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Ultralife(ULBI) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, the company reported sales of $43.9 million, a decrease from $44.5 million in Q4 2023 [13] - The operating income for Q4 was $1.5 million, which includes a one-time cost of $1.1 million related to the Electrochem acquisition, resulting in an EPS of $0.01 [8] - For the full year 2024, total sales were $164.5 million with an operating income of $10 million, leading to an EPS of $0.38 [9] Business Line Data and Key Metrics Changes - Battery & Energy Products segment revenues were $39.9 million, up from $35.7 million year-over-year, but excluding Electrochem sales, there was a decline of $1.9 million or 5.3% [14] - Government/defense sales increased by 48.1%, while medical battery sales saw a decline of 47.2% compared to last year [14] - Communications Systems segment revenues fell to $4 million, a 55.1% decrease from $8.8 million in the previous year, primarily due to delayed shipments [15] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 70-30, compared to 77-23 in the previous year, indicating increased domestic demand [14] - The total backlog exiting Q4 was $102.2 million, representing 62% of trailing twelve months (TTM) sales, indicating a healthy replenishment rate [16] Company Strategy and Development Direction - The company aims to leverage the Electrochem acquisition to enhance vertical integration and expand into adjacent markets [10] - Key operational priorities for 2025 include completing the transition of the Electrochem acquisition, improving gross margins, and enhancing sales opportunities [33][43] - The company is focusing on lean productivity projects to offset rising costs and has initiated several projects to improve throughput and efficiency [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing a strong pipeline of new products and growth initiatives [10][43] - The company is addressing a material weakness in internal controls and is actively seeking to strengthen its accounting personnel [27] - Management noted that the decline in industrial sales was primarily due to order push-outs rather than macroeconomic weakness [58] Other Important Information - The company is pursuing legal action regarding a business interruption claim from a cyberattack, seeking a fair settlement after receiving only a fraction of the claimed amount [24] - The IRS has approved a $1.5 million employee retention credit, which will be used to reduce acquisition debt [25] Q&A Session Summary Question: Where are you ahead of schedule with Electrochem and what are the major hurdles? - Management indicated they are already utilizing Electrochem cells in their packs, which positively impacts the bottom line. The main hurdle is gaining total control over the business from its previous parent [52][53] Question: What part of the industrial sales timing is a push-out versus macro-related weakness? - Management clarified that it is all push-out, with no significant economic trends affecting their markets [56][58] Question: What does the initial production look like for the thin cell medical opportunity? - Management expects around $1 million in sales for the current year, with significant growth potential in the following years depending on hospital adoption and CapEx spending [60][62]