Flux Power's Q4 2025: Contradictions Emerge on Customer Commitment, Gross Margin Drivers, Product Enhancements, Market Demand, and Production Capacity

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

Date of Call: September 16, 2025

Financials Results

• Revenue: $16.7M, up 24.6% YOY (vs $13.4M in Q4 FY2024)
• EPS: $-0.07 per share (GAAP), better than $-0.13 in Q4 FY2024
• Gross Margin: 34.5%, up from 26.8% in Q4 FY2024 (+770 bps)

Guidance:

• Company does not provide formal guidance.
• Q1 FY2026 seeing a customer slowdown/pause.
• Quoting activity rising; management expects improvement in Q2 FY2026 (calendar Q4).
• Backlog at quarter-end was about $9M.
• Tariffs/macro uncertainties persist, but management is more optimistic for the later part of the fiscal year.

Business Commentary:

* Strong Financial Performance and Margin Improvement: - Flux Power reported $16.7 million in revenue for Q4, up from $13.4 million in the same quarter last year. - The gross margin improved to 34.5%, compared to 26.8% in the previous year, driven by higher-margin products and cost savings initiatives.

• Operational Efficiencies and Cost Reductions:
• The company implemented operational efficiencies, which included strengthening vendor relationships to mitigate tariff impacts and reducing headcount by 15%.

• This resulted in improved gross profit and a net loss reduction, contributing to meaningful improvements in bottom-line results.

• Customer Success and New Orders:

• Flux Power received significant orders for its battery packs, including a $2 million order for its G80-420 lithium-ion battery pack and a $1.2 million order for a G80 lithium-ion energy solution along with the SkyEMS software platform.

• These orders were driven by customer commitments to operational efficiency, sustainability, and next-generation fleet readiness, as well as the successful implementation of the new solution selling strategy.

• Software Development and Customer Engagement:

• The SkyEMS AI platform version 2.0 was successfully beta-tested and will be rolled out to additional customers in the coming months.
• The new version is designed to improve customer engagement, increase battery efficiency, and generate recurring revenue by integrating software and services with hardware solutions.

Sentiment Analysis:

• Management highlighted “solid year-over-year growth” and a Q4 gross margin of 34.5% vs 26.8% prior year, with narrowed net loss. However, they noted “a bit of a slowdown and a pause” from customers in the current quarter, while increased quoting “bodes very well” for next quarter amid tariff/macro uncertainty.

Q&A:

• Question from Andrew Scutt (ROTH Capital Partners): What drove the strong gross margin expansion, and how is progress toward 40% GM?
  Response: Lower input/component costs (~60% of improvement) and reduced warranty incidents from better product quality drove Q4 GM gains.

• Question from Andrew Scutt (ROTH Capital Partners): How is SkyEMS 2.0 being received and what’s new versus the initial product?
  Response: Early feedback is positive; v2.0 adds charging optimization and efficiency insights, is lightweight/browser-based, and is being bundled with battery sales.

• Question from Amit Dayal (H.C. Wainwright & Co): What does the pipeline/backlog look like?
  Response: No formal guidance; current quarter shows some customer pause, but quoting is up for next quarter; backlog ended at about $9M.

• Question from Amit Dayal (H.C. Wainwright & Co): How will SkyEMS be sold—attach strategy and standalone potential?
  Response: Primary strategy is bundling SkyEMS with every battery, retrofitting the 28k installed base, and upselling advanced features over time.

• Question from Robert Brown (Lake Street Capital Markets): What’s driving the two sizable airline orders—fleet expansion or new products?
  Response: One is a redesigned, higher-margin G80-420; the other is an existing G-series battery sold as a package with SkyEMS amid early-stage lithium adoption.

• Question from Robert Brown (Lake Street Capital Markets): Where is the improved quoting activity occurring—GSE or material handling?
  Response: GSE saw modest pullback; material handling had pre-tariff buys then capex pause; with tariff clarity, capital is releasing—driving quoting improvement mainly in material handling.