Dragonfly Energy Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 14, 2025

Key Takeaways

  • Positive Sentiment: Company delivered 23% net sales growth to $16.2 million in Q2, led by over 50% year-over-year increase in the OEM segment for its third consecutive quarter of revenue gains.
  • Negative Sentiment: Direct-to-consumer net sales declined to $5.9 million from $6.5 million as customers remained cautious amid ongoing macroeconomic uncertainty.
  • Positive Sentiment: Gross profit rose 45.4% and gross margin expanded 430 basis points to 28.3%, while operating expenses fell by $2 million, reflecting benefits from the corporate optimization program.
  • Positive Sentiment: Company was granted a patent for its non-flammable all-solid-state battery feedstock preparation, reinforcing safety, thermal stability, and scalability advantages.
  • Positive Sentiment: Capital structure was simplified by exchanging preferred shares to common stock and a straight common stock offering raised $5.5 million to support expansion and enhance financial flexibility.
AI Generated. May Contain Errors.
Earnings Conference Call
Dragonfly Energy Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Dragonfly Energy's Second Quarter twenty twenty five Earnings Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. I'll now turn the call over to Simon Sarovieczki, Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. We appreciate you joining us for today's call. Joining me here are Doctor. Dennis Farris, Dragonfly Energy's Chairman, President and Chief Executive Officer and Wade Sieberg, Chief Commercial Officer. Before I turn the call over to Dennis, I'd like to make a brief statement regarding forward looking remarks.

Speaker 1

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 periodic SEC filings. Management will reference some non GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today's release on the company's website.

Speaker 1

Please note that all comparisons will be discussed today on a year over year basis unless otherwise noted. I'll now turn the call over to Dennis.

Speaker 2

Thank you, Simon, and thank you everyone for joining us today. I am pleased to report strong results for the second quarter with net sales growing 23% to $16,200,000 This marks our third consecutive quarter of year over year revenue growth. We believe this performance demonstrates the resilience of our partnerships in what continues to be a challenging macro environment. Our performance also reflects our continuing strategic focus on driving near term revenue generating opportunities as part of our corporate optimization program. Net sales growth was driven by continued strength from our OEM partners, which saw net sales increase more than 50% year over year.

Speaker 2

This significant growth underscores the momentum we are seeing as OEMs increasingly integrate our solutions at the factory level across an increasing number of model lineups. We are particularly encouraged by what appears to be an industry wide shift back toward premium features and value added offerings, a notable contrast from the cost reduction approach that characterized much of the last few years. Net sales in our DTC segment were $5,900,000 compared with $6,500,000 as customers remain cautious due to ongoing macroeconomic uncertainty as expected. As noted last quarter, we anticipate long term growth will be primarily driven by expanding OEM partnerships where we can leverage our engineering capabilities and deliver integrated solutions at scale. On the operational front, we continue to execute our corporate optimization initiatives as we remain steadfast in positioning Dragonfly to capitalize on the near term growth opportunities we see across our markets.

Speaker 2

The initiative is delivering measurable benefits. By strategically reallocating internal resources to immediate revenue generating opportunities, we have been able to accelerate product development without incremental investment. A great example of this approach is our partnership with Airstream, a leading RV OEM, in which we designed and manufactured a fully integrated energy storage system that will be a standard option across select twenty twenty six models. This was made possible through the redeployment of existing personnel as well as the targeted manufacturing enhancements we implemented in prior quarters, which streamlined our manufacturing process. We currently have similar programs underway with several RV and heavy duty trucking OEMs focused on developing unique solutions that address their specific operational needs.

Speaker 2

It is worth emphasizing that our domestic manufacturing capabilities remain a strategic advantage in today's volatile trade environment. With assembly completed at our Nevada facility, we maintain greater control over quality, cost management, and production timelines compared to companies relying on overseas production. This has proven particularly valuable as the tariff environment remains volatile. Ultimately, we believe our domestic production allows us to respond quickly to evolving customer needs and supports the broader trend we are seeing towards supply chain localization. Beyond these operational advantages, we believe a critical driver of our long term success is our commitment to innovation and the continued expansion of our intellectual property portfolio.

Speaker 2

Recently, we were granted a patent advancing our non flammable all solid state battery program with materials that enhance safety, thermal stability, and scalability. With this patent, we reinforce our leadership in advanced battery technology and create a strategic advantage that can drive significant upside in the years ahead. From a capital structure perspective, we made meaningful progress this quarter through two strategic initiatives. First, we exchanged the remaining preferred shares to common stock, simplifying our capital structure and eliminating associated interest payments and share dilution. And second, we successfully completed a public offering of our common stock in July, raising $5,500,000 to support our expansion into adjacent markets and strengthen our financial flexibility.

Speaker 2

We were very pleased that this latest raise was a straight common stock offering without warrants as opposed to past structured offerings. We were also encouraged by the strong participation from institutional investors. While the overall market environment remains uncertain, we are focused on positioning Dragonfly for the significant growth opportunities ahead while driving towards profitability. We continue to take decisive strategic actions to lower costs and enhance our balance sheet as we maintain focus on deepening relationships with our existing partners, enhancing our product development capabilities to meet the evolving needs of our customers, and expanding into the heavy duty trucking market. We remain confident in our ability to deliver sustained growth.

Speaker 2

Now I would like to pass the call to Wade, who will detail some of the trends we see in our OEM segment.

Speaker 3

Thanks, Dennis. I would like to talk about the trends driving our OEM performance as well as the strategic initiatives positioning us for sustained growth. We believe the impressive performance we are seeing in the OEM segment reflects the strength of our great partnerships as well as our approach to collaborating with these manufacturers. Increasingly, OEMs are coming to us for complete energy storage solutions, not just batteries. This plays directly into our strengths as we manage the design and integration process, ensuring our systems fit seamlessly into space constrained environments while maximizing energy density.

Speaker 3

This removes the complexity for OEMs and allows Dragonfly to deliver turnkey solutions that enhance value for the end customer. By getting involved early in the design process, we are moving closer to owning the entire energy storage ecosystem from initial design to implementation and providing the accessory suite. This approach has been especially effective in the RV market, where space is at a premium and customer power demands keep growing. Our work with Airstream on their twenty twenty six motorized lineup is a great example. Our engineering team collaborated directly with Airstreams to develop their new advanced power system and advanced power plus packages, compact factory installed solutions built around our industry leading battle born batteries.

Speaker 3

These uniquely designed systems deliver over 10 kilowatt hours of usable energy featuring integrated cold weather heating, seamless alternator charging, and solar compatibility. They can even be expanded with an additional 6.9 kilowatt hours after purchase to meet future power needs. We believe partnering with a top tier brand like Airstream reinforces our position as the go to provider for safe, reliable, high performance lithium power solutions, and we look forward to continuing to build on this relationship. Another key development in the quarter was the accelerated adoption of our proprietary DragonFly Intelligence smart battery platform among OEMs. This advanced technology enhances the real time communication capabilities of our lithium iron phosphate batteries, allowing users to monitor performance directly through our Battleborn mobile app.

Speaker 3

Several OEMs are currently beta testing the Intelligent Solution as they finalize their 2026 model year lineups, positioning us well for continued expansion within these partnerships. The growing integration of our intelligence offering validates that our technology focused approach is delivering meaningful value to both OEMs and end users. In the heavy duty truck market, while market conditions remain very challenging, we continue to see strong results from pilot programs. Our dual flow PowerPack solution has received positive feedback, delivering measurable idle reduction and cost savings at the fleet level. We have built a solid foundation in this market and look forward to expanding our pilot programs and working with existing partners to deliver high quality solutions.

Speaker 3

We believe it is only a matter of when we will see significant adoption in heavy duty trucking, not a matter of if. Whether in RV or trucking, our approach remains consistent. We continue to work with OEMs to design and manufacture tailored practical solutions that directly address real world needs. Our customer first approach has allowed us to expand our OEM relationships and strengthen our competitive position in markets where quality and long term performance matter most. Now I will turn the call back to Dennis to review our second quarter results.

Speaker 2

Thank you, Wade. Net sales in the second quarter rose 23% to $16,200,000 led by an over 50% increase in OEM net sales. Sales in this segment amounted to $10,100,000 led by continued strong adoption of our solutions. Net sales to DTC customers were $5,900,000 down from $6,500,000 due to continued macroeconomic pressures. Gross profit in the second quarter rose 45.4% to $4,600,000 and gross margin expanded an impressive 430 basis points to 28.3%.

Speaker 2

These increases were driven by lower inventory costs as well as higher absorption of fixed costs due to increased volume, highlighting the great leverage in our manufacturing as we continue to drive revenue growth. Operating expenses totaled $7,900,000, down from $9,900,000, which includes lower r and d costs. Net loss was $7,000,000 or $0.58 per share versus a net loss of $13,600,000 or $2.02 per share. Adjusted EBITDA improved to negative $2,200,000 compared to negative $6,200,000 reflecting increased OEM net sales and benefits from our corporate optimization initiative. Moving on to our outlook.

Speaker 2

In the third quarter, we anticipate net sales of $15,900,000, representing year over year growth of approximately 25% and adjusted EBITDA of negative $2,700,000. As a reminder, third quarter sales are typically seasonally slower than in the second quarter. To conclude, I am pleased with the progress we are making. Our focus on near term revenue opportunities has yielded measurable benefits and has strengthened our ability to meet our customers' needs through high quality tailored energy storage solutions. We believe we have the right foundation in place led by our domestic manufacturing advantage, our enhanced product development capabilities, and the traction we are building in the heavy duty trucking market, all of which position us for sustained growth moving forward.

Speaker 2

We are confident in our ability to capitalize on the opportunities ahead and deliver meaningful value for our shareholders. Operator, we'd like to open the call to questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Please press star one in your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2.

Operator

Your Your first question comes from George Gianaritas of Canaccord. Your line is already open.

Speaker 4

Hey, everyone. Thank you for taking my questions. I'd like to start a little bit on heavy duty trucking. When do you expect some of the pilot programs that you're in to eventually result in, you know, have a P and L impact? Thank you.

Speaker 3

Thanks, George, for the question. We're right now, within the heavy duty trucking, we're we're really seeing a lot of performance out of our pilot systems and are in a position where we're waiting for fleets to move on new truck orders. There's a lot of fleets that because of the the tariff increases that OEMs have had pushed through on them and because of the uncertainty of the freight market are really waiting on those new truck orders to to be purchased before they spec our systems in. So realistically, we're probably looking at the first half of next year before that that revenue really starts to support the business. But we are seeing in q three and q four a ramp of pilot systems that will, benefit the revenue side of of that sector.

Speaker 4

Thank you. And maybe a little bit on tariff impact. How should we sort of think about the P and L impact, excuse me, of tariffs over the next several quarters?

Speaker 2

Hi, George. Thanks for your question. This is Dennis. Yeah. The the tariff impact has been obviously fluid over the last six months as things really sort of ebb and flow, I would say.

Speaker 2

So we've been able to manage the tariff impact pretty well through a number of mechanisms. I mean, the the most important one I would say is we've negotiated better inventory pricing, and that has contributed actually to the improved margins we experienced this quarter. In general, obviously, there's going to be some of that passed on to the customers. So we are managing the expenses through passing on the cost as well. And just in general, there are from a cash flow standpoint, there are mechanisms by which we can sort of spread out the payments through the use of bonded warehousing and that sort of thing.

Speaker 2

So we feel pretty confident in our ability to manage the tariff cost. But I would say more importantly, we are able to onshore most of the components anyway. So we're in a really good position in terms of doing all the assembly in house that we can pick and choose where all the components come from. And we have, you know, completed an optimization of where we source a lot of the components. Cells obviously are kind of limited as to where you can get them globally, but that's obviously on our road map moving forward.

Speaker 4

Great. And I know you've only got it for Q3 and not Q4, but should we, in theory, expect sequential improvement to Q4? And how are you tracking relative to your aspiration of being EBITDA breakeven in the fourth quarter?

Speaker 2

So a lot of that really does depend on some of those expanded pilots that Wade was alluding to. The trucking industry for us feels almost like a switch. It's it's a industry that has been struggling over the over the past couple of years. We did expect things to kinda turn around this year. Think a lot of folks did.

Speaker 2

And then the tariff impacts on the trucking market, I think, sort of extended that freight recession. But we are confident that things are turning around pretty soon here. And we're not ready to pull back anything because we do expect the ramp to begin. But we do think that, in general, a lot of the new truck orders are gonna be coming in as Wade noted in the first half of next year. But we do think that the expanded pilots and some of the aftermarket business that we're doing, especially using the dual flow, do begin to kick in.

Speaker 4

Great. And in terms of sequential improvement in the fourth quarter in in revenue?

Speaker 2

Yeah. We the sequential improvement is going to combine basically continued improvement in the RV industry. Actually, some of the business that we have is stretching into Q4 in terms of our ability to ramp internally. But at the same time, we are expecting the new markets to contribute as well. So there we do expect the ramp to occur.

Speaker 4

Okay. Great. And maybe last question for me, Dennis. As it relates to the patent that you were recently awarded, can you just sort of talk a little bit about what technology was behind that? Thank you.

Speaker 2

Yes. Sure, George. That particular patent had to do with how you prepare the the feedstock for solid state batteries, particularly the solid state electrolyte, how the the composite material is mixed between the the the ceramics, the polymers, the salts. Very critical to how you actually deposit the the layers using the dry electrode process. So the dry electrode process is a combination of the feedstock preparation, the actual deposition, and then how the cells are prepared.

Speaker 2

And and this particular this particular patent issuance was really important in terms of that upfront feedstock portion of it.

Speaker 4

Great. Thanks all. Thank you, George.

Operator

There are no further questions at this time. I would hand over the call to Dennis Farris for closing remarks. Please go ahead.

Speaker 2

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.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

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