Flux Power Holdings, Inc.

Greetings and welcome to the Flux Power Holdings fourth 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. Carolyn?

Good afternoon. Your hosts today, Ron Dutt, Chief Executive Officer, and Chuck Shiley, she's financial officer, will present results of operations for the fiscal fourth quarter and fiscal year ended June 30th, 2023. A press release detailing these results crossed the wires this afternoon at 4.01 p.m. Eastern Time and is 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 webcasts 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 reflects 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 our predictions. You should also review our most recent Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. I will turn the call over to Fox Power Chief Executive Officer Ron Dutt.

Thank you, Carolyn, and good afternoon, everyone. I'm pleased to welcome you to today's fiscal fourth quarter and fiscal year 2003 financial results conference call. Firstly, please note that on slide three, 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. 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 or existing equipment delivered on time without difficulty. Fortune 100 companies demand suppliers that are transparent, experienced, and accountable as they transition their fleets to new 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 break even, 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 $66.3 million, up 57% from $42.8 million. $3 million in the prior year. Quarter 4-23 revenue was up 7% to $16.3 million compared to Q4 of 2022 revenue of $15.2 million, marking our 20th consecutive quarter of year-over-year revenue growth. We also continued to improve gross profit. increasing 134% to $17.1 million in fiscal year 2023 compared to $7.3 million in fiscal year 2022, and increasing 44% to $4.3 million in Q4 23 compared to $3 million in Q4 22. Gross margin was 26% in fiscal year 2023 compared to 17% in fiscal year 2022 and 27% in Q4 2023 compared to 20% in Q4 2022. Adjusted EBITDA loss decreased 74% to $3.7 million for the year ended June 30, 2023, compared to a loss of $14.1 million for the year ended June 30, 2022. And adjusted EBITDA decreased 73% to a loss of $600,000 for Q4 23 compared to a loss of $2.2 million in Q4 of 22 and $700,000 in Q3 2023. For the fourth quarter, our customer order backlog increased from $25 million to $29 million as of June 30, 2023, reflecting continued lithium adoption. A new $15 million credit facility from Gibraltar Business Capital provides funds for working capital and replaces the $14 million line with Silicon Valley Bank. The new facility has a two-year term with provisions to increase the line to $20 million and provides for our working capital needs of our planned business growth. We're highly focused on achieving cash flow break even in the near term, reflected in the reduction of cash used by operations in fiscal 2023, which declined 20.3 million 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 23 compared to 20% in Q4 22. 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 break-even 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 seven, showing the upward trend over the past fiscal year and our momentum toward break-even. We are executing our specific supply chain and cost reduction initiatives to continue this momentum. Further, our realized successes are being applied across various customer applications. Our current potential pipeline of customers continues to expand with three new customers this past quarter and a total of eight new customers in the full year 2023. Our full product line caters to large fleets who seek a relationship partner to meet current and future needs, not just one-time purchases. 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. 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 into 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 680 basis points to 27% 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. All these initiatives are part of our plan to accelerate gross margins. During the fiscal fourth quarter, our backlog increased to 29 million due to new orders outpacing shipments. Normalization of global supply chains and ongoing adoption of our lean manufacturing principles are driving throughput and capacity improvements as we continue to monetize a healthy customer backlog. Our strategic initiatives are also improving sourcing actions to mitigate part 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 of raw materials, finished goods, and component parts to $19 million as of June 30, 2023, all due to improved inventory management while at the same time supporting our strong revenue growth. With that, I will now turn it over to Chuck Shiley, our Chief Financial Officer, to review the financial results for the quarter and fiscal year ended June 30th, 2023. Chuck?