Fly-E's Robust Business Transformation

Fly-E Group, Inc. (FLYE) is an electric vehicle (EV) company that has rapidly emerged as a leading provider of smart electric motorcycles, bikes, and scooters, catering to the growing demand for eco-friendly transportation solutions. Established in 2018 with its first store in New York, the company has since expanded its footprint to 36 stores, including 35 retail locations in the U.S. and one in Canada, as of February 19, 2025.

Fly-E's journey began in 2018 when it opened its first store in New York, focusing on designing, installing, and selling a diverse range of electric two-wheeled vehicles. Over the years, the company has demonstrated remarkable growth, both in terms of its product portfolio and geographical expansion. As of February 19, 2025, Fly-E operates 36 stores, a significant increase from its humble beginnings.

The company's product lineup has also evolved to cater to the diverse needs of its customers. Fly-E now offers 25 electric motorcycle models, 28 electric bike models, and 37 electric scooter models, allowing it to address a wide range of urban travel scenarios. The company's commitment to innovation and staying ahead of market trends is exemplified by its ongoing development of a Fly-E mobile app, which aims to provide customers with a comprehensive and intelligent experience in managing their electric vehicle needs.

Fly-E has become one of the leading providers of e-bikes for food delivery workers in New York City, showcasing its ability to cater to specific market segments. The company's growth has been accompanied by strategic corporate restructuring. In September 2022, Fly-E-Bike, a wholly-owned subsidiary of Ctate, merged into Fly-E-Bike, with the latter being the surviving corporation. This merger resulted in the original shareholders of Ctate becoming stockholders of Fly-E-Bike and effectively controlling the combined entity. Subsequently, in December 2022, Fly-E Group acquired all of the issued and outstanding shares of Fly-E-Bike, making it a wholly-owned subsidiary.

In addition to its physical stores, Fly-E operates an online store at flyebike.com, focusing on selling e-motorcycles, e-bikes, and e-scooters to customers in the United States. This multi-channel approach allows the company to reach a broader customer base and capitalize on the growing trend of online shopping for electric vehicles.

Innovative Rental Services Expand Reach

In a strategic move to address the growing demand for flexible and affordable e-bike options, Fly-E launched its rental service business in October 2024. The rental service, available through the Go Fly rental service mobile app and select Fly-E stores, offers customers in New York City and Los Angeles the opportunity to experience the convenience and sustainability of electric two-wheeled transportation. This initiative aligns with Fly-E's vision of encouraging people to incorporate eco-friendly transportation into their active lifestyles, contributing to a more environmentally conscious future.

Leveraging Regulatory Tailwinds

Fly-E has positioned itself to capitalize on the favorable regulatory environment surrounding electric vehicles. In July 2024, the Governor of New York State signed a legislative package aimed at raising awareness about the safe use of e-bikes and lithium-ion battery products, prohibiting the sale of non-compliant batteries, and improving accident reporting and registration processes. Additionally, in January 2025, the New York City Department of Transportation (NYC DOT) launched a $2 million trade-in program, allowing eligible food delivery workers to replace their unsafe e-bikes, e-mobility devices, and batteries with certified, high-quality versions. Fly-E's Fly-11 PRO model was chosen as the official model for this program, further solidifying the company's position in the market.

Financial Performance and Liquidity

Fly-E's financial performance has been mixed, with both successes and challenges. For the fiscal year ended March 31, 2024, the company reported net revenues of $32.21 million, representing a 47.9% increase from the previous year. Gross profit also saw a significant improvement, rising by 58.1% to $13.11 million, with the gross profit margin expanding from 38.1% to 40.7%. The company reported net income of $1.90 million, operating cash flow of $4.31 million, and free cash flow of $1.29 million for the fiscal year.

However, the company's latest quarterly results, reported for the three months ended December 31, 2024, paint a more complex picture. Net revenues decreased by 23.6% to $5.7 million, compared to $7.4 million in the same period of the previous year. This decline was primarily driven by a 3.51K unit decrease in total units sold, from 13.5K units in the third quarter of fiscal year 2024 to 9.99K units in the third quarter of fiscal year 2025. The company reported a net loss of $0.68 million for the quarter.

Despite the revenue challenges, Fly-E managed to maintain a healthy gross margin of 45.1% in the third quarter of fiscal year 2025, up from 39.0% in the same period of the previous year. This improvement was largely attributable to more favorable pricing obtained from suppliers, particularly for batteries, as well as a reduction in battery sales volume.

For the nine months ended December 31, 2024, Fly-E's total net revenues decreased by 15.2% to $20.38 million, compared to $24.03 million for the same period in 2023. This decrease was primarily driven by a 7.58K unit decline in total units sold, from 49.50K units to 41.92K units. Gross profit for this period was $8.57 million, with a gross margin of 42.0%, representing a decrease of $0.89 million, or 9.4%, from the $9.46 million gross profit and 39.3% gross margin in the prior year period.

The company's liquidity position raises some concerns. As of December 31, 2024, Fly-E had a working capital of $3.0 million and cash of $1.4 million. During the nine months ended December 31, 2024, the company incurred a net loss of $2.0 million and used $9.4 million in net cash from operating activities. The company's current portion of contractual obligations stood at approximately $8.2 million as of December 31, 2024.

Mitigating Liquidity Risks through Diversified Funding

To address the liquidity challenges, Fly-E has outlined several strategies. The company plans to alleviate the going concern risk through equity financing to support its working capital, seeking other available sources of financing such as debt from banks and other financial institutions, and securing financial support from its related parties.

Fly-E's successful initial public offering (IPO) in June 2024 provided a significant boost to its liquidity. The company raised approximately $9.2 million in net proceeds from the IPO, including the exercise of the underwriters' over-allotment option. These funds are expected to be used primarily to cover the purchase of inventory, fund the development of the Fly-E mobile app, and support the company's overall growth initiatives.

As of December 31, 2024, Fly-E had a debt-to-equity ratio of 1.71. The company had $1.37 million in cash on hand and a $5.00 million credit line from Peapack-Gladstone Bank, of which $4.91 million was drawn as of the quarter end. Fly-E's current ratio was 1.30 and quick ratio was 0.43, indicating potential short-term liquidity challenges.

Diversifying Revenue Streams through Rental Services

In addition to its retail and wholesale business, Fly-E has also launched a rental service business to diversify its revenue streams and address the growing demand for affordable and sustainable e-bike options. The rental service, now available in New York City and Los Angeles, is expected to contribute to the company's top-line growth and provide a more resilient revenue model. For the nine months ended December 31, 2024, rental service revenue was $48,960.

Product Segment Performance

Fly-E's product portfolio consists of E-motorcycles, E-bikes, and E-scooters. E-motorcycle sales revenue decreased by $3.20 million, from $7.20 million in the nine months ended December 31, 2023 to $4.00 million in the nine months ended December 31, 2024. This decrease was primarily driven by a decline in E-motorcycle sales volume. The cost of E-motorcycles also decreased by $2.30 million, from $5.00 million to $2.80 million during the same period.

E-bike sales revenue decreased by $1.52 million, or 7.9%, from $19.23 million for the nine months ended December 31, 2023 to $17.71 million for the nine months ended December 31, 2024. This decrease was mainly due to recent lithium-battery accidents involving E-Bikes, causing customers to be less inclined to purchase E-Bikes and instead opt for oil-powered vehicles.

Navigating Operational Challenges and Regulatory Hurdles

Fly-E's growth journey has not been without its challenges. The company has faced operational hurdles, including supply chain disruptions, production ramp-up, and quality control issues. Furthermore, the heavily regulated nature of the electric vehicle industry, with evolving safety standards and certification requirements, has posed additional complexities for the company.

To mitigate these challenges, Fly-E has implemented a centralized vendor management system to streamline purchasing, enhance negotiating power, and maintain strong relationships with its key suppliers. The company has also taken steps to strengthen its internal control processes and invest in its IT infrastructure, including the development of an enterprise resource planning (ERP) system to improve operational efficiency and financial reporting.

Fly-E's ongoing collaboration with government entities, such as the NYC DOT's e-bike trade-in program, showcases the company's ability to navigate the regulatory landscape and position itself as a trusted partner in the industry.

Outlook and Future Prospects

Fly-E's future prospects remain cautiously optimistic, with both opportunities and risks on the horizon. The company's strategic focus on expanding its retail footprint, diversifying revenue streams through rental services, and leveraging regulatory tailwinds in its target markets suggest a path for continued growth.

The electric two-wheeled vehicle industry in the U.S. is experiencing rapid growth, with a compound annual growth rate (CAGR) of 20-25% expected over the next 5 years. This favorable industry trend provides a strong tailwind for Fly-E's business expansion.

However, the company's liquidity concerns and the ongoing operational challenges it faces will require close monitoring and effective execution of its mitigation strategies. Maintaining a delicate balance between growth initiatives and financial discipline will be crucial for Fly-E's long-term success.

As Fly-E navigates the evolving electric vehicle landscape, its ability to innovate, adapt to market dynamics, and deliver a superior customer experience will be key factors in determining its future trajectory. Investors will closely watch the company's progress in addressing its liquidity challenges, expanding its rental service business, and capitalizing on the favorable regulatory environment to drive sustainable growth and profitability.