Flux Power Holdings, Inc (FLUX)

Company website 2019 Financial Report Stock Analysis

2000

tons

of CO2 avoided by Flux Power

7000

battery packs

sold since founding

97.7^%

CAGR

in lithium-ion sales revenue between 2016 - 2020

View Our Analysis

The Path to Drawdown: Batteries for Electric Vehicles

The first electric vehicle (EV) prototype was built in the 1820s, but its inability to overcome the challenge of building a lightweight, durable battery with adequate range allowed internal combustion engines to dominate the automotive and transport landscape since the 1920s.

Today, that landscape’s changing. Thanks to supportive policies and declining costs, there are millions of EVs on the road. The difference in their effect on the climate is remarkable. Compared to internal combustion engine vehicles, CO2 emissions drop by 50% if an EV’s power comes from the conventional power grid. If powered by solar energy, emissions are cut by 95%. When households purchase EVs, the operating costs for those cars are often cheaper than gas-based cars, too.

What once used to be an obstacle for EVs - the question of how far the car can travel on a single charge - is now much less of a concern. The average range of a battery electric vehicle produced in 2020 is about 217.5 miles, up from 124 miles in 2015.

What’s making this increase in mileage possible is the development in battery technology and expansion in battery production capacity. The cost of batteries is falling fast as a result. The cost of lithium-ion batteries in particular -- the key technology for electrifying transport -- has declined sharply in recent years after having been developed for widespread use in consumer electronics.

But battery production needs to continue to scale massively to keep up with the electrification of the transport sector. According to the IEA:

<::marker> Manufacturing operations globally produced 170 GWh of batteries in 2020
<::marker> ~3,000 GWh battery production capacity is needed by 2030 to achieve long-term sustainability goals
<::marker> That’s CAGR of 33.25%

About

Flux Power Holdings Inc. (stock ticker: FLUX), headquartered in Vista, California, provides rechargeable lithium-ion batteries for lift trucks and other industrial equipment. It also offers a proprietary battery management system that makes managing and maintaining their batteries more cost efficient.

FLUX's Role in Drawdown

Flux Power designs, manufactures and sells lithium-ion battery packs for industrial forklifts. By the end of 2020, it had sold over 7,000 battery packs (p. 6) in total. In an industry that still predominantly uses lead acid batteries and propane-based solutions, Flux Power’s batteries have several advantages (p. 7).

Their edge over lead acid batteries includes environmental benefits, faster charging times, greater cycle life, longer run times, and less energy consumption, all of which provide operational and financial benefits to customers.

Compared to propane solutions, Flux Power’s lithium-ion batteries don’t emit greenhouse gases and other environmental contaminants, and don’t require arduous maintenance associated with internal combustion engines.

Flux also sells energy storage for solar-powered EV charging stations (to Beam Global - also in the Climate Index), another much-needed component of electrifying the transport system.

FLUX: What We Like

We applaud Flux for focusing on the niche market of providing zero-emissions batteries to industrial forklifts. Flux was founded (p. 4) in 2009 with a focus on EV battery packs, but in 2013 shifted to the industrial market. We think this was the right move.

Since then, Flux has established a diverse customer base in multiple sectors (p. 15), ranging from beverage, food, retail/grocery, manufacturing, airport ground support equipment, and more. This diversification ensures that the demand for Flux’s batteries are resilient.We are also excited about the news that Flux has recently expanded its facility to double its production capacity. This is a necessary step in keeping pace with the electrification of the transport sector and achieving a world of net zero emissions.

What We Want to See Improve

Achieve Profitability

While we’re encouraged by Flux’s recent facility expansion and growing sales revenues, we are still concerned about its financial position. Flux has had substantial net losses (p. 15) in the last couple of years and has been relying on equity financings, borrowings under short-term loans, credit facilities and previous cash flows. We want to see Flux pull itself out of this precarious situation and reach profitability as soon as possible.

Switch to Long-Term Contracts with Customers

Flux has no long-term contracts (p. 17) with its customers, instead relying on periodic negotiation with each customer regarding pricing, returns, and promotions. This means that a loss of any significant customer will severely impact Flux’s revenue. We would like to see Flux work toward entering into longer-term contracts with customers to ensure stability in its operations, financial condition and liquidity.

Track Sustainability Metrics

Flux Power received the Green Supply Chain Award for 2020 from Supply & Demand Chain Executive, but we don’t have data about how sustainable its supply chain is. This is on top of the fact that Flux does not publish key sustainability metrics, such as GHG emissions from its operations. We want these data published in an annual ESG report so that climate-concerned investors can evaluate and hold Flux accountable for reducing its impact on the environment.

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Allocated	Company	Description
0.78%	QuantumScape Corporation (QS)	QuantumScape makes solid-state lithium-ion batteries for electric vehicles. Their battery is lighter and charges faster, key to making EVs more attractive
0.30%	Livent Corporation (LTHM)	Livent is one of the largest lithium producers in the world. Lithium is the key metal in making batteries for electric vehicles and energy storage.
0.19%	Stem, Inc. (STEM)	Stem makes energy storage solutions that optimize energy use through the use of AI. Energy storage is the key to integrating more renewables into the grid
0.03%	Eos Energy Enterprises, Inc. (EOSE)	Eos makes stationary batteries and energy storage systems that can make renewable power more reliable and attractive
0.03%	Romeo Power, Inc. (RMO)	Romeo Power makes lithium-ion battery modules and packs for commercial EVs. High-quality batteries are critical for electrifying transportation
0.02%	CBAK Energy Technology, Inc. (CBAT)	CBAK makes lithium-ion battery packs that can be used in many electric vehicles, tools and energy storage applications, a key to electrifying everything
0.02%	Flux Power Holdings, Inc (FLUX)	Flux Power makes batteries for industrial forklifts and other utility vehicles. Electrifying these vehicles is a key component of solving climate change.
0.02%	Kandi Technologies Group Inc. (KNDI)	Kandi Technologies mass produces entry-level EVs for Chinese consumers and quickly swaps EV batteries. Both are critical for making EVs attractive.
0.02%	KULR Technology Group, Inc. (KULR)	KULR sells thermal management technologies that are used in the lithium-ion batteries to ensure they stay within safe operating temperatures.
0.02%	Westwater Resources, Inc. (WWR)	Westwater Resources mines and purified graphite materials, which is a key component in battery construction. They’re helping expand energy storage