Marvelous Microcaps

Ultralife Corporation (ULBI)

INTRO:

At Perritt Capital Management, we take focused positions in companies where we have a high conviction in their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the newest installment in our ongoing series “Marvelous Microcaps – Big Ideas on Small Companies.”  This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.

THE COMPANY:

Ultralife Corporation (ULBI) designs, manufactures, installs, and maintains power, and communication and electronics systems worldwide. The company operates in two segments: Battery and Energy Products and Communications Systems. The Battery and Energy Products segment produces a variety of offerings ranging from lithium 9-volt batteries to multi-kilowatt module lithium-ion battery systems. They also produce various charging systems including rugged military and commercial battery charging systems and smart chargers. The Communications Systems segment provides communications systems and accessories to support military communications systems. Products include but are not limited to radio frequency amplifiers, power supplies and cables, connector assemblies, amplified speakers, and satellite communications systems. The company was founded in 1991 and is headquartered in Newark, New York.

WHY WE OWN: THE PERRITT ADVANTAGE

We believe Ultralife Corporation is an undiscovered opportunity within the microcap space. The company has just one analyst covering the stock and is currently trading at just its book value. While they stumbled in their most recent quarter’s results due to the timing of certain orders, the company has been able to grow revenues nicely over the past several years, ending the most recent quarter with trailing twelve-month revenues of $165.2mil, up from $98.3mil just three years ago. The company has been able to achieve this growth through a combination of organic sales growth and mergers and acquisitions. Their most recent acquisition was of a company named Electrochem, a company making $34 million in annual revenue. They completed this acquisition for $50 million and it will complement their offerings in the lithium battery space.

We believe they fill a niche market in addressing ruggedized military and commercial needs in both the battery and communications system segments. They have successfully sold these products into the medical and healthcare, government and defense, oil and gas, energy storage, and safety, security, and industrial markets. By addressing mission-critical needs within these markets, they establish themselves as a reliable supplier which makes for repeatable purchasing patterns from customers. This is demonstrated by the robust backlog of revenues they currently have, representing 48% of their trailing twelve-month sales. They are also generating record levels of cash, spinning off $17.4 mil in adj. EBITDA on a trailing twelve-month basis.

While they stumbled on revenue growth in the most recent results due to the timing of certain orders, we believe that the company has an attractive valuation profile at this time. It is a profitable company generating ample cash and trading at slightly less than the book value of its assets. They have focused on controlling costs and more dollars should drop to the bottom line as new orders come in. We are excited about what the future has to offer to Ultralife Corporation.

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Data here is obtained from what are considered reliable sources. We consider the data used to be relevant and reliable.
Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please click PRCGX for a list of the top ten holdings.
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternative measure of a company’s overall financial performance.

Book value is the value of a company’s assets after netting out its liabilities.
Trailing Twelve Month revenue (TTM) is the revenue that a company earns over the trailing 12 months of business.
Before you invest in the Perritt MicroCap Opportunities Fund, please refer to the prospectus for important information about the investment company, including investment objectives, risks, charges, and expenses. You may also obtain a hard copy of the prospectus by calling 800-331-8936. The prospectus should be read carefully before you invest.

Mutual fund investing involves risk. Principal loss is possible. The Fund invests in smaller companies, which involve additional risks, such as limited liquidity and greater volatility. The Fund invests in microcap companies which tend to perform poorly during times of economic stress.
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Past Performance does not guarantee future results.

The Perritt Fund is distributed by Quasar Distributors, LLC.

First published January 2025.

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