Flux Power Holdings, Inc. Common Stock 2026 Q4 Earnings Call

Leanne, please go ahead. Good afternoon, and welcome to Flux Power's fiscal fourth quarter and full year 2026 earnings conference call.

I am Leanne Sievers, president of Shelton Group, Flux Power's investor relations firm. Joining me today from Flux Power are Krishna Vanka, CEO, Kevin Royal, Chief Financial Officer, and Stu Jacover, Vice President of Sales for Material Handling. 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 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 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-K, which can be found in the investor relations section of Flux Power's website at www.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. Now it is my pleasure to turn the call over to Flux Power CEO, Krishna Vanka.

Krishna, please go ahead. Thank you, Leanne, and thank you everyone for joining us on today's conference call.

I am very pleased to report fourth quarter revenue increased 25% sequentially and even slightly better than the expectations conveyed on last quarter's call. We are encouraged by the improving order patterns we saw throughout the quarter across both our ground service equipment and material handling business. On a year-over-year basis, the quarter was below our historic revenue level due to our most significant material handling customer continuing to navigate its capital freeze, as we conveyed previously. Our business has also been impacted by the broader economic disruptions related to tariffs and higher fuel prices. I want to reiterate that our partnership with our significant customer remains strong, and we expect business with this valued customer to resume in the future.

As mentioned on prior calls, we have been taking decisive actions over the past year to lower product and operating costs, as well as improve operating efficiencies. We reduced operating expenses by 33% over the fourth quarter of FY 2025, and a decrease of 28% when comparing full year 2026 versus 2025. These actions have included headcount reductions, cost containment, and broader efficiency measures. We also continue to work aggressively to improve margins through near-term supply chain optimization, vendor pricing negotiations, and product redesign efforts. Additionally, we have been closely evaluating all of our component costs and meeting with vendor partners in low-cost regions. Also, this initiative will take time to implement. It should have a meaningful benefit to overall product costs over time. Another initiative I mentioned last quarter was optimizing our sales team and launching aggressive new marketing programs.

These programs are aimed at diversifying our customer base, so we are less dependent on any one customer. We are beginning to see positive results from new lead generation programs that have increased our customer activity. As a result of these marketing programs, we are also very excited to announce we entered a new and growing vertical robotics in the last quarter. We are doing this in close collaboration with a very large global technology platform company. They already deployed more than 70 of our batteries for their robotics testing and are looking at full-scale production starting in a quarter or two. I cannot wait to share more details soon. We also successfully added senior sales veterans to the team, including a new VP of sales for material handling, Stu Jacover. Stu has more than three decades of dealer network, OEM, and national account leadership experience.

I would now like to turn the call over to Stu to tell you more about himself and his initiatives aimed at accelerating growth across North America.

Stu, please go ahead. Thank you, Krishna, and thank you for the opportunity to introduce myself and talk about my primary objectives and our go-forward strategy.

I am certainly excited to be part of the Flux Power team. As Krishna mentioned, I have spent the last 25 years in the material handling industry, most recently as General Manager at Mitsubishi Logisnext, and previously in various sales leadership roles, including Toyota Material Handling. Over that time, I have built and led sales organizations across the industry, and I have done it with a consistent focus on profitable market share growth. Whether it was managing dealer networks or building out enterprise account strategies, my track record has been about identifying where the real growth opportunities are and building the right team and process to capture them. That is exactly the lens I am bringing to Flux Power.

Flux has built its business on a strong dealer sales network, and that foundation will be further enhanced. Our dealer partners remain central to our go-to-market strategy. That said, I believe there's a significant opportunity to add a second growth engine. Throughout my career, I've spent a substantial amount of time calling directly on large enterprise and national accounts. These are the big fleet operators who run hundreds or thousands of forklifts across multiple sites. I know how these organizations make purchasing decisions, I know the stakeholders involved, and I have existing relationships with many of them. My plan is to leverage that experience and build a direct enterprise sales engine that runs alongside and complements our dealer channel. This will not be in competition, but complementary to. That gives us a hybrid strategy with two ways to win business instead of one.

It positions Flux Power to go after large fleet opportunities directly with a tailored approach. I wouldn't be as confident in this strategy if I didn't believe in what we're selling, and Flux Power's products give us a real edge. One differentiator I'm especially excited about is our end-of-life recycling program. This matters, as a lot of our corporate customers have significant green and sustainability initiatives. This is an area where Flux is ahead of the industry and not just working toward it. Flux has a documented, robust program that utilizes a named, certified recycling partner specializing in lithium-ion battery processing, and a written take-back guarantee. This provides our customers a formal end-of-life agreement, not just a verbal promise, so our customers know exactly what happens to their batteries at a nominal expense. We offer our customers multiple paths to being environmentally responsible.

Depending on the condition, battery modules can go into second life uses like grid storage or emergency power. Components can also be refurbished to be utilized again, or the unit goes to certified material recovery. Being able to walk a large enterprise fleet operator through an actual documented program with real paths to recovery, rather than an industry that's still figuring this out, is a genuine differentiator in the conversation. In addition to recycling, we back our product with best-in-class customer support during the life of the battery. When you're asking a large fleet operator to trust their operation to us, they need to know we'll be there after the sale, not just at the point of purchase. The combination of a strong sustainability program and dependable, responsive support is exactly what gives me confidence in our ability to win and retain these larger accounts.