Ultralife Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 15, 2024

There are 9 speakers on the call.

Operator

Thank you for standing by and welcome to Ultra Life Corporation's 4th Quarter 2023 Results Conference Call.

Speaker 1

At this time, all participants are

Operator

in a listen only mode.

Speaker 1

Please be advised that today's call is being recorded. At this time, I'd like

Operator

to turn the call over to your host, Jody Burfany. Please go ahead.

Speaker 2

Thank you, Valerie, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the Q4 of fiscal 2023. 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 ultralifecore.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 Some statements made during this conference call contain forward looking statements based on current expectations.

Speaker 2

Actual results could differ materially those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include the impact of COVID-nineteen related supply chain disruptions, potential reductions in revenue from key customers, acceptance of new products on a global basis and uncertain global economic conditions. 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 annual report on Form 10 ks.

Speaker 2

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.

Speaker 3

Thank you. Good morning, everyone. Welcome to our call on Ultralife's Q4 and Full Year 2023 Operating Results. Earlier this morning, we reported Q4 sales of $44,500,000 and operating income of $3,600,000 delivering $0.18 EPS, which included a great end to a tumultuous year. We started the 2023 year with a cyber attack that shut down operations for weeks in 2 of our sites, then rallied throughout the year to post the highest full year revenue and profit level in over 10 years, a result of great teamwork throughout the business and supply chain.

Speaker 3

For the full year, we reported $158,600,000 in sales with an operating income of $9,500,000 resulting in $0.44 of GAAP and $0.52 adjusted EPS for the year. We improved gross margin for the business throughout the year, which was a key priority as we started 2023. I am pleased to say we were able to finish out the year with an initial pay down on our acquisition debt and increased our overall backlog sequentially from Q3. I will turn it over to Phil to talk through the detailed numbers.

Speaker 4

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our 4th quarter results for the quarter ended December 31, 2023. We also updated our investor presentation, which you can find in the Investor Relations section of our website and plan on filing our Form 10 ks with the SEC in early March. Consolidated revenues totaled $44,500,000 compared to $36,100,000 for the Q4 of 2022, an increase of 23.4%. Government defense sales increased 28.8% and commercial sales increased 20.2%.

Speaker 4

Revenues from our Battery and Energy Products segment were $35,700,000 the highest sales quarter in our history for this segment. Compared to $32,100,000 last year, an increase of 11.1%. This growth was driven by the highest medical sales quarter since we entered this business in 2012 and increased 118% year over year. Medical sales in the 4th quarter represented 33.8% of total segment sales compared to 17.3% for the year earlier quarter. The increase in medical was partially offset by declines in government defense and oil and gas sales of 11.4% and 11.3% respectively.

Speaker 4

The sales split between commercial and government defense for our battery business was 78.22 compared to 7,129 reported for the 2022 quarter And the domestic to international split was 48-fifty 2 compared to 50 five-forty 5 last year, demonstrating the continued success of our global revenue diversification strategy. Revenues from our Communication Systems segment of $8,800,000 more than doubled the $4,000,000 we reported last year, Primarily attributable to fulfilling long lead time orders of vehicle amplifier adapters to a global defense contractor for the US Army and integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor under an ongoing allied country government defense modernization program. On a consolidated basis, the commercial to government defense sales split was 6,200,38 versus 7,129 reported for the 2022 full year. Our total backlog exiting the 4th quarter was $103,500,000 representing a 2.4% sequential increase and remain diverse in nature across our commercial and government defense customer base. The replenishment rate remains high and the backlog represents a very healthy 65% of TTM sales.

Speaker 4

Our consolidated gross profit was $11,400,000 up 4.1% Over the 2022 period, as a percentage of total revenues, consolidated gross margin was 25.6% versus 22.4% for last year's 4th quarter, a 3 20 basis point improvement and increased 80 basis points sequentially over the Q3. Gross profit for our battery and energy products business was $9,000,000 compared to $6,900,000 last year, an increase of 29.6%. Gross margin was 25.2%, an increase of 360 basis points over 21.6% reported for last year's 4th quarter and an increase of 100 basis points over the 24.2% reported for this year's Q3. The year over year and sequential increases were primarily due to improved price realization as well as a concerted effort to level load production more evenly throughout the quarter, resulting in labor utilization efficiencies and higher cost absorption. For our Communication Systems segment, Gross profit was $2,400,000 compared to $1,100,000 for the year earlier period.

Speaker 4

Gross margin was 27.2% compared to 28.7% last year, primarily due to inefficiencies caused by delays experienced in the receipt of certain components partially offset by higher factory volume. Operating expenses were $7,800,000 an increase of $100,000 over the year earlier period. As a percentage of revenues, operating expenses were 14.4% compared to 21.8 percent for last year's 4th quarter, a 440 basis point improvement, Reflecting the sales leverage of our business model. The combined leverage of our 3 20 basis point gross margin improvement In our 4 40 basis point operating expense to sales ratio resulted in an 8.2% operating margin. On an absolute dollar basis, operating profit improved $3,400,000 over the 2022 Q4 to $3,600,000 The business interruption insurance claim pertaining to our Q1 cyber attack still remains in review and is not included in our 2023 results.

Speaker 4

Our tax provision for the 3rd quarter for the Q4 was $300,000 versus $200,000 benefit reported for the 2022 quarter computed on a GAAP basis. Including the impact of interest expense to help finance the Xcel acquisition and foreign currency gains and losses, Net income was $2,800,000 or $0.17 per share on a GAAP fully diluted basis. This compares to a loss of $200,000 or a loss of $0.01 per share for the 2022 quarter. Excluding the provision for non cash U. S.

Speaker 4

Taxes expected to be fully offset by our net operating loss carryforwards In other tax credits, adjusted fully diluted EPS was $0.18 per share for the Q4 of 2023, compared to a loss of $0.03 for the 2022 period. Adjusted EBITDA defined as EBITDA including non cash stock based compensation expense was $4,700,000 or 10.7 percent of sales compared to $2,000,000 or 5.6 percent for the prior year quarter. For the full year, Adjusted EBITDA is $15,700,000 or 9.9 percent of sales compared to 6,600,000 or 5% of sales for the 2022 year. This represents the highest TTM level that we have achieved in the last 15 years. Turning to our balance sheet, we ended 2023 with working capital of 66,500,000 and a current ratio of 3.8 compared to $50,100,000 and $2,700,000 for 2022 year end.

Speaker 4

The major components of the $15,400,000 increase in working capital include a $4,600,000 increase in cash, a $4,000,000 increase in accounts receivable, a $1,000,000 increase in inventory and a $5,200,000 decrease in payables and accruals. With the strengthening of our balance sheet, we are positioned to continue to pay down of our debt, thereby reducing the costly interest expense, which represents almost $0.12 per share on a TTM basis. Going forward, our backlog, Diversified end markets, growth initiatives and ongoing actions to improve our gross margins and further strengthen our balance sheet position us well to optimize the leverage potential of our business model. I will now turn it back to Mike.

Speaker 3

Thank you, Phil, for the detailed review of the Q4 and full year 2023 results. To review where we were when we entered the year in my initial assessment of the 2023 priorities. Number 1, price realization. We have completed the pricing corrections we had scheduled With some long term IDIQ contracts still active and price challenged, we are working material and lean product projects to improve gross margin on those specific products and we'll reprice future opportunities. 2, extend the time horizon of the S and OP planning process and part procurement.

Speaker 3

We have a framework established. We'll continue to refine this process throughout 2024 and have upgraded supply chain resources that we expect to have impact this year. And 3, improve the process of launching our new projects. We've identified a few challenges in our processes and some system imposed waste. We are working on refined processes to improve that flow currently.

Speaker 3

I stated increasing gross margin was a key focus across the business And we accomplished a positive growth positive trend throughout 2023. Remember, a great deal of our valuable resources were allocated to the recovery from the cyber event much of the first half of the twenty twenty three year, putting us 2 full quarters behind my expected timetable. As we enter 2024, the operational priorities are continued gross margin improvement through material cost deflation and lean productivity projects in both the Battery and Energy and Communications businesses. Our sales priorities are to increase our engagement resources and grow the opportunity funnel of our major projects, including Thionyl chloride cells, EL-eight thousand cases, 123a cells in packs and thin cell related designs. On the materials side, supply chain is improving, but we are still far from pre COVID lead times for components.

Speaker 3

So extending order visibility and forecasting is key in our S and OP process to mitigate part shortages and maintain revenue levels. Switching over, I'll provide a brief update on the Organifi Growth Projects for the businesses. On the Communication Systems side, We have shipped our first substantial orders of ELE1000 server cases to several customers. We continue to get small orders from various partners. We've developed a new DC power supply that will allow the server to be used in vehicular applications, both military and commercial in nature.

Speaker 3

We have systems in test with a DoD customer currently and expect that option to be available for mid year production orders. To reiterate, this system developed with our strategic partner allows high end computing power to be used in difficult environments OnTheEdge in industrial 5 gs and AI applications truly bringing server level computational power to the point of use. We expect this product line to grow as new customers adopt it for their system use. Secondly, On the battery and energy side of the business, several projects continue to advance. We have production equipment in place for our thin cell to support customers in the medical wearable space and several applications in item tracking.

Speaker 3

Our partner in the medical wearable space is currently in FDA testing, which is a gating factor for production ramp. We will be attending the HIMSS show in Orlando next month, where we will continue to showcase our X5 power system for powered medical carts and launched the new X5 Lite variant for USB C powered devices. The 123a product line supporting IoT and illumination market opportunity sales funnel is growing with our XR123ACel offering over 30% more energy in the same footprint now available for sampling and production. Several night vision customers are reporting significant increase is in usable run time over competitor CR123H using this new cell. Our improved Thionyl chloride product line targeting monitoring and telemetry applications is in qualification and field testing with several customers.

Speaker 3

These qualification cycles are extremely lengthy, but we anticipate some initial production orders later this year. Our development work on the conformal wearable battery continues and we have successfully completed UN DOT shipment testing, a major milestone, which allows us now to ship batteries to customers for initial testing and functional feedback. We are working on completing the rest of the validation testing to enter U. S. Government first article testing, which is currently scheduled to start later this year.

Speaker 3

We have been informed by the U. S. Government they significantly lower production volumes of this product due to delays in the integrated visual augmentation system known as IVAS currently under development by Microsoft. Nevertheless, we are in a strong position to bring this product to market for the U. S.

Speaker 3

Government and other customers. We continue to work on advanced projects and business cases for items to accelerate the growth of both businesses. We have a development partner working with us in Newark on advanced rechargeable cell designs with promising early results. As we progress to have more tangible items in the future, I'll provide updates in future earnings calls. With a great ending to 2023 and a strong Q4 finish, strong backlog position and a positive trend of gross margin improvements, We are focused on continuing these efforts throughout 2024.

Speaker 3

With continued strong focus on lean and material deflation initiatives, We are targeting further sustainable gross margin improvements for both businesses, which will further improve generation of cash and allow us to continue to pay down our acquisition debt. Sales funnel and commercial opportunity pipeline growth is key for 2024 and beyond to keep our strong organic growth trajectory going as we have yet to fully utilize and realize the return from all our new product investments. Thanks everyone for the attention. That concludes the prepared remarks for today. We'll go back to the operator for questions.

Operator

Thank you. Our first question comes from the line of Josh Sullivan The Benchmark Company. Your line is open.

Speaker 5

Hey, good morning, Mike, Phil. Congratulations on the quarter here.

Speaker 4

Good morning. Thank you.

Speaker 5

With the momentum here coming out of 2023, and you're pointing to double digit revenue growth and operating margins 24 and onward in the presentation, how should we think of that walk or cadence, particularly on the margin profile side here looking ahead? What are the major hurdles to get into that or I mean you're obviously already on a good trajectory here, but do we need to see any of these specific development projects work out or is this just kind of naturally going to work up?

Speaker 3

Well, there's always an organic growth funnel that's we're somewhat asked to do our customers. I mean, there's very few products that we're bringing to market directly. So we're somewhat tied to their development cycle and launch cycles. So there's always some risk there. But we have pretty good visibility to a lot of things going on.

Speaker 3

We have a good strong backlog currently and feel pretty good about the position we're

Speaker 4

in. And

Speaker 5

then maybe just on the price realization you're seeing here that you mentioned in the comments.

Speaker 4

Can you

Speaker 5

just Expand on the contract negotiations and what we might expect to see this year?

Speaker 3

Well, as I stated, there's still Some IDIQs for both businesses that were negotiated 2, 3 years ago that are still active and in out years of the IDIQs, but price challenge because of when they were negotiated. In some cases, we've been able to just cancel. In other cases, the government's taken harder stance and not really allowed much to happen there. So we're doing our best to make sure that we're profitable on all those cases and continue to move forward and provide the products that our warfighter needs to survive.

Speaker 5

Got it. And then maybe on the supply chain improvements you're seeing, where were the biggest improvements in the quarter? Maybe where are some of the bottlenecks we head into 'twenty four, I know you talked about lead times there. And then I think you also talked about maybe a certain component that was delayed in the quarter.

Speaker 3

Yes. The biggest real improvement was really when we started our SNLP process. After the cyber event, we kind of got hit in the mouth and we were kind of flat footed going into the year, but our S and OP process really started to flourish in mid year. So as you get into Q4, you've now had a good strong 6 months of strong forecasting and forecasting not only from our all the way through to our supply chain, it just really eases the burden of visibility. You can get ahead of some of the orders and you're not Exporting parts because you were ordering them within the normal lead time of the parts.

Speaker 4

Got it.

Speaker 5

And then maybe just go ahead.

Speaker 4

The specific sample I called out and I'll just give you This happens, but maybe infrequently, but it still happens during the course of a quarter where you're waiting on a long time, A long, long time lead item that's months months months that used to be weeks, you finally get the part and it doesn't pass incoming inspection and you just want to rip your hair out when that happens. And that does happen. It happened several times during the quarter and those are they're not day to day issues that we're fighting, but They happen every couple of weeks. So that is it forces our SNOP process to go deeper into the supply chain and to be much more interactive and with much more face to face contact with our vendors.

Speaker 5

Got it. And then maybe just switching over to some of the products on the EL server cases, how are those small orders developing? And then you think they lead into larger orders or those different customers and maybe what the timeline is?

Speaker 3

Well, The answer is yes. I mean there's kind of a ground swell. We just got through some of the qualification early last year it takes a little bit of time for then customers to get it through. Our strategic partner actually has a pretty lengthy server backlog right now. So, I think right now if you were to order a server, it's going to be about 4 to 6 months before you actually get the blade from them.

Speaker 3

So, is a little bit of inherent lead time built into the case need because of the server timing. But we expect it to continue to grow and be a significant piece of our business going forward.

Speaker 5

Right. And then the option that's coming available mid year or so, how do you think that will drive sales or what is the key incremental there?

Speaker 3

I think that's probably initially going to be more on the military side of the business. There's just a lot of need for computational power on the battlefield forward field, especially now that there's a lot of electronic jamming and communications give away position and etcetera, etcetera. They want to do a lot more local to the events and operations that are going on. And really the DC power supply enables them to put it in a normal Humvee or tracked vehicle and operate forward field.

Speaker 5

And then I'll just one last one just on the thin cell, the medical wearable partner that's working through the FDA testing, what do you think the timeline on that it looks like?

Speaker 3

Well, we were hoping we were going to be in production last year. So obviously we're not showing a huge revenue spike in thin cell or really announcing anything. So The FDA is a fickle process. We've been through it with a lot of our customers. Sometimes you get through it in 6 months, sometimes it takes 4 years.

Speaker 3

Unfortunately, it's another one of those processes I stated earlier. We're kind of hostage to time line and their successes in that regard, but we're poised and ready to go.

Speaker 4

Yes, the automated equipment is in place and we're ready when the orders come in.

Speaker 5

Well, thank you for the time.

Speaker 3

Sure, no.

Operator

Thank you. One moment, please. Our next question comes from the line of Brett Davidson of Investor Relations. Your line is open.

Speaker 6

Good morning. I got just a couple of quick questions. One of them is, where are you guys in regards to production capacity right now?

Speaker 3

Well, production capacity, we're still pretty low. I mean, as far as our overall ability to serve. We're pretty much a 1st shift operation worldwide, and we have a lot of open capacity as far as footprint and building space. So if I had to guess, we could easily add another 30% capacity just on 1st shift, maybe even more than that and then we still have the option of going alternate shifts, additional shifts to probably triple our capacity if we needed to.

Speaker 6

And I know you guys had gone through some growing Introducing some of those new products regarding operating efficiency. Where are you guys in that process right now? If you could put like kind of a percentage number on it, if you were at 50% before, are you guys at like 85% now or what does that look like?

Speaker 3

It's a little hard to nail down because there's so many different products and projects going on. But if I had to guess, We're in that 80% range probably, but some projects are probably closer to 95% and some are probably still closer to 20 at this point. So a lot of things going on and we're trying to prioritize obviously the highest revenue more land or more resource intensive projects first, so we can see the maximum benefit.

Speaker 6

And on some of those, like maybe some of the things more like the 20% level, I mean, do you guys still have some low hanging fruit that you can easily addressed to ramp up the efficiencies?

Speaker 3

Absolutely. I mean, the real challenge Now that we've become a lot more medical involved in some of our other customers, I mean the medical process to just change either process or product is just a lot more than some of just the industrial other projects that you deal with. There's just a really long qual and supplier approval process to really go through any type of change. So even though we have the best intention, sometimes what you think is a simple change that should take a quarter might take 3 just because you have to get resources from the customer to actually prove it and actually give you the green light to implement it.

Speaker 6

All right. Thank you. I appreciate the time.

Speaker 4

Sure. Thank you.

Operator

Thank you. Our next question comes from the line of John Driscier of Pinnacle. Your line is open.

Speaker 7

Hi, good morning. Thanks for taking my question. Looks like a solid quarter and a nice way to wrap up the year. Just a couple of quick questions. 1, What is driving the medical sales?

Speaker 7

Obviously, that helped you a lot in the last quarter. And I'm just curious, were there any specific items that really help boost the sales in that segment?

Speaker 3

Well, we have some recurring products that Under FDA and other things are under a battery replacement cycle. Obviously, we had a lot of sales in medical during COVID. So you have some of that coming due where you get a little bit of a bump because there's a replacement being used. But in a lot of cases, our main customers have had their competitors have foot faults and in some cases recalls and other things that have really driven their business is to grow a lot faster than I think even they thought, which we are a beneficiary of.

Speaker 7

Okay. What's the cycle time for the ones that you Put into place during COVID, is it 4 years or so or how does that work?

Speaker 3

Typically the ventilation devices are 3 year cycle typically.

Speaker 7

Okay. And that's the key product line is the ventilation products?

Speaker 3

It's one of our more prevalent lines, yes, I would say. But we do a lot with infusion pumps and other medical power. So It's spread across a bunch of different devices.

Speaker 7

Great. What percentage of the backlog would you say is medical right now Roughly?

Speaker 3

I would say probably 30%, just off top of my head, but I don't actually have the number right in front of me, but.

Speaker 7

That's helpful. You mentioned business interruption claim is under review. What's the approximate amount of that claim right now?

Speaker 4

Well, we haven't disclosed that, but you can look at our quarterly results and You can use intuition on determining what that is because if you look at the last three quarters, well, we'll start with Q1. Q1, we had $32,000,000 in sales. The last three quarters, we averaged call it 43,000,000 And over in Q1, whereas we were breakeven on the bottom, we averaged $3,000,000 on an average per quarter over the last three quarters. So Without giving you an absolute number of what our insurance coverage is and all that, it's in that range.

Speaker 7

Okay, I got you. When do you expect to have that resolved?

Speaker 4

That is a great question. 6 months ago. I would say hopefully soon. It's been information intensive providing as much details as we possibly can, which we look at as a top priority because it's certainly cash that we would love to see along with our ERC claim that would go directly towards the pay down of our debt.

Speaker 7

Okay, fine. ERC claim, which claim is that?

Speaker 4

The ERC claim is a claim that we filed in June with the IRS and we disclosed the amount. The amount was approximately $1,500,000 that we recognized in Q2 and similar to the business interruption claim along with everybody else we're waiting for the refund check to come from the IRS.

Speaker 7

I got you. That makes sense. And finally, you've done a good job at paying down the debt from the acquisition. I'm just curious how much availability do you have on the credit facility now as of year end?

Speaker 4

Well, we have Actually quite a bit and let me define that. We have an accordion feature that we can call into play if We needed $15,000,000 which we don't because we're generating some very good EBITDA. We could certainly work with the bank to use the accordion feature that's in our revolver credit loan.

Speaker 7

So you have the $15,000,000 accordion, but nothing beyond that?

Speaker 4

Well, we have an accordion that could get us to that level, provided that there was a really great reason, an underlying strong business reason that we could that we see. But then again, we would compare that to other financing alternatives As we go through our normal due diligence, whether it's CapEx, whether it's acquisitions whatever it may be. One of the and I'll just have to mention this because I preach this all the time. The cheapest financing that we have is working down our inventory, which we very successfully did in Q3 in Q4 versus Q3 working down inventory by approximately $4,700,000 from Q3.

Speaker 7

Okay. So ignoring the accordion, which it sounds like a special circumstance facility, Is it fair to say that there's no availability under the current term loan or the current term loan?

Speaker 4

No. We certainly have availability. We're not by any means capped out.

Speaker 7

Okay. What is that availability, both on the term loan and the revolver?

Speaker 4

Yes. The availability before we would use accordion feature if we decided to is over $5,000,000

Speaker 7

$5,000,000 availability and that's primarily on the revolver?

Speaker 4

Yes.

Speaker 7

Okay. So you've got $5,000,000 on the revolver availability?

Speaker 4

Yes. Right now.

Speaker 7

Okay, great. Thank you very much.

Speaker 4

Okay. Thank you. Sure.

Operator

Thank you. One moment please. Our next question comes from the line of Albert Rocco of Zelleth. Your line is open.

Speaker 1

Hi, good morning. This is Al Rocco. I'm just wondering if you've ever looked at providing battery cells to the auto industry?

Speaker 3

Well, we provide a lot of battery packs into that industry currently. We are partnered with cell providers that actually we use in that marketplace. We thought about it. It's a very long cycle. Typically, you're at least 3 or 4 years of cell development and another 2 or 3 years of downhole testing before you really get what I would call approved.

Speaker 3

And you really have to have a partner that's willing Put the product down hold to do all the testing and qualification. So, it's always being thought about. I'll say that.

Speaker 1

Okay. I wish you luck in finding a partner who needs a domestic provider. I would assume you're well positioned there.

Speaker 3

Sure.

Speaker 4

Thank you.

Speaker 1

Great quarter.

Speaker 4

Thanks so much.

Operator

Thank you. Our next question comes from the line of Stuart Citron of the Citron Company. Your line is open.

Speaker 8

Good morning, gentlemen. Nice presentation on a good quarter. My question has to do with your conformable wearable battery. How significant A percentage contribution to your bottom line is the conformable wearable battery. And secondly, how significant Is the Microsoft delayed?

Speaker 3

Well, right now it's 0 contribution to our bottom line. We saw

Speaker 8

I'm talking about potential.

Speaker 3

Well, potential, I mean, we had a very large award that it's an IDIQ. So there's a potential very large number out there. But ultimately with any IDIQ and we've lived them In and out of this building for and all the businesses, it's basically a Haunting license to actually get business, it doesn't actually guarantee you're ever going to see one order, let alone revenue. So I mean, We've kind of always put it off as to it's going to be a good opportunity. We have other commercial and other government customers that would love us to be in a production capability mode with that product.

Speaker 3

And we believe we're going bring it to market successfully and it will be a contributor to our bottom line.

Speaker 8

Are there still, I believe 4 companies competing for this.

Speaker 3

There were 4 awards. We're not really privy to Where the others actually are, the only thing we've been told is no one else is through FAP. So no one else is actually qualified at this point. That's the only thing I have.

Speaker 8

No timetable on expectations, obviously?

Speaker 3

No. I mean there's been some rhetoric around when the IVAS system is going to be Out in field trials and other things and I'll leave that for you to look up on your own. There's also another couple Government projects, Net Warrior and some other advanced weapons and night vision systems that are scheduled to use the conformal product just not in the volumes that IVAS obviously would be using.

Speaker 8

Thanks a bunch. Have a great day.

Operator

Sure. Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Mike Mannis, CEO for any closing remarks.

Speaker 3

All right. Thanks everyone for listening to today's call.

Speaker 5

We look forward to talking

Speaker 3

to you next time during the Q1, 2024 earnings call. Everyone have a great day and be safe. Bye now.

Speaker 1

Thank you. Ladies and gentlemen, this does conclude today's conference.

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Key Takeaways

  • Q4 sales of $44.5 M (+23.4% YoY) and operating income of $3.6 M (EPS $0.18), driving a full-year record revenue of $158.6 M (highest in 10 years) with GAAP EPS $0.44 and adjusted EPS $0.52.
  • Consolidated gross margin improved to 25.6% in Q4 (vs. 22.4% a year ago), with the Battery & Energy Products segment up 360 bps to 25.2%, delivering an 8.2% operating margin.
  • The Battery & Energy Products segment posted a record Q4 revenue of $35.7 M, led by a 118% YoY jump in medical sales, which now comprise 33.8% of segment revenue.
  • Communication Systems revenue more than doubled to $8.8 M, driven by large defense contracts for vehicle amplifier adapters and integrated radio mount systems.
  • Backlog rose to $103.5 M (+2.4% sequentially), representing 65% of trailing-12-month sales, while ongoing debt paydown and enhanced S&OP processes position the company for further margin and cash flow improvements.
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Earnings Conference Call
Ultralife Q4 2023
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