Flux Power Holdings, Inc.

Greetings, and welcome to the Flux Power Holdings Fiscal Second Quarter 2022 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 Justin Forbes, Director of Business Development at Flux Power. Justin?

Good afternoon, and welcome to Flux Power's Financial Results Call. Today's conference call is being recorded. Your host today, Ron Dutt, CEO, and Chuck Shiawee, CFO, will present results of operations for our fiscal year 2022 second quarter ended December 31st, 2021. A press release detailing these results crossed the wires this afternoon at 4.01 p.m. Eastern Time, and it's available in the investor relations section of our company's website, fluxpower.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. Your caution 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 that 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 our predictions. You should also review our most recent Form 10-K, and Form 10-Q form our complete discussion of these factors and other risks, particularly under the heading Risk Factors. At this time, I will now turn the call over to Flux Power CEO, Ron Dutt.

Thank you, Justin, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2022 Financial Results Conference call. Our second quarter continued our trend of strong revenue growth and customer demand for our lithium ion battery packs, along with the addition of new customers and product improvements. Revenue increased 19% to $7.7 million, compared to a year ago $6.5 million, making our 14th consecutive quarter of year-over-year revenue growth. In the second quarter, we received $19.8 million in customer purchase orders from existing Fortune 500 and new customers, an increase of 51% from the first quarter of fiscal 2022, and over 200% from the same period a year ago. Meanwhile, shipments increased 20%, 24% over prior quarter Q1 22, in 23.8% over the year-ago quarter. To highlight a few of our successes, we received multiple orders for our large Class I X-Series battery packs from a global consumer appliance manufacturer, and a new order for GSE, or Airport Ground Support Equipment, battery packs from an additional large domestic airlines. We also received multiple orders for our C-Series battery pack, signed for our solar-powered EV charging station partner, Beam Global, who recently reported record deliveries, pipelines, and backlog. For the second quarter, customer order backlog increased to a record $31.4 million as of December 31st, 2021. This reflects the growing demand for our products from new and existing customers and our continued expansion into new verticals. And then in January, we also strengthened our corporate governance with the appointment of Chi-Min Bo-Lin, a 25-year global technology veteran, to our board of directors as an independent director, and to serve as a member of the audit committee, compensation committee, and nominating committee. Welcome, Team N. As we put our fiscal Q2 results in perspective for the full year of 2021, the December ending quarter reflected the impact of the global supply chain disruption everybody's familiar with. increased shipping delays of key parts throughout the year, triggered delays in production, and increasing purchase orders from growing customer demand, as I've alluded to. This resulted in pre-purchasing of inventory given the production delays. While we did not lose customers or orders, the increase in inventory spending was, fortunately, supported by our capital rates of $14 million in September. Related to those delays, we experienced increases in the prices of steel, electronic components, and shipping, which impacted Q2 gross margins. While we implemented a price increase in Q2 2021 on new orders, we continued to ship orders from our backlog that were ordered prior to the increase at the higher component costs. This supply chain impact occurred as we were supporting product design changes for new cells that will bring lower costs and better features in 2022. I will outline actions to restore our gross margin improvement path as is highlighted on slide five for those of you on the webcast. In addition to the price increase, we also initiated a design cost reduction project to improve gross margins across our product line. We took actions to improve our supply chain efficiency and supplier management. such as vendor metrics, better tracking of accountability, and alternate suppliers to replace vendors that we have outgrown. In fiscal year 2022, we have made changes to our ERP purchasing methodology to avoid excess inventory, particularly in the race-defined parts that are available. also to rebalance supply chains to leverage low-cost sourcing, and also to improve payment terms with our suppliers. Given the recent growth of our product lines, an impactful action has been taken to better align our suppliers to meet our production demands while taking into consideration the current supply chain disruptions. Additionally, we are pursuing sourcing strategies in Mexico and selection of other vendors to align better our growing needs and increase timing demands. We've been aggressively resolving supply chain issues with our vendors. Our pricing actions with customers have a delayed effect due to the build-up and open sales orders already received. However, our price increases with customers are intended to help offset cost increases already incurred from suppliers. And our design cost reductions from our 10-year accumulated pioneering experiences with lithium ion technology is meant to provide the remaining element of achieving our gross margin targets. Our strategy for the past several years has been to capture leadership in the lithium ion sector for industrial and commercial equipment. We are pleased with being chosen by Fortune 500 companies as their supplier of choice. This refers to customers, as shown in our website presentation, such as Delta Airlines, PepsiCo, Caterpillar, and a number of other household names. Our vision is to be a leader in providing best-in-class product and service to material handling, energy storage, and related sectors. We have confidence in these goals and the credibility in sustaining relationships I have mentioned with those household names. At the same time, we're committed to reach profitability as soon as possible. While our strategy continues to aggressively maintain our leadership position and invest in our growth, we are equally as aggressive at improving our gross profit margins and preserving our cash and pursuing cash flow break even. I'm pleased with the specific initiatives and actions were taken to meet that goal. Our vision is to then move forward to expand bringing our proprietary energy storage products to serve the rapidly growing applications of lithium ion technology, as most of you know, and to lead the innovation of energy storage solutions, including engaging partnerships to leverage our resources. During the second quarter, We experienced the full impact of the supply chain disruption, but without time to build and collect from the order backlog. We are pleased to report that we have a line of sight to accelerate our trajectory to cash flow breakeven. We do acknowledge the unprecedented level of supply chain uncertainty and the potential for continuation. Accordingly, we have chosen to report our FY 2022 Q2 10Q going concern language. Finally, we increased our purchasing and related inventory to $9.6 million at December 31, 2021, to mitigate supply chain disruptions from increasingly hard-to-acquire microchips and electronic components while utilizing, as I said earlier, our capital raise of 14 million in September. These actions were taken to protect customer orders and customer relationships, which for us are long-term. With our recent production throughput improvements, including launching lean manufacturing, a second shift to launch this month, and a major quality initiative to reduce costs, we expect to achieve quicker turns on this customer backlog. A strategic decision was made to secure inventory to align our backlog to deliver our customer requirements. While this as well outside our inventory turnover goals, we felt it was necessary to secure this inventory given the current supply chain inconsistencies to achieve our future financial goals while meeting our customer expectations. Looking beyond the remaining 2022 fiscal year and building on our success in the material handling industry, we intend to broaden our reach to include stationary energy storage and related sectors. We are focused on delivery of our stationary energy storage product to Beam Global for their solar-powered EV charging stations. With our operational investments, we are positioned well to continue to support this sector as EV adoption continues to accelerate. On the technology front, We have commenced deployment of our Sky BMS Telematics product for remote fleet management and monitoring that delivers battery-packed data to optimize performance and customer fleet tracking. I'm happy to report the customer interest has been very positive. Now, Turning to review our financial results in the quarter ending December, revenue grew 19% to $7.7 million in the quarter as compared to $6.5 million a year ago quarter. Revenue grew 27% to $14 million for the six-month ended period December 31st, 2021, as compared to $11. million in the six months ended December 2020. The increased revenue was primarily driven by sales of battery packs with higher selling prices of products sold, including greater sales to existing customers as well as initial sales to new customers. In the second quarter of 2022 alone, we booked 19.8 million in new orders. While there can be some seasonality with orders, clearly strong customer demand continues. Gross profit margin decreased to $1 million in the quarter, or 13.6 in this fiscal second quarter of 2022. As compared to gross profit margin of $1.5 million, or 23% in the same year-ago quarter. Gross profit margin increased to $2.5 million, or 18%, for the six months ended December 2021 as compared to the gross profit margin of $2.4 million, or 22%, for the six months ended a year ago. Gross profit in 2021 was affected by higher costs for steel, electronic components, electronic parts, and common off-the-shelf parts during the quarter and partially offset by higher revenues associated with increased product sales. Taking a look at our gross margin trajectory as illustrated on the slide for those watching, Our gross margin improvement was impacted by the pandemic during the last two quarters. While the supply chain disruption hit us hard, we have taken aggressive actions with our suppliers. Our pricing strategies, product redesigns, and manufacturing initiatives to regain our previous trajectory. Selling and administrative expenses increased too. $4 million in the fiscal second quarter of 2022 from $3.1 million in the same fiscal period of 2021, reflecting increases in outbound shipping costs, personnel-related expenses, insurance premiums, and sales and marketing expenses. R&D expenses increased to $2.1 million in the second quarter, compared to $1.6 million and a quarter a year ago, primarily due to new product development activities and their related OEM and UL certifications. Cash usage, as described earlier, supported our actions to protect our customer orders, given global product shortage and delivery delays. We are actively working to reduce inventory balances as we move through this pandemic-caused disruption. We ended the second quarter with $7.9 million in cash and additionally have our credit line with Silicon Valley Bank with the line recently increased from $4.0 million to $6.0 million as an alternative resource to manage working capital needs. With $19.6 million in product inventory, we will do everything in our power to build, produce, and deliver product timely. In summary, we are well positioned to create long-term value for our shareholders. Looking ahead into 2022, we are intensely focused on our strategic initiatives to increase profitability, mitigate ongoing global supply chain disruption, and deliver upon our record customer order backlog. We are seeing strong interest from both investment funds, customers, and vendors, or products and businesses that are aligned with ESG, or environmental social governance, values and impact. Well, FlexPower is at the forefront of sustainable products, saving customers tons of carbon dioxide from our efficiency. and empowering our drive to create more sustainable material handling and GSE solutions as we continue expanding into emerging application and adjacent verticals. I look forward to providing our shareholders with further updates in the near term as we continue to leverage our first mover position in lithium ion technology solutions. With our growing list of new and diverse, large customers, which provide validation of our strategy. We also hope to see some of you at the upcoming 34th Annual Roth Conference in March, and also our investor analyst facility tour planned this year at our headquarters in Vista, California. I thank you all for attending. And now I'd like to hand the call over to the operator to begin our Q&A session. Operator?

At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone to indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Craig Irwin with Roth Capital Partners. Please proceed with your question.

Good evening, and thanks for taking my questions. First, I should say congratulations on that $20 million in purchase orders. That is a big number and quite an accomplishment. I wanted to start by asking if you could maybe give us a little bit more of a breakdown. What was the relative contribution maybe from airlines to and your other major customer groups to that $19.8 million you recorded. And, you know, as a second part of the question, the $31.4 million backlog, how much of that approximately is deliverable over the next 12 months?

Yeah, no, thanks, Craig. Thanks for jumping on. The backlog, we're going to work most of that backlog. It should be delivered by summer, by the end of June. So it's front-loaded in the calendar year. So we're out to hustle on our production. We've got key customers that, you know, they're getting their forklifts and other equipment delivered and looking for the batteries. Fortunately, there's a long lag with forklifts as well. But to your question on that backlog, we have – Delta Airlines has a big piece of that, more than 10%. Electrolux has a piece that's more than twice that. PepsiCo, of course, as you know, is our biggest account, has quite a bit more than that, a leading customer. Caterpillar has a good chunk. And we've got quite a few other companies. But those are some of the marquee names. Beam Global, you know, I mentioned earlier, just doubled their pacing. We build and ship them packs every week on a regular basis. So they're upping their opportunities. And so we're seeing a doubling there. So we are optimistic on that front. Does that help, Craig?

That definitely does. That definitely does. So it's wide-based, tier one customers. And, you know, many of those, I think, are things you've been pursuing for a long period of time. So it's nice to see them all bearing fruit now. I wanted to ask a little bit about the progression into the March and June quarters as you close out your fiscal year. You know, I know this environment is challenging. tricky as far as overall visibility but with your investments in the raw materials to make the deliveries and you know a little bit more customer confidence out there it sounds like you know how do you feel about the shape of the the growth curve which we look into the third and fourth fiscal quarters you know

we can't build packs fast enough to keep up with the demand. And so we see robust quarters. And however, as you've seen this past quarter, if we can't get the electronic components, these isolator chips, everybody's fighting for them. Gigavac contactors, other components are the ones everybody's chasing all over the world. So it certainly dampens what we could do revenue-wise in the quarter, as I've kind of beat that drum pretty loudly here. But I don't think anybody projects that the supply chain disruption is over. We do see signs, though, very positive signs of our suppliers and ourselves working hard to mitigate a lot of those impacts. We see some indication of steel prices coming down a few Yeah, there were 100 ships at the port to cause delays. So we see some of that. But we are working on that backlog for the next two quarters and shipping just as much as we possibly can. The one thing we don't want to do is purchase significantly more material and inventory than will be allowed under supplies chain potential constraints. So that's the balancing act. We're continuing to receive orders weekly and on out beyond this year as well. So the growth is there. We're implementing lean manufacturing, a number of other measures. Look, we're an emerging growth company. We're building all the time our processes, caliber of people. to do this. It is very exciting. Does that help, Craig?

Yes, absolutely. So, last question, if I may. Your SG&A growth seems to be outpacing your revenue growth, you know, and we can call this maybe a little bit material. Can you maybe break out any items you would call one-time items as far as your certification costs or other items that are unlikely to repeat? in the next couple quarters?

Yeah, are you referring to just SG&A or all operating expense?

Well, we could do either, right? SG&A was $4 million up from 3.1. R&D was up, you know, 2.1 from 1.6. Both of them had fairly substantial growth compared to your 19% top line.

Yeah, yeah, you know, it's a good question. It's one that's been frustrating. There's a variety of things. I'd say you have to cut several buckets. One, insurance premiums have just gone through the roof, as a lot of people know. Our public company expenses are to ensure that we're in touch with the market, and things we need to do certainly have contributed something. There's a slide, I think, in our website that shows Our packs are all over the country. Well, all over the country means we need to support them. Now, we use equipment dealers and battery distributors to support that, but it does take more effort on our part. What we're doing to mitigate some of these things with SG&A is to expand our certified people on the ground in those areas so we're not shipping packs back and forth. increasing costs from that as well. As we look forward, we've always kind of forecast those operating expenses not to increase and get a lot of leverage from the revenue growth. But as you say, this past quarter, You know, that's not very evident, but what's going on on the ground. Another one, for example, in R&D has been up because we migrated from our calc cells to E cells, and that whole effort took at least a million dollars, and a lot of that was in the quarter. That's non-recurring. The other one that was big was the 100% increase in shipping costs. All our outbound shipping costs are in OPEX. That's been a huge hit. We hope that starts to recover. I can't imagine that one continuing as well. Some of those things are temporary or hoping that they will be mitigated as the supply chain disruption lessens.

Thanks again for that, Culler, and congratulations on the nice revenue this quarter.

Yeah, thanks, Craig.

Our next question is from Samir Joshi with HC Wainwright. Please proceed with your question.

Yeah, thanks, Ron. Thanks, Chuck, for taking my questions. The inventory of 19.6 million, how much of that is finished good inventory, and what proportion of that is the inventory that you are experiencing supply chain problems from? For example, the electronics and the chips.

Can you give us a... Yeah, yeah. You know, the finished goods is probably two or three million of that. And in terms of the mix of other components, cells is probably the single biggest one. Electronic components and steel, you know, are next in line. So they take a big chunk of that. They're longer lean items. And there are some parts, the electronic parts, by the way, there's some that there have been such a toilet paper run and global chase. We have, our engineers have gone out and bought some of those and put them into consigned inventory so that when our board assemblers need them, they'll have them and we won't run out. So that's part of our mitigation strategy that we probably wouldn't have had. And there's, I don't know, a couple million of that as well. Yeah.

1.3 million just stuff bought for other vendors.

Right, right. So then just digging a little bit deeper there, when you built up this inventory, were the prices already elevated or it was before you saw increases in prices?

You know, the price rise, you know, when COVID came along in March 2020, We didn't see a very big effect for a while. And I think there was just a delay of even our suppliers raising prices along with the other dynamics that we're building. And as they built it, we really started to see it more in June. Chuck, would you say?

Yes.

In June. And then it really started to accelerate in October, November, December. And so I think... That period, hopefully, is the hardest hit. But we'll see. Who knows? But those prices were definitely going up through that period. And so we put out very significant price increases to our customer in October. But again, there's a lag with that, as I mentioned.

right right so so then uh just combining uh an answer you gave uh for to craig about uh the 13.1 sorry 31.4 million of backlog uh significant portion of that to be delivered before june uh and uh juxtapose that with the 19 uh minus three or four million uh of finished good inventory uh which will be your raw material inventory uh so it seems like uh for the rest of the fiscal year, you do have inventory enough to satisfy the backlog. Am I reading it right or am I missing something?

Well, you know, if you look at the numbers, you say, well, why don't you have enough inventory? And the simple answer is in the complexity of the purchasing and the long lead items versus non-long lead uh so and they con and the committed contracts we have on buying inventory we're trying to push out some of those po commitments we have in our suppliers so we're working we've been working hard on that uh doing some of it but there's there uh uh it's not possible in all cases so there's going to be some some some purchasing uh that's for future use um and some for parts that have been hard to get that we get at the last minute.

Right. And from a money standpoint, they're small parts. These are connectors or some, you know, small item that we're chasing down that we're getting more and more confident we're going to find. It's not big dollars, but you still can restrain getting stuff out the door.

Right, right. No, thanks for that, Taylor. And then the gross margin improvements you're targeting, of course, it will come from recovery of some of the gross margin headwinds that you have faced now. But it seems you are also working on lowering material costs and improving design. And I think there was also some talk about adding production lines in the past. Yeah. Yeah. Can you explain that?

Yeah. Yeah. No. We're adding a second shift now, this month, as we speak. And the second shift will not be a full second shift yet, but it will be a doubling of our large-dollar, high-volume packs, which include our Class I X-Series, the large pack, the $20,000-plus battery pack, and similar packs that go on the airport trucks as well. So that, in fact, has been one of the places of the most urgent need to accelerate our production. So I'm real pleased with that. Our VP of operations is doing a great job with that, along with implementing lean manufacturing, which we'll cover many months ahead.

okay thanks for that color and just one last one you briefly mentioned sky BMS can you give us a little bit more color on what kind of customers you are talking to what the level of stocks are and when should we start seeing initial revenues and then significant revenues yeah you know I've been talking about that for a number of quarters and we initially started

delivering that last August to some customers, and it was really more of a pilot phase with PepsiCo. And we had used it ourselves internally just to track packs out there, our engineers, to monitor and know what's going on with the packs. But PepsiCo said they looked at a lot of telemetry, and ours was the best they'd ever seen, so they wanted it on all their larger packs. everything but the walkies, you know, the walkie-pallie jacks. So we're putting that on there, and we're charging for it. And we – what we try to do is we're really moving toward, like, your XM radio where you get it, and then if you want to keep it, you have to pay for it. Because once we found that once customers see this and understand it – Everybody's heard of telemetry. They got telemetry all over the forklifts. And half the time, the customers don't use them. But we found that once they see it, they love it and want more. They get customized reports. They get real-time reports, which we don't know of any of our competitors in lithium-ion doing that. I'm sure they'll be catching up. But we see that as a platform to expand, adding new features on a regular basis, downloading updates, downloading new calibrations for different applications that the PACs may go through, corner cases, extreme conditions. So we're really excited about it and see that as a differentiating feature.

Great. Thanks a lot, Ron, for taking my questions. And congratulations on a great quarter despite the headwinds. Thanks.

Yeah, thanks, Samir.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. Our next question is from Chip Moore with Hutton. Please proceed with your question.

Hi. Thanks for taking the question. I wanted to follow up on gross margins, right, so number of actions underway, whether it's pricing or product design or supply chain. So maybe you can help us sort of near-term, next couple quarters, you know, given product mix and backlog and things like that, versus a bit, you know, mid-term and sort of line of sight on 30% margins, if you could.

Yeah, yeah. Let me start out with that, and then I'm going to ask Chuck to fill in the blanks that I don't have. But gross margins, as you know, are a hot topic. We put out pricing in October. We see opportunity for another round now. And there is a little bit of judgment put in with that. But I think it's there. Everybody's getting price increases. Everybody's got material costs. And so we think we have to – that will be a big element in recovering our – but it's going to take some time. As we mentioned, we've got a lot of backlog orders there that we're We're committed before that. But that's a big one. Our engineers are designing out some cost in the steel and the number of welds, the number of turns, and sourcing to Mexico. Our VP of operations has a lot of experience with some high-quality vendors in Mexico. We can reduce piece costs on those and still have a very good supply partner. And then in Q4, and some of these things are going to take a little time. I mean, I'm talking about them now. We're working on them, but there's a bit of implementation and launch time, as you would guess. But it's real, very, very real. In Q4, Chuck can probably talk about this. Our projections based on all of our planned shipments are really based on current backlog we have. And there's a much bigger increase in the large packs, which have higher prices and typically higher gross margins. So we hope to see a real impact of that. And that really gets back to the high-demand lines I mentioned earlier, our Class I offerings and our – airport GSE offerings. Chuck, can you add some color to that?

Yeah, and I think that a lot of this is PAC mix, and also, of course, like any business, we have fixed costs, like rent expense or something. So as revenue increases, that rent is still there. So gross margins are naturally going to go up based on some fixed costs that we have there as well. But definitely, it's heavily driven off of the PAC mix, which is heading towards these bigger PACs that have higher margins and, you know, being Something we can talk separate about as well if you want a little more detail.

Yeah, no, that's helpful. Just to walk through the different pieces.

Oh, and yeah, and Chip, you know, one other thing that we're, and honestly, I don't know how big this is going to be, but it's like the right thing to do. Everybody's running into chip problems, and I'm not talking about you, Chip. Not very funny, but we're actually trying to use Tesla's playbook a little bit of our engineers and supply guys trying to source some of these electronic components that are not in such high demand and or scarcity. so that we can get them. And so the engineers need to do a little, uh, development and testing modest work on our, uh, DMF, our circuit boards to do that. So, you know, I serve that up more as an example of the kinds of things we're doing to shake the bushes, uh, to move this gross margin. You know, as I said before, we're an emerging company. We're, we're pioneering these things. We're looking at everything. Um, we know that this is getting gross margin up is, uh, as an extremely urgent matter of business. And that's what we're doing as well.

Okay? Yeah, no, that's helpful, Ron. Maybe one more on, you know, given the inventory bill that we've talked about and executing on backlog here, you know, sort of front load this fiscal year. How are you thinking about cash burn dynamics in the second half? Um, you know, I imagine some of your customers, that's an important thing. And you mentioned the going concern. So just, just curious if you could help us there.

Yeah, no. Cashburn is a big one. You know, I mean, we're, we're, we're trying to deal with this backup in the, in the pipe here, if you will, from the supply chain. And, and, uh, um, we're going to do everything I can, as I said, to, uh, build and ship. Everybody's learning more lessons in how to deal with the supply chain backup. But we believe we can, with the added assembly line, our improved processes on dealing with scarcities and and better planning, given a better understanding of what can be late, what's not late, can tighten up some of that efficiency in the system. But Chuck's got a forecast. We update it a lot, as you could expect. I think everybody is these days. But we're doing everything in our power to use the capital that we have. I think, Chuck, do you have anything to add on that?

No, I think it's just a pure uncertainty. So, you know, as you look at this, we've been caught out with stuff that, you know, a vendor says, I got it next week, and all of a sudden they're like, oh, I don't have it because the vendor before them promised it. So it's just not a cash issue. It's more of an uncertainty of is the supply chain getting better or not. We'll manage through it. We have no problem. We have access to money. But it is one of those things where we have to just look at and assess that is there risk? Yeah, there's risk. We don't know what's happening in the supply chain.

I'd say there's another element here as well, though, when we look at the impacting forces. We do see there's probably a lesser need to overstock our inventory. in that defensive posture we were taking. There was more uncertainty as what was really going on. There's still uncertainty, but I think that matters. I think it matters a lot. So we're going to do the best we can to manage that inventory down. We've got aggressive targets, goals to bring it down each month. Our purchasing activities, moving committed purchasing out, as I mentioned earlier. So if All of that we hope drives cash to be satisfactory for us and improve and drive. Our drive is like driving to the end zone of cash flow break even. So all of these supply chain initiatives, gross margin, operating expense, we've got initiatives in those areas as well to be as efficient, lean, even down to, you know, it's very important to get the right person and the right job, address any rework and efficiencies we have. So we have a major quality initiative that we're initiating. We just hired a new, very, very competent, experienced director of quality. So I think all these things play to building momentum in the direction that we're trying to head here because our future is so good. And our vision and our plan is to be this vendor of choice. So as part of that, my experience has been mostly with large companies. If that is your goal, you need to be as efficient, you need to do all these things we're doing. So we are on that march. Absolutely.

Great. I'll take the rest of mine offline and echo the congratulations on the great order flow.

Okay. Thanks, Chip. Thank you.

We have reached the end of the question and answer session, and I will now turn the call over to Mr. Dutt for his closing remarks.

Okay. Thank you. I'd like to thank each of you for joining our earnings conference call today, and I look forward to continuing to update you on our ongoing progress and growth. It's a very, very challenging, but exciting time, particularly when we day-to-day are working with our customers. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who would be more than happy to assist. Thank you very much.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.