Fly-E Group, Inc. is a leading innovator in the electric vehicle (EV) industry, dedicated to designing, installing, and selling smart electric motorcycles, electric bikes, electric scooters, and related accessories. The company's commitment to sustainability and cutting-edge technology has positioned it at the forefront of the growing EV market.

Business Overview and History

Fly-E Group's roots can be traced back to 2018 when its business was initially operated under CTATE INC., a corporation formed under the laws of the State of New York. CTATE owned 27 companies, each of which operated a Fly E-Bike store. On September 12, 2022, CTATE and Fly E-Bike, which was a wholly-owned subsidiary of CTATE, entered into an Agreement and Plan of Merger, resulting in CTATE merging into Fly E-Bike, with Fly E-Bike being the surviving corporation. This merger led to the original shareholders of CTATE becoming the stockholders of Fly E-Bike and effectively controlling the combined entity.

The company's current structure took shape on November 1, 2022, when Fly-E Group, Inc. was incorporated under the laws of the State of Delaware. Shortly after, on December 21, 2022, Fly-E Group and Fly E-Bike entered into a Share Exchange Agreement, through which Fly-E Group acquired all of the issued and outstanding shares of Fly E-Bike by issuing its shares to the stockholders of Fly E-Bike on a one-for-one basis. This transaction resulted in Fly E-Bike becoming a wholly-owned subsidiary of Fly-E Group.

Since its inception, Fly-E Group has experienced rapid growth, expanding its footprint to 37 stores, including 36 retail stores in the U.S. and one in Canada, as of November 14, 2024. The company's success is rooted in its ability to cater to the diverse transportation needs of urban and suburban customers, offering a wide range of EV models and accessories. In addition to its physical retail presence, Fly-E Group operates an online store focused on selling E-motorcycles, E-bikes, and E-scooters. The company has plans to open another online store in the future, specifically dedicated to selling gas bikes.

In its early days, Fly-E Group primarily focused on serving the needs of food delivery workers in New York City, becoming one of the leading providers of e-bikes for this segment. As the company's reputation grew, it expanded its product portfolio to include electric motorcycles, e-scooters, and a variety of accessories, catering to the evolving preferences of its customer base.

Fly-E Group's commitment to innovation is exemplified by its continuous efforts to enhance its product offerings. The company is currently in the process of developing a Fly E-Bike app, a comprehensive management service mobile software that will enable customers to seamlessly purchase bikes, locate company stores, schedule repairs, and more. This app is expected to provide users with a cutting-edge, intelligent experience, further solidifying Fly-E Group's position as a leader in the EV space.

In December 2023, the company engaged DF Technology US Inc. (DFT), a related party, for the development of its enterprise resource planning (ERP) system. Additionally, in July 2024, Fly-E Group partnered with DFT to create the "GO FLY APP," a mobile application specifically designed for the company's rental services.

Financial Performance

For the fiscal year ended March 31, 2024, Fly-E Group reported net revenues of $32.21 million, reflecting a robust 47.9% year-over-year increase. Gross profit also surged by 58.1% to $13.11 million, with the company's gross profit margin improving from 38.1% to 40.7%. Net income for the fiscal year 2024 was $1.90 million, with operating cash flow (OCF) of $4.31 million and free cash flow (FCF) of $1.29 million.

Despite the challenging macroeconomic environment and the impact of the COVID-19 pandemic, Fly-E Group has demonstrated resilience in its financial performance. For the six months ended September 30, 2024, the company reported net revenues of $14.70 million, a decrease of 11.5% compared to the same period in the prior year. This decline was primarily attributed to a decrease in total units sold, which dropped by 4,070 units, from 36,000 units in the six months ended September 30, 2023, to 31,940 units in the six months ended September 30, 2024.

Gross profit for the six-month period ended September 30, 2024, was $6.00 million, a decrease of 7.4% compared to the same period in the prior year. However, the company's gross profit margin improved from 39.0% in the six months ended September 30, 2023, to 40.9% in the six months ended September 30, 2024, driven by an increase in the average sale price of its EVs and a decrease in the unit cost of batteries.

For the most recent quarter (Q2 FY 2025), Fly-E Group reported revenue of $6.82 million, representing a 22.10% decrease compared to the same quarter last year. The company incurred a net loss of $1.14 million, with negative operating cash flow of $4.89 million and negative free cash flow of $6.52 million. This decrease in revenue was primarily due to a 5,850 unit decrease in total units sold, from 20,910 units in Q2 FY 2024 to 15,060 units in Q2 FY 2025. The company attributes this decline to recent lithium-battery accidents involving E-Bikes and E-Scooters, causing customers to opt for oil-powered vehicles over electric vehicles.

Product Segments

Fly-E Group operates in three main product segments: E-bikes, E-motorcycles, and E-scooters. The E-bikes segment is the company's largest revenue contributor. For the three months ended September 30, 2024, E-bike sales revenue was $5.92 million, down 12.5% from $6.77 million in the same period of the prior year. The decrease in E-bike sales revenue was primarily driven by a decline in sales volume.

The E-motorcycles segment generated $900,830 in revenue for the three months ended September 30, 2024, a decrease of 54.8% compared to $2 million in the same period of the prior year. This decline was driven primarily by decreases in orders from the company's top two customers, who closed their retail stores in December 2023.

The E-scooters segment is the third product category for Fly-E Group. While revenue from E-scooter sales was not broken out separately in the financial reports, it is included within the overall $6.82 million in net revenues reported for the three months ended September 30, 2024.

Gross margin for the business was 42.6% in the three months ended September 30, 2024, relatively flat compared to 42.9% in the same quarter of the prior year. This stability in gross margin was achieved despite the decrease in revenue, as the company was able to obtain more favorable pricing from suppliers, particularly for batteries, which helped offset the decline in sales volume.

Liquidity

As of September 30, 2024, Fly-E Group had a cash balance of $1.27 million and working capital of $2.30 million. The company has funded its operations through a combination of equity contributions from shareholders, net proceeds from its initial public offering (IPO) in June 2024, cash flow from operations, and bank loans.

The company's debt-to-equity ratio stood at 0.73 as of September 30, 2024. Fly-E Group has a $5 million revolving credit line from Peapack-Gladstone Bank, with the current annual interest rate at 8.80%. The company's current ratio was 1.21, and its quick ratio was 0.42 as of September 30, 2024.

Expanding into Rental Services and Participation in NYC's Trade-In Program

In October 2024, Fly-E Group launched its new e-bike rental service, the "Go Fly" program, to address the growing market demand for safe, UL-certified e-bikes in compliance with New York State regulations. The rental service, available in New York City through the Go Fly rental service mobile app and selected Fly E-Bike stores, provides users with a flexible and affordable e-bike rental option featuring the Fly-E Fly-11 Pro model.

Additionally, the company announced its participation in the New York City Department of Transportation's $2.0 million trade-in program, which is expected to launch in early 2025. This program will allow eligible food delivery workers to replace their unsafe e-bikes, e-mobility devices, and batteries with certified, high-quality versions, further bolstering Fly-E Group's position in the market.

Production and Supply Chain

Fly-E Group sources a significant portion of its vehicle components from China and the US and assembles them at its facility in Maspeth, New York. For the three months ended September 30, 2024, the company produced 1,150 E-motorcycles, 3,270 E-bikes, and 756 E-scooters at this facility. This diversified product portfolio, consisting of 24 E-motorcycle models, 28 E-bike models, and 35 E-scooter models, allows the company to cater to a wide range of customer preferences and needs.

Risks and Challenges

Fly-E Group operates in a rapidly evolving industry, and the company faces several risks and challenges that could impact its long-term growth and profitability:

1. Competitive Landscape: The EV market is highly competitive, with established players and new entrants vying for market share. Fly-E Group's ability to maintain its competitive edge and market position will be crucial to its success.

2. Regulatory Environment: As an EV company, Fly-E Group is subject to a complex regulatory landscape, including product safety and testing requirements, as well as battery safety and disposal regulations. Any changes or new regulations could impact the company's operations and profitability.

3. Supply Chain Disruptions: The company's reliance on global supply chains for its vehicle components and parts exposes it to the risk of disruptions, which could affect production and delivery timelines.

4. Lithium-Ion Battery Safety Concerns: The recent increase in lithium-ion battery-related incidents in New York has impacted customer sentiment and demand for e-bikes, which could have a negative effect on Fly-E Group's sales.

5. Liquidity and Financing Needs: The company's significant capital requirements for continued growth and expansion may necessitate additional financing, which could be challenging to secure on favorable terms.

Industry Trends and Outlook

The US electric two-wheeled vehicles industry, in which Fly-E Group operates, is experiencing rapid growth. Management estimates the industry compound annual growth rate (CAGR) to be around 20% over the next 5 years. This growth is driven by several factors, including the increase in per capita disposable income, the expansion of urbanization, and the growth in consumer spending and consumption upgrades.

Despite the recent challenges faced by the company, particularly the impact of lithium-battery incidents on sales, the overall market trajectory remains positive. Fly-E Group's strong brand recognition, innovative product offerings, and commitment to sustainability position it as a key player in this rapidly growing market.

The company's expansion into rental services and participation in New York City's trade-in program demonstrate its ability to adapt to evolving market dynamics and capitalize on emerging opportunities. These initiatives, coupled with the ongoing development of the Fly E-Bike app and the company's diversified product portfolio, suggest that Fly-E Group is well-positioned to navigate the challenges in the EV landscape and potentially return to a growth trajectory in the coming quarters.

As Fly-E Group continues to address the factors behind recent sales declines and focuses on operational efficiency, it remains poised to drive the electric vehicle revolution and deliver long-term value for its shareholders. The company's future success will depend on its ability to leverage its strengths, address safety concerns, and capitalize on the growing demand for sustainable transportation solutions in urban environments.