10-Q: Dragonfly Energy Reports Q2 2026 Results, Revenue Declines

Dragonfly Energy Holdings Corp. reported a decrease in net sales for the second quarter of 2026 compared to the prior year, alongside continued net losses, though gross profit margin improved due to tariff refunds.

Summary

• Dragonfly Energy Holdings Corp. reported a net sales decrease of 19.0% to $13.2 million for the three months ended June 30, 2026, compared to $16.2 million in the same period of 2025.
• For the six months ended June 30, 2026, net sales decreased by 22.8% to $22.9 million from $29.6 million in the prior year.
• The company incurred a net loss of $4.4 million for the three months ended June 30, 2026, and $11.0 million for the six months ended June 30, 2026.
• Gross profit margin improved to 33.0% for the quarter due to a $1.1 million IEEPA tariff refund recognized as a reduction to cost of sales.
• The company completed the acquisition of the Dakota Lithium brand assets for $4.0 million, consisting of $1.0 million cash and $3.0 million in common stock.
• Subsequent to the quarter, the company entered into the Seventh Amendment to its Term Loan Agreement, modifying interest rates and covenants.
• Management expects sales to increase in the next 12 months due to customer model expansion and entry into new markets, and believes it has sufficient liquidity to meet obligations for the next twelve months.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to declining revenues, continued net losses, and significant debt obligations, despite some positive operational adjustments and strategic acquisitions.

Positives

• Gross profit percentage increased to 33.0% for the three months ended June 30, 2026, up from 28.3% in the prior year, primarily due to a $1.1 million IEEPA tariff refund recognized as a reduction to cost of sales.
• The company acquired the Dakota Lithium brand assets for $4.0 million, expanding its product offerings and retail sales focus.
• Management expects sales to increase in the next 12 months due to customer expansion and new market entry.
• Management believes the company has sufficient liquidity to meet its obligations over the next twelve months, supported by cash on hand and an at-the-market (ATM) equity offering program.
• The company received patent allowances in Japan and Europe for its solid-state battery development and dry electrode manufacturing platform.
• A significant purchase order from Stevens Transport valued over $3 million for approximately 500 trucks was secured.

Negatives

• Net sales decreased by 19.0% to $13.2 million for the three months ended June 30, 2026, compared to $16.2 million in the prior year.
• Net sales decreased by 22.8% to $22.9 million for the six months ended June 30, 2026, compared to $29.6 million in the prior year.
• The company reported a net loss of $4.4 million for the three months ended June 30, 2026, and $11.0 million for the six months ended June 30, 2026.
• Total operating expenses remained high, at $7.2 million for the quarter and $14.7 million for the six months, representing 55.0% and 64.2% of net sales, respectively.
• The company has a significant amount of debt, with a total long-term debt of $10.6 million and redeemable preferred stock of $23.5 million.
• DTC sales declined due to macroeconomic pressures and negative third-party online commentary regarding products.
• The company continues to rely on two cell manufacturers in China for its LFP cells and a single supplier for its battery management system.

Risks

• The company's ability to service its outstanding indebtedness and comply with financial covenants in its loan agreement is critical, as failure could lead to acceleration of payments.
• The potential impact of the conversion and terms of Series B Convertible Stock on the market price of common stock and the company's ability to make dividend and redemption payments.
• The company's ability to raise additional capital to fund operations is essential, with potential for dilutive financings.
• Failure to achieve anticipated benefits from customer arrangements, including with Stevens Transport.
• The company's reliance on two suppliers for lithium iron phosphate cells and a single supplier for battery management systems.
• The potential for events or circumstances that result in the failure to timely achieve the anticipated benefits of customer arrangements.
• The company's dependence on one manufacturing facility.
• The potential for adverse effects from global and macroeconomic conditions, including economic, political, and social instability.

Future Outlook

Management expects sales to increase in the next 12 months due to customers expanding the number of models that include their battery systems and entry into new markets like trucking and industrials. The acquisition of Dakota Lithium is expected to contribute material revenue starting in the fourth quarter of 2026. The company believes it will have sufficient liquidity to meet its obligations over the next twelve months.

Management Comments

• "We expect our sales to continue to increase in the next 12 months as our customers expand the number of models in which they include our battery systems for the new model year and as we continue to grow into new markets, including trucking and industrials, with new product offerings."
• "Moreover, we expect the focus of the Dakota Lithium brand on retail sales to restore that channel for the Company moving forward, with such assets expected to contribute material revenue beginning in the fourth quarter of 2026."
• "Management has evaluated the conditions and events described above in relation to the Companys obligations coming due within one year after the date these condensed consolidated financial statements are issued. ... management expects the Company to achieve profitability and generate positive cash flows from operations within the next twelve months and has concluded that the Company is expected to have sufficient liquidity to meet its obligations as they become due over the next twelve months."

Industry Context

StockSavvy.ai notes that Dragonfly Energy's performance is influenced by broader macroeconomic conditions affecting consumer demand, particularly in the RV market. The company's strategic focus on OEM and fleet channels, alongside its proprietary technology development in solid-state batteries and dry electrode manufacturing, positions it within a competitive but evolving energy storage landscape.

Comparison to Industry Standards

• The company's gross profit margin of 33.0% for the quarter is a key metric. While improved, it is important to compare this against industry benchmarks for battery manufacturers, which can vary significantly based on product type (e.g., LFP vs. other chemistries) and sales channel (OEM vs. DTC).
• The company's net loss of $4.4 million for the quarter and $11.0 million for the six months highlights ongoing profitability challenges. Many companies in the battery technology and manufacturing sector, especially those investing heavily in R&D and scaling production, experience periods of net loss.
• Dragonfly Energy's focus on LFP batteries aligns with a growing segment of the market due to cost and safety advantages over other lithium-ion chemistries. However, competition from established players like CATL, LG Energy Solution, and BYD, as well as emerging solid-state battery developers, is intense.
• The company's efforts to develop proprietary dry electrode manufacturing processes and solid-state cell technology are critical differentiators. Success in scaling these technologies could position Dragonfly Energy favorably against competitors who rely on more traditional manufacturing methods.

Legal Proceedings

• Dragonfly Energy filed a complaint against William Errol Prowse IV and Prowse Publications LLC alleging trade libel, unfair competition, and intentional interference with economic advantage due to false and misleading statements about its products.
• The company is monitoring developments and assessing potential impacts related to a U.S. Supreme Court decision invalidating tariffs imposed under IEEPA, which may result in tariff refunds.

Related Party Transactions

• Executive leadership team agreed to a 20% salary reduction for the remainder of fiscal 2026, effective April 1, 2026, in lieu of which they were granted stock options.
• Non-employee directors agreed to a comparable 20% reduction in cash compensation for the remainder of fiscal 2026, receiving restricted stock units (RSUs) in lieu thereof.
• On June 18, 2026, Lukas Lutz was appointed as an independent director and granted 10,000 RSUs.

Stakeholder Impact

• Shareholders may experience dilution from ongoing at-the-market equity offerings and potential future capital raises.
• Creditors and lenders are impacted by the company's debt obligations and financial covenants, with recent amendments to the Term Loan providing some flexibility.
• Employees may be impacted by cost reduction measures, including reduced headcount in R&D, and by the granting of stock options and RSUs as part of compensation adjustments.
• Suppliers are affected by the company's inventory management strategies and its reliance on specific suppliers, particularly in China.

Next Steps

• Continue to implement corporate optimization initiatives, prioritizing product development to drive near-term revenue and profit.
• Accelerate development of purpose-built solutions for trucking and industrial markets.
• Complete facility consolidation actions during the third quarter of 2026.
• Continue to advance intellectual property portfolio in support of solid-state battery development and dry electrode manufacturing platform.
• Generate material revenue from the Dakota Lithium asset acquisition beginning in the fourth quarter of 2026.
• Manage inventory levels and work down to appropriate safety stock levels.
• Continue to monitor developments and assess potential impact of tariff refund rulings.

Key Dates

Recommendation

While the company is making strategic moves, including an acquisition and patent advancements, the continued decline in revenue, persistent net losses, and significant debt obligations warrant caution. The improved gross margin is a positive, but the overall financial performance and ongoing need for capital suggest a 'hold' rating until a clear path to sustained profitability and reduced debt is demonstrated.

Keywords

lithium-ion batteries, deep cycle batteries, Battle Born Batteries, OEM, DTC, RV, energy storage, solid-state battery