Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the Ultralife Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Burfening. conference like speaker to now Jody today, would hand over the your I ahead. go Please

Jody Burfening

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

The call could would everyone I those the materially turning forward-looking like revenue during to conference management, results in differ to a some and economic projected risks and that a supply based of call products results cause acceptance our reductions include over Actual potential new differ remind statements uncertain potential could that uncertainties. expectations. basis this various contain made of disruptions, conditions. statements on chain result key materially actual from as customers, from global current to on Before uncertainties and global risks

filings latest on publicly Securities company's to cautions Exchange circumstances. XX-K. investors that the obligation results other included could as the factors only analysis of events information affect and factors company's the financial forward-looking forward-looking on these the is Form annual undertakes today's reflect and reflects including no or subsequent company Ultralife's in Commission, report Further The on The which with not to reliance statements place statements, date. company to undue update

measures measures. considers The In addition, GAAP. non-GAAP to figures. financial These be will metrics and certain on to to differ be corresponding management GAAP should considered useful call, management non-GAAP refer supplemental from today's

to over Mike. the now to would With that, Mike. like Good turn call I morning,

Michael Manna

Ultralife's to XXXX morning. Welcome operating on the results. call Good QX

team say slow the and QX first impact me internal a profit increasing businesses network, teams model. of XXX% strong quarter revenue business supplier our performance cyber-attack, our of operating the of the to up with QX valued Let due XX% year-over-year, Both to delivered rallied. lingering which over I'm after very reported the previously the and highlighting proud leverage start

We business over backlog gross QX, with the increased even QX. pleased period. the am increased but not the total the replenished, revenue, with company's for total start highest in history slow only a I even our to strong exiting margin to that was

I will now turn Phil it to QX talk the results. over to through financial

Philip Fain

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

can Relations presentation, all those help you We our also SEC XX-Q find happen. and updated section with filed investor website. the that our like make in I'd which the of Investor Form our to thank this

the quarter amount process. in starting want interruption details the review, in forward Before funded, of you sharing to claim business results. our out after has that is been resulting point claim include financial still settlement will look to first finalized from our I the which the our with our once we settlement and I financial cyber-attack insurance

sales defense XXXX, the period. earlier to and totaled for to $XX.X for an sales commercial XXXX of second revenues the XXX.X% million increased the quarter of quarter increased compared increase X.X% Consolidated second million compared Government $XX.X XX.X%. year

highest we defense during expect base to of the half XXXX. across commercial to and our history representing the exiting over the backlog a level million, comparable period increase first and backlog company's customer government total in the year. ship of is the second the The nature last XX% diverse approximately X.X% XX.X% $XXX.X increased Our over quarter second quarter in the and backlog

major from Energy Products an growth together to the segment of our Battery million strong XX% Revenues $XX.X revenues. three battery sales for partially of million increased offset XX.X%, segment year-over-year that & XX.X%, increased sales timing XX.X%, oil in compared reflecting year, were increase markets sales increases increased sales. XX.X% other & $XX.X last industrial were primarily accounted China These gas our due and XX.X%. sales by in certain decline medical of approximately to in the Government/defense commercial an

$XX.X second to to million, The increased backlog XXXX the Products exiting first the year, quarter (ph) was second government/defense business business to & for for of this XX-XX strategy. the highest our diversification history commercial commercial Energy accentuating reported the million quarter sales compared revenue split the global XX-XX Battery in highest The success in segment. company's international over year our continued last $XX for level compared domestic was and XX-XX for quarter our split XX-XX the The of for the quarter and any company's was for battery also the for history. our the sales between XX.X% to

to international program. an defense segment Revenues our Systems U.S. and integrated Army and increase, allied last vehicle $X.X the than radio government/defense contractor from country year, to were for primarily million compared of four-fold amounts amplifier $X.X defense shipments amplifiers attributable more modernization to adapters to a contractor million Communications systems a vehicle ongoing under a major of global

was program million down The $XX.X our while working of million programs $XX.X first the the commercial XX.X% we round of of the exiting backlog towards in from first the securing next for deliver Systems to continue backlog defense existing of orders significant on quarter Communications round business as orders.

XX-XX for government/defense On sales reported full was a XX-XX versus year. the basis, the XXXX to consolidated commercial split

XX.X% was the profit quarter, over the period. XXXX up for second million $XX.X XXXX gross consolidated Our

year's the consolidated margin for quarter versus basis gross was XX.X% XX.X% points a As second total increased of XXX last first and by percentage revenues, quarter. over

first & year. new of to the quarter partially to The QX year. in decrease the Products compared price XX.X%, high-volume due margin last from transition business million Energy a in products points XXX to year-over-year by XX.X% nonconforming Gross primarily realization. from lingering improved and profit XX% offset XX materials points our was investments was from $X.X resulting a was for continued reported the of Battery $X.X Gross inefficiencies million decrease production, reported basis of and cyber-attack, of certain disposition the decline last basis

profit higher absorption $X.X was Systems our to million earlier to million segment, compared product leading XX.X% margin throughput For for and compared was mix. gross Gross reflecting XX.X% $X.X Communications higher the to last year year, period. favorable cost factory

the reported same Operating expenses earlier were year million, that for the period. as $X.X

for model. a of XXX demonstrating our improvement, basis revenues, combined of compared quarter, XX.X% a As year's the improvement were in increase The XXXX more $X.X to flat in second resulted expenses and to margin leverage million gross operating expenses compared profit our percentage or point quarter. $X.X leverage million operating operating of a business last million second than XX.X% for the $X.X to four-fold sales

Employee is the XXXX income, During its a our our of the ERC, filed refund eligibility for in necessary tax credit profit Internal the refundable the receivable XXXX of and the under Rescue Retention Service ERC balance which Credit, other plan is for which assets credit. in the statement. million income taxes the amended as sheet The company on confirmed refund against tax Act with forms a other $X.X and employment to below CARES current American of reported is claim operating and certain quarter, second the payroll Revenue

of $X.X reported a losses sterling the impact the interest computed to quarter pound for million GAAP provision tax second to quarter strengthening was basis, $X.X million for of XXXX with acquisition, versus the expense and finance the the associated currency including U.S. Our dollar Excell on the ERC. the help foreign

resulting operations. per $X.XX net $X.XX taxes share. remaining of of $X.X share income compares computed to basis Net share per represented The per or $X.X with income the $X.XX ERC million a was This or GAAP XXXX for quarter. on million the net per share $X.XXX from

our Excluding fully expected the operating tax carryforwards U.S. be other for and by credits. taxes to loss net provision non-cash offset

Adjusted X.X% for EBITDA, the EPS million sales $X.XX quarter, of contributing the to was share ERC period. was as the XXXX year per quarter. XXXX or for expense the $X.X Adjusted compensation including for XX.X% noncash operations defined or with million second EBITDA, approximately quarter prior of the XXXX, to compared for $X.X compared $X.XX stock-based including $X.XX

the and capital $XX.X compared of and sheet. second of $XX.X million a ratio balance our ended X.X X.X for working XXXX million year-end. XXXX to Turning quarter to with current We

XXXX While our proactively to inventory increase primarily reflects decreased cyber-attack over impact X.X% year-end, the actions service XX.X% as of the QX on position a basis, sequential to substantial backlog. continued the as influence well our

growth forward, backlog, us our our the markets, improve end to and continue diversified margin leverage cyber-attack business potential position our With of ongoing the initiatives to our optimize gross well actions mirror, to rearview model. going in

it to turn back now will I Mike.

Michael Manna

detailed performance. the for QX on you, Thank the Phil, breakdown

margin of in the manage production to the gross We QX, see some our mix improving and backlog process mentioned, continue in but to operational of throughout inbound we early expect so implementation, materials, executing are smooth XXXX, improves Several our realized which to better this initiatives initiatives subject and customer improvement I to flow. and cash in on stages are focus outbound stable further many margin. into year As gross improvement of in demand. flow,

side parts were Customer needed remain cost to labor by we which still chain, allowing backlog, have internally parts eliminate expediting within lead us end to and improvement parts forecasts procure Direct and supply year. our our specialty logged tight orders within of to we QX. in lead some and produce except to the for where and some generate QX times. all our were able remains to in improved excessively execute able chain Supply increase that is windows time strong, headcount ship order in the locations, both fees, expected but

backlog initiatives price QX stabilize some in actual in for to earlier, and top pressure than some the pricing Systems, year both margin a that margin of which from recap initiatives are businesses. and continue experiencing performance To gross a continue results benefit delivery. cases activities, award to priced in gross specifically realization Communication improve our as we over in contracts in progress, margin

return activities. reviews cadence while initiative to expect this to this price down heightened internal We transitioning focused complete to normal year and pricing cost

sales of forecast horizon both our our of extending process and process most forecasting. customers continue from We being our planning is and This recurring functions. of improving experienced aiding orders journey planning procurement suppliers, time with strong our end-to-end operations customers, and and we've and our refined, the

transitioning and design of appropriate Lastly, products principles. to process manufacturing new higher we launching continue improve for with production volume and to lean our

of give brief our organic development. Next, I will product on growth updates some strategy new

and Battery business, develop we branded & of for and Energy customers. our our the continue the OEM on First, to improve products important for side sales general

line medical momentum wearable gain in and product to tracking product continues ThinCell rapidly market Our the spaces. growing

customers. our CapEx, start QX. This QX QX validation of by end in support additional have forecasted demand should began arriving by and in We equipment the and purchased which operational be should qualification to

On cell line same with us cell where XX% XXXA sales multiple to the end and space, The ultimately more production volumes to markets. carbon to value and commercial sales, in energy to blend variants, target relationships. the monofluoride crucial testing battery shipments in for of longer-term offer continued the will enabling we week, XX% IoT size, line, can last Both market cell this a but servicing continue start be cadence believe this product pack custom of solutions expect our UBXXXA ramp our successfully version added the opportunities piece customer UL just assemblies completed this safety year. we cell XRXXXA, of work

power temperature and partners line, With expectancy, for the and XX-year extreme items can targeting have for product life be chloride monitoring these this our multiple excessive. XX evaluating improved technology an across telemetry products up thionyl qualification can to time validation years. a range applications where We

the projects customers. this used our for for prospective of conformal advanced for wearable with follow-on $X.X was our order swappable In a battery engineering to devices, sampling for to launched revenue XX-LITE resources international follow-on hot for QX, USB-powered initially system XX We the System power in QX to support equipment this currently medical is purchase temporarily near-term earlier year, partner committed from dismounted XXXX. which million Power development soldier paused growth a received we utilize power year. in carts, to an The launched

revenue uncommitted government a and With QX. with will in extension volumes, for internal place, anticipate we project known we being this This with balance will contract indefinite the on resources other with projects. conformal quantity, to an work resume contract cost reduction continue indefinite XX-day in generating the delivery

products air, and will business. Systems side This anticipate commercial validations to year we in Communications the the help and power our the continue on business, primarily work this support are power server military Secondly, ground diversify communications, cases to partners Meanwhile, orders for advanced and as with multiple we of on nature. and scale system ELXXXX amplification to complete. sea

growth. on Lastly,

take and We how advantage XG continue us spaces. of best electrification position to developing market relationships the to on strategies and

applications our power niche will Looking and our enhance capabilities. design for that leveraging system and expertise competitive advantage, cell investments

example, we cell OEM facility chemistries with at an development on advanced other As several commercial and currently are Newark our in resident and collaborate have partners designs. partner discussions X to

both Communication Systems margin QX, on is initiatives converting our achieve for Execution In returning That focused to down priority key the strong Battery closing, our a which goal laser we Energy businesses. growth be main With improvements. continue prepared everyone debt. remarks. scale profitability, Thanks, consistent after of growth, concludes increasing gross attention. while acquisition for to continues profitable the paying multiple driving on the and to to

Now back operator for to the questions.

Operator

from session. Company. of Instructions] ahead. conduct comes will the Josh Thank go first Our Please you. Sullivan time, we At Benchmark question question-and-answer The this [Operator

Joshua Sullivan

morning. Good results Impressive here. Hey.

Michael Manna

Josh. Good morning,

Joshua Sullivan

I can how impact think you then were And recover we paperwork. you the about should forward know talk you're going able still so But any cyber-attack at to working all? quickly. about through residual

Michael Manna

get really the it's external we quickly the our pockets event that did. on whole and still to us to going recovery feet basically a through some as Well, There's testament on. we as resources of team and use help back our

For recreated luckily, attack part, a any manufacturing to not over can other was systems. most documentation our great time. be do anything have It our team add? of did technology the disrupt or Phil, mostly the job. things and the did that you And

Philip Fain

we -- lingering of the both we the April the of together, in effect -- about to a cyber-attack. QX lingering going course The cyber effects and that talked the is out regrouped We figure month businesses Yeah. forward.

the in we more helped drive the the bottom really hope working right more May and business depth that But forward. the loading, recover line So June XX/X push our ultimately and April systems did a direction. going is is -- in the and what team certainly is were level results April recover the to and data, successful

Joshua Sullivan

know of And to begin I then on deliver these allowing new can supply you as we're things provide chain detail are bottlenecks on in and where any backlogs? starting but a ease some to the ease, and you to reality,

Michael Manna

in we've us Well, I where really weeks. have strong front of think a to get pretty out as a mean, we our commented, supply of were and backlog couple quarters XX I for lot had allowed got a things now it's problems, where out over of chain

they're we execute. XX we but in us thought the to might will at is not to bit side Now would it, say, a because from weeks, everything I us of which typically least have allows didn't I'm it chain going the we XX perfect, event supply in manageable. Part say to helped little QX. it's cyber ship

not like building. long lot a plow inventory an get surge we of through there's pockets So the needed we some and and vendors. and to that parts of had out the that execute pretty side lead, especially still There's RF on of

in an areas, hostage products really you're of some were things most change. don't within using to a lead easy difficult to MOSFETs you pretty be really whom at are where you're of XX-week them least But and have and time qualified previously, that now. other to option So seem the

Joshua Sullivan

that? leverage And just going getting then you the help little about operating the you've is forward? at frame a easier it us on think sounds might like how made, just least. we Can investments hiring And

Philip Fain

it's which at reality on most gross Sure. of EPS we ingrained GAAP worth tax is my it isn't and a know in XXX side each that's I'll and point look calculated increase financial for for a basis, us. the basis $X.XX brain the number in important purely on margin,

just which stream the down to margin. going, comes I at, improved revenue very we've really keep think the basics, been it gross successful So

can't is that that And when soon about comes we focus be point we're our root and when whole gross times that and basis X next can't the to have what after of we to. but we all understatement, to series Band-Aids, that's meet enough, what say an X really have different cause. improved week, control. these margin, margin, times get spending. get really attacking actions Well, That's to XXX a the but They we we're spending that's I -- probably increase it that say gross the in actions we a down

expenses So difference quarter, leverage when look the XX% sales, defines in the then gross at in in flat. you increase profit, XX.X% went operating we which keeping us and up a to

out. "Well, comes things Josh, we know So that happen." There's this -- really to back, and say, issues. happened that efficiencies batch look operations have could happen are or on and the basics. Improving and always to you us that then helped happened next the we these that going But of that could or sustainable then and if down things it

Joshua Sullivan

to battery Maybe then side. just And getting so that strong. mean, comments that I What medical comments, while seeing it. just a up that some in is end Got Is turning easier? demand medical market supply some chain maybe market in the on over through? was XX% are coming there? the supply you

Michael Manna

major benefiting due we're through well. the I pull-through we X think, competitor's from us OEM That, dramatically. issues as I situation. benefited is has that up time of medical pretty to and to It's Really supply Josh. they're been big products customers coming factors, that now launched a -- that growth the piece market starting see We've have penetration got that some have they've had the through combination it. been and chain increased and of chain volume that -- some We're seeing know their has of the recall side COVID in a some start supply a back have

into have due products, products batteries we these just the by where And put of revenue course then maintenance. early replaced COVID out stream that for coming to in just replacement are normal some there's of also some recurring

I a So been strong fronts. it's couple think of different on

Joshua Sullivan

you Got sales activity & rig translate it. demand for XX%. And seeing the the oil into of mean are offshore gas then I products? your

Michael Manna

international Yeah. of of a We've lot in We've unique a servicing players business. of we're a a spot seen lot smaller business. of a the kind of seen and the players. We're lot offshore lot where bigger

there. that gas now, of a that because couple looked the bit -- price right But mean, have positive. think in fall hopefully, the forecasts So to I last announced help. rebounds kind segment continues players here natural the level been days, we're I strong. few may that even loaded little pretty and a pretty have earnings there their strong, over be pretty was that We of

So we're stays hoping that, solid. that

Joshua Sullivan

And forward? defense it. wrap I up just I'll seeing some backlog we mean, that and I government/defense. next mean, round going about And mentioned, defense? should as opportunities of think on what are Got how then what you impressive the just of there the think really growth, we in here. about we're

Michael Manna

chain there's to side, defense in programs named going the that on that execute a pretty that have substantial revenue backlog buys we've or Systems the the others. bottleneck. Well, to They're either and think in get wanting year-over-year been side, a We for been continue. was on, for obviously, is embedded out while Communications a some and contracts long-term that U.S. supply the government really door

our of lot direct have military the On Battery OEM business, Energy right and and sales. of sales now been pass-through the sales side a

contracts past very assist been Our with we've are And that have that products to awarded. actually in were some an could revenue like the the DLA XXXX others they in have sales order additional others if about low. to direct talked and actually and IDIQ for we

Joshua Sullivan

the thank on and the again, time. Well, Great. then congratulations for you quarter,

Jody Burfening

Josh. you, Thank

Operator

remarks. be back questions. you. it like would for seems further Manna Instructions] to Thank to now Mike turn no I to [Operator closing There

Michael Manna

to to have Bye the right, call. forward everyone. talking today's Thanks time Everyone, now. to call. for We you QX day. a great look next earnings All at listening

Ultralife (ULBI) 27 Jul 232023 Q2 Earnings call transcript