ULBI - Earnings call transcript Q1 2018

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Operator

Good day, and welcome to this Ultralife Corporation First Quarter 2018 Earnings Release Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Jody Burfening. Please go ahead, ma'am.

Jody Burfening

Thank you, Gina, and good morning, everyone. joining for morning XXXX. the for earnings Ultralife you call conference first thank us for this Corporation's And quarter fiscal us Ultralife's are CEO; call on Ultralife's With and President Mike and Financial Chief Popielec, Fain, Officer. Phil today's investor earlier Relations www.ultralifecorp.com, The morning, anyone the where a I you'll and received section. visit to under this invite earnings find yet was you not news the if Investor release copy, press in issued the has company's release website,

on statements, as investors reflects obligation not to which to undertakes update today's economic products The projected to basis. and as to management, analysis military of that Ultralife's reflect exchange from information company's over with These cautions risks publicly Actual included would like during conditions Ultralife's is no or financial Before forward-looking conference the securities these in everyone a on could other latest call factors turning results that Further factors on differ The forward-looking those and of company expectations. include annual company global I uncertainties. to remind and company's the the a place events on commission, some circumstances. affect undue statements of this date. in XX-K. including reliance the on report acceptance filings potential global subsequent materially new and the results could Form result current made forward-looking various reductions statements uncertain U.S. spending, statements only call contain based

non-GAAP that, to Good would considers to morning, figures. Mike. differ metrics on to considered financial certain management that to call In from measures turn management I non-GAAP With as be and today's over GAAP supplemental refer to like useful should Mike. corresponding call, now the addition, GAAP. These will be measures

Michael Popielec

update an over were making to I'll the it start XXXX to QX profit, Good up morning, call Today, the take initiatives, After highs will you turn revenue performance. Phil questions. XXXX Phil, multiyear detailed We share. operating Then, you, comments financial start then, by and the everyone, against earnings thank our joining with overall our the through some the I'll for and on call. Jody, who revenue, operating progress about per encouraged in provide finished, is open new year quarterly I'll for results.

For QX basic up quarter and profit pleased solid operating deliver up of growth, revenue of we to share XXXX, leading with were very earnings and year-over-year $X.XX. revenue another and profit a X% of per to operating XX%,

important an milestone. We also achieved

$X.X company system organic communication solid $XX.X medical X%, expense control to These of company generating operating business QX sales total margin million for Energy of shipments of by higher "XX-X-X-XX=XX" model. revenue earnings As X%, the and grew gross growth sales commercial operating on Government/Defense Products, favorable million, over by revenue Battery profit led from and double-digit by XXXX. driven increases mix sales. combined grew threshold an margins with our crossed & Total driven continued disciplined rate our XX% strong leverage

Fain our to initiatives, product quarter I'd development new CFO, supplemented additional have but minutes, recovery a you Ultralife XXXX ongoing of ask markets, you the revenue first about further give financial Our first the in Phil now for through Phil? I'll few information Government/Defense In like take details to well performance. and international us revenue an and at by commercial XXXX. diversification efforts emerging positioned

Philip Fain

X, XXXX. Earlier and period ended morning, Mike, good released for you, first we Thank morning, results April this quarter our the everyone.

happen. who like make to Form thank helped XX-Q SEC filed this I this also our updated have morning our the with Ultralife website. the and investor in folks We presentation would

the the first highest totaled increase level commercial the million primary And X.X%. For Government is from the $XX $X.X our markets, over In sales growth reported of increasing quarter, revenues year-over-year X we million, or experienced million quarterly X.X% served X $XX.X revenue of with first reported for in and consolidated XXXX. X.X% & a increasing years. representing quarter Defense

year, between XX% sales. breakdown Revenues last sectors Government were over X sales and to XX% XX% the & & and $XX.X timing non-U.S. XX% of million, increased last our Products commercial. Energy lower unchanged Defense at batteries total Department was of sales Defense X-volt XXXX to & to medical to medical & offsetting Government X.X%. sales. Government and and & contractor, company due Defense, sales Battery XX.X% compared sales, Energy defense increase in gains $XX.X than of Products segment compared commercial the from shipments more decreased Although offset to with XX% year, customers of segment in million our The of Battery our the large Defense commercial primarily shipments represented Sales of sales lower a U.S.

of compared geographic to As The period. & communication a segment under XXXX, of million, vehicle for split Defense our our a to for the December year. Force of were for result, split XX-XX the commercial awarded our the Special XXXX XX-XX increased Battery an shipments a higher period. core Army's Products & XX% distribution or sales which XX-watt & million Adapter products, first and Brigades systems and the last contract XX.X% and was Assistant Energy from in the between increase compared Energy to of XX-XX Revenues Battery The amplifier Universal Products prior-year year-over-year Vehicle XXXX XX-XX $X.X Government international $X.X was sales is over domestic shipments of quarter. U.S. amplifier increase our attributable over adapters

for profit million gross XXXX X.X%. was of to increase $X.X period, compared an consolidated the $X.X Our million

shipments. Battery medical Communications of to and $X.X of increased XX total for quarter. XX.X% increased $X.X products. basis margin year's margin Products the higher revenues, improvement medical in Energy million profit Systems gross reflects XX.X% versus last from our percentage first Gross proposition consolidated reflecting X.X% gross The mix business for & a mix value was high XXXX As in million, point of the

an the margin points As of XX.X%, over a increase was reported basis result, XX.X% year. last XXX gross

For year-earlier decrease was profit period. reported the first increase or an last expenses our Operating million margin XX.X% X.X%. mix. XX.X% reflecting was gross XX.X% totaled million from segment, $X.X communication year, last compared $X.X compared for a to Gross year's $X.X quarter, of system million million, of to sales $X.X

improvement a while first for $X.X income growth. Said percentage of gain tight reflects highest As and the XXX quarter, revenue the first demonstration discretionary for represented the continued quarter improvement in points the in a level quarter years. in margin is and margin, a of resulted XX.X% Operating profit reported first The basis from for basis basis operating XXXX in the operating the sales. XXXX of our for period, of $XXX,XXX point in our revenues, a increase X to improvement the the expenses basis gross offering the is of operating XXX clear our the model. the profit over first XXXX over expenses was reported business the XXXX for XX the the $X.X points differently, comprised point an the compared reported for XXX of million in model. XXXX. generated leverage of XXXX, over our first the years. leverage period, over business X.X% million X.X% improvement basis control spending, million point highlighting of operating revenue Operating XX.X%, XX.X% of $X level leverage is quarter increase of The was to X XX.X% an increase highest quarter XXX on The

Accordingly, brings expenses, EBITDA sales the stock expenses, depreciation, now million, expenses, XXXX. of Sterling quarter EBITDA in to including stock-based prior asset quarter noncash the the primarily operating for comprised million XX-month dollar compensation to for $X.X from strengthening to expense primarily XX.X% for to us interest U.S. defined Other as period same noncash the foreign trailing year. and of period. EBITDA, of over $XX,XXX intangible or $X.X margin including This currency as amounted compensation year-earlier the amortization XX.X% of pound increased versus first an of adjusted expense adjusted or of due $X.X representing transactions, million, $XX.X $XXX,XXX, First to million EBITDA, the is the XX.X%.

for was and elimination Act. tax to the Cut the Jobs for Our $XX,XXX reflecting period, tax Tax XXXX first the the under minimum provision quarter alternative the of $XX,XXX compared

million, performance, operating no $X.XX the in to Our XXXX. $X.XX, per we share NOLs cash for our the of offset strong. per trailing from was profits the net are the ratio performance, million on $X.XX operating our capital tax $X.XX million of drive favorable relating solid quarter tax solid On our fully and and our remains the by actions a of tax by taking In $XX.X reported operating against including per from first or the Also, period future eligible in the of are new results. income $X.XX to to XX-month company's increased year. performance debt, XXXX basic or last basis, remain benefit profitable apparent hand $XX.X a Driven fourth to working $X.X With driven growth million quarter purposes for share current compared going liquidity $X.X legislation summary, for forward. X.X. earnings same share

volume now of to unleash to driving full and turn further business will the back on remains intent model. it through potential Our initiatives I and sales synergistic leverage our Mike. organic

Michael Popielec

Phil. you, Thank

and market focused keenly reach opportunity and For through new expansion, on development, are revenue acquisitions. potential XXXX, we our increasing product sales set

For defense concentration the diversify & our markets, the historical into for has Energy the U.S. more market thereby market. commercial to international Battery markets Products sales global Government strategy expansion and government business, defense been the lessening in reach and

applications, sales quarter The the comes our XXXX of of first the of sales. represented total represented government medical total international revenue. from XX% B&E global XX% commercial quarter portion in the revenue our into commercial B&E For revenues and first of largest which defense

with at we including compounded XXXX, During revenue year-over-year. medical strategy, commercial revenue our initially acquisition QX January our XX% up growth XXXX, rate has the XX%, Accutronics launched contribution of in grown when medical overall annual a Since battery QX the shipments as infusion diversification of was pumps, imaging customers breathing high, carts, robotics. with XXXX. external and such transactional remained and devices, products-serving our charger defibrillators, automated recent surgical activity new existing medical and applications, medical digital device of XXXX of

which our also they do the performance battery requirements. process. detailed Our technical a an manufacturing customers contribution intellectual specific to as the that device their And for of expertise engineering continues is solution charger property and/or through role medical provide the to

shipments end equipment, to safety and of UAVs, consisted including applications; chargers security steady security new nonmedical for Internet X-volt in China a to sensors, ultra and of, and and in other American addition from of and of and government shipments primary non-U.S. battery channel and new Things pursue products partners; industrial orders stream Scandinavia; we and and shipments X-Bay medical, and rechargeable government safety ThinCell equipment. entertainment, our and drones in-transport tracking, smart international to defense Acid OEM including Internet Specific XXXX customers, of replacement Lead tactical ancillary majoring also asset QX chargers our batteries, international security, Sealed commercial other continue several applications; In things. of difference commercial continued and batteries, markets, defense new for activity safety North orders the government X-volt to

revenue in a were XXXX saw continues nonrecurring due slightly year, QX Government revenue B&Es building in early QX Lastly, the pleased shipments we U.S. first XXXX. momentum year U.S. into Defense quarter, year's the some we although below to XXXX prior Government that business, larger Defense ago, this was

our revenue XX%. OEM DOA over solid up contracting As applications. surveillance a communications, and XXXX sequentially primary again year. multi-kilowatt by XXXX for U.S. in selection Government for modules battery $X.X QX were all levels QX for activity various different channels received revenue as tactical are QX indicators batteries XXXX from for The border growth from of of January, of our Defense the of Defense showed the revenues encouraging ramping for the as up deliveries award Department Primes increasing contributions potential million this from well DOA

new development X of introduced was revenue. QX years XXXX, B&E to than XX% Regarding product revenue less ago or products equal in total for revenue from B&E,

that radio XXXX BA-XXXX in UX for and battery wide such x-ray in a a as on for a product the new multiple a of quarter, rechargeable OEMs; device digital first During for medical use continued Lead Acid battery for products, next-generation range activity communications; XXXX; a with battery replacement smart Sealed multiyear customer. non-rechargeable pack a products for inverters large custom a a European received carts; for latest medical use battery military and contracts the we and drone application;

competitive helping long-term We advantage. their to relationships products, our continue product strengthen key and the development expand products existing customers provide products and customers, by by collaborating closely value plans of in through with multigenerational developing new

plan continue York of to rapidly we on production devices a well manufacturing as alarms, applications; development and during the builds completed volume products and U.S. start and with China to facility, we market, thionyl Internet cells strategic commercial beginning growing wireless half next-generation our metering. applications. applications. as currently product Lastly, We're New XXXX, China-produced full product, into have volume moving an equipment smoke several around with initial evaluating to that continue dioxide industrial MGPP a first in CapEx will of At facility, of attack partnership chloride OEM improvement a serve manganese Things two existing year-end XXXX. the of the modernize our devices production with the new premium higher also multigenerational shipments, will generation to and with our tracking production Newark, the serving customers investment support low and for use began customers fronts, cell, and and asset newly-identified of product the forward expected X-volt we qualification their lithium for product development At manufacturing improvement next capability, X-volt the

highest best that end locations and one OEM customers. chain proposition, in best serves quality, the our value safest Our which supply to produce global is our our every goal products, of and market of the

flexibility spending a to QX recent a Regarding of years than see U.S. OEM, new Confirming an starting sales. from million budget radio what market radio Universal for products and quarter, Armed programs. to from retooling amplifier development We soldier. adapter FOSOV XXXX support effort result last increase or QX and activity approximately believe in the shipments of we includes communications this of to equal as Forces. $X.X Brigades, Adapters defense initial Vehicle products less technically-innovative serve pace for X well-positioned XXXX, to the Systems, of supplies range thought were the power old are This there in the performance of Army's the we operational enhance in our award approvals, Communications revenue represented proven we be with XX% continues of System major that the various the Forces Security the vehicle product of for to

development the strategic upgrade, channel and NATOs of as to improvements they of STC key modernize overall Army's product with also Some program, operations domestic near-term the in increasing, Systems improve strategically with multigenerational and fighter active special legacy program. and on close invest see readiness. militaries global radio Communications man vehicle planning continued include war is in radio radio systems sales command, we to Leader and look has the continues in initiatives partners integrated and radio products emerging spending focused new through partners pack, countries, HMS collaboration as systems. of several product Internationally, allied platforms,

for were We product In and closing, engineering execution are in then, earnings to by robustness. operating solid XXXX, technology double-digit growth, capability year the and also investing share. increase double-digit per overall improvements in over programs, pleased very support multiple life manufacturing earnings management QX in achieving margin, revenue techniques, organic growth, test concurrent year-over-year the and cycle product of leverage we to XX% kickoff

confidence year, the backlog, created and profitable strong We another and to conditions the are investment reach and for are give to defense we expansion, business commercial revenue and growing as strategic XXXX. new of leverage, market CapEx, start deliver A growth operating government and year continued that market positioned global in additional adherence by model in parameters, product well sales improve. us will development opportunities strict

our the catalysts of maturing Internet are we aggressive and revenue, key major at Things lastly, more meaningful of a development; deals; increasing for new defense government into an least market acquisition. medical forward, push, market; product the concentrating on Going X

the balance questions. sheet, the to organic opportunities. be Our and clean growth generation efficient up capital, Operator, inorganic to both prepared give call us concludes this open pursue flexibility to for cash we'd my and and access happy remarks, aggressively

Operator

question Rose. [Operator Instructions]. from And Eliot our Siperstein we'll take first Gary of

Gary Siperstein

for sales Phil, sales best you the but -- I said way, missed question, might've quarterly guys is was -- I think think, the X first years. Phil. in you this, that My I along

time when margin over the the margin last operating an over had we With XX%, was operating XX%?

Philip Fain

into Gary. Well XXXX, that goes back

Gary Siperstein

XXXX.

you, given security, you called out is Mexico? but I that that And general safety border -- order Okay. specific know and category Mike, was And a was the that before, of surveillance, or for a domestic? Canada

Michael Popielec

use a I really types our where robustness obviously, for States, application, it's those can't makes being outside and comment applications. border it module, it as to of it's with United is, the multi-kilowatt but of security proven

Gary Siperstein

if the it area some particular us? potential, Trump that Is something have new along for does does Or upside more borders? Right.

Michael Popielec

You really in this can't speculate opportunities. with an pursuing have existing would what a types over these decade successful the an extremely OEM President do, about know worked is we I of but that's relationship

have We pursuit existing of line. of working OEM and It's a this our product years, with their fit been these multiple for applications. great for types fully supporting

Gary Siperstein

the robotics, called Okay. cetera. breathing, carts, in Mike, infusion, medical you et area, out And

As those meaningful the mature, larger those one a opportunity of is what categories might there above that of is X there I beyond categories? do? In any within be, other those guess, and other could one words

Michael Popielec

means, really board. what that something that so with out talk way, culmination because to million to a contract not been sometimes, our will multiyear a us. sticky application number when customers, They several a in don't period. that validation types the we've time, I X, of that million, products getting mean, on like I take this working anywhere it's that product press I that as long but we it's talked X of million, a million of may of could the is side have $X and $X basis, relationship. even And the fact about much sticky. And maturity investment takes them type of very about it $X annual release, single there's and an we've that customer order, we we're what that's see it lot though they're with a be codevelop like X, you'd if applications mean, I'd engagements $X.X products, before, a Gary. not a is characterize really as these I to know sort of the of on from to it you different be get years million on

of how of point all layering about tale excited it. medical sort our pretty there a point here, on long stream. are adds to revenue to really so of has And device that These a revenue that a

Gary Siperstein

Okay. And that includes digital well? as x-ray

Michael Popielec

correct. That's

Gary Siperstein

moving of And Okay. situation. over that to is for new, doing drone opportunity Is for first have all? that Or -- us? that we've then, years? And is the multiyear that something does been relatively

Michael Popielec

life is or I whether specific a unique off-the-shelf wait-and-see the a are it's applications on applications, pursuing development not providers new the it's at but pain we -- bring areas. one a find it's say battery design party, we that regular something look review battery. points to a our for a configuration application. service value-add type know of application product wouldn't I very that some just as specific may particular mean, because where be some we drone And trying the the protection of that basis we we're of to we scheme for battery

space packs I commercial we for the into pure value going a add about very aggressively extremely and So play get volume some really we lot and because we there's that until applications versus battery not feelings we product. see we're of small about that But off-the-shelf can mixed asked that drone pursue can don't. substantial we there's have some, a of unique type it a

Gary Siperstein

Understood.

that on to plant, RFP, that area? with new IoT, tell I some you your talked later, X Are moving at closer us doing Okay. commercialization? IoT in opportunities space? on kind working thing? the buildout different IoT. the things think this And of quarter, you Are XX Plus companies in on last developments getting how Can to since the -- you're is then, about buildout, months the

Michael Popielec

initial is and that going million and up sort of unpack volume or number a so, investment. product We a that production $XX to as of anywhere anywhere is running, as Certainly, of through case process couple revenue to of in the from per one customer's So were be a a of type of up $X this but we to validation it business the to phases. units said get have those application. could could customers pretty $X.X from million customers make fully initial of to still we revenue as from of from and attractive the in couple dollars streams be a full million rates, potential million couple dozen

So we're excited extremely about those.

type budget, volume be we as out and to have pursue ago the do couple same to talked manufacturing in point is. continue to particularly close at located I which over higher testing product period, sort validation We and on developed looking Those an And right is -- we in United haven't about products basis. we in the those there. picking on-time the -- calls that initial we through able we like given customer go mentioned chain was we lost as we're about decent now already mature. But XXXX, performance and be product opportunities if product overall where the facility China-produced the out China, applications. to fully my a sure make to Relative plan get a some time, States, to we quantities want of multigenerational latter have we're would towards legacy would that through putting of a part actual qualification to of investments, any OEM we'll right that's qualification of under there continue supply good a speak, for prepared we making shipments the that and of to their verification remarks, a some to now, very well-suited and of a we are as investment

would And XXXX, so in we're really see, period. XXXX really, excited increase we for revenue the the that potential

Gary Siperstein

Super.

have tracking and any are metering, been of the And the of those of IoT? on with three-volt Okay. those upsides, like And maturity has in asset situation, you some there opportunities? terms then,

Michael Popielec

but now I'd Certainly, want those mature about any in variety, right dollar really of continue revenue. specific in expand terms overall to comment and nothing to

Gary Siperstein

Okay. And can at of end give the you the us backlog QX?

Philip Fain

Gary, periods. to end our XX-K we year, interim provide increase. the we as the only the And that of of from is entered At million. increased don't level that generally backlog million It $XX was very last the $XX first in quarter. a the we the mentioned pleased we're during comment backlog XX% with backlog my

Gary Siperstein

then, And for you a gave NextGen, and I Forces, Great. radios Mike, Okay. some it commentary being and around, I and you tactical about XXXX modernization think Special talked believe, maybe troop opportunity.

So moving along is testing? expected that at through the rate

Michael Popielec

want Yes. be we're we all I very OEMs, active and Like radio fronts. It every on of with and projects one them. to all each we said, the active mean, is. friends have I to

Gary Siperstein

been if hearing? sub-contractors Is different? anything up X it that seen I've was concludes some couple-billion-dollar from industry recollect and the I the summer. the and a but even correctly, it's reading out think if awards that mentioned out Or one don't later and to in down moving indicate think, Because forward, I contract opportunity tactical of I've seems I some commentary ManTech, I And two. growing. Okay. it then, of I are the with contract DOA, company-specific you know transcripts stuff VIPER expectation what and think this it's vendors about radio to communication started

Michael Popielec

of overall on previous very mentioned, spending skinny a were we We I that Department Defense years. went is on tactical think communications. through Yes. calls, We've couple

leaders, And amplifiers. for and that's good We batteries. integrated getting supply so, the see supply these for of We some when various industry radios supply we a IDIQs, platforms We thing large systems. the OEMs us.

high products. no of our demand there's isn't if some radio so program, a And there for

good ancillary a suppliers. down thing, see of optimistic as and a for to generally us speaking, to one future. it's the we it But takes we're equipment potential contracts allowed, the as being about while the So sometimes those little trickle

Gary Siperstein

can nothing give a And Good. a on color there's Since more last give obviously, but on announced, M&A someone last what us been you front? question, Okay. -- chance. the I'll any seeing you're quarter, else little my

Michael Popielec

continue entity involved, with make type through of trying extremely just other discussions. on a we're Still to lot a about good decision And bringing to of is go one-on-one that fit. ours good

I a we good have cash position. think

of access but of highest at those of We out no discussions. it's we're we involved external would some types if the to those to the there sure it but actively to involved to acquisition, company announce, as there'd just fit. know there's pursue you put that soon mean, to it's a really opportunities, there have something are we make good and capital I perfect levels as good in for And be digest. definitely -- want

Operator

And we'll take of our Bergman next question Asset. Bayberry from Sam

Samuel Bergman

is about in Couple second quarter. be Because to not at again half? Can a battery talk was given about that manufactured the -- backlog the did asked and of you I of such division shipped things. backlog, to know number December. the that assume have going end Gary the the Should one seem great that of much

Philip Fain

was shipments. was expected at don't manufactured those a to timing have what think because that's correct really of shipped look what I you assumption and versus the

comment is it there throughout spread year. that, part, at spread million, my it So the -- most for throughout the when we full $XX look the

Samuel Bergman

spread standard throughout think go -- being I ahead. So the

Michael Popielec

go No, ahead Sam.

Samuel Bergman

being out of the I for percentage So the can what there understand but increase was quarter? battery spread throughout year, the

Philip Fain

was The X.X% quarter-over-quarter. Battery down business

Samuel Bergman

Right.

tell of what for or if is, Year-end what at backlog, breakout backlog? not? So in have what the of us you that terms divisions the can look you backlog

Philip Fain

disclose XX-K. that we in Yes, our

we you. happy reported I'm our and -- we was XX-K sector XX-K. those. sector million. that in the What The in with the Defense $XX.X million, with from $XX.X commercial I to to And be share happy I'm would & and sector and commercial the happy provide broke backlog was So the was Government it $X.X between that you up to was out million,

was million, & million. $XX.X So that Defense up XX% was Government increase. $XX.X a from

resulting increase, overall in XX% year-over-year. the a was increase XX% that of So

Samuel Bergman

Okay.

the back and out? to building Going that you're adding to space built when the be And finally that conclusion? is on, going when's

Michael Popielec

XXXX. built the will The end be through overall of majority out

Samuel Bergman

expect And production when do to you there? start

Michael Popielec

remarks to in prepared and we've production, already production the higher I expect Q&A some mentioned of low and the started volume XXXX. we responses, start volume in As the

Operator

are over this And Michael turn Instructions]. queue. no call the there to the appears At [Operator it back Popielec, time, question I closing in any remarks. will further for

Michael Popielec

the Well, earnings with our great. to once you first each thank call conference quarter sharing look We for quarter's joining on forward us call. XXXX the quarterly you, in progress again, Well, for future.

have new with information our basis. some updated, also presentation website, of a latest on We our on investor the TTM

great check to that you encourage we a as day well. Have So everyone.

Operator

This concludes today's for participation. your call. Thank you

disconnect. now may You

Jody Burfening	MD and Principal, Lippert/Heilshorn & Associates, Inc.
Michael Popielec	CEO, President & Director
Philip Fain	CFO, Principal Accounting Officer, Treasurer & Corporate Secretary
Gary Siperstein	Eliot Rose Asset Management
Samuel Bergman	Bayberry Asset

Ultralife (ULBI) 6 May 182018 Q1 Earnings call transcript