Ultralife(ULBI) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's analysis of the company's financial condition and results of operations Item 1. Consolidated Financial Statements Ultralife Corporation's Q1 2023 unaudited financials report $171.2 million in assets, $31.9 million revenue, a net loss, and negative operating cash flow due to inventory increase Consolidated Balance Sheets Details Ultralife Corporation's financial position, showing assets, liabilities, and equity as of March 31, 2023, and December 31, 2022 Consolidated Balance Sheet Highlights (In Thousands) | Account | March 31, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $171,154 | $168,430 | +$2,724 | | Cash | $5,605 | $5,713 | -$108 | | Inventories, net | $47,311 | $41,192 | +$6,119 | | Total Liabilities | $54,750 | $52,027 | +$2,723 | | Long-term debt | $21,126 | $19,310 | +$1,816 | | Total Shareholders' Equity | $116,404 | $116,403 | +$1 | Consolidated Statements of Loss and Comprehensive Income (Loss) Presents Ultralife Corporation's financial performance for the three-month periods ended March 31, 2023 and 2022 Q1 2023 vs Q1 2022 Performance (In Thousands, except per share amounts) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Revenues | $31,916 | $30,373 | +5.1% | | Gross Profit | $7,436 | $6,958 | +6.9% | | Operating Income (Loss) | $26 | ($295) | +$321 | | Net Loss Attributable to Ultralife | ($346) | ($168) | -$178 | | Net Loss Per Share (basic & diluted) | ($0.02) | ($0.01) | -$0.01 | Consolidated Statements of Cash Flows Summarizes Ultralife Corporation's cash inflows and outflows from operating, investing, and financing activities for the quarter Cash Flow Summary for Three-Month Periods (In Thousands) | Activity | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,365) | ($3,222) | | Net cash used in investing activities | ($497) | ($371) | | Net cash provided by financing activities | $1,800 | $1,223 | | Decrease in Cash | ($108) | ($2,363) | - The primary reason for negative operating cash flow in Q1 2023 was a significant increase in inventories of $6.0 million[14] Notes to Consolidated Financial Statements Offers detailed explanations and supplementary information supporting the consolidated financial statements - As of March 31, 2023, the company had $7.7 million outstanding on its Term Loan Facility and $15.6 million on its Revolving Credit Facility, and was in full compliance with all debt covenants[25][28] - The effective tax rate for Q1 2023 was 28.4%, a significant decrease from 60.9% in Q1 2022, primarily due to the geographic mix of operating results[46] Segment Revenue Breakdown (Q1 2023 vs Q1 2022, In Thousands) | Segment | Q1 2023 Revenue | Q1 2022 Revenue | Change | | :--- | :--- | :--- | :--- | | Battery & Energy Products | $28,470 | $29,150 | -2.3% | | Communications Systems | $3,446 | $1,223 | +181.8% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 revenue growth driven by Communications Systems, operational impacts from a cybersecurity attack, improved gross margin, and strategic focus on backlog fulfillment and debt reduction Results of Operations Analyzes key drivers of revenue, gross profit, and operating expenses, highlighting segment performance and backlog - A cybersecurity ransomware attack in Q1 2023 significantly impacted the company's ability to process orders and ship products, with no ransom paid and a $100 thousand insurance deductible recorded[83][90] - Battery & Energy Products revenues decreased by 2.3% due to the cybersecurity attack's impact on medical and government sales, partially offset by a 21.3% increase in oil & gas market sales[92] - Communications Systems sales grew 181.8%, primarily due to shipments for a large vehicle-amplifier adaptor order from a global defense contractor[94] - Total backlog was $108.1 million at March 31, 2023, with $96.1 million scheduled to ship in the remainder of 2023, representing a 30.2% increase over the comparable prior-year period[95] - Gross margin increased to 23.3% from 22.9% year-over-year, reflecting higher volume in Communications Systems, tempered by inefficiencies from the cyber attack and higher material costs[96] Adjusted EBITDA Reconciles net loss to Adjusted EBITDA, a non-GAAP measure used to assess operational performance - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operating performance by excluding items like interest, taxes, depreciation, amortization, and stock-based compensation[104] Adjusted EBITDA Reconciliation (In Thousands) | Line Item | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net loss attributable to Ultralife | $(346) | $(168) | | Interest expense | 424 | 134 | | Income tax benefit | (133) | (251) | | Depreciation expense | 762 | 816 | | Amortization of intangible assets | 209 | 328 | | Stock-based compensation expense | 139 | 189 | | Cyber insurance deductible | 100 | - | | Adjusted EBITDA | $1,155 | $1,103 | Liquidity and Capital Resources Discusses the company's cash position, sources and uses of funds, and overall financial flexibility - Cash decreased by $108 thousand during Q1 2023 to $5.6 million, primarily due to the cybersecurity attack and strategic inventory procurement[109] - Cash used in operations was $1.4 million, driven by a $6.0 million increase in inventory to manage supply chain challenges and prepare for customer orders[110] - Financing activities provided $1.8 million in cash, reflecting draws on the credit facility to manage the sales impact of the cyber attack and fund inventory purchases, offset by $500 thousand in term loan payments[112] - The company has an effective S-3 shelf registration statement allowing it to offer and sell up to $100 million in securities for general corporate purposes, including potential acquisitions[115] Item 4. Controls and Procedures The Principal Executive and Financial Officers concluded that disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[120] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[121] PART II. OTHER INFORMATION This section includes supplementary information, primarily detailing exhibits filed with the report Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including required certifications and Inline XBRL financial data - The report includes required CEO and CFO certifications under Rule 13a-14(a) / 15d-14(a) and Section 1350[123] - Financial statements and notes are provided in iXBRL (Inline eXtensible Business Reporting Language) format as Exhibit 101[123] Signatures Confirms the official signing and authorization of the Form 10-Q report by the company's Principal Executive and Financial Officers - The report was signed and authorized on May 4, 2023, by the company's Principal Executive Officer and Principal Financial Officer[127]