Ultralife (ULBI -2.66%), a specialty battery and communications systems manufacturer, reported its second quarter 2025 earnings on August 7, 2025, covering the period ended June 30. The report showed headline revenue (GAAP) grew 13.0% to $48.6 million, driven by the Electrochem acquisition. However, that figure missed analysts’ estimates, which expected $51.0 million in GAAP revenue. Adjusted EPS came in at $0.07, significantly below the $0.13 consensus non-GAAP EPS estimate. The company also saw tighter margins and lower profits (GAAP) compared to Q2 2024. Overall, the quarter reflected gains from recent acquisitions, but organic growth was muted and operating challenges remained in place.
| Metric | Q2 2025 | Q2 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.07 | $0.13 | $0.22 | (68.2%) |
| Revenue (GAAP) | $48.6 million | $51.0 million | $43.0 million | 13.0% |
| Gross Margin | 23.9% | 26.9% | (3.0) pp | |
| Operating Income | $2.3 million | $3.9 million | (41.0%) | |
| Adjusted EBITDA | $4.1 million | $5.4 million | -24.1% |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Strategic Focus
Ultralife is known for designing and manufacturing specialty batteries and communications systems. Its products serve a range of markets, including government and defense, medical, industrial, and energy sectors. The company operates through two main segments: Battery & Energy Products and Communications Systems.
Recently, Ultralife's strategy has leaned heavily on acquisitions and innovation investments to foster growth. In particular, the purchase of Electrochem brought a boost to the top line, but also exposed the business to integration challenges and margin pressures. The company places emphasis on developing advanced battery technologies and maintaining relationships with key customers, especially in the defense sector. Mitigating customer concentration risk, expanding in new markets, and responding to supply chain pressures remain critical areas for future success.
Quarterly Highlights: Financial and Operational Developments
Quarterly results were marked by clear contrasts between the company's business lines. The Battery & Energy segment generated $45.9 million in sales, an increase of 25.0% from the prior year. This growth, however, was almost entirely from the Electrochem acquisition. When excluding Electrochem, segment sales were flat, evidencing sluggish organic expansion. Within the segment, government and defense sales jumped 61.1%, yet commercial sales declined 20.4%, particularly in medical and oil & gas markets. This shift raised the business’s exposure to concentrated government contracts.
The Communications Systems segment struggled. Sales dropped 57.2% year over year for Communications Systems, attributed by management to lower order volumes from a major international defense customer and delays in purchase order timing. That result added volatility, as revenues from this segment often depend on lumpy defense contracts. On the positive side, gross margin in Communications improved to 28.4% from 25.6% in Q2 2024, yet overall benefit was diluted by sharply lower sales volume.
Across both segments, gross profit totaled $11.6 million (GAAP), flat compared to Q2 2024. However, higher overall operating expenses eroded the company's margins. Notably, gross margin (GAAP) declined to 23.9%, down three percentage points compared to Q2 2024. Margin pressures stemmed from increased tariffs, unfavorable product mix, and lower factory throughput. Operating income slumped 41.0% to $2.3 million compared to Q2 2024, with operating margin falling to 4.6%. Operating expenses rose 22.4% compared to Q2 2024, reflecting higher research and development spending, costs tied to integrating Electrochem, and non-recurring expenses. R&D expenses specifically climbed to $2.3 million, indicating a 16% year-over-year increase as the company continued to invest in new product development and validation.
Ultralife ended the quarter with cash rising to $10.9 million (GAAP) and long-term debt reduced to $47.5 million. The company accelerated debt repayment by $2.7 million, exceeding required minimums. Backlog of high-confidence orders was $89 million, down from $95 million at the end of Q1 2025. Management attributed this decrease to the timing of order placements but underscored expectations for a rebound in both the Battery & Energy and Communications segments going forward. No material regulatory changes were cited this period, but ongoing focus on compliance continues given the company’s exposure to highly regulated end-markets.
Product Families and Market Details
The Battery & Energy Products segment primarily focuses on lithium and other advanced chemistry batteries, including high-energy density offerings for both government and commercial customers. Recent efforts include integrating Electrochem’s cells into existing battery pack assemblies and scaling production of ThinCell batteries designed for applications in medical wearables and tracking devices. The company also advanced its 123A product line, which serves internet-of-things (IoT) and illumination markets, and continued development of advanced thionyl chloride cells for monitoring and telemetry applications.
On the Communications Systems side, Ultralife produces ruggedized server cases and portable power solutions for military and commercial use. This quarter, the company advanced new portable server cases and digital power supplies. Several new products are currently in the stages of customer validation, including the 3U portable server case and 21-series amplifiers, which target radio and tactical vehicle applications for both domestic and international clients. However, order timing and defense customer concentration add unpredictability to segment performance.
Looking Forward: Guidance and Investor Considerations
Management delivered only qualitative guidance for the rest of fiscal 2025 and into 2026. The company expressed expectations for improved results in the second half of the year, citing anticipated rebounds in Communications Systems, early orders for new battery programs, and a potential recovery in medical and oil & gas sectors. It highlighted ongoing efforts to optimize operational efficiency and convert research initiatives into revenue, along with the aim of maximizing the value from its recent acquisitions. No specific revenue or earnings targets were provided for either the next quarter or the full year.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
