Good day, ladies and gentlemen, and welcome to this Ultralife Corporation Fourth Quarter 2019 Earnings Release Conference Call. At this time for opening remarks and introductions, I'd like to turn the call over to Ms. Jody Burfening. Please go ahead ma'am.

Thank you, James and good morning everyone and thank you for joining us this morning for UltraLife Corporation's earnings conference call for the fourth quarter of fiscal 2019. With us on today's call are Mike Popielec, Ultralife's President and CEO; and Phil Fain, UltraLife's Chief Financial Officer. The earnings press release was issued earlier this morning. 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 the Investor Relations -- 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 will contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. These include potential reduction in revenues from key customers, uncertain global economic conditions, and acceptance of new products on a global basis. 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 affect Ultralife's filings with the Securities and Exchange Commission, including the latest annual 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 corresponding GAAP figures. With that, I would now like to turn the call over to Mike. Good morning, Mike.

Good morning Jody and thank you everyone for joining the call. Today I'll start by making some overall comments about our Q4 and total year 2019 operating performance after which I'll turn the call over to Phil who will take you through the detailed financial results. After Phil is finished, I'll provide an update on the progress against our 2019 revenue initiatives including the acquisition of Southwest Electronic Energy Corporation referred to as SWE, then I'll talk about the focus areas for 2020 before opening it up for questions. For the fourth quarter of 2019, total company revenue increased 48% year-over-year driving leveraged operating profit up 132% and GAAP earnings per share up 49%. Both Battery & Energy Products and Communication Systems core businesses achieved quarterly revenue increases leading to a total company Q4 organic revenue growth of 16%. At Communication Systems, fourth quarter revenues were up 113% year-over-year resulting from solid shipments under existing contracts for the U.S. Army's network modernization initiatives. At B&E, total fourth quarter revenue was up 38% year-over-year with the core business revenue growth again boosted by a strong SWE acquisition contribution. For the total year of 2019, we were pleased to deliver our fifth consecutive year of profitable growth with operating profit increasing 12% and total company revenue increasing 22%. The business teams finished the year strong offsetting earlier in the year increased cost to ramp up production of new products, investment in additional headcount to support future revenue streams, and completion of the acquisition and integration of SWE, all while achieving a total year increase in EPS. In a few minutes, I'll give you further updates on our revenue initiatives, but first I'd like to ask Ultralife's, CFO, Phil Fain to take you through additional details of the fourth quarter 2019 financial performance. Phil?

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our fourth quarter results. For the quarter ended December 31, 2019. We also filed our Form 10-K with the SEC and have updated our investor presentation, which you can find in the Investor Relations section of our website. I would like to thank all those that help make this happen. For the fourth quarter, consolidated revenues totaled $31.0 million, representing a $10.1 million or 48.2% increase over the $20.9 million reported for the fourth quarter of 2018. Overall, commercial sales increased 53.6% boosted by Southwest Electronic Energy Corporation, or SWE, which we acquired on May 1. Government and defense sales increased 43.1%, unfavorable performances by both businesses. Revenues from our Battery & Energy Products segment were $25.1 million, an increase of 38.4% over last year, primarily attributable to a $6.8 million revenue contribution from SWE. Sales for our core business was at the highest quarterly level in over two years, driven by a 14.9% increase in government and defense sales. Including SWE, the sales split between commercial and government and defense was 67-33 compared to 61-39 for the 2018 fourth quarter in the domestic to international split remained fairly constant at 49-51 compared to 47-53 last year. Revenues from our Communications Systems segment were $5.9 million, an increase of $3.1 million more than doubling over last year. The increase primarily reflects shipments of vehicle amplifier adapter systems to support the U.S. Army's network modernization and other initiatives under the delivery orders announced in October 2018 and shipments of vehicle communication kits under an IDIQ contract with a major defense contractor also announced in October 2018. On a consolidated basis, the commercial to government and defense sales split was 55-45 versus 53-47 for the year earlier period, demonstrating the…

Thank you, Phil. As was the case for 2019 continuing in 2020, we are focused on increasing our revenue growth opportunities through diversification, expansion of markets and sales reach, new product development and strategic CapEx and potential acquisitions. For the Battery & Energy Products business, this has meant expanding our participation and penetration in the worldwide commercial markets and international government defense markets, while continuing to bolster our existing position in the U.S. government defense market. B&E's 2019 SWE acquisition was another step in diversifying our end markets and mitigating the lumpiness and long revenue realization cycle times associated with some of our U.S. government defense revenue streams. In Q4, its second complete quarter as part of the Ultralife portfolio. The acquisition provided 27% of total B&E sales. SWE met our internal revenue target and was again EPS accretive, net of our acquisition, amortization, interest, taxes and pro forma corporate allocation expenses. Considering the addition of SWE, our diversification into global commercial and international government and defense revenues has further lessened our historical dependence on the U.S. government defense market now representing below 25% of our total B&E sales. Taking a closer look inside commercial revenue and our medical revenue, in Q4 2019, global medical sales represented 20% of total B&E sales and were slightly down as compared to last year's fourth quarter due to timing, as well as non-recurring revenue from two particular customers. In general, key medical device battery and charger product shipments were made in Q4 2019 for a wide range of applications, including breathing devices, infusion pumps, digital x-ray and surgical robots. New delivery orders also continued for existing customer blanket and/or multi-year agreements and in Q4 2019 totaled over $4.2 million. Looking at the other non-medical commercial and international government defense end markets some examples…

Thank you very much. [Operator Instructions] We'll now take our first question from Mr. Brett Davidson [ph]. Please go ahead. Your line is now open.

Good morning. I just had a quick question regarding the R&D expenses. The run rate in the fourth quarter was considerably higher than the rate of the prior three quarters. I was wondering if you can give an idea, is that just a fourth quarter thing, or is that representative of a new rate going forward?

Brett, this is Phil fain. I believe there's really two ways to look at the increase in R&D expense in the fourth quarter. There is the development testing, resulting from the timing of the introduction of certain new products. And then there's the increased investment that we're making in bringing in what I consider -- what we consider to be world-class engineering talent. And I believe the split between the two is probably 60/40, meaning that perhaps 40% of the increase that we're seeing in Q4 could likely be ongoing.

40% of the total or 40% of the increase?

A 40% of the increase?

Got it. And can you just give me some color as to how much of the R&D is related to new products? And how much is targeted to new -- to customer development, so developing a product for a specific customer? And how much of it is just new products in general?

Yeah. I would say that we work in very close collaboration with our customers in developing most of our new products. So, my guess would be 80% of it is -- at this time 80% is working with specific customers and 20%, overall the 20% being certain things like the new three-volt line or the improvements in final chloride, the other applications that we work with and customers does absorb quite a bit of our time, but it results in very sticky relationships going forward.

So for the most part then when you guys are generating R&D expenses, it's to produce a new product or updated product for a particular customer then?

Yeah absolutely.

Thank you very much.

[Operator Instructions] There are currently no questions on the phone line.

Okay operator, I'll close then. Well, thank you very much for joining us again for our fourth quarter 2019 earnings call. I look forward to sharing with you our quarterly progress on each quarter's conference call in the future. We'd also like to note as Phil mentioned that the investor presentation has been updated, it’s on the website. So please check it out.

Ladies and gentlemen, that will conclude our conference call for today. Thank you very much for your participation and you may now disconnect.