Flux Power Holdings, Inc. (NASDAQ:FLUX) is a leading developer of advanced lithium-ion energy storage solutions for the electrification of commercial and industrial equipment. The company has established itself as a key player in the rapidly growing market for lithium-ion battery packs, providing innovative and reliable power solutions to a diverse range of industries.
Business Overview and History Flux Power was incorporated in 2009 in the State of Nevada, with its operations conducted through its wholly owned subsidiary, Flux Power, Inc. The company designs, develops, manufactures, and sells a portfolio 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 other applications.
In its early years, Flux Power focused on developing and marketing its lithium-ion battery packs as a more reliable, high-performing, cost-effective, and environmentally-friendly alternative to traditional lead acid and propane-based energy storage solutions. The company’s modular and scalable battery pack designs, paired with its proprietary wireless battery management system, allowed it to offer customers customized energy storage configurations to meet their specific needs.
Over time, Flux Power established selling relationships with original equipment manufacturers (OEMs) and customers with large fleets of forklifts and ground support equipment. This helped the company gain traction in the material handling sector, which it identified as a multi-billion dollar addressable market. The company also explored applications of its modular battery packs in other industrial and commercial uses, such as solar energy storage.
In the years leading up to 2023, Flux Power experienced significant growth, with revenues increasing from $26.3 million in fiscal year 2021 to $66.3 million in fiscal year 2023. However, the company also faced challenges, including supply chain disruptions, manufacturing delays, and financial losses. In 2023, Flux Power entered into a new credit facility with Gibraltar Business Capital to help support its operations and growth initiatives.
Financial Overview Flux Power’s financial performance has shown both progress and challenges in recent years. For the fiscal year ended June 30, 2023, the company reported total revenue of $66.34 million, a significant increase from the $42.33 million reported in the prior fiscal year. However, the company has faced ongoing challenges in achieving profitability, reporting a net loss of $6.74 million in fiscal 2023, compared to a net loss of $15.61 million in fiscal 2022.
For the most recent quarter (Q3 2024), Flux Power reported revenue of $14.46 million, representing a 4% decrease year-over-year. This decline was primarily attributed to lower capital spending in the market sectors the company serves, resulting in fewer units shipped during the quarter. The net loss for the quarter was $2.64 million, compared to a loss of $1.4 million in the same quarter of the previous year.
The company’s gross margin decreased slightly to 30% in Q3 2024 from 31% in the prior year quarter, due to higher warranty expenses partially offset by lower average costs per unit. Flux Power’s adjusted EBITDA for Q3 2024 was a loss of $1.4 million, compared to a loss of $0.7 million in Q3 2023.
It’s worth noting that Flux Power experienced its highest quarterly revenue ever of $18.3 million in the fiscal second quarter of 2024, indicating some positive momentum despite the recent challenges.
Liquidity The company’s liquidity position has been a concern, with Flux Power reporting cash and cash equivalents of $2.38 million as of June 30, 2023, down from $4.71 million a year earlier. The company’s operating cash flow for fiscal 2023 was negative $3.57 million, while its free cash flow was negative $4.61 million.
As of March 31, 2024, Flux Power had $1.25 million in cash and $2.4 million available under its $16 million credit facility with Gibraltar Business Capital, subject to borrowing base limitations. An additional $2 million was available under a subordinated credit line.
Flux Power’s balance sheet reflects a highly leveraged capital structure, with a debt-to-equity ratio of 2.52 as of March 31, 2024. The company’s current ratio, a measure of its short-term liquidity, stood at 1.10, while its quick ratio was 0.42, indicating potential challenges in meeting its near-term obligations.
Operational Highlights and Challenges Flux Power has made significant strides in expanding its product portfolio and customer base in recent years. The company has introduced new lithium-ion battery pack models, including heavy-duty configurations, to cater to the diverse needs of its industrial and commercial customers. Additionally, Flux Power has secured several strategic partnerships and OEM approvals, further strengthening its market presence.
The company has filed three new patents on advanced lithium-ion battery pack technology to increase battery life, provide better health monitoring, and utilize AI for optimal performance. Flux Power is also expanding its product lineup to include heavier-duty models across its product lines to meet customer demands.
Recently, Flux Power added a second tier-one OEM private label program to supplement its existing OEM relationships and approvals. This move is part of the company’s strategy to diversify its customer base and expand its market reach.
However, the company has faced some operational challenges that have impacted its financial performance. In the fiscal third quarter of 2024, Flux Power reported a 4% decrease in revenue compared to the same period in the prior year, primarily due to lower capital spending in its target markets, resulting in fewer unit shipments. The company has also grappled with supply chain disruptions and cost pressures, which have weighed on its gross margins.
Flux Power’s management has acknowledged these challenges and has taken steps to address them, including implementing cost-reduction initiatives, expanding its sales and marketing efforts, and exploring new market opportunities. The company’s long-term strategy focuses on building scale, diversifying its revenue streams, and achieving profitability through a combination of organic growth and strategic partnerships.
Regulatory and Industry Landscape The energy storage industry, particularly the lithium-ion battery segment, is subject to a complex regulatory environment. Flux Power must navigate a web of safety, environmental, and transportation regulations to ensure the compliance of its products. The company’s ability to maintain its UL listings and OEM approvals is crucial to its continued success.
The material handling sector that Flux Power serves has historically seen single-digit growth. However, the adoption of lithium-ion batteries is growing at a much higher rate, driven by the compelling value proposition compared to lead acid and propane solutions, especially for larger multi-shift operations. This trend presents significant growth opportunities for Flux Power as more companies transition to lithium-ion energy storage solutions.
Moreover, the broader macroeconomic and industry trends can significantly impact Flux Power’s performance. The recent slowdown in capital spending in the material handling and commercial sectors, partly driven by higher interest rates and economic uncertainty, has presented challenges for the company. Flux Power’s management has noted that they are experiencing a “pause” due to the higher interest rate environment, but they see signs of a gradual return to their growth rate in the second half of calendar 2024.
Future Outlook While Flux Power did not provide specific financial guidance for future periods, the company remains optimistic about its long-term prospects. Management is highly focused on expanding sales and marketing initiatives to secure new customer relationships and support the continued migration of current customers to lithium-ion solutions.
Flux Power is targeting gross margin improvement to continue, with a long-term goal of exceeding 40%. This target reflects the company’s efforts to optimize its product costs and improve operational efficiency.
The company’s ability to manage its working capital requirements and secure additional funding will be critical to supporting its current operations and planned investments in sales, marketing, and research and development. As Flux Power continues to navigate the challenges in its market and pursues its growth strategies, investors will be closely monitoring its progress towards profitability and its ability to capitalize on the expanding opportunities in the lithium-ion energy storage market.
Conclusion Flux Power Holdings, Inc. (NASDAQ:FLUX) is a versatile player in the rapidly evolving lithium-ion energy storage market. The company has demonstrated its technological capabilities and established a strong customer base, but it continues to navigate operational and financial challenges. As Flux Power works to address these obstacles and execute its long-term growth strategy, investors will be closely monitoring the company’s ability to achieve profitability and capitalize on the significant opportunities within the industrial and commercial energy storage landscape. The company’s success will depend on its ability to adapt to market shifts, improve its financial performance, and leverage its innovative technology to meet the growing demand for advanced energy storage solutions.
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