Flux Power reports 3rd Quarter Fiscal 2023 financial results
2685 S Melrose Drive
Vista, CA 92081
Phone: 877 505-3589
http://www.fluxpower.com
- Third Quarter Fiscal 2023 Revenue Increased 14% to $15.1 Million
- Third Quarter Fiscal 2023 Gross Profit Increased 146% to $4.7 Million
Flux Power Holdings, Inc. a developer of advanced lithium-ion energy storage solutions for electrification of commercial and industrial equipment, has reported its financial and operational results for the fiscal third quarter ended March 31, 2023.
Key Financial & Operational Highlights for the Third Quarter Fiscal Year 2023
- Revenue (Shipments) increased 14% to $15.1M in Q3’23 compared to Q3’22 revenue of $13.2M.
- Achieved 19th consecutive quarter of year-over-year revenue growth.
- Gross profit increased 146% to $4.7M in Q3’23 compared to $1.9M in Q3’22.
- Q3’23 gross margin was 31% compared to 15% in Q3’22, reflecting gross margin improvement initiatives including sourcing changes, design cost reductions, and pricing recovery of pandemic-related cost increases.
- Operating Leverage continued its positive trend for the nine months ended March 31, 2023, of revenue growth and gross margin improvement compared with no increase in operating expense.
- Net cash used in operating activities decreased 16% in Q3’23 compared to Q3’22 and 73% for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022.
- Adjusted EBITDA loss decreased 80% in Q3’23 compared to Q3’22 and decreased 74% for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022.
- Customer order backlog totaled $25.0M as of March 31, 2023.
- Renewed the existing credit facility with Silicon Valley Bank, a division of First Citizens Bank of $14.0 million to support working capital requirements.
- Strategic Supply Chain & Profitability Improvement Initiatives continued to accelerate the path to cash flow breakeven.
- Added 2 new large fleet customers, reflecting customers’ desire to fulfill long-term fleet needs of replacing lead acid battery packs with lithium-ion.
Backlog Summary
| Fiscal Quarter Ended | Beginning Backlog | New Orders | Shipments | Ending Backlog | ||||||||||||
| December 31, 2021 | $ | 19,433,000 | $ | 19,819,000 | $ | 7,837,000 | $ | 31,415,000 | ||||||||
| March 31, 2022 | $ | 31,415,000 | $ | 20,495,000 | $ | 13,317,000 | $ | 38,593,000 | ||||||||
| June 30, 2022 | $ | 38,593,000 | $ | 11,622,000 | $ | 15,195,000 | $ | 35,020,000 | ||||||||
| September 30, 2022 | $ | 35,020,000 | $ | 9,678,000 | $ | 17,840,000 | $ | 26,858,000 | ||||||||
| December 31, 2022 | $ | 26,858,000 | $ | 20,652,000 | $ | 17,158,000 | $ | 30,352,000 | ||||||||
| March 31, 2023 | $ | 30,352,000 | $ | 9,751,000 | $ | 15,087,000 | $ | 25,016,000 | ||||||||
Management Commentary
“We continued our successful cadence of year-over-year revenue growth with our 19th consecutive quarter of revenue growth, combined with a renewed credit facility providing additional cash to fund higher working capital requirements driven by increased customer demand and to meet our growth goals,” said Ron Dutt, Chief Executive Officer of Flux Power. “We also continued to improve gross profit, up 146% in the third quarter to $4.7 million, and gross margin expansion of 16 basis points to 31% compared to the year-ago period. Adjusted EBITDA loss decreased $0.2 million for the quarter on a sequential basis, and decreased $8.7 million, or 74%, for the nine months ended March 31, 2023, compared to the nine months ended March 31, 2022.
“The positive trend of operating leverage during the nine months ended March 31, 2023, versus the prior year supports our profitability goals with revenue growth of 85%, gross margin improvement of 197% against the operating expense of a slight decrease.
“To supplement our customer support services in response to this growth in nationwide sales, we recently announced the opening of our new Atlanta facility. The facility will enable faster response times to our customer base, with an effective service and call center capability. Investment in the Atlanta office broadens our geographic footprint to bring comprehensive and responsive services to customers in the eastern half of the U.S. while also, and importantly, resulting in lower service logistics costs incurred by our Company.
“Although global supply chain disruptions have lessened, we increased our inventory to $21 million as of March 31, 2023, to accommodate the lengthening of forklift OEM delivery timelines being experienced in the material handling sector. To address disruptions and reduce excess inventory, we have improved lean manufacturing processes and supply chain management. We have launched an in-house automated modular production initiative to manage module SKUs and accommodate diversification of cell suppliers and also utilized lower cost, more reliable, and secondary suppliers of key components including cells, steel, electronics, circuit boards, and other production critical components.
“We recently announced a renewal of the credit facility with Silicon Valley Bank, now a division of First Citizens Bank (“SVB Facility”), of $14.0 million to support higher working capital requirements related to increased customer demand. This renewal, along with our existing cash, will continue to meet our anticipated capital resources to fund planned operations. We also continue to explore alternative capital opportunities to enable us to meet the demands of our aggressive growth trajectory.
“Looking ahead, we believe our strong purchase orders, backlog and continued expansion of margins through improved sourcing and supply chain management, continual process improvement, and pricing is leading us toward what we believe is a clear path to profitability. We are focused on the continuation of our growth trajectory through the advancement of our technology, capacity, and customer and partnership relationships, and expanding into new markets. I look forward to additional announcements, as well as a customer demo day we are planning, in the months to come as we strive to create long-term sustainable growth and shareholder value,” concluded Dutt.
Q3’23 Financial Results
- Revenue for the fiscal third quarter of 2023 increased by 14% to $15.1 million compared to $13.2 million in the fiscal third quarter of 2022, driven by increased sales volumes and models with higher selling prices, including greater sales to existing and new customers.
- Gross profit for the fiscal third quarter of 2023 increased to $4.7 million compared to a gross profit of $1.9 million in the fiscal third quarter of 2022. Gross margin was 31% in the fiscal third quarter of 2023 as compared to 15% in the fiscal third quarter of 2022, reflecting a higher volume of units sold with greater gross margin and lower cost of sales as a result of the gross margin improvement initiatives.
- Adjusted EBITDA loss decreased to $0.7 million in the fiscal third quarter of 2023 from $3.4 million in the fiscal third quarter of 2022 and decreased 74% to $3.1 million for the nine months ended March 31, 2023, compared to $11.9 million in the nine months ended March 31, 2022, driven by the improved gross margins.
- Selling & Administrative expenses increased to $4.7 million in the fiscal third quarter of 2023 from $3.9 million in the fiscal third quarter of 2022, reflecting increases in marketing expenses, commissions, insurance premiums, depreciation, and outbound shipping costs.
- Research & Development expenses decreased to $1.2 million in the fiscal third quarter of 2023, compared to $1.7 million in the fiscal third quarter of 2022, primarily due to lower staff-related expenses and expenses related to the development of new products.
- Net loss for the fiscal third quarter of 2023 decreased to $1.4 million from a net loss of $3.7 million in the fiscal third quarter of 2022, principally reflecting increased gross profit, partially offset by increased operating expenses and interest expense.
- Cash was $0.8 million on March 31, 2023, as compared to $0.5 million on June 30, 2022. Available working capital includes our line of credit as of May 10, 2023, under our $14.0 million revolving line of credit with Silicon Valley Bank (“SVB Credit Facility”) with a remaining available balance of $3.8 million; and $4.0 million available under the subordinated line of credit (“Subordinated LOC”).
- Net cash used in operating activities decreased to $3.3 million in Q3’23 compared to $3.9 million in Q3’22 and to $5.2 million for the nine months ended March 31, 2023, compared to $19.3 million for the nine months ended March 31, 2022, primarily due to a decrease in net loss and an increase in accounts payable.
FLUX POWER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
| March 31,
2023 |
June 30,
2022 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 790,000 | $ | 485,000 | ||||
| Accounts receivable | 9,853,000 | 8,609,000 | ||||||
| Inventories, net | 20,959,000 | 16,262,000 | ||||||
| Other current assets | 775,000 | 1,261,000 | ||||||
| Total current assets | 32,377,000 | 26,617,000 | ||||||
| Right of use assets | 3,035,000 | 2,597,000 | ||||||
| Property, plant and equipment, net | 1,724,000 | 1,578,000 | ||||||
| Other assets | 119,000 | 89,000 | ||||||
| Total assets | $ | 37,255,000 | $ | 30,881,000 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 10,827,000 | $ | 6,645,000 | ||||
| Accrued expenses | 2,604,000 | 2,209,000 | ||||||
| Line of credit | 10,491,000 | 4,889,000 | ||||||
| Deferred revenue | – | 163,000 | ||||||
| Customer deposits | 135,000 | 175,000 | ||||||
| Finance lease payable, current portion | 140,000 | – | ||||||
| Office lease payable, current portion | 616,000 | 504,000 | ||||||
| Accrued interest | 3,000 | 1,000 | ||||||
| Total current liabilities | 24,816,000 | 14,586,000 | ||||||
| Office lease payable, less current portion | 2,223,000 | 2,361,000 | ||||||
| Finance lease payable, less current portion | 311,000 | – | ||||||
| Total liabilities | 27,350,000 | 16,947,000 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.001 par value; 500,000 shares authorized; none issued and outstanding | – | – | ||||||
| Common stock, $0.001 par value; 30,000,000 shares authorized; 16,156,432 and 15,996,658 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively | 16,000 | 16,000 | ||||||
| Additional paid-in capital | 96,968,000 | 95,732,000 | ||||||
| Accumulated deficit | (87,079,000 | ) | (81,814,000 | ) | ||||
| Total stockholders’ equity | 9,905,000 | 13,934,000 | ||||||
| Total liabilities and stockholders’ equity | $ | 37,255,000 | $ | 30,881,000 | ||||
FLUX POWER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 15,087,000 | $ | 13,177,000 | $ | 50,085,000 | $ | 27,138,000 | ||||||||
| Cost of sales | 10,368,000 | 11,257,000 | 37,310,000 | 22,838,000 | ||||||||||||
| Gross profit | 4,719,000 | 1,920,000 | 12,775,000 | 4,300,000 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and administrative | 4,724,000 | 3,904,000 | 13,510,000 | 11,402,000 | ||||||||||||
| Research and development | 1,182,000 | 1,713,000 | 3,567,000 | 5,768,000 | ||||||||||||
| Total operating expenses | 5,906,000 | 5,617,000 | 17,077,000 | 17,170,000 | ||||||||||||
| Operating loss | (1,187,000 | ) | (3,697,000 | ) | (4,302,000 | ) | (12,870,000 | ) | ||||||||
| Other income | – | – | 8,000 | – | ||||||||||||
| Interest expense | (258,000 | ) | (52,000 | ) | (971,000 | ) | (86,000 | ) | ||||||||
| Net loss | $ | (1,445,000 | ) | $ | (3,749,000 | ) | $ | (5,265,000 | ) | $ | (12,956,000 | ) | ||||
| Net loss per share – basic and diluted | $ | (0.09 | ) | $ | (0.23 | ) | $ | (0.33 | ) | $ | (0.85 | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted | 16,048,054 | 15,988,926 | 16,021,653 | 15,254,983 | ||||||||||||
FLUX POWER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (5,265,000 | ) | $ | (12,956,000 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | 647,000 | 412,000 | ||||||
| Stock-based compensation | 539,000 | 601,000 | ||||||
| Amortization of debt issuance costs | 445,000 | – | ||||||
| Noncash lease expense | 370,000 | 324,000 | ||||||
| Allowance for inventory reserve | 214,000 | 109,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,244,000 | ) | (3,411,000 | ) | ||||
| Inventories | (4,911,000 | ) | (10,530,000 | ) | ||||
| Other current assets | 11,000 | (118,000 | ) | |||||
| Accounts payable | 4,182,000 | 6,186,000 | ||||||
| Accrued expenses | 395,000 | (441,000 | ) | |||||
| Accrued interest | 2,000 | – | ||||||
| Office lease payable | (379,000 | ) | (322,000 | ) | ||||
| Deferred revenue | (163,000 | ) | 289,000 | |||||
| Customer deposits | (40,000 | ) | 519,000 | |||||
| Net cash used in operating activities | (5,197,000 | ) | (19,338,000 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of equipment | (753,000 | ) | (644,000 | ) | ||||
| Proceeds from sale of fixed assets | 8,000 | – | ||||||
| Net cash used in investing activities | (745,000 | ) | (644,000 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock in registered direct offering, net of offering costs | – | 13,971,000 | ||||||
| Proceeds from issuance of common stock in public offering, net of offering costs | 697,000 | 1,602,000 | ||||||
| Proceeds from revolving line of credit | 48,800,000 | 3,500,000 | ||||||
| Payment of revolving line of credit | (43,198,000 | ) | – | |||||
| Payment of financed leases | (52,000 | ) | – | |||||
| Net cash provided by financing activities | 6,247,000 | 19,073,000 | ||||||
| Net change in cash | 305,000 | (909,000 | ) | |||||
| Cash, beginning of period | 485,000 | 4,713,000 | ||||||
| Cash, end of period | $ | 790,000 | $ | 3,804,000 | ||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities: | ||||||||
| Initial right of use asset recognition | $ | 855,000 | $ | – | ||||
| Common stock issued for vested RSUs | $ | 114,000 | $ | 10,000 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | ||||||||
