Q3 2022 Ultralife Corp Earnings Call
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Ladies and gentlemen, who are currently on hold for Ultra Life Corporation third quarter 2022 earnings call. At this time, we are assembling today's audience and trying to be underway.
We appreciate your patience and please remain on the line. Thank you.
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Ladies and gentlemen, you are currently on hold for Altra Life Corporation third quarter try in 'twenty two earnings release conference call. At this time, we are assembling today's audience and plan to be underway shortly.
We appreciate your patience and please remain on the line. Thank you.
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Hello, and welcome to Altra Life Corporation third quarter 2022 earnings release. My name is first of all and I'll be your coordinator for today's event. Please note. This call is being recorded and your lines will be on listen only however, you will have the opportunity to ask questions at the end during the Q&A session. This can be done by pressing star one.
On your telephone keypad to register your question. If you require assistance at any point. Please press star Zero and you will be connected to an operator I will now hand over to Yacos to majority of Buffon, Inc. To begin today's conference. Thank you.
Thank you and good morning, everyone and thank you for joining US. This morning for Ultra large corporations earnings conference call for the third quarter of fiscal 2022.
We apologize for the delay.
During today's call, which occurred due to AR issues experienced by the AR conference call provider.
With us on today's call are Mike Popovic, Ultra life's, president and CEO , and Phil Fain Ultra lights, Chief Financial Officer.
The earnings press release was issued earlier. This morning, if anyone has not yet received a copy I invite you to visit the Companys website Www Dot ultra life core dot com, where you'll find the release under Investor News in the Investor Relations section.
Before turning the call over to management I would like to remind everyone that some statements made during this conference call contains forward looking statements based on current presentations actual results could differ materially from those projected as a result of various risks and uncertainties.
Potential risks and uncertainties that could cause actual results to differ materially include the impact of COVID-19 related supply chain disruptions potential reductions in revenues from key customers.
Acceptance of new products on a global basis and uncertain global economic conditions.
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.
Other information on these factors.
These and other factors that could affect ultra life's financial results is included in the ultra lights filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K.
In addition on today's call management will refer to certain non-GAAP financial measures that management considers to be useful metrics and differ from GAAP to non.
non-GAAP measures should be considered as supplemental to corresponding GAAP 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 and apologize for the slight delay this morning.
Today I'll start by making some brief overall comments about our Q3 2022 operating performance.
Which I'll turn the call over to Phil who will take you through the detailed financial results.
When Phil is finished I'll provide a brief update on our progress against our 2022 revenue initiatives then.
Open it up for questions.
For the third quarter of 2022 total company organic revenue increased by over 20% year over year, driven primarily by strong shipments to government defense end markets.
When including the acquisition of Excel.
Total company revenue increased by over 50%.
Each of our business segments battery and energy products and communications systems.
Liberty solid year over year revenue increases.
Our overall customer demand remains high and.
And at the end of Q3 2022.
Total company firm order backlog was at a level not seen in over 10 years.
During the quarter, we continued to be negatively impacted by ongoing input component inflation and procurement cost increases as well as manufacturing inefficiencies from erratic par lead times and excess material usage during the ramp up of several new products.
As such these execution headwinds drove beanie gross margins downward.
It resulted in a total company EPS loss of one set for this years third quarter.
In addition to continuing to work very closely with our customers and suppliers to address the ongoing component cost increases lead time fluctuation and sell price increases.
We are implementing a number of actions to mitigate the ongoing gross margin pressures.
In a few minutes I'll give you a further update on our revenue initiatives.
And provide a summary of some of the gross margin initiatives.
But first I'd like to ask oxalate CFO , Phil Fain to take you through additional details of the Q3 2022 financial performance.
No.
Thank you Mike and good morning, everyone earlier. This morning, we released our third quarter results for the quarter ended September 32022.
We also filed our Form 10-Q with the SEC.
I've updated our investor presentation, which you can find in the Investor Relations section of our website.
Consolidated revenues for the 2022 third quarter totaled $33 2 million.
<unk> to $21 8 million reported for the third quarter of 2021.
An increase of 52, 7%.
Government defense sales increased 99, 8%.
With strong growth in both business segments, driven by order flow and the commencement of deliveries of some long lead components.
Commercial sales increased 38%, reflecting the contribution of excel and solid organic growth in oil and gas and industrial commercial end markets.
Total organic sales increased 21, 1%.
From the prior year period.
During the quarter supply chain disruptions persisted.
<unk> increased lead times on components from suppliers.
Impacting both our internal and customer manufacturing delivery schedules.
<unk> continued delays in our shipments to future periods.
Revenues from our battery and energy products segment were $28 6 million compared to $21 million last year, an increase of 42, 9%.
With $6 9 million up $8 6 million variance attributable to excel and $1 7 million of net organic growth comprise.
Comprised of increases of 66, 4% in government defense sales, seven, 4% and sweet oil and gas market sales and two 4% in industrial market sales.
Partially offset by a 12, 1% decrease in medical sales due solely to component shortages to fulfill increased demand from a large international medical device Oems.
Net organic sales for this segment increased eight 5%.
The backlog for our battery and energy products business of $88 3 million.
The highest in our history represents an increase of $17 2 million or 24, 1% over the comparable amount exiting the second quarter.
The sales split between commercial and government defense for our battery business was $8 20 compared to $83 17 for the 2021 third quarter.
And the domestic to international split was $47 53, compared to $40 60 last year.
Accentuating, both with continued success of our global revenue diversification strategy and growth in U S government defense sales.
Revenues from our communications systems segment were $4 7 million compared to $1 8 million last year.
An increase of 165, 3%, reflecting the receipt of components to fill a large international order.
And to continue the fulfillment of a large U S order with some modest shipments.
The backlog for our communication systems business up $17 9 million represents an increase of $9 8 million or 124% over the comparable amount exiting the second quarter.
On a consolidated basis, the commercial government defense sales split was $69 31 versus $76 24 for the year earlier quarter.
Again, reflecting the growth in government defense sales.
Our consolidated gross profit was $6 7 million for the 2022 third quarter up.
Up 31, 5% over the 2021 period.
As a percentage of total revenues consolidated gross margin was 22% versus 23, 5% for last year's third quarter.
Gross profit for our battery and energy products business was $5 3 million compared to $4 8 million last year.
<unk> margin was 18, 7% a decrease of 520 basis points from 23, 9% reported last year.
The disruptions, resulting from supply chain and logistics complications were more pronounced in our battery and energy products business during Q3.
In large part because of a sharp uptick for our more advanced for chargeable battery packs, which increase the need for highly sought after components.
Including various electronic components.
The boards chipsets and certain metals to name a few.
Major contributing factors impacting the gross margin variance included the following.
In a relatively proportional amount.
Number one rapid cost inflation on raw materials, and key components not entirely aligned with customer price increases.
We experienced more frequent weekly or sometimes daily input cost increases this quarter versus more periodic customer price increases.
Causing an inevitable lag and cost price alignment.
To reduce this lag we are initiating more frequent customer price increases.
Closely aligned to cost increases.
Number two.
Incremental fees to source and expedite critical components.
Increases in demand with tight shipments schedules from both government defense and medical customers in.
In some cases went beyond the wherewithal of our vendors to obtain key materials in a timely manner.
Necessitating the onetime use of brokers.
At a much higher cost.
With more complex logistics.
And further complicating the timely matching off higher cost with customer price increases.
To minimize the use of costly brokers going forward. We have now extended the forward time horizon of our S MLP process with customers and suppliers.
Should a demand surge with expedited timing again necessitate more costly sourcing alternatives.
We will require customers to fund all of the incremental costs on a timely basis.
Number three internal manufacturing inefficiencies.
As a result of irregular component availability and lead times, we experienced continuous production line startups shutdowns and changeovers, resulting in labor inefficiencies higher scrap and decreased absorption of overhead.
Most notable were delays in the supply of rechargeable cells for our fulfillment double large medical order as a vendor change their focus to supplying large format cells for easy.
Accordingly, we are in the process of qualifying another vendor by year end to meet the strict FDA requirements of our designed in batteries.
Number four increased an uncertain lead times impacting timely deliveries.
More mundane yet vital components, such as a proxy labels and boxes trickled in well past the expected dates reducing productivity and increase in cost to expedite shipments.
Using our global supply chain, we have worked to secure alternate vendors to minimize these occurrences.
And number five transitioning new products to higher volume production.
We generally incur higher scrap and labor inefficiencies and lower overhead absorption as we transitioned our new more technically advanced and complex products to full rate production.
During Q3, we experienced much higher demand for our key new government defense product, which drove up the startup variances in advance of completing the associated lean manufacturing process.
We have bolstered our resources to further our lean efforts and are investing in capital equipment to reduce operator dependence and variability.
For our communication systems segment gross profit was $1 4 million compared to <unk> 3 million for the year earlier period.
Gross margin was 29, 5% compared to 18 <unk> percent last year, reflecting higher factory throughput leading to higher cost absorption and.
And more favorable sales mix.
Operating expenses were $7 3 million compared to $5 9 million last year, an increase of $1 4 million or 24, 1% the.
The increase was primarily attributable to the addition of excel.
Excluding XL operating expenses increased <unk> 3 million or five 1%, primarily reflecting the timing of new product development costs and increased travel.
As a percentage of revenues operating expenses were 22.8% compared to 27, 1% for last year's third quarter, a 510 basis point improvement reflecting sales leverage.
The operating loss narrowed slightly to <unk> 6 million from <unk> 8 million for the 2021 quarter.
Including the impact of interest expense to help finance, the <unk> acquisition and foreign currency gains net loss was <unk> 2 million or <unk> <unk> per share. This.
This compares to a net loss of <unk> 6 million or <unk> <unk> per share on a diluted basis for the 2021 quarter.
Similar to the first two quarters <unk> was once again accretive.
Adjusted EBITDA defined as EBITDA, including noncash stock based compensation expense was $1 3 million or three 8% of sales for the 2022 quarter.
<unk> to <unk> 3 million or one 3% for the prior year quarter.
Turning to our balance sheet to proactively influence our position to service our substantial backlog, we increased inventory by $1 5 billion or 4% over the second quarter.
This represents an increase of $7 6 million or 22, 8% over year end 2021.
We ended the 2022 third quarter with working capital of $50 9 million compared to $47 6 million for year end 2021 debt.
Debt to capital at quarter end remained low at approximately <unk> two well.
We remain well positioned to fund organic growth initiatives, including new product development and strategic capital expenditures, while continuing our focus on expedited growth through accretive M&A.
Going forward with our backlog liquidity diversified end markets growth initiatives.
And actions underway to improve our gross margins, we remain steadfastly focused on realizing the full leverage potential of our business model I will now turn it back to Mike.
Yes.
Thank you Phil.
For the battery energy products business.
<unk> strategy.
And sales reach expansion is about diversifying more into the global commercial markets and international government defense markets.
<unk> and the cyclicality associated with our historical concentration in the U S government defense market.
In Q3, and including the new acquisition.
Total commercial and international government defense revenues represented approximately 80% of total <unk> sales and were up 40% year over year.
Looking deeper into our third quarter commercial revenue.
Overall global B any medical revenue represented approximately 23% of total battery on your product sales.
<unk> from current customers was for applications, such as ventilators respirators infusion pumps digital X Ray <unk>.
Surgical robots and powered medical carts.
We also received over $4 $3 million in delivery orders from existing medical customer blanket <unk> multiyear agreements and we continue to expand our collaboration with existing major medical Oems as they pursue new programs for their products.
Q3 oil and gas and subsea electrification commercial revenue was approximately 32% of total <unk> sales with oil and gas prices and increasing rig counts continuing to drive demand in our oil and gas end markets.
Organically.
Oil and gas in subsea revenues were up 7% year over year.
In Q3, we also made the first shipment of our new one atmosphere subsea battery to an international customer.
And lastly.
<unk> Q3 U S government defense business represented approximately 17% of total G&A product sales and was up 57% year over year.
Consisting primarily of radio batteries and Chargers to OEM primes.
Regarding the can form a wearable battery U S Army <unk> contract, which we announced last may with a not to exceed value of $168 million. During the three year base Award period there.
The product development process and component testing continues to move forward.
The conformer wearable battery first article testing.
Demonstrating for compliance with the contractual product specifications and program requirements.
Is now expected to begin Q1 of next year as parts delays have shifted the build schedule.
As an idea IQ contract actual delivery orders, including quantities and timing are at the discretion of the Dod.
And are still to be determined.
Market and sales reach expansion through diversification.
<unk> is having the right products for the end markets to a cornerstone of <unk> organic growth strategy remains new product development.
During the third quarter, we continued to advance several of our products under development over the last few years, one such product is our new <unk> medical cart battery system.
Which we had received in a prior quarter and initial launch order under a $2 million contract for medical Cart battery systems.
This new product started shipping in Q3.
We will continue shipping through the early part of 2023.
And we anticipate follow on orders of similar size for delivery Nadir next year from the same customer.
OEM customer interest remains high which has led to more demonstrations throughout Q3.
And more positive customer feedback.
We are also beginning to see adoption of the <unk> battery system product outside of our simple medical carts.
Expanding the available market opportunity.
Other new product development projects. Currently underway include but are not limited to a higher capacity 24 volt smart <unk> battery.
New 50, 790, <unk> blend primary batteries.
OEM public safety radio batteries.
So uplifts in multiple products.
And next generation Ruggedized modular large format energy storage batteries.
New product development and multi generational product planning.
Deepest current with market needs and gives us the opportunity to remain close with and provide value to our key customers.
We also continue to invest in strategic Capex in our facilities to strengthen our competitive differentiation.
Lithium manganese dioxide primary three volt CR cell manufacturer on the new line in our Newark, New York facility continues to make progress having already passed UN testing the cells past UL and IC testing at the end of Q3, and we are currently awaiting the final reports and facility inspections.
This premium product performs favorably to competitors at highway discharge, which is particularly useful in illumination devices and medical devices with short high pulse rate applications and will be one of the few domestically manufactured cells of its form factor.
Production and new potential customer testing will continue to ramp up through the end of the year. Following the completion of all of the UL and Ics certification requirements.
We also continued to develop our hybrid <unk> <unk> <unk> chemistry cell, which.
Which will be able to run on the same news see ourselves.
This product, which would have over 30% higher energy capacity versus standard 1% to three eight products yet in the same form factor is targeted at industrial and Iot Center and security applications, where extended life is critical.
At our wholly owned China facility, we continue to move forward on our project to upgrade our final chloride primary E ourselves and manufacturing processes.
Customers are in various stages of testing and commercial activity with one example, being our new 19, empower low rate sell to Oems, specifically targeting long life metering applications.
And our China facility, we also manufacture thin cells nine volt and several custom battery pack solutions.
Our goal remains to produce the highest value proposition best quality and safest products.
And whichever one of our global locations.
<unk> serves the supply chain or a specific end market <unk> OEM customer.
Looking at our communication systems business Q.
Q3, new product development revenue from products less than or equal to three years old represented approximately 11% of communication system revenues.
What are the various military vehicle modernization programs, both domestically and internationally.
Communication system products have been well received as demonstrated in multiple awards over the last 12 months.
As an update.
For the U S Army's handheld manpack small form fit and leader radio programs.
The October 2021 announced $4 2 million vehicle amplifier Adapters Award ship.
<unk> continued in the third quarter 2022.
And we anticipate making the remainder of the shipments throughout the end of this year.
Next for the July 2022, additional $4 6 million dollar award for vehicle amplifier adapters supply chain actions are underway to support the deliveries to start in early 2023.
Regarding the International vehicle program award valued at $7 $5 million that was received in September 2022 for.
For <unk> hundred 20, HVA and <unk> hundred 20 amplifiers.
These units start shipping by year end 2022, and will be completed in the first half of 2023.
And finally for the most recent vehicle communication Systems Award announced today valued at $5 $5 million. The initial supply chain execution process is underway to support 2023 deliveries.
In total these contracts received in the last year represent over $21 million in communications systems revenue most of which is still in front of us to deliver as of the end of Q3, just under $1 million has shipped to date due.
Due to the ongoing supply chain constraints.
New product development activities for both defense and commercial applications continues with several OEM partners addressing bearing emerging requirements for integrated systems.
One significant power solution, which will support rotary wing aircraft has completed form fit and function qualification trials by the customer on various platforms.
And is moving to procurement production units, which will take place over several years starting in 2023.
The edge service system integration product the <unk> thousand now in production with over 269 units delivered to date.
Continues to gain traction in multiple programs as it provides increased capability with a smaller form factor compared to currently fielded systems estimated at a 50% reduction in Cuban ways.
Ultralight provides the case systems and integration to enable this leading edge compute capability to be deployed and harsh military environments.
And edge solution dismounted variant the Crescent server.
Continuous early prototype test evaluation and demonstration at multiple events and customer venues interest is high in collaboration with key strategic partners continues in the development and exploration of the art of the possible when enterprise class compute capability is employed onto an individual.
Expectations are that we will feel crescent server operational prototypes in early 2023.
Development in the commercial markets also continues.
The initial low rate production units of our mobile data card delivered in 2021 remain in operational testing with the customer collecting in transporting autonomous vehicle data to their engineering facilities.
Other commercial products, the Virtualized radio access network enclosure supporting <unk> network deployments worldwide.
Is undergoing customer testing and evaluation by.
By multiple cellular network providers in two different countries for use in expanding <unk> market installation.
Supply chain challenges specific to electronic components continue to impact forecasting delivery schedules and our continued area of engagement by the communication systems team.
That said.
Communication systems ongoing captured Defense program awards improvement into defense core business bookings.
Combined with diversification into commercial markets and multiple brands provides a pathway to improve revenue continuity and for long term sustainable growth.
In closing for the third quarter of 2022.
Whereas we are pleased with.
The success by revenue.
Supplemented by our accretive acquisition.
The uptick in communication systems program Awards.
Strong overall company backlog.
And disciplined cost control and operating leverage.
We are still battling through the gross margin challenges.
The present inflationary and supply chain environment.
To that end some of the corrective actions underway.
Include but not limited to.
Modifying purchase agreement language to enable price increases prior to shipment due to market and our commodity price increases affecting the supply chain.
Being more aggressive in passing a law expediting logistical piece.
Increasing the reach of our sales and operational planning process with our customers and suppliers to better align a longer future time horizon for component availability with demand.
Reinvigorating and adding resources to our lean initiatives to better position, our manufacturing operators to be more efficient ascending the learning curve of producing a new products, including allocating capex for high return productivity investments.
And further leveraging our global facilities footprint to expand our global supply chain network.
Barack component access as well as cost improvement.
As we work to improve our gross margins through these and other specific variable costs and manufacturing productivity projects as well as price increases.
We remain committed to advancing our multi year transformational projects and transitioning more new products to production.
These transformational projects are expected to yield meaningful sustainable annual revenue streams in attractive growth markets from new competitively differentiated products.
Our capabilities.
And the mission critical end markets we serve.
Military defense energy and medical.
Align well with current world events and needs.
As we approach the end of 2022, we are still targeting total year profitable growth.
Solid cash flow from operations and maintaining a strong balance sheet.
We are determined to work through the near term gross margin challenges.
Again, the full benefit of the success of our revenue growth strategy.
Refocusing resources on our operating teams is necessary for.
For improved revenue and.
And EPS consistency.
Operator. This concludes my prepared remarks, and we'd be happy to open the call for questions.
Yeah.
Thank you, ladies and gentlemen, as a reminder, if you would like to ask a question I'll make a contribution in todays call. Please press star one on your telephone keypad to withdraw your question. Please press star two we'll pause just for a moment to allow everyone an opportunity to signal for questions.
We will now take our first question from Josh Josh Sullivan. Please go ahead. Your line is open.
Hey, good morning.
Good morning, Josh.
On the supply chain headwinds.
I think in the past you characterize you hold the hold ups with your customers' ability to take quarters from.
From you guys.
And then there's also the issue of your own ability to get things like Microelectronics curious kind of where is the center of gravity at this point.
What metrics are you watching to maybe suggest some easing at some point.
Well I wish I wish we were getting those signals at least during the third quarter that things that things were easing and what we experienced during the third quarter compared to earlier in the year earlier in the year, we ran into weekly or may be biweekly occurrences of issues that.
We had a resolve very very quickly with suppliers.
It seemed like during Q3 it seemed like it was in a daily occurrence or every other day.
Across a much broader spectrum of suppliers now.
What we're dealing with Josh as you know as we're dealing with large global primes and medical Oems very large companies our supply chain is comprised of numerous local smaller vendors.
It's pretty much scratch scattered that we have done business with.
For many many years so one of the things that we experienced is actually a success based issue and that is a surge lets say a surge in demand whether it be for medical whether it be for government and defense.
Suddenly quickly without too much advanced notice and we have to respond very very quickly now. The response, if we got these in the normal course of business is extended to start with so this puts us in a situation where we.
Go to our vendors.
And our vendors are pretty much tapped out in their ability to use their normal supply chain. So then we have to look at more extreme means and I hate to use this word but the word broker pops up and we all know the costs and complexities of dealing with brokers.
Think that the change now is that with the extension of our <unk> process to look further out.
And when I say further out.
If you look at our inventory around Towry has increased $8 million. So work doing the best we very Ken too.
To properly stock our shelves across all of our locations with the cells and in some of the critical components for at least what we know about our what we believe is going to happen. When you get hit with a surge that has to go out quickly it puts pressure across the whole.
Chain now will that continue to happen.
It could.
Have we developed alternative sources.
So that we don't have to go the brokerage road and trying to match cost with price increases in all the mathematical equations are trying to get everything matched one to one.
It's hard to say, but at least these situations experienced in Q3.
I think facilitated the path going forward and how we deal with both our vendors.
And our customers.
Just to add to another situation.
Of experience to the what if but as far as easing goes.
I can't say that there is too many visible signs that we're seeing in overall in overall lease easing.
In the end.
Five items that I had mentioned.
Got it okay that makes sense.
And then on the energy side, it seems to be growing cycle for deepwater.
Your exposure there to electrification.
So those activities. So curious if you're seeing any increased order activity or what you are seeing a loss.
The energy from the forward look.
Josh its Mike.
It continues to increase in both of our businesses three acquisition and next acquisition both had good content in oil and gas.
In addition to the oil and gas growth, which we're seeing which we know is.
As a cyclical market as well.
Both of those business units are also diversifying into other areas.
Thus, we operationally as we know oil and gas, which we're really excited about where they are also participating in some of our government defense product.
Designs and execution as well as medical carts.
XL acquisition, obviously, you've seen the benefit of the oil and gas business.
So as I was heavily involved in industrial computing and getting in some.
Some new brand new products exciting things, we didn't talk about we'll talk about by next quarter, where were getting into some asset tracking so.
I think healthy.
<unk> growth and I think we mentioned in the prepared remarks about a 7% organic growth in Q3, we see that continuing near term.
But we're also extremely excited about the diversification of those two entities as we move forward.
Got it and then kind of just to that point yet.
Some other products that server prototype at 'twenty, three that mobile data cards <unk> opportunity. How are we going to how are we going to measure success externally or are we going to see orders are you going to provide some of those testing results, which we look forward some of those new products coming forward.
And we're looking for new meaningful revenue streams.
We love our communication systems business is really good at what it does.
But it has a reasonably narrow lane traditionally and has ample ample fire radios and so one of the things we've been searching for a number of years is there a commercial play.
That'll give us some diversification have us be less susceptible to the cyclicality of the government defense spending and what we've developed over the last couple of years is where we had a strong.
Body worn amplifier capability with some vehicle amplifiers, and we got into integrated solutions involving amplifiers and power supplies and other components.
And to be able to build those products for.
Sort of battle hardened environments.
From a core competencies of the idea.
Consistent with the military is use of trying to get.
More compute capability closer towards the action as we're seeing there is an opportunity to for some of these solutions to be integrated into military products, but as well as the commercial products. So I think we will define success when we start to get some ongoing meaningful revenue on a recurring basis and we'll certainly communicate that during <unk>.
Future press releases and the earnings call.
Great. Thank you for that.
Thank you Josh your question.
Thank you Josh once again, if you would like to ask a question. Please press star one on your telephone keypad.
Yeah.
Okay.
It appears there is no further questions at this time I would like to turn the conference back to Mr. Michael for any additional or closing remarks. Thank you.
Great well. Thank you once again, everyone for joining us for the third quarter of 2022 earnings call and apologize again for the slight delay at the start.
We look forward to continue to share with you our quarterly progress so sorry to interrupt Mr. Michael So sorry, we have one.
Participants who would like to ask a question sure sure. It's Choi Chung from Wells Fargo Advisors. Please go ahead. Your line is open.
Good morning, Mike I'm, sorry, I was a little bit late getting onto the call.
Did you touch upon the wearable conformable battery contract and whether or not.
There has been any progress or information about whether or not you are getting any of the business.
Yes, we did comment in the prepared remarks, and you'll see that in the transcript.
Where we stand right now as we're continuing to move forward on the development of the product.
Mentioned.
And you probably didn't hear maybe didn't hear it the fat testing, which is a core part of the overall process will probably be in the first quarter now as we experienced some parts delays, but those things are still moving along well, we're very excited about that product and as being an idea Q contract. We really don't have any visibility to future delivery orders until we get through this hole.
First article testing process.
So certainly when there is any developments in terms of delivery orders and things like that given the strategic nature of this contract.
We would communicate that.
Thank you very much.
Quite welcome.
Thank you once again.
Would like to ask a question. Please press star one on your telephone keypad.
We will wait for a moment.
Alright. It appears there is no further questions at this time I would like to turn the conference back to you Mr. Michael.
Alright, well, thanks, everybody for participating have a great day.
Thank you for joining today's call you may now disconnect host please stay on the line and wait for further <unk>.
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Thanks.
[music].
Thank you.
No.
Yes.
Thanks.
Thank you.
Okay.
Okay.
Okay.
[music].
[music].
Okay.
Okay.
Okay.
Eminent.
Yes.
Yes.
Thank you.
[music].
Yes.
Okay.
Yes.
Yes.
[music].
Yes.
Got it.
Okay.
Yes.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
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Sure.
Great.
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Thank you.
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Yes.
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[music].
Okay.
[music].
Yes.
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Yes.
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Sure.
James.
[music].
Yes.
[music].
Okay.
Yes.
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Sure.
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Great.
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Sure.
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Yes.
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Yes.
Yes.
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[music].
Yes.
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Thank you.
Yes.
Thank you.
[music] expansion.
Yes.
[music].
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
[music] economy.
Okay.
[music].
Great.
[music].
Okay.
[music].
Okay.
Yes.
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Yes.
Yes.
Thank you.
Okay.
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Sure.
[music].
Yes.
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[music].
Okay.
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[music].
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Sure.
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[music].
Thanks.
Sure.