Dragonfly Energy Holdings Corp. Q1 FY2024 earnings call

• Return to growth theme with efforts in RV, heavy-duty trucking, and new oil and gas markets.
• In Q1 2024, began taking orders for all-electric auxiliary power unit and launched Liftgate power system. Liftgate system implemented in trucking operations, with expansion to OEM level.
• All-electric APU has received purchase orders from diverse fleets, with pilots showing reduced idling and enhanced ROI.
• RV market: Q1 RV shipments up 9% vs previous quarter; OEM revenue $7.3M, excluding Keystone, up 70% year-over-year. Expect continued growth with new model year and IntelLigence batteries.
• Entered oil and gas market with certified power systems for methane mitigation, first deployment expected summer 2024, potential thousands of deployments over 18 months.
• Cell manufacturing technologies continue with dry electrode process at pilot scale, focusing on optimizing unit operations, using PFAS-free electrodes, and qualifying IRA compliance suppliers.

Dragonfly generated net sales of $12.5 million in Q1 2024, down from $18.8 million in Q1 2023. The DTC segment had net sales of $5.2 million in Q1 2024, down from $10.0 million in Q1 2023, with flat sales in recent quarters. OEM sales in Q1 2024 were $7.3 million, down from $8.8 million in Q1 2023. Excluding Keystone, OEM revenue grew 70% year-over-year due to new partnerships and standardization with legacy customers.

• Second quarter 2024 revenue expected $14.0M to $15.0M (approx 16% sequential growth midpoint).
• Gross margin expected 24%-26% in Q2.
• Operating expenses expected $8.5M to $9.5M in Q2.
• Other income/expense expected $3.0M to $4.0M expense in Q2.
• Net loss expected $8M to $10M or negative $0.13 to $0.16 per share in Q2.

• Tariffs on batteries: Tariffs on EV batteries increase from 7.5% to 25% this year, but not immediate for non-EV batteries; long-term positive for domestic cell manufacturing.

Q: Opinion on Section 301 tariffs and impact on core and cell production business A: Tariffs on batteries increase from 7.5% to 25% for EV batteries this year, not affecting immediate business; long-term positive for domestic cell manufacturing development Q: Cash position and potential levers for cash source A: Expect to continue using inventory as working capital; $150M equity line of credit unutilized, cash burn expected less moving forward Q: RV market optimism and new IntelLigence product line A: RV market showing signs of recovery, lithium uptake faster than RV shipments recovery; new IntelLigence product line helps solidify place in new model year Q: Oil and gas market opportunity details A: New adjacent opportunity in oil and gas with potential thousands of deployments over 18 months, first system deployed summer 2024 Q: Trucking front order patterns and adoption curve A: APU adoption tied to fleet turnover (20%-25% annually); rate up to individual fleets, quick ROI expected Q: PFAS-free production benefits A: PFAS-free electrodes eliminate forever chemicals, environmentally friendly, batteries perform as well as conventional, with manufacturing process benefits