Ultralife (NASDAQ:ULBI) reported second-quarter 2026 revenue of $47.9 million, operating income of $3.4 million and diluted earnings per share of $0.15, as the company cited stronger gross margins, a record backlog and continued investment in product development across its battery and communications businesses.
Revenue was modestly below the $48.6 million reported in the second quarter of 2025. Government defense sales increased 5% on a consolidated basis, while commercial sales declined 4.7%. Net income rose to $2.5 million, or $0.15 per diluted share, from $0.9 million, or $0.05 per diluted share, a year earlier.
Record Backlog and July Order Activity
President and CEO Mike Manna said the company’s expanding product portfolio is moving from development toward commercialization. During the question-and-answer session, Manna said order activity during July had lifted backlog to “almost at $130 million as we sit today.”
Management said backlog remained diversified between commercial and government defense customers, with replenishment representing 63% of trailing-12-month sales.
Margins Improve, Though Results Included Tariff Refund
Consolidated gross profit increased 19.5% year over year to $13.9 million, and gross margin expanded 500 basis points to 28.9%. Chief Financial Officer Phil Fain said the improvement reflected favorable product mix in both segments as well as a $1.1 million net refund of IEEPA tariffs that had been recognized as costs in earlier periods.
The tariff refund accounted for 230 basis points of the year-over-year gross-margin expansion. Excluding the refund, Fain said consolidated gross margin was 26.6%.
Operating expenses increased 10.6% to $10.4 million. New-product development costs rose 39.1% as Ultralife continued investing in its portfolio and vertical-integration opportunities. Expenses also included $0.9 million of one-time costs related to litigation for a cyber-insurance claim and consulting fees intended to accelerate gross-margin improvements at its two largest manufacturing facilities.
Adjusted EBITDA totaled $6.1 million, or 12.8% of sales, compared with $4.1 million, or 8.5% of sales, in the prior-year period.
Segment Results
Battery & Energy Products revenue declined 3.7% to $44.2 million. Commercial sales were affected by lower oil-and-gas sales tied to geopolitical factors, partly offset by a 7.2% increase in medical battery sales. Government defense revenue in the segment fell 1.4%, which Fain attributed to shipments of a large allied-country order in the prior-year quarter.
Battery & Energy Products gross profit rose 15.4% to $12.5 million, while gross margin improved to 28.3% from 23.6%. Excluding the tariff refund, segment gross margin was 25.8%.
Communications Systems revenue increased 39.3% to $3.8 million, primarily due to the timing of orders. The segment’s gross profit rose to $1.4 million from $0.8 million, with gross margin increasing to 36.3% from 28.4%, driven mainly by favorable sales mix.
Operational and Product Priorities
Manna outlined four priorities for 2026: accelerating revenue capture in Communications Systems, improving margins in Battery & Energy Products, expanding vertical integration following the Electrochem acquisition, and completing a corporate branding realignment under the Ultralife master brand.
At its Raynham operation, Ultralife said it addressed a major scrap issue affecting its largest margin-impacting product line and began seeing profit-and-loss benefits near the end of the second quarter. The company also corrected the second-largest source of margin inefficiency, with supply-chain updates expected to begin producing benefits in mid-third quarter. Management expects the two initiatives to generate approximately $600,000 to $800,000 in annual gross-margin savings.
The company is also pursuing lean manufacturing and automation projects at Raynham as it anticipates more than 30% growth in customer demand and cell consumption over the next year.
- Ultralife shipped more than $2 million of conformal battery orders during 2026 and held more than $7 million of related backlog expected to ship before year-end.
- The company said water-based defense drone programs have design and prototype funding in place for 2026, with production expected to begin in early 2027.
- A rechargeable power-pack program for a remote surveillance system is expected to complete development and certifications in the fourth quarter, with deliveries beginning in early 2027.
- Thin-cell technology production capabilities have been established for medical wearable and asset-tracking customers, with opportunities progressing through qualification.
Within Communications Systems, Ultralife showcased its StrikeHub product line during the quarter, targeting special operations, U.S. Air Force Joint Fires Network and U.S. Army Next Generation Command and Control applications. The company also discussed new ruggedized computing configurations incorporating HPE server products, a 20-watt amplifier under evaluation by global customers, vehicle radio mounts and its Crescent wearable edge-computing system, for which first prototypes are expected later this year.
During the call, Manna said Ultralife had heard that equipment made it through recent testing involving HPE servers, though he said the company did not receive significant additional detail. Fain added that Ultralife’s cooling system accompanying the servers is designed to withstand extreme heat conditions.
Ultralife ended the quarter with working capital of $69.8 million and a current ratio of 2.9, compared with $68.5 million and 2.8, respectively, at the end of 2025.
About Ultralife (NASDAQ:ULBI)
Ultralife Corporation (NASDAQ: ULBI) develops, manufactures and sells a broad range of energy and communications products for defense, medical, automotive and consumer electronics markets. The company operates through two primary segments: Power Systems and Communications Systems. In its Power Systems segment, Ultralife produces lithium-ion rechargeable cells and battery packs, primary lithium batteries, alkaline and rechargeable battery packs, chargers and battery accessories designed to meet demanding performance and safety requirements.
