Flux Power Holdings, Inc. Q4 FY2025 earnings call

• Krishna Vanka has been CEO for 6 months, emphasizing strategic initiatives like achieving profitable growth, operational efficiencies, solution selling, building right products, and integrating software for recurring revenue.
• Implemented operational efficiencies: strengthened vendor relationships in China, renegotiated contracts with domestic vendors, evaluated cost-reducing product engineering, and reduced headcount by 15% except sales/marketing.
• SkyEMS AI platform beta testing of version 2.0 with an airline customer, to roll out to more customers.
• Recent customer successes: $2M+ order from a North American airline for G80-420 battery packs in July, $1.2M+ order from another airline for G80 solution with SkyEMS in August. Shipped over 28,000 battery packs.

For the fourth quarter of 2025, revenue was $16.7 million compared to $13.4 million in the same quarter of the prior year. Full year 2025 revenue increased to $66.4 million from $60.8 million in the prior year. Gross margin in the fourth quarter was 34.5% compared to 26.8% in the prior year's same quarter. Full year 2025 gross margin was 32.7% vs. 28.3% prior year. Shipped more than 28,000 battery packs. Revenue growth was driven by higher volume in material handling and ground support equipment markets, with higher average selling prices in GSE offset by lower in material handling. Gross margin improvement was due to cost savings from product input components and lower warranty costs.

• Near-term visibility to 40% gross margin.
• Current backlog at $9 million as of quarter end.
• Expected benefits from strategic initiatives give optimism for later part of fiscal year despite near-term tariff and macroeconomic uncertainties.

• Current tariff and macroeconomic environment create uncertainty and near-term caution for some customers.

Q: It was nice to see strong gross margin expansion in the quarter. Can you talk about what went right and near-term visibility to 40% gross margin?

A: Initiatives to improve product input costs (60% of margin improvement) and lower warranty costs contributed. Components/raw materials cost improvements and reduced repair incidents led to gross profit improvement. Near-term visibility to 40% margin is expected from ongoing cost initiatives.

Q: Congrats on beta rollout of SkyEMS 2.0. How did customers receive it and what does it provide vs initial rollout?

A: SkyEMS 2.0 is designed with customer pain points in mind, working with airline and material handling industries. It addresses issues like charging efficiency and battery usage in colder environments. It's packaged with batteries and has upsell opportunities like advanced reporting.

Q: What's the pipeline look like and backlog? Expectations for SkyEMS attach rate and sales strategy?

A: Current backlog is $9 million. SkyEMS is sold with batteries as 'intelligent battery'. Beta is being rolled out, with intention to remove beta label soon. It's sold with every battery, with upsell opportunities for advanced features.

Q: Talk about airline orders. What's driving them? Quoting activity dynamics?

A: G80-420 is a redesigned efficient product sold to an airline. Second order is G lithium-ion with SkyEMS. Quoting activity improved, with ground support equipment market seeing some pullback due to tariffs and economic uncertainty, but material handling market seeing increased quoting as customers adjust to tariff situation.