Good afternoon. My name is Jenny, and I will be your operator today for Dragonfly Energy's First Quarter 2024 Earnings Call. The call can be accessed along with the earnings press release, earnings presentation and SEC filings on the Investors section of the Dragonfly Energy website found at www.dragonflyenergy.com. As a reminder, this conference call is being webcast and recorded. During this call, the company will be making forward-looking statements based on current expectations. Actual results may differ due to factors noted in the press release and in periodic SEC filings. Management will reference some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today's release on the company's website. I will now turn the call over to Dr. Denis Phares, Chief Executive Officer of Dragonfly Energy.

Thank you, and thank you to everyone joining us today. Ladies and gentlemen, the theme for today is, return to growth. There is no doubt that this company faced many challenges in addition to market headwinds that consumed our core markets throughout last year. But our strengths make us uniquely capable as a technology company with both revenue and large upside potential to weather historically bad economic conditions. We have demonstrated our ability to revolutionize an industry with broad adoption of our lithium batteries in RVs. And we are poised to repeat the same success in other adjacent downstream markets, including the heavy-duty trucking market. To update on that effort, during the first quarter of 2024, we have begun to take orders for our all-electric auxiliary power unit. In addition, we have launched our new Liftgate power system. Both of these leverage our expertise in mobile alternator charging demonstrated by our Wakespeed technology. Our Liftgate system has now been implemented in the trucking operations of bottling companies through Rush Enterprises, and we are looking to expand this application to the OEM level. Regarding the all-electric APU, we are pleased to announce that since the beginning of the year, we have begun taking purchase orders from fleets, including dry van fleet operator, CRST; a tanker fleet operator, Oakley; as well as Ploger, S&S, Wooster, Twin City among others. The fleets are diverse in size and in application demonstrating the versatility of the system. The previously announced pilot systems deployed within the larger fleets proved out the concept for these customers, consistently demonstrating reduced idling and enhanced ROI. Double-digit percentage improvements in miles per gallon have been commonly observed in the pilots, and we expect those improvements to only increase as we enter the warmer summer months. As some of these pilots are in their final stages, we expect to announce the transitioning of these fleets to our products throughout the summer. Moreover, the number of large fleets implementing pilot systems continues to grow. Regarding our core RV market, the latest RV Industry Association report forecasts a medium annual growth rate of 13.8%. RV shipments for the industry were up 9% for Q1 compared to the previous quarter. In Q1, our OEM revenue was $7.3 million. Although this represents a $1.5 million drop from the previous year's quarter, it is important to note that our batteries were standard on every Keystone trailer a year ago. Excluding Keystone, our OEM revenue grew year-over-year by 70%, thanks to new partnerships such as the previously announced deal with Forest River as well as expansion of standardization across legacy customers, Airstream and nuCamp. This rapid growth is more demonstrative of our increased market penetration than growth of the RV market. We expect continued growth in this business line throughout the year, especially with the onset of the new model year in Q3 and the release of our IntelLigence line of batteries. In addition to these significant near-term growth drivers, I am pleased today to announce that we are poised to enter an entirely new adjacent downstream market, resulting from our efforts and relationships within the industrial solar and stationary storage markets. Over the last year, we have been quietly working on getting our products certified for deployment throughout the oil and gas industry. And in Q1, we have achieved the necessary certifications. At the same time, we have identified a large new customer in this space and worked with our previously announced integration partners at Connexa to deliver a unique power system that is fully certified to operate in the vicinity of oil and gas pipelines. The first of these power systems is expected to be deployed over this summer as an integral part of equipment that helps respond to the growing need to mitigate methane leakage into the atmosphere. This market is new and significant given the new EPA mandate through the methane emissions reduction program to both fund methane mitigation equipment and fine each instance of methane leakage. Success for these power systems, defined by successful technical performance in the field during the initial deployment could potentially yield thousands of deployments over the next 18 months. The customer we are working with on this project is a legacy equipment, a market-leading natural gas compressor packager and their dedicated affiliate agonist systems. We are very excited about this partnership and the new application of our technology, and we will share more details as this project progresses. Concurrent with our expanding potential market set, the development of our cell manufacturing technologies has continued as we push towards domestic cell production. The quality and scalability of our dry electrode process has garnered significant interest from large customers in sectors such as automotive, consumer electronics and data centers. With the dry electrode process at pilot scale, we are now focusing our efforts on optimizing all other unit operations associated with cell manufacturing, especially optimizing aging formation and end-of-line testing. These tend to be very chemistry and application specific. Although we had historically focused on storage, which requires longevity and cyclability, propulsion and consumer electronics applications require higher electrode mass loadings and higher charge and discharge rates. We have demonstrated the ability of our dry electrode process to meet these metrics, and we are now becoming uniquely versatile in developing application-specific aging and formation protocols in-house. We have also demonstrated the ability of our dry electrode process to meet these metrics using PFAS-free electrodes, thereby eliminating the forever chemicals that are ubiquitous in conventional lithium-ion batteries. This is a critical step in addressing the coming regulations to control the widespread use of these chemicals, especially within the European Union. We have provided some data demonstrating the results of our aging information protocols as well as PFAS-free electrode data in our quarterly earnings presentation posted to our website. We are also, at this time, qualifying IRA compliance suppliers, active material, binders, carbon conductors, current collectors, electrolyte, separators, etc., to support the scaling process of our products across new markets. I will now provide a review of our first quarter 2024 financial results as well as a more detailed outlook for the second quarter of 2024. Please note that the following figures presented are GAAP unless otherwise noted. Dragonfly generated net sales of $12.5 million in the first quarter of 2024, down from $18.8 million in the first quarter of 2023. As a reminder, the first quarter of 2023 included standard install revenue from Keystone, which was not the case in the first quarter of 2024. Net sales of $12.5 million in the quarter was in line with our $12 million to $13 million guidance range. Our direct-to-consumer or DTC segment generated net sales of $5.2 million in the first quarter of 2024, down from $10.0 million in the first quarter of 2023. This segment has seen flat sales over the last several quarters despite continued pressure on consumer discretionary spending, and we would expect a similar trajectory for this portion of the business at least through the second quarter of 2024. OEM sales in the first quarter of 2024 were $7.3 million, down from $8.8 million during the first quarter of 2023. As previously mentioned, we expect that OEM revenue will continue to increase as a percentage of overall sales throughout 2024. Dragonfly's gross profit in the first quarter of 2024 was approximately $3.1 million compared to $4.7 million in the first quarter of 2023. Operating expenses in the first quarter of 2024 were $8.9 million, down from $14.6 million in the first quarter of 2023. The decrease was primarily driven by reduced headcount, lower shipping costs, lower legal costs and lower overall stock-based compensation costs. Total other expense in the first quarter of 2024 was $4.5 million compared to total other income of $14.7 million in the first quarter of 2023. Other expense of $4.5 million in the quarter ended March 31, 2024, is comprised primarily of interest expense of $4.8 million related to our debt securities, offset by a change in fair market value of warrant liability in the amount of $0.2 million. Net loss in the first quarter of 2024 was $10.4 million or negative $0.17 per diluted share compared to net income of $4.8 million or $0.10 per diluted share in the first quarter of 2023. EBITDA in the first quarter of 2024 was negative $5.3 million compared to positive $8.9 million in the first quarter of 2023. In the first quarter of 2024, adjusted EBITDA, excluding stock-based compensation, offset by changes in the fair market value of our warrants was negative $5.2 million compared to negative $5.1 million for the first quarter of 2023. For a reconciliation of our EBITDA to adjusted EBITDA, please refer to our earnings press release. Before I turn to our guidance for the second quarter of 2024, I wanted to take a moment to discuss our cash position and expectations. Dragonfly ended the first quarter with approximately $8.5 million in cash, down from $12.7 million at the end of 2023. Our uses of cash in the first quarter of 2024 included payment for critical cell manufacturing equipment, along with acceleration of payments to vendors who we see as crucial partners as we expand into new markets. Our $150 million equity line of credit remains effectively unutilized, and we will continue to be prudent and opportunistic about its use going forward. As such, we believe that the levers we have to manage our cash spend provide us the necessary liquidity and resources to continue our R&D efforts, execute on our plans to enter new markets and expand our market footprint. Now I would like to turn our attention to our expectations for the second quarter of 2024. As mentioned earlier, we believe that the RV market continues to show signs of recovery, and our entry into the heavy-duty trucking market is now gaining traction and will be a more meaningful revenue contributor in the second half of 2024. We expect second quarter 2024 revenue to be in a range of $14.0 million to $15.0 million, representing approximately 16% sequential growth at the midpoint of the range. We expect gross margin in the second quarter to remain in the range of 24% to 26%. Operating expenses in the second quarter of 2024 are expected to be in the range of $8.5 million to $9.5 million, and we expect other income and expense to be an expense in the range of $3.0 million to $4.0 million. We expect to report a net loss in the second quarter of 2024 in the range of $8 million to $10 million or a negative $0.13 per share to negative $0.16 per share based on approximately 61 million shares outstanding. For Dragonfly Energy and expected two consecutive quarters of growth and an expansion of our RV market share, especially through partnerships with customers like Forest River, Airstream and nuCamp provides evidence that we are comfortably past the bottom and that the most difficult days are now behind us. Significant new opportunities through our Battle Born batteries brand and adjacent downstream markets such as oil and gas, are expected to supplement the growth of our core battery pack business. Meanwhile, our continued efforts in scaling chemistry agnostic cell production and establishing an IRA compliance supply chain, ensure that we are prepared to act rapidly when the opportunity presents itself. We are pursuing all of these opportunities with a keen eye towards managing our liquidity from our effectively undrawn equity line of credit as well as cash on hand. With that, I will turn the call back over to the operator, who can open the line for questions.

Your first question is from George Gianarikas from Canaccord.

I'd like to ask your opinion on today's news around the Section 301 tariffs and how that may impact both your core business and your growing cell production business.

Thanks for your question, George. Yes, happy to answer that. So from what I could read, this is news. It looks like the tariffs on sales and batteries in general are going to be increased from 7.5% to 25%. For EV batteries, that happens this year. So that is not going to affect us for non-EV batteries that happens in 2026. So that doesn't affect the immediate business at all. But in terms of the longer term, that is fantastically positive for us because, ultimately, what we are trying to do is onshore the production of the cells and the increase in tariffs combined with the IRA certainly makes it very attractive to continue our domestic cell manufacturing developments and certainly it should make it more attractive to prospective customers as well.

And would you say that most of your competitors in the marketplace are using cells from China currently?

In terms of LFP, yes, that is absolutely a factor.

Maybe just a follow-up to focus on your cash position at the end of the quarter. Remember, last quarter, you talked about inventory on hand helping as a source of cash in Q1. I'm not sure if that impacted your Q1 cash balance or if you still see that as a potential lever for a cash source in the second quarter? And maybe if you can help us understand where you expect your ending second quarter cash to finish up.

Yes, George, we certainly do expect to continue using the inventory as a source of working capital. And we have and there were increased uses of cash in the first quarter. As I mentioned, we did follow up on some cell manufacturing opportunities that we needed to execute on, and that has to do with our current relationships that we have in terms of prospective cell customers. But moving forward, we do expect to be able to access the ChEF. We did not access a ChEF at all in Q1. And so it is something that, as I mentioned, we certainly have at our disposal to use opportunistically. And so I think that the cash burn is expected to be less moving forward compared to Q1.

Your next question is from Alfred Moore from ROTH.

I wanted to ask maybe about nice to be talking about growth, I guess, first of all, and Denis, your comments just around the RV market, it sounded a bit more, I'd say, optimistic than back in March with the Q4 call. Can you just expand on what you're seeing there? I think you'll have better visibility when we got new models in a couple of months here. But any way to think about sort of cadence of the rest of the year with some of the share gains you've had and obviously, you're looking for a step-up in Q2.

Sure. Although our direct-to-consumer and RV business have remained flat, this isn't necessarily a negative. We are no longer seeing declines, and we hope for a recovery soon. Our OEM RV business has been surprisingly positive, which contributes to our optimism. We've noticed an increase in demand for the lithium option, as evidenced by more orders from Keystone, indicating that it is being chosen more frequently. We're also standardizing more features, and trailers with lithium are becoming increasingly popular. It appears that the industry is shifting more towards lithium, with adoption rates outpacing the recovery of RV shipments. This is a positive development, which is why we feel optimistic about the recovery, especially in the lithium segment of the RV market. Additionally, as we look forward to the new model year, we are focused on introducing more models, and the new IntelLigence product line will help strengthen our position in the market.

I have a question about the new opportunity in the oil and gas market, which seems quite promising. Could you elaborate on what you mentioned regarding the potential for around 1,000 deployments over the next 18 months? Is there a way to estimate the revenue opportunity per seat and how long these systems might need to be piloted? Additionally, could you provide insight into the competitive landscape and what you're competing against?

It's a relatively new product in terms of methane scrubbing. So it is a collaboration with a legacy. So we are providing the entire power system, which is comprised of about 70 kilowatt hours of batteries plus associated inversion, the Wakespeed technology for charging. It's a pretty large system. And I did say potentially thousands of deployments, and that certainly is coming from the customer and their customers and what they expect the new MERP requirements will require moving forward. So we are pretty excited about the opportunity. We are deploying the first system this summer. And we expect that towards the end of the summer, we'll have a little bit more visibility as to what those first POs might look like.

And if I could sneak one last one in, maybe just on the APU side, I think. You called out a number of fleets in the remarks and I think you're seeing traction with larger fleets. Just any update on how we should think about timing, particularly for those larger fleet orders, maybe more for next year, but just remind us.

Yes. I believe that we will begin to see progress in this area, especially with the larger fleets during the summer. As the summer advances and we receive the final data sets for the warmer months, we will be able to announce some of these larger fleets making changes.

Your next question is from Brian Dobson from Chardan Capital Markets.

Thanks for the additional color on the positive benefit of these tariffs on your business. I guess I wanted to chat a little bit about the elimination of PFAS chemicals in your production. You had mentioned that this gives you a competitive advantage both in the United States and in Europe. Do you think you can delve into that a little bit further and speak a little bit about how you plan to take advantage of that?

This topic primarily concerns potential upcoming regulations. More broadly, the absence of forever chemicals is increasingly significant as we recognize their effects in wastewater and streams. While I’m not asserting that these batteries are necessarily superior, they are indeed more environmentally friendly and safer. Notably, the data we've presented shows that our batteries perform equally well, as we can ensure that the electrodes adhere effectively. The battery performance is comparable to that of traditional PFAS binders. Additionally, our manufacturing process offers environmental advantages, as it requires less power and enhances efficiency when using the dry electrode method. Ultimately, this is an environmental matter, but it also enables us to produce batteries that are as effective as those currently available.

Your next question is from Jeff Grampp from Alliance Global Partners.

I was curious on the trucking front. Do you have any sense with these fleets that you're talking to that sound a little bit closer to purchase decisions, what those order patterns may look like? Or do you get the sense these companies are looking to perhaps convert their fleet as part of this normal replacement cycle or maybe just a subset as kind of some of the early adopters? Or just any kind of insight as far as what the adoption curve may look like when fleets ultimately decide to go forward with your option?

Sure. Well, ultimately, the rate of adoption is up to each individual fleet. But what we expect is that the APU will be applied in terms of the turnover of their fleets annually. So typically, they're in the range of 20%, 25% of the fleet is turned over annually. And so our expectation would be that at least eventually will be in that cycle and in those new orders. But it really is up to the fleets to decide how quickly they want to move in that direction. And our optimism has to do with the fact that this is a quick ROI. I mean, this is a relatively easy decision once you're comfortable with the technology.

And then in the existing RV market, I appreciate highlighting that ex Keystone number, which is really impressive. Can you kind of contextualize how you guys are thinking about the rest of the year, especially taking into account the fact that as you guys kind of lapse the legacy Keystone revenue, obviously, that could imply some pretty healthy growth numbers at kind of the corporate level?

Sure. We anticipate a significant increase in Q3 due to the new model year. Overall, we expect a steady rise throughout the year because of the growing demand for the lithium option in specific coaches. You mentioned Keystone, and we have an option on the Keystone trailers. We observed a notable surge in Keystone orders in Q1 compared to Q4, even though those figures were not included in our 70% growth metrics.

There are no further questions at this time. I will now hand the call back to Dr. Denis Phares for the closing remarks.

Thank you for everyone joining us today. We look forward to sharing additional details with all of you in the coming quarters. Have a great day.

Thank you. Ladies and gentlemen, this concludes the call. We thank you for participating and ask that you please disconnect your lines.