Q3 2025 Earnings Call: Contradictions Emerge on Revenue Growth, EBITDA Breakeven, and Dry Electrode Technology Prioritization

Date of Call: November 14, 2025

Financials Results

• Revenue: $16.0 million, up 26% year-over-year
• EPS: Net loss per share $0.20, compared to $0.98 loss per share prior year
• Gross Margin: 29.7%, expanded 710 basis points year-over-year

Guidance:

• Q4 2025 net sales expected to be approximately $13 million (~7% YOY growth)
• Q4 2025 adjusted EBITDA forecasted at approximately negative $3.3 million (previously targeted breakeven by year-end)
• Company remains confident in 2026 growth driven by OEM expansion and heavy-duty trucking adoption

Business Commentary:

* Financial Turnaround and Balance Sheet Improvement: - Dragonfly Energy reported a 26% increase in revenue to $16 million in Q3, with a $3.3 million improvement in adjusted EBITDA. - The financial turnaround was driven by a comprehensive capital raising and debt restructuring that significantly improved the company's liquidity and balance sheet stability.

• Expansion into OEM Markets and Strategic Partnerships:
• The company's OEM segment saw a 44% increase in sales, with notable partnerships in the RV market, including Airstream, Awaken RV, and Ember RV.

• The growth in OEM sales was attributed to expanding market penetration and strategic partnerships with premium and innovative manufacturers.

• Technological Advancements and Intellectual Property:

• Dragonfly Energy expanded its intellectual property portfolio with two new patents, enhancing its platform's capabilities and integration.
• These technological advancements support advanced system performance and reliability, strengthening the company's position as a complete power systems provider.

• Operational Optimization and Margin Expansion:
• Gross margin improved by 710 basis points to 29.7%, driven by increased volumes, product mix, and operational efficiencies.

• The operational optimization program aimed to enhance cost management and production timelines, resulting in significant margin expansion.

• Debt Restructuring and Market Access:

• The company restructured its debt, reducing its principal to $19 million with a lower interest rate and extended covenant flexibility.
• This restructuring improved market access and credibility, supporting the expansion of OEM partnerships and new business segments like heavy-duty trucking.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a strengthened balance sheet ( ~ $90M raised; debt principal reduced to $19M; pro forma cash ~$30M), gross margin expansion to 29.7% (+710 bps), and resumed commercial traction (POs, OEM wins, trucking validation), calling the company 'playing offense' and positioned to invest in growth.

Q&A:

• Question from George Gianarikas (Canaccord Genuity): Maybe to focus first just on the guidance a little bit for Q4 as to which segment of the business is dragging down sequentially, the revenue is it -- the OEM business that's sort of impacting the Q4 outlook?
  Response: Q4 weakness is primarily due to DTC uncertainty (lower consumer sentiment and industrial customers impacted by the government shutdown); OEM is seasonally slow but not the main driver.

• Question from George Gianarikas (Canaccord Genuity): Right. And maybe assuming a return -- I'm not asking for '26 guidance necessarily but assuming a normalization from the consumer, is it fair to say we can look for significant growth in 2026? And how you're thinking about the year as far as perform and shape of 2026.
  Response: Management is confident in significant 2026 growth, expecting new segments—particularly heavy‑duty trucking—to be the primary drivers.

• Question from George Gianarikas (Canaccord Genuity): Got it. And in terms of -- can you help us sort of rightsize our mind in terms of where the balance sheet where the cash sits today after these transactions, where the share count sits today? Just trying to understand how to sort of have a real-time snapshot of your assets and your share count?
  Response: The improved balance sheet removes a major obstacle for customers and allows the company to invest in growth; customer conversations have shifted to product ROI and execution.

• Question from George Gianarikas (Canaccord Genuity): And maybe just I understand the numbers, though, Denis, how much cash do you have on the balance sheet now? Because these transactions happened after the end of the quarter. So can you just sort of update us on the proper share count for our models -- proper cash for our models, et cetera.
  Response: Pro forma common shares ~121 million and pro forma cash balance on the order of $30 million after debt paydowns.

• Question from George Gianarikas (Canaccord Genuity): And maybe just to talk about -- it'd be my last question, with some of the growth initiatives that you're able to put in place now that the balance sheet has been fixed essentially. What are the sort of things that you were able to do from a customer perspective to expand your -- and accelerate our growth in 2026?
  Response: Plan to expand outside sales, invest in product development and target large markets (trucking, oil & gas) to accelerate OEM wins and revenue growth.

• Question from Alfred Moore (ROTH Capital Partners): Denis, I wanted to echo congrats on the debt restructuring... How are you thinking about early feedback from potential customers, whether it's fleets or OEMs? Is this more so to think about capital budgets for next year... what are the conversations you're having?
  Response: Since the restructuring they are receiving purchase orders; lenders/investors' confidence removed balance-sheet concerns and conversations now focus on deployment, ROI and scaling projects.

• Question from Alfred Moore (ROTH Capital Partners): That's great. And a follow-up there, Denis, maybe you talked about EBITDA breakeven... you'll also have quite a bit lower interest expense as well, right? So just any more thoughts there? And then as you do hit breakeven, how are you thinking about some of the other growth areas, dry electrode and some of those -- any update there?
  Response: Reaching breakeven requires higher volumes; gross margins and efficiency improvements set the stage, and R&D on dry‑electrode/solid‑state continues but will be scaled prudently to protect cash.

• Question from Alfred Moore (ROTH Capital Partners): And maybe just the last one, just the government shutdown impacts, right? I imagine it's not massive, but as that abated here as things have opened up, hopefully, we don't get another one shortly, but yes.
  Response: Some important customers paused meaningful projects during the shutdown; management is monitoring consequences and incorporated impacts into Q4 guidance.

Contradiction Point 1

Revenue Growth Expectations

It involves changes in revenue growth expectations, which are critical for investors to assess the company's future performance and financial health.

Given consumer normalization, will 2026 see significant growth? - George Gianarikas (Canaccord Genuity)

2025Q3: We expect a return to normality and are expanding into new segments like heavy-duty trucking, which will be a primary growth driver. - Denis Phares(CEO)

When do you expect the pilot programs to result in a P&L impact? - George Gianarikas (Canaccord Genuity)

2025Q2: We're looking at the first half of next year before revenue really starts to support the business from the heavy-duty trucking sector. However, we're seeing a ramp in pilot systems that will benefit the revenue side in Q3 and Q4. - Wade Seaburg(CRO)

Contradiction Point 2

EBITDA Breakeven Expectations

It involves changes in EBITDA breakeven expectations, which are crucial for assessing the company's financial sustainability and profitability.

Given the improved outlook for next year, how do you plan to achieve EBITDA breakeven and scale key growth areas like dry electrodes and solid-state chemistries? - Alfred Moore (ROTH Capital Partners)

2025Q3: We need more volume for profitability. We're prioritizing getting back to profitability and operating more efficiently. - Denis Phares(CEO)

Are you expecting sequential improvement in Q4 and how are you tracking relative to EBITDA breakeven? - George Gianarikas (Canaccord Genuity)

2025Q2: While we anticipate some improvement, we're not ready to confirm EBITDA breakeven in the fourth quarter. - Denis Phares(CEO)

Contradiction Point 3

Dry Electrode Manufacturing Technology Prioritization

It reflects differing priorities and focus on the development and commercialization of dry electrode manufacturing technology, which could impact future product innovation and competitive positioning.

How do you see the path to EBITDA breakeven and key growth areas such as dry electrodes and solid-state chemistries? - Alfred Moore (ROTH Capital Partners)

2025Q3: We're prioritizing getting back to profitability and operating more efficiently. We continue to make progress in dry electrode and solid-state technologies. - Denis Phares(CEO)

Are there any updates on commercialization opportunities for your dry electrode manufacturing technology? - George Gianarikas (Canaccord Genuity)

2025Q1: Development of dry electrode manufacturing technology is ongoing. There is interest from commercial partners, but the focus has been on near-term revenue and profitability rather than solely on this technology. Resources have been devoted to this, but it's not the top priority currently. - Denis Phares(CEO)

Contradiction Point 4

Government Shutdown Impact

It involves differing assessments of the impact of the government shutdown, which could affect the company's financial performance and strategic planning.

What are the impacts and expected ramifications of the government shutdown? - Alfred Moore (ROTH Capital Partners)

2025Q3: It's too early to assess the overall impacts, but we have important customers who were unable to proceed with projects due to the shutdown. We've accounted for this in our guidance. - Denis Phares(CEO)

How should we assess the government's battery storage spending opportunities? Did the recent government shutdown affect your pipeline? - Harrison A. G. Colliander(INFOLINK)

2025Q1: We think the U.S. government continues to present a good opportunity for us, despite the recent budget impasse, which has indirectly affected drill rig permitting and others, but I think overall, the government has been a good opportunity for us. - Denis Phares(CEO)

Contradiction Point 5

Debt Restructuring Impact

It involves the impact of debt restructuring, which could affect the company's financial stability and customer confidence.

How are potential customers reacting to the debt restructuring, and what are the discussions about next year's capital budgets? - Alfred Moore (ROTH Capital Partners)

2025Q3: The debt restructuring has taken the balance sheet concerns out of the equation, and we're now getting purchase orders (POs) from customers. - Denis Phares(CEO)

What will be the P&L impact of tariffs over the next several quarters? - George Gianarikas (Canaccord Genuity)

2025Q2: We have been managing the tariff impact pretty well through mechanisms like negotiating better inventory pricing, passing on costs to customers, and using bonded warehousing. - Denis Phares(CEO)