Analyst inquired about the performance of Hewlett Packard Enterprise servers, used for NGC-2, during recent tests in extreme heat conditions, noting that some equipment struggled.

Management stated that all equipment, including the HPE servers, made it through the testing successfully. They highlighted that their state-of-the-art cooling system, accompanying the servers, is specifically designed to withstand extreme heat conditions like those encountered in places such as Fort Irwin, California. “Well, from what we hear, everything made it through the testing. We don't really get a lot of detail other than that. But accompanying the Hewlett Packard Enterprise servers is our state of the art cooling system. So when you're dealing with some extreme heat, let's say in California, Fort Irwin in California, they're designed to withstand that heat.”

ULBI

Ultralife (ULBI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 7, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Brand realignment completion	Completed medium materiality	H2 FY26	High
Annual savings from gross margin initiatives	$600,000-$800,000 medium materiality	Annual	High
Customer demand and cell consumption growth	more than 30% medium materiality	Next year · FY27	Medium
Incremental revenue from water-based drone platforms	meaningful incremental revenue medium materiality	Q4 · FY26	Medium
Production start for water-based defense drone applications	early 2027 medium materiality	Early 2027 · FY27	High
Product deliveries for rechargeable power pack OEM partnership	early 2027 medium materiality	Early 2027 · FY27	High
Conformal wearable battery backlog shipment	fully ship medium materiality	Before year-end · FY26	High
Communication Systems new product launches	multiple new products medium materiality	This year · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%

Orderbook & backlog

Total backlog $117.5 million Q2 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 million July 2026

Reflects significant order pull-through since Q2 end

Conformal wearable battery backlog $7 million Q2 FY26 end

Expected to fully ship before year-end

Product announcements

Product	Type	Timeline
StrikeHub product line	launch	—
New HPE server products and configurations	expansion	2026 deliveries
Advanced variant of 20-watt amplifier	launch	2026
New vehicle radio mounts	launch	2026
Crescent small form factor wearable edge compute solution	milestone	prototypes available later this year
Thin cell technology platform	expansion	—

Capital programs

Lean manufacturing and automation projects underway

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

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 factors Q2 FY26

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

What to watch in Q3 FY26

Gross margin improvement initiatives benefits

Mid Q3

Current $600,000-$800,000 annual savings expected from two initiatives

Target Materialization 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.

Find out whether ULBI delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.