Good day, and welcome to this Ultralife Corporation Second Quarter 2022 Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Miss. Jody Burfening. Please go ahead.

Thank you, Martina, and good morning, everyone, and thank you for joining us this morning for the Ultralife Corporation's earnings conference call for the second quarter of fiscal 2022. With us on today's call are Mike Popielec, 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 the impact of COVID-19 and related supply chain disruptions, potential reductions in revenues from key customers, acceptance of our new products on a global basis and uncertain global economic conditions. 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 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. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful that differ from GAAP. These non-GAAP measures should be considered as supplemental to 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 brief overall comments about our Q2 2022 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 a brief update on the progress against our 2022 revenue initiatives, then open it up for questions. For the second quarter of 2022, driven by strong shipments to commercial end markets, we delivered a 20% year-over-year sales increase and $0.03 of earnings per share. Double-digit increases in organic medical and industrial market sales and strong single-digit increases in core oil and gas sales, aided by revenues from the new acquisition more than offset delayed shipments against government defense existing orders in both our business segments due to persistent supply chain constraints. In Q2, we were pleased to swing back to profitability from the last few quarters due to increased revenues and controlling operating expenses and despite continued inflationary cost pressures and manufacturing inefficiencies associated with supply chain disruptions, which pressured gross margins. We also assertively manage working capital, including inventory by working closely with our suppliers and customers in an effort to position ourselves to the best extent possible for mitigating the impact of long lead time raw materials and components, on the timely manufacturing of our products and delivery to our customers. 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 second quarter 2022 financial performance. Phil?

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our second quarter results for the quarter ended June 30, 2022. We also filed our Form 10-Q with the SEC and have updated our investor presentation, which you can find in the Investor Relations section of our website. Consolidated revenues for the 2022 second quarter totaled $32.1 million compared to $26.8 million reported for the second quarter of 2021, an increase of 20%. Commercial sales increased 54.1%, reflecting solid growth across virtually all commercial end markets, including medical, industrial and oil and gas. Government defense sales declined 30.8% due primarily to continued supply chain disruptions, including increased lead times on components from suppliers impacting both our internal and customer manufacturing delivery schedules, resulting in delays in our shipments to future periods. On a sequential basis, second quarter sales increased 5.8%, with Battery & Energy Products and Communications Systems sales increasing 3.4% and 62.4% respectively. The notable quarter-over-quarter increase for Communications Systems primarily resulted from the availability of components to partially fulfill an order placed in 2021 and the timing of orders for which inventory was on hand. Revenues from our Battery & Energy Products segment were $30.1 million compared to $22.9 million last year, an increase of 31.8% with $6.6 million of the $7.3 million variance attributable to Excell and $0.7 million of net organic growth, comprised of a $2.1 million increase in commercial sales, partially offset by a $1.4 million decrease in government defense sales. The increase in commercial sales, excluding Excell, consisted of a $1.1 million increase in medical battery sales, a $0.7 million increase in industrial end market sales and a $0.3 million increase in SWE's oil and gas market sales. The sales split between commercial and government defense for our battery business was 82-18…

Thank you, Phil. For the second quarter of 2022, we continue to drive our revenue growth strategy, which is based on market and sales reach expansion, primarily through diversification, new product development and when appropriate, with strategic CapEx for achieving competitive advantage and a disciplined approach to acquisitions to quickly gain scale, additional skilled resources, market access technology and new products. For the Battery & Energy Products business, market sales reach expansion and diversification is about penetrating the global commercial markets as well as the international government defense markets to help mitigate the lumpiness and cyclicality associated with our historical concentration in the U.S. government defense market. In the second quarter, despite a 21% decline in sales to the U.S. government defense end market, our commercial end market revenues increases fully offset the government defense decline, leading to 3% of net B&E organic revenue growth. In Q2, and including the new acquisition, the total commercial and international government defense revenues represented approximately 84% of our total B&E sales. As for the acquisition, Excell was again EPS accretive in Q2 with revenues exceeding expectations, its second total quarter as part of the Ultralife portfolio. Excell's bring additional diversification and scale to our Battery & Energy Products business. And while we continue to integrate operations and business cadences, best practice sharing has begun, further leveraging the talented and valuable resources gained in the acquisition. Drilling down further into our second quarter commercial revenues, overall global B&E medical revenue represented approximately 26% of total Battery & Energy Products sales. Demand from current customers was for applications such as ventilators, respirators, infusion pumps, digital X-ray and surgical robots. Q2 oil and gas and subsea electrification commercial revenue was approximately 32% of total B&E sales. High oil and gas prices and increasing rig counts continue…

Thank you. [Operator Instructions] Our first question today comes from Berry [ph] Luis of Sandler Capital Management. Please go ahead.

Hi guys. The last conference call, I asked a question regarding the May 2021 press release from the government. And you talked about that today, and I want to make something clear. You expect that order in the second half of 2022 or you think it will come in the third quarter or 2023?

Hi Berry, this is Mike Popielec. The press release in May was for the conformal wearable battery program, which was an IDIQ, which at the time had awarded to four different potential manufacturers sort of a place in the game for the conformal wearable battery. Each of us is now very actively involved in the development of the battery solution in preparation for first article testing, which in my prepared remarks, we said we start in really the back half of this year. Upon completion of the first article testing and demonstration that we meet the program requirements and specifications, then we would be in a position to receive delivery orders from the U.S. Army. Given that IDIQ contract, there's no guarantees that you get any or you get -- what proportion you would get, but we're working diligently to ensure that we're one of the players that successfully passed on the first article test so that we'd be in a position when the government decided to place orders to receive some of those initial delivery orders. But at this time, it really is dependent upon the completion of the first article testing to try to determine what would be the timing of potential delivery orders going forward. So there's no firm delivery order of any large quantity until after we get through that first article testing process. And that first article testing process is expected to be initiated and completed in the second half of the year.

Thank you very much.

[Operator Instructions] It appears that we have no further questions at this time. I would now like to turn the call back over to Mike Popielec for any additional remarks.

Great. Okay. Well, thank you once again for joining us for our second quarter 2022 earnings call. We look forward to sharing with you our quarterly progress on each of these calls in the future. As Phil mentioned, I also like to mention that we had updated our investor presentation on the website. So please check it out. Thank you, everybody, and have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.