Dragonfly Energy Holdings Corp. (NASDAQ:DFLI) Q2 2023 Earnings Call Transcript

Operator: Your next question comes from the line of George Gianarikas from Canaccord.

George Gianarikas: Just so I can clarify here on your guidance for the year. You’ve talked about $70 million to $80 million in revenue, and that’s reducing $30 million from a customer that — I’m going to assume is Keystone and $10 million from a customer that I’m going to assume is Airstream? Is that kind of — is that the new guidance relative to where we were in the past?

John Marchetti: So George, I would say that the $30 million from the largest customer really is all in very much one camp. But with the other $10 million, it really isn’t just any 1 customer, but across that overall RV market segment, right? We’re just — we are really operating still at much lower volumes than we had originally expected. So we’ve won a lot of the new customers that we expected to win and we’ve announced a handful of those. There’s a couple of others that we haven’t even announced. And those customers have come in, in terms of awarding us programs that we expected to win but it’s just — the overall industry volumes are much lower than originally expected. I mean the industry came into this year predicting a return to sort of 2019 levels, which would have been let’s call it somewhere in the 415,000 to maybe 420,000 [trailer range].

And now the industry is predicting something much closer to 300,000 as an industry. So as we’ve gone through this year, those revisions continue to be worked down. The industry body, the RV Industry Association, the RVIA, it seems to be expecting that the worst is behind it in terms of year-over-year declines, but isn’t really expecting much of an uptick until we get into probably early 2024. So we’re trying to be thoughtful about where we are with a lot of these customers, but the biggest driver by far is with that 1 largest customer who has moved to — a move back to being an option rather than putting us on as a standard install.

George Gianarikas: Now is this strictly a reflection of weaker demand? Or is there also inventory in this 1 large customer?

John Marchetti: No, there’s not a lot of inventory there to be fair, George. I mean this was — we get POs on a fairly consistent basis from the customer. So it’s not as if they are holding a fair bit of inventory that they need to work down to be fair. This is really a situation now where we have to have either the end customer or the dealer place that order with our batteries on as an option, and then that has to then come through to us, from the OEM. So like as I mentioned on the call, we just thought rather than try to make an estimate of where those might be and go back to sort of earlier ’22 levels where we had a little bit better visibility into what that — what that demand might be from an add-on perspective, given the struggles in the industry right now, it just seems prudent to, to remove that guidance all together.

And hopefully, a quarter from now, we’ll be in a little bit of a better position, at least to have a sense of how maybe some of those dealer orders are coming through with us as a request.

George Gianarikas: Okay. Maybe just to focus next on the cash and the burn. You talked about — I mean, last quarter, you had about a loss of $6 million in EBITDA, which I’m assuming is going to be about the same for this quarter based on your guidance and adjusted EBITDA — and then I’m just trying to understand if you have some interest expense there. So how should we think about the trajectory of your cash, $30-something million you had at the end of the quarter and how — where that [indiscernible] through — go ahead, I’m sorry.

John Marchetti: Sure. Sure. So as you rightly point out, we are burning cash here until we can get revenue levels back up to where we had anticipated them being at. We do have that $150 million equity line of credit. So as needed, we can certainly tap on to that as a way to supplement the cash over this intermediate term until we get revenue back up where it needs to be. But as Denis sort of highlighted, we do have a fair number of, I think, very strong growth initiatives that are starting to really generate some traction, not just on the cell manufacturing side, but also on the revenue diversification front, particularly within that broader transportation market that he highlighted. I think we’re certainly hopeful that we’ll be able to announce a couple of those here before year-end, even if maybe revenue is a little bit more of a ’24 event.

So I think that once we get that revenue back up to where we need it to be, then, then we should be in a much more comfortable position there. But over this next quarter or 2, we do expect to continue to burn cash. And like I said, we do have that equity line of credit that we can tap into to augment it if we feel like we need to.

George Gianarikas: Was there a — can you repeat those markets? You mentioned transportation broadly, also long-haul trucking. And I think there was 1 more that I may have missed within that.