Q2 2024 Ultralife Corp Earnings Call

www.ultralifecorp.com

Operator: Good day, and thank you for standing by. Welcome to Ultralife Corporation's second quarter 2024 results conference call.

Operator: Good day, and thank you for standing by. Welcome to Ultralife Corporation 2nd, 2020-24 results conference call.

Speaker Change: Good day and thank you for standing by. Welcome to Ultralife Corporation's second quarter 2024 results conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to our first speaker today, Jody Burfening, Managing Director of LHA Investor Relations. Please go ahead.

Operator: At the time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question in that session. To ask a question during the session, you will need to press star 1-1 on your telephone. You then hear another made-at message; revising your hand is raised. To withdraw your question, please press star 1-1 again.

To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.

Operator: Please be advised, today's conference is being recorded.

Jody Burfening: It is now my pleasure to hand you over to our first speaker today, Jody Burfening, Managing Director of LHA Investor Relations. Please go ahead.

Jody Burfening: It is now my pleasure to hand you over to our first speaker today, Jody Burfening, Managing Director of LHA Investor Relations. Please go ahead.

Jody Burfening: Thank you, Evelyn, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the second quarter of fiscal 2024. With us on today's call are Mike Manna, Ultralife's President and CEO, and Phil Fain, Ultralife's Chief Financial Officer.

Jody Burfening: Thank you, everyone, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the 2nd quarter of fiscal 2024. With us on today's call, are Mike Manna, Ultralife's president and CEO, and Phil Fane, Ultralife's chief financial officer.

Jody Burfening: Thank you, Amberlynn, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the second quarter of fiscal 2024.

Speaker Change: With us on today's call are Mike Manna, Ultralife's President and CEO , and Phil Fain, Ultralife's Chief Financial Officer.

Jody Burfening: 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.UltralifeCore.com, where you'll find the release under Investor News in the Investor Relations section.

Jody Burfening: 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.ultralifecorp.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 contain forward-looking statements based on current expectations. However, actual results could differ materially from those projected as a result of various risks and uncertainties.

Speaker Change: 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.ultralifecorp.com, where you'll find the release under Investor News in the Investor Relations section.

Jody Burfening: Before turning 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 differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U.S. and foreign military spending, acceptance of our new products on a global basis, disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under our control.

Jody Burfening: The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in US and foreign military spending, acceptance of our new products on a global basis, disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under our control. The company cautions investors not to place undue reliance on forward-looking statements, which reflect the company's analysis only as of today. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances.

Speaker Change: Before turning 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.

Speaker Change: The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U.S. and foreign military spending,

Speaker Change: acceptance of our new products on a global basis, disruptions or delays in our supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under our control.

Jody Burfening: 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 new obligation to publicly update forward-looking statements to reflect subsequent events or circumstances.

Speaker Change: 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.

Jody Burfening: Further information on these factors and other factors that could affect Ultra-Life financial results are included in the company's filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K.

Speaker Change: Further information on these factors and other factors that could affect Ultralife's financial results are included in the company's filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K .

Jody Burfening: In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures.

Speaker Change: In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures. With that, I would now like to turn the call over to Mike. Good morning, Mike.

Michael Manna: With that, I would now like to turn the call over to Mike. Good morning, Mike. Thank you. Good morning. Welcome to our call on Ultra-Life Q2 operating results. Earlier today, we reported Q2 sales of 43 million and operating income of 3.9 million. The third consecutive quarter of 42 million or more in sales and 18 cents of EPS. Battery and energy product sales increased 8.3% over Q1 to the highest revenue level ever for the segment. Our combined gross margin continued to be strong at 26.9% compared to 24.8% a year ago, as our gross margin improvement projects continue a top priority.

Jody Burfening: Further information on these factors and other factors that could affect Ultralife's financial results is included in the company's 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 and differ from GAAP. With that said, I would now like to turn the call over to Mike. Good morning, Mike.

Michael E. Manna: Good morning. Welcome to our call on Ultralife's Q2 operating results. Earlier today, we reported Q2 sales of $43 million, and an operating income of $3.9 million. This was the third consecutive quarter of 42 million or more in sales and 18 cents of EPS. Battery and Energy product sales increased 8.3% over Q1 to the highest revenue level ever for the segment. Our combined gross margin continued to be strong at 26.9% compared to 24.8% a year ago as our gross margin improvement projects continue to be a top priority.

Michael E. Manna: Thank you.

Michael E. Manna: Good morning. Welcome to our call on Ultralife's Q2 operating results. Earlier today, we reported Q2 sales of $43 million, an operating income of $3.9 million.

Michael E. Manna: The third consecutive quarter of 42 million or more in sales and 18 cents of EPS.

Michael E. Manna: Battery and Energy product sales increased 8.3% over Q1 to the highest revenue level ever for the segment.

Michael E. Manna: Our combined gross margin continued to be strong at 26.9% compared to 24.8% a year ago as our gross margin improvement projects continue a top priority.

Michael Manna: Deity. Our top three initiatives for the year, material cost deflation, lean productivity, and sales funnel improvement, continued favorable for our grass in Q2 with additional expertise in place to drive future revenue growth. During Q2, we are able to pay down our acquisition debt by over 52 percent, which will significantly decrease our interest expense going forward and allow for future accretive M&A. As a result of our strong operational performance, I am happy to report that Ultralife was included in the Russia 2000 Index this year, which will enhance our profile in the investment community, which is something Phil and I are focused on.

Michael E. Manna: Our top three initiatives for the year, material cost deflation, lean productivity, and sales funnel improvement, continued favorable progress in Q2, with additional expertise in place to drive future revenue growth. During Q2, we were able to pay down our acquisition debt by over 52%, which will significantly decrease our interest expense going forward and allow for future accretive M&A. As a result of our strong operational performance, I am happy to report that Ultralife was included in the RUSHEL 2000 Index this year, which will enhance our profile in the investment community, which is something Phil and I are focused on. I will now turn it over to Phil to go through the detailed numbers.

Michael E. Manna: Our top three initiatives for the year, material cost deflation, lean productivity, and sales funnel improvement, continued favorable progress in Q2 with additional expertise in place to drive future revenue growth.

Michael E. Manna: During Q2, we were able to pay down our acquisition debt by over 52%, which will significantly decrease our interest expense going forward and allow for future accretive M&A.

Michael E. Manna: As a result of our strong operational performance, I am happy to report that Ultralife was included in the RUSHEL 2000 Index this year, which will enhance our profile in the investment community, which is something Phil and I are focused on.

Philip Fain: I will now turn it over to Phil to talk through the detailed numbers.

Philip A. Fain: Thank you, Mike, and good morning, everyone. Earlier this morning, we released our second quarter results for the quarter ended June 30th, 2024. We also filed our Form 10-Q with the SEC and updated our investor presentation in the Investor Relations section of our website, which includes a summary and status of our transformational new product. Consolidated revenues totaled $43 million, compared to $42.7 million for the second quarter of 2023. Revenues from our battery and energy product segment were $36.7 million, compared to $33.9 million last year, an increase of 8.3 percent.

Philip Fain: Thank you, Mike, and good morning, everyone. Earlier this morning, we released our second quarter results for the quarter ended June 30, 2024. We also filed our Form 10-Q with the SEC and updated our investor presentation in the Investor Relations section of our website, which includes a summary and status of our transformational new products. Consolidated revenues told 43 million compared to 42.7 million for the second quarter of 2023. Revenue from our battery and energy product segment were 36.7 million compared to 33.9 million last year, an increase of 8.3 percent. This growth was driven by very strong performance in our sales to government defense in medical markets, which increased 30.5 percent and 20.1 percent, respectively.

Michael E. Manna: I will now turn it over to Phil to talk through the detailed numbers.

Philip A. Fain: Thank you, Mike, and good morning, everyone.

Philip A. Fain: Earlier this morning we released our second quarter results for the quarter end of June 30th 2024.

Philip A. Fain: We also filed our Form 10-Q with the SEC and updated our investor presentation in the Investor Relations section of our website, which includes a summary and status of our transformational new products.

Philip A. Fain: This growth was driven by very strong performance in our sales to government defense and medical markets, which increased 30.5% and 20.1%, respectively. These increases were partially offset by a decline of 10.9% in oil and gas market sales.

Michael E. Manna: Consolidated revenues totaled $43 million compared to $42.7 million for the second quarter of 2023.

Michael E. Manna: Revenues from our battery and energy product segment were $36.7 million compared to $33.9 million last year, an increase of 8.3 percent.

Michael E. Manna: This growth was driven by very strong performance in our sales to government defense and medical markets which increased 30.5% and 20.1% respectively.

Philip Fain: These increases were partially offset by a decline of 10.9 percent in oil and gas market sales. The sales split between commercial and government defense for a battery business was 75.25 compared to 78.22 reported for the 2023 full year, and the domestic to international split was 53.47 compared to 49.51 for the 2023 full year. Demonstrating heightened domestic demand for our core products and the continued success of our global revenue diversification strategy.

Michael E. Manna: These increases were partially offset by a decline of 10.9% in oil and gas market sales.

Philip A. Fain: The sales split between commercial and government defense for the battery business was $75.25 compared to $78.22 reported for the 2023 full year, and the domestic to international split was 53-47 compared to 49-51 for the 2023 full year, demonstrating heightened domestic demand for our core products and the continued success of our global revenue diversification strategy. Revenues from our communications system segment, of 6.3 million, declined 28.7 percent from the 8.8 million we reported last year.

Michael E. Manna: The sales split between commercial and government defense for a battery business was $75.25 compared to $78.22 reported for the 2023 full year.

Michael E. Manna: and the domestic to international split was 53-47 compared to 49-51 for the 2023 full year.

Michael E. Manna: demonstrating heightened domestic demand for our core products and the continued success of our global revenue diversification strategy.

Philip Fain: Revenue from our communication system segment of 6.3 million declined 28.7 percent from the 8.8 million we reported last year. Primarily attributable to shipments in the 2023 period of vehicle amplifier adapter orders to a global defense contractor for the US Army in an integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor for which shipments had been delayed from earlier periods due to supply chain disruptions. On a consolidated basis, the commercial to government defense sales split was 64.36, identical to that reported for the 2023 full year. Our total backlog exiting the second quarter was 93 million and remains diverse in nature across our commercial and government defense customer base.

Speaker Change: Revenues from our communications system segment of $6.3 million declined 28.7% from the $8.8 million we reported last year.

Philip A. Fain: Primarily attributable to shipments in the 2023 period of vehicle amplifier adapter orders to a global defense contractor for the U.S. Army and of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor, for which shipments had been delayed from earlier periods due to supply chain disruption.

Michael E. Manna: primarily attributable to shipments in the 2023 period of vehicle amplifier adapter orders to a global defense contractor for the U.S. Army and of integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor.

Michael E. Manna: for which shipments had been delayed from earlier periods due to supply chain disruptions.

Philip A. Fain: On a consolidated basis, the commercial to government defense sales split was $64.36, identical to that reported for the 2023 full year. Our total backlog exiting the second quarter was $93 million and remains diverse in nature across our commercial and government defense customer base. The replenishment rate remains high, and the backlog represents 55% of TTM sales.

Michael E. Manna: On a consolidated basis, the commercial-to-government defense sales split was $64.36, identical to that reported for the 2023 full year.

Michael E. Manna: Our total backlog exiting the second quarter was 93 million and remains diverse in nature across our commercial and government defense customer base.

Philip Fain: James. The replenishment rate remains high, and the backlog represents 55% of TTM sales. Our consolidated gross profit was 11.6 million, up 9.2% over the 2023 period. Fire Eclipsing, the 0.7% increase in revenues. As a percentage of total revenues, Consolidated Gross Margin was 26.9%, a 210 basis point improvement over the 24.8% reported for last year's second quarter. Gross profit for our battery and energy products business was 10 million compared to 7.5 million last year, an increase of 32%. Gross margin was 27.1%, an increase of 480 basis points from the 22.3% reported for last year's quarter, and an increase of 140 basis points on a quarterly sequential basis.

Michael E. Manna: The replenishment rate remains high and the backlog represents 55% of TTM sales.

Philip A. Fain: Our consolidated gross profit was $11.6 million, up 9.2% over the 2023 period, far exceeding the 0.7% increase in revenue. As a percentage of total revenues, our consolidated gross margin was 26.9 percent, a 210 basis point improvement over the 24.8 percent reported for last year's second quarter. Gross profit for our battery and energy products business was $10 million compared to $7.5 million last year, an increase of 32 percent. Gross margin was 27.1%, an increase of 480 basis points from the 22.3% reported for last year's quarter and an increase of 140 basis points on a quarterly sequential basis.

Michael E. Manna: Our consolidated gross profit was $11.6 million, up 9.2% over the 2023 period.

Michael E. Manna: far eclipsing the 0.7% increase in revenues.

Michael E. Manna: As a percentage of total revenues, consolidated gross margin was 26.9%, a 210 basis point improvement over the 24.8% reported for last year's second quarter.

Michael E. Manna: Gross profit for our battery and energy products business was $10 million compared to $7.5 million last year, an increase of 32 percent.

Speaker Change: Gross margin was 27.1%, an increase of 480 basis points from the 22.3% reported for last year's quarter, and an increase of 140 basis points on a quarterly sequential basis.

Philip Fain: The year over a year in sequential increases were primarily due to higher cost absorption and more efficiencies resulting from our concerted efforts to level load production more evenly across the 2024 quarter, as well as improved price realization. For a communication system segment, gross profit was 1.6 million compared to 3 million for the year earlier period. Gross margin was 25.6% compared to 34.5% last year, primarily due to sales product mix and factory volume. Operating expenses were 7.6 million, an increase of 0.7 million or 10.4% from the year earlier quarter. As a percentage of revenues, operating expenses were 17.8%, compared to 16.2% for last year's second quarter.

Philip A. Fain: The year-over-year and sequential increases were primarily due to higher cost absorption and more efficiencies resulting from our concerted efforts to level load production more evenly across the 2024 quarter, as well as improved price realization. For our communications system segment, gross profit was $1.6 million compared to $3 million for the year earlier period. Gross margin was 25.6 percent compared to 34.5 percent last year, primarily due to sales product mix and factory volume.

Speaker Change: The year-over-year and sequential increases were primarily due to higher cost absorption and more efficiencies resulting from our concerted efforts to level-load production more evenly across the 2024 quarter, as well as improved price realization.

Speaker Change: For our communications system segment, gross profit was $1.6 million compared to $3 million for the year earlier period.

Speaker Change: Gross margin was 25.6% compared to 34.5% last year, primarily due to sales product mix and factory volume.

Philip A. Fain: Operating expenses were $7.6 million, an increase of $0.7 million, or 10.4% from the year earlier quarter. As a percentage of revenues, operating expenses were 17.8% compared to 16.2% for last year's second quarter. The increase is spread evenly among investments in new product development, the addition of experienced sales resources to drive future growth, and executive bonus accruals which were not recorded in the 2023 second quarter. The leverage provided by our 210 basis point gross margin improvement resulted in an increase in operating margin to 9.1% compared to 8.6% for the 2023 second quarter.

Speaker Change: Operating expenses were $7.6 million, an increase of $0.7 million, or 10.4% from the year earlier quarter. As a percentage of revenues, operating expenses were 17.8%, compared to 16.2% for last year's second quarter.

Philip Fain: The increase is spread evenly among investments in new product development, addition of experienced sales resources to drive future growth, and executive bonus accruals which were not reported in the 2023 second quarter. The leverage provided by our 210 basis point gross margin improvement resulted in an increase in operating margin to 9.1% compared to 8.6% for the 2023 second quarter. Other income, reported below operating income, includes 0.2 million as a preliminary payment from our insurance carrier pertaining to the cyber attack which occurred in the first quarter of 2023, with a considerably larger amount remaining in review with the carrier.

Speaker Change: The increase is spread evenly among investments in new product development, addition of experienced sales resources to drive future growth, and executive bonus accruals which were not recorded in the 2023 second quarter.

Speaker Change: The leverage provided by our 210 basis point gross margin improvement resulted in an increase in operating margin to 9.1% compared to 8.6% for the 2023 second quarter.

Philip A. Fain: Other income reported below operating income includes $0.2 million as a preliminary payment from our insurance carrier pertaining to the cyber attack which occurred in the first quarter of 2023, with a considerably larger amount remaining in review with the carrier. Other income for the second quarter of 2023 includes an employee retention credit of $1.5 million under the CARES Act of 2020 and the American Rescue Plan of 2021. We are still waiting to receive our ERC refund plus the interest earned on this amount from the IRS.

Speaker Change: Other income, reported below operating income, includes $0.2 million as a preliminary payment from our insurance carrier pertaining to the cyber attack which occurred in the first quarter of 2023.

Philip Fain: Other income for the second quarter of 2023 includes an employee retention credit of 1.25 million under the CARES Act of 2020 and the American Rescue Plan of 2021.

Speaker Change: with a considerably larger amount remaining in review with the carrier.

Speaker Change: Other income for the second quarter of 2023 includes an employee retention credit of $1.5 million under the CARES Act of 2020 and the American Rescue Plan of 2021.

Philip Fain: We are still waiting to receive our ERC refund plus the interest earned on this amount from the IRS. Our tax provision for the second quarter was 0.9 million versus 1.4 million reported for the 2023 quarter, computed on a GAAP basis at statutory rate. Included the impact of interest expense, health finance, the Excel acquisition, and foreign currency gains and losses, net income was $3 million or $0.18 per share on a GAAP fully diluted basis. Excluding the provision for non-KSUS taxes, expected to be fully offset by our net operating loss carry forwards, in other tax credits, adjusted fully diluted EPS was $0.22 per share for the second quarter of 2024, compared to $0.29 per share for the 2023 period, which included $0.10 per share from the ERC.

Speaker Change: We are still waiting to receive our ERC refund plus the interest earned on this amount from the IRS.

Philip A. Fain: Our tax provision for the second quarter was $0.9 million versus $1.4 million reported for the 2023 quarter, computed on a gap basis at statutory rates. Including the impact of interest expense to help finance the Excel acquisition and foreign currency gains and losses, net income was $3 million, or 18 cents per share on a GAAP fully diluted basis. This compares to net income of $3.3 million, or $0.21 per share, for the 2023 quarter, which included $0.07 per share net of gap taxes from the recognition of the ERC.

Speaker Change: Our tax provision for the second quarter was $0.9 million versus $1.4 million reported for the 2023 quarter, computed on a gap basis at statutory rates.

Speaker Change: Including the impact of interest expense to help finance the Excel acquisition and foreign currency gains and losses, net income was $3 million or $0.18 per share on a GAAP fully diluted basis.

Speaker Change: This compares to net income of $3.3 million or $0.21 per share for the 2023 quarter, which included $0.07 per share net of gap taxes from the recognition of the ERC.

Philip A. Fain: Excluding the provision for non-cash U.S. taxes expected to be fully offset by our net operating loss carry-forwards in other tax credits, adjusted fully diluted EPS was $0.22 per share for the second quarter of 2024, compared to $0.29 per share for the 2023 period, which included $0.10 per share from the ERC. Adjusted EBITDA, defined as EBITDA including non-cash stock-based compensation expense, was $5.4 million, or 12.6% of sales, compared to $6.3 million, or 14.7% for the prior year quarter, which included $1.5 million for the ERC. On a TTM basis, adjusted EBITDA is $18.9 million, or 11.2% of sales.

Speaker Change: Excluding the provision for non-cash U.S. taxes expected to be fully offset by our net operating loss carry-forwards in other tax credits, adjusted fully diluted EPS was $0.22 per share for the second quarter of 2024.

Speaker Change: compared to $0.29 per share for the 2023 period, which included $0.10 per share from the ERC.

Philip Fain: Adjusted EBITDA, defined as EBITDA, including non-KSUS stock-based compensation expense, was $5.4 million or 12.6 per cent of sales, compared to $6.3 million or 14.7 per cent for the prior year quarter, which included $1.5 million for the ERC. On a TTM basis, adjusted EBITDA is $18.9 million or 11.2 percent of sales. Turning to our balance sheet, we ended the second quarter with work in capital of $63.2 million in a current ratio of $4.1, compared to $66.5 million and $3.8 for 2023 year end. A highlight of the second quarter was the reduction of our debt by $13.2 million, or 52.2 per cent, from $25.3 million to $12.1 million.

Speaker Change: Adjusted EBITDA, defined as EBITDA including non-cash stock-based compensation expense, was 5.4 million or 12.6 percent of sales.

Speaker Change: compared to 6.3 million, or 14.7%, for the prior year quarter, which included 1.5 million for the ERC.

Philip A. Fain: On a TTM basis, adjusted EBITDA is $18.9 million or 11.2% of sales.

Philip A. Fain: Turning to our balance sheet, we ended the second quarter with working capital of $63.2 million in a current ratio of 4.1, compared to $66.5 million and $3.8 million for 2023 year-end. The highlight of the second quarter was the reduction of our debt by 13.2 million, or 52.2%, from 25.3 million to 12.1 million. This reduction, on top of a $3.6 million reduction in accounts payable during the quarter, was primarily driven by our continued strong operating results.

Speaker Change: Turning to our balance sheet, we ended the second quarter with working capital of $63.2 million in a current ratio of 4.1 compared to $66.5 million and $3.8 million for 2023 year end.

Speaker Change: A highlight of the second quarter was the reduction of our debt by 13.2 million or 52.2% from 25.3 million to 12.1 million.

Philip Fain: This reduction, on top of a $3.6 million reduction in accounts payable during the quarter, was primarily driven by our continued strong operating results. The favorable impact of the level loading of our operations, resulting in more consistent customer remittances, and a $2.4 million reduction in inventory. The pay down of our debt has a significant impact on our EPS, as each $1 million reduction reduces interest expense by approximately $18,000 per quarter. So the $13 million pay down of debt should lower interest expense by $234,000 in the third quarter, excluding any further pay downs, and equates to $1.5 of GAAP EPS in $1.5 of adjusted EPS.

Speaker Change: This reduction, on top of a $3.6 million reduction in accounts payable during the quarter, was primarily driven by our continued strong operating results

Philip A. Fain: The favorable impact of the level loading of our operations resulted in more consistent customer remittances and a $2.4 million reduction in inventory. The pay down of our debt has a significant impact on our EPS, as each $1 million reduction reduces interest expense by approximately $18,000 per quarter. So the $13 million paydown of debt should lower interest expense by $234,000 in the third quarter, excluding any further paydowns, and equates to one cent of gap EPS and 1.5 cents of adjusted EPS.

Speaker Change: The favorable impact of the level loading of our operations resulting in more consistent customer remittances and a $2.4 million reduction in inventory.

Speaker Change: The pay down of our debt has a significant impact on our EPS as each $1 million reduction reduces interest expense by approximately $18,000 per quarter.

Speaker Change: So the $13 million pay down of debt should lower interest expense by $234,000 in the third quarter, excluding any further pay downs.

Speaker Change: and equates to 1 cent of gap EPS and 1.5 cents of adjusted EPS.

Philip Fain: Accordingly, our focus is to continue the heightened pace of the pay down of our debt. Going forward, our backlog, diversified end markets, growth initiatives, and ongoing actions to improve our gross margins, while further strengthening our balance sheet, positioned us well to realize the leverage of our business model.

Philip A. Fain: Accordingly, our focus is to continue the heightened pace of the paydown of our debt. Going forward, our backlog, diversified end markets, growth initiatives, and ongoing actions to improve our gross margins, while further strengthening our balance sheet, position us well to realize the leverage of our business model. I will now turn it back to Mike.

Speaker Change: Accordingly, our focus is to continue the heightened pace of the pay down of our debt.

Speaker Change: Going forward, our backlog diversified end markets.

Speaker Change: growth initiatives and ongoing actions to improve our gross margins, while further strengthening our balance sheet, position us well to realize the leverage of our business model. I will now turn it back to Mike.

Michael Manna: I will now turn it back to Mike. Thank you, Phil, for the detailed review of the Q2 results.

Michael E. Manna: Thank you, Phil, for the detailed review of the Q2 results. As I mentioned on previous calls, we have three major 2024 priorities to accomplish. First, continued material cost deflation. In Q2, we favorably negotiated our main logistics contracts and expect to realize positive savings of a few cents per year based on current volumes. We continue to work on Kanban and pull systems with key suppliers to smooth material and cash flow and positively impact inventory terms. Secondly, lean productivity continues to reduce waste and inefficiencies in all of our processes throughout the business.

Michael Manna: As I mentioned on previous calls, we have three major 2024 priorities to accomplish. First, continued material cost deflation. In Q2, we favorably negotiated our main logistics contracts and expect to realize positive savings of a few cents per year based on current volumes. We continue to work on combine and pull systems with key suppliers to smooth material and cash flow and positively impact inventory turns.

Michael E. Manna: Thank you, Phil, for the detailed review of the Q2 results. As I mentioned on previous calls, we have three major 2024 priorities to accomplish.

Michael E. Manna: First, continued material cost deflation.

Speaker Change: In Q2, we favorably negotiated our main logistics contracts and expect to realize positive savings of a few cents per year based on current volumes. We continue to work on Kanban and pull systems with key suppliers to smooth material and cash flow and positively impact inventory turns.

Michael Manna: Secondly, lean productivity. Continue to reduce waste and inefficiencies in all of our processes throughout the business. We have hired a 25-year lean process veteran in our newer location to focus on improving manufacturing and back office efficiencies throughout the organization with a target of decreasing labor 3-5 percent on several or high volume lines.

Michael E. Manna: We have hired a 25-year lean process veteran in our Newark location to focus on improving manufacturing and back office efficiencies throughout the organization with a target of decreasing labor 3-5% on several of our high volume lines. Lastly, sales funnel improvement. We have a larger and increasing pipeline of new products with a healthy set of funnel sales opportunities that need to continue to grow. To that end, we've hired two additional sales resources to focus on large program wins with key OEM partners, driving commercial sales growth of both custom and Ultralife-branded products. One sales resource is a 30-year battery industry veteran, and the other joins us from a major medical device manufacturer.

Michael E. Manna: Secondly, lean productivity.

Michael E. Manna: continue to reduce waste and inefficiencies in all of our processes throughout the business.

Michael E. Manna: We have hired a 25-year lean process veteran in our Newark location to focus on improving manufacturing and back office efficiencies throughout the organization with a target of decreasing labor 3-5% on several of our high volume lines.

Michael Manna: Lastly, sales funnel improvement. We have a larger and increasing pipeline of new products with a healthy set funnel sales opportunities that needs to continue to grow. To that end, we have hired two additional sales resources to focus on large program winds with key OEM partners, driving commercial sales growth of both custom and ultra life branded products. One sales resource is a 30-year battery industry veteran, where the other joins us from a major medical device manufacturer. We are currently transitioning multiple CRM systems to a new global CRM system to better manage global opportunities and funnel status.

Michael E. Manna: Lastly, sales funnel improvement. We have a larger and increasing pipeline of new products with a healthy set funnel sales opportunities that needs to continue to grow.

Speaker Change: To that end, we have hired two additional sales resources to focus on large program wins with key OEM partners, driving commercial sales growth of both custom and Ultralife branded products.

Michael E. Manna: One sales resource is a 30-year battery industry veteran, where the other joins us from a major medical device manufacturer.

Michael E. Manna: We are currently transitioning multiple CRM systems to a new global CRM system to better manage global opportunities and funnel status. Next, I will give updates on the organic growth projects and new product development underway for the businesses, which are key to future sales and market expansion. Our communication systems business continues to ship EL8000 server cases to several customers, and we are working diligently to elevate our partner status level, which will enable us to work more collaboratively with other partners on integration and engineering projects within the organization.

Michael E. Manna: We are currently transitioning multiple CRM systems to a new global CRM system to better manage global opportunities and funnel status.

Michael Manna: Next, I will give updates on the organic growth projects and new product development underway for the businesses, which are key to future sales and market expansion. Our communication systems business continues to ship EL-8000 server cases to several customers, and we are working diligently to elevate our partner status level, which will enable us to work more collaboratively with other partners on the integration and engineering projects within the organization. As I have noted in past calls, we have several new exciting next generation amplification products underway and nearing completion. We are completing validation and testing on a new amplification product with several international customers.

Michael E. Manna: Next, I will give updates on the organic growth projects and new product development underway for the businesses, which are key to future sales and market expansion.

Michael E. Manna: Our communication systems business continues to ship EL8000 server cases to several customers and we are working diligently to elevate our partner status level, which will enable us to work more collaboratively with other partners on the integration and engineering projects within the organization.

Michael E. Manna: As I've noted in past calls, we have several new exciting next-generation amplification products underway and nearing completion. We are completing validation and testing on a new amplification product with several international customers. This product is targeted to be radio-agnostic with an optional test and maintenance package to support customer sustainment, and we expect it to be available for production orders by the end of the year. Meanwhile, we are advancing our next generation high-performance amplifier engine to be used across all advanced radio platforms. This advanced amplifier continues our heritage of small, high-power, high-efficiency, man-worn amplification products in the Ultralife family of brands.

Michael E. Manna: As I've noted in past calls, we have several new exciting next-generation amplification products underway and nearing completion.

Michael E. Manna: We are completing validation and testing on a new amplification product with several international customers. This product is targeted to be radio-agnostic with an optional test and maintenance package to support customer sustainment, and we expect it to be available for production orders by the end of the year.

Michael Manna: This product is targeted to be radio agnostic with an optional test and maintenance package to support customer sustainment, and we expected to be available for production orders by the end of the year. Meanwhile, we are advancing our next-generation high-performance amplifier engine to be used across all advanced radio platforms. This advanced amplifier continues our heritage of small, high-power, high-efficiency, man-worn amplification products in the ultra-life family of brands.

Michael E. Manna: Meanwhile, we are advancing our next-generation high-performance amplifier engine to be used across all advanced radio platforms. This advanced amplifier continues our heritage of small, high-power, high-efficiency, man-worn amplification products in the Ultralife family of brands.

Michael Manna: Lastly, we received the following $5.5 million IDIQ from the U.S. government to continue its purchase of radio power supplies and mounts for vehicular modernization initiatives and a logistics support contract of $3.1 million supporting fielded amplified and non-amplified vehicle communications platforms. On the battery and energy side of the business, we are excited about the opportunity to funnel growth across a variety of new and existing products and our optimistic will see incremental orders this year. As previously mentioned, we have production equipment in place for our thin cell to support customers in the medical wearable space and several applications in Bluetooth tracking.

Michael E. Manna: Lastly, we received a follow-on $5.5 million IDIQ from the U.S. government to continue its purchase of radio power supplies and mounts for vehicular modernization initiatives and a logistics Support Contract of $3.1 million to support fielded amplified and non-amplified vehicle communications platforms. On the battery and energy side of the business, we're excited about the opportunity for funnel growth across the variety of new and existing products and are optimistic we'll see incremental orders this year.

Michael E. Manna: And lastly...

Michael E. Manna: We received a follow-on $5.5 million IDIQ from the U.S. government to continue its purchase of radio power supplies and mounts for vehicular modernization initiatives and a logistics support contract of $3.1 million supporting fielded amplified and non-amplified vehicle communications platforms.

Michael E. Manna: On the battery and energy side of the business, we're excited about the opportunity funnel growth across the variety of new and existing products.

Michael E. Manna: As previously mentioned, we have production equipment in place for our thin cell to support customers in the medical wearable space and several applications in Bluetooth tracking. The sales funnel is strong, with multiple projects in the qualification phase, primarily in the medical application space. We expect further updates on qualification and forecast in Q3 as our customers continue their qualification and commercialization efforts. The 1-2-3-A product line, currently supporting IOT and illumination markets, has seen opportunity funnel growth in medical battery-packed assemblies, both with domestic and international customers.

Michael E. Manna: and are optimistic we'll see incremental orders this year.

Michael E. Manna: As previously mentioned, we have production equipment in place for our thin cell to support customers in a medical wearable space and several applications in Bluetooth tracking.

Michael Manna: The salesman will strong with multiple projects in the qualification phase primarily in the medical application space. We expect further updates on qualification and forecast and Q3 as our customers continue their qualification and commercialization efforts. The 123A product client currently supporting IoT and illumination markets has seen opportunities for growth in medical battery pack assemblies, both with domestic and international customers. We continue to make improvements in both the CR and XR 123A products to reduce costs and increase performance as we quote opportunities. Our improved final product, the final chloride product client targeting monitoring and telemetry applications, continues qualification and field testing with several customers and are currently in commercial discussions and quality reviews of manufacturing locations.

Michael E. Manna: The sales funnel is strong with multiple projects in the qualification phase, primarily in the medical application space.

Michael E. Manna: We expect further updates on qualification and forecast in Q3 as our customers continue their qualification and commercialization efforts.

Michael E. Manna: The 1-2-3-A product line, currently supporting IOT and illumination markets,

Michael E. Manna: has seen opportunity funnel growth in medical battery pack assemblies both with domestic and international customers. We continue to make improvements in both the CR and XR123A products to reduce costs and increase performance as we quote opportunities.

Michael E. Manna: We continue to make improvements in both the CR and XR123A products to reduce costs and increase performance as we quote opportunities. Our improved final product, the final chloride product line, targeting monitoring and telemetry applications, continues qualification and field testing with several customers, and is currently in commercial discussions and quality reviews of manufacturing locations. With respect to the conformal wearable battery, the U.S. government has ended our program, coincident with the expiration of the three-year base contract, due to lack of visibility for long-term production volume because of delays and technical issues with the Integrated Visual Augmentation System program, known as IVAS.

Michael E. Manna: Our Improved Phenyl Chloride product line, targeting monitoring and telemetry applications, continues qualification and field testing with several customers, and are currently in commercial discussions and quality reviews of manufacturing locations.

Michael Manna: With respect to the conformal wearable battery, the U.S. government has ended our program, coincident with the expiration of the three-year-based contract, due to lack of visibility for long-term production volume because of delays and technical issues with the Integrated Visual Augmentation System program known as IVAS. Nevertheless, we are continuing to develop this product to support several allied government and defense customers and believe our investment in the product will pay off long-term as we've already received a $270,000 order from an international customer.

Michael E. Manna: With respect to the conformal wearable battery,

Speaker Change: The U.S. government has ended our program, coincident with the expiration of the three-year base contract, due to lack of visibility for long-term production volume because of delays and technical issues with the Integrated Visual Augmentation System program, known as IVAS.

Michael E. Manna: Nevertheless, we are continuing to develop this product to support several allied government and defense customers and believe our investment in the product will pay off long term, as we have already received a $270,000 order from an international customer. Sales funnel and opportunity pipeline growth in both businesses continues to be key for 2024. And I expect with the added focus and resources, we will continue to expand our aperture and opportunity wins. We continue to work on our key gross margin initiatives and expect to see significant improvement as CapEx investments, lean projects, and material efforts continue to enter our production line. We expect to strategically pay down our debt throughout 2024, balancing debt repayment with other business investments to support our key objectives, as we concurrently look for possible accretive acquisitions.

Michael E. Manna: Nevertheless, we are continuing to develop this product to support several allied government and defense customers and believe our investment in the product will pay off long term as we have already received a $270,000 order from an international customer.

Michael Manna: Sales funnel and opportunity pipeline growth in both businesses continues to be key for 2024, and I expect that with the added focus and resources we will continue to expand our aperture and opportunity wins. We continue to work on our key gross margin initiatives and expect to see study improvement as capex investments, lean projects, and material efforts continue to enter our production lines. We expect this strategically paid down our debt throughout 2024, bouncing debt paid down with other business investments to support our key objectives as we can currently look for possible creative acquisitions.

Michael E. Manna: Sales funnel and opportunity pipeline growth in both businesses continues to be key for 2024, and I expect with the added focus and resources, we will continue to expand our aperture and opportunity wins.

Michael E. Manna: We continue to work on our key gross margin initiatives and expect to see study improvement as CapEx investments, lean projects, and material efforts continue to enter our production lines.

Michael E. Manna: We expect to strategically pay down our debt throughout 2024, balancing debt paydown with other business investments to support our key objectives, as we concurrently look for possible accretive acquisitions.

Michael Manna: Thanks, everyone.

Michael E. Manna: Thanks, everyone. That concludes the prepared remarks for today. Now, back to the operator for questions.

Michael Manna: That concludes the prepared remarks for today.

Operator: Now back to the operator for questions. Thank you.

Speaker Change: Thanks everyone. That concludes the prepared remarks for today. Now back to the operator for questions.

Operator: We will now begin the question and answer session. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be known. To withdraw your question, please press star 11 again. Our first question comes from the line of Josh Sullivan from the Benchmark Company. Please ask your question.

Operator: We will now begin the question and answer session. That's a reminder to ask a question. Please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Please stand by while we compile the Q&A roster.

Speaker Change: Thank you. We will now begin the question and answer session. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 1 1 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Joshua Sullivan: Our first question comes from the line of George Sullivan from the Benchmark Company. Please ask your question.

Speaker Change: Our first question comes from the line of Josh Sullivan from the Benchmark Company. Please ask your question.

Joshua Ward Sullivan: Hey, good morning. Congratulations on the results here. Um, you know, starting off looking at the impressive debt paydown in the quarter, how should we think of free cash generation going forward? Can we stay at these levels? And then maybe what are the priorities for cash?

Joshua Sullivan: Good morning. Good to listen to the other results here. Maybe starting off looking at the impressive debt paid down in the quarter.

Joshua Ward Sullivan: Hey, good morning. Congratulations on the results here.

Joshua Sullivan: How should we think of free cash generation going forward? Can we stay at these levels? And then maybe what are the priorities for cash? Certainly, the level loading has been a major, a major help for us. And it was just a matter of time before we got that functioning across all the various functions. Now you can talk about level loading and manufacturing, but that is, you know, it extends downward into the whole supply chain. It extends upward to the customers throughout the S&OP process. And it ends up on the balance sheet in terms of cash if it's all properly operating.

Speaker Change: You know, just maybe starting off looking at the impressive debt pay down in the quarter, you know, how should we think of free cash generation going forward? Can we can we stay at these levels?

Speaker Change: and then maybe what are the priorities for cash.

Speaker Change: Well, certainly the level loading has been a major, a major help for us.

Philip A. Fain: And it was just a matter of time before we got that functioning across all the various functions. Now, you can talk about level loading in manufacturing, but that is, you know, it extends downward into the whole supply chain. It extends upward to the customers throughout the S&OP process, and it ends up on the balance sheet in terms of cash if it's all properly operating. And that's exactly what we saw in Q3.

Speaker Change: And it was just a matter of time before we got that functioning across all the various functions.

Speaker Change: Now, you can talk about level loading in manufacturing, but that is, you know, it extends downward into the whole supply chain. It extends upward to the customers throughout the S&OP process.

Speaker Change: And it ends up on the balance sheet in terms of cash, if it's all up properly.

Michael Manna: And that's exactly what we saw in Q3. Payables down, meaning a more steady supply of products from our supplier, meaning an improved S&OP chain. Throughout the supply base, throughout the customers, all the way through the customers. And at the end of the day, we wind up with cash sooner on a steady or basis. The way I look at what's going to happen with debt, I mean I could tell you right now that we've already reduced our debt by a couple million dollars in just in the few weeks since the second quarter ended.

Philip A. Fain: Payables down, meaning a more steady supply of products from our supplier, meaning an increase throughout the supply base, throughout the customers, all the way through the customers. And at the end of the day, we wind up with cash sooner on a steadier basis. So potential acquisitions, and anything and everything that's going to help grow our business profitably.

Speaker Change: operating. And that's exactly what we saw in Q3. Payables down, meaning a more steady supply of products from our supplier, meaning an improved S&OP chain.

Speaker Change: throughout the supply base, throughout the customers, all the way through the customers. And at the end of the day, we wind up with cash sooner on a steadier basis. So.

Speaker Change: The way I look at what's going to happen with debt, I mean, I could tell you right now that we've already reduced our debt by a couple million dollars just in the few weeks since the second quarter ended.

Michael Manna: God willing, I expect that to continue, and then going forward, as Mike mentioned, it's a matter of balancing the paydown of the debt with other strategic spending opportunities, including the full spectrum of strategic cutbacks, potential acquisitions, and anything and everything that's going to help grow our business profitably.

Michael E. Manna: God willing, I expect that to continue. And then going forward, as Mike mentioned, it's a matter of balancing the pay down of the debt with other strategic spending opportunities, including the full spectrum of strategic CapEx.

Michael E. Manna: potential acquisitions, and anything and everything that's going to help grow our business profitably.

Michael E. Manna: And then, Mike, as far as, you know, the efficiency efforts you're pursuing here on a number of levels and have in the previous quarters, you know, what inning do you think we're in here as far as your strategic plan as you look at it?

Michael Manna: As far as the efficiency efforts you're pursuing here on a number of levels and have over the previous quarters, what any do you think we're in here as far as kind of your strategic plan as you look at it? We're early in the game still, Josh. I mean, we've I guess attacked the easy things obviously and tried to get those, you know, quickly mitigated and functioning and, you know, producing results. But, you know, there's things in all of our businesses we've done a, you know, I'll start with the back office side. The back office, you know, we've had a host of acquisitions over the last decade. You know, they've been at different levels of integration and whatnot. We have a new CIO that we brought on board almost a year ago now, nine months ago, and, you know, our one of our functions there is to really get all the all the locations really functional is, is one, you know, so we can all share systems and collaborate properly and, you know, multiple licenses at multiple facilities, etc., etc. And then you've got the, you know, the operations and, you know, we're, you know, it takes time to go through the variety of products we have and actually lean things out. So, you know, we're starting with the things that, you know, we think are gonna give us the biggest bang for the buck right up front. But, you know, with all lean journeys and efficiency journeys, they never really end because as you get done with, you know, leaning it out, once people get better at doing their jobs, they find better ways to do things and, you know, all of a sudden you're in a line-in balance situation and you need to really rebounce the line again. So, it's a continual process. But, you know, we're in even like two out of a nine-in-game. And then on the, you know, within the battery segment, you know, the products and the government and defense that are driving some of the near-term strength, you know, as we look at the 2025 defense budget, do you feel this type of growth can continue? Well, there's reviewing the 2025 budget, there's really no what I would call significant decreases in any of the programs that, you know, we're involved with through our prime customers. So, we don't expect to see a dramatic change to that short-term. But, you know, it's also, you know, part of it's we're asked to do our customer supply chain difficulties as well. So, if they're not pulling product, we're not selling product. So, it's a two-way street there. And they just wanted to decline in oil and gas.

Michael E. Manna: Got it

Michael E. Manna: And then, Mike, as far as, you know, the efficiency efforts you're pursuing here on a number of levels and have over the previous quarters, you know, what inning do you think we're in here as far as kind of your strategic plan as you look at it?

Michael E. Manna: We're early in the game still, Josh. I mean, we've, I guess, attacked the easy things, obviously, and tried to get those quickly mitigated and functioning and producing results out of a nine-inning game.

Michael E. Manna: We're early in the game still, Josh. I mean, we've, I guess, attacked the easy things, obviously, and tried to get those, you know, quickly mitigated and functioning and, you know, producing results.

Speaker Change: But, you know, there's things in all of our businesses. We've done a, you know, I'll start with the back office side. The back office.

Michael E. Manna: You know, we've had a host of acquisitions over the last decade.

Michael E. Manna: You know, they've been at different levels of integration and whatnot.

Michael E. Manna: We have a new CIO that we brought on board almost a year ago now, well, nine months ago.

Michael E. Manna: And, you know, one of our functions there is to really get all the locations really functional as one, you know, so we can all share systems and...

Michael E. Manna: collaborate properly and, you know, get rid of some of that waste and, you know, multiple licenses at multiple facilities, etc., etc.

Michael E. Manna: And then you've got the, you know, the operations and, you know, we're, you know, it takes time to go through the variety of products we have and actually lean things out. So, you know, we're starting with the things that, you know, we think are going to give us the biggest bang for the buck right up front.

Michael E. Manna: But, you know, with all lean journeys and efficiency journeys, they never really end because as you get done with, you know, leaning it out once, people get better at doing their jobs, they find better ways to do things.

Michael E. Manna: And, you know, all of a sudden you're in a line imbalance situation, and you need to really rebalance the line again. So, it's a continual process, but, you know, we're in anything like two out of a nine-inning game.

Michael E. Manna: And then on the, you know, within the battery segment, the products in the government and defense that are driving some of the near-term strength, as we look at the 2025 defense budget, do you feel this type of growth can continue?

Speaker Change: Thank you. Bye.

Michael E. Manna: And then on the, you know, within the battery segment, you know, the products in the government and defense that are driving some of the near-term strength, as we look at the 2025 defense budget, do you feel this type of growth can continue?

Michael E. Manna: Well, there's a review in the 2025 budget, but there are really no what I would call significant decreases in any of the programs that, you know, we're involved with through our prime customers.

Michael E. Manna: Well there's, reviewing the 2025 budget, there's really no, what I would call significant decreases in any of the programs that, you know, we're involved with through our prime customers.

Michael E. Manna: So, we don't expect to see a dramatic change to that short term.

Michael E. Manna: But, you know, it's also, you know, part of it's we're hostage to our customer supply chain difficulties as well. So, if they're not pulling product, we're not selling product. So, it's a two-way street there.

Michael Manna: Anything going on there cyclically?

Michael Manna: Is there anything in the offshore activity that we should be thinking about? For us, it really seemed like it was more of an over buy with one customer, one or two customers, towards the end of late last year. And then some reorganization in their part where I think they got a little bit flat-footed, and we expect that volume to rebound pretty well in the back half of the year. But who knows? On that stage, a lot of things can happen when the oil and gas market over the next couple of years.

Speaker Change: And then just on the decline in oil and gas, anything going on there cyclically? Is there anything in the offshore activity that we should be thinking about?

Speaker Change: For us, it really seemed like it was more of an overbuy with one customer, one or two customers, towards the end of late last year.

Speaker Change: And then some reorganization on their part, where I think they got a little bit flat-footed, and we expect that volume to rebound pretty well in the back half of the year.

Michael E. Manna: Who knows, on that stage, a lot of things can happen in the oil and gas market over the next couple of years.

Michael Manna: Good. And then we have Josh, is that our oil and gas portfolio is really diversified, is diversified between 50% international, 50% domestic and the domestic breakdown is pretty evenly split between the blue chip companies. And I guess what I call the wildcatters. And then we do a little bit of everything also, Josh. We're down hole on the drills, but we're also in pipeline inspection; we're in monitoring of devices. There's a lot to the whole flow of oil from the ground to your car or to a plastic processing facility or wherever.

Philip A. Fain: And the advice that we have, Josh, is that our oil and gas...

Speaker Change: Got it.

Joshua Ward Sullivan: And the message that we have, Josh, is that our oil and gas portfolio is really diversified. It's diversified between, you know, 50% is international, 50% domestic, and the domestic breakdown is pretty evenly split between the blue chip companies and, I guess what I call the wildcatters.

Philip A. Fain: And then we do a little bit of everything also, Josh, we're downhole and on the drills, but we're also in pipeline inspection, we're in monitoring of devices, there's, there's a lot to the whole flow of oil from the ground to, you know, your car or to a plastics processing facility or wherever.

Joshua Ward Sullivan: And we do a little bit of everything also, Josh. You know, we're downhole on the drills, but we're also in pipeline inspection, we're in monitoring of...

Joshua Ward Sullivan: of devices. There's a lot to, you know, the whole flow of oil from the ground to, you know, your car or to a plastics processing facility or wherever.

Michael Manna: And then as we think of the thin cell opportunities, the update in Q3, you're anticipating, could this be a major gating event, and then how quickly can you ramp up to support that product? Well, we always hope it's going to be a major gating, major event. And to be clear, all these initiatives are relatively in production stage, and we are selling all of the products.

Michael E. Manna: And then as we think of the thin cell opportunities, you know, the update in Q3 you're anticipating, could this be a major gating event? And then how quickly, you know, can you ramp up to support that product?

Joshua Ward Sullivan: Got it.

Speaker Change: And then as we think of the thin cell opportunities, the update in Q3 you're anticipating, could this be a major gating event, and then how quickly can you ramp up to support that product?

Speaker Change: Well, we always hope it's going to be a major event. I mean, you know, and to be clear, I mean, all these initiatives are relatively in production stage, and we are selling all of the products.

Michael Manna: It's just I would say we haven't landed at what I would call an anchor customer where it's an announceable type of an event that would make people excited. So we're going through a lot of different quals with a few different customers, and they have to get through all their stuff with the FDA and what not before they're going to pull from us. Again, we're not driving the bus, so to speak. So it's frustrating.

Michael E. Manna: It's just I would say we haven't landed that what I would call anchor customer where it's an announceable type of an event That that would make people excited So we're going you know we're going

Michael E. Manna: So we're going, you know, we're going through a lot of different quality checks with a few different customers, and they have to get through all their stuff with the FDA and whatnot before they're going to pull from us. Again, we're not driving the bus, so to speak.

Michael E. Manna: through a lot of different quals with a few different customers, and they have to get through all their stuff with the FDA and whatnot before they're going to pull from us. Again, we're not driving the bus, so to speak.

Michael E. Manna: It's frustrating. I wish it would happen quicker. But, you know, I've been involved in the medical side for a lot of years, and one of our largest medical customers that we now have, it took six years for us to really, you know, really start seeing any real production volume. So I also know it takes time.

Michael Manna: I wish it would happen quicker, but I've been involved in the medical side for a lot of years, and one of our largest medical customers that we now have, it took six years for us to really start seeing any real production volume. So I also know it takes time.

Michael E. Manna: It's frustrating, I wish it would happen quicker, but, you know, I've been involved in the medical side for a lot of years, and one of our largest medical customers that we now have, it took six years for us to really, you know, really start seeing any real production volume. So I also know it takes time.

Michael Manna: And then on the new sales resource investments, you know, where are their efforts going to be, maybe, you know, what are they shading in areas where you could touch before? Well, you know, the first resource I mentioned, the industry veteran, I mean, he's really focused in on how do we move then sell, how do we move final? I mean, how do we get into some of these bigger accounts? And, you know, we've, we need to have more conversations going with bigger OEM customers, and that's really where his focus is. If we get into door and have the conversations, we have the technical people that can offer a solution.

Michael E. Manna: And then on the new sales resource investments, you know, where are their efforts going to be? Maybe, you know, what are they shading in areas where you couldn't touch before?

Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the

Speaker Change: And then on the new sales resource investments, you know, where are their efforts going to be? Maybe, you know, what are they shading in areas where you couldn't touch before?

Michael E. Manna: Well, you know, the first resource I mentioned, the industry veteran, he's really focused on how do we move thin cell, how do we move final, I mean, how do we get into some of these bigger accounts. And, you know, we need to have more conversations going on with bigger OEM customers. And that's really where his focus is.

Speaker Change: Well, you know, the first resource I mentioned, the industry veteran, I mean, he's really focused in on how do we move thin cell, how do we move final, I mean, how do we get into some of these bigger accounts. And you know, we've...

Speaker Change: We need it.

Speaker Change: We need to have more conversations going with bigger OEM customers and that's really where his focus is. If we get in the door and have the conversations, we have the technical people that can offer a solution.

Michael E. Manna: If we get in the door and have the conversations, we have the technical people that can offer a solution. And as far as the manufacturing side is concerned, you know, we're pretty agile and able to respond very quickly. So I think once we get those conversations going, we're going to be much better.

Michael Manna: And as far as the manufacturing side, you know, we're pretty agile and able to respond very quickly. So I think once we get those conversations going, we're going to be much better.

Speaker Change: And as far as the manufacturing side, you know, we're pretty agile and able to respond very quickly.

Speaker Change: So, I think once we get those conversations going, we're going to be much better.

Michael E. Manna: The second resource, she's really focused on, you know, some of the major medical companies that we don't necessarily have relationships with. You know, I look at the top 100, you know, device manufacturers in the medical space, and we probably have some relationship or sales with them. So there are 80 major medical device manufacturers that we have to go out and we've got to develop the relationship, and she's got a list, and she's going out to do just that.

Michael Manna: The second resource, she's really focused on, you know, some of the major medical companies that we don't necessarily have relationships with. You know, I look at the top 100, you know, device manufacturers in the medical space, and we have some relationship or sales with probably... 20% of them. So there's 80 major medical device manufacturers that, you know, we have to go out and we've got to develop the relationship. And she's got a list, and she's going out to do just that.

Speaker Change: The second resource, she's really focused on, you know, some of the major medical companies that we don't necessarily have relationships with. You know, I look at the top 100, you know, device manufacturers in the medical space, and we have some relationship or sales with probably

Speaker Change: 20% of them. So there's 80 major medical device manufacturers that you know we we have to go out and we've got to develop the relationship and she's got a list and she's going out to do just that.

Michael E. Manna: And then I guess just one last one, on the IVAS battery, you know, given the increasing need for power by, you know, foot soldiers kind of globally, you mentioned some international efforts there, but, you know, could you just expand on, you know, why you're continuing to invest in, you know, maybe what other programs you see where that technology could be used?

Michael Manna: And then I guess just one last one on the IBS battery, you know, just given the increasing need for power by, you know, which solders kind of globally.

Michael E. Manna: Yeah.

Speaker Change: And then I guess just one last one, on the IVAS battery, you know, just given the increasing need for power by, you know, foot soldiers kind of globally, you know, you mentioned some international efforts there, but, you know, could you just expand on, you know, why you're continuing to invest in, you know, maybe what other programs you see where that technology could be used?

Michael Manna: You know, you mentioned some international efforts there, but you know, could you just expand on, you know, why you're continuing to invest and, you know, maybe what other programs you see where that technology could be used. Well, you know, all our technology, we try to develop it so that it's agnostic and you know, it's a tool, toolkit in the bag, so to speak. So, you know, we've learned a lot going through the conformal development. And we've been developing various versions of this battery for the last 12 years. We, we sell one and have been selling one version are you be able 35 for the last decade.

Michael E. Manna: Well, all our technology, we try to develop it so that it's agnostic, and it's a tool kit in the bag or a tool in the bag, so to speak. We've learned a lot going through the conformal development process. We've been developing various versions of this battery for the last 12 years. We sell one, and have been selling one version, our UBVL35, for the last decade.

Speaker Change: Well, you know, all our technology...

Speaker Change: We try to develop it so that it's agnostic and, you know, it's a tool kit in the bag or a tool in the bag, so to speak. So, you know, we've learned a lot going through the conformal development. We've been developing various versions of this battery for the last 12 years. We sell one.

Speaker Change: and have been selling one version, our UBVL 35, for the last decade.

Michael Manna: And you know, we think that there's going to be need for conformal. We want to recoup obviously some of the investment that we've made in developing the technology. But, you know, on the military side, the power is going to, like you said, it's going to continue to be more and more needful. The power requirements are not going away. You know, the conformal is a premium product, and we still sell a lot of land where batteries, because the price point per energy is just way better. And, you know, we expect it, you know, we want to be a, you know, a complete, you know, soldier supplier, soldier, soldier power supplier.

Michael E. Manna: We think that there's going to be a need for conformal lining. And we want to recoup, obviously, some of the investment that we've made in developing the technology. But on the military side, the power is going to, like you said, continue to be more and more needed. The power requirements are not going away. The conformal is a premium product, and we still sell a lot of Land Warrior batteries because the price point per watt is just way better. We expect it We want to be a complete soldier supplier, a soldier power supplier, so we're going to have the conformal in our product portfolio along with some of the legacy Land Warrior battery products.

Speaker Change: And, you know, we think that there's going to be need for conformal. We want to recoup, obviously, some of the investment that we've made in developing the technology. But, you know, on the military side, the power is going to, like you said, it's going to continue to be more and more needful.

Speaker Change: The power requirements are not going away.

Speaker Change: You know, the conformal is a premium product.

Speaker Change: and we still sell a lot of Land Warrior batteries because...

Speaker Change: the price point per energy.

Speaker Change: We want to be a complete soldier power supplier, so we're going to have a conformal in our product portfolio along with some of the legacy Land Warrior battery products.

Michael Manna: So we're going to have a conformal in our product portfolio, along with some of the legacy Land Warrior battery products.

Michael Manna: Got it.

Joshua Ward Sullivan: Got it. Well, thank you for the time.

Michael Manna: Well, thank you for the time. Sure, thank you anytime.

Michael E. Manna: Sure.

Operator: Thank you George. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. Once again, to ask a question, please press star 11 on your telephone. I'm showing no further questions, and I'll turn the conference back to Mike for closing remarks.

Operator: Thank you, George. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. Once again, to ask a question, please press star 11 on your telephone.

Speaker Change: Got it. Well, thank you for the time.

Speaker Change: Sure, anytime.

Speaker Change: Thank you, George. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Speaker Change: Jody Burfening, Philip Fain, Michael Manna

Speaker Change: Once again, to ask a question, please press star 11 on your telephone.

Michael Manna: I'm sure you know for the questions, an alternate conference back to Mike for closing remarks. All right. Thank you. Thanks for listening to today's call.

Speaker Change: I'm showing no further questions and I'll turn the conference back to Mike for closing remarks.

Michael E. Manna: Alright, thank you. Thanks for listening to today's call. We look forward to talking to you all next time during the 2024 Q3 earnings call.

Michael Manna: We look forward to talking to you all next time during the 2024 Q3 earnings call. Bye now.

Michael E. Manna: All right, thank you. Thanks for listening to today's call. We look forward to talking to you all next time during the 2024 Q3 earnings call.

Operator: Thank you for your participation in today's conference. This is conclude the program. You may now disconnect. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Bye now. Thanks.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.