ULTRALIFE CORP Q1 FY2025 earnings call

• Q1 sales were $50.7 million with operating income of $3.4 million, resulting in $0.11 EPS GAAP and $0.13 adjusted. • Electrochem was fully included in Q1 results, a positive addition despite onetime costs, with transition to complete in Q2. • Addressed tariff impact, executing mitigation plan including reviewing supply sources, managing inventory, and examining manufacturing locations. • Closed smallest manufacturing location in Mississauga, moving production and eliminating fixed costs. • Advanced product development in Battery & Energy (e.g., ThinCell technology, 19-amp hour D cell) and Communications Systems (e.g., ruggedized server case, handheld radio mount upgrade kit). • Electrochem integration activities ongoing, with ERP carve-out expected to complete in H1 2025.

Consolidated revenues for Q1 2025 were $50.7 million. The Battery & Energy Products segment had revenues of $46.3 million, an increase from $35 million in the prior year, contributing approximately 91.3% of total revenues. The Communications Systems segment had revenues of $4.4 million, a decrease from $6.9 million in the prior year, contributing approximately 8.7% of total revenues. Consolidated gross profit was $12.7 million, up 11.1% from the prior year. Battery & Energy Products gross profit was $11.4 million, up 27.3% from the prior year, while Communications Systems gross profit was $1.3 million, down from $2.5 million in the prior year.

• Expect Electrochem transition to complete in Q2 2025. • Confident in 2025 growth with strong backlog and pipeline of new products. • Anticipate continued gross margin improvements through pricing, material cost deflation, and lean projects. • Expect cash flow to be consistent throughout 2025 due to level loading strategies.

• Uncertain global economic conditions. • Reductions in revenues from key customers. • Delays or reductions in U.S. and foreign military spending. • Acceptance of new products on a global basis. • Disruptions or delays in the supply of raw materials and components due to business conditions, global conflicts, weather, etc.

Q: Just given the qualification realities and the barriers of your products, how have the conversations with customers on tariff pass-throughs evolved?

A: Everyone understands tariffs are a cost to bear, customers worried about cash flow impact at border. Conversations are about reducing tariff impacts and managing cash flow.

Q: Can you provide detail on the current trends you're seeing across key end markets, particularly in government, defense and medical and how those dynamics are shaping your expectations for backlog and overall demand visibility?

A: Medical has steady demand with replacement cycles. Government and defense has strong backlog in Q2, with no falloff expected in 2025, possibly seeing increases from conflict areas and NATO spend.

Q: On free cash flow, can you discuss how you expect free cash flow to trend over the remainder of 2025?

A: Expect free cash flow to be consistent due to level loading strategies, with positive cash GAAP receivables greater than payables in good shape, continuing to pay down debt in advance of bank schedules.