Dragonfly Energy Holdings Corp

Second, during this call, we'll be making forward-looking statements based on current expectations. Actual results may differ due to factors noted in today's release and in our periodic SEC filings. And finally, we will reference some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today's release on our website. With that, I will turn the call over to Dennis.

Thank you, John, and thank you to everyone joining us today. Before we review the first quarter results, I would like to take a few minutes to provide some information about the company for those who still might be new to the Dragonfly story. Dragonfly is a comprehensive lithium ion battery technology company with operations that span the development of proprietary and patented cell manufacturing processes, the design and assembly of battery packs, as well as the integration of these packs and other ancillary components into full energy storage systems. And we market and sell these systems into a wide range of consumer and industrial markets. The company was founded in 2012 to initially develop intellectual property focused on lithium ion cell manufacturing. Since then, Dragonfly has worked to revolutionize the mobile energy storage industry with an initial focus on making lithium-ion batteries more accessible for RVers, facilitating a completely off-grid experience for those consumers. Our market share continues to increase within the RV market and has expanded to include the marine and off-grid solar sectors. Traditionally, the RV, marine, and off-grid markets have relied on lead-acid batteries for energy storage. However, lead is toxic and remains a widespread problem in our environments. Dragonfly's lithium ion battery technology presents customers with a safer, cleaner, and better performing storage solution. When compared to lead acid alternatives, our batteries are environmentally safer, provide two to three times more power, last over 10 times longer, are one fifth the weight, charge faster, and require no maintenance. We are proud of our innovations and growth to date, and we look forward to further growth within these core markets while expanding our reach into new market adjacencies that also rely on lead-acid batteries. We market our deep cycle lithium-ion batteries under two brands. The first is our Dragonfly Energy brand, which serves our original equipment manufacturing customers and partners, such as the Thor family of recreational vehicles. And the second is our direct-to-consumer retail brand named Battle Born Batteries, which was named after the Battle Born state of Nevada, where we are headquartered. In addition to our branded batteries, we are also designers and resellers of accessories, making us full system integrators for our customers. Our acquisition last year of Wake Speed Offshore allowed us to better integrate our storage systems with vehicle engines and alternators. And innovations in battery pack monitoring and communication led to the launches of our intelligence line of products in the first quarter, which sets the stage for larger stationary storage systems and applications. As a result, today we are recognized as not only the experts in lithium ion batteries, but on entire lithium battery storage systems. It is also important to note that Dragonfly has a robust patent portfolio. We are at the forefront of battery cell innovation with a unique focus on dry powder coating cell manufacturing technology and non-flammable battery technology for which we have already begun production of the cell pilot line. We are currently targeting commencement of cell manufacturing here in the United States in 2024. Before discussing our non-flammable technology and some of our other operational highlights, I will turn the call over to John to provide a review of our first quarter financial and operational results, as well as our outlook for the second quarter of 2023. Thank you, Dennis.

I will now review our first quarter 2023 results. All figures are GAAP unless otherwise noted. Despite the challenging macroeconomic backdrop, Dragonfly generated net sales of $18.8 million in the first quarter, an increase of 3% compared to the first quarter of 2022, and at the top of our 17 to 19 million revenue guidance. Total battery units increased by 3% year over year, and growth was again driven by our OEM customers, which accounted for approximately 47% of sales in the quarter compared to 17% of revenue in the first quarter of 2022. The growth in our OEM business is largely the result of increased demand from our partners to include our battery solutions on their products at the manufacturer, rather than having the consumer choose to add the solution in the aftermarket. We expect this trend to continue and believe OEM sales will continue to be a significant driver of our growth throughout 2023. Our direct to consumer business, or DTC, represented approximately 53% of sales in the quarter. compared to 83% of sales in the same quarter a year ago. The year-over-year decline in our DTC business was in line with expectations and driven primarily by macroeconomic factors, with overall aftermarket demand for batteries and accessories declining as rising interest rates and inflation continue to negatively impact demand. While we have seen recent signs of stability, we expect this segment of the market to remain more challenging through the remainder of 2023. Dragonfly's gross profit in the quarter was approximately $4.7 million, a decrease of $0.8 million from $5.5 million in the first quarter of 2022. The decrease in gross profit was primarily due to the change in revenue mix that included a larger percentage of lower margin OEM sales and a lower percentage of higher margin DTC sales. Operating expenses in the first quarter were $14.6 million. up from 7.1 million in the first quarter of 2022, and above the high end of our guidance range. First quarter operating expenses included higher stock-based compensation expenses of approximately 3.6 million due to the timing of year-end compensation payments. We do not expect these higher expenses to repeat in the remainder of 2023. Net income in the first quarter was $4.9 million, or 10 cents per diluted share. compared to a net loss of $2.3 million, or a negative six cents per diluted share in the first quarter of 2022. Net income in the quarter benefited from an increase in other income, which was a result of an 18.5 million change in the fair market value of our warrants. First quarter EBITDA was $9 million in 2023, compared to a negative 1.4 million in the first quarter of 2022. Adjusted EBITDA, excluding stock-based compensation, The change in fair market value of the company's warrants and other one-time items was a negative $5 million in the quarter compared to a negative $0.4 million in the same quarter a year ago. For a reconciliation of EBITDA to adjusted EBITDA, please refer to our earnings press release. Dragonfly ended the quarter with $15.8 million in cash and retains a strong financial flexibility, including access to a $150 million equity line of credit. Turning now to our expectations for the second quarter of 2023. As discussed earlier, our DTC business, while stable, continues to face headwinds with consumers focused on macroeconomic challenges such as rising interest rates and inflation. Our OEM business, on the other hand, continues to provide significant year-over-year growth as we continue to win new programs such as the recently announced Airstream Partnership, and as OEMs are increasingly offering our storage solutions as options or standard equipment at the time of manufacture. Given these dynamics, we expect second quarter revenue to be in the range of $18 to $22 million. We expect gross margin to be relatively flat on a sequential basis as we expect a similar OEM to DTC revenue mix in the second quarter. Operating expenses in the June quarter are expected to be in the range of $10.5 million to $13.5 million. And we expect total other income and expense to be an expense in the range of $3.6 million to $4 million. We expect to report a net loss in the second quarter in the range of $9.5 million to $12.5 million, or a negative $0.21 per share to negative $0.27 per share, based on approximately 46 million shares outstanding. Let me now turn the call back over to Dennis to provide some additional color on our growth initiatives.