Ultralife Corporation (NASDAQ: ULBI) reported operating income of $500,000 on revenue of $18.9 million for the first quarter ended March 31, 2019 compared to operating income of $2.4 million on revenue of $23.1 million for the first quarter ended April 1, 2018.
First Quarter 2019 Financial Results
“First quarter results were significantly impacted by a reduction in government/defense sales largely due to delays of amplifier shipments under the U.S. Army’s Network Modernization initiatives by Communications Systems. We are now operating at a higher rate of amplifier production and have produced more units in the month of April than during the entire first quarter. In addition, normal fluctuations in government/defense order flow resulted in a decline in Battery & Energy Products sales that was buffered by continued strength in medical sales,” said Michael D. Popielec, President and Chief Executive Officer. “With key amplifier product shipments now increasing and robust opportunities for growth from our diversified set of commercial and government/defense customers ahead of us, we remain well positioned for another year of profitable growth in 2019.”
Revenue was $18.9 million, a decrease of $4.2 million, or 18.2%, compared to $23.1 million for the first quarter of 2018. Battery & Energy Products sales decreased $1.2 million, or 7.1%, to $16.0 million compared to $17.2 million last year due primarily to timing differences in government/defense shipments, not fully offset by a 10.4% increase in medical sales. Communications Systems sales decreased 50.7% to $2.9 million compared to $5.8 million for the same period last year as the initial start-up production and shipment of products to support the U.S. Army’s Network Modernization initiatives under the delivery orders announced in October 2018 were less than Q1 2018 shipments of Vehicle Amplifier Adapters for the U.S. Army’s Special Force Assistance Brigades under a contract awarded in December 2017 and shipments of power supplies to a large global defense prime contractor.
Gross profit was $5.1 million, or 26.9% of revenue, compared to $7.3 million, or 31.6% of revenue, for the same quarter a year ago. Battery & Energy Products’ gross margin was 27.6%, compared to 29.2% last year, primarily due to sales mix. Communications Systems’ gross margin was 23.4%, compared to 38.4% last year, primarily due to costs incurred to commence production of Communications Systems large program awards received in October 2018 for shipment in 2019.
Operating expenses were $4.5 million compared to $4.9 million last year reflecting continued tight control over discretionary spending. Operating expenses were 24.0% of revenue compared to 21.4% of revenue for the year-earlier period.
Operating income was $0.5 million compared to $2.4 million last year for an operating margin of 2.9% compared to 10.2% last year.
Net income was $0.4 million, or $0.03 per share, compared to net income of $2.2 million, or $0.14 per share ($0.13 per diluted share), for the first quarter of 2018.
Acquisition of Southwest Electronic Energy Corporation
Ultralife also announced today that it has acquired all of the outstanding shares of Southwest Electronic Energy Corporation (“SWE”), including its ISO certified manufacturing and technology facility, for $25.0 million in cash, subject to a customary working capital adjustment.
Based in Missouri City, TX, SWE is a leading independent designer and manufacturer of high-performance smart battery systems and battery packs to customer specifications using Lithium cells. SWE serves a variety of industrial markets, including oil & gas, remote monitoring, process control and marine, which demand uncompromised safety, service, reliability and quality.
For the trailing twelve-month period ended December 31, 2018, SWE generated revenue of over $28 million. The transaction is expected to be accretive on an EPS basis within 12 months.
“This acquisition advances our strategy of commercial revenue diversification and enhances the operating leverage of our business model. SWE checks nearly every box in our profile of an ideal acquisition candidate: a complementary line of highly engineered, mission critical, differentiated products; a blue-chip customer base; an innovative culture similar to our own; an experienced technical engineering and new product development team; a very strong management team; and a business model aligned with our core business. We welcome the SWE team to Ultralife and look forward to a smooth integration process,” said Michael D. Popielec, President and Chief Executive Officer.