Good day, and welcome to the iAccess Alpha Virtual Best Ideas Winter Investment Conference 2025. The next presenting company is Flux Power Holdings Inc. If you'd like to ask a question during the webcast, you may do so at any point during the presentation by clicking the Ask Question button on the left side of your screen. Type your question into the box and hit Send to Submit. I'd now like to turn the floor over to today's host, Krishna Vanka, CEO, Flux Power Holdings Inc. Sir, the floor is yours.
Thank you. Welcome, everyone. Good afternoon, and we are thrilled to be part of this conference and give you some updates on the Flux Power. I'm going to present the section, and then we'll have Kevin Royal join me towards the end to talk about financials. So moving on to the safe harbor, the standard slide here. I'm going to skip this, and let me tell you a little bit about Flux. We are based here in Vista, California. We design and manufacture Lithium-ion-based battery packs and the energy management system, which is really the firmware that controls the battery. And then we also have a cloud-based software, a SaaS platform through which you can monitor and control the batteries remotely. And today, our advanced Lithium-ion packs are used in two industries. One is the material handling, literally the forklifts which we see across all the warehouses.
The second one is the airport ground support equipment. Whenever you are at an airport, the tug that brings your suitcases to the airplane or the vehicle that actually pushes the airplane back, all of them can be powered with Lithium-ion batteries. Our vision is really to work with our customers and partners in taking them through this transition as they move away from the lead-acid and adopt Lithium-ion for better productivity and a greater ROI, which I'll explain to you in a couple of minutes here. Talking a little bit more about our company, we have produced more than 29,000 now. The slide shows 28,000. We produce more than 29,000. We are, as I mentioned, based in Vista, California, with a facility that can support up to $150 million of annual production.
As you can see on the right side of the slide, you can see the company having a very good trajectory with respect to getting better margins year over year, but there was a little bit of stagnation on the revenue side. This is when the board decided to bring a new leadership team, really to take this company to the next level. On this slide, you can see the new leadership team that formed within the last 12 months. Again, my name is Krishna Vanka. I'm the Chief Executive Officer here. I came from another publicly traded battery company that's called Fluence Energy. And prior to that, I was one of the founding team members at a charging company called InCharge, which was acquired by ABB.
Both the experience literally building batteries to scale and also the charger infrastructure, which is a core part of making these batteries work, is the experience I bring in here. And Kevin, do you want to quickly introduce yourself? You may be on mute, Kevin.
Sorry about that. Kevin Royal, I'm the Chief Financial Officer of Flux. I've been with the company for a little bit over a year and a half. And my experience is that I've been CFO of various publicly traded companies for the past 23 years.
Thanks, Kevin. And we also have Kelly Frey, who joined the company recently, early this year, a few months before I joined. And both myself and Kelly, we worked together at Fluence, where he ran the sales organization for me. So Kelly is bringing a new solutions-based approach to talk to our customers about the Lithium-ion adoption. We also have Mark Barmettler, who is our VP of Engineering, that joined last December. So together, this new team, leadership, and some director-level changes we did recently, we are all focused on the strategic objectives that you are seeing on the screen. The most important one being, let's get to the profitability and build a profitable growth story for this company. And how are we planning to do this is, number one, getting operational efficiencies. Ever since I came on board, we were able to renegotiate with the supply chain.
We actually used tariffs to our advantage, and we also did a couple of internal reduction in forces for us to get to the right size that we need for this company at this moment. As I mentioned, the solution selling is something that this company never really had, that sales momentum, and Kelly Frey, coming from a similar background, is looking into how to talk directly to customers and how do we look really beyond the existing two verticals that we are supporting today. With Mark as the engineering lead, we are also looking at building modular products that can be scaled faster and taking into consideration the customer feedback and how they are going through the transition. Last but not least, as I mentioned, these are intelligent batteries.
So, along with the chemistry on top of it, there is a firmware that there are really electronics that control the battery. And there's a lot of patents that we have that control the BMS, the battery management system. And then we also have the software SaaS platform, where it sends the data to the cloud, where you can look at holistically across your battery line and see how they are performing. So we are very eager in promoting this software as a part of the battery when they purchase this as a package together. And we are also seeing some significant adoption coming in the last few months from some of our key customers using this software and integrating it into their package systems. So with that said, you may be asking, "Hey, why Lithium? Why right now?" Right?
So the beauty of a Lithium pack is it can replace lead-acid almost as a plug and play. The only thing is Lithium is a little bit lighter than lead-acid, so you got to literally add a little bit of extra weight for counterbalancing on forklifts and stuff. Otherwise, it's almost a plug and play. That said, Lithium has a very good lower cost of ownership. It needs minimum infrastructure changes, as I mentioned. And more than anything else, these are smart batteries, so you can control them remotely, update the firmware, and you don't need, unlike lead-acid, battery rooms. You can charge Lithium-ion between the shifts. That's what we call the opportunity charging. So there are immense benefits for our customers to operate and adopt Lithium-ion, especially when they're using lead-acid today.
So if you look at the cost analysis and try to understand, "Hey, how does this work?" This particular graph on the right side here shows you that within six years, which is literally a life cycle of any battery like Lithium-ion, whereas a lead-acid only runs three to four years, within six years for a 50-lift truck deployment, we are seeing about $4.6 million of savings by adoption of the Lithium. The life cycles, as I mentioned, is almost double. You can run it more often. You can have a better warranty coverage. You can ultimately do more work because the customers buy these batteries as part of their vehicle. And mind that in both these industries, when you buy the vehicle today, energy is a separate equation. Energy is a separate line item.
This is where some of our key customers, no matter which OEM they procure the vehicles, they always say, "We want them with the Flux batteries." So this is a story that's getting developed. And during the last five to six years at Flux Power, we were able to build a portfolio of products that meets various classes. So this slide that you are seeing here is actually showing you that we have these small, medium, and large-sized batteries that fit in different vehicle classes of the forklift. And on the right side, you can see the G-Series batteries that go in the ground support equipment and also a much bigger battery for a different class of the vehicle. We are also looking into taking these two verticals, the battery form factors we have, and then try to find adjacency markets.
We are looking into industrial applications using autonomous robots, AMRs, AGVs, etc. Some of our batteries are UL certified, which is a big deal for some of these customers, especially airlines, as they start thinking about using these batteries as a mobile best solution that you can also see on the right side that we recently announced with a partner. I spoke a little bit about it. Our forte and our area of focus is definitely on how to bring this chemistry together with Lithium and make it efficiently work. In the last six months, we were awarded about three patents, literally after I came on board. Of course, patent takes a lot of time to get approved, but these are final approvals where we have an AI-driven energy optimization algorithm now that we are deploying into the software.
We can remotely and quantum balance these batteries for better life, and also, we have an advanced state-of-health technology that we have a proprietary algorithm that we are planning to deploy as well, so we are taking advantage of these patents and putting them into production. As I mentioned, the telematics platform, which is really what you have on the SaaS side, sends the data. Moving forward, we want every battery to be an intelligent battery, so we are deploying this telematics very aggressively, and we want to put it with every battery starting next quarter, so the data goes to the cloud. You have visibility across the fleet of the vehicles. You can remotely monitor, see how the batteries are performing, diagnose the issues remotely either through our support or the customer can get notifications and alerts.
This data, which is a critical part of running the fleet, can be integrated to their back-end fleet telematics units. Last but not least, the patents that I mentioned, we are taking them and putting them into the platform. We, again, not only have a hardware which we sell as a key differentiator with all this technology, but we have a recurring revenue stream that we are just getting started and tapping into. How big is the market, right? If you look at the material handling space, it's already about just the Lithium battery, which is replacing the lead acid. The battery itself is about $2.5 billion of industry in 2025 and growing at 9%.
So we are literally getting started, and the adoption is still in infancy, about 15%-20% of all the batteries out there in production if you look across the forklift industry, across all different industries. So there is about an 80% of uptake that can happen in the next five years as these lead-acid batteries need to be replaced. And moving forward, whenever they're also replacing these vehicles, which are typically a 10-year life cycle, give or take, they are ordering the new vehicles with Lithium-ion batteries, especially the bigger enterprises, which is the focus of our company. They're all proactively trying to just get the new vehicles built with Lithium-ion. As I mentioned, energy is a separate equation, and they're asking for it. It's a very similar story in the ground support equipment.
What you're seeing here on the right side, I don't have the CAM for the battery, but I have the CAM for the entire GSE equipment, which is, again, almost a $5 billion business next year, growing around 7.8%. And I can say that when you look at these ground support equipment that airlines buy, you can make a very good assumption that a quarter of the cost, about 20%-25% of the cost of the vehicle, is really the energy management, which includes buying the battery and then putting everything together. We are very proud to also say that we have a top eight fleets of airlines in North America that uses our batteries today. So we are very proud of our deployment and our ability to dominate in the GSE space through our partners.
The next slide here showing our customers based on how they use these intelligent batteries, so we put them in these five verticals. The food and beverage industry, it's very constant usage throughout the year with some Super Bowl and Christmas time and so on. You'll see an uptick, but they use these products on a regular basis. The retail and grocery, they get pretty busy during holiday time, so they run more shifts with it. If you have a lead acid today, it needs eight hours of charge to run it for eight hours, and it has to cool for eight hours. So they literally have to buy three lead-acid batteries to run a 24-hour shift. Whereas if you have a Lithium-ion pack, you can literally charge between the shifts, opportunity charging for those 20 minutes, right?
Those are the very good use cases for us where the customers deploy this and they're able to run their shifts 24/7. We are also very actively used in the manufacturing industry, like Electrolux, Caterpillar, when they produce these lift trucks in their manufacturing facilities. They use our batteries. The distribution, you can see Amazon Prime Air is literally an airline that's distributing goods and services. Some of these customers, as you can see on the screen, they use our batteries. Last but not least, as I mentioned, the airport GSE, where we have a pretty significant footprint, they use our batteries to not only run their equipment, ground support equipment, but also the heavy equipment that pushes the actual airplane back when it's ready to take off.
With that said, I'm going to stop on this last slide, a quote that was given by our customers in those three, the airlines, food and beverage, and also the manufacturing here. And after you take a look at it for a second, I'm going to quickly pass on to the next slide to have Kevin talk a little bit about our financials. So Kevin, if you're ready, please let me know. I'm going to do the next slide.
Yeah, go right ahead. Thanks, Krishna. Sure. I want to provide a quick overview of our financial information. This includes the last three fiscal years plus our first quarter for our fiscal 2026 fiscal year. We're a June 30 year in.
And if you look, this is by quarter, but if you summarize it, and we did earlier summarize by year, we've essentially been in the $60-$67 million range. So essentially flat over the last three years. We've got a new team, and the new team is working aggressively to increase our revenues. We estimate that our break-even is $16 million. So above that, we'll be positive on a net income basis. As was mentioned earlier, we've hired a new Chief Revenue Officer, Kelly Frey. He's taking steps to expand our customer base. We've got a new VP of Engineering, and he's taking steps to expand and improve our product lines. If you notice in Q1, we were down about $13.2 million in revenues. That's solely a result of the tariffs that were implemented in our fourth fiscal quarter, which is the second calendar quarter of FY 2026.
We're starting to see some signs that the pressure associated with that may be abating a little bit. Even though we've not grown, we have taken steps to improve our cost structure, both from a product cost structure as well as operating expenses. We continue to work on expanding our product portfolio and our customer base. With that, I will turn it back over to Krishna.
Thank you, Kevin. That sort of brings us to the last slide of the presentation. We will now flip over to the question and answer session. We will take some questions for the next one, two minutes, and then try to address them in the 10 minutes we have here. We'll take a minute to see all the questions that are just popping in. Okay. Let me start with the first one.
How should we think about the order cadence over the next few quarters as the demand normalizes? So I can take this. So yeah, as Kevin mentioned, the tariffs had a negative impact on customers' ability to continue ordering normally, like how they would do. And they were in this wait mode early this year as the tariffs started providing an impact on what's going to happen, how it's just going to change the way I order, and so on. But we are now seeing signs where it's normalizing, to your point, and we are seeing some interest coming from the customers, and they start planning for the next fiscal year or the next calendar year. So we will see some pull because they did not order in the last quarter and so on. So we'll see some pull early in 2026.
We just don't know which exact quarter it's going to be, but we will see some pull in, and then the demand should normalize and continue on the regular path. So the next question for you, Kevin, what are the key drivers for gross margin improvement and these 30% plus achievable?
Yeah. So there's two areas of kind of, as you put it in the question, key drivers. The first being supply chain. So working with our supply chain to reduce our cost. A number of ways you can do that. You can do that through bringing in additional vendors and creating competition. You can look at the component parts from an engineering standpoint, and are there lower-cost components that exist in the market that we can replace existing components? And with that exercise, 30% plus is definitely achievable.
We are somewhat mixed-dependent, but we do believe with that exercise alone, the supply chain vendor focus, that we can get into the high 30s. The second activity is more of a deeper product redesign, looking at a modular concept where larger products are based on building blocks from smaller products. So the smallest energy building product would be a component of all of the larger products. That will allow us to increase our volumes and therefore take advantage of higher volumes and lower costs.
Thanks, Kevin. That also addresses another question we got here, which was literally about what are you prioritizing to use the recent capital raises to support growth and margin?
As Kevin mentioned, we are looking at modularity as an engineering project with a very high priority for us to be able to get to better margins and have more control over the supply chain and the volume levels that we can order. So that's the answer for that question. Looking at the question pipeline here, are you seeing any shift towards larger multi-site customer deployments?
Yes. The way I say this is the customers are going through a big transformation. They built a little bit of infrastructure for these lead-acid. So they built these battery rooms, and they created this infrastructure where you need three batteries to run a 24-hour shift and whatnot. So Lithium-ion is literally liberating them from this type of thinking and really giving more value.
And you can see that there will be a battery room that can be used to produce more on the floor, right? So they are understanding this. So especially the bigger customers, as you asked in the question, when they think about deploying Lithium, the first is the green field, right? So when they're thinking of putting a new warehouse at a new location or building the factory with autonomous vehicles and all those types of new technologies, they're definitely looking at Lithium. And it's just not at one site. It's really across their sites. And they also do quite a bit of comparisons between different locations for them to understand which operating situation can get more value from Lithium. So they do a little bit of studies, energy studies, which we help the bigger customers.
So yeah, so definitely we are seeing a shift towards multi-site deployment, but they still do pick the priorities based on where they need more operational efficiencies first. Now, the next question here, which markets or verticals do you expect to ramp first following recent certifications? So if you're just asking us about the UL certifications, we have significant coverage of UL both in the material handling, and we also got the recent certification, as you saw in the press release, on the GSE equipment side, which is literally taking our batteries and creating a mobile charging unit because these airlines can't wait for that infrastructure to be built up at airports. So they are even using a mobile charging unit where they take lots of our batteries, put together on a cart, and take it to the vehicles and charge them.
So yeah, that's where we are seeing quite a bit of ramp. And UL is, again, a highest level of standard that some of these customers expect. And with the certifications coming, we are proven as the best product out there. So that answers your question. And the last question here for you, Kevin, what additional cost efficiency opportunities remain after recent reductions?
Yeah. So we have had a number of expense reductions as well as reductions in workforce in order to match the revenue levels. Now, if our revenues stay flat at the Q1 level or decline, then we would need to look at our overall structure once again. We're variable to a larger client. So to the extent that we need to reduce costs, additional costs, we just have to roll up our sleeves and put together a plan to become more efficient.
Thank you.
We just got one more question. The last question we'll take here. What level of sales gets you to the net income? I think you answered, but maybe you can repeat the answer. And does your recent funding get you there? How many shares are outstanding if you count warrants and options and converts?
Yeah. So let me just answer. It's about 20 million shares if you count everything. The level of sales I mentioned to get to net income break-even is $16 million. And that's at the gross margin levels of around 34%-35%, just to be clear on that. And then as far as the question on OpEx, should we expect OpEx to remain stable or will investments increase as growth returns? There will be some investment, but not significant amounts in developing our next-generation product portfolio.
So it'll be I talked about the modular concept in order to kind of standardize the component parts across our entire product portfolio, doing that to improve margins and take advantage of volumes. There will be some increase there once we resume growth once again. But by and large, we won't need to increase our operating cost base as we grow.
Thanks, Kevin. Looks like we answered all the questions that came in. I'm doing one more quick refresh. We're almost also on the clock here. So I want to thank you all again for joining this call and listening to our story. As both Kevin and myself explained, we are at that point where we are very close to profitability. The new leadership is heavily focused on turning this ship and then building a profitable growth story.
The opportunity is immense ahead of us, as you can see with the market data, and the whole Lithium-ion transition is just getting started. So thanks again for your time today, and we look forward to talking to you soon, operator.
Thank you. That concludes Flux Power Holdings, Inc.'s presentation. Thank you for joining us for the presentation portion of the iAccess Alpha Virtual Best Ideas Winter Investment Conference 2025. We'd also like to thank the investors and partners who help make these events possible by sharing ideas and supporting our vision. We hope to see you at our next virtual event, the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2026, scheduled for March 10 through 11, 2026. Thank you very much for attending today's presentations.
On behalf of all of us at iAccess Alpha, we wish you and your families a healthy, enjoyable holiday season and a prosperous New Year.