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ULTRALIFE CORP (ULBI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue was $48.6M (+13.0% YoY) and GAAP diluted EPS was $0.05; gross margin compressed to 23.9% and operating margin to 4.6%, driven by tariffs, adverse mix and lower throughput . Sequentially, revenue and EPS declined vs Q1 ($50.7M, $0.11) as Communications Systems orders slipped into H2 .
  • Results missed thin Wall Street consensus: EPS $0.07 vs $0.14 estimate and revenue $48.56M vs $51.0M estimate; only one estimate existed for each metric, limiting signal strength. Bold miss: revenue and EPS both below consensus* [GetEstimates; Values retrieved from S&P Global].
  • Battery & Energy Products government/defense sales rose 61.1% YoY, but Communications Systems sales fell 57.2% YoY on delayed purchase orders (~$2.7M pushed to H2); backlog ended at $89M (vs $95M in Q1). Management expects a rebound in H2 and into 2026 .
  • Liquidity is solid: working capital $69.1M, current ratio 3.3; zero revolver draw. The company prepaid $2.7M of acquisition debt in Q2, using $1.8M ERC proceeds, and has reduced 2025 principal by $3.4M vs $2.8M annual amortization requirement .
  • Subsequent event: DLA awarded ~$5.2M BA-5390 battery order (mostly 2026–2027 shipments), adding defense visibility. Near-term catalysts include Communications Systems order catch-up, tariff normalization, and new product ramps (radio-agnostic amplifiers, server power systems, thin cells) .

What Went Well and What Went Wrong

What Went Well

  • Government/defense demand was strong: Battery & Energy Products government/defense sales were up 61.1% YoY, and overall segment revenue rose to $45.9M (+25.0% YoY) with Electrochem contribution .
  • Communications Systems gross margin improved to 28.4% despite lower volume, reflecting favorable mix and price realization .
  • Balance sheet and cash actions: $2.7M debt prepaid in Q2 using $1.8M ERC; zero revolver usage; working capital $69.1M and current ratio 3.3 .
  • Management quote: “Notwithstanding the challenges… we expect improved results in the second half of the year and into 2026… early purchase orders from long-term new product programs… rebound in demand from our medical and oil & gas customers” .
  • Management quote: “We’re ahead of schedule in paying down our debt from the Electrochem acquisition with over $2,700,000 repaid in Q2” .

What Went Wrong

  • Communications Systems revenue fell 57.2% YoY to $2.7M on delayed purchase orders; ~$2.7M of orders were pushed to H2 by customers .
  • Gross margin fell 300 bps YoY to 23.9%; CFO quantified impacts: tariffs (~100 bps), mix (~200 bps), other inefficiencies (~30–40 bps) .
  • Tariff headwinds: net hit of ~$0.4M in Q2; management expects less impact in Q3 absent extreme spikes; surcharge being passed to customers .
  • Other expense increased to ~$1.1–$1.2M (interest on acquisition debt and FX), pressuring net income and EPS ($0.05 vs $0.18 YoY) .

Financial Results

Consolidated P&L and Margins

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$42.98 $43.85 $50.75 $48.56
GAAP Diluted EPS ($USD)$0.18 $0.01 $0.11 $0.05
Adjusted EPS ($USD)$0.22 $0.01 $0.13 $0.07
Gross Margin %26.9% 24.2% 25.1% 23.9%
Operating Margin %9.1% 3.4% 6.7% 4.6%
Adjusted EBITDA ($USD Millions)—$3.90 $5.45 $4.11

Q2 2025 Actuals vs Consensus

MetricConsensus (Q2 2025)Actual (Q2 2025)Surprise
Primary EPS ($USD)$0.14*$0.07 Miss*
Revenue ($USD Millions)$51.00*$48.56 Miss*
# of EstimatesEPS: 1*, Revenue: 1*——

Values retrieved from S&P Global.*

Segment Breakdown

Segment MetricQ2 2024Q4 2024Q1 2025Q2 2025
Battery & Energy Products Revenue ($USD Millions)$36.68 $39.88 $46.32 $45.87
Battery & Energy Products Gross Margin %27.1% 23.4% 24.7% 23.6%
Communications Systems Revenue ($USD Millions)$6.30 $3.97 $4.43 $2.69
Communications Systems Gross Margin %25.6% 31.9% 29.5% 28.4%

Backlog Trend

KPIQ4 2024Q1 2025Q2 2025
Backlog + High-Confidence Orders ($USD Millions)$102.2 $95.0 $89.0

Liquidity

KPIQ4 2024Q2 2025
Working Capital ($USD Millions)$67.9 $69.1
Current Ratio (x)3.3 3.3
Long-Term Debt, Net ($USD Millions)$51.50 $47.51
Cash ($USD Millions)$6.85 $10.94

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Communications Systems revenue trajectoryH2 2025Continued delays impacting 2024/early 2025; reliance on order timing Expects rebound from tough H1; ~$2.7M delayed orders pushed to H2 Raised (qualitative)
Battery & Energy Products end marketsH2 2025–2026Organic growth in gov/defense; medical softness; tariff mitigation plan Early POs from long-term programs; medical and oil & gas rebound expected; sustained defense growth Raised (qualitative)
Gross margin outlookH2 2025Focus on pricing, cost deflation, lean productivity; mitigation in progress Continued initiatives; headwinds in Q2; expect improvement as mix normalizes and vertical integration advances Maintained (focus)
Debt reductionFY 2025Plan to reduce acquisition-related debt from cash flow Ahead of schedule; $2.7M prepaid in Q2; $3.4M principal reduction YTD vs $2.8M annual amortization Improved
Liquidity/revolver usageFY 2025Strong liquidity No revolver draw; no plans to draw $30M revolver; borrowing base intact Maintained

No formal numeric revenue/EPS guidance was provided; commentary is qualitative and directional .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
TariffsMitigation plan (surcharges, inventory, sourcing/manufacturing review) Net tariff hit ~$0.4M; ~100 bps margin impact; expect less extreme impact in Q3; surcharge being passed Improving from Q2 peak risk
Communications Systems order timingLarge prior-year shipments; delays pushing orders Sales -57.2% YoY; ~$2.7M orders pushed to H2; margin ~28.4% Recovery expected H2
Electrochem integrationAcquisition completed 10/31/24; integration commenced ERP/office systems transitioned; manufacturing support systems to complete in Q3 Progressing
Government/Defense demandGov/defense growth; strong backlog Gov/defense +61.1% YoY within B&E; DLA post-Q quarter award Strong
Medical & Oil & Gas demandMedical -47.2% YoY in Q4; medical -12.3% in Q1 Commercial down (medical -39%, oil & gas -23.1%); expecting rebound H2 Stabilizing
R&D/product developmentOngoing development and investment Multiple launches: 3U portable server case, DC power supply, radio-agnostic 20W amplifier; thin cells; X5 cart power bank Accelerating
Legal/regulatory—Cyber insurance lawsuit filed; trial planned 2026; seeking millions for business interruption Active

Management Commentary

  • “The second quarter was a challenging period… We also faced headwinds from tariffs, unfavorable product mix shifts… Nevertheless, we continued to invest in new product development… we expect improved results in the second half of the year and into 2026” — Mike Manna, CEO .
  • “We’re ahead of schedule in paying down our debt… with over $2,700,000 repaid in Q2” — Mike Manna, CEO .
  • “Gross margin… a 300 basis point decline… primarily related to product mix, tariffs and lower factory throughput” — Phil Fain, CFO .
  • “Approximately $2,700,000 [of Communications Systems purchase orders] have been pushed out to the second half” — Phil Fain, CFO .
  • “Adjusted EBITDA… $4.1M or 8.5% of sales; TTM $15.4M or 8.6% of sales” — Management .

Q&A Highlights

  • Tariffs: net Q2 hit ~$0.4M; bps impact breakdown: tariffs (~100 bps), mix (~200 bps), other inefficiencies (~30–40 bps). Management expects less impact in Q3 absent extreme spikes; passing tariff surcharges to customers .
  • Order timing: ~$2.7M of Communications Systems orders pushed to H2; management expects segment rebound and highlights higher-margin mix contribution when volume normalizes .
  • Liquidity/debt: $1.8M ERC received and entirely used to reduce acquisition debt; YTD principal reduction $3.4M vs $2.8M required; no revolving credit usage planned .
  • Legal: Cyber insurance lawsuit filed in NY (Wayne County) seeking damages “in the millions” for business interruption; discovery ongoing; trial planned for 2026 .
  • Pipeline: Multiple $5–$20M potential program opportunities across battery and communications; early POs emerging; management acknowledged long qualification cycles but sees improved H2 visibility .

Estimates Context

  • Consensus EPS was $0.14; reported adjusted EPS $0.07 — miss*. Consensus revenue was $51.0M; reported revenue $48.56M — miss*. Coverage was limited (1 estimate each), so revisions may be sensitive to company commentary and H2 execution*. Values retrieved from S&P Global.*
  • Implications: Near-term estimate revisions may reflect Q2 margin compression (tariffs/mix) and Communications Systems timing, potentially lowering Q3 estimates; upside risk if H2 order catch-up and product ramps materialize .

Key Takeaways for Investors

  • Q2 was a reset quarter with compressed margins and order timing issues; watch for H2 recovery in Communications Systems and normalization of mix as medical/oil & gas demand stabilizes .
  • Tariff headwinds were quantifiable (~$0.4M; ~100 bps); management is surcharging customers and expects less impact in Q3 absent spikes — a potential margin tailwind .
  • Liquidity is robust and de-risked: debt prepaid ahead of schedule; no revolver usage; cash improved; provides capacity to invest and absorb timing fluctuations .
  • Defense exposure is strengthening: gov/defense sales +61.1% YoY in B&E, plus post-quarter DLA BA-5390 award (~$5.2M) — support for backlog quality and margin mix in H2/FY26 .
  • Execution priorities: complete Electrochem manufacturing system transition in Q3, advance vertical integration to lower costs, and convert pipeline into revenue — key drivers for margin repair and scale leverage .
  • Product catalysts: radio-agnostic 20W amplifier (customer tests underway), DC server power supply, 3U server case, thin cell programs in medical/wearables/industrial tracking — monitor order flow and initial contracts .
  • Trading lens: Near term, stock likely reacts to evidence of H2 order catch-up and tariff relief; medium term, margin trajectory, vertical integration savings, and defense program wins will shape thesis durability .