Dragonfly Energy Holdings Corp. Q3 FY2024 earnings call

• Commitment to pioneering innovative lithium-ion battery technology despite macroeconomic headwinds. • Expanding into heavy-duty trucking, oil and gas, and other sectors beyond RV market. • Partnership with Stryten Energy, with Battle Born products showcased at SEMA and APEX events, and collaboration on new battery models. • Dragonfly Intelligence technology introduced, integrated with smart Battle Born battery packs to be released in Q4 2024. • Progress on dry electrode cell manufacturing, with plans for North American expansion and Canadian subsidiary. • Approval of Ioneer's Rhyolite Ridge lithium mine, strengthening supply chain for vertical integration.

Dragonfly Energy's third quarter 2024 net sales were $12.7 million. DTC segment net sales were $5.2 million in Q3 2024, down from $10.3 million in Q3 2023. OEM sales in Q3 2024 were $7.4 million, up from $5.6 million in Q3 2023. In the heavy-duty trucking market, the company recognized first meaningful revenue in Q3 and anticipates continued growth. In oil and gas, the company achieved a milestone with a first off-grid methane reclamation power system demonstration.

• Expect fourth quarter 2024 revenues in the range of $13.5 million to $14.0 million, representing ~8% sequential growth at midpoint. • Anticipate slightly lower RV OEM revenue due to seasonality but return to growth in DTC markets with new Dragonfly Intelligence batteries. • Notable growth expected in trucking revenue. • Expect gross margin in fourth quarter to be in range of 22% to 25%. • Operating expenses in fourth quarter expected to be in range of $5.5 million to $6.5 million.

• Macro-economic headwinds impacting consumer discretionary spending and sectors like retail and trucking. • Delays in market adoption in newer sectors like heavy-duty trucking and oil and gas due to economic conditions.

Q: Wanted to ask on auxiliary power. Nice job getting some revenues this quarter, particularly in a market that's not particularly doing great right now. I guess I thought I heard you say, you're looking for more growth next quarter, but then did I hear you right on significant revenue potential next year? Is there any way to sort of frame that?

A: The way we're looking at it is threefold: market acceptance, expansion of programs through new trucks, and market recovery. Also, seeing more applications for our product within the transportation market.

Q: Just update us on methane reduction. First pilot completed, sounds like things are going well. Just update us there on market potential and then any concerns that we get a new EPA administration and that could have impact or how are you thinking about that?

A: Conversations with fleet operators and end users have been positive regardless of administration. Packaging companies are in sales negotiations for our solution. The MERP is moving forward with no real way to stop it.

Q: Modeling the Q4 guide, I guess the OpEx sequential step down looks pretty notable. Any timing issues there or anything to keep in mind or maybe how do we think about the next few quarters on OpEx?

A: We've been in cash conservation mode and continue to focus on being frugal and managing cash burn.