Dragonfly Energy anticipates 47% growth in 2022 ahead of SPAC listing

• Lithium-ion battery pack supplier Dragonfly Energy expects revenues to increase 47% this year, during which it will complete a Nasdaq listing via a SPAC merger, before doubling in 2023.

As reported by Energy-Storage. news last month, Dragonfly Energy is going public via a merger with special purpose acquisition company (SPAC) Chardan NexTech Acquisition 2 Corp. The purchase will certainly be concluded in the second half of this year and its Type S-4 enrollment declaration, submitted yesterday (June 22) has supplied even more details regarding the company's financials, long-lasting strategies and risks, and also the transaction structure.

Economic consultancy Duff & Phelps estimates that the venture value of the new combined entity, Dragonfly Energy Holdings Corp, to be in between US$ 640-760 million.

Dragonfly has to-date focused on recreational vehicle (RV), aquatic and also off-grid residential storage markets yet intends to enter into grid connected energy storage solutions, and also is likewise establishing a solid-state battery product. It purchases lithium iron phosphate (LFP) battery cells from two vendors in China as well as relies upon one, also in China, for its battery monitoring system (BMS) platform.

Dragonfly Energy financials

Dragonfly Energy expects to clock in US$ 115 million in revenue this year, up 47%, with unfavorable EBITDA of US$ 18.1 million and also changed EBITDA of US$ 12.2 million.

For 2023, it expects revenues to greater than dual to US$ 255.1 million and unadjusted EBITDA to become favorable at US$ 39.1 million.

The company presently has 13,500 consumers in North America, made up of huge electric vehicle OEMs (original devices producers), distributors that buy bulk and re-sell, upfitters who augment vehicles, and retail consumers acquiring directly.

For the 3 months ending March 31, 2022, throughout which it sold 19,664 batteries, revenue was up 17% year-on-year to US$ 18.1 million.

OEMs comprised 17.4% of sales in the period yet Dragonfly expects that to get to 37% by 2023. The OEM mix of revenues has actually grown from 2020 as well as 2021 when OEMs composed simply 9/10% of sales, with retail as well as representatives composing the rest.

Long-term strategy, development into grid storage space and also risks

Dragonfly wants to expand outside of its 3 present markets. In the medium term, it wishes to offer into industrial, specialty and also work vehicles, material handling, solar integration and emergency situation and also standby power.

In the long-term, it is targeting the information centre, telecom as well as dispersed on-grid or grid-connected storage space markets. It claimed there are 2,750 information centres in the United States and anticipates these to significantly change in the direction of lithium-ion batteries to give a dependable power supply.

For on-grid storage space, the company believes its solid-state technology will certainly help reduce the associated cost of storage to get to 'grid parity', indicating expense competitiveness with power from the grid, sooner than currently anticipated.

On risks, Dragonfly highlighted that its future growth relies on the needs and success of its customers. This is especially true for selling to OEMs. It additionally expects competitors to raise which increasing into new markets for LFP batteries depends in part on the ability to create and also manufacture items.

It has no strategies to expand its cell and also BMS supply mix as of yet however acknowledges that "any interruption in the operations of these essential vendors can detrimentally influence our business and also results of procedures", and also its reliance on one solitary production facility was likewise highlighted as an organization risk.

There are also clear risks to its decision to invest in solid-state batteries, and the success of that venture really connects right into the SPAC listing, the company's registration statement described. Dragonfly pointed out significant design challenges in the development of the product and admitted that it might be postponed and even fail. It may additionally fail to adequately regulate the capital investments needed to be successful.

SPAC listing extra information

As Chardan is an existing publicly-listed entity, its investors can demand the company redeem their shares for cash money once business mix takes place. Thinking no redemption shares, Dragonfly's existing shareholders will certainly hold 66% of the new entity and Chardan's existing public investors hold 23%, with the rest held by initial shareholders and also a term funding lending institution. Presuming maximum redemption, the mix adjustments to 87/0/9/ 4% specifically, because all Chardan's shareholders will certainly have been bought out.

The work that has gone into the enrollment document has not factored any solid-state battery sales right into future revenue forecasts. Interestingly, up to 25 million earnout shares as part of the SPAC merger are just payable if relevant trading rate targets of US$ 22.50 by the end of 2026 and/or US$ 32.50 by the end of 2028 are fulfilled.

However the enrollment document states: "We believe that meeting these trading price targets is not likely to take place unless Dragonfly efficiently creates its solid-state innovation and also solid-state battery sales potential customers."

Various other players in the energy storage market to have actually gone public in the last few years via the SPAC route include C&I-focused energy storage remedy carrier Stem Inc, iron circulation battery company ESS Inc as well as lithium-ion recycler Li-Cycle.