ULBI - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to this Ultralife Corporation's Third Quarter 2021 Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Jody Burfening. Please go ahead.

Jody Burfening

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

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

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

Mike Popielec

Today, will the I'll Phil, it call. results. against update XXXX take making brief joining financial for thank detailed revenue which then everyone, open some our and over you, on questions. Phil Jody, I'll morning, who overall finished, the turn start provide comments to is call for the after Good you an QX performance, the about initiatives, progress by up our I'll through XXXX When operating

For had supply challenges on our the $X.X impact as for schedules, $X.XX. revenue of million, customers, well own COVID impact affecting of chain issues quarter EPS profit third quarter quarterly product the of an manufacturing XXXX, and adverse and revenue operating chain million of COVID the negatively shipments, We third to approximately have as $X.X estimate supply XXXX of earnings. our an

core XX% total slight such, was a medical, markets, defense our million per $X.X and loss share. As end earnings Revenues drove company in negative year-over-year, year-over-year. government, operating up both were and down or revenue down which

possible, with few have and our with leveraged However, company we Radio and order customers, customer and qualify respectively, will the China minutes, projects the permanent. despite gas XXXX to materials, details side-by-side just spending, completion X%. and we our and to pressure to firm cases, you do COVID In I'll Leader backlog not increased established worldwide QX chain-related monitoring new working transformational up profitability revenues, comparisons. Bill? first, chain best order initiatives. remained by Phil transparently we a oil Coincident view up developments, performance. the revenues total did challenges, our commercial To our on managing challenges But supply pursue and Ultralife's prices. overhead supply and a XX%, tightening the like total as to cost continue chain announced in few the freight our or continue to see demand and ending million to growth chain update through and to raising including realize days I'd contract supply of received supply of presently solid $X.X expectations, liquidity we and bring add our year-over-year revenue on acquire near-term which current and drove improvement streams as year-over-year, position, suppliers financial these while give and difficult, logistical expected further QX not end $X.X new many the they costs million delivery CFO, address a the as impact, our QX you in revenue high, aggressively ask relationships in required ago. support revenue over XX% take adjusting COVID additional XX% our and Though given closely on And Fain, contracts company of

Phil Fain

and released quarter Thank the September for third morning, you, everyone. Mike, good ended this morning, XXXX. Earlier results we quarter our XX,

presentation, shipment $XX.X partially for which section you Relations would Investor We offset with a in website. in updated find business. reduction Government year. the surge last have also Form and Communications filed initial relative infusion Systems to last medical thank of ventilators, our can defense investor the a and for and the XX-Q in I like our batteries to quarter respirators quarter for our the help sales of reflecting decrease COVID-XX period shipments pumps $XX.X sales all to SEC lower X.X%, make and industrial oil our increased XXXX, declined by that million and an XXXX order of rebound for of from batteries XX.X% international revenues year's response in gas Consolidated in those million markets, a this of Commercial XX.X%. reported to totaled compared for the sales happen. third the third XXXX

new communication million Battery XX.X% defense XX-XX our million from and to increased Battery international The or impacted Energy other and to periods. XX-XX last million primarily our XX.X% product. ER defense of remaining and mentioned, sales government order to year, suppliers on resulting COVID were and in our $X.X systems reflecting a a accounted future government Products to was XXXX for revenue times of third million a X.X XXXX schedules, December commercial delays million components Communications Mike million and $XX from medical 'XX 'XX for split versus XX-XX a defense in significantly combined and a between defense, COVID attributable $XX.X market segment by split logistics commercial Of or internal year, in revenue a the logistics the and compared China $X.X $X.X $X.X or manufacturing in components split defense lead to government battery quarter for a driven domestic million increase compared and million. global sales million sales $X.X XX.X% shipments in Revenues XX-XX basis, XXXX a in of and a was large the and for or of products. increased consolidated and segment As compared related battery suppliers from by decline in cell million was decrease due sales decrease $X.X partially related resulted customers' $X.X large million a to shipments government matters business. from was the revenue U.S. by adverse our increase were our commercial our & success The third business, $X.X the accentuating offset Defense XX-XX year's $X.X from to the gas the Revenues in XX-XX the last our to related the Systems diversification and operations, decrease Department year, to business million our thin sales of delayed our times U.S. placed third defense to Products government last matters. shipment government quarter. both XX.X% from delays future and & sales million On our the quarter, periods of the with $X.X compared XXXX both lead last Energy in to to defense decrease in delayed impact global impact, other for to year-earlier segment X.X%, a $X sales our XX.X% on On quarter, related strategy. oil sales, for basis,

$X.X million period. the Our for XXXX was million $X.X consolidated compared to profit gross

a was points XX.X%, sales $X.X business revenues, gross XX.X% was quarter. XX.X% to and third year's Products margin Battery mix reported product compared of a last As basis for reflecting Energy last million Gross consolidated percentage margin profit million of lower last volume. versus was XXX XX% year, from & total Gross $X.X factory for our year. decrease

Systems the XX. resources throughput last million year, year, IDIQ XXXX $X.X compared million product $X.X Operating compared engineering Gross the reflecting wearable XX.X% the compared gross conformal $X.X for For expenses for Communications factory including of our investment year-earlier profit million $X.X to period. was in resources period. development, to new XX.X% last segment, million announced margin lower contract to were on May reflecting in battery dedicated to

to were the quarter lower third was to resulting delays of of third million adjusted for a XXXX operating defined of percentage and As continued expense compensation On the $X.X $X.X sales was EBITDA development. compared the and trailing of to $X.X margins, XX.X% in of million from supply sales X.X% including $X.X Operating X.X% XX-month for for gross for last reflecting investments our quarter XXXX. quarter. chain as XX.X% million million income compared loss revenues, Adjusted EBITDA year's X.X% EBITDA sales. $X.X XXXX basis, expenses compared or or new a product stock-based was noncash third or of quarter, million

when net utilized was based tax define diluted the as we rate reduced $X.X the excluding quarter. adjusted third EPS purposes. EPS for noncash per quarter to XX.X%, or be million operating of XXXX net our per XX.X% statutory an paid income million the statutory basis reported taxes Our share for carryforwards expected loss for million rate, to other share loss for the net and benefit which $X.X tax XXXX GAAP was credits. by is be compared effective cash taxes provision for paid basis taxes. on We to fully tax of our provision quarter for $X.X third our to the for to is U.S. on quarter. tax pay or Using computed EPS Accordingly, the diluted third of a $X.XX $X.XX offset and X.X% a benefit the quarter adjusted This at reflect million or $X.X to reporting XXXX on rates compares a actual

diluted from the compared the table a earnings third of the noted in for share quarter, balance release, quarter the the in quarter. third loss slightly the debt cash its quarter. decreasing supplementary EPS adjusted million a of and increasing for X.X% on capital third $X.X hand $XX.X working to We sheet our in X.X with positive to compared $XX.X $X.XX million ended on second with maintained solid to basis year-end and quarter to was of XXXX. million XXXX XXXX ratio from $X.X third a for $XX.X from Ultralife current liquidity As million XXXX per and $X.XX million and a $XX.X

a growth organic new capital we well initiatives, expenditures expediting fund and result, our development organic M&A. to strategic through positioned including while As accretive remain product growth

our liquidity, Going forward, steadfastly realizing remain we now turn ample model. I leverage backlog, full growing initiatives, focused end diversified of to back the growth it with Mike. our on business potential markets will and

Mike Popielec

Thank you, Phil.

to continue sales and strategic approach market diversification, advantage competitive focus product CapEx by for and expansion, we development revenue a primarily on new accretive and to XXXX, growth disciplined driving through acquisitions. For reach

Energy & is U.S. the market global the sales historical concentration products in defense the international our about lessen reach For markets Battery strategy markets government the more government expansion and and into commercial diversifying to business, market. and defense for

medical such x-ray B&E represented Demand & Battery robots. total of for revenue surgical global as current overall ventilators, infusion XXXX, QX and pumps, revenue. from applications Energy respirators, XX% was products For customers digital

from $X.X thin used blanket for orders as over power medical area agreements. existing cell signs medical customer are million monitoring. also devices of such is about very excited multiyear emerging and/or received A We batteries, wearable that in vital new we device application to the delivery in

multiple were we for XX% orders was in commercial over total oil to production XXXX just XXXX-XXXX in production significantly frame. now received time a subsea approximately up gas in testing and QX initial and which samples serve product in grow QX, ramping electrification the the demand, is we to B&E of For and we shipping which revenue for line XXXX, expected are QX, shipments sales. and customers

XX% product B&E's main as sales, continue and represented of we strong to of OEM shipments XXXX and delays prior earlier, revenues U.S. improvement earlier, batteries gas due oil OEM B&E QX signs in shipment QX year-over-year, business COVID supply approximately the nonrecurrence government oil As as the total rate of primes. which mentioned with see core business, up drove is stated drivers. double-digit primarily and chargers In encouraging and chain total to at our year-over-year. to gas Revenue DLA radio for shipments year down a

is IDIQ The first first under we the of XXXX. a and with BA-XXXX shipments primary article order now signed to testing for fully small off, approved battery this current the next-generation half delivery supply do and in expected have

of of additional We also are IDIQ, the delivery over decade government in hundreds given guarantees thousands of of revenue contracts, for millions dollars the a dollars. up subject year eligible historical now has Though orders to any last of to there's under discretion IDIQ for orders DoD. to this several from future delivery no ranged the

May supports Army's the development are the through supply IDIQ first process testing conformal wearable of chain navigating sourcing while schedule. on augmentation XX phase integrated challenges the executing an Regarding meet new and system, visual announced we which U.S. we best the to currently ambitious contract, the battery article

As program aggressively IVIS the in work was Despite completion heads up towards battery. display. up wearable the recently associated technical this, one the IVIS continue overarching year first to Army the we due to testing key challenge for to milestone delayed article the digital conformal announced,

demonstrating latter include first more actual compliance discussion the and Army with with timing potential protection are the testing, of XXXX the article requirements. thereafter. contractual the Now quantities at deliveries -- and with to production of product of full occur completion part of likely specifications and in U.S. successful program awards The prudential

remains growth strategy. development our core product new element As a of organic

that again the XRXXXA at of medical new in products, to next-generation multiyear public medical OEM year. next-generation customers once XXXX, and first but Show later new Vegas. swappable some new new attend large-format conformal the to and In Healthcare and and addition our wearable safety Society battery, production CFx we our XXXX radio the next-generation resulted Las specific storage is batteries, industry technical showcase noting ruggedized XXXX limited several to quarter, with to, and including, batteries, during public development advance smart modular hot batteries. not easing a It beginning for continued of COVID energy introduce primary restrictions, card battery, Management blend batteries UX worth we swappable have events, as the Trade half product The evaluations of early several requesting year this with formal next deliveries battery to the Systems Information were in delighted begun August hot we as a

fact designed, We product that talent delivering multiple technical the are proud suitable manufactured for our leveraging and customer conceived, very also a and locations, global this product sourced of base. worldwide over was a Ultralife

and for COVID, to all access to post up customers development a our As we are our opportunities more key seeing return new product collaboration opens across locations. of

our market with value needs customers. to key product multigenerational remain in provide current development us to with opportunity the us close product to New and planning and continues keep gives

which or our differentiation, Regarding cell project be in high of location. at New is testing. the customer short, devices devices well initial new China, chloride manufacturing applications. new by differentiation to magnets continue its facility is completion the medical owing continue in our rate a our illumination devices and for the invest with confirmed U.S. our the performance, The efforts performance particularly fulfilling New is of feedback from responses phase the lithium manufacturing in to showing thionyl also to capability, high cell now demonstrated attributes X-volt rate has line to products' positive for ER orders. contribution upgrade we customer York as safety, strengthen as strategic In power been competitiveness, first our CapEx. to York, dioxide expected our Voice-of-the-customer high-performance Performance competitive useful pulse

XX line, For to in customers be this to and years, which anywhere have qualification operation periods. long product can XX testing from X

provides of feedback their So leads products and relationships. validation customer sticky valuable to our

steps identified continue and several total our Medical customers several applications. will improvements, to project and us newly In available this overall XX% commercial battery QX, cell by industrial ER recall, As thionyl total for other you chloride into multiply growing market capabilities. just fold, our our product industrial also tap may and process involves year-over-year, help proposition. of not which which of ourselves, our global an growing operations revenue China indicator operations China supply our solutions, pack demand up was of is China value for with

best Our customer. which every goal service of remains locations of to proposition, value produce chain end our the market in and/or supply the OEM best the global and safest quality particular products, highest one

or new years from revenues. than business, three Looking to less communication QX at XX% Systems our old approximately product equal systems development Communication products revenue represented of

Handheld, XXXX. Radio Regarding Small another order and and programs, Leader we QX follow-on potentially Army's with reproduction, starting $X.X for Leader program in the delivery Manpack moving announced in expect and for Army first of of Form as the round half the million received And is a U.S. Radio Fit XXXX. awards for just into we

critical continually the issues customer the market As position Communication is and for on Systems and The Systems of to trends the systems. requirements of supporting radios in revenue integrated Supply time are us future and affecting lines, radios availability, impact business, manufacturing innovations, chain enabler extended continued times material team are to the component both electronic business, forecast. Manpack Handheld technology focused resulting lead Communication effects and COVID-XX clouding business.

often are of available, increased costs. For is supply shortage with deliveries, global logistics that transport and compounded resources chain the components delayed transportation causing

expand with product to customers integration to system continue data enable and the impact planning will manufacturing to which of extent tests data Initial and vehicles. also card, mobile be manufacturing received supply will into market purchases low the the possible. the sales mitigate Communication in continue manage operations during suppliers and QX. chain work rate multiple vehicle of of and for to evaluations and with teams autonomous systems working closely several commercial Our actively testing for the quantities production customers analysis initiatives and are for key to delivered

customer is test this We commercial for access milestone prototype continued to the radio the virtualized product the offering significant team. Separately, is orders supporting for first Systems are Communication product a for second, purely and have This has commercial This follow. deployments Communication with position a all and pleased network successful working with are the Systems also milestone Communications phase steadily and a reached to worldwide. for production XG evaluation to enclosure, Systems network business opportunities. the

been sales our Handheld company backlog government for delays growth, completion orders positive of third amplifier fronts, projects, our military with experienced on in anticipate Systems new to Communications business acquisition have revenue, or ongoing growth for with test to The were in anchors to follow, systems we which cash combined of and quarter overall ongoing optimism participation in XXXX, Manpack, quickly communication In in products, diversification We systems commercial long-term prototypes, for award total in order of radar customer the for business. but progress evaluation other on material with our commercial initiate the lumpy though the XXXX. dependent. our in traditionally increased inconsistent a finalizing with The commercial with the initial to all results transformational about our are soon production several often dialogue were operational a volume challenged and programs HMS, flow. OEMs, has delivery closing, financial pleased to addition of additional with defense early QX in opportunities which second defense mitigating program insist orders

award chain in our to for the of to glad Leader are effort fulfillment customers and cooperation channel We importantly, want hand. one and present each have partners follow-on supply employees, I next also given extraordinary Radio hurdles. thank their execution in tremendous and the Most now every

sustainable top meaningful, competitively products. priority revenue to projects, our from realization Our transformational annual streams attractive remains revenue achieve in new delivering markets from new growth differentiated

next-generation OEM At B&E, Volt Radio Manpack awards, amplifiers potential solutions. the -- smart UX included batteries; XXXX For the new our public radios Communication and product battery line, and wearable and and AI safety, and CFx-blend Systems line, subsea and product new included ThinCell, XX-watt ancillaries, electrification several additional battery ER the Leader the integrated XG new computing, our XRXXXA the follow-on product conformal line, packs. primary medical battery, new X

through package potential units, We for legislation opportunities Congress. are budget U.S. infrastructure each government business also several monitoring new should our of and that pass

COVID supporting optimize approach to XXXX, As current streams transformational the keenly quarters, flow focused of expect to continue current continue financial investments. and we and on year we the targeting our solid at challenges stay more each the performance, new that few potentially is we profitability, cash unleash from maintaining imperative order chain transformational bring. balance a completing strong will we total end it multiyear our revenue will least in while operations Though products our to projects sheet supply

under our We the and on growth improve to they and continue EPS consistency. projects these which completing rate to as control we transformational elements, focus believe are our revenue time revenue most effort and are organic our

leverage. continue and we'll to happy can where further will and achieve my for this Operator, gain acquisition We quickly questions. the open to up operating be remarks, also call evaluate prepared opportunities we concludes scale

Operator

Management. Instructions] will question take Gary first Siperstein [Operator at Wealth from Eliot I Rose the

Gary Siperstein

of feel that increases? increases know do change Mike, the on will mentioned expense through it's any supply will I half X/X delays. or put the expense of help not most think going added Do some you COVID increases. the offset with expenses? chain, you you that to price necessarily the you But and

Mike Popielec

have contracts we've and generally, yes. fact right remarks, of and make you mean, been are some extremely us working premiums been the as most the are customers. for so cases, delays. some in changes. customers some address with in and close my that our try subject in our side-by-side are to part we've increases go there and I right and indicated cost us helping think these some to prepared these But after like, think contracts, freight existing help I of of customers I to up and with the our some of I mean, some stepping the our I in

a standpoint, this it's good purely doing we impact you cost delays the bigger point. a pretty as knocking those think down. are of from increases, at indicate, of the job But I a So of

Gary Siperstein

Okay. go And QX? in increases through go later so full quarter, we'll did recently. in Or through they did a third quarter have effect price the those just

the will of QX quarter it of of more more and part a fourth opportunity. So be a QX

Mike Popielec

went through QX. they earlier Gary, in

Gary Siperstein

Okay. XX And and and one recently And XXX,XXX you contractor, contract was in radios, just terms one Leader prime production. of said talked and And years news into $X.X XX,XXX and about is release, in billion, contractors I the the they guess, got contract, a for they $XX Leader the Radio, of saw Radios of the it $XXX amplifiers million said million got other the over went contract. just full-rate the contractors. is that then they that that where Manpack ceiling on I the next the

customer first rate a does also full different? my both prime as the know get the is, out contract into it what? So million question they Or government amplifier is is Did gets who to production? $XXX it equal contractors? give Or went hard contracts to

Mike Popielec

those Yes, the each details goes it's the know contracts. what as read I into well. of news hard we really final of headlines to mean, individual

bigger on least award. split they the single just allocate one give portions own from a they to our versus sometimes sometimes experiences, other, a they Sometimes at

as upon the make by can do to what's very, try help partners, possible OEM not contracts. we is OEM best do we're to try called for them job to But share we competitive going as our the partners out too us. into very much just get biggest really what figure we so possible a whenever So

Gary Siperstein

XX that billion contractor. for to come out year Okay. a $X.X Ultralife. is billion for And with figure trying one years potential a over $XX

XX%, if one year amplifiers one for a chargers you by $XXX I it's that the supply guys other. and even cut $X So you to million and here And batteries or like almost that to billion something still it contractor. know

million $XX to a million million mean the least is battery if $X So to that a does go indeed, million sense chargers is chargers. production contractor is Does year? continue I'm it Ultralife $XX just to with million for and it $XX batteries get the year? trying if worth the Or full at to annually on one contractor for a to opportunity and $XXX into that that government?

Mike Popielec

Yes. just press we the life That using was I U.S. And across system it's XX% is was math XX% the by figure from release three the you that could gave this Army, years wish Leader initial type those that XXX,XXX easy But issued straight-line that with years. VAA of Radios the have it's Gary, or a of it. ago. accurate. all

that you're and correct, supply VAA and our batteries systems. the So magnifies opportunity, we

& X-dimensional It's then of predicting -- the but the I -- to those, impact again, is to difficult So Very used magnitude annual chess. now of Government it do. those Defense contracts, of timing the X-dimensional call chess.

is So the opportunity side there battery on both side. the and the VAA

Gary Siperstein

start would one $X.X year. Or going Is ship in won next is million they get Mike, take that? two to does quarter? QX amplifiers, Okay. said expect all there the shipped for shipping you to recently -- in And an on it contract that quarters

Mike Popielec

commitments the units really from probably on the supply our construct have into to the firm I mean, it really And depends getting biggest is we suppliers obstacle ship. chain. that's

days having to would XXXX. be will in it we but contract And -- so premature ago, it just guess a to starting it received everything would be QX be this try would exactly few believe when ship,

Gary Siperstein

thing, customer after and any from have so kind the you is you from of nine from notice? them Did there have of that any government give they that six months' can you, kind what on therefore, that the expect orders orders been expecting indications what, supply follow-on color chain, improve And on they notice, point? Okay. months'

Mike Popielec

partners media. to try remarks steps sign. production believed, And my right to by keep But it's prepared mentioned I there's be. point, our that would total us. close the we to another full-rate to the as on the gone various would government early that read various mean they've that fact potentially budgeting positive this that was production we really -- too what going channel it's to just just on to our in next We as a year make we in going full-rate of well say. variables, what as things now that predict it in very and impossible because at we're a world for But creates pleased lot what opportunity is

Gary Siperstein

Okay.

the line. to Moving product X-volt

you last quarter's different discussions mentioned call, think customers. with I conference

said to on color or Can And you there? you X-figure unit XX some potential you of give what's think are us on even more. applications. are they any customers up going million the orders and some mentioned were customers orders, I different

Mike Popielec

to Now, this those didn't work continuing work some of the again continue, in product good making through products quarter, marketplace. on covered of I remarks, brings and the as to as getting of and funnel that's mentioned the I continue and I characteristics final mentioned new initial the the but on last read to customer why the opportunities. we're the shipments quarter, And tweaks feedback

And so we're very future. its optimistic about

Gary Siperstein

moving the Okay. conformal. to And

you that a schedule changed has the So bit. said

testing in So previously, you the in first getting starting into next had second about of talked and maybe orders or shipments the quarter maybe year half.

next the delayed correct? testing now second half is year. that Is to of So

Mike Popielec

a The delayed with has of publicly yes. overall that year. program the data program Yes, part up we're been to a due to involved not

little And whole so a it bit. of program the sort pushed out

make as and of article as possible. that we're with we're line to sure work position the extra testing the deliveries comes So follow the aggressively spending some trying to first We're to frankly, be good pass that. would hopefully when a do money it, still that that in first to in time

Gary Siperstein

the on they as any article first you color start when can giving And government testing? Okay.

Mike Popielec

updates new our No, specific we schedule. have no on

Gary Siperstein

Okay.

equals XX, talk still Company, In the model, now something a Can gross take get if The of a to terms that. operating of it was, while for it? I been you going has XX, get XX% to X, originally, and to to like challenged that the Company models the XX, effective what it's XX, margin. to think it's to

Mike Popielec

Yes.

I much effective. think very it's still

I the firm. whole principles, think overall the

associated brand certainly Phil There's last battery that on extra so I of going that you made with new. new some As that the mentioned number the business, that products is inefficiencies our the comments of with from as could has of forth. glean the of so production couple of the and in the through and side some factory over scrap quarters

gross hit the related and also, do a the very we volume. a And growing things of price value to And the investment be higher per make. communication It's development bit activity full the technically going with or and on necessarily to some tends case hasn't se It complex little [indiscernible] up of with level just frankly, proposition do with taken an more a anything through getting volumes, of been for of capabilities. higher-margin of to some the so products has that's type systems, our a margins. cycle to that susceptible to in

effect And last you overall was so in the margins. quarter, that that volume gross the adverse had on an low, and saw

of the through not they sort we that know collectively, through emphasize factory So challenges, we the been priced these are causing margin know new though. manufacturing. efficient what's going getting an pains permanent gross are the It to want growing situations, of Mostly, production a just impact on gross to but products it's very I having margin. that. hasn't

Gary Siperstein

Okay.

the So mix the picking business communications base levels the and and the I between right business. you start battery business if have the up and revenue

you and million hopefully, million, run on as to you then a $XX to get move, quarterly think that to would the us XX%? do rate So get back $XX

Mike Popielec

Directionally, it would [indiscernible].

Gary Siperstein

you can still get you XX%? Okay. But believe to

Mike Popielec

there's the products no do a The time. Most as we that our I that business we some of has it reason achievable. to know Yes. same can't. last forever. mean, we term, how through at with from why putting talked inflation there's all But and lot of forever. simultaneously earlier believe we our in fundamentally, put aspirations long won't We the impact, short Yes. issues supply about But call we together last, still the last don't they those again, about is they won't model have. of chain new some

Gary Siperstein

Okay.

Merck indeed, and So to already having nine COVID COVID. who months the with people the I pressures think booster they mitigate upcoming six, if have with for new years the some the success drug, over XX X the to old start next approval shot, with antidepressant, mentioned kids,

maybe at government some wane addressed, to wane the to to of nine it to you get and next starts and if get XXxX, these is logistics better of chain that getting the So chain peak operations ports parts nine working next and if COVID lingers, so months. starts six the over supply the of supply months some dealing peak and the but with over six and

away mitigate, $X.X and So don't the as including that's million, go million with the they backlog maybe or away go mitigate, coupled those completely, but they not $X up being contract. over

in XX over to testing we to third as there's seems from months. improve the strong start be go year, could million next QX. all and new into there's could with products for and a the coupled starting next get So with out, production. to the to possibility ultimate bottom starting mark And quarter million, like It that come that the the things backlog then slightly [indiscernible], $XX $X.X

ramp that you products maybe will as one through the quarter So slowly a or two year. go

you and us price that seems model is both to the are it and the future challenging. So with stick the all brighter the stock the telling of than potential is which revenue in being to said, confirm what quarters, lot earnings last like hold, two a

of trading back was my guess if the the a under And that stock back you time, it's that sales program. more. you when because for guys I And at the bought think, was -- look $X. to time one-time $X, million, question was last I value, the at $X.XX and the at So just book stock time, just lot bought Company remember is, buyback Company under or I X.X%, maybe

when clearly, back of were ago enterprise cap book an at next more basis, minus starting looking cash, But you year. a range. and plus onetime sales, value rebound under a on now, in we're market bought revenue years several right stock the the than discount $X So to you at we're

the and and the a seems $XX continues gone make stock to with is price, availability, stock almost the And to to of Nothing's cash away. -- the conformal credit, people, $X, the million the $XX And So it bright. sense advantage of stock take in opportunity a million future are $XX. plus If of we go million selling fact money results, $XX this of line be that potential giving you an hot obviously, getting lower. we're disappointed to $XX, announcement buy lot time. presumably, tax on at a lot to then the with into higher loss people prices, continue bought quarterly

selling. So to be tax there's going some

-- at insider exercise higher and pay has exercise the XX prices. Company at without months, than for also now some the corresponding buys So the to where had prices is higher over stock the option selling and several last

capital as you instead not and you But the is the M&A keeping one company because times buying paid of allocation, which time two saying of So in of to part know, sales. terms we bought companies, plan. I'm another M&A, just mentioned, alive, M&A addition last about you still in

your than buy book two and sure than can you less at time likely, the here, more, are book. sales companies one less So sales again, than stock over value. onetime you previously own we're And I'm more bought

stock just with be as better So -- program, of your benefits million go you're of to in the the million would And forward, I'm all different plan best part going and about. into But as seems opportunities for and with between to in a your tax accretive M&A, $XX seem to don't decent $X seems take allocation looking be stock things and not get transformational buy especially saying quarter stock buy new M&A. to to start third in to capital instead our to saying addition the acquisitions back your we talking selling marks that the capacity cetera. bargain now and I'm knocks do year year-end if nadir all bottom. it accrue the et

but likely or takes and of two the diminish some $XX start three headwinds some production. mitigate of and it to get quarters to as these $XX to and million, it three go as maybe testing four So million from into to to to back products seems possible

So talk possibility this and that, advantage of can Mike, to of take using you of the cash the some opportunity? to

Mike Popielec

organic Well, we do I deployment, do on organic organic thank can I more say, a at different in recent and revenue we you can our of to growth, years time at suggestions. category priority. we transformational growth. look very it much to anything talk we for mean we capabilities sort would capital things. about the look number on CapEx. have a of when what regular top capital comments which spend put basis, And towards to very and [indiscernible] high is And for those and strategic is products effort, and of increasing trajectory a also revenue of going We our that's the obviously,

organic gross growth we deploy initiative another capital towards. that's that So

Next, we look acquisitions. at

and we've We acquisitions now have for again. think made to good it. debt-free acquisitions almost buys accretive I some are show and

of are So now the to cash we we have flexibility, of think I generating. the buybacks. difficult continue, I of we course, in think, that it form us the And return stewards in gives especially times good our some like shareholders And these. opportunity then, to stock

generally continues all a on mentioned grow. internally. is suggestion balance speaking, maybe We'll under basis, items appreciate to advisement. discuss are on just your regular being I'll any those table And the our that So those But about I given I cash timing take time. the at look good. at those

put to Company. want line we it drive to use to to and good continue So make top bottom we of sure the the

Gary Siperstein

all just that. done add, Okay. you've I would

to positive been Company, the absorbed invested inorganic position the for you've acquisitions, You've absorbed the that products, could invested you've supply still you've increased problems, EBITDA what the in you've to problems, cash. COVID you've made prove and still low transformational chain Company, you've your and be

I'm of still keeps of cash inorganic instead and debt up out you've transformational have every again, of gotten CapEx, transformational of and not those done opportunities, So going saying all instead quarter. products, CapEx, instead things

back unfolds go opportunity could $XX, an where have and always all as opportunity an an to second XXXX $XX, half presumably, $X, you it So is and be there future the secondary. opportunity into or the for all be again, XXXX, things a cylinders, seems knows, stock hitting on it's who production, whether when these to the you're and of

thank with So too, to or range poor the buy before cake ability come by buy the your it guys, selling prohibit with priorities and have it investments good that any in about, tax seems find the talked of deal. stock you just any and and All recent five can a eat like that of wouldn't you that it and six results, M&A right also you. to luck, you good the from your

Mike Popielec

Thank you, Gary.

Phil Fain

Gary. you, Thank

Operator

Josh question next from The take of now Benchmark Sullivan Company. I'll the

Josh Sullivan

program comment to your impact continuing If how get your defense percentage a we does X-dimensional or Just three by chess on on spending? that spending. of are resolution, so the next new What longer predicting quarters the defined over is you? that contributions

Mike Popielec

but it's of XX% I when excellent costing is I expert with I sort and Josh. but know And are our new roughly may funded, you play it it -- get think that understand day-to-day projects from behavioral because can. us you impacting same in overall an have of sometimes money perspective, to think I projects. there's resolution, an business I an of a on personally continuing as existing will, of the continue budgets resolutions, the the on impacts on as question, units. that impact the if available, flow understand I'm I mean, to best trying less both see time, business, at which just

we're the understanding issue from it core business whatever the funding is on currently maybe of flowing under that probably knowing that funds. of make right, flow the existing we going trying bigger be what large development we involved is programs some a to but would be, captured understand exactly brand-new respectively. that just to delayed. to bidding the But going the that through of may some the to I potentially under with get the or where programs that But -- be not may of will just that short-term still customer impact trying long-term with possibilities. we're available, understanding sure meet basis, the So sort said the think forward, We're be

Josh Sullivan

Right.

for in there? comes support on reads early the any budget comments programs seeing the it of you're together, 'XX then any And Okay. some various into as out if pentagon

Mike Popielec

expert And we I they -- our think mean, We in some that's can glean. Yes. analyze have opportunities an both businesses. we what on there's

times either cautiously what would sure are or participation, or channel understand many OEM we potential can make an so do we're we're to and we optimistic that, another target trying about available, we direct partner. things that So participation through

But on wait speculation. comes the So signs until we're reality completed versus least what it actually optimistic on surface. consciously off and them about says at things Congress we'll

Josh Sullivan

just see you the mean, that? labor up, availability thinking curious mandate. you or impacting high-touch just it vaccine consider do on I then your how the as deadline I labor labor? about you're comes do customers' your And yourself availability? mean, Or

Mike Popielec

inflation, without challenging. let vaccine labor availability, or wage think I rate the the Even from labor of is are. alone be availability and it benefit Whether vaccine what mandates

make to situation. So trying taking we that's to challenging for from facet the to trying perspective make and our sure it to employer, want to we're right a already wage trying employees, sure be a We to work do is that, of come for we're me, just try or terms and good reductions whipsaw two that of attractive things we're care benefit a quarter headcount pressure. profitability there's portfolio. as from us, of What we're and an and people both well another to in message, good sending don't new make of just like employees a because

of existing another is facet to situation. So the just me, potential vaccine

Josh Sullivan

the Got And Got bit opportunities? then a you it. diversifying talked about those sales. defense little it. are international What

Mike Popielec

Most front companies of we and to multinational relationships countries United other have the with the time, other States.

an there's highlights of And or derivative opportunity a matures that it. so U.S., the around our technology when one a of technology times for the world a lot of in in

cycle. long also they're So

the names of -- even shutdowns been own we that through the gone have had than some severe we've lockdowns there large know well COVID time more their participating the of of and you would are countries in, countries here. Some that

types in And U.S. involved allied a place that of provider with are right the equipment as impact our very like speaking, In And so or thereof. of that's these that are a us. But ancillary are taking the of on taking are as a of Comm companies. have generally countries to there's an radio, similar also international number positive military. Systems, derivatives their such, case had place relationships own in activities in modernization of lot certainly, equipment

with there activities. working partners those to So would try in modernization be to well provide product we as

Josh Sullivan

curious far you you And see passing realities. having customers, you're conversations those to might just prices inflational how with How customers? be costs what those are then between balancing as structural transitory conversations versus as on as

Mike Popielec

customers. I very the Well, that closely I are dealing themselves think we're pricing, issues cost customers with. same aligned that dealing with think our pricing the And with we're

the cost I think there boat. to it progressed, come in with I started and stories. pretty of hearing by to against difficult, relatively you there same they that, own that their is as understanding were out about because customers, talking first, a they So defense passing much was you we're instead at their better back on personal much think -- but the And

is what price say want many increases. So it's there it in I is the general cases, conversations. don't easy And then But of expected. driving a understanding again, seems like to it's

in some customers. I we our outliers, with terrific difficult but done based initially on -- relationships that think with So it's the the deep relationships, -- our really folks have a have job

Josh Sullivan

that are just inventory that just gas on have segment, that might specific then given to driving do kind of oil in an and it's the on allow one then the here products you strength environment? rebound capture mentioned. And you that What that? this you And

Phil Fain

Yes.

count. U.S. a at year-over-year, you now, we look that the follow-on basis, U.S. the right rig is think you the if I main driver, Josh, if closely look weekly

So now. count active rig the right U.S. is rigs XXX

up And to drilling. that have mentioned. than rigs. rig time inventory You we industry, see is That increase anything, inventory. access downhole purely is and year this higher have a by ago, where the downhole the I drilling lot XX% a we lead of it the it's largest that portion count available over itself look And we the not at is of to think it's or driving that within available XXX that's more with

$XX you'll So be million, would $XX that's want below circumstances, towards that $XX why trending where under pushing to inventory see million. is we normal that our million,

U.S., again, -- the which numbers just by up. is the it's is rig gave what we international count, also anticipate to trying next So what's I in about. you which all well, those is again, But close relationships as really to driven and happen it's going week

Operator

questions-and-answer session. today's Mike to conference turn the now remarks. concludes That I'd back like any or for additional to closing

Mike Popielec

you us once future. quarterly conference third for progress our quarter our call look earnings sharing on forward again Thank We with joining each quarter's XXXX call. Great. the in to you for

mentioned our presentation also note, we website. As investor update earlier, like our on

check That please Thanks for for out. day. concludes call. very have a great today's you Thank much that participating. So your participation. Everybody,

You may disconnect. now

Ultralife (ULBI) 29 Oct 212021 Q3 Earnings call transcript