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    ULBI
    Earnings call· Jun 2026(Q2 FY26)

    ULTRALIFE Q2 FY26 earnings call ULBI

    Aug 7, 2026 Source

    Executive summary

    Ultralife Q2 FY26 — Record Backlog and Gross Margin Expansion

    Ultralife Corporation delivered a strong second quarter, marked by record backlog growth and significant gross margin expansion, partially offset by a revenue decline in its Battery and Energy Products segment. The company is focused on operational improvements, new product commercialization, and vertical integration, with several initiatives expected to drive future revenue and margin benefits. Brand realignment is also underway to consolidate under the Ultralife Master brand.

    Highlights

    5

    • Achieved a record backlog of $117.5 million, representing a 39% increase over the comparable 2025 period.

    • Consolidated gross margin expanded by 500 basis points to 28.9%, driven by favorable product mix and a $1.1 million net tariff refund.

    • Communication Systems segment revenue increased 39.3% year-over-year to $3.8 million.

    • Adjusted EBITDA grew 48.8% to $6.1 million, or 12.8% of sales, compared to $4.1 million or 8.5% in the prior year.

    • Net income significantly increased to $2.5 million, or $0.15 per share, from $0.9 million or $0.05 per share year-over-year.

    Concerns

    3

    • Battery and Energy Products segment revenue decreased 3.7% year-over-year to $44.2 million, primarily due to a 4.7% decline in commercial oil and gas sales.

    • Operating expenses increased 10.6% to $10.4 million, including $0.9 million in one-time litigation and consulting fees.

    • Government defense sales within the Battery and Energy Products segment declined 1.4% due to the timing of a very large order shipment in the prior year.

    Guidance & targets

    8
    CategoryTargetConfidence
    Brand realignment completion
    Completed
    medium materiality
    High
    Annual savings from gross margin initiatives
    $600,000-$800,000
    medium materiality
    High
    Customer demand and cell consumption growth
    more than 30%
    medium materiality
    Medium
    Incremental revenue from water-based drone platforms
    meaningful incremental revenue
    medium materiality
    Medium
    Production start for water-based defense drone applications
    early 2027
    medium materiality
    High
    Product deliveries for rechargeable power pack OEM partnership
    early 2027
    medium materiality
    High
    Conformal wearable battery backlog shipment
    fully ship
    medium materiality
    High
    Communication Systems new product launches
    multiple new products
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Battery and Energy Products
    Revenue decrease reflects lower commercial sales, partially offset by growth in medical batteries. Gross margin improved due to sales mix and tariff refund.
    Commercial sales decline: 4.7% (primarily lower oil and gas sales)Medical battery sales increase: 7.2%Government defense sales decline: 1.4% (due to prior year large order shipment)Sales split commercial/government defense: 68/32Domestic/international split: 59/41Gross margin (excluding net tariff refund): 25.8%
    		$44.2 million-3.7%—28.3%
    Communication Systems
    Significant revenue and gross margin increase primarily driven by the timing of orders and favorable sales mix.
    Growth due to timing of orders
    		$3.8 million+39.3%—36.3%

    Operational metrics

    23
    Consolidated gross profit growth
    19.5%YoY
    Q2 FY26

    Increase over the 2025 period.

    Consolidated gross margin
    28.9%+500 bps YoY
    Q2 FY26

    Compared to 23.9% in Q2 FY25.

    Net tariff refund
    $1.1 million
    Q2 FY26

    Recognized as costs in previous periods.

    Battery and Energy Products gross profit growth
    15.4%YoY
    Q2 FY26

    Compared to $10.8 million last year.

    Battery and Energy Products gross margin (excl. tariff refund)
    25.8%
    Q2 FY26

    Gross margin for the segment after excluding the net tariff refund impact.

    Communication Systems gross profit
    1.4 millionvs 0.8 million prior year
    Q2 FY26

    Compared to the year earlier period.

    Operating expenses
    $10.4 million+10.6% YoY
    Q2 FY26

    Compared to 19.8% for last year's second quarter.

    Product Development Costs growth
    39.1%
    Q2 FY26

    Related to continued investment in product offering and vertical integration.

    One-time costs
    $0.9 million
    Q2 FY26

    Incurred for specific non-recurring items.

    Operating income
    $3.4 millionvs $2.3 million prior year
    Q2 FY26

    Reflecting overall increase in gross margin.

    Operating margin
    7.2%vs 4.7% prior year
    Q2 FY26

    Compared to Q2 FY25.

    Operating margin (excl. tariff refund)
    26.6%
    Q2 FY26

    Reflecting the overall increase in gross margin when excluding the tariff refund.

    Other expense
    $0.5 millionvs $1.1 million prior year
    Q2 FY26

    Compared to the year earlier period.

    Tax provision
    $0.5 millionvs $0.2 million prior year
    Q2 FY26

    Computed on a GAAP basis at statutory rates.

    Net income
    $2.5 millionvs $0.9 million prior year
    Q2 FY26

    On a GAAP fully diluted basis.

    Diluted EPS
    $0.15vs $0.05 prior year
    Q2 FY26

    On a GAAP fully diluted basis.

    Adjusted EBITDA
    $6.1 millionvs $4.1 million prior year
    Q2 FY26

    Defined as EBITDA including non-cash stock-based compensation expense and one-time costs not reflective of ongoing operations.

    Adjusted EBITDA (TTM)
    $17.1 million
    TTM Q2 FY26

    Trailing twelve months basis.

    Working capital
    $69.8 millionvs $68.5 million FY25 year-end
    Q2 FY26 end

    Balance sheet item.

    Current ratio
    2.9vs 2.8 FY25 year-end
    Q2 FY26 end

    Balance sheet item.

    Annual savings from margin initiatives
    $600,000-$800,000
    Annual

    Expected to be generated by two specific initiatives.

    Conformal wearable battery orders shipped
    $2 million
    2026 YTD

    Orders shipped for products powering dismounted soldier systems.

    Backlog from new products
    $14 million
    Q2 FY26 end

    Portion of total backlog from products released within the last year.

    Industry KPIs

    3
    MetricValueDetails
    Book to bill ratio0.63ratio
    Orders bookings growth$33 millionUSD
    Backlog by segment end market$117.5 millionUSD

    Orderbook & backlog

    3
    Total backlog$117.5 millionQ2 FY26 end

    +$33 million YoY, +39% YoY

    Highest level in company's history; replenishment rate of 63% of trailing 12-month sales

    Total backlog (as of July)almost $130 millionJuly 2026

    Reflects significant order pull-through since Q2 end

    Conformal wearable battery backlog$7 millionQ2 FY26 end

    Expected to fully ship before year-end

    Product announcements

    6
    ProductTypeDetails
    StrikeHub product linelaunch
    New HPE server products and configurationsexpansion
    Advanced variant of 20-watt amplifierlaunch
    New vehicle radio mountslaunch
    Crescent small form factor wearable edge compute solutionmilestone
    Thin cell technology platformexpansion

    Capital programs

    1
    Lean manufacturing and automation projectsunderway

    Benefit: Increased throughput, improved quality, enhanced operational efficiency

    Projects at the RANM facility, particularly important given anticipated more than 30% growth in customer demand and cell consumption next year.

    Risks & headwinds

    6
    Uncertain global economic conditions

    Unquantified

    Reductions in revenues from key customers

    Unquantified

    Delays or reductions in U.S. and foreign military spending

    Unquantified

    Acceptance of new products on a global basis

    Unquantified

    Disruptions or delays in supply of raw materials and components

    Unquantified

    Lower oil and gas sales due to geopolitical factorsQ2 FY26

    4.7% decline in commercial sales for Battery and Energy Products segment

    What to watch in Q3 FY26

    5

    Gross margin improvement initiatives benefits

    Mid Q3
    Current$600,000-$800,000 annual savings expected from two initiatives
    TargetMaterialization of benefits from supply chain corrections

    Why it matters

    These initiatives are expected to significantly improve battery and energy gross margin, impacting overall profitability.

    We've also corrected the second largest contributor to margin inefficiencies, and updates are currently being implemented through the supply chain, with benefits expected to begin materializing mid Q3.

    Q&A highlights

    2

    Analyst asked about the impact of L3 Harris winning the NGC2 award for Falcon ManPacks on Ultralife's backlog, specifically if it has increased since quarter-end.

    Management confirmed that the backlog has significantly increased since quarter-end, reaching almost $130 million as of July, but could not provide specific details on which divisions the Falcon ManPAC order would roll out to.

    “I mean, we're almost at $130 million as we sit today.”

    asked by Will Lauber, Visionary Wealth Advisors · answered by Michael Manna

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Improvements & Margin Expansion

    Ultralife is actively driving operational improvements, with new plant leaders in Newark and Rainham implementing key gross margin initiatives. These efforts have already begun to deliver measurable benefits, including successfully addressing a significant scrap issue and correcting another major contributor to margin inefficiencies. Two initiatives alone are expected to generate annual savings of $600,000 to $800,000 for the battery and energy gross margin, with benefits from supply chain corrections expected to materialize mid-Q3.

    02

    Communication Systems Momentum & Product Development

    The Communication Systems business is gaining momentum with multiple new product releases and a growing opportunity funnel. The company showcased its new StrikeHub product line, targeting special operations and next-gen command and control applications, and has received initial orders for new HPE server products. An advanced variant of the 20-watt amplifier and new vehicle radio mounts are slated for 2026 launches, expanding the ruggedized computing portfolio and driving pull-through sales.

    03

    Vertical Integration & New Market Opportunities

    Vertical integration opportunities from the Electrochem acquisition are expanding, enabling the incorporation of Electrochem cells into existing battery pack assemblies and broadening the addressable market. The company is experiencing growing demand for water-based drone platforms utilizing Electrochem cells, with these opportunities expected to contribute meaningful incremental revenue starting in Q4 FY26 and continuing over several years. Production for these applications is anticipated to begin in early 2027.

    04

    Battery & Energy Product Innovation

    The Battery and Energy business is focused on new business growth through transformational programs and strategic OEM partnerships. This includes multiple OEM development programs for customer-specific products, initiatives to enhance existing products, and the establishment of initial production capabilities for thin cell technology for medical wearables and asset tracking. The conformal wearable battery has shipped over $2 million in orders year-to-date, with a $7 million backlog expected to ship by year-end.

    05

    Strategic Priorities & Outlook

    Ultralife's strategic priorities remain consistent: converting long-term development programs into recurring revenue, advancing vertical integration for value creation, and maintaining disciplined operational excellence. With a healthy backlog exceeding $117 million and a robust development pipeline across both business segments, the company is well-positioned for continued revenue growth and market expansion, including custom battery programs transitioning to production in late 2026 and 2027.

    06

    Brand Realignment

    The company is well underway with its brand realignment initiative, consolidating all sub-brands under the Ultralife Master brand. This process is expected to be completed by the end of 2026, aiming to provide clear, concise messaging to customers and strengthen market positioning as a leader in critical RF and portable power products.

    AI-generated summary of the company’s earnings call. Not investment advice.