Flux Power(US:FLUX)2022-02-11 01:24Financial Data and Key Metrics Changes - Revenue increased by 19% to $7.7 million compared to $6.5 million a year ago, marking the 14th consecutive quarter of year-over-year revenue growth [8] - Customer purchase orders reached $19.8 million, a 51% increase from the first quarter of fiscal 2022 and over 200% from the same period a year ago [8] - Gross profit margin decreased to $1 million or 13.6% in Q2 2022, down from $1.5 million or 23% in the same year-ago quarter [29] Business Line Data and Key Metrics Changes - Significant orders received for large Class 1 X-series battery packs from a global consumer appliance manufacturer and airport ground support equipment battery packs from a large domestic airline [9] - Customer order backlog increased to a record $31.4 million as of December 31, 2021, reflecting growing demand from new and existing customers [10] Market Data and Key Metrics Changes - The company experienced supply chain disruptions impacting production and increasing costs for steel and electronic components, which affected gross margins [12][13] - Increased purchasing and related inventory to $9.6 million to mitigate supply chain disruptions, particularly for hard-to-acquire microchips and electronic components [23] Company Strategy and Development Direction - The company aims to capture leadership in the lithium-ion sector for industrial and commercial equipment, focusing on best-in-class products and services [19] - Plans to broaden reach into stationary energy storage and related sectors, particularly for solar-powered EV charging stations [26] - Implementation of lean manufacturing and a second shift to improve production throughput [24][65] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented level of supply chain uncertainty but expressed optimism about accelerating towards cash flow breakeven [22] - The company is actively working to reduce inventory balances and improve supply chain efficiency [32][87] - Management is focused on strategic initiatives to increase profitability and mitigate ongoing global supply chain disruptions [33] Other Important Information - The company appointed Cheemin Bo-Linn to the Board of Directors to strengthen corporate governance [11] - The company is pursuing sourcing strategies in Mexico to better align with growing production demands [17] Q&A Session Summary Question: Breakdown of $19.8 million in purchase orders and backlog deliverability - Management indicated that the backlog should be delivered by the end of June, with major contributions from Delta Airlines, Electrolux, and PepsiCo [38][39] Question: Growth curve outlook for the next quarters - Management expressed confidence in robust growth but noted challenges due to electronic component shortages [42] Question: SG&A growth outpacing revenue growth - Management explained that increased insurance premiums, public company expenses, and shipping costs contributed to higher SG&A expenses [49][52] Question: Inventory composition and supply chain issues - Management stated that finished goods inventory is around $2 million to $3 million, with electronic components being the largest part of the inventory affected by supply chain issues [55] Question: Gross margin improvements and production lines - Management confirmed the addition of a second shift to increase production of high-volume packs and ongoing efforts to reduce material costs [65] Question: Cash burn dynamics in the second half of the fiscal year - Management acknowledged cash burn as a concern but emphasized efforts to manage inventory and improve efficiency [82][87]