Q4 2024 Dragonfly Energy Holdings Corp Earnings Call

Unknown Executive: Good afternoon, ladies and gentlemen, and welcome to the Dragonfly Energy's fourth quarter earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Good afternoon, ladies and gentlemen, and welcome to the check in flight Energy's fourth quarter earnings call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

At any time during this call can be quite immediate assistance. Please press star zero for the operator.

Unknown Executive: This call is being recorded on Monday, March 24, 2025.

Speaker Change: Call is being recorded on Monday March 24, 2025, and I would now like to turn the conference over to Mr. Simon Sorry, Jetski of Investor Relations. Thank you. Please go ahead.

Simon Soreyevsky: And I would now like to turn the conference over to Mr. Simon Soreyevsky of Investor Relations. Thank you. Please go ahead. Thank you, operator, and good afternoon, everyone. We appreciate you joining us for today's call.

Simon Jetski: Thank you operator, and good afternoon, everyone.

Simon Sorry: And you joining us for today's call.

Simon Soreyevsky: Joining me here are Dr. Denis Phares, Dragonfly Energy's Chairman, President, and Chief Executive Officer, and Wade Seaburg, Chief Commercial Officer.

Simon Sorry: Joining me here I got to Dennis first Dragonfly Energy's, Chairman, President and Chief Executive Officer, and Wade Siebert Chief Commercial officer.

Simon Soreyevsky: Before I turn the call over to Denis, I'd like to make a brief statement regarding forward-looking remarks. During this call, the company will be making forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, based on current expectations. 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 a periodic SEC filing.

Simon Sorry: Before I turn the call over to Dennis I'd like to make a brief statement regarding forward looking remarks.

Speaker Change: During this call the company will be making forward looking statements within the meaning.

Speaker Change: Private Securities Litigation Reform Act of 1995 patent applications.

Speaker Change: These forward looking statements are subject to risks uncertainties and other factors could cause actual results to differ materially from those expressed or implied by such forward looking statements.

Speaker Change: Actual results may differ due to factors noted in the press release and in our periodic SEC filings.

Simon Soreyevsky: Management will reference some non-GAAP bans or measures. Reconciliations to the nearest corresponding gap measure can be found for its release on the company's website. Please note that all comparisons will be discussed today on a year-over-year basis, unless otherwise noted.

Andrew: Andrew I'll reference some non-GAAP measures.

Reconciliations to the nearest corresponding GAAP measure can be found say so at least on the company's website.

Andrew: Please note that all comparisons will be discussed today on a year over year basis, unless otherwise noted.

Denis Phares: And I'll turn the call over to Denis. Thank you, Simon, and thank you everyone for joining us for today's call. Before discussing our fourth quarter results, I'd like to highlight key developments in early 2025 that I believe will strengthen our position for continued growth and accelerate our path towards achieving positive adjusted EBITDA by year end. First, we successfully negotiated a debt restructuring with our lenders, significantly enhancing our financial flexibility. This milestone eliminates all covenants except for a monthly liquidity requirement through June 30, 2026, and extends the debt maturity to October 2027. Importantly, this action will reclassify our debt as long-term from its current short-term designation on the balance sheet.

Vince: I'll turn the call over to Vince.

Vince: Thank you Simon and thank you everyone for joining us for today's call.

Vince: Before discussing our fourth quarter results I'd like to highlight key developments in early 2025 that I believe will strengthen our position for continued growth and accelerate our path towards achieving positive adjusted EBITDA by year end.

Vince: First we successfully negotiated a debt restructuring with our lenders significantly enhancing our financial flexibility.

Vince: This milestone eliminates all covenants, except for a monthly liquidity requirement through June 32026, and extends the debt maturity to October 2027 importantly.

Vince: Importantly, this action will reclassify our debt is long term from its current short term designation on the balance sheet.

Denis Phares: Additionally, we strengthened our balance sheet by raising additional capital through a preferred stock offer. Together, we believe these actions provide Dragonfly Energy with the capital and financial flexibility needed to capitalize on our significant growth opportunities and position the company for a much stronger financial standing by year end. We also have recently launched a corporate optimization program designed to focus our resources on near-term revenue generating opportunities and accelerate our path to profitability. This initiative is being led in collaboration with Provence, a nationally recognized advisory firm specializing in strategic, operational, and financial advisory services.

Vince: Additionally, we strengthened our balance sheet by raising additional capital through our preferred stock offering.

Vince: Together, we believe these actions provide dragonfly energy with the capital and financial flexibility needed to capitalize on our significant growth opportunities and position the company for a much stronger financial standing by yearend.

Vince: We also have recently launched a corporate optimization program designed to focus our resources on near term revenue generating opportunities and accelerate our path to profitability.

Vince: This initiative is being led in collaboration with province, and nationally recognized advisory firm specializing in strategic operational and financial Advisory services.

Denis Phares: Through this effort, we are temporarily shifting investments from longer-term R&D efforts to near-term revenue-driving actions, such as new product development, allowing us to capitalize on momentum in the RV, trucking, and industrials markets while improving operational efficiency and positioning the company for sustained profitability.

Vince: Through this effort we are temporarily shifting investments from longer term R&D efforts to near term revenue driving actions, such as new product development, allowing us to capitalize on momentum in the RV trucking and industrials markets, while improving operational efficiency and positioning the company for sustained profitability.

Denis Phares: As part of this strategic effort, we have also promoted Dr. Vik Singh to Chief Operating Officer. With a background in material science, chemical engineering, and large-scale research initiatives, Dr. Singh has played a pivotal role in optimizing company-wide structures, improving efficiencies, and streamlining manufacturing processes. His expertise in structuring teams and driving operational excellence makes him well qualified to oversee the execution of this program and drive broader efficiencies across the country.

Vince: As part of this strategic effort. We have also promoted doctor Vixen to Chief operating officer.

Vince: With a background in materials science chemical engineering, and large scale research initiatives doctors seeing has played a pivotal role in optimizing companywide structures, improving efficiencies and streamlining manufacturing processes.

Vince: His expertise in structuring teams and driving operational excellence makes him well qualified to oversee the execution of this program and drive broader efficiencies across the company.

Denis Phares: We believe this strategic undertaking will enable us to prioritize near-term revenue generation, strengthen relationships with existing and potential partners, and establish the financial foundation necessary to support our long-term vision, including continued advancements in our dry electric technology.

Vince: We believe the strategic undertaking will enable us to prioritize near term revenue generation strengthened relationships with existing and potential partners and establish the financial foundation necessary to support our long term vision, including continued advancements in our dry electrode technology.

Denis Phares: Moving on to the fourth quarter, I am pleased to report that total revenue grew 17% driven by significant increase in sales to our OEM customers. This strong result marked our first quarterly year-over-year revenue growth in the last two years. While the overall RV market continues to face challenging conditions, we have made substantial progress in expanding our industry footprint through both OEM growth and key strategic partnerships. In addition to continued expansion with our OEM customers, we have significantly strengthened our distribution network by partnering with Keystone Automotive, NTP Stagg, Seawide, and Meijer Distributions. These partnerships provide RV and marine dealers with easier access to our products, expanding our potential customer reach, and strengthening our market presence.

Vince: Moving onto the fourth quarter I am pleased to report that total revenue grew 17% driven by significant increase in sales to our OEM customers.

Vince: This strong result marked our first quarterly year over year revenue growth in the last two years.

While the overall RV market continues to face challenging conditions, we have made substantial progress in expanding our industry footprint through both OEM growth and key strategic partnerships.

Vince: In addition to continued expansion with our OEM customers, we have significantly strengthened our distribution network by partnering with Keystone automotive N T. P stag see wide admire distribute it.

Vince: These partnerships provide RV and marine dealers with easier access to our products expanding our potential customer reach and strengthening our market presence.

Denis Phares: Looking at near-term trends in the RV market, we are seeing encouraging signs of increased adoption as manufacturers reintegrate add-on and premium products into their units at the factory level. This marks an important reversal from prior years when cost-cutting measures led some manufacturers to decontent or opt for lower-cost alternatives. This positive shift is particularly notable given the ongoing challenges in the broader RV market and suggests a renewed focus on delivering higher value offerings to consumers.

Vince: Looking at near term trends in the RV market, we are seeing encouraging signs of increased adoption as manufacturers reintegrate add on and premium products into their units at the factory level.

Vince: This marks an important reversal from prior years when cost cutting measures, let some manufacturers to D content or opt for lower cost alternatives.

Vince: This positive shift is particularly notable given the ongoing challenges in the broader RV market and suggests a renewed focus on delivering higher value offerings to consumers throughout.

Denis Phares: Throughout the year, we have made significant strides in diversifying our end markets and revenue streams beyond the RV sector, with a key focus on expanding our presence in the large and growing truck industry. We believe our partnerships with fleets such as Stevens Transport and Highway Transport serve as strong validations of Dragonfly Energy's exceptional quality and reliability. These fleets conducted rigorous testing processes, allowing us to demonstrate the real-world cost benefits and durability of our solution. Following successful evaluations, these operators have committed to fleet-wide implementation of our batteries, reinforcing the strength of our value proposition. Over the past two years, we have strategically positioned ourselves for this growth opportunity by developing tailored offerings, navigating stringent industry regulations, and conducting initial trials with select fleet operators.

Vince: Throughout the year, we have made significant strides in diversifying our end markets and revenue streams beyond the RV sector with a key focus on expanding our presence in the large and growing trucking industry. We believe our partnerships with fleets such as Stephen's transport and highway transport service strong validation of Dragonfly Energy's except.

Vince: <unk> quality and reliability.

Vince: These fleets conducted rigorous testing processes, allowing us to demonstrate the real world cost benefits and durability of our solutions.

Vince: Following successful evaluations. These operators have committed to fleet wide implementation of our batteries reinforcing the strength of our value proposition.

Vince: Over the past two years, we have strategically positioned ourselves for this growth opportunity like developing tailored offerings navigating stringent industry regulations and conducting initial trials with select fleet operators.

Denis Phares: Today our partners are moving beyond the testing phase into commercial rollouts with a clear vision toward full-scale fleet integration. With a strengthened financial foundation, we believe we are well positioned to capitalize on this momentum and support our partners as they transition toward implementation.

Vince: Our partners are moving beyond the testing phase into commercial Rollouts with a clear vision towards full scale fleet integration with a strengthened financial foundation. We believe we are well positioned to capitalize on this momentum and support our partners as they transition towards implementation.

Denis Phares: Given increasing order activity in this sector, we expect significant revenue contributions in 2025, driven by deeper penetration with existing partners and new business operations.

Vince: Even increasing order activity in this sector, we expect significant revenue contributions in 2025, driven by deeper penetration with existing partners and new business opportunities.

Denis Phares: We have also gained potential exposure to additional markets through our brand licensing and contract manufacturing agreement with Strident Energy, which provides access to the military, automotive, marine, power sports, lawn and garden, and golf cart sector. This collaboration further diversifies our customer base and revenue opportunities.

Vince: We have also gained potential exposure to additional markets through our brand licensing and contract manufacturing agreement with straightened energy, which provides access to the military automotive marine power sports lawn and garden and golf cart sectors.

Vince: This collaboration further diversifies, our customer base and revenue opportunities.

Denis Phares: We continue to work closely with Stryton's team to refine our approach and accelerate market entry. As we expand into new verticals, we will apply the same strategic discipline that has fueled our success in the RV and trucking industries, ensuring steady and sustainable growth across our diversified portfolio.

Vince: We continue to work closely with straightens team to refine our approach and accelerate market entry as we expand into new verticals. We will apply the same strategic discipline that has fueled our success in the RV and trucking industries, ensuring steady and sustainable growth across our diversified portfolio.

Vince: With that I will turn the call over to Wade who will provide a deeper look at the opportunities ahead, and our heavy duty trucking sector, which we expect to be a significant growth drivers this year.

Wade Seaburg: With that, I'll turn the call over to Wade, who will provide a deeper look at the opportunities ahead in our heavy-duty trucking sector, which we expect to be a significant growth driver this year. Thank you, Denis. And thank you, everyone, for joining. I'd like to highlight the significant opportunities ahead for Dragonfly Energy, particularly in the heavy-duty trucking market. Heavy-duty trucking represents a substantial addressable market opportunity for Dragonfly Energy, and we're seeing strong momentum in our commercial expansion now that fleets have resumed new vehicle orders following a multi-year capacity correction. Our solutions are designed to tackle key challenges faced by both drivers and fleet operators.

Wade Siebert: Thank you Dennis and thank you everyone for joining us today.

Speaker Change: I'd like to highlight the significant opportunities ahead for dragonfly energy, particularly in the heavy duty trucking market heavy duty trucking represents a substantial addressable market opportunity for dragonfly energy and we're seeing strong momentum in our commercial expansion now that fleets have resumed new vehicle orders following a multi year capacity.

Correction.

Speaker Change: Our solutions are designed to tackle key challenges faced by both drivers and fleet operators.

Wade Seaburg: For drivers, our technology provides reliable power for climate control and hotel loads during mandatory rest. ensuring a more comfortable and rest. This directly reduces the risks associated with driver fatigue, enhancing safety while also improving driver satisfaction and retention, a critical factor in an industry facing ongoing workforce shortages. We estimate 40 to 50% of heavy-duty trucking operations currently do not utilize an auxiliary power unit, instead relying on engine idling during rest This practice leads to significant operational and efficiency. Including shortened engine life, increased downtime for more frequent repairs, and higher battery replacement costs due to excessive jump starts.

Speaker Change: Drivers our technology provides a reliable power for climate control and hotel loads during mandatory rest periods, ensuring a more comfortable and restful sleep.

Speaker Change: This directly reduces the risks associated with driver fatigue, enhancing safety, while also improving driver satisfaction and retention a critical factor in an industry facing ongoing workforce shortages.

Speaker Change: We estimate $40 to 50% of heavy duty trucking operations currently do not utilize an auxiliary power unit instead relying on engine idling during <unk> periods. This practice leads to significant operational inefficiencies, including short an engine life increased downtime for more frequent repairs and <unk>.

Speaker Change: Higher battery replacement costs due to access a jumpstarts these challenges directly impact the bottom line for operators, who have historically accepted idling as an unavoidable cost of doing business.

Wade Seaburg: These challenges directly impact the bottom line for operators who have historically accepted idling as an unavoidable cost. We believe Dragonfly Energy's innovative lithium-powered change this paradigm entirely. Our systems provide reliable auxiliary power for appliances and electronics, eliminating unnecessary engine idle. They operate silently, produce zero emissions, and require minimal maintenance, offering a cost-effective Sustainable Feedback from customers deploying our solutions has consistently demonstrated substantial improvements in idle time, with many fleets eliminating idling entirely during the mandatory 10-hour rest period. In other cases, we have reduced idling from the mid 30% range to low single. By implementing our technology, fleet operators can significantly lower fuel expenses, reduce maintenance costs, and increase uptime, all while ensuring the driver comfort and rest.

Speaker Change: We believe dragonfly energies innovative lithium powered solutions change this paradigm entirely our systems provide a reliable auxiliary power for appliances and electronics, eliminating unnecessary engine idling.

They operate silently produced zero emissions and require minimal maintenance offering a cost effective and sustainable alternatives.

Speaker Change: Feedback from customers deploying our solutions has consistently demonstrated substantial improvements in idle time with many fleece, eliminating idling entirely during the mandatory 10 hour rest period.

Speaker Change: In other cases, we have reduced idling from the mid 30% range to low single digits by implementing our technology fleet operators can significantly lower fuel expenses reduced maintenance costs and increase uptime, all while ensuring the driver comfort and Ross.

Wade Seaburg: As Denis noted, we have been strategically laying the groundwork in this industry for over two years, taking a measured approach that includes initial testing and pilot programs with engaged fleet operators. These partnerships have validated the value proposition of our solutions, and we are now working with select operators to advance into commercial Our approach to the trucking industry follows the same proven strategy that has driven our success in the RV market. Rather than taking a traditional top-down approach, targeting major manufacturers first, Dragonfly Energy engages directly with end-users, lead operators who experience the challenges of idling firsthand.

Speaker Change: As Dennis noted we have been strategically laying the groundwork in this industry for over two years, taking a measured approach that includes initial testing and pilot programs with engaged fleet operators. These partnerships has validated the value proposition of our solutions and we are now working with select operators to advance.

Speaker Change: And two commercial Rollouts.

Speaker Change: Our approach to the trucking industry follows the same proven strategy that has driven our success in the RV market.

Speaker Change: Rather than taking a traditional top down approach targeting major manufacturers first dragonfly energy engages directly with end users fleet operators, who experienced the challenges of idling firsthand.

Wade Seaburg: These operators recognize the economic and operational benefits of our solutions. they become advocates for standardization across driving momentum with truck OEM. This approach has already proven successful in the RV sector, where we have transitioned from an aftermarket solution to an increasingly standard OEM feature. By following this model, each satisfied fleet operator becomes a catalyst for broader adoption throughout the trucking As you can tell, I'm very excited about the tremendous opportunity in a large and growing heavy-duty truck. We feel strongly that Dragonfly Energy has the right solution for the industry.

Speaker Change: As these operators recognize the economic and operational benefits of our solutions they become advocates for standardization across the industry driving momentum with truck Oems.

Speaker Change: This approach has already proven successful in the RV sector, where we have transitioned from an aftermarket solution to an increasingly standard OEM feature.

Speaker Change: By following this model each satisfy fleet, operator becomes a catalyst for broader adoption throughout the trucking ecosystem.

Speaker Change: As you can tell I'm very excited about the tremendous opportunity in the large and growing heavy duty trucking sector. We feel strongly that dragonfly energy has the right solution for the industry. Our customers are at an important commercial inflection point, which we believe will drive meaningful revenue growth in this market in 2025, I will now turn the call.

Wade Seaburg: Our customers are at an important commercial inflection point, which we believe will drive meaningful revenue growth in this market in 2025.

Denis Phares: I will now turn the call back to Denis to review our financial.

Speaker Change: Paul back to Dennis to review our financial results.

Denis Phares: Thank you, Wade. I will now provide a review of our fourth quarter as well as a more detailed outlook for the first quarter of 2025. Net sales increased 17% to $12.2 million, led by 61% growth in OEM sales, partially offset by a decline in DTC sales. OEM sales increased to $6.2 million from $3.9 million, driven by increased adoption of current products as we ramped up partnerships and acquired new business. We have also seen solid uptake of new products from our OEM. Our DTC segment generated net sales of $5.7 million, down from $6.6 million, reflecting ongoing macroeconomic pressure.

Dennis: Thank you Wade.

Dennis: I will now provide a review of our fourth quarter as well as a more detailed outlook for the first quarter of 2025.

Dennis: Net sales increased 17% to $12 $2 million led by 61% growth in OEM sales, partially offset by a decline in DTC sales.

Dennis: <unk> sales increased to $6 2 million from $3 $9 million driven by increased adoption of current products as we've ramped up partnerships and acquired new business.

Dennis: We have also seen solid uptake of new products from our OEM customers.

Our DTC segment generated net sales of $5 $7 million down from $6 $6 million, reflecting ongoing macroeconomic pressures.

Denis Phares: Gross profit rose 12.5% to $2.5 million, with a gross profit margin of 20.8%. Gross margin declined 80 basis points year over year due to higher material costs and a mixed shift to lower margin OEM customers. Operating expenses were $6.3 million compared to $5.4 million in the fourth quarter of 2023 due to higher GNA and R&D costs. We also incurred expenses related to the consolidation into our new 400,000 square foot facility, a strategic relocation that is expected to drive long-term operational. Net loss was $9.8 million, representing a diluted net loss of $1.39 per share. This compares to net income of $3.3 million with diluted earnings per share of $0.50.

Dennis: Gross profit rose 12, 5% to $2 $5 million with a gross profit margin of 28%.

Dennis: Gross margin declined 80 basis points year over year due to higher material costs, and a mix shift to lower margin OEM customers.

Dennis: Operating expenses were $6 3 million compared to $5 4 million in the fourth quarter of 2023 due to higher G&A and R&D costs.

Dennis: We also incurred expenses related to the consolidation into our new 400000 square foot facility.

Dennis: Strategic relocation that is expected to drive long term operational efficiencies.

Dennis: Net loss was $9 8 million, representing a diluted net loss of $1 39 per share.

Dennis: This compares to net income of $3 $3 million with diluted earnings per share of <unk> 50.

Denis Phares: Adjusted EBITDA was negative $2.3 million, below the negative $1.8 million reported last year.

Dennis: Adjusted EBITDA was negative $2 $3 million below the negative $1 8 million reported last year.

Denis Phares: Moving on to our outlook. For the first quarter of 2025, we expect net sales to be approximately $13.3 million and adjusted EBITDA to be approximately negative $3.8 million. For the full year, we expect to achieve positive adjusted EBITDA by the fourth quarter, led by a resumption of revenue growth and our corporate optimization program.

Dennis: Moving onto our outlook for the first quarter of 2025, we expect net sales to be approximately $13 3 million and adjusted EBITDA to be approximately negative $3 $8 million.

Dennis: For the full year, we expect to achieve positive adjusted EBITDA by the fourth quarter led by a resumption of revenue growth and our corporate optimization program.

Denis Phares: I'd like to conclude by reaffirming our confidence and excitement for 2025. The financial initiatives we implemented earlier this year, combined with our sharp operational focus on near-term revenue growth and profitability, have significantly strengthened our financial and operating position. At the same time, the momentum in our diversification efforts, particularly in trucking and other industrial markets, reinforces the strong growth opportunities ahead. With these strategic advancements, we believe Dragonfly Energy is well positioned to fully capitalize on its potential and drive meaningful value for our shareholders.

Dennis: I'd like to conclude by reaffirming our confidence and excitement for 2025, the financial initiatives. We implemented earlier this year combined with our sharp operational focus on near term revenue growth and profitability have significantly strengthened our financial and operating positions.

Dennis: At the same time the momentum in our diversification efforts, particularly in trucking and other industrials markets reinforces the strong growth opportunities ahead.

Dennis: With these strategic advancements, we believe dragonfly energy is well positioned to fully capitalize on its potential and drive meaningful value for our shareholders.

Unknown Executive: Operator, we would like to open the call to questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question.

Speaker Change: Operator, we would like to open the call to questions.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad, you would hear a pump that Johanna Speedways and should you wish to cancel your request. Please press star followed by that do you feel are you seeing your speaker phone just lift the handset.

Speaker Change: <unk> one moment. Please for your first question.

Speaker Change: Yeah.

George Gianarikas: Your first question comes from the line of George Gianarikas from Category Genuity. Please go ahead. Hi, good afternoon. Thank you for taking my question. Um, I George, I'd like to.

Speaker Change: Your first question comes from the line of George <unk> from Canaccord Genuity. Please go ahead.

George: Hi, good afternoon, and thank you for taking my questions.

Speaker Change: Okay.

George: Hi, George I would like to vote.

George Gianarikas: Hi, I'd like to focus on your target of EBITDA profitability. by the fourth quarter. Just to be clear, does that include the entire fourth quarter at some point in the We expect the fourth quarter to be the entire fourth quarter. and just that he puts out positives. Assuming that implies some revenue growth, sequential revenue growth from the first quarter to the fourth quarter.

Speaker Change: Hi, I'd like to focus on your target of EBITDA profitability.

By the fourth quarter just to be clear does that include the entire fourth quarter at some point in the fourth quarter.

Speaker Change: We expect the fourth quarter to be the entire fourth quarter to be adjusted EBITDA positive.

Speaker Change: And.

Speaker Change: Assuming that implies some.

Speaker Change: Revenue growth sequential revenue growth from the first quarter the fourth quarter.

Denis Phares: What are the contingency plans in case the market doesn't pick up as you expect, some of the programs get pushed out? wanted you to give us some sort of confidence interval around getting to that number. Thanks for that question, George. It's not, this is not sort of a, you know, we have to hit that number. We're just looking at our projections, given the new opportunities we have in the trucking and industrials markets, as well as the growth that we see in the RV market, especially within our existing customer base. And it's not something that, you know, we've said, well, we need contingency plans.

Speaker Change: What are the contingency plans in case the.

Speaker Change: The market doesn't pick up as you expect and some of the programs get pushed out.

Speaker Change: I'm wondering if you could give us some sort of confidence interval around getting to that number.

Speaker Change: Yeah.

George: Thanks for that question George.

George: It's not this is not sort of a we have to hit that number we're just looking at our projections.

George: Given the new opportunities, we have in the trucking and industrials markets as well as the growth that we see in the RV market, especially within our existing customer base and.

George: And it's not something that we said well we need contingency plans.

George Gianarikas: It's something that we're expecting is going to happen because of the pipeline that we see. Okay.

George: Something that we're expecting is is going to happen because of the pipeline that we see.

George: Okay.

George Gianarikas: Maybe to switch gears to the dry. manufacturing business. I'm curious if you can give us any update, any progress there, customer, potential customer discussions, strategic discussions, etc.

George: Maybe to switch gears to <unk>.

George: The dry.

George: Manufacturing business I'm curious if you can give us any update as to any progress there customer potential customer discussion strategic discussions et cetera.

Denis Phares: Yeah, thanks for that question, George. It's obviously something that is always front of mind. This is obviously something that we believe to be a significant value driver for this company. And so it's something that we continue to spend a lot of our efforts on. But what we have done is really focus on the electrode tapes themselves, that is the anode and the cathode. So the pivot that we've been making lately is from trying to produce these cells in-house to really focusing on customers that can take the electrodes and produce the cells themselves. We've got a lot of data in-house on the mechanical properties of the cells and actually the chemical properties and electrochemical properties at the coin cell and single layer pouch cell level.

Speaker Change: Yeah. Thanks for that question George It's obviously something that is that is always front of mind. This is obviously something that we believe to be a significant.

Speaker Change: Value driver for this company and so it's it's something that we continue to spend a lot of our efforts on.

Speaker Change: But what we have done is really focus on the.

Speaker Change: The electro taste tapes themselves. So that is the anode and cathode. So the pivot that we've been making lately is from trying to produce the cells in house.

Speaker Change: To really focusing on customers that can take the electrodes and produce the cells themselves. We've got a lot of data in house on the.

Speaker Change: The mechanical properties of the cells and actually the chemical properties and electrochemical properties at the coin cell and single air pouch cell level, but because we don't have the in house capabilities too.

Denis Phares: But because we don't have the in-house capabilities to produce the larger scale format cells, we're really focusing on customers that can take what we have and produce cells from those tapes that we're able to give them. Consequently, we're able to refocus some of our resources on the near term revenue drivers that we feel is critical for this business in terms of revenue growth and market viability.

Speaker Change: Produce the the larger scale format cells.

Speaker Change: We're really focusing on <unk>.

Speaker Change: Customers that can take what we have.

Speaker Change: And produced cells from those.

Speaker Change: From those tapes that we're able to give them. Consequently, we were able to refocus some of our.

Speaker Change: Resources on the near term revenue drivers that we feel is critical for this business too.

Speaker Change: In terms of revenue growth and market viability.

Denis Phares: Any last question for me just in terms of potential tariff impact? Have you fully baked that into your profitability guidance for the fourth quarter? Yeah, we have. The tariff impact, as it turns out, we have a lot of non-tariffable costs in terms of, you know, our labor and our overhead and some of the components that we don't source overseas. So, I would say from a percentage standpoint, the tariff effect on us is lower than it is generally in the industry, but it is something that, you know, obviously we've had to deal with, go to our upstream suppliers and work with them, go to our downstream customers.

Speaker Change: Maybe last question for me just in terms of potential tariff impact have you fully baked that into your profitability guidance for the fourth quarter.

Speaker Change: Yes, we have the tariff impact as it turns out we have.

Speaker Change: A lot of non terrible.

Speaker Change: Costs in terms of our labor and our overhead and some of the components that we don't source overseas. So I would say from a percentage standpoint, the tariff effect on us is lower than it is generally in the industry, but it is something that we.

Speaker Change: Obviously, we've we've had to deal with go to our upstream suppliers and work with them to our downstream customers.

Denis Phares: So, it is something that, you know, we have been, we've had to bake into our projections, but obviously it's something that we're able to work around, and fortunately, we don't feel it's a huge impact on our business comparative to, compared to the rest of the industry.

Speaker Change: It is something that we have been we've had to bake into our projections, but obviously, it's something that we're able to work around and Fortunately, we don't feel it's a huge impact on our business comparative to compared to the rest of the industry.

George Gianarikas: Thank you. Thank you, George. Thank you.

Speaker Change: Thank you.

George: Thank you George.

Chip Moore: And your next question comes from the line of Chip Moore from Roth Capital Partner. Please go ahead. Thanks for taking the question.

Speaker Change: Thank you and your next question comes from the line of Chip Moore from Roth Capital Partners. Please go ahead.

Chip Moore: Thanks for taking the question.

Denis Phares: Denis, I was wondering, maybe it sounds like you feel pretty good about the revenue funnel this year, what you're seeing in terms of potential opportunities, maybe just a little bit, if you could expand on, I guess, particularly in RV, around re-contenting and some of the trends in that market, particularly with some of the uncertainties, just more broadly in terms of macro, what you're seeing there. Yeah, sure. Thanks. Thanks, Jim. Wade, you there? I can't hear you. Yeah, sorry, Chip. Can you hear me? All right. Yeah, yep, I hear you now. Okay, great. So what we're seeing, sorry, I had my line on mute there.

Chip Moore: So I was wondering maybe it sounds like you feel pretty good about the revenue funnel. This year, what you're seeing in terms of potential opportunities, maybe just a little bit if you could expand on I guess, particularly in RV.

Chip Moore: Re content and some of the trends in that market.

Chip Moore: Maybe with some of the uncertainties just just more broadly in terms of macro what youre seeing there.

Chip Moore: Yeah sure Thanks, Jeff.

Lane: This is lane I'll take that question.

Lane: Wade you there I can't hear you.

Wade Siebert: Yes, sorry can you hear me all right.

Wade Siebert: Yes, yes, I hear you know okay, great. So what we're seeing I'm, sorry, I had my my.

Wade Siebert: Line on mute there.

Wade Seaburg: So what we're seeing from a overall macro perspective is still in line with what the RVIA is putting out there, which is, you know, a modest, you know, 5 to 10% growth across the industry. But what we're seeing from our window into the market is wider adoption of our products across our core customers' platforms. So they're putting lithium products onto more models, and they're – and models that we were on already, they're expanding those platforms. And then we're also seeing people wanting – OEMs specifically wanting to get a little bit more maybe sophisticated with their approach to energy storage and calling us because we've done it more than anybody else in that industry specifically.

Wade Siebert: So what we're seeing from an overall macro perspective is still in line with what the RV IAA is is putting out there, which as you know.

Wade Siebert: A modest 5% to 10% growth across the industry, but what we're seeing from our our window into the market is wider adoption of our products across our core customers platforms.

Wade Siebert: So, they're putting lithium products onto more models and theyre expand and models that we were on already they are expanding those platforms and then we're also seeing.

Wade Siebert: People wanted to Oems, specifically wanted to get a little bit more.

Wade Siebert: Maybe sophisticated with their approach to energy storage and calling us.

Wade Siebert: Because we've done it more than anybody else in that industry, specifically so that's.

Denis Phares: So that's, you know, it's exciting because that we're seeing some of that content come back into the OEMs, and we're seeing them take ownership over that customer experience, and that's what our products really enable them to do. Got it. So safe to assume it sounds like you think you can comfortably outperform that forecast with Yes, with some of the friends and then for yep. Right, right.

Wade Siebert: It's exciting because that we're seeing some of that content come back into the Oems and we're seeing them take ownership over that customer experience and that's what our products really enable them to do.

Wade Siebert: Got it.

Wade Siebert: Safe to assume it sounds like you think you can comfortably outperform that.

Wade Siebert: Forecast.

Wade Siebert: Yes, with some of the.

Wade Siebert: Therefore.

Wade Siebert: Right right.

Chip Moore: And then to layer on top of that, I think I heard you say, around auxiliary power, in particular, that, you know, we should look for a larger contribution this year, I know, it's a small base, but in terms of materiality, there any any way to think about how much that could contribute, and I imagine that some of the same dynamics around, you know, some of that some of the uncertainties out there, as well. You know, it's exciting that the trucking market is starting to come back just a little bit, right? We're seeing some rates start to come back up.

Wade Siebert: Great.

Wade Siebert: To layer on top of that I think I heard you say.

Wade Siebert: Around auxiliary power in particular.

Wade Siebert: We should look for a larger contribution this year I know, it's a small base, but in terms of materiality there any any way to think about how much that could contribute.

Wade Siebert: I imagine that some of the same dynamics around some of the some of the uncertainties out there as.

Wade Siebert: As well.

Wade Siebert: It's exciting that the trucking market is starting to come back just a little bit right. It's we're seeing some rates start to come back up we.

Wade Seaburg: We attended TMC, the big trucking maintenance conference, this last couple weeks, and it was higher attended than it had been in years past, which was very encouraging. As far as estimates there, it's really indicative on our customers on how they decide to roll those out commercially as to what that growth looks like. But the engagement that we're having and the number of trials and the number of engagements going from one or two trucks to 100 trucks to then 1,000 trucks is happening. And that part is extremely encouraging because the market is extremely fragmented. There are thousands of operators out there with a couple hundred trucks in their organization, and they really take the lead from the larger organizations that have R&D and engineering teams to be able to evaluate new technologies within the transportation market.

Wade Siebert: Attended TMC.

Wade Siebert: Big trucking maintenance conference. This last couple of weeks and it was higher attended than it had been in years past, which was very encouraging.

Wade Siebert: As far as you know.

Wade Siebert: Estimates there its really indicative on our customers on how they decided to roll those out commercially.

Wade Siebert: As to what that growth looks like but the engagement that we're having in the number of trials and the number of.

Wade Siebert: Of engagements coming from it from one or two trucks to a 100 trucks to then 1000 trucks is happening and that part is extremely encouraging because.

Wade Siebert: The market is extremely fragmented there are thousands of operators out there with a couple of hundred trucks in their organization and they really take the lead.

Wade Siebert: The larger organizations that have R&D and engineering teams to be able to evaluate new technologies within the transportation market. So as we knock down some of these leaders and bring them into into the dragonfly.

Wade Seaburg: So, as we knock down some of these leaders and bring them into the Dragonfly customer base, it will speak volumes for the industry. Great.

Wade Siebert: Customer base, it will speak volumes for the industry.

Wade Siebert: Great.

Chip Moore: And maybe if I could just get one last one in just to straighten a licensing deal, just any update there and and you know, how to think about, you know, maybe new new market areas that you might go after there as well. Thanks. Yeah, thank you, Chip. The Striton relationship has been pretty strong and active since we signed the deal last last July. And honestly, it really has focused on product development, on establishing our internal efficiencies, and making sure that, you know, that we're able to produce the products that they're interested in, because there is a contract manufacturing component to that deal as well.

And maybe if I could just get one last one in just.

Speaker Change: The straightened.

Speaker Change: Licensing deal just any update there and how to think about.

Speaker Change: Maybe new new market areas.

Speaker Change: Go after there as well thanks.

Speaker Change: Yes. Thank you chip the straightened relationship has been pretty strong and active since we signed the deal.

Speaker Change: Last last July and honestly it really has focused on product development on establishing our internal efficiencies and making sure that that we're able to produce.

Speaker Change: Produce the products that they are interested in because there is a contract manufacturing component to that deal as well, but it does take some time and we're not expecting anything.

Denis Phares: But it does take some time. And we're not expecting anything meaningful in the short term. This is something that we'll really start to look at in terms of meaningful revenue, I think, starting, you know, 2026, if not later in 2025. But it's not something that we're really projecting to be meaningful this year. But it is, you know, an active relationship.

Speaker Change: Meaningful in the short term.

Speaker Change: This is something that will really start to look at add in terms of meaningful revenue I think starting.

Speaker Change: 2026, if not later in 2025, but it's not something that we're really.

Speaker Change: Projecting to be meaningful this year, but it is.

Speaker Change: An active relationship and since they are different markets, we're talking about things like golf cart and lawn and garden that we haven't been really involved in in the past there is some product development associated with that and that's sort of the time constant we're dealing with.

Chip Moore: And since they are different markets, we're talking about things like golf cart and lawn and garden that we haven't been really involved in in the past, there is some product development associated with that. And that's sort of the time constant we're dealing Great, thank you very much. Thank you.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you there are no further questions at this time I would now hand, the call back to Mr. Janus Paris for any closing remarks.

Unknown Executive: There are no further questions at this time.

Denis Phares: I will now hand the call back to Mr. Denis Phares for any closing remarks. Thank you, operator. In closing, I would like to thank our employees, customers, and stockholders for their continued support.

Speaker Change: Thank you operator in closing I would like to thank our employees customers and stockholders for their continued support.

Speaker Change: Okay.

Speaker Change: Thank you.

Unknown Executive: And this concludes today's call. Thank you for participating. You may all disconnect.

Speaker Change: This concludes today's call. Thank you for participating you may all disconnect.

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