Q3 2024 Flux Power Holdings Inc Earnings Call - Q&A
Hum.
[music].
Okay.
Speaker Change: Greetings and welcome to the flux holdings third quarter fiscal year, 'twenty 'twenty four financial results conference call.
Speaker Change: At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: I would now like to hand, the call over to Mary Kay marketing manager Maria.
Maria: Thank you operator your host today, Ron <unk>, Chief Executive Officer, and Kevin Royal Chief Financial Officer will present results of operations for our fiscal third quarter ended March 31 2024.
Speaker Change: A press release detailing these results crossed the wire. This afternoon at 401 P. M. Eastern time and is available in the Investor Relations section of our company's website flux tower Dot com.
Speaker Change: 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 well. These forward looking statements represent our current judgment on what the future holds they are such.
That's terrific.
And uncertainties that could cause actual results to differ materially.
Speaker Change: 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 revisions to these forward looking statements.
Speaker Change: In light of new information 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 power Chief Executive Officer Rhonda.
Rhonda: Thank you Maria and good afternoon, everyone.
Rhonda: I'm pleased to welcome you to todays fiscal third quarter 2024.
Rhonda: Financial results conference call.
Rhonda: To begin I would first like to call out a headline themes.
Rhonda: And then go on to step through supporting context and color.
Rhonda: We had experienced delays of new orders since this past January driven by revised timing of forklift deliveries, which impact timing of our orders and shipments.
Rhonda: We see indications in our market sector, and the impact of higher interest rates and <unk>.
Rhonda: They can certainly during this calendar year.
Speaker Change: Well, we don't give specific guidance.
Speaker Change: We are aware of signs of potential base many of the headwinds later this calendar year.
Speaker Change: We have been undertaking specific initiative to increase revenue and growth.
Speaker Change: Scott.
Speaker Change: Launch new high demand products, and then share our pricing is appropriate for all our models.
Speaker Change: Put simply.
Speaker Change: Our two high priorities are revenue growth and reaching profitability.
Speaker Change: Our reputation in the market.
Speaker Change: The sustaining fortune 100 customers, we have provide evidence of our value proposition along with over 22000.
Speaker Change: <unk> power lithium ion pack operating in North America.
Speaker Change: Yes.
Speaker Change: Turning to fiscal third quarter F. 'twenty 'twenty. Four result, we did experience reduced revenue at $14 5 million versus 15.1 million in the year ago quarter.
Speaker Change: This reduction in revenue comes following our highest quarterly revenue ever of 18.3, and the fiscal second quarter.
Speaker Change: Of 'twenty 'twenty four.
Speaker Change: This year.
Speaker Change: Guarding our gross margin the fiscal third quarter of 2024 decreased slightly to 30%.
Speaker Change: Adjusted EBITDA was a loss of one 4 million compared with a loss of $700000 in the year ago quarter.
Speaker Change: Our backlog has seen a similar impact with reduction to $18 5 million from 25 million a year ago.
Speaker Change: Regarding our customer base, we have no no large customers.
Speaker Change: No.
Speaker Change: Borders the competition.
Speaker Change: Furthermore, we have not seen any pullback from interest in migrating to lithium on installations.
Speaker Change: Despite our current.
Speaker Change: Higher interest rate environment.
Speaker Change: We believe the trend a fleetwide migration to lithium ion solution.
Speaker Change: Hello dancing.
Speaker Change: In micro capital spending trends remained intact.
Speaker Change: Evidenced by the Institute of supply Management Survey released this month showing that manufacturing grew for the first time in one and a half years.
Speaker Change: And this past March.
Speaker Change: Yeah.
Speaker Change: To support revenue growth, we're expanding our sales force and implementing marketing initiatives to expand awareness of both the value proposition to customers.
Speaker Change: And capabilities of flux power the impact their fleet operations.
Speaker Change: Our solutions provide increased performance of forklifts.
Speaker Change: Lifecycle cost savings.
Speaker Change: Asset management and improvements from our leading telemetry.
Speaker Change: Carbon dioxide reductions to the environment.
Speaker Change: We also provide integration of most brands are charging equipment.
Speaker Change: Two our packs to our lithium battery packs and provide it in a great solution for their customers.
Speaker Change: I would like to reiterate that we are highly focused on expanding sales and marketing initiatives to secure new customer relationships.
Speaker Change: And support our customers' continued migration to lithium with their typical very large fleet.
Speaker Change: Additionally, we're working with our distribution partners to acquire new customers.
Speaker Change: Includes sales and marketing resources and materials and getting our salespeople closer to end customers.
Speaker Change: And their needs as we collaborate with our dealers and distributors.
Speaker Change: Also we're taking several actions in support of our targeted sales trajectory. These include new product launches of heavy duty models.
Speaker Change: Addressing customer demand, adding salespeople to support new customer acquisition.
Speaker Change: And increasing our marketing resources and initiatives.
Speaker Change: Importantly, we are launching a new private label program this quarter with another top tier four class OEM.
Speaker Change: As mentioned earlier, we're also taking actions to increase our gross margins.
Speaker Change: Putting cost reductions companywide.
Speaker Change: And select pricing increases, reflecting our total value added products.
Speaker Change: And services for our customers.
Speaker Change: We are pleased to report on our continued progress in expanding technology.
Speaker Change: And partnerships.
Speaker Change: Prototype testing a very fast charging technology is scheduled to take place this summer.
Speaker Change: Separately, we are launching the automation of modular station a battery cells.
Speaker Change: It should improve our working capital management.
Speaker Change: We are working with new potential customers and format.
Speaker Change: Second life use.
Speaker Change: I've heard pack.
Speaker Change: They are reaching the end of their initial application.
Speaker Change: This will include stationary storage opportunities for those packs.
Speaker Change: We have an initiative with one of our fortune 50 long term customers to implement a nationwide installation of telemetry.
Speaker Change: Which we call our Sky D M S.
Speaker Change: And this is all to improve customer asset management.
Speaker Change: Our software and cloud accessibility includes the development.
Speaker Change: And the application of machine learning and AI features.
Speaker Change: For product support.
Speaker Change: Taylor to large fleets.
Speaker Change: Yeah.
Speaker Change: Now I do want to mention two of our recent appointment.
Speaker Change: I'm also pleased to highlight our new CFO, Kevin Royal who joined in early March this year.
Speaker Change: Also our newly elected board director Mark lip Husky.
Speaker Change: They both bring impressive depth of experience successfully building high growth businesses.
Speaker Change: And our key resources to achieve our strategy of scaling our business with top tier customers.
Speaker Change: And the longer term our strategy revolves around building scale the seller pacs products to large fleet building on our momentum in revenue gross margin and operating leverage.
Speaker Change: Currently we're growing organically within our capital resources.
Speaker Change: <unk> begun to explore and develop strategies, including those already mentioned to build partnerships that can leverage revenue growth.
Speaker Change: Technology and profitability.
Speaker Change: And achieve our goal of building scale to.
Speaker Change: To meet the needs of our customers.
Speaker Change: As I mentioned earlier adjusted EBITDA loss of 1.4 million during the fiscal third quarter.
Speaker Change: Resulted primarily from the impact of lower revenue and a one time warranty related expense.
Speaker Change: As presented in the previous slide we are experiencing a pause you would call. It due to the higher interest rate environment, Yes, we do see signs of a gradual return to our growth rate in the second half of calendar 2024.
Speaker Change: Our current customer base continues to reflect large fleets are well known companies seeking the value proposition of higher performance lower lifetime costs.
Speaker Change: In asset management tools and services.
Speaker Change: Our full product line caters to large fleets, who seek ongoing relationship.
Speaker Change: Hartner ship to meet current and future needs not just one time transactional purchases. These.
Speaker Change: These customers represent well known household names, having large fleet.
Speaker Change: Who require a high performing suppliers, who provide best in class products and especially services.
Speaker Change: Well the forklift growth rate has historically been single digit the adoption of lithium ion batteries is growing at a much higher rate.
Speaker Change: And by the compelling value proposition of lithium compared to let asset.
Speaker Change: And propane for that matter.
Speaker Change: And especially in larger multi shift operations.
Speaker Change: The material handling sector is not unaffected by economic downturn, but it is critical to support.
Speaker Change: To transport goods and provide services throughout the business cycle.
Speaker Change: Our strategy includes adjacent verticals such as airport ground support equipment referred to as T. S E N.
Speaker Change: And we continue to explore additional adjacencies to leverage our core competencies and capabilities.
Speaker Change: Gross margin initiatives have dramatically improved over the last two years.
Speaker Change: And we expect continued improvement.
Speaker Change: Joe profit went down slightly during the third quarter to 4.4 million and <unk>.
Speaker Change: Gross margin held steady at 30% compared to the year ago.
Speaker Change: We have strategic supply chain and profitability improvement initiatives.
Speaker Change: Achieving lower costs and higher volume purchasing we're targeting gross margin improvement to continue with a long term goal of exceeding 40%.
Speaker Change: All of these initiatives are part of our plan to accelerate gross margin and reach our target goal.
Speaker Change: As of May six 2024, our open order backlog was $18 5 million.
Speaker Change: Our backlog reflects longer lead time stuff incoming purchase orders for major Oems.
Speaker Change: To align with their schedule of new forklift deliveries and extended delivery times for certain model lines for new GSE equipment.
Speaker Change: Beyond our backlog of open orders, that's very future continues to look bright with growth of current customer adoption and new customer potential acquisition.
Speaker Change: Yeah.
Speaker Change: With that I will now turn it over to Kevin Royal.
Kevin Royal: Our newly appointed Chief Financial Officer to review the financial results, Kevin. Thank you Ryan.
Kevin Royal: Now turning to review our financial results for the quarter ended March 31 2024.
Kevin Royal: Revenue for the first fiscal quarter of 'twenty 'twenty, four decreased 4% to $14 5 million compared to $15 1 million in the fiscal third quarter of 2023.
Kevin Royal: Due to lower capital spending in the market sectors that we serve.
Kevin Royal: <unk> shipments are fewer units during the quarter.
Kevin Royal: Gross profit for the fiscal third quarter of 2024 decreased 7% to four 4 million compared to a gross profit of $4 7 million in the fiscal third quarter of 2023.
Kevin Royal: Margin decreased to 30% in the fiscal third quarter of 'twenty 'twenty four.
Kevin Royal: As compared to 31% in the fiscal third quarter up 2023.
Kevin Royal: Gross profit margin decreased slightly by 100 basis points as a result of higher warranty expense during the current quarter.
Kevin Royal: Partially offset by lower average cost of sales per unit achieved as a result of our product cost improvement initiatives.
Kevin Royal: Selling and administrative expenses increased to $5 3 million in the fiscal third quarter of 'twenty 'twenty four is.
Kevin Royal: As compared to $4 7 million in fiscal third quarter of 2023.
Kevin Royal: Primarily attributable to higher staff related expenses incurred.
Kevin Royal: Including certain severance expenses and increases in stock based compensation.
Kevin Royal: Accrued expenses helped down shipping cost.
Kevin Royal: Personal service fees, partially offset by decreases in sales commissions.
Kevin Royal: You know insurance expenses.
Kevin Royal: Travel expenses and depreciation expense.
Kevin Royal: Research and development expenses increased to $1 3 million in the fiscal third quarter of 2024 compared to $1 2 million in the fiscal third quarter of 2023.
Kevin Royal: Primarily due to higher staff related expenses, including severance expenses stock.
Kevin Royal: Stock based compensation.
Kevin Royal: General research and development costs.
Kevin Royal: Adjusted EBITDA loss was $1 4 million in the fiscal third quarter of 'twenty 'twenty four is compared to a loss of <unk> 7 million in the fiscal third quarter up 2023.
Kevin Royal: Primarily attributable to the impact of lower revenues.
Kevin Royal: Net loss for the fiscal third quarter of 'twenty 'twenty four it was $2 6 million compared to a loss of one 4 million in the fiscal third quarter of 2023.
Kevin Royal: Primarily attributable to decreased gross profit and increases in operating expenses and interest expense to support our planned growth.
Kevin Royal: Cash was $1 3 million on March 31, 2024, as compared to $2 4 million at June 32023, based on timing of utilizing our credit line.
Kevin Royal: Net cash used in operating activities decreased by point 9 million to $4 3 million in the nine months ended March 31, 2024, compared to $5 2 million in the nine months ended March 31 2023.
Kevin Royal: Available working capital includes our line of credit as of May six 2024, and there are $16 million credit facility. Since you bought Gibraltar business capital with the remaining available balance of $3 2 million and 2 million available under the subordinated line of credit with Cleveland capital.
Kevin Royal: I Didnt language Gibraltar subject of eligible accounts receivable and receivables and the inventory borrowing base provides for expansion up to 20 million.
Kevin Royal: Now looking at capital allocation, we have been impacted by slowing revenue this calendar year, which is extending the timeframe to reach cash flow breakeven.
Kevin Royal: We are working with your Baltar, our lender for our working capital line to revise our financial covenant requirements to support our current trajectory.
Kevin Royal: As a result, we needed to include a going concern clause in our 10-Q filing which we anticipate to file on Monday May 13 2024.
Kevin Royal: I'd now like to pass it back to Ron to offer some closing remarks.
Ron: Thank you Kevin.
Ron: To summarize our comments so far the fiscal third quarter of 2024 saw lumpiness from timing of deliveries and custom renewed forklifts orders and interest rate variability.
Ron: We do however remain confident in our recovery and are highly focused on additional selling strategies to support our historical sales trajectory.
Ron: Gross margin initiatives has dropped dramatically improve margins over the last two years with strategic supply chain and profitability improvement initiatives lower costs and higher volume pricing, we continue to experience gross margin improvement.
Ron: We're highly focused on expanding sales and marketing initiatives to secure new customer relationships and support continued migration to lithium or current customers.
Ron: We're very excited to add another tier one OEM private label program to supplement our strong OEM relationships and approvals.
Ron: We're also working with our distribution network to expand customer acquisition.
Ron: Leveraging our position with growth oriented projects and developing partnerships with vendors technology partners.
Ron: And opportunities to further drive growth.
Ron: We were working to expand product lines for multiple customer segments and.
Ron: In adjacent markets with new products and filling gaps in our energy storage offerings.
Ron: Recently re entered we introduced our new second generation lithium ion battery pack for a class two narrow aisle forklifts and class one four wheel counterbalanced for class.
Ron: And we'll be adding heavy duty models to most of our product lines in coming months.
Ron: Our telemetry, which includes asset management features is in a pilot stage with a fortune 50 company for nation for implementation nationwide.
Ron: Finally.
Ron: Be assured.
Ron: Priorities are revenue growth and reaching profitability.
Ron: Fortunately underlying interest for migration to lithium ion solutions has never been greater.
Ron: I look forward to providing our shareholders with further updates in the near term.
Ron: As we strengthen our leadership position in lithium ion technology solutions.
Ron: Our growing list of new and diverse large customers.
Speaker Change: I. Thank you all for attending.
Speaker Change: And now I would like to hand, the call over to the operator to begin our question and answer session.
Speaker Change: Operator.
Speaker Change: Thank you.
Operator: We'll now be conducting a question and answer session.
Operator: If you would like to ask a question. Please press star and then one on your telephone keypad.
Operator: <unk> wanted to get your line is in the question queue.
Operator: You May press Star and then Qi, if he would like to remove your question from the queue.
Ron: For participants using speaker equipment, it may be necessary to pick up your hands.
Ron: Before passing the sakes.
Ron: The first question, we have is from Craig Irwin of Russell.
Craig Irwin: Please go ahead.
Craig Irwin: Good afternoon. This is Andrew on for Craig and Thank you for taking my questions. So the first question I have here on the AR announced private label. The second one with the OEM I'm just wondering if you could just kind of describe a maybe.
Andrew: Maybe the scale of the partnership on any any details on that rollout. There are just more color would be would be much appreciated.
Speaker Change: Sure Yeah, you know the private do we have another OEM private label than we've had for four or five years. This has gotta be equal to or bigger than that.
Speaker Change: So it really provides very consistent almost monthly definitely quarterly.
Speaker Change: Orders and they.
Speaker Change: They are both top five Oems globally.
Speaker Change: And we found that our.
Speaker Change: Very helpful. Because these are class three walkie pallet, Jack's which is the <unk> program.
Speaker Change: Are found almost in every installation around the country and the and the OEM dealerships that feed that interest and really provide a very helpful efficient distribution strategy for us. So we we we already are getting park, we work closely with the Oems and <unk>.
Speaker Change: Jacking their forecasts for this there.
Ron: They're both a similar magnitude in size at this point and are very excited about launching this that we've just started that it involves a.
Ron: Three or four variations of that of that product.
Ron: Mine are very excited about it.
Speaker Change: Great. Thanks for the color and it's great to hear second one here I'm kind of touched on a different different initiatives to stimulate revenue between the prepared remarks.
Ron: And in the press release, I'm imagining direct to consumer initiatives, Jack and working with your marketing team and even I think Ron you mentioned a potential partnerships I earlier on the call can you just kind of talk through why what youre looking at there and the different ways, you can not kind of boosting out here.
Jack: Yes, I think it's pretty exciting we've found you know while we have a good core customers on shown on our slide on our website in the presentation of all of the household customer names I think we see it as time to aggressively expand our.
Jack: Sales and marketing reach by adding more salespeople and we're in that process right. Now we brought on and then one another salesperson bring on another one I fully expect to at least double possibly triple that over over the coming year, we found that.
Ron: There's a a very strong interest to get more exposure of who we are what we do references.
Ron: Of having flux as a supplier to.
Ron: Help them understand what configuration of lithium is best for them to work with them. It's a long term partnership.
Ron: So our salespeople are just not out there quoting deals try and trying to get the lowest bid get this deal and move on to something else.
Ron: It's building that reputation and those references that show how we can provide a complete package.
Ron: For them understanding their needs and striking their people and all of their installations around the country, they're tax provide that.
Ron: To support network confidence that we can deliver our packs on time to them.
Ron: And also that long term relationships that we will continue to have the technology and product features in the future as the sector evolves you have confidence that where we're a player that can do it so our salespeople are marketing.
Ron: She is.
Ron: We're looking now to really get aggressive with those.
Ron: Great opportunity for that to attract that interest you know, particularly now that we have a reputation in the marketplace are very strong. We just had a annual trade show in Atlanta in March and we certainly got a reassurance of that which is very helpful.
Ron: Because you know when your investors are investing in a deal nobody wants to be the first one at you.
Ron: And the same way with trying a new product. So I think we have we have a we felt a lot of leverage over a lot of hard work over the past 10 years developing this we'd been validated in the marketplace and now is the time to certainly expand our exposure.
Speaker Change: Great well, thank you for answering my questions and I'll hop back into queue.
Speaker Change: Yeah. Thanks, Andrew.
Speaker Change: Yeah.
Speaker Change: The next question, we have is from Rob Brown of Lake Street Capital markets. Please go ahead.
Robert Duncan Brown: Hi, good afternoon.
Robert Duncan Brown: Hi, Rob how are you doing.
Robert Duncan Brown: Great. Thank you I'm not on the sort of the order activity in that.
Robert Duncan Brown: The market demand.
Robert Duncan Brown: It's slowed down a little bit how how's the visibility there do you do you get a sense of things.
Robert Duncan Brown: Things starting to pick up some kind of customer conversations or whereas.
Speaker Change: Or is there sort of a time cycle or seasonality to the orders that you said you feel comfortable that they can get some growth in the back half.
Speaker Change: You know in.
Speaker Change: In the past in past years, we've had some seasonality for the summer, particularly for.
Ron: The food and beverage distribution companies that don't like to install new equipment in the summer. So there has been some of that that experience, but I think what we're seeing is pretty broad broad base.
Ron:
Ron: Reaction by the end customers of the interest rate.
Ron: Activity and it's what we suspect we we got a lot at input across the sector at the trade show along with what our salespeople get in and we see as well so I think where we you know the December.
Ron: <unk> past December quarter, we had our highest revenue month, what was the underlying current was there was if you look at gross output starting starting to have.
Ron: Be impacted back in the fall so there's a little time lag effect of that to win we and really our competitors in the sector start, saying gosh I'd add as it is.
Ron:
Ron: Follow through and it affects us so we see that continuing we work with our largest customers on long term forecast and they're all they're all there they're just pushing delaying some of these out so the the hard numbers or the backlog that you get because those are orders definite timing.
Ron: Then we work with a forecast of our end customers and also our OEM who are.
Ron: Seeing that new forklifts with our batteries.
Ron: We see and hear a lot of of.
Ron: Uh huh.
Ron: Talk about the impacts across the whole sector. So we have indications in I'd say indications do we don't give guidance but.
Ron: Uh huh.
Ron: Things starting to pick up.
Ron: And having less collection.
Ron: On putting new equipment into place up in the latter half of the year, particularly more towards the fourth quarter their lead times on forklifts their lead times on batteries. So that has to be factored into the understanding of timing, but I I would say.
Ron: We see it.
Ron: Coming out of that in the back half of this year.
Ron: Yeah.
Speaker Change: Okay, great. Thanks for the color there and then on the new product launches you might as you get into sort of how where are you at in that.
Speaker Change: Some models that were launched and some are coming.
Speaker Change: The new product kind of refresh.
Ron: Smiles.
Ron: Yeah.
Ron: Sure.
Ron: We have.
Ron: <unk> been working on well over the past year actually longer than that having a series of what I would call heavy duty models for all our lines you know our customers with their forklifts, they need different power needs, depending on whether they're lifting and moving potato chips or engine blocks yeah Hello.
Ron: To it.
Ron: And so we're introducing the heavier duty power capable across.
Ron: Oh really almost all of our lines and getting that through all of those through you. All this thing and then they have to be approved by the engineers and all of our Oems that are putting this on the forklifts and so that process has just taken taken.
Ron: Longer actually longer than we anticipated but.
Ron: That that has been happening and getting approved and we are gonna be rolling those out and in the coming months.
Ron: And in line with the concept of heavy duty. We've also seen in among end customers that were using large forklifts or very large forklifts Bose indoor outdoor had in the past <unk> been using propane or diesel because it.
Ron: Was outdoors.
Ron: And those configurations handled those jobs better at lithium has now coming in to the a very viable choice where were seeing the higher need for a higher voltage products such as our 80 volt. Yeah, we do 80 volts for the airline sector, but we.
Ron: Not that the demand hasnt been there in the material handling side. However, it is now emerging we are developing those 80 volt applications. So we see the future very bright and continuing to supply to those higher voltage.
Ron: Larger trucks mm margins are higher in that area also requires more capability on the supplier side.
Ron: To meet those requirements.
Ron: Yeah.
Ron: Okay.
Ron: Yeah.
Speaker Change: Thanks, Ron I'll tell you there Rob.
Speaker Change: Okay. Thanks, Rob.
Speaker Change: The next question, we have is from Eric Stine of Craig Hallum. Please go ahead.
Eric Stine: Hi, Ron Hi, Kevin I've been jumping around on calls so I hope I don't double up on questions or topics.
Eric Stine: But maybe we can just go back to the interest rate dynamic and I can appreciate the impact on.
Eric Stine: On the order book or the order Lumpiness, but can you just talk about I mean, do you get a sense that it's more interest rate uncertainty or is it level of interest rates because I guess those two those two points have a very different conclusion as to when things might start to lift.
Speaker Change: Yeah, No. That's it you know too that's a great question Eric.
Speaker Change: Having come off really a very long area era is we know a very very low interest rates, you had 4567, 8% and.
Speaker Change: Is it a maintenance a lot of people creates a lot of uncertainty.
Speaker Change: Nash the forecast at the national level.
Eric Stine: I really haven't been all that accurate recently, which I think is cause day. It's just my opinion, a degree of uncertainty well, what's really going to happen with interest rates are.
Eric Stine: And you know.
Eric Stine: As a footnote I think it you know.
Eric Stine: And some in some way a fallout from the pandemic and they're disrupting of a lot of the economic forces.
Eric Stine: At work, but.
Eric Stine: So if you look historically interest rates are extremely high, but I, but I do think that.
Eric Stine: Apparently there's a very wide perception of of input that we get to people a lot of customers are waiting for interest rates to mitigate a little bit.
Eric Stine: Before they execute these orders on forklifts and.
Eric Stine: And batteries thinking that calling some pork as interest rates there are going to decline.
Eric Stine:
Speaker Change: So you're not getting it right yeah.
Speaker Change: Yeah, sorry go ahead.
Speaker Change: Yeah, No I'm, just saying, it's one that's a little bit requires a little bit of crystal ball to interpretation exactly what's happening happening but.
Speaker Change:
Speaker Change: You have to remember that the equipment, we're talking about particularly the Ford class for the workplace in the batteries.
Speaker Change: But the forklifts don't suddenly die and has to be replaced and that gets the asset managers in these warehouses and factories.
Speaker Change: Some wiggle room on the timing of this stuff so there's.
Speaker Change: There's not a big high risk and that now having said that.
Speaker Change: These four clubs don't last forever. The battery sure go into batteries have a limited life and so I think I don't see this as a long as long term a very long term nor do nor do we get that from the input of our large customers.
Speaker Change: Okay.
Speaker Change: Alright, that's helpful. And then maybe just on the additions to the sales organizations and I think you've said doubling or potentially tripling that I mean any way to kind of quantify maybe before doing this what percentage of the market or the opportunities you might have.
Speaker Change: Got to look at and what you expect that to be once you're you know, whether you've doubled or tripled that that organization and the capabilities.
Speaker Change: Yeah, No we've had a three.
Speaker Change: Salespeople in the field.
Speaker Change: Having the three large geographies of the country and are focused on them.
Speaker Change: Or are the very large fortune 100, 500 companies are located.
Speaker Change: And going after you know what I would call the low hanging fruit.
Speaker Change: What what I have in mind is we need to at least double that here as fast as we can digest and train the people we are.
Speaker Change: I don't believe this is any place for somebody new to the industry to cut their teeth, we need to have people with relationships understanding in this sector. We just hired a really good hire that was recommended by one of our partners and the industry and so I feel very confident and also on top of it and that approach. So my.
Speaker Change: My VP of sales is also in process with two other potential ones. So we get that added coverage and along with our staffing our marketing back office and sales support.
Speaker Change: With that.
Speaker Change: I think.
Speaker Change: Our our strategy is certainly to be able to get a much wider exposure, whether its double or not you know those things are hard to determine and also the timeline that on that is harder I'd say also with those new product introductions, we have.
Speaker Change: Those also provide a lot more ammunition for some of these fleets the fleet.
Speaker Change: Like do not like going to one fork lift so part supplier for one battery and then another one for another battery so that there's a.
Speaker Change: A fair amount of one stop shopping, particularly when it comes to lithium because you have to go in and and now the application set up and so forth is.
Speaker Change: Hum.
Speaker Change: It becomes a practical point.
Speaker Change: So.
Speaker Change: I think.
Speaker Change: I felt pretty confident we are going to really expand I think to your question well how much it's a little difficult to say except.
Speaker Change: Through my own network I've got a lot of feedback look there's a real opportunity to get some more people out there and and execute marketing campaigns.
Speaker Change: Got it thanks a lot.
Speaker Change: Thanks, Eric.
Speaker Change: The next question, we have is from Matthew Kalinka of Maxim Group. Please go ahead.
Matthew Evan Galinko: Hey, Thanks for taking my questions.
Matthew Evan Galinko: I guess maybe.
Matthew Evan Galinko: Maybe just following up on something you just mentioned and market preference for one stop shopping.
Matthew Evan Galinko: Do you have a sense of opportunities that maybe you werent competitive in the past with the products weren't there and you think you are able to fill going forward or is the market just not developed enough that you haven't missed out on any opportunities, but do you believe that there's kind of a greenfield from here.
Matthew Evan Galinko: You know you know Matt I.
Speaker Change: The first part of that didn't come through very very clear.
Speaker Change: What opportunity potential opportunity you're talking about.
Matthew Evan Galinko: I you know I'm, just kind of stitching together a couple of themes.
Matthew Evan Galinko: But I think you talked about on the call one one being that.
Matthew Evan Galinko: Keith you mentioned filling some voids potentially in the product line and then also and market preference for one stop shopping and that that was really the impetus for the question.
Matthew Evan Galinko: Where I'm just curious if there have been competitive situations, where no you've lost out but do you think he go back after or whether you just see the market developing to the point, where it's time to put those resources into play.
Matthew Evan Galinko: No.
Keith: Your sense is spot on we have.
Matthew Evan Galinko: Some deals that were kind of agonising to Miss because there was.
Matthew Evan Galinko: Certain variation of product we weren't offering you know if you. If you wanted to go somebody counted I'll close up and there's like 440 different variations now some of them are small variations on the models, but the point is there are some.
Matthew Evan Galinko: But what we believe to be a little lower volume gas that are in fact, there's one where we're.
Matthew Evan Galinko: Coming up with and selling that now, but weakness some orders because a customer wanted to go with someone they need it like three different types of forklifts and they didn't want to wanted to go to one supplier to do all three well one of them.
Matthew Evan Galinko: Hum.
Matthew Evan Galinko: The order picture that we hadn't developed yet and so we so we didn't get the business. So there are some examples of that and.
Matthew Evan Galinko:
Matthew Evan Galinko: I really understand that and I think all of our our folks do so we think we can get a.
Matthew Evan Galinko: Acquire more business as.
Matthew Evan Galinko: As we continue to fill out and fill out our lineup.
Speaker Change: Got it thank you and I guess, just a follow up to the.
Speaker Change: Sales and.
Speaker Change: In the not too distant future I mean, I was just given where macro is and I guess what are your expectations for <unk>.
Speaker Change: So how quickly those new sales additions start contributing.
Speaker Change: Two top line is it something that you know contingent on macro and when when purchasing starts again more see that.
Matthew Evan Galinko: Come through meaningfully or is.
Matthew Evan Galinko: Is it.
Matthew Evan Galinko: Do you think they could find spots to contribute in the relatively short term even in the context of the current spending environment.
Speaker Change: Yeah sure no. There there is a rule of thumb in AR and the sales circuit when you hire a new sale, but it takes about a year and a half to get fully up to speed well I think that's been the case when they're noticed sector and a new to a lot of things I'm not recruiting from from that group of people are.
Speaker Change: You know the person you just hired a hasnt network has contacts understands the industry and feeding off paying off that network and know how.
Speaker Change: We've sat down and discussed how much he could bring in and this and this coming 12 months and I thought it was a little aggressive, but oh I like that and I think they can they can start bringing in business.
Speaker Change: The only within and and <unk> and you know three to six months period and really start to.
Matthew Evan Galinko: Increase that because they're not starting from ground zero.
Matthew Evan Galinko: And also the other big factor here.
Matthew Evan Galinko: Yeah.
Matthew Evan Galinko:
Matthew Evan Galinko: Four of five six years ago, we were having problems hiring salespeople, who could really sell anything you know they were more order takers and I think to the extent that when you hire salespeople in this sector, where you're dealing with a top tier companies you really require that.
Matthew Evan Galinko: Certain skill level capability level, along with that network I've mentioned as well so you get that firing on all of those cylinders and I think you know this fiscal year 'twenty five I'm definitely cutting on a revenue how much you know, it's a bit of a crystal ball exercise for that but I think what we have.
Matthew Evan Galinko: Learn it's you just don't hire salespeople are the first one that comes in the door Youre very very focused very determine we found we have a lot of interest because we.
Matthew Evan Galinko: We've had a very high growth rate over the past four or five years not not this not these past months, but and salespeople love that and they also love we've got in advanced energy solution product Hot market in hot demand. So.
Matthew Evan Galinko: Exciting interesting time to be expanding sales force.
Speaker Change: Great. Thank you.
Speaker Change: Okay. Thanks Pat.
Speaker Change: The next question, we have is from Craig Irwin Roth Capital Partners. Please go ahead.
Craig Irwin: Hi, Good evening. Thank you for taking my questions. So I guess, what Ron you did a really good job last quarter communicating the air pocket.
Craig Irwin: For for the March quarter, So no I guess financial results here are you know they.
Craig Irwin: They are what they are right, but one thing that impressed me was the gross margins right. The fact that you still had very strong gross margins.
Craig Irwin: And that's one of the areas, where you've kind of you know outperformed done a really impeccable job over the last couple of years.
Speaker Change:
Speaker Change: You you talk a little bit about this this target longer term of getting to 40% gross margins can you maybe update us on anything that might have changed there are there any things likely to cut in over the next you know.
Speaker Change: Now a couple of quarters that might give you a little opportunity to capture more margin dollars on the products, you're making and you know is it a business mix issue or you know manufacturing efficiency any color would be helpful.
Speaker Change: Yeah sure no.
Speaker Change: We are.
Speaker Change: We are the beneficiaries of a lot of hard work on improving our vendors and and that comes with costs along with the volumes that we've had as we've grown in volume, although you havent seen that volume this past quarter, but but underlying a lot of that pricing I'd say one of the most significant if I had to 0.1 thing.
Speaker Change: You've heard a lot about how you may have thought about lithium battery packs are declining in price coming out of China, and we're the beneficiaries of that with a high single digit reduction in the cost of those packs and you know a patch or like a third to over a half of the bom cost of our products. So.
Speaker Change: That's gonna begin begin flowing through soon.
Speaker Change: Close to gradually Thursday.
Speaker Change: Inventory of goods, but we're certainly keen on that that's that that's a nice boost I'd say the other foods along with ongoing cost reductions from an early stage product to a more mature from the designs to the manufacturing elements, where two thirds of the way through.
Speaker Change: <unk> are starting to get elements out there that that effect that caused quality with with warranty as well, though we had a warranty blip.
Speaker Change: A few months ago.
Speaker Change: Which happen, but those things all all.
Speaker Change: Have bearing on that and I'd say the last thing that has bearing on this is that.
Speaker Change: Our pricing and really our competitors pricing or are in part a function of they can a competitive marketplace. It's also a function of the value that customers see so to the extent that that we execute on our quality our delivery our training attacks.
Speaker Change: Our responsiveness of our product service and I'd say building trust with the supplier from all of that that goes on.
Speaker Change: Really against us more pricing leverage I remember four or five years ago I didn't have a lot of pricing.
Speaker Change: A product that pretty high failure rate you just didn't have the leverage because of the uncertainty.
Speaker Change: So the whole risk risk return principal so we see we see something coming from that to fuel to help fuel yeah. It's never just one thing, but helped fuel a march eventually to 40% or beyond.
Speaker Change: Excellent and then a big picture Big picture question for you Ajay.
Speaker Change: Adjacent markets outside of lift trucks right have you have you considered you know other potential opportunities like a military batteries or you know.
Speaker Change: Other industrial batteries medical batteries.
Speaker Change: That would benefit from your existing manufacturing footprint and you know also retained not really chunky margins.
Speaker Change: That your are your engineers and your salespeople would be a good match for.
Speaker Change: Delivering ease into the market I mean are you looking at diversification.
Speaker Change: Oh yeah.
Speaker Change: Very much so you know our our our our strategy has always been to add Adjacencies, where we didn't have to create a whole new infrastructure or get distracted with but now that you mentioned D. O D. We just put in a bid on a D. O D. A proposal, which would you think would be very very <unk>.
Speaker Change: <unk>.
Speaker Change: With a partner I'm keen on getting into that D. O D business, because I think we need it to to help fuel.
Speaker Change: R R.
Speaker Change: Our strategy to build scale.
Speaker Change: So we have a couple of partners that that.
Speaker Change: On on actually two different.
Speaker Change: Proposals on that or fast charging technology that we talk about you know we have a R&D partner back east.
Speaker Change: Is one.
Speaker Change: Approach that we're using and that has connections to the D O D too as well.
Speaker Change: So yes, we're very keen on that you know we have done by the way we did a project with a company called local motors for automated shuttle vehicles, Florida bold.
Speaker Change: Eight passenger fully automated shuttle vehicles, and we made about a dozen of those in there.
Speaker Change: The local motors when under a new company came along so we're working with them. So we are exploring opportunities you know it has to it has to satisfy our business case in the one hand.
Speaker Change: At the same time.
Speaker Change: To build scale, we need to explore we are exploring those so yes, absolutely Greg.
Greg: Fantastic well congratulations for the progress I'll hop back in the queue.
Speaker Change: Okay. Thanks, Craig.
Speaker Change: Okay.
Speaker Change: There are no further questions at this time and I would like to turn the floor back over to Ron for closing comments.
Ron: Thank you operator.
Ron: Like to thank each of you for joining our financial results conference today.
Ron: We look forward to continuing to update you on our ongoing progress and growth.
Speaker Change: We were unable to answer any of your questions. Please.
Ron: Please reach out to our IR firm MZ group, who would be more than happy to assess this.
Ron: This concludes our update for this past quarter. Thank you.
Speaker Change: Ladies and gentlemen that concludes today's conference. Thank you for joining US you may now disconnect your lines.
Ron: Yeah.
Ron: [music].
Ron: Hum.
Ron: Uh huh.
Ron:
Ron: Hum.
Ron: Hum.
Ron: Hum.
Ron: Hum.
Ron: [music].
Ron: Yeah.
Ron: Hum.
Ron: Mhm.
Ron: Uh huh.
Ron: Hum.
Ron: Hum.
Ron: [noise] [noise] [music].
Ron: Oh Oh.
Ron: [music].
Ron: Hum.
Ron: Yeah.
Ron: Okay.
Ron: [noise].