8-K: Dragonfly Energy Q2 Sales Up 23%, OEM Growth Strong

Dragonfly Energy Holdings Corp. reported a 23% increase in second-quarter net sales, driven by robust 51% growth in OEM sales, exceeding guidance.

Summary

• Net sales for Q2 2025 increased 23.0% year-over-year to $16.2 million, surpassing guidance.
• OEM net sales surged 50.6% to $10.1 million, reflecting strong factory-level adoption.
• Gross margin expanded by 430 basis points to 28.3%, attributed to lower inventory costs and improved fixed cost absorption.
• Net loss significantly improved to $(7.0) million from $(13.6) million in the prior-year period.
• Adjusted EBITDA improved to $(2.2) million from $(6.2) million year-over-year.
• Operating expenses decreased to $7.9 million from $9.9 million, including lower R&D costs.
• Direct-to-Consumer (DTC) net sales decreased 9.0% to $5.9 million due to ongoing macroeconomic pressures.
• The company provided Q3 2025 guidance, anticipating net sales of approximately $15.9 million (a 25% year-over-year increase) and Adjusted EBITDA of approximately $(2.7) million.
• The capital structure was simplified through a recent exchange of preferred shares, and a public offering enhanced financial flexibility.

Sentiment

Score: 7

Explanation: The company demonstrated strong top-line growth, particularly in OEM sales, and significant improvements in gross margin, net loss, and Adjusted EBITDA, exceeding guidance. Strategic moves to simplify capital structure and raise capital are positive. However, the company continues to operate at a net loss and negative Adjusted EBITDA, with a declining cash balance and worsening stockholders' deficit, indicating ongoing financial challenges despite operational improvements.

Positives

• Net sales increased 23.0% year-over-year to $16.2 million, exceeding guidance.
• OEM net sales grew significantly by 50.6% to $10.1 million, indicating strong demand from manufacturing partners.
• Gross margin expanded by 430 basis points to 28.3%, driven by lower inventory costs and higher volumes.
• Net loss improved substantially to $(7.0) million from $(13.6) million in the prior-year period.
• Adjusted EBITDA improved to $(2.2) million from $(6.2) million year-over-year.
• Operating expenses decreased by 20.4% to $7.9 million, including lower R&D costs.
• Successful acceleration of design and manufacturing for fully integrated energy storage systems for several leading RV and heavy-duty trucking OEMs.
• One RV partner adopted Dragonfly's systems as standard across select 2026 models.
• Simplified capital structure through preferred stock exchange and enhanced financial flexibility from a recent public offering.
• Positive change in fair market value of warrant liability, contributing a $1.689 million gain in Q2 2025.

Negatives

• Net loss remains significant at $(7.0) million.
• Adjusted EBITDA is still negative at $(2.2) million.
• Direct-to-Consumer (DTC) net sales decreased 9.0% to $5.9 million, reflecting ongoing macroeconomic pressures.
• Cash and cash equivalents decreased to $2.733 million at June 30, 2025, from $4.849 million at December 31, 2024.
• Net cash used in operating activities increased to $(7.865) million for the six months ended June 30, 2025, compared to $(7.411) million in the prior year.
• Total Stockholders (Deficit) worsened to $(16.604) million at June 30, 2025, from $(9.404) million at December 31, 2024.
• Interest expense, net, increased to $(5.442) million in Q2 2025 from $(4.878) million in Q2 2024.
• Notes payable, non-current portion, increased to $38.647 million at June 30, 2025, from $29.646 million at December 31, 2024.

Risks

• Ability to achieve improved recovery in core markets, including the RV market.
• Ability to successfully increase market penetration into target markets.
• Ability to penetrate the heavy-duty trucking and other new markets.
• Growth of the addressable markets that the company intends to target.
• Ability to retain members of its senior management team and other key personnel.
• Ability to maintain relationships with key suppliers, including suppliers in China.
• Ability to maintain relationships with key customers.
• Ability to protect its patents and other intellectual property.
• Ability to successfully utilize its patented dry electrode battery manufacturing process and optimize solid-state cells, as well as to produce commercially viable solid-state cells in a timely manner or at all, and to scale to mass production.
• Ability to timely achieve the anticipated benefits of its licensing arrangement with Stryten Energy LLC.
• Ability to achieve the anticipated benefits of its customer arrangements with THOR Industries and THOR Industries affiliated brands.
• Ability to maintain the listing of its common stock and public warrants on the Nasdaq Capital Market.
• Impact of the Russian/Ukrainian conflict.
• Ability to generate revenue from future product sales and its ability to achieve and maintain profitability.
• Ability to compete with other manufacturers in the industry and its ability to engage target customers and successfully convert these customers into meaningful orders in the future.

Future Outlook

Dragonfly Energy anticipates third-quarter net sales of approximately $15.9 million, representing a 25% year-over-year increase. The company expects to deliver continued growth despite macroeconomic uncertainty, supported by deepening customer relationships, enhanced operational efficiency, and expansion into the heavy-duty trucking market. Adjusted EBITDA for Q3 2025 is projected to be approximately $(2.7) million.

Management Comments

• "We are pleased to report another strong quarter, with net sales increasing 23% year-over-year, driven by sustained demand from OEM customers despite continued economic uncertainty."
• "This performance demonstrates the resilience of our OEM partnerships, as we continue to see healthy adoption trends across our portfolio."
• "Our ongoing corporate optimization efforts continue to drive meaningful operational improvements, allowing us to strengthen our product development capabilities without increasing costs."
• "By reallocating in-house personnel, we successfully accelerated the design and manufacturing of fully integrated energy storage systems for several leading RV and heavy-duty trucking OEMs."
• "One RV partner has adopted these systems as standard across select 2026 models, reflecting Dragonflys agility and commitment to delivering innovative, tailored solutions that meet our customers evolving needs."
• "From a financial standpoint, we remain focused on strengthening our balance sheet to support growth and achieve profitability."
• "The recent exchange of our remaining outstanding preferred shares simplified our capital structure and eliminated associated interest payments, while we believe the proceeds from our recent public offering enhanced our financial flexibility to pursue near-term strategic opportunities."
• "Despite ongoing macroeconomic uncertainty, we believe Dragonfly remains well-positioned to deliver continued growth supported by deepening customer relationships, enhanced operational efficiency, and continued expansion into the heavy-duty trucking market."

Industry Context

The company's strong OEM growth, particularly in the RV and heavy-duty trucking sectors, indicates a robust demand for advanced energy storage solutions despite broader economic uncertainties impacting direct-to-consumer sales. The adoption of Dragonfly's systems as standard in new RV models suggests a positive trend towards integrated, high-performance battery solutions in the recreational vehicle industry. Expansion into heavy-duty trucking aligns with the broader industry shift towards electrification and more efficient power management in commercial vehicles.

Stakeholder Impact

• Shareholders: Potential for increased value due to strong OEM growth and improved financial metrics, but diluted by increased share count and ongoing losses. Capital raise provides financial flexibility but also dilution.
• Customers (OEMs): Benefit from innovative, tailored energy storage solutions and integrated systems, with one RV partner adopting systems as standard for 2026 models.
• Employees: Corporate optimization efforts and reallocation of in-house personnel suggest efficient resource utilization, potentially stable employment, and focus on product development.
• Creditors: Notes payable increased, but capital raise and improved operational performance could enhance ability to meet obligations.

Next Steps

• Host an earnings call on August 14, 2025, at 4:30 p.m. (Eastern Time) to discuss Q2 2025 financial results.
• Continue corporate optimization efforts to drive operational improvements.
• Strengthen the balance sheet to support growth and achieve profitability.
• Pursue near-term strategic opportunities.
• Deliver continued growth supported by deepening customer relationships, enhanced operational efficiency, and continued expansion into the heavy-duty trucking market.
• Focus on the future deployment of proprietary, nonflammable, all-solid-state battery cells.

Key Dates

Recommendation

While Dragonfly Energy demonstrated strong operational improvements with significant OEM sales growth and improved gross margin, the company continues to report substantial net losses and negative Adjusted EBITDA. The recent capital raise and preferred share exchange provide financial flexibility but also indicate ongoing funding needs and potential dilution. The declining cash balance and worsening stockholders' deficit suggest continued financial pressure. Given the mixed financial picture – strong operational execution against a backdrop of persistent unprofitability and cash burn – a 'hold' recommendation is appropriate for investors to monitor the company's progress towards sustained profitability and positive cash flow.

Keywords

lithium battery technology, energy storage, OEM sales, RV market, heavy-duty trucking, solid-state battery, dry electrode manufacturing, financial results, Q2 2025, Dragonfly Energy, DFLI, Battle Born Batteries, Nasdaq