Dragonfly Energy Holdings Corp

Good afternoon. My name is Ina and I'll be your operator today for Dragonfly Energy's third quarter 2024 earnings call. The call can be accessed along with the earnings press release and SEC filings on the investor section of the Dragonfly Energy website found at www.DragonflyEnergy.com. As a reminder, this conference call is being webcast and recorded. All attendees are in listen-only mode at this time. 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. Forward-looking statements include all statements that are not historical statements of fact and statements regarding the company's intent, belief, or expectations, including but not limited to statements regarding the company's guidance for 2024, the source of operations and financial position, planned products and services, business strategy and plans, market size and growth opportunities, competitive position and technological and market trends. Some of these forward-looking statements can be identified by the use of forward-looking words including may, should, expect, intend, will, estimate, anticipate, believe, predict, plan, target, project, could, would, continue, forecast, or the negatives of these terms or variations of them or similar expressions. 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 NANGA financial measures Reconciliations to the nearest corresponding gap measure can be found in today's release on the company's website. I'll now turn the call over to Dragonfly's Energy CEO, Dr. Dennis Farris. Please go ahead.

Thank you, and welcome to everyone joining us today. At Dragonfly Energy, our commitment to pioneering innovative lithium-ion battery technology remains unwavering. Despite macroeconomic headwinds, we believe we have made considerable strides in expanding our footprint beyond the RV market and into the heavy duty trucking, oil and gas, and other high impact sectors. Our strategic initiatives have focused on diversifying revenue streams, enhancing our technology, and positioning ourselves for long term growth through partnerships and targeted research and development investments. The broader economic environment continues to pose challenges, impacting consumer discretionary spending and extending economic pressure to sectors such as retail and trucking. However, our adaptability has been key to navigating these uncertainties. By reinforcing our partnerships, advancing our product innovation, and strategically focusing on high potential verticals, we believe we are laying a robust foundation for sustained growth. Our move into the trucking and oil and gas sectors is part of our strategy to leverage our experience in transitioning traditional lead-acid application to lithium solutions, a shift we demonstrated in the RV market. Although initial adoption in these newer markets has faced delays due to numerous economic conditions, we remain confident in these sectors' potential to become significant revenue drivers as conditions improve. The continued success of our pilot programs within the trucking industry has led to the conversion of these initial trial customers into a revenue generating segment. With that, we're proud to report that we recognized our first meaningful trucking revenue in the third quarter, and we anticipate continued quarterly growth within the trucking market. We believe positioning it as a significant revenue driver for Dragonfly Energy in 2025. In terms of technology, we believe that we are at the forefront of introducing intelligent, connected solutions that enhance energy storage efficiency and user experience. Our new Dragonfly intelligence technology exemplifies this approach, offering real-time monitoring and advanced diagnostics. We believe this technology will enhance our current offerings and also positions us for deeper market penetration as we introduce it across various segments. This technology, integrated with our new smart Battle Born battery packs, will also be released to the general public during the fourth quarter 2024, which we believe has the potential to rejuvenate our direct-to-consumer markets. We have also entered into strategic partnerships to further develop and enhance our battery technology. We have also made positive strides in our partnership with Stryton Energy, one of the largest battery manufacturers in North America. The existing licensing agreement we announced in July 2024 plays a pivotal role in our strategy of expanding the reach of our Battle Born product line. That was kicked off this November as battery products were prominently showcased at Stryton's booths during the Specialty Equipment Market Association, or SEMA, and Automotive Aftermarket Products Expo, or APEX, events. Two major automotive industry gatherings, These showcases attracted substantial attention from a diverse and engaged audience, including many of Strident's key business-to-business customers. The initial response has been positive, with strong interest and enthusiasm for our product offerings. In parallel, we have been collaborating with Strident on developing multiple new battery models. These models are slated for production under our contract manufacturing agreement in 2025. From a research and development perspective, we continue to advance our preparations for gigascale deployment through enhanced design considerations that strengthen our already extensive intellectual property portfolio. While cash management focus has temporarily limited our ability to scale dry electrode battery cell manufacturing, we remain committed to deploying this transformative cell manufacturing process through creative financing strategies. One such strategy is looking into North American expansion and establishing a Canadian subsidiary for constructing our first half gigawatt hour of cell manufacturing by leveraging government and private funding. We also continue to collaborate with upstream and downstream partners to provide cells and data as interest in dry electrode cell manufacturing grows. Additionally, I would like to highlight our existing offtake agreement for lithium sourced from Nevada through Ioneer and the Rhyolite Ridge project. Ioneer recently received approval by the federal government of its Rhylite Ridge lithium mine. We believe this development is an important step as we work towards vertical integration, ensuring a reliable domestic supply of lithium that will support our long-term manufacturing and expansion goals. The progress at Rhylite Ridge helps to strengthen our supply chain and continue our commitment to leveraging U.S.-based resources to enhance the sustainability and scalability of our battery solutions. To discuss third quarter results, operational specifics, and detailed revenue insights, I'll now turn it over to our Chief Revenue Officer, Wade Seberg.

Thank you, Dennis, and thank you to everyone for joining us today. Before we dive into the details, I want to acknowledge that our revenues for the third quarter were negatively impacted by challenges in our direct-to-consumer markets, which were affected by broader macroeconomic factors impacting discretionary spending. While we are disappointed by this outcome, we're encouraged by several bright spots that are driving long-term momentum across our business. Starting with the original equipment manufacturers, or our OEM revenue, we experienced sequential growth, and our increasing portion of these sales continues to be derived from the RV OEM market. Our OEM revenue increased from $5.6 million in the second quarter of 2024 to $7.4 million in the third quarter of 2024. This represents a 10% increase that we believe may be attributable to a recovering RV market, the implementation of our smart battery product line, and us beginning to penetrate the heavy duty trucking market. A significant driver of this revenue increase was the introduction of our new smart battery product line implemented by one of our OEM partners. These new Battle Born products featuring our patent-pending Dragonfly Intelligence communication technology have not only been adopted by this OEM, but have also expanded their energy storage capacity, demonstrating the value of this technology. We believe that the Dragonfly Intelligence ecosystem with its feature-rich design will gain further market traction as additional OEMs test and experience its potential to enhance customer satisfaction. The RV Industry Association, or RBIA, is forecasting continued recovery in the overall RV market, with unit production reaching the mid-300,000s per year range. We believe this broader market recovery will benefit our OEM partners and further support Dragonfly Energy's growth trajectory. In the heavy-duty trucking market, our solutions provide the benefit of a restful night's sleep during the 10-hour rest period, reducing the risk factors associated with driver fatigue. Expanded trials are underway with several fleets who are experiencing firsthand how our electric auxiliary power units can eliminate idling and contribute to more sustainable and driver-focused fleet operations without imposing a green premium. We've recently introduced our Dragonfly Intelligence technology to the heavy-duty trucking market as well. This advanced technology, which seamlessly integrates into our Battle Born product line, offers real-time insights into each truck's energy system. With this increased visibility, drivers can now monitor battery health via an app, while fleet managers gain access to historical performance data and in-depth diagnostics. This connectivity not only ensures peace of mind but also positions our systems as a superior alternative to traditional lead-acid batteries in an increasingly connected world. Additionally, we believe the revenue will increase in fourth quarter revenue within the heavy-duty trucking industry in part due to our trailer solution for lift gates with large beverage distribution chains. We look forward to sharing more specifics as these solutions are installed and announcements are approved. Turning to oil and gas. Leveraging our uniquely certified lithium power solutions, we've achieved a significant milestone by demonstrating our first off-grid methane reclamation power system in collaboration with a legacy equipment and its subsidiary, Agnet Systems. This initial deployment, serving as a demonstration unit for Legacy's customers, including both fleet equipment providers and end users, in October garnered strong positive feedback. During these demonstrations, our clients identified additional unexpected benefits of our solutions. For instance, our energy storage systems can supply grid-level power from natural gas compressor packages and replace outdated lead-acid battery systems that are currently being replaced annually due to poor maintenance. Our Class I, Division II certified lithium battery packs present a compelling alternative, and we are now actively working to formalize partnerships within the oil and gas sector to capitalize on this and other opportunities. Our distribution network has expanded through agreements with Meijer Distribution and Keystone Automotive, a subsidiary of LKQ Corporation, serving over 18,000 customers. These partnerships extend our reach to thousands of RV and marine dealers nationwide and are expected to drive additional revenue growth as they increase our market access and product availability. We believe that the strategic initiatives discussed, paired with upcoming product releases and partnerships, position DragonFall Energy for sustained growth. We remain committed to navigating economic challenges with a proactive, solution-oriented mindset. and are excited for what lies ahead as we expand our reaching capabilities. Thank you all for joining us today, and we look forward to continuing our journey towards sustainable and diversified growth. I will now turn the call back over to Dennis Farris to discuss our third quarter 2024 financial results.