Flux Power - Earnings Call - Q4 2025

Executive Summary

• Q4 FY25 revenue rose 25% YoY to $16.7M with gross margin expanding 760 bps to 34.5%; adjusted EBITDA turned positive to $0.6M and non-GAAP operating income was $0.4M, reflecting cost actions and lower warranty expense.
• Orders and software attach: two airline orders ($2.0M G80-420 redesign; $1.2M G80 + SkyEMS) and SkyEMS 2.0 entered beta with an airline and is being packaged with batteries; management aims to upsell telemetry into ~28,000 installed packs.
• Balance sheet and liquidity: cash was $1.3M at 6/30; subsequent ~$5M gross warrant financing (~$3.8M net cash impact) plus $2.4M available on ABL and $1.0M on subordinated LOC; equity deficit at year-end was $(5.4)M.
• Outlook/tone: management cited tariff/macro caution near term, but growing pipeline and operational initiatives support optimism later in the fiscal year; no formal guidance provided this quarter.
• Estimates: Q4 revenue modestly beat S&P Global consensus; EPS was in line; prior two quarters saw revenue beats but EPS misses as restatement/OpEx weighed on profitability (see Estimates Context). Values marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Material gross margin expansion: Q4 GM 34.5% vs 26.9% YoY on higher-margin mix, cost savings, and lower warranty cost; adjusted EBITDA positive $0.6M in Q4.
  • Solution selling traction: $1.2M airline order bundled hardware plus SkyEMS; SkyEMS 2.0 in beta with airline and rolling to additional customers; strategy is telematics on every new battery and upsell into installed base.
  • Product/innovation: redesigned G80-420 (margin-focused) secured $2M+ order; awarded a new patent covering a breakthrough charge balancing approach, reinforcing technology differentiation.

• What Went Wrong

  • Operating expenses elevated: Q4 OpEx $6.5M (vs $5.4M YoY) and FY25 included ~$2.9M restatement costs; GAAP net loss persisted in Q4 at $(1.2)M.
  • Backlog/near-term demand: backlog exited Q4 at ~$9M (down from $16.9M at 3/31), and management noted a pause in early Q1 FY26 amid tariff/macro uncertainty.
  • Capital structure: cash $1.3M at year-end and a stockholders’ equity deficit of $(5.4)M necessitated additional financing post quarter (prefunded and common warrants).

Transcript

Operator (participant)

Please note this event is being recorded. I would now like to turn the conference over to Joel Achramowicz, Managing Director. Please go ahead.

Joel Achramowicz (Managing Director)

Good afternoon and welcome to Flux Power's Fourth Quarter and Full Year Fiscal 2025 Earnings Conference Call. I'm Joel Achramowicz, Managing Director of Shelton Group, Flux Power's investor relations firm. Joining me today are Krishna Vanka, Flux Power's CEO, Kevin Royal, Chief Financial Officer, and Kelly Frey, Chief Revenue Officer. Before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC. Specifically, our Form 10-K and our most recent Form 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-K, which can be found in the Investor Relations section of Flux Power's website at www.fluxpower.com. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on the company's website. Now it's my great pleasure to turn the call over to Flux Power's CEO, Krishna Vanka. Krishna, please go ahead.

Krishna Vanka (CEO)

Thank you and welcome to everyone as we review our fourth quarter and fiscal year 2025 results and business updates. I have been at Flux Power now for six months as CEO and have had the opportunity to meet more extensively with our customers and partners. This gave me a better understanding of their business, the product requirements, and how Flux Power can offer added value through our battery solutions. These discussions have made me very excited about the company's future and the opportunities that lie ahead of us. Flux Power is at the forefront of shaping the future for intelligent energy solutions, where every lithium-ion battery functions as part of a connected, self-optimizing network. This vision is part of a mandate shared across the members of our newly established management team, and we are all fully committed to achieving our long-term objectives, both operationally and financially.

In our last earnings call, I shared with you the five strategic initiatives that will be guiding our execution and performance in the upcoming quarters and years. These initiatives include, number one, achieving profitable growth; number two, executing on operational efficiency; number three, implementing a solution selling approach; number four, building the right products for customer needs; and number five, integrating value-added software across our battery portfolio to generate recurring revenue streams. As highlighted in our press release issued earlier today, we finished 2025 with a solid year-over-year growth on both a quarterly and annualized basis. We also significantly improved our gross profit and margin performance, contributing to meaningful improvement in our bottom-line results. Acknowledging that we still have some work to do to achieve our goals of profitability and cash flow breakeven, we are demonstrating initial progress.

In support of these goals, we have implemented various operational efficiencies to further reduce costs. First, I spent time in China, meeting with existing partners in order to strengthen the vendor relationships. We discussed the macroeconomic situation and determined ways to work together to help offset the impact of the current tariffs. More broadly, we also engaged with our domestic vendors to mitigate the international tariff exposure by renegotiating contract terms where possible. We are also evaluating additional product engineering work to reduce costs by simplifying our design. This work is ongoing and we'll have more details to share with you on future calls. Finally, in June, we took action to reduce our headcount by about 15% across all segments of the company, except for Sales and Marketing. This will help to reduce our ongoing operating expenses and ultimately our cash flow.

As part of our initiative to grow our software offerings and provide high-value solutions to customers, we have made good progress on our SkyEMS AI platform during this quarter. I'm pleased to inform you that we have provided beta testing access of our SkyEMS 2.0 to one of our airline customers, and we will be rolling it out soon to additional customers in the coming months. By embedding our solution into a connected ecosystem of vehicles, chargers, and software, Flux will eventually create an integrated service and solution that will generate recurring revenue and predictable replacement cycles. We believe these initiatives will position Flux to accelerate product adoption among our customers, thus expanding our market share and driving our growth of sustained profitable growth. Now, I would like to review some of our recent customer successes. Recent orders.

In early July, we received a significant purchase order through our GSC distributor for a major North American airline for 120 units of our newly announced and redesigned G80-420 lithium-ion battery pack. This $2+ million order will be delivered throughout the calendar year 2025, reinforcing this airline's commitment to operational efficiency, sustainability, and next-generation fleet readiness. In mid-August, we received an additional $1.2+ million purchase order through our GSC distributor from another airline for a G80 lithium-ion energy solution along with the SkyEMS software platform. This is a great example of the success of our new solution selling strategy. We offered the customer a powerful combination of both hardware and software designed specifically to transform their fleet of ground service equipment. In addition to our progress on the new business development, it is also important to note that we have now shipped more than 28,000 battery packs.

This represents a tremendous opportunity to add intelligence to the customer's existing equipment and IT infrastructure with our SkyEMS software and telemetry solutions. Now, I would like to hand over the call to Kelly Frey, our Chief Revenue Officer, to discuss our partnerships and solution selling initiatives, which are transforming the way we sell by aligning our product offerings to each customer's specific needs. Kelly, please go ahead.

Kelly Frey (CRO)

Thank you, Krishna, and thanks everyone for joining us today. I'm now in my third quarter at Flux Power, and like Krishna, over the past several months, I've immersed myself in the outbound business development activities across the company. I'd like to spend just a few minutes walking you through how we're thinking about the business today and where we see opportunities and momentum building. At Flux, our top focus is on building long-term partnerships with customers, dealers, and OEM sales teams. Over the last couple of quarters, we've shifted our sales approach to engage more directly with end-customer users while continuing to fulfill business through OEMs, dealers, and distribution partners. This is giving us better visibility into their needs and how we can deliver more value along with our dealer and OEM partners.

We're not just selling a battery; we're also selling the company's telematics software, which can be a critical component for customers to design their charging and energy management infrastructure. In fact, our SkyEMS telemetry and energy management systems for monitoring and optimizing battery performance are becoming a bigger piece of the conversation. In addition to the potential new revenue streams from our software, we're also excited about our growth opportunities in new market verticals and geographies. We're leveraging our strong foothold in the United States and targeting expanded opportunities in North and Central America, where we think Flux can play an important role. These efforts are expected to open up significant market potential to help drive future growth. Partnerships are another key driver of our growth strategy. Currently, we're engaged in more OEM discussions than at any other point in our history.

We're working to remove barriers to adoption by expanding certifications, pursuing private label opportunities, and investing in marketing. The goal is to turn first-time buyers into long-term repeat customers. We are also looking at partnerships beyond OEMs with telematics providers as well as energy and charging infrastructure players. We see a real opportunity to strengthen the ecosystem around our solutions and add more value for our customers. Finally, in terms of our sales pipeline, Flux has been involved in more opportunities this year, and quoting activity is up significantly. Even though it may take a couple more quarters for that activity to materialize into backlog, the recent trend is very encouraging. With that, let me now hand the call over to our CFO, Kevin Royal, to discuss our results for the quarter and year. Kevin?

Kevin Royal (CFO)

Good afternoon, everyone. Revenue for the fourth quarter of 2025 was $16.7 million compared to $13.4 million during the same quarter of the prior year. Full-year 2025 revenue increased to $66.4 million from $60.8 million in the prior year. Increased sales for the full year 2025 was driven by higher volume in both material handling and ground support equipment markets, higher average selling prices in the GSE market, while slightly offset by lower average selling prices in the material handling market. Gross margin in the fourth quarter was 34.5% compared to 26.8% during the same quarter of the prior year. Full-year 2025 gross margin increased to 32.7% from 28.3% in the prior year. The improvement in gross margin was driven by sales of higher margin products, the benefit of cost-savings initiatives, and lower warranty-related expense.

Operating expenses in the fourth quarter of 2025 were $6.5 million compared to $5.4 million in the fourth quarter of 2024. Full-year 2025 operating expenses increased to $26.8 million from $23.8 million in the prior year. Higher operating expenses were driven by $2.9 million of one-time costs associated with the multi-year restatement of previously issued financial statements. The net loss for the fourth quarter was $1.2 million, or $0.07 per share, compared to a net loss of $2.2 million, or $0.13 per share in the fourth quarter of 2024. Net loss for the full year was $6.7 million, or $0.40 per share, which includes approximately $3 million in one-time costs. This compares to a net loss of $8.3 million, or $0.50 per share in 2024.

Excluding one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation, the fourth quarter non-GAAP net loss was $30,000, or $0.00 per share, compared to a non-GAAP net loss of $1.9 million, or $0.11 per share in the prior period. For the full year, non-GAAP net loss was $2.8 million, or $0.17 per share, which excludes one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation. This compares to a net loss of $6.8 million, or $0.41 per share in the prior year. Adjusted EBITDA for the fourth quarter was $600,000+ compared to $1.2- million in the same quarter a year ago. Full-year 2025 adjusted EBITDA was a $0.1- million compared to a $4- million in the prior year.

Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $1.3 million compared to $600,000 a year ago. I will now turn it over to Krishna for his final remarks prior to the question and answer session.

Krishna Vanka (CEO)

Thank you, Kevin. As we highlighted today, we finished fiscal 2025 with solid year-over-year growth on both a quarterly and as well as on annualized basis. We have a refreshed leadership team here that's fully focused on executing our strategic initiatives, including implementing our solutions-based sales approach with partners and customers to increase the value we provide. Although the current tariff and macroeconomic environment create uncertainty and near-term caution to certain customers, the growth of our sales opportunities, combined with the expected benefits from our strategic initiatives, gives us a reason to be increasingly optimistic for the later part of our fiscal year. With that said, I will now turn the call back over to the operator for Q&A session. Operator?

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Craig Irwin with ROTH Capital Partners. Please go ahead.

Andrew Scutt (Equity Research Analyst)

Hi, guys. It's Andrew on for Craig, but thank you for taking our questions. First question from me, it was really nice to see the strong gross margin expansion in the quarter. Can you guys just talk a little bit more about what went right in the quarter there? You guys have also talked about near-term visibility to 40% gross margin. Additional color on wherever you are in that journey would be great.

Kevin Royal (CFO)

Yeah, we've had some initiatives to improve the cost of our product input. The components and raw materials that go into our products, that's what you're seeing flow through the quarter that contributed to probably about 60% of the improvement. The other being lower warranty costs. As we continue to improve the quality of our products, we're really starting to see the number of repair incidents decline both for the full year, but especially in the fourth quarter. Both of those items contributed to the improvement that we saw in the gross profit in the quarter.

Andrew Scutt (Equity Research Analyst)

Great. It was great to see the progress. Second one for me, before I jump back in the queue, congrats on getting the beta rollout of SkyEMS 2.0. Can you just kind of talk about how that's, the customers received the product so far? Maybe just remind us kind of what the upgraded product provides versus, you know, the initial rollout of SkyEMS?

Krishna Vanka (CEO)

Yeah, so this new version, SkyEMS 2.0, is really designed with customers in mind. We work closely with both the airline industry and material handling to understand their pain points. These are specifically related to, hey, let us know when it's time to charge your battery. Can you increase the efficiency of the battery charging? Can we know when we're overusing the battery, when it's discharging, just to warm up the vehicle, for example, in colder environments? We took all the feedback and we improved the product. We also made it pretty light and slick so it can almost work, you know, on a mobile environment, like in a browser. This is a new product. We are very proud, as I mentioned, that we gave this to an existing airline who is testing this and gave us good feedback so far.

We are also giving it to a material handling customer this week as we speak, and pretty soon we will roll this out. As you heard me saying, we are, you know, packaging this together when we sell the battery. That's one of the things we did earlier with the airline for $1.2 million. That solution included SkyEMS software.

Andrew Scutt (Equity Research Analyst)

Great. We really appreciate the color. Congrats on the continued progress in the strong quarter.

Kevin Royal (CFO)

Thank you.

Operator (participant)

The next question is from Amit Dayal with H.C. Wainwright. Please go ahead.

Amit Dayal (Senior Technology Analyst)

Thank you. Good afternoon, everyone. Congrats on all the progress. I'm just trying to see what the pipeline is looking like for you guys, and if you maybe have shared the backlog number. I didn't see it in the press release, I think. Any color on that would be helpful. Thank you.

Kevin Royal (CFO)

Yeah, so specifically, you know, related to the outlook, while we don't provide guidance, we have seen kind of a bit of a slowdown and a pause from some of our customers in the quarter that we're currently in, which would be our first fiscal quarter. We've also started to see an increase in quoting activity, which we think bodes very well for, you know, the second fiscal quarter, which is the fourth calendar quarter. As it specifically relates to backlog, our current number is right at $9 million as we end the quarter.

Amit Dayal (Senior Technology Analyst)

Thank you. As you sort of look to now, maybe moving from beta to actual sort of product rollout for the SkyEMS, how should we think about what the plan is on that side and what are your expectations for the attach rate? Are you selling this independently as well, or will this exclusively initially be sold along with the battery solutions? Just trying to get a sense of what the, at least the initial sales strategy is going to be for this offering.

Krishna Vanka (CEO)

Sure. I'll answer this, and then I'll have Kelly add any more color. Yes, our strategy is to package and sell the SkyEMS software along with the battery. That's why we are calling it Intelligent Battery. We are seeing some good success with it as we roll this out. Beta is the name we gave it to make sure customers are happy and they will gladly use the product. The product is literally ready with their live data. As I mentioned, in a month or two, we will remove the name Beta from the product and call it SkyEMS 2.0, which we are already selling, as I mentioned, with every battery possible. You also probably noticed we have 28,000 units that are already in the field. Our intentions are to go back and get them on the platform as much as we can.

We do have a few thousands of batteries in the field that are already online. It's literally working with these customers, giving them access, and having them pay for it, which gives us a very good upsell opportunity. With that said, Kelly, do you want to add any other color?

Kelly Frey (CRO)

Sure. I think, Krishna, you nailed it, but it's really three motions. The first is telematics on every battery to make sure that we're positioning it in every, including at least a base level of telemetry, SkyEMS with each battery. Then, it is going back to the installed base of customers who are maybe in their first, second, third, fourth year of having a Flux battery, even longer, and saying, "Hey, there could be value in you putting telemetry on this battery so that you can get better visibility, which allows for better capital planning, better optimization." That's kind of the second motion. The third motion is once somebody takes, perhaps their first version of SkyEMS, as we move, we have upsell opportunities, perhaps advanced reporting, advanced optimization capability, integrations with other software they may be using.

It's kind of an upsell on top of the original purchase of that telemetry.

Amit Dayal (Senior Technology Analyst)

Understood. Thank you for that. That's all I have for this call. I'll take my other questions after. Thank you.

Krishna Vanka (CEO)

Thanks, Amit.

Operator (participant)

The next question is from Rob Brown with Lake Street Capital. Please go ahead.

Rob Brown (Senior Equity Research Analyst)

Good afternoon. First question is on the airline orders that you received. I think there were two pretty sizable orders there. Could you give us a sense of what's driving that? Is it an expansion into the fleet or really, kind of the new product offerings that you've got?

Krishna Vanka (CEO)

The G80-420, the $2 million, is a redesigned battery. It was redesigned to be more efficient, more gross margin-driven, design. I would say it is as a new product almost that we sold to an existing airline. The second order we mentioned is for the G lithium-ion, which is sold as a package with SkyEMS. Those are, that's an existing product that we sold with the software added to it as a package.

Kelly Frey (CRO)

Could I add something, Krishna?

Krishna Vanka (CEO)

Go ahead.

Kelly Frey (CRO)

The other thing is, Krishna is accurate in that. The other thing is, just to remind everybody, we're still at a very early adoption phase of lithium within the ground support equipment market. Even our existing customers who have purchased several hundred or even a couple thousand of batteries from us, or low thousands of batteries from us, still have a lot of migration to do from lead acid to lithium or from internal combustion to lithium. It's not only just upselling the existing customers to get further adoption throughout their fleets. They typically roll out airport by airport by airport or sometimes by region or by country. It's the existing increased adoption, and then it's new airport acquisition, or sorry, new airline acquisition is the other key focus in that market.

Rob Brown (Senior Equity Research Analyst)

Okay, great. Thank you for the color. On the quoting activity, I think you talked about an uptick after a bit of a lull. Is that both material handling and ground support equipment, or what's sort of the dynamics of that improving order going?

Krishna Vanka (CEO)

Kelly, do you want to take it?

Kelly Frey (CRO)

Yes, I can. I think everybody on this call is aware, we service two main markets. There's the ground support equipment market and the material handling market. The ground support equipment market, we didn't see as much of a pullback in capital expenditures. There was a little where there was related to uncertainty with the economy. We think driven mostly by the tariffs and what was going to happen, perhaps a little downturn in passenger traffic. There was some impact on the ground support equipment market. However, in the material handling market, we did see, in particularly Q1 calendar year, there was a little bit of advanced purchasing. Let's get it before the tariffs hit. There was a pullback on capital expenditures. I think everybody's aware, our batteries go into lift trucks. Lift trucks are a fairly heavy capital expenditure.

We saw customers kind of holding their capital tight to chest in kind of late Q1, Q2. Now that increased quoting activity is really people saying, "Okay, I think I understand what's going on with tariffs. I understand the impact on my supply chain. Okay, I'm now going to release that capital to purchase the lift trucks, purchase the batteries, etc." That's really where it's driving it in the material handling market.

Rob Brown (Senior Equity Research Analyst)

Okay, thank you. I'll turn it over.

Operator (participant)

This concludes our question and answer section. I'd like to turn the conference back over to Krishna Vanka for any closing remarks.

Krishna Vanka (CEO)

Thank you all again for joining us on the call today. We really look forward to speaking with you again during our first quarter call in the longer timeframe. Operator, you may now disconnect.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.