Dragonfly (DFLI) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

DATE

Thursday, May 14, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Denis Phares
• Chief Revenue Officer — Wade Seaburg

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Net Sales -- $9.7 million, including $5.8 million from OEM and $3.7 million from direct-to-consumer channels, reflecting reduced demand in the RV segment.
• Gross Margin -- 17.6%, with management citing volume-driven pressure but projecting notable improvement as trucking revenue increases and fixed costs are absorbed.
• Operating Expenses -- $7.4 million compared to $9.8 million prior, primarily due to targeted cost reductions.
• Net Loss -- $7.7 million, or $0.64 per diluted share, with negative adjusted EBITDA of $4.6 million.
• Cost Reduction Initiatives -- $4.5 million in annualized expense cut in March through marketing, workforce, and executive compensation adjustments, plus $4 million expected from facility consolidation, supporting a projected $9 million annualized adjusted EBITDA improvement.
• Major Commercial Order -- Stevens Transport placed an over $3 million order post-quarter for nearly 500 trucks, the largest trucking purchase order to date, with deliveries beginning in the second quarter and continuing through 2026.
• Product Adoption -- Commercial order spans the whole heavy duty trucking portfolio, covering four OEM chassis, and includes 24-volt dual flow power packs, all-electric APU, and inverters.
• Market Recovery Signals -- Management notes "signs of stabilization in the RV market" and "on heavy duty trucking," expecting acceleration in the second quarter.
• Q2 Sales Guidance -- Anticipated net sales of approximately $13.2 million, representing a sequential increase of 36% as trucking revenues begin to scale.
• Q2 Adjusted EBITDA Guidance -- Projected loss of $1.9 million, a sequential improvement of $2.7 million, attributed to cost reductions and higher revenue.
• Profitability Target -- Positive adjusted EBITDA targeted at an annualized net sales run rate of $70 million, supported by an improved cost structure and growing trucking and RV momentum.
• Intellectual Property and Technology -- First Japan patent allowance received for powderized solid state electrolyte; portfolio comprises nearly 90 issued or pending patents.
• Nevada Tech Hub Award -- Received $527,000 in nondilutive funding to expand cylindrical cell prototyping and testing, with the project running through the second quarter of 2027.
• Leadership Compensation Shift -- Executive and board cash compensation reduced by approximately 20%, with conversion to equity-based incentives, enhancing shareholder alignment.
• RV Industry Environment -- March RV retail sales down more than 20%, and wholesale shipments also declined, but OEM partnerships show continued adoption and higher battery content per unit.
• Payback Acceleration -- Dual flow power pack payback period improved from "just over 1 year" to "under 10 months," driven by increased diesel prices.

SUMMARY

Dragonfly Energy (NASDAQ:DFLI) reported first quarter results that exceeded internal guidance for net sales and adjusted EBITDA, driven by expanded adoption in OEM partnerships despite sustained RV market headwinds. The company secured its largest heavy duty trucking order to date from Stevens Transport, with the order spanning nearly 500 trucks and underwriting future revenue starting in the second quarter. Executives detailed targeted actions expected to drive an annualized adjusted EBITDA improvement of approximately $9 million, and project a notable improvement in gross margin as fixed costs are leveraged by higher volumes. With positive momentum in the trucking business and a pipeline of additional fleet engagements, management forecasts sequential growth in both sales and adjusted EBITDA for the second quarter. Progress was also reported on technology initiatives, including a nondilutive grant to expand domestic cell prototyping, and the receipt of a significant Japanese patent allowance.

• Management described 2026 as a "pivotal year" for the company following substantial improvements in capital structure and cost base.
• Stevens Transport's commitment represents the initial phase in transitioning a 2,500-truck fleet to Dragonfly's platform.
• "the order spans our full heavy duty trucking product portfolio," highlighting diversification within the customer order.
• Dual flow power pack and all-electric APU solutions target increased engine idle rates anticipated from 2027 NOx-compliant trucks and higher associated fleet expenses.
• Dragonfly's intellectual property portfolio totals nearly 90 issued or pending patents, including a Japanese allowance, broadening geographical protection.
• Nevada Tech Hub funding enables further in-house battery prototyping, reinforcing U.S.-based manufacturing capabilities through the second quarter of 2027.
• Leadership and board compensation is now more closely aligned with long-term shareholder interests via increased equity exposure.
• Management identified increasing fleet capital spending and accelerating order activity by OEMs as evidence of market recovery beyond the RV sector.

INDUSTRY GLOSSARY

• APU (Auxiliary Power Unit): An onboard system that provides power for heating, cooling, and appliances in trucks without engine idling.
• OEM (Original Equipment Manufacturer): Vehicle manufacturers who integrate Dragonfly's energy storage solutions directly into their platforms.
• D2C (Direct-to-Consumer): Sales conducted directly to end customers without intermediary channels.
• NOx-Compliant Engines: Diesel engines designed to meet 2027 emissions standards for nitrogen oxide, anticipated to be more expensive and require higher idle rates.
• Dual Flow Power Pack: A battery solution for trucks that supports both starter battery health and powers rest-period onboard electronics.

Full Conference Call Transcript

Denis Phares: And thank you everyone for joining us today. First quarter results came in above guidance on both net sales and adjusted EBITDA and reflected a soft RV environment as expected. The RV market continues to navigate meaningful headwinds, with industry shipments and recent retail sales data down year over year. While the broader market remains soft, we continue to see healthy adoption trends within our OEM partnerships. Driven by both expanded integration across additional model lineups and increased energy storage content within existing platforms. We are encouraged by signs of stabilization in the RV market as we move into second quarter. As well as the strong momentum we are seeing in our heavy duty trucking business.

After several years of building our presence in trucking, we are now beginning to see that work translate into meaningful revenue. Following our quarter end, Stevens Transport, 1 of the largest, temperature controlled freight carriers in North America, placed our largest trucking purchase order to date valued at over $3 million covering nearly 500 trucks. Deliveries are expected to begin in the second quarter and continue to ramp through 2026. Stevens has been a partner since 2024, when we began deploying our all electric APU across a portion of their fleet for validation testing.

We believe the results of that pilot program gave Stevens confidence to commit to transitioning their entire fleet of 2.5 thousand trucks to our platform, and this purchase order marks the beginning of that broader commitment. Importantly, the order spans our full heavy duty trucking product portfolio, reflecting the expansion of our relationship beyond the initial deployment a trend we are seeing more broadly as fleets transition from pilots to fleet wide multisystem implementation. Wade will discuss the heavy duty trucking environment in more detail. I would note that the backdrop for our trucking business has shifted meaningfully over the past several months. And we believe we are well positioned to build on this momentum throughout the year.

Turning to our cost structure, As we noted on our fourth quarter call, we implemented a series of decisive actions to align our cost structure with key growth opportunities. While also ensuring that incentives across the organization remain closely aligned with long term shareholder value. This included reductions in marketing spend primarily in D2C focused channels, targeted workforce reductions, and compensation adjustments at the leadership level, where members of the executive team and board agreed to reduce cash compensation by approximately 20% with that portion converted to equity based incentives. Again, with the goal of directly aligning the interests of our leadership team with those of long term shareholders.

Since implementing these actions in March, we have realized approximately $4.5 million in annualized expense reduction on an adjusted basis. We also expect an additional $4 million in annualized expense reduction from the consolidation of rental space which is expected to be finalized in the second quarter. Collectively, these actions are expected to drive an annualized adjusted EBITDA improvement of approximately $9 million. Following these actions, we believe Dragonfly is now appropriately sized while still retaining the resources necessary to support growth as our business continues to scale. Moving on to the technology and IP side, In April, we received our first patent allowance from the Japan Patent Office for our powderized solid state electrolyte and electroactive materials application.

This milestone strengthens our global intellectual property portfolio. Which includes nearly 90 issued or pending patents. Across battery technology, system integration capabilities, and proprietary software. While our top priority remains getting back to profitability, we continue to advance our dry electrode and solid state programs. Which we believe represent a significant long term opportunity for Dragonfly. We have developed a significant amount of valuable IP over the years, we look to appropriately leverage through organic development partnerships, joint ventures, and similar structures. Alongside this progress, we continue to invest in our domestic manufacturing capabilities. Earlier this month, we were selected for a second round of Nevada Tech Hub funding.

A $527 thousand nondilutive award that will support the expansion of our in house cylindrical cell prototyping and testing capabilities. The project is expected to run through Q2 27. And receiving this award for a second consecutive cycle reflects the program's confidence in our domestic battery manufacturing road map. With that, I would like to turn the call over to Wade to discuss our commercial markets in more detail.

Wade Seaburg: Thank you, Dennis. I would like to discuss the progress we are seeing across our commercial markets. With a particular focus on heavy duty trucking, where rising diesel prices and an accelerating fleet replacement cycle are strengthening the ROI case for our solutions in real time. Fleets have been operating through an extended freight recession, capital spending constrained across the industry. Against that backdrop, the Stevens transport order is particularly meaningful. It reflects a customer who evaluated our technology under pressure. And chose to commit to transitioning their entire 2.5 thousand-truck fleet to our platform. Following the Werner order in the fourth quarter, Stevens has now placed a purchase order spanning nearly 500 trucks, with delivery scheduled throughout 2026.

The scope of the order is worth noting. As it spans our full heavy duty trucking product portfolio. The dual flow power pack the all electric APU, and inverter. The deployment is also expected to span 4 different OEM chassis. Including trucks equipped with our 24-volt dual flow power pack. Together, these products address the full range of a truck's needs during a rest period. The dual flow supports starter battery health and reduces idle related strain. The all electric APU eliminates engine idling by powering in cab hotel loads HVAC, climate control, and onboard appliances, without running the engine. And the inverter delivers clean, stable AC power for onboard electronic and appliances.

Our ability to deliver fully integrated solutions differentiates our platform. Reinforces our position as a complete energy solutions provider in this market and increases our revenue opportunity per truck. The timing of the Stevens order is also worth noting given the broader economic environment. Diesel prices have increased significantly since the beginning of the year, which has had a meaningful impact on the ROI equation for fleet operators evaluating our solutions. Based on our internal fleet modeling, the dual flow power pack was delivering a payback period of just over 1 year at prior diesel prices. In the current pricing environment, the payback period is under 10 months. With similar improvements across our all electric APU.

Compounding this dynamic is the 2027 engine transition. As many carriers are pre buying 2026 trucks in anticipation of higher prices when the new NOx compliant engines come to market. These next generation engines are showing higher idle rates, as they need to operate at elevated temperatures to process emissions effectively. Leading to increased fuel consumption and engine wear during rest periods. They are also expected to be meaningfully more expensive. Further strengthening the economics for our idle reduction solutions. With these converging factors, we believe the outlook for the balance of the year is increasingly favorable. Fleet capital spending is beginning to recover, and the fleets that deferred equipment purchases through the downturn are now moving.

We are engaging in meaningful conversations and seeing encouraging progression as fleets advance through their evaluation phases. Have spent the last few years validating our technology and establishing our credibility across the industry. Now we are seeing that work start to translate into the commercial momentum we have been building toward. Turning to the RV market. The overall environment remained soft in the first quarter, with recent industry data showing March new RV retail sales down more than 20% year over year, while wholesale shipments also declined year over year. Against that backdrop, we remain well positioned and continue to see healthy adoption trends within our OEM partnerships.

Importantly, that growth is coming not only from broader inclusion, across additional model lineups, but also from increased energy storage content within select existing models as OEMs look to deliver more capable power systems to their customers. We are in active discussions with existing OEM partners on expanding our energy storage solutions to additional model lineups and increasing battery capacity within select current platforms. And we expect to provide further updates as those conversations progress. Across both markets, we entered the second quarter with improving momentum with trucking accelerating from a strong commercial foundation and RV positioned to benefit as end market conditions improve. With that, I will turn the call back to Dennis.

Denis Phares: Thank you, Wade. Turning now to our first quarter financial results. Net sales were $9.7 million including $5.8 million in OEM net sales and $3.7 million in DTC net sales, reflecting the softer demand environment in the RV market. Gross margin was 17.6% reflecting lower volumes We expect meaningful improvement in Q2 as trucking revenue scales and fixed cost absorption improves. Operating expenses totaled $7.4 million compared to $9.8 million primarily driven by our targeted cost reduction measures. Net loss attributable to common shareholders was $7.7 million or $0.64 per diluted share. And adjusted EBITDA was negative $4.6 million. Looking ahead to the second quarter, we expect net sales of approximately $13.2 million representing sequential growth of 36%.

As we begin to realize meaningful trucking revenue. For adjusted EBITDA, we anticipate a loss of approximately $1.9 million representing a sequential improvement of $2.7 million. Reflecting a higher revenue run rate and the cost reductions we implemented in Q1 flowing through the business. We continue to target positive adjusted EBITDA at an annualized net sales run rate of approximately $70 million With a more efficient cost structure in place, and commercial momentum building across both our trucking and RV businesses, we believe we are well positioned to reach this target and deliver long term value for our shareholders. We view 2026 as a pivotal year for Dragonfly.

Over the past year, we have both greatly improved our capital structure and reduced our cost base. Importantly, our board and executive team now operate under a compensation structure weighted toward equity, closely aligning their interests with those of our long term shareholders. We are also beginning to see the tangible benefits from our investments in the trucking market with material commercial orders and believe our momentum in the market will continue to increase as other carriers and OEMs follow suit. Especially against the backdrop of higher fuel prices. With a stronger balance sheet, a leaner cost structure, and accelerating commercial traction in trucking, we believe Dragonfly Energy is strongly positioned to capitalize on the opportunities in front of us.

We look forward to seeing many of you at upcoming meetings and conferences. In closing, I would like to thank our employees, customers, and stockholders for their continued support of Dragonfly Energy. Operator, we would like to open the call for questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Chip Moore with Roth. Your line is now open. Please go ahead.

Analyst (Chip Moore): Hey, Dennis and Wade. Thanks for taking the question. How are you guys doing?

Wade Seaburg: Good. How are you doing, Chip?

Analyst (Chip Moore): Good. Hey. So nice to see this commercial momentum on the trucking side. Wondering maybe if you could expand a bit on I think you had Wade, you talked about some of the efforts there and conversations you have been having. But any way to help think about the pipeline of opportunities, you know, similar to the order you outlined, you know, what is the addressable opportunity and how far are some of those conversations?

Wade Seaburg: Yeah. The pipeline is really strong, Chip. Thanks for the question. We have been, for the last 3 years since we have entered this market, we have been iterating product solutions and lining that up with OEMs and a lot of fleet trials that are happening in the marketplace over the last 3 years. And percentage of those fleets now started to order trucks. I mean, just you know, I saw on transport topics yesterday, that you know, truck orders are up 200% again. I think the second straight month has been up triple digits. So you are seeing it at the OEM level where fleets are starting to now order trucks again.

And as they are ordering those trucks, they are taking into account all of the technologies that they have been testing over that time. This is 1 of the reasons why, you know, previous call, we talked about Werner announcements that we had in at the end of last year, and that announcement was significant because at the time, they were not spending any money on really anything. So to be able to get them to spend capital on technology at that point was, was a real significant marker for us within the heavy duty truck market.

So far as total addressable market, you know, they are they are building, you know, 250 thousand trucks every single year, and about half of those have sleeper cabs. And need some sort of driver comfort feature. So the overall market is really strong for the solutions that we are putting out there. that is great. that is helpful, Wade.

Analyst (Chip Moore): And, you know, maybe for my follow-up, you know, maybe Dennis around, you know, dry electrode and solid state, obviously, capital being a priority in preserving the balance sheet. But any updates there or, you know, anything capital light or anything else being explored around those assets? Thanks.

Denis Phares: Yeah. I mean, we are still obviously, the top priority, as I mentioned, is revenue cost structure and getting back to profitability. But we do have some, you know, obviously, spend to maximize what we can do in terms of developing the dry electrode, the solid state, continuing the development of IP, So what we are doing really just in the background, we are developing partnerships. You know, we have we have interested parties, obviously, in what we are doing. it is a you know, tricky time in terms of batteries. it is what is happening outside of China is becoming, you know, more and more difficult.

So having technology is very important, and it is not lost, you know, on anyone trying to do something domestically. So we continue to develop the supply chain, to develop the partnerships and, you know, we look forward to being able to announce something really meaningful in the future.

Analyst (Chip Moore): Great. Appreciate it. Thanks very much.

Wade Seaburg: Thanks, Chip.

Operator: To withdraw your question, press *1 again. There are no further questions at this time. I will now turn the call back to Denis Phares for closing remarks.

Denis Phares: Thank you all for joining us today. We look forward to sharing more updates with you in the coming quarters.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.