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DATE

Friday, Aug. 7, 2026, at 8 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer - Michael Manna
• Chief Financial Officer - Philip A. Fain
• Investor Relations - Jody Burfening

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TAKEAWAYS

• Revenue -- $47.9 million, representing a 1.3% decrease due to lower Battery & Energy segment sales offsetting growth in Communications Systems.
• GAAP EPS -- $0.15, compared to $0.05 for the second quarter of 2025.
• Total Backlog -- $117.5 million, marking a record level for the company and a 39% increase from the prior year.
• Battery & Energy Products Revenue -- $44.2 million, a 3.7% decrease resulting from lower oil and gas sales due to geopolitical factors.
• Communications Systems Revenue -- $3.8 million, an increase of 39.3% attributed to the timing of orders.
• Consolidated Gross Margin -- 28.9%, a 500 basis point increase from the 23.9% reported in the second quarter of 2025.
• IEEPA Tariff Refund -- $1.1 million, which contributed 230 basis points to the consolidated gross margin increase.
• Adjusted EBITDA -- $6.1 million, or 12.8% of sales, compared to $4.1 million for the second quarter of 2025.
• Operating Expenses -- $10.4 million, a 10.6% increase.
• Litigation and Consulting Costs -- $0.9 million, representing one-time expenses for a cyber insurance claim and margin improvement consulting.
• Battery & Energy Gross Margin -- 28.3%, a 470 basis point increase driven by favorable sales mix and the tariff refund.
• Communications Systems Gross Margin -- 36.3%, compared to 28.4% last year, primarily due to sales product mix.
• July Backlog Update -- $130 million, representing continued order pull-through since the end of the second quarter.
• Conformal Wearable Battery Sales -- $2 million, with a remaining backlog exceeding $7 million expected to ship before year-end.
• Commercial and Government Sales Split -- 62% commercial and 38% government defense on a consolidated basis.
• Domestic and International Battery Sales -- 59% domestic and 41% international, compared to a 73-27 split in the prior year period.
• Margin Improvement Savings -- $600,000 to $800,000, projected annual savings from addressing manufacturing scrap and supply chain inefficiencies.
• Anticipated Cell Consumption Growth -- 30%, expected over the next year due to increased customer demand at the Raynham facility.
• Working Capital -- $69.8 million, with a current ratio of 2.9 as of June 30, 2026.
• TTM Adjusted EBITDA -- $17.1 million, representing 9.1% of sales on a trailing 12-month basis.
• 45X Tax Credit -- Management reported an estimated portion of a refundable tax credit for qualifying battery cells and packs was recognized in other income.

SUMMARY

Ultralife (ULBI +19.36%) management reported record backlog levels and a significant improvement in gross margins driven by operational initiatives and favorable product mix. The company is currently executing four primary strategic priorities: accelerating revenue capture in Communications Systems, improving Battery & Energy manufacturing margins, expanding vertical integration of Electrochem cells, and consolidating brands under a master brand architecture. During the call, the company confirmed the completion of several product development cycles and highlighted growing demand for water-based defense drone applications and medical wearables.

• CEO Manna reported that the July backlog reached nearly $130 million, stating, "In July, we've had a lot of order pull-through to our backlog. I mean, we're almost at $130 million as we sit today."
• The company is expanding its ruggedized computing portfolio by integrating new HPE server configurations for tactical environments.
• CFO Fain addressed equipment reliability in extreme heat, noting that for Hewlett Packard Enterprise servers, the company's "state-of-the-art cooling system" is "designed to withstand that heat."
• Management expect meaningful incremental revenue from water-based drone platforms utilizing Electrochem cells to begin in the fourth quarter.
• The company is introducing new vehicle radio mounts in 2026 designed to provide a universal solution for integrating various handheld radio platforms with its amplifier portfolio.
• CEO Manna indicated that the brand realignment to the Ultralife Master brand will be completed in the second half of the year to clarify market positioning.
• The company has established initial production for its thin cell technology platform, targeting the medical wearables and asset tracking markets where designs enable smaller sensors.

INDUSTRY GLOSSARY

• 45X: An Advanced Manufacturing Production Tax Credit established by the Inflation Reduction Act to incentivize domestic manufacturing of clean energy components.
• Conformal Wearable Battery: A flexible, low-profile battery pack designed to be worn by soldiers, providing power for various electronic devices without hindering movement.
• IEEPA: The International Emergency Economic Powers Act, related here to a refund of tariffs previously paid by the company.
• MANET: Mobile Ad Hoc Network, a decentralized type of wireless network where devices connect directly to each other without fixed infrastructure.
• StrikeHub: A specialized product line providing vehicle mounting, network switching, and power support for edge computing solutions in military applications.
• UPS: Uninterruptible Power Supply, a device that provides emergency power when the input power source fails.
• Vertical Integration: The strategy of incorporating internally manufactured components, such as Electrochem cells, into the company's own final battery pack products to increase total content value.

Full Conference Call Transcript

Operator: Thank you for standing by and welcome to Ultralife Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jody Burfening. Please go ahead.

Jody Burfening: Thank you, Lateef, and good morning, everyone. Thank you for joining us for Ultralife Corporation's Earnings Conference Call for the second quarter of fiscal 2026. With us on today's call are Mike Manna, Ultralife's President and CEO, and Phil Fain, Ultralife's Chief Financial Officer. 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.

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 new products on a global basis, and disruptions or delays in supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under the company's control. 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. 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 quarterly report on Form 10-Q. 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: Good morning. Welcome to Ultralife's Q2 2026 Earnings Call. Earlier today, we announced Q2 revenue of $47.9 million with operating profit of $3.4 million, which resulted in an EPS of $0.15 per share. We made positive progress on several fronts during the second quarter. We continue to build a strong and growing backlog, supported by an expanding product portfolio as recent product developments transition from development into commercialization. In addition, our new plant leaders in Newark and Raynham are continuing to gain experience and drive operational improvements. Their teams are executing key gross margin initiatives, which have begun to deliver measurable benefits and are expected to contribute further improvements as these efforts gain traction.

Our Communications Systems business is gaining momentum, supported by multiple new product releases, a growing opportunity funnel, and active development programs focused on expanding revenue and improving business stability. We remain confident in the long-term upside of this business and are continuing to invest in product development, customer engagement, and projects that position us to pursue large sustained revenue opportunities. With defense spending continuing to emphasize force modernization and advanced network capabilities, our product portfolio remains closely aligned with emerging program requirements. We believe this favorable spending environment will support incremental program awards and long-term growth opportunities.

We exited the quarter with a record backlog of $117.5 million, with over $14 million of the backlog from products released within the last year, including the Conformal Wearable Battery, an updated Manpack radio battery for a NATO partner, new amplifiers, new speakers, and new battery packs for medical and safety customers. We expect our brand realignment to complete over the back half of the year, consolidating under the Ultralife Master brand, which will bring clear, concise messaging to our customers that we design and deliver critical RF and portable power products. 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, 2026. We have also updated our investor presentation in the Investor Relations section of our website, and our Form 10-Q was filed with the SEC earlier this morning. Consolidated revenues totaled $47.9 million compared to $48.6 million for the second quarter of 2025. Overall, government defense sales increased 5% while commercial sales decreased 4.7%. Revenues from our Battery & Energy Products segment were $44.2 million compared to $45.9 million last year, a 3.7% decrease.

The year-over-year decrease reflects a 4.7% decline in commercial sales, primarily attributable to lower oil and gas sales reflecting geopolitical factors, offsetting a 7.2% increase in medical battery sales. Government defense sales declined 1.4% due to the shipment of a very large order for an allied country last year. The sales split between commercial and government defense for our battery business was 68-32, identical to that reported for the 2025 quarter, and the domestic to international split was 59-41 compared to 73-27 for the 2025 period, reflecting the heightened global demand for our products. Revenues from our Communications Systems segment of $3.8 million increased 39.3% from the $2.7 million we reported last year, due primarily to the timing of orders.

On a consolidated basis, the commercial to government defense sales split was 62-38 compared to 65-35 for the 2025 second quarter. Our total backlog exiting the second quarter was $117.5 million, the highest level in the company's history, representing a $33 million or 39% increase over the comparable 2025 period. The backlog remains diverse in nature across our commercial and government defense customer base, and the replenishment rate remains high, representing 63% of trailing 12-month sales. Our consolidated gross profit was $13.9 million, an increase of 19.5% over the 2025 period. As a percentage of total revenues, consolidated gross margin was 28.9%, a 500 basis point increase from the 23.9% reported for last year's second quarter.

The increase resulted from favorable sales product mix for both business segments and the net refund of IEEPA tariffs, which had been recognized as costs in previous periods. The net tariff refund in the second quarter of 2026 was $1.1 million and accounted for 230 basis points of the year-over-year increase in gross margin. Gross profit for our Battery & Energy Products business was $12.5 million compared to $10.8 million last year, an increase of 15.4%. Gross margin was 28.3%, a 470 basis point increase over 23.6% last year due to sales mix and the tariff net refund, with this refund accounting for 250 basis points of the year-over-year increase. Accordingly, gross margin excluding the net tariff refund was 25.8%.

For our Communications Systems segment, gross profit was $1.4 million compared to $0.8 million for the year-earlier period. Gross margin was 36.3% compared to 28.4% last year, primarily due to favorable sales mix. Operating expenses were $10.4 million, an increase of $1.1 million, or 10.6% from the year-earlier quarter. New product development costs increased 39.1% related to the continued investment in our product offering and vertical integration opportunities within our portfolio. In addition, we incurred one-time costs of $0.9 million relating to litigation expenses for our cyber insurance claim and the completion of certain consulting fees to help expedite gross margin improvement at our two largest manufacturing facilities.

As a percentage of revenues, operating expenses were 21.8% compared to 19.8% for last year's second quarter. Operating income was $3.4 million compared to $2.3 million last year, reflecting the overall increase in gross margin to 26.6%, when excluding the tariff refund. Operating margin increased to 7.2% compared to 4.7% for the 2025 second quarter. Other expense reported below operating income was $0.5 million for the quarter primarily comprised of interest expense from the financing of our Electrochem acquisition, partially offset by the second quarter estimated portion of a refundable tax credit for certain qualifying battery cells and packs we manufacture under the 45X Advanced Manufacturing Production Tax Credit.

This tax credit, established by the Inflation Reduction Act, runs through 2032. Other expense for the year-earlier period was $1.1 million, reflecting the acquisition financing. Our tax provision for the second quarter was $0.5 million compared to $0.2 million for the 2025 quarter, computed on a GAAP basis at statutory rates. Net income was $2.5 million or $0.15 per share on a GAAP fully diluted basis. This compares to net income of $0.9 million or $0.05 per share for the 2025 quarter. Adjusted EBITDA, defined as EBITDA including non-cash stock-based compensation expense and one-time costs not reflective of our ongoing operations, was $6.1 million or 12.8% of sales compared to $4.1 million or 8.5% for the prior year quarter.

Adjusted EBITDA on a TTM basis is $17.1 million or 9.1% of sales. Turning to our balance sheet, we ended the second quarter with working capital of $69.8 million and a current ratio of 2.9 compared to $68.5 million and 2.8 for 2025 year-end. Looking beyond our second quarter results, our backlog, the sheer number of our growth initiatives, our continued focus on gross margin improvement, progress with our vertical integration opportunities, and the transition of our various sub-brands to the Ultralife Master brand keep us positioned to realize the leverage of our business model. I will now turn it back to Mike.

Michael Manna: Thank you, Phil, for the detailed review of the Q2 2026 results. For 2026, we have four distinct priorities well underway. Our first priority was to accelerate the revenue capture in the Communications Systems business. We have several new products now moving through commercial capture phase, including products that already received initial orders, with additional product releases planned later this year. During Q2, we showcased our new StrikeHub product line at Special Operations Week and HPE Discover. StrikeHub provides vehicle mounting, network switching, power, and UPS to support edge compute solutions targeting Special Operations Forces, U.S. Air Force Joint Fires Network, and U.S. Army Next-Gen Command and Control applications.

We're actively working with multiple partners on longer-term opportunities that we believe can attain profitable baseline revenue in the business over the next year. The second priority is improving gross margin within our Battery & Energy business, with our Newark operations serving as the initial focus. As discussed on the last earnings call, we successfully addressed the significant scrap issue associated with our largest margin-impacting product line and began realizing positive P&L benefits as we ended the second quarter. 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.

These two initiatives alone are expected to generate annual savings of approximately $600,000 to $800,000 to the Battery & Energy gross margin. We have several lean manufacturing and automation projects underway at our Raynham facility, aimed at increasing throughput, improving quality, and enhancing operational efficiency. These investments are particularly important as we anticipate more than 30% growth in customer demand and cell consumption over the next year. Third, we continue to expand the vertical integration opportunities resulting from the Electrochem acquisition, enabling us to incorporate Electrochem cells into our existing battery pack assemblies and increase the amount of content we provide to customers.

This strategy not only enhances our competitive position, but also broadens our addressable market for battery pack solutions. In addition, through our enhanced marketing efforts, we are experiencing growing demand in support of both large and small water-based drone platforms utilizing Electrochem cells. These opportunities are progressing well, and we expect them to contribute meaningful incremental revenue beginning in the fourth quarter and continuing over the next several years. Lastly, on priority 4, we are well underway in our company branding realignment under the Ultralife Master brand, which will be completed this year, clarifying our customer messaging and market positioning as a market leader in battery and RF Products.

Switching to development projects, we continue to invest in products on both sides of the business to drive revenue and opportunities for organic growth. Within communication systems, continued focus remains on multiple new product development projects with 2026 launch dates. We're expanding our ruggedized computing portfolio by integrating new HPE server products and configurations tailored for tactical and mission-critical environments. We have already received several initial orders and continue to pursue additional program awards with expected 2026 deliveries. Our new 21 amplifier is under evaluation with multiple global customers for potential adoption in key modernization programs, while we continue to receive orders from international partners with deliveries expected this year.

We remain engaged with radio manufacturers to pair amplifiers with OEM platforms and drive pull-through sales opportunities. We will introduce the advanced variant of the 21 amplifier in 2026, supporting the newest high-speed single-channel and frequency-hopping MANET waveforms in a compact, body-worn form factor. We're also releasing new vehicle radio mounts in 2026 that integrate our entire amplifier portfolio with multiple handheld radio platforms, providing customers with a cost-effective universal mounting solution for both legacy vehicle fleets and new vehicle programs. Our Crescent small form factor wearable edge compute solution, which provides portable high-end compute capability in manned vehicle and drone applications, is in the final design stages.

We have an established strong partner ecosystem to support hardware development, system integration, and software tool development while incorporating voice of customer feedback to refine requirements, with the first prototypes available later this year. On the Battery & Energy side of the business, our primary focus remains driving new business growth through transformational programs and strategic OEM partnerships. We currently have multiple OEM development programs underway aimed at bringing new customer-specific products to market over the next several years. In addition, we are collaborating with existing customers on several initiatives to enhance the performance of current products and refresh product designs to meet evolving market requirements.

With respect to our conformal battery, which powers dismounted soldier systems, I'm pleased to say we have shipped more than $2 million in orders during 2026. Current backlog exceeds $7 million and is expected to fully ship before year-end. We have secured several cell and battery pack development programs supporting water-based defense drone applications. Design and prototype funding is in place for 2026, with production expected to begin in early 2027. This represents an exciting and expanding segment of our business where we have an established leadership position as a supplier of advanced underwater battery solutions in both rechargeable and non-rechargeable configurations.

We are nearing completion of product development activities with an OEM partner for a rechargeable power pack powering a remote surveillance system. This development and product certifications are scheduled to be completed in Q4, with product deliveries beginning in early 2027. We've established initial production capabilities for our thin cell technology platform to support customers in the medical wearables and asset tracking markets. Our sales pipeline continues to gain momentum with several opportunities advancing through qualification processes. These ultra-thin battery designs enable smaller, more discreet wearable sensors than those typically available today, improving user comfort while delivering longer device operating life. Continued investment in new product development remains a key component of our long-term growth strategy.

Expanding and diversifying our product portfolio not only creates new revenue opportunities, but also reinforces our legacy of delivering mission-critical power solutions. Our strategic priorities remain unchanged: converting long-term development programs into recurring revenue, advancing vertical integration where it creates value, and maintaining a disciplined focus on operational excellence and efficiency improvements. During 2026, we've made meaningful progress on gross margin improvement initiatives within the battery business. Looking ahead, we have multiple new communication system products scheduled for launch this year in support of next-gen command and control programs. At the same time, we continue to streamline our operations and strengthen our market recognition through our consolidation of our business under the Ultralife Master brand.

With a healthy backlog exceeding $117 million as we enter the second quarter and a robust development pipeline across both business segments, we are well positioned for revenue growth. Several custom battery programs serving medical, safety, and drone markets are expected to transition to new production later this year and into 2027. In addition new amplification and man-wearable computing products are slated for release in our Communications Systems business, further supporting our growth outlook and expanding our market opportunities. I will now pass it back to the operator for questions.

Operator: [Operator Instructions] Our first question comes from the line of Will Lauber of Visionary Wealth Advisors. Your line is open, Will.

William Lauber: I guess my question was, I saw last month that L3Harris had won the NGC2 award for their Falcon Manpack. I'm assuming that you guys will get some or most of that business. So I guess my question is, what has happened to the backlog since the end of the quarter, or how much has been added in July?

Michael Manna: Well, in July, we've had a lot of order pull-through to our backlog. I mean, we're almost at $130 million as we sit today.

William Lauber: Okay. And with the Falcon Manpack order, would it be safe to assume that, that was just like one division and it will roll out to all the divisions? Or do you have any insight into that?

Michael Manna: We do not directly have the insight as to which divisions it's going to at this point. We may in the future, but right now we don't.

William Lauber: Okay. And then with the Hewlett Packard Enterprise servers for the NGC2, I noticed that the Army had conducted some tests in some pretty extreme conditions last month. Is there any kind of report as to how the Hewlett Packard servers held up in that heat?

Michael Manna: Well, from what we hear, everything made it through the testing. We don't really get a lot of detail other than that at this point.

Philip A. Fain: 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.

William Lauber: Okay. That's good, because I saw in some of the press mentions that there was some of the equipment that didn't handle the heat as well.

Operator: [Operator Instructions] I would now like to turn the conference back to Mike Manna for closing remarks. Sir?

Michael Manna: All right. Thanks, everyone, for listening to today's call. We look forward to talking to you next time during the Q3 2026 earnings call. Bye now.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.