Good afternoon, ladies and gentlemen, and welcome to the Dragonfly Energy's Fourth Quarter Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Monday, March 24, 2025. And I would now like to turn the conference over to Mr. Szymon Serowiecki of Investor Relations. Thank you. Please go ahead.

Thank you, operator, and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are Dr. Denis Phares, Dragonfly Energy's Chairman, President and Chief Executive Officer; and Wade Seaburg, Chief Commercial Officer. Before I turn the call over to Denis, I'd like to make a brief statement regarding forward-looking remarks. 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 the periodic SEC filings. Management will reference some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found today's release on the company's website. 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 Denis.

Thank you, Szymon, and thank you everyone for joining us for today's call. Before discussing our fourth quarter results, I'd like to highlight key developments in early 2025 that I believe will strengthen our position for continued growth and accelerate our path towards achieving positive adjusted EBITDA by year-end. First, we successfully negotiated a debt restructuring with our lenders, significantly enhancing our financial flexibility. This milestone eliminates all covenants except for a monthly liquidity requirement through June 30, 2026, and extends the debt maturity to October 2027. Importantly, this action will reclassify our debt as long-term from its current short term designation on the balance sheet. Additionally, we strengthened our balance sheet by raising additional capital through a preferred stock offering. Together, we believe these actions provide Dragonfly Energy with the capital and financial flexibility needed to capitalize on our significant growth opportunities and position the company for a much stronger financial standing by year-end. We also have recently launched a corporate optimization program designed to focus our resources on near-term revenue generating opportunities and accelerate our path to profitability. This initiative is being led in collaboration with Province, a nationally recognized advisory firm specializing in strategic, operational and financial advisory services. Through this effort, we are temporarily shifting investments from longer term R&D efforts to near-term revenue driving actions such as new product development, allowing us to capitalize on momentum in the RV, trucking and industrials markets, while improving operational efficiency and positioning the company for sustained profitability. As part of this strategic effort, we have also promoted Dr. Vick Singh to Chief Operating Officer. With a background in material science, chemical engineering and large scale research initiatives, Dr. Singh has played a pivotal role in optimizing company-wide structures, improving efficiencies and streamlining manufacturing processes. His expertise in structuring…

Thank you, Denis, and thank you everyone for joining us today. I'd like to highlight the significant opportunities ahead for Dragonfly Energy, particularly in the Heavy-duty trucking market. Heavy-duty trucking represents a substantial addressable market opportunity for Dragonfly Energy and we are seeing strong momentum in our commercial expansion now that fleets have resumed new vehicle orders following a multi-year capacity correction. Our solutions are designed to tackle key challenges faced by both drivers and fleet operators. For drivers, our technology provides reliable power for climate control and hotel loads during mandatory rest periods, ensuring a more comfortable and restful sleep. This directly reduces the risks associated with driver fatigue, enhancing safety while also improving driver satisfaction and retention, a critical factor in an industry facing ongoing workforce shortages. We estimate 40% to 50% of Heavy-duty trucking operations currently do not utilize an auxiliary power unit, instead relying on engine idling during rest periods. This practice leads to significant operational inefficiencies, including shortened engine life, increased downtime for more frequent repairs and higher battery replacement costs due to excessive jump starts. These challenges directly impact the bottom line for operators who have historically accepted idling as an unavoidable cost of doing business. We believe Dragonfly Energy's innovative lithium powered solutions change this paradigm entirely. Our systems provide reliable auxiliary power for appliances and electronics eliminating unnecessary engine idling. They operate silently, produce zero emissions and require minimal maintenance offering a cost effective and sustainable alternative. Feedback from customers deploying our solutions has consistently demonstrated substantial improvements in idle time with many fleets eliminating idling entirely during the mandatory 10-hour rest period. In other cases, we have reduced idling from the mid-30% range to low single-digits. By implementing our technology, fleet operators can significantly lower fuel expenses, reduce maintenance costs and…

Thank you, Wade. I will now provide a review of our fourth quarter as well as a more detailed outlook for the first quarter of 2025. Net sales increased 17% to $12.2 million, led by 61% growth in OEM sales, partially offset by a decline in DTC sales. OEM sales increased to $6.2 million from $3.9 million, driven by increased adoption of current products as we ramped up partnerships and acquired new business. We have also seen solid uptake of new products from our OEM customers. Our DTC segment generated net sales of $5.7 million, down from $6.6 million, reflecting ongoing macroeconomic pressures. Gross profit rose 12.5% to $2.5 million with a gross profit margin of 20.8%. Gross margin declined 80 basis points year-over-year due to higher material costs and a mix shift to lower-margin OEM customers. Operating expenses were $6.3 million compared to $5.4 million in the fourth quarter of 2023 due to higher G&A and R&D costs. We also incurred expenses related to the consolidation into our new 400,000 square foot facility, a strategic relocation that is expected to drive long-term operational efficiencies. We -- Net loss was $9.8 million, representing a diluted net loss of $1.39 per share. This compares to net income of $3.3 million with diluted earnings per share of $0.50. Adjusted EBITDA was negative $2.3 million, below the negative $1.8 million reported last year. Moving on to our outlook. For the first quarter of 2025, we expect net sales to be approximately $13.3 million and adjusted EBITDA to be approximately negative $3.8 million. For the full year, we expect to achieve positive adjusted EBITDA by the fourth quarter, led by a resumption of revenue growth in our corporate optimization program. I'd like to conclude by reaffirming our confidence and excitement for 2025. The financial initiatives we implemented earlier this year, combined with our sharp operational focus on near-term revenue growth and profitability, have significantly strengthened our financial and operating positions. At the same time, the momentum in our diversification efforts, particularly in trucking and other industrial markets reinforces the strong growth opportunities ahead. With these strategic advancements, we believe Dragonfly Energy is well positioned to fully capitalize on its potential and drive meaningful value for our shareholders. Operator, we would like to open the call to questions.

[Operator Instructions]. Your first question comes from the line of George Gianarikas from Canaccord Genuity.

I'd like to focus on your target of EBITDA profitability by the fourth quarter? Just to be clear, does that include the entire fourth quarter at some point in the fourth quarter?

We expect the fourth quarter to be the entire fourth quarter to be adjusted EBITDA positive.

And assuming that implies some revenue growth -- sequential revenue growth from the first quarter to the fourth quarter what are the contingency plans in case the market doesn't pick up as you expect and some of the programs get pushed out? Wondering if you could give us some sort of confidence interval around getting to that number regardless of the macro

Thanks for that question, George. It's not -- this is not sort of a -- we have to hit that number. We're just looking at our projections given the new opportunities we have in the trucking and industrial markets as well as the growth that we see in the RV market, especially within our existing customer base and it's not something that we said, well, we need contingency plans. It's something that we're expecting is going to happen because of the pipeline that we see.

Okay. Maybe to switch gears to the dry manufacturing business. I'm curious if you can give us any update or any progress there, customer -- potential customer discussion, strategic discussions, et cetera?

Yes. Thanks for that question, George. It's obviously something that is always front of mind. This is obviously something that we believe to be a significant value driver for this company. And so it's something that we continue to spend a lot of our efforts on. But what we have done is really focus on the electro tapes themselves that is the anode and the cathode. So the pivot that we've been making lately is from trying to produce these cells in-house to really focusing on customers that can take the electrodes and produce the cells themselves. We've got a lot of data in-house on the mechanical properties of the cells and actually the chemical properties and electrochemical properties at the coin cell and single air power cell level. But because we don't have the in-house capabilities to produce the larger scale format cells, we're really focusing on customers that can take what we have and produce cells from those tapes that we're able to give them. Consequently, we're able to refocus some of our resources on the near-term revenue drivers that we feel is critical for this business to -- in terms of revenue growth and market viability.

Maybe last question for me, just in terms of potential tariff impact. Have you fully baked that into your profitability guidance for the fourth quarter?

Yes, we have. The tariff impact as it turns out, we have a lot of non-tariffable costs in terms of our labor and our overhead and some of the components that we don't source overseas. So I would say from a percentage standpoint, the tariff effect on us is lower than it is generally in the industry, but it is something that we -- obviously, we've had to deal with, go to our upstream suppliers and work with them, go to our downstream customers. So it is something that we have been -- we've had to bake into our projections -- but obviously, it's something that we're able to work around. And fortunately, we don't feel it's a huge impact on our business compared to the rest of the industry.

And your next question comes from the line of Chip Moore from ROTH Capital Partners.

Denis, I was wondering maybe it sounds like you feel pretty good about the revenue funnel this year, what you're seeing in terms of potential opportunities. Maybe just a little bit, if you could expand on, I guess, particularly in RV around re-contenting and some of the trends in that market particularly with some of the uncertainties, just more broadly in terms of macro, what you're seeing there?

Yes. Sure. Thanks, Chip. This is Wade, I'll take that question.

Wade you there, I can't hear you?

Yes. Sorry, Chip, can you hear me all right?

You have to hear you now.

Okay. Great. So what we're seeing -- sorry, I had my line on mute there. So what we're seeing from an overall macro perspective is still in line with what the RVIA is putting out there, which is a modest 5% to 10% growth across the industry. But what we're seeing from our window into the market is wider adoption of our products across our core customers' platforms. So they're putting lithium products on to more models and models that we were on already, they're expanding those platforms. And then we're also seeing people wanting OEMs specifically wanting to get a little bit more maybe sophisticated with their approach to energy storage and calling us because we've done it more than anybody else in that industry specifically. So that's -- it's exciting because that we're seeing some of that content come back into the OEMs and we're seeing them take ownership over that customer experience, and that's what our products really enable them to do.

Got it. So safe to assume it sounds like you think you can comfortably outperform that forecast with some of the --

RVIA

Right, Right. And then to layer on top of that, I think I heard you say around auxiliary power in particular that we should look for a larger contribution this year? I know it's a small base, but in terms of materiality there? Any way to think about how much that could contribute? And I imagine that some of the same dynamics around some of the uncertainties out there as well.

It's exciting that the trucking market is starting to come back just a little bit, right? It's we're seeing some ready start to come back up. We attended TMC, the big trucking maintenance conference this last couple of weeks, and it was higher attended than it had been in years past, which was very encouraging. As far as estimates there, it's really indicative of our customers on how they decide to roll those out commercially as to what that growth looks like. But the engagement that we're having and the number of trials and the number of engagements going from 1 or 2 trucks to 100 trucks to then 1,000 trucks is happening. And that part is extremely encouraging because the market is extremely fragmented. There are thousands of operators out there with a couple of hundred trucks in their organization. And they really take the lead the larger organizations that have R&D and engineering teams to be able to evaluate new technologies within the transportation market. So as we knock down some of these leaders and bring them into the Dragonfly customer base, it will speak volumes for the industry.

Great. And maybe if I could just get one last one in. Just the Stryten licensing deal? Just any update there and how to think about maybe new market areas that you might go after there as well?

Yes. Thank you, Chip. The Stryten relationship has been pretty strong and active since we signed the deal last July. And honestly, it really has focused on product development on establishing our internal efficiencies and making sure that we're able to produce the products that they're interested in because there is a contract manufacturing component to that deal as well. But it does take some time, and we're not expecting anything meaningful in the short term. This is something that we'll really start to look at in terms of meaningful revenue, I think, starting 2026, if not later in 2025, but it's not something that we're really projecting to be meaningful this year. But it is an active relationship. And since they are different markets, we're talking about things like golf card and lawn and garden that we haven't been really involved in, in the past. There is some product development associated with that, and that's sort of the time constant we're dealing with.

There are no further questions at this time. I will now hand the call back to Mr. Denis Phares for any closing remarks.

Thank you, operator. In closing, I would like to thank our employees, customers and stockholders for their continued support.

Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.