Flux Power Holdings, Inc. (FLUX) Q3 2026 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Flux Power Holdings, Inc.'s fiscal third quarter 2026 earnings conference call. At this time, participants are in listen-only mode. At the conclusion of today's conference call, instructions will be given for the Q&A session. As a reminder, this conference call is being recorded today, 05/07/2026. If you require operator assistance, please press star then 0. I would now like to turn the call over to Joel Achramowicz of Shelton Group Investor Relations. Joel, please go ahead.

Good afternoon, and welcome to Flux Power Holdings, Inc.'s fiscal third quarter 2026 earnings conference call. I am Joel Achramowicz of Shelton Group, Flux Power Holdings, Inc.'s investor relations firm. Joining me on today's call are Krishna Vanka, Flux Power Holdings, Inc.'s CEO; Kevin Royal, Flux Power Holdings, Inc.'s Chief Financial Officer; and [inaudible], Flux Power Holdings, Inc.'s new Director of OEM Sales. Before I turn the call over to Krishna, I would 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, 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's 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-Ks, which can be found in the Investor Relations section of Flux Power Holdings, Inc.'s website at 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 is now my great pleasure to turn the call over to Flux Power Holdings, Inc.'s CEO, Krishna Vanka. Krishna, please go ahead.

Thank you, Joel, and welcome, everyone, to our third quarter conference call. As we anticipated and signaled last quarter, third quarter revenue was impacted by two factors: our largest material handling customer implementing a capital freeze and dynamic ordering patterns across the business. Late in the quarter, rising geopolitical tensions in the Middle East drove fuel prices higher, which further delayed some customer spending. Together, these headwinds pulled consolidated revenue below our expectations entering the quarter. Importantly, however, in both the ground service equipment business and with our material handling customer navigating their capital freeze, customer commitment to Flux Power Holdings, Inc. remains strong. We expect order activity to return to prior levels once these near-term headwinds subside. Given these headwinds, we moved decisively on cost. With our targeted headcount reductions and broader efficiency actions, operating expenses are down 30% versus the prior-year period. We continue to optimize our sales team, launching aggressive new marketing programs and expanding our OEM partner engagements. We have been successful in adding senior industry sales professionals to the team, and we are in the process of replacing our sales leader; we are anxious to have this position filled soon. Further, under new marketing leadership, we launched a comprehensive digital strategy spanning social media, lead generation, and brand awareness initiatives. We also had a strong showing at the MODEX show in Atlanta last month, one of the most important industry events on our calendar. The highlight was winning the Innovation in Sustainability Award. After a rigorous vetting process, including multiple booth visits from an elite panel of industry judges, Flux Power Holdings, Inc. was recognized for delivering an innovative sustainability solution not currently offered by any other company in our space. This award reflects our commitment to cleaner, more efficient, and holistic energy life cycle management from design through deployment to recycling. We believe no one in the lithium-ion battery industry does this better than Flux Power Holdings, Inc. Beyond the award, MODEX delivered on several fronts. Booth traffic was strong, with meaningful engagement from both new prospects and existing customers. We showcased recent advancements to our Sky EMS Fleet Intelligence platform, including mobile dashboards, real-time notifications, expanded data integration and API connectivity, and advanced reporting and analytics. We also featured our newly patented state-of-health technology, which we believe represents a significant advancement in battery life cycle management. I want to highlight another development driving new business activity. You may recall that we announced last quarter that we hired a new director to work with our existing OEM partners and to identify and cultivate new OEM partnerships. He has more than 20 years of experience working for material handling OEMs and their dealer networks. I will now turn the call over to our Director of OEM Sales to provide an overview of these efforts.

Thank you, Krishna. I am very happy to be with Flux Power Holdings, Inc. I am thoroughly enjoying working with our existing OEM partners and also working with other OEMs to introduce them to Flux Power Holdings, Inc. and identify how we can work together. I would like to highlight a few data points related to the global forklift market and the status of the electrification of the forklift industry. The global forklift market was approximately $87 billion in calendar year 2025. The electric share of new purchases in North America was 65% for the same period. Lithium-ion penetration stands at 32% at the end of calendar year 2024 and is projected to exceed 70% by 2034, with calendar year 2027 being the year that lithium-ion overtakes lead-acid as the preferred power source for electric forklifts. In addition, the North American forklift market is projected to grow at a compound annual growth rate of 17.2% through calendar 2031. These factors, along with Flux Power Holdings, Inc.'s strong product portfolio, are the primary reasons I am excited to be a part of the team. I have already been in contact with several OEMs. I am pleased with the responses I have received and look forward to securing new OEM partners. I will now turn it back over to Krishna.

Thank you. The company has also been working closely with existing OEM partners to optimize our pricing structure for our white-label products. We believe this initiative increases our competitiveness in the market and has resulted in increased volume commitments from our existing OEM partners. As a result of these developments, along with the proactive efforts I have outlined above, we are seeing positive indications of increased order activity going into the fourth quarter and expect sequential revenue growth of approximately 20% in the fourth quarter. Additionally, we are aggressively working to improve margins through near-term supply chain optimization, vendor renegotiations, and product redesign efforts. We believe that these initiatives will have a significant impact on our operating model and will improve our profitability. I look forward to providing additional details of these new efforts and our results on the next earnings call. Let me be clear. While I am excited with our new initiatives and we believe we are positioned positively in the market, I am not satisfied with the results. We are taking every step we believe is necessary to meet and ultimately exceed historic revenue levels, achieve profitability, and build a stable recurring revenue stream business. We have proven our potential to get there based on our Q2 performance. To achieve this profitability goal, the Flux Power Holdings, Inc. team remains intensely focused on the five strategic initiatives that continue to guide us, which include: number one, profitable growth; number two, operational efficiencies; number three, solution selling; number four, building the right products; and number five, integrating value-added software. We continue to make progress on these initiatives each quarter as they remain a top priority for the company. With that, I will now turn the call over to our CFO, Kevin Royal, to discuss our third quarter financial results in more detail. Kevin, please go ahead.

Good afternoon, everyone. Revenue for the third quarter of 2026 was $6.6 million compared to $16.7 million in the same quarter last year. Gross margin in the third quarter was 27.3% compared to 32% in the prior-year period. The year-over-year decline in gross margin was largely due to changes in product mix and lower volumes resulting in higher unabsorbed labor and overhead. Operating expenses in the third quarter of 2026 were $4.8 million compared to $6.9 million in the third quarter of 2025. The year-over-year decrease in operating expenses primarily reflects cost reduction actions taken to reduce headcount and streamline the operating model. Net loss for the third quarter was $3.2 million, or $0.15 per share, compared to a net loss of $1.9 million, or $0.12 per share, in the third quarter of 2025. Excluding stock-based compensation, third quarter non-GAAP net loss was $2.9 million, or $0.14 per share, compared to a non-GAAP net loss of $1.1 million, or $0.07 per share, in the prior-year period, which also excluded costs associated with the multiyear restatement of previously issued financial statements. Adjusted EBITDA for the third quarter was negative $2.5 million compared to negative $500 thousand in the same quarter a year ago. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $400 thousand compared to $1.3 million at the end of our 2025 fiscal year. I will now hand the call back to Krishna for closing comments before we open it up to your questions.

Thank you, Kevin. In summary, I want to emphasize that the entire Flux Power Holdings, Inc. team remains fully focused on executing our key strategic initiatives as we navigate these short-term challenges. We believe the markets we are targeting in the global lithium-ion industry continue to offer expanding growth opportunities. In addition, our leaner cost structure, margin improvement initiatives, new product development, and enhanced sales and marketing efforts are designed to position us for a return to growth and profitability as revenue recovers. Thank you for your continuing interest and support of Flux Power Holdings, Inc. Operator, you may now open the line for questions.

We will now open the call for questions. To ask a question, please press star then 1. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Mr. Vanka, you have a clarification.

Yes. I want to clarify the sequential revenue growth. It will be approximately 20% in the fourth quarter. I want to make sure that came out clearly; there was some double connection on the line.

The first question comes from Sameer Joshi with H.C. Wainwright. Please go ahead.

Good afternoon, Krishna and Kevin, and welcome to the team. Thanks for taking my questions. Maybe the first question is for your Director of OEM Sales. You highlighted the market growing at around 17.2% CAGR to 2031. What is the approach you are taking to grow faster than this 17.2% for Flux Power Holdings, Inc.?

I will start the answer, and then we will have our Director of OEM Sales follow up. Our approach is to continue working with existing OEMs to further gain share of wallet, as well as work with new OEMs so that we are not only certified, but eventually work more closely with them.

Thank you, Krishna. That is a very good question. We are working with OEMs—some under nondisclosure agreements—whose path forward in the market is to transition the majority of their product lines to electrified lift truck models. That aligns with our goals to grow with them and ahead of them, so that we are ready for the market as they continue to phase lead-acid out of their operations.

Understood. Krishna, you mentioned 20% sequential growth. Do you have any further visibility beyond that for 2027 in terms of the pipeline you are looking at and maybe orders that are already on the books that will be executed in the fiscal first and second quarters?

We are definitely seeing increased activity, and we believe we are coming back up from this quarter—picking up 20% this quarter—and then hopefully continuing that trend forward. The geopolitical situation is not helping, so we hope that will subside soon. We are investing significantly into marketing. We have optimized pricing as we mentioned on the call. We are working closely with our Director of OEM Sales on more OEMs, and we are looking at a new sales leader. All of the above should allow us to continue to grow beyond Q4 and into Q1.

Understood. On your comprehensive social media strategy, can you give a bit more insight into what that entails, and does it incrementally add to operating costs going forward?

Our digital strategy focuses on generating more qualified leads for our sales team, especially as we target top fleets. This includes collecting information through social media and running significant account-based campaigns. We are seeing good feedback. MODEX proved that we are not only getting good leads, but also quality leads as we follow up. We are doing all of this within the existing budget by focusing the team on what is important. With Michelle, our Director of Marketing who joined about six months ago, we put this program together and started executing in January. We are starting to see the fruits of it, and we are positive it will help build pipeline and backlog.

Understood. Thanks for taking my questions. Congratulations on the success at MODEX, and good luck for the rest of the year.

The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.

Good afternoon. Thanks for taking my question. Just to clarify the outlook, it is 20% growth off what you reported here in Q3. Is that the baseline?

Yes, that is correct—sequential.

And then on visibility for the lifting of the capital freeze, do you see that coming, or is that still to be determined?

We do see indications of an eventual lift, but not this calendar year.

Thank you.

Again, if you have a question, please press star then 1. The next question comes from Craig Irwin with ROTH Capital Partners. Please go ahead.

Good evening, and thanks for taking my questions. Can you compare the relative levels of activity you are seeing in the electric forklift market versus the airport ground equipment market? You have introduced new technology to these customer groups over the last few years with specific product introductions. Can you help us unpack relative activity in these two markets and whether some of these product changes are helping you generate leads that will convert to revenue over the next couple of quarters?

Thanks, Craig. Our solutions are being very positively received. We continue to lead the GSE space with respect to lithium-ion solutions through our partner. Any lag we are seeing is due to broader market dynamics, not our product portfolio or GSE in particular. The forklift market has been moving up and down with tariffs and sensitivity to capital spending, and we were particularly affected by one customer's capital freeze, which was beyond our control. Overall, we are seeing increased activity. There was a pickup during the tariff changes, and then the war added some stress again. In both cases, we are looking at growth. In forklift, we are working closely with OEMs and dealerships and pursuing more certifications. In GSE, we remain committed to working with our partner as they bring new airlines into the mix.

Thank you. Given the sequential progression in revenue, I was pleasantly surprised that margins were as strong as they were. Can you talk about what went right on gross margin and how this should impact progress over the next couple of quarters toward your longer-term targets of 40%?

We have focused on improving product cost, working with existing vendors in some cases and, in other cases, creating competition by putting certain subassemblies out for bid, thereby lowering cost. That work is ongoing. We have seen a fair amount of progress that has not fully rolled through cost of sales yet because we hold inventory of older, higher-priced components. We also have additional plans for product redesigns, which take longer, so we will not realize those improvements for probably 12 to 15 months. We are happy with the progress thus far from working the supply chain side of the equation.

Understood. Last question is on the balance sheet. Kevin, inventory management looked good. What stood out was approximately $4.6 million in cash in from receivables. Did you change terms, offer discounts, or were there specific items that allowed you to cut receivables by more than 50% in the quarter?

We did not change terms. We have been fortunate, even with deteriorating conditions in some cases, to hold the line on payment terms. We had strong collections from last quarter’s shipments, which helped reduce receivables by the March 31 balance sheet date.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Krishna Vanka for any closing remarks.

Thank you again for joining today's call. We look forward to speaking with you all again on our Q4 call during the September timeframe.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.