Flux Power Holdings, Inc. (NASDAQ:FLUX) is a leading developer of advanced lithium-ion energy storage solutions for electrification of a range of industrial and commercial sectors, including material handling, airport ground support equipment (GSE), and stationary energy storage. Despite facing some near-term headwinds, the company has demonstrated resilience and a commitment to innovation that positions it well for long-term growth.
Financials
For the fiscal year ended June 30, 2024, Flux Power reported annual revenue of $66,337,000, a decrease from the prior year. The company's net loss for the year was $6,741,000, and its annual operating cash flow was -$3,574,000, with free cash flow of -$4,606,000. These financial results reflect the impact of delays in new orders and shipments, driven by revised timing of forklift deliveries and economic uncertainty in the company's market sectors.In the fiscal third quarter of 2024, Flux Power's revenue decreased 4% to $14,457,000, compared to $15,087,000 in the same period of the prior year. Gross profit for the quarter decreased 7% to $4,390,000, with a gross margin of 30%, down slightly from 31% in the prior-year quarter. The company's net loss for the quarter was $2,640,000.
Business Overview
Flux Power designs, manufactures, and sells a portfolio of advanced lithium-ion energy storage solutions for a range of industrial and commercial applications. The company's lithium-ion battery packs, including its proprietary battery management system (BMS) and telemetry, provide customers with a better performing, lower cost of ownership, and more environmentally friendly alternative to traditional lead acid and propane-based solutions.The company's primary focus has been on the material handling sector, which it believes represents a multi-billion dollar addressable market. Flux Power has established strong relationships with original equipment manufacturers (OEMs) and customers with large fleets of forklifts and GSE. The company's modular and scalable design allows different configurations of lithium-ion battery packs to be paired with its proprietary wireless BMS to provide the level of energy storage required and real-time monitoring of pack performance.
In addition to the material handling sector, Flux Power is exploring opportunities in adjacent markets, such as airport GSE and stationary energy storage, to leverage its core competencies and capabilities. The company's strategy revolves around building scale to sell its pack products to large fleets, while also pursuing partnerships and potential acquisitions to accelerate growth and profitability.
Operational Initiatives
To address the near-term headwinds, Flux Power is undertaking several initiatives to drive revenue growth and improve profitability. The company is expanding its sales force and implementing marketing campaigns to increase awareness of its value proposition and capabilities among both new and existing customers. Flux Power is also launching new high-demand products, such as heavy-duty models for its battery pack lines, to better cater to the needs of its large fleet customers.Additionally, the company is focused on cost reduction and margin improvement efforts, including strategic supply chain initiatives, higher-volume purchasing, and selective pricing increases. These actions are aimed at achieving the company's long-term gross margin target of exceeding 40%.
Flux Power is also leveraging its technology and partnerships to drive innovation. The company is currently testing a prototype of its fast-charging technology and is exploring opportunities to implement second-life use of its battery packs in stationary storage applications. Furthermore, the company is developing machine learning and AI-powered features for its product support and asset management offerings, which are tailored to the needs of its large fleet customers.
Liquidity and Capital Resources
As of March 31, 2024, Flux Power had a cash balance of $1,250,000 and available working capital, including a $16 million credit facility from Gibraltar Business Capital with a remaining available balance of $3,200,000, as well as $2 million available under a subordinated line of credit with Cleveland Capital.The company's operations have relied on its ability to successfully maintain and draw on its credit facilities. However, Flux Power recently notified its lender, Gibraltar Business Capital, of a potential event of default related to its anticipated failure to maintain a financial covenant. The company has received a waiver from Gibraltar, subject to certain conditions, and is working to modify the covenant terms to prevent future defaults.
Flux Power's ability to continue as a going concern is dependent on its ability to meet order projections, ship open sales orders, further improve its margins, reduce operating costs, and raise additional capital as needed. The company's recent actions to expand its sales force, launch new products, and enhance its gross margins are aimed at strengthening its financial position and cash flow generation.