Ultralife Corporation Q2 FY2025 earnings call

• Completed transition of Electrochem's ERP and office systems to Ultralife systems in Q2, with manufacturing support systems to finalize in Q3.
• Continued investment in new product development, with several offerings advancing into validation and production.
• Government defense sales in the Battery & Energy Products segment increased 61.1% due to strong demand from U.S.-based global primes, but commercial sales were hit by softness in oil and gas and medical sectors.
• Communications Systems segment facing order timing challenges, but new products like ruggedizer server cases, DC power supplies, and amplifiers in development.
• Vertical integration opportunities from Electrochem acquisition, including incorporating Electrochem cells into oil and gas battery packs, with efforts to qualify cells with oil and gas customers.

Consolidated revenues for Ultralife Corporation in the second quarter of 2025 were $48.6 million. The Battery & Energy Products segment contributed $45.9 million in revenues, up from $36.7 million the previous year. Excluding Electrochem third-party sales, segment sales were flat year-over-year. Government defense sales in this segment grew 61.1%, but commercial sales declined due to softness in oil and gas and medical sectors. The Communications Systems segment had revenues of $2.7 million, a 57.2% decline from the prior year, primarily due to order timing challenges. Consolidated gross profit was $11.6 million, essentially flat with the prior year, and consolidated gross margin was 23.9%, a 300 basis point decline. The Battery & Energy Products segment had a gross profit of $10.8 million (up 8.9%) with a margin of 23.6%, while the Communications Systems segment had a gross profit of $0.8 million (down from $1.6 million) with a margin of 28.4%.

• Total backlog at the end of the second quarter was $89 million, diverse across commercial and government defense customers.
• Expecting growth in the second half of 2025 and into 2026, with Communications Systems segment expected to rebound and new product initiatives progressing.
• Focus on improving gross margins through pricing, material cost deflation, and lean productivity projects across facilities.

• Uncertain global economic conditions that could impact revenues.
• Reductions in revenues from key customers.
• Delays or reductions in U.S. and foreign military spending affecting sales.
• Uncertain acceptance of new products globally.
• Disruptions or delays in raw material and component supply due to business conflicts, global conflicts, weather, etc.

Q: Do you have any feel for what the tariffs cost you this past quarter?

A: Absolutely. $539,482 less $126,000 received back from customers. So bottom line hit was $400,000 Q: Based on what you know now with the current tariffs, how do you see that impacting the third quarter tariffs?

A: We don't expect with what we know right today that it's going to have as much impact as it did in Q2 because we don't expect to see that really exorbitant tariffs, but it's a very fluid situation Q: Regarding the employee retention credit that you received and applied to the debt, which we're happy to see, do you -- is there any more of that credit that's going to flow through in the balance of the year? Or have you captured everything?

A: No, we captured every penny plus interest, very happy that, that came through Q: Regarding the insurance reimbursement for the cyber attack, I think you said it was $200,000 in the quarter. How much have you received so far from the insurance company? And how much more are you looking to receive?

A: It's $235,000 is what we have received. And as you probably know, John, that is now a lawsuit that we have commenced in the Supreme Court of Wayne County where we are located for a jury trial that's going to happen in 2026. We believe our case is very, very solid and we're looking at an amount that's in the millions Q: Just a quick question on the B&E Commercial segment. I know last time we talked, it sounded like oil and gas was pretty stable. I know the macro and whatnot has probably impacted orders there. But I mean, as we sit here today and maybe have a little more certainty than we did mid-quarter. Is there anything to call out maybe on orders returning or demand? Just any updates you can provide on the 2 end markets, medical and oil and gas?

A: When it comes to oil and gas, it comes down to what is the index and the WTI this morning was a tad under $65. And the Brent index is about $4, $5 over that. And for medical, Q2 of last year was the second largest medical sales volume in the history of the company and it's just on the timing of the orders