Flux Power (NASDAQ:FLUX) reported fiscal second-quarter 2026 results highlighted by what management said was the company’s first profitable quarter, as expense reductions and a sequential increase in revenue helped offset year-over-year sales pressure and ongoing tariff-related costs.
CEO Krishna Vanka said the company “achieved profitability for the first time in the company’s history,” crediting internal discipline on spending, multi-quarter restructuring actions, and improving operating leverage. However, Vanka also cautioned that the company’s “most significant customer” has implemented a capital freeze, which Flux expects will lead to “materially lower revenue” in the fiscal third quarter.
Second-quarter financial performance
Gross margin was 34.7%, compared with 28.6% in the prior quarter and 32.5% in the year-ago period. Royal attributed the 610-basis-point sequential improvement largely to improved product mix, cost-saving initiatives, and lower warranty costs.
Operating expenses were $4.1 million, down from $5.9 million in the prior quarter and $6.9 million in the second quarter of fiscal 2025. Royal said the decline reflected the benefits of cost reduction initiatives, and also noted an approximately $0.5 million reversal of previously accrued employee bonus awards during the quarter.
Net income was $0.6 million, or $0.03 per share, compared with a net loss of $2.6 million, or $0.15 per share, in the prior quarter and a net loss of $1.9 million, or $0.11 per share, in the year-ago quarter. On a non-GAAP basis (excluding legal costs associated with the multi-year restatement of previously issued financial statements and stock-based compensation), Flux reported non-GAAP net income of $1.0 million, or $0.04 per fully diluted share, compared to a non-GAAP net loss of $2.0 million, or $0.12 per share, in the prior quarter.
Adjusted EBITDA was positive $1.5 million, compared with an adjusted EBITDA loss of $1.4 million in the prior quarter and positive adjusted EBITDA of $130,000 in the year-ago period.
Cost structure and operational efficiency initiatives
Vanka described the profitability milestone as the result of “multi-quarter restructuring decisions” that included right-sizing headcount and broader cost optimizations. He said the company now has “a much lower cost structure, higher margins, and a lower break-even point” than a year ago, creating “high operating leverage.”
Management also discussed adoption of AI-driven tools internally. Vanka said Flux has begun using AI tools across engineering design, software development, and day-to-day operations in an effort to improve productivity and efficiency, with the expectation of seeing benefits as those initiatives are deployed across the organization.
Product updates: SkyLink, GSE battery, and software enhancements
On product development, Vanka said Flux released its next-generation SkyLink telematics device, which he described as complementary to Flux’s battery management system. The company emphasized higher processing capability and expanded sensing. Vanka said SkyLink is powered by a quad-core 64-bit processor and includes integrated Wi-Fi, Bluetooth, worldwide cellular and GPS, and multiple sensors including a three-axis accelerometer, gyroscope, and temperature sensing. He added the new device has “four times the sensors compared to the current generation.”
Vanka said SkyLink units are in beta testing at multiple customer sites and that Flux has been receiving “great feedback.” He said the company plans to make the telematics device broadly available to customers “in a couple of months,” and later confirmed during Q&A that it will be offered across the company’s product line with each battery sold.
Flux also announced the release of a new GAT 315 battery in response to ground support equipment (GSE) customer demand. Vanka said the addition supports the company’s position in the GSE market and brings Flux to four product lines with multiple configurations serving that segment.
On the software side, Vanka said Flux recently upgraded its SkyEMS platform with new features, including:
- Intelligent alerting: AI-based alerts intended to shift fleet management “from being reactive to proactive,” providing notifications of potential battery issues and recommended corrective actions. Vanka said initial observations suggest customers “can gain 10%–30% uptime” using the feature.
- Mobile interface: A new mobile interface designed for on-the-go monitoring and faster decision-making. Vanka said mobile access can reduce the time required to recognize an issue by 15%–40%.
During Q&A, management said it is working on tiering software into a standard and a premium package, with the premium tier expected to include additional AI-based functionality and higher gross margins. Vanka said the company is focused not only on selling software with new battery shipments, but also on monetizing software features across its installed base, which he said exceeds 30,000 batteries.
Vanka also addressed a “State of Health” patent discussed by an analyst, saying the company received the full patent in the prior quarter and has implemented the associated algorithm on the software side. He said the capability is expected to be included in the premium software package and is aimed at helping customers make planning decisions such as timing battery repurchases and capacity planning.
Outlook: major customer capital freeze and demand conditions
Despite reporting profitability, Vanka warned of near-term revenue pressure. He said Flux’s most significant customer has indicated it is implementing a capital freeze, which management expects may impact “a significant portion of calendar year 2026.” Vanka said Flux is not certain how long the freeze will last, but described the partnership as strong and said the company expects business with the customer to resume in the future.
In response to questions, Vanka said the capital freeze is specific to that single customer. He described broader demand as “a little bit mixed,” noting that tariff effects are still lingering and that customers remain cautious as tariff percentages change. At the same time, he said customers need batteries to run their operations and are continuing to move forward with purchases.
Vanka said Flux has taken additional steps to further decrease its expense run rate, including an additional cost reduction action completed in the current quarter. He also pointed to the long-term opportunity in the lithium-ion forklift battery segment, which he said is projected to grow at an 8.8% CAGR through 2035.
Balance sheet and bonus accrual reversal clarification
Royal said Flux ended the quarter with cash and cash equivalents of $0.9 million, compared with $1.3 million as of June 30, 2025. He said capital raised recently has been used primarily to reduce balances on the company’s line of credit and, to a lesser extent, to reduce accounts payable. Royal said current borrowing capacity under the Gibraltar line of credit is $16 million, subject to available collateral and satisfaction of certain financial covenants.
Addressing the $0.5 million incentive compensation accrual reversal, Royal said the company reversed the estimate because performance objectives were not expected to be achieved, particularly in light of the customer capital freeze disclosure. He said the reversal reflected amounts accrued through the first quarter and “will not have an impact on the upcoming quarters.” In response to a follow-up question, Royal said the reversal was recorded “in all three” areas of the income statement, primarily in SG&A and R&D, with about $50,000 in cost of goods sold.
Flux said it expects to provide another update on its progress during its next earnings call in mid-May.
About Flux Power (NASDAQ:FLUX)
Flux Power (NASDAQ: FLUX) is a U.S.-based designer and manufacturer of advanced lithium-ion battery systems tailored for industrial and material-handling applications. The company develops modular battery packs, battery management systems and related charging solutions that deliver high performance, extended runtimes and rapid recharge cycles. Flux Power’s technology is engineered to withstand the demanding environments of warehouses, manufacturing facilities, airports and port terminals, offering a zero-emission alternative to traditional lead-acid batteries.
Among its core offerings, Flux Power provides plug-and-play lithium-ion battery packs, battery management electronics and telematics software that enable real-time monitoring of state of charge, health metrics and energy usage.
