DFLI - Earnings call transcript Q2 2024 | Dragonfly Energy Holdings Corp.

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Operator

Good afternoon. My name is Marissa, and I'll be your operator today for Dragonfly Energy's Second Quarter 2024 Earnings Call.

The call can be accessed along with the earnings press release and SEC filings on the Investors section of the Dragonfly Energy website found at www.dragonflyenergy.com.

As a reminder, this conference call is being webcast and recorded. [Operator Instructions]

company making the on statements call, expectations. current this will forward-looking be based During differ factors due press may results Actual to in SEC release noted periodic filings. and the in some measures. non-GAAP Management will reference financial corresponding GAAP on release website. Reconciliations to company's the measure be today's the found can press in nearest

I'll the to call Dragonfly Denis CEO, Dr. now turn Phares. over Energy's

Denis Phares

progress Energy With our improving to growth under of Thank thank to you quarter face ability the you, in market our everyone belts, business another continues Dragonfly of and diversify slowly demonstrate and joining us today. though to our difficult conditions.

higher our technology our rates And into as spending discretionary leveraged historically have our affect and no continue sales we with strength marketing. to We markets. consumer quarter exception interest is consequently, cutting-edge how and development weather lean strong core the to this of realities

We preparation hard oil path included in trucking the our for a downstream to heavy-duty more our profitability. have markets rapid to and has gas markets. This into back growth worked diversify entrance and stable and

Over We able the closing the American our finalized for this we brand quarter, with a to of thrilled of Stryten end second also the deal deal and Born companies, Energy. of storage July. negotiated the licensing energy brand one to largest announce were be Battle at course of the

bring. are We collaboration this extremely happy with benefits expected to the is mutual

box and Battle types Continental like expect Tractor retailers broad the Company, product into allow with it products for stores the Battle brand road battery. big for our means Born channels available vast to Batteries Energy, exposure where are were even These Stryten's see consumers distribution purchase brand we that for future. to markets and For AutoZone previously proliferation Interstate, to on BXB map. Dragonfly channels their Born of batteries mass extending not major through our in reach Supply

should core our exposure markets. brand value, build this believe We considerable including in

the that sold in licensing manufacturing Dragonfly royalties, form support Batteries liquidity Energy as come Stryten. revenue and In will will are also the through through increased Born produce of addition to contract Battle the

Stryten collaboration our value is brand, Energy and reputation to quality of but have with in strong Battle This built exemplifies Born it the also technology. a the a testament we

our we to expanded a And win-win produce Stryten Stryten using cells agreement, and truly dry anticipate expanding We is future. addition an both we collaboration, In believe we one in the will licensing our anticipate electric process. whereby this arrangement. for

has efforts. scaled-up cell research R&D cell Moving our Apart our for produce partners, samples potential and to development to been test program OEM of design continuing production the of battery the focus plant. a electrode from dry

in actively the commitment our of are been evaluating for production first ways and for we cell North currently first have are partnerships negotiations manufacturing we funding At upstream such dry America. component the a the construction numerous in domestic willing suppliers. same today. hour desire for to of gigawatt electrode The time, We half as and is enormous fund supply affordable battery government facility, sites customers material downstream through nondilutive and seeking advanced

even we third-party process. result of our study pricing process, reductions cost in previously have design identified scale-up electric cost we believe a will the presented more During in further dry that was what than competitive

markets to beyond storage our operation composite cyclability within improved diversification and continuing conventional voltage discuss not Officer, to the and connectivity core revenue I core optimize electrolyte to over now progress Chief our turn have process And our extension having require cell been applications. to does will Revenue composite call for since a our we electrode Sibert, of work itself the of electrolyte efforts. modifications the expanded the line, our further significant to allow all cells and dry nonflammable our our solid-state stability from Wade ionic

Unknown Executive

joining everyone to you thank and us Denis, today. you, Thank

today Our sustainable is for on building diversified growth. focus and momentum

Over in multiple long-term across markets. laying strides sustainable made groundwork for quarter, the significant growth has key the past Energy Dragonfly

reach continue ongoing We solidify position our storage industry expand as challenges. even to our energy and in we face the

excited initiatives. in market our to trucking progress report are heavy-duty We

full and unit, These or systems. anticipated. than our be they partners freight our power demonstrate EAPU, longer-than-normal benefits to some adoption, our to critical trials recession the we real-world all-electric are to are a has While auxiliary the of as slower and Liftgate season transition multiple power the attributed can been market EAPU larger This requesting. of trials

other turn when all solutions theme with the fleets general diesel off but -- discussing engine use it our let's freight, is let's Our instances. in move to

significant trials costs reduced our eliminate have and idling other idling XX-hour range increases uninterrupted through fleets and mid-XX% In completely rest low the the greatly mandatory during rest. both comfort idle fuel improvements most This In real times. in we from cases, Importantly, to maintenance have yielded digits. represents single for in savings ongoing cases, we driver period.

by is affirmed premium. that fleets green differentiation there the Another of point is no our solution for

and is decarbonization rapid additional costs, corporations especially offers solution their our with requirements. ESG but are not This important profitable customers, to ESG also the larger just often clients, which stated with companies who to Our for extends without goals. shippers

significant made Importantly, the to channels. this like our batteries our the in allows fleets we for take without developing the share distribution I'd for lithium moment to have need adoption government progress trucking into of mandates. a

approved an them all at ensures available This tractor, readily and now on be purchase CVS CTS, batteries our capital included Trucks to modification can expense and in for brand-new upfit a asset. Daimler or Enterprises, are of PDI batteries centers. to ship from Rush operating the which are Our transitioning the modification, and trucks Fontaine installation price are

in the suitable system market truck and widespread represent with battery offer ownership buyer. underscores and the driving integration and for centers, disruptive of spans, life which and CTS the It's industry exceeding modification shift trucking accelerating role extended market the distribution to of Traditional Daimler currently initial This requires term often products a adoption critical our channels technology batteries other beyond. transformative growth. lithium specialized are that our potential sales not note important in for

reliability. and Additionally, we ability customer The week beneficial, And a operating to switch independent earlier particularly recently new been lots Liftgate and Pepsi engine including transport, fleet this for emissions trucks turn that costs. during sustainability parking highway full make in retrofitting has announce were have the reducing all-electric of products, services to APU and their to excited an trucks parked to existing a powered refreshment deliveries both and Pepsi, we bottler, lastly, for both while over operations off XXX plans ones. enhancing our

a truck same benefit. months, reshape We the a a and our in fleets to their also to partnership to presents believe exciting X trucking milestone will to in transportation through the Working typical within encourage retention Class due the and XXX,XXX leader make emissions. sustainability with The Green mission reducing this sustainability which X cycle and driver highway growth industry. ordered of to experience fuel has opportunities costs potential market X industry, cost, in robust. is been program With heavy-duty years the the transport, switch past represents the market [indiscernible] additional substantial XX diesel replacement for the units over major

within XX% focus us X Our this approximately positions Class sleeper representing of cab growing strategically on segment. installations, production

industry. oil efforts and We the gas also to continue in advance our

a certified emissions market addressing We mitigate the believe through us for new opens methane new the a program. growing We the systems, driven with our leakage. systems agonist deployment the are need partnership this significant legacy by EPA of and methane to preparing mandates for power equipment reduction

oil both throughout our that the the compliant to certifications are necessary with of and gas us XXXX, allow and solutions certifications reliable for we first be stringent products to In standards. quarter deployed achieved industry industry. These the offer

could first the market new methane particular reducing leakage into mitigation of EPA deployment installations over due and fines potentially lead thousands the believe successful to to a methane in focusing September, The methane leakage. mandate, expected which months. is atmosphere. significance next equipment imposes the This We for holds XX on funds deployment

Over meet work for while as industry efficiencies and we first customers. qualify to for been as cost-effective operations system This standards the the the diligently well providing last design. source deployment ensures quarter, that equipment in have driving our our solutions ancillary and efficient working

our hazardous to use certified in represents the Dragonfly Additionally, We look believe and market for this using impact. more a sustainable were our noncertified to the applications integrators more more pressure opportunity coming We forward batteries batteries with need regulatory for Energy our locations. existing increasing operations, our significant and substantial make to results technology quarters. details who positioned deployments sharing access in vapor a is can these from now

up the quarter market, the rate RVs XX.X%. of our shipments finished while ended XX.X%, a the first XXXX, by to motor mid-March annual conventional XXXX. the production were damaged hailstorm the pre-inventory second X.X% in led Airstreams compared RV compared [indiscernible] a of latest growth that of median by forecasts month report travel trailers RV largely June in XXXX million, core Association homes up Industry influenced $X.X our RV to quarter. revenue in coach second OEM and chassis. Regarding significantly was XX.X% quarter severe a same facility touring down decrease In

Airstreams online we impact approximately X motorized can line The opportunities be consumer market not do our where both the for and production that as to paused challenge added price-sensitive in towable returning decline. in the incident batteries This market often months has items, navigate shifts. these QX. entry-level is come work Meanwhile, come is typically challenges market in with provided higher-priced units $XXX,XXX. on experienced to QX sales estimated for and aftermarket. back creates and dynamic our expected this other face the This expensive last a month One we with which are equipped less

launched batteries. design offerings, batteries success OEMs solidifying spot market their our that included Airstream. bright to the our initial into our trade presence. from Airstream and shorter model have further announcement recent the floor explore wins incorporate X ways and to of a following of expanding their our plan innovative a model systems the A for is partnership among of continues our They

is Another system integration spot these within bright OEMs. our

conversion, storage which on vehicles. charging our solutions, and per to are we growing solution energy content system power that able complete are offer OEM Our include

we on the market QX expanding of batteries. share, particularly release Intelligence as Our of line year the approach new remains our and in our focus model RV Dragonfly

sector continued growth year. anticipate the this throughout in We

relationships committed strong partners maintaining our their with meet needs. to continuously are OEM innovating to We and

the second in financial now capitalize will XXXX efforts demand over RV to results. discuss to the growing market Our on positioned us turn I beyond. Phares to and Denis call have quarter back well our

Denis Phares

quarter quarter DragonFly of second million otherwise now in XXXX. generated second well are XXXX. I net our the unless Thank GAAP third you, all million quarter detailed more review in provide results $XX.X as for the from [indiscernible]. Please presented second of $XX.X XXXX XXXX, down noted. figures quarter of financial outlook of a a that will sales note as of the

million of which As a quarter was revenue customer's at the our to event in customers' due install with of the XXXX. $XX case range. not This be lingering of million RV weakness can was of in low $XX reminder, second lower attributed from the quarter Keystone, to facility, included in million to orders, the in primarily market. XXXX weakness X.X% key weather our quarter than a some end $XX.X the guidance Revenue largest second standard our production combined the motorized

XXXX. or segment of were second sales second in million, $XX generated million the The $X.X the of quarter quarter of XXXX. from $X.X XXXX, down the the net sales from direct-to-consumer during Our OEM million quarter quarter $X.X XXXX million DTC of second second in in of down

As previously a throughout mentioned, continue XXXX. expect percentage revenue as to that overall we of sales OEM will increase

employee-related XXXX gross expenses second million, Operating XXXX. compared $X.X down million $X.X the part from The were in in million in which year second of compensation decrease due the the lower, the Professional million quarter lower to Dragonfly's approximately quarter second prior stock-based by year. in in second were primarily was the in prior to of quarter quarter services the of costs public driven profit offering. also and XXXX. $XX.X was $X.X is

ended quarter $X.X was quarter million warrant quarter. was in to million a value $X to of expense the XX, million million comprised expense our of change other XXXX $X.X of in $X.X Total of prior compared and of the expense the liability amount year June $X.X in interest XXXX, million. negative primarily debt in fair of securities related Other in second market

in second loss XXXX $X.XX share million or the quarter $X.XX second to of XXXX, loss for and of the net expenses, Net second to $X.X million. compensation, other quarter of $XX.X XXXX million in negative the compared second second million quarter loss net second the per million our negative loss XXXX. excluding was of in EBITDA of compared in or to the warrants changes share the stock-based quarter fair of $X.X negative market XXXX. million $XX.X per was XXXX. $X.X negative adjusted In of $X.X of in was onetime quarter EBITDA, compared the value quarter

adjusted reconciliation our a EBITDA earnings EBITDA, release. of press For please to to refer

I the moment a approximately Before of XXXX, ended third end and expectations. from guidance cash discuss XXXX. of quarter down million position quarter to first quarter $X.X the cash, turn in our with I the to of to for take our second wanted million the at Dragonfly $X.X

Although inventory we will our half continue continue some moved as second to the AP other of and payments of this we and assets. XXXX, working use also cash our source a into expect capital accelerated into

deal upfront licensing we fee, with our to of us our million the to Energy believe liquidity provides operational was and necessary that cash levers execute largely combined on credit access $X of continued equity untapped line we with have Stryten part including control our to the As which resources plans. million burn, such, $XXX the

would turn to I our Now, our for like XXXX. the quarter third expectations of to attention

As of and oil our in as trucking gas into and XXXX. recovery earlier, well revenue entry show our half heavy-duty we deal and manufacturing RV signs Stryten licensing second that market as markets with believe the contribute contract continues of the mentioned will meaningful to and the

be However, all from licensing of expect upfront to cash quarter. and of ramping, efforts we those $X immediately is the we Stryten paid realized Also, will the million revenues be realize are in that the the even initial as majority though nonrefundable. fee do to fourth not those is expect able

fee we third $XX.X $XX the even recognition including range. quarter expect of X% not over trademark the in of The that requires to with at Nevertheless, Stryten nature still sequential the be a million licensing XXXX must fee approximately of any an the representing of upfront range licensing of of growth revenues recognized growth period million, midpoint time.

it expected the third remain in expect range impacted quarter other Since our outstanding each to a are the future on margin We be are prudent is warrants which operating guidance price the and and to the income day of in of We fair in income believe and $XX market to reflective revaluation XX%. Operating stock to million. not by third in gross to on XX% not continue quarter on a provide quarter, income of of is million dependent XXXX to net results. income. expenses range given do other net $XX.X of

of market new Battle view In closing, Significant our agnostic we battery through supplement as cell in chemistry continue to address most diversification. are and successfully market we core adjacent are for revenue through our to differentiator Born and us. navigate headwinds markets expected the opportunities continuing pack we the domestic difficult brand and business. scaling our growth significant efforts production, which Meanwhile, downstream

operator, With to that, the back the questions. who for line the can I will over turn call open

Operator

Canaccord from Your Genuity. first with George comes Instructions] Gianarikas question [Operator

George Gianarikas

with recovery regard talked to your the impacting trucking you things relative just delays is of that sort the also, of the impact airstream some about in But robustness start to an sort didn't of issue QX? mentioned? to you can you of some pick just that go in I heavy having over Maybe QX. up QX that duty your comments. also And guidance,

Unknown Executive

Thanks, Seaberg. George. Wade This is

to impacting is our lines a month production in that in last and in QX. impact online, some on the do quarter. event, although back QX later revenue of normalize with QX, those and We of have little as the weather definitely then this it far recovery both Airstream As bit bit expect coming

than indicative rates the to in are those to other the freight largely the speak in happening company As trucking, by spot heavy-duty seen as recession that's that the longer sector. the market and filings you've driven freight by to transportation -- is normal delays the from public and

system. other is to The the able need that delaying out X-season part a the of adoption test that's see be to

system the for we will out. more than going is the we've And confident of not are we on wanting energy that what also is high conditioner, are summertime, months investment perform to make cost gotten system air the want be that of but running milder in the return the season out. to that during fleets more So see see the will only which it from on based fleets sure that climate to -- absolutely that pan data still to ROI have they pan

George Gianarikas

truck recent would And maybe use you on of thoughts appreciated. Denis, the cyber whether share the any Tesla any thoughts first there? I'm for That curious as cathode to dry XXXX be cells, can to unveiling

Denis Phares

but It's drive I and can't challenges and it different I that polymers, crosses think the process associated trucks. a scale our chemistries, on efficacy there same on much extrusion implemented it's that. about really I being different one, that different ours. of time, than certainly speak It's mass can't the and an process, how is comment those process at are alleviates, I a mean, too with in

Operator

comes next Moore Your Chip Capital from with ROTH question Partners.

Alfred Moore

on Does to nondilutive guess, dry the advancing color on efforts. then wanted board. around change just think ask And mentioned conversations electrode, Denis, those funding? Stryten I of you I some another government funding, potential on I having some that

Denis Phares

Stryten in supply. reasons partnership domestic one is Certainly, think are of interested [indiscernible] the is so I Yes. that they the synergistic

the definitely -- end there's there's on us be for make process -- them. there's So dry to interest applying cells their no electro to for

unambiguous. So that's

be to we've able And opportunities, instances. couple throughout continue Regarding the think as we're particular. of and said, successful things a of government more middle in we'll and in been selection, progress. I funding, pretty for the to number in say, a that North there government I America I been And site as to honing will have on in speak funding, we're

Alfred Moore

maybe opportunity, just Denis. We'll I right methane more, That's could ask around deployment in the first the tuned, around if leakage corner. stay September X And helpful.

Just orders potentially there closely one follow-on the how any opportunity that maybe How we and things and on larger time are before watch develop. update progressing? you'll see lines

Denis Phares

Yes. Well, that speak. is certainly ongoing as we

what That can Methane in assembled in will the potent we And -- put are of an So expected place. methane that such to the from observing components is methane what's fashion. it actual to detected happens happen coming be and there space, system a and what system is certainly terms September mandates since now deployment, and in greenhouse find into methane are gas. -- leakage be is reclaiming in is uninterruptible the customers getting leakers we're needed. in is

expect is pretty And so it something that we off take to rapidly.

Operator

Grampp question next Jeff Global comes from Your with Alliance Partners.

Jeffrey Grampp

maybe can we more that and pull in oil start Denis, on topic thread last and if little a gas. that bit

and data, sense think to think that? next years So months, quarters, terms successful Is purchasing need guys a see defining of about that? you a suppose, I How they what do we thousands you customers of data? trial. of guys trial? I prospective month, maybe of And before need do would duration How you decision? this indicated sense of any first have you in are something should deployments with deployment of successful a have Or

Denis Phares

rapid No, down. test while ultimately, very is recovery the is unit no. because [indiscernible] of It's are continuous a what the operation the batteries providing compressor

a go when that So leakage importance the that's it can down. the happen of instances compressors

normal the until up. the X-, run run for can down, ramp when recovery compressors units But the the they batteries X-hour kick operation. downtime expected in, go to So back are and vapor they in

in with to electricity. goes engine turned the off, done with our trucking batteries that the we've tune engine about where keeping batteries the typical is an is -- or very or you batteries it's when kick that what heavy-duty charging or this what the in is RV nice in down run So much with applications charged thing are project

Jeffrey Grampp

that announced. trucking helpful. And my for it. just the on very That's Got follow-up, you Understood. guys deal

accelerated of that So of XXX-plus be that handful Should of cycle time could you looks a kind to their what Or sense that's conversion are line trucks. on of just years? basically, these a line you Any turning going this a that more perhaps? of normal conversion mentioned follow over typically time guys guys mentioned fleet entire kind be that like?

Denis Phares

to aftermarket. little to of the of of months bit -- they but units age their for trade converted a being thanks that Yes, normal existing under field they the are evaluating in are X-year going They're are year that transition have units then to XX process in going the in question. a both. of They're X- also trade to under the and the a cycle cycle,

rest normal there are the will there percentage a aftermarket, -- fleet So that see converted we'll as of cycle. is the decent the trade then but follow

Operator

There Denis further turn Phares. questions Dr. time. to this to at over like are back call would the I no

Denis Phares

you in for with look We joining Thank Have day. the all today. quarters. forward you to additional great a everyone us of sharing coming details

Operator

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

disconnect. now may You

Dragonfly Energy (DFLI) 14 Aug 242024 Q2 Earnings call transcript