Dragonfly Energy SPAC Presentation Deck
Financial Model Assumptions (1/2)
Financial Projections
Included in this presentation are the Company's estimates for the fiscal years 2022 and 2023 (the "Financial Projections"), based on information known as of the date of this
presentation. These projections were prepared by the Company's management as part of its long-range planning process and to provide current and potential investors the
Company's expectations of projected financial performance for their use in evaluating the transaction described in this presentation.
The underlying assumptions on which the Financial Projections are based require significant judgment. As a result, there can be no assurance that the Financial Projections will be
an accurate prediction of future results. Key estimates and assumptions underlying the Financial Projections include:
Revenue growth:
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dragonfly
ENERGY
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Overall projected increase in revenue and unit sales in both fiscal 2022 and 2023 is based on projected OEM and DTC sales increases;
OEM revenue is expected to grow primarily based on increasing sales to RV OEM customers with whom the Company has existing relationships and reflecting (i)
increased OEM purchases in anticipation of increased end customer demand for lithium-ion batteries as original equipment; (ii) an increase in the number of RV models
where the respective OEMs design in the Company's batteries as a 'standard' rather than an 'optional' feature; and (iii) growth in aftermarket sales through the various
OEM dealer networks where the Company's products are featured (in some cases exclusively) and stocked for after-market RV service and lead-acid replacement;
DTC revenue growth is primarily based on (i) increased penetration within existing markets in line with the trend of lithium-ion batteries increasingly replacing lead acid
batteries; (ii) increased sales and marketing investments targeting new adjacent markets; and (iii) the introduction of new lithium-ion battery products; and
DTC revenue growth is also expected to benefit from increased accessory sales as (i) the Company further develops its full-system design expertise and product offerings
and (ii) customers increasingly demand more sophisticated systems, rather than simple drop-in replacement (in each case, enabling the Company to sell the additional
components needed for a full storage solution).
Gross Margin: expected to remain relatively stable as fixed cost absorption increases with higher revenue, and manufacturing efficiencies (including additional automation efforts)
help to lower overall production costs, somewhat offset by an increase in lower margin OEM sales and third-party sourced accessory sales.
Gross Profit: expected to increase in line with increased sales and benefits from manufacturing efficiencies and platform scale.
Adjusted EBITDA and Adjusted EBITDA Margin: each expected to increase in line with increased revenue and scale, somewhat offset by higher operating expenses across the
major expense categories.
Manufacturing efficiencies: to improve production efficiency, the Company intends to continue to introduce additional automation functions into its manufacturing and
assembly processes.
Manufacturing facility: the Company's 99,000 square foot production facility (occupied since mid-2021) currently houses two production lines with plans to introduce an
additional production line over the next 12 months to meet expected increases in unit demand.
Cell supply: the Company has opted to purchase its lithium-ion battery cells from two carefully selected cell manufacturers in China. Doing so, to date, has enabled the Company
to manage inventory and lead-times in anticipation of future needs and offset potential cell manufacturer cost increases with volume-based purchase discounts. An inability to
timely and cost effectively source cell supplies could adversely impact the Company's revenue and margins.
Solid state technology: over the last decade, the Company has made significant investments to develop its solid state battery technology and position the Company to
manufacture and market its own solid state lithium-ion batteries. The Financial Projections for fiscal years 2022 and 2023 reflect related investments intended to support (i)
continued optimization of the Company's solid state chemistry and (ii) construction of an initial pilot production manufacturing line. The Financial Projections do not include any
contribution from solid state battery sales, with these future sales subject to successful related technology development and production process advancement efforts. At this
time, it is impracticable to provide a meaningful estimate of potential solid state battery sales. However, a significant element of the potential transaction consideration consists of
up to 25 million Earnout Shares payable only if related trading price targets of $22.50 prior to December 31, 2026 and/or $32.50 prior to December 31, 2028 are met (in addition to
15 million Earnout Shares issuable upon the Company meeting certain revenue or income thresholds for fiscal year 2023). We believe that meeting these trading price targets is
unlikely to occur unless the Company successfully develops its solid state technology and solid state battery sales prospects.
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