Q1 2025 Dragonfly Energy Holdings Corp Earnings Call
Okay.
Good afternoon, and welcome to the Dragonflies Energy's first quarter 2025 earnings call.
At this time.
All lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
Simon Cherokee: I'll now turn the call over to Simon Cherokee at Ski Investor Relations. Please go ahead.
Speaker Change: Thank you operator I appreciate you joining us for today's call.
Dennis Spirit: Joining me here are Dennis Spirit, Energy's, Chairman, President and Chief Executive Officer, and await Seabury Chief commercial officer.
Speaker Change: Before turning 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 remarks within the meaning of the United States Private Securities Litigation Reform Act of 1995 based on current expectations.
Speaker Change: 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.
Speaker Change: Actual results may differ due to factors noted in the press release and periodic SEC filings.
Speaker Change: Major orphaned some non-GAAP financial measures.
Speaker Change: Reconciliations to the nearest corresponding GAAP measures can be found in states or at least on the company's website.
Speaker Change: Please note that all comparisons will be discussed today on a year over year basis, unless otherwise noted.
Dennis Spirit: And I'll turn the call over to Dennis.
Dennis: Thank you Simon and thank you everyone for joining us today.
Dennis: We were pleased to report revenue growth of six 8% in the first quarter exceeding our guidance and representing our second consecutive quarter of year over year revenue growth, while the RV market continues to navigate headwinds adoption trends within our product portfolio remain healthy. This is evidenced by the 10, 8% growth in net sales.
Dennis: From OEM customers driven by broader integration of our solutions at the factory level across more models with an existing partnerships.
Dennis: Partially offsetting OEM growth was a slight decline in net sales from DTC customers as the segment continues to be impacted by macroeconomic pressures, while we remain committed to serving our valued DTC customers. We expect long term growth to be led by our OEM channel as we expand our strategic partnerships and accelerate our <unk>.
Dennis: Development and rollout efforts.
Dennis: As we discussed in the prior quarter, we successfully launched our corporate optimization program to more precisely focus the organization and its priorities on near term revenue generating opportunities accelerating our path to growth and profitability.
Dennis: This strategic initiative is already delivering tangible operational improvements strengthening our ability to execute across key target markets.
Dennis: As part of this initiative, we reallocated resources to prioritize product development with near term revenue potential.
Dennis: Our strong early example of this strategy is the accelerated launch of our battle born dual flow power pack for the heavy duty trucking market.
Dennis: Nickel hybrid electrification solution.
Dennis: In today's uncertain market. We believe many fleets are looking to adopt partial electrification strategies that balance short term cost control with long term sustainability and performance goals.
Wade: As Wade will discuss shortly the dual flow solution is already gaining traction among fleets navigating these operational challenges.
Speaker Change: The optimization program has also enabled us to implement several targeted enhancements across our manufacturing operations, resulting in increased production capacity without the need for any additional head count.
Speaker Change: Under the leadership of Dr. Vic thing, our Chief operating officer, we have increased the use of automation on our product lines standardized user interfaces and implemented new accountability frameworks.
Speaker Change: Along with recent consolidation into our new 400000 square foot facility. These operational enhancements are strengthening our ability to serve and grow our diverse customer base, while maintaining our focus on cost discipline and organizational efficiency.
Speaker Change: Ultimately, we believe our corporate optimization initiatives combined with our stronger financial position. Following our recent debt restructuring and capital raise provides the foundation for continued revenue growth as we drive towards profitability.
Speaker Change: Turning to the broader market environment I'd like to highlight dragonfly Energy's unique strategic position amid today's volatile tariff landscape.
Speaker Change: First and foremost our growing U S based production capabilities provide a significant competitive advantage over companies relying on overseas production we.
Speaker Change: We have been investing in domestic battery production since 2012, well before onshoring became a national priority.
Speaker Change: While we continue to source certain components, such as battery cells from overseas suppliers. We complete all final assembly at our Nevada based facility and approach that not only strengthens quality control, but also reflects our long standing commitment to U S manufacturing.
Speaker Change: We view this strategy as an interim step on our path to becoming a complete domestic producer, including production of our own lithium iron phosphate cells.
Speaker Change: We believe our domestic operations allow us to add substantial value through design assembly testing and integration, resulting in greater flexibility improved quality assurance and key cost advantages.
Speaker Change: With a larger portion of our cost structure tied to U S labor and overhead rather than imported finished goods, we are better positioned to absorb tariff related impacts.
Speaker Change: In addition, our vertically integrated approach lays the groundwork for further domestic expansion, we've accelerated efforts to transition select components to north American based sourcing where feasible and we remain committed to expanding our domestic footprint as market conditions and regulatory factors involved.
Speaker Change: In addition, dragonfly energy holds the lithium supply agreement with irony are positioning US ahead of the curve as the U S works to localize critical minerals supply chain.
Speaker Change: Located in Nevada, I N years, Rhyolite rich lithium boron project offers both logistical and strategic advantages with lithium development recognized as a priority industry by state leadership. We believe this agreement supports our long term vision of building a more sustainable and resilient U S based battery ecosystem as we continue.
Speaker Change: Working towards full vertical integration of our battery manufacturing within the states.
Speaker Change: In direct response to tariff developments, we've taken proactive steps to help mitigate potential impacts.
Speaker Change: First we've leveraged our position as a long term strategic customer to secure favorable terms with key foreign suppliers, helping to offset potential cost increases.
Speaker Change: Second we're working closely with our customers to manage pricing adjustments and ensure minimal disruption to their operations.
Speaker Change: We continue to evaluate additional strategies to enhance our flexibility and efficiency as the trade environment evolves.
Speaker Change: Looking ahead, we believe our domestic manufacturing foundation combined with our strategic diversification into adjacent markets positions dragonfly energy to navigate this volatile environment, while continuing to deliver high quality energy storage solutions to a diverse and growing customer base.
Speaker Change: Now I would like to pass the call to Wade who will discuss trends we are seeing in the heavy duty trucking industry.
Wade: Thank you Dennis I'd like to take a few moments to provide an update on what we're seeing across the heavy duty trucking market, where we continue to engage with both fleet owners and Oems offering unique value add solutions.
Speaker Change: In response to market uncertainty.
Speaker Change: We are increasingly focused on extending the life of existing trucks and unlocking real world operational savings today not years down the line. We believe our product portfolio is uniquely positioned to meet those needs delivering cost effective practical solutions that reduce idling lower maintenance burdens.
Speaker Change: An improved system reliability across aging fleets.
Speaker Change: This trend plays directly into the dragonfly energy strengths grounded and years of experience developing advanced battery technology at power system innovations, we believe our deep technical expertise combined with our flexible U S based manufacturing foundation enables us to deliver practical.
<unk> location specific solutions that align with the evolving needs of our customers.
Speaker Change: A strong example of this approach is our battle born dual flow power pack practical and cost effective solution for fleet speaking idle reduction benefits without the complexity or cost of an all electric Apu system.
Speaker Change: Many fleets are either dealing with the common failures of diesel ipos are simply arent ready to transition to a fully electric system for climate control with.
Speaker Change: With capital expenditures under pressure the dual flow addresses these challenges head on by powering hotel loads, such as HVAC lighting and electronics during rest periods, allowing fleets to significantly reduced engine idling. In addition to fuel savings the system also helps <unk>.
Speaker Change: And the life of the trucks starter batteries by isolating and supporting parasitic loads with seamless integration into both new and existing vehicles, a compact footprint and an ROI typically under one year. The dual flow is gaining traction as a smart dependable option for fleets looking to cut operating costs.
Speaker Change: Without overhauling their current systems.
Speaker Change: The strength of our value proposition is reflected in the increased engagement, we've seen over the past few months, Mark and meaningful progress as we work to establish ourselves within the heavy duty trucking industry.
Speaker Change: Recent trucking industry events, we believe dragonfly energy solutions have emerged as a priority for attendees with many high profile potential customers, making dragon fly their first point of contact.
Speaker Change: As battery related challenges in fleet operations become more visible our solutions are being recognized as practical.
Speaker Change: <unk> tools that deliver immediate cost and performance benefits.
Speaker Change: Even in a challenging market operators see that our offerings are purpose built to address the real world needs supported by a compelling ROI.
Speaker Change: We believe dragonfly energy is uniquely positioned to capitalize on this industry shift our ability to deliver practical lithium powered solutions that directly address sleep needs continues to resonate with operators navigating today's cost and reliability challenges are excited to work alongside our <unk>.
Speaker Change: <unk> to drive meaningful performance improvements and support their long term sustainability and operational goals I will now turn the call back to Dennis.
Dennis Spirit: Thank you Wade I will now provide a review of our first quarter results as well as a more detailed outlook for the second quarter of 2025.
Speaker Change: First quarter net sales of $13 $4 million were up six 8% led by continued strength from our OEM customers.
Speaker Change: Net sales increased 10, 8% to $8 $1 million as we continue to see healthy adoption trends within our product portfolio.
Speaker Change: Net sales growth was partially offset by the DTC segment, which saw revenue decline approximately three 6% to $5.1 million reflecting.
Speaker Change: Continued macroeconomic uncertainty.
Speaker Change: First quarter gross profit increased 12, 5% to $3 9 million and gross margin increased 500 basis points to 29, 4%, primarily driven by higher volume.
Speaker Change: Operating expenses were $9 $8 million above the $8 $9 million reported in the prior year period, primarily due to expenses related to patent litigation and the February capital raise both of which are onetime in nature.
Speaker Change: Net loss was $6 $8 million with a diluted loss per share of <unk> 93.
Speaker Change: Compared to net loss of $10 $4 million with a diluted loss per share of $1 55.
Speaker Change: Adjusted EBITDA was negative $3 $6 million compared to negative $5 $2 million.
Speaker Change: Looking ahead to the second quarter, we expect net sales to be approximately $14 $8 million representing year over year growth of 12% and we expect an adjusted EBITDA loss of approximately $3 $5 million.
Speaker Change: To conclude we believe dragonfly energy is well positioned to navigate ongoing market volatility, while continuing to deliver high quality energy storage solutions to our diverse customer base by.
Speaker Change: By prioritizing near term revenue opportunities optimizing our manufacturing operations in reinforcing our financial position, we have established a clear path toward profitability and sustained growth.
Speaker Change: Domestic manufacturing capabilities provide a strategic advantage in today's complex environment, allowing us to respond quickly and effectively to evolving customer needs.
Speaker Change: We look forward to building on this momentum throughout 2025, and driving long term value for our shareholders.
Speaker Change: Operator, we would like to open the call to questions.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: So do you have a question. Please press star one on your Touchtone phone.
Speaker Change: You'll hear a prompt Mr hand has been erased.
Speaker Change: Should you wish to decline from the polling process. Please press star two.
Speaker Change: If you are using a speaker phone please lift the handset before pressing on the keys.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from George.
Jan Erik: Jan Erik <unk> from Canaccord security.
Speaker Change: Your line is already open.
Speaker Change: Hi, good afternoon, everyone. Thank you for taking my questions.
Speaker Change: Hum.
Speaker Change: I'd like to ask about the commercialization.
Attunity is surrounding your dry electrode.
Speaker Change: Manufacturing technology any updates there are developments.
Speaker Change: Any news would be very much appreciate it. Thank you.
Speaker Change: Hi, George Thank you for your question.
Speaker Change: I will say that development is ongoing we're obviously still working on developing the.
Speaker Change: The scale up of equipment.
Speaker Change: And we do have interest from commercial partners.
I would like to say that we've been.
Speaker Change: Devoting a significant amount of resource to that but that is not the case in the last quarter. We we've been really focusing on near term revenue and getting back to profitability. That's been our number one priority.
Speaker Change: But we're certainly continuing our progress on the dry electrode.
Speaker Change: Fast as we can.
Speaker Change: Thank you and maybe as a follow up I'd, just like to focus on the balance sheet and profitability first just.
Speaker Change: Thoughts on the cash balance as reported as of the end of March and also.
Speaker Change: Your EBITDA guidance for the quarter.
Speaker Change: I would've expected a little bit of an improvement sequentially based on the increased revenue just any thoughts on those two I appreciate it. Thank you.
Speaker Change: Sure well in terms of the cash balance we are we did just complete the.
Speaker Change: The preferred equity deal.
Speaker Change: It came in two tranches one the initial tranche came in the first quarter and the second tranche came in the second quarter.
Speaker Change: And we do feel that we have the cash.
Speaker Change: To get us back to profitability at the end of the year.
Speaker Change: We in terms of the cash at the end of the first quarter, we did pay down some AP. So we feel very good about the fact that we're able to catch up on some of those expenses.
Speaker Change: And.
Speaker Change: You know moving forward.
Speaker Change: We have been really focused on investing in near term revenue growth and that's really where the spend has gone up although we had some reductions in our research and development. The fact that we were able to accelerate the development of a highly anticipated heavy duty trucking products like the duals.
Speaker Change: Flow was entirely made possible by the.
Speaker Change: The enhanced investments that we made in this near term opportunity you know and I can't stress enough that the importance for us to get back to cash flow positive to get back to profitability is going to open up a lot of doors in terms of our ability to to really produce in.
Speaker Change: Not just the dry electrode, but also getting back to the solid state development, which we're all still very excited about but the frustration in it in the recent history is the fact that we are.
Speaker Change: <unk> been having to focus on cash flow and our ability to really.
Speaker Change: Give ourselves some breathing room, especially through this preferred equity deal and some debt relief that we got is going to make all this possible.
Speaker Change: Thank you and maybe just a follow up on the EBITDA in Q2 that you're expecting a loss of $3 5 million I think it was but.
Speaker Change: Why isn't there a little bit of a sequential improvement in Q2 based on the fact that revenues ramping a little bit. Thanks.
Speaker Change: That's that's because of some continued investment in it.
Speaker Change: And as I said, the near term product development and the new products that we have coming out and driving the business that is.
Speaker Change: Is going to get us back to the you know to the to the profitability.
Speaker Change: To the profitability that we expect the other thing that I have to say is we are also incorporating the.
Speaker Change: The effect of tariffs.
Speaker Change: And that's been difficult to predict it's obviously something that's been in flux, but.
Speaker Change: But given the fact that we have been allowing the situation to evolve and allowing ourselves to a planned for that accordingly, and try to hold on as best as we can to the very important customers that we have we've been able to incorporate that in the in the projections for this quarter.
Speaker Change: Thank you.
Speaker Change: Thank you George.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Speaker Change: There are no further questions at this time.
Speaker Change: I would hand over the call to Daniel Harris for closing remarks. Please go ahead.
Daniel Harris: Thank you for everyone joining us today, we look forward to sharing additional details with all of you in the coming quarters have a great day.
Daniel Harris: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Daniel Harris: Yeah.
Daniel Harris: Yeah.
Daniel Harris: Okay.
Daniel Harris: Yes.
Daniel Harris: Yes.
Daniel Harris: Okay.
Daniel Harris: Yes.