Greetings, and welcome to the Flux Power Holdings Fiscal First and Second Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the conference call over to Flux Power Chief Financial Officer, Kevin Royal. Please go ahead.

Thank you, operator. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K for a more complete discussion of these factors and other risks, particularly under the heading, Risk Factors. A press release detailing these results crossed the wire this afternoon at 4:01 PM Eastern Time and is available in the Investor Relations section of our company's website, fluxpower.com. Your host today, Krishna Vanka, Chief Executive Officer; Ron Dutt, Senior Advisor and former CEO; Kelly Frey, Chief Revenue Officer; and myself, Chief Financial Officer, Kevin Royal, will present results of operations for the fiscal first quarter ended September 30, 2024, and fiscal second quarter ended December 31, 2024. At this time, I will now turn the call over to Flux Power's newly appointed CEO, Krishna Vanka.

Thank you, Kevin, and good afternoon, everyone. I am pleased to welcome you to today's first and second fiscal quarter 2025 financial results conference call. To begin, I'd like to take a moment to introduce myself and share my vision for Flux Power. Earlier this month, I was privileged to join Flux Power as CEO to help build on the great foundation built by Ron and the team. Prior to joining the company, I spent 18 years building, scaling, managing, and transforming technology companies in sectors such as renewable energy, EV transition, Internet of Things, fleet and asset management, and telematics. Most recently, I was the CEO of Fluence Digital, which is part of Fluence Energy and is a NASDAQ-listed global market leader in energy storage. As part of the diligence process, I evaluated the company's overall potential as well as the underlying ingredients, including talent, technology, our customer base, and the vision to make my decision. I can confidently say that we have the right technology at the right time with the right people to scale and build Flux Power into your market leader in this space. I believe in the months and years ahead, I and the entire Flux team will accelerate our mission of delivering industry-leading lithium-ion energy storage solutions. I will now turn the call over to Ron Dutt to discuss the first and second quarter highlights and then walk through our business updates and financials. Ron?

Thank you, Krishna, and again welcome to Flux Power. I'm pleased to pass the baton to such a highly qualified leader who can grow and scale Flux into a very profitable business that will deliver on all the needs of our customers as the leader in advanced energy solutions. Turning to the first half of fiscal year 2025, our first and second quarters were highlighted by sequential growth in revenue and gross margin compared with the quarter ending June 30, 2024, driven by enhanced sales strategies, better market conditions, and growing demand for our innovative suite of products. In the first quarter, revenue grew 9% year-over-year to $16.1 million, driven by an increase in shipments into the ground support equipment market at higher average selling prices. We are excited to see gross profit margins steadily improve over the last several quarters. First-quarter gross profit increased 23% to $5.2 million and gross margin increased to 32%, compared to 29% in the fiscal quarter of 2024, which was driven by an increase in average selling prices partially offset by an increase in warranty costs. Adjusted EBITDA loss improved to $600,000 in the first quarter, compared to a loss of $1.2 million in the prior year quarter. Backlog as of September 30, 2024, stood at $21.2 million. Moving on, second quarter 2025 results were affected by lumpiness in orders, with revenue for the first quarter decreasing 8% year-over-year to $16.8 million but up 4% sequentially from the first quarter of 2025. We expect our momentum to strengthen, as indications reflect potential increasing order flow for the coming quarters. Gross profit for the second quarter increased 2% to $5.5 million, and gross margin increased to 33% in the quarter compared to 30% in the second quarter of 2024. Cost reductions and price increases have contributed to this gross margin growth, along with a focus on strategic supply chain and profitability improvement initiatives, lower costs, and higher volume purchasing. Adjusted EBITDA loss was $1.0 million in the fiscal second quarter of 2025 compared to a gain of $200,000 in the fiscal second quarter of 2024, with a difference attributed to the aforementioned lumpiness in the quarter. Order backlog was $17.5 million as of December 31, 2024, and $19.5 million as of February 28, 2025, supporting a positive long-term outlook. The key themes from the last two quarters support our belief that we have built a strong foundation and have the right strategy in place to support revenue growth to fuel our path to sustained profitability. We improved our ability to execute in these areas during the first half of the year and expect this momentum to continue as we further monetize a $19.5 million customer backlog. Key themes to highlight include the following: we have executed additional initiatives to support growth, which included expanding our product lines for multiple customer segments and adjacent markets, and filling gaps in energy storage offerings. In the coming months, we also plan additional heavy-duty models to fill product line gaps. We remain especially excited about our telemetry product, which includes asset management features that offer leading technology and true value creation to our fleet customers. Our SkyBMS telemetry product is in the pilot stage for a Fortune 50 company's implementation nationwide. We recently conducted live demonstrations of SkyBMS at ProMat 2025, one of the largest manufacturing supply chain events for the year. In addition to appointing Krishna as CEO, we also strengthened our sales and engineering teams with several key appointments, including Kelly Frey as Chief Revenue Officer and Mark Barmettler as our new Senior Head of Engineering. Kelly brings over 20 years of experience as a sales and marketing leader, including a variety of roles ranging from startups to Fortune 100 companies. Kelly's focus is on elevating our revenue generation, expanding relationship sales, expanding our market research, and improving customer retention. Playing a key leadership role in maximizing revenue potential and sustaining long-term growth, Mark brings over 10 years of experience in engineering leadership roles, covering telecommunications and test equipment, incorporating firmware, software, and cloud solutions. Mark will be addressing new product innovation, cost reductions, and telemetry. Fortune 500 companies and other large fleets are increasingly looking to electrify with lower-cost and higher-performance lithium energy solutions that also support sustainability. As this trend continues to advance, Flux is ideally positioned to meet their needs. Now, turning to our first and second quarter operational and business updates. Our two highest priorities have remained, driving revenue growth and achieving profitability. We continued to focus on expanding sales and marketing initiatives to capitalize on the fleet-wide replacement trend and support continued migration to lithium. Despite the strong demand we saw from our customers, we experienced delays in orders driven by revised timing of forklift deliveries of certain models that impacted the timing of our orders and shipments. The new order delays were felt throughout our industry sector due to higher interest rates and economic uncertainty during the 2024 calendar year. While we don't give specific guidance, we are seeing signs that these headwinds could abate later this 2025 calendar year. We have been laser-focused on several initiatives to increase revenue growth, reduce costs, launch new high-demand products, and ensure our pricing is appropriate for all our models. Our strong reputation in the market combined with our ability to service Fortune 100 customers provides evidence of our value proposition, along with recently achieving over 25,000 Flux-powered lithium-ion packs operating in North America. Looking at our customer base, we have no known lost customers and no lost orders to competition. Furthermore, we have not seen any pullback from interest in companies migrating to lithium-ion solutions. To support our targeted sales trajectory, we are launching several new products, including heavy-duty models that directly address customer demand. We are expanding our sales force and implementing marketing initiatives to expand awareness of both value proposition to customers and capabilities of Flux Power to impact their fleet operations. Our solutions provide increased forklift performance, product lifecycle return on investment, asset management improvements from our leading telemetry, and, of course, carbon dioxide reductions to the environment. We also integrate most brands of charging equipment with our lithium-ion energy packs. We remain on target to offer a complete end-to-end energy storage solution to current and future customers. Recently, we announced a strategic partnership with a second top forklift OEM to launch a new private-label battery program. This collaboration marks a significant milestone for Flux Power's S-series line, which now includes products with the coveted UL type EE certification, providing added safety and durability capability that many of our competitors do not have. Our telemetry, which includes asset management features, is in the pilot stage for a Fortune 50 company implementation nationwide, as I mentioned earlier. Our telemetry includes features for customer asset management, including fleet-wide installation, and our customer interface energy management solution, set to launch in 2025, is designed to provide deeper insights and greater control over energy use. We are also actively exploring and leveraging supply chain innovations and opportunities to further reduce our cost footprint. In addition, we are leveraging machine learning and AI features for product support of large fleets and will be launching the automation of modularizing battery cells this summer.

Thank you, Ron. I would like to share some quick updates and key activities I have been focused on that are designed to accelerate revenue growth, brand awareness, and the overall customer experience, all of which are key to driving long-term growth for Flux. Since I started, I have met several key customers, OEMs, and dealer partners who have helped us achieve a milestone of 25,000 battery packs deployed in almost all 50 states, Canada, and Mexico. I can say definitively that our material handling and ground support customers greatly appreciate our product quality, support services, and innovative energy telematics solutions. We have the right foundation in place to build upon. For many, we are their first experience with lithium or a replacement for underperforming batteries provided by our competition. Proving our superior product and service advantage presents significant revenue potential, both within our existing customer base as well as prospective customers, as lithium adoption accelerates and batteries need replacement. With nearly 100% customer retention and increased OEM certifications, the future looks promising for Flux. Since my arrival, we have also grown the sales team and introduced a solution selling framework. Our pipeline opportunities have increased, and we have secured significant new accounts in various sectors, including the nation's largest medical supplier and the country's largest winery, as well as other food and beverage, retail, and distribution customers. Notably, we've partnered with a leading distributor in airport and ground support equipment to secure two new airline customers. We have hit the ground running, and the reception to our offering has been very well received. In the coming months, my focus will be on closing out Q3 and Q4 with new account revenue growth, increasing the pipeline, and meeting more customers, prospects, and partners. We will invest in more strategic OEM and partner relationships while continuing to professionalize our sales process, instill a growth and performance mindset, and invest in customer experience excellence in marketing. I'm excited about this opportunity and look forward to helping the company grow. Thank you very much. And with that, I'll now turn it over to Kevin Royal, our Chief Financial Officer, to review the financial results.

Thank you, Kelly. As Ron mentioned earlier, adjusted EBITDA losses of $600,000 during the fiscal first quarter and $1 million in the second quarter resulted primarily from sequential growth in revenues, more than offset by costs associated with the restatement of previously issued financial statements. Gross margin initiatives have dramatically improved margins over the last two years, and we expect continued improvement. Most recently, gross margins increased from 27% in Q4 of fiscal year 2024 to 32% in Q1 fiscal year 2025 and 33% in Q2 fiscal year 2025. Cost reductions and price increases have contributed to this gross margin expansion, combined with a focus on strategic supply chain and profitability improvement initiatives, lower costs, and higher volume purchasing. All these initiatives are part of our plan to accelerate gross margins further. As of February 28, 2025, our open order backlog was $19.5 million. Our backlog reflects longer lead times of incoming purchase orders from major OEMs to align with their schedule of new forklift deliveries and extend delivery times for certain model lines for new GSE equipment. Beyond our backlog of open orders, we continue to anticipate growth in current customer adoption and new customer potential acquisition. Now, turning to review our financial results for the fiscal first quarter ended September 30, 2024. Revenue for the fiscal first quarter of 2025 was $16.1 million, an increase of 9% compared to $14.8 million in the fiscal first quarter of 2024, primarily driven by an increase in shipments into the ground support equipment market at high levels of higher average selling prices compared to the same period in the prior year. This was partially offset by a reduction in shipments to the material handling market. Revenue in the immediately preceding fiscal Q4 2024 was $13.4 million. Gross profit for the first fiscal quarter of 2025 increased 23% to $5.2 million compared to the gross profit of $4.2 million in the fiscal first quarter of 2024. Gross margin increased to 32% in the fiscal first quarter of 2025 compared to 29% in the fiscal first quarter of 2024. Gross profit margin increased by 370 basis points driven by an increase in average selling prices partially offset by an increase in warranty costs. Adjusted EBITDA loss was $600,000 in the first fiscal quarter of 2025 compared to a loss of $1.2 million in the fiscal first quarter of 2024. Selling and administrative expenses increased to $5.1 million in the fiscal first quarter of 2025 compared to $4.7 million in the fiscal first quarter of 2024, primarily attributable to stock-based compensation and professional services associated with the restatement of previously issued financial statements. Research and development expenses were flat at $1.3 million in both fiscal first quarters 2025 and 2024, as we continue to place an emphasis on enhancing our technological advantage and driving innovation through our product lines. Net loss for the first fiscal quarter of 2025 was $1.7 million compared to a loss of $2.2 million in the fiscal first quarter of 2024, primarily attributable to increased gross profit, which was partially offset by increases in operating expenses and interest expense. Turning now to our financial results for the second quarter ended December 31, 2024. Revenue for the second fiscal quarter decreased 8% to $16.8 million compared to $18.2 million in the fiscal second quarter of 2024, driven by lower demand in the material handling market and lower average selling prices due to product mix. Gross profit for the fiscal second quarter of 2025 increased 2% to $5.5 million compared to a gross profit of $5.4 million in the fiscal second quarter of 2024. Gross margin increased to 33% in the fiscal second quarter of 2025 compared to 30% in the fiscal second quarter of 2024. Gross profit margin increased by 290 basis points as a result of a decrease in average cost partially offset by an increase in warranty costs. Adjusted EBITDA loss was $1 million in the fiscal second quarter of 2025 compared to a gain of $200,000 in the fiscal second quarter of 2024. Selling and administrative expenses increased to $6 million in the fiscal second quarter of 2025 compared to $4.6 million in the fiscal second quarter of 2024, primarily attributable to variable incentive compensation, severance, and professional fees associated with the multi-year restatement of previously filed financial statements. Research and development expenses decreased to $1 million in the fiscal second quarter of 2025 compared to $1.2 million in the fiscal second quarter of 2024, mainly driven by lower salaries and stock-based compensation. Our net loss for the fiscal second quarter of 2025 was $1.9 million compared to a loss of $900,000 in the fiscal second quarter of 2024, primarily attributable to an increase in operating expenses. Cash was $900,000 at December 31, 2024, compared to $16,000 at June 30, 2024, reflecting changes in working capital management. Available working capital includes our line of credit as of December 31, 2024, under our $16 million credit facility from Gibraltar Business Capital with a remaining available balance of $6.3 million, subject to borrowing based limitations and satisfaction of certain financial covenants, and $1 million available under the subordinated line of credit with Cleveland Capital. Our credit line with our strategic financing partner, Gibraltar, subject to eligible accounts receivable and inventory borrowing based, provides for an expansion up to $20 million. We continue to be in good standing with Gibraltar and remain confident in their continued support of Flux and our long-term mission. For those of you who are new to Flux, last year we announced we'd identified approximately $4.4 million of excess and obsolete inventory and related non-cash, quarantine-related items of approximately $500,000, primarily related to product innovation and design of our products during a period of rapid growth over the last several years. To properly reflect the obsolete inventory, the company restated previously issued financial statements for fiscal year 2023 and the interim period of fiscal year 2024. We took all appropriate measures to rectify the inventory accounting issues related to our transition to more advanced energy cells, including implementing enhanced procedures and quality checks to mitigate the possibility of it reoccurring. After filing the 10-K and subsequent 10-Qs, we are pleased to be caught up with our filings and do not expect any lingering issues going forward. Looking ahead, we expect fiscal third quarter 2025 revenues to be in line with the second quarter revenue results, with a stronger trajectory in the fourth quarter as macroeconomic conditions improve and additional selling strategies support our historical sales trajectory to scale. Taken together, we believe our fourth fiscal quarter revenues will increase over the third quarter in a range of 5% to 10%. I'd now like to provide some closing remarks. The first and second quarters of fiscal 2025 have been challenging for the company as we worked through the restatement of our previously issued financial statements. Even with these challenges, the company delivered strong revenue and gross margin growth, driven by enhanced sales strategies, better market conditions, and growing demand for our innovative suite of products. We also welcome several strong additions to the Flux team that will lead us into the next phase of growth. Krishna Vanka has already provided significant contributions in his short time as CEO. Chief Revenue Officer, Kelly Frey, is driving our revenue generation strategy, aligning sales, marketing, and pipeline management to ensure cohesive and effective growth. Mark Barmettler, Senior Head of Engineering, is addressing new product innovation, cost reduction, and telemetry. We look forward to providing our shareholders with further updates in the near term as we strengthen our leadership position in lithium-ion technology solutions with our growing list of new and diverse large customers. I would like to thank you all for attending, and I will now hand the call over to the operator to begin our question-and-answer session.

Our first question today is coming from Rob Brown from Lake Street Capital. Your line is now live.

Good afternoon. Congratulations on all the progress. If you could talk a little bit more about sort of the order activity you're seeing, where you're seeing strength, and it was a pretty bullish kind of comment in the back half of the year here. Just wanted to get a sense of where those orders are?

Thanks, Rob, for the question. What we're seeing is there's still a lot of demand with lithium. Many customers are wanting to explore the addition of lithium to their often lead-acid batteries. So we're seeing it from both the ground support equipment market as well as the material handling market. There's a lot of excitement about it. There still are some questions folks have. So what we're seeing is they're trying it maybe in one operation before they decide for a nationwide rollout. But everybody's excited by it. And then when you combine the lithium with the visibility that telemetry gives them, it's a much smarter battery, and how that data fits into their larger data infrastructure, we're seeing a lot of demand and excitement.

Okay, great. And then on the heavy-duty model introduction, when does that hit and start to generate revenue, and what's sort of the opportunity you see from that product?

Rob, this is Ron. We've been working on this heavy-duty model for some time, and we're just now starting to roll the first ones of those, really for each of our major product lines, particularly Class 2 and Class 3, introducing a heavy-duty line for those very aggressive operations that we've seen, such as Subaru and others. So we feel it's filling the need, and we're going to roll those out across those lines over the coming months this year.

Okay, great. Thank you. I'll turn it over.

Thank you. Next question is coming from Craig Irwin from ROTH Capital Partners. Your line is now live.

Good evening and thanks for taking my questions. Lots of things we can call out from the last couple quarters here as pretty strong progress. I guess the biggest surprise to me was the balance sheet. You had, I guess, about a little over $5 million from inventory improvement over the last couple quarters, receivables down, a million and a half. You got a little bit of extension on your deferred, but the debt was down quite materially. It seems like, Kevin, you've been doing a lot of work on the balance sheet. What kind of room do we have for continued improvement over the next couple quarters? Should we expect the positive cash flows? And, yes, I did notice positive cash flows these last two quarters. Is that even feasible as we look into the end of the year?

So I think, as we go into Q3, we wouldn't expect at those levels to be positive. We'll be close. But in Q4, we did give an indication of what we expect from revenue. And at those levels, we should be breakeven to positive cash flow.

Excellent. Excellent. So then you did give us sort of an adjusted EBITDA discussion, but in your adjusted EBITDA, you did not break out the adjustments for severance and for the expenses related to the restatement that you guys have now completed and brought everything up to date for. I'm guessing it's probably somewhere between a million and a million and a half the last couple quarters. Is that something you might be able to give us a little bit of color on the impact in the fourth, first, and second quarters of '24 and '25?

Yes. So for the first half of the year 2025, that's where we incurred the lion's share of the cost associated with the restatement. And those costs were $1.2 million, almost spread evenly, across the two quarters. The severance charges were just under half a million dollars, you know, probably a little bit closer to $400,000, actually. And those were incurred in the second fiscal quarter of 2025.

Okay. Excellent. And then last question if I may, the price increases, can you maybe put some boundaries around that? Are we talking single digit, mid-single digit, double-digit price increases and the timing there? Were these put in all at once? And is it something that was put in sort of towards the end of the calendar year and have all of those sort of rolled through? Or is there product and backlog, the 19 and change you mentioned, some of that maybe at the legacy pricing that will roll through over the next couple quarters as we deliver on those?

So the way I would think about our price increases is we wanted those to hit the price list at the beginning of the fiscal year. They were really select increases that impacted about half our product line. And they were in the single digit, say mid-single digit would be a way to think about it. And while we have experienced some of those, we've realized rather some of those beginning in October, so the second fiscal quarter, a lot of those price increases will not hit us until the third fiscal quarter, which we're currently in, and the fourth fiscal quarter because we had backlog or we had quotes out with customers that we of course honored.

Okay, and if I can squeeze another one in, your medical equipment customer, obviously, another nice addition to the fleet. Medical equipment packs have historically been very high margin in the battery market. And it seems like you're probably supplying one of the most technically demanding applications that they have, serving in their warehouses. Can you talk about whether or not this adjacent market is potentially an opportunity with this new customer? Is this something that's been a part of the conversations as you've helped them bring down costs in operating their warehouses?

This is Kelly. Thanks for the question, Craig. Yes, it certainly is. It's exciting that we've got a customer that really this is their very early stage of deployment of lithium. So that means that there's a lot more upside potential not only with this customer, but in that industry at large, for sure. It's also an industry that is looking forward to automation ultimately. And the nice part of our story with lithium is that for us, it doesn't matter if there's a human operator on that lift truck or material handling, or if it's an automated guided vehicle, it still needs lithium. As a matter of fact, as you move towards automation, there's probably more of a propensity to go with lithium because it requires a lot less automation. So I feel very bullish about the opportunity in that sector, for sure. And I think you are accurate that that sector is willing to generally pay a little bit or invest a little bit more. Let's put it that way.

Excellent. Well, congrats on the progress. I'll go ahead and hop back into the queue. Thank you.

Thank you.

Thank you. Next question today is coming from Eric Stine from Craig Hallum. Your line is now live.

Hi, everyone. You know, maybe quickly. So the line was kind of garbled there when you talked about the third quarter. I did hear the fourth quarter commentary about being up 5% to 10%. But I guess first, could you just go through the third quarter commentary again? And then I'm curious if we think about the price increases taking effect in the second half and then OpEx more normalized post the restatement expenses, et cetera. Is EBITDA positive a possibility in the second half? And if not, I mean, I would think that that's something that you are targeting in fiscal 26?

So what we said about Q3 is that we would expect it or we are expecting it to be on par with Q2, Q1 in the $16 million range. And then you heard what I said about Q4. I think I also earlier commented on Q4, and at the levels that we're talking about from a revenue standpoint, we would expect to be profitable on an adjusted EBITDA basis. So EBITDA less our stock-based compensation should put us at breakeven and slightly positive from a cash flow basis as well.

Okay, that is helpful. Thanks for clarifying that. And then maybe this bigger picture get a sense on this call, but certainly in the past that you kind of feel like you needed to focus more on sales. You haven't had a full look at the market opportunity. So maybe a question for Kelly, maybe when you - as you've kind of come in, where do you think the company was in terms of a look at that market opportunity and maybe stick to materials handling or some of the other main end markets, and where do you think that can go and how long do you think that that process can take?

Sure. Thanks for the question. It's a nuanced question, and I'll give that as direct of a response as I can. What I really have observed in the material handling market in particular is that Flux was taking a fairly, what I would call a passive sales approach, meaning waiting for the demand signal to come from the distributors, the resellers, and the OEMs, which is important. Those are important partners for us, but we haven't really been doing a lot of proactive demand generation. We really have been underfunding marketing and underfunding sales, and that means that we are not pulling as much through the market as the potential is there. So I think that's a key thing, refocusing the team on it's easy to say solution selling, but really this lithium-ion technology, it's actually quite an advanced technology when you consider it to be a smart battery that needs a smart energy solution, really that fits into the overall plant energy solution. Opportunities for things such as heat shaving to help a customer understand when should I be charging my equipment, understanding that when you have hundreds of pieces of equipment in a warehouse, well that becomes a lot of distributed energy resources, and you have to decide when and how do I use them, when and how do I charge them. So really trying to change the orientation of the sales organization to a solution orientation and then creating more demand generation in the market because we do have a strong brand. You talk to virtually any customer, they know who we are because we're the innovator, but we need to create that demand in the market as opposed to what I would say is being fairly passive in the market.

Okay, thank you.

Thank you. Next question is coming from Matthew Galinko from Maxim Group. Your line is now live.

Hi, thanks for taking my questions. Can we start on the macro outlook? I guess what gives you confidence at this point of the year in I guess the fourth quarter uptick?

Yes, well our sales are fairly long lead times. So we do struggle with this ability given our sales model selling through distributors, dealers, so on and so forth. But our confidence is really driven off of a strong backlog as we sit here today and where we sit in our third quarter. Working with the sales force and understanding the forecast orders and their probability, it's really just based on a combination of backlog and then working with our sales force on the opportunities they expect to ship in our fiscal fourth quarter.

And Kevin, could I add, there's one other dimension to the business that's important to understand. As we mentioned, we've achieved 25,000 packs in the field. Many of those packs are now getting to that four, five, six, even seven-year level where there's a replacement cycle. We have a very good track record of keeping our customers as they continue to adopt new lithium within new distribution centers, new areas of their business. Not only are we getting the new growth, but we're getting that replacement cycle starting to kick in. So that gives us very good forward visibility to demand. I've already mentioned telemetry or telematics a couple of times. Having that visibility to the battery, how it's being operated, how many cycles are available, what is its current state of health or degradation stage in its life cycle allows us to have very good visibility to when it needs to be replaced. And that's kind of a nice business model.

All right, thank you. And if I could follow up on that point on the telemetry, is there a business model around the software, or is it primarily just as a kind of a solution package that you're bringing to the table that kind of induces demand more than anything?

Hi, Matthew. This is Krishna. There is definitely a software revenue-generating model here. Because as Kelly said, it is an intelligent device, constantly generating data. And this data is powerful. It goes deep into the operational model on how they run the business literally. A truck not moving is not going to work for our customers. So with this powerful data connected to the ecosystem of charging on one end and the whole logistics on the other end, we are in a very good position to be able to eventually get software recurring revenue from our SkyBMS and other products we'll be announcing later next year. So I’m very positive about the recurring model opportunity that exists in front of us.

Got it. And if I could just slip a follow-up to that one. And as you look out longer term, do you see software being a, I guess, material part of the revenue mix, or stays as sort of a nice margin contributor, but doesn't really reach too high in overall mix?

Our aspirations are to make it material. And Kevin here looking at him, he will decide when to make it material, but definitely our aspirations are there.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Thank you, operator. This is Krishna. I appreciate everyone on this call for joining our financial results conference today. I look forward to keeping you updated on our ongoing progress and growth. The future is promising, and I want to express my gratitude to you all once again.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.