Flux Power Holdings, Inc. Q2 FY2026 earnings call

• Achieved net profitability for the first time in company history, completing the first goal of the profitable growth initiative.
• Benefited from multi-quarter restructuring decisions to improve operational efficiencies, including rightsizing headcount and cost optimizations, resulting in a lower cost structure, higher margins, and lower breakeven point.
• Started using AI-driven tools in engineering design, software development, and day-to-day operations to further improve efficiencies.
• Made progress on product development, including the next-generation SkyLNK telematics device with machine learning capabilities and a new GAT 315 battery in response to customer demand.
• Focus on solution selling with recent hires in sales leadership to engage closely with customers and provide complete energy management solutions.
• Integrated value-added software like SkyEMS, which was upgraded with intelligent alerting and mobile interface features to generate recurring revenue.

Revenue for the second fiscal quarter of 2026 was $14.1 million, up from $13.2 million in the prior quarter and down from $16.8 million in the same quarter last year. Gross margin in the second quarter was 34.7% compared to 28.6% in the prior quarter and 32.5% in the prior year period. Operating expenses in the second quarter of 2026 were $4.1 million compared to $5.9 million in the prior quarter and $6.9 million in the second quarter of 2025. Net income for the second quarter was $0.6 million or $0.03 per share compared to a net loss of $2.6 million or $0.15 per share in the prior quarter and a net loss of $1.9 million or $0.11 per share in the second quarter of 2025.

• Anticipates materially lower revenue in the third quarter due to a significant customer's capital freeze, but believes in the long-term market opportunity for the lithium-ion forklift battery segment (projected 8.8% CAGR through 2035).
• Has proactively decreased expense run rate and completed additional cost reduction actions during the current quarter.
• Remains positioned to work through the slowdown and restore profitable growth.

• A significant customer has implemented a capital freeze, which may impact a significant portion of calendar year 2026, potentially reducing revenue in the third quarter.

Q: On the capital freeze and the customer commentary, is this unique to this customer?

A: Krishna Vanka responds it is one individual customer.

Q: How is the demand environment looking in the market?

A: Krishna Vanka states tariff effects are lingering, but customers need batteries to run their businesses and are moving forward cautiously.

Q: On the SkyLNK product, how is it rolled out and opportunity for new business?

A: Krishna Vanka says SkyLNK telematics will be offered across product line in a couple of months, with positive initial feedback and potential for more telematics-based solutions.

Q: On gross margins, are cost savings and warranty costs expected to stay low?

A: Kevin Royal states continued steps to lower product cost and positive trends in warranty and repair costs, with leverage impacting gross margin profile.

Q: On SkyLNK features pricing and impact on gross margin?

A: Krishna Vanka mentions tiered software with standard and premium versions, premium packages having higher gross margins, and aim to monetize existing customer base.

Q: On State of Health patent, revenue potential?

A: Krishna Vanka explains the patent covers local battery implementation and algorithm, included in premium package, providing insights for customers on battery life and capacity planning.

Q: On accounting for $0.5 million reversal of incentive comp, how split between cost of sales and SG&A?

A: Kevin Royal states the amount was primarily in SG&A and R&D with a slight amount in COGS, and won't impact current quarter.