marking the start of a planned full transition of Stevens' 2,500-truck fleet to Dragonfly's platforms following successful 2024 pilot testing.
• The Stevens order spans Dragonfly's full heavy-duty product portfolio (dual-flow power pack, all-electric APU, inverter) across four OEM chassis, demonstrating the company's positioning as a full-service integrated energy solutions provider and increasing revenue per truck.
• OEM partnerships in the RV segment continue to show healthy adoption, with growth coming from both integration across additional model lineups and increased energy storage content per existing vehicle.

Cost Structure Optimization

• In Q1 2026, Dragonfly implemented a series of cost alignment actions including reduced DTC marketing spend, targeted workforce reductions, and 20% cash compensation cuts for executive and board members (converted to equity to align leadership with shareholder interests).
• Implemented actions have delivered $4.5 million in annualized adjusted expense reduction, with an additional $4 million in annualized reduction expected from rental space consolidation finalized in Q2 2026. Total annualized adjusted EBITDA improvement from these actions is expected to reach ~$9 million.

Technology and IP Progress

• In April 2026, Dragonfly received its first patent allowance from the Japan Patent Office for its powderized solid-state electrolyte and electroactive materials application, strengthening its global IP portfolio of nearly 90 issued or pending patents across battery technology, system integration, and software.
• The company was awarded a second-round $527,000 non-diluted Nevada Tech Hub grant to expand in-house cylindrical cell prototyping and testing capabilities, with the project running through Q2 2027.

For Q1 2026, Dragonfly Energy recorded total net sales of $9.7 million. The OEM product segment contributed $5.8 million in net sales, accounting for approximately 59.8% of total net sales. The Direct-to-Consumer (DTC) product segment contributed $3.7 million in net sales, accounting for approximately 38.1% of total net sales. Gross margin for the quarter was 17.6%, impacted by lower sales volume amid the soft RV market. Total operating expenses were $7.4 million, down from $9.8 million year-over-year due to cost reduction initiatives. Net loss attributable to common shareholders was $7.7 million (64 cents per diluted share), and adjusted EBITDA was negative $4.6 million.

• For Q2 2026, management expects net sales of approximately $13.2 million, representing 36% sequential growth driven by the start of revenue recognition from the Stevens Transport trucking order.
• For Q2 2026, management forecasts an adjusted EBITDA loss of approximately $1.9 million, a $2.7 million sequential improvement driven by higher revenue volume and full flow-through of Q1 2026 cost reduction actions.
• Dragonfly maintains its long-term target of achieving positive adjusted EBITDA at an annualized net sales run rate of approximately $70 million.
• Management views 2026 as a pivotal year for the company, with expected continued acceleration of commercial momentum in the heavy-duty trucking segment.

Forward-looking statements provided on the call are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projected expectations, including softness in the RV end market, sustained constraints on fleet capital spending, delays in commercial adoption of new trucking technologies, and general macroeconomic conditions that impact consumer and commercial demand. These risk factors are outlined in more detail in the company's press release and periodic SEC filings.

Q: Can you elaborate on the pipeline of heavy-duty trucking opportunities similar to the Stevens Transport order, what the size of the addressable market is, and how far along other potential customer conversations are?

A: The pipeline of opportunities is very strong. Over the past three years of market entry, Dragonfly has iterated its products, conducted extensive fleet trials, and built relationships with OEMs and fleets, and a growing share of these tested fleets are now placing orders. Industry-wide truck orders are up 200% for the second straight month, as fleets that deferred purchases during the freight downturn are now moving forward with new orders, and they are adding tested technologies like Dragonfly's to their new trucks. The total annual addressable market is approximately 125,000 new sleeper cab trucks (half of the 250,000 total new heavy-duty trucks built annually) that require driver comfort and idle reduction solutions.

Q: What is the update on dry electrode and solid-state development efforts, given profitability and balance sheet preservation are top priorities, and are any external partnerships or capital structures being explored for these programs?

A: The top corporate priority remains growing revenue, optimizing cost structure, and returning to profitability, so only minimal spending is allocated to advance dry electrode and solid-state development and continue building out the company's IP portfolio. The company is actively developing partnerships in the background, as there is strong market interest in non-Chinese domestic battery technology, and Dragonfly continues to build out its domestic supply chain for these programs. Management expects to be able to announce meaningful partnership updates in the future.