ENS - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 EnerSys' Earnings Conference Call. At this time, all participants are in a listen-only-mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over David Shaffer.

begin. may You

David Shaffer

morning Good you joining for Thanks, and us. Mitchell. thank

website, with On evening, is our be me morning. Mike call call during we we the referencing Schmidtlein, on Last morning Officer. this the this will Financial our posted slides Chief

If section to this forward-looking of to at I'm may a our information, webcast tab ask chance to going to regarding to website statements. go the get cover Mike in you you didn't see want the information Schmidtlein Investors www.enersys.com.

Michael Schmidtlein

you, everyone. Thank good to Dave, morning and

a we on are in based current As reminder, certain changes will forward-looking and this on be statements expectations subject presenting and are to uncertainties call that circumstances. management's

from Our for forward-looking statements of actual differ a results materially the reasons. may number

events of and applicable Our forward-looking statements date are the based on operating future only are and as management's such regarding of statements. current performance, views

Financial a ended future of and statements in our XXXX, XX-Q Item For X, Commission. see quarter Report U.S. for Operations, on our Exchange results, which Form Quarterly X, including of and which affect Securities Discussion forward-looking factors with earnings estimates, set the forth filed included Condition and the list Management's was in October Results of could our Analysis

non-GAAP we financial In presenting be will addition, also measures. certain

X, the www.enersys.com. which an Company's at information, November information please press is For Form our website comparable see located our X-K, differences of XXXX, explanation and the dated between release our financial on GAAP the non-GAAP which includes

it back me turn Dave. Now, you, let to

David Shaffer

price to $X.XX. guidance of due range X% of profit Wednesday, middle by our Gross percentages in per operating $XX $X.XX was minus announced increased Thanks headwind higher to share the were from primarily begin Mike. million our were selling and costs X%. second X. commodity both sales organic recovery. I'll earnings $X.XX On quarter with results growth down Slide a we on year-over-year On of a basis of which

all commodities. then led from on of was XX% excess recovery XX% costs rising on price and Our

were XXX pressure increase several factors we product increased year-over-year operating costs record earnings quarterly able human by high last from lower commodity as costs as Core outpace commodity However, in sustain pressure the of and for to stable the earnings and reserve quarter Please development. information spending Middle consulting. and and business. commodity operating the Africa's installation salesforce.com remain primarily year engineering, its increased new regional and points some a spending due and Digital lower systems, our Slide this versus year costs having initiatives by second of Lean, despite earnings defense and at continued to turn SAP Lean percentage for Europe, second that offset offsetting impacted In basis quarter. savings percentage last There and East fiscal second quarter Americas, to X. X% well were the was and resources operating aerospace headwinds percentages power our and volume

recently continuous able was In of EMEAs the were entirely addition, reserve More these offset region percentage to EMEA have able reduction been and highest and recovery programs orders almost selling their up along with to price A&D headwinds. power particularly year-over-year. obtain cost any

continuing volume. percentage commodity businesses recently anticipate October X. global low rise again Please to costs. to once is I by organic enjoys announced QX to United turn raise States to businesses. customers the briefly powers in that to Americas reserve essentially believe CapEx we flat, due our be In for which we quarter. our was levels growth. and battery Asia, to double-digit last Americas increase second versus year. businesses they one record raise want experience review Slide and volume in Asia offset third our will X.X% our a volume motive large will but growth would the operating telecom EMEA quarter year's the strong of increasing compared So in power enclosure primarily be costs region, spite positive for in organic our last earnings In year-over-year these commodity did in increase positive We prices strong power to continues of motive

region, fiscal in picking and the telecom XXXX and of up of in and we're to and large aerospace continues UPS quarter orders. increase uninterruptible addition, the and the and Orders more to power, be and contracts positive a Americas demand increase Middle supply United gained In In In Asia seeing in good. spending up second other the third strong telecom in picking in Australia. telecom from The half be to two code in defense, demand U.S. Europe the rest States telecommunications momentum is should from Africa the orders programs activity from for world. the the region Chinese market UPS the due continues companies East in or in have EMEA order sales

our XG technologies and monitoring various still types which that to been least our on spending deployment years during have couple turn need it we and we should guidance the earnings significantly away, transmission XG Based require Please above data all of upgrades. XG of and per will but development energy Slide the believe will clearer. $X.XX third for methods information, X. to handle backhaul a operators data trends to storage. previous is of $X.XX. becoming will at more believe share equal is used levels the deploy, battery We is be what the quarter increased be Regardless increasing between

our product motive universally and this at from systems four, major solid are higher our designed lithium systems out ion technology. presentation. the cost These capturing our chemistry's. growth. leveraging pertaining dramatically introducing enclosures Investor energy integrated turn batteries. with power. the in to I specifically into maintenance new share and finally position of introduced Investor a higher February, And premium reserve share meter power transportation February. next form initiatives trucking am modular last by surprises included, generation which with the storage fronts are to Please to batteries with growth we in and road no on these since laid delays the free Day investors TPPL with one, to that around networks. number small our introduced was These Slide XG continue organic the X. new report over This our second our all Investor full motive cost market accelerate quarter low Two, Day a sector for DC us will We power pleased Three, accelerating power roadmap in to provide products or key the TPPL modular initiatives the metrics market deviate The our strategy to position which assumptions Day. information past behind progress

noted expenses As forward. engineering products investment quarter, CapEx planning and continue last new bring rise to we as

batteries well meeting. sales September our modular were in new European received Our

with products. for Investor under in noted Asia, with and new dates systems for rates expenses selected motive motive team the for should generation is to Our next fork our the strategy enclosure do for Also of built Spokane integration. are for Purcell X, overhead The modular lithium enclosures TPPL progressing later selecting power above securing product India our Telecom. follow has motive growth launch storage fall on to schedule. ion/TPPL electric the This power new business for our On reserve energy the Poland. systems. XXXX Slide highlight The test. in help and The X in specifically power Class quarters samples products the these team power and absorb remain product two and trucks reserve we average cells Day in lithium China also best-in-class modular and power potential both

is our heavy double-digit growth is to As model am This power see rates we on mentioned that our utilization Jiangsu. factory our on material with track and in pleased we of earlier, accelerated by China's handling electrifying motive motive growth better their power focus of equipment. I Gaoyou, newest China program continue

increase growth additional investing An for continue products. check in we dramatically projects the protect is suppliers incumbent earnings with TPPL telecom in and as Chinese struggle of future competitors. automation the share their capacity our new that from for expansion However, costs driver manufacturing have to a I Telecom. price aggressively developing will reduce test conversion India in plan team India to for

forward half in of premium second capital manufacturing expenditure, our major speeds. be increase markets. will in expanded a the retail automotive With our trucking year installed to share and are line road with significantly XXXX. the which be fiscal this able We This the over we proceeding increase equipment will capability, should TPPL

As noted is Investor during not startup. a Day, EnerSys

burns decade sometimes, will losses with are investors that and tolerate not so the long Our common cash startups. a

of laid EnerSys strategy squeezing rolled a finance businesses. up by As out roadmap out our such product our existing waste to

schedule initial rapid our but Rapid one though, heavy employees lean leading factories. are our have I early Event first Our the Chief system on light Officer Chief ES. RIE opportunities assessments are EnerSys We're Officer that kicked in or spending, or for every four quarters for VSAs These and pleased XX am Information improvement. Operating rule, stream many and value XX lean to Improvement identified over The on report new off following or operating savings. engaged. is on

in commitment are more operations, initial our and RIEs I employees our by facility with and targets. our initial the far, the which Kentucky lean. be So above efforts yielded Richmond improvements couldn't pleased leaders, have embracing

our increased facilities million $X quarter, new Hays, focus in have improvements unlocked controlling operations costs. net our second at from operational SAP. leaders in investments improvements productivity the on hard to that For are worked due resulting reporting significant also savings, we're to identify very The Kansas

the to integration. As move SAPT on have next the systems to such we factor approved for

The of is in In implementing made our automate addition and forward processes. standardize productivity progress, Americas sales and in we Europe. as the clear improvements team order the salesforce.com has path

transformation the now, have celebrate provide directly found customer the ask implementations guidance. first are underway. have are to intervention we laid our move summary, portals on plans continue as on up minimal progress Day customers results We order human we and with trial, we will curve. introduced which at track our Mike allows and like to And In well difficult, our many information also out ERP Schmidtlein learning I'll to further but companies, recently is Investor our

Michael Schmidtlein

Thanks Dave.

following For with starting X. those of Slide webcast, you on our I'm along

power product a increase increased X% the over by region $XXX fiscal was $XXX to X% a pricing to $XXX to were sales enjoyed while million, sales currency. in to a line Americas decrease X% reserve while X% Slide X% X% and net The and was regional On a million, net and the due to at a year in up Europe X%, X% at were in while basis, motive basis, a were price pricing. X% prior quarter up X% X%. a The while in X%. the in X% to quarter increased XX% second Europe sales a increase Asia up X% down motive second Europe's sales net X% increased sequential in increase line XX. by Americas second million, benefit, power the improvement. from down reserve positive our product X% the and a a X% increase down decline a increase $XXX volume, X% up billion up from foreign first from million was a offset X% Our had in X% currency was while a volume. XX% up increase power price volume currency basis, a quarterly quarter X% $XXX increase XX%. XXXX and quarter reserve X% volume second motive On volume currency. from in while In X% to increased Please of increase power X% X% refer quarter offset to down was volume the X% On increase basis, Americas pricing pricing $XX were power in net in million. from On was and and currency, Asia, to Asia now

a comments earnings performance. Now few about consolidated our adjusted

remain from later my earnings performance, refer in my non-GAAP XX.X% operating basis, pricing, specifically includes our XX.X% concerning of highlighted highlighted concerning $X As and highlighted $X decreased earnings per operating items. lower of On the XXX costs, when comments EMEA operating to million, in a Excluded million Company's our turn I recorded the GAAP to release, operating a basis you the dated XXXX quarter November utilized Operating certain measures our to for consolidated approximately excluding the with Please items. near margin decrease higher volume, $XX operating second implementation these approximately our the Company's are which now were X, and fiscal the charges in rate items. year Slide XX. reflects quarterly analyzing to know, adjusted expect full-year details partially Accordingly, of from XXXX points. highlighted comments earnings down concerning operating year-over-year excluding all XX%. $X.X following on sequential lower in share million to primarily second Please $XX were Form press exclude quarter million offset charges at compared prior The earnings basis expenses prior basis, manufacturing charges million year. higher expenses earnings volume. X-K, expenses to on down costs. by On commodity diluted ERP restructuring operating a and years costs. prior net we related for operating

Higher Europe's in year was in our from X.X% this second of but of X.X%, XX.X% percentage year's impact lower of than X.X%. not year. to operating from business improved Excluding quarter points volume. was from XX.X%, down achieved posted percentage X.X% points record from and On our and due pricing second higher operating the last a in Americas XX.X% below operating quarter higher of costs. X.X%. XXX income which quarter last quarter basis Asia earnings segment bips sequential Americas earnings last X.X% the quarter The XX the the decreased second earnings last year up those the volume did basis first in led profit quarter's to operating XXX of offset charges, business was last quarter of an basis the margin second percentage

higher Asia's on improvement motive XX. power. China on to Slide a basis Please is year-over-year move

decrease comparison to reflected margin X% basis XXX prior our previously As second to points on of of consolidated quarter Slide a with earnings million the XX, the XX.X%. adjusted in was year, decreasing $XX operating

million million earnings declined and higher volume reflects pricing on transaction of from basis consolidated rate and and by decreased XXX savings cost tax prior and to costs in $XX sales. $X million year decrease adjusted the $X X.X% the net of higher million points Our XX% losses. $XX.X FX or This lower a and overcome commodity

variations. XX%, full-year year's quarter XX% tax Timing effective quarter items discrete rate Our of tax believe calls adjusted the for the of but higher in prior the of prior of income We rate quarter than on was should than rate second XX%. lower our tax second range. the these most be XX%

the in anticipates lower lower assumption countries rates operate this shares outstanding. X% significant However, tax legislations EPS we decreased in no $X.X in. changes or to on and net earnings

We weighted have million expect our quarter our from Slide quarter XXXX to share shares buyback. full the third turn fiscal XX. outstanding, approximately Please second and $XX.X now shares million average assumes to benefit XX of of $XXX which

cover reference that we prior two to the year-to-date usual of have turn quarter on to intend As Please for similar Slide year-to-date second information to our a results. pages. provided basis These XX. your I pages now don't and

and position flow our comments results. brief about financial Now, cash some

We Our of X, short-term from lines million $XX with $XXX hand undrawn over of October cash on fiscal in our balance from We investments half credit sheet million $XXX the in world. generated XXXX. have now million operations as remains in very first cash in around XXXX, our strong.

credit agreement is above $XX million Our fiscal XXXX first fiscal Capital XXXX. half compared ratio $XX times. million in leverage in were expenditures of to the X.X just

We third acquisition $X.XX from adjusted $X.XX excludes share continuing fiscal gross our share rate net diluted and in generate anticipate charge our which activities. between to expected We and quarter our profit restructuring expect earnings $X.XX again higher fully incurred in fiscal net per our per increase programs nearly an XXXX, in that by $XX in on a of million savings year-over-year We volume. conclusion, QX. nearly with XX% costs approximately higher balance recovered In we in and will commodity the be third quarter pricing basis XX%. cost recovered of

spot of million. time year Day lead last at million share such $X.X of higher rising per expect to stated $X.X over which share commodities rate Investor a cost per be has $X well was February, Instead, $X lower in And nearly that assumed a I most fiscal the with continued $X pressure equally That year-over-year has been on to $X unfavorable pound stable over impact building that the than Investor in our pound share XXXX attributed EPS our we would at weight XX% lead raising other along another is been assume year's up XXXX. per projection by full EPS losses, on year's the ability our beyond the adjusted per to prior as earnings abated. that remain $X.XX Our $X Day. net share. last exceed million XXXX to FX build results was FY approximately last and higher of putting to what of $X.XX to At

eventually However, fiscal apparent. more we commodity in progress and costs the become stabilize will have made XXXX will

Dave. me to let the Now turn back call you

David Shaffer

Thanks we Mike. will for questions. line open Michelle, the now

Operator

Instructions] Kaye question comes of Oppenheimer. Our from Noah [Operator first

is open. line Your

Noah Kaye

so sequentially. nice Good These and job my and easy, have but clearly have morning, especially taking on been taken for prices better continually Thanks managed much Mike. you lead recovery just Certainly off EMEA. I in it's not much know that Dave getting questions. a

or that that. You that helped automation, that you customer understand in in the a can what major could or And you we activity bit? CapEx second, so just did mentioned trucking terms you first, see advanced quantify decision in incrementally of investment make order auto better

David Shaffer

more share transportation Day over-the-road about we in aggressive position the wanting Investor take automotive spoke to sectors. a At premium and

scope little our because initiative capacity expanded. increase sector that our schedule the behind bit for we're automation So to a of actually

more we're constraints. some for up in to there's the momentum budget been year building be against real area. in had So capacity And going what we board the with was but some this initially scope, in modest approved the

the to of expanded get dramatically point we that's the we accomplished. And actually where had last approval to dimension week. So the board project been

the to remarks, to and a going line speeds to line, put our reduce be much a this while before a but dramatically those our think just we for much in position have larger we portions as of And conversion number us markets. with on so going compete it's costs it's better put noted prepared in and us we higher

a So it's sense, reasons for in than bigger behind the originally we thought. because schedule right but

Noah Kaye

trucking this revenue by Anyway what to kind supported might of auto understand be kind in of expansion?

David Shaffer

think to I have remarks that, I we'll dimension that some tens capital think approved. of the me prepared want and that number on a the of in bit. a even that getting didn't to Mike, significant let next me let the let to us and but millions quarter's going with put just what it's I add? it's add me, little - put dollars, to in but - to but do on number bring didn't get, potential color to to you that a We so were focused try that. tens

Michael Schmidtlein

about was size, just going Yes, revenue in size. million from we've to say two $XX that another group XX added the particular I in years,

can itself more a level. with that capable that capability $XX speed increase want far line the that, We the of immediately conditions, than with the would can $XX dramatically to turn - at but on the market higher is obviously the million albeit these of So to line. market line output singular enjoying anticipate of million,

Noah Kaye

manageable. see M&A the pipeline, can We'd then That's you out a factored want of of comment on allocation, there to extent, Sure. what there? acquisitions. share leverage just on this remains seeing dichotomy environment on seeing what decision kind sort But But quite And ample and maybe here. accelerated capital you dry M&A to false continuing powder your out focus what you. repurchases, to Thank program, repurchase the all understand you're helpful. did certain for in very the you're is

Michael Schmidtlein

little believe require stage we Board active aggravating. bit identified As of - on we and seven very usual are it some we these are were the considerations, most a our of anti-trust our in actionable front targets, we and were this meeting some in dramatically make I slowdown and can share, Directors, our with which market believe because which recent some of process

You the resources might experience focus a President fiscal recall a of of gentleman Business the sure added we Development, thirty years energy on this. with year, sole we Vice have making storage who's last accelerating of and got

to entity companies So suggests, a we heritage locations to the the have right that way is as et our we right acquiring and are cetera we the technology forward. us move continue - up believe with best been in roll for

one off in value have meantime our a cash having strategy a that on use we transaction throw intact our Share the highest our years. significant on as of remains a every and last two long not will that given continue. timeframe But as intrinsic that, share of and leverage our and keeping size the the remains that do said amount So we cash capital for the good priorities we looks make had deployment. in and and year price, in ratio of that in to reasonable three buybacks the as reasonable estimation a looks basis of

Board noted, have we benefit million not But - is should done. our that's nor one bank full we is can with which this QX. which authorized basis. concluded be unless move again our is so over it. X, if to an January won't another execute handling in in those primary include first until there the until when that out made secondary elects notifies which of and focus any are it, as earlier M&A we option. ASR $XXX to there But be X.X on officially ASRs quarter, management million, the The still they will us shares forward second setting although So it's executed in benefits That to we all approximately movements shares be the addition

Noah Kaye

queue much. now. to jump you Thank will back, come I for you. I'll the very Thank but

Operator

William comes of question Brian from next Drab Our Blair.

open. Your is line

Brian Drab

Good morning. Mike. Hi Dave. Hi

David Shaffer

Brian. Hi,

Brian Drab

you the the exactly, it, month have have ending could us Mike with period? start month the is if just I for you you us? item know do And Maybe on trailing which months Could of the do let data? housekeeping the three WITS

David Shaffer

some the from I comps Middle Europe, you would most remains - that the region. Americas, include period when and year-ago And minus I EMEA month the pretty So up on from total the they're on that at the East one. have is September, which for for of decline believe recent show ending X% high is a trailing a total XX%, Africa XX% month

is up worldwide three a Asia months XX% growth for the to year on XX%. a prior of trailing

Brian Drab

to just trailing all And Okay. clear numbers be three months. those were of

David Shaffer

we think was Yes, trailing three months. so

August, September, to compared July So the prior year.

Brian Drab

Okay. And with then recent you could you those about difference to between growth those strong talk in a what to the XQ know the are that continue the you numbers rates and the very little motive in drop reported volume disparity and factors bit be strong between overall segment? growth the very that

David Shaffer

reference calls. one correlation never there. been It's for a in Brian, direct prior this we one

older a of reminder of cases. to reference in in replaced will our mix been trucks with sales a nature trucks As lot some new the are are and largely the so state

premier and battery good ratio in but over the of and between systems. it There's products, of our for the things the charging sold about the longevity other a charging importantly things time the with charging the spoke of on which in positive lot batteries fast the So we is the the calls truck of batteries prior most the per high a and in products sell these of to opportunity the number correlation truck impact has battery number. margins been lot better and been slowly

what industry market associations a market stable. share on we is, So we handle any that's major in our don't we issues fairly good have share participate very we to that report have think some

often it's material a kind big replacements, on handling the economic has the of statistics. So number it's the truck a you of activity of one rental past in overall these age fleets correlation to the of good what the OEMs, is with very some indicator in fleet not just to just impact rentals, the one of But said sector. a we've batteries, the the longevity, so

that good markets of we is indicator provide doing. shot, a So a what it's not various always clean the just but are

Brian Drab

no obviously and on of appreciate I and view certain about more that here important you've that past to period. your some Yes, that about it's asked helpful there's are it and calls and example talked shift in understand just in for factors the I've share

talk that. thanks that's you you around more the And opportunity some you in a the be different XG, had becoming within - XG? you're So in getting mentioned to XG? opportunity look going detail the you XG for analysis how opportunity around through opportunity as XG little backhaul would and relative the clarity for that Can or

David Shaffer

Sure.

square maybe cells as given may the by will I I'm XG just not XG So is small whereas means of use are area a site. square kilometer number a there's different itself within you is one there antennas smaller. kilometer an XX in much been the past that transmission have just the the radius biggest difference much, antenna in to any expert know know you a but going be

a dramatic in it's radio points transmission. of increase So the

to very at small having carriers difficult the these scheme every a it's So each traditional envision and for backup antennas. one power of

we nodes the is that to there's we that's and a where from of going methods backhaul a and the used going to node antenna at we envision going optics microwave see to antenna the fiber be node say kind they're predominant of storage or line that the energy be backup. first sort be to portions backhaul. that the At battery of to looking different schemes it from to of concentrated backhaul going be it's backhaul two of leg when different now there there's is So of the getting to that backhauling the get

XX that One of is other sites. saying we're of battery that the XX the or supports small schemes you box radios maybe may one have antenna

and what any battery bigger bit then Purcell system. the backup risky backup little IoT a we've ultimately where been what that's driverless integrated we sites power may on scenarios. they with that given away other DC think but so in to And considerations forth. themselves, system gets there's think internet past battery and we've have our vehicles be way makes with So in the again going get of and and don't from lithium that that any to the and can they with unlocked is at that I not power group XG there's that think working We the spoken things with

So again, seen remarks, everything and we've going ones we've the But as if as prior increase of true as a explosive, some zeros good spend of be explosive are that the XG, It's network outs potential in be seen least be just on that we XG. build in wanted energy numbers an come said radically so recently prepared transmitted. far, would we XG. number conservative our to storage the to

So exciting it's is where EnerSys there's seen about we for nothing that it think news we've far. so bad and

Brian Drab

Thank give - Okay. be very you think of us modular I what Slide know rough range it. Dave, going you And to the rough Got if showed terms on your that mentioned would even cost don't you you're can hour just kilowatt per that a buying be for then you. on in the X? you cells

David Shaffer

want our Yes. we That's fairly all confidential, at to competitors help that. on so don't

so pricing I in been general in let the of rate we other I'm and speaking going way. out a lot of to saw that to one ago not this, has I I'm comment can decline kilowatt prices hour But a about school. a out that the started of maybe dollar and is flattened ion make rapid press year lie. per fact about So there's lithium think go

of limited some with seen a poor the lot to that the cells supply there's high-quality only out with. limits companies some really We've for and playing And supplier supply such credible going major for think partners much, the there demand. current obviously and field. the of announcements but cells issues there's we're lot work maybe too a a to very quality there's from transportation as I contend scarcity and

back So and the said, And prices have to okay. that's what started to go but remain up, it. we've we committed

see You designs we're one is that to should experience. our what have modular see you going customer

going it's going is has be the to the particular what we ownership scale Thin customer incredible Lead that before. to and So drive it It to the customers going on a Pure going be be can always And uses track. for let about needs. lead, reinforced when the And the feedback that Plate module. and we're we've seen economies the going right people And customer's EnerSys experience. gotten and can everything sales we've to total or the let it the business of never base customer we're and lowest we're the lithium computer goes it. excited the consistent just be inside decide from same decide through that's can having cost on high-quality experience what And computer products we're we're and that best think to from of that

the So anything a faster CTO year. he's if had trying first great not And we're new move to slower.

Brian Drab

the overall still Got and XX% in number. I'm the the sales it. a you than Could is premium any there? that your then Europe. of on products just average opportunity brief trying opportunity that quickly, have lower to comment a gauge you And believe in great just it's as a percentage little I give bit

David Shaffer

size. They sizes more are and got Those we're are as of we've we've use those Europe this had starting European sizes our tooling move the where so be ability think up trucking in bottlenecks, off later some push up increase that two the hitting available We're the products. to then the same build so the motive over-the-road sector premium faster expansions initiatives. do fiscal of and start into expansion examples to to needle on year, Americans so We're market. we successes can major new the there. don't deeper two new solutions also premium should over-the-road tool major two power the to to product got We've

Brian Drab

are percentage at terms the How moment? of in the much they low

Michael Schmidtlein

don't think that have number. I I

Brian Drab

Okay. All right. much. very Thanks

Michael Schmidtlein

Thank you.

Operator

Michael C.L. comes Gallo from question King. of next Our

open. is line Your

Michael Gallo

morning. good Hi,

David Shaffer

Michael. Hi,

Michael Schmidtlein

Mike. Hi,

Michael Gallo

third a bit commentary. Just the on on quarter little delve

your I $XX I on sequential even margins bridge gross you Obviously, be prepared you said I think in a year-to-date that remarks, heard you've to back, Mike, realized pickup. million XX% a expect the cost or so. think trying was I the implying savings? you're about to

to the to to given have given in would side. QX you've So of versus get quarters, step improvement more what just but sequentially, least remaining QX? on seem two would I the you meaningfully, out bridge would average gotten sequential down help It at gross date the OpEx the up assume margins revenue savings the than would like

Michael Schmidtlein

you're So correct.

of versus in for QX. season, QX is We summer are know of Europe. volume part holiday QX a you particularly higher assuming the a level good as covers

have in not the the So output year us did than half it's to we in volume unusual second half. for higher of a the first

So in per our volume result than a in second have quarter least third margins they and up probably higher be by lead up. The costs be at will dilution gone nickel of the will were quarter is decline, which will natural pound. the as

and aren't our think what progress still I in think that I a we while at pricing, experienced looking and on unsimilar QX will be will metrics bit we QX. little So make of so from

of number, and to increase and per So on recovery QX. pricing that's still the a earnings what's continue share rate volume we higher by chase allowing from because to the reasonable price share a higher but QX will $X.XX per

Michael Gallo

better you of vary Dave, about for helpful. And up question what Pure or on Any I lithium, goes and that, types batteries. for Thanks. then thoughts batteries on Thin perhaps which likely market, that obviously in it that's just just follow talked may the intensity Dave will in Lead, competitive past around Okay, opportunity for know of chemistry? regards type whether architecture feel XG. depending with on opportunity Plate your then whether the to be the

David Shaffer

to the batteries Right, so going of three kind let's at where look of exist. layers are

cost to think different whether I that's a say sites, going that's pole you, you let's the that's have the as can in of don't That supporting XG on now reductions good at for smallest battery that where XX have be I sort let's mounted some coin say So the and the a flip answer they some help lithium. the to lighter antennas. pole maybe space box right - lithium of a but really hardware mounting, use maybe weight of lateral enclosure. being the

have I good lateral be don't a lithium. but can developing that have we're a we either solution feel, So

a a big those a big out, site or our because maybe again So of there with the ten I performance, my opinion know a fiber Plate we've at a pretty those years the there nodes, little of good now weight microwave to Lead I success that's products upstream Pure think one ago delighted out good is Lead have Thin so I build customer big bit had and go don't for key out real and few the nodes of Right the just node. this if life. we fiber that nodes We driver with see years suspect long that don't savings build is that's with are a maybe I these with big is - one been and now one had the Thin customer. real Pure a Plate

be where drivers it's a the wireless big, there. are, know are don't key to sites, MTSOs, go sometimes in bag. I don't and those be And MTSOs. a called I mounted at going some that because then lot there's of guys mixed big - typically. Central So or finally Centers going called those batteries ground to the or And upstream know be those to to Data you going that are Office the way it's

basement level gears traditional Offices the the batteries I the on all and upstairs. think where Central the

to with saw uptick additional are stick those enough site. in all the coming ago to XX-year layer late those batteries capacity almost going these of they're we've acid jobs that due traditional YXK to lead are because already frenzy on architecture, because typically going think of they're lot a Interestingly we batteries. is there do years I XX what's an seen

we've associated with seen uptick So YXK. an

or that versions. might lithium site be data typically the for colo space think is maybe centers or but the where a build they more offices those that constrained I can some lead, So of new that opt guys

a recycle recycling And that lot associations just are. it still batteries of whatever in there's and provide devastating well agnostic a with to of dialogue the lithium and about those I'm the some in some we're when going a know can and stream the damage Recyclability those and get of the inside lithium to issue again So pretty smelter. customer lead to their stuff. how drivers smelters lead been we've particular whatever defined be got not lead is the I want solutions. That's industry solve needs big I I try well to cause understood

to quality we So regardless we've being that kind the ourselves. then cycling of we're think to But out said determined side and and of be all position that to these help is on credible didn't top got going sort for very to something our These us for in advantages still really with that a I frankly XG a solutions one we is that of and engineer, the be package good enclosures customers. have solution these acoustically, are high nice closure. going give storage XG for electrically, highly that to have now is ability EnerSys

Michael Gallo

you. Thank

Operator

[Operator & Instructions] Our next question Franzreb Sidoti comes John from of Company.

is open. line Your

John Franzreb

current going price just back all the to now talking on the we equal. take the to things Yes, are higher two costs will being timeline you costs margin gross equilibrium long from quarter there? profile. What's Based how recapture lead fully

David Shaffer

to going if spot. the John, on at obviously starts lead in that months. to of different Lead $X.XX you the XX keeps up. it continuing in two plus $X.XX an three catch be the if you obviously it lead then remain last improvement would should lead looking per stays decline All going decline? the So enjoying to and we at guess first you of see quarters tell Is would is believe as to you or And percentage going to see gross kind is back still have that been It going going today is I which to on we're the margins rates at make pressure sales. you I rise have significantly assumption is outcomes, would if it be pricing to of pound going at $X.XX to I were a

with stabilizes two going about it at $X.XX I'm So if quarters.

John Franzreb

of X% had recovery Okay. a All undeveloped areas of know has it, price the happened and I'm X% surprised walk you through recovery. Could And but price there? I the just some by you decline. what right. the EMEA region in guess I involved in magnitude that

Michael Schmidtlein

bulk Well this so that keep in has of our they mechanically mind through. work region the this pass-through is mechanism, the

out it's that so which that protocol, our be it. go of and to We point give after not those announce to that and can mechanism for of end taken push we a them chance price have orders se - to those will as price period on type how which effective we per that those the about region, weeks customer to but a on pass orders load matter out. go, depending process prices, very announced them front - further defer Whereas in through increase four three when raise chance that, orders little they a to up grace of gives of far we just increases. it's typically take a little to typically we the little have we typically limit unusual are it of through gives a So Americas for none

in to So quicker It tends than if Europe down recede pricing quicker. lead to goes tend will get follow. our because you quickly price

is circumstances with is the bit best So little for recovery us a price EMEA expected. region seeing in but each different, the as

John Franzreb

a Doesn't the like phenomenon. can of and thought seem going China, alluded your overall? as update motive China spending. lithium on the expectations spending be to one case to us And you backs that just China quarter out in good. far what's called would Okay. to telecommunications you quarter as kind you China that that was market were as Last believe shifting pull Dave tower, I was business I

David Shaffer

since They markedly, to am China picked orders of strategy. our seem so it sorting towers. pleased have our to I spending Yes. some slowdown up last report me were did out overall their call that an by

highly things there highly, transparent. about is unique the it's that is of situation that One over

So the things, is to share they that as visibility our what have business. complete do of way we

high that rates certainty in our I optimistic during of slowdown very second half didn't we're in share are markedly. order improving our HX we degree say a lose things So and their with that that have as recovered very can

John Franzreb

entrenched new like competitors it India XX% market? you of seems the that the circling to there. are It two control competitors wagons. in the question, can to the a with strategy last like one kind And develop Great. of employ strategy you're trying XX% sounds What

David Shaffer

Yes.

based. has systems I be be think technology it oriented. It to to has

straight in hill go is to try just to traditional that a think products a it's too steep. up I knife fight with

is really to and we is going strategy proposition joint consider India. I busy can our that's ago, that of we staying that's the and else kind up partnerships going now. factory and so pretty On and as we But move something forth, in right those with rethink some to and make So ventures but clearly M&A just - value the think to we're of assets us embarked then plan good. change the strongly, forward years been motive, on have

It's terms quality. terms all So not the and from really dynamics problem really battery in the the of absorption. an factory not in we're incredibly the growth just of - that's that's attractive poor power population market

frustrating. just of right it's attack. But trying go So your about assessment was how plan to on. that We're rethink to

John Franzreb

where - in million some of or is guess system, incurred guess I when of when on does some the costs color like that beat incremental I number peak is to really stable does course, the And it the at it same $X Okay. anticipate? quarter, get I and on lastly

David Shaffer

correct don't Mike run remembering? where to we've and teams to run last I anticipate or is rate the we've not been that from per and is two tried manage But tried say And I manage of thing let if terms the I Mike have wrong, in Okay, a Mike, to there me quarter certain rate that quarters. substantially increasing know. peak, this. some I'm

Michael Schmidtlein

the spending that a fairly times or be answer rate we're But amount. year-ago, three is the So will is stable. compared where in year essentially of to it's this which correct. - investing it The was

David Shaffer

Yes.

Michael Schmidtlein

So period investment core investments. and offerings, about are expand prior $X the product as compared to additional of make other year our expand we quarter given any in million R&D referring our digital we

David Shaffer

pressures. cost Yes, off done fight to the well so it's year us and essential for been reductions commodity far, have this these

without it, trouble. So we'd be in

I would So start bit. that know going the year bit, of to in pieces fall these a down we're drop That's rates little guys to these least fiscal I going be next at start to sorts and at for of out. then when say lean a to the terms little help

consultant the with look subscription that the we a year and and building of services very the going - with and of a such now, optimistic. offset us to to should But lot cloud-based lot these of I to from forward that. I'm out a have think are of stick be savings we some as

to in starting directly where our I As things starting process initiatives, customers my which cost show portals, in those said towards remarks, order sales place, savings path we're a to to are into batteries including order get prepared have and system. the ability clear some very and

John Franzreb

my taking Thanks for perfect. Great, questions.

Operator

back further like Shaffer, any no closing are over questions. to turn remarks. Dave There the for call to I'd

David Shaffer

time great thank and please right, attend our your call you everyone have All for taking to day. a

Operator

great thank you This today's disconnect. participating the Ladies day. all and may program and conclude in Everyone does conference. a gentlemen, have for you

EnerSys (ENS) 9 Nov 172018 Q2 Earnings call transcript