Earnings call transcript: Ultralife Q2 2025 results miss forecasts, stock drops 17%

Ultralife Corporation reported its financial results for the second quarter of 2025, revealing earnings per share (EPS) of $0.07, which missed the forecast of $0.13 by 46.15%. The company’s revenue also fell short, coming in at $48.6 million against an expected $51 million. Following the announcement, Ultralife’s stock declined by 17.03%, closing at $6.77, indicating investor disappointment with the results. According to InvestingPro data, the company maintains a "GOOD" overall financial health score, suggesting resilience despite the earnings miss. The stock appears undervalued based on InvestingPro’s Fair Value analysis.

Key Takeaways

• Ultralife’s Q2 2025 EPS of $0.07 missed expectations by 46.15%.
• Revenue fell short at $48.6 million, below the forecast of $51 million.
• Stock price dropped by 17.03% in post-earnings trading.
• Challenges include tariffs and a decline in the oil and gas sector.
• Optimism remains for a rebound in the second half of 2025.

Company Performance

Ultralife’s performance in Q2 2025 reflected both challenges and opportunities. Sales increased to $48.6 million from $43 million in the same quarter last year, yet the company faced a decline in its gross margin to 23.9% from 26.9%. The company cited tariffs and a shift in product mix as key challenges. Despite these hurdles, Ultralife managed to reduce debt by over $2.7 million.

Financial Highlights

• Revenue: $48.6 million, up from $43 million in Q2 2024.
• EPS: $0.07, down from the forecasted $0.13.
• Net Profit: $900,000, translating to $0.05 per share on a GAAP basis.
• Gross Margin: 23.9%, down 300 basis points from 2024.

Earnings vs. Forecast

Ultralife’s Q2 results missed analysts’ expectations, with EPS falling short by 46.15% and revenue by 4.71%. This miss contrasts with previous quarters where the company had met or exceeded forecasts, highlighting the impact of current market challenges.

Market Reaction

Investors responded negatively to the earnings miss, resulting in a 17.03% drop in Ultralife’s stock price to $6.77. This decline positions the stock closer to its 52-week low of $4.07, reflecting broader concerns about the company’s near-term prospects.

Outlook & Guidance

Despite the Q2 shortfall, Ultralife remains optimistic about the second half of 2025 and beyond. The company anticipates growth in its Communications Systems segment and expects new product programs to drive recovery in the medical and oil and gas markets. Sustained global defense spending is also seen as a positive factor.

Executive Commentary

CEO Mike Manna acknowledged the challenges, stating, "We’re not proud of it by any means. There’s a lot going on." CFO Phil Fain added, "We’re incredibly impatient in the roles that we do and as shareholders," emphasizing the company’s commitment to improving performance.

Risks and Challenges

• Tariffs: Imposed costs of approximately $400,000 in Q2.
• Product Mix Shifts: Affected gross margins negatively.
• Oil and Gas Sector: Sales dropped by 23.1%, impacting overall revenue.
• Medical Battery Sales: Declined by 39%, highlighting sector-specific challenges.
• Ongoing Litigation: Involves a cyber attack insurance claim.

Q&A

During the earnings call, analysts focused on the impact of tariffs and the company’s strategies for navigating the challenging oil and gas market. Questions also addressed the potential revenue opportunities from new product developments, which could range from $5 million to $20 million.

Full transcript - Ultralife Corporation (ULBI) Q2 2025:

Conference Operator: Welcome to the Ultralife Corporation’s second quarter twenty twenty five 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. To ask a question during the session, you will need to press 11 on your telephone. You’ll then hear an automated message advising your hand is raised.

To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Alex Vialta of excuse me, please go ahead.

Alex Vialta, Investor Relations, Ultralife Corporation: Thank you, operator, and good afternoon, everyone. Thank you for joining us for Ultralife Corporation’s earnings conference call for the 2025. With us on today’s call are Mr. Mike Mana, Ultralife’s CEO and Mr. Phil Fain, Ultralife’s Chief Financial Officer.

The earnings press release was issued earlier today, and if anyone has not received a copy, I invite you to visit the company’s website at ultralifecorporation.com, where you will find the release in the Investor Relations section. Before turning the call over to management, I’d like to remind everyone that some statements made during this conference call contain forward looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U. S.

And foreign military spending, acceptance of our new products on a global basis, and disruptions or delays in our supply of raw materials and components due to business conflicts, global conflicts, weather or other factors not under our control. The company cautions investors not to place undue reliance on forward looking statements, which reflect the company’s analysis only as of today’s date. The company undertakes no obligation to publicly update forward looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralife’s financial results is included in the company’s filings with the SEC, included in the latest quarterly form on Form 10 Q. In addition, on today’s call, will refer to non GAAP financial measures that management considers to be useful and differ from GAAP.

These non GAAP measures should be considered supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to Ultralife’s CEO, Mike Manna. Please go ahead, Mike.

Mike Manna, CEO, Ultralife Corporation: Good afternoon. Welcome to our call on Ultralife’s Q2 operating results. Earlier this morning, we reported Q2 sales of $48,600,000 with an operating income of $2,300,000 including a one time adjustment of $300,000 Net profit was $900,000 which resulted in $05 EPS on a GAAP basis and $07 on an adjusted basis. In Q2, we faced direct headwinds from tariffs, unfavorable product mix shifts across the business, softness in our oil and gas business as customers were hesitant to commit to capital projects, and anticipated order timing challenges, particularly in our Communication Systems segment, which negatively affected gross margin. Despite these pressures, we maintained our focus on growth, continuing to invest in new product development with several offerings advancing into validation and production.

This is the second full quarter reporting with the Electrochem results, and as planned, we successfully transitioned their ERP and office systems to Ultralife systems in Q2. With the Ultralife back office now in place, several manufacturing support systems related to execution and quality will finalize transition in Q3. Our overall strategy of continued diversification through M and A and new product development is key to stabilizing and increasing the profitability of the business. But it is important to note that we are still often a component or accessory to a customer product, and therefore, we have limited ability to control order flow, timing and mix. On the consolidation front, we completed the closure of our Missagua operation and incurred some one time cost associated with that effort, which will not repeat going forward.

With that said, we continue to generate cash, and I’m pleased to report that we’re ahead of schedule in paying down our debt from the Electrochem acquisition with over $2,700,000 repaid in Q2. I will now turn it over to Phil to talk through the detailed numbers.

Phil Fain, CFO, Ultralife Corporation: Thank you, Mike, and good afternoon, everyone. This morning, we released our second quarter results for the quarter ended 06/30/2025. We have also updated our investor presentation in the Investor Relations section of our website and will file our Form 10 Q with the SEC shortly. Consolidated revenues totaled 48,600,000.0 compared to $43,000,000 for the 2024. Revenues from our Battery and Energy Products segment were $45,900,000 compared to $36,700,000 last year.

Excluding third party sales for Electrochem, which we acquired on 10/31/2024, sales for this segment were essentially flat year over year. Government defense sales for the twenty twenty five quarter increased 61.1%, reflecting strong demand from The U. S.-based global prime. This growth was offset by a 20.4% decrease in commercial sales, resulting from declines in medical battery sales of 39% due to the timing of orders and in oil and gas sales of 23.1% due to macroeconomic and geopolitical factors. The sales split between commercial and government defense for our battery business was 60 eightthirty two compared to 70 five-twenty five reported for the twenty twenty four quarter and the domestic to international split was 70 three-twenty seven compared to 50 three-forty seven for the 2024 period, representing the heightened domestic shipments of our government defense products.

Revenues from our Communications Systems segment of 2,700,000.0 declined 57.2% from the $6,300,000 we reported last year, primarily attributable to large shipments in the prior year of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor magnified by delays in the timing of purchase orders during the twenty twenty five second quarter of approximately $2,700,000 which have been pushed out to the second half by the respective customers. On a consolidated basis, the commercial to government defense sales split was 60 fivethirty 5, almost identical to $64.36 for the twenty twenty four second quarter, highlighting our acquisition of Electrochem and lower communication system sales. Our total backlog with high confidence orders exiting the second quarter was $89,000,000 and remains diverse in nature across our commercial and government defense customer base. The replenishment rate remains solid, especially after almost $100,000,000 of sales in the 2025. Our consolidated gross profit was 11,600,000 essentially flat with the 2024 period.

As a percentage of total revenues, consolidated gross margin was 23.9%, a 300 basis point decline from the 26.9% reported for last year’s second quarter, primarily related to product mix, tariffs and lower factory throughput at some of our operations. Gross profit for our Battery and Energy Products business was $10,800,000 compared to $10,000,000 last year, an increase of 8.9%. Gross margin was 23.6% compared to twenty seven point one percent last year. The year over year reduction resulted from sales mix reflecting the declines in generally higher margin medical and oil and gas sales, higher tariff costs due to the need to purchase components at inopportune times to fulfill certain orders, and the one time write off of some discrepant materials. For our Communications Systems segment, gross profit was $800,000 compared to $1,600,000 for the year earlier period.

Gross margin was 28.4% compared to 25.6% last year, primarily due to favorable sales mix, although negatively impacted by the lower factory volume. Operating expenses were $9,300,000 an increase of 1,700,000.0 or 22.2% from the year earlier quarter. The year over year increase is comprised of $700,000 related to the inclusion of Electrochem, a 25.3% increase in new product development costs related to continued investments in our product offering and certain one time non recurring expenses, which include costs related to our acquisition and integration of Electrochem. As a percentage of revenues, operating expenses were 19.2% compared to 17.8% for last year’s second quarter. Operating income was $2,300,000 compared to $3,900,000 last year, reflecting the 57.2% decline in Communication Systems sales, the decline in battery and energy products gross margin and the one time non recurring costs totaling $300,000 Accordingly, the operating margin decreased to 4.6% for the second quarter compared to 9.1% for the twenty twenty four second quarter.

Other expense reported below operating income was $1,200,000 for the quarter compared to $100,000 for the year earlier period, primarily resulting from the increase in interest expense on the acquisition debt and the impact of foreign currency fluctuations. The 2024 period benefited from the receipt of $200,000 from our insurance carrier related to the ransomware cyber attack experienced by the company in the 2023. Our tax provision for the second quarter was $200,000 compared to $900,000 for the twenty twenty four quarter computed on a GAAP basis at statutory rates. Net income was $900,000 or $05 per share on a GAAP fully diluted basis. This compares to net income of $2,700,000 or $0.18 per share for the twenty twenty four quarter.

Excluding the provision for non cash U. S. Taxes expected to be fully offset by our net operating loss carryforwards and other tax credits, adjusted fully diluted EPS was $0.07 per share for the 2025 compared to $0.22 for the 2024 period. Adjusted EBITDA, defined as EBITDA including non cash stock based compensation expense and one time acquisition and other costs, as well as non cash purchase accounting adjustments not reflective of our ongoing operations, was $4,100,000 or 8.5% of sales compared to $5,400,000 or 12.6% for prior year quarter. Adjusted EBITDA on a TTM basis is $15,400,000 or 8.6% of sales.

Turning to our balance sheet, we ended the second quarter with working capital of $69,100,000 and a current ratio of 3.3 compared to $67,900,000 and 3.3 for 2024 year end. Our liquidity remains solid. I am happy to report that in the second quarter, we received $1,800,000 from our employee retention credit, including interest, which we filed under the Coronavirus Aid, Relief, and Economic Security Act in June 2023. These funds, in their entirety, were used to reduce our acquisition debt during the quarter. In the 2025, we have reduced our debt principal by $3,400,000 which already exceeds the $2,800,000 amortization required for the full year under our debt agreement.

While we do not have any draws on the $30,000,000 revolver portion of our debt agreement and no plans to do so, our balance sheet provides the borrowing base capacity for this amount. Looking forward, our increasing sales funnel, diversified government, defense, medical and oil and gas end markets, the sheer volume and pending traction of our growth initiatives and the further actions we will be taking to improve our gross margins, including the vertical integration opportunities associated with our acquisition of Electrochem, position us well to recognize the leverage of our business model. I will now turn it back to Mike.

Mike Manna, CEO, Ultralife Corporation: Thank you, Phil, for the detailed review of the Q2 twenty twenty five results. As mentioned in the last call, our priorities remain clear for 2025. First, we completed the main system transition of the Electrochem acquisition into Ultralyce back office, successfully migrating email office and ERP systems as planned in Q2. We are transitioning the balance of manufacturing support systems in Q3, which will conclude the one time cost associated with these activities. We continue to expand vertical integration opportunities enabled by the acquisition of Electrochem, allowing us to incorporate Electrochem cells into existing pack assemblies, and broaden our addressable market in areas such as pipeline inspection, seismic telemetry, and sonobuoys.

We are qualifying cells with several oil and gas customers to enable transition of their battery packs to utilize Electrochem cells and expect to see benefit of these efforts in 2026. Secondly, we are committed to improving our sales opportunity pipeline to support growth throughout 2025, while continuing to focus on strategically diversifying our business and customer base. We have made a concerted effort to improve our marketing through search engine optimization, targeted ads, and contact engagement within specific customers, initially focused on our transformational projects. I’m happy with the quality of leads, and the opportunity sizes are increasing as our funnel grows across a variety of end markets. Third, we are focused on improving and stabilizing gross margin through pricing, material cost deflation, and lean productivity projects in both the Battery and Energy and Communications businesses.

We experienced headwinds in both product mix and order flow in Q2 that muted some of these efforts. We continued multiple initiatives across our facilities, including a major lean project completed in Q2 at our electrochem site. This effort eliminated the need to hire 30 additional employees to support increased cell sales, including a new purchase order from a major defense contractor scheduled for delivery this year and increased cell volumes expected from the vertical integration of our oil and gas battery packs. Switching to the organic growth projects and new product development underway for the businesses, there is positive momentum on several fronts. The communication systems business is expanding the ruggedizer server case portfolio to service new programs and server variants, which will provide greater opportunity to expand market market share in ruggedized computing environments.

Our newest 3U portable server case is complete and now available for orders. Our recently launched DC power supply, supporting various server platforms where no AC power is available, most notably tactical vehicles, is now undergoing tests with multiple customers prior to expected contract awards. The newly developed 20 watt amplifier, which provides radio agnostic functionality to support international markets, is in the hands of multiple partners for evaluation and systems tests, with initial orders expected later this year. We developed this radio agnostic amplifier to further support the needs of the warfighter with what we believe is the smallest, lightest, and most power efficient 20 watt man portable amplifier in the marketplace. We believe our total addressable market for this amplifier starts at 5,000,000 per year, so happy to see this out in customer testing.

Meanwhile, we are finalizing the design of our next high performance amplifier, targeting advanced radio platforms, with the latest high speed waveforms utilized by US and allied forces. This amplifier continues our heritage of small radio agnostic, high efficiency man worn and vehicular amplification products, with this new variant available in late twenty twenty five for customer testing. Both amplifiers will be showcased at our booth at the Defense and Securities Equipment International Show in London starting September 9. In a project we haven’t covered previously, we received a production purchase order for a new advanced speaker, which we developed for a prime partner, with initial shipments completing in 2025. We expect this to be a recurring revenue stream going forward, which further diversifies the business and builds on our history of having exceptional audio quality and ruggedness found in our McDowell product line of radio speakers.

On the battery and energy side of the business, we have a great deal of activity across several new products, with new business being the key focus. As mentioned earlier, we established initial production capabilities for our thin cell technology to support customers in the medical wearable sector and various item tracking application. The sales pipeline continues to strengthen with several new projects now qualification phase. Our main current medical patch customer continues to build up their system and test their software, and we are awaiting orders for the product. Meanwhile, we receive initial purchase orders to qualify two thin cells for a major contract manufacturer for portable industrial tracking applications, with revenue beginning in 2026 once we successfully complete validation.

The 123 product line, which currently service the IoT and illumination markets, is seeing growing interest in medical battery pack assemblies from both domestic and international customers. We have samples of both the manganese and carbon monofluoride cells being tested by multiple customers currently, and these applications include flashlights, night vision, and tracking products. Meanwhile, our advanced nylon chloride technology aimed at metering and telemetry applications continues to progress through customer qualification and field testing, with all reports to date positive. This has been a long qualification cycle, but we anticipate multiple commercial discussions in the metering space to commence in the 2025 for deliveries beginning in 2026. We continue to rattle out the family of X5 medical cart products with a pre release of our latest product, the portable power bank, that provides power to pole mounted equipment or any item that requires extended run time utilizing USB C, mostly targeting tablet and portable computers.

Samples are shipping now to various partners, with production volumes available later this year. The conformal wearable battery originally developed for the Integrated Visual Augmentation System, or IVAS, continues to evolve as a commercial product to our international or internal development efforts. We received a new PO from an international partner in Q2, which is expected to ship this year. Lastly, on the Battery and Energy side of the business, we have several ongoing projects with existing customers to modernize legacy designs and transition to newer technologies, as reflected in increased R and D spend in Q2. These initiatives are essential to sustaining our base business, strengthening customer relationships, and ensuring our product lines are optimized for manufacturability and long term component availability.

Investing in new product development is essential to diversifying and strengthening our product portfolio, driving future growth, and building on our legacy of delivering critical power solutions. Our priorities remain converting long term development efforts into revenue, advancing vertical integration in the oil and gas segment, and maintaining a strong focus on operational efficiency initiatives. While I remain cautious due to ongoing challenges with scaling, tariff impacts and product mix, I see encouraging signals pointing to growth for I’m optimistic about the second half of the year and into 2026. Our Communication Systems Group is expected to rebound from a tough first half. We’re beginning to see early purchase orders from long term new product programs, selling new products to new customers, a rebound from our medical and oil and gas customers, and sustained growth in global defense spending, and an expanding opportunity pipeline across both businesses.

Now we’ll go back to the operator for questions.

Conference Operator: Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you’ll need to press 11 on your telephone and wait for your name to be announced. To withdraw a question, please press 11 again. Please stand by while we compile the Q and A roster.

Our first question today is from John Deysher from Pinnacle. Your line is open.

John Deysher, Analyst, Pinnacle: Hi, good morning. Just a couple of quick questions. Do you have any feel for what the tariffs cost you this past quarter?

Phil Fain, CFO, Ultralife Corporation: Absolutely. Dollars 539,482 less than $126,000 received back from customers. So bottom line hit was $400,000 And John, what hurts most about that is we were forced into a situation to purchase some components at the very peak of the China tariffs that makes you sick when you look back and have to go through something like that to meet certain delivery orders.

Mike Manna, CEO, Ultralife Corporation: It was bad timing of the arrival during that peak 150 plus percent period.

John Deysher, Analyst, Pinnacle: Okay. I guess that’s my second question. Based on what you know now with the current tariffs, how do you see that impacting the third quarter tariffs?

Mike Manna, CEO, Ultralife Corporation: Well, think it’s important to note, we’ve been experiencing the Section three zero one tariffs from the first Trump presidency the entire time. So the tariff rate that’s there currently is not that much higher for us than what it’s been the entire time since five, six, seven years ago, except for that period of time when it really expanded to over 100%. So we don’t expect with what we know right today that it’s going to have as much impact as it did in Q2 because we don’t expect it to see that really exorbitant tariffs, but we’re kind of sitting and waiting with some of that that goes on every day. Every day it’s changing. So it’s definitely a very fluid situation, I would say.

And we’re

Phil Fain, CFO, Ultralife Corporation: also passing a tariff surcharge on to our customers as well.

John Deysher, Analyst, Pinnacle: You are, okay.

Phil Fain, CFO, Ultralife Corporation: Yes, yes. Okay,

John Deysher, Analyst, Pinnacle: that’s good to hear. Regarding the employee retention credit that you received and applied to the debt, which we’re happy to see, Is there any more of that credit that’s gonna flow through in the balance of the year, or have you captured everything?

Phil Fain, CFO, Ultralife Corporation: No, we captured every penny plus interest. Very happy that that came through.

John Deysher, Analyst, Pinnacle: Okay, great. And I guess finally, in terms of the insurance reimbursement for the cyber attack, think you said it was $200,000 in the quarter. How much have you received so far from the insurance company, and how much more are you looking to receive? Sure,

Phil Fain, CFO, Ultralife Corporation: it’s $235,000 is what we have received. And as you probably know, John, that is now a lawsuit that we have commenced in the Supreme Court of Wayne County, where we are located, for a jury trial that’s going to happen in 2026. So right now, we’re going through all the discovery and all that. We believe our case is very, very solid, and we’re looking at an amount that’s in the millions because it’s the business interruption, the business impact that happened to our business and which we feel is covered by the policy that we had in place. So to answer your question, it’s in the millions of dollars.

John Deysher, Analyst, Pinnacle: Okay, and the trial date is sometime in 2026, you say?

Phil Fain, CFO, Ultralife Corporation: Yeah, discovery ends. It’s all public information. Discovery ends in the 2026 with the trial planned for 2026.

John Deysher, Analyst, Pinnacle: Okay. It’s all public, so is the amount that you’re actually seeking to obtain disclosed in the complaint?

Phil Fain, CFO, Ultralife Corporation: In the court documents, I don’t believe so. It’s all in the discovery documents that’s going to be coming out.

John Deysher, Analyst, Pinnacle: Okay, they’ve not been The complaint

Phil Fain, CFO, Ultralife Corporation: should it actually go to trial.

John Deysher, Analyst, Pinnacle: Okay, but the complaint has been filed in the Supreme Court of New York, Wayne County?

Phil Fain, CFO, Ultralife Corporation: Yes, it has, yes.

John Deysher, Analyst, Pinnacle: Okay. Without specifying the amount of damages that you’re seeking. Correct?

Phil Fain, CFO, Ultralife Corporation: I believe that that is the case. If not, I will, I will go through it, and I will, personally call you and let you know if it is publicly disclosed.

John Deysher, Analyst, Pinnacle: Okay. That’s great. I appreciate the color. Thank you very Good much, luck.

Phil Fain, CFO, Ultralife Corporation: Thank you. Thanks.

Conference Operator: Thank you. Our next question is from Jake Patterson with Talanta Investment Group. Your line is open.

Jake Patterson, Analyst, Talanta Investment Group: Hey, guys. Just a quick question on the B and E commercial segment. I know last time we talked, it sounded like oil and gas was pretty stable. I know the macro and whatnot has probably impacted the orders there, but I mean as we sit here today and maybe have a little more certainty than we did mid quarter, is there anything to call out maybe on orders returning or demand? Just any updates you can provide on those two end markets, medical and oil and gas.

Phil Fain, CFO, Ultralife Corporation: Sure. When it comes to oil and gas, it comes down to two numbers. It comes down to what is the WTI index, and the WTI this morning was a tad under $65 and the Brent index is about $4 or $5 over that, so the oil and gas customers and believe me, we cover all of them. We cover all the blue chippers, international, domestic. We cover the wildcatters, and they’re all playing the profit games of when they’re going to order and how much they’re going to make on it.

And we know over the last couple years, these companies just didn’t sit around idly and wait for the WTI to go up. They’ve restructured. They’ve made improvements. They’ve made efficiencies, so their breakeven point is lower than what it once was, but it’s a numbers game for those, and they’ll come right out and tell us that.

Jake Patterson, Analyst, Talanta Investment Group: Got it. Okay.

Mike Manna, CEO, Ultralife Corporation: Then on

Jake Patterson, Analyst, Talanta Investment Group: the medical

Phil Fain, CFO, Ultralife Corporation: side, it’s just a floorboard. And I will point out, Jake, that what was interesting about the comparison, 2024 was the second largest medical sales volume month in the history of the company, and it’s just on the timing of the orders. And of course, we’re very, very bullish with the relationships we have with the new products that have been introduced, and it’s just a time game. It all evens out.

Mike Manna, CEO, Ultralife Corporation: Yeah, and what we’ve been hearing from customers is some of them are being cautious with their cash, they’re trying to manage cash, they’re paying for tariff charges on things when they show up. You’ve got to make sure that you can pay your tariffs and they’re being very careful and studious with their order flow.

Will Lobber, Analyst, Visionary Wealth Advisors: Got it. Okay.

Jake Patterson, Analyst, Talanta Investment Group: I think I guess kind of just staying on that discussion, the margins, I know you guys mentioned a few drivers of the decline. Is there any way to kind of bucket where the impacts were felt the most? I know the tariffs were, what, dollars 400,000 and probably I can break

Phil Fain, CFO, Ultralife Corporation: that out for you. I I can do look at it this way. The tariffs the net amount of the tariffs cost us 100 basis points of margin. The mix impact caused us around almost 200 basis points of margin, and the rest of it was, throwing out some materials that we couldn’t use going forward, some overtime and labor inefficiencies and just the impact of some volumes going through some of the other facilities, which in total was probably 30 or 40 basis points.

Jake Patterson, Analyst, Talanta Investment Group: Okay. So, I mean, I guess visibility into those kind of higher margin markets returning is limited, but I mean, if you guys get back to kind of a normalized demand environment, no reason we shouldn’t see margins kind of back into that high to mid-20s range at some point?

Mike Manna, CEO, Ultralife Corporation: In my closing remarks there, did say we are seeing somewhat of a return on our medical and oil and gas business so far with what we have visibility to in the second half compared to Q2. So, far it’s looking up.

Phil Fain, CFO, Ultralife Corporation: And then, once comm systems, the order flows return to a more expected level, their margins are generally higher than battery and energy products, so the mix impact on the comm systems is worth 100 basis points when all is said and done, or slightly less than that, but it does have a pretty significant impact because their margins are generally approaching 30% or in some cases higher.

Jake Patterson, Analyst, Talanta Investment Group: Yeah, no, absolutely. That’s pretty much it for me. I appreciate it.

Phil Fain, CFO, Ultralife Corporation: I’ll comment on that. So our focus as the officers of the company is what do we have to do, what our actions that we need to execute when the mix isn’t the ideal mix? How do we get the margins up to the levels that we expect? And we’re not just sitting around waiting for mix and waiting for orders. We’re out there every day looking at best alternatives for execution to get the margins up on, let’s say, a static mix.

Conference Operator: Thanks so much for your question. As a reminder, if you would like to ask a question, please press 11 on your telephone, and then you’ll hear an automated message advising that your hand is raised. Our next question comes from Will Lobber with Visionary Wealth Advisors. Your line is open.

Will Lobber, Analyst, Visionary Wealth Advisors: Yeah. So it was a pretty crappy quarter, but you did I’ve never remember you guys highlighting so many potential kind of things for later this year and next year. Can you put any kind of quantification or kind of how certain you are on some of these opportunities materializing?

Mike Manna, CEO, Ultralife Corporation: Well, Will, and we agree it was a crappy quarter. Let’s start there. We’re not proud of it by any means. There’s a lot going on. There has been a lot going on.

I sit on these calls time after time saying, we’re in qual, we’re in qual, we’re in qual. And I get sick of hearing my voice sometimes saying it. So I’m sure it rings hollow in some cases on these calls. But unfortunately, like I said in the open air, we’re a hostage to a lot of our customers’ success in their product launches in some cases. So it’s been a long wait, but I will say we’re starting to see some initial POs, we’re seeing some qualification activity beyond just we’re doing testing, it’s more site visits and things like that, more on the preproduction launch areas.

But I don’t have paper in hand to talk about dollars and figures and things like that. I wish I did. But we have a lot of hooks in the water, as we’ve talked about on every call. And that’s been part of our diversification strategy is to really not rely on one growth initiative to carry us through. And we’re working hard to land multiples.

And I’m hoping over the next twelve to eighteen months here, we land multiple large opportunities and I’m in a much different spot talking about the revenue increases and the profit increases than the waiting for qual to complete position.

Will Lobber, Analyst, Visionary Wealth Advisors: I mean, you kind of, maybe if you can’t quantify it qualitatively, how you guys feel about the potential opportunities now compared to historically.

Mike Manna, CEO, Ultralife Corporation: Well, believe in all the opportunities, and we’re doing them all because they’re what we call chunks of additional revenue to the business. Nothing’s a $1,000,000 adder. They’re all 5,000,000 to $20,000,000 potential adders to the business, so that if we actually hit a couple of them, it becomes a meaningful increase to the bottom line and gets us closer to our scale ambitions because we’re still subscale at this point.

Phil Fain, CFO, Ultralife Corporation: And we also want to be in the unique position where we’re a sole supplier or we’re locked in with a great relationship. I guess the testimony being we’ve been through it as partners for, what, like three, four, five years with these companies, and they’re depending on us. We’re depending on them, and things are progressing. The glimmer of light when you see the progress is what this is all about because we’re incredibly impatient in the roles that we do and as shareholders with the insiders owning almost 40% of the company, we’re incredibly impatient. So we’re pushing as hard as we possibly can, but then again, we have a much better understanding of the process and what they’re going through.

They’re playing for the big W, too, in the markets with our products.

Will Lobber, Analyst, Visionary Wealth Advisors: Okay. So, maybe you can refresh my memory. I know you guys have obviously had some big deals over time here, but have you ever had multiple

John Deysher, Analyst, Pinnacle: know,

Will Lobber, Analyst, Visionary Wealth Advisors: we call it a couple million plus dollars deals that hit all within, like, the same year, year and a half or two?

Mike Manna, CEO, Ultralife Corporation: Not in recent memory. No. It would be back before probably 2010 that we really were in some of those activities.

John Deysher, Analyst, Pinnacle: Okay.

Will Lobber, Analyst, Visionary Wealth Advisors: So what you’re saying is that the potential is there for that to happen again?

Phil Fain, CFO, Ultralife Corporation: Well, that’s the position that we’re playing for.

Mike Manna, CEO, Ultralife Corporation: Invested a lot of money and effort in a lot of new products across both businesses, not just to spend the money. Obviously, we’re spending the money ahead of revenue to fuel some of our growth ambitions. Some of these projects just take a lot longer than you ever would expect. Our biggest customer in medical was six years from when our battery was developed before the product actually launched with the medical customer. So it was a lot of sitting on your hands waiting, but, now they’re they’re one of our our best customers and and one of our bigger customers, which is fantastic.

And we have a great relationship. So, takes longer than you want in some cases for sure.

Will Lobber, Analyst, Visionary Wealth Advisors: Okay. All right. Thank you.

Phil Fain, CFO, Ultralife Corporation: Thank you, Will.

Conference Operator: Thank you. I am showing no other questions at this time, so I would now like to turn it back to Mike Manna for closing remarks.

Mike Manna, CEO, Ultralife Corporation: Thank you, everyone, for participating in today’s call. We look forward to seeing you next time on our Q3 twenty twenty five call. Have a great day. Bye now.

Conference Operator: This does conclude the program. You may now disconnect.

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