Flux Power's Q4 2025 Earnings Call: Contradictions Emerge on SkyEMS Strategy, Tariff Resilience, Sales Growth, and Macroeconomic Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $16.7M for Q4 FY2025, up from $13.4M in the prior-year quarter; full-year $66.4M vs $60.8M prior year
• EPS: $-0.07 per share (net loss) for Q4, improved from $-0.13 in the prior-year quarter; full-year $-0.40 vs $-0.50 prior year
• Gross Margin: 34.5% for Q4, up from 26.8% in the prior-year quarter; full-year 32.7% vs 28.3% prior year

Business Commentary:

* Revenue Growth and Market Expansion: - Flux Power reported revenue of $16.7 million for Q4 2025, up 24% year-on-year, and full-year 2025 revenue increased to $66.4 million from $60.8 million in the prior year. - Growth was driven by higher volume in material handling and ground support equipment markets, higher average selling prices in the GSE market, and strategic initiatives such as solution selling and software integration.

• Gross Margin Improvement:
• Flux Power's gross margin increased to 34.5% in Q4 2025, up from 26.8% in the same quarter of the prior year.

• The improvement was due to sales of higher margin products, cost-savings initiatives, and lower warranty-related expenses, contributing to profitable growth.

• Software and Telemetry Expansion:

• The company successfully launched SkyEMS 2.0, its AI platform for battery management, with beta testing underway for airline customers.

• This expansion is part of Flux Power's strategy to generate recurring revenue through software solutions and intelligent battery offerings.

• Cost Management and Efficiency:

• Flux Power implemented operational efficiencies, such as renegotiating contracts with vendors and reducing headcount by 15%, to lower costs and improve cash flow.

• These measures are aimed at achieving profitability and cash flow breakeven in the long term.

• Partnership and Sales Momentum:

• Flux Power has seen increased quoting activity and is engaged in more OEM discussions than ever before, indicating potential future growth.
• The company is focused on building long-term partnerships, including private label opportunities and collaborations with telematics providers, to expand its ecosystem and customer base.

Sentiment Analysis:

• Management cited “solid year-over-year growth” and significant gross margin improvement, with Q4 adjusted EBITDA positive. However, they noted a “slowdown and a pause from some of our customers” in the current quarter and tariff-related uncertainty, while expressing optimism that increased quoting “bodes very well” for the second fiscal quarter and later in the year.

Q&A:

• Question from Andrew (ROTH Capital Partners): What drove the strong Q4 gross margin expansion, and where are you on the path toward 40% gross margin?
  Response: About 60% of the improvement came from lower input/component costs and the rest from reduced warranty costs as quality improved; progress continues toward the 40% goal.

• Question from Andrew (ROTH Capital Partners): How is SkyEMS 2.0 being received and what’s new versus the initial version?
  Response: SkyEMS 2.0 adds customer-driven features to optimize charging and usage with a lightweight browser-based UI; beta feedback from an airline is positive, rollout is imminent, and it’s being bundled with batteries.

• Question from Amit Dyal (A.C. Wainwright): What does the pipeline/backlog look like?
  Response: They don’t provide guidance; current quarter saw some customer pauses, but quoting is up for the next quarter; backlog was about $9M at quarter-end.

• Question from Amit Dyal (A.C. Wainwright): What’s the SkyEMS go-to-market plan and attach strategy?
  Response: Bundle SkyEMS with every battery, drop the ‘beta’ label in 1–2 months, and upsell telemetry/software to the ~28,000-unit installed base with tiered capabilities.

• Question from Rob Brown (Lake Street Capital): What drove the two sizable airline orders?
  Response: One was a redesigned, higher-efficiency, higher-margin G80 420 pack for an existing airline; the other was an existing G-series product sold as a package with SkyEMS, amid early-stage lithium adoption in GSE.

• Question from Rob Brown (Lake Street Capital): Where is quoting activity improving—material handling or GSE?
  Response: GSE had modest impact; material handling saw earlier CAPEX pullbacks around tariffs, but customers now understand supply chain impacts and are releasing capital, lifting quoting.