“Toyota sees lithium-ion batteries as viable and in demand now. We’re pleased the Flux LiFT-24V-TRW battery pack testing went well.”
Toyota Material Handling
“Our business depends on being flexible to serve a wide variety of transportation and logistics needs for businesses nationwide. The company was experiencing frequent issues with battery failures and loss of power in their equipment. Flux’s LiFT pack provided us with a great opportunity to offer our customer a solution and enabled us to stand out from the competition.”
Sue Herron, Sales Manager of Southwest Material Handling
“Flux’s portable power packs provide performance, reliability, extended life and durability that meet the needs of today’s advanced military equipment. We were sold on their experience, design and technical expertise, the overall performance of their solution and their commitment to customer support. We are pleased to partner with them to deliver an exciting new solution for Forward Operating Base power.”
Carl Pates, VP of Engineering of HDT
“The prospect of improved performance, customer satisfaction and a lower cost of ownership from lithium storage packs is a win-win for our customers. We are excited to be teaming with Flux in developing these solutions and believe they will resonate with our larger global logistics and manufacturing clients.”
Bob Fisher, President of Wesley International
“We chose Flux for their technical expertise and responsiveness to our unique design needs for run time, charge time and hazardous environment requirements. Innovations in energy storage are allowing Penguin to bring to market new advanced telerobotics solutions for more demanding applications across multiple industries.”
Greg Baiden, Chairman and Chief Technology Officer of Penguin ASI
“The benefits of the Flux battery technology, in terms of size, capacity and safety, should enable better operating performance and acceptance by mine operations and unions.”
Hector Cerda, Project Manager of Emerging Technologies – Codelco
Flux Power Holdings, Inc. (OTCQB: FLUX) Q1 2015 Conference Call Script November 14, 2014
Speaker: Ron Dutt, CEO and acting CFO
Chris Eddy Today’s call is available live and via online replay via a link on today’s news release and on the IR section of Flux’s website. Leading today’s call is Ron Dutt, Flux Power’s CEO and acting CFO.
I would like to remind everyone that comments Flux management may make on today’s call may include predictions, estimates, expectations, and other forward-looking statements which are based on the Company’s knowledge as of today. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Flux disclaims any obligation to update such forward-looking statements and encourages investors to refer to Flux Power’s recent SEC filings for a detailed list of such risk factors. I will now turn the call over to Ron Dutt, CEO.
Ron Dutt: Thank you, Chris. Not much time has elapsed since our last conference call but I think Flux continues to make great progress. Some of the recent small ‘wins’ I see, in no particular order, are; Page 1 of 7
1) Flux has doubled from $400,000 to $800,000 the potential business revenue that we are negotiating through battery distributors and equipment dealers from end-users. This is very encouraging as it reflects progress over the past 6 weeks. And we have expanded our shipment footprint from 18 states this summer to 25 states currently. And that’s up from 4 states last January, 11 months ago. 2) Customers have placed $200,000 of orders that we are in the process of fulfilling. Please remember that Flux does not recognize revenue until packs are built and shipped.
3) A lengthy sales cycle is not a foregone conclusion for every national account. Very recently, we received an order for 15 LiFT Packs from a regional distributor that only took 2 months from ‘initial dialogue with a new distributor’ to ‘purchase order from his national account’. While I don’t expect this expedited cycle to be the norm yet, it validates my opinion that current and potential customers are taking note of all our business development and marketing efforts over the last year. Watching from the sidelines, they do factor in their decision process if they know other competitors and users are satisfied and adopting.
‘Stand On’ Page 2 of 7
A number our pallet jack customers have encouraged us to supply packs for their larger and heavier equipment; namely, Stand On Riders. This is important for several reasons. Number 1, it diversifies our product suite to address an even larger portion of the Class III market. Number 2, existing customers that ask for a solution for a related vehicle proves that these customers believe in Flux technology and product performance and our ability to deliver. If they weren’t happy with the packs we supplied for their Pallet Jacks, they certainly would not call us and ask for another variation of our pack. The way I see it, they believe the packs are 1) compelling and 2) the same technology can be applied to heavier and larger equipment. In the long run, that means more sales volume in the form of a larger addressable market and, higher margins to Flux from larger equipment.
Let me take a minute to define the market for Class III lift equipment. Published industry statistics report that 60,000 new lift trucks are bought per year and trucks last 5 years on average. My back of the napkin calculation suggests 300,000 trucks operate today based on sales of 60,000 trucks per year multiplied by a 5 year life expectancy. That’s the big picture opportunity for Flux in the Class III market. Keep in mind that wet cell batteries, according our distribution network, need replacement every 2 years on average. There is therefore an opportunity for Flux to sell LiFT packs when users buy a new truck AND when the operator has to replace a wet cell battery. Page 3 of 7
About half of the Class III trucks are Walkie pallet jack and the remainder is end rider and similarly configured trucks, at a much higher price point. The simple math has always indicated a huge market for adoption of the lithium solution. In aggregate, the lift equipment and other related industrial equipment segments are a multi billion market. And we are leading this first wave of adoption.
In our press release for the last earnings call, we referenced three large national accounts that represented potential orders. Since that time, our purchase process is complete in each case and we are in the process of fulfilling orders. Our core sales strategy to leverage the expanding network of relationships of our distribution partners is clearly paying off. Flux looks forward to significant revenue opportunities with the help of our distribution partners to engage national accounts in “trying out our product to affirm their confidence in the value proposition”, which all leads to significant ordering and adoption for their fleets.
OEMs We continue to build strong working relationships with original equipment manufacturers, since customer satisfaction is driven by the total experience and integration of power source and material handling equipment. We have established relationships with OEMs who supply 75% of the Class III sector. These relationships are important in that we will be more successful by collaborating with Page 4 of 7
the equipment manufacturers to achieve high levels of customer satisfaction. In a nutshell, we are executing the plan I share with investors last year and with all of you earlier this year, which includes:
1) Design a reliable product that meets the needs of the customer 2) Build an effective distribution network and 3) Be responsive to customer feedback
Gaining Reputation Our reputation is spreading and we are excited to hear that Flux is becoming known as very responsive, trustworthy and cooperative. The best praise in our minds is the fact that some people are starting to CALL US; Flux is not always the one chasing potential customers. Our emerging reputation is one reason we have recently been invited to bid on a multi-million dollar deal. And one of our national accounts has indicated their order level could climb to $1million per year in the very near future.
Growth enablers: Sales & Mktg and Product Our plan to growth includes scaling our sales and marketing efforts as well. In addition to traditional methods, Flux expects to stay visible through a variety of mediums such as attendance at trade shows, PR and advertising in industry media and a more robust social media presence. Look for us and our partners to be working together. Page 5 of 7
And we expect to improve our battery packs with features such as WIFI monitoring and software updates. We have a track record as an innovative and responsive provider to our customers. Distribution Network Progress Flux believes the quickest way to scale our business is leverage the networks of OEM dealers and battery distributors to connect with national accounts. Those networks are a far greater sales force than Flux alone, understand the value proposition of Lithium, have national account relationships, want to grow their market share and are very supportive of better and cost effective product design. Our partners are impressive in their own right and are excited about Flux.
Board Advisors I am pleased to tell you that Tim Collins, Executive Chairman, and I have formed a strategic advisory board and now welcome Sir Nigel Burney and Steven Capelli as the first such advisors. They each bring very successful business experience and careers and are currently very supportive investors. As mentioned in our press release earlier today, Nigel has been a publishing executive and cleantech entrepreneur and Steve has been the former executive and leader at both Sybase and Pyramid Technology, and at other notable technology companies. I am excited to work with both Nigel and Steve, having already worked with Steve on a number of Page 6 of 7
business issues. They share my ever-increasing excitement about progress we are making and where we are going.
So with that, let’s open the call to your questions. Operator?