Q2 2022 Flux Power Holdings Inc Earnings Call
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Speaker 1: Greetings, and welcome to the Flux Power Holdings Fiscal Second Quarter 2022 Financial Results List of hook, maintaining tenhas
Greetings and welcome to the flux power holdings fiscal second quarter 2022 financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded I would now like to hand, the call over to Justin Forbes director of business development at flux power Justin.
Speaker 1: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation of the recording.
Speaker 1: As a reminder, this conference is being recorded. I would now like to hand the call over to Justin Forbes, Director of Business Development at Flux Power. Justin bigger Thank you.
Uh huh.
Hi, good afternoon, and welcome to plug Power's financial results call.
Speaker 2: Good afternoon and welcome to FlexPowers Financial Results Call.
Today's conference call is being recorded your host today, Ron <unk> CEO , Chuck <unk>, CFO , who will present the results of operations for our fiscal year 2022.
Speaker 2: Today's conference call is being recorded. Your host today, Ron Dutt, CEO , and Chuck Shiehwey, CFO , will present results of operations for our fiscal year 2022 second quarter ended December 31, 2021.
<unk> quarter ended December 31st 2021.
A press release detailing these results crossed the wires. This afternoon at four <unk> P. M. Eastern time, that's available in the Investor Relations section of our company's website.
Speaker 2: A press release detailing these results across the wires this afternoon at 4.01 PM Eastern Time. And it's available in the investor relations section of our company's website, fluxpower.com.
<unk> power Dot com.
Before we begin the formal presentation I would like to remind everyone that statements made on the call and webcast may include predictions estimates or other information that might be considered forward looking.
Speaker 2: Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered for looking at the webcast.
Speaker 2: While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ in the current material.
While these forward looking statements represent our current judgment on what the future holds they are subject to risks and uncertainties that could cause actual results to differ materially.
Speaker 2: Your caution not to place undue reliance on these forward-looking statements which reflect our opinions only as of the date of this presentation.
You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation.
Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events.
Speaker 2: Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
Speaker 2: Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions.
Throughout today's discussion we will attempt to present some important factors relating to our business that may affect our predictions you should also review our most recent Form 10-K and Form 10-Q for more complete discussion of these factors and other risks, particularly under the heading risk factors.
Speaker 2: You should also review our most recent Form 10-K and Form 10-Q for more complete discussion of these factors and other risks, particularly under the heading RISC-VAC-2.
At this time I will now turn the call over to flex power CEO Ron <unk>.
Speaker 2: At this time, I will now turn the call over to Flux Power CEO , Ron Dutt.
Speaker 3: Thank you, Justin, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2022 Financial Results Conference call.
Thank you Justin and good afternoon, everyone I'm pleased to welcome you to today's second quarter 2022 financial results Conference call.
Our second quarter continued our trend of strong revenue growth and customer demand for lithium ion battery pack.
Speaker 3: Our second quarter continued our trend of strong revenue growth and custard demand for our lithium ion battery pack.
Along with the addition of new customers and product improvements.
Speaker 3: along with the addition of new customers and product approval.
Speaker 3: Revenue increased 19% to $7.7 million.
Revenue increased 19% to seven 7 million compared to a year ago, $6 5 million, taking our 14th.
Speaker 3: compared to a year ago, 6.5 million, making our 14th consecutive quarter of year over year.
Consecutive quarter of year over year revenue growth.
In the second quarter, we received 19.8 million and customer purchase orders.
Speaker 3: In the second quarter, we received $19.8 million in customer purchase orders from existing
ZIP thing.
Speaker 3: Fortune 500 and new customers, an increase of 51% from the first quarter of fiscal 2022 and over 200% from the same period a year ago.
Fortune 500, and new customers, an increase of 51% in the first quarter of fiscal 2022 and over 200% in the same period a year ago.
Meanwhile, shipments increased 20%, 24% over prior quarter Q1 'twenty two.
Speaker 3: Meanwhile, shipments increased 20%, 24% over prior quarter Q1-22, and 23.8% over the year ago quarter.
And 23, 8% over the year ago quarter.
To highlight a few of our successes.
Speaker 3: We received multiple orders for our large class one X-Series battery packs from a global consumer appliance manufacturer.
We received multiple orders for our large class one X theory battery pack from a global consumer appliance manufacturer.
Speaker 3: And a new order for GSE, or Airport Ground Support Equipment, battery pack from an additional large domestic airline.
And a new order for GSE or airport ground support equipment battery pack from an additional large domestic airline.
We also received multiple orders for our C series battery pack.
Speaker 3: We also received multiple orders for our C-Series battery pack.
Speaker 3: Time for our solar powered EV charging station partner, Beam Global
Sign for our solar powered EV charging station partner being global.
You recently reported record deliveries pipeline and backlog.
Speaker 3: who recently reported record deliveries, pipelines, and fact loss.
Speaker 3: For the second quarter. Customer order backlog increased to a record $31.4 million as of December 31st, 2021.
The second quarter customer.
Customer order backlog increased to a record 31 4 million as of December 31, 2021.
This reflects the growing demand for our products from new and existing customers.
Speaker 3: This reflects the growing demand for our products from new and existing customers and our continued expansion into new verticals.
And our continued expansion into new verticals.
And then in January we also strengthened our corporate governance with the appointment of Jim then Boland, our 25 year global technology veteran too.
Speaker 3: And then in January , we also strengthened our corporate governance with the appointment of Chi-Min Bo-Lin, a 25-year global technology veteran, to our Board of Directors as an independent director and to serve as a member of the Audit Committee, Compensation Committee.
Two our board of directors as an independent director and to serve as a member of the audit Committee and compensation Committee.
And nominating Committee welcome Matt.
Speaker 3: and nominating committee. Welcome to you, men.
As we put our fiscal Q2 results in perspective.
Speaker 3: As we put our fiscal Q2 results in perspective.
Speaker 3: for the full year of 2021. The December ending quarter reflected the impact of the global supply chain disruption everybody's familiar with. Increased shipping delays of key parts throughout the year triggered delays in production and increasing purchase orders from growing customer demand, as I've alluded to.
For the full year 2021 .
Remember ending quarter reflected the impact of the global supply chain disruption everybody is familiar with it.
Increased shipping delays of key parts throughout the year trigger delay in production and increasing purchase orders from growing customer demand as Ted alluded to.
Yeah.
Speaker 3: This resulted in pre-purchasing of inventory given the production delay.
So this resulted in pre purchasing of inventory.
Given the production delays.
Speaker 3: While we did not lose customers or orders, the increase in inventory spending was, fortunately,
While we did not lose customers or orders the increasing inventory spending was fortunately.
Supported by our capital raise and $14 million in September .
Speaker 3: supported by our capital raise of $14 million in September .
Related to those delays, we experienced increases in the prices of steel electronic component and shipping.
Speaker 3: Related to those delays, we experienced increases in the prices of steel, electronic components, and shipping, which impacted Q2.
Which impacted Q2 gross margin.
Yeah.
Speaker 3: While we implemented a price increase in Q2 2021 on new orders, we continue to ship orders from our backlog that were ordered prior to the increase at the
Well, we implemented a price increase in Q2, 2021 on new orders.
We continue to ship orders from our backlog that were ordered prior to the increase.
The higher component costs.
The supply chain impact occurred as we were supporting product design changes for new cell that will bring lower cost and better features in 2022.
Speaker 3: This supply chain impact occurred as we were supporting product design changes for new cells that will bring lower costs and better features in 2022.
Speaker 3: I will outline actions to restore our gross margin improvement path as it's highlighted on slide 5 for those of you on the webcast.
I will outline actions to restore our gross margin an improvement path.
As highlighted on slide five.
Or do you use for those of you on the webcast.
In addition to the price increase we also initiated that design cost reduction project to improve gross margins across our product line. He.
Speaker 3: In addition to the price increase, we also initiated a design cost reduction project to improve gross margins across our product line.
Speaker 3: We took actions to improve our supply chain efficiency and supplier management.
We took actions to improve our supply chain efficiency and supplier management.
Speaker 3: such as vendor metrics, better tracking of accountability, and alternate suppliers to replace vendors that we have outgrown.
Such as vendor metrics better tracking of accountability and alternate suppliers to replace vendors that we have outgrown.
In fiscal year 'twenty to 'twenty two.
We've made changes to our ERP purchasing methodologies to avoid excess inventory.
Speaker 3: We have made changes to our ERP purchasing methodology to avoid excess inventory.
Speaker 3: particularly in the race to find parts that are available.
Typically in a race to find.
Parts that are available.
Speaker 3: Also, to rebalance supply chains to leverage low cost sourcing, and also to improve payment terms with our suppliers.
Also have to rebalance supply chain to leverage low cost sourcing.
And also to improve payment terms with our suppliers.
Speaker 3: Given the recent growth of our product lines, an impactful action has been taken to better align our suppliers to meet our production demand.
Given the recent growth of our product lines and impactful action has been taken to better align our suppliers to meet our production demands.
Well taking into consideration our current supply chain disruptions.
Speaker 3: while taking into consideration the current supply chain disruption.
Additionally, we are pursuing sourcing strategy in Mexico.
Speaker 3: Additionally, we are pursuing sourcing strategies in Mexico.
Speaker 3: and selection of other vendors to align better our growing needs and increase timing demand.
And selection of other vendors who are.
Align better are growing need and increase timing demand.
We have been aggressively resolving supply chain issues with our vendors.
Speaker 3: We've been aggressively resolving supply chain issues with our vendors.
Yeah.
Speaker 3: Our pricing actions with customers have a delayed effect due to the buildup in open sales orders already received.
Our pricing actions with customers has a delayed effect due to the buildup in open sales orders already received.
However, our price increases with customers are intended to help offset cost increases.
Speaker 3: However, our price increases with customers are intended to help offset cost increases already incurred from suppliers. In our design...
Already incurred can suppliers in.
Our design cost reductions.
From our 10 year accumulated pioneering experiences with lithium ion.
Speaker 3: From our 10-year accumulated pioneering experiences with lithium-ion technology, it's meant to provide the remaining element of achieving our gross margin target.
Technology is meant to provide the remaining element of achieving our gross margin targets.
Our strategy for the past several years has been to capture leadership.
Speaker 3: Our strategy for the past several years has been to capture leadership in the lithium-ion sector for industrial and commercial equipment.
In the lithium ion sector for industrial and commercial equipment.
We are pleased with being chosen by Fortune 500 companies as their supplier of choice.
Speaker 3: We are pleased with being chosen by Fortune 500 companies as their supplier of choice.
Speaker 3: This refers to customers as shown in our website presentation.
This refers to customers as shown in our website presentation.
Such a delta airline Pepsico caterpillar.
Speaker 3: such as Delta Airlines, PepsiCo, Caterpillar, and a number of other household names.
Number of other household names.
Speaker 3: Our vision is to be a leader in providing best-in-class product and service to material handling, energy storage, and related sectors.
Asian is to be a leader in providing best in class product and service to material handling energy storage and related sectors.
We have confidence in these goals.
And the credibility.
Speaker 3: and the credibility and sustaining relationships I have mentioned with those household names. At the same time...
Sustaining relationships I have mentioned.
As household names.
At the same time.
We're committed to reach profitability.
Soon as possible.
Our strategy continues to aggressively maintain our leadership position.
Speaker 3: While our strategy continues to aggressively maintain our leadership position and invest in our growth.
And invest in our growth.
We are equally.
Speaker 3: as aggressive at improving our gross profit margins and preserving...
As aggressive that improving our gross profit margin and <unk>.
Preserving our cash.
And.
Speaker 3: and pursuing cash flow breakeven.
Doing cash flow breakeven.
I'm pleased with the specific initiatives and actions were taken to meet that goal.
Speaker 3: I'm pleased with the specific initiatives and actions were taken to meet that goal.
Our vision is to then move forward to expand bringing our proprietary.
Speaker 3: Our vision is to then move forward to expand bringing our proprietary energy storage products
Energy storage product.
Speaker 3: to serve the rapidly growing applications of lithium ion technology, as most of you know.
Serve the rapidly growing applications of lithium ion technology as most of you know.
Speaker 3: and to lead the innovation of energy storage solutions.
And to lead the innovation of energy storage solutions.
Speaker 3: including engaging partnerships to leverage our resources.
Including engaging partnerships to leverage our resources.
During the second quarter.
We experienced the full impact of that supply chain disruption.
Speaker 3: We experienced the full impact of the supply chain disruption.
But without time to build and collect from the order backlog.
Speaker 3: but without time to build and collect from the order backlog.
Speaker 3: We are pleased to report that we have a line of sight to accelerate our trajectory to cash flow break-even.
We are pleased to report that we have a line of sight to accelerate our trajectory to cash flow breakeven.
We do acknowledge.
Speaker 3: the unprecedented level of supply chain uncertainty, and the potential for continuation.
Unprecedented level of supply chain uncertainty.
And the potential for continuation.
Accordingly.
Speaker 3: We have chosen to report our FY20-22 Q2-10Q Going Concern Languages.
We have chosen to report our FY 2022 Q2 10-Q going concern language.
Finally, we increased our purchasing and related inventory to $9.6 million.
Speaker 3: Finally, we increased our purchasing and related inventory to $9.6 million at December 31, 2021, to mitigate supply chain disruptions from increasingly hard-to-acquire microchips and electronic components.
At December 31st 2021 to mitigate supply chain disruptions from increasingly hard to acquire microchips and electronic components.
While you're utilizing as I said earlier, our capital raise and 14 million in September .
Speaker 3: while utilizing, as I said earlier, our capital raise of $14 million in September .
Speaker 3: These actions were taken to protect customer orders and customer relationships, which for us are long-term. With our recent production throughput improvements, including launching
These actions were taken to protect customer orders and customer relationship which for us are long term.
With our recent <unk>.
<unk> throughput.
Improvement.
Including launching lean manufacturing.
Second ship to launch this month.
And a major quality initiative to reduce cost we expect to achieve.
Speaker 3: and a major quality initiative to reduce cost we expect to achieve.
Speaker 3: quicker turns on this customer backlog.
Record turns on this customer backlog.
A strategic decision was made to secure inventory to align our backlog to do.
Speaker 3: A strategic decision was made to secure inventory to align our backlog to deliver our customer requirements. While this is well outside our inventory turnover goals,
Whatever our customer requirements, while this is well outside our inventory turnover goes.
We felt it was necessary to secure this inventory given the current supply chain inconsistency.
Speaker 3: We felt it was necessary to secure this inventory given the current supply chain inconsistencies.
To achieve our future financial goal, while meeting our customer expectations.
Speaker 3: to achieve our future financial goals while meeting our customer expectations.
Looking beyond the remaining 2022 fiscal year and building on our success in material handling industry.
Speaker 3: Looking beyond the remaining 2022 fiscal year and building on our success in the material handling industry, we intend to broaden our reach to include stationary energy storage and related sectors.
Tend to broaden our reach to include stationary energy storage and related sectors.
We are focused on delivery of our stationary energy storage product to be global or their solar powered EV charging stations.
Speaker 3: We are focused on delivery of our stationary energy storage product to being global for their solar-powered EV charging.
With our operational investments, we are positioned well to continue to support this sector as easy adoption.
Speaker 3: With our operational investments, we are positioned well to continue to support this sector as EV adoption continues to accelerate.
To accelerate.
Yeah.
On the technology front.
We have commenced deployment of our sky beyond that telematics product.
Speaker 3: We have commenced deployment of our Sky BMS Telematics product.
Our remote fleet management and monitoring that.
Speaker 3: for remote fleet management and monitoring that delivers battery-packed data to optimize performance and customer fleet tracking.
Deliveries battery pack data to optimize performance and customer fleet tracking.
Speaker 3: I'm happy to report the customer interest has been very positive.
I'm happy to report that customer interest has been very positive.
Yeah.
Speaker 3: Turning to review our financial results in the quarter ending December .
Turning to review of our financial results in the quarter ending December .
Speaker 3: Revenue grew 19% to $7.7 million in the quarter as compared to $6.5 million a year ago quarter.
Revenue grew 19% to $7.7 million in the quarter as compared to $6 5 million a year.
A year ago quarter.
Revenue grew 27% to $14 million or the six months ended.
Speaker 3: Revenue grew 27% to $14 million for the six months in this period, December 31st.
Syria December 31st.
Speaker 3: 2021 as compared to 11 million in the six months in this December .
2021 as compared to it love it.
And the six months ended December .
2020.
Speaker 3: The increased revenue was primarily driven by sales of battery packs with higher selling prices of products sold.
The increased revenue was primarily driven by sales of battery pack with higher selling prices of products, though.
Speaker 3: including greater sales to existing customers, as well as initial sales.
Including greater sales to existing customers as well as the initial sale.
And your customers.
In the second quarter of 2022 alone.
Speaker 3: In the second quarter of 2022 alone, we booked $19.8 million in new orders. While there can be some seasonality with orders, clearly strong customers.
Book, $19 8 million in new orders, while there can be some seasonality with orders.
Clearly strong customer demand continues.
Gross profit margin decreased to 1 million in the quarter or 13.6, and this fiscal second quarter 2022.
Speaker 3: Gross profit margin decreased to $1 million in the quarter, or $13.6 in this fiscal second quarter of 2022. As compared to gross.
As compared to gross.
Okay.
Speaker 3: As compared to gross profit margin of 1.5 million, or 23%
As compared to gross profit margin.
A $1 5 million.
Our 23% in the same year ago quarter.
Speaker 3: Gross profit margin increased to $2.5 million, or 18%, for the six months ended December 2021 as compared to the gross profit margin of $2.4 million, or 22%, for the six months
Gross profit margin increased to two and a half million or 18% for the six months ended December 2021 as compared to the gross profit margin of 2.4 million or 22%.
For the six months ended a year ago.
Gross profit in 2021 was affected by higher cost for steel electronic boats and component electronic parts and common off the shelf part.
Speaker 3: Gross profit in 2021 was affected by higher costs for steel, electronic parts, and common off-the-shelf parts.
During the quarter and partially offset by higher revenues.
Speaker 3: during the quarter and partially offset by higher revenues associated with increased product sales.
Associated with increased product sales.
Taking a look at our gross margin trajectory.
Speaker 3: As illustrated on the slide for those watching, our gross margin improvement was impacted by the pandemic during the last two quarters. While the supply chain disruption hit us hard, we have taken aggressive
As illustrated on the slide for those watching our.
Gross margin improvement was impacted by the pandemic during the last two quarters.
Well the supply chain disruption hit us hard.
We have taken aggressive actions with our suppliers.
Our pricing strategies.
Speaker 3: product redesigns, and manufacturing initiatives to regain our previous trajectory.
<unk> redesigned and manufacturing initiatives.
Regain our previous trajectory.
Speaker 3: Selling and administrative expenses increased to $4 million in the fiscal second quarter of 2022 from $3.1 million in the same fiscal period of 2021. Reflecting increases in outbound shipping costs, personnel-related expenses.
Selling and administrative expenses increased to <unk>.
4 million in the fiscal second quarter of 2022 from $3 1 million in the same fiscal period of 2021 .
Selecting increases in outbound shipping costs personnel related expenses.
Insurance premiums and sales and marketing expenses.
Speaker 3: insurance premiums, and sales and marketing expenses.
R&D expenses increased to $2 1 million in the second quarter.
Speaker 3: R&D expenses increased to $2.1 million in the second quarter.
Speaker 3: compared to 1.6 million and a quarter a year ago.
Third to one 6 million in the quarter a year ago.
Speaker 3: primarily due to new product development activities.
Primarily due to new product development activity.
And their related OEM and UL certifications.
Speaker 3: and their related OEM and UL certification.
Cash usage as the.
Speaker 3: Cash usage, as described earlier, supported our actions to protect our customer orders, given global product shortage and delivery delays.
Described earlier supported our actions to protect our customer orders given global product shortages and delivery delays.
We are actively working to reduce inventory balances as we move through the pandemic caused disruption. We ended the second quarter with $7 9 million in cash and Additionally have our credit line with silicon.
Speaker 3: We are actively working to reduce inventory balances as we move through this pandemic-caused disruption. We ended the second quarter with $7.9 million in cash, and additionally have our credit line with Silicon Valley.
Valley Bank.
With the line recently increased from 4.1 million to $6 1 million.
Speaker 3: with the line recently increased from 4.0 million to 6.0 million as an alternative resource to manage working capital needs.
Alternative research to manage working capital needs.
Speaker 3: With $19.6 million in product inventory, we will do everything in our power to build, produce, and deliver product kindly.
With $19 6 million and product inventory.
We will do everything in our power to.
It will produce and deliver product timely.
In summary.
We are well positioned to create long term value for shareholders.
Speaker 3: We are well-positioned to create long-term value for our shareholders.
Looking ahead into 2022 we are intensely focused on our strategic initiatives to increase profitability mitigate ongoing global supply chain disruption and deliver upon our record customer order backlog.
Speaker 3: Looking ahead into 2022, we are intensely focused on our strategic initiatives to increase profitability, mitigate ongoing global supply chain disruption, and deliver upon our record customer order backlog.
Speaker 3: We are seeing strong interest from both investment funds, customers, and vendors for products and businesses that are aligned with ESG, or Environmental Social Governance, values and impacts.
We are seeing strong interest interests from both investment fund customers and vendors for products and businesses that are aligned with ESG or environmental social governance values that impact.
Speaker 3: Well, plus power is at the forefront of sustainable products.
Well flex power is at the forefront of sustainable products.
Saving customers tons of carbon dioxide from our efficiency and empowering our drive to create more sustainable material handling and GSE solutions as we continue expanding into emerging applications in adjacent verticals.
Speaker 3: Saving customers tons of carbon dioxide from our efficiency and empowering our drive to create more sustainable material handling and GSE solutions as we continue expanding into emerging application and adjacent vertical.
I look forward to providing our shareholders with further updates in the near term as we continue.
Speaker 3: I look forward to providing our shareholders with further updates in the near term as we continue.
Speaker 3: to leverage our first-mover position in lithium-ion technology solutions.
To leverage our first mover position in lithium ion technology solutions.
With our growing list of new and diverse large customers.
Speaker 3: with our growing list of new and diverse large customers which provide validation of our strategy. We also hope to see some of you at the upcoming 34th Annual Roth Conference in March.
Provide validation of our strategy.
We also hope to see some of you at the upcoming 34th annual Roth Conference in March.
Speaker 3: And also, our investor analyst facility tour plan this year at our headquarters in Vista, California.
And also our investor analysts facility towards planned this year at our eight.
Headquarters in Vista, California.
Okay.
I. Thank you all for attending.
Speaker 3: And now I'd like to turn and hand the call over to the operator to begin our Q&A session.
And now I'd like to turn the call over to the operator to begin our Q&A session operator.
Speaker 1: At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question is from Craig Irwin with Roth Capital Partners. Please proceed with your question.
Speaker 1: Our first question is from Craig Irwin with Roth Capital Partners. Please proceed with your question.
Speaker 4: Good evening, and thanks for taking my questions. First, I should say congratulations on that $20 million in purchase orders. That is a big number and quite an accomplishment.
Hi, good evening and thanks, Thanks for taking my questions first I should say congratulations on that $20 million and purchase orders that is a big number and quite an accomplishment.
Speaker 4: I wanted to start by asking if you could maybe give us a little bit more of a breakdown. What was the relative contribution maybe from airlines and your other major customer groups to that $19.8 million you recorded? And as a second part of the question, the $31.4 million backlog, how much of that approximately is deliverable over the next 12 months?
I wanted to start by asking if you could maybe give us a little bit more of a breakdown.
What was the relative contribution maybe from airlines and your other major customer groups to that that $19 8 million you recorded.
And as a second part of the question is $31 $4 million backlog, how much of that approximately is deliverable over the next 12 months.
Yeah, No no. Thanks, Craig Thanks for jumping on.
Speaker 3: Yeah, no, no, thanks, Craig. Thanks for jumping on.
Speaker 3: The backlog we're going to work most of that backlog. It should be delivered by by summer by the end of June So it's front-loaded in the calendar calendar
The backlog ready to work most of that backlog is it should be delivered by by summer by the end of June .
So it's frontloaded in the count on the calendar year.
Speaker 3: So we're out to hustle on our production.
So we're out to hustle on our production we've got key customers that are you know, they're they're getting their forklifts.
Speaker 3: We've got key customers that, you know, they're getting their forklifts and other equipment delivered and looking for the batteries, fortunately.
The other equipment deliver and looking for the batteries Fortunately.
Speaker 3: There's a long lag with forklifts as well, but to your question on that backlog, we have
There's a long lag with with forklifts as well, but to your question on that backlog.
We have.
Delta Airlines has a big piece of that are more than 10%.
Speaker 3: Delta Airlines has a big piece of that, more than 10%.
Electra locks has a piece that's more than twice that.
Speaker 3: Electrolux has a piece that's more than twice that.
Speaker 3: PepsiCo, of course, as you know, is our biggest account, has quite a bit more than that, a leading customer. Caterpillar has a good chunk.
Pepsico of course as you know is our biggest account.
<unk> has a quite a bit quite a bit more than that.
Leading customer Caterpillar has a good chunk.
And we've got a.
Speaker 3: And we've got quite a few other companies, but those are some of the marquee names. Beam Global, you know, I mentioned earlier.
Quite a few other companies, but those are some of the marquee names being global I, you know I mentioned earlier.
Just.
Doubled their pacing, but we we build and ship that impacts every week on a regular basis. So they are helping there.
Speaker 3: doubled their pacing. We build and ship 10 packs every week on a regular basis. So they're upping their, uh, opportunities. And so we're seeing a doubling there. So, um, we're optimistic on that front. Does that help? Correct.
Opportunities and so we're seeing a doubling there so wait we're optimistic on that front does that help Craig.
Speaker 4: That definitely does. That definitely does. So it's wide based, tier one customers. And, you know, many of those, I think, are things you've been pursuing for a long period of time. So it's nice to see them all bearing fruit.
That definitely does that definitely does so its wide based tier one customers and many.
Many of those I think are things you've been pursuing for.
For a long period of time, so it's nice to see them all bearing fruit now.
Speaker 4: Um, I wanted to ask a little bit about the, um, the progression into the, um.
I wanted to ask a little bit about the the progression into the.
Speaker 4: the March and June quarters as you close out your fiscal year. You know, I know this environment is.
The March and June quarters, as she closeout your fiscal year.
You know I know this environment is.
Speaker 4: tricky as far as overall visibility, but with your investments in the raw materials to make the deliveries and, you know, a little bit more customer confidence out there, it sounds like, you know, how do you feel about the shape of the growth curve as we look into the third and fourth fiscal quarters?
Tricky as far as overall visibility, but what's your investments in the raw materials to make the deliveries.
And you know a little bit more customer confidence out there. It sounds like you know how do you feel about the shape of the growth curve, we look into the <unk>.
Third and fourth fiscal quarters.
You know.
We can't build back fast enough to keep up with the demand and so we see a robust quarters.
Speaker 3: We can't build packs fast enough to keep up with the demand. And so we see robust quarters. And however, as you've seen this past quarter, if we can't get the electronic components, these isolator chips, everybody's fighting for them.
However, as you've seen this past quarter, if we can't get the electronic components that he's isolator chips are based fighting for them.
Speaker 3: Gigabit contactors, other components are the ones everybody's chasing all over the world. So it's certainly dampened what we could do revenue-wise in the quarter, as I've kind of beat that drum pretty loudly here. But I don't think anybody projects that the supply chain disruption is over. We do see signs, though, very positive signs of.
Jacob back Contactor is are there other components are the ones everybody's chasing all over the world. So it's certainly <unk>.
And what we could do revenue wise in the quarter as I've kind of beat that drum pretty loudly here, but.
But I don't think anybody projects at the supply chain disruption is over we do see signs, though very positive sign of our suppliers and ourselves.
Speaker 3: our suppliers and ourselves working hard to mitigate a lot of those impacts.
I'm working hard to mitigate a lot of those impacts.
Speaker 3: We see we see some indication of steel prices coming down a few. You know, there are a hundred ships at the port to cause delay. So we see some of that. But we are working on that backlog for the next two quarters and shipping just as much as we possibly can. The one thing we don't want to do.
See we see some indication of steel prices coming down a few yeah. There were 100 and shifts at the port to cause delays. So we see some of that but we are working on that backlog for the next two quarters and shipping just as much as we possibly can the one thing we don't want to do.
Speaker 3: is purchase significantly more material and inventory than the
Is is purchased.
Significantly more.
Material and inventory.
Then the.
Then we'll be allowed under supplied.
Speaker 3: potential constraints. So that's the balancing act. We're continuing to receive orders weekly and on out beyond this year as well. So the growth is...
Jane potential constraint so that that's the balancing act, we're continuing to receive orders a weekly.
And on out beyond.
This year as well so so the growth is there.
Speaker 3: Uh, we're implementing lean manufacturing, a number of other measures as you work. Look, we're an emerging growth company. We're building all the time. Our processes caliber of people to do this. It is very exciting. Does that help? Correct.
We're implementing lean manufacturing a number of other measures as you worried look we're in a mode of emerging growth company. We're building all the time our processes caliber of people to do this it is very exciting because that help correct.
Speaker 4: Yes, absolutely. So, last question, if I may. Your SG&A growth seems to be outpacing your revenue growth.
Yes, absolutely. So last question if I may your SG&A.
Growth seems to be outpacing your revenue growth.
Speaker 4: You know, and we can call this maybe a little bit material.
You know and and and and we can call. This maybe a little bit material.
Speaker 4: Uhm, can you? Can you maybe break out any items you would call one time items as far as your certification costs or other items that are unlikely to repeat in the next couple quarters?
Can you can you maybe break out any items you would call one time items as far as your certification costs or other items that are unlikely to repeat in the next couple of quarters.
Yeah are you, referring to just SG&A or all of our operating expense.
Speaker 3: Yeah, are you referring to just SG&A or all operating accounts?
Speaker 4: Well, we could we could do either right. SG&A was $4 million up from $3.1. R&D was up, you know, $2.1 from $1.6. It's both of them had.
Well, we could we could do either right SG&A was 4 million up from three one R&D was a 2.1 from 1.6, it's both of them had.
Fairly substantial growth compared to your your 19% top line.
Speaker 4: Fairly substantial growth compared to your 19% top.
Yeah, Yeah, you know, it's it's a good question and it's one that's been frustrating.
Speaker 3: Yeah, yeah, you know, it's a good question. It's one that's been frustrating. There's a variety of things, I'd say. You have several buckets. One, insurance premiums have just gone through the roof, as a lot of people know. You know, our public company expenses are, you know, to ensure that we're in touch with the market and things we need to do. It certainly has contributed something.
There, there's a variety of things I'd say you Havent got several buckets, one insurance premiums have just gone through the roof.
Lot of people now are public company expenses are you know to ensure that that we're in touch with the market and things we need to do it it certainly have contributed something.
Speaker 3: As we, as we, there's a slide I think in our website that shows our packs are all over the country. So all over the country means we need to support them. Now we use equipment dealers and battery distributors to support that, but it does take more effort on our part.
As we as we I, there's there's a slide I think that our website that shows our pets are all over the country well all over the country means we need to support them now we use.
Equipment dealers and battery distributors to support that but it does take more effort on our part.
Speaker 3: what we're doing to mitigate some of these things with SGNA.
What we're doing to mitigate some of these things with with SG&A.
Speaker 3: is to expand our certified people on the ground in those areas so we're not shipping packs back and forth, increasing costs from that as well.
Is to get our expand our certified people on the ground in those areas. So we're not shipping packs back and forth.
Increasing.
Costs from that.
As well.
And.
So we as we look forward.
Speaker 3: We've always kind of forecast those operating expenses not to increase and get a lot of leverage from.
We've always kind of forecasts are those operating expenses.
Not to increase and get a lot of leverage from.
The revenue growth, but as you say you know this past quarter.
Speaker 3: the revenue growth. But as you say, you know, this past quarter, uh, you know, that that's not very evident, but what's going on on the ground. Another one, for example, in R and D has been up, uh, because we migrated from, um,
You know that that's not very evident, but what's going on on the ground and the other one for example in R&D has been up.
Because we migrated from.
<unk> cells and that whole effort took.
Speaker 3: our cow cells to yeast cells, and that whole effort took...
Speaker 3: at least a million dollars. And a lot of that was in the quarter. That's non-recurring. The other one that was big was the 100% increase in shipping costs. All our outbound shipping costs are in OPTAC.
At least a million dollars and a lot of that was in was in the quarter.
That's not that's non recurring.
The other one that was big was the 100% increase in shipping costs, all our outbound shipping costs are in our opex.
Speaker 3: And that's been a huge hit. We hope that starts to recover. I can't imagine that one continuing as well. So some of those things are temporary or hoping that they will be mitigated as a supply chain disruption lesson.
And that that's been a huge hit.
We hope that starts to recover.
I can't imagine that that one continuing as well so so some of those things.
Our our temporary or are hoping that they will be mitigated as the supply chain disruption.
Lessons.
Thanks, again for that color and congratulations on the nice revenue this quarter.
Speaker 4: Thanks again for that color and congratulations on the nice revenue this quarter.
Yeah. Thanks, Craig.
Yeah.
Speaker 1: Our next question is from Samir Joshi with H.C. Wainwright. Please proceed with the question.
Our next question is from Sameer Joshi with H C. Wainwright. Please proceed with your question.
Speaker 5: Yeah. Thanks, Ron. Thanks, Chad, for taking my questions. The inventory of $19.6 million, how much of that is finished good inventory, and what proportion of that is the inventory that you are experiencing supply chain problems from? For example, the electronics and the chips. Can you give us a…
Yeah. Thanks, Thanks for taking my questions.
But the inventory of $19 6 million how much of that is our finished good inventory and what proportion of that is what they like to read that.
Yeah, you are experiencing supply chain problems for them for example, the way.
Electronics and the chips.
That's it.
Yeah Yeah.
You know the finished goods is probably $2 million to $3 million of that too.
Speaker 3: You know, the finished goods is probably $2-3 million of that, and the...
And the.
Speaker 3: In terms of the mix of other components, cells is probably the single biggest one. Electronic components and steel, you know, are next in line, so they take a big chunk of that. They're longer lean items.
In terms of the mix of other components. So it's probably the single biggest one electronic components and steel you know are next in line to they they they take a big chunk of that there longer lean items.
Speaker 3: And there are some parts, the electronic parts, by the way, there's some that there's been such a toilet paper run and global chase. We have, our engineers have gone out and bought some of those and put them into consigned inventory so that when our board assemblers need them, they'll have them and we won't run out. So that's part of our mitigation strategy that we probably wouldn't have had. And there's, I don't know, a couple million of that as well, 1.3 million.
And there are some parts of the electronic parts by the way, there's some that there've been such a toilet paper running global case.
We have our engineers have gone out and bought some of those and put them into consigned inventory so that when our board assemblers need them they'll have them and we won't run out. So that's part of our our mitigation strategy that we probably wouldn't have had then there's I don't know a couple of million dollars of that.
As well yeah.
1.3 Mills stop.
Stop for all the vendors.
Speaker 6: Right, right.
Right right.
Speaker 5: So then, just digging a little bit deeper there, when you bought these, or when you built up this inventory, were the prices already elevated, or it was before you saw increases in prices?
So then just digging a little deeper there.
When you walk these oh when you build up this inventory, what's the prices already elevated or it was before you saw increases in prices.
But you know the price rise start you know when Covid came along in March 2020, we didnt see a very big effect for a while and I think there is just a delay of even our suppliers raising prices along with the other dynamics that were that were building and its they built it we really started it really started to see it more in June .
Speaker 3: You know, the price rise, you know, when COVID came along in March 2020, we didn't see a very big effect for a while. And I think there was just a delay of even our suppliers raising prices along with the other dynamics that we're that we're building. And as they built, and we really started to really started to see it more in June , Chuck, would you say? Yeah, yeah. In June , and then and then it really started to accelerate.
Chuck would you say yep Yep in June and then and then it really started to accelerate.
Speaker 3: in October , November , December . And so I think
In October November December .
December .
So I think.
Speaker 3: That period, hopefully, is the hardest hit. But we'll see. Who knows? But those prices were.
That period, hopefully is the hardest hit them, but we'll see.
Who knows.
But those those prices.
Yeah.
We're we're we're definitely going up through that period.
Speaker 3: And so, so we, uh,
So yeah, so we put out.
That's very significant pricing increases to our customer in October , but again, there's a lag with that as I mentioned.
Speaker 3: Very significant price increases to our customer in October , but again, there's a lag with that at the moment.
Speaker 5: Right, right. So then just combining an answer you gave to Craig about the 31.4 million of backlog, significant portion of that to be delivered before June .
Right Great. So then just combining an answer you gave.
Greg about a 13.10 sorry.
For a million of backlog.
If we can close enough that it can be delivered before June .
Speaker 5: and juxtapose that with the 19 minus three or four million of finished good inventory, which will be your raw material inventory. So it seems like for the rest of the fiscal year, you do have inventory enough.
And juxtapose that with the the 19, almost three or 4 million of finished goods inventory, which will be our raw material inventory. So it seems like for the.
The rest of the fiscal year, you do have inventory enough to satisfy the backlog.
Speaker 5: to satisfy the backlog, am I reading it right or am I missing something?
Am I reading, it right or am I missing something.
Speaker 3: Well, you know, if you look at the numbers, you say, well, why don't you have enough inventory and, and the, um.
Well you know if you look at the number you say well why don't you have enough inventory and.
And the.
The simple answer is and the complexity of the purchasing and the and the long lead items versus non long lead.
Speaker 3: The simple answer is in the complexity of the purchasing and the long lead items versus non-long lead, and the committed contracts we have on buying inventory, we're trying to push out.
So and they cant and the committed contracts we have on buying inventory, we're trying to push out.
Speaker 3: some of those PO commitments we have in our suppliers. So we've been working hard on that, doing some of it, but it's not possible in all cases. So there's going to be some purchasing that's for future use, and some for parts that have been hard to get that we get at the last minute. Right. And from a money standpoint, they're small parts. These are connectors or some small item that we're chasing down that we're getting more and more.
Some of those P O commitments, we have in our suppliers. So we're working we've been working hard on that are doing some of it but there is there.
It's not possible in all cases, so there's going to be some some some purchasing that's for future use and some for parts that have been hard to get that that we would get at the last minute right.
From a money standpoint, they're small parks either connectors or some.
Oh item that we're chasing down.
Getting more and more confident we're in a fine it's not big.
Speaker 3: big dollars.
Dollars.
Now he's looking with strength.
Sure.
Speaker 5: Right, right. No, thanks for that, Kallur. And then the gross margin improvements you're targeting, of course, it will come from recovery of some of the gross margin headwinds that you have faced now, but it seems you are also working on lowering material costs and improving design. And I think there was also some talk about adding production lines in the past. Can you explain that? Yeah.
Right right no thanks for that color.
And then the gross margin improvements are you targeting are the of course, it will come from recovery of some of the gross margin.
The headwinds that you have now but it seems you are also working on lowering material cost and improving our design and I think there was also some talk about adding production lines.
In the past.
Yeah can you explain that.
Yeah, Yeah no.
We're adding a second shift now.
Speaker 3: We're adding a second shift.
Speaker 3: now uh... this month as we speak and the second shift will not be a full second shift yet but it will be a doubling of our large dollar high-volume packs which include our class one x-series the large pack twenty thousand dollar plus battery pack and uh... similar packs that go on the airport trucks
This month that as we speak and the second shift will not be a full second shift yet, but it will be a doubling of our a large dollar high volume packs, which include our class One X series, the large back that 21, $20000 plus battery pack.
And at similar packs that go on the airport trucks as.
Speaker 3: as well. So, that, in fact, has been one of the places of the most urgent need to accelerate our production. So, I'm real pleased with that. Our VP of Operations is doing a great job with that, along with implementing lean manufacturing, which we'll cover many months ahead.
As well.
So that.
That in fact has been one of the places of the most urgent need.
Accelerate.
Our production so I'm I'm real real pleased with that are our VP of operations is doing a great job with that along with implementing lean manufacturing, which we'll cover many many months ahead.
Mhm.
Speaker 5: And just one last one, you briefly mentioned SkyBMS, can you give us a little bit more color on what kind of customers you're talking to, what the level of talks are and when should we start seeing initial revenues and then significant revenues?
Okay. Thanks for that color and just one last one you beat you mentioned Sky B M S.
Can you give us a little bit more color on what kind of customers you're talking to watch.
The level of stocks are and when should we start seeing the.
Initial revenues and then significant revenues.
Yeah, you know I.
Speaker 3: Yeah, you know, I've been talking about that for a number of quarters. And we initially started
I've been talking about that for a number of quarters and we initially.
Started.
Speaker 3: delivering that last August .
Delivering that last August to some customers and it was really more of a pilot phase with Pepsico.
Speaker 3: to some customers and it was really more of a pilot phase with PepsiCo.
Speaker 3: And, uh, we had used it ourselves internally just to track packs out there. Our engineers.
And we'd use it ourselves internally just attract backs out there our engineers to to monitor and and know what's going on with the with the packs, but perhaps it goes said they'd looked at a lot of telemetry and arts was the best ever seen so they want it on all their all of their larger packs.
Speaker 3: to monitor and know what's going on with the packs. But PepsiCo said they looked at a lot of telemetry and ours was the best they'd ever seen, so they wanted it on all their larger packs.
Speaker 3: uh... everything but the walkies you know that walkie-talkie act so uh... we're putting that on their were charging for uh... and uh... uh... we we
Everything, but the work each you know the walkie pallet, Jack So we're putting that on there we're charging for it.
And.
We.
Oh, what what we tried to do is where we're really moving towards like your XM radio where you get it.
Speaker 3: What we try to do is we're really moving towards like your XM radio where you get a
Speaker 3: You get it, and then if you want to keep it, you have to pay for it. Because we found that once customers see this and understand it, because everybody's heard of telemetry. They've got telemetry all over the forklifts. And half the time, the customers don't use them.
You get it in and then and then if you want to if you want to keep it you have to pay for it because once we found that once customers see this and understand it because everybody has heard it telling them until they got telemetry all over the forklifts and half the time to customers don't use them and so but we found that once they see it they love it and want more of that.
Speaker 3: And so, but we found that once they see it, they love it and want more, they get customized reports, they get real-time reports which.
Get customized reports they get real time reports, which we don't know of any of our competitors and lithium ion doing that I'm sure there are.
Speaker 3: We don't know of any of our competitors in lithium-ion doing that. I'm sure they'll be catching up. But we see that as a platform to expand, adding new features on a regular basis, downloading updates, downloading new calibrations for different applications that the PACs may go through, corner cases, extreme conditions. So we're real excited about it and see that as a differentiating.
They'll be catching up but we see that as a platform to expand.
Adding new features on a regular basis downloading updates.
Down loading our new calibrations for different applications that the that the pacts may go through corner cases extreme conditions. So we're really excited about it and see that as.
A differentiating feature.
Great.
Speaker 5: Thanks a lot, Ron, for taking my questions, and congratulations on a great quarter, despite the headwinds.
Thanks, a lot Ron so taking my questions and.
Congratulations on a great quarter, despite the headwinds.
Yeah. Thanks Amir.
Speaker 1: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
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Our next question is from Chip Moore with Han. Please proceed with your question.
Speaker 1: Our next question is from Chip Moore with Hutton. Please proceed with your question.
Speaker 4: Hi. Thanks for taking the question. I wanted to follow up on gross margins, right? So a number of actions underway, whether it's pricing or product design or supply chain. So maybe you can help us parse that out, sort of near-term, next couple quarters, you know, getting product mix and backlog and things like that versus...
Hi, Thanks for taking the question.
I wanted to follow up on gross margins right. So number of actions underway, whether it's pricing or where product design or supply chain. So maybe you can help us parse that out sort of near term next couple of quarters, you know getting product mix and backlog and things like that versus.
Oh, you know mid term sort of line of sight on 30% margins.
Speaker 4: of it, you know, midterm and sort of line of sight on 30% margins, uh, if you can.
It would be good.
Yeah, Yeah, let me, let me start out with that and then I'm going to ask Chuck to to fill in the blanks.
Speaker 3: Let me, let me start out with that. And then I'm going to ask Chuck to fill in the blanks that I don't have. But gross margins, as you know, are a hot topic. We put out pricing in October , we see opportunity to
That I don't have but gross margins as you know are a hot topic, we put out pricing in October we see opportunity to.
Speaker 3: uh... for another round now and uh... there is uh... a little bit of judgment put in with that but i i think it's their everybody's getting price increases everybody's got material costs
For another round now.
And.
There is a little bit of judgment put in with that but I think it's there everybody is getting price increases everybody's got material cost.
Speaker 3: And so we think we have to, that will be a big element in recovering our, but it's gonna take some time. As we mentioned, we got a lot of backlog orders there that were submitted before that.
And so we think we have to that that will be a big element and recovering our but it's going to take some time as we've mentioned we've got we've got a lot of backlog orders, there that where we're committed before that but.
Speaker 3: That's a big one. Our engineers are designing out some cost in the steel, and the number of welds, the number of turns, and sourcing to Mexico. Our VP of operations has a lot of experience with some high-quality vendors in Mexico. We can reduce piece costs on those.
That's a big one where where our engineers are designing out.
Some cost in the steel and the number of wells the number of turns and and sourcing to Mexico. Our VP of operations. There's a lot of experience with some high quality vendors and Mexico are we.
We can reduce these costs on those and still have a very good job our supply partner.
Speaker 3: and still have a very good supply partner. And then in Q4, and some of these things are going to take a little time. I mean, I'm talking about them now. We're working on them, but there's a bit of implementation and launch time, as you would guess. But it's real, very, very real.
And then in Q4 and some of these things are going to take a little time, I mean, I am talking about them now we're working on them, but there's a bit of implementation and launch time as you would guess, but its real very very real.
In Q4, Chuck can probably talk about this our projections based on all of our all of our planned shipments are really based on current backlog, we have and there's a much bigger increase in the large packs, which have a higher prices and to.
Speaker 3: In Q4, Chuck can probably talk about this. Our projections based on all of our plan shipments are really based on current backlog we have.
Speaker 3: And there's a much bigger increase in the large packs, which have higher prices.
Speaker 3: And typically, higher gross margins. So we hope to see a real impact of that. And that really gets back to the high demand lines I mentioned earlier, our class 1 offerings and our airport GSE offerings. Chuck, can you add some color to that? Yeah, and I think that a lot of this is packed mixed. And also, of course, like any business, we have fixed cost, like rents expansion.
<unk> a higher gross margin. So we hope to see a real impact of that and that really gets back to the high demand lines I mentioned earlier, our class one offerings in our airport GSE offerings. Chuck can you add some color to that yeah, and I think that a lot of this is Pat.
Next and also of course like any business, we have fixed costs like a red Sox fans or something so that's good.
Speaker 3: So as revenue increases, that rent is still there. So gross margins are naturally gonna go up based on some fixed costs that we have there as well. But definitely, it's heavily driven off of the PAC mix, which is heading towards these bigger PACs that have higher margins.
Revenue increases Atlanta is still there. So gross margins are naturally going to go up based on some fixed costs that we have there as well.
But definitely it's heavily driven off of the pack next we're heading towards the bigger packs.
That have higher margins.
Okay.
It's something we can talk separately about as well if you want a little more detail.
Yes.
Yeah, No that's helpful.
Just stick to.
To walk through the different Oh, Yeah, Oh, yeah.
Speaker 3: to walk through the different pieces. Oh, and yeah, and Chip, you know, one other thing that we're, and honestly, I don't know how big this is gonna be, but it's like the right thing to do.
Yeah.
And chip Chip you know what one other thing that work and honestly I don't know how big is going to be but it's like the right thing to do.
You know everybody is running at in the chip problems and I'm not talking about you kept that [laughter] not not not very funny, but otherwise yeah.
Speaker 3: You know, everybody's running into Chip problems. And I'm not talking about you, Chip. Not very funny, but. No way, yeah.
We were actually trying to use the testicles playbook, a little bit of our engineers and supply guys trying to source some of these electronic components.
Speaker 3: We're actually trying to use Tesla's playbook a little bit of.
Speaker 3: our engineers and supply guys trying to source some of these electronic components.
Speaker 3: that are not in such high demand and or scarcity.
That are or are not in such high demand <unk> scarcity. So that we can get them and so the engineers need to do a little development and testing modest work on R. P. M S. Our circuit boards to do that so.
Speaker 3: so that we can get them. And so the engineers need to do a little development and testing, modest work on our DMS, our circuit boards to do that. So.
Speaker 3: You know, I serve that up more as an example of the kinds of things we're doing to shape the bushes, to move this.
Sure that up more is another example of the kinds of things we're doing to shake the bushes.
To move this gross margin and as I said before we're emerging company.
Speaker 3: You know, as I said before, we're emerging company. We're pioneering these things. We're looking at everything. We know that this is getting gross margin up is as extremely urgent matter of business.
We're pioneering these things we're looking at everything.
We know that this is getting gross margin up as.
As a extremely urgent matter of business.
Speaker 3: And that's what we're doing as well.
And that's that's that's what we're doing as.
As well.
Speaker 4: Okay. Got it. No, that's helpful, Ron. Maybe one more on...
Okay, Yeah, no that's a.
That's helpful. Ron.
Maybe one more on <unk>.
Speaker 4: you know, given the inventory bill that we've talked about and executing on backlog here.
You know given the inventory build that we've talked about in <unk>.
Executing on backlog here.
Sort of front loaded.
Speaker 4: you know, sort of front loaded this fiscal year. How are you thinking about cash burn dynamics in the second half?
Fiscal year.
Are you thinking about cash burn dynamics in the second half.
You know I imagine some of your customers. That's an important thing and you mentioned the going concern. So just I'm just curious if you could help us there.
Speaker 7: You know, I imagine some of your customers, that's an important thing. And you mentioned the goal and concern. So just, just curious.
Yeah, no. Okay cash burn is a big one you know I mean, we're trying to deal with this backup in the in the pipe here, if you will from the supply chain and our.
Speaker 3: Yeah, no, Keshburn is a big one. You know, I mean, we're trying to deal with this backup in the pipe here, if you will, from the supply chain and
Speaker 3: We're going to do everything I can, as I said, to build and ship. Everybody's learning more lessons in how to deal with the supply chain backup. But we believe we can, with the added assembly line, our improved...
We're going to do everything I can as I said too.
Build and ship everybody's learning my lessons and how to how to deal with with the supply.
Supply chain back up.
And Oh.
We believe we can with the added Assembly line our.
Improved processes on dealing with scarcity and and better better better planning given a better understanding of what can be late what's what's not late can can tighten up some of that efficiency.
Speaker 3: Processes on dealing with scarcities and better planning, given a better understanding of what can be late, what's not late, can tighten up some of that efficiency in the system.
In the system.
But.
Speaker 3: Chuck's got a forecast. We updated a lot, as you could expect. I think everybody is these days. But we're doing everything in our power to.
<unk> got a forecast we updated a lot as you could expect I think everybody is these days, but we're doing.
Everything in our power to.
Speaker 3: use the capital that we have and
Use the capital that we have.
And.
I think.
Speaker 3: Chuck, do you have anything to add on that? No, I think it's just a pure uncertainty. So, you know, as you look at this, we've been...
Chuck do you have anything to add on on that I think it's just it's just the pure uncertainty. So you know.
As you look at this we completed.
Got out with stuff that you.
Speaker 3: vendor says I got it next week and all of a sudden they're like oh I don't have it because the vendor before them promised me so
You know I understand so I got it next week and all of a sudden they're like Oh I don't have it because the vendor before then promising so.
Yes.
Speaker 3: not a cash issue, it's more of an uncertainty of is the supply chain getting better.
Not a cash issue that's more of an uncertainty as a as a supply chain getting better one god willing.
Speaker 3: We'll manage through it. We have no problem. We have access to money, but it is one of those things where we have to just look at and assess that is there risk? Yeah, there's risk. We don't know what's happening in the supply chain.
We'll manage through it we have no problem, we have access to the money, but it is one of those things where we have to just look at the end.
Yes that is there a risk yeah, there's risk, but you don't know what's happening in the supply chain.
I'd say, there's another element here as well, though when we look at our the impacting courses.
Speaker 3: I'd say there's another element here as well, though, when we look at the impacting forces.
We do see there's probably a lesser.
Speaker 3: We do see there's probably a lesser need to overstock our inventory in that defensive posture we were taking.
Need to overstock car inventory and that defensive posture, where we were taking.
Speaker 3: uh... there's more uncertainty as what was really going on there still uncertainty i but i think that matters i think it matters a lot so uh... we're going to the best we can to manage that inventory down we've got aggressive targets goals to bring it down each month uh... uh... are are purchasing uh... activities uh... moving committed purchasing out of that as i mentioned earlier so all that we hope drives cash too uh...
There was more uncertainty is what was really going on there is still uncertainty, but I, but I think that matters and I think it matters a lot. So we're going to do the best we can to manage that inventory down we got aggressive targets goals to bring it down each month.
Or are purchasing.
Activities are moving committed purchasing out is that as I mentioned earlier, so all of that we hope drives cash too.
Speaker 3: be satisfactory for us and improve and drive. Our drive is like driving to the end zone of cash flow break even. So all of these supply chain initiatives, gross margin, operating expense, we've got initiatives in those areas as well to be as efficient, lean.
Satisfactory for us and improve and drive.
Our drive is like driving to the end zone of cash flow breakeven. So all of these supply chain initiatives gross margin.
Operating expense, we've got initiatives in.
Those areas as well.
To be as efficient lean.
Speaker 3: uh... even down to you know it's very important to get the right person in the right job uh... address any rework inefficiencies we have so we have a major quality initiative uh... that were initiating we just hired a new very very competent experience director of quality so i think all these things play to to building momentum in the direction that we're uh... trying to head here because our future is so good
Even down to you know its very important to get the right person and the right job.
Address any rework and efficiencies we have so we have a major quality initiative.
That we're initiating we just hired a new very very competent and experienced director of quality. So I think all these things play to two building momentum and the direction that were.
Trying to head here, because our future is so good and our vision and our plan is to be this.
Speaker 3: And our vision and our plan is to be this.
Under a choice so.
Speaker 3: vendor of choice. So, as part of that, my experience has been mostly with large companies.
As part of that my experience has been mostly with large companies. If you want to if you. If that is your goal you need to be as a patient you need to do all these things work.
Speaker 3: If that is your goal, you need to be as efficient, you need to do all these things we're doing. So we are on that march.
We're doing so we are on that March.
Absolutely great.
Speaker 7: Absolutely. Great. Well, I'll take the rest of mine offline and echo the congratulations on the great order flow. Okay. Thank you.
I'll take my the rest of mine offline.
Congratulations on the great order flow.
Okay. Thanks, Thanks chip thank you.
Yeah.
We have reached the end of the question and answer session and I will now turn the call over to Mr. Doug for his closing remarks.
Speaker 1: We have reached the end of the question and answer session, and I will now turn the call over to Mr. Dutt for his closing remarks.
Okay. Thank you.
Speaker 3: Okay thank you. I'd like to thank each of you for joining our earnings conference call today and I look forward to continuing to update you on our ongoing progress and growth. It's a very, very challenging but exciting time, particularly when we day-to-day are working with our customers.
I'd like to thank each of you for joining our earnings conference call today, and I look forward to continuing to update you on our ongoing progress and growth.
It's a very very.
Challenging, but exciting time, particularly.
When we day to day R. R.
King with our customers.
Speaker 3: If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who would be more than happy to assist.
If we were unable to answer any of your questions. Please reach out to our IR firm MZ group, who would be more than happy to assist.
Thank you very much.
Speaker 1: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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Okay.
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