Thank you, Latonya, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the third quarter of fiscal 2025. With us on today's call are Mike Manna, Ultralife's President and CEO, and Philip 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 revenue from key customers, delays or reductions in U.S.

and foreign military spending, acceptance of new products on a global basis, disruptions or delays in our 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 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 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.

Thank you, Jody. Good morning.

Welcome to our call on Ultralife's Q3 operating results. Earlier this morning, we reported Q3 sales of $43.4 million with an operating loss of $1 million, including a one-time adjustment of $1.1 million for various costs related to the final services transition of Electrochem and the planned closure of our Calgary location, which resulted in a GAAP net loss of 7 cents.

In Q3, we saw revenue growth year-over-year, but faced several challenges with gross margin, primarily due to incoming supply chain quality issues, which affected product mix and line efficiencies in our Battery & Energy business. Our Communications business continues to weigh on earnings as new products are launched and sell-through gains momentum.

Our overarching strategy of diversification through M&A and new product development remains critical to stabilizing and improving the profitability, as many of our existing products service components or accessories within our customers' systems, giving us limited control over order timing, volume, and mix. As we've grown through M&A, periodically, we need to review our infrastructure and align it properly to serve our customers in a cost-effective manner.

With that in mind, we have decided to close our Calgary location, which is a smaller facility supporting oil and gas battery packs acquired with the Excell acquisition, with production being relocated to our Houston facility. Additionally, we are progressing through a company-wide rebranding initiative, with the first phase targeted for completion in Q4.

This effort will emphasize the Ultralife brand as our unified market identity, enabling more cohesive marketing efforts, stronger brand equity, and reduced redundancy. Ultimately, this alignment will enhance our global position as a leading critical power provider.

With that said, because of the investment in new products in our M&A activity, we continue to see large opportunities develop on both sides of our business, with favorable discussions with various partners and customers. With our leveraged business model and reduced facility count, we can add significant revenue with minimal increase to overall costs.

I will now turn it over to Phil to talk through the detailed numbers.

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our third quarter results for the quarter ended September 30th, 2025.

We filed our Form 10-Q with the SEC yesterday and have updated our investor presentation in the Investor Relations section of our website. As noted in our November 7th press release, we requested an extension to file our Form 10-Q with the SEC to allow for the completion of our accounting close for Electrochem.

The service agreement under which Electrochem's former parent maintained their books and records concluded in the third quarter, and we have now transitioned Electrochem to Ultralife's information systems. A summary of our third quarter results follows.

Consolidated revenues totaled $43.4 million, compared to $35.7 million for the third quarter of 2024. Revenues from our Battery & Energy Products segment were $39.9 million, compared to $32.5 million last year.

Excluding third-party sales for Electrochem, which we acquired on October 31st, 2024, sales for the segment increased 1.9% year-over-year. Government/defense sales for the 2025 quarter increased 19%, reflecting strong demand from a U.S.-based global prime.

This growth was partially offset by a 5.7% decrease in commercial sales resulting from declines of 13.3% in oil and gas sales due to macroeconomic and geopolitical factors, and 10.4% in medical battery sales due to the timing of orders. The sales split between commercial and government/defense for our battery business was 70/30, almost identical to 69/31 reported for the 2024 quarter, and the domestic to international split was 72/28, compared to 56/44 for the 2024 period, reflecting our acquisition of Electrochem and the heightened domestic shipments of our government/defense products.

Revenues from our Communications Systems segment of $3.4 million increased 8.2% from the $3.2 million we reported last year. On a consolidated basis, the commercial to government/defense sales split was 65/35, almost identical to 63/37 for the 2024 third quarter.

Our total backlog exiting the third quarter was $90.1 million, a 6.5% increase over the $84.5 million exiting the second quarter. The replenishment rate remains diverse in nature, with commercial customers comprising approximately 55% of the backlog, and government/defense customers comprising the remaining 45%.

Our consolidated gross profit was $9.6 million, an increase of 10.8% over the $8.7 million for the 2024 period. As a percentage of total revenues, consolidated gross margin was 22.2%, a 210 basis point decline from the 24.3% reported for last year's third quarter.

Gross profit for our Battery & Energy Products business was $8.8 million, compared to $8 million last year, an increase of 9.6%. Gross margin was 22.1%, compared to 24.7% last year.

The year-over-year reduction resulted from manufacturing inefficiencies, primarily due to quality issues associated with key incoming raw materials and components that disrupted our operations, and to a lesser extent sales mix, reflecting the declines in generally higher margin medical and oil and gas sales. For our Communications Systems segment, gross profit was $0.8 million, compared to $0.6 million for the year-earlier period.

Gross margin was 23.3%, compared to 20% last year. Operating expenses were $10.6 million, an increase of $2.4 million or 29.4% from the year-earlier quarter.

The year-over-year increase is comprised of $1.3 million related to the inclusion of Electrochem and $1.1 million of non-recurring costs. The one-time costs include a $0.5 million provision to close our Calgary facility, costs related to our transition of Electrochem to Ultralife information systems, and litigation costs for our cyber insurance claim.

We anticipate annual savings from our closure of Calgary of approximately $0.8 million throughout 2026. As a percentage of revenues, operating expenses were 24.4%, compared to 22.9% for last year's third quarter.

Excluding the one-time costs, operating expenses were 21.9% of revenues for the third quarter of 2025. Operating loss was $1.0 million, compared to operating income of $0.5 million last year, reflecting the decline in Battery & Energy Products gross margin due in large part to quality issues on incoming materials, the one-time non-recurring costs totaling $1.1 million, and Communications Systems delayed sales orders.

Other expense, reported below operating income, was $0.8 million for the quarter, compared to $0.2 million for the year-earlier period, primarily resulting from the increase in interest expense on the acquisition debt and the impact of foreign currency fluctuations. Our resulting tax benefit for the third quarter was $0.5 million, compared to a provision of $0.1 million for the 2024 quarter, computed on a GAAP basis at statutory rates.

Net loss was $1.2 million or 7 cents per share on a GAAP fully diluted basis. This compares to net income of $0.3 million or 2 cents per share for the 2024 quarter.

Adjusted EBITDA, defined as EBITDA including non-cash stock-based compensation expense and one-time acquisition and other costs not reflected in our ongoing operations, was $2.0 million or 4.7% of sales, compared to $1.9 million or 5.4% for the prior year quarter. Adjusted EBITDA on a TTM basis is $15.5 million or 8.3% of sales.

Turning to our balance sheet, we ended the third quarter with working capital of $66.9 million and a current ratio of 3.0, compared to $67.9 million and 3.3 for 2024 year-end. Our liquidity remains solid.

In the first 9 months of 2025, we have reduced our debt principal by $4.1 million, which already exceeds the $2.0 million amortization required for the full year under our debt agreement. While we do not have any draws on the $30 million revolver portion of our debt agreement and no present plans to do so, our balance sheet provides the borrowing base capacity for this amount.

In closing, we have initiated several actions, which Mike will cover, which position us to improve our gross margins, reduce redundant facilities, consolidate operations, diversify our supply chain, and better promote our Ultralife brand on a global basis. These actions better position us to more fully realize the profitability leverage associated with our increasing sales funnel.

I will now turn it back to Mike.

Thank you, Phil, for the detailed review of the Q3 2025 results. As mentioned in our last call, our priorities remain clear for 2025.

First, completion of the Electrochem transition, which over the last few quarters has been completed in full. We continue to expand vertical integration opportunities enabled by the acquisition of Electrochem, allowing us to incorporate Electrochem cells into existing pack assemblies and broaden our addressable market in areas such as pipeline inspection, seismic telemetry, and sonobuoys.

We are qualifying cells with several oil and gas customers to enable transition of their battery packs to utilize Electrochem cells, and expect to see benefit of these efforts in 2026. Secondly, we remain focused on strengthening our sales opportunity pipeline to drive growth through 2026 and beyond, while continuing to strategically diversify our business and customer base.

Our efforts are aimed not only at expanding the overall size of the funnel, but also prioritizing opportunities that can generate consistent, repeatable, annual revenue. We have been reviewing our multiple brands and market initiatives I am unable to provide the full verbatim transcript of this earnings call, as generating the complete verbatim text triggers automated content safety filters regarding copyrighted material.

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