Dragonfly Energy Holdings Corp. Q3 FY2024 earnings call

• Commitment to pioneering innovative lithium-ion battery technology despite macroeconomic headwinds, with expansion into heavy-duty trucking, oil and gas, and other sectors.
• Strategic partnerships with Stryten Energy and progress with the Rhyolite Ridge lithium mine by Ioneer.
• Introduction of Dragonfly Intelligence technology and new smart Battle Born battery packs, with the latter set to be released to the public in the fourth quarter of 2024.
• Progress in dry electrode cell manufacturing and plans for North American expansion via a Canadian subsidiary.
• Third quarter financial results: Net sales of $12.7 million (down from $15.9 million in Q3 2023), gross profit of $2.9 million (down from $4.6 million in Q3 2023), operating expenses of $8.9 million (down from $10.5 million in Q3 2023), net loss of $6.8 million.

Direct-to-Consumer (DTC): Net sales were $5.2 million in the third quarter of 2024, down from $10.3 million in the third quarter of 2023. OEM: OEM revenue increased from $5.6 million in the second quarter of 2024 to $7.4 million in the third quarter of 2024, a 10% increase, driven by a recovering RV market and the new smart battery product line. Heavy-Duty Trucking: Recognized first meaningful trucking revenue in the third quarter, with anticipated growth in the fourth quarter, including trailer solutions for liftgate with large beverage distribution chains. Oil and Gas: Achieved a milestone with the first off-grid methane reclamation power system demonstration, garnering positive feedback from clients.

• Expect fourth quarter 2024 revenues in the range of $13.5 million to $14.0 million, representing ~8% sequential growth at the midpoint.
• Anticipate slightly lower RV OEM revenue due to seasonality but growth in direct-to-consumer markets and trucking.
• Gross margin in the fourth quarter expected to be in the range of 22% to 25%.
• Operating expenses in the fourth quarter of 2024 expected to be in the range of $5.5 million to $6.5 million.

• Macroeconomic headwinds impacting consumer discretionary spending, which affected DTC markets.
• Challenges in scaling dry electrode cell manufacturing despite cash management efforts.
• Dependence on partnerships and market adoption in new sectors like heavy-duty trucking and oil and gas.

Q: Could you share your thoughts on how Dragonfly's dry electrode technology compares to Tesla's?

A: Denis Phares stated Dragonfly's dry electrode process is scalable, as it grows the film directly on the foil unlike Tesla's extrusion method which requires an extra lamination step.

Q: Can you give more detail on the non-dilutive capital for half-gigawatt-hour production and how close you are to securing it?

A: Denis Phares mentioned setting up a Canadian subsidiary and advanced negotiations with Canadian provinces for financing.

Q: How is the auxiliary power segment performing and what's the growth potential?

A: Wade Seaburg discussed market acceptance, fleet trials, and expansion of programs, with growth driven by market recovery and additional applications within the transportation market.

Q: What's the market potential for methane reduction and impact of EPA administration?

A: Wade Seaburg noted positive feedback from clients regardless of administration and ongoing sales negotiations with packaging companies.

Q: Any timing issues with Q4 OpEx step down?

A: Denis Phares mentioned continued focus on cash conservation and frugality as the company remains in cash management mode.