Detailed Narrative
Q2 Financial Performance Overview
Dragonfly Energy reported net sales of $13.2 million for Q2 FY26, aligning with guidance. Gross profit reached $4.3 million, with gross margin expanding 470 basis points year-over-year to 33.0%, partially due to a $1.1 million tariff refund. Operating expenses decreased to $7.2 million from $7.9 million, reflecting cost reduction actions. Adjusted EBITDA improved by $3.0 million sequentially to negative $1.6 million, surpassing expectations, while the net loss attributable to common shareholders was $5.5 million, or $0.43 per diluted share.
Dakota Lithium Acquisition Details and Strategy
The company acquired Dakota Lithium's assets for a total purchase price of $4 million, comprising $1 million in cash and $3 million in Dragonfly common stock issued at $2 per share, subject to a 12-month lockup. Dakota Lithium generated approximately $12 million in net revenue in 2025, despite prior inventory constraints. This acquisition is expected to contribute meaningful revenue and be accretive to adjusted EBITDA starting in Q4 FY26, leveraging Dragonfly's existing infrastructure to expand product and market reach with limited incremental operating expense.
Heavy Duty Trucking Market Inflection
The heavy-duty trucking market began contributing meaningful revenue in Q2 FY26, generating $0.5 million. This is projected to more than double to approximately $1.3 million in Q3 FY26, with sequential growth expected thereafter. Initial deployments are with large fleet customers like Stevens Transport (planning to move its 2,500-truck fleet) and Werner Enterprises. The improving broader trucking environment, elevated diesel prices, and the 2027 engine transition are enhancing the economic case for Dragonfly's solutions.
RV Market Softness and OEM Positioning
The RV market remained soft in Q2 FY26, with RVIA reporting a 14.2% year-over-year decline in shipments through mid-year. Despite this, Dragonfly continues to strengthen its position with OEM partners, securing inclusion across additional model lineups and seeing increased energy storage content within existing models. Management expects the general softness to persist through the end of 2026 and into 2027 due to macroeconomic factors affecting discretionary spending.
Strategic Hires and Intellectual Property Expansion
Dragonfly strengthened its team with the appointment of Robert Keller as Director of National Fleet Sales, bringing extensive experience in commercial fleets. Dr. Lucas Lutz, co-founder of Sphere Energy, joined the board of directors, contributing expertise in battery science and data modeling. The company also expanded its intellectual property portfolio by receiving a Japanese patent allowance supporting its solid-state battery technology, covering dry powder coating layers within electrochemical cells, complementing recent U.S. and European patent allowances.
Q3 Outlook and Path to Profitability
For Q3 FY26, net sales are expected to reach approximately $13.5 million, while Adjusted EBITDA is projected at negative $2.4 million. The sequential decline in Adjusted EBITDA is attributed to temporary timing factors, including expenses for vacated space and incremental operating costs for Dakota Lithium integration, rather than a change in underlying business trajectory. The company remains focused on achieving positive Adjusted EBITDA at an annualized net sales run rate of approximately $70 million, driven by cost right-sizing, trucking revenue ramp, and Dakota Lithium's contribution.