Q1 and Q2 2025 Flux Power Holdings Inc Earnings Call
music music
Speaker Change: Greetings, and welcome to the Flux Power Holdings Fiscal First and Second Quarter 2025 Financial Results Copper's Coal.
Speaker Change: In fact, 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.
Speaker Change: A press release detailing these results crossed the wires. This afternoon at one P. M. Eastern time and is available in the Investor Relations section of our company's website like star Dot Com.
Speaker Change: Your host today Krishna Banca.
Kevin Royal: Chief Executive Officer, Rhonda Senior adviser and former CEO, Kelly Fry, Chief revenue Officer, and myself, Chief Financial Officer, Kevin Royal will present results of operations for the physical.
Kevin Royal: The fiscal first quarter ended September 32024, and fiscal second quarter ended December 31 2024.
Kevin Royal: At this time I will now turn the call over to flex hours newly appointed CEO Christian.
Christian: Thank you Kevin and good afternoon, everyone I'm pleased to welcome you to today's often second fiscal quarter 25 financial event.
Kevin Royal: To begin I'd like to take a moment to introduce myself and share my vision.
Kevin Royal: Earlier this month I was privileged to try and put all of that.
Kevin Royal: To help build on the Great Foundation by Don and the team prior to joining the company I spent 18 years building scaling managing and transforming technology companies and factors such as menu over the energy any transition internet of things and that's it.
Kevin Royal: Management and the telematics. Most recently I was the themes of digital which is part of the fluent energy and NASDAQ listed global market leader in energy storage as part of the diligence process I evaluated the company thought all potential as well as the underlying ingredient cutting talent.
Kevin Royal: Technology.
Kevin Royal: There might be anything again to make my best I.
Kevin Royal: I can confidently say that we have the right technology at the right time with the right people to scale and build flexibility into their markets.
Kevin Royal: I believe in the months and years ahead, I hadn't done that Blackstone and Blackstone is I'm gonna Miss you'll update the marine industry, leading lithium ion energy storage solutions.
Ron: Now I'll turn the call over to Ron.
Ron: To discuss second quarter highlights and then walk through our business update and financial.
Speaker Change: Thank you Krishna and again welcome to flex power.
Ron: I'm pleased to pass the baton to.
Speaker Change: It's such a highly qualified leader, who can grow and scale flux.
Speaker Change: Very profitable business that will deliver on all of the needs of our customers as the leader in advanced energy solutions.
Speaker Change: Turning to the first half of fiscal year 'twenty 25, our first and second quarters were highlighted by sequential growth.
Speaker Change: <unk> revenue and gross margin.
Speaker Change: Paired with the quarter ending June 30th 'twenty 'twenty four.
Speaker Change: And driven by enhanced sales strategies better market conditions and growing demand for our innovative suite at suite suite of products.
In the first quarter revenue grew 9% year over year to $16 1 million.
Speaker Change: Driven by an increase in shipments into the ground support equipment market at higher average selling prices.
Speaker Change: We are excited to see gross profit margins have steadily improved over the last several quarters.
Speaker Change: First quarter gross profit increased 23% to $5 $2 million and gross margin increased to 32% as compared to 29%.
Speaker Change: In the fiscal quarter of 'twenty 'twenty four.
Speaker Change: Driven by an increase in average selling prices, partially offset by increase in warranty costs.
Speaker Change: Adjusted EBITDA loss improved to $600000 in the first quarter as compared to a loss of $1 2 million in the prior year quarter.
Speaker Change: Backlog as of September 30th 'twenty, 'twenty four stood at $21 2 million.
Speaker Change: Moving on second quarter 'twenty twenty-five results were affected by Lumpiness in orders with revenue for the first quarter decreasing 8% year over year to 16.8 million, but up 4% sequentially from the first quarter.
Speaker Change: Order a 2025.
Speaker Change: We expect our momentum to strengthen its indications reflect potential increasing order flow.
Speaker Change: Coming quarters.
Speaker Change: Gross profit for the second quarter increased 2% to $5 5 million and gross margin.
Speaker Change: Kris to 33% in the quarter as compared to 30% in the second quarter of 'twenty 'twenty four.
Speaker Change: Cost reductions and price increases have contributed to this growth.
Speaker Change: Margin growth, along with a focus on strategic supply chain and profitability improvement initiatives.
Speaker Change: Lower Cogs and.
Speaker Change: And higher volume purchasing.
Speaker Change: Adjusted EBITDA loss was 1.0 millions in the fiscal second quarter of 2025 as compared to a gain of $200000 in the fiscal second quarter of 2024.
Speaker Change: The difference being attributed to the aforementioned lumpiness in the quarter.
Speaker Change: Order backlog.
Speaker Change: $17 5 million as of December 31, 'twenty 'twenty four and.
Speaker Change: $19 5 million as of February 28 to 2025.
Speaker Change: Supporting our positive long term outlook.
Speaker Change: The key themes in the law.
Speaker Change: Last two quarters support our belief that we have built a strong foundation and the right strategy in place to support revenue growth to fuel our path to sustained profitability.
Speaker Change: We improved our ability to execute in these areas during the first half of the year.
Speaker Change: We expect this momentum to continue.
Speaker Change: As we further monetize at $19 5 million customer backlog.
Speaker Change: Yeah.
Speaker Change: Key thing key themes to highlight include the following.
Speaker Change: We have executed.
Speaker Change: <unk> initiatives to support growth.
Speaker Change: Which included expanding our product lines or multiple customer segments.
Speaker Change: And adjacent markets.
Speaker Change: And filling gaps in energy storage offerings.
Speaker Change: Coming months, we also plan additional heavy duty models to fill a product line gap.
Speaker Change: We remain especially excited about our telemetry product, which includes asset management teachers that offer leading technology and true value creation.
Speaker Change: Our fleet customers.
Speaker Change: Sky D. M. S elementary product is in the pilot stage.
Speaker Change: Or a fortune 50 companies implementation nationwide.
Speaker Change: And we recently conducted live demonstrations of Sky D. M S.
Speaker Change: Chrome at 2025, one of the largest manufacturing supply.
Speaker Change: Chain events for the year.
Speaker Change: In addition to appointing Krishna as CEO, we also strengthen our sales and engineering teams with several very key appointments, including Kelly Fry as Chief revenue Officer, and Mark Barb Mettler.
Speaker Change: New senior head of engineering.
Speaker Change: Kelly brings over 20 years of experience as a sales and marketing leader.
Speaker Change: Including a variety of roles ranging from startups to fortune 100 companies.
Speaker Change: Kelly spoke us on.
Speaker Change: Elevating our revenue generation.
Speaker Change: Expanding relationship sales, expanding our market research and improving customer retention play.
Speaker Change: Playing a key leadership role in maximizing revenue potential and sustaining long term growth.
Speaker Change: Mark.
Mark: Brings over 10 years' experience in engineering leadership roles, covering telecommunications and test equipment.
Mark: Incorporating firmware software cloud solutions, Mark will be addressing new product innovation cost reductions and telemetry.
Mark: Finally, fortune 500 companies and other large fleets are increasingly looking to electrify with lower cost higher performance lithium energy solutions that also supports sustainability as this trend continues to advance well.
Mark: It is ideally positioned to meet their needs.
Mark: Now turning to our first and second quarter operational and business update.
Mark: Our two highest priorities remain driving revenue growth and achieving profitability.
Mark: We continued to focus on expanding sales and marketing initiatives.
Mark: Capitalized on the fleet wide replacement trend and support continued migration to lithium.
Mark: Despite the strong demand we saw from our customers we experienced delays in orders.
Mark: We're driven by revised timing of forklift deliveries of certain models that impacted the timing of our orders and shipments.
Mark: The new order delays were felt throughout our industry sector. As a result of the higher interest rates and economic uncertainty during the 'twenty 'twenty four calendar year.
Mark: Well, we don't give specific guidance.
Mark: We are seeing signs that these headwinds could abate later this 2025 calendar year.
Mark: We have been laser focused on several initiatives.
Mark: Increased revenue growth reduce costs.
Mark: Such new high demand products.
Mark: Sure our pricing is appropriate for all our models.
Mark: Our strong reputation in the market combined with our ability to service Fortune 100 customers provides evidence of our value proposition.
Mark: Along with recently achieving over 25000 floods powered lithium ion pack operating in North America.
Mark: Looking at our customer base.
Mark: We have no known lost customers.
Mark: And no lost orders to competition.
Mark: Furthermore, we have not seen any pull back from interest in companies migrating to lithium ion solutions.
Mark: To support our targeted sales trajectory.
Mark: We are launching several new products, including heavy duty models.
Mark: Directly address customer demand.
Mark: We are expanding our sales force and implementing marketing initiatives to expand awareness of both the value proposition to customers and capabilities of flux power impact their fleet operations.
Mark: Our solutions provide increased forklift performance product lifecycle return on investment asset management improvements from our leading telemetry.
Mark: And of course carbon dioxide reductions to the environment.
We also integrate most brands of charging equipment with our lithium ion energy packs.
Mark: We remain on target to offer a complete end to end energy storage solution to current and future customers.
Mark: Recently, we announced a strategic partnership with a second top forklift OEM.
Mark: To launch a new private label battery program.
Mark: This collaboration.
Mark: Marks a significant milestone for flex power F series line, which now includes products with the coveted U L.
Mark: Tight E certification.
Mark: Providing added safety and durability capability that many of our competitors do not have.
Mark: Our telemetry.
Mark: Which includes asset management features in the pilot stage for a fortune 50 company implementation name.
Mark: Nationwide as I mentioned earlier.
Mark: Our telemetry includes features for customer asset management, including fleet wide installation.
Mark: And our customer interface energy management solution.
Mark: Set to launch in 2025 is designed to provide deeper insight and greater control over energy use.
Mark: We're also actively exploring and leveraging supply chain innovations and opportunities to further reduce our cost footprint.
Mark: In addition, we are leveraging machine learning and AI features for product support.
Mark: Large fleets.
Mark: And we will be launching the automation of modular sizing.
Mark: Battery cells.
Mark: Did this summer.
Mark: Yeah.
Mark: With that I will turn it over to Kelly.
Kelly Fry: Kelly Fry Chief revenue Officer.
Mark: Joining us this past January.
Speaker Change: Provide his first impressions of flux.
Mark: And the opportunities that lie ahead.
Speaker Change: Ron I would like to share some quick updates on key activities have been focused on that are designed to accelerate revenue growth brand awareness and the overall customer experience all of which are key to driving long term growth for blocks.
Speaker Change: Since I started I've met several key customers Oems and dealer partners, who have helped us achieve a milestone of 25000 battery packs deployed in almost all 50 States, Canada and Mexico.
Speaker Change: I can say definitively that our material handling and ground support customers greatly appreciate our product quality support services and innovative energy Telematic solutions, we have the right foundation in place to build upon.
Speaker Change: For many we are their first experience with lithium or a replacement for underperforming batteries provided by our competition.
Speaker Change: Proofing, how our superior product and service advantage presents significant revenue potential both within our existing customer base as well as prospective customers as lithium adoption accelerates in batteries need replacement, but.
Speaker Change: Nearly 100% customer retention and increased OEM certifications, the future looks promising for flocks.
Speaker Change: Since my arrival, we've also grown the sales team and introduce the solution selling framework our pipeline of opportunities have increased and we secured significant new accounts in various sectors, including the nation's largest medical supplier and the country's largest winery as well as other food and beverage retail and distribution customers.
Speaker Change: Notably we've partnered with a leading distributor and airport ground support equipment to secured two new airline customers. We have hit the ground running and the reception to our offering has been very well received.
Speaker Change: In the coming months my focus will be on closing out Q3, and Q4 with new account revenue growth.
Speaker Change: Greasing, the pipeline and meeting more customers prospects and partners.
Speaker Change: We will invest in more strategic OEM and partner relationships, while continuing to professionalize, our sales process and still our growth and performance mindset and invest in customer experience excellence in marketing.
Excited about this opportunity and look forward to helping the company grow. Thank you very much and with that I'll now turn it over to Kevin Royal Our Chief Financial Officer to review the financial results. Thank you Kelly.
Speaker Change: As Ron mentioned earlier adjusted EBITDA losses of 600000 during the fiscal first quarter and 1 million in the second quarter resulted primarily for sequential growth in revenues more than offset by costs associated with the restatement of our previously issued financials.
Speaker Change: Yes.
Gross margin initiatives, so dramatically improve margins over the last two years and we expect.
Speaker Change: We expect continued improvement.
Speaker Change: Most recently gross margins increased from 27% in Q4.
Speaker Change: You're putting 24% to 32% in Q1 fiscal year 2025 and three.
Speaker Change: 33% in Q2 fiscal year 2025 cars.
Speaker Change: Cost reductions and price increases who contributed to this gross margin expansion.
Speaker Change: Combined with our focus on strategic supply chain and profitability improvement initiatives lower cost and higher volume purchasing.
Speaker Change: All these initiatives are part of our plan to accelerate gross margins further.
Speaker Change: As of February 28, 2025, our open order backlog was $19 5 million our backlog reflects longer lead times of incoming purchase orders for major Oems to align with their schedule, a new sport with deliveries.
Speaker Change: Delivery premiums for certain model wise for you GSE or close to it.
Speaker Change: Beyond our backlog of open orders, we continue to anticipate growth.
Speaker Change: Adoption and new customer potential acquisition.
Speaker Change: Now turning to review our financial results for the fiscal first quarter ended September 32020 for revenue for the fiscal first quarter of 2025.
Speaker Change: Was $16 1 million, an increase of 9% compared to 14 8 million.
Speaker Change: In the fiscal first quarter of 'twenty 'twenty, four primarily driven by an increase in shipments into the ground support equipment market.
Speaker Change: Higher average selling prices compared to the same period in the prior year.
Speaker Change: This was partially offset by a reduction in shipments to the material handling market.
Speaker Change: Revenue in the immediately preceding fiscal Q4, 'twenty 'twenty four was $13 4 million.
Speaker Change: Gross profit for the first fiscal quarter of 2025 increased 23% to $5 2 million compared to the gross profit of $4 2 million in the fiscal first quarter of 'twenty 'twenty four.
<unk> margin increased to 32% in the fiscal first quarter 2025, as compared to three 9% in the fiscal first quarter of 2024.
Speaker Change: Gross profit margin increased by 370 basis points, driven by an increase in average selling prices, partially offset by an increase in warranty costs.
Speaker Change: Adjusted EBITDA loss was 600000.
Speaker Change: First fiscal quarter of 2025.
Speaker Change: Compared to a loss of $1 2 million in the fiscal first quarter of 'twenty 'twenty four.
Speaker Change: Selling and administrative expenses increased to $5 1 million in the fiscal first quarter of 2025 as compared to four 7 million in the fiscal first quarter of 'twenty 'twenty four primarily attributable to stock based compensation and professional services associated with the restatement.
Speaker Change: Previously issued financial statements.
Speaker Change: Research and development expenses were flat.
Speaker Change: 3 million in both fiscal first quarters of 2025 and 2034.
Speaker Change: As we continue to place an emphasis on enhancing our technological advantage and driving innovation through our product lines.
Speaker Change: Net loss for the first fiscal quarter of 2025 was $1 7 million.
Speaker Change: Compared to a loss of $2 2 million in the fiscal first quarter of 2024.
Speaker Change: Primarily attributable to increased gross profit, which was partially offset by increases in operating expenses and interest expense.
Speaker Change: Turning now to our financial results for the second quarter ended December 31, 2020 for revenue for the second fiscal quarter decreased 8% to $16 8 million compared to $18 2 million in the fiscal second quarter totaled 44, driven by lower demand in the material handling or.
Speaker Change: Yes.
Speaker Change: Our average selling prices due to product mix.
Speaker Change: Gross profit for the fiscal second quarter of 2025 increased 2% to $5 5 million compared to a gross profit of $5 4 million in the fiscal second quarter of 'twenty 'twenty four.
Speaker Change: Gross margin increased to 33% in the fiscal second quarter of 2025 as compared to 30% in the fiscal second quarter 2024.
Speaker Change: Gross profit margin increased by 208 basis points as a result of the decrease in average cost partially offset by an increase in warranty costs.
Speaker Change: Adjusted EBITDA loss was $1 million in the fiscal second quarter of 2025.
Speaker Change: Compared to 200000 in this fiscal second quarter of 2024.
Speaker Change: Selling and administrative expenses increased to $6 million in the fiscal second quarter of 2045 as compared to four 6 million in the fiscal second quarter of 2024, primarily attributable to variable incentive compensation.
Speaker Change: Severance and professional fees associated with the multiyear.
Speaker Change: These statements are previously filed financial statements.
Speaker Change: Okay.
Speaker Change: Research and development expenses decreased $1 million in the fiscal second quarter 2025, compared to $1 2 million in the fiscal second quarter of 2024, mainly driven by lower salaries and stock based compensation.
Speaker Change: Our net loss for the fiscal second quarter of 2025 point something million.
Speaker Change: Compared to a loss of 900000 in the fiscal second quarter, a true 24, primarily attributable to an increase in operating expenses.
Speaker Change: Cash was 900000.
Speaker Change: At December 31, 2024, as compared to 61000 at June 30, 'twenty 'twenty, four reflecting changes in working capital management.
Speaker Change: Available working capital as our line of credit as of December 31, 'twenty 'twenty four under our $60 million credit facility from Gibraltar business capital.
Speaker Change: <unk> available balance of $6 3 million subject to borrowing base limitations and satisfaction of certain financial covenants and 1 million available under the subordinated line of credit with Cleveland capital.
Speaker Change: Our credit line with our strategic financing partner Gibraltar subject to eligible accounts receivable and inventory borrowing base provides current expansion up to $20 million.
Speaker Change: We continue to be in good standing with Gibraltar and remain confident in their continued support of Lux and our long term mission.
Speaker Change: For those of you who are new books last year, we announced we had identified approximately 4.4 million of excess and obsolete inventory related non cash warranty related items of approximately 500000, primarily related to product innovation and design of our products during the period.
Speaker Change: Rapid growth over the last several years.
Speaker Change: To properly reflect the obsolete inventory to company restated previously issued financial statements for fiscal year, 2020 three.
Speaker Change: Interim periods of fiscal year 2024.
Speaker Change: All appropriate measures to rectify the inventory accounting issues related to our transition to more advanced theaters yourselves.
Speaker Change: <unk> implementing enhanced procedures and quality checks to mitigate the possibility of reoccurring.
Speaker Change: After filing the 10-K and subsequent 10-Qs we were pleased to be caught up with our filings and do not expect any lingering issues going forward.
Speaker Change: Looking ahead, we expect fiscal third quarter 2025 revenues to be in line with the second quarter revenue results with a stronger trajectory in the fourth quarter has make macro economic conditions improve and additional selling strategies to support our historical.
Speaker Change: Sales trajectory to scale.
Speaker Change: Taken together, we believe our fourth fiscal quarter revenues will increase over the third quarter in a range of 5% to 10%.
Speaker Change: I'd now like to provide some closing remarks.
Speaker Change: The first and second quarters of fiscal 2025 have been challenged with the company as we work through the restatement of our previously issued financial statements even with these challenges the company delivered strong revenue and gross margin growth.
Speaker Change: And by enhanced sales strategies, better market conditions and growing demand for our innovative suite of products we offer.
Speaker Change: Also well with several strong additions to the flex team that will lead us into the next phase of growth.
Speaker Change: Christian Vodka has already provided significant contributions in his short time as CEO.
Speaker Change: <unk> revenue officer, Kelly Frye, it's driving our revenue generation strategy aligning sales marketing and pipeline management to ensure a cohesive and effective growth and Mark Department, where senior head of engineering is addressing new product innovation.
Speaker Change: Cost reductions and telemetry.
Speaker Change: We look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position position lithium players technology solutions with our growing list of new and diverse large customers.
We'd like to thank you all for attending.
Speaker Change: I'll now hand, the call over to the operator to begin our question and answer session operator.
Speaker Change: Thank you and the other conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if does that come over your question from the queue.
Speaker Change: One of them and please hold any poll for questions.
Speaker Change: Our first question today is coming from Rob Brown from Lake Street Capital. Your line is now live.
Rob Brown: Good afternoon, congratulations on all the progress.
Speaker Change: If you could talk a little bit more about sort of the order activity, you're seeing where you're seeing strength and then it was a pretty bullish kind of comment and into the back half of the year here just wanted to get a sense of where those orders are coming from.
Speaker Change: Thanks, Rob for the question, what we're seeing is there's still a lot of demand.
Speaker Change: With lithium many customers are wanting to explore the addition of lithium to there very often lead acid that they are replacing so we're seeing it from both in the ground support equipment market as well as the material handling market Theres a lot of excitement about it there still is some you know.
Speaker Change: Questions folks have so what we're seeing is that they're trying it maybe in one operation before they decide for a nationwide rollout, but everybody is excited by it and then when you combine the lithium with the visibility that telemetry gives them into a much smarter battery and.
Speaker Change: How that data fits into their larger a you know a data infrastructure, we're seeing a lot of that demand and excitement.
Speaker Change: Yeah.
Speaker Change: Okay, Great and then on the on the heavy duty model introduction when when does it hit in and start to generate revenue and what's sort of the opportunity you see from that product.
Speaker Change: Yeah.
Speaker Change: Rob This is Ron we've been working on those heavy duty models for some time.
Speaker Change: And we're just now starting to roll the first ones of those really for each of our major product lines.
Speaker Change: Class II and class III, introducing a heavy duty line for those very aggressive operations that we've seen such as Subaru and others. So we feel it's filling the need and we're going to roll those out across those lines over the coming months of this year.
Speaker Change: Okay, great. Thank you I'll turn it over.
Yeah.
Speaker Change: Thank you. Your next question is coming from Craig Irwin from Roth Capital Partners. Your line is now live.
Hi, good evening and thanks for taking my questions.
Speaker Change: Lots of things, we can call out from the last couple of quarters here pretty.
Speaker Change: Pretty strong progress I guess, the biggest surprise to me was the balance sheet.
Speaker Change: You had I guess about.
Speaker Change: A little over $5 million from.
Speaker Change: Inventory improvement over the last couple of quarters.
Speaker Change: Civils down you know millions in house, you know you got a little bit of an extension on your.
Speaker Change: Your deferred but the debt was down quite materially.
Kevin Royal: It seems like Kevin you've been doing a lot of work on the balance sheet.
Kevin Royal: What kind of room do we have for continued improvement over the next couple of quarters should we expect the positive cash flows and in fact I did noticed positive cash flows. These last two quarters.
Kevin Royal: Is that even feasible as we look into the into the end of the year.
Kevin Royal: So I think you know us.
Kevin Royal: We go into Q3, we wouldn't expect those levels to be positive will be close.
Kevin Royal: But in Q4 are you know we did you.
Kevin Royal: Can you give any indication of what we expect from revenue and at those levels, we should be breakeven to positive cash flow.
Kevin Royal: Excellent excellent. So then.
Speaker Change: You did give us sort of an adjusted EBITDAR discussion, but in your adjusted EBITDA you.
Speaker Change: You did not break out the adjustments for severance and for the expenses related to the restatement that you guys have now completed and brought everything up to date for <unk>.
Speaker Change: I'm guessing, it's probably somewhere between a million and a million or half. The last couple of quarters is that something you might be able to give us a little bit a little bit of color on the impact in the fourth first and second quarters of Ah.
Speaker Change: 'twenty four and 'twenty five.
Speaker Change: Yeah. So for the first half of the year 'twenty 25, that's where we incurred the lion's share of the costs associated with the restatement.
Speaker Change: Those costs were $1 2 million almost spread evenly across the two quarters and then the severance charges were just under half a million dollars are probably a little bit closer to 400000 actually and those were incurred in the second fiscal quarter of 2025.
Okay excellent and then last question if I may the price increases can.
Speaker Change: Can you maybe put some some boundaries around that are we talking you know single digit mid single digit double digit price increases and the timing there where these put in all at once.
Speaker Change: And you know is it something that was put in sort of towards the end of the calendar year.
Speaker Change: And have all of those sort of rolled through or is there is a product in backlog you know the 19 and change you mentioned.
Speaker Change: Some of that maybe at the legacy pricing that.
Speaker Change: So overall through over the next couple of quarters as we are as we deliver on those.
Speaker Change: So the way I would think about our price increases is we wanted to do is to hit the price list at the beginning of the fiscal year and they were really select increases it impacted about half our product line and they were in the in a single.
Speaker Change: Single digits, let's say mid single digits could be a way to think about it.
Speaker Change: And while we have experienced some of those we've realized rather some of those beginning in October so the second fiscal quarter a lot of those price increases will not hit us until the third fiscal quarter, which we're currently in in the fourth fiscal quarter, because we had backlog are.
Speaker Change: We have quotes out with customers that we believe of course monitored.
Speaker Change: Okay, and if I can squeeze another one in your medical equipment customer. So obviously another nice addition to the fleet.
Speaker Change: Medical medical equipment packs have historically been very very high margin in the battery market and it seems like you're probably supplying one of the most technically demanding applications that they have you know.
Speaker Change: Serving in their warehouses can you talk about whether or not this adjacent market is potentially an opportunity with this new customer is this something that's been a part of the conversations as you've as you've helped them bring down costs and operating the warehouses.
Kelly Fry: This is Kelly, yes, thanks for the question.
Speaker Change: Yeah. It certainly is it's it's exciting that we've got a customer that really this is they're very early stage of deployment of lithium so that means that there's a lot more upside potential not only with this customer but the in that industry at large for sure. It's also an industry that is looking forward to.
Speaker Change: <unk> automation ultimately and the nice part of our story with lithium is that for us it doesn't matter if there's a human operator on that lift truck or material handling or if it's a you know automated guided vehicle, it's still need lithium as a matter of fact that you moved towards automation theres, probably more of a propensity to go with lithium because it requires a lot less.
Speaker Change: Automation, so I feel very bullish about the opportunity in that sector for sure and I think you are accurate that sir.
Speaker Change: He is willing to generally pay a little bit or invest a little bit more of a let's put it that way.
Speaker Change: Excellent well congrats on the progress I'll go ahead and hop back in the queue. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question today is coming from Eric Stine from Craig Hallum. Your line is now live.
Speaker Change: Hi, everyone.
Eric Stine: Yeah, maybe quickly so the line was kind of garbled there when you talked about third quarter I didn't hear the fourth quarter commentary about being up 5% to 10%, but I guess first could you just go through the third quarter commentary again, and then I'm curious you know if we think about the price increases taking.
Eric Stine: Effect in the second half and then Opex more normalized post the restatement expenses et cetera is EBITDA positive a possibility in the second half and if not I mean, I would think that that's something that you are targeting in fiscal 'twenty six.
Eric Stine: Yeah. So what we said about Q3 is it where you would expect or we are expecting it to be on par with Q2 Q1 right in the $16 million.
Eric Stine: Yeah range and then you know.
Eric Stine: What I said about Q4.
Eric Stine: That also earlier commented on Q4 and at the levels that we're talking about from a revenue standpoint.
Eric Stine: We would expect to be profitable on an adjusted EBITDA basis, EBITDA less our stock based compensation, which as you know should put us at.
Eric Stine: At breakeven to slightly positive from a cash flow basis as well.
Speaker Change: Okay that is helpful. Thanks for clarifying that and then maybe just bigger picture.
Eric Stine: Get a sense on.
Eric Stine: On this call, but certainly in the past that you kind of feel like you needed to focus more on sales you haven't had a full look at the market opportunities. So maybe a question for Kelly.
Speaker Change: You know maybe when you.
Speaker Change: As you've kind of come in where do you think the company was in terms of a look at that market opportunity and maybe you know stick the materials handling or some of the other main end markets and where do you think that can go and how long do you think that that process can take.
Speaker Change: Sure. Thanks for the question that's a it's a nuanced question and I'll give that a directive of responses I can what I really I have observed in the material handling market. In particular is that a flex was taking a fairly what I would call a passive sales approach meaning.
Speaker Change: Waiting for the demand signal to come from the distributors the resellers and the Oems, which is important those are important partners for us but.
Speaker Change: But we haven't really been doing a lot of our proactive demand generation, we really haven't been underfunding marketing and underfunding sales and that means that we are not pulling as much through the market as the potential is there. So I think that's the key thing a refocusing the team.
Speaker Change: You know, it's it's easy to say solution selling but really this a lithium ion technology its actually a it's quite a.
Speaker Change: And advanced technology, when you consider it to be a smart battery that needs. The smart energy solution really that fits into the overall plant energy solution. So opportunities for things such as peak shaving to help a customer understand when should that be charging my equipment understanding that when you have hundreds of pieces of equipment in the warehouse well that becomes a lot of distributed enter.
Speaker Change: Resources, and you have to decide when and how do I use them when and how do I charged them. So really trying to change the orientation of the sales organization to a solution orientation, and then creating more demand generation in the market because we do have a strong brand you talked to virtually any customer. They know who we are because we are the innovator, but we need.
Speaker Change: To create that demand in the market as opposed to what I would say it'd be fairly passive in that are in the market.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you next question is coming from Matthew Korn go from Maxim Group. Your line is not wise.
Speaker Change: Hey, Thanks for taking my questions.
Speaker Change: Can we just start on the macro outlook I guess, what gives you confidence at this point of the year and you know.
Speaker Change: I guess the fourth corner uptick.
Speaker Change: Yeah, well you know our our sales are fairly long lead time, so we get you know.
Speaker Change: We have we do struggle with visibility gives them ourselves.
Speaker Change: Model selling through distributors dealers, so on and so forth.
Speaker Change: But our confidence is really driven off of you know.
Speaker Change: A strong backlog as we are.
Speaker Change: Sitting here today, where we sit in our third quarter.
Speaker Change: And.
Speaker Change: The working with the sales force and understanding to forecast orders and their probability so.
Speaker Change: It's really just based on a combination of our.
Speaker Change: Backlog and working with our sales force on the opportunities that they expect to ship in our fiscal fourth quarter and Kevin could I add theres one other dimension to the business that's important to understand as we mentioned we've achieved 25000 packs in the field and many of those packs are now getting to that 456 even.
Speaker Change: Seven year level, where there's a replacement cycle are we have a very good track record of keeping our customers as they continue to adopt new lithium within new distribution center in new areas of their business not only are we getting the new growth, but we're getting that replacement cycle starting to kick in so that gives us very good forward.
Speaker Change: Visibility to and demand.
Speaker Change: I've already mentioned telemetry or telematics, a couple of times, having that visibility to the battery how it's being operated how many cycles are available what is its current state of health or degradation stage in its lifecycle allows us to have very good visibility to when it needs to be replaced and that's that's it's kind of a nice business model.
Speaker Change: No.
Speaker Change: Alright, Thank you and if I can follow up.
On that point on the telemetry is staring at me.
Speaker Change: Business model around the software or is it primarily just as you.
Speaker Change: You know what kind of a.
Speaker Change: Our solution package that you're bringing to the table that that kind of induces demand more than I am.
Matthew Korn: Hey, Matthew.
Speaker Change: Not that it's definitely a software revenue generating model here.
Speaker Change: Cause as I can he said it is a intelligent device constantly generating data and this data at.
Speaker Change: Often it goes deep into the operational model on how they run the business that they currently right.
Speaker Change: Not moving it's not going to work for our customers. So this powerful data connected to the ecosystem of charging on one end and you know the whole logistics on the other end we are in a very good position to be able to eventually get software recurring revenue coming out of our mask and.
Speaker Change: And the other products and we'll be announcing later next year, So our baseball.
Speaker Change: I'll, just say about the recurring model opportunity that exists in front of us.
Speaker Change: Got it and if I could just slip a follow up to that one and.
Speaker Change: As you look out longer term do you see software being a drag.
Speaker Change: Yes material part of the.
Speaker Change: The revenue mix or stay at this sort of a nice margin contributor, but it doesn't really rich too high in overall mix.
Speaker Change: Our aspiration to make it makes it really came in here you know looking at him he will decide when to make it material but are definitely.
Speaker Change: Definitely not aspirations out there.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Okay.
Speaker Change: Thank you operator.
Speaker Change: I'm fishing here, a very you know second week here very early but I would like to thank each of you on this call are joining our financial results conference today, and I really look forward to continuing to update you all on the ongoing problem for the future is bright and I wanted to thank you all again.
Speaker Change: Yes.
Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.