Q4 2025 Flux Power Holdings Inc Earnings Call
Speaker #3: Good afternoon. And
Joel Achramowicz: Good afternoon and welcome to the Flux Power Holdings Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Joel Achramowicz, Managing Director. Please go ahead.
Speaker #1: Welcome to the Flux Power Q4 and fiscal year 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on your telephone keypad.
Speaker #1: To withdraw your question, please press star followed by two. Please note, this event is being recorded. I would now like to turn the conference over to Joel Ackerman, Managing Director.
Speaker #1: Please go ahead.
Speaker #4: Good afternoon and welcome to Flux Power's 4th quarter and full year fiscal 2025 earnings conference call. I'm Joel Ackerman, Managing Director of Shelton Group.
Joel Achramowicz: Good afternoon and welcome to Flux Power Holdings' Fourth Quarter and Full Year Fiscal 2025 Earnings Conference Call. I'm Joel Achramowicz, Managing Director of Shelton Group, Flux Power Holdings' investor relations firm. Joining me today are Krishna Vanka, Flux Power Holdings' CEO, Kevin Royal, Chief Financial Officer, and Kelly Frey, Chief Revenue Officer. Before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC.
Speaker #4: Flux Power's investor relations firm. And joining me today are Krishna Vanka, Flux Power's CEO; Kevin Royal, Chief Financial Officer; and Kelly Frey, Chief Revenue Officer.
Speaker #4: Before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters.
Speaker #4: These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.
Joel Achramowicz: Specifically, our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-K, which can be found in the Investor Relations section of Flux Power Holdings' website at www.fluxpower.com. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on the company's website. It's my great pleasure to turn the call over to Flux Power Holdings' CEO, Krishna Vanka. Krishna, please go ahead.
Speaker #4: Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-K, which can be found on the Investor Relations section of Flux Power's website at www.fluxpower.com.
Speaker #4: For those of you listening to the entire call at this time, a recording will be available via webcast on the company's website.
Speaker #4: And now, it's my great pleasure to turn the call over to Flux Power's CEO, Krishna Vanka. Krishna, please go ahead.
Speaker #5: Thank you and welcome to everyone as we review our Q4 and fiscal year 2025 results and business updates. I have been at Flux Power now for six months as CEO and have had the opportunity to meet more extensively with our customers and partners.
Krishna Vanka: Thank you and welcome to everyone as we review our Fourth Quarter and Fiscal Year 2025 results and business updates. I have been at Flux Power Holdings now for six months as CEO and have had the opportunity to meet more extensively with our customers and partners. This gave me a better understanding of their business, the product requirements, and how Flux Power Holdings can offer added value through our battery solution. These discussions have made me very excited about the company's future and the opportunities that lie ahead of us. Flux Power Holdings is at the forefront of shaping the future for intelligent energy solutions, where every lithium-ion battery functions as part of a connected self-optimizing network. This vision is part of a mandate shared across the members of our newly established management team, and we are all fully committed to achieving our long-term objectives, both operationally and financially.
Speaker #5: This has given me a better understanding of their business, the product requirements, and how Flux Power can offer added value through our battery solutions. These discussions have made me very excited about the company's future and the opportunities that lie ahead of us.
Speaker #5: Flux Power is at the forefront of shaping the future for intelligent energy solutions, where every lithium-ion battery functions as part of a connected, self-optimizing network.
Speaker #5: This vision is part of a mandate shared across the members of our newly established management team, and we are all fully committed to achieving our long-term objectives, both operationally and financially.
Speaker #5: In our last earnings call, I shared with you the five strategic initiatives that will be guiding our execution and performance in the upcoming quarters and years.
Krishna Vanka: In our last earnings call, I shared with you the five strategic initiatives that will be guiding our execution and performance in the upcoming quarters and years. These initiatives include, number one, achieving profitable growth; number two, executing on operational efficiencies; number three, implementing a solution selling approach; number four, building the right products for customer needs; and number five, integrating value-added software across our battery portfolio to generate recurring revenue streams. As highlighted in our press release issued earlier today, we finished 2025 with a solid year-over-year growth on both a quarterly and annualized basis. We also significantly improved our gross profit and margin performance, contributing to meaningful improvement in our bottom-line results. Acknowledging that we still have some work to do to achieve our goals of profitability and cash flow break-even, we are demonstrating initial progress.
Speaker #5: These initiatives include: number one, achieving profitable growth; number two, executing on operational efficiencies; number three, implementing a solution-selling approach; and number four, building the right products for customer needs.
Speaker #5: And number five, integrating value-added software across our battery portfolio to generate recurring revenue streams. As highlighted in our press release, issued earlier today, we finished Q4 2025 with a solid year-over-year growth on both a quarterly and annualized basis.
Speaker #5: We also significantly improved our gross profit and margin performance, contributing to meaningful improvement in our bottom line results. Acknowledging that we still have some work to do to achieve our goals of profitability and cash flow break-even, we are demonstrating initial progress.
Speaker #5: In support of these goals, we have implemented various operational efficiencies to further reduce costs. First, I spent time in China, meeting with existing partners in order to strengthen the vendor relationships.
Krishna Vanka: In support of these goals, we have implemented various operational efficiencies to further reduce costs. First, I spent time in China meeting with existing partners in order to strengthen the vendor relationships. We discussed the macroeconomic situation and determined ways to work together to help offset the impact of the current tariffs. More broadly, we also engaged with our domestic vendors to mitigate the international tariff exposure by renegotiating contract terms where possible. We are also evaluating additional product engineering work to reduce costs by simplifying our design. This work is ongoing, and we'll have more details to share with you on future calls. Finally, in June, we took action to reduce our headcount by about 15% across all segments of the company, except for Sales and Marketing. This will help to reduce our ongoing operating expenses and ultimately our cash flow.
Speaker #5: We discussed the macroeconomic situation and determined ways to work together to help offset the impact of the current tariffs. More broadly, we also engaged with our domestic vendors to mitigate the international tariff exposure by renegotiating contract terms where possible.
Speaker #5: We are also evaluating additional product engineering work to reduce costs by simplifying our designs. This work is ongoing, and we'll have more details to share with you on future calls.
Speaker #5: Finally, in June, we took action to reduce our headcount by about 15% across all segments of the company, except for Sales and Marketing. This will help to reduce our ongoing operating expenses and ultimately our cash flow.
Speaker #5: As part of our initiative to grow our software offerings and provide high-value solutions to customers, we have made good progress on our Sky EMS AI platform during this quarter.
Krishna Vanka: As part of our initiative to grow our software offerings and provide high-value solutions to customers, we have made good progress on our SkyEMS AI platform during this quarter. I am pleased to inform you that we have provided beta testing access of our SkyEMS 2.0 to one of our airline customers, and we will be rolling it out soon to additional customers in the coming months. By embedding our solution into a connected ecosystem of vehicles, chargers, and software, Flux Power Holdings will eventually create an integrated service and solution that will generate recurring revenue and predictable replacement cycles. We believe these initiatives will position Flux Power Holdings to accelerate product adoption among our customers, thus expanding our market share and driving our growth of sustained profitable growth. Now, I would like to review some of our recent customer successes.
Speaker #5: I am pleased to inform you that we have provided beta testing access of our Sky EMS version 2.0 to one of our airline customers, and we will be rolling it out soon to additional customers in the coming months.
Speaker #5: By embedding our solution into a connected ecosystem of vehicles, chargers, and software, Flux will eventually create integrated services and solutions that will generate recurring revenue and predictable replacement cycles.
Speaker #5: We believe these initiatives will position Flux to accelerate product adoption among our customers, thus expanding our market share and driving our growth of sustained profitable growth.
Speaker #5: Now, I would like to review some of our recent customer successes and audits. In early July, we received a significant purchase order through our GSC distributors for a major North American airline for 120 units of our newly announced and redesigned G8420 lithium-ion battery packs.
Krishna Vanka: In early July, we received a significant purchase order through our GSC distributor for a major North American airline for 120 units of our newly announced and redesigned G80 420 lithium-ion battery pack. This total of $2 million plus orders will be delivered throughout the calendar year 2025, reinforcing this airline's commitment to operational efficiency, sustainability, and next-generation fleet readiness. In mid-August, we received an additional $1.2 million plus purchase order through our GSC distributor from another airline for a G80 lithium-ion energy solution along with the SkyEMS software platform. This is a great example of the success of our new solution selling strategy. We offer the customer a powerful combination of both hardware and software designed specifically to transform their fleet of ground service equipment.
Speaker #5: This $2 million plus order will be delivered throughout the calendar year 2025, reinforcing this airline's commitment to operational efficiency, sustainability, and next-generation fleet readiness.
Speaker #5: In mid-August, we received an additional $1.2 million purchase order through our GSC distributors from another airline for a G80 lithium-ion energy solution, along with the Sky EMS software platform.
Speaker #5: This is a great example of the success of our new solution-selling strategy. We offered the customer a powerful combination of both hardware and software designed specifically to transform their fleet of ground service equipment.
Speaker #5: In addition to our progress on new business development, it is also important to know that we have now shipped more than 28,000 battery packs.
Krishna Vanka: In addition to our progress on the new business development, it is also important to know that we have now shipped more than 28,000 battery packs. This represents a tremendous opportunity to add intelligence to the customer's existing equipment and IT infrastructure with our SkyEMS software and telemetry system. Now, I would like to hand over the call to Kelly Frey, our Chief Revenue Officer, to discuss our partnerships and solution selling initiatives, which are transforming the way we sell by aligning our product offerings to each customer's specific needs. Kelly, please go ahead.
Speaker #5: This represents a tremendous opportunity to add intelligence to the customer's existing equipment and IT infrastructure with our Sky EMS software and telemetry systems. Now, I would like to hand over the call to Kelly Frey, our Chief Revenue Officer, to discuss our partnership and solution-selling initiatives.
Speaker #5: Richard, transforming the way we sell by aligning our product offerings to each customer's specific needs. Kelly, please go ahead.
Speaker #6: Thank you, Krishna, and thanks everyone for joining us today. I'm now in my third quarter at Flux Power, and like Krishna, over the past several months, I've immersed myself in the outbound business development activities across the company.
Kelly Frey: Thank you, Krishna, and thanks everyone for joining us today. I'm now in my third quarter at Flux Power Holdings, and like Krishna, over the past several months, I've immersed myself in the outbound business development activities across the company. I'd like to spend just a few minutes walking you through how we're thinking about the business today and where we see opportunities and momentum building. At Flux Power Holdings, our top focus is on building long-term partnerships with customers, dealers, and OEM sales teams. Over the last couple of quarters, we've shifted our sales approach to engage more directly with end-customer users while continuing to fulfill business through OEMs, dealers, and distribution partners. This is giving us better visibility into their needs and how we can deliver more value along with our dealer and OEM partners.
Speaker #6: I'd like to spend just a few minutes walking you through how we're thinking about the business today and where we see opportunities and momentum building.
Speaker #6: At Flux, our top focus is on building long-term partnerships with customers, dealers, and OEM sales teams. Over the last couple of quarters, we've shifted our sales approach to engage more directly with end customer users, while continuing to fulfill business through OEMs, dealers, and distribution partners.
Speaker #6: This is giving us better visibility into their needs and how we can deliver more value along with our dealer and OEM partners. We're not just selling a battery; we're also selling the accompanying telematics software, which can be a critical component for customers to design their charging and energy management infrastructure.
Kelly Frey: We're not just selling a battery; we're also selling the company's telematics software, which can be a critical component for customers to design their charging and energy management infrastructure. In fact, our SkyEMS telemetry and energy management systems for monitoring and optimizing battery performance are becoming a bigger piece of the conversation. In addition to the potential new revenue streams from our software, we're also excited about our growth opportunities in new market verticals and geographies. We're leveraging our strong foothold in the United States and targeting expanded opportunities in North and Central America, where we think Flux Power Holdings can play an important role. These efforts are expected to open up significant market potential to help drive future growth. Partnerships are another key driver of our growth strategy. Currently, we're engaged in more OEM discussions than at any other point in our history.
Speaker #6: In fact, our Sky EMS telemetry and energy management systems for monitoring and optimizing battery performance are becoming a bigger piece of the conversation. In addition to the potential new revenue streams from our software, we're also excited about our growth opportunities and new market verticals and geographies.
Speaker #6: We're leveraging our strong foothold in the United States and targeting expanded opportunities in North and Central America, where we think Flux can play an important role.
Speaker #6: These efforts are expected to open up significant market potential to help drive future growth. Partnerships are another key driver of our growth strategy. Currently, we're engaged in more OEM discussions than at any other point in our history.
Speaker #6: We are working to remove barriers to adoption by expanding certifications, pursuing private label opportunities, and investing in marketing. The goal is to turn first-time buyers into long-term repeat customers.
Kelly Frey: We're working to remove barriers to adoption by expanding certifications, pursuing private label opportunities, and investing in marketing. The goal is to turn first-time buyers into long-term repeat customers. We are also looking at partnerships beyond OEMs with telematics providers as well as energy and charging infrastructure players. We see a real opportunity to strengthen the ecosystem around our solutions and add more value for our customers. Finally, in terms of our sales pipeline, Flux Power Holdings has been involved in more opportunities this year, and quoting activity is up significantly. Even though it may take a couple more quarters for that activity to materialize into backlog, the recent trend is very encouraging. With that, let me now hand the call over to our Chief Financial Officer, Kevin Royal, to discuss our results for the quarter and year. Kevin?
Speaker #6: We are also looking at partnerships beyond OEMs, with telematics providers as well as energy and charging infrastructure players. We see a real opportunity to strengthen the ecosystem around our solutions and add more value for our customers.
Speaker #6: Finally, in terms of our sales pipeline, Flux has been involved in more opportunities this year, and quoting activity is up significantly. Even though it may take a couple more quarters for that activity to materialize into backlog, the recent trend is very encouraging.
Speaker #6: So, with that, let me now hand the call over to our CFO, Kevin Royal, to discuss our results for the quarter and year. Kevin?
Speaker #7: Good afternoon, everyone. Revenue for the fourth quarter of 2025 was $16.7 million, compared to $13.4 million during the same quarter of the prior year.
Kevin Royal: Good afternoon, everyone. Revenue for the fourth quarter of 2025 was $16.7 million compared to $13.4 million during the same quarter of the prior year. Full-year 2025 revenue increased to $66.4 million from $60.8 million in the prior year. Increased sales for the full year 2025 was driven by higher volume in both material handling and ground support equipment markets, higher average selling prices in the GSE market, while slightly offset by lower average selling prices in the material handling market. Gross margin in the fourth quarter was 34.5% compared to 26.8% during the same quarter of the prior year. The full year 2025 gross margin increased to 32.7% from 28.3% in the prior year. The improvement in gross margin was driven by sales of higher margin products, the benefit of cost savings initiatives, and lower warranty-related expense.
Speaker #7: Full-year 2025 revenue increased to $66.4 million, up from $60.8 million in the prior year. The increased sales for the full year 2025 were driven by higher volume in both material handling and ground support equipment markets.
Speaker #7: Higher average selling prices in the GSC market, while slightly offset by lower average selling prices in the material handling market. Gross margin in the fourth quarter was 34.5%, compared to 26.8% during the same quarter of the prior year.
Speaker #7: Full year 2025 gross margin increased to 32.7% from 28.3% in the prior year. The improvement in gross margin was driven by sales of higher-margin products, the benefit of cost-saving initiatives, and lower warranty-related expenses.
Speaker #7: Operating expenses in the fourth quarter of 2025 were $6.5 million, compared to $5.4 million in the fourth quarter of 2024. Full year 2025 operating expenses increased to $26.8 million from $23.8 million in the prior year.
Kevin Royal: Operating expenses in the fourth quarter of 2025 were $6.5 million compared to $5.4 million in the fourth quarter of 2024. Full year 2025 operating expenses increased to $26.8 million from $23.8 million in the prior year. Higher operating expenses were driven by $2.9 million of one-time costs associated with the multi-year restatement of previously issued financial statements. The net loss for the fourth quarter was $1.2 million or $0.07 per share compared to a net loss of $2.2 million or $0.13 in the fourth quarter of 2024. Net loss for the full year was $6.7 million or $0.40 per share, which includes approximately $3 million in one-time costs. This compares to a net loss of $8.3 million or $0.50 per share in 2024.
Speaker #7: Higher operating expenses were driven by $2.9 million of one-time costs associated with the multi-year restatement of previously issued financial statements. The net loss for the fourth quarter was $1.2 million, or $0.07 per share, compared to a net loss of $2.2 million, or $0.13 per share, in the fourth quarter of 2024.
Speaker #7: Net loss for the full year was $6.7 million, or 40 cents per share, which includes approximately $3 million in one-time costs. This compares to a net loss of $8.3 million, or 50 cents per share, in 2024.
Speaker #7: Excluding one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation, the fourth quarter non-GAAP net loss was $30,000 or 0 cents per share, compared to a non-GAAP net loss of $1.9 million or 11 cents per share in the prior period.
Kevin Royal: Excluding one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation, the fourth quarter non-GAAP net loss was $30,000 or $0.00 per share compared to a non-GAAP net loss of $1.9 million or $0.11 per share in the prior period. For the full year, non-GAAP net loss was $2.8 million or $0.17 per share, which excludes one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation. This compares to a net loss of $6.8 million or $0.41 per share in the prior year. Adjusted EBITDA for the fourth quarter was positive $600,000 compared to negative $1.2 million in the same quarter a year ago. Full year 2025 adjusted EBITDA was a negative $0.1 million compared to a negative $4 million in the prior year.
Speaker #7: For the full year, non-GAAP net loss was $2.8 million, or 17 cents per share, which excludes one-time costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation.
Speaker #7: This compares to a net loss of $6.8 million, or 41 cents per share, in the prior year. Adjusted EBITDA for the fourth quarter was positive $600,000, compared to negative $1.2 million in the same quarter a year ago.
Speaker #7: Full-year 2025 adjusted EBITDA was a negative $0.1 million, compared to a negative $4 million in the prior year. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $1.3 million, compared to $600,000 a year ago.
Kevin Royal: Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $1.3 million compared to $600,000 a year ago. I will now turn it over to Krishna for his final remarks prior to the question and answer session.
Speaker #7: I will now turn it over to Krishna for his final remarks prior to the question-and-answer session.
Speaker #5: Thank you, Kevin. As we highlighted today, we finished fiscal 2025 with solid year-over-year growth on both a quarterly and an annualized basis.
Krishna Vanka: Thank you, Kevin. As we highlighted today, we finished Fiscal 2025 with solid year-over-year growth on both a quarterly and as well as on an annualized basis. We have a refreshed leadership team here that's fully focused on executing our strategic initiatives, including implementing our solutions-based sales approach with partners and customers to increase the value we provide. Although the current tariff and macroeconomic environment create uncertainty and near-term caution to certain customers, the growth of our sales opportunities, combined with the expected benefits from our strategic initiatives, gives us a reason to be increasingly optimistic for the latest part of our fiscal year. With that said, I will now turn the call back over to the operator for Q&A session. Operator?
Speaker #5: We have a refreshed leadership team here that's fully focused on executing our strategic initiatives, including implementing our solutions-based sales approach with partners and customers to increase the value we provide.
Speaker #5: Although the current tariff and macroeconomic environment create uncertainty and near-term caution for certain customers, the growth of our sales opportunities, combined with the expected benefits from our strategic initiatives, gives us reason to be increasingly optimistic for the later part of our fiscal year.
Speaker #5: With that said, I will now turn the call back over to the operator for the Q&A session. Operator?
Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Joel Achramowicz: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Craig Irwin with ROTH Capital Partners. Please go ahead.
Speaker #1: To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Craig Irwin with Roth Capital Partners.
Speaker #1: Please go ahead.
Speaker #8: Hi, hi guys, it's Andrew on for Craig, but thank you for taking our questions. First question for me, it was really nice to see the strong gross margin expansion in the quarter.
Andrew: Hi, guys. It's Andrew on for Craig, but thank you for taking our questions. First question from me, you know, it was really nice to see the strong gross margin expansion in the quarter. Can you guys just kind of talk a little bit more about what went right in the quarter there? You guys have also talked about near-term visibility to 40% gross margin. Kind of additional color on kind of wherever you are in that journey would be great.
Kevin Royal: Yeah. We've had some initiatives to improve the cost of our product input. The components and raw materials that go into our products, that's what you've seen flow through the quarter that contributed to probably about 60% of the improvement. The other being lower warranty costs. As we continue to improve the quality of our products, we're really starting to see the number of repair incidents decline, both for the full year, but especially in the fourth quarter. Both of those items contributed to the improvement that we saw in the gross profit in the quarter.
Andrew: Great. It was great to see the progress. Second one from me before I jump back in the queue. Congrats on getting the beta rollout of SkyEMS 2.0. Can you just kind of talk about how the customers received the product so far? Maybe just remind us kind of what the upgraded product provides versus the initial rollout of SkyEMS?
Krishna Vanka: Yeah. This new version, SkyEMS 2.0, is really designed with the customer in mind. We work closely with both the airline industry and material handling to understand their pain points. These are specifically related to, "Hey, let us know when it's time to charge a battery. Can you increase the efficiency of the battery charging? Can we know when we're overusing the battery, when it's discharging just too long on the vehicle, for example, in colder environments?" We took all the feedback and we improved the product. We also made it pretty light and slick so it can almost work, you know, on a mobile environment like in a browser. This is the new product. We are very proud, as I mentioned, that we gave this to an existing airline who is testing this and gave us good feedback so far.
Krishna Vanka: We are also giving it to a material handling customer this week as we speak, and pretty soon we will roll this out. As you heard me saying, we are, you know, packaging this together when we sell the battery. That's one of the things we did earlier with the airline for $1.2 million. That solution included SkyEMS software.
Testing, this gave us good feedback. So far, we are also giving it a material handling customer this week as we speak. And pretty soon, we will roll this out. Um, and as you heard me saying we are, you know, packaging this together when we sell the battery, uh, that's 1 of the things we did earlier with the airline for 1.2 million dollars, that solution included as IMS software.
Andrew: Great. We really appreciate the color. Congrats on the continued progress in the strong quarter.
Krishna Vanka: Thank you.
I think we really appreciate the color. Um, congrats on the continued progress and the strong quarter.
Joel Achramowicz: The next question is from Amit Dyal with H.C. Wainwright. Please go ahead.
Thank you.
Rob Brown: Thank you. Good afternoon, everyone. Congrats on all the progress. Just trying to see what the pipeline is looking like for you guys. If you maybe have shared the backlog number, I didn't see it in the press release. I think any color on that would be helpful. Thank you.
The next question is from Ahmed. Dial with HC Wayne Wright. Please go ahead.
Thank you. Uh, good afternoon everyone. Uh, congrats on all the progress. Um, just trying to see, you know, what the pipeline is looking like for you guys and if you maybe have shared the backlog of them. I didn't see it in the press release, I think. Um, so any color on that would be awesome. Thank you.
Kevin Royal: Yeah. Specifically, you know, related to the outlook, while we don't provide guidance, we have seen kind of a bit of a slowdown and a pause from some of our customers in the quarter that we're currently in, which would be our first fiscal quarter. We've also started to see an increase in quoting activity, which we think bodes very well for, you know, the second fiscal quarter, which is the fourth calendar quarter. As it specifically relates to backlog, our current number is right at $9 million as we end the quarter.
Yeah, so, uh, specifically, um, you know related to the outlook, while we don't provide guidance, we have seen, um, kind of a bit of a slowdown in a pause, uh, from some of our customers in the quarter that we're currently in, which would be our first fiscal quarter. Um, we've also, uh, started to see an increase in quoting.
Activity, which we think loads very well for, you know, the second fiscal quarter, which is the fourth calendar quarter, as it specifically relates to um.
To, uh, backlog. Our current number is right at 9 million as we end the quarter.
Rob Brown: Thank you. As you sort of look to now, maybe moving from beta to actual sort of product rollout for the SkyEMS, how should we think about what the plan is on that side? What are your expectations for the attach rate? Are you selling this independently as well, or will this exclusively initially be sold along with the battery solutions? Just trying to get a sense of what the, at least, the initial sales strategy is going to be for this offering.
Okay, thank you. Um, and
You know, as you sort of look to now maybe moving from beta to, um, actual sort of product rollout for this guy. Yes.
Krishna Vanka: Sure. I'll answer this, and then I'll have Kelly add any more color. Yes, our strategy is to package and sell the SkyEMS software along with the battery. That's why we are calling it Intelligent Battery. We are seeing some good success with it as we roll this out. Beta is the name we gave it to make sure customers are happy and they will gladly use the product. The product is literally ready with their live data. As I mentioned, in a month or two, we will remove the name Beta from the product and call it SkyEMS 2.0, which we are already selling, as I mentioned, with every battery possible. You also probably noticed we have 28,000 units that are already in the field. Our intentions are to go back and get them on the platform as much as we can.
How should we think about, you know, what the plan is on that side? And you know, what are your expectations for the attach rate? You know, are you selling this independently as well, or will this exclusively initially be sold along with the battery solutions? Just trying to get a sense of, you know, what the sort of at least the initial sales strategy is going to be for this offering.
Sure. Um, I'll answer this and then I'll have Kelly add any more color. So, um, yes, our strategy is to package and sell the Sky EMS software along with the battery. That's why we are calling it the intelligent battery, and we are seeing some good success with it as we roll this out. Beta is the name we gave it to make sure customers are happy and they will gladly use the product, but...
The product is literally ready. It is their live data. As I mentioned, in a month or two, we will remove the name data from the product and call it KMS 2.0, which we are already selling. As I mentioned, with every battery possible.
Krishna Vanka: We do have a few thousands of the batteries in the field that are already online. It's literally working with these customers, giving them access, and having them pay for it, which gives us a very good upsell opportunity. With that said, Kelly, do you want to add any other color?
Uh, you also probably noticed. We have 28,000 units that are already in the field. Our intentions are to go back and, uh, get them on the platform as much as we can. We do have a few thousand of the batteries in the field that are already online. Uh, it's literally working with these customers, giving them access and having them pay for it, which gives us a very good upsell opportunity.
Joel Achramowicz: Sure. I think, Krishna, you nailed it, but it's really three motions. The first is telematics on every battery to make sure that we're positioning it in every, including at least a base level of telemetry, SkyEMS with each battery. Then it is going back to the installed base of customers who are maybe in their first, second, third, fourth year of having a Flux battery, even longer, and saying, "Hey, there could be value in you putting telemetry on this battery so that you can get better visibility, which allows for better capital planning, better optimization." That's kind of the second motion. The third motion is once somebody takes, perhaps their first, version of SkyEMS, as we move forward, we have upsell opportunities, perhaps advanced reporting, advanced optimization capability, integrations with other software they may be using.
With that said, uh, Kelly, do you want to add any other color?
Sure, I think Christina, you nailed it, but it's really three motions. The first is, uh, telematics on every battery to make sure that we're positioning it in every...
Including at least a base level of telemetry, uh, uh, Sky EMS with each battery, then, uh, is going back to the installed base of customers who are maybe in their first, second, third, or fourth year of having a Flex battery, even longer, and saying, "Hey, you know, there could be value in putting telemetry on this battery so you can get better visibility, which allows for better capital planning and better optimization." That's kind of the second motion. And then, the third motion is once somebody takes, um, perhaps their first, um, uh, version of Sky EMS, um, as we move.
Joel Achramowicz: It's kind of an upsell on top of the original purchase of that telemetry.
Rob Brown: Understood. Thank you for that. That's all I have for this call. I'll take my other questions offline. Thank you.
We have upsell opportunities, perhaps Advanced reporting Advanced optimization capability, uh, um, Integrations with other software that may be using. So it's kind of an an upsell uh, on top of the additional uh sorry the original um purchase of that telemetry.
Understood. Thank you for that. Yeah, that's all I have for this call. I'll take my other questions offline. Thank you.
Joel Achramowicz: The next question is from Rob Brown with Lake Street Capital. Please go ahead.
The next question is from Rob Brown with Lakes Street Capital Markets. Please go ahead.
Rob Brown: Good afternoon. First question's on the airline orders that you received. I think there were two pretty sizable orders there. Could you give us a sense of sort of what's driving that? Is it an expansion into the fleet or really kind of the new product offerings that you've got?
Good afternoon. Um,
Krishna Vanka: The G80 420, the $2 million, is a redesigned battery. It was redesigned to be more efficient, more gross margin-driven design. I would say it is a new product almost that we sold to an existing airline. The second order we mentioned is for the G lithium-ion, which is sold as a package with SkyEMS. That's an existing product that we sold with the software added to it as a package.
Uh, first question is on the on the airline orders that you received? I think there were 2 pretty pretty sizable orders there. Um could you give us a sense of of sort of what's what's driving? That is an expansion into the fleet or really um kind of the new product offerings that you've you've got
So, the GAT 420, the $2 million dollar battery, is a redesigned battery. It was redesigned to be more efficient, more gross margin-driven, and has an improved design. I would say it is almost a new product that we sold to an existing airline. The second order we mentioned is for the G lithium-ion, which is sold as a package with Sky EMS.
So, that's an existing product that we sold with the software added to it as a package.
Joel Achramowicz: Could I add something, Krishna?
Krishna Vanka: Go ahead.
Joel Achramowicz: Krishna's accurate in that. The other thing is just to remind everybody, we're still at a very early adoption phase of lithium within the ground support equipment market. Even our existing customers who have purchased several hundred or even a couple thousand of batteries from us or low thousands of batteries from us still have a lot of migration to do from lead acid to lithium or from internal combustion to lithium. It's not only just upselling the existing customers to get further adoption throughout their fleets. They typically roll out airport by airport by airport or sometimes by region or by country. It's the existing increased adoption, and then it's new airport acquisition, or sorry, new airline acquisition is the other key focus in that market.
Uh, could I add something, Krishna? Um, the other thing is, so Chris is accurate in that. The other thing is just to remind everybody, we're still at a very early adoption phase of lithium within the ground support equipment market. So even our existing customers, who have purchased several hundred, or even a couple of thousand batteries from us, or low thousands of batteries from us, still have a lot of migration to do from lead acid to lithium or from internal.
Combustion to lithium. So it's not only just upselling, the existing customers to get further adoption throughout their fleets. They typically roll out, uh, airport by airport by airport, or sometimes by region or by country. Um, so it's the existing increased adoption and then it's new airport acquisition as the other. Uh, sorry new Airline acquisition, as the other key focus in that market.
Rob Brown: Okay. Great. Thank you for the color. On the quoting activity, I think you talked about an uptick after a bit of a lull. Is that both material handling and ground support equipment, or what is the dynamics of that improving order quoting?
Okay, great, thank you for the color. Um, and then on the quoting activity, I think you talked about an uptick, um, after a bit of a long. Uh, what’s the, you know, is that both Material Handling and Ground Support Equipment, or...?
that uh, improving order quoting
Krishna Vanka: Kelly, do you want to take it?
Joel Achramowicz: Yes, I can. Really, I think everybody on this call is aware, we service two main markets. There's the ground support equipment market and the material handling market. The ground support equipment market, we didn't see as much of a pullback in capital expenditures. There was a little where there was related to uncertainty with the economy. We think driven mostly by the tariffs and what was going to happen, perhaps a little downturn in passenger traffic. There was some impact on the ground support equipment market. However, in the material handling market, we did see, particularly in the Q1 calendar year, there was a little bit of advanced purchasing. Let's get it before the tariffs hit. There was a pullback on capital expenditures. I think everybody's aware, our batteries go into lift trucks. Lift trucks are a fairly heavy capital expenditure.
Kelly, do you want to take it?
Yes, I can. Um, so really, I think everybody on this call is aware we service two main markets: there's the ground support equipment market and the material handling market. The ground support equipment market, uh, we didn't see as much of a pullback in capital expenditures; there was a little, uh, where there was a related to uncertainty with the economy. We think this was driven mostly by the tariffs and what was going to happen, perhaps a little downturn in passenger traffic. So, there was some impact on the ground support equipment market. However, in the material handling market, we did see, um, in, uh, particularly Q1 calendar year, there was a little bit of advanced purchasing, let's get it before the tariffs hit. And then there was a pullback on capital expenditures.
Joel Achramowicz: We saw customers kind of holding their capital tight to chest in late Q1, Q2. Now that increased quoting activity is really people saying, "Okay, I think I understand what's going on with tariffs. I understand the impact on my supply chain. Okay, I'm now going to release that capital to purchase the lift trucks, purchase the batteries, etc." That's really what's driving it in the material handling market.
I think everybody's aware our batteries go into lift trucks. Lift trucks are a fairly heavy capital expenditure. We saw customers kind of holding their capital tight to their chests in late Q1 and Q2. Now that increased ordering activity is really indicating that people are saying, "Okay, I think I understand what's going on with tariffs. I understand the impact on my supply chain. Okay, I'm now going to release that capital to purchase the lift trucks, purchase the batteries, etc." That's really where it's driving it in the material handling market.
Rob Brown: Okay, thank you. I'll turn it over.
Okay, thank you. I'll turn it over.
Joel Achramowicz: This concludes our question and answer section. I'd like to turn the conference back over to Krishna Vanka for any closing remarks.
This concludes our question-and-answer section.
Krishna Vanka: Thank you all again for joining us on the call today. We really look forward to speaking with you again during our first quarter call in the November timeframe. Operator, you may now disconnect.
I'd like to turn the conference back over to Krishna Vanka for any closing remarks.
Joel Achramowicz: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Thank you all again for joining us on the call. Today, we really look forward to speaking with you again during our first quarter call in the November time frame. Operator, you may now disconnect.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.