Ron Dutt: Sure. There’s a rule of thumb in the sales circuit: when you hire a new salesman, it takes about 1.5 years to get fully up to speed. Well, I think that’s been the case when they’re new to the sector and new to a lot of things. I’m not recruiting from that group of people. The person we just hired has a network, has contacts, understands the industry. And feeding off that network and know-how, we’ve sat down and discussed how much he could bring in, in this coming 12 months. And I thought it was a little aggressive, but I like that. And I think they can start bringing in business definitely within the 3- to 6-month period and really start to increase that because they’re not starting from ground zero. And also the other big factor here is 4 or 5, 6 years ago, we were having problems hiring salespeople who could really sell anything.
They were more order-takers. And I think to the extent that when you hire sales people in this sector where you’re dealing with top-tier companies, you really require a certain skill level, capability level, along with that network I mentioned as well. So you get that firing on all those cylinders, and I think that this Fiscal Year ’25, I’m definitely counting on revenue. How much? It’s a bit of a crystal ball exercise for that. But I think what we have learned is you just don’t hire salespeople, the first one that comes in the door. You’re very focused, very determined. We’ve found we have a lot of interest because we’ve had a very high growth rate over the past 4 or 5 years, not these past months, and salespeople love that. And they also love we’ve got an advanced energy solution product, a hot market and hot demand.
So exciting. It’s a really interesting time to be expanding the sales force.
Operator: The next question we have is from Craig Irwin of ROTH Capital Partners.
Craig Irwin: So I guess, Ron, you did a really good job last quarter communicating the air pocket for the March quarter. So I guess financial results, they are what they are, right? But one thing that impressed me was the gross margins, right? The fact that you still had very strong gross margins, and that’s one of the areas where you’ve kind of outperformed, done a really impeccable job over the last couple of years. You talk a little bit about this target longer term of getting to 40% gross margins. Can you maybe update us on anything that might have changed there? Are there any things likely to cut in over the next couple of quarters that might give you a little opportunity to capture more margin dollars on the products you’re making? And is it a business mix issue or manufacturing efficiency? Any color would be helpful.
Ron Dutt: Sure. We are the beneficiaries of a lot of hard work on improving our vendors, and that comes with costs, along with the volumes that we’ve had as we’ve grown in volume, although you haven’t seen that volume this past quarter, but underlying a lot of that pricing. I’d say one of the most significant, if I had to point to one thing, you’ve heard a lot about how, you may have thought about those in battery packs declining in price coming out of China. And we are the beneficiaries of that, with a high-single-digit reduction in the cost of those packs. And the packs are, like, 1/3 to over 1/2 of the bottom costs of our products. So that’s going to begin flowing through soon, kind of close through, gradually through the inventory of goods.
But we’re certainly keen on that. That’s a nice boost. I’d say the other boost, along with ongoing cost reductions from an early-stage product to a more mature, from the designs to the manufacturing elements, we’re 2/3 of the way through lean, we’re starting to get elements of there that affect that bottom cost quality, with warranty as well. Although we had a warranty blip a few months ago, which happens. But those things all have bearing on that. And I’d say the last thing that has bearing on this is that our pricing and really our competitors’ pricing are in part a function of the competitive marketplace. It’s also a function of the value-add that the customers see. So to the extent that we execute on our quality, our delivery, our training attacks, our responsiveness of our product service and, I’d say, building trust with the supplier, from all of that that goes on really gets us more pricing leverage.
I remember 4 or 5 years ago, I didn’t have a lot of pricing. We were innovating a product at pretty high failure rates. You just didn’t have the leverage because of the uncertainty. It’s the whole risk-return principle. So we see something coming from that to help fuel, storage is one thing, that helps fuel a march eventually to 40% or beyond.
Craig Irwin: Excellent. And then a big-picture question for you. Adjacent markets, outside of lift trucks, right? Have you considered other potential opportunities like military batteries or other industrial batteries, medical batteries, that would benefit from your existing manufacturing footprint and also retain really chunky margins that your engineers and your salespeople would be a good match for delivering these into the market? I mean, are you looking at diversification?
Ron Dutt: Yes, very much so. Our strategy has always been to add adjacencies where we didn’t have to create a whole new infrastructure or get distracted with. But now that you mention DoD, we just put in a bid on a DoD proposal which we think would be very, very interesting, with a partner. I’m keen on getting into that DoD business because I think we need it to help fuel our strategy to build scale. So we have a couple of partners on actually 2 different proposals on that. Our fast-charging technology that we talk about, we have an R&D partner back East. There’s one approach that we’re using, and that has connections to the DoD, too, as well. So yes, we’re very keen on that. We have done, by the way, we did a project with a company called Local Motors for automated shuttle vehicles, 400-volt, 8-passenger fully automated shuttle vehicles, and we made about a dozen of those.
And Local Motors went under, a new company came along. So we’re working with them. So we are exploring opportunities. It has to satisfy our business case, on the one hand; at the same time, to build scale, we need to explore. We are exploring those. So yes, absolutely, Craig.
Operator: There are no further questions at this time. I now would like to turn the floor back over to Ron Dutt for closing comments.
Ron Dutt: Thank you, operator. I’d like to thank each of you for joining our financial results conference today, and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who would be more than happy to assist. This concludes our update for this past quarter. Thank you.
Operator: Ladies and gentlemen, that concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
