Flux Power Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter ended March 31, 2022, with nine-month results for the period ended March 31, 2022. The request metadata says “2021 Q3,” but the filing is for fiscal 2022 Q3.
Business context
Flux designs, manufactures, and sells lithium-ion energy storage solutions, primarily for material handling, airport ground support equipment, and stationary storage. It reported one operating segment. Management is investing in product development, sales, and production capacity and cited new battery products introduced at the March 2022 MODEX trade show.
Financial performance
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $13.177 million, up 89% from $6.964 million | $27.138 million, up 51% from $17.932 million |
| Gross profit / margin | $1.920 million / 15%, versus $1.677 million / 24% | $4.300 million / 16%, versus $4.039 million / 23% |
| Operating loss | $3.697 million, versus $2.968 million | $12.870 million, versus $9.762 million |
| Net loss | $3.749 million, or $0.23 per share, versus $1.725 million, or $0.14 per share | $12.956 million, or $0.85 per share, versus $9.073 million, or $0.80 per share |
| Adjusted EBITDA loss | Not stated in the supplied filing text | $11.857 million, versus $7.629 million |
Revenue growth reflected higher selling prices and increased unit sales to existing and new customers. Cost of sales rose faster than revenue, driven by higher sales volume and increased costs of steel, electronic parts, and other components. Management attributed the lower gross margin primarily to these cost pressures. Operating expenses increased, including personnel, shipping, insurance, R&D, and product certification costs.
Cash flow, liquidity, and debt
- Cash was $3.804 million at March 31, 2022, down from $4.713 million at June 30, 2021. Nine-month operating cash use was $19.338 million, investing cash use was $0.644 million, and financing provided $19.073 million.
- Working capital was approximately $14.329 million, based on current assets of $34.823 million and current liabilities of $20.494 million. Inventory increased to $20.934 million from $10.513 million at June 30, 2021.
- The SVB revolving facility was increased to $6.0 million and matures November 7, 2022. At March 31, $3.5 million was outstanding and $2.5 million remained available. The facility is secured by substantially all company assets.
- Lease liabilities totaled approximately $2.979 million. The company reported no outstanding related-party debt at March 31.
- In September 2021, the company raised approximately $14.0 million net through a registered direct offering; it also received $1.602 million net from ATM sales during the nine-month period.
Management said existing cash and available borrowing capacity were expected to fund planned operations for the next 12 months, while warning that credit availability depends on compliance with loan conditions and that additional financing may be needed. The company may pursue equity or convertible debt, which could dilute shareholders.
Changes, outlook, and risks
- Backlog rose to $38.593 million at March 31, 2022, from $12.624 million at June 30, 2021; it was approximately $33.1 million as of May 10. Management cautioned that orders may be changed or cancelled and fulfillment depends on parts availability and manufacturing capacity.
- COVID-related supply interruptions, port delays, and higher component and freight costs continued. Flux raised prices in October 2021 and April 2022 and increased inventory to support deliveries; it said there was no assurance that price increases would offset future cost increases.
- Quarterly revenue was highly concentrated: four customers represented 82% of revenue. Three suppliers accounted for 48% of quarterly purchases.
- After quarter-end, on May 11, 2022, Flux entered a subordinated, unsecured working-capital facility of up to $5.0 million; lenders had committed $4.0 million as of May 12. Advances bear 15% annual interest and are due December 31, 2022, subject to extension provisions. The arrangement includes fees and warrants, and is subordinated to SVB debt.
- The prior-year comparable periods included $1.307 million of PPP loan forgiveness income; no such income was recorded in fiscal 2022.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. The company reported no material pending legal proceedings.
Important facts for investors to verify
- Whether Flux can improve gross margins as input, shipping, and production costs evolve, and whether announced price increases are sufficient.
- Whether it can obtain key components and convert backlog into timely shipments, revenue, and cash collections.
- Customer and supplier concentration, including the impact of changes in major relationships.
- Actual draws, fees, repayment terms, and warrant dilution under the May 2022 subordinated facility, as well as continued availability and covenant compliance under the SVB line.
- Cash burn and financing needs: operating cash use was $19.338 million over nine months, and management’s 12-month liquidity assessment depends on available credit and operating execution.