Earnings call transcript: Flux Power Q1 2025 misses EPS forecast

Flux Power Holdings Inc. (FLUX) reported its first-quarter earnings for 2025, showing a revenue of $16.1 million, which marked a 9% year-over-year increase. The company posted an earnings per share (EPS) of -$0.10, missing the forecasted EPS of -$0.06. Following the earnings release, the stock price saw a slight increase of 0.31% in aftermarket trading, closing at $1.63. According to InvestingPro data, the company’s current market capitalization stands at $27.19 million, with analysts setting price targets between $3 and $7.

Key Takeaways

• Flux Power’s Q1 revenue increased by 9% year-over-year to $16.1 million.
• The company missed its EPS forecast, reporting -$0.10 against an expected -$0.06.
• Aftermarket trading saw a minor 0.31% increase in stock price.
• The company is launching new heavy-duty battery models and expanding its product lines.
• Flux Power maintains a strong backlog of $19.5 million as of February 2025.

Company Performance

Flux Power Holdings demonstrated a solid revenue performance in Q1 2025, with a 9% increase compared to the previous year. This growth was driven by strong demand for its lithium-ion battery solutions and the expansion of its product lines. The company continues to focus on electrification trends in fleet operations and has maintained nearly 100% customer retention.

Financial Highlights

• Revenue: $16.1 million, up 9% year-over-year.
• Earnings per share: -$0.10, missing the forecast of -$0.06.
• Gross margin: 32%, an increase from 29% in the previous year.
• Adjusted EBITDA loss: $600,000 for Q1.

Earnings vs. Forecast

Flux Power’s reported EPS of -$0.10 fell short of the forecasted -$0.06, marking a significant miss. The revenue also came in below expectations, with the actual figure at $16.1 million compared to the forecasted $16.81 million. This earnings miss follows a trend of challenging quarters for the company, with previous periods also showing struggles to meet expectations.

Market Reaction

Despite the earnings miss, Flux Power’s stock saw a slight increase of 0.31% in aftermarket trading, closing at $1.63. This movement might reflect investor optimism about the company’s future product launches and strategic initiatives. The stock remains near its 52-week low of $1.15, having declined 60.29% over the past year. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with a beta of 1.25 suggesting higher volatility than the broader market.

Outlook & Guidance

Looking ahead, Flux Power expects Q3 revenue to be similar to Q2, around the $16 million range, with a projected increase of 5-10% in Q4. The company aims to achieve breakeven or positive adjusted EBITDA in Q4, driven by potential software recurring revenue from its telemetry solutions. The company is also focusing on cost reduction and supply chain innovations.

Executive Commentary

CEO Krishna Venkata stated, "We have the right technology at the right time with the right people to scale and build Flux Power." This sentiment was echoed by Senior Advisor Ron Dutt, who highlighted the company’s solutions for increasing forklift performance and asset management improvements. Chief Revenue Officer Kelly Fry noted, "We’re seeing a lot of demand and excitement."

Risks and Challenges

• Supply chain disruptions could impact production and delivery schedules.
• Competition from other battery manufacturers may pressure market share.
• Economic uncertainties could affect customer purchasing decisions.
• The company faces challenges in achieving profitability amid ongoing losses.

Q&A

During the earnings call, analysts focused on the company’s strategy for proactive demand generation and the potential revenue from replacing existing battery packs. There was also interest in the telemetry product as a future software revenue stream, with executives expressing confidence in the improving macro outlook and strong sales pipeline.

Full transcript - Flux Power Holdings Inc (FLUX) Q2 2025:

Conference Operator: Greetings, and welcome to the Flux Power Holdings Fiscal First and Second Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I’ll now turn the conference call over to Flux Power Chief Financial Officer, Kevin Royal.

Please go ahead.

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Thank you, operator. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the result of any revision to these forward looking statements in light of new information or future events.

Throughout today’s discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10 K for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results across the wire this afternoon at 04:01PM Eastern Time is available in the Investor Relations section of our company’s website, luxstar.com. Your host today, Chris Belvanka, Chief Executive Officer Ron Dutt, Senior Advisor and former CEO Kelly Fry, Chief Revenue Officer and myself, Chief Financial Officer, Kevin Royal, will present results of operations for the fiscal first quarter ended 09/30/2024 and fiscal second quarter ended 12/31/2024. At this time, I will now turn the call over to Flex Power’s newly appointed CEO, Krishna Venkata.

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: Thank you, Kevin, and good afternoon, everyone. I am pleased to welcome you to today’s first and second fiscal quarter twenty twenty five financial results conference call.

Kevin Royal, Chief Financial Officer, Flux Power Holdings: To begin,

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: I’d like to take a moment to introduce myself and share my vision for Flux Power. Earlier this month, I was privileged to join Flux Power as CEO to help build on the great foundation built by Ron and the team. Prior to joining the company, I spent eighteen years building, scaling, managing and transforming technology companies in sectors such as renewable energy, EV transition, Internet of Things, Fleet and Asset Management and Telematics. Most recently, I was the CEO of Fluent Digital, which is part of the Fluent Energy, a NASDAQ listed global market leader in energy storage. As part of the diligence process, I evaluated the company’s overall potential as well as the underlying ingredients, including talent, technology, our customer base and division to make my decision.

I can confidently say that we have the right technology at the right time with the right people to scale and build Flux Power into your market leader in this space. I believe in the months and years ahead, I and the entire Flux team will accelerate our mission of delivering industry leading lithium ion energy storage solutions. I will now turn the call over to Ron Pest to discuss the first and second quarter highlights and then walk through our business updates and financials. Ron?

Ron Dutt, Senior Advisor and Former CEO, Flux Power Holdings: Thank you, Krishna, and again welcome to Flux Power. I’m pleased to pass the baton to such a highly qualified leader who can grow and scale flux into a very profitable business that will deliver on all the needs of our customers as the leader in advanced energy solutions. Turning to the first half of fiscal year twenty twenty five, our first and second quarters were highlighted by sequential growth in revenue and gross margin compared with the quarter ending 06/30/2024, and driven by enhanced sales strategies, better market conditions and growing demand for our innovative suite of products. In the first quarter, revenue grew 9% year over year to $16,100,000 driven by an increase in shipments into the ground support equipment market at higher average selling prices. We are excited to see gross profit margins have steadily improved over the last several quarters.

First quarter gross profit increased 23% to $5,200,000 and gross margin increased to 32% as compared to 29% in the fiscal quarter of twenty twenty four, which was driven by an increase in average selling prices, partially offset by increase in warranty costs. Adjusted EBITDA loss improved to $600,000 in the first quarter as compared to a loss of $1,200,000 in the prior year quarter. Backlog as of 09/30/2024 stood at $21,200,000 Moving on, second quarter twenty twenty five results were affected by lumpiness in orders with revenue for the first quarter decreasing 8% year over year to $16,800,000 but up 4% sequentially from the first quarter of twenty twenty five. We expect our momentum to strengthen as indications reflect potential increasing order flow for the coming quarters. Gross profit for the second quarter increased 2% to $5,500,000 and gross margin increased to 33 in the quarter as compared to 30% in the second quarter of twenty twenty four.

Cost reductions and price increases have contributed to this gross margin growth along with a focus on strategic supply chain and profitability improvement initiatives, lower costs and higher volume purchasing. Adjusted EBITDA loss was $1,000,000 in the fiscal second quarter of twenty twenty five as compared to a gain of $200,000 in the fiscal second quarter of twenty twenty four, with the difference being attributed to the aforementioned lumpiness in the quarter. Quarter backlog was $17,500,000 as of 12/31/2024 and $19,500,000 as of 02/28/2025, supporting a positive long term outlook. The key themes from the last two quarters support our belief that we have built a strong foundation, as the right strategy in place to support revenue growth to fuel our path to sustain profitability. We improved our ability to execute in these areas during the first half of the year and we expect this momentum to continue as we further monetize a $19,500,000 customer backlog.

Key themes to highlight include the following. We have executed additional initiatives to support growth, which included expanding our product lines for multiple customer segments and adjacent markets and filling gaps in energy storage offerings. In the coming months, we also plan additional heavy duty models to fill product line gap. We remain especially excited about our telemetry product, which includes asset management features that offer leading technology and true value creation to our fleet customers. Our Sky BMS telemetry product is in the pilot stage for a Fortune 50 company’s implementation nationwide.

And we recently conducted live demonstrations of SkyDMS at ProMat twenty twenty five, one of the largest manufacturing supply chain events for the year. In addition to appointing Krishna as CEO, we also strengthened our sales and engineering teams with several very key appointments, including Kelly Fry as Chief Revenue Officer and Mark Barbmetler as our new Senior Head of Engineering. Kelly brings over twenty years of experience as a sales and marketing leader, including a variety of roles ranging from startups to Fortune 100 companies. Kelly’s focus on elevating our revenue generation, expanding relationship sales, expanding our market research and improving customer retention, playing a key leadership role in maximizing revenue potential and sustaining long term growth. Mark brings over ten years experience in engineering leadership roles covering telecommunications and test equipment, incorporating firmware, software and cloud solutions.

Mark will be addressing new product innovation, cost reductions and telemetry. Finally, Fortune five hundred companies and other large fleets are increasingly looking to electrify with lower costs and higher performance lithium energy solutions that also support sustainability. As this trend continues to advance, us is ideally positioned to meet their needs. Now turning to our first and second quarter operational and business updates. Our two highest priorities have remained driving revenue growth and achieving profitability.

We continued to focus on expanding sales and marketing initiatives to capitalize on the fleet wide replacement trend and support continued migration to lithium. Despite the strong demand we saw from our customers, we experienced delays in orders that were driven by revised timing of forklift deliveries of certain models that impacted the timing of our orders and shipments. The new order delays were felt throughout our industry sector as a result of the higher interest rates and economic uncertainty during the 2024 calendar year. While we don’t give specific guidance, we are seeing signs that these headwinds could abate later this 2025 calendar year. We have been laser focused on several initiatives to increase revenue growth, reduce costs, launch new high demand products and ensure our pricing is appropriate for all our models.

Our strong reputation in the market combined with our ability to service Fortune 100 customers provides evidence of our value proposition, along with recently achieving over 25,000 flux powered lithium ion packs operating in North America. Looking at our customer base, we have no known lost customers and no lost orders to competition. Furthermore, we have not seen any pullback from interest in companies migrating to lithium ion solutions. To support our targeted sales trajectory, we are launching several new products including heavy duty models that directly address customer demand. We are expanding our sales force and implementing marketing initiatives to expand awareness of both the value proposition to customers and capabilities of flux power to impact their fleet operations.

Our solutions provide increased forklift performance, product lifecycle return on investment, asset management improvements from our leading telemetry, and of course carbon dioxide reductions to the environment. We also integrate most brands of charging equipment with our lithium ion energy packs. We remain on target to offer a complete end to end energy storage solution to current and future customers. Recently, we announced a strategic partnership with a second top forklift OEM to launch a new private label battery program. This collaboration marks a significant milestone for Flux Power S Series line, which now includes products with the coveted UL Type EE Certification, providing added safety and durability capability that many of our competitors do not have.

Our telemetry, which includes asset management features is in the pilot stage for a Fortune 50 company implementation nationwide as I mentioned earlier. Our telemetry includes features for customer asset management, including fleet wide installation and our Customer Interface Energy Management solution set to launch in 2025 is designed to provide deeper insights and greater control over energy use. We are also actively exploring and leveraging supply chain innovations and opportunities to further reduce our cost footprint. In addition, we are leveraging machine learning and AI features for product support of large fleets and will be launching the automation of modularizing battery cells to this summer. With that, I will turn it over to Kelly Fry, Chief Revenue Officer, who joined us this past January to provide his first impressions of Flux and the opportunities that lie ahead.

Kelly Fry, Chief Revenue Officer, Flux Power Holdings: Thank you, Ron. I would like to share some quick updates and key activities I’ve been focused on that are designed to accelerate revenue growth, brand awareness and the overall customer experience, all of which are key to driving long term growth for Flux. Since I started, I’ve met several key customers, OEMs and dealer partners who have helped us achieve a milestone of 25,000 battery packs deployed in almost all 50 states, Canada and Mexico. I can say definitively that our material handling and ground support customers greatly appreciate our product quality, support services and innovative energy telematics solutions. We have the right foundation in place to build upon.

For many, we are their first experience with lithium or a replacement for underperforming batteries provided by our competition. Proving our superior product and service advantage presents significant revenue potential, both within our existing customer base as well as prospective customers as lithium adoption accelerates and batteries need replacement. With nearly 100% customer retention and increased OEM certifications, the future looks promising for Flux. Since my arrival, we’ve also grown the sales team and introduced a solution selling framework. Our pipeline opportunities have increased and we’ve secured significant new accounts in various sectors, including the nation’s largest medical supplier and the country’s largest winery, as well as other food and beverage, retail and distribution customers.

Notably, we’ve partnered with a leading distributor in airport and ground support equipment to secure two new airline customers. We have hit the ground running and the reception to our offering has been very well received. In the coming months, my focus will be on closing out Q3 and Q4 with new account revenue growth, increasing the pipeline and meeting more customers, prospects and partners. We will invest in more strategic OEM and partner relationships, while continuing to professionalize our sales process, instill a growth and performance mindset and invest in customers’ experience excellence in marketing. I’m excited about this opportunity and look forward to helping the company grow.

Thank you very much. And with that, I’ll now turn it over to Kevin Royal, our Chief Financial Officer to review the financial results.

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Thank you, Kelly. As Ron mentioned earlier, adjusted EBITDA losses of $600,000 during the fiscal first quarter and $1,000,000 in the second quarter resulted primarily from sequential growth in revenues, more than offset by costs associated with the restatement of previously issued financial statements. Gross margin initiatives have dramatically improved margins over the last two years and we expect continued improvement. Most recently, gross margins increased from 27% in Q4 of fiscal year twenty twenty four to 32% in Q1 fiscal year twenty twenty five and thirty three percent in Q2 fiscal year twenty twenty five. Cost reductions and price increases have contributed to this gross margin expansion.

Combined with a focus on strategic supply chain and profitability improvement initiatives, lower cost and higher volume purchasing, All these initiatives are part of our plan to accelerate gross margins further. As of 02/28/2025, our open order backlog was $19,500,000 dollars Our backlog reflects longer lead times of incoming purchase orders from major OEMs to align with their schedule of new forklift deliveries and extend delivery times for certain model lines for new GSE equipment. Beyond our backlog of open orders, we continue to anticipate growth in current customer adoption and new customer potential acquisition. Now turning to review our financial results for the fiscal first quarter ended 09/30/2024. Revenue for the fiscal first quarter of twenty twenty five was $16,100,000 an increase of 9% compared to $14,800,000 in the fiscal first quarter of twenty twenty four, primarily driven by an increase in shipments into the ground support equipment market at higher average selling prices compared to the same period in the prior year.

This was partially offset by a reduction in shipments to the material handling market. Revenue in the immediately preceding fiscal Q4 twenty twenty four was $13,400,000 Gross profit for the first fiscal quarter of twenty twenty five increased 23% to $5,200,000 compared to a gross profit of $4,200,000 in the fiscal first quarter of twenty twenty four. Gross margin increased to 32% in the fiscal first quarter twenty twenty five as compared to 29% in the fiscal first quarter of twenty twenty four. Gross profit margin increased by three seventy basis points, driven by an increase in average selling prices, partially offset by an increase in warranty costs. Adjusted EBITDA loss was $600,000 in the first fiscal quarter of twenty twenty five as compared to a loss of $1,200,000 in the fiscal first quarter of twenty twenty four.

Selling and administrative expenses increased to $5,100,000 in the fiscal first quarter of twenty twenty five as compared to $4,700,000 in the fiscal first quarter of twenty twenty four, primarily attributable to stock based compensation and professional services associated with the restatement of previously issued financial statements. Research and development expenses were flat at $1,300,000 in both fiscal first quarters twenty twenty five and 2024, as we continue to place an emphasis on enhancing our technological advantage and driving innovation through our product lines. Net loss for the first fiscal quarter of twenty twenty five was $1,700,000 compared to a loss of $2,200,000 in the fiscal first quarter of twenty twenty four, primarily attributable to increased gross profit, which was partially offset by increases in operating expenses and interest expense. Turning now to our financial results for the second quarter ended 12/31/2024. Revenue for the second fiscal quarter decreased 8% to $16,800,000 compared to $18,200,000 in the fiscal second quarter of twenty twenty four, driven by lower demand in the material handling market and lower average selling prices due to product mix.

Gross profit for the fiscal second quarter of twenty twenty five increased 2% to $5,500,000 compared to a gross profit of $5,400,000 in the fiscal second quarter of twenty twenty four. Gross margin increased to 33% in the fiscal second quarter of twenty twenty five as compared to 30% in the fiscal second quarter of twenty twenty four. Gross profit margin increased by two ninety basis points as a result of a decrease in average cost partially offset by an increase in warranty costs. Adjusted EBITDA loss was $1,000,000 in the fiscal second quarter of twenty twenty five as compared to a gain of $200,000 in the fiscal second quarter of twenty twenty four. Selling and administrative expenses increased to $6,000,000 in the fiscal second quarter of twenty twenty five as compared to $4,600,000 in the fiscal second quarter of twenty twenty four, primarily attributable to variable incentive compensation, severance and professional fees associated with the multi year restatement of previously filed financial statements.

Research and development expenses decreased to $1,000,000 in the fiscal second quarter of twenty twenty five compared to $1,200,000 in the fiscal second quarter of twenty twenty four, mainly driven by lower salaries and spot based compensation. Our net loss for the fiscal second quarter of twenty twenty five was $1,900,000 compared to a loss of $900,000 in the fiscal second quarter of twenty twenty four, primarily attributable to an increase in operating expenses. Cash was $900,000 at 12/31/2024, as compared to $600,000 at 06/30/2024, reflecting changes in working capital management. Available working capital includes our line of credit as of 12/31/2024, under our $16,000,000 credit facility from Gibraltar Business Capital with the remaining available balance of $6,300,000 subject to borrowing base limitations and satisfaction of certain financial covenants and $1,000,000 available under the subordinated line of credit with Cleveland Capital. Our credit lines with our strategic financing partner, Gibraltar, subject to eligible accounts receivable and inventory borrowing base, provides current expansion up to $20,000,000 We continue to be in good standing with Gibraltar and remain confident in their continued support of Flux and our long term mission.

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: For those of you who

Kevin Royal, Chief Financial Officer, Flux Power Holdings: are new to Flux, last year we announced we’ve identified approximately $4,400,000 of excess and obsolete inventory related non cash warranty related items of approximately $500,000 primarily related to product innovation and design of our products during a period of rapid growth over the last several years. To properly reflect the obsolete inventory, the company restated previously issued financial statements for fiscal year twenty twenty three and the interim period of fiscal year twenty twenty four. We took all appropriate measures to rectify the inventory accounting issues related to our transition to more advanced energy sales, including implementing enhanced procedures and quality checks to mitigate the possibility of it reoccurring. After filing the 10 ks and subsequent 10 Qs, we are pleased to be caught up with our filings and do not expect any lingering issues going forward. Looking ahead, we expect fiscal third quarter twenty twenty five revenues to be in line with the second quarter revenue results with a stronger trajectory in the fourth quarter as macroeconomic conditions improve and additional selling strategies to support our historical sales trajectory to scale.

Taken together, we believe our fourth fiscal quarter revenues will increase over the third quarter in a range of 5% to 10%. I’d now like to provide some closing remarks. The first and second quarters of fiscal twenty twenty five have been challenging for the company as we work through the restatement of our previously issued financial statements. Even with these challenges, the company delivered strong revenue and gross margin growth, driven by enhanced sales strategies, better market conditions and growing demand for our innovative suite of products. We also welcome several strong additions to the Flux team that will lead us into the next phase of growth.

Krishnavalka has already provided significant contributions in his short time as CEO. Chief Revenue Officer, Kelly Fry, is driving our revenue generation strategy, aligning sales, marketing and pipeline management to ensure cohesive and effective growth. And Mark Barbentler, Senior Head of Engineering, is addressing new product innovation, cost reductions and telemetry. We look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position in lithium ion technology solutions with our growing list of new and diverse large customers. I would like to thank you all for attending.

And I will now hand the call over to the operator to begin our question and answer session. Operator?

Conference Operator: Thank you. We’ll now be conducting a question and answer session. Our first question today is coming from Rob Brown from Lake Street Capital. Your line is now live.

Rob Brown, Analyst, Lake Street Capital: Good afternoon. Congratulations on all the progress.

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: If you could talk a little

Rob Brown, Analyst, Lake Street Capital: bit more about sort of the order activity you’re seeing, where you’re seeing strength and it was a pretty bullish kind of comment into the back half of the year here. Just wanted to get a sense of where those orders are coming from?

Kelly Fry, Chief Revenue Officer, Flux Power Holdings: Thanks, Rob, for the question. What we’re seeing is there’s still a lot of demand with lithium. Many customers are wanting to explore the addition of lithium to their very often lead acid that they are replacing. So we’re seeing it from both in the ground support equipment market as well as the material handling market. There’s a lot of excitement about it.

There still is some questions folks have. So what we’re seeing is they’re trying it maybe in one operation before they decide for a nationwide rollout. But everybody is excited by it. And then when you combine the lithium with the visibility that telemetry gives them into a much smarter battery, and how that data fits into their larger data infrastructure, we’re seeing a lot of demand and excitement.

Rob Brown, Analyst, Lake Street Capital: Okay, great. And then on the heavy duty model introduction, when does that hit and start to generate revenue and what sort of the opportunity you see from that product?

Ron Dutt, Senior Advisor and Former CEO, Flux Power Holdings: Rob, this is Ron. We’ve been working on those heavy duty models for some time and we’re just now starting to roll the first ones of those really for each of our major product lines, particularly Class II and Class III, introducing a heavy duty line for those very aggressive operations that we’ve seen such as Subaru and others. So we feel it’s filling the need and we’re going to roll those out across those lines over the coming months of this year.

Rob Brown, Analyst, Lake Street Capital: Okay, great. Thank you. I’ll turn it over.

Conference Operator: Thank you. Next question is coming from Craig Irwin from Roth Capital Partners. Your line is now live.

Craig Irwin, Analyst, Roth Capital Partners: Good evening and thanks for taking my questions. Lots of things we can call out from the last couple of quarters here as pretty strong progress. I guess the biggest surprise to me was the balance sheet. You had, I guess about a little over $5,000,000 from inventory improvement over the last couple of quarters, receivables down $1,500,000 You got a little bit of extension on your deferred, but the debt was down quite materially. It seems like, Kevin, you’ve been doing a lot of work on the balance sheet.

What kind of room do we have for continued improvement over the next couple of quarters? Should we expect the positive cash flows? And I did notice positive cash flows these last two quarters. Is that even feasible as we look into the end of the year?

Kevin Royal, Chief Financial Officer, Flux Power Holdings: So I think as we go into Q3, Q3, we wouldn’t expect at those levels to be positive. We’ll be close. But in Q4, we did give an indication of what we expect from revenue. And at those levels, we should be breakeven to positive cash flow.

Craig Irwin, Analyst, Roth Capital Partners: Excellent, excellent. So then you did give us sort of an adjusted EBITDA discussion, but in your adjusted EBITDA, you did not break out the adjustments for severance and for the expenses related to the restatement that you guys have now completed and brought everything up to date for. I’m guessing it’s probably somewhere between $1,000,000 and $1,500,000 the last couple of quarters. Is that something you might be able to give us a little bit of color on the impact in the fourth, first and second quarters of twenty twenty four and 2025?

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Yes. So for the first half of the year 2025, that’s where we incurred the lion’s share of the costs associated with the restatement. And those costs were $1,200,000 almost spread evenly across the two quarters. And then the severance charges were just under $500,000 probably a little bit closer to $400,000 actually And those were incurred in the second fiscal quarter of twenty twenty five.

Craig Irwin, Analyst, Roth Capital Partners: Okay, excellent. And then last question, if I may, the price increases, can you maybe put some boundaries around that? Are we talking single digit, mid single digit, double digit price increases? And the timing there, were these put in all at once? And is it something that was put in sort of towards the end of the calendar year and have all of those sort of rolled through or is there is a product and backlog, the 2019 and change you mentioned, some of that maybe at the legacy pricing that will roll through over the next couple of quarters as we deliver on those?

Kevin Royal, Chief Financial Officer, Flux Power Holdings: So the way I would think about our pricing increases is we wanted those to hit the price list at the beginning of the fiscal year. They were really select increases that impacted about half our product line and they were in the single digits, say mid single digit, would be a way to think about it. And while we have experienced some of those, we realized rather some of those beginning in October. So the second fiscal quarter, a lot of those price increases will not hit us until the third fiscal quarter, which we’re currently in, and the fourth fiscal quarter because we had backlog or we had quotes out with customers that we of course honored.

Craig Irwin, Analyst, Roth Capital Partners: Okay. And if I can squeeze another one in, your medical equipment customer is obviously another nice addition to the fleet. Medical equipment packs have historically been very, very high margin in the battery market. And it seems like you’re probably supplying one of the most technically demanding applications that they have serving in their warehouses. Can you talk about whether or not this adjacent market is potentially an opportunity with this new customer?

Is this something that’s been a part of the conversations as you’ve helped them bring down costs in operating their warehouses?

Kelly Fry, Chief Revenue Officer, Flux Power Holdings: This is Kelly. Thanks for the question, Craig. Yes, it certainly is. It’s exciting that we’ve got a customer that really this is their very early stage of deployment of lithium. So that means that there’s a lot more upside potential not only with this customer, looking forward to automation ultimately.

And the nice part of our story with lithium is that for us, it doesn’t matter if there’s a human operator on that lift truck or material handling or if it’s an automated guided vehicle, it still needs lithium. As a matter of fact, as you move towards automation, there’s probably more of a propensity to go with lithium because it requires a lot less automation. So I feel very bullish about the opportunity in that sector for sure. And I think you are accurate that that sector is willing to generally pay a little bit or invest a little bit more, let’s put it that way.

Craig Irwin, Analyst, Roth Capital Partners: Excellent. Well, congrats on the progress. I’ll go ahead and hop back in the queue. Thank you.

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Thank you.

Conference Operator: Thank you. Next question today is coming from Eric Stine from Craig Hallum. Your line is now live.

Eric Stine, Analyst, Craig Hallum: Hi, everyone. Maybe quickly, so the line was kind of garbled there. When you talked about third quarter, I did hear the fourth quarter commentary about being up 5% to 10%. But I guess first, could you just go through the third quarter commentary again? And then I’m curious, if we think about the price increases taking effect in the second half and then OpEx more normalized post the restatement expenses, etcetera.

Is EBITDA positive a possibility in the second half? And if not, I mean, I would think that that’s something that you are targeting in fiscal twenty twenty six.

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Yes. So what we said about Q3 is that we would expect it or we are expecting it to be on par with Q2, Q1, right, in the $16,000,000 range. And then you heard what I had said about Q4. I think I had also earlier commented on Q4 and at the levels that we’re talking about from a revenue standpoint, we would expect to be profitable on an adjusted EBITDA basis. So EBITDA less our stock based compensation, which should put us at breakeven and slightly positive from a cash flow basis as well.

Eric Stine, Analyst, Craig Hallum: Okay. That is helpful. Thanks for clarifying that. And then maybe just bigger picture, get a sense on this call, but certainly in the past that you kind of feel like you needed to focus more on sales, you haven’t had a full look at the market opportunity. So maybe a question for Kelly, maybe when you as you’ve kind of come in, where do you think the company was in terms of a look at that market opportunity and maybe stick to materials handling or some of the other maintenance markets?

And where do you think that can go? And how long do you think that that process can take?

Kelly Fry, Chief Revenue Officer, Flux Power Holdings: Sure. Thanks for the question. It’s a nuanced question and I’ll give that as direct of a response as I can. What I really have observed in the material handling market in particular is that Flux was taking a fairly, what I would call a passive sales approach, meaning, waiting for the demand signal to come from the distributors, the resellers and the OEMs, which is important. Those are important partners for us.

But we haven’t really been doing a lot of proactive demand generation. We really have been underfunding marketing and underfunding sales. And that means that we are not pulling as much through the market as the potential is there. So I think that’s a key thing, refocusing the team on, it’s easy to say solution selling, but really this lithium ion technology, it’s actually it’s quite a advanced technology when you consider it to be a smart battery that needs a smart energy solution really that fits into the overall plant energy solution. So opportunities for things such as peak shaving to help a customer understand when should I be charging my equipment.

Understanding that when you have hundreds of pieces of equipment in a warehouse, well that becomes a lot of distributed energy resources and you have to decide when and how do I use them, when and how do I charge them. So really trying to change the orientation of the sales organization to a solution orientation and then creating more demand generation in the market, because we do have a strong brand. You talk to virtually any customer, they know who we are, because we are the innovator, but we need to create that demand in the market as opposed to what I would say is be fairly passive in the market.

Craig Irwin, Analyst, Roth Capital Partners: Okay. Thank you.

Conference Operator: Thank you. Next question is coming from Matthew Galinko from Maxim Group. Your line is now live.

Matthew Galinko, Analyst, Maxim Group: Hey, thanks for taking my questions. Can you start on the macro outlook? I guess, what gives you confidence at this point of the year in, I guess, the fourth quarter uptick?

Kevin Royal, Chief Financial Officer, Flux Power Holdings: Yes. Well, our sales are fairly long lead times. So we get we have we do struggle with visibility given our sales model, selling through distributors, dealers, so on and so forth. But our confidence is really driven off of a strong backlog as we sit here today and where we sit in our third quarter. And the working with the sales force and understanding the forecast orders and their probability.

So it’s really just based on a combination of backlog and then working with our sales force on the opportunities they expect to ship in our fiscal fourth quarter.

Kelly Fry, Chief Revenue Officer, Flux Power Holdings: And Kevin, could I add, there’s one other dimension to the business that’s important to understand. As we mentioned, we’ve achieved 25,000 packs in the field. Many of those packs are now getting to that four, five, six, even seven year level where there’s a replacement cycle. We have a very good track record of keeping our customers as they continue to adopt new lithium within new distribution centers, new areas of their business. Not only are we getting the new growth, but we’re getting that replacement cycle starting to kick in.

So that gives us very good forward visibility to demand. I’ve already mentioned telemetry or telematics a couple of times. Having that visibility to the battery, how it’s being operated, how many cycles are available, what is its current state of health or degradation stage in its life cycle allows us to have very good visibility to when it needs to be replaced. And that’s kind of a nice business model.

Matthew Galinko, Analyst, Maxim Group: All right. Thank you. And if I could follow-up on that point on the telemetry, is there a business model around the software or is it primarily just as a kind of a solution package that you’re bringing to the table that kind of induces demand more than anything?

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: Hey, Matthew, this is Krishna. There is definitely a software revenue generating model here, because as Rachaeli said, it is an intelligent device constantly generating data. And this data is powerful. It goes deep into the operational model on how they run the business literally, right? The truck not moving, it’s not going to work for our customers.

So with this powerful data connected to the ecosystem of charging on one end and the whole logistics on the other end, we are in a very good position to be able to eventually get software recurring revenue coming out of our CyCityMS and other products we’ll be announcing later in the next year. So very positive about the recurring model opportunity that exists in front office.

Matthew Galinko, Analyst, Maxim Group: Got it. And if I could just slip a follow-up to that one. As you look out longer term, do you see software being a, I guess, material part of the revenue mix or stays as sort of a nice margin contributor, but doesn’t really reach too high in overall mix?

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: Our aspirations are to make it material and Kevin here looking at him, he will decide when to make it material, but definitely our aspirations are there.

Matthew Galinko, Analyst, Maxim Group: Great. Thank you.

Conference Operator: Thank you. We reached the end of our question and answer session. I’d like to turn the floor back over for any further or closing comments.

Krishna Venkata, Chief Executive Officer, Flux Power Holdings: Thank you, operator. This again, Krishna here. Very second week here, very early, but I would like to thank each of you on this call for joining our financial results conference today. And I really look forward to continuing to update you all on the ongoing process and growth. The future is bright and I want to thank you all again.

Conference Operator: Thank you. That does conclude today’s teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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