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Ultralife Corp (ULBI) Q2 2019 Earnings Call Transcript

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Ultralife Corp (NASDAQ: ULBI)
Q2 2019 Earnings Call
Aug 1, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to this Ultralife Corporation Second Quarter 2019 Earnings Release Conference Call.

At this time, I would like to turn the conference over to Jody Burfening. Please go ahead.

Jody Burfening -- Investor Relations

Thank you, Olga, and good morning, everyone. And thank you for joining us this morning for Ultralife Corporation's earnings conference call for the second quarter of 2019.

With us on the call today 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 will find the release under 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 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 metrics that differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures.

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

Michael D. Popielec -- President and Chief Executive Officer

Good morning, Jody, and thank you, everyone, for joining the call. Today, I'll start by making some brief overall comments about our Q2 2019 operating performance, after which I'll turn the call over to Phil who will take you through the detailed financial results. When Phil is finished, I'll provide an update on the progress against our 2019 revenue initiatives, including the acquisition of Southwest Electronic Energy Corporation which we'd refer to as SWEE, then open it up for questions.

Looking at our second quarter results on an organic basis, we were pleased to deliver an 8% increase in revenue and a 70% increase in leveraged operating profit. The revenue increase was driven primarily by communications systems and shipments of mounted power amplifiers to our channel partner under existing contracts for the US Army's network modernization initiatives, as well as shipments for the first delivery order under the $10 million Universal Vehicle Adaptor IDIQ announced in June.

Our battery and energy products core business revenues were down from a year ago due to prior-year large shipments of 5390s to DLA not recurring this quarter and continued softness in our China manufacturer tariff impacted 9-volt product line. Boosted by two months contribution from SWEE, total Company revenue increased 29% year-over-year on a reported basis.

In a few minutes, I'll give you further information on our revenue growth initiatives. But first, I'd like to ask Ultralife CFO Phil Fain to take you through additional details of the second quarter 2019 financial performance. Phil?

Philip A. Fain -- Chief Financial Officer and Treasurer

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our second quarter results for the quarter ended June 30th 2019. We also filed our form 10-Q and form 8-K with the SEC and have updated our investor presentation in the Ultralife website. I would like to thank all those who helped make this possible.

Our second quarter includes SWE's operating results for May and June, along with the purchase accounting adjustments, indirect costs related to the acquisition. As I go through my prepared remarks, I will point out the impact of the acquisition on various line items and earnings per share.

For the second quarter, consolidated revenues totaled $29.4 million, representing a $6.5 million or 28.6% increase over the $22.9 million reported for the second quarter of 2018. Overall, commercial sales increased 46.8% and government and defense sales increased 13.8% over the 2018 period. Revenues from our battery and energy products segment were $20.3 million, an increase of $2.5 million or 13.9% over last year. The year-over-year increase was attributable to the $4.8 million revenue contribution from SWE, which more than offset lower government and defense revenue associated with a large 5390 battery order and higher 9-volt sales in the second quarter of 2018.

Including SWE, the sales split between commercial and government defense was 74:26 compared to 58:42 for the 2018 period and the domestic to international split was 51:49 compared to 60:40 for the 2018 second quarter, reflecting higher international demand for our medical products.

Revenues from our communication systems segment were $9.1 million, an increase of $4.1 million or 80.7% over last year. This increase is primarily attributable to shipments of mounted power amplifiers to support the US Army's network modernization and other initiatives under the delivery orders announced in October 2018, and shipments of universal vehicle adapters under an IDIQ contract with a Naval Air Warfare Center announced in June 2019.

On a consolidated basis, the commercial, the government and defense sales split was 51:49 versus 45:55 for the year earlier period, reflecting both our acquisition of SWE and the 81% year-over-year increase in communication system sales.

Our consolidated gross profit was $8.9 million, compared to $6.6 million for the 2018 period. As a percentage of total revenues, consolidated gross margin was 30.2% versus 28.6% for last year's second quarter, an increase of 160 basis points. This increase is net of 70 basis points of purchase accounting adjustments relating to the acquisition of SWE.

In accordance with generally accepted accounting principles, we wrote up SWE's beginning inventory to fair market value, thereby eliminating a significant portion of the gross profit from the sale of this inventory in the second quarter.

Gross profit for our battery and energy products business increased 14.8% from $4.9 million to $5.7 million. Gross margin was 27.9%, an increase of 30 basis points from 27.6% reported last year due to favorable sales mix. Excluding the impact of the purchase accounting adjustments, the gross margin would have been 28.9% for the 2019 second quarter.

For our communication systems segment, gross profit was $3.2 million, an increase of $1.6 million or 97.7% compared to $1.6 million for the year earlier period. Gross margin was 35.3% compared to 32.3%, an increase of 300 basis points due to favorable sales mix.

Operating expenses totaled $5.8 million compared to $4.9 million last year, an increase of $0.9 million or 18.4%. The increase was fully attributable to SWE's operating expenses of $1.1 million, including $0.2 million of one-time direct acquisition costs, reflecting customary legal audit and due diligence expenses. Excluding SWE, operating expenses decreased $0.3 million or 5.1% due primarily to lower corporate expenses. As a percentage of revenue, operating expenses were 19.8% compared to 21.5% for the year earlier period.

Operating income for the second quarter of 2019, inclusive of $0.4 million of purchase accounting adjustments and direct acquisition costs, was $3.0 million, compared to $1.6 million for the 2018 period, representing an increase of 86.4%, and operating margin was 10.3% for the 2019 period versus 7.1% last year.

Adjusted EBITDA defined as EBITDA including non-cash stock-based compensation expense was $4.1 million or 13.9%of sales, an increase of 61% over the $2.5 million or 11.1% for the second quarter of 2018.

Our tax provision for the second quarter was $0.7 million compared to $0.1 million for the 2018 period. As a result of reversing the valuation allowance on our US deferred tax assets at year-end 2018, in accordance with generally accepted accounting principles, we utilized a 21% tax rate on the US portion of net income, resulting in an overall tax rate of 22.8% to determine our tax provision for the second quarter of 2019. This compared to an effective tax rate of 4.5% for the year earlier quarter. We expect that our deferred tax assets will offset US taxes for the foreseeable future and that a cash-based effective tax rate for the 2019 second quarter would be approximately 1.2%.

Including the non-recurring acquisition adjustments in expenses amounting to $0.4 million equivalent to $0.02 per share and the 22.8% effective tax rate, net income was $2.3 million or $0.14 per share compared to net income of $1.6 million or $0.10 per share for the second quarter of 2018.

Net of the adjustments and utilizing the US statutory tax rate, SWE was accretive by approximately $0.01 per share.

During the Q4 2018 investors call, I stated that I would present 2019 EPS on an adjusted basis to reflect actual taxes to be paid while ensuring a proper year-over-year comparison. 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 $0.18 per share for the second quarter of 2019, representing an 80% increase over the comparable $0.10 per share reported last year.

The Company's liquidity remains solid, with cash on hand of $6.8 million, working capital of $48.3 million and a current ratio of 3.4. We continue to carefully manage our cash and financing availability in a balanced fashion. The acquisition of SWE, CapEx to support our 3-volt and thionyl chloride strategic projects, increasing inventory to fulfill our backlog, and share repurchases. This balanced approach will continue.

In summary, the actions we're taking to drive profitable growth remain our highest priority. Our intent remains on driving volume and sales through further organic and synergistic initiatives, supplemented with accretive M&A to release the full leverage potential of our business model.

I will now turn it back to Mike.

Michael D. Popielec -- President and Chief Executive Officer

Thank you, Phil. For 2019, we continue to be focused on revenue growth through diversification and expansion in markets and sales reach, new product development and strategic CapEx and accretive acquisitions. Regarding the recent acquisition of SWE, the initial 100-day functional integration plans are in full execution mode with no negative surprises so far. The acquisition was slightly accretive to Q2 earnings. So we remain on track for the acquisition's earning contribution to be EPS accretive for the first 12 months.

We are very excited about the SWE acquisition as it is another step in diversifying our end markets to not only grow revenue, but to also mitigate the lumpiness and unpredictability of our US government and defense revenue streams. SWE provides us an entry to new revenue opportunities in oil and gas exploration and production and subsea electrification, markets largely currently unserved by Ultralife. These markets possess similar attributes to our core business in that they involve mission critical niche applications with competitive differentiation based on quality and reliability and long-term high-value proposition customer relationships. And most importantly, we are expanding our overall technical and new product development capability by the addition of SWE's highly valuable and unique technical team of battery pack and charger system engineers and technicians. We look forward to their contributions to our efforts to pursue additional revenue growth opportunities in our existing commercial end markets.

Stepping back to look more broadly at the battery and energy products business diversification and available market expansion progress, we've been using the global commercial and international government and defense market revenue mix as an indicator of diversification from the US. government and defense market, historically our strongest yet lumpiest market.

We're now including SWE to Q2 2019 commercial and international government and defense revenues represented 77%of total B&E sales.

Revealing medical revenues, in Q2 2019, global medical sales represented 27% of total B&E sales and we're just under last year due to softness in our Accutronics business, not fully offset by high single-digit growth in the remainder of our medical business. Key medical device battery and charger product shipments were made in Q2 2019 for applications including breathing devices, medical cards, infusion pumps, digital X-ray and surgical robots.

New delivery orders continue against existing customer blanket and/or multiyear agreements, and in Q2 2019, totaled over $3 million. In addition to medical, we are also targeting other commercial end markets such as industrial equipment, safety and security, metering and sensors, and asset tracking.

Some specific transactions in Q2 2019 included a $2.6 million purchase order for our China legacy thionyl chloride product for the toll pass market, and an international government defense P.O. for just under $1 million for a global prime for our Land Warrior batteries.

In B&E's US. government and defense business, key shipments and follow-on orders in Q2 2019 included the usual range of batteries for tactical communications to DoD and various OEM primes.

We also received a new contract from a major global OEM for non-military communications batteries for the public safety market, which are currently being produced by another manufacturer. And finally, in cooperation with the DoD, we continue the lengthy first article testing and production readiness preparation process on that under way for the next-generation 5390 primary batteries and the new CFx blend 5790 battery as part of the approximately $72 million in multi-year DLA IDIQ awards received in 2017.

Regarding B&E new product development, during the second quarter, activity continued across numerous projects, including a new military communications backup battery, our next generation organized large format and modular energy storage battery. And in China, our thionyl chloride cell product line improvements, targeting global industrial, metering, and IoT applications.

We also continue to move forward on two B&E strategic CapEx projects focused on the development and manufacturing of new products that will serve the rapidly growing IoT wireless devices market, next-generation 3-volt smoke alarms, asset tracking devices and metering.

At a Newark, New York facility, low volume production of our new premium 3-volt product is now under way, and in Q2, we began providing samples for qualification testing to customers, while the final commissioning and fine tuning of the automated equipment continued throughout the second quarter. These new products will provide customers with world-class product performance, safety and a competitive price value proposition, as well as a supply chain proximity of a US manufactured product. In China, our new locally manufactured lithium manganese oxide 3-volt cell samples continue to be supplied to customers for testing and we're ramping to full production volumes. Although we're early in the customer qualification testing processes, we are encouraged by the initial interest in the new 3-volt products and are seeing individual customer annual demand potential range anywhere from thousands to millions of units per year, depending on the device and application.

Regarding communication systems, in Q2 2019, new product development revenue from less than or equal to three years old represented approximately 91% of comm systems revenues. The IDIQ award at the end of the quarter for our universal vehicle adapters with an immediate delivery order for $1.4 million from the Navy Air Warfare Center aircraft division was quickly supported with initial shipments with the remainder to be completed in early Q3.

Other key shipments in the second quarter include mounted power amplifier systems in support of the US Army's network modernization initiatives and follow-on deliveries for the non-standard commercial vehicle communications kits. Funding for major radio programs continues with operational testing and evaluation of the current systems ongoing in Q3. Follow-on program awards for the US. Army's handheld, manpack and small form fit programs focused on the Leader handheld radio are anticipated later in 2019 and into 2020.

In addition, multi-generational product planning engineering activity is nearly complete on a lightweight power supply that will support of one channel and two channel manpack radios. Comm Systems is well positioned to support future requirements in these existing programs and is also pursuing diversification into other new opportunities and customers as an integrator of C4ISR support equipment for the military community.

Given that strategically focus on radio programs has yielded strong growth opportunities, we have added technical staff within the engineering department in multiple disciplines. Also, CapEx investment made last year in automated test equipment has enabled high volume test capability to meet current demand with additional testing capacity planned again for later this year.

We remain driven to build technically superior products that enhance the soldiers' operational readiness and effectiveness, using the latest radio programs and solutions, supporting dismounted operations and ground mobility, maritime and air platforms globally.

In closing, for the second quarter of 2019, we were pleased to see the expected bounce back of revenue into our communication systems business and the strong initial performance of our new acquisition, reflected in solid top and leveraged bottom line growth.

Communication Systems enhanced, present viewership of a backlog, provides good visibility for the remainder of the year, and the team is actively pursuing other new product development driven integrated communication systems program opportunities for potential revenue by the end of 2019 and throughout 2020.

At battery and energy products, we look forward to leveraging the new revenue sources and talent base that SWE brings and plan to comprehensively, yet quickly complete the tactical integration such that our full focus can be on serving their existing customers and winning new ones. We're also patiently, yet assertively, looking to start to capture several new revenue streams as current new product development and MGPP projects in the core business reach completion throughout the year.

As a company, we are selectively adding technical and sales resources while maintaining our cost discipline to better serve the growing revenue set and continue to focus on prospect development for future revenue growth. We remain committed to our target of increasing revenue each quarter, year over year with leveraged earnings, and we fully expect to deliver a year of profitable growth in 2019.

Operator, this concludes our prepared remarks, and we're happy to open the call up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll go first to Gary Siperstein at Eliot Rose Wealth Management.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Good morning, Mike and Phil, congratulations on another strong quarter.

Michael D. Popielec -- President and Chief Executive Officer

Thank you.

Philip A. Fain -- Chief Financial Officer and Treasurer

Thank you, Steven.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Mike, so my first question is, you mentioned the 9-volt, I guess, slowdown in China. Is that just due to the weak Chinese economy or is it because they're transitioning to the 3-volt and so they're holding off on 9-volt orders until the 3-volt goes into full production? What's the reason for that?

Michael D. Popielec -- President and Chief Executive Officer

What I was referring to mostly is -- is the supply of China produced 9-volt into the US market are being impacted by the tariffs that are associated with that product import.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay got you. Okay And also on, I guess, based on last quarter's news release in terms of SWE's accretiveness, we didn't expect that to necessarily be accretive till the spring of 2020. So is that penny accretive in the quarter due to the fact that you closed in the quarter? Did it have to do with the various debits and credits and adjustments for the first couple of months in the quarter with the closing? Or was that an actual business accretiveness, organic?

Michael D. Popielec -- President and Chief Executive Officer

Really, all the above. I mean, I think this team performed very, very well, from a revenue perspective, I think we got the benefit of sort of the last two months of a quarter versus, sometimes the first quarter -- or the first month of a quarter can be a little slower. I think we're beneficiaries in having a second and third month of a quarter. The team performed well. But I also think on the acquisition itself that the team associated with the closing of the transaction deployed their typical operating expense discipline and making sure that we had all the proper inside and outside resources deployed, but that we just didn't waste money so that the elements that go into sort of the hurdle that you need to overcome on that acquisition upfront, obviously, as a one-time closing cost, the right above the initial inventory to market, the increase in intangible asset amortization and then interest expense, and so in a delightful surprise, the strong revenue production and profitability of SWE was able to overcome all those elements such that we scratched out a slight accretion in the second quarter.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Mike, so based on what you just said, so it's not automatic that Q3, Q4 will show a slight loss, and then we maybe get accretiveness in the spring. It's possible they could break-even or show accretivenss sequentially from here.

Michael D. Popielec -- President and Chief Executive Officer

It really depends on volume.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay.

Philip A. Fain -- Chief Financial Officer and Treasurer

The only thing I'll add here is all the adjustments and one-time expenses worked against us in the quarter [Speech Overlap].

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

And those won't be there in Q3. So that'll help. Just one last one on SWE. So you said no surprises thus far as you delve more into talking with their customers. Is it as robust as you expect? I mean, did you find any-anything with any larger potential now that they're owned by a bigger company as you talk to customers?

Michael D. Popielec -- President and Chief Executive Officer

Not specifically with the customers yet. I mean, I think just generally speaking, we spent a lot of money on investment here, we want to make sure that they prosper. So the management team and the board and et cetera are very interested in this cycle of our strategic plan development to make sure that all opportunities that makes sense for us that we're fully supporting those with our investment in human resources. I think there is good customer portion of it, but I think above and beyond that, it's what more can we bring to party to help them prosper

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. That's fair. And one last question on SWE. So, Phil, can you tell me how much of the purchase price was allocated to their land and building?

Philip A. Fain -- Chief Financial Officer and Treasurer

Yeah, I'll break it down for you Gary. So it's $25 million -- $25.248 million per the Form 8-K that was filed, approximately $8.2 million -- $8.25 million is the assessed value of the building. In addition, there's working capital of just over $7 million. So you have the $8.2 million, you have the $7.2 million, the rest of it is is truly the generation of cash flows going forward.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. And do you feel that $8.2 million assessed value is current market value as well?

Philip A. Fain -- Chief Financial Officer and Treasurer

I know for a fact it is because the assessment was done at the very end of last year.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Super. Okay, thank you. Okay. And moving on to the where we stand in the shipments of the $19.2 million contract with comm systems. How much were shipped in Q2? And is the balance going to be go all in Q3 or some go into Q4?

Michael D. Popielec -- President and Chief Executive Officer

Well, Gary, I'll start with the second half of your question. We expect that shipments will likely go across Q3 and Q4. A good chunk -- a good starting point, I don't want to give the exact number, but maybe I can give you a fair indication when you look at backlog and in you know that we don't give backlog on an interim basis, we give backlog just at the beginning of the year. But the backlog is fairly consistent with where it was when we started the year. So we'll leave it at that. But we were very pleased with the progress that was made. And I think we have a pretty solid schedule going forward that will help us in Q3 and Q4.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Super. So despite all the shipments, backlogs remaining steady. So -- in other words, you're not going to tell me out of the $19.2 million, how much is shipped already through June 30th?

Philip A. Fain -- Chief Financial Officer and Treasurer

I'm not going to give you the specific dollar amount, but I will tell you that a majority of the $19.2 million lies in front of us in terms of percentages.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. That's all I needed. Thank you. And in terms of the increase in inventory, I think $22 million to $34 million, how much of that $12 million came with SWE? How much is related to the balance of the contract we just discussed and how much is just regular business?

Philip A. Fain -- Chief Financial Officer and Treasurer

Yeah. Great question, Gary. SWE came in at around just over $3.5 million. So when I look at the core businesses, we had approximately $7.2 million of inventory build from the end of the year. And I would say a very, very large proportion of that is inventory pre-buy to fulfill the $19.2 million, in addition, an increase in battery and energy products for what we consider future opportunities that will be upon us. I would consider them, although you don't like to show an increase in inventory, there were some what I would call smart buys associated with that increase.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. Based on that Phil, with the $19.2 million completing by 12/31, where should inventory lands at year-end?

Philip A. Fain -- Chief Financial Officer and Treasurer

Well, I think inventory, Gary, at year end, in my perfect cash management crystal ball will be in the $25 million to $27 million range. And the reason why I'm using that range is because I expect that there are going to be, God willing, some good solid backlog going into the next year as well.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. Super. And in terms of the debt taken on for the SWE acquisition, what's your interest rate on that debt?

Philip A. Fain -- Chief Financial Officer and Treasurer

The interest rate is approximately 4.22%.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. Super. And Mike, in terms of you mentioned a new contract in public safety with a new OEM. Is that over seven figures or is it in -- is it just a starting contract with that product with more to follow possibly if they're happy or any more color you can give us on that?

Michael D. Popielec -- President and Chief Executive Officer

Yeah, I mean, initially it's small dollars, but certainly has potential to be in the seven figure range.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. And In terms of the 3-volt both in the U.S. and China, which one should move first with commercial orders, I know they could be, as you said, in the thousands or it could be in the millions of units. But is the US ahead of China in the sampling and the testing or should they both sort of launch concurrently?

Michael D. Popielec -- President and Chief Executive Officer

They're both really concurrently being launched. I mean, the focus of the China one would be if there is any particular OEMs that are manufacturing in China. We think that we have a great position developing and manufacturing capability in US to serve the US markets [Technical Issues] tariff or not. So really they're happening on a parallel basis and ultimately we want to build the product where it needs to be built to best serve as supply chain is trying to propel.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. That's good color. Thank you.

And just another follow-up on the $19.2 million. So is that part of an ongoing program for the general contractor with the government in terms of modernization and there's the potential for additional business in 2020, 2021, or is it a one and done once the $19.2 million, that satisfies them forever?

Michael D. Popielec -- President and Chief Executive Officer

That's the -- that would be a fulfillment of our delivery orders we currently have contracts for, but it's part of a larger program that is expected to continue on and have additional transfers in the future.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay, so they can once if they get additional orders from the government, they could come back to us for more amplifiers?

Michael D. Popielec -- President and Chief Executive Officer

It's correct.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay. and then so you mentioned some commentary on the end regarding ongoing testing of the Leader radio for later in '19 and '20. And that's, I guess, part of the this whole modernization next-gen on these radios. And you mentioned manpack and I think you said one and two lines, that kind of thing. I don't think we heard much in terms of Leader revenue in the first six months of this year. So is that lagging the $19.2 million contract with the other general contractor or they just move at different cadences, but well, assuming these testings go correctly will be part of the Leader as well?

Michael D. Popielec -- President and Chief Executive Officer

I think you may be confusing a little bit of items. The $19.2 million consisted of two contracts, one which was just under the umbrella of network modernization initiatives and the other one that was attributable to the Leader. Because now we're shipping quantities of products from both of those different contracts to our channel partner, we're trying to be really careful not to designate one Leader versus not Leader. But the point is, we still have headroom to ship under both of those contracts, for that $19.2 million of contracts that we received last year, and the Leader program is a highly publicized, ongoing program that we're looking to try to do our very best on what we're making right now. So we're in our best position to get any future orders that may be important to our channel partner and then hence, by extension, does.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay, yes. Understood. So just one last question for my own clarity. So Leader is the name for the general program and the $19.2 million contract was with a European contractor, whereas when you say manpack or -- the manpack stuff is a US contractor, but they're both the US and the international customer are both shipping for the Leader program. Is that accurate?

Michael D. Popielec -- President and Chief Executive Officer

No, I think just to drive some [Indecipherable], the overall umbrella is US Army's network modernization initiatives, which a portion of that was the Leader radio. And these are being done through, frankly, the multinational global OEM primes, but into the US Army.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Ok. All right. I got it. Thank you. And last question, I'll give someone else a chance, in terms of additional M&A, has anything, I know you just -- you're just digesting this one. But is there anything else and then any other kind of movement in the pipeline with potentially some prospects that maybe rejected you guys before and they've come back to talk again? Or has anything new shown up since last conference call?

I mean, only thing I could really say at this point is that we continue to be equally interested in pursuing acquisitions as we were at the moment before we did the SWE acquisition. Now, we first found out about the SWE acquisition as a potential target was over four years ago. So continuing developing acquisition targets, developing those relationships, as our results get better, we're more attractive acquirers so that people start to think about combinations and reach out to us or we reach out to them and they're more receptive. So it's just an ongoing prospect development type activity that hasn't changed one bit as a result of this acquisition that we've already done, and we hope to do more in the future.

Super. Got you. And last question. Phil, was there any stock bought back in the quarter?

Philip A. Fain -- Chief Financial Officer and Treasurer

There was not. And you'll see a complete reconciliation of what was repurchased since the program's inception in the 10-Q.

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

Okay, super. Thanks, guys, and congratulations again on a strong quarter.

Michael D. Popielec -- President and Chief Executive Officer

Thank you. Gary.

Operator

[Operator Instructions]

And at this time, we have no further questions. I'll turn the conference back over to management for any closing remarks.

Michael D. Popielec -- President and Chief Executive Officer

Great. Well, thank you once again for joining us for our second quarter 2019 earnings call. We look forward to sharing with you our quarterly progress in each quarter's conference call in the future. I'd also like to note that we've updated our investor presentation on our website, as Phil mentioned earlier, so please check it out. Everybody, have a great day.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Jody Burfening -- Investor Relations

Michael D. Popielec -- President and Chief Executive Officer

Philip A. Fain -- Chief Financial Officer and Treasurer

Gary Steven Siperstein -- Eliot Rose Asset Management, LLC -- Analyst

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