Ultralife Corporation

Hello and welcome to Ultralife Corporation third quarter 2022 earnings release. My name is Priscilla and I'll be your coordinator for today's event. Please note this call is being recorded and your lines will be on listen only however you will have the opportunity to ask questions at the end during the Q&A session. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point please press star 0 and you will be connected to an operator. I will now hand over to your host, Ms. Jordi Buffening, to begin today's conference. Thank you.

Thank you, and good morning, everyone. Thank you for joining us this morning for Ultralife Corporation's earnings conference call for the third quarter of fiscal 2022. We apologize for the delay in starting today's call, which occurred due to issues experienced by the conference call provider. With us on today's call are Mike Popolek, Ultralife's president and CEO, and Phil Fain, Ultralife's Chief Financial Officer. The earnings press release was issued earlier this morning. 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 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. Potential risks and uncertainties that could cause actual results to differ materially include the impact of COVID-19, 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 reflects 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, these and other factors that could affect Ultralife's financial results is included in Ultralife's filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful metrics 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.

Good morning, Jody, and thank you, everyone, for joining the call, and I apologize for the slight delay this morning. Today, I'll start by making some brief overall comments about our Q3 2022 operating performance, after which I'll turn the call over to Phil, who will take you through the detailed financial results. When Phil is finished, I'll provide a brief update on the progress against our 2022 revenue initiatives, then open it up for questions. For the third quarter of 2022, total company organic revenue increased by over 20% year over year, driven primarily by strong shipments to government defense and markets. When including the acquisition of Excel, total company revenue increased by over 50%. Each of our business segments, battery energy products, and communication systems delivered solid year-over-year revenue increases. Our overall customer demand remains high, and at the end of Q3 2022, total company firm order backlog was at a level not seen in over 10 years. During the quarter, we continued to be negatively impacted by ongoing input component inflation and procurement cost increases, as well as manufacturing inefficiencies from erratic part lead times and excess material usage during the ramp-up of several new products. As such, these execution headwinds drove B&E gross margins downward and resulted in a total company EPS loss of one cent for this year's third quarter. In addition to continuing to work very closely with our customer and suppliers to address the ongoing component cost increases, lead time fluctuation, and sell price increases, we are implementing a number of actions to mitigate the ongoing gross margin pressures. In a few minutes, I'll give you a further update on our revenue initiatives and provide a summary of some of the gross margin initiatives. But first, I'd like to ask Ultralight CFO Phil Fain to take you through additional details of the Q3 2022 financial performance.