Q2 2022 Ultralife Corp Earnings Call
Good day and welcome to this ultra-life cooperation second quarter 2022 earnings release conference call. At this time for opening remarks and introduction, I would like to turn the call over to Ms. Odie Barovling, please go ahead.
Thank you, Bettina, and good morning, everyone. Thank you for joining us this morning for the UltraLife Corporation's Earnings Conference Call for the second quarter of fiscal 2022. With us on today's call are Mike Popalik, UltraLife's President and CEO , and Phil Fain, UltraLife's Chief Financial Officer.
The earnings press release was issued earlier this morning and if anyone has not yet received a copy, I invite you to visit the company's website, www.ultralifecorps.com, where you'll find the release under investor news in the investor relations section.
Before I turn the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to different materialings include the impact of COVID-19 and related supply chain disruptions, potential reductions in revenues from peak customers.
acceptance of our new products on a global basis in uncertain global economic conditions. In uncertain global economic conditions.
The company cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances.
Further information on these and other factors that could affect ultra-fonential results is included in the company's filing for the Security and Exchange Commission, including the latest annual report on form K&K. In addition, on today's call, management will refer to certain non- GAAP financial measures. The management considers to be useful with defer from that and GAP. These non- GAAP measures should be considered as supplemental to course fund GAP figures.
With that, I would now like to turn the call over to Mike. Good morning, Mike.
Good morning Jody, and thank you everyone for joining the call. Today I'll start by making some brief overall comments about our Q2 2022 operating performance, after which I'll turn the call over to Phil, who will take you through the detailed financial results. After Phil has finished, I'll provide a brief update on the progress against our 2022 revenue initiatives, then open it up for questions.
For the second quarter of 2022, driven by strong shipments to commercial and markets.
We delivered a 20% Euro for your sales increase and 3 cents a earnings per share. and 3 cents a earnings per share.
Double-digit increases in organic medical and industrial market sales and strong single-digit increases in core oil and gas sales aided by revenues from the new acquisition
More than offset, delayed shipments against government depends existing orders in both our business segments due to persistent supply chain constraints.
In Q2, we were pleased to swing back to profitability from the last few quarters.
Due to increased revenues and controlling operating expenses and despite continued inflationary cost pressures and manufacturing inefficiencies associated with supply chain disruptions, which pressure grows margins.
We also assertively managed working capital, including inventory, by working closely with our suppliers and customers.
in an effort to position ourselves to the best extent possible for mitigating the impact of long lead time raw materials and components.
on the timely manufacturing of our products and delivery to our customers.
In a few minutes, I'll give you further updates on our revenue initiatives, but first I'd like to ask Alta Life CFO Phil Fain to take you through additional details of the second quarter 2022 financial performance. Phil?
Thank you, Mike, and good morning, everyone.
Earlier this morning, we released our second quarter results for the quarter ended June 30th, 2022. For the quarter ended June 30th, 2022.
We also filed their form 10Q with the SEC.
And have updated our investor presentation, which you can find in the investor relations section of our website.
Consolidated revenues for the 2022 second quarter.
totaled 32.1 million compared to 26.8 million reported for the second quarter of 2021.
An increase of 20%.
Commercial sales increased 54.1 percent.
reflecting solid growth across virtually all commercial end markets.
including medical, industrial, and oil and gas.
Government defense sales declined 30.8%. Do primarily to continue supply chain disruptions.
including increased lead times on components from suppliers impacting both our internal and customer manufacturing delivery schedules.
resulting in delays in our shipments to future periods.
On a sequential basis, second quarter sales increased 5.8 percent, with battery and energy products and communication system sales increasing 3.4 percent and 62.4 percent respectively.
The notable quarter over quarter increase for communication systems
Primarily resulted from the availability of components.
partially fulfill an order placed in 2021.
and the timing of orders for which inventory was on hand.
Revenues from our battery and energy product segment were 30.1 million compared to 22.9 million last year, an increase of 31.8 percent.
With 6.6 million of the 7.3 million variants attributable to Excel,
and 0.7 million of net organic growth.
comprised of a 2.1 million increase in commercial sales.
partially offset by a 1.4 million decrease in government defense sales.
The increase in commercial sales, excluding Excel, consisted of a $1.1 million increase in medical battery sales, a $0.7 million increase in industrial and market sales, and a $1.7 million increase in hybrid economics at the same time.
In a.3 million increase in sweet oil and gas market sales.
The sales split between commercial and government defense for our battery business was 82-18 compared to 70-30 for the 2021 second quarter and the domestic to international split was 47.53.
compared to 5248 last year.
Accentuating both the continued success of our global revenue diversification strategy and the delays in U.S. government defense sales.
The $24.7 million of commercial sales for the second quarter was the highest for any quarter in the company's history.
Revenues from our communication system segment were 2.0 million compared to 3.9 million last year, a decrease of 49%, reflecting shipments delayed to future periods due to increased lead times on components from suppliers and the timing of orders placed by our customers.
We have identified eight sales opportunities which were pushed out to future periods by our customers. We have identified eight sales opportunities and we shall face all these weaknesses. Let's talk about theQZQ L Satra here. Thank you.
and eight opportunities which we did not have the components on hand to ship in the second quarter with a combined total exceeding four million dollars.
On a Consolidate basis, the commercial to government defense sales split was 7723 versus 6040 for the year earlier quarter. The commercial to government defense sales split was 75%.
Our consolidated gross profit was $7.6 million for the 2022 second quarter, up 9.7% over the 2021 period.
As a percentage of total revenues, consolidated gross margin was 23.8%
Versus 27.1% for last year's second quarter.
gross profit for our battery and energy products business with 7.2 million compared to 6.0 million last year.
Gross margin was 23.7%, a decrease of 260 basis points.
from 26.3% reported last year, primarily reflecting raw material and component cost inflation ahead of customer price realization and manufacturing inefficiencies associated with supply chain disruptions.
For our Communication Systems Segment,
Gross profit was 0.5 million compared to 1.2 million for the year earlier period.
Gross margin was 24.9% compared to 32.1% last year, reflecting lower volume resulting in the under-absorption of factory costs caused by delays in component deliveries and the timing of orders.
Operating expenses were $6.9 million compared to $6.2 million last year, an increase of $0.7 million or 11%.
The increase was fully attributable to the addition of Excel. Excluding Excel, operating expenses decreased 0.4 million, or 6.6%, primarily reflecting the timing of new product development spending.
As a percentage of revenues, operating expenses were 21.3% compared to 23.1% for last year's second quarter.
Operating income was 0.8 million compared to 1.1 million for the 2021 quarter.
On a sequential basis, second quarter operating income increased $1.1 million.
Our tax provision for the second quarter was 0.2 million, the same as the year earlier quarter, computed on a gap basis.
Including the impact of interest expense to help finance the Excel acquisition. Net income was 0.5 million or 3 cents per share.
This compares to net income of 0.8 million or 5 cents per share on a diluted basis for the 2021 quarter.
Similar to the first quarter, Excel was once again accreted.
Adjusted EBITDA defined as EBITDA, including non-cash stock-based compensation expense.
was 2.2 million for both the current and prior year quarters, representing 6.8% and 8.2% of sales respectively.
Turning to our solid balance sheet to proactively manage our supply chain, reduce the impact of potential component price increases, and optimize our position to service our substantial backlog. Turning up the measure position to service our substantial backlog.
We increased inventory by 2.8 million or 7.8% over the first quarter.
This represents an increase of 6 million or 18.1% over year end 2021. This represents an increase of 6 million
We ended the 2022 second quarter with working capital of 49.6 million in a current ratio of 3.2 compared to 47.6 million in 3.5 for year end 2021.
Death to capital at quarter end remained low. It approximately 0.15.
As a result, we remain well positioned to fund organic growth initiatives, including new product development and strategic capital expenditures.
while continuing our focus on expediting organic growth recreative M&A. recreative M&A. recreative M&A. recreative M&A.
Going forward with our backlog, liquidity, diversified end markets, and growth initiatives, we remain steadfastly focused on realizing the full average potential of our business model.
I will now turn it back to light.
Thank you, Phil.
For the second quarter of 2022, we continue to drive our revenue growth strategy.
which is based on market and sales reach expansion, primarily through diversification.
New product development and when appropriate with strategic catbacks for achieving competitive advantage
and a disciplined approach to acquisitions.
to quickly gain scale, additional skilled resources, market access, technology, and new products.
For the battery-and-view products business, the market sales reach expansion and diversification.
is about penetrating the global commercial market.
as well as the international government defense markets to help mitigate the lumpiness and cyclicality.
associated with our historical concentration.
in the US government defense market.
In the second quarter, theending pandemic started because of the expenses.
and sales to the US government defense and market.
Our commercial and market revenues increase is fully offset the government defense decline
leading to 3% of net, the B&E Organic Revenue Pro.
In Q2 and including the new acquisition, the total commercial and international government defense revenues
represent approximately 84% of our total B&E sales.
As for the acquisition.
Excel was again EPS-Acreative in Q2 with revenues exceeding expectations.
Its second total quarter is part of the ultra life portfolio.
Excel has bring additional diversification and scale to our battery and your products business.
And while we continue to integrate operations and business cadences,
Best practice sharing has begun.
further leveraging the talented and valuable resources gained in the acquisition.
Drilling down further into our second quarter commercial revenues, overall global B&E medical revenue represented approximately 26% of total battery and your product sales.
Demand from current customers was for applications such as ventilators, respirators, infusion pumps, digital x-ray and surgical robots.
Due to oil and gas and subsea electrification commercial revenue was approximately 32% of total being in sales.
High oil and gas prices and increasing recounts continue to favorably impact a man in our oil and gas and markets. M Consulting
And finally, Beanie's Q2US government defense business represented approximately 16% of total Beanie product sales.
consisting primarily of radial battery and chargers to OEM primes.
Regarding the conformal wearable battery, US Army IDIQ contract announced last May.
with a value not to exceed of up to $168 million during the three-year base award period.
The product development process and component testing is moving forward.
First article testing is expected to begin later this year, demonstrating full compliance with contractual product specifications and program requirements.
As an IDIQ contract, actual delivery orders, including quantities and timing, are at the discretion of the DoD.
A core element of B&E's organic growth strategy remains new product development.
And during the second quarter, we continued to advance several of our products under development over the last few years............
One such product is the new X5 Medical Cart Battery System, where OEM customer interest remains high.
leading to more demonstrations throughout Q2 and more positive customer feedback.
As for the initial $2 million order discussed last quarter, we expect to start shipping in Q3 and continue through the early part of 2023.
Are the new product development projects currently underway?
Include an at-limited 2, a higher capacity smart U1 battery.
New 5790 and XR1238 CFX Blend, primary batteries.
OEM Public Safety Radio Batteries.
and next generation ruggedized modular large format energy storage batteries.
New product development in multi-generational product planning.
Keep us current with market needs.
and give us the opportunity to remain close with and provide value to our key customers.
Regarding efforts to strengthen competitive differentiation, we also continue to invest in strategic capex in our facilities. We also continue to invest in strategic capex in our facilities.
Progress continues at our New York New York facility on the new Lithium Magnesia to Oxide primary three of all cell manufacturing lines.
Having already passed UN testing,
The cells are currently undergoing UL and IEC testing.
This premium product outperforms at high rate discharge, which is favorable for lighting and medical applications.
and will be one of the few domestically manufactured cells of its form factor.
Production will continue ramp up through the end of the year, following the UL and IEC testing.
At our China facility, our project to upgrade our final chloride primer ear cells and manufacturing processes continues to move forward. China moist
Several customers are in various stages of testing and commercial activity driving an increase in production.
In Q2, ER cell revenue is up 64% year over year.
We are currently sampling a new 19Ah low rate cell to OEMs.
Specifically targeting long-life metering applications.
With each stage of product and process improvements and newly identified final chord ER cell commercial industrial applications.
We are expanding our available opportunity set.
We also manufacture our thin-cell 9-volt products in China, and we continue to add to our value proposition with global medical and industrial customers.
We'll supply ourselves in battery packs solutions.
In Q2, our total China operations revenue was up 21% year-over-year.
Looking at a communication systems business, in Q2, new product development revenue for products less than or equal to three years old, represent approximately 48% of communication systems revenue. Represent approximately 48% of communication systems revenue.
For the U.S. Army's handheld, man-packed, small form-fit and leader radio programs...
After some supply chain delays, in the second quarter of 2022, we began shipping against the October 2021 announced
$4.2 million vehicle Amplifier Adapters Award and anticipate making the remainder of the shipments throughout the end of this year.
We are also initiating supply chain actions.
to support the just recently awarded $4.6 million vehicle amplifier adapter order for deliveries to start in late 2022 early 2023. In late 2022 early 2023.
The VA contracts over the last several years, combined with the recent new awards, demonstrated that back to this other product line.
in supporting the critical missions of our ground forces.
And the confidence our customers have in our capability of integrated sophisticated electronics.
for harsh environment.
New product development activities for defense and commercial applications continue, with several OEM partners addressing various emerging requirements for integrated systems.
One such opportunity.
is for a bespoke power solution supporting radio integration into military aircraft, which is moved to form, fit, and function qualification trials by the customer on various rotor wing platforms.
Procurement of production units could take place over several years starting in fiscal year 2023.
Another product is an Edge Server System integration.
which has moved to production with over 211 units delivered to date.
This solution provides greatly increased capability.
with a smaller form factor compared to currently fielded systems.
estimating a 50% reduction in Cuban weight.
AllTry provides the case systems and integration to enable this leading edge compute capability to be deployed into harsh military environments. backyard e av
This configuration is a 2K system. With one housing a server, the other providing uninterruptible power supply backup with the answering items. and 30 items.
Lower rate initial production awards are continuing with program follow-on awards expected later in 2022 and into 2023.
A new development app report, Ed Sushin Varian, has also moved to early prototype stage.
We are very excited about this new capability, which will provide enterprise class edge computing capability on dismounted operators for both military and commercial applications.
A capability demonstration was completed at the special operation forces in the Street Conference in May, which highlighted the art of the possible.
When enterprise class compute capability is employed onto an individual.
Expectations are that we will feel, we'll excuse me, expectations are that we will feel the operation of prototypes later in 2022. please.
Regarding our communication systems teams previously mentioned pushing into commercial markets, the initial low rate production units of a mobile data cart delivered in 2021 remain in operational testing with the customer, collecting and transporting autonomous vehicle data to their engineering facilities.
Another commercial product is a virtualized radio access network enclosure.
Supporting 5G network deployments worldwide.
Initial units were delivered to a customer and are now supporting test evaluation.
by multiple cellular network providers in two different countries for use in expanding 5G market installation.
Dialogue around installation and support continues as we interface with cellular providers to assist with their system evaluations.
Supply chain challenges specific to electronic components continue to impact estimating delivery schedules.
in a continued area of engagement by communication systems management and supply chain professionals.
Communication Systems Ongoing Capture Defense Program Awards.
Improvement and defense core business bookings.
Combined with diversification in the commercial markets on multiple fronts.
Provides a path to improved revenue continuity.
and for long-term sustainable growth.
closing for the second quarter of 2022. You were pleased to achieve solid year over your revenue growth?
The return to profitability.
and revenue and earnings gains quarter to quarter.
Why we anticipate continued battle, supply chain and inflationary challenges in the second half of the year?
We remain committed.
to advancing our new product development initiatives.
Transitioning new products to production.
and generating profitable growth for the year.
We are keenly focused on the realization.
of numerous transformational projects to deliver new meaningful, sustainable, annual revenue streams and attractive growth markets from new, competitively differentiated products.
In our government defense markets, these include but are not limited to...
multiple DoD IDIQ awards in various stages of maturity.
including the 5368, 5390, 5790CFX, and conformal wearable batteries.
Full rate production follow on leader radio VAA contracts.
And new OEM ManPack radio ancillaries.
In our commercial land markets,
These include the new medical cart batteries,
The new C-R-E ourselves.
New public safety thin-cell medical and subsea electrification battery packs.
And several of our new communication systems.
integrated computing, 5G, and AI commercial solutions.
Our capabilities and the mission critical end markets we serve
military defense, energy and medical.
Align well with current world events and needs.
Our strong balance sheet.
Solid test book from operations.
discipline execution of our business model.
model. What is the opportunity?
The simultaneous speed pursue organic revenue growth for our Transmational Projects.
Invest in new product development and to change the CAPEX for competitive advantage.
and seek out impactful acquisitions.
Always the aim of growing the business with profitable revenues.
business with profitable revenues each and every year.
Operator this concludes my prepared remarks and we'll be happy to open the call for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question over the telephone, please signal by pressing star 1 on your telephone keypad.
If you're using a speakerphone, please make sure your mute function is turned off to allow your thickness to reach our equipment.
Again.
Press star one to ask questions.
We report for just a moment to allow everyone an opportunity to signal for questions.
Our first question today comes from Barry Lewis of Sandler Capital Management. Please go ahead.
Hi guys.
The last conference call I ask a question.
regarding the May 2021 fresh release from the government.
And you talked about that today, and I want to make something clearer. You expect that order in the second half?
of 2022 or you think it'll come in the third quarter or 2023.
Hi, Brad, this is Mike Poplick.
The press release in May was for the conformal wearable battery program, which was an IDIQ, which at the time had awarded four different potential manufacturers sort of a place in the game for the conformal wearable battery. Each of us is now very actively involved in the development of the battery solution in preparation for first article testing, which in my prepare to march, we said we start in really the back half of this year. Upon completion of the first article testing and demonstration that we meet the program requirements specifications.
then we'd be in a position to receive delivery orders from the U.S. Army. Given that it's an IDIQ contract, there's no guarantees that you get any or what proportion you would get, but we're working diligently to ensure that we're one of the players that successfully passed all the first article tests so that we'd be in a position when the government decided to place orders to receive some of those initial delivery orders. But at this time, it really is dependent upon the completion of the first article testing.
to try to determine what would be the timing of potential delivery orders going forward. So there's no firm delivery order of any large quantity until after we get through that first article testing process. I think that first article testing process is expected to be.
initiated and completed in the second half of the year.
Thank you very much.
Ladies and gentlemen, as a reminder to ask a question over the telephone, please press star 1 on your telephone keypad.
It appears that we have no further questions at this time. I would now like to turn the call back over to Mike Poplich.
for any additional remarks.
Great, okay, well thank you once again for joining us for our second quarter 2022 earnings call. We look forward to sharing with you our quarterly progress on each of these calls in the future. As Phil mentioned, I'd also like to mention that we had updated our investment presentation on the website, so please check it out. Thank you everybody and have a great day. Google Analytics lead crashed
This concludes today's call. Thank you for your participation. You may now disconnect.
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