Core Points - Ultralife Corporation has received a $5.2 million award from the U.S. Government's Defense Logistics Agency for its BA-5390 military batteries, with shipments scheduled throughout 2026 and completion in early 2027 [1] - The BA-5390 battery is recognized for its long life, safety, and reliability, and Ultralife has been a long-standing supplier to the U.S. military [2] - The previous significant award for the BA-5390 battery was a multi-year contract valued at up to $9.9 million received in 2021 [2] Company Overview - Ultralife Corporation provides products and services ranging from power solutions to communications and electronics systems, serving government/defense and commercial customers globally [3] - The company is headquartered in Newark, New York, and operates in North America, Europe, and Asia, with business segments including Battery & Energy Products and Communications Systems [4]

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements of Ultralife Corporation and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, income statements, cash flow statements, and statements of changes in stockholders' equity, along with detailed notes on accounting policies, acquisitions, debt, and segment information [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time **Consolidated Balance Sheet Highlights (In Thousands)** | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Cash | $10,941 | $6,854 | +$4,087 | | Trade accounts receivable, net | $32,322 | $29,370 | +$2,952 | | Inventories, net | $50,575 | $51,363 | -$788 | | Total current assets | $99,003 | $97,160 | +$1,843 | | Total assets | $220,961 | $220,451 | +$510 | | Total current liabilities | $29,898 | $29,291 | +$607 | | Long-term debt, net | $47,510 | $51,502 | -$3,992 | | Total liabilities | $82,316 | $86,264 | -$3,948 | | Total stockholders' equity | $138,645 | $134,187 | +$4,458 | [Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20for%20the%20Three%20and%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income **Consolidated Statements of Income and Comprehensive Income (In Thousands, except per share)** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3M) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6M) | | :----------------------------------- | :--------------------------- | :--------------------------- | :---------------- | :--------------------------- | :--------------------------- | :---------------- | | Revenues | $48,561 | $42,983 | +13.0% | $99,307 | $84,910 | +17.0% | | Cost of products sold | $36,960 | $31,420 | +17.6% | $74,961 | $61,877 | +21.1% | | Gross profit | $11,601 | $11,563 | +0.3% | $24,346 | $23,033 | +5.7% | | Operating expenses | $9,345 | $7,646 | +22.2% | $18,691 | $15,053 | +24.2% | | Operating income | $2,256 | $3,917 | -42.4% | $5,655 | $7,980 | -29.1% | | Income before income taxes | $1,113 | $3,846 | -71.0% | $3,559 | $7,453 | -52.2% | | Net income attributable to Ultralife Corporation | $879 | $2,969 | -70.4% | $2,744 | $5,860 | -53.2% | | Basic EPS | $0.05 | $0.18 | -72.2% | $0.17 | $0.36 | -52.8% | | Diluted EPS | $0.05 | $0.18 | -72.2% | $0.17 | $0.35 | -51.4% | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section details the inflows and outflows of cash from operating, investing, and financing activities over specific periods **Consolidated Statements of Cash Flows (In Thousands)** | Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :---------------- | | Net cash provided by operating activities | $9,303 | $8,844 | +5.2% | | Net cash used in investing activities | $(1,995) | $(732) | +172.5% | | Net cash used in financing activities | $(3,338) | $(11,743) | -71.6% | | Increase (decrease) in cash | $4,087 | $(3,588) | N/A | | Cash, End of period | $10,941 | $6,690 | +63.5% | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section presents the changes in the equity accounts of the company's stockholders over specific reporting periods **Key Changes in Stockholders' Equity (In Thousands)** | Item | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Balance – December 31, 2024/2023 | $134,187 | $125,427 | | Net income | $2,744 | $5,860 | | Stock option exercises | $61 | $1,936 | | Stock-based compensation | $462 | $320 | | Foreign currency translation adjustments | $1,186 | $(235) | | Balance – June 30, 2025/2024 | $138,645 | $133,345 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and additional information supporting the consolidated financial statements [1. Basis of Presentation](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section describes the accounting principles and standards used in preparing the interim financial statements - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and Rule 8-03 of Regulation S-X[21](index=21&type=chunk) - The company adopted ASU 2023-07 "Segment Reporting" in November 2023, which did not impact financial results[23](index=23&type=chunk) - The company is evaluating ASU 2023-09 "Income Taxes" (effective Jan 1, 2025) and ASU 2024-03 "Expense Disaggregation Disclosures" (effective Jan 1, 2027) for potential impacts on disclosures[24](index=24&type=chunk)[25](index=25&type=chunk) [2. Acquisition](index=10&type=section&id=2.%20ACQUISITION) This section details the acquisition of Electrochem Solutions, Inc., including its financial impact and strategic rationale - On October 31, 2024, Ultralife completed the acquisition of Electrochem Solutions, Inc. for **$48,022 thousand** in cash[26](index=26&type=chunk) - The acquisition enhances Ultralife's strategy by providing scale, manufacturing cost efficiencies, a blue-chip customer base, and a complementary portfolio of highly engineered battery cells and packs[27](index=27&type=chunk) - Electrochem contributed **$9,299 thousand** in revenue and **$1,626 thousand** in net income before taxes for the three-month period ended June 30, 2025, and **$16,921 thousand** in revenue and **$2,369 thousand** in net income before taxes for the six-month period ended June 30, 2025[34](index=34&type=chunk)[35](index=35&type=chunk) **Electrochem Purchase Price Allocation (In Thousands)** | Asset/Liability | Amount | | :-------------------------------- | :----- | | Accounts receivable | $5,270 | | Inventories | $9,172 | | Property, plant and equipment | $20,735 | | Goodwill | $7,558 | | Other intangible assets | $10,500 | | Net assets acquired | $48,022 | [3. Debt](index=11&type=section&id=3.%20DEBT) This section outlines the company's debt arrangements, including the new Term Loan Facility and repayment obligations - On October 31, 2024, Ultralife entered into a new Credit and Security Agreement with KeyBank, including a 5-year, **$55 million** senior secured Term Loan Facility[37](index=37&type=chunk)[38](index=38&type=chunk) - As of June 30, 2025, **$51,625 thousand** principal was outstanding on the Term Loan, with **$3,438 thousand** classified as current portion of long-term debt[40](index=40&type=chunk) - The company was in full compliance with its debt covenants as of June 30, 2025, and the borrowing rate was **6.79%**[43](index=43&type=chunk)[45](index=45&type=chunk) **Future Minimum Principal Repayment Obligations (In Thousands)** | Year | Amount | | :--- | :----- | | 2025 | $1,375 | | 2026 | $4,125 | | 2027 | $5,500 | | 2028 | $5,500 | | 2029 | $35,125 | | **Total** | **$51,625** | [4. Earnings Per Share](index=13&type=section&id=4.%20EARNINGS%20PER%20SHARE) This section explains the calculation of basic and diluted earnings per share and factors affecting share count - Basic EPS is computed by dividing net income attributable to Ultralife by the weighted average shares outstanding, while diluted EPS includes the dilutive effect of securities[49](index=49&type=chunk) - For the three-month period ended June 30, 2025, **21,856** potential common shares were included in diluted EPS calculation, significantly lower than **257,068** in the prior year due to fewer dilutive stock options and restricted stock awards[50](index=50&type=chunk) [5. Supplemental Balance Sheet Information](index=13&type=section&id=5.%20SUPPLEMENTAL%20BALANCE%20SHEET%20INFORMATION) This section provides detailed breakdowns of specific balance sheet accounts, including inventories, property, plant and equipment, goodwill, and other intangible assets [Inventories, Net](index=13&type=section&id=Inventories%2C%20Net) This section details the composition of the company's inventory, categorized by raw materials, work in process, and finished goods **Inventories, Net (In Thousands)** | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Raw materials | $35,502 | $36,035 | | Work in process | $5,639 | $4,501 | | Finished goods | $9,434 | $10,827 | | **Total** | **$50,575** | **$51,363** | [Property, Plant and Equipment, Net](index=13&type=section&id=Property%2C%20Plant%20and%20Equipment%2C%20Net) This section provides a breakdown of the company's tangible long-term assets and associated depreciation **Property, Plant and Equipment, Net (In Thousands)** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Land | $4,693 | $4,693 | | Buildings and leasehold improvements | $30,124 | $30,109 | | Machinery and equipment | $62,012 | $60,986 | | Construction in process | $3,122 | $2,077 | | Less: Accumulated depreciation | $(70,535) | $(68,437) | | **Total PP&E, net** | **$40,614** | **$40,485** | **Depreciation Expense (In Thousands)** | Period | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Three-month period ended | $1,008 | $789 | | Six-month period ended | $1,958 | $1,529 | [Goodwill](index=14&type=section&id=Goodwill) This section details the changes in goodwill by segment, including the impact of foreign currency translation **Goodwill Activity by Segment (In Thousands)** | Segment | December 31, 2024 | Effect of Foreign Currency Translation | June 30, 2025 | | :-------------------- | :---------------- | :----------------------------------- | :------------ | | Battery & Energy Products | $33,513 | $400 | $33,913 | | Communications Systems | $11,493 | - | $11,493 | | **Total** | **$45,006** | **$400** | **$45,406** | [Other Intangible Assets, Net](index=15&type=section&id=Other%20Intangible%20Assets%2C%20Net) This section presents the company's intangible assets, such as customer relationships and trade names, along with their amortization **Other Intangible Assets, Net (In Thousands)** | Category | Cost (June 30, 2025) | Accumulated Amortization (June 30, 2025) | Net (June 30, 2025) | Net (December 31, 2024) | | :-------------------- | :------------------- | :--------------------------------------- | :---------------- | :-------------------- | | Customer relationships | $18,383 | $7,913 | $10,470 | $10,858 | | Trade names | $9,976 | $1,078 | $8,898 | $9,129 | | Patents and technology | $5,783 | $5,583 | $200 | $262 | | Trademarks | $3,400 | - | $3,400 | $3,399 | | Other | $1,500 | $629 | $871 | $909 | | **Total other intangible assets** | **$39,042** | **$15,203** | **$23,839** | **$24,557** | **Amortization Expense for Intangible Assets (In Thousands)** | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Selling, general and administrative | $378 | $202 | $754 | $405 | | Research and development | $32 | $25 | $61 | $50 | | **Total amortization expense** | **$410** | **$227** | **$815** | **$455** | [6. Stock-Based Compensation](index=16&type=section&id=6.%20STOCK-BASED%20COMPENSATION) This section details the expenses related to stock options and restricted stock awards, and unrecognized compensation costs **Stock-Based Compensation Expense (In Thousands)** | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Stock options | $190 | $152 | $378 | $308 | | Restricted stock | $45 | $7 | $84 | $12 | | **Total** | **$235** | **$159** | **$462** | **$320** | - As of June 30, 2025, total unrecognized compensation cost related to outstanding stock options was **$733 thousand**, expected to be recognized over a weighted average period of **1.1 years**[60](index=60&type=chunk) - Cash received from stock option exercises for the six-month period ended June 30, 2025, was **$61 thousand**, a significant decrease from **$1,936 thousand** in the prior year[61](index=61&type=chunk) [7. Income Taxes](index=17&type=section&id=7.%20INCOME%20TAXES) This section discusses the effective tax rate, net operating loss carryforwards, and valuation allowances - The effective tax rate for the six-month period ended June 30, 2025, was **22.8%**, up from **20.9%** in the prior year, primarily due to the geographic mix of operating results[64](index=64&type=chunk) - As of December 31, 2024, the company had domestic net operating loss (NOL) carryforwards of **$15,000 thousand** and domestic tax credits of **$3,200 thousand**, which management expects to fully utilize[65](index=65&type=chunk) - A valuation allowance of approximately **$9,600 thousand** is maintained for NOL carryforwards related to past U.K. operations, which cannot be used by the current U.K. subsidiary[66](index=66&type=chunk) [8. Operating Leases](index=17&type=section&id=8.%20OPERATING%20LEASES) This section outlines the company's operating lease costs, right-of-use assets, and lease liabilities **Total Lease Cost (In Thousands)** | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $291 | $268 | $591 | $530 | | Variable lease cost | $22 | $24 | $46 | $52 | | **Total lease cost** | **$313** | **$292** | **$637** | **$582** | **Operating Lease Liabilities (In Thousands)** | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Operating lease right-of-use asset | $3,746 | $4,153 | | Current operating lease liability | $1,112 | $1,138 | | Operating lease liability, net of current portion | $2,632 | $2,998 | | **Total operating lease liability** | **$3,744** | **$4,136** | | Weighted-average remaining lease term (years) | 4.1 | 4.5 | | Weighted-average discount rate | 6.7% | 6.7% | [9. Commitments and Contingencies](index=19&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) This section details the company's purchase commitments and accrued warranty obligations - As of June 30, 2025, the company had commitments to purchase approximately **$1,408 thousand** in production machinery and equipment[74](index=74&type=chunk) **Accrued Warranty Obligations (In Thousands)** | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Accrued warranty obligations – beginning | $887 | $547 | | Accruals for warranties issued | $251 | $389 | | Settlements made | $(173) | $(147) | | **Accrued warranty obligations – ending** | **$965** | **$789** | [10. Revenue Recognition](index=19&type=section&id=10.%20REVENUE%20RECOGNITION) This section explains the company's policies for recognizing revenue from product sales and extended warranty contracts - Revenue is generally recognized upon transfer of control to the customer, typically upon shipment or delivery[77](index=77&type=chunk) - Extended warranty contracts for Communications Systems products are treated as separate performance obligations and recognized evenly over the contract term[78](index=78&type=chunk) - As of June 30, 2025, deferred revenue on extended warranty contracts totaled **$1,004 thousand**, with **$298 thousand** expected to be recognized within one year[79](index=79&type=chunk) [11. Business Segment Information](index=20&type=section&id=11.%20BUSINESS%20SEGMENT%20INFORMATION) This section provides financial data for the Battery & Energy Products and Communications Systems segments, including revenues by source and geography - Ultralife operates in two reportable segments: Battery & Energy Products and Communications Systems[83](index=83&type=chunk) - Segment performance is monitored by "segment contribution," defined as gross profit less direct SG&A and R&D expenses[85](index=85&type=chunk) **Segment Revenues (In Thousands)** | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3M) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6M) | | :-------------------------- | :--------------------------- | :--------------------------- | :---------------- | :--------------------------- | :--------------------------- | :---------------- | | Battery & Energy Products | $45,867 | $36,683 | +25.0% | $92,188 | $71,672 | +28.6% | | Communications Systems | $2,694 | $6,300 | -57.2% | $7,119 | $13,238 | -46.2% | | **Total Revenues** | **$48,561** | **$42,983** | **+13.0%** | **$99,307** | **$84,910** | **+17.0%** | **Revenue by Source (In Thousands)** | Source | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commercial | $31,333 (65%) | $27,664 (64%) | $60,992 (61%) | $51,804 (61%) | | Government/Defense | $17,228 (35%) | $15,319 (36%) | $38,315 (39%) | $33,106 (39%) | | **Total** | **$48,561** | **$42,983** | **$99,307** | **$84,910** | **Revenue by Geography (In Thousands)** | Geography | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | United States | $35,364 (73%) | $23,399 (54%) | $74,833 (75%) | $47,860 (56%) | | Non-United States | $13,197 (27%) | $19,584 (46%) | $24,474 (25%) | $37,050 (44%) | | **Total** | **$48,561** | **$42,983** | **$99,307** | **$84,910** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and operational results for the three and six-month periods ended June 30, 2025, including an overview of business segments, key financial metrics, and a discussion of liquidity and capital resources [Forward-Looking Statements](index=25&type=section&id=Forward-Looking%20Statements) This section highlights the inherent uncertainties and risks associated with future-oriented statements in the report - The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, reliance on key customers, military spending, supply chain disruptions, and new product development[100](index=100&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially from projections[101](index=101&type=chunk)[102](index=102&type=chunk) [General Business Overview](index=26&type=section&id=General) This section describes Ultralife's core business, product offerings, global market reach, and segment reporting structure - Ultralife provides power solutions and communications/electronics systems to government, defense, and commercial sectors globally, focusing on engineering and collaborative problem-solving[105](index=105&type=chunk) - The company sells products worldwide through OEMs, distributors, and directly to defense departments, operating under various brand names[106](index=106&type=chunk) - Financial results are reported in two segments: Battery & Energy Products and Communications Systems, with segment contribution as the key performance indicator[107](index=107&type=chunk) [Overview of Financial Performance](index=26&type=section&id=Overview) This section summarizes the company's consolidated financial results for the quarter, highlighting key revenue, profit, and income trends - Consolidated revenues for Q2 2025 increased **13.0%** to **$48,561 thousand**, driven by the Electrochem acquisition and government/defense sales, despite a **20.4%** decrease in commercial sales[109](index=109&type=chunk) - Gross profit margin declined by **300 basis points** to **23.9%** in Q2 2025 due to sales product mix, higher tariffs/freight, and lower factory throughput[110](index=110&type=chunk) - Operating income for Q2 2025 decreased **42.4%** to **$2,256 thousand**, impacted by lower Communications Systems sales, reduced gross margin in Battery & Energy Products, and increased operating expenses[112](index=112&type=chunk) - Net income attributable to Ultralife Corporation for Q2 2025 was **$879 thousand** (**$0.05** EPS), down from **$2,969 thousand** (**$0.18** EPS) in Q2 2024[114](index=114&type=chunk) - Management expects improved results in the second half of 2025 and into 2026, driven by a rebound in Communications Systems, new product programs, and sustained defense spending[116](index=116&type=chunk) [Results of Operations (Three-Month Periods)](index=27&type=section&id=Results%20of%20Operations%20Three-Month%20Periods%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section provides a detailed analysis of the company's financial performance for the three-month periods, covering revenues, gross profit, operating expenses, and net income - **Revenues:** Consolidated revenues increased **13.0%** to **$48,561 thousand**. Battery & Energy Products revenues increased **25.0%** to **$45,867 thousand** (attributable to Electrochem and strong government/defense demand), while Communications Systems sales decreased **57.2%** to **$2,694 thousand** due to shipment delays[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - **Gross Profit:** Consolidated gross margin decreased from **26.9%** to **23.9%**. Battery & Energy Products gross margin declined **350 basis points** to **23.6%** due to sales mix (declines in medical and oil & gas) and higher costs. Communications Systems gross margin increased **280 basis points** to **28.4%** due to favorable sales mix despite lower volume[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - **Operating Expenses:** Total operating expenses increased **22.2%** to **$9,345 thousand**, primarily due to Electrochem inclusion (**$654 thousand**), a **25.3%** increase in new product development, and strengthening of sales/marketing teams[123](index=123&type=chunk)[124](index=124&type=chunk) - **Other Expense:** Increased significantly to **$1,143 thousand** from **$71 thousand**, mainly due to higher interest expense from Electrochem acquisition financing and the absence of a prior-year insurance payment for a cyberattack[125](index=125&type=chunk) - **Net Income & EPS:** Net income attributable to Ultralife was **$879 thousand** (**$0.05** basic/diluted EPS), a **70.4%** decrease from **$2,969 thousand** (**$0.18** basic/diluted EPS) in the prior year[127](index=127&type=chunk) [Results of Operations (Six-Month Periods)](index=29&type=section&id=Six-Month%20Periods%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) This section provides a detailed analysis of the company's financial performance for the six-month periods, covering revenues, operating expenses, other income/expense, and net income - **Revenues:** Consolidated revenues increased **17.0%** to **$99,307 thousand**. Battery & Energy Products revenues increased **28.6%** to **$92,188 thousand** (including **$16,921 thousand** from Electrochem and **5.0%** organic growth from government/defense, offset by commercial declines). Communications Systems revenues decreased **46.2%** to **$7,119 thousand** due to prior-year shipments and timing delays[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - **Operating Expenses:** Total operating expenses increased **24.2%** to **$18,691 thousand**, driven by Electrochem inclusion and increased investment in R&D and sales/marketing[132](index=132&type=chunk)[133](index=133&type=chunk) - **Other Expense:** Increased to **$2,096 thousand** from **$527 thousand**, primarily due to a **115.8%** increase in interest expense from the Electrochem acquisition financing and a shift from miscellaneous income to expense[134](index=134&type=chunk) - **Income Taxes:** The effective tax rate increased to **22.8%** from **20.9%**. The provision was **$810 thousand**, including a **$609 thousand** deferred tax provision expected to be offset by NOLs[135](index=135&type=chunk) - **Net Income & EPS:** Net income attributable to Ultralife was **$2,744 thousand** (**$0.17** basic/diluted EPS), a **53.2%** decrease from **$5,860 thousand** (**$0.36** basic, **$0.35** diluted EPS) in the prior year[136](index=136&type=chunk) [Non-GAAP Financial Measures](index=30&type=section&id=Adjusted%20EBITDA) This section presents non-GAAP financial measures, including Adjusted EBITDA and Adjusted Earnings Per Share, with their reconciliations to GAAP measures [Adjusted EBITDA](index=30&type=section&id=Adjusted%20EBITDA) This section defines and reconciles Adjusted EBITDA, a non-GAAP measure, to net income attributable to Ultralife Corporation - Adjusted EBITDA is a non-GAAP measure defined as net income attributable to Ultralife Corporation before net interest expense, income taxes, depreciation, amortization, stock-based compensation, and certain non-recurring items[138](index=138&type=chunk) **Adjusted EBITDA Reconciliation (In Thousands)** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Ultralife Corp. | $879 | $2,969 | $2,744 | $5,860 | | Add: Interest expense | $992 | $418 | $2,024 | $938 | | Add: Income tax provision | $243 | $853 | $810 | $1,556 | | Add: Depreciation expense | $1,008 | $789 | $1,958 | $1,529 | | Add: Amortization expense | $410 | $227 | $815 | $455 | | Add: Stock-based compensation expense | $235 | $159 | $462 | $320 | | Add: Severance cost for plant closure | - | - | $150 | - | | Add: Acquisition and other non-recurring costs | $326 | - | $518 | - | | Add: Non-cash purchase accounting adjustments | $20 | - | $80 | - | | **Adjusted EBITDA** | **$4,113** | **$5,415** | **$9,561** | **$10,658** | - Adjusted EBITDA for Q2 2025 was **$4,113 thousand** (**8.4%** of revenues), down from **$5,415 thousand** (**12.6%** of revenues) in Q2 2024. For H1 2025, it was **$9,561 thousand**, down from **$10,658 thousand** in H1 2024[115](index=115&type=chunk)[142](index=142&type=chunk) [Adjusted Earnings Per Share](index=32&type=section&id=Adjusted%20Earnings%20Per%20Share) This section defines and reconciles Adjusted EPS, a non-GAAP measure, to diluted EPS attributable to Ultralife Corporation - Adjusted EPS is a non-GAAP measure that excludes the provision for deferred income taxes from net income attributable to Ultralife Corporation[144](index=144&type=chunk) **Adjusted EPS Reconciliation** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Ultralife Corp. (Diluted EPS) | $0.05 | $0.18 | $0.16 | $0.35 | | Deferred tax provision (per diluted share) | $0.02 | $0.04 | $0.04 | $0.09 | | **Adjusted net income (Diluted EPS)** | **$0.07** | **$0.22** | **$0.20** | **$0.44** | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, operating cash flow, investing and financing activities, and future funding plans - Cash increased to **$10,941 thousand** as of June 30, 2025, from **$6,854 thousand** at December 31, 2024, primarily due to cash generated from operations[146](index=146&type=chunk) - Net cash provided by operating activities was **$9,303 thousand** for H1 2025, compared to **$8,844 thousand** for H1 2024[147](index=147&type=chunk) - Cash used in investing activities for H1 2025 was **$1,995 thousand** for capital expenditures, while cash used in financing activities was **$3,338 thousand**, mainly for debt reduction[148](index=148&type=chunk) - The company expects positive operating cash flow and available Revolving Credit Facility borrowings to meet future funding requirements[149](index=149&type=chunk) - A new shelf registration statement (Form S-3) was filed in March 2024 for **$100 million** in securities, intended for general corporate purposes including acquisitions and strategic investments[150](index=150&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) This section confirms that no significant changes were made to critical accounting policies during the reporting period - No significant changes were made to critical accounting policies or related assumptions and estimates during the first six months of 2025[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and internal control over financial reporting, identifying a material weakness related to accounting personnel but affirming the fair presentation of financial statements, and outlining ongoing remediation efforts [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures, noting a material weakness - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to an existing material weakness in internal control over financial reporting[156](index=156&type=chunk) - Despite the material weakness, management believes the Consolidated Financial Statements are fairly stated in all material respects[157](index=157&type=chunk) [Remediation Efforts to Address Material Weaknesses](index=35&type=section&id=Remediation%20Efforts%20to%20Address%20Material%20Weaknesses) This section outlines the company's ongoing actions to address identified material weaknesses in internal control over financial reporting - A material weakness was identified due to the need for additional accounting personnel with expertise commensurate with the company's growth[158](index=158&type=chunk) - Remediation efforts are ongoing, including hiring additional personnel (e.g., VP of Financial Growth, Controller for Electrochem) to augment the accounting team and strengthen controls[160](index=160&type=chunk) - Remediation will be complete once corrective actions are fully implemented and internal control over financial reporting is deemed effective through further evaluation and testing[161](index=161&type=chunk) [Changes in Internal Control Over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section describes recent organizational changes and personnel additions aimed at strengthening the company's internal control environment - During and after Q2 2025, the company reorganized its Corporate Accounting organization and hired additional experienced personnel, including a Director, Internal Audit & SOX Compliance[162](index=162&type=chunk) - These changes are expected to significantly strengthen internal control over financial reporting as the company continues its global growth[162](index=162&type=chunk) PART II. OTHER INFORMATION [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2) and Section 1350 Certifications (Exhibit 32)[163](index=163&type=chunk) - Financial statements are attached in iXBRL format as Exhibit 101[163](index=163&type=chunk) [Signatures](index=37&type=section&id=Signatures) This section contains the official signatures for the Form 10-Q filing - The report was signed on August 7, 2025, by Michael E. Manna, President and Chief Executive Officer, and Philip A. Fain, Chief Financial Officer and Treasurer[167](index=167&type=chunk)

[Q2 2025 Performance Highlights](index=1&type=section&id=Q2%202025%20Performance%20Highlights) This section summarizes Ultralife's Q2 2025 performance, highlighting CEO commentary and key financial metrics [CEO's Commentary](index=1&type=section&id=CEO's%20Commentary) The CEO noted Q2 2025 as challenging, with Electrochem acquisition-driven revenue growth offset by flat organic sales and declining Communications Systems sales due to delayed orders - Q2 was challenging due to flat organic sales in Battery & Energy Products and a decline in Communications Systems sales from delayed orders[2](index=2&type=chunk) - Gross profit was negatively affected by tariffs, unfavorable product mix shifts, and order timing[2](index=2&type=chunk) - The company prepaid **$2.7 million** of its acquisition debt, which is **$2.0 million** more than the required quarterly amortization[2](index=2&type=chunk) - Management expects improved results in the second half of 2025 and into 2026, driven by a rebound in Communications Systems, new product programs, and recovering commercial demand[3](index=3&type=chunk) - Strategic priorities include converting new product development into revenue, advancing vertical integration in the oil & gas segment, and focusing on operational efficiency[3](index=3&type=chunk) [Key Financial Metrics Summary](index=1&type=section&id=Key%20Financial%20Metrics%20Summary) Total sales increased 13.0% to $48.6 million in Q2 2025 due to the Electrochem acquisition, while gross profit remained flat and key profitability metrics declined year-over-year Q2 2025 Key Financial Metrics vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales ($M) | $48.6 | $43.0 | +13.0% | | Gross Profit ($M) | $11.6 | $11.6 | 0.0% | | Gross Margin | 23.9% | 26.9% | -3.0 p.p. | | Operating Income ($M) | $2.3 | $3.9 | -41.0% | | GAAP EPS | $0.05 | $0.18 | -72.2% | | Adjusted EBITDA ($M) | $4.1 | $5.4 | -24.1% | | Backlog ($M) | $89 | N/A | (vs $95M in Q1 2025) | [Q2 2025 Financial Results Analysis](index=2&type=section&id=Q2%202025%20Financial%20Results%20Analysis) This section provides a detailed analysis of Ultralife's Q2 2025 financial performance, covering revenue, profitability, and operating expenses [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Total revenue for Q2 2025 increased by 13.0% to $48.6 million, driven by the Battery & Energy Products segment's acquisition-related growth, while Communications Systems sales significantly declined - Battery & Energy Products sales increased **25.0% to $45.9 million**, reflecting the inclusion of Electrochem, with organic sales flat due to a **61.1% increase** in government/defense sales offset by a **20.4% decrease** in commercial sales[5](index=5&type=chunk) - Communications Systems sales decreased by **57.2% to $2.7 million**, primarily due to large prior-year shipments to an international defense contractor and current period purchase order delays[5](index=5&type=chunk) [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Gross profit remained flat at $11.6 million, but gross margin compressed to 23.9%, while operating income and net income saw significant year-over-year declines due to various factors - Gross margin for Battery & Energy Products decreased from **27.1% to 23.6%** due to product mix, higher tariff/freight costs, and lower factory throughput[6](index=6&type=chunk) - Communications Systems gross margin improved to **28.4% from 25.6%** due to product mix, though muted by lower sales volume[6](index=6&type=chunk) - Operating income fell to **$2.3 million from $3.9 million**, with operating margin declining to **4.6% from 9.1%** year-over-year[8](index=8&type=chunk) - Net income attributable to Ultralife Corporation was **$0.9 million** (**$0.05 per diluted share**), compared to **$3.0 million** (**$0.18 per diluted share**) in Q2 2024[10](index=10&type=chunk) [Operating and Other Expenses](index=2&type=section&id=Operating%20and%20Other%20Expenses) Operating expenses increased to $9.3 million, primarily due to the Electrochem acquisition and higher R&D costs, while other expenses rose significantly due to interest from acquisition financing - Operating expenses rose to **$9.3 million** (**19.2% of revenue**) from **$7.6 million** (**17.8% of revenue**) in the prior year[7](index=7&type=chunk) - The increase in operating expenses was driven by the inclusion of Electrochem, a **25.3% rise** in R&D costs, and one-time non-recurring expenses[7](index=7&type=chunk) - Other expense increased to **$1.1 million**, primarily comprising interest expense from the Electrochem acquisition financing and foreign currency losses[9](index=9&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents Ultralife's consolidated balance sheets and statements of income for the reported periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly increased to $221.0 million, while total liabilities decreased to $82.3 million, leading to an increase in total shareholders' equity Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | **$99,003** | **$97,160** | | Cash | $10,941 | $6,854 | | Inventories, Net | $50,575 | $51,363 | | **Total Assets** | **$220,961** | **$220,451** | | **Total Current Liabilities** | **$29,898** | **$29,291** | | Long-Term Debt, Net | $47,510 | $51,502 | | **Total Liabilities** | **$82,316** | **$86,264** | | **Total Shareholders' Equity** | **$138,645** | **$134,187** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) For Q2 2025, total revenues increased to $48.6 million, but operating income and net income attributable to Ultralife significantly declined compared to the prior year Consolidated Income Statement Summary (Three Months Ended June 30, in thousands) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $48,561 | $42,983 | | Gross Profit | $11,601 | $11,563 | | Operating Income | $2,256 | $3,917 | | Income Before Income Taxes | $1,113 | $3,846 | | Net Income Attributable to Ultralife | $879 | $2,969 | | Diluted EPS | $0.05 | $0.18 | Consolidated Income Statement Summary (Six Months Ended June 30, in thousands) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $99,307 | $84,910 | | Gross Profit | $24,346 | $23,033 | | Operating Income | $5,655 | $7,980 | | Income Before Income Taxes | $3,559 | $7,453 | | Net Income Attributable to Ultralife | $2,744 | $5,860 | | Diluted EPS | $0.17 | $0.35 | [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations for non-GAAP financial measures, including Adjusted EBITDA and Adjusted EPS, used to supplement the analysis of operating performance [Adjusted EBITDA Reconciliation](index=6&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 was $4.1 million, a decrease from $5.4 million in Q2 2024, calculated by adjusting net income for non-cash and non-recurring items Adjusted EBITDA Reconciliation (Three Months Ended June 30, in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net Income Attributable to Ultralife | $879 | $2,969 | | Interest Expense, Net | $992 | $418 | | Income Tax Provision | $243 | $853 | | Depreciation Expense | $1,008 | $789 | | Amortization Expense | $410 | $227 | | Stock-Based Compensation Expense | $235 | $159 | | Acquisition and Other Non-Recurring Costs | $326 | $ - | | Non-Cash Purchase Accounting Adjustment | $20 | $ - | | **Adjusted EBITDA** | **$4,113** | **$5,415** | [Adjusted EPS Reconciliation](index=7&type=section&id=Adjusted%20EPS%20Reconciliation) Adjusted Diluted EPS for Q2 2025 was $0.07, down from $0.22 in Q2 2024, reflecting net income excluding the deferred income tax provision Adjusted EPS Reconciliation (Three Months Ended June 30) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net Income Attributable to Ultralife ($M) | $879 | $2,969 | | Diluted EPS (GAAP) | $0.05 | $0.18 | | Add: Deferred Tax Provision ($M) | $265 | $744 | | **Adjusted Net Income ($M)** | **$1,144** | **$3,713** | | **Adjusted Diluted EPS** | **$0.07** | **$0.22** | [Company Information and Forward-Looking Statements](index=3&type=section&id=Company%20Information%20and%20Forward-Looking%20Statements) This section provides an overview of Ultralife Corporation and includes important disclaimers regarding forward-looking statements [About Ultralife Corporation](index=3&type=section&id=About%20Ultralife%20Corporation) Ultralife Corporation, based in Newark, New York, delivers power solutions and communications systems globally to government/defense and commercial clients through two distinct business segments - Ultralife serves government/defense and commercial markets with products ranging from power solutions to communications and electronics systems[12](index=12&type=chunk) - The company's business is divided into two segments: Battery & Energy Products and Communications Systems[13](index=13&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from expectations - The company warns that forward-looking statements involve risks and uncertainties[16](index=16&type=chunk) - Key potential risks include global economic conditions, impact of tariffs, changes in military spending, new product acceptance, and supply chain disruptions[16](index=16&type=chunk)

Financial Data and Key Metrics Changes - The company reported Q2 sales of $48.6 million, an increase from $43 million in the same quarter of 2024, with an operating income of $2.3 million, down from $3.9 million last year [7][10][14] - Net profit for Q2 was $900,000, resulting in $0.05 EPS on a GAAP basis and $0.07 on an adjusted basis, compared to $2.7 million or $0.18 per share for the same quarter in 2024 [16][17] - Consolidated gross margin decreased to 23.9%, down 300 basis points from 26.9% in the previous year, primarily due to product mix and tariffs [12][13] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $45.9 million, up from $36.7 million last year, while government defense sales increased by 61.1% [10][11] - The Communications Systems segment saw revenues decline by 57.2% to $2.7 million, attributed to large shipments in the prior year and delays in purchase orders [12][14] - The sales split between commercial and government defense for the battery business was 68% to 32%, compared to 75% to 25% in 2024 [11] Market Data and Key Metrics Changes - The domestic to international sales split was 73% to 27%, reflecting increased domestic shipments of government defense products [11] - Total backlog with high confidence orders exiting the second quarter was $89 million, indicating a diverse customer base [12] Company Strategy and Development Direction - The company aims to diversify through M&A and new product development, focusing on vertical integration opportunities from the Electrochem acquisition [8][20] - Continued investment in new product development is essential for future growth, with several initiatives underway across both business segments [29] - The company is also focused on improving gross margins through pricing strategies and lean productivity projects [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds from tariffs, unfavorable product mix, and softness in the oil and gas sector, but remains optimistic about growth in the second half of the year [7][29] - The company is seeing early purchase orders and qualification activities, indicating potential revenue increases in the near future [66][68] - Management expressed confidence in the potential for multiple large opportunities to materialize over the next 12 to 18 months [66][68] Other Important Information - The company successfully transitioned the Electrochem ERP and office systems, with further manufacturing support systems to be finalized in Q3 [8][20] - The company received $1.8 million from the employee retention credit, which was used to reduce acquisition debt [18] Q&A Session Summary Question: What was the impact of tariffs this past quarter? - The tariffs cost the company approximately $400,000 after accounting for customer reimbursements [33] Question: How do you see tariffs impacting the third quarter? - The company does not expect as significant an impact from tariffs in Q3 as experienced in Q2, given the current tariff rates [35] Question: Is there more employee retention credit expected to flow through this year? - The company has captured all available employee retention credit [38] Question: How much has been received from the insurance reimbursement for the cyber attack? - The company has received $235,000 and is pursuing a lawsuit for additional compensation in the millions [40][41] Question: Any updates on orders returning in the oil and gas and medical sectors? - Oil and gas orders are influenced by WTI prices, while medical sales are expected to stabilize as order timing improves [50][53] Question: Can you quantify the potential opportunities for later this year and next year? - The company is optimistic about multiple opportunities that could significantly increase revenue, although specific figures are not available yet [66][68]

Core Viewpoint - Ultralife Corporation faced challenges in the second quarter of 2025, with flat organic sales in Battery & Energy Products and a significant decline in Communications Systems sales, but anticipates improved results in the second half of the year and into 2026 due to various factors including new product programs and increased demand from key sectors [1][2]. Financial Performance - Revenue for the second quarter was $48.6 million, a 13.0% increase from $43.0 million in the same quarter of 2024 [3][6]. - Battery & Energy Products sales rose by 25.0% to $45.9 million, largely due to the inclusion of Electrochem Solutions, Inc. [3][6]. - Excluding Electrochem, Battery & Energy Products sales were flat year-over-year, with government/defense sales up 61.1% but commercial sales down 20.4% [3][6]. - Communications Systems sales decreased by 57.2% to $2.7 million, primarily due to shipment delays and order timing issues [3][6]. Profitability Metrics - Gross profit was $11.6 million, representing 23.9% of revenue, down from 26.9% in the same quarter last year [4][6]. - Operating income was $2.3 million, a decline from $3.9 million in the prior year, with an operating margin of 4.6% compared to 9.1% [7][6]. - Net income attributable to Ultralife was $0.9 million, or $0.05 per diluted share, down from $3.0 million or $0.18 per diluted share in the second quarter of 2024 [9][6]. Operating Expenses - Operating expenses increased to $9.3 million from $7.6 million in the same quarter last year, reflecting higher costs associated with new product development and the inclusion of Electrochem [5][6]. - Operating expenses accounted for 19.2% of revenue, compared to 17.8% in the previous year [5][6]. Future Outlook - The company expects a rebound in its Communications Systems business and early purchase orders from new product programs in the battery segment, alongside growth in defense spending and opportunities in the oil & gas sector [2][1]. - Priorities include converting long-term product development into revenue and enhancing operational efficiency for sustainable growth [2][1].

Company Overview - Ultralife Corporation is set to report its second quarter results for the period ended June 30, 2025, before the market opens on August 7, 2025 [1] - The company will host an investor conference call and simultaneous webcast at Noon ET on the same day [1] Participation Details - Participants planning to join the conference call by phone must pre-register using a provided link to ensure a fast and reliable connection [2] - After registration, dial-in information and a personal identification number will be provided [2] Webcast Information - A live webcast of the conference call will be available in the Events & Presentations Section of the company's website [3] - A replay of the webcast will be accessible shortly after the call for those unable to listen live [3] Business Segments - Ultralife Corporation operates in two main business segments: Battery & Energy Products and Communications Systems [5] - The company serves government, defense, and commercial customers globally, with operations in North America, Europe, and Asia [4][5]

Company Overview - Ultralife Corporation, founded in 1990, is headquartered in Newark, NY, and specializes in power solutions, including rechargeable and non-rechargeable batteries, charging systems, communications and electronics systems, and accessories [1]. Market Position - The company serves a global customer base, including industrial sectors, indicating a diverse market presence [1].

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for Ultralife Corporation's first quarter of 2025 [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Ultralife Corporation's unaudited consolidated financial statements for Q1 2025, including balance sheets, income, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a summary of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Consolidated Balance Sheet Summary (in Thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $101,469 | $97,160 | | **Total Assets** | **$223,753** | **$220,451** | | **Total Current Liabilities** | $31,496 | $29,291 | | **Total Liabilities** | $87,149 | $86,264 | | **Total Stockholders' Equity** | $136,604 | $134,187 | | **Total Liabilities and Stockholders' Equity** | **$223,753** | **$220,451** | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section presents the company's financial performance, including revenues, gross profit, operating income, and net income for the first quarter of 2025 and 2024 Consolidated Statement of Income (in Thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $50,746 | $41,927 | | Gross Profit | $12,745 | $11,470 | | Operating Income | $3,399 | $4,063 | | Net Income Attributable to Ultralife | $1,865 | $2,891 | | Diluted EPS | $0.11 | $0.18 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities for the first quarter of 2025 and 2024 Consolidated Statement of Cash Flows Summary (in Thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,368 | $(81) | | Net cash used in investing activities | $(895) | $(372) | | Net cash (used in) provided by financing activities | $(687) | $185 | | **Increase (Decrease) in Cash** | **$1,865** | **$(179)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information on accounting policies, the Electrochem acquisition, debt agreements, and segment data, supplementing the financial statements - On October 31, 2024, the Company acquired Electrochem Solutions, Inc. for **$48,022 in cash**, including working capital adjustments. The acquisition is expected to enhance scale, manufacturing efficiencies, and provide cross-selling opportunities[23](index=23&type=chunk)[24](index=24&type=chunk) - For Q1 2025, the Electrochem acquisition contributed **$7,622 in revenue** and **$743 in net income**[32](index=32&type=chunk) - The company entered into a new Credit and Security Agreement with KeyBank, including a **5-year, $55 million senior secured term loan** to fund the acquisition and repay previous debt[34](index=34&type=chunk)[35](index=35&type=chunk) Segment Contribution (in Thousands) | Segment | Q1 2025 Contribution | Q1 2024 Contribution | | :--- | :--- | :--- | | Battery & Energy Products | $5,984 | $5,078 | | Communications Systems | $126 | $1,335 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, including revenue growth, segment performance, gross margin, operating expenses, liquidity, and non-GAAP reconciliations [Overview](index=22&type=section&id=Overview) This section provides a high-level summary of the company's financial performance for Q1 2025, highlighting key changes in revenues, gross margin, operating income, and net income - Consolidated revenues for Q1 2025 increased **21.0% YoY to $50.7 million**, primarily due to the inclusion of the recently acquired Electrochem and an **18.6% increase in government/defense sales**[95](index=95&type=chunk) - Gross margin decreased by **230 basis points to 25.1%** in Q1 2025 from 27.4% in Q1 2024, mainly due to an unfavorable sales product mix[96](index=96&type=chunk) - Operating income fell to **$3.4 million (6.7% of revenues)** in Q1 2025 from $4.1 million (9.7% of revenues) in Q1 2024, impacted by lower gross margin and higher operating expenses, including one-time acquisition-related costs[98](index=98&type=chunk) - Net income attributable to Ultralife was **$1.9 million ($0.11 per share)** for Q1 2025, a decrease from $2.9 million ($0.18 per share) in Q1 2024[99](index=99&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section details the financial performance by segment, analyzing revenue changes and the factors influencing operating expenses for Q1 2025 Segment Revenue Performance (in Thousands) | Segment | Q1 2025 Revenue | Q1 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Battery & Energy Products | $46,321 | $34,989 | +32.4% | | Communications Systems | $4,425 | $6,938 | -36.2% | | **Total** | **$50,746** | **$41,927** | **+21.0%** | - The Battery & Energy Products segment revenue growth was driven by the Electrochem acquisition and a **53.6% increase in government/defense sales**, partially offset by a **12.3% decrease in medical battery sales**[103](index=103&type=chunk) - The Communications Systems sales decrease was primarily due to large shipments of integrated systems in the prior year to a major international defense contractor[104](index=104&type=chunk) - Operating expenses increased **26.2% YoY to $9.3 million**, mainly due to the inclusion of Electrochem (**$1.1 million**), a **24.0% increase in new product development costs**, and strengthening the sales and marketing team[108](index=108&type=chunk) [Adjusted EBITDA and Adjusted EPS (Non-GAAP)](index=25&type=section&id=Adjusted%20EBITDA%20and%20Adjusted%20EPS%20(Non-GAAP)) This section provides reconciliations of non-GAAP financial measures, specifically Adjusted EBITDA and Adjusted EPS, to their most directly comparable GAAP measures Adjusted EBITDA Reconciliation (in Thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income attributable to Ultralife | $1,865 | $2,891 | | Adjustments (Interest, Taxes, D&A, etc.) | $3,583 | $2,352 | | **Adjusted EBITDA** | **$5,448** | **$5,243** | Adjusted EPS Reconciliation | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.11 | $0.18 | | Deferred tax provision per share | $0.02 | $0.04 | | **Adjusted Diluted EPS** | **$0.13** | **$0.22** | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flow generation, debt obligations, and capital market access for future financial flexibility - Cash increased by **$1.9 million** during Q1 2025, ending the period at **$8.7 million**[123](index=123&type=chunk) - Cash generated from operations was **$3.4 million** in Q1 2025, a significant improvement from **$81 thousand used in operations** in Q1 2024[124](index=124&type=chunk) - As of March 31, 2025, the company had **$54.3 million outstanding on its Term Loan** and no amount outstanding on its Revolving Credit Facility, and was in full compliance with debt covenants[128](index=128&type=chunk) - The company filed a new shelf registration statement on Form S-3 for up to **$100 million**, providing flexibility to access capital markets for general corporate purposes, including potential acquisitions[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2025, due to an existing material weakness in internal control over financial reporting[132](index=132&type=chunk) - The material weakness is attributed to the need for additional accounting personnel with expertise commensurate with the company's growth, both organic and through acquisitions[134](index=134&type=chunk) - Remediation efforts include hiring a **VP of Financial Growth, Transition & Efficiency** in Q4 2024 and a **Controller for Electrochem** in Q1 2025, with plans to hire additional personnel[136](index=136&type=chunk) [PART II. OTHER INFORMATION](index=30&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes additional information such as exhibits filed with the report and formal signatures [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL financial data - The exhibits filed with this report include CEO and CFO certifications under Rule 13a-14(a) / 15d-14(a), Section 1350 certifications, and various Inline XBRL documents for financial reporting[139](index=139&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report is formally signed and authorized by the company's principal executive and financial officers - The Form 10-Q was signed on **May 12, 2025**, by Michael E. Manna, President and Chief Executive Officer, and Philip A. Fain, Chief Financial Officer and Treasurer[144](index=144&type=chunk)

Financial Data and Key Metrics Changes - The company reported Q1 sales of $50.7 million, an increase from $41.9 million in the same quarter last year, representing a year-over-year growth of 21% [10] - Operating income for Q1 was $3.4 million, down from $4.1 million in the previous year, leading to a decrease in operating margin to 6.7% from 9.7% [15] - Net income was $1.9 million or $0.11 per share on a GAAP basis, compared to $2.9 million or $0.18 per share for the same quarter last year [15][16] - Adjusted EBITDA was $5.4 million, or 10.7% of sales, compared to $5.2 million or 12.5% for the prior year quarter [16] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $46.3 million, up from $35 million last year, with a 10.6% organic growth excluding Electrochem sales [10][11] - Government defense sales in the Battery segment increased by 53.6%, while medical battery sales decreased by 12.3% [11] - The Communications Systems segment saw revenues decline by 36.2% to $4.4 million, primarily due to large shipments in the prior year [12] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 64% to 36%, with a domestic to international sales split of 78% to 22% [11] - The total backlog exiting Q1 was $95 million, representing 55% of trailing twelve-month sales, indicating a healthy demand outlook [12] Company Strategy and Development Direction - The company is focused on completing the integration of the Electrochem acquisition, including ERP system setup, by the end of Q2 [18][26] - There is a commitment to improve sales pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [19][20] - The company aims to leverage vertical integration opportunities from the Electrochem acquisition to enhance product offerings and market reach [18][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, citing a strong backlog and expected recovery in medical sales in the latter half of the year [40][52] - The government defense sector is expected to remain robust, with potential increases in spending due to global conflicts and NATO commitments [52] - The company anticipates consistent free cash flow throughout 2025, with plans to pay down acquisition debt ahead of schedule [53][54] Other Important Information - The company is actively managing tariff impacts by passing along known costs as surcharges and exploring alternative supply sources [8][34] - The integration of Electrochem is expected to yield favorable contribution margins and enhance overall profitability [38] Q&A Session Summary Question: How have conversations with customers on tariff pass-throughs evolved? - Management noted that customers are concerned about cash flow impacts due to tariffs, which could affect their ability to invest in product development [32][33] Question: What are the major milestones left for the Electrochem integration? - The integration is on track, with most systems set up and the focus now on finalizing the ERP system [35][36] Question: What markets are targeted for the IVAS battery? - The primary focus is on foreign military markets, with some commercial engagements anticipated [39] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while government defense remains strong with no expected downturn [50][52] Question: How do you expect free cash flow to trend over 2025? - Free cash flow is expected to be consistent, with a focus on maintaining a positive cash gap and paying down debt [53][54]

Financial Data and Key Metrics Changes - The company reported Q1 sales of $50.7 million, an increase from $41.9 million in the same quarter last year, representing a year-over-year growth of 21% [10] - Operating income for Q1 was $3.4 million, down from $4.1 million in the previous year, leading to a decrease in operating margin to 6.7% from 9.7% [15] - Net income was $1.9 million or $0.11 per share on a GAAP basis, compared to $2.9 million or $0.18 per share for the same quarter last year [15][16] - Adjusted EBITDA was $5.4 million, or 10.7% of sales, compared to $5.2 million or 12.5% for the prior year quarter [16] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $46.3 million, up from $35 million last year, with a 10.6% organic growth excluding Electrochem sales [10][11] - Government defense sales in the Battery segment increased by 53.6%, while medical battery sales decreased by 12.3% [11] - The Communications Systems segment saw revenues decline by 36.2% to $4.4 million, primarily due to large shipments in the prior year [12] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 64% to 36%, with a domestic to international split of 78% to 22% [11] - The total backlog exiting Q1 was $95 million, representing 55% of trailing twelve-month sales, indicating a healthy demand outlook [12] Company Strategy and Development Direction - The company is focused on completing the integration of the Electrochem acquisition, which is expected to enhance vertical integration opportunities and expand the addressable market [19][27] - There is a commitment to improve sales opportunity pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [20][21] - The company is investing in new product development and marketing efforts to support targeted growth goals [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, citing a strong backlog and expected recovery in medical sales in the latter half of the year [42][55] - The government defense business is expected to remain strong due to ongoing global conflicts and increased NATO spending [55] - The company anticipates continued cash flow consistency and plans to pay down acquisition debt ahead of schedule [56] Other Important Information - The company ended Q1 with working capital of $70 million and a current ratio of 3.2, indicating solid liquidity [17] - The company received $1.5 million from the employee retention credit, which was used to reduce acquisition debt [17] Q&A Session Summary Question: How have conversations with customers on tariff pass-throughs evolved? - Management noted that customers are concerned about cash flow impacts due to tariffs, which could affect their ability to invest in product development [33][34] Question: What are the major milestones left for the Electrochem integration? - The integration is on track, with most systems set up, and the focus is on completing the ERP system setup [36][37] Question: What markets are targeted for the IVAS battery? - The focus is primarily on foreign military markets, with some commercial engagements expected [41] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while the government defense market remains strong with no expected fall-off in 2025 [53][55] Question: How do you expect free cash flow to trend over 2025? - Free cash flow is expected to be consistent, with plans to maintain a positive cash gap and continue paying down debt [56]