Dragonfly Energy(DFLI) - 2024 Q4 - Annual Results

Overview of Q4 and Full Year 2024 Performance Dragonfly Energy reported Q4 2024 revenue growth driven by OEM, initiated a corporate optimization program, and aims for positive Adjusted EBITDA by Q4 2025, despite a full-year revenue decline and increased net loss Key Highlights and Strategic Initiatives Dragonfly Energy reported a 17% year-over-year revenue growth in Q4 2024, driven by strong performance in the OEM segment. Post-quarter, the company enhanced its financial position through a significant debt restructuring and a concurrent capital raise. To improve efficiency and target profitability, a corporate optimization program has been initiated, with a goal of achieving positive Adjusted EBITDA in Q4 2025 - Successfully negotiated a significant debt restructuring and secured additional capital, strengthening the company's near-term financial position and reclassifying debt to long-term[2] - Launched a corporate optimization program to establish a more efficient cost structure and align operations with near-term revenue opportunities, aiming for a path to profitability[2] - Fourth-quarter net sales returned to year-over-year growth, increasing by approximately 17%, primarily driven by a 61% increase in adoption among OEM customers, despite ongoing challenges in the RV market[3][6] Q4 and Full Year 2024 Key Financial Metrics (in millions) | Metric | Q4 2024 | Full Year 2024 | | :--- | :--- | :--- | | Net Sales | $12.2 | $50.6 | | OEM Net Sales | $6.2 | $27.6 | | Gross Margin | 20.8% | 23.0% | | Net Loss | $(9.8) | $(40.6) | | Adjusted EBITDA | $(2.0) | $(18.5) | Fourth Quarter 2024 Financial Results In Q4 2024, net sales increased 17.0% YoY to $12.2 million, propelled by a 61% surge in OEM sales to $6.2 million, which more than compensated for a 13% decline in DTC sales. Gross margin slightly compressed to 20.8% from 21.6% due to higher material costs and a sales mix shift towards OEM. The company reported a Net Loss of $9.8 million, a significant downturn from a Net Income of $3.3 million in the prior-year period Q4 2024 Net Sales by Customer Type (in thousands) | Customer Type | Q4 2024 | Q4 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | DTC | $5,726 | $6,561 | -13% | | OEM | $6,236 | $3,877 | 61% | | Licensing | $250 | $0 | N/A | | Total Net Sales | $12,212 | $10,438 | 17% | - Gross Profit increased 12.5% to $2.6 million, though Gross Margin declined to 20.8% from 21.6% due to higher material costs and a shift in sales mix to OEM[7] - Operating Expenses rose to $6.3 million from $5.4 million, primarily due to one-time expenses related to patent litigation, a reverse stock split, and costs associated with moving into a new facility[7] - The company reported a Net Loss of $(9.8) million, or $(1.39) per share, compared to Net Income of $3.3 million, or $0.50 per share, in Q4 2023. Adjusted EBITDA was $(2.3) million[8] Full Year 2024 Financial Results For the full year 2024, net sales decreased by 21% to $50.6 million, driven by a 39% decline in DTC sales to $22.6 million due to continued softness in the RV market. OEM sales remained flat year-over-year at $27.6 million. The company's Net Loss widened substantially to $40.6 million from $13.8 million in 2023, with Adjusted EBITDA deteriorating slightly to negative $18.5 million Full Year 2024 Net Sales by Customer Type (in thousands) | Customer Type | FY 2024 | FY 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | DTC | $22,616 | $36,875 | -39% | | OEM | $27,612 | $27,517 | 0% | | Licensing | $417 | $0 | N/A | | Total Net Sales | $50,645 | $64,392 | -21% | - The decline in DTC sales was attributed to continued softness and macroeconomic pressures in the RV market. Flat OEM sales resulted from new customer acquisitions being offset by a large customer changing the product from a standard offering to an option[11] - Gross profit for the year was $11.6 million with a 23.0% margin, down from $15.4 million and a 24.0% margin in the prior year, primarily due to lower sales volume[12] - The company reported a Net Loss of $(40.6) million, or $(5.91) per share, compared to a Net Loss of $(13.8) million, or $(2.36) per share, in 2023. Full-year Adjusted EBITDA was $(18.5) million[13] Business Outlook and Guidance Looking ahead, Dragonfly Energy is focused on driving shareholder value through growth, market diversification, and product innovation. The company has issued guidance for Q1 2025, projecting net sales of approximately $13.3 million. A key strategic goal is to achieve positive Adjusted EBITDA by the fourth quarter of 2025, aided by the ongoing corporate optimization program - The company's focus for 2025 is on driving shareholder value through growth, diversification across end markets, and continued product innovation[15] - With the combination of revenue growth and the corporate optimization program, the company expects to achieve positive Adjusted EBITDA by the fourth quarter of 2025[15] Q1 2025 Guidance (in millions) | Metric | Guidance | | :--- | :--- | | Net Sales | ~$13.3 | | Adjusted EBITDA | ~$(3.8) | Financial Statements The company's financial statements for 2024 reflect a stable asset base but a significant increase in liabilities due to debt restructuring, leading to a stockholders' deficit, alongside a widened net loss and improved operating cash flow primarily from inventory reduction Consolidated Balance Sheets As of December 31, 2024, total assets remained stable at $75.2 million. However, total liabilities increased significantly to $84.6 million from $47.3 million in the prior year, driven by the reclassification of notes payable to long-term debt following restructuring. This shift resulted in a stockholders' deficit of $9.4 million, compared to stockholders' equity of $27.9 million at the end of 2023. Cash and cash equivalents decreased to $4.8 million, while inventory was substantially reduced to $21.7 million Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,849 | $12,713 | | Inventory | $21,716 | $38,778 | | Total Assets | $75,214 | $75,204 | | Notes payable, current portion | $0 | $19,683 | | Notes payable, non current portion | $29,646 | $0 | | Total Liabilities | $84,618 | $47,292 | | Total Stockholders' (Deficit) Equity | $(9,404) | $27,912 | Consolidated Statement of Operations For the full year 2024, Dragonfly Energy reported net sales of $50.6 million, a decrease from $64.4 million in 2023. Gross profit fell to $11.6 million from $15.4 million. Despite a reduction in operating expenses to $34.0 million, the company's loss from operations was $22.4 million. The net loss for the year widened significantly to $40.6 million, or $(5.91) per share, compared to a net loss of $13.8 million, or $(2.36) per share, in the prior year Statement of Operations Summary (in thousands) | Metric | Full Year 2024 | Full Year 2023 | | :--- | :--- | :--- | | Net Sales | $50,645 | $64,392 | | Gross Profit | $11,626 | $15,446 | | Total Operating Expenses | $34,012 | $42,875 | | Loss From Operations | $(22,386) | $(27,429) | | Net (Loss) Income | $(40,615) | $(13,843) | | Net (Loss) Gain Per Share | $(5.91) | $(2.36) | Consolidated Statement of Cash Flows For the year ended December 31, 2024, net cash used in operating activities improved to $7.2 million from $16.5 million in 2023, primarily due to a $17.1 million reduction in inventory. Net cash used in investing activities was $2.7 million for property and equipment purchases. Net cash from financing activities was $2.0 million, significantly lower than the $19.5 million in 2023. Consequently, the company's cash and cash equivalents decreased by $7.9 million, ending the year at $4.8 million - Net cash used in operating activities improved to $(7.2) million in 2024 from $(16.5) million in 2023, largely driven by a significant decrease in inventories[29] - Net cash used in investing activities was $(2.7) million, primarily for the purchase of property and equipment[29] - Net cash provided by financing activities totaled $2.0 million, mainly from an At-The-Market (ATM) public offering[29] - The company's cash and cash equivalents position decreased from $12.7 million at the beginning of the year to $4.8 million at the end of the year[29] Non-GAAP Financial Measures The company provides reconciliations for its non-GAAP Adjusted EBITDA, highlighting significant adjustments from GAAP net loss, and offers forward-looking guidance for Q1 2025 Adjusted EBITDA Reconciliation of GAAP to Non-GAAP Measures The company provides a reconciliation from Net (Loss) Income to its non-GAAP measure, Adjusted EBITDA. For the full year 2024, Adjusted EBITDA was negative $18.5 million, a slight increase in loss from negative $17.1 million in 2023. For Q4 2024, Adjusted EBITDA was negative $2.3 million. Significant adjustments from GAAP net loss include stock-based compensation, changes in the fair value of warrant liability, and various one-time expenses such as patent litigation and loss on settlement Adjusted EBITDA Reconciliation Summary (in thousands) | Period | Net (Loss) Income | Adjusted EBITDA | | :--- | :--- | :--- | | Q4 2024 | $(9,842) | $(2,347) | | Q4 2023 | $3,314 | $(1,831) | | Full Year 2024 | $(40,615) | $(18,500) | | Full Year 2023 | $(13,817) | $(17,127) | - Key adjustments for Full Year 2024 included removing the positive $6.7 million change in fair market value of warrant liability, adding back $1.0 million in stock-based compensation, a $2.5 million loss on settlement, and a $0.9 million loss on asset impairment[32] Q1 2025 Guidance Reconciliation Dragonfly Energy provides a reconciliation for its Q1 2025 Adjusted EBITDA guidance of approximately negative $3.8 million. The company reconciles from a projected Operating Loss of $4.8 million, adjusting for items such as depreciation & amortization ($0.3 million), stock-based compensation ($0.2 million), and patent litigation expenses ($0.4 million). A reconciliation to forward-looking net loss is not provided due to the unreasonable effort required to predict the change in fair value of the company's warrant liability Q1 2025 Adjusted EBITDA Guidance Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | Operating Loss | $(4,843) | | Depreciation and Amortization | $297 | | Stock Based Compensation | $219 | | ATW Deal expenses | $150 | | Patent Litigation expenses | $368 | | Adjusted EBITDA | $(3,809) | - The company states it is not able to calculate forward-looking net loss without unreasonable efforts due to significant uncertainties related to the accounting for the change in fair market value of its warrant liability[34]