Executive Summary / Key Takeaways

• Transformative Growth in Industrial Electrification: Flux Power is at the forefront of the rapidly expanding lithium-ion energy storage market for industrial and commercial equipment, particularly in material handling and airport ground support equipment (GSE). The company is strategically shifting from a pure battery manufacturer to a tech-driven energy solutions provider, aiming to capitalize on the compelling value proposition of lithium-ion over traditional lead-acid and propane solutions.
• Technological Edge and Software-Driven Value: Central to Flux Power's investment thesis is its proprietary Battery Management System (BMS) and the evolving SkyBMS/SkyEMS software platform. This technology offers quantifiable benefits like extended run times, faster charging, and longer battery life, while the software provides critical operational insights, predictive maintenance, and a pathway to recurring revenue streams.
• Improving Financial Trajectory Amidst Headwinds: Despite macroeconomic uncertainties, including higher interest rates and tariffs, Flux Power demonstrated significant financial improvement in fiscal year 2025, with revenue growing 9% to $66.43 million and gross margin expanding to 32.7%. Management projects a stronger Q4 2025, anticipating 5-10% revenue growth over Q3 and achieving break-even to slightly positive adjusted EBITDA and cash flow.
• Strategic Initiatives for Scalability and Profitability: The company is aggressively pursuing operational efficiencies, supply chain diversification (including domestic assembly), new product development (heavy-duty and higher-voltage packs), and a "solution selling" approach to deepen customer relationships and expand market share. Recent capital raises and debt restructuring have also addressed liquidity and Nasdaq compliance concerns.
• Competitive Positioning and Market Opportunity: Flux Power differentiates itself through its specialized technology, strong OEM partnerships, and direct customer engagement, allowing it to capture niche markets effectively. The early adoption phase of lithium-ion in its target sectors, coupled with a growing replacement cycle for its 28,000+ deployed packs, presents substantial long-term growth opportunities.

The Charge Towards Intelligent Electrification

Flux Power Holdings, Inc. (NASDAQ:FLUX) stands at a pivotal juncture, transforming from a specialized lithium-ion battery manufacturer into a comprehensive, tech-driven energy solutions provider for industrial and commercial sectors. Since its inception in 2009, with operations primarily through its California subsidiary, Flux Power has honed its expertise in lithium-ion applications, initially for automotive EVs before strategically focusing on the multi-billion-dollar material handling market and, more recently, expanding into airport ground support equipment (GSE). This evolution is underpinned by a clear vision: to establish every lithium-ion battery as part of a connected, self-optimizing network, driving efficiency and sustainability across customer fleets.

The broader industrial landscape is undergoing a profound shift towards electrification. Historically, lithium-ion battery solutions struggled to compete on cost with lead-acid and propane alternatives. However, a dramatic expansion in lithium-ion battery supply has led to an 85% price decline since 2010, making these solutions increasingly cost-competitive. Prices, which averaged $1,160 per kilowatt-hour (kWh) in 2010, dropped to $156 per kWh in 2019 and further to $115 per kWh in 2024. This affordability, coupled with superior performance and environmental benefits, is accelerating the migration away from legacy power products. The global lift truck market, for instance, is projected to grow at a compound annual growth rate of 5.70% from 2024 through 2030, with electric products already representing 67% of North American shipments in 2023. This trend, driven by factors like global manufacturing growth, e-commerce, and construction, positions Flux Power squarely within a robust growth market.

Technological Leadership and the Intelligent Battery Ecosystem

Flux Power's core competitive advantage lies in its proprietary wireless Battery Management System (BMS). This advanced technology is the "brain" of its energy solutions, meticulously managing cell balancing, charging, discharging, monitoring, and communication between the battery pack and the equipment. The tangible benefits of Flux Power's lithium-ion solutions, powered by its BMS, are significant and quantifiable. They offer up to 50% longer run times compared to lead-acid batteries of comparable capacity. For example, a 100Ah lithium-ion system can deliver over 92Ah during a 30-minute discharge, whereas a lead-acid battery might only deliver 80Ah over a four-hour period. This sustained high power maximizes equipment performance throughout a shift.

Furthermore, Flux Power's batteries can be recharged in as little as one hour, enabling "opportunity charging" and eliminating the need for battery changeouts common in multi-shift operations with lead-acid batteries. This contrasts sharply with lead-acid batteries, which require eight hours for discharge, eight hours for charging, and another eight hours for cooling. The extended life of Flux Power's lithium-ion batteries, lasting up to five times longer than the approximately 500 charging cycles of lead-acid batteries in industrial applications, translates directly into lower total cost of ownership for customers. Additionally, lithium-ion batteries are about one-third the weight of lead-acid for comparable power ratings and use 20-50% less energy, based on internal studies. Environmentally, they avoid the combustible gases and exhaust emissions associated with lead-acid and propane solutions. The company's commitment to safety and reliability is further underscored by its goal to obtain UL Listing for all its packs, a significant competitive differentiator.

Flux Power is aggressively investing in research and development to expand its technological lead. A key innovation is the SkyBMS telemetry solution, which provides real-time reports on pack performance, health, and remaining useful life. Building on this, the company is developing SkyEMS, an energy management solution designed to provide deeper insights and greater control over energy use. SkyEMS offers tools for fleet and infrastructure planning, real-time operational insight, usage optimization, predictive maintenance, and even supports second-life options for batteries. A patent awarded in May 2025 for intelligent battery life cycle maximization, utilizing an AI-based algorithm, highlights the company's commitment to advanced software. Management's strategic intent is to have every battery shipped be cloud-connected, creating an integrated ecosystem that will generate recurring revenue and predictable replacement cycles, with aspirations for software to become a material part of the revenue mix.

New product introductions in fiscal year 2025, such as the G96 (a higher-voltage system for intensive airline and aviation applications) and an improved G80 design for GSE, demonstrate a focus on higher energy capacities, simplified service access, and cost efficiencies. The company is also developing heavy-duty models for Class 2 and Class 3 forklifts and exploring 80-volt applications for larger material handling trucks, areas that typically command higher margins. Prototype testing of fast-charging technology is scheduled for summer 2025, alongside the automation of modularizing battery cells to improve working capital management.

Financial Performance and Strategic Execution

Flux Power's financial performance in fiscal year 2025 reflects a company making significant strides towards profitability, despite facing a challenging macroeconomic backdrop. Revenues for fiscal year 2025 increased 9% to $66.43 million, up from $60.82 million in fiscal year 2024. This growth was fueled by increased demand in both the material handling and GSE markets. The material handling segment saw higher unit demand for private label walkie packs, while GSE benefited from new customer acquisition and higher average selling prices.

A notable achievement has been the substantial improvement in gross profitability. Gross profit for fiscal year 2025 surged 26% to $21.74 million, compared to $17.23 million in the prior year. This translated into a gross profit margin of 32.7% for fiscal year 2025, a significant expansion from 28.3% in fiscal year 2024. The improvement is attributed to manufacturing efficiencies, cost savings initiatives, and lower warranty-related expenses. The company has a stated near-term target of achieving 40% or higher gross profit margins, driven by continued product cost reductions and strategic supply chain initiatives.

While operating expenses increased to $26.77 million in fiscal year 2025, primarily due to professional fees related to a multi-year financial statement restatement and legal settlements, the company's net loss decreased by 20% to $6.67 million from $8.33 million in fiscal year 2024. Adjusted EBITDA, a key metric for management, saw a dramatic improvement, moving from a loss of $4.00 million in fiscal year 2024 to a loss of only $147,000 in fiscal year 2025. Excluding one-time costs associated with the restatement and stock-based compensation, the non-GAAP net loss for FY2025 was $2.8 million, a substantial improvement from $6.8 million in the prior year.

Liquidity has been a focus, with the company generating positive cash flow from operations of $610,000 in fiscal year 2025, a significant turnaround from a cash outflow of $4.80 million in fiscal year 2024.

As of June 30, 2025, Flux Power had $1.33 million in cash. The company's ability to continue as a going concern has been a point of discussion, given historical losses and an accumulated deficit.

However, recent actions, including a $5 million private placement in September 2025 and the conversion of subordinated debt into equity, have bolstered liquidity and extended the maturity date of its GBC credit facility to July 31, 2027, addressing immediate concerns and regaining Nasdaq listing compliance.

Competitive Landscape and Strategic Positioning

Flux Power operates in a competitive environment, primarily contending with traditional lead-acid battery manufacturers like Stryten Energy and a growing number of lithium-ion solution providers. While larger players like EnerSys (ENS) benefit from established scale and broader distribution networks, Flux Power differentiates itself through its specialized BMS technology and a focused market approach. Flux Power's BMS offers superior energy efficiency and integration with equipment, potentially reducing maintenance needs for customers, a key advantage over EnerSys's more diversified offerings.

Against hydrogen fuel cell specialists like Plug Power (PLUG), Flux Power's lithium-ion solutions offer advantages in reliability and ease of implementation, as hydrogen fuel cells can be more complex to deploy due to infrastructure requirements. Flux Power's direct sales channels foster quicker customer engagement in cost-sensitive segments, contrasting with Plug Power's strategy of large-scale partnerships. Similarly, when compared to stationary fuel cell providers like Bloom Energy (BE), Flux Power's mobile lithium-ion solutions provide greater flexibility for applications like airport equipment. Its specialized BMS offers enhanced monitoring capabilities for safety and efficiency, a differentiator from Bloom Energy's focus on scalable power generation for data centers.

Flux Power's competitive moats include its proprietary BMS technology, which translates into higher operational efficiency for customers and potentially superior margins for the company through reduced downtime and faster innovation cycles. Its direct sales channels provide greater customer control and foster loyal relationships, contributing to revenue stability. However, Flux Power's smaller scale can lead to higher operating costs per unit compared to larger competitors, potentially impacting profitability in price-sensitive markets. Its dependence on a single battery cell supplier in China also exposes it to tariff risks and supply chain disruptions, a vulnerability that larger, more diversified competitors may mitigate more easily.

In response, Flux Power is actively diversifying its supply chain, evaluating new suppliers and chemistries to reduce reliance on high-tariff regions, and committing to scaling domestic assembly capabilities in the U.S. These initiatives, coupled with R&D investments in tariff-resistant product designs, aim to enhance resilience and cost efficiency. The company is also expanding its sales force and implementing a "solution selling" framework, engaging directly with end-users to align offerings with specific customer problems and drive proactive demand generation. This approach, combined with a strong track record of nearly 100% customer retention and increasing OEM certifications, positions Flux Power to capture additional market share as lithium adoption accelerates.

Outlook and Risks

Flux Power's management anticipates a positive trajectory for the remainder of fiscal year 2025. Following Q3 2025 revenues expected to be in line with Q2, the company projects a 5% to 10% increase in Q4 revenues over Q3. Crucially, at these projected revenue levels, management expects to achieve break-even to slightly positive adjusted EBITDA and cash flow in Q4 2025. This outlook is predicated on an expected abatement of macroeconomic headwinds, including interest rate uncertainty, later in calendar year 2025, which has previously caused deferrals in customer capital spending. Increased quoting activity observed by the sales team is seen as an encouraging sign for future order flow.

However, the investment thesis is not without risks. The "going concern" qualification from its independent auditors, while mitigated by recent financing, highlights the ongoing need for sustained profitability and efficient capital management. Dependence on a single battery cell supplier in China exposes the company to geopolitical risks and tariffs, which could increase costs and pressure margins. While Flux Power has updated its price lists to reflect tariff impacts and is actively seeking alternative sourcing, further escalation of trade tensions could materially affect its ability to cost-effectively source components. The company has also identified material weaknesses in its internal control over financial reporting, which could impact the accuracy and timeliness of financial reporting. Furthermore, product liability claims and the inherent risks associated with lithium-ion battery technology, though perceived as safe by the company, could affect demand or result in significant costs.

Conclusion

Flux Power is strategically positioned to capitalize on the accelerating electrification of industrial and commercial fleets. Its proprietary lithium-ion technology, offering superior performance and lower total cost of ownership, combined with an ambitious software-driven strategy centered on SkyBMS and SkyEMS, forms a compelling investment narrative. The company's recent financial performance, marked by robust revenue growth and significant gross margin expansion in fiscal year 2025, demonstrates operational effectiveness in a challenging environment. With a refreshed leadership team, a clear roadmap for profitable growth, and proactive measures to address supply chain and financial compliance, Flux Power is laying the groundwork for sustained expansion. While macroeconomic uncertainties and competitive pressures remain, the company's focus on technological differentiation, solution selling, and expanding its market reach into high-growth adjacencies like GSE, alongside a growing opportunity in its extensive installed base, underscores its potential to emerge as a leader in the intelligent energy solutions space. Investors should closely monitor the execution of its strategic initiatives and the continued expansion of its software offerings as key indicators of its long-term value creation.