Flux Power Q4 2023 Earnings Call Transcript

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Provided by Quartr
September 21, 2023

There are 8 speakers on the call.

Operator

And welcome to

Speaker 1

the Flux Power Holdings 4th Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to hand the call over to Carolyn Gordon, Marketing Manager.

Speaker 1

Carolyn?

Speaker 2

Good afternoon. Your host today, Ron Gutt, Chief Executive Officer and Chuck Shiley, Chief Financial Officer, will present results of operations for the fiscal 4th quarter and fiscal year ended June 30, 2023. A press release detailing these results crossed the wires this afternoon at 4:0:1 p. M. Eastern time and is available in the Investor Relations section of our company's website, fluxpower.com.

Speaker 2

Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include They are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind, we are not obligating ourselves to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect You should also review our most recent Form 10 ks for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. Time, I will turn the call over to Fux Power Chief Executive Officer, Ron Nuts.

Speaker 3

Thank you, Carolyn, and good afternoon, everyone. I'm pleased to welcome you to today's fiscal Q4 fiscal year 2003 financial results conference call. Firstly, please note that on Slide 3, if you are following the deck, There is a short reminder of what we do, that is electrifying commerce. We are powering material handling, Airport ground support, solar energy storage, port authority equipment and other applications With new and clean technology, our products and services are focused on large nationwide fleets that are pursuing a better return on investment and a positive environmental impact compared to lead acid batteries. Our reputation and brand are critical as We target the household names, which I'll point out shortly.

Speaker 3

We must have a strong reputation and do what we say In order to satisfy these large fleets that have hundreds of facilities and need their batteries for new equipment For existing equipment delivered on time without difficulty, Fortune 100 Companies Demand suppliers that are transparent, experienced and accountable as they transition their fleets To do and clean technologies, which puts us in a very strong position in the electrification market. Now on to our year end results. Our business priority this past fiscal year focused on progress to cash flow breakeven, while continuing to capture increasing demand for lithium batteries. Fiscal year 2023 reflected our cadence of strong revenue growth as we continue to focus on fulfilling orders. In fiscal 2023, revenues were $66,300,000 up 57% from $42,300,000 in the prior year.

Speaker 3

Quarter 4, 2023 revenue was up 7 Percent to $16,300,000 compared to Q4 of 2022 revenue of 15,200,000 marking our 20th consecutive quarter of year over year revenue growth. We also continued to improve gross profit, increasing 134% to $17,100,000 in fiscal year 2023 compared to 7,300,000 In fiscal year 2022, an increasing 44% to $4,300,000 In Q4, 2023 compared to $3,000,000 in Q4, 20 22. Gross margin was 26% in fiscal year 2023 compared to 17 Percent in fiscal year 202227% in Q4 2020 3% compared to 20% in Q4 2022. Adjusted EBITDA loss decreased 74% to $3,700,000 for the year ended June 30, 2023, compared to a loss of $14,100,000 for the year ended June 30, 2022. And adjusted EBITDA decreased 73% to a loss of 600,000 dollars for Q4 2023 compared to a loss of $2,200,000 in Q4 of 20 22 And $700,000 in Q3 2023.

Speaker 3

For the 4th quarter, Our customer order backlog increased from $25,000,000 to $29,000,000 as of June 30, 2023, reflecting continued lithium adoption. A new $15,000,000 credit facility From Gibraltar Business Capital provides funds for working capital and replaces The $14,000,000 line with Silicon Valley Bank. The new facility has a 2 year term with provisions to increase the line to $20,000,000 and provides for our working capital needs of our planned business growth. We're highly focused on achieving cash flow breakeven in the near term reflected in the reduction of cash used by operations in fiscal 2023, which declined $20,300,000 or 85% compared to fiscal year 2022. Our cost and price initiatives also contributed to gross margin improvements to 26% in the fiscal year 2023 compared to 17% in fiscal year 2022 and 27% in Q4 of 2023 compared to 20% in Q4 2022.

Speaker 3

As well, our inventory balance has become more consistent due to improved inventory management, sourcing and supply chain management. Taken together, we are executing on our strategy for cash flow breakeven and sustained profitability as we continue to drive expansion of our product lineup and service network. In the longer term, Our strategy revolves around building scale to sell our products to large fleets, Building on our momentum in revenue, gross margin and operating leverage, Right now, we're growing organically and beginning to explore and develop strategies to build partnerships that can leverage revenue growth, Technology and Profitability. Our efforts on increasing revenue and margin improvement, specifically for adjusted EBITDA, are reflected on Slide 7, showing the upward trend over the past fiscal year and our momentum toward breakeven. We are executing our specific supply chain and cost reduction initiatives to continue this momentum.

Speaker 3

Further, our realized successes are being applied across various customer applications. Our current potential pipeline of customers continues to expand with 3 new customers this past quarter And a total of 8 new customers in the full year 2023. Our full product line caters to large fleets who These customers represent a diverse base in multiple sectors, all of whom are seeking lower costs during the life of the product and higher performance from lithium battery packs from a reliable partner. For example, PepsiCo has hundreds of facilities across the country and we deliver to all of them. Our primary revenue has come from orders for our packs on new forklift deliveries.

Speaker 3

As customer adoption of lithium ion solutions increases across fleets, we're anticipating increasing orders to replace lead acid batteries reaching their end of life prior to forklift in the life. Given the generally longer life of lithium versus lead acid, We have taken actions to restore our gross margin trajectory that was interrupted by the pandemic, With our goal now of sustained profitability, while full year gross margin expanded 6.80 basis points to 27 percent compared to the prior year. We continue to see some quarter to quarter lumpiness as shipment delays persist to delays in some selected heavier duty forklift model deliveries. Our improvement initiatives include a number of actions that have begun to impact gross margin. Price increases to offset commodity increases, increased pack volumes, More competitive shipping costs, lower costs, more reliable and secondary suppliers of key components, Improved manufacturing capacity and production processes and transition of product lines to a new modular platform.

Speaker 3

All these initiatives are part of our plan to accelerate gross margins. During the fiscal Q4, our backlog increased to 29,000,000 Due to new orders outpacing shipments, normalization of global supply chains and ongoing adoption Of our lean manufacturing principles, our driving throughput and capacity improvements as we continue to monetize A healthy customer backlog. Our strategic initiatives are also improving sourcing actions to mitigate parts shortages, Accelerating backlog conversion to shipments and increasing inventory turns to help mitigate backlog expansion. These initiatives are key drivers of gross margin along with operating leverage discussed previously. During the quarter, we have slightly decreased our inventory raw materials, Finished goods and component parts to $19,000,000 as of June 30, 2023, All due to improved inventory management, while at the same time supporting our strong revenue growth.

Speaker 3

With that, I will now turn it over to Chuck Shiley, our Chief Financial Officer, to review the financial results for Quarter and fiscal year ended June 30, 2023. Chuck?

Speaker 4

Thank you, Ron. Now turning to review our financial results in the quarter ended June 30, 2023. As Ron mentioned, revenue for the fiscal Q4 of 2023 increased by 7% to $16,300,000 compared to $15,200,000 in the fiscal Q4 of 2022. This is driven by the sale of energy storage solutions with higher average Selling prices, a higher volume of units sold and especially significant increases in our GSE sales. The gross profit for the fiscal Q4 of 2023 increased to $4,300,000 compared to a gross profit of 3,000,000 in the fiscal Q4 of 2022.

Speaker 4

Gross margin was 27% in the fiscal Q4 of 2023 as compared to 20% in the fiscal Q4 of 2022. This reflected higher volume of units sold, again with higher gross margin and just lower cost of sales as a result of the gross margin in the fiscal Q4 of 2023. This is contributing to our operating leverage we've discussed in the past. Research and development expenses decreased to $1,300,000 in the Q4 of 2023 compared to $1,400,000 in the Q4 of 2022. This is primarily due to lower expenses related to development of new products.

Speaker 4

Adjusted EBITDA loss decreased to 600,000 in the fiscal Q4 of 2023 from $22,000,000 in the fiscal Q4 of 2022. This is mostly driven by the improved gross margins. Our continued initiatives of business growth and operating leverage all contribute to drive this trajectory. Net loss for the Q4 of 2023 decreased to $1,500,000 from a net loss of $2,700,000 in the fiscal Q4 of 2022. This principally reflecting increased gross profit, partially offset by increased operating expenses along with some modest interest expense.

Speaker 4

Now turning to review our financial results in the year ended June 30. Revenue for the fiscal year 2023 increased by 57 percent to $66,300,000 compared to $42,300,000 in the fiscal year 2022. This is mainly a result of sales of Energy Storage Solutions with higher average selling prices, higher volume of units sold and the significant increases in the GSE sales. Gross profit for FY 2023 increased to $17,100,000 compared to gross profit of $7,300,000 in FY 2022. Gross margin was 26% in FY 2023 as compared to 17% in FY 2022.

Speaker 4

Again, reflects higher volume of units sold with greater gross margin, Lower cost of sales as a result of the gross margin improvement initiatives. Selling and administrative expenses to $17,600,000 in FY2023 from $15,500,000 in FY2022. This is primarily attributable to increase in outbound shipping costs, insurance premiums, New hours and temporary labor, some severance expenses incurred, increases in depreciation expense, Travel expenses increased, marketing expenses and facility related costs partially offset by decreases in our commissions, bad debt expenses, consulting and fees, public relation expenses and stock based compensation. Research and development expenses decreased to $4,900,000 in FY 2023. This is compared to $7,100,000 in FY 20 22.

Speaker 4

This is primarily due to lower expenses related to development and testing of new products by utilizing our in house testing equipment we have purchased. Adjusted EBITDA loss decreased to $3,700,000 in FY2023. This is significantly lower from the $14,100,000

Speaker 3

in FY 2022. This is

Speaker 4

driven by the improved gross margins and the higher revenue. Net loss for FY 2023 decreased to $6,700,000 from a net loss of $15,600,000 in FY 2022, principally as reflecting the increased gross profit and Slightly decreased operating expenses partially offset by increases in interest expense. Cash was $2,400,000 at June 30, 2023 as compared to $500,000 at June 30, 2022. Net cash Used in operating activities decreased to $3,600,000 in fiscal year 2023 compared to $23,900,000 in fiscal year 2022. Again, this is primarily due to a decrease in net loss, lower inventory levels and an increase in accounts payable.

Speaker 4

Available working capital includes our line of credit As of September 20, 2023 under our $15,000,000 credit facility which is Ralter Business Capital with remaining available balance is $3,800,000 and the $4,000,000 available under the subordinated line of credit we have. We recently announced that new $15,000,000 credit facility from Gibraltar Business Capital to fund working capital and to refinance the existing credit facility with Silicon Valley Bank. This facility has been used to repay The credit facility with SVB and along with our existing cash is intended to help meet Our anticipated working capital needs to fund planned operations to meet the demands of our growth trajectory for the foreseeable future. In summary, the substantial progress made reducing fiscal full year 2023 net Cash used in operating activities now positions FlexPower toward an improved cash flow trajectory in fiscal year 2024, supported by a reinforced balance sheet and strong Fortune 500 customer order backlog. I'd now like to pass it back to Ron to offer some closing remarks.

Speaker 3

Thanks, Chuck. Looking at the positive momentum in fiscal 2023 that Chuck just took you through. We are confident that we are on a strong trajectory toward near term profitability, while balancing with continued revenue growth, gross margin improvement and ongoing cost control initiatives. Our long term growth strategy continues to focus on the strong demand for sustainable energy. We believe the combination of existing customer orders and the acquisition of new customers who want the benefits of lithium ion technology business And drive continued revenue growth.

Speaker 3

Product quality, leading technology and service are key factors as to why we continue to attract and maintain business relationships, which will enable continuation of our growth trajectory that you've seen on the slides. For our technology and our proprietary technology by the way, we are now working to implement artificial intelligence features and capabilities into our Sky BMS Telematics platform, which delivers insight into fleet management, so customers can make more informed and timely decisions to maximize operational efficiencies. With AI, we can have the capability to anticipate and resolve issues sometimes before they happen, Addressing the number one driver in fleet management pain points and we want to minimize downtime of the equipment. And our current production facility should support annual revenue up to $150,000,000 given our facility footprint, 2nd shift build out and lean manufacturing implementation. Looking beyond reaching profitability And building on our success in the material handling industry, we are also focused on broadening our reach into related verticals such as warehouse robotics.

Speaker 3

With our operational strategy, including 8 assembly lines, We are well positioned to continue to leverage our capabilities as the adoption of lithium energy solution continues to accelerate. We will also pursue relationships and initiatives to ensure leadership in technology that expand The product and service value to our customers and then also to our shareholders in the end. And we ended the fiscal year supported by a new working capital line of credit of $15,000,000 with Gibraltar Business Capital to support planned growth with provisions to increase to $20,000,000 as Chuck had mentioned. In summary, we are well positioned to execute our strategy of electrifying commerce as we offer customers stored energy solutions to increase productivity at a lower cost during the product's life. We are encouraged by strong purchase orders and expansion of margins through improved sourcing and supply management, Ongoing process improvement and pricing.

Speaker 3

We continue to execute actions to Profitability. And further, we anticipate expanding into new markets, Having strong demand for our value proposition of high performance and service at lower total cost of ownership. I look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position in Lithium Ion Technology Solutions with our growing list of new and diverse Large customers. I thank you all for attending. And now I'd like to hand the call over to the operator to begin our question and answer session.

Speaker 3

Operator?

Speaker 1

Thank you. We will now be conducting a question and answer session. Thank you. Our first question is from Rob Brown with Lake Street Capital Markets. Please proceed with your question.

Speaker 5

Good afternoon and congratulations on all the progress.

Speaker 3

Thank you, Rod.

Speaker 4

Just wanted to get a little

Speaker 5

bit into the order activity. It appeared pretty strong in the quarter. Could you give us some color on sort of the uptick in orders you saw and what's driving it and maybe how that's playing out?

Speaker 3

Yes. Fortunately, we have a number Product lines and not only material handling, but GSE, which was really part of our strategy. And I mentioned we want Jenny, to add those lines because it's helpful. Because particularly during the last 6 months of this fiscal year In the last quarter, of course. We saw a big increase in deltas and Air Canada's Orders in shipping and which was really well received.

Speaker 3

It was some pent up demand from the supply chain disruption. And so that played well because it had been nearly zero for some period of time. And at the same time, as I mentioned In my remarks, we have seen some limited selected delays in New forklift deliveries from some of the major global OEMs being pushed out. So that didn't represent a losing any business, just deferring more to the future. So There was certainly the benefit of that diversification, of course, with all those orders, we have Small, medium and large packs and there's a little bit of difference in the gross margin Depending on the mix of those packs.

Speaker 3

So, those were the key drivers in the revenue.

Speaker 5

Okay, great. Thank you. And then, on the gross margins, you had some bumpiness in the different compared to Q3, I guess it was down a little bit. Could you expand on that? Are you sort of where you want to be on pricing or do you have

Speaker 3

more to go on pricing or what had the margin retrench a little Yes. It's a good question, Rob. We're always looking at pricing In the marketplace, particularly what we've gone through in the past 3 years with passing on price increases by vendors and the Abatement of a lot of those effects of the supply chain as we sit here now. But pricing is one of them. We've made progress in trying to achieve gross margin at Sustainable levels for product lines and it ranges larger packs tend to have a higher gross margin than the smaller packs.

Speaker 3

But yes, in fact, we were just discussing earlier today some potential pricing actions on A chunk of our business and not something we continually look at, but the Variation or lumpiness, however you want to turn it in the past couple of quarters, It is driven by really these factors I've mentioned, product mix can change some, model lines and As well. So that's all part of what we manage. We feel confident in our overall management of trend line. And as it relates to our forecast accuracy, which is critical to manage the business.

Speaker 5

Okay, good.

Speaker 3

Thank you.

Speaker 5

I'll turn it over. Yes, thank you. I'll turn it over.

Speaker 2

Thanks, Robert.

Speaker 1

Thank you. Our next question is from Matthew Galinko with Maxim Group. Please proceed with your question.

Speaker 6

All right. Thanks for taking my questions. I think you mentioned 2 new customers In the Q4, anything you can share about the market they're in or size or expected opportunity?

Speaker 3

Yes. Each quarter we've been adding 2 or 3 new customers, some are different in Some of the big 800 pound gorillas, which we try to really focus our effort on a very large fleet. Some of the more moderate fleets are important as well because they represent good diversity, good balance as part of our overall strategy Four larger fleets. We added 2 in the Pacific Northwest, and we also added A supplier who had picked up the business in the project, I don't know if you recall some quarters ago, We have a product and a project for 400 volt autonomous Shuttle vehicles of 8 people at limited speed. So we see that as a segment that is an adjacency And they picked it up and we understand they're going to expand that.

Speaker 3

So That's important. We like, as part of our strategy, expanding to larger packs, Whether they be 80 volt packs of material handling, 80 volts in GSE or more and also 400 volts in this case, That demand, the sophistication of our engineering capabilities and of course then To gross margin. So pleased to see that happening. Some quarters we get bigger bumps in the new customers, But it's all part of all the new customers have a timeline of how fast they order, how fast they adopt, many locations they have. So in summary, the diversification is very welcome and part of our strategy.

Speaker 6

Great. Thank you. And my follow-up, I guess really around, and apologies if you covered this earlier, but How your visibility is for revenue over the next fiscal year and Any just early, even qualitative comments on what we might expect Over the next year. I guess to qualify that a little bit, revenue ended The year a little lower than it entered the year Q4 versus Q1, but obviously we had the strong growth full year in 2023. So just how should we be thinking about the 2024 trajectory on the top line?

Speaker 3

Yes. No, good question. So we spent a lot of time looking at that as you I'd imagine. And again, we are we live by the ordering patterns of the deliveries of the new forklifts, Which is probably 95% of their business as opposed to replacing in the life lead acid battery. So depending on how all those orders flow and who it's from, you can really get Some variability in how that proceeds.

Speaker 3

At the same time, We're a number of our largest customers, a couple of them have been giving us letters intent for all of calendar year 2024 and 2025, they're non binding, of course. But certainly, the larger companies in the world where there's been Some battle scars from shortages of parts are very keen on ring fencing the allotment that they get theirs First, we're seeing that very encouraging signs, continued growth. All of our customers are Standing through their tens and hundreds of facilities and they typically do it 1 at a time and add them. And so you see that accumulation process. So we think this growth trajectory is going to continue to because of that.

Speaker 3

Also, In our the slides we have on our deck that are on our website show you All the accounts that we're in very early stages and a lot of them are household names that have very large fleets And bringing those new customers on are going to add to that. How much, how fast, it's a little uncertain. The other final element I would point to as we look to fiscal year revenue, As we said, we are in the process of rolling out some heavy duty models of our current offerings. And these are, for example, for companies like Subaru or Caterpillar that are Lifting heavy industrial items and need that heavier capacity. So we see really expansion of Tony, given those models, that we're just now starting to roll out over the next So we're optimistic for next year, but of course, cautiously optimistic, but very, very bullish on Over the next several years as all those factors I mentioned gain momentum.

Speaker 6

Great. Thank you. I'll jump back in the queue.

Speaker 1

Our next question is from Jeff Grampp. Please proceed with your question.

Speaker 7

Hey guys, thanks for the time. Ron, in the release you mentioned exploring and developing some partnership opportunities that could include vendors, technology partners and just kind of, I guess other various opportunities. So I'm wondering that can take a lot of different directions. Can you give us either maybe some examples of what you're assessing or maybe just Kind of high level the benefits you're looking to achieve through any of these kind of opportunities that you guys are thinking about?

Speaker 3

Yes, sure. No, it's Keene because it goes with our strategy, which I mentioned many times is to build scale. And we're executing to our plan right now, building scale organically, but certainly developing partnerships Where they make sense, where it fits with our strategy and with their partners we have that we can Trust and work with. So I mean, I've done a dozen acquisitions in my time and I could tell you it's easy to do one, a bad one and Integration is a big part, but the two areas that we are in early stages of are Expanding our capability with, for example, automation of Such projects as well related to production and leveraging the most efficient source To those ends, and also we have a partner who Is interested in licensing our packs in South America. We'll see the very early stages.

Speaker 3

We're not Committing on anything, I just want to give you some color of some of the types of things that we could do. Another one is technology. 1,000,000,000 are spent all over the world trying to get the next best increment of technology And the cells, lithium battery cells and we had some discussion going on one opportunity. So I think it's a little bit like in the world of acquisitions that some of you know, it's important To really explore these relationships because the timelines can be pretty long, but it's certainly part of our long term strategy.

Speaker 7

Great. That's super helpful. I appreciate that. And for my follow-up, You guys mentioned and highlighted the inventory being able to be worked down a little bit sequentially. How much more room is there to have that be kind of a source Cash or a bit of a tailwind on the cash generation side of the business in fiscal in the upcoming fiscal year?

Speaker 3

Yes, Chuck, can you handle that?

Speaker 4

Yes. We continue to work through that and we do see some opportunity to continue to monetize some more of that. What we've been seeing lately is order shifting around, so finished goods is higher than we would like it to be. I think we're running $4,000,000 to $5,000,000 typically. It should be down more around $2,000,000 to $3,000,000 So there's some space there.

Speaker 4

And then what we continue to do as we grow larger, we're able to push some inventory off the balance sheet to Like we have a Chinese supplier of truck adapters that holds it in their own inventory at their risk. So we can start to look at more relationships like that, work through common off the shelf parts and have them actually roll out to our property and stock rather than us making orders. So we spend a lot of time working on tweaking that to just get the most out of that. There's definitely a few million there, couple of million.

Speaker 7

Great. Thank you, guys. Appreciate it.

Speaker 3

Yes. Thanks, Jeff.

Speaker 1

Thank you. Our next question is from Sameer Joshi with H. C. Wainwright. Please proceed with your question.

Operator

Great. Thanks. Ron, Chuck, congratulations on the progress. I just had a couple of questions. I think you mentioned the AI initiative for the SKY BMS.

Operator

Should we look at this as additional functionality to remain competitive or should we consider this to be an effort to improve margins by like selling this as an add on service?

Speaker 3

I'm sorry, our sound wasn't very good. Could you repeat that? I couldn't quite Couldn't quite hear it.

Operator

Yes, yes. So basically the AI initiative for the SKYY BMS, should we consider it to be Additional service that could be improving revenues or is it to give additional functionality that will make your product more competitive?

Speaker 3

Yes. It's really both. I think it's very exciting. You read about AI every time you pick up something nowadays. But we have this Sky BMS Our battery management system firmware software, it connects the PAC to the cloud and then from the cloud goes anywhere and everywhere.

Speaker 3

And the capabilities that that affords are just limitless and we're real keen on it. Our CTO has Been leading that effort for a number of years now. And we're seeing given our experience we're a prime mover in this, we're the first ones to have You all listed batteries in 2014. And so having that experience and understanding the spectrum Of use, opportunities, environmental factors and our BMS is allowing us to Identify patterns early on, communicate them, communicate, needing Any necessary fixes to PACS to support people or to the customer before PACS might go down, If not attended to, can identify service patterns that are needed, can identify The remaining length of life of PACS is that they can balance the use of PACS over different pieces of equipment. Some use Energy faster than others and in short, to Help the asset management of their fleet.

Speaker 3

Now we believe this adds a lot of value. We're starting to sell it. It does help with margin as well, because it's essentially software based. That certainly is a plus, both the revenue and the margin. And I'd say strategically, it's particularly important because our customers, we have a long term relationship.

Speaker 3

And these Fortune 105 100 companies selected us because Of our ability and proprietary technology to have continue to have leading technology for them In the future, because it's very disruptive for them to change vendors. Now they can always add a vendor, but change vendors is very, very difficult. And a final point Is that one of our largest customers has asked us to partner with them in implementing a joint AI or Sky BMS or telemetry, if you will, With the telemetry of the forklift, because it has planned maintenance and other information needed to manage that asset With large and have it all in one location and one spot. So this really represents A breakthrough with customer base we have. So we're really excited about the future with this And being in a leadership position and being in a leadership position with the top global OEMs.

Operator

Great, great. Thanks, Ron, for that color. In terms of costs, I think there was question about around gross margins and you also gave some color on it. But it seems that the SG and A expense was also lower quarter over quarter. I think the 3rd quarter SG and A was 4 point 7 versus 4.1.

Operator

Should we read anything into that? Or was that just some non cash items?

Speaker 3

Yes, Chad?

Speaker 4

Yes. It's not to read anything. I think the thing to read in that is we are keeping it sustained. So that's The bigger point is the operating leverage. So we're not there would be some like you said some non cash items and non recurring type stuff hit.

Speaker 4

But We really want to keep that operating leverage going forward and keep OpEx stable here.

Speaker 3

Yes. And it's really We've spoken to this a number of times. In order to secure and particularly to keep these large customers that have these large fleets. We have to have the capability to deliver product on time and service and service on a timely basis. So it does take, to think of it this way, a minimum level capability in your fixed cost, your operating costs, your operating resources in order to do that.

Speaker 3

And if you look at our numbers that you've seen for a number of quarters now, Very impressive operating leverage of revenue growing much faster than operating expense. And we expect that to continue as we have made The investment in UL listings, our quality, lean manufacturing ISO 9,000 That we felt are necessary to be a leader, a sustainable leader in the sector. Great, great.

Operator

Thanks. And then the last, we are already towards the end of September, this quarter is coming to an end. I know for the fiscal 2024, you may not be able to give guidance. But for this next quarter, Based on whatever you have seen thus far, should we expect sequential or year over year improvements in the top line? How should we look this quarter?

Speaker 3

Well, I think this quarter historically for us has often been The weaker quarter because of some of the number of our large customers are beverage and Food delivery companies that do not like implementing new assets During the summer, July, August and even September. And so tend to shy away from that in How they pace their deliveries. So I think that continues. It wasn't quite so much last year, but again, We are seeing it. We are seeing it.

Speaker 3

Jeff, can you add anything to that?

Speaker 4

No, it's exactly it. We are seeing that typical seasonality we see in this July, August September quarter is typically down a little bit over prior quarters. And a lot of that is driven as Some of our largest customer used to call it just the summer months, they go quiet because they're too busy delivering beverages.

Operator

Got it. Understood. Thanks and good luck. Thanks for taking my questions.

Speaker 3

Okay. Yes. Thank you.

Speaker 4

Thank you.

Speaker 1

Thank you. There are no further questions at this time.

Speaker 4

I would

Speaker 1

now like to turn the call back to Mr. Dutt for closing remarks.

Speaker 3

Thank you, operator. I'd like to thank each of you for joining our financial results conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions or didn't get to them, please

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Key Takeaways

  • Revenue Growth: Fiscal 2023 revenue rose 57% to $66.3 million and Q4 revenue increased 7% to $16.3 million, marking the 20th consecutive quarter of year-over-year growth.
  • Margin Expansion & Cash Flow Improvement: Gross margin expanded to 26% for FY2023 (from 17%), adjusted EBITDA loss narrowed 74% to $3.7 million, and cash used in operations fell 85%.
  • Order Backlog & Customer Expansion: Customer order backlog climbed to $29 million at June 30, 2023, and Flux added eight new customers in FY2023, including entries into GSE and autonomous shuttle markets.
  • Strengthened Financing: A new $15 million credit facility from Gibraltar Business Capital replaces a $14 million line, supports working capital needs, and can expand to $20 million.
  • Technology & Capacity Plans: Flux is integrating AI capabilities into its Sky™ BMS telematics for proactive fleet management and readies its manufacturing footprint to support up to $150 million in annual revenue.
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Earnings Conference Call
Flux Power Q4 2023
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