Ultralife(ULBI) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 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 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 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 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 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][24] - For Q1 2025, the Electrochem acquisition contributed $7,622 in revenue and $743 in net income[32] - 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][35] 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 Management discusses Q1 2025 financial results, including revenue growth, segment performance, gross margin, operating expenses, liquidity, and non-GAAP reconciliations 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] - 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] - 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] - 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] Results of Operations 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] - 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] - 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] Adjusted EBITDA and Adjusted EPS (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 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] - Cash generated from operations was $3.4 million in Q1 2025, a significant improvement from $81 thousand used in operations in Q1 2024[124] - 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] - 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] Item 4. Controls and Procedures 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] - 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] - 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] PART II. OTHER INFORMATION This section includes additional information such as exhibits filed with the report and formal signatures Item 6. Exhibits 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] 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]