Earnings call transcript Q3 2023

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Operator

Greetings and welcome to the Flux Power Holdings Third Quarter Fiscal 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call over to Sean Stewart, Financial Planning and Analyst Manager. Sean, you may proceed.

Sean Stewart

Your host today, Ron Dutt, Chief Executive Officer; and Chuck Scheiwe, Chief Financial Officer, will present results of operations for our third quarter of fiscal year 2023 ended March 31, 2023. these the detailing at this release p.m. X:XX press results wires crossed afternoon A is the available of and Time Eastern on website fluxpower.com. our Investor at company’s section Relations

remind presentation, Before the may be include other the I considered everyone or webcast that estimates that would call we and statements formal like information begin predictions, forward-looking. on made to may

materially. and While results they are holds, what the these future actual forward-looking statements cause to represent uncertainties risks our to could current differ judgment on that subject

to reliance this of that undue new of forward-looking forward-looking keep to which cautioned the publicly these future are as or You information revise mind only reflect place release these ourselves statements results the statements, in on we not in our events. presentation. obligating of light opinions or to are any of date Please revision

we relating factors predictions. discussion, some today’s affect to our will attempt present our that may to important Throughout business

recent complete and XX-Q review Form Form You and our particularly risks, other of should discussion Risk under the most also Factors. XX-K heading more these a for factors

I this over Chief Power Flux Dutt. the Officer, turn Ron At to Executive call will time,

Ron Dutt

Thank fiscal welcome financial third and today’s you conference pleased quarter you, am to to good afternoon everyone. call. Sean results XXXX I

that Slide we note short reminder if do, Commerce. following you of calling are deck, please Firstly, on what there X, the is a out, Electrifying

and and very located technology, solar port on authority storage, including clean those support products equipment are energy powering applications are nationwide. equipment, airport, other with handling, fleets, We new ground material and large and focused our services

results. Now on QX to our

revenues our quarter the fulfilling $XX.X we as orders. cadence prior up XX% in on from quarter of growth. focus reflected year, were our continue million, growth third revenue Our revenue consecutive marking $XX.X strong In year-over-year XXth QX ‘XX, million to of

in – the compared – points period. quarter, gross year the profit prior of third We XXX% margin million, $X.X a to gross to gross percentage to the up XX% expansion and to to expansion improve also continued XX ago

growth X expense revenue $X.X and provide for and gross was and period. and ended continued in given respectively. million improvement expansion only operating operating for of X loss loss margin that an X XXXX, leverage increase and EBITDA million Our million X% $XXX,XXX for our March modest $XX.X of EBITDA X months March $X.X the XX, from months the ended XX, XXXX, adjusted Adjusted

a EBITDA on sequential X basis the ended Adjusted December months has declined loss from XX. XX%

the to reflecting of models. delays timing third of customer adoption, XX, by fiscal million customers. million In forklift as orders purchase ‘XX, our impacted Fortune third XXXX, $XX partially For and of some customer from production backlog continued in quarter, new the decreased received order March $XX.X from existing XXX lithium million although $X.X we quarter

New times supply continuing, and some and to existing down support these which anticipate product orders forklifts out. times due diminishing caused lines, all although We for coming to factors equipment lead new the increasing orders were be on extended issues, supply the in in normalize. chain quarter lead delays months ground as anticipated orders pushed

over XX% customers. foundation the customers, revenue was whom for importance with from and strong of contributed consistent relationships existing relationships, commitment, long-term customers partnerships with trustworthiness long-term, the have with the highlight To during sustainable building of our our our performance of quarter we

Our emphasis requirements. service on service needs product new quality, and support purchase technology continues to and ongoing

and will basis. have up-to-date drive on products technology help the our We customers our customers have from internally sustainable also that business base and developing a ensures technology new experienced to most services our our installed

improvement supply continue and and to see pursue chain that chain pleased disruption in and time, we profitability were our the customers initiatives. pipeline coming with the large we during abate for continued customers to in at large our the planned in X same with other supply quarter, made to accounts third added, third shipments importantly, progress with fleets months. while strategic Also, new new the new We quarter, we have

have the scale we XX For our past chain issues efforts also with and taken months, business. aggressive to supply to build mitigate

leveraged steel to components re-source and increased board higher volume and regions to sales volumes have We to suppliers. low-cost

implemented also productivity have inventory process improvements We provided kitting have that enhancements. sustainable

We designs on customer platform product packs new for needs. to new a based are battery progressing on modular address

we more higher commonality servicing variety challenges the the other the in existing provide time, our reduction same new of customer performance designs serve. demanding of a to achieving features improvements Some a of across include parts, solve diverse capacities easier and a for models. operations of At shifts, number

shipping and new the our models on platform. building new the recently now received models few having platform, of first We’re of UL certification

for We pursuing required are now is UN shipping which XX.X and certification, compliance. forklift approvals

expedite also table all therefore testing eliminating We the and aspect Achieving and successful of any testing in-house our production UL either the XX.X reflects the or oversight to and UL capabilities confidence equipment the all the testing UN vibration including both technical UL validation experience with satisfy UN testing, our of under expanded recognized needed in-house to an certifications building UL. compliance requirements process. onsite outsource which by need for

have to lean enabling manufacturing efforts us business included Our process, and monetize output existing quickly to implementing with our resources. increase backlog more scale

customer in investment comprehensive new field. our augments help geographic facility, customers The with which Arcon broadens the a have we half The resulting as use includes which the California importantly, with to On to service and to our a United of responsive May personnel Atlanta logistics in from in packs. operates Atlanta while and the X, our and packs associated repair services eastern office States facility also, Atlanta travel and costs batteries in support our located of Cleveland, services the we Ohio, partnership sports facility Equipment lower service current XX,XXX footprint the in shipping our opened and and our supplement in facility. to bring

disruption improvement have chain initiatives supply our As declining, momentum. gain to is profitability continued

I to of and facilities revolving secondly, lean efficiency by level year-over-year in $X.X line have to material higher progress $X.X In lower our and throughput. million. declined used remaining million new manufacturing, resulted and May previously, improvement – ‘XX we in of of implementing million, quarter, gross Availability which price the line increased mentioned as the and from year and by inventory credit cash under cost of Bank including $XX.X subordinated sequential assembly and also from was includes Improved XXXX design XX% with our fiscal cost Citizens cost or processes, balance operations under in For of First first This a requirements. saw $X.X million months under this million available fiscal actions helped initiatives. production margins our $X credit. our reduce renewed XX two credit totaled as by X

are adjusted for upward Our efforts and revenue showing trend increasing past fiscal the the reflected improvement X, Slide margin on on year. over specifically EBITDA

to Further, We applications. reduction various our being are realized this are executing customer momentum. and our successes applied specific initiatives continue cost supply chain across

current of with Our customers having quarter, two this customers fleets. potential and pipeline expand new continues large to past

Our higher sectors, the seeking caters to and life future relationship seek to of product fleets multiple and large performance a whom lower to customers of base line full a in packs. are cost needs. diverse represent all during product lithium-ion partner These battery the from meet current

on our orders from come of deliveries. has revenue primary forklift new packs Our

lead lithium in of generally prior reaching device acid. to of across adoption acid life in batteries increases lithium longer forklift anticipate to lead fleets, customer As the given replace solutions device orders we versus increasing

We to gross restore margin have trajectory. taken our actions

XX% and As margin quarter from our quarter sequentially of highlighted XX% quarter gross XXXX. third XXXX second to X, the the on fiscal from first of Slide in in improved past in XX% the

and product modular margin production and begun impact pandemic-related increased of manufacturing actions secondary shipping part key volumes, Our forward. components, reliable all improvement initiatives more for platform, more both accelerate our continue lower are commodity and which capacity to new the improved to include Other of margins have pack competitive Price lines results. our costs, costs, of number a to increases to drivers of to margin. moving gross that of impact suppliers unit transition increases include plan processes now offset and a

to chains, partially I’ve adoption lean $XX we and extended customer a improvements continue previously, million, equipment. driving as monetize our to During of global GSE the delivery manufacturing as and and reflecting times ongoing throughput third healthy was forklifts of Normalization capacity of some are for principles backlog. supply quarter, backlog models mentioned reduced

our Our are discussed initiatives along strategic shortages, conversion initiatives to to are accelerating and also of backlog These shipments help increasing gross operating part with inventory turns improving sourcing leverage to actions previously. expansion. mitigate inventory key mitigate margins, drivers

deliveries, disruptions chain supply as to improved, increased delays XXXX. of inventory finished goods chain supply have our as March Although $XX million mentioned. component parts raw mitigate accommodate In order forklift to XX, have and previously we and of disruptions our materials,

XX, quarter our Scheiwe, Chuck results that, will to XXXX. I over the the Officer, to now March review Chuck? for financial it turn Financial With Chief ended

Chuck Scheiwe

Hey, thanks, Ron.

XXXX. to turning results XX, review financial Now, March the the ended in quarter

million mentioned increased percentage third XXXX. of prices. the As fiscal revenue to a to quarter third a by lower profit and Ron XXXX. prices $XX.X sales fiscal was $X.X sold as $X.X increased volumes in million profit for the margin compared cost of million increased quarter margin sales XXXX to XX% initiatives. of compared at XX% fiscal increased gross was the models Gross in Gross by XXXX gross and the XX% higher quarter XXXX. third in XXXX This of improvement fiscal of of million fiscal fiscal compared driven a new, to as in quarter units $XX.X our reflected the to of quarter the of with selling of third of third higher third result for This quarter

primarily is expenses XXXX to million fiscal marketing and to million quarter third third Selling million outbound costs. to the products. million $X.X increases decreased XXXX. and quarter depreciation compared development fiscal and new fiscal expenses the staff-related $X.X commissions, reflected expenses This related in premiums, $X.X lower insurance of of third in XXXX, This to the of of shipping Research of quarter and to XXXX. administrative $X.X third the development lower due expenses quarter timing expenses, in fiscal in increased from the in

to loss third EBITDA in XXXX XXXX. in third of the million of decreased quarter fiscal fiscal quarter from Adjusted the $X.X $XXX,XXX

For million March million in the X the $XX.X XXXX, $X.X compared XX% months loss XX, months adjusted to March to decreased EBITDA XX, XXXX. X ended ended

trajectory. to this and Our contributed business operating all continued leverage growth drive initiatives,

the quarter decreased due $X.X loss – in reflected to compared for XXXX net of principally million quarter in net gross of million QX $XX.X million primarily quarter activities The for in in decreased XX, the $X.X $X.X and the months ‘XX, profit. to the of X fiscal March ended for XXXX. for increase used is to which ended of of loss to a $X.X XXXX fiscal XXXX the XXXX. accounts a QX million cash to X increased Net million cash or payable. This Net compared third months operating the $X.X March in million to and decrease decreases in net loss XX, third were

renewal of is We customer million $XX recently Bank, Silicon available requirements credit demand. to at announced now First our the capital existing under which of a of a related division support Bank, working to facility our renewal Citizens Valley with

resources basis, opportunities to First aggressive our demand continue the we on them Citizens line. to enable are institution, a growth. Bank to On to along capital alternative with meet renewal, pleased and financial now is top will meet our continue This anticipated a our to also capital revolving existing to fund we tier operations. our us cash, credit of planned with be partnering explore longer-term

Now, I’d to closing it to remarks. like Ron some pass offer to back

Ron Dutt

Chuck. you, Thank

our While control increases capital cost track we’re margin working gross improvement exploring availability. we initiatives, executing our are and on to

want technology customer lithium-ion we who benefits existing Looking of continued ahead, and customers, combination business of orders the revenue of growth. the acquisition can believe drive, new

quality, lean our shift as continue service second implementation. goal current are current relationships manufacturing $XXX and our And and also growth Product to and business facility we leading to we annual up continue our technology trajectory. revenue key million footprint, why production maintain facility win build-out ensure factors to and support should our to given

value our are also beyond operational building lithium are our the reaching we ensure robotics. energy we of on in positioned broadening product and handling to adoption profitability service continue reach as continues six to With our to assembly such well focused to leverage that warehouse accelerate, initiatives expands and into material including related capabilities verticals success Looking lines, on strategy, our industry, in solutions our technology leadership to customers. as the

execute cost to stored positioned Electrifying In summary, of energy customers are as we to Commerce well offer our solutions during product’s productivity increase life. at strategy our we lower

continual through margins expansion We chain backlog strong are process and orders, encouraged management, by supply of improvement and improving improved and purchase sourcing continued pricing.

markets profitability. We as key cost value indicator execute demand achieve EBITDA a into is new And to lower proposition actions anticipate performance strong ownership. continue Slide improve further, expanding to we high of on which adjusted and to our shown X, for having of

look technology solutions shareholders in updates diverse near I of our providing lithium-ion we position forward growing and further continue the in large list customers. with our new leverage to future with to as leadership our

And hand call our operator thank you the attending. begin over I’d I to all like for question-and-answer to the to now, session.

Operator

question [Operator you. Thank with comes Please EF Our Instructions] Chip proceed. first from Hutton. Moore

Chip Moore

on Thanks and are of of – a mix I you’ve of taking leverage. about anything to with there Is help where ramping regard you a for Ron XX%. Chuck, to margins. got able the Evening. ask a That’s help just initiatives there to to getting great way quarter the And volume there? that us Congrats sort questions. sort margins be course, wanted sort term to guess, of then underway I forward, get in of milestone. moving on to and near think about might think long-term? number then, and another is

Ron Dutt

Yes. you Chuck, want one? handle that do to

Chuck Scheiwe

forecasted bit the we’ve a that. a terms amount kind think is little what done There’s a even it lot now, there slight of than not I a but much. margins, a mix Yes. what we little little higher internally. of drove you Right at that done bit, of bit there little if of we’ve look in of Chip, a actually

product different to different going have product, we know, you which a creating group is margins. that’s As of the are

We on yet. are fully not those vetted

are in we the continue to we stay going So, for range as move forward I think in little. a that short-term, that to

steel part as if a product and steel you We us prices the that well. are our also seeing which commodities a again, little big the is markets can side, on watch bit pressure on of of affect that’s

Chip Moore

Okay.

opened. yes, some there of brings to just That’s here now, new the of here. you you on profitability margins, And That guess guided sort a So, maybe you I helpful. very right it yes, sounds upside well. and what on should that expand as clearly, like have that sustainable But benefits – give term, in potential? – takes. right, puts specifically facility longer follow-up terms Can Atlanta some from

Ron Dutt

way our Yes. to items what improvement strategy. as you jump we margin in board as to via we in producing And a in ongoing Chuck, – it about have reduce we our lot does it, have Chuck, let room to seen, And here. about value think an – done have ultimately – with addition mentioned. That have of initiatives we engineering. said, me want think But work weekly costs. we Chip, addition warranty on another as continue Chuck

with we to are growth and that the we and XX% as And we that of to have realized and have leverage we will. our the have with of one revenue fixed, we We costs, now, that higher is move enablers that going are which need largely well. operating our roughly fixed operating be in

helps, hope that Chip. – So, I that hope

Chip Moore

could great, I Yes. specifically it’s it on And guess that’s Ron. another, still ask No, pipeline, very I like sounds the strong. if

think potentially for some constraint that been what OEMs. that Maybe versus times issue adding about particular very in real demand? of about about size And heard of timing, the terms seeing maybe talk have some welding you you underlying about has talked I there. help a obviously, potential accounts. the backlog, But are in terms in the near-term just new, and of an us lead Thanks. sort I forklift scope there? talked And think You being of then large

Ron Dutt

is some live big would build the They pipeline, scale. the really are, over big, support their deliveries future, the scale. near-term. to of want and point customers our we Yes. and big No, we address yesterday, they new Canada, to next in us want Chip, that service that bigger we to on two. and strategy breathe mentioned can of are the us because The like some name, our I better the yes, to X all sure. for these at our don’t But take I the country. Mexico so and the years, of thought mention, Procter order not for we it’s internationally us in is mentioning will build on got that’s just which customer, some companies fortunately, mention I a Gamble. That’s & been these part I but want we not are that – track. point

– order that for And on an on our This – long-term website. deck Typically, and be business. other forklift, got the they how have of our PowerPoint different their are disruptive We big for how They first they example sticky very a with connect see connect chargers, our suppliers things a is some it the are in locations, have have of things so we a you that. operated, suppliers. them. it’s of our things relationship change them just with with to can how very lots

long-term mean have in. customers in of a were the the our part guarantee industries. a good month. frankly, Now, even however, that that really that, profile a That’s I of not that, contract. am each other doesn’t of And like I been want you we we relationship. It’s long-term lot the how idea used are having to And sector of

I some customers an and but weeks, others in we to that. working XX the I am variety can going wanted not just mention So, – a over are give we you have on others. out of one six pipeline. example to take sense took so to another other That months, of throw

the ProMat, at and at everybody Chicago about to times here. have that trade forklift were the couple delivery and talking we largest mentioned lead has lead yes, delayed times, was impacted a on times March us. in show, the just show trade the annual We Turning in of

not And we pipeline, Now, the – and that’s line, supply believe chain are it’s them of it’s when going that. But ones. some every it’s hangover of assurance that when from the we bigger pandemic but working don’t and on disruptions. the exactly some every we abate, any get a of residual to through

We I this are a business, impacted next a any quarter, new quarter. and It impact could adding in good. us fill bit trying think us bit that’s gaps, to

out are am us of supplier are But not does I it is explaining but one but good guidance, driving that’s giving factor the coming, and affecting that I business, The this nearly We the an news losing have it business. well as and that others. forklifts not impact. pertains just past know begins we get just particularly ahead any situation few are is and supply to to normalize. future, we months a

Chip Moore

That’s Appreciate much. color hop queue. to it. all very Thanks the Got I the in will great hear. and back

Operator

We Instructions] [Operator Galinko Matthew question with Group. have Maxim Please proceed. from a

Matthew Galinko

I guys. my taking Hey you that heard I price was apologize passed – But think this I increases. and you already I mention for question Thank if through some you answered. if

be steel mentioned somewhat You been based of your just also that gross on a have upside recent margin limiter prices or to trends. somewhat will

you prices that material increases your bit little like about remain current high, to what a going or to look and forward if So, continue have as can we ability does forward? price move talk maybe do the pushing customers, you

Ron Dutt

one? to Chuck, that do Yes. you want field

Chuck Scheiwe

of it’s so at course, increases. Matt, there we initiatives gross will. Yes. going and can, numerous And are harnesses other all products more have sense do of the are push we this and components. continue specific we point, at we and to the some looking And margin to to have and overall look pricing continue on make instead pricing, we boards that at we product-by-product got – that

significant are a to of of plenty – is continue not – So, but there on you margins. it’s other steel piece a it. it’s we part, increase working will It’s stuff just, that is know, as

like So, anything that it’s is at not stopping this point.

of pull more a there. have – it’s every think got going activities out that’s starting to we I week costs

X-point not from here do going continue It’s you growth just will we to I a going steady see So, on jump. a to think to more are be out. it.

Ron Dutt

Yes.

world it the is Google, you really largely interesting, come out, as pandemic that. price it’s look recent in went and Chuck up it’s cold-rolled a just really think upward and to we of of up to dealing pointed the getting like steel, all some But element, And mountain live really, down. during I have Matt, seen with Another us we are used if the that’s adjustment that. on

Matthew Galinko

or you as given your respect going helpful. to follow-up. the capacity, more timely? chain all be some of that the of That’s ability see your I and to guess can a in-house dynamics then to talked you Thanks. a benefits And that that how product bit supply are able With to the processes – deliver testing little about you talk about, how benefits that,

Ron Dutt

answer. went a involved. Yes, testing here. early it’s than We product, back a good time first question. to in this for there two It’s two-fold a our lot through There with UL points XXXX it There initial is more believe. is and started make the you just and is

the testing safety durability for the On of it’s packs. and really surface,

us So, and get actually these forever go to had and out we really took and we felt testing. it third-parties with all that was because being lithium important new,

So, and in time. time to to and and Texas come out space the and you UL and reserve all had elsewhere, in had – facilities

years, our all over past UL-ed X first the generation. our So, packs, have we

new platform. went Now, we this through just

and a developed UL by and we we experience confidence lot So, do. what of can

durability this high-temp so let’s So, our what, Shake forth. you internally hey, said, and we products. could for along that because developing test, some buy equipment know low-temp we use it test, vibe just journey, of test, test,

that. test where just they compliance. bought monitor So, that thousands that. internally spend an products elements tests of as to to part have – secondly, their enabler of and to internally testing and series the of they of to is cheap. we timeline on We UL requirement hundreds it that’s being – able and of do equipment, And dollars Then takes any that and accelerating to not develop the

and give it tape do can it they So, can to on-site, on it either we Zoom them. or

places not would and and for other So, sending testing. to anything Texas third-party really are we we –

cost-wise us, many benefit and has it to a aspects financially So, time-wise. both with

Matthew Galinko

Great. the and margin gross again congrats Thank you trajectory. on

Ron Dutt

Matt. Thanks Yes.

Operator

questions turn back Mr. no for are There I call would queue. Instructions] to Dutt like [Operator further remarks. closing in over the to his

Ron Dutt

were to thank update on of results to ongoing If you and operator. our you, you each forward financial I would conference call today and continuing growth. joining progress please for further to unable to if have Thank our look like reach to our more questions, you or would questions we out IR to MZ your of happy any Group, firm, Thank who than assist. you. answer be

Operator

concludes This today’s teleconference.

your You may time. for a Thank have you this your participation at and disconnect lines great day.

Flux Power (FLUX) 11 May 232023 Q3 Earnings call transcript