Dragonfly Energy Holdings Corp. Q2 FY2024 earnings call

• Dragonfly entered a brand licensing deal with Stryten Energy for Battle Born Batteries, providing broad brand exposure and contract manufacturing opportunities.
• R&D efforts focused on scaled-up dry electrode cell production plant, seeking non-dilutive funding and advanced negotiations for government funding.
• In heavy-duty trucking, ongoing trials showed improvements in idle times, no green premium, and partnerships with highway transport. In oil and gas, preparing for deployment of certified power systems to mitigate methane leakage.
• In RV market, Q2 2024 RV shipments up 7.8%, but OEM revenue affected by hailstorm; Airstream launched new floor plan and explored battery integration.

Dragonfly generated net sales of $13.2 million in the second quarter of 2024, down from $19.3 million in the second quarter of 2023. The direct-to-consumer (DTC) segment had net sales of $6.5 million in Q2 2024, down from $10 million in Q2 2023. OEM sales in Q2 2024 were $6.7 million, down from $9.3 million in Q2 2023. Gross profit in Q2 was approximately $3.2 million compared to $3.9 million in Q2 2023. Operating expenses in Q2 2024 were $9.9 million, down from $12.5 million in Q2 2023. Net loss in Q2 2024 was $13.6 million or $0.22 loss per share.

• Anticipates Q3 2024 revenue in range of $13.5 million to $15 million, ~8% sequential growth at midpoint.
• Expect gross margin in Q3 to be 24%-26%.
• Operating expenses in Q3 expected to be in range of $10 million to $10.5 million.
• Licensing fee from Stryten not immediately recognized as per trademark licensing rules.

• Weakness in key customers' orders due to weather events and motorized RV market weakness.
• Delays in heavy-duty trucking trials caused by freight recession and partner trials.
• Impact of market conditions on revenue and profitability.

Q: Could you go over heavy-duty trucking delays and Airstream issue impact on Q3?

A: Airstream weather event impacts Q3 revenue but production lines ramping back; heavy-duty trucking delays due to freight recession and need for three-season testing.

Q: Thoughts on Tesla's dry-cathode 4680 cells?

A: Can't comment on efficacy of Tesla's process as it's a different drive process with different chemistries.

Q: How does Stryten partnership change non-dilutive funding talks and government funding?

A: Stryten interested in domestic cell supply for dry electrode process; government funding opportunities in North America, honing in on specific ones with site selection ongoing.

Q: Update on methane leakage deployment in September and timelines?

A: System deployment ongoing, expected customers to observe methane reclaiming in September; methane leakage mandates driving rapid adoption.

Q: Oil and gas methane leakage trial definition and conversion timeline for trucking deal?

A: Trial defined by continuous operation of vapor recovery unit when compressors down; trucking conversion follows normal 4-5 year trade cycle with some aftermarket conversions.