Ultralife Corp (ULBI) 2023 Q2 法說會逐字稿

Good day and thank you for standing by. Welcome to the Ultralife earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. (Operator Instructions) Please be advised that today's conference is being recorded.

美好的一天，感謝您的支持。歡迎參加 Ultralife 財報電話會議。此時，所有參與者都處於只聽模式。演講者演講結束後，將進行問答環節。 （操作員指示）請注意，今天的會議正在錄製中。

I would now like to hand the conference over to your speaker today, Jody Burfening. Please go ahead.

我現在想把會議交給今天的發言人喬迪·伯芬寧。請繼續。

Thank you, Jada, and good morning, everyone. And thank you for joining us this morning for Ultralife Corporation's earnings conference call for the second quarter of fiscal 2023. With us on today's call are Mike Manna, Ultralife's President and CEO; and Phil 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.

謝謝賈達，大家早上好。感謝您今天早上參加 Ultralife Corporation 2023 財年第二季度的收益電話會議。參加今天電話會議的有 Ultralife 總裁兼首席執行官 Mike Manna；和 Ultralife 首席財務官 Phil Fain。收益新聞稿於今天早上早些時候發布，如果有人還沒有收到副本，我邀請您訪問該公司的網站 www.ultralifecorp.com，您可以在投資者關係部分的投資者新聞下找到該新聞稿。

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 supply chain disruptions, potential reductions in revenue from key customers, acceptance of our new products on a global basis and uncertain global economic conditions.

在將電話轉交給管理層之前，我想提醒大家，本次電話會議中所做的一些陳述包含基於當前預期的前瞻性陳述。由於各種風險和不確定性，實際結果可能與預測存在重大差異。可能導致實際結果出現重大差異的潛在風險和不確定性包括供應鏈中斷、主要客戶收入的潛在減少、全球範圍內對我們新產品的接受度以及不確定的全球經濟狀況。

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 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 annual report on Form 10-K.

該公司提醒投資者不要過分依賴前瞻性陳述，這些陳述僅反映該公司截至今天的分析。該公司不承擔公開更新前瞻性陳述以反映後續事件或情況的義務。有關這些因素以及可能影響 Ultralife 財務業績的其他因素的更多信息包含在該公司向美國證券交易委員會提交的文件中，包括最新的 10-K 表格年度報告。

In addition, on today's call, management will refer to certain non-GAAP financial measures. The management considers to be useful metrics and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures.

此外，在今天的電話會議上，管理層將參考某些非公認會計準則財務指標。管理層認為這是有用的指標，並且與公認會計準則不同。這些非公認會計原則措施應被視為對相應公認會計原則數據的補充。

With that, I would now like to turn the call over to Mike. Good morning, Mike.

有了這個，我現在想把電話轉給邁克。早上好，邁克。

Good morning. Welcome to the call on Ultralife's Q2-2023 operating results. Let me first say I'm very proud of our internal team and valued supplier network, which after a slow start to the quarter due to the lingering impact of the previously reported Q1 cyber-attack, the teams rallied. Both businesses delivered strong Q2 performance with revenue up 33% and operating profit increasing over 360% year over year, highlighting the leverage of our business model.

早上好。歡迎致電了解 Ultralife 2023 年第二季度的經營業績。首先我要說的是，我對我們的內部團隊和有價值的供應商網絡感到非常自豪，由於之前報導的第一季度網絡攻擊的持續影響，本季度開局緩慢，但團隊又重新振作起來。兩項業務第二季度均表現強勁，收入同比增長 33%，營業利潤同比增長超過 360%，凸顯了我們業務模式的優勢。

We increased gross margin for the total business over Q1, even with a slow start to the period. I am pleased that even with the strong revenue, our total backlog was not only replenished, but increased to the highest in company's history exiting Q2.

儘管第一季度開局緩慢，但我們整體業務的毛利率有所提高。我很高興的是，即使收入強勁，我們的總積壓訂單不僅得到了補充，而且還增加到了第二季度公司歷史上的最高水平。

I will now turn it over to Phil to talk through the Q2 financial results.

我現在將把它交給菲爾來討論第二季度的財務業績。

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our second-quarter results for the quarter ended June 30, 2023. We also filed our Form 10-Q with the SEC and updated our investor presentation, which you can find in the Investor Relations section of our website. I'd like to thank all those that help make this happen.

謝謝你，邁克，大家早上好。今天早上早些時候，我們發布了截至2023 年6 月30 日的第二季度業績。我們還向SEC 提交了10-Q 表格，並更新了我們的投資者演示文稿，您可以在我們網站的投資者關係部分找到該演示文稿。我要感謝所有幫助實現這一目標的人。

Before starting the financial review, I want to point out that our business interruption insurance claim resulting from our first-quarter cyber-attack is still in process. I look forward to sharing with you the details of our claim once the settlement has been finalized and funded, after which we will include the settlement amount in our financial results.

在開始財務審查之前，我想指出，我們因第一季度網絡攻擊而導致的業務中斷保險索賠仍在處理中。我期待在和解完成並提供資金後與您分享我們的索賠細節，之後我們會將和解金額納入我們的財務業績中。

Consolidated revenues for the 2023 second quarter totaled 42.7 million compared to 32.1 million for the second quarter of 2022, an increase of 32.9%. Government defense sales increased 111.5% and commercial sales increased 9.2% compared to the year-earlier period.

2023年第二季度合併營收總計4270萬美元，較2022年第二季度的3210萬美元增長32.9%。與去年同期相比，政府國防銷售增長111.5%，商業銷售增長9.2%。

Our total backlog exiting the second quarter increased 2.6% over the first quarter to 110.9 million, the highest level in the company's history and representing a 40.1% increase over the comparable period last year. The backlog is diverse in nature across our commercial and government defense customer base and we expect approximately 70% of the backlog to ship during the second half of 2023.

我們第二季度的未完成訂單總數比第一季度增長了 2.6%，達到 1.109 億，這是公司歷史上的最高水平，比去年同期增長了 40.1%。我們的商業和政府國防客戶群的積壓訂單性質多種多樣，我們預計大約 70% 的積壓訂單將在 2023 年下半年發貨。

Revenues from our battery & energy products segment were 33.9 million compared to 30.1 million last year, an increase of 12.3%, reflecting strong year-over-year growth in our three major markets that together, accounted for approximately 83% of the segment revenues. Government/defense sales increased 26.6%, medical battery sales increased 25.2%, and oil & gas sales increased 17.9%. These increases were partially offset by an 18.8% decline in other commercial sales primarily in China due to the timing of certain industrial sales.

我們的電池和能源產品部門的收入為 3,390 萬美元，較去年的 3,010 萬美元增長 12.3%，反映出我們的三個主要市場同比強勁增長，這三個市場合計約佔該部門收入的 83%。政府/國​​防銷售額增長 26.6%，醫用電池銷售額增長 25.2%，石油和天然氣銷售額增長 17.9%。由於某些工業銷售的時間安排，主要在中國的其他商業銷售下降 18.8%，部分抵消了這些增長。

The backlog for our battery & energy products business exiting the second quarter increased 12.1% over the first quarter to $98.5 million, also the highest level in our company's history for this segment. The sales split between commercial and government/defense for our battery business was 80-20 compared to 78-28 (sic - 72-28) reported for the 2022 year and the domestic to international split was 51-49 compared to 49-51 for last year, accentuating the continued success of our global revenue diversification strategy. The $27 million of commercial sales for the second quarter was the highest for any quarter in the company's history.

第二季度我們的電池和能源產品業務的積壓訂單比第一季度增長了 12.1%，達到 9,850 萬美元，也是我們公司該領域歷史上的最高水平。我們的電池業務的商業和政府/國防之間的銷售比例為80-20，而2022 年報告的比例為78-28（原文如此- 72-28），國內與國際比例為51-49，而2022年的比例為49-51。去年，突顯了我們的全球收入多元化戰略的持續成功。第二季度的商業銷售額為 2700 萬美元，是公司歷史上任何一個季度的最高銷售額。

Revenues from our communications systems segment were 8.8 million compared to 2.0 million last year. A more than four-fold increase, primarily attributable to shipments of vehicle amplifier adapters to a global defense contractor for the US Army and integrated systems of amplifiers and radio vehicle mounts to a major international defense contractor under an ongoing allied country government/defense modernization program. The backlog for our communications systems business of 12.3 million was down 38.8% from the backlog of 20.2 million exiting the first quarter as we continue to deliver on existing programs while working towards securing the next round of defense program orders in the first round of significant commercial orders.

我們的通信系統部門的收入為 880 萬美元，而去年為 200 萬美元。增長超過四倍，主要歸因於根據正在進行的盟國政府/國防現代化計劃，向美國陸軍的全球國防承包商運送了車輛放大器適配器，以及向主要國際國防承包商運送了放大器和無線電車載支架集成系統。我們的通信系統業務積壓訂單數量為1,230 萬件，比第一季度的2,020 萬件積壓訂單下降了38.8%，因為我們繼續交付現有項目，同時努力確保第一輪重大商業項目中的下一輪國防項目訂單。命令。

On a consolidated basis, the commercial to government/defense sales split was 63-37 versus 71-29 reported for the 2022 full year. Our consolidated gross profit was 10.6 million for the 2023 second quarter, up 38.5% over the 2022 period. As a percentage of total revenues, consolidated gross margin was 24.8% versus 23.8% for last year's second quarter, an increased by 150 basis points over the first quarter.

綜合來看，商業與政府/國防銷售比例為 63-37，而 2022 年全年報告的比例為 71-29。 2023年第二季度我們的綜合毛利潤為1060萬美元，比2022年同期增長38.5%。綜合毛利率佔總收入的百分比為 24.8%，去年第二季度為 23.8%，比第一季度增加了 150 個基點。

Gross profit for our battery & energy products business was 7.5 million compared to 7.2 million last year. Gross margin was 22.3%, a decrease of 60 basis points from 22.9% reported in the first quarter and a decrease of 140 basis points from 23% reported last year. The year-over-year decline was primarily due to lingering inefficiencies resulting from the Q1 cyber-attack, the disposition of certain non-conforming materials, and continued investments in the transition of new products to high-volume production, partially offset by improved price realization.

我們的電池和能源產品業務的毛利潤為 750 萬美元，而去年為 720 萬美元。毛利率為 22.3%，比第一季度的 22.9% 下降 60 個基點，比去年報告的 23% 下降 140 個基點。同比下降主要是由於第一季度網絡攻擊、某些不合格材料的處置以及新產品向大批量生產過渡的持續投資導致效率持續低下，但部分被價格上漲所抵消實現。

For our communications systems segment, gross profit was 3.0 million compared to 0.5 million for the year earlier period. Gross margin was 34.5% compared to 24.9% last year, reflecting higher factory throughput leading to higher cost absorption and favorable product mix.

我們的通信系統部門的毛利潤為 300 萬美元，而去年同期為 50 萬美元。毛利率為 34.5%，而去年為 24.9%，反映出更高的工廠產量導致更高的成本吸收和有利的產品組合。

Operating expenses were 6.9 million, the same as that reported for the year earlier period. As a percentage of revenues, operating expenses were 16.2% compared to 21.3% for last year's second quarter, a 510-basis-point improvement, demonstrating the sales leverage of our business model. The combined leverage of our gross margin improvement and flat operating expenses resulted in a 2.9 million or more than four-fold increase in operating profit to 3.7 million compared to 0.8 million for the 2022 second quarter.

營業費用為 690 萬元，與上年同期持平。運營費用佔收入的比例為 16.2%，而去年第二季度為 21.3%，提高了 510 個基點，體現了我們業務模式的銷售槓桿作用。毛利率提高和營業費用持平的綜合槓桿作用使營業利潤增加了 290 萬美元或四倍多，達到 370 萬美元，而 2022 年第二季度為 80 萬美元。

During the second quarter, the company confirmed its eligibility for the Employee Retention Credit, ERC, which is a refundable tax credit against certain employment taxes under the CARES Act of 2020, and the American Rescue Plan of 2021. And filed the necessary amended payroll tax forms with the Internal Revenue Service to claim a refund for the credit. The ERC refund receivable of 1.5 million is reported in other current assets on our balance sheet and as other income, which is below operating profit in our income statement.

第二季度，該公司確認了其獲得員工保留抵免(ERC) 的資格，該抵免是根據2020 年CARES 法案和2021 年美國救援計劃針對某些就業稅提供的可退還稅收抵免。並提交了必要的修正工資稅向國稅局提交表格申請退款。應收 150 萬美元的 ERC 退款在我們的資產負債表中的其他流動資產和其他收入中報告，低於我們損益表中的營業利潤。

Our tax provision for the second quarter was 1.4 million versus 0.2 million reported for the 2022 quarter computed on a GAAP basis. Including the impact of interest expense to help finance the Excell acquisition, foreign currency losses associated with the strengthening of pound sterling to the US dollar and the ERC, net income was 3.3 million or $0.21 per share.

我們第二季度的稅款準備金為 140 萬美元，而根據 GAAP 計算，2022 年季度報告的稅款準備金為 20 萬美元。包括為收購 Excell 融資而產生的利息支出、與英鎊兌美元走強以及 ERC 相關的外匯損失，淨利潤為 330 萬美元，即每股 0.21 美元。

The ERC net of taxes computed on a GAAP basis represented $0.07 per share with the remaining $0.145 per share resulting from operations. This compares to net income of 0.2 million or $0.03 per share for the 2022 quarter. Excluding the provision for non-cash US taxes expected to be fully offset by our net operating loss carry forwards and other tax credits, adjusted EPS was $0.29 for the second quarter of 2023, with operations contributing approximately $0.20 per share compared to $0.03 for the 2022 period.

根據 GAAP 計算的 ERC 扣除稅費後每股 0.07 美元，其餘 0.145 美元來自運營。相比之下，2022 年季度的淨利潤為 20 萬美元，即每股 0.03 美元。不包括預計將被我們的淨營業虧損結轉和其他稅收抵免完全抵消的非現金美國稅項，2023 年第二季度調整後每股收益為0.29 美元，其中業務貢獻約為每股0.20 美元，而2022 年為0.03 美元時期。

Adjusted EBITDA, defined as EBITDA, including non-cash stock-based compensation expense was 6.3 million or 14.7% of sales for the 2023 quarter, including the ERC compared to 2.2 million or 6.8% for the prior year quarter. Turning to our balance sheet, we ended the 2023 second quarter with working capital of 58.6 million and a current ratio of 3.0 compared to 50.1 million and 2.7 for 2022 yearend.

2023 年季度調整後 EBITDA（定義為 EBITDA，包括非現金股票補償費用）為 630 萬美元，佔銷售額的 14.7%（包括 ERC），而去年同期為 220 萬美元，佔銷售額的 6.8%。談到我們的資產負債表，2023 年第二季度結束時，我們的營運資本為 5860 萬美元，流動比率為 3.0，而 2022 年年底的流動資本為 5010 萬美元，流動比率為 2.7。

While inventory decreased 2.6% on a sequential basis, the 11.8% increase over 2022 year-end primarily reflects the impact of the Q1 cyber-attack, as well as continued actions to proactively influence our position to service our substantial backlog. With the cyber-attack in our rearview mirror, going forward, our backlog, diversified end markets, growth initiatives, and ongoing actions to improve our gross margin, position us well to continue to optimize the leverage potential of our business model.

雖然庫存環比下降 2.6%，但較 2022 年底增加 11.8% 主要反映了第一季度網絡攻擊的影響，以及為主動影響我們的地位以服務大量積壓的持續行動。隨著網絡攻擊成為我們的後視鏡，展望未來，我們的積壓訂單、多元化的終端市場、增長計劃以及提高毛利率的持續行動，使我們能夠繼續優化我們業務模式的槓桿潛力。

I will now turn it back to Mike.

我現在將其轉回給邁克。

Thank you, Phil, for the detailed breakdown on the Q2 performance. As mentioned, we continue to focus on executing our backlog and improving gross margin. Several operational initiatives are in process to smooth production flow, better manage inbound and outbound materials, which improves cash flow. We realized some improvement in gross margin in Q2, but many of our initiatives are in the early stages of implementation, so I expect to see further improvement throughout this year and into 2024, subject to the stable mix of customer demand.

謝謝 Phil 對第二季度表現的詳細分析。如前所述，我們繼續專注於執行積壓訂單和提高毛利率。多項運營舉措正在進行中，以平滑生產流程，更好地管理進出材料，從而改善現金流。我們在第二季度實現了毛利率的一些改善，但我們的許多舉措還處於實施的早期階段，因此我預計今年到 2024 年將看到進一步的改善，這取決於客戶需求的穩定組合。

Supply chain improved in Q2, where we were able to produce and procure parts needed to execute our ship backlog, except for some specialty parts that still have excessively logged lead times. Customer forecasts and orders remain strong, allowing us to order parts within lead time windows and eliminate expediting fees, which is expected to generate some cost side improvement by the end of the year. Direct labor remains tight in all locations, both internally and within our supply chain, but we were able to increase our headcount in Q2.

第二季度供應鏈得到改善，我們能夠生產和採購執行船舶積壓訂單所需的零件，但某些特殊零件的交貨時間仍然過長。客戶預測和訂單仍然強勁，使我們能夠在交貨時間內訂購零件並消除加急費用，預計這將在年底前產生一些成本方面的改善。所有地點的直接勞動力仍然緊張，無論是內部還是供應鏈內，但我們在第二季度增加了員工人數。

To recap the top initiatives in progress, we continue price realization activities, experiencing some benefit in gross margin in Q2 and continue initiatives to improve and stabilize our gross margin performance for both businesses. Communication systems, specifically, as a backlog of contracts or priced in some cases over a year earlier, which results in margin pressure from pricing, then award, to actual delivery. We expect to complete this heightened pricing initiative this year and return to normal cadence price reviews while transitioning focused to internal cost down activities.

為了回顧正在進行的主要舉措，我們繼續進行價格實現活動，在第二季度毛利率方面取得了一些好處，並繼續採取措施改善和穩定我們兩項業務的毛利率表現。特別是通信系統，作為合同的積壓或在某些情況下比一年前定價，這導致從定價、授標到實際交付的利潤壓力。我們預計今年將完成這一提高定價舉措，並恢復正常的價格審查節奏，同時將重點轉向內部成本降低活動。

We continue our journey of extending the time horizon of our sales and operations planning process with both customers and suppliers, improving our end-to-end forecasting. This process is being refined, and we've experienced strong orders and forecast from most of our recurring customers, aiding our planning and procurement functions. Lastly, we continue to improve our process of launching new products and transitioning to higher volume production with appropriate design for manufacturing and lean principles.

我們繼續與客戶和供應商一起延長銷售和運營規劃流程的時間範圍，改進我們的端到端預測。這一流程正在不斷完善，我們從大多數老客戶那裡得到了強勁的訂單和預測，這有助於我們的規劃和採購職能。最後，我們繼續改進推出新產品的流程，並通過適當的製造設計和精益原則轉向大批量生產。

Next, I will give some brief updates on our organic growth strategy of new product development. First, on the batteries & energy side of the business, we continue to develop and improve products for our branded general sales and for our important OEM customers.

接下來，我將簡要介紹我們新產品開發的有機增長戰略。首先，在電池和能源業務方面，我們繼續為我們的品牌一般銷售和重要的 OEM 客戶開發和改進產品。

Our ThinCell product line continues to gain momentum in the rapidly growing medical wearable and product tracking market spaces. We have purchased additional CapEx, which began arriving in Q2 and should be operational by the end of Q3. This equipment should start qualification and validation in Q4 to support forecasted demand by our customers.

我們的 ThinCell 產品線在快速增長的醫療可穿戴設備和產品跟踪市場領域繼續保持強勁勢頭。我們已經購買了額外的資本支出，這些資本支出將於第二季度開始到位，並應在第三季度末投入運營。該設備應在第四季度開始鑑定和驗證，以支持客戶的預測需求。

On the UB123A cell line servicing the IoT market space, we continued cadence production shipments and expect volumes to ramp this year. The XR123A, our carbon monofluoride blend version of this cell with 20% to 30% more energy in the same size, just successfully completed UL safety testing last week, enabling us to start commercial sales in our target end markets. Both of the 123A cell variants, we continue to work multiple opportunities for cell sales, but ultimately believe battery pack assemblies will be a crucial piece of this product line, where custom solutions can offer added value and longer-term customer relationships.

在服務於物聯網市場空間的 UB123A 單元系列中，我們繼續加快生產出貨量，並預計今年銷量將會增加。 XR123A 是該電池的一氟化碳混合版本，在相同尺寸下能量增加了 20% 至 30%，上周剛剛成功完成 UL 安全測試，使我們能夠在目標終端市場開始商業銷售。對於這兩種 123A 電池型號，我們將繼續尋找多種電池銷售機會，但最終相信電池組組件將成為該產品線的關鍵部分，定制解決方案可以提供附加值和長期客戶關係。

We have multiple partners evaluating our improved thionyl-chloride product line, targeting monitoring and telemetry applications where this technology can power items across an extreme temperature range for up to 20 years. With a 20-year life expectancy, the qualification and validation time for these products can be excessive.

我們有多個合作夥伴評估我們改進的亞硫酰氯產品線，目標是監控和遙測應用，該技術可以在極端溫度範圍內為物品供電長達 20 年。這些產品的預期壽命為 20 年，其資格和驗證時間可能會過長。

In Q2, we received a follow-on purchase order for $2.5 million from an international partner for our X5 Power System for medical carts, initially launched in 2022. We launched a follow-on hot swappable power system for USB-powered devices, the X5-LITE earlier this year, which is currently sampling its prospective customers. The development of the conformal wearable battery used to power advanced dismounted soldier equipment was paused in Q2 temporarily to utilize our engineering resources to support near-term growth projects with committed revenue for this year.

第二季度，我們收到了來自國際合作夥伴的250 萬美元的後續採購訂單，用於醫療車X5 電源系統，該系統最初於2022 年推出。我們推出了用於USB 供電設備的後續熱插拔電源系統X5 -今年早些時候的 LITE，目前正在對其潛在客戶進行抽樣。用於為先進徒步士兵裝備提供動力的保形可穿戴電池的開發在第二季度暫時暫停，以利用我們的工程資源來支持近期增長項目以及今年的承諾收入。

With a 90-day contract extension with the government in place, we anticipate the work will resume on conformal in Q4. This being an indefinite quantity, indefinite delivery contract with uncommitted volumes, we will continue to balance internal resources for this project with other known revenue generating and cost reduction projects.

隨著與政府延長 90 天的合同到位，我們預計工作將在第四季度正常恢復。這是一份數量不定、交付量不定、數量未承諾的合同，我們將繼續平衡該項目的內部資源與其他已知的創收和降低成本項目。

Secondly, on the communications systems side of the business, we anticipate commercial orders this year for our EL8000 server cases and power system as validations are complete. This will help diversify and scale to the business. Meanwhile, we continue to work on advanced amplification and power products with multiple partners to support air, ground, and sea communications, primarily military in nature.

其次，在業務的通信系統方面，隨著驗證完成，我們預計今年將獲得 EL8000 服務器機箱和電源系統的商業訂單。這將有助於業務多元化和規模化。與此同時，我們繼續與多個合作夥伴合作開發先進的放大和電源產品，以支持空中、地面和海上通信，主要是軍事性質的通信。

Lastly, on growth. We continue developing strategies and relationships on how to best position us to take advantage of the electrification in 5G market spaces. Looking for niche applications and investments that will enhance our competitive advantage, leveraging our cell design expertise and power system capabilities. As an example, we currently have 1 commercial OEM development partner resident at our Newark facility and are in discussions with several other partners to collaborate on advanced cell chemistries and designs.

最後，關於成長。我們繼續制定戰略和關係，以幫助我們更好地利用 5G 市場空間的電氣化優勢。利用我們的電池設計專業知識和電力系統能力，尋找能夠增強我們競爭優勢的利基應用和投資。例如，我們目前在紐瓦克工廠有 1 個商業 OEM 開發合作夥伴，並且正在與其他幾個合作夥伴討論在先進的電池化學和設計方面進行合作。

In closing, after a strong Q2, we continue to be laser focused on our goal of returning to profitable growth, which is key to paying down our acquisition debt. Execution continues the main priority for both businesses. With communication systems increasing scale to achieve consistent profitability, battery and energy converting on multiple growth initiatives while driving gross margin improvements.

最後，在第二季度的強勁表現之後，我們繼續專注於恢復盈利增長的目標，這是償還收購債務的關鍵。執行仍然是兩家公司的首要任務。隨著通信系統規模不斷擴大以實現持續盈利，電池和能源轉換將推動多項增長計劃，同時推動毛利率提高。

Thanks, everyone for the attention. That concludes the prepared remarks. Now, back to the operator for questions.

謝謝大家的關注。準備好的發言到此結束。現在，回到接線員那裡詢問問題。

Thank you. At this time, we will conduct the question-and-answer session. (Operator Instructions) Josh Sullivan, The Benchmark Company.

謝謝。這時，我們將進行問答環節。 （操作員說明）Josh Sullivan，Benchmark 公司。

Hey, good morning. Impressive results here.

嗨，早上好。這裡的結果令人印象深刻。

Good morning, Josh.

早上好，喬什。

I know you're still working through the cyber-attack paperwork, but can you talk about how you were able to recover so quickly? And then, any residual impact we should think about going forward at all?

我知道您仍在處理網絡攻擊的文書工作，但您能談談您是如何能夠如此快地恢復的嗎？然後，我們應該考慮未來的任何殘餘影響嗎？

Well, it's really a testament to our whole team and the external resources that we use to help us basically get through the event and back on our feet as quickly as we did. There's still some pockets of recovery going on. For the most part, the attack did not disrupt any of our technology or our manufacturing systems.

嗯，這確實是對我們整個團隊以及我們用來幫助​​我們基本上度過難關並儘快恢復正常的外部資源的證明。仍有一些地區正在復蘇。在很大程度上，這次攻擊沒有破壞我們的任何技術或製造系統。

It was mostly documentation and other things that can be recreated over time. And luckily, the team did a great job. Phil, do you have anything to add?

它主要是文檔和其他可以隨著時間的推移重新創建的東西。幸運的是，團隊做得很好。菲爾，你還有什麼要補充的嗎？

Yeah, we talked about the lingering effects of the cyber -- the Q1 cyber-attack. The lingering effect is that we -- both businesses and together, we regrouped in the month of April to figure out a course going forward. So the April results were -- what we did in April really helped drive a more successful May and June and more level loading, and that depth certainly is our hope going forward. But bottom line is, the team is working 24/7 to recover the data, recover the systems and ultimately, push the business in the right direction.

是的，我們討論了網絡的揮之不去的影響——第一季度的網絡攻擊。揮之不去的影響是，我們——無論是企業還是在一起——在四月份重新集結，以找出未來的方向。所以四月份的結果是——我們四月份所做的確實有助於推動五月和六月更加成功以及更多的關卡加載，而這種深度無疑是我們未來的希望。但最重要的是，該團隊正在全天候 (24/7) 恢復數據、恢復系統，並最終將業務推向正確的方向。

And then, on the supply chain as things begin to ease, and I know we're in a new reality, but any detail you can provide where bottlenecks are starting to ease and allowing you to deliver on some of these backlogs?

然後，在供應鏈上，隨著事情開始緩解，我知道我們正處於一個新的現實中，但是您可以提供任何細節，瓶頸開始緩解，並允許您交付其中一些積壓的訂單嗎？

Well, I think as we commented, I mean, we've got a pretty strong backlog now and have had for a couple of quarters where it's really allowed us to get out in front of a lot of our supply chain problems, where things were out over 52 weeks. Now, they're typically in the 24 to 36 weeks, which is manageable. I'm not going to say it's perfect, but it allows us to at least execute. Part of it, I will say, the cyber event from supply chain side might have helped us a little bit because we didn't ship everything we thought we would in Q1.

好吧，我認為正如我們所評論的，我的意思是，我們現在有相當多的積壓，並且已經持續了幾個季度，這確實使我們能夠解決許多供應鏈問題，當時的情況超過 52 週。現在，它們通常在 24 到 36 週內，這是可以控制的。我不會說它是完美的，但它至少讓我們能夠執行。我想說，供應鏈方面的網絡事件可能對我們有一點幫助，因為我們沒有在第一季度運送我們認為會運送的所有東西。

So we had an inventory surge that we needed to plow through and execute and get out of the building. There's still some pockets of parts like especially on the RF side that pretty long lead, and there's not a lot of vendors. So you're pretty hostage to whom you're using and most of them are in qualified products where you really don't have an easy option to change. But other areas, MOSFETs and some of the things that were really difficult previously, seem to at least be within a 26-week lead time now.

因此，我們的庫存激增，我們需要努力解決並執行並撤離大樓。仍然有一些零件，特別是在射頻方面，有相當長的領先優勢，而且供應商並不多。所以你很受制於你所使用的人，而且他們中的大多數都是合格的產品，你真的沒有一個簡單的選擇來改變。但其他領域，MOSFET 和一些以前確實很困難的事情，現在似乎至少在 26 週的交貨時間內。

And then, just on the operating investments you've made, it sounds like hiring is getting a little easier at least. Can you help us think about the leverage going forward? And just how we might frame that?

然後，僅就您所做的運營投資而言，聽起來招聘至少變得容易了一些。您能幫助我們考慮一下未來的槓桿作用嗎？我們該如何構建它呢？

Sure. I'll look at it purely on the financial side and the most important number ingrained in my brain is for each 100-basis-point increase in gross margin, it's worth $0.07 of EPS, and that's calculated on a GAAP tax basis, which we know isn't a reality for us. So it really comes down to just the basics, keep the revenue stream going, which I think we've been very successful at, improved gross margin.

當然。我會純粹從財務方面來看待它，我腦海中根深蒂固的最重要的數字是，毛利率每增加 100 個基點，每股收益就價值 0.07 美元，這是根據 GAAP 稅基計算的，我們知道對我們來說不是現實。因此，這實際上歸結為基礎，保持收入流的持續發展，我認為我們在這方面非常成功，提高了毛利率。

And when we say improved gross margin, we have a whole series of different actions that we're attacking that we meet. When I say 3 times to 4 times a week, that's probably an understatement, but we're after that next 100 basis point increase in gross margin, and we can't get that soon enough. But these actions have to get to the root cause, they can't be Band-Aids, and that's what our focus is really all about.

當我們說提高毛利率時，我們正在採取一系列不同的行動來應對。當我說每週 3 到 4 次時，這可能是輕描淡寫的，但我們正在追求毛利率接下來 100 個基點的增長，而且我們無法盡快實現這一點。但這些行動必須找到根本原因，它們不能是創可貼，這才是我們真正關注的重點。

The spending, well, the spending we control. That's really what it comes down to, so when you look at the difference in the quarter, we went up 33% in sales, a 38.5% increase in gross profit, which defines to us leverage. And then, keeping operating expenses flat, so -- and then we look back, Josh, and we say, well, if this happened or that happened or these things happen.

支出，嗯，我們控制的支出。歸根結底就是這樣，所以當你看看本季度的差異時，我們的銷售額增長了 33%，毛利潤增長了 38.5%，這對我們來說是槓桿。然後，保持運營支出持平，所以——然後我們回顧一下，喬什，我們說，好吧，如果這件事發生了，那件事發生了，或者這些事情發生了。

There's always things that you know that could happen that could have helped us out, but it really comes down to the basics. Improving operations and efficiencies that are sustainable, and then, going on to the next batch of issues.

總有一些你知道可能發生的事情可以幫助我們擺脫困境，但這確實歸結為基礎問題。改善可持續的運營和效率，然後繼續解決下一批問題。

Got it. And then, maybe just turning over to some end market comments. Up 25% in battery in the medical side, what are you seeing there?

知道了。然後，也許只是轉向一些終端市場評論。醫療方面的電池增加了 25%，您看到了什麼？

I mean, is that a supply chain getting easier? Is that demand coming through? Maybe just some comments on the medical supply market while that was so strong.

我的意思是，供應鏈變得更容易了嗎？這個需求能實現嗎？也許只是對醫療供應市場如此強勁的一些評論。

It's a combination of factors, Josh. Really, the supply chain coming through has been a big piece of it. We've got some customers in the medical side that have been -- that have launched products and they're starting to see their market penetration and growth start back up now that we're through the COVID time. And some of the supply chain issues that they've had as well we're seeing some pull through.

這是多種因素綜合作用的結果，喬什。事實上，供應鍊是其中的重要組成部分。我們在醫療領域有一些客戶已經推出了產品，隨著我們度過了新冠疫情時期，他們開始看到自己的市場滲透率和增長開始回升。他們也遇到過一些供應鏈問題，我們看到一些問題得到了解決。

We have 1 major OEM that I know is benefiting from increased volume due to a competitor's recall situation, that I think, has benefited us pretty dramatically. And then, there's also some recurring revenue coming into that stream just for replacement products. Where some of these products we put out in early COVID are due to have batteries replaced, just by the normal course of maintenance. So I think it's been strong on a couple of different fronts.

我知道我們有 1 個主要的 OEM，由於競爭對手的召回情況，該 OEM 正在從銷量增加中受益，我認為這使我們受益匪淺。然後，還有一些經常性收入進入該流，僅用於替換產品。我們在新冠疫情早期推出的一些產品需要更換電池，只需通過正常的維護過程即可。所以我認為它在幾個不同的方面都很強大。

Got it. And then, the oil & gas sales up 18%. I mean are you seeing the offshore rig activity translate into demand for your products?

知道了。隨後，石油和天然氣銷售額增長了18%。我的意思是，您是否看到海上鑽井平台活動轉化為對您產品的需求？

Yeah. We've seen a lot of international business. We've seen a lot of offshore business. We're in a unique spot where we're servicing a lot of the bigger players and a lot of the smaller players, so we're level loaded there.

是的。我們見過很多國際業務。我們看到了很多離岸業務。我們處於一個獨特的位置，我們為許多較大的玩家和許多較小的玩家提供服務，所以我們在那裡有水平負載。

We -- hopefully, the natural gas price rebounds a little bit here in the fall because I think that may even help. But right now, that segment continues to be pretty strong. I mean, there was a few players that announced over the last couple of days, earnings that have been pretty strong, and their forecasts have looked pretty positive. So we're hoping that, that stays solid.

我們希望天然氣價格在秋季略有反彈，因為我認為這可能會有所幫助。但目前，該細分市場仍然相當強勁。我的意思是，有一些公司在過去幾天宣布了盈利相當強勁的消息，而且他們的預測看起來也相當樂觀。所以我們希望這種情況能夠保持穩定。

Got it. And I'll just wrap up on government/defense, I mean, really impressive here. I mean, how should we think about that going forward? And then you mentioned, as we think about the next round of defense backlog growth, what are some of the opportunities there, and just what we're seeing in defense?

知道了。我將結束政府/國防，我的意思是，這裡真的令人印象深刻。我的意思是，我們應該如何考慮未來？然後你提到，當我們考慮下一輪國防積壓的增長時，那裡有哪些機會，以及我們在國防方面看到了什麼？

Well, on the defense side, obviously, in the communications systems side, there's been a substantial backlog for a while that we've been wanting to get out the door and execute on, that really was a supply chain bottleneck. We think that revenue is going to continue. They're embedded in some pretty long-term contracts that have year-over-year buys and named programs for either the US government or others.

嗯，在防禦方面，顯然，在通信系統方面，有一段時間我們一直希望走出去並執行大量積壓工作，這確實是供應鏈瓶頸。我們認為收入將持續下去。它們嵌入在一些相當長期的合同中，這些合同有逐年購買和為美國政府或其他機構指定的項目。

On the battery & energy side of the business, there are a lot of our military sales right now have been direct OEM sales and pass-through sales. Our sales direct to DLA and others for products like the 5390 and others that we've talked about in the past have actually been very low. And we are in IDIQ contracts that could assist with some additional revenue if they were to actually have an order awarded.

在電池和能源業務方面，我們現在的很多軍品銷售都是直接OEM銷售和轉手銷售。我們直接向 DLA 和其他公司銷售的產品（如 5390 和我們過去討論過的其他產品）實際上非常低。如果他們確實獲得了訂單，我們簽訂的 IDIQ 合同可以幫助他們獲得一些額外的收入。

Great. Well, again, congratulations on the quarter, and then, thank you for the time.

偉大的。好吧，再次祝賀這個季度，然後，感謝您抽出時間。

Thank you, Josh.

謝謝你，喬什。

Thank you. (Operator Instructions) There seems to be no further questions. I would now like to turn it back to Mike Manna for closing remarks.

謝謝。 （操作員指示）似乎沒有其他問題了。現在我想請邁克·曼納（Mike Manna）發表結束語。

All right, everyone. Thanks for listening to today's call. We look forward to talking to you next time at the Q3 earnings call. Everyone, have a great day. Bye now.

好吧，大家。感謝您收聽今天的電話。我們期待下次在第三季度財報電話會議上與您交談。大家，祝你有美好的一天。再見了。