Flux Power Holdings, Inc. Q3 FY2025 earnings call

Strategic Initiatives - Profitable growth: Top priority is achieving consistent quarterly profitable results as scaling. - Operational efficiencies: Aggressively optimizing supply chain and internal processes to reduce costs, especially amid tariff uncertainty. - Solution selling: Led by Chief Revenue Officer Kelly Frey, transforming how to sell by aligning offerings to customer's problem. - Build the right products: Focused on creating innovations to meet real customer needs and expand margins. - Software and recurring revenue: Sky EMS intelligent battery platform is foundation for broader recurring revenue strategy. ### Product Updates - Launch of G96 solution advancing electrification of airline drone support equipment, supporting high energy demand pushback tractors. - Sky EMS platform development to support full life cycle of intelligent battery including plan, operate, optimize usage, predictive maintenance, recycling. - Patent award for intelligent battery life cycle maximization AI-based algorithm. ### Supply Chain - Responding to tariff pressures by updating price list, accelerating evaluation of new suppliers, transitioning to alternative regions with lower tariff exposures, reinforcing LF battery solutions, investigating new battery chemistries. - Long-term supply chain strategy: Commodity-based sourcing, partnerships with OEM suppliers, supplier diversification, domestic assembly and manufacturing expansion, R&D investments in tariff-resistant product design. ### Financial Highlights - Revenue increased 16% to $16.7M in Q3 2025 vs $14.5M in Q3 2024. - Gross profit increased 32.5% to $5.3M in Q3 2025 vs $4M in Q3 2024. - Gross margin increased to 32% in Q3 2025 vs 28% in Q3 2024. - Selling and administrative expenses increased to $5.7M in Q3 2025 vs $5.3M in Q3 2024. - Research and development expenses decreased to $1.1M in Q3 2025 vs $1.3M in Q3 2024. - Adjusted EBITDA loss was $1.1M in Q3 2025 vs $1.7M in Q3 2024. - Net loss was $1.9M in Q3 2025 vs $3M in Q3 2024.

Revenue for the third fiscal quarter increased 16% to $16.7 million compared to $14.5 million in the third fiscal quarter of 2024, driven by higher demand in the material handling and ground support equipment markets with unit growth of 10% and 25%, respectively. Gross profit for the third fiscal quarter of 2025 increased 32.5% to $5.3 million compared to a gross profit of $4 million in the third fiscal quarter of 2024. Gross margin increased to 32% in the third fiscal quarter of 2025 as compared to 28% in the third fiscal quarter of 2024. Selling and administrative expenses increased to $5.7 million in the third fiscal quarter of 2025 as compared to $5.3 million in the third fiscal quarter of 2024. Research and development expenses decreased to $1.1 million in the third fiscal quarter of 2025 compared to $1.3 million in the third fiscal quarter of 2024. Adjusted EBITDA loss was $1.1 million in the third fiscal quarter of 2025 as compared to an adjusted EBITDA loss of $1.7 million in the third fiscal quarter of 2024. Net loss for the third fiscal quarter of 2025 was $1.9 million compared to a net loss of $3 million in the third fiscal quarter of 2024.

Forward-looking Statements - Anticipates Q4 will be very minimally impacted by tariff increase as they have pretty good inventory in stock not subject to reciprocal tariffs. - Sees increased level of interest from customers in forklift market and increased quotation activities due to competitors' issues with tariffs providing an advantage to gain market share.

Risks - Tariff uncertainty impacting global trade and supply chain, requiring optimization of supply chain and evaluation of new suppliers.

Q: Congrats on a strong quarter. Talk about sensitivity of airport GSE customers to pricing actions from tariffs and subsidy withdrawal.

A: Customers are well committed to ESG goals and transformation, and it's business as usual for now in terms of working with us on accruing basis.

Q: Talk about feedback from customers on Sky BMS regarding ROI and maintenance.

A: Sky BMS is important for customers to realize value, with ROI coming from reduced maintenance visits due to remote issue resolution via data, and it's part of an ecosystem integrating with other technologies.

Q: Talk about forklift market adoption of lithium and interest from customers.

A: Competitors' issues with tariffs give them an advantage to gain market share, seeing increased interest and quotation activities from customers.

Q: Talk about order trends and if there's back-end loaded order book.

A: They have pretty good inventory in stock not subject to reciprocal tariffs, anticipating Q4 will be minimally impacted by tariff increase, and seeing early activity and inquiries resulting in more quotations.