Q2 2024 Flux Power Holdings Inc Earnings Call
Greetings and welcome to the flux power Holdings second quarter fiscal year, 'twenty 'twenty four financial results conference call.
Operator: Greetings and welcome to the Flux Power Hldg 2nd Quarter Fiscal Year 2024 Financial Results Conference. This time, all participants are on a list of, This question and answer session will follow the As a reminder, this conference is being held. I would now like to hand the call over to Maria Rica, Marketing Manager. Thank you, operator.
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'd now like to turn the call over to Maria Rica marketing manager Maria.
Thank you operator your hosts today are Brian Bird, Chief Executive Officer, and Chuck Shyly, Chief Financial Officer will present results of operations for the fiscal second quarter ended December 31st 2023.
Maria Rica: Your host today, Ron Dutt, Chief Executive Officer, and Chuck Shiley, Chief Financial Officer, for the fiscal second quarter ended December 31st, 2023. The press release detailing these results crossed the wires this afternoon at 4.01 PM Eastern Time and is available in the Investor Relations section of our company's website, FluxPower.com. Before we begin the formal presentation...
A press release detailing these results crossed the wires. This afternoon at four P. M. Eastern time and is available in the Investor Relations section of our company's website plus 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.
Maria Rica: I would like to remind everyone that statements made on the call and webcasts may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgments on what the future holds, they are subject to risk and uncertainty that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this meeting.
While these forward looking statements represent our current judgment on what the future holds they.
They are subject to risks and uncertainties that could cause actual results to differ materially.
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 obligated.
Maria Rica: Please keep in mind that we are not obligated, or 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. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our. You should also review our most recent form, 10-K, for a more complete discussion of these factors and other risks, particularly under the heading RISC-VAC. At this time, I will turn the call over to Flux Power Chief Executive Officer Ron Depp. Thank you, Maria, and good afternoon, everyone.
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.
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 for a more complete discussion of these factors and other risks, particularly under the heading risk factors.
At this time I will turn the call over to flux tower, Chief Executive Officer Rhonda.
Thank you Maria and good afternoon, everyone.
Ron Dutt: I'm pleased to welcome you to today's fiscal second quarter 2004 financial results conference call. Firstly, please note that on slide 3, if you're following the deck, for those of you new to our story, there's a short reminder of what we do. We are powering your transition to sustainable lithium-ion battery technology. We are powering material handling.
I'm pleased to welcome you to todays fiscal second quarter, 2000, and poor financial results Conference call.
Yeah.
Firstly. Please note on slide three if you're following the deck for those of you new to our story. There was a short reminder of what we do we are powering your transition to sustainable lithium ion battery technology.
Powering material handling.
Ron Dutt: Airport grant support, solar energy storage, Port Authority equipment, and other applications with new and clean technology. Our products and services are focused on the growing demand for large nationwide fleets that are pursuing a better return on investment and a positive environmental impact compared to lead-acid batteries. We are the leading supplier to the large material handling fleets who require the best, both now and with future deliveries in product, technology, service, and ease of doing business. Our reputation and brand are critical as we target top-tier customer and OEM names, which I'll point out shortly. We must have a strong reputation and a solid track record to reliably satisfy these large fleets that have hundreds of facilities and need their batteries for new equipment and existing equipment delivered on time without difficulty.
Grant support solar energy storage Port authority equipment and.
In other applications with new and clean technology.
Our products and services are focused on the growing demand for large nationwide fleet that are pursuing a better return on investment.
And a positive environmental impact compared to lead acid batteries.
We are the leading supplier to the large material handling fleets, who required the best both now and with future deliveries and product.
<unk> service and ease of doing business.
Our reputation and brand are critical as we target top tier customer in OE and names, which I'll point out shortly.
We must have a strong reputation and solid track record to reliably satisfy these large fleets that have hundreds of facilities and need their batteries for new equipment and existing equipment.
Delivered on time without difficulty.
Ron Dutt: Fortune 100 companies demand suppliers that are transparent, experienced, and trustworthy as they transition their fleets to new and clean technology, which puts us in a very strong position in the clean energy market. And we have a trend of, on average, adding two large new customers per quarter without losing any of our installed base of customers. Our business priority this past year focused on progressing to cash flow break-even while continuing to capture market share for the increasing demand for lithium batteries. We continue to be highly encouraged by our momentum toward cash flow break-even and profitability, given the underlying demand for our product. We have made progress on a number of our growth initiatives that have a near-term and long-term impact.
Fortunately 100 companies demand suppliers that are transparent.
Experienced and trustworthy as they transition their fleets to new and clean technologies.
Which puts us in a very strong position in the clean energy market and we have the trend on average.
Adding two large new customers per quarter.
And at the same time without losing any of our installed base of customers.
Our business priority this past year focused on progress to cash flow breakeven.
Continuing to capture market share for the increasing demand for lithium batteries.
We continue to be highly encouraged by our momentum toward cash flow breakeven and profitability given.
Given the underlying demand of our products.
We have made progress on a number of our growth initiatives.
That has near term and long term impacts.
Our new series of heavy duty models will be added to most of our products that by segment and along with that a new top five forklift OEM private label program.
Ron Dutt: Our new series of heavy-duty models will be added to most of our product segments and, along with that, a new top five forklift OEM private label program, both of which will address the strong market demand beginning in early 2024, and our automated assembly of cell modules is tracking well. We plan to launch the industry's first integrated telematics fleet-wide program for the Fortune 100 customer later this year that combines the telemetry data of both the forklift and the battery.
Both of which will address the strong <unk>.
Market demand beginning in early 2024 calendar year.
And our automated assembly of cell modules is tracking well.
We plan to launch the first the industry's first integrated telematics fleet wide program, but at a fortune 100 customer later in 2024 this year that combined that telemetry data of both the forklift.
In the battery.
Ron Dutt: We believe that our leadership in telematics will serve as a continuing platform to introduce new features for operating performance and asset management that are highly desired by our customers. Also, we are exploring opportunities with partners for fast-charging technology and international sales opportunities. The second fiscal quarter 2024 also saw ongoing momentum to both the top and bottom lines as we continue to move steadily towards profitability. While reaching record quarterly revenue of $18.3 million during the quarter, we do continue to see lumpiness due to the timing of deliveries of customer new forklift orders and higher interest rate impact. We improved gross profit by 38% in the second quarter to $5.7 million, and Gross Margin Expansion of 700 basis points to 31% compared to the year-ago period, and also up from our fiscal first quarter of $4.3 million and 29%, respectively. With ongoing initiatives focused on strategic supply chain and profitability improvement Lower costs and higher volume purchasing. We are targeting gross margin improvement to continue toward 35% in the short term. We are highly focused on achieving cash flow break even during this fiscal year 2024.
We believe that our leadership in telematics will serve as a continuing platform the <unk>.
Produce new features for operating performance in asset management that are highly desired by our customers.
Also we are exploring with partners opportunities for fast charging technology.
And international sales opportunities.
The second fiscal quarter of 2024 also saw.
Ongoing met a momentum to both the top and bottom lines as we continue to move steadily towards profitability.
Well, reaching record quarter revenue of $18 $3 million during the quarter.
We do continue to see Lumpiness due to the timing of deliveries of customer new forklift orders.
And higher interest rate impacts.
We improved gross profit up 38% in the second quarter to 5.7 million.
And gross margin expansion of 700 basis points to 31% compared to the year ago period.
And also up from our fiscal first quarter up $4 3 million.
And 29% respectively.
With ongoing initiatives focused on strategic supply chain and profitability improvement.
Lower costs and higher volume purchasing.
We are targeting gross margin improvement to continue toward 35% in the short term.
We are highly focused on achieving cash flow breakeven during this fiscal year 'twenty 'twenty four.
Ron Dutt: We made good progress during the second fiscal quarter, delivering positive adjusted EBITDA of $300,000 and an improvement of $1.2 million from an adjusted EBITDA loss of $900,000 in the second fiscal quarter of 2023 and sequential improvement from a loss of $1.2 million in the first fiscal quarter of 2024. Key drivers of the improvement include gross margin expansion and steady operating leverage for modest growth in operating expenses over the year. Our cost and pricing initiatives contributed to the gross margin improvements that I just mentioned, to 31%. Q224.
We made good progress during the second fiscal quarter delivering positive adjusted EBITDA of $300000, an improvement of 1.2 million from an adjusted EBITDA loss of $900000 in the second fiscal quarter of 2023.
And sequential improvement from a loss of 1.2 million in the first fiscal quarter of 2024.
Key drivers of the improvement include gross margin expansion.
And steady operating leverage for modest growth in operating expenses over the year.
Our cost and pricing initiatives contributed to gross margin improvements that I just mentioned.
31% in Q2 24.
Also our inventory balances and then stable, reflecting better management of supply chain sourcing and higher inventory turns from improved operational processes and lean manufacturing implementation.
Ron Dutt: Also, our inventory balances have been stable, reflecting better management of supply chain sourcing and higher inventory turns from improved operational processes and lean manufacturing implementation. Taken together, we are executing operational efficiencies on our strategy for cash flow break even, beginning in this fiscal year 2024, and increasing profitability beyond, as we continue to drive expansion of our product lineup, operational efficiencies, and service network. In the longer term, our strategy revolves around building scale to sell our products to large fleets. Building on our momentum and revenue. Gross Margin and Operating Leverage.
Okay.
Taken together, we are executing operational efficiencies.
Our strategy for cash flow breakeven beginning in this fiscal year 2024.
And increasing profitability beyond.
As we continue to drive expansion of our product lineup operational efficiencies and service network.
Yeah.
And the longer term.
Our strategy revolves around building scale to sell our products.
Two large fleets.
Building on our momentum in revenue.
Most margin and operating leverage.
Ron Dutt: Currently, we are growing organically within our capital resources, but I've begun to explore and develop strategies, including, as already mentioned, building partnerships that can leverage our revenue growth. Our technology and our profitability and achieve our goal of building scale to meet the needs of our top-tier customers. Our efforts at increasing revenue and margin improvement, specifically for adjusted EBITDA, are shown on slide 7, reflecting the upward trend over the past two fiscal years and our momentum towards sustained break even. The increase in Q2 fiscal 24 is directly attributed to improved gross profit from gross margin expansion and revenue growth.
Currently we are growing organically within our capital resources.
Begun to explore and develop strategies, including those already mentioned to.
To build partnerships that can leverage our revenue growth.
Our technology and our profitability and achieve our goal of building scale to meet the needs of our top tier customers.
Our efforts on increasing revenue and margin improvement specifically for adjusted EBITDA are shown on slide seven.
Reflecting the upward trend over the past two fiscal years and our momentum towards sustained breakeven.
The increase in Q2 fiscal 'twenty four is directly attributed to the improved gross margin gross profit sorry from gross margin expansion and revenue growth.
Ron Dutt: We believe our trajectory to profitability is built on a strong foundation of lean implementation and ISO 9001 processes. Additional enablers include expansion of high demand models and continued operational and volume-related supply chain cost reduction. Our current and potential pipeline of customers continues to expand with four new customers this past quarter and eight new customers in the calendar year 2023. Our full product line caters to large fleets who seek an ongoing, long-term relationship partner to meet current and future needs. Not just a one-time transactional purchase. Engage.
We believe our trajectory to profitability has built a strong foundation of lean implementation and ISO 9001 processes.
Additional enablers include expansion of high demand models, and continued operational and volume related supply chain cost reductions.
Yeah.
Our current and potential pipeline customers.
Continues to expand with four new customers this past quarter in eight new customers in the calendar year 2023.
Our full product line caters to large fleets.
<unk> ongoing long term relationship partner to meet current and future needs.
Not just the one time transactional.
Purchase engagement.
Ron Dutt: These customers represent well-known household names, having large fleets who require high-performance suppliers. However, the forklift growth rate has historically been single-digit. The adoption of lithium ion batteries is growing at a much higher rate, driven by the compelling value proposition of lithium compared to lead acid.
These customers represent well known household names, having large fleets who require.
High performing suppliers.
Well the forklift growth rate has historically been single digit.
The adoption of lithium ion batteries is growing at a much higher rate driven by the compelling value proposition of lithium compared to lead acid.
Ron Dutt: Especially for larger multi-shift operations, the material handling sector is not unaffected by the economic downturn. It is critical to transport goods and provide services throughout the business cycle. Our strategy has included adjacent verticals, such as airport ground support equipment, and we continue to assess other possible adjacencies to leverage our core competencies and capabilities. The trajectories of our revenue and gross margin on slide 9 speak for themselves. We have taken actions to restore our gross margin trajectory that was interrupted by the pandemic, and our highest priority now is achieving sustained profitability this fiscal year. Our ongoing improvement initiatives include a number of actions that are now impacting gross margin and will continue to do so, increases to offset commodity costs, increased pack volume, and more competitive shipping costs.
Especially for the larger multi shift operations.
The material handling sector is not affected by economic downturns.
It is critical to transport goods and provide services throughout the business cycle.
Our strategy has included adjacent vertical such as airport ground support equipment.
And we continue to it.
That other possible adjacency to leverage our core competencies and capabilities.
The trajectories of our revenue and gross margin on slide nine speak for themselves.
We have taken actions to restore our gross margin trajectory that was interrupted by the pandemic.
And our highest priority now of achieving sustained profitability this fiscal year.
Our ongoing improvement initiatives include a number of actions that are now impacting gross margin and we will continue to do so.
Sure, it's price increases to offset commodity.
He says.
Increased pack Lions.
More competitive shipping costs.
Ron Dutt: Lower cost, more reliable, and secondary suppliers of key components. Expanded Manufacturing Capacity and Production Process. And finally...
Lower cost more reliable and secondary suppliers of key components.
Expanded manufacturing capacity and production processes.
And finally.
Ron Dutt: Transition of product lines to a new modular platform which has a more efficient design for assembly and service. All these initiatives are part of our plan to accelerate gross margins as our target is to reach a gross margin of 40%. Slide 10 highlights our backlog and inventory level trends, which are reflecting a more predictable pattern in recent periods, reflecting the growth of the business. As of February 1st, our backlog was $30 million.
Transition of product lines to a new modular platform, which has more efficient design for the.
Assembly and service.
All of these initiatives are part of our plan to accelerate gross margins as our target is to reach a gross margin at 40%.
Slide 10 highlights our backlog and inventory level trends, which are reflecting a more predictable pattern in recent periods, reflecting the growth of the business.
As of February 1st our backlog was $30 million.
Ron Dutt: We have four new customers during the quarter, including a winery that is the largest wine producer in the world. Our run rate backlog does vary at any point in time, but it runs from $20 million to $38 million, depending on the time of the orders received. Beyond our backlog of open orders, we're working on a pipeline of high-probability orders well over $100 million, which does stretch beyond our current fiscal year ending June 30. We monitor the multi-billion-dollar addressable material handling market for economic trends, new entrants, and customer demand trends, and we believe this market will provide a very positive growth environment for a strong, stable undercurrent, especially given the recognized double-digit growth of Our strategic initiatives also include improving sourcing actions to mitigate part shortages, supply chain efficiencies, and increasing inventory churn. With that, I will now turn it over to Chuck Chiwi, our Chief Financial Officer, to review the financial results for the quarter ended December 31, 2023. Thanks, Ron.
For new customers during the quarter, including a winery that is the largest wine producer in the world.
Our run rate of backlog does vary at any point in time, but as a pattern of running from 20 million to $38 million, depending on the time of the orders received.
Beyond our backlog of open orders, we're working on a pipeline of high probability orders well over $100 million, which does stretch beyond our current fiscal year ending June 30th.
We monitor the multibillion dollar addressable material handling market for economic trends, new entrants and customer demand trends and we believe this market to provide a very positive growth environment for <unk>.
Throng stable undercurrent.
Basically given the recognize it.
Double digit growth of lithium mining solutions in this sector.
Our strategic initiatives also include improving sourcing actions.
And mitigate part shortages.
Supply chain efficiencies and increasing inventory turns.
With that all right.
We'll now turn it over to Chuck <unk>, our Chief Financial Officer to review the financial results for the quarter ended December 31 2023.
Sure. Thanks, Ron.
Chuck Shiley: Now, turning to review our financial results for the quarter ended December 31st, 2023. As Ron mentioned, revenue for the fiscal second quarter of 2024 increased by 7% to $18.3 million, compared to $17.2 million in the fiscal second quarter of 2020. This was due to a higher number of packs sold during the quarter, as well as price increases for certain packs sold. Gross profit for fiscal Q2 of 2024 increased to $5.7 million, compared to a gross profit of $4.1 million in fiscal Q2 of 2020. Gross margin was 30.9% in fiscal Q2 of 2024, as compared to 23.9 in fiscal Q2 of 2023.
Now turning to review our financial results in the quarter ended December 31 2023.
As Ron mentioned revenue for the fiscal second quarter of 2024.
Increased by 7% to $18 3 million compared.
Compared to $17 2 million in the fiscal second quarter of 2023.
This was due to a higher number of pack sold during the quarter as well as price increases for certain packs sold.
Gross profit for fiscal Q2 of 'twenty 'twenty four increased to 5.7 million compared.
Compared to a gross profit of $4 1 million in fiscal Q2 of 2023.
Gross margin was 39% in fiscal Q2 of 'twenty 'twenty four.
As compared to 23.9 in fiscal Q2 of 2023.
Chuck Shiley: This has reflected higher gross profit and lower cost of sales as a result of the gross margin improvement initiatives we've talked about, and this will help us achieve our profitability. Selling and administrative expenses were at $4.6 million in fiscal Q2 of 2024. This is up slightly from $4.3 million in the previous year quarter, primarily attributable to staff-related expenses and some higher professional service fees. This is a presentation of a stock-based company. This is also partially offset by decreases in outbound shipping costs, recruiting costs, and consulting costs. Research and development expenses increased slightly to $4.3 million in fiscal Q2 of 2024.
So its reflected higher gross profit and lower cost of sales as a result of the gross margin improvement initiatives, we've talked about and this will help us achieve our profitability.
Selling and administrative expenses were up $4 6 million in fiscal Q2 of 'twenty 'twenty four.
It's up slightly from $4 3 million in the previous year quarter.
It was primarily attributable staff related expenses, some higher professional service fees.
And stock based comp this is al.
Also partially offset by decreases of outbound shipping costs recruiting costs and consulting fees.
Research and development expenses increased slightly to $4 3 million.
In fiscal Q2 of 'twenty 'twenty four.
Chuck Shiley: This is compared to $1.2 million in fiscal Q2 of 2023, primarily due to additional engineering projects to support our new, Adjusted EBITDA improved to a positive $300,000 in fiscal Q2 of 2024 from a loss of $900,000 in fiscal Q2 of 2023, mostly driven by the improved gross margin. Amit Dayal, James McIlree, Amit Dayal, Flux Powe Hldg, our continued initiatives. Our continued initiatives, business growth, and operating leverage all contribute to drive this trajectory. The net loss for fiscal Q2 of 2024 was $800,000 compared to a net loss of $1.7 million in fiscal Q2 of 2023.
As compared to $1 2 million in fiscal Q2 of 2023.
This was primarily due to additional engineering projects to support our new products.
Adjusted EBITDA improved to a positive 300000 in fiscal Q2 of 'twenty 'twenty four.
From a loss of 900000 in fiscal Q2 of 2023.
This was mostly driven by the improved gross margins.
Our continued initiative.
Yeah.
Our continued initiatives business growth and operating leverage all contribute to drive this trajectory.
Net loss for fiscal Q2 of 'twenty 'twenty four it was 800000 compared to a net loss of one 7 million in fiscal Q2 of 2023.
Chuck Shiley: The improvement principally reflected increased gross profit, but that was offset by increased operating expenses and interest expense. Cash was $1.6 million at December 31, 2023, as compared to $2.4 million at June 30, 2023.
The improvement principally reflected increased gross profit and.
And that was offset by increased operating expenses and interest expense.
Cash was $1 6 million at December 31, 2023, as compared to 2.4 million at June 30th of 2023.
Chuck Shiley: This is mostly based on just timing of utilizing our credit line and when we borrow. Net cash used in operating activities decreased by $2.1 million to $1 million in the three months ending December 31, 2020, compared to $3.1 million in the three months ended September 30, 2023. And available working capital includes our line of credit as of January 31st, 2024. That's under our $16 million credit facility from Gibraltar Business Capital. That is the remaining available balance of $6 million.
And this is mostly based on just timing of utilizing our credit line and when we borrow.
Net cash used in operating activities decreased by $2 1 million to $1 million in the three months ended December 31 2023.
<unk> to $3 1 million in the three months ended September 32023.
And available working capital includes our line of credit as of January 31, 2024.
That's under our $16 million credit facility from Gibraltar business capital that.
That is a remaining available balance of $6 million.
Chuck Shiley: And we also have $2 million available under the syndicated line of credit with Cleveland Capital. Our credit line with Gibraltar provides for expansion for up to $20 million. Now I'd like to pass it back to Ron to offer some closing remarks. Thanks, Chuck.
And we also have our 2 million available under the subordinated line of credit with Cleveland capital.
Our credit line with Gibraltar provides for expansion for up to $20 million.
Now I'd like to pass it back to Ron to offer some closing remarks.
Thanks Chuck.
Ron Dutt: Looking at the positive momentum of our existing customer base and New Customer Acquisitions, we are confident that we are on a trajectory toward reaching sustained profitability during the current fiscal year. Our steady, ongoing gross margin improvement reflects our goal to reach 40% gross margin, leveraging our operational and pricing, operational, and pricing initiatives. As we establish consistent and increasing profitability this year, we look to implement revenue growth initiatives that we are currently exploring and developing. Our strategy continues to focus on the strong demand of the market for sustainable energy, especially in our industrial sector. We do not rely on government incentives but only a compelling value proposition in ROI.
Looking at the positive momentum of our existing customer base and new customer acquisitions. We are confident that we are on a trajectory toward reaching sustained profitability during the current fiscal year.
Our steady ongoing gross margin improvement.
<unk> reflects our goal to reach 40% gross margin leveraging our operating and pricing.
Operational and pricing initiatives.
As we establish consistent and increasing profitability this year.
We look to implement revenue growth initiatives that we're currently exploring and developing.
Our strategy continues to focus on the strong demand of market for sustainable energy, especially in our industrial sector.
Where we do not rely on government incentives, but only a compelling value proposition and our O I.
Ron Dutt: We believe the combination of existing customer orders and the acquisition of new customers who want the benefits of lithium-ion technology can drive continued revenue growth. We're seeing strong progress with our growth strategy, including the introduction of new heavy duty models to be launched this year and a second private label program expected to launch with a major forklift OEM. We also have a partnership with a fast-charging proprietary technology firm, and we look to additional revenue potential from establishing the industry's first telematics integration for an entire nationwide fleet with a Fortune 100 company. And our current production facility should support annual revenue up to $150 million. Given our facility footprint... A second chip build out, and full implementation of Lean Manufacturing. As I mentioned previously, we have an improved capital structure that includes an increased working capital line of credit of $16 million with Gibraltar business capital to support planned growth, with provisions to increase to $20 million and a new $2 million subordinated credit facility with Cleveland Capital that has an extended maturity to August 15th, 2025. Amit Dayal, Flux Powe Hldg.
We believe the combination of the existing customer orders and the acquisition of new customers, who want the benefits of lithium ion technology.
Can drive continued revenue growth.
We're seeing strong progress with our growth strategy, including the introduction of new heavy duty models to be launched this year.
And a second private label program expected to launch with a major forklift OEM.
We also have a export we are exploring a partnership with a fast charging proprietary technology.
Technology firm and we'd look to additional revenue potential from establishing the industry's first telematics integration for an entire nationwide fleet with a fortune 100 company.
And our current production facility should support annual revenue up to $150 million.
Given our facility footprint.
A second chip build out.
And full implementation of lean manufacturing.
As I've mentioned previously we have an improved capital structure that includes increased working capital line of credit of $16 million with Gibraltar business capital.
To support planned growth.
Provision increased to $20 million and $2 million subordinated credit facility with Cleveland capital.
It has an extended maturity to August 15th 2025.
Yes.
In summary, we are well positioned to execute our growth strategy.
Operator: In summary, we are well positioned to execute our growth strategy, as we offer customers deep experience as first movers in the sector and validation by Fortune 100 customers who entrust the migration of their fleets to lithium ion solutions. I look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position in lithium-ion technology. Solutions with our growing list of new and diverse large customers. I thank you all for attending, and now I would like to hand the call over to the operator to begin our question and answer session. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, you may press star 1 on your telephone. Confirmation Tone will indicate your line is. Press Star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your hands. For Preston, this is Starkey.
We offer customers deep experience as.
As first movers in the sector and validation by Fortune 100 customers, who entrust migration of their fleets to lithium ion solutions.
I look forward to providing our shareholders with further updates in the near term as we.
We strengthened our leadership position in lithium ion technology.
Solutions with our growing list of new and diverse large customers.
I. Thank you all for attending and now I would like to hand, the call over to the operator to begin our question and answer session operator.
Thank you.
Ladies and gentlemen at this time, we will be conducting a question and answer session. If.
If you'd like to ask a question you May 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 would 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 key.
Rob Brown: Our first question comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question. Good afternoon and congratulations on a strong quarter. Yeah, thanks, Rob. My first question is about the order environment.
Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.
Good afternoon, and congratulations on the strong quarter.
Yeah. Thanks, Rob.
On the I guess first question here is on the order environment, a very strong orders in the quarter.
Ron Dutt: There were very strong orders in the quarter. I know the business can be a bit lumpy, but what are you seeing in terms of customer activity, and how do you see the order environment over the next couple of years? Yeah, Rob, that's really a good question. You know, we spent a lot of time looking at that. Our sales people, especially, are working with our customers and the OEMs on that. The industry has, you know, largely recovered from the pandemic, but there's still some lumpiness out there in orders. We have not seen any backing off a reduction of orders from any of our customers, but we have seen some deferral out toward the end of the year and, in some cases, beyond, as they just manage the timing of the replacement of the forklifts, and there must be some effect on high instance rates because we see that happening a lot in other sectors.
The business will be a bit lumpy, but what are you seeing in terms of customer.
Activity and how do you see the order environment over the next couple of quarters.
Yeah, Rob that that's really a good question you know we spent a lot of time looking at that are particularly our salespeople are working with our index and in customers and the Oems on that the industry is has largely recovered from the pandemic, but theres still some lumpiness out there in order.
There's a we have not seen any.
Backing off or reduction of orders for many of our customers, but we have seen some deferral out towards the end of the year and in some in some cases beyond as they just manage the timing as it were.
Placing other four eclipsing.
And.
There must be some effect on high answers released because we see that happening.
A lot in other sectors and we haven't lost any customers. So we've seen no back off and the managing of our installed base and adding new customers, but we are.
Ron Dutt: And we haven't lost any customers, so we've seen no back off in the management of our installed base and adding new customers, but we are dealing with that lumpiness. The lead times... You know, in normal stable times, they could be two months or so, and you can kind of see that reflected somewhat in our open sales orders, but there are a couple lines with one of our largest OEM customers about forklift delays, so. A large percentage of our business, over 90 percent, is for putting on new forklifts, although the growing business of replacing lead-acid batteries at the end of their life is certainly beginning to grow. That can affect our timing.
Dealing with that Lumpiness.
The lead times are.
You know and in a normal stable times could be two months or so.
And you can kind of see that reflected somewhat in our open sales orders, but there are a couple of lines with one of our largest.
OEM customers of a forklift delay so.
Since a large percentage of our business over 90 is for put on new forklifts, although the growing our business on replacing led asset batteries at the end of life that certainly beginning to grow.
Now that can affect our timing. So you know we have an ongoing strategy as a growth company and talk about it all the time and the initiatives to accelerate growth.
Ron Dutt: We have an ongoing strategy as a growth company and talk about it all the time, and the initiatives to accelerate growth. There is currently a strong interest on our part to reduce the concentration of our biggest customers as a public company so we can have a more predictable trajectory on our orders. I'd just add, though, that like a lot of companies, I think a lot of customers who have gone after look at how deep and broad you have gone with some of these Fortune 50 and 100 customers, because that really does provide validation to others that are looking at this adoption and migration. So in your response to the orders, that's going around the wagons pretty well. Does that help?
Growth.
They are currently.
<unk> is a strong as in our part to reduce reuse the concentration of our biggest customers.
And as a public company so we can.
A more predictable.
<unk> trajectory on our orders.
I just add though that we're like a lot of companies I think a lot of customers who are going after a look at how deep and broad it'd be gone, but some of these fortune 5100 customers because that really does provide the validation to others that are looking at this adoption and migration. So.
You know in your response to the orders that that's that's going around around the wagons pretty well does that help.
Oh excellent yes. Thank you that was a great overview.
Rob Brown: Thank you. That was a great overview and answered some of my other questions along the way, so that's fantastic. And then on the margin trends, obviously, good progress there. How much further to go is there in terms of some of these initiatives you put in place? Are there initiatives in place that really are set to show through in the numbers?
And answered some of them some of my other questions along the way. So that's fantastic and then on the margin trends obviously good progress there how you know how much further to go is there in terms of some of these initiatives you put in place are there other initiatives in place that that really are.
At the show through in the numbers I think you mentioned a 35% gross margin that's a near term target, but there's a sense of how confident you are in achieving the margin improvement that you've worked on.
Ron Dutt: I think you mentioned the 35% gross margin. That's a near-term target, but it gives a sense of how confident you are in achieving the margin improvement that you need. Yeah, you know, you hit on another hot topic here.
Yeah, you know you know you hit on another hot topic here, we we work with on a on a constant basis.
Ron Dutt: We work with on a constant basis. For the last, well, three or four years since when we had negative margins, it has been in large part because of low, low volumes. But we have established an infrastructure at cadence, a war room mentality on margins of going after them in all the high potential areas, supply chains, sourcing, getting better pricing from higher, higher volumes on the design side, improving our designs for quality, and reducing warranty. And then also from the pandemic, with the price increases, we had to catch up on pricing because we had to honor long-lead purchase orders with some of these customers. So the benefit of the aggravation of that supply chain was that it forced us to really build a stronger, robust infrastructure to reduce costs, make all of our processes more efficient, and also take a hard look at the products we have and make sure the pricing is right.
The lads up well three or four years from when we had negative margin depends in large part because of the low low volumes, but we had to establish the infrastructure at cadence.
A war room mentality on margins of going out after them in all of the high potential area of supply chain sourcing getting better pricing from higher higher volumes on the design side.
Proving our designs.
For quality and reducing our warranty and then also from the pandemic with the price increases we had to catch up on on pricing.
Because we had to honor long lead purchase orders with some of these customers. So the benefit of the aggravation of that supply chain was it forced us to really.
Build a stronger robust infrastructure.
To reduce costs.
The make all of our processes more efficient.
And also be taken a hard look at products, we have and making sure. The pricing is right I mean after all you know we in that.
Ron Dutt: I mean, after all, you know, we and a dozen or so others that are in this sector are really breaking new ground and learning more all the time about that. So I think those areas have initiatives that have momentum behind them. So when we target cash flow breakeven, a big part of that is margin. It's helped by growing volume. But the efforts on those are ongoing. Our goal is not just to break even; our goal is to achieve the margin that a manufacturing company like us should achieve, which we've talked about. And we have a lot of confidence that we have in place, what I loosely call the infrastructure to continue that momentum. Okay, my last question is around kind of the working capital cash flows. Do you have any seasonality there?
And they're so others that are in this sector or a really plowing.
New ground and learning more all the time about that so I think those are those those.
Those areas have initiatives it has momentum weapon. So when we target cash flow breakeven a big part of that is margin.
It's helped by growing volume, but the efforts on those are ongoing our our goal was not just a breakeven our goal is to achieve the margin that a manufacturing company like us should achieved which we've talked about and we have a lot of confidence that we have in place.
What I could loosely called the infrastructure to continue that momentum.
Okay, Great and then my last question is around kind of the working capital cash flows do you have some seasonality there and do you expect the working capital kind of.
Ron Dutt: And do you expect the working capital kind of, I guess, use of cash flow to meet demand? Yeah, well, a lot of the changes right now, since you're right on that edge of, you know, the zero adjusted EBITDA framework, you know, going close to that level, a lot of the changes in capital are just working capital, inventory purchases, and customer payments. So for us, you know, it can bounce around a lot when you have million-dollar payments coming in. Whether they come in this week or the next week, you're going to see that bounce around a little bit. So I think our focus really on the cash side is holding inventory down and utilizing the balance sheet to keep us close to zero. Great, thanks guys, I'll turn it over.
I guess use of cash quota to diminish.
Yeah, well a lot of the changes right now since youre right on that edge of you know zero adjusted EBITDA right.
Close to that level a lot of the changes in capital is just it's working capital inventory purchases and customer payments so for us.
It can bounce around a lot when you're a $1 million payments coming in whether they come in this week or the next week.
You're going to see that bounce around a little bit. So I think our focus really on the cash side is holding inventory down.
And utilizing the balance sheet to keep as close to zero.
Okay, great. Thanks, guys I'll turn it over.
Rob Brown: Yeah, thanks, Rob, www.microsoft.com.au. As a reminder, it is Star 1 to ask a question. Our next question comes from the line of Samir Joshi with HC Wainwright. Thank you. Thanks. Ron, Chuck, congratulations on the positive registry to death. Yeah, thanks to the mayor.
Yes, thanks, Rob.
As a reminder, it is star one to ask a question. Our next question comes from the line of Sameer Joshi with H C. Wainwright. Please proceed with your question.
Thanks, Ron.
Ron.
Resolutions on the positive adjusted EBITDA.
Yeah. Thanks Amir.
Yeah on the.
Samir Joshi: On the heavy-duty models that are expected to be launched later this year, have you received the UL listing for that? And part two of that question is, have you already sort of scoped prospective customers, and is there a pipeline behind that? James Moore, you know, our heavy-duty models that we have planned to roll out all have UL certification achieved. And the material handling sector is one our customers almost always want that UL listing. You know, it's a top-tier customer. They know it's there, and they want it.
Heavy duty models that are expected to be launched later this year or have you received that you were listening for that and a part a little bit question is.
Have you already sort of scoop prosper.
Prospect customers and it's been a pipeline behind that Oh those ones.
You know our our heavy duty models.
That we have planned to rollout all have UL certification are achieved.
And the material handling sectors. One our customers are almost always want that you. All are saying you know, it's a top tier customers.
It's there and they want it and its platform we've been rolling out so we do have ground support equipment that.
Ron Dutt: In this platform we've been rolling out, though, we do have ground support equipment for customers who don't require the UL listing. So we have sent some of those 80-volt packs out to them. But what we are working on right now is getting the top-tier OEMs to approve these new packs in their trucks, and the scenario has shifted over the past few years from them doing the approval themselves, which can be a fairly quick turnaround, to having third parties do that, which is a longer turnaround. And so that's why the rollout of our sales over heavy-duty models has taken a little bit longer than expected.
Customers, who don't require the U L listing. So we have sent some of those 80 volt packs out to them.
But what.
What we're what we are working on right now is getting the.
Top tier Oems to approve these new packs in their trucks.
And the.
Scenario has shifted over the past few years from them doing the approval themselves, which can be a fairly quick turnaround.
Having third parties do that which is a longer turnaround and so that's why the rollout of our sales of our heavy duty that.
Our models have have taken a little bit longer than expected. We have a project in now with with our largest OEM partner and it will.
Ron Dutt: We have a project in now with our largest OEM partner, and it will be forthcoming through approval in the coming several months. So, our sales people are certainly eager for these packs to sell because for some time, we've seen, we've learned, and come across many more applications where the heavy duty, uh... pack is just the right answer. You know, it does matter whether you know we offer the 24, 36, 48, and 80 volts. It does matter whether you're moving potato chips or engine blocks, uh... as well, so we want to cater to On integrated telematics.
The forthcoming through approval and in the in the coming several months.
So our salespeople.
Certainly eager for these packs to be able to sell because for some time, we've seen we've learned and come across much more many more applications, where the heavy duty.
<unk> Pak is is just just the right answer yes it.
It does matter, whether you know we offer the 24 36 48 volt it doesn't matter, whether you're losing potato chips or engine block.
As well, so we want to cater to that entire line.
And so that's kind of ongoing.
The integrated doesn't ethics.
Ron Dutt: I know you said you would launch it later again in this later in the calendar year 2024. Do we know what kind of revenues or cash flows we can expect from that? And do you expect several of your customers to adopt it, or Well, the telematics we've offered telematics for several years, and it's, I would characterize it as the first generation, really born out of our engineers. Having a tool to assess the state of health, troubleshoot our models, and we start, we start selling that to selected customers, you know, about over the past year or two. And what we found is that many of the operations in both material handling and GSE had operated for many, many years without telematics on their batteries and just didn't think, they didn't understand the real benefit of it for asset management, state of health, managing their packs, and what they found as they did, I think we're going to see a continuing, more rapid growth and rollout of this. Now we charge an amount to install the tele So we've got the initial fixed fee and the monthly fee.
I know you said you would launch at a later again. This later in calendar 2024.
Do we know what kind of rabbits.
Oh cash flows we can expect from that.
And do you expect.
Several of your customers to adopt it or just.
Just a few.
Well the telematics, we've offered telematics for several years and it is I would characterize it as the first generation was really born out of our engineers.
Having a tool to assess.
The state of health Troubleshoot, our models and we start we started selling that to selected.
Customers are you know about it.
Over the past year or two and what we've found is that many of the operations and in both material handling and GIC.
It operated for many many years without telematics on their battery and just didn't think that they they didn't understand the real benefit of it for asset management stay to help managing their packs and.
What they found as as they.
Pilot and try these.
We're very very excited so worst route.
I think we're going to see a continuing more rapid growth in rollout.
Of this now we we charge an amount to install the telematics and we also recently beginning to charge a monthly fee to provide services to.
To support those people with customized reports and our other other support services.
We've got the initial fixed fee and the.
And the monthly fee and we see that evolving.
Ron Dutt: And we see that evolving, uh... to the point of being, uh... A huge leverage point to offer new features and capability for our customers to manage their fleet. They have locations all over the country, they have lots of forklifts, lots of battery packs, of course, with that, and managing the life of the batteries. Forklifts do different jobs, telemetry, they can swap the batteries to extend the life.
To the point of being.
A huge leverage point to offer new features and capability.
These are our customers to manage their fleet.
They have locations all over the country.
Have lots of forklifts lot lots of battery packs of course with that and managing the life forklifts do different jobs.
Telemetry they can they can swap the batteries to extend the life.
Ron Dutt: Everyone is into extending asset life because that's dollars and cents. The other thing, and probably even more important they are into, is reducing downtime. So with telemetry, which is channeled through the cloud to the customers and us, we can provide downloads and repair facts, and alert local techs to do repair work where a hands-on approach is needed. All of which can reduce the amount of downtime, which is critical for these high-performance operations, and what we're seeing is that we've introduced these into plants, and it has been very, very well received. Lastly, I'd say, look, this is software, and it's kind of like our iPhones. I don't know about you, but I get downloads all the time, improving this, and new versions, and iPhone 14, 15, and so forth.
Everyone is into extending asset lives because that's that's dollars and sense. The other thing and probably even more important or into is reducing downtime so with telemetry.
Which is channeled through the cloud to the customers and us.
We can provide downloads and repair back alert local tax to do.
Repair work, where a hands on approach is needed.
All of which can reduce the amount of downtime, which is critical for these high performance.
Operations.
And what we're seeing as we introduce these into the.
Plans and.
It has been very very well received.
Lastly, I would say look this is this is software.
It's.
It's kind of like our.
Iphones I don't know about you, but I get download all the time and improving this in new versions and iPhone 14, 15, and so forth and that's the path I see for this telemetry.
Ron Dutt: And that's the path I see for this telemetry. And we're very, very excited about it because it's a source not only of some income, but I think it's even larger than that. It's a source of new business and differentiation for our company. We're a first mover in this. There are others doing it, but it represents a way for us to get new business.
And we're very very excited about it because it's a source not only of some income, but I think it's even even larger than that it's a source of new business and a differentiation for our company. We're a first mover in that there are others doing it but it.
<unk> represents a <unk>.
<unk> for us to get new business.
Ron Dutt: It's also beneficial for pricing. You know, simply put, it's value creation, a value we see that the customer wants, not something that our engineers think is slick and clever. It's what the customers want, so it's very exciting. Yeah, no, certainly it is a high gross margin revenue stream as well. We're looking forward to it. My last question is just, I know you mentioned 150 million capacity, but in terms of on the operating side, with current operating level expense levels, how much revenue can be supported, or should we see some scaling of sales expenses as revenues increase?
It's also a beneficial beneficial for for pricing simply put.
Now you creation value, we see that the customer wants not something that our engineers think as slick and clever it's what the customers want so it's very exciting.
Yeah no.
Certainly it is a high gross margin.
The revenue stream as well.
It was looking forward to that.
My last question is just I know you mentioned the 150 million capacity.
But in terms of on the operating side with cousin operating expense.
Expense levels are how much revenue.
We supported.
Or should we see some scaling.
Also since our expenses as revenues increase.
Well, if I if I understand the question right there.
Samir Joshi: Well, if I understand the question right, our capacity at this site is to be able to increase our production line to ship 150 million dollars of lithium battery packs per year out of here. And the operating infrastructure is set to do that. We're not capital-intensive, as we double the size of that revenue.
Our capacity at this site is to be able to increase our production line to ship out of here of 101 hundred $50 million of lithium battery packs per year.
And the operating infrastructure is set to do that we're not capital intensive as we double the size of that revenue and we expect a modest amount of additional tools and some testing equipment.
Ron Dutt: We expect a modest amount of additional tools and some testing equipment, and a few more people. But we're very confident of that rollout, and particularly because we have two great enablers. The ISO 9000 process has been embedded here for the last four years.
A few more people, but were very confident of that rollout and particularly because we had two great enablers.
9000 processes embedded here for the last four years.
Ron Dutt: And we're very close to wrapping up lean manufacturing with this to make this efficient, from the standpoint of expenses to support it, given the low capital expenditure that's required for that, our expertise in that, we can, we believe we have a good line of sight on that. And filling out a second shift, I mean a real functional second shift as well, will give us a lot of positive understanding of it. Operating leverage here that we can capitalize on because a lot of the bodies we would add to our production base, which is already in the COGS line. You know, forecast going forward, so those bodies are already part of the cost to get sold in terms of production, and we could definitely have a lot of leverage here to grow the business without adding a lot of op-eds. Right, so cash flows and net margins are not only going to be It's going to kick in from here on very well.
And we're we're very close to wrapping up lean manufacturing.
With this to make this efficient from.
From the standpoint of expenses to support it given.
Given the low capital.
<unk> expense that's required for that our expertise in that week.
We can we believe we have good good line of sight on that.
And filling.
Selling out a second shift I mean, a real functional second shift as well.
I'll give us.
A lot of.
Positive understanding of it yet, but we do have a lot of.
Operating leverage here that we can capitalize on because a lot of the bodies, we would add a production based which is already in the Cogs line you know.
Forecast going forward. So those bodies are already part of the cost of goods sold in terms of production.
And we can definitely have a lot of leverage here to grow the business without adding a lot of opex.
That's right so cash flows and net margins.
Well I'm not going to you're going to be improved as gross margins improve but you wouldn't find this operating leverage as well in Florida correct correct.
It's really it's going to kick in from here all of them very well.
Samir Joshi: Thanks for taking the time to speak with us today. Yep. Thanks, Samir.
What I am saying sounds really exciting oh, thanks for taking my questions.
Yep. Thanks Amir.
Craig Irwin: Our next question comes from the line of Craig Irwin with Roth. Please proceed with your question. Good evening, gentlemen.
Our next question comes from the line of Craig Irwin with Roth. Please proceed with your question.
Good evening, gentlemen, and congratulations on the on the nice growth in progress with your margin.
Ron Dutt: Congratulations on the nice growth and progress with your margins. Yeah, thanks Greg. So Ron, can you maybe give us some color on your competitiveness in the airport ground equipment market, and you know, with the environmental commitments of the airlines looking to reduce their carbon footprints and commit to these advanced technologies? Well, you know, it's certainly come back to life from the pandemic, as you know, when, you know, you know, particularly, you know, the top five airlines just really shut down everything bad down the hatches.
Yeah, Thanks, Craig that's correct.
So Ron can you, maybe a comment for us or give us some color on your competitiveness in the airport ground equipment market.
And you know with the environmental commitments. The airlines are looking to reduce their there their carbon footprints and commit to these advanced technologies.
Do you expect that market to potentially be this year.
Well you know its certainly come back to life from the pandemic as you know and you know you know, particularly the top five airlines that are really shut down everything batten down the hatches and so for the past year, we've seen a.
Ron Dutt: And so, for the past year, we've seen really very strong revenue growth. I would say our largest customer Delta Delta Airlines is known as a technology leader in the sector. And our distributor that we have, Averis, is a very long-term seasoned supplier of batteries to the airline. So we have a great leverage, a great enabler there with the airline. So we see them some other airlines we've brought on board the top five, including Air and then also Air Canada, we have others piling on the packs, and we see growing interest. And I think part of it is that it just is interesting.
Really a very strong.
Revenue growth I would say are our largest customer Delta airlines.
Known as a technology leader in the sector and of our distributor that we have aviarist as it is a very.
Long term season.
Supplier of that.
<unk> to the airlines, so we have a great leverage great enablers there.
With the airlines, so we see them some other airlines we brought on top five.
Including Air and then also air Canada, we have others.
Pipe piling the packs and we see the growing interest and I think part of it is it's yes, it's interesting I mean as I was.
Ron Dutt: I mean, as I was referencing before, they're looking at lithium and going, well, with lead acid or diesel, we didn't have telemetry. What are the real leverage points and benefits of this? And I think when you see somebody like Delta, who has brought this on, and with the very positive experiences they have had and what they're getting out of it for cost management, and emissions, I think it's just my opinion.
Referencing before they're looking at lithium and going well with with lead acid or diesel we didn't have telemetry what other real leverage points embedding benefits of this and I think when you see.
Somebody like Delta.
Who has brought this on and others.
With the very positive experiences they have and what they're getting out of it.
For cost management emissions.
I I I think it's just my opinion I think that's going to continue.
Ron Dutt: I think that's gonna continue to grow. Credibility is everything, and the current players are giving it credibility. We claim leadership, particularly in the US, in supplying GSE, and the market, of course, is not nearly as big as the material handling market in North America, but it's very sizable. It represents a market where our core competencies can be exploited for them. And we're seeing that; we're very excited about that and working with them because all their equipment, virtually all their equipment, uses 80 volt battery packs.
To grow credibility is everything in there then the current players are giving credibility.
We claim leadership.
Particularly in the U S on supplying GSV.
And the market of course is not nearly as big as the material handling market in North America.
But it's very sizable it represents.
A market, where our core competencies can be exploited.
For them and we're saying that we're very excited.
About that and working with them because all their equipment virtually all of their equipment uses 80 volt battery packs and what we're seeing is that having.
Ron Dutt: And what we're seeing is that having spent time with that has allowed the basis for continued expansion of products in GSE and also the adoption of 80-volt lithium batteries for the very heavy-duty forklift. So there's that competitive benefit to the GSE market you mentioned. Now, you mentioned competitiveness. There are other competitors out there. But, but.
Having spent time with that.
Uh huh.
<unk> has allowed AR.
So bases for continued expansion of products in GSC and also the adoption of 80 volt lithium batteries for the very heavy duty forklifts. So there's that tangential benefit to the GSE marketing that you did.
Jesse market you mentioned now you mentioned the competitiveness.
There are other competitors out there and.
But but.
Ron Dutt: I think we offer some of the reputation with some of these large customers, and the airlines' top five, as you know, are very large themselves. And what we're finding in responding to them is that we're somebody that can handle a lot of the things that we do. So, thank you for having me. Thank you, operations with many sites and meet their quality and service needs. Amit Dayal, No, that's excellent.
I think.
We offered some of the reputation with some of these large customers and the airlines top five as you know a very large themselves and what were finding it resonating with them is that we're somebody that.
It can handle.
Operations with many sites and meet their quality net quality.
And service needs does that help.
No that's excellent that's really helpful.
Craig Irwin: That's really helpful. My next question is about PACS certifications this year and spending on new product development. Can you maybe update us on any planned certifications this year that we should look at in the financial model? How would you discuss the expenses for these PACS? And R&D, do you have any specific new initiatives that will alter the trajectory from where you've been? I mean, I know you guys have been really tight on the spending side, but you're smart about where you spend your money.
My next question is about pasture to vacations this year and spending on new product development can you maybe update us on any plans certification. This year that we should look at the financial model.
You know.
How would you discuss the expenses.
For these for these packs and you know R&D you know do you have any specific new initiatives that will let you know.
Alter the trajectory from where you're saying I mean, I know you guys have been really tight on the spending side, but are you you're smart about where you where you spend your money. So if you could maybe just give us a little granularity.
Ron Dutt: So if you could maybe just give us a little granularity. Yeah, you know, the UL certification is one where, historically, for the past seven, eight years, really requires money and time to go through that, and we will continue to incur that. The current heavy-duty models have UL, but as we add more models, we're working on a 96-volt model.
Yeah, you know the UL certification is one where.
Historically that is seven eight years.
It really requires a money and time to go through that and we will continue to incur that the current heavy duty models have U L. But as we add more model, where we're working on a 96 volt model.
Ron Dutt: We believe that all those models are going into ground support equipment. At some point, we'll likely require UL certification, and we view that UL certification really as a good thing, even though it's time and money, which used to be an aggravation, but it's also a point of differentiation. It's also a point of building confidence with our customers, and you take the airlines. If they have anything go wrong, any thermal event or something. Yeah, absolutely. They get extremely nervous, and send their safety officers immediately to wherever they're going.
We believe that all of those models going into ground support equipment.
At some point will likely require a UL certification and we use that we view that UL certification.
Really is a good thing, even though it's time and money used to be an aggravation, but it's also a point of differentiation. It's also a point of building confidence with our with our customers and you take the airlines.
If they have anything go wrong, any thermal or event or something.
They get extremely nervous then their safety officers are immediately to wherever they're going so they are particularly excited as our other customers on that UL certification. So we'll continue that the good news.
Ron Dutt: So they are particularly excited, as are other customers, about that UL certification. So we'll continue that. The good news is that given our many years with UL, we are able to do all the testing here. We used to have to send it out to expensive third-party groups that took time and money, and now we can do it now with UL oversight, either virtually or in person, depending on the test that they think is important.
Is that given our many years with you well.
We are able to do all the testing here, we used to have to send it out to expenses third party groups that took time and money and we can do it now with the UL oversight either virtually or in person depending on the tests that they think is important. So that's an important that's been an important leverage point.
Ron Dutt: So that's been an important leverage point in mitigating that expense. The other thing is that, you know, there's some testing there that, honestly, we need to do anyway. I mean, they cover safety and ruggedness tests, which, of course, we will want to do as well. The other piece of certification, Craig, is getting the OEMs, whether they're forklifts, particularly, we're putting a battery in their forklift. If you put a car engine in a car, it's, you know, it's integrated, and it's very important for warranty.
And in mitigating that expense it. The other thing is you know there's there's some testing there that we honestly, we need to do anyway, I mean, theyre covering safety and ruggedness test, which of course, we wouldn't want to do as well.
The other piece of certification Craig is getting the Oems, whether they're forklifts.
It's particularly we're putting a battery and therefore clubs if you'd put a car engine in a car. It's you know it's integrated and it's a very it's very important for warranty when the customer has problems. They just go to probably the forklift dealers. So there they're very.
Ron Dutt: When the customer has problems, they just go to the forklift dealer. So they're very... keenly aware of that, and there's a process, as I mentioned earlier, and that does cost us some money, a PAX. It's not a major expense, but it's an expense, and actually, the real pain point is this time for them to get it done. There's some other testing and self-certification for the transport of lithium batteries.
Keenly aware of that and there's a process as I mentioned earlier and that does cost us some money of packs.
It's not a major expense, but it's an expense and actually the real pain points at this time for them to get it done there's some other testing self certification for transport of.
Lithium batteries, we do all of that here self certification occasionally we might ship something out if for some for some reason.
Ron Dutt: We do all that here, with self-certification. Occasionally, we might ship something out for some reason. I think for the next six to 12 months, we're going to spend a lot more money on telemetry in terms of that's a key product here, so we're going to spend some money on the GUI for the user interface, how that looks. We're going to create an app for phones, and spend some money on that because I think it's a big point that we need to start pressing.
And I think other than that.
Six months to 12 months, we're going to spend a lot more money on telemetry in terms of that's that's a key product area. So we're going to spend some money on the Gui for the users look you know how that looks we're going to create an app for phones spend some money on that because I think it's a big point that we need to start present as well and that's a lot of R&D development there.
Craig Irwin: And that's my R&D development. Understandable. Thank you for that call and congratulations on the progress, guys. Okay, thanks, Greg. Our next question comes from the line of Matthew Galinko with Max. Thank you for having me. Hey, thanks for taking my question. You might have covered this already, but I was hoping you could talk, I guess, a little bit more about the $100 million pipeline you referenced that extends beyond this fiscal year. I mean, any changes to the composition of that pipeline in the last quarter or any changes in confidence level about capturing a portion of that pipeline? You know, it's, um... Our head of sales and his guys are all over that. There's a number The lead time on a lot of these sales orders is quite some time, quite long, particularly for a new company.
Understood.
And congratulations on the progress guys.
Okay. Thanks, Craig.
Our next question comes from the line of Matthew <unk> with Maxim Group. Please proceed with your question.
Hey, Thanks for taking my question.
I you might have covered this already but I was hoping you could talk.
I guess, a little bit more about the $100 million pipeline you referenced that extends beyond.
This fiscal year.
Yeah I guess.
And any changes to the composition of that pipeline in the last quarter or any changes in confidence level level of capturing.
A portion of that pipeline.
You know it's.
Our our head of sales and those guys are all over that Theres a number the lead time on on a lot of these are sales orders, there's quite some time, particularly quite a quite long, particularly for our new company.
Craig Irwin: The other, again, kind of going back to the same old message you may be tired of hearing, but the timing of the new forklifts going out is moving around as well. The forecasting on their side of when the forklifts are going out is the big question mark. Once we know that, we're fine. But the $100 million covers quite a few customers through our network, through the national account sales rep of the large OEM, and covers it out. It comes after several years. We have reason to believe they're high confidence, they're not guaranteed, they're not contractual, but what it does represent is this growing build out of fleets that we have over their schedule and also new customers.
Again, it kind of going back to the same old now.
And that's what you may be tired of hearing, but the timing of the new forklifts going out is moving around as well.
The forecasting on their side of Wynn forklifts are going up as the big is the big question Mark Once we know that we're.
Were fine, but the 100 million covers are quite a few customers.
Through our network through the National account sales rep of the large Oems.
And and covers out.
It comes after several years.
We have reason to believe there they're high confidence they're not guaranteed they're not you know contractual but what it does represent is there's this growing.
Build out our fleets that we have over their schedule and and also the new customers.
Matthew Galinko: This is good. I got it. Terrific. Thank you. There are no further questions in the queue. I'd like to hand the call back to management for closing remarks. Thank you, operator. I'd like to thank each of you on the call for joining our financial results conference call today and look forward to updating you on our ongoing progress and growth. 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. This concludes our update for this past quarter. Thank you. Ladies and gentlemen, this does conclude today's... Amit Dayal, and have a wonderful day. Amit Dayal, James McIlree, Flux Powe Hldg
That's good.
Got it terrific. Thank you.
Okay.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Yeah.
Yeah.
Thank you operator.
Like to thank each of you on the call for joining our financial results.
The conference call today, and look forward to updating you on our ongoing progress and growth.
If we were unable to answer any of your questions, but please reach out to our IR firm.
MZ group, who would be more than happy to assist.
This concludes our update for this past quarter. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation.
May disconnect your lines at this time and have a wonderful day.
Yeah.