[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]

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][12] - 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][14] 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 aims to complete the integration of the Electrochem acquisition by the end of Q2, focusing on ERP system setup and leveraging vertical integration opportunities [19][27] - There is a commitment to improve sales pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [20][21] - The company is expanding its product offerings in both the Communications Systems and Battery segments, targeting military and medical markets [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, noting that Q1 performance exceeded expectations [42][43] - The government defense sector is expected to remain strong, with potential increases in NATO spending anticipated over the next 18 to 24 months [54] - The medical battery segment is expected to stabilize as replacement cycles for COVID-related devices approach [52] 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 [32][34] Question: What are the major milestones left for the Electrochem integration? - The integration is on track for completion by Q2, with most systems set up and data transitioned [36][37] Question: What markets are targeted for the IVAS battery? - The focus is primarily on foreign military markets, with some commercial engagements anticipated [41] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while government defense remains strong with a good backlog [52][54] Question: How is free cash flow expected to trend over 2025? - Free cash flow is expected to be consistent, with plans to continue paying down debt ahead of schedule [55][56]

[Performance Highlights & Management Commentary](index=1&type=section&id=Performance%20Highlights%20%26%20Management%20Commentary) Ultralife's Q1 2025 revenue grew 21% to $50.7 million, driven by Battery & Energy Products and Electrochem, with management focused on integration, tariff mitigation, and debt reduction Q1 2025 Key Performance Indicators vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales | $50.7 million | $41.9 million | | Gross Profit | $12.7 million (25.1%) | $11.5 million (27.4%) | | Operating Income | $3.4 million | $4.1 million | | GAAP EPS | $0.11 | $0.18 | | Adjusted EBITDA | $5.4 million | $5.2 million | | Backlog (High Confidence) | $95.0 million | N/A (vs $102.2M Q4'24) | - Management's strategic focus includes: - Integrating the Electrochem acquisition to capture manufacturing cost efficiencies and savings through U.S.-based vertical integration - Actively implementing a tariff mitigation plan, which includes surcharges, adjusting inventory movements, and reviewing sourcing/manufacturing locations - Generating incremental cash flow to reduce acquisition-related debt while continuing to invest in strategic product development - Accelerating organic growth through enhanced sales and marketing leadership[2](index=2&type=chunk) [First Quarter 2025 Financial Results](index=2&type=section&id=First%20Quarter%202025%20Financial%20Results) Q1 2025 revenue increased 21% to $50.7 million, driven by Battery & Energy Products growth, while gross margin and operating income declined due to product mix and lower Communications Systems sales Revenue by Segment (Q1 2025 vs. Q1 2024) | Segment | Q1 2025 Revenue | Q1 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Battery & Energy Products | $46.3 million | $35.0 million | +32.4% | | Communications Systems | $4.4 million | $6.9 million | -36.2% | | **Total Revenue** | **$50.7 million** | **$41.9 million** | **+21.0%** | - The organic growth in Battery & Energy Products was primarily driven by a **53.6% increase** in government/defense sales, which was partially offset by a **12.3% decrease** in medical battery sales[4](index=4&type=chunk) Gross Margin by Segment (Q1 2025 vs. Q1 2024) | Segment | Q1 2025 Gross Margin | Q1 2024 Gross Margin | | :--- | :--- | :--- | | Battery & Energy Products | 24.7% | 25.7% | | Communications Systems | 29.5% | 35.8% | | **Total Gross Margin** | **25.1%** | **27.4%** | - Operating expenses increased to **$9.3 million** from **$7.4 million** in Q1 2024, reflecting the inclusion of Electrochem, a **24.0% increase** in new product development costs, and one-time, non-recurring expenses[6](index=6&type=chunk) - The company's backlog of high-confidence orders was **$95.0 million** at the end of Q1 2025, down from **$102.2 million** at the end of Q4 2024, but indicative of a strong replenishment rate during the quarter[4](index=4&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) Ultralife's consolidated financial statements for Q1 2025 show total assets of $223.8 million, total equity of $136.6 million, and a net income of $1.9 million [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $8,719 | $6,854 | | Inventories, Net | $47,853 | $51,363 | | Total Current Assets | $101,469 | $97,160 | | Total Assets | $223,753 | $220,451 | | Total Current Liabilities | $31,496 | $29,291 | | Long-Term Debt, Net | $50,510 | $51,502 | | Total Liabilities | $87,149 | $86,264 | | Total Shareholders' Equity | $136,604 | $134,187 | [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated Statements of Income (in thousands, except per share amounts) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $50,746 | $41,927 | | Gross Profit | $12,745 | $11,470 | | Operating Income | $3,399 | $4,063 | | Income Before Income Tax | $2,446 | $3,607 | | Net Income Attributable to Ultralife | $1,865 | $2,891 | | Diluted EPS | $0.11 | $0.18 | [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) Ultralife presents Adjusted EBITDA of $5.4 million and Adjusted Diluted EPS of $0.13 for Q1 2025 as non-GAAP measures, excluding specific items to reflect ongoing operational performance [Adjusted EBITDA Reconciliation](index=6&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA is defined as net income before interest, taxes, depreciation, amortization, stock-based compensation, and other expenses not considered reflective of ongoing operations; for Q1 2025, these other expenses included severance costs, acquisition costs, and a non-cash purchase accounting adjustment[19](index=19&type=chunk)[21](index=21&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income Attributable to Ultralife | $1,865 | $2,891 | | Interest Expense, Net | $1,032 | $520 | | Income Tax Provision | $567 | $703 | | Depreciation & Amortization | $1,355 | $968 | | Stock-Based Compensation | $227 | $161 | | Severance/Acquisition/Other Costs | $402 | $0 | | **Adjusted EBITDA** | **$5,448** | **$5,243** | [Adjusted EPS Reconciliation](index=7&type=section&id=Adjusted%20Earnings%20Per%20Share) - Adjusted EPS is defined as net income excluding the provision for deferred taxes; the company believes this is useful for comparison as it expects U.S. taxes to be fully offset by net operating loss carryforwards and other tax credits[22](index=22&type=chunk) Adjusted EPS Reconciliation | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Diluted GAAP EPS | $0.11 | $0.18 | | Deferred Tax Provision per Share | $0.02 | $0.03 | | **Adjusted Diluted EPS** | **$0.13** | **$0.21** | [About Ultralife Corporation & Investor Information](index=3&type=section&id=About%20Ultralife%20Corporation%20%26%20Investor%20Information) Ultralife Corporation, a global provider of power and communication solutions, will host an earnings call and cautions investors about potential risks including economic conditions, tariffs, and supply chain disruptions - Ultralife serves its markets with products ranging from power solutions to communications and electronics systems, with operations in North America, Europe, and Asia[10](index=10&type=chunk)[11](index=11&type=chunk) - The company will hold its Q1 earnings conference call at **10:00 AM ET**, with registration required for dial-in participation and a live webcast available on its investor relations website[12](index=12&type=chunk)[13](index=13&type=chunk) - Potential risks that could cause actual results to differ materially include uncertain global economic conditions, tariffs, inflation, military spending reductions, and supply chain disruptions[14](index=14&type=chunk)