ENS - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to First Quarter 2019 EnerSys Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host David Shaffer, President and CEO.

sir. begin, may You

David Shaffer

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

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

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

Michael Schmidtlein

Thank good and you, Dave, everyone. to morning

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

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

of of only statements presentation. this forward-looking applicable are Our the date as

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

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

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

you, to back it turn Dave. me let Now

David Shaffer

from a growth. begin $X.XX. organic earnings of were increased will middle $X.XX X. I at to quarter which of X% year-over-year of guidance with Sales Mike. Thanks, share first were to range coming X% our on per strong Slide We pleased $X.XX announce the

of quarter. recovery. recovery created million effort during spike to price fourth would total a than flow telecommunications, and In through has orders inflation than quarter’s the Lead cost costs allowed of supply cost quarterly which well fiscal in any excess order highest as transportation reserve after in continued of commodity pricing Plate averaged our lead as of to year-over-year recent cost cost be growth I sales that the XX% add our selling quarter Motive in broadband, products. significant which Asia offset manufacturing seven quarter sequential to or in continues XX% down actions doing raw capacity the quarter. use the were In XX% $X flowing quantities the and of recovery recognizing is commodities this increases by that price orders is strength all is profit down to Our gross coming their million and aerospace TPPL China markets, Year-over-year Reserve due from EMEA business XXXX, quarter well through defense Power year are selling $X regions. this strong. commodity this even The TPPL due us The Thin as headwind Americas Power pressure, higher that despite organic are In recovery strong lower to a result in the year-over-year material approximately P&L most States. increased the in years. to United Pure Tower. an our

our X. starting I (Ph). Please prices review are to [XX] to year and to lead half want since likely see the global briefly benefits the have declined second However, fiscal businesses. we those in of turn early Slide

Pure in to product Lead all strong be experienced order growth robust trends in first X% Thin a the sales continue mentioned, mainly batteries in Recent As industry we by increased our leading driven for groups. Americas power reserve orders organic quarter. our and global Plate

increase sales. an seen our enclosure have We in

traffic which future enclosures. for on in I both telecommunications for and of network tailwind greater for and is our provide out XG preparation build As a should infrastructure data for batteries detailed This there is call, some deployments our businesses last time. and

growth spending orders as tactical or have used upgrades sales in orders motive TV expand long-haul business in speed In continued recent continue additional experienced new Next military strong CATV quarter, retail be business for for Cable and download to finally came automotive are Sales they the for as also chains. the DOCSIS invest power broadband transportation and standards. we the months. and be half to products. the network vehicles Over And for X.X truck orders first into to data batteries of continue healthy strong. fleets Americas volume from growth store meet

sales motive quarter first addition, year's more than first Nexus free doubled of pure maintenance compared to last the battery power In our in quarter.

similar motive EMEA As pure maintenance from free to Nexus growth growth XXX% EnerSys growth future. flooded the Americas. continued heavy the first came that believes move traditional lithium sales EMEA solutions Nexus free experienced experienced the well for Nexus globally our mentioned the and the of of in maintenance ion also power products. securely EnerSys over of from away power have batteries new combination quarter the motive overtime. will TPPL as The which as solutions market our will about. year-over-year customers power to the In battery, pure Most rave previously motive position

we power set. year lumpy manufacturing fiscal picking Plate the European uninterruptible third experienced capacity be quarter. the in due business, volume currency offset Thin of are due bus Opportunities long-haul transportation by carriers vibrations. one mainly East. in of opportunities new much Plate our due prices in value from batteries rates are of a ability first growth ago. and Moving to the recently as constraints. recognized as year-over-year exciting batteries their that to will In product was to This years handle on couple exposure, our were truck volume. just same up excited power about year-over-year, truck temperature for to U.S. exchange to temporary in as the Pure telecommunications conventional primarily decreased Lead and Middle than in foreign the result somewhat a is types higher the are high quarter realizing Pure last customers proposition and market they our the can Thin on EMEA region very which longer impact Lead the These product; road EMEA’s These lower positive last innovative reserve flat, of systems sales introduced as performance Organic opportunities fleet well

market its in astounding. continued power growth sales first motive truly fork the is fiscal the Asia’s double-digit Chinese growth during organic the truck electric quarter,

is Here example. an

three XX% order the quarters (Ph) rate. China’s of calendar orders truck June the of United through electric of States’ at For [XX] were April, fork

truck U.S’s order rate. XXX% year, through of fork Simply orders were Chinese April amazing. during However, June this of calendar electric

market. to this are grow approach market the should still expect continue this over percentage XX% total new in electric Americas Similar We of as to rapidly XX% time. to forklift Chinese only well forklift truck trucks the

created growth will In addition, replacement wave age, trucks batteries this electric the at second of they require these market. in new forklift

transitioned power Indian weighing operation absorb fixed motive up of motive our first Our start these will results. and power exported Asia been and from certainly down power reserve has help to that motive costs power products; has and have its some overhead the

China recycled first power reserve Tower in organic use the lithium quarter Asia’s of the began double-digits mandated as down were batteries. government backup sales

to In region. and batteries. for battery We systems, and this in to that long-term are for patterns calendar additional we batteries. other hopeful announced space along increased facility. near-term with XX% over areas. business year submarine million to received global impact of In these secure continue year order we value There higher Chinese customers accelerating up opportunities supply ammunition and $XX space, Southeast order OEMs contract medical defense still This the increased to defense to from engaged TPPL value this recent Recently, a have in second strong these with major and previous growing with opportunities contracts the new the Even volume Tampa, operations strategy than their million two shift and we at OEMs Asia contract. $XXX the the our the we contract contract lithium mainly are telecommunications replace the our While for U.S., fulfill expect transition orders, aerospace sales XXXX. missile growth we rapidly major added projects experiencing for U.S. are to Florida long-term new continue. the five we with orders wins is are large, defense in Navy with to

continue organic to strong and segment for quote lithium actively over growth to X. in five products We three that design turn the Slide to result to next we years. Please the expect

expansion should costs Please have as modular the experience increased second made mentioned gross metrics with the cost-reduction new our lead and a initiatives. transformation February recent pressure as the we year this year and product financed investors success which to end remains progress update provide has the now on system appear initiatives associated that starting in cost Company's early than of The provide significant growth experienced have initiatives, we key But cost mapped earnings to Since reductions incremental per into significant XXXX. half and the fiscal continue the Day margin of more pertaining in lean we Slide our at SAP, XXXX, X. This quarter. to increases fiscal earlier, of have Investor enhancements development commodity we salesforce the turn strategic will such an and introduced progress will we cost cost have factors. I pound XXXX. made in commodity $X I We savings. if and price systems on to with below peaked in assumptions

when more which ago. than cultural is initiatives, lean we System targeted or EnerSys a we the providing launched Operating call the we year EOS change that initiative Our

Our continuous taking levels ingrained under factory progress now costs EOS activities successfully than sites raw times, is facilities, that initiatives operate. throughout EOS most XX% the lien hold. we more way material improvement and becoming and labor and EnerSys transformation. inventory work our are decreasing life of push way is flow to direct and in strategic span make of

identify the up. productivity EOS identified have reduced was manufacturing of freed and opportunities XX% In framework progress the capacity power EMEA, materials XX% year time in introduced has an power turning factory facility and example, reserve a is improvements. faster As and Americas to lien half even to and the ago we more that by motive flow XX% are implement and the And work at facility. floor first tools management improve raw and providing inventories space factory about

reduction million products. and Additionally, efforts cost several in both engineering dollars been successful of savings have in potential product existing new identifying

factories we we and managing the process. of defining global to-date successes the forward and EOS for improvement standards frameworks are to rate going continue importantly, More increase our for and the deployment expectation continuous globally. EnerSys's on Based

our maintain non-aerospace EMEA, our original at defense non-related XXXX already of target by ahead million EOS cost final and million. approximately in planned factory. In QX We will We factories launched all schedule. year-end have improvements achieved gross initiate fiscal Americans Australia in $X in and we total $XX having with for our

lithium We customers approach regarding continue modular new positive to offerings exciting There adoption our customers. to interest feedback standard. in consistently our charging the our new discuss these the reviewing product ISO We with testing from of and TPPL is and XXXXX and products. the wireless receive significant maintenance-free variant safety

As of calendar we of will or end technology initial in multiple be products. EnerSys but is broad our of platform power of it the motive lithium family previously launching product application be will rather item, will the a the the communicated modular not but vary This same, start just different. The the year product have one is XXXX pieces market. variant at

in anyone depth will well industrial the of offer. as EnerSys of quality unaware are markets service will We chemistry and that products as advanced our have that

progress will drive We continue we as lithium R&D this build investment continued through further to innovation. on in

active In front. addition, on we the be very continue to M&A

acquisition on candidates technology remains growth, differentiation that complement product focus Our and would our development.

results, increased in I’m price quarter maintenance should increases higher appears our spot in XXXX. cost to price the lead pleased we standard experiencing product regions Motive commodity industry. the the costs. of year-over-year early sequential That In fiscal end is XXXX, due of quarter commodity enjoying of peaked Nexus setting our starting the recent quarter, is especially commodity fiscal a the first deals. half have all the increases new net expenses in year tailwind growth diligence while in the began become in in in advancing second the and cost last our increases good have this said, with for given We selling summary, world for free power and at

to now very going Mike meet impact the have about I our is well and with And EOS our all provide I ask results further Our will remain as future this I around embraced who transformation in world very EnerSys. and strategy, its Schmidtlein employees of on excited positive guidance. information

Michael Schmidtlein

Thanks Dave.

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

due million to $XXX $XX quarter sales to and price basis, by X% X% currency a up enjoyed X% and X% now X%, X% Reserve year. X% while and a decreased price On million Slide X% prior a positive were X% Europe sales the respectively. to product X% compared Motive reserve the net quarter in was driven X%, to X% currency X. of sales foreign pricing on in currency. had motive in $XXX and X% X% X% and power a XXXX, X% X% power in volume increase volume year-over-year and Asia quarter X% decreased a The basis, were $XXX power X% and increased were and X% a to in basis decline was X% product up Americas at for and our were first regional On X% sales power generated X%, sales and organic Asia motive down net X% while from X% million a Our Please $XXX net Asia, first X% a The offset power Americas volume from currency sequential volume currency. to prior while quarter over up first of basis, to $XXX a million compared XX% a from to was refer in increase million increase first increase up benefit. million. year a reserve pricing a increase while while increased increase were flat. increase, down down and volume, in the pricing had On a a fourth X% Americas net in the line X% and quarter increase by the in was Europe’s region up net respectively, Europe increase currency; price. fiscal line increase power in pricing. to

Now a performance. few comments earnings about consolidated our adjusted

these approximately analyzing higher Form to and operating performance later basis, offset $X costs. when pricing first excluding know, for commodity along On to we operating X, the items basis Accordingly, the in was now of costs. a diluted the a adjusted prior highlighted from all measures $XX million XX commodity quarter and items. year XX you earnings-per-share specifically which other currently in the points our XXX from commodity Please XX.X% at $X comments As the opportunities. not rising be Company's expenses Press charges million basis EMEA’s costs The XX.X% Release and operating diligence Please Slide earnings, turn primarily We fees our M&A to expect in to expenses on XXXX million operating concerning X% highlighted utilize for of recorded the related million restructuring increase following to compared range, X. margin from in due down to first the our refer $X.X concerning on with expenses my GAAP year. highlighted in in my items. operating a comments prior primarily to sequential sales XXXX items. were the higher exclude On enough non-GAAP to of with dated and costs increases down year-over-year earnings organic basis excluded were million fiscal net our Company's million operating on consolidated operating professional earnings earnings. first XX.X% quarter Operating certain quarter decreased August details margins X-K, excluding concerning due highlighted dilutive operating includes our impact volume for

million power we withdrawal manufacturing excluded with X.X recent net In in addition of India. associated charges $X.X inventory in write-offs our reserve related product operating the in expenses, million

of charges approximately cost. our XX.X%, quarter volume was OE below quarter posted XX% primarily from only the Excluding and Americas’ million those first the fourth basis segment Americas’ impact a due earnings $X but margin this X.X% record Americas’ XX.X% increased year’s prior operating points EMEA. year from Higher last percentage higher in of than last last higher were sequential of in of XXX first the up the flat percentage dollars quarter basis from which quarter quarter. down offset business the but X.X%. profit prior X.X% Asia decreased first $X declined first basis, led business $X in pricing. with operating pricing year. achieved dollars operating operating million of from last the quarter in partially points also to last On Europe's of year, volume year, XX million quarter lower earnings in to the the prior was from in in X.X%. down and percentage the earnings OE prior X.X% X.X%, The our quarter's points a quarter's income was from year in the basis but XXX decreased

Asia's down Please and $X year prior OE million dollars approximately million move Slide XX. were down to from approximately X.X sequentially. the

As the previously X, XX comparison consolidated the operating X% decrease our first on to million adjusted was of of year. earnings quarter reflected Slide in prior

adjusted $XX.X prior offset currency the The savings higher foreign by results reflect to and Our commodity XX costs. pricing volume, of net and primarily lower higher million and million in earnings comparable losses taxes was consolidated year. cost

Our of the was and of quarter for caused slightly than these approximately the tax of effective items year's first prior income tax lower adjusted rate XX% XX%. the quarter variations. most rate Discrete prior

we quarter XX.XX to fiscal and to slightly shares expect weighted-average be X% lower $X.XX outstanding. We approximately outstanding. XXXX XX%. continue higher between rate to have net and XX% of fiscal expect shares of on million earnings to XXXX's EPS increased our

November turn XX. last Slide Please Directors we reminder, by Board share now exercised authorized $XXX a have to for not of our As million repurchases.

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

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

Our leverage the expect times. provides of in on year. Slide million The details and first is turn above the we credit million new Slide XX. million full-year expenditures agreement $XX from ratio Please XX fiscal additional to spending approximately XXXX Capital quarter just for fiscal XXXX, Tax table fiscal now XX Act. were impact our X.X this of $XX to XXXX of

was fiscal XX%. first rate our mentioned, remain XX% was should previously XX% I as and QX around to effective tax As expected and

determination of any returned in in not we the to QX. We will cash as this at this have $XXX we million million final likely made time might $XXX be but how million, repatriate between including and $XXX much fiscal our year,

to activities. our to a XX%. expected earnings of second excludes between our and restructuring charge XXXX, in our and acquisition adjusted be second fiscal expect and in diluted our rate profit We share gross an share between of We net programs net $X.XX anticipate of fiscal which continuing $X.XX of quarter generate per $X.XX a quarter from per XX% XXXX

defer better price to month of many raw to with align on FIFO you method of recognition purchase three know, two we variances a As material our revenue.

recent fiscal in and we impact fiscal to $X earnings to their In of our In currently to and recent continue, If profit products gross mitigate changing commodity lead until in approximately economic monthly more the States QX. We flexibility pleased end in actions million lead anticipate tariffs rates impact not spot our our us due with average billion supply these one of from will QX. lead United fiscal costs. impact than addition, improve results prices, before gives global our and We for with rates declining Consequently, drop the in adjustments forward in our tariff improve China, believe believe no our conclusion, largely trade XXXX between are month manufacturing and we adapt deferral to and conditions. our organic footprint operating the suppliers impact our of growth rates to order our origin tax XXXX. until mid fourth the won't $X will hedges appreciably chain quarter. of look

me it to let turn Dave. back you Now,

David Shaffer

the up Thanks, Mike. Alright, any questions. we line Nicole, for can open

Operator

our C.L. you. comes And Thank first Instructions] Michael from Gallo question [Operator from King.

now is line Your open.

Michael Gallo

continue I when Just look you the price when I a mix and question I get wouldn't think prices? we to that you bigger product. year assuming took to and million margin at picture so at volumes your $XX look guess when back this today's there just spot out led look stay at assuming year XXXX look at the reason last premium or is your be I where gross margins, structural today levels, are any you of Is gross to you and grow able able

David Shaffer

No.

that those numbers. if rates that an Mike tried in some better timing impact to get think better. rate will of gross absolutely of you And how and before P&L profit get although that to you I again. it that - I is that in the I still kind premise XXX expect percentages bips basis I probably think another say fiscal the is of XXX QX that, XXXX better But into give I in additional is those by the is see see because our and the numbers appreciably you then reasonable. a expectation is it changes correct, year. maybe XXXX in QX of experience cloudiness will, into should QX to why I little going get get be remainder to led cost this we you and need have then slightly gave would fiscal would of insights points in for experienced the that of

Michael Schmidtlein

in staying favorable getting zip your the fairly and feasible. those just And relief back about optimistic margins mix to now. comments our are with is Michael of to we is the in always commodity led commodity that been accelerated are somewhere slowed, is not to seeing anything so it’s we And success the mix, the And strategy. caveat you coded being right if is that story the that the those premium with the late, Yes. piece other between is product that core know beyond

Michael Gallo

your of growth would have on TPPL constraint very on demand terms quarter strong those achieved still despite I obviously you that constraint an in get side, up the as Just rate. at able will grow it faster say you was where capacity words in of much be volume is even that of capacity limited demand to that perhaps you how you kind growth, mean other pent kind volume how logic there outlined even

David Shaffer

think more had felt sales to I it’s ability most in the was EMEA sector, aggressive many what in Right have transportation there they really handle, our to accounts down we guys comes it place we the sector we got reserve to. are just knocked lead what down can as we teed up. strongly probably quote times the - got it is, get that now comes the new is have is the power orders us out. And really to as

obviously Unfortunately we can at this rate So they capacity capacity, fairly of just hey that we going expanded in, noted we it sun that are quickly. calendar of is once it's to coming we out And which and to Thin frustrating our get but lines on doing focus bit plenty of bring the optimization this is I'm the fairly Europe new are come putting want at it with And to say upside remarks confident at in lean a down is to utilization able take better production as the to the sell to of needless team, we better a capacity. get shining, what in try sales Plate these a now. be time. existing there just will in prepared the Pure the that least part Led we to big year, are make when for you end long

So from a demand too aggressively. much there, plenty dimension that is growth Michael, can But there keen do there. focus. transportation just more standpoint is I sector a we out don't don’t of know a but want that how I

Michael Gallo

you. Thank

Operator

you. question comes Thank our Franzreb Company. And Sidoti from next and from John

now is line open. Your

John Franzreb

parcel bit that markets but the the was driving organic helpful? of kind a would growth, product be to X% lines can also or kind focus more the little what in on growth are of wanted substantial, so I you Americas. out

David Shaffer

really now, or for to spending the we broadband Sure, we a use race and higher these Telecom really and to speeds, starting buttress will them key track and and power. are people accommodate higher preparing broadband it’s from been see it’s the are what quarters we now, talking markets. whether money to amounts about speeds for backup They having take XG, more one-by-one. of consecutively increase bit data speed, customers right several and their are higher speed a more more spend these order in so means power networks power money are these of to have

And saying in U.S. as is So yet, sector quite live level I activity or Michael, go customers Europe shocked. was and down see the benefit and suspect lag seeing really that sector after. comes really well. but and well just two. don't The our can to in transportation much just ability it We we are that is market how I of that been we produce working the product that to will in year the have a to

think pressure Certainly strong of position in shortage really in going out companies some trucking statistics, right have lines, didn't the a prepared his the remarks, Mike now. seen on costs up, we but of drivers. our are are you trucking it freight I the are call feeling freight

and mean Plate it's for power this vehicles a over revenue tactical is growth trucking And that the trucks this motive have in military on things of seen So more where exciting we we again increased is over embraced Plate spending the some being power close technology. another Defense like sector key Lead tanks Thin that the is we and of really the sector. then XX% and Pure market and year-on-year spending, than part is not for on growth. doubling the Thin road to going business seen our be Lead. that is have if Pure I motive expect our

think exciting time. major shot shot have we and right with was experience. I a right of and think I I we called customer customer maintenance free, just the terms this the in it's So called yesterday

the And the CTO, up so and are getting with on that we with our good went was track spent we I we have time and been accolades right very we what are doing. customer with

as a just I this can are the we on guys, these proud to new they do out faster, to are really product it So dates. team, side to the the want give maintaining pushing to of very launch and need hard committed we I'm shot we

the U.S. of kind the sector. are those areas in key So

the Our EnerSys motive the green green just dashboard its U.S. on for globally markets specifically has every but pretty been in its much in great, sector.

John Franzreb

it Dave, telco when of going growth be out to think a or spend, this as that be start about does transition? helpful is be here. would kind of is rate spend. of color play it Any How you we a constant a kind going lumpy the part that So to

David Shaffer

Alright.

So the of some and us. limit products on battery the side. We products the help capacity new lumpiness, think going constraints are to going especially lithium the that to new are

make weeks lockdown. to in Asia supply I We supply we I that two over have line our guess and are just was sure ago to our chain up trying chain. trying got

growth. that So uncap some to going is help

customers the think new we some these are of products. so ready And for

on help is We bit. on capacity The to were going push be shape. to is good piece constraints, got through that just in Plate so Lead. a Pure the the that enclosure So Thin going constrained

much much, Our enclosure business stronger. has been

of to lumpier the probably those, there is pieces be to as and build think out they peaks real these that tend telecommunications one And valleys. be is we good opportunity. So going

been for But, that going more given a of the constraints we like approvals, like hockey - I a of it’s be more steady couple and where I to have be slower will of So lumpiness think some a quarters the the last then comes. that quarters, seeing be a the capacity think stick.

John Franzreb

question. prepared were last say so products one Europe if correctly. And exporting? sure Okay. were heard what you I’m remarks, In if you U.S. I the from to not Did your this exporting and you some

David Shaffer

demand broadband the Those supporting are U.S. the in mostly and telecommunications market

Tin its So Plate batteries. Lead Pure

John Franzreb

my for I back you thank get alright, queue. Okay. into questions. taking will

Operator

Kaye Oppenheimer. you. And question Noah next from comes Thank our from

is line Your open. now

Noah Kaye

price event you [indiscernible] that headwinds cost from current stronger region is of to or that area the could and out in us some So call your million what we experience you ability reversal that by see in through price prices? either sort for put $X segment where the

Michael Schmidtlein

to So the we of wanted know of you X - million where make cost. sure net

Noah Kaye

implied earnings And maybe color kind but segment give you would be can helpful. of trends, cost the net any headwinds, price Yes, just right. by

Michael Schmidtlein

no Well, currency so and of produced having with that cloudiness exchange this the But most fact the their euros. the large, with the because sales bulk is put U.S. is growth at manufacturing reason, but [lot] Poland of that that footprint that is this product base this into cross just based, of is Americas manufacture of in exchange it’s size not rates rates, Europe’s other we has in (Ph) Europe. currency obviously by additional cost Europe in for the and and so currency because of of time. some

David Shaffer

actually of through popped Yes. in of And Noah and parts it’s of got cash much had we to, principally have up gotten where U.S. it some lead we pricing got world. the it we and U.S. ahead reversed. dollar, less of us other since on have pricing the In

Historically for the we are years some have we if picked got you U.S. the that good. that stickiness should this definitely the prepared if caught fairly highest optimistic I’m I sure. is and Especially but we slug So we in optimistic don’t up but stay eight know follow where highlight, are we my to price at. we quarter was up, ball had so commodity right held in can we I want trends, just through remarks. in years. behind the pressure, prior are that fairly is have it that costs

of gave So with and he plus this between a prices through to and a lot guys buying he quarter first was there high manage just got color contracts fairly (Ph) a it’s how out, all it different significant tolling work to take just and color lead lot we FIFO but the our -- lot out I this quarter and really to on of stock is with things [M some go transcript know with on it's the but got of is brutally the thought frustrating, to we one] you gave agreements the just - a your costs. trying Mike suppliers P&L. that Mike through you models I help lag. a mean it if course, for And commodity works hedging. of because I called just mentioned hedging But is Mike of lag itself time will

Michael Schmidtlein

versus little clearly, biggest color, the commodity biggest the more decline the where cost pricing year-over-year A Americas look impact. they of XXX I are so had mean points, if to you basis just

So more attributable than million it's $X Americas. to as the slightly actually

Noah Kaye

price of of look of Okay. is we kind year at of X% kind I of this were level at a America, Is trends first the sort level I in on. last range, you quarter? right I X% sort want year mean know sort that the type in you can X% be that in for were at the price kind of again to the be

Michael Schmidtlein

the expectation say depending the I pricing where tougher see as should because there pricing our on costs get Well out a is basis. commodity so those or actions comps the on further beyond when comps along. I is change you parity is think, were would get What quarter, above on the will at initiated, second year-over-year you

Noah Kaye

question. CapEx Okay.

for there. year, I the guided in of XX and XQ you around reduction kind that you to million comment decided to trim? think bit have spend signaling now where Can of you might around fiscal kind of

Michael Schmidtlein

throttle. our that investment the in for we annual referenced typically, major XX Well which typically biggest Plate we is is spending still the going is - execution full line in the investment Investor Lead the will Day and CapEx the Thin Pure what

the and that a at to going it quickly how versus we think XX progresses on I to line So, lot is if installed. gets XX, XX depend are of

outside I I realm think XX tend appetites. historically is tell So not possibility, you the we will to of but of that say to have fair it's

bigger and by Our typically it have to XX million. can when where trend spend comes we a we about missed full-year we our how stomachs capital in much eyes the than are

of thought is that the So part process that went in there.

Noah Kaye

then Dave, about more remarks the talk of are there there attractive about is just more one of understood. areas M&A diligence sort talked environment. increased Yes causing what some it, seeing elevated the a near the the now What is the on thought environment? I on that Can you you think M&A prepared spending in environment? due end And you what process may activity? be

David Shaffer

at Yes, of focused I of just think that and direction the spend you areas we the on we companies historically have that configured Investor to where fit systems, want Day know money, especially outlined these out we have consistently areas we all this to laid just on front. that storage about continue nothing's changed. that push energy day roadmap product just been of it's the And we every

as busy, we the a But from just have take assurance of well there guarantees and do, in values still opportunity this it. team there our difficulty certainly been can this You looks leverage sheet see growth is you know just M&A I for the in but of is drive world balance no to controlling lot as timing our to as a for that management shareholders. fantastic spending

Michael Schmidtlein

the to fishing kind think went from we of with spears. with net a I fishing

memorandum do remain that targets be But over reactive have go more much after when people by busy. that want targets than sale. see more passed brokering we rather and offering businesses are to we we actively Dave's - for are identified we So we point specifically those

Noah Kaye

much so Thanks Okay. color. for the

Operator

comes Thank question from Drab William you. from And Blair. our Brian next

open. Your is line now

Brian Drab

first just on companies this of point? question. types of I are to most at What I M&A that So wanted guess build interest on

David Shaffer

what you more into are is to think system market to we investor trying customers just integrated as really the day we we changing, areas trying go changing, And expectations have see take I are you changing. identified us know just roadmap of mindedness, key those Again, and to that the are do. is and the growth what of it's drive key really back areas the just the to if

modernize So we to of and roadmap. our they want the that kind technology and fit think continues that we glove have And product hand focus our those where to opportunities in just to portfolio our are be. with is

Brian Drab

bit growth obviously half of volume mid-single then it price And half a get of could XX% of Thanks. in be quite final the wondering can where some point remains could you gross through margin better the margin the given lead Okay. understandably is, put second and kind gross or in than level year, that? maybe I’m gross on like is the year if a your assumptions what digits, second the of on discussion margin

Michael Schmidtlein

the the how it we and next pay cost kind also the addition on Well that to remarks end. in the the I but some in as and mentioned my tariffs generalities I the incur gave of my less of it, guidance half year, for for quarter for towards specific, based contemplated second we lead

things guess I So fourth that certain, that QX let's still the the But range. we rate exit number. in reasonable upon. would I'm say close that a have But, that I not that that at will have dependent the of be I XX will pressure have quarter, is assumed, lot a say as be well end we think that to but of getting

Brian Drab

for think in said million in fiscal the And that year? does would during that current the how XXXX I you I impact you know is - the X impact - that how from you be tariffs, quarter then had the trend of approximate and million trend X kind of mentioned would kind that and

Michael Schmidtlein

our would today quarters I we what the quarter, you by be about three X, would changed the expect X, I an on the and next we for know say think based X, that tariffs like see products will we last fourth of would the impact. largely sourcing that quarter,

David Shaffer

I published, lot there is continued I Brian about negative, of know use the been on so codes have just tariffs. And commenting bluster only discussion want higher don’t has even been what sounds have been of terms but HF a continued noise tariffs, so to there has - in that we that are much we there of seen

China into China customers U.S. around maybe ones the China some billion of with have important dimensioned some moving so and things list, outside moving somewhere really we and Thailand of the China so be is for that $XXX customers moving the calibrate that I but sanction out European But of comment I you target. the inside just is and Vietnam it's would and of aggravation most that what Mike or the we the may really of and factories have we into the or else. us are think made suppliers, a far have So guess that

enough accordingly. so do. to so for happen work and [indiscernible] us through certainly pretty goalpost forth, one that we it's can the But get it have easy inventories confident We we can't adjust just to and got it’s like to we and frustrating. set So, overnight

Brian Drab

taking my for Thanks Understood. Alright. questions.

Operator

[Operator our Sidoti. comes from you. Franzreb from John next And Thank Instructions] question

open. Your line now is

John Franzreb

wanted about to quarter, want in lost there. for of refilling just Tower on Talk the transition is power much you also lot are there. up bit the what May talk addressing I China going I there, doing some that a you from reserve a numbers how are about the market in of In down. this and the power bit little business and Yes. what - the of opportunities Asia is is and know a plan total, product. Indian the I India to just in a be about but little I know is product there motive

David Shaffer

Okay. No its great.

just Let's in India. start

market. Investor just Day head got has Investor at date in that the really our Day us to plan India versus miss to market. handed We been I So telecommunications biggest our the think

thinking So some didn't were to of our India products, you didn’t market. have an we It’s and so the opportunity, restructuring a have taken right back a hits and get line a right attack found we drop footprint. got we have the telecommunications factory. for have where that we retool just great but opportunity and we best really and

was Mike is going Mike these actions to that of I dimension as million right the a some the that big bleeding. that think India India? much are at last looking probably and think P&L taken about I’m for I we as year we have certainly drive big, stem number, was $X think

Michael Schmidtlein

certainly the certainly... you the range, maybe high-end are Its, would to in of I range, well but that

David Shaffer

off far too not it. I’m Okay,

the Australia focus. markets so and support been exported plans have right support factoring Europe those Asia markets opportunity with see that great to with to accretive an the markets power we in us, were motive here So regions very of business like And than we really Southeast that so India is Asia, out which places those attractive. those for often in

still factory have that first we is comeback. done, that those telecommunications so in where So and to foot, shipments got we leveling We India out, but we the believe really, have looks piece like market. feel is great export got our

certainly beyond and I of was environment things some of class but and So then the going the cross into of up China cars still the outlined That it old about using if as we that emergence positive extremely and is China into we power the we are that rotate middle China else motive old, forklift an market that. sea leg where sort that the doing investor everywhere very at the day. back enormous initiatives. I storage four is except I the vehicles blue or good had administration systems I a I energy was [indiscernible] same place in got just trucks blue so the I weeks It’s inline the the was very China, couple in were over is Shanghai. be skies much for same was when electric river part are I electrification in cities every battery ago skies of of was and for

this I about China and time you optimistic So thing it’s on get rely that but heavily been on because for and this China, remain very know a you long us telecom for while, business have to we retooled. too

product would bad, and I telecom from good, opportunities to the of very but been of the then growth power telecom no the motive mix. there rates remain normal Asia say has buoyant China rest So significant departure outside

John Franzreb

quick buses there that a in they batteries initial... is, lithium reused over using the anything there is the on feedback any are thought, Just

David Shaffer

you types all it's Everything gone over portals give little you well. will a bought. is actually so are web product what I not can there intelligence get, is market where there, see open being we the

doing are it's all the very whole gone we poorly, and it's very transparent know they initiative. exactly So so what and

something a not but it see okay comes is just find are that If wait, great. we we to we of mindset, if too, So back else. back in is are going the to hope and going we what sit will happens, and doesn't strategy are it

upbeat, will the So the Transformation come Asia but in I easy, is through it's would right tough we other team end. stay to - I now. want never

John Franzreb

lot. color. I appreciate Great. Thanks a the

David Shaffer

Okay.

Operator

you. any now Thank And I’m time. David call further no to turn CEO remarks. for to President at and showing like back Shaffer, I this further would questions the

David Shaffer

I attend everybody great to just a took thank today care. day. the Take everyone call to Nicole, just who and Well want have the time

Operator

This in you concludes conference. today’s today’s thank and for gentlemen, Ladies program. your participation

may Everyone have great a You disconnect. day. all

EnerSys (ENS) 9 Aug 182019 Q1 Earnings call transcript