Flux Power Holdings (FLUX) Q4 2026 earnings call transcript

Good afternoon, and welcome to Flux Power's fiscal fourth quarter and full year 2026 earnings conference call. I'm Leanne Severs, president of Shelton Group, Flux Power's investor relations firm. Joining me today from Flux Power are Krishna Ivanka, CEO, Kevin Royal, chief financial officer, and Stu Jokover, vice president of sales for material handling.

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 risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 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 8K, which can be found in the investor relations section of Flux Power's website at www. flexpower. 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. And now it's my pleasure to turn the call over to Flux Power's CEO, Krishna Vanka. Krishna, please go ahead.

Thank you, Leanne, and thank you everyone for joining us on today's conference call. I am very pleased to report fourth quarter revenue increased 25% sequentially and even slightly better than the expectations conveyed on last quarter's call. We are encouraged by the improving order patterns we saw throughout the quarter across both our ground service equipment and material handling business. On a year-over-year basis, the quarter was below our historic revenue level due to our most significant material handling customer continuing to navigate its capital freeze as we conveyed previously.

Our business has also been impacted by the broader economic disruptions related to tariffs and higher fuel prices. I want to reiterate that our partnership with our significant customer remains strong, and we expect business with this valued customer to resume in the future. As mentioned on prior calls, we have been taking decisive actions over the past year to lower product and operating costs as well as improve operating efficiencies. We reduced operating expenses by 33% over the fourth quarter of fiscal 2025 and a decrease of 28% when comparing full year 2026 versus 2025. These actions have included headcount reductions, cost containment, and broader efficiency measures. We also continue to work aggressively to improve margins through near-term supply chain optimization, vendor pricing negotiations, and product redesign efforts.

Additionally, we have been closely evaluating all of our component costs and meeting with vendor partners in low-cost regions. Also, this initiative will take time to implement. It should have a meaningful benefit to overall product costs over time. Another initiative I mentioned last quarter was optimizing our sales team and launching aggressive new marketing programs. These programs are aimed at diversifying our customer base, so we are less dependent on any one customer. We are beginning to see positive results from new lead generation programs that have increased our customer activity. As a result of these marketing programs, we are also very excited to announce we entered a new and growing vertical robotics in the last quarter. We are doing this in close collaboration with a very large global technology platform company.

They already deployed more than 70 of our batteries for their robotics testing and are looking at full-scale production starting in a quarter or two. I can't wait to share more details soon. We also successfully added senior sales veterans to the team, including a new VP of sales for material handling, Stu Jacover. Stu has more than three decades of dealer network, OEM, and national account leadership experience. I would now like to turn the call over to Stu to tell you more about himself and his initiatives aimed at accelerating growth across North America. Stu, please go ahead.

Thank you, Krishna, and thank you for the opportunity to introduce myself and talk about my primary objectives and our go-forward strategy. I'm certainly excited to be part of the Flux Power team. As Krishna mentioned, I've spent the last 25 years in the material handling industry, most recently as general manager at Mitsubishi Logisnext, and previously in various sales leadership roles, including Toyota material handling. Over that time, I've built and led sales organizations across the industry, and I've done it with a consistent focus on profitable market share growth. Whether it was managing dealer networks or building out enterprise account strategies, my track record has been about identifying where the real growth opportunities are and building the right team and process to capture them.

That's exactly the lens I'm bringing to Flux Power. Flux has built this business on a strong dealer sales network, and that foundation will be further enhanced. Our dealer partners remain central to our go-to-market strategy. That said, I believe there's a significant opportunity to add a second growth engine. Throughout my career, I've spent a substantial amount of time calling directly on large enterprise and national accounts. These are the big fleet operators who run hundreds or thousands of forklifts across multiple sites. I know how these organizations make purchasing decisions, I know the stakeholders involved, and I have existing relationships with many of them. My plan is to leverage that experience and build a direct enterprise sales engine that runs alongside and complements our dealer channel.

This will not be in competition, but complimentary too. That gives us a hybrid strategy with two ways to win business instead of one. It positions Flux Power to go after large fleet opportunities directly with a tailored approach. I wouldn't be as confident in this strategy if I didn't believe in what we're selling, and Flux Power's products give us a real edge. One differentiator I'm especially excited about is our end-of-life recycling program.

This matters as a lot of our corporate customers have significant green and sustainability initiatives. This is an area where Flux is ahead of the industry and not just working toward it. Flux has a documented robust program that utilizes a name certified recycling partners specializing in lithium battery processing and a written take guarantee This provides our customers a formal end agreement not just a verbal promise so our customers know exactly what happens to their batteries at a nominal expense We offer our customers multiple paths to being environmentally responsible. Depending on the condition, battery modules can go into second-life uses like grid storage or emergency power. Components can also be refurbished to be utilized again, or the unit goes to certified material recovery.

Being able to walk a large enterprise fleet operator through an actual documented program with real paths to recovery rather than an industry that's still figuring this out is a genuine differentiator in the conversation. In addition to recycling, we back our product with best-in-class customer support during the life of the battery. When you're asking a large fleet operator to trust their operation to us, they need to know we'll be there after the sale, not just at the point of purchase. The combination of a strong sustainability program and dependable, responsive support is exactly what gives me confidence in our ability to win and retain these larger accounts. As you can tell, I'm very excited about Flux Power's product differentiation, reputation in the industry, and opportunities that lie ahead.

for what we believe will be a very promising future. We look forward to providing you with more updates in the coming quarters. And now, I'll turn the call back over to Krishna.

Krishna Choudhury Thank you, Stu. Once again, it's great having you on the team. Let me turn back to the other notable progress made during the last quarter. I'll start with the positive developments made on our OEM partnership programs that our director Brian McKinsey discussed last quarter.

First, one of our OEM white label customers increased This is the first time we were able to get that commitment from a white label customer and serves as a strong validation of our OEM program success. I'm also very pleased today to announce that during the last quarter, Flux received official certification from Hysterial Material Handling, Inc. , a key OEM partner who is a global leader in lift truck manufacturing. This important certification is for all of the Hyster Rails class 1, 2, and 3 forklifts. These three classes of forklifts represented $3.5 billion in Hyster Rails revenue during their fiscal year 2025. This represents a major growth opportunity for flux power as it significantly expands our market share across the largest segments of the electric material handling industry.

The certification not only validates our technology, but also strengthens our credibility with OEMs and dealers, while also reducing adoption barriers for large enterprise fleets. We are now selling to the top four OEMs, which account for more than 60% of the North American market. When combined with the direct enterprise sales strategies to outline, this gives us multiple avenues to grow. Also, on June 30th, we made one of our most significant platform leaves in the company history with the launch of AI-driven SkyMS 3.0. This wasn't a minor update, but rather a fundamental redesign of how our customers manage and optimize their energy assets. This plays a key role in shaping Flux Power's competitive position. As many of you know, Flux has historically competed as a battery hardware manufacturer.

SkyEMS 3.0 enhances that equation. It layers AI-powered intelligence, predictive analytics, and a fully customizable dashboard experience on top of every battery we deploy. It turns fleet data into a personalized command center. This software-driven differentiation is difficult for hardware-only vendors to replicate quickly and also strengthens our moat in the market. As I mentioned previously, 100% of our GSC batteries now come with Sky MS Access, and airline customers are actively using it. We look forward to making it part of every material handling battery sale as well. Why does all this matter for Flux Power?

First, it deepens our engagements with customers and increases customer retention. Once a fleet operates on Sky MS, the platform becomes embedded in their daily operations. Next, it also expands our value delivered beyond the battery sale, which is a foundation for future recurring software-attached revenue. And finally, it positions LuxPower as a technology company, not just as a lithium battery manufacturer.

And also for our customers, it provides 15 to 40 percent faster time to awareness on battery issues, so operators catch problems before they become downtime issues. Fleet uptime is improved 10 to 30 percent, a direct measurable productivity gain. And it's built on more than 90 platform enhancements delivered in just the past six months, showing sustained execution velocity, not just a one-off release. Overall reception in the market has been strong since the launch. Reinforcing this platform meets a real market need. As we look to fiscal 2027, the Flux team remains intently focused on driving future growth and executing on our five strategic initiatives that include profitable growth, operational efficiencies, solution selling, building the right products, and integrating value-added software to generate recurring revenue streams.

With that, I will now turn the call over to our CFO, Kevin Royal, who will review our fourth quarter and full year financial results in more detail. Kevin, please go ahead.

Good afternoon, everyone. Revenue for the fourth fiscal quarter of 2026 was $8.2 million, up from $6.6 million in the prior quarter and compared to $16.7 million in the same quarter a year ago. Revenue for the full year of 2026 was $42.1 million compared to $66.4 million in 2025. Gross margin for the fourth fiscal quarter of 2026 was 27.4% compared to 27.3% in the prior quarter and 34.5% in the fourth quarter of 2025. Gross margin for the full year 2026 was 30.2% compared to 32.7% in 2025.

The year-over-year decline in gross profit as a percentage of revenue was largely due to changes in product mix, a full-year impact from tariffs, and a loss in operating leverage due to lower volumes resulting in higher unabsorbed labor and overhead. Operating expenses for the fourth quarter were $4.4 million, a decrease from $4.8 million in the prior quarter, and $6.5 million in the same quarter a year ago.

Full-year 2026 operating expenses were $19.2 million compared to $26.8 million in the prior year. The year decrease in operating expenses primarily reflects the benefit of our previous actions to reduce headcount and streamline the operating model As well as the fiscal year 2025 included costs of million associated with the restatement of previously issued financial statements Net loss for the fourth quarter was $2.3 million, or $0.11 per share, compared to a net loss of $3.2 million, or $0.15 per share, in the prior quarter, and a net loss of $1.2 million, or $0.07 per share, in the fourth fiscal quarter of 2025. Net loss for the full year of 2026 was $7.4 million, or $0.38 per share, compared to net loss of $6.7 million, or $0.40 per share, in the prior year.

On a non-GAAP basis, excluding the above-referenced stock-based compensation costs, the fourth quarter net loss was $2.1 million, or $0.10 per share, compared to a net loss of $2.9 million, or $0.14 per share, in the same quarter, and a net loss of $0.1 million, or one penny per share, in the same quarter a year ago, which also excluded the above-referenced restatement cost.

The full-year 2026 non-GAAP net loss was $6.5 million, or $0.33 per share, compared to a net loss of $2.8 million, or $0.17 per share, in 2025, which also excluded restatement cost. Adjusted EBITDA for the fourth quarter was negative $1.6 million compared to negative $2.5 million in the prior quarter and a positive adjusted EBITDA of $0.5 million in the prior year period.

Adjusted EBITDA for the full year of 2026 was negative $4.5 million compared to negative $0.1 million in 2025. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $0.3 million compared to $0.4 million in the prior quarter. Before turning the call back over to Krishna, I want to provide some insight around our near-term revenue expectations.

For the first quarter of 2027, we are currently expecting revenue to be down in the range of $6 to $7 million. However, we expect the second fiscal quarter revenue to rebound and be in the range of $8 to $9 million. I'll now hand the call over to Krishna for closing comments before opening it up to your questions. Krishna?

Thank you, Kevin. In conclusion, the company has faced a number of headwinds during my first 18 months as a CEO. This in turn led us to reassess our business priorities and implement changes that we expect to benefit us in the fiscal year 2027 and beyond. We have the right team in place to execute on our sales and marketing initiatives with multiple growth engines to drive a more diversified customer base and a new vertical. With our lower cost base, we are well positioned to achieve renewed growth and profitability in the future as broader economic conditions improve. We look forward to the opportunities that lie ahead and remain confident in our ability to deliver long-term value for our shareholders.

With that, let's open the call to questions. Operator?

Samir, thanks for a great question, and thanks for your compliments. Yeah, the SkyEMS 3.0, as I mentioned, is built from ground up with AI embedded in it. And it's not just managing the battery analytics, it's also managing the energy matrix. So this includes some charger data that can potentially come through OCPP-type protocols. So it's really gathering all the data that the fleet needs for managing their energy efficiently. So this is the first time we actually did this type of connection. At this point, it is being deployed, as I mentioned again, with the airline customers. All of our batteries since quarter or quarter and a half are going with Sky MS as a default option for airlines.

And we have also reached out to our material handling customers, few significant ones, and having them start using this new SkyEMS platform. So as it stands today, our intent is to obviously deploy this 100% with both the verticals. And as we explore these new verticals, including the robotics, we see a potential of having something like this for our customers to embed and work through the SkyMS for their energy decisions. At this point, that's our plan. So this is adding on top of our hardware sales, not a standalone software product yet.

Yeah, so the opportunity we are working on is a very significant one. It's with one big technology company that is on the forefront of using robotics. So we are very thrilled about it, and as I mentioned, we deployed, or we are deploying and testing, as we speak, about 70 batteries with them to start with. They are, if everything goes well and the testing goes well and it goes into production, this is going to be one of our marquee customers and there's a good potential that they'll have a significant revenue coming up in the next couple of years, you know, not just for one quarter or two quarters. So we are looking holistically, you know, for multiple year contracts and deployments.

I would love to speak more with you as soon as the testing is done, and we know that we are deploying at scale.

Yeah. Yeah, sure. Thank you for the question. Yes, we have delivered the initial order and installment of product. We are actively involved in several other open projects. However, at this time, those are not secure, but we are looking very favorably on those additional opportunities.

Yeah, I think, you know, we'll see improvement when we're above the $12 million quarterly run rate. So between, you know, 12 and 14, we would expect to get up above 30% once again.

Yeah, Rob, thanks for the question. We are in close communication, as I mentioned, you know, constant communication, trying to get updates. As far as we heard, they are now working on planning for the next, you know, fiscal or the calendar year, I would say. So it's in good progress, and we are literally awaiting. We are seeing the positive signs, and we are awaiting to hear some good news pretty soon.

Yeah, that is we deployed one of our UL certified standard offerings, so it was a great use case for us to be able to find new verticals for our existing products. That said, we are very open to find new opportunities in this industry, and we may be able to accelerate the product roadmap as needed.

So the airline industry particularly, as we mentioned, has been hit a little bit because of the fuel costs, right, in the last few quarters, again, because of the wars and whatnot. But we have just started seeing through our partner some good progress, some, you know, renewed interest to start buying the equipment again, which we see it as a positive sign. And, yeah, I would say we would, you know, all the signals are pointing to, you know, more airline business in the next two, three quarters to pick up.

Yeah, I think the latter part of your observation is what we'll see is, you know, a little bit of a degradation before the revenues pick back up, and we get up above 30% and into that mid-30s range.

Yeah, Craig, so the model is our C48, and a good ASP to use, a good round ASP would be $10,000 per battery.

Yeah, I would say that, you know, these are batteries that we've provided for, you know, prototype build and testing, so that when they go to scale, you know, it'll be, you know, hundreds per year.

Thank you. Thank you.

Thank you again for joining today's call. One final note, we will be in New York on September 10th, 11th, 14th, and 15th with opportunities to meet with investors at the Lake Street, and HC Wainwright conferences, as well as an additional day of non-conference meetings. If you are interested in meeting with us while we are in the city, please reach out to Leanne Sievers at Shelton Group to schedule a time. I really look forward to some good discussions.