Ultralife Corporation

What they do

Ultralife operates two reported segments: Battery & Energy Products and Communications Systems. Battery & Energy Products makes primary and rechargeable battery cells and packs across multiple chemistries for commercial and government/defense customers, while Communications Systems supplies military communications equipment and related products. The company sells to oil & gas, industrial, medical, and allied-country government/defense customers and manufactures in the United States.

Revenue drivers

• Battery & Energy Products — The largest segment, generating $44.2 million of the $47.9 million in Q2 2026 revenue, serving commercial (oil & gas, industrial, medical) and government/defense battery markets.
• Communications Systems — Generated $3.8 million in Q2 2026, up 39.3% year over year, supplying communications products primarily tied to government/defense programs.
• Government/defense demand — A meaningful demand pool across both segments, including large allied-country orders; Q2 2026 government/defense sales declined 1.4% against a very large allied-country order shipped in the prior-year quarter.
• Backlog — Total backlog exiting Q2 2026 was $117.5 million, the highest in company history, compared with $115.1 million exiting Q1 2026 and $84.5 million exiting Q2 2025.

Recent performance

For the second quarter ended June 30, 2026, revenue was $47.9 million, down 1.3% from $48.6 million a year earlier. Gross profit was $13.9 million, or 28.9% of revenue, versus $11.6 million, or 23.9%, a year ago; excluding a $1.1 million net IEEPA refund, gross margin was 26.6%. Operating income was $3.4 million, including $0.9 million of one-time costs, compared with $2.3 million including $0.3 million of one-time costs in the prior-year quarter. GAAP net income attributable to Ultralife was $2.5 million, or $0.15 per diluted share, versus $0.9 million, or $0.05, last year, and Adjusted EBITDA was $6.1 million versus $4.1 million.

Strategy

Management is focused on improving gross margin by addressing manufacturing inefficiencies and on favorable sales mix; Q2 2026 gross margin improved 760 basis points versus the first quarter. The Communications Systems business is preparing to launch multiple new products later in 2026 for government/defense programs while expanding its opportunity funnel. Battery & Energy Products is advancing product development programs, including for water-based defense drone applications, several of which are expected to transition to production later this year. The company continues to execute its $117.5 million backlog and characterizes these multi-year opportunities plus margin initiatives as supporting an outlook for profitable growth in 2026.

Risks

• Government/defense order timing — Q2 2026 government/defense battery sales fell 1.4% because a very large allied-country order shipped in the prior-year quarter, showing results can swing on large order timing.
• Commercial end-market softness — Oil & gas and industrial battery sales declined 8.7% year over year in Q2 2026, partly offset by a 7.2% increase in medical battery sales.
• Debt and interest cost from Electrochem acquisition — Long-term debt was $42.9 million at June 30, 2026, and interest expense on the Electrochem acquisition financing was the main component of $0.5 million of Q2 2026 other expense.
• Manufacturing execution and one-time costs — Q2 2026 operating expenses included $0.9 million of one-time costs, primarily litigation expenses for a cyber-insurance claim and consulting costs to expedite gross margin improvement.

Outlook

Management said the Communications Systems business is positioned for revenue gains as new products move through the capture phase and multiple launches are planned later this year in support of government/defense programs. Several Battery & Energy Products development programs, including for water-based defense drone applications, are expected to transition into production later this year. The company expects these multi-year revenue opportunities combined with ongoing gross margin improvement initiatives to reinforce its outlook for profitable growth in 2026.