Ultralife ((ULBI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Ultralife Corporation’s recent earnings call painted a mixed picture for investors, with notable achievements and challenges. The company reported significant revenue growth in its Battery & Energy Products segment and successfully integrated Electrochem’s systems. However, it faced hurdles such as a decline in Communication Systems revenue, tariff challenges, and lower gross margins. Despite these issues, Ultralife’s ongoing product development and debt reduction efforts offer optimism for future growth.
Revenue Growth in Battery & Energy Products
Revenues from Ultralife’s Battery & Energy Products segment soared to $45.9 million, up from $36.7 million last year. This impressive growth was largely driven by a 61.1% increase in government defense sales, highlighting the segment’s robust performance.
Successful Integration of Electrochem
Ultralife successfully transitioned Electrochem’s ERP and office systems to its own in Q2, completing the main system transition. The company plans further integration in Q3, marking a significant milestone in the acquisition process.
Debt Reduction Progress
The company made substantial progress in reducing its acquisition debt, cutting it by $3.4 million in the first half of 2025. This reduction exceeded the $2.8 million amortization required for the full year, showcasing Ultralife’s commitment to strengthening its financial position.
New Product Developments
Ultralife expanded its ruggedizer server case portfolio and developed a 20-Watt amplifier for international markets. These innovations are expected to generate orders later this year, underscoring the company’s focus on product development.
Decline in Communication Systems Revenue
The Communication Systems segment experienced a 57.2% revenue decline, primarily due to delays in purchase orders and large shipments in the prior year. This decline poses a challenge for Ultralife as it seeks to stabilize this segment.
Gross Margin Decline
Ultralife’s consolidated gross margin fell by 300 basis points to 23.9%, impacted by product mix, tariffs, and lower factory throughput. This decline in profitability is a concern for the company’s financial health.
Challenges with Tariffs
The company faced $400,000 in tariff costs in Q2, which affected profitability due to unfavorable timing and high tariff rates. Tariffs remain a significant challenge for Ultralife’s bottom line.
Medical and Oil & Gas Sales Decline
Sales in the medical battery sector declined by 39%, while oil and gas sales fell by 23.1%. These declines were attributed to macroeconomic and geopolitical factors, reflecting broader industry challenges.
Forward-Looking Guidance
Ultralife reported Q2 2025 sales of $48.6 million, up from $43 million in the same period last year. Despite challenges, the company maintained a gross profit of $11.6 million, with a consolidated gross margin of 23.9%. Operating expenses increased due to investments in new product development and the Electrochem acquisition. The company has a backlog of high-confidence orders totaling $89 million, and it continues to focus on debt reduction, having repaid over $0.7 million of acquisition debt in Q2.
In summary, Ultralife’s earnings call highlighted a mix of positive developments and challenges. While the company achieved significant revenue growth in its Battery & Energy Products segment and made progress in debt reduction, it faced hurdles such as declining Communication Systems revenue and tariff impacts. Nevertheless, ongoing product development and a strong order backlog provide optimism for future growth.