Dragonfly Energy Holdings Corp. Q2 FY2025 earnings call

• Strong second quarter net sales growth of 23% to $16.2 million, marking the third consecutive quarter of year-over-year revenue growth.
• OEM net sales increased over 50% year-over-year, driven by OEMs integrating solutions at the factory level across more model lineups.
• DTC segment sales were $5.9 million, down from $6.5 million due to ongoing macroeconomic uncertainty.
• Executing corporate optimization initiatives, reallocating resources to immediate revenue-generating opportunities, e.g., partnership with Airstream for an integrated energy storage system in 2026 models.
• Domestic manufacturing capabilities provide strategic advantage in volatile trade environment, allowing greater control over quality, cost, and production timelines.
• Recently granted a patent for nonflammable all-solid-state battery program, reinforcing leadership in advanced battery technology.
• Made progress in capital structure: exchanged remaining preferred shares to common stock and completed a $5.5 million common stock public offering in July.

Net sales grew 23% to $16.2 million for the second quarter. The OEM segment saw net sales increase more than 50% year-over-year, amounting to $10.1 million. The DTC segment had net sales of $5.9 million, down from $6.5 million due to macroeconomic uncertainty. Gross profit rose 45.4% to $4.6 million with gross margin expanding 430 basis points to 28.3%. Operating expenses totaled $7.9 million, down from $9.9 million, and net loss was $7.0 million or $0.58 per share versus a net loss of $13.6 million or $2.02 per share. Adjusted EBITDA improved to negative $2.2 million from negative $6.2 million.

• Anticipate Q3 net sales of $15.9 million, representing approximately 25% year-over-year growth, and adjusted EBITDA of negative $2.7 million.
• Expect sequential improvement in Q4 revenue, combining continued improvement in the RV industry and contributions from new markets.

• Volatile trade environment and tariffs, which have been managed but remain a factor.
• Macro-economic uncertainty impacting DTC segment sales.

Q: When do you expect some of the pilot programs that you're in to eventually result in have a P&L impact?

A: Right now, within the heavy-duty trucking, we're really seeing a lot of performance out of our pilot systems and are in a position where we're waiting for fleets to move on new truck orders. Realistically, we're probably looking at the first half of next year.

Q: How should we sort of think about the P&L impact of tariffs over the next several quarters?

A: The tariff impact has been fluid. We've managed it through negotiating better inventory pricing, passing on costs to customers, and using mechanisms like bonded warehousing. We're also able to onshore most components and have optimized component sourcing.

Q: Should we, in theory, expect sequential improvement into Q4? And how are you tracking relative to your aspiration of being EBITDA breakeven in the fourth quarter?

A: A lot of that depends on expanded pilots. We expect the ramp to begin with expanded pilots and aftermarket business. The sequential improvement is going to combine continued improvement in the RV industry and contributions from new markets.

Q: As it relates to the patent that you were recently awarded, can you just sort of talk a little bit about what technology was behind that?

A: That particular patent had to do with how you prepare the feedstock for solid-state batteries, particularly the solid-state electrolyte, how the composite material is mixed between the ceramics, the polymers, the salts. Very critical to how you actually deposit the layers using the dry electrode process.