• Revenue: $35.7 million for Q3 2024, down from $39.5 million in Q3 2023.
• Operating Income: $0.5 million for Q3 2024.
• Earnings Per Share (EPS): $0.02 for Q3 2024.
• Battery and Energy Products Revenue: $32.5 million, up from $31.9 million in Q3 2023.
• Communication Systems Revenue: $3.2 million, a decrease of 58.2% from $7.6 million in Q3 2023.
• Gross Profit: $8.7 million, down 11.2% from Q3 2023.
• Gross Margin: 24.3%, a decline of 50 basis points from 24.8% in Q3 2023.
• Operating Expenses: $8.2 million, an increase of 7% from Q3 2023.
• Net Income: $0.3 million for Q3 2024, compared to $1.3 million in Q3 2023.
• Adjusted EBITDA: $1.9 million or 5.4% of sales, compared to $3.5 million or 8.8% in Q3 2023.
• Backlog: $78 million at the end of Q3 2024.
• Debt Reduction: Reduced by $4.1 million to $8.0 million during Q3 2024.
• Working Capital: $60.2 million with a current ratio of 3.3.

• Warning! GuruFocus has detected 4 Warning Signs with ULBI.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ultralife Corp (NASDAQ:ULBI) reported Q3 sales of $35.7 million, with battery energy product sales increasing by 1.9% over the previous year.
• The company has successfully negotiated material cost deflation in key areas such as lithium metal and printed circuit boards, expecting significant annual savings.
• Sales funnel opportunities are growing, particularly in thin cell and thionyl chloride products, with a focus on closing long-term supply agreements.
• Ultralife Corp (NASDAQ:ULBI) has reduced its debt by 68.2% over the last two quarters, demonstrating strong financial management.
• The acquisition of Electrochem is expected to provide vertical integration opportunities and enhance the company's product portfolio, with integration activities planned for completion in the first half of 2025.

Negative Points

• Communication system sales decreased by 58% to $3.2 million, primarily due to delays in shipments and order timing.
• Consolidated gross profit decreased by 11.2% compared to the previous year, with a decline in gross margin from 24.8% to 24.3%.
• Operating expenses increased by 7% year-over-year, impacting the operating margin, which fell to 1.4% from 5.4% in the previous year.
• The backlog has declined from recent post-COVID periods, reflecting a return to more normalized order flow.
• Supply chain disruptions and order delays have led to increased inventory levels, impacting cash flow and operational efficiency.

Q & A Highlights

Q: Within the battery and energy product segment, how much of the headwinds were due to supply chain issues versus order delays? A: Philip Fain, CFO: It's about 50/50. Despite expectations that post-COVID supply chain issues would be resolved, unforeseen challenges still arise. We try to control what we can and influence what we can't, but some factors remain beyond our control, leading to increased inventory.

Q: Were the delays related to any specific industry, or were they broad-based? A: Michael Manna, CEO: The delays were broad-based, affecting both medical customers and the communication systems side. Some orders expected in Q3 were delayed, impacting inventory levels. However, we haven't lost any orders; it's more about timing.

Q: Regarding the thin cell opportunity, where are your medical customers in the approval timeline, and what products are being added to the funnel? A: Michael Manna, CEO: The thin cell area is exciting with many opportunities, including electronic shelf labeling and RFID tracking. Some medical wearable opportunities are a few years out but promising in volume. The first major opportunity is still in qualification and software integration phases.

Q: How significant is the EL 8000 direct current vehicle opportunity? A: Michael Manna, CEO: The commercial opportunity is estimated at $5 to $10 million, with military potential at $20 to $30 million. The market is strong, especially as AI grows. The DC power supply in validation will enable further expansion into vehicle and base applications.

Q: What made the Electrochem acquisition appealing, and were there other bidders? A: Michael Manna, CEO: Electrochem fills a gap in our portfolio with its thionyl chloride chemistry. It was a make vs. buy decision, and Electrochem, with its premier product, was the best fit. There were other bidders, but our synergies and execution timeline were more favorable.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.