ENS - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen. Thank you for standing by. And welcome to the EnerSys Second Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker host today to Mr. David Shaffer, President and CEO. sir. ahead, go Please

David Shaffer

morning quarter you fiscal Good for joining our second XXXX and Olivia. for thank us Thanks, earnings call.

with Officer; our call our of the me is morning On Mike the Chief Americas. Financial President and Vice Funk, Andrea of Finance this Schmidtlein,

Last started, that Day. we this referencing the we we will happy get wish morning. a on call would be I Before posted to slides like everybody Veterans evening, website our during

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

Mike Schmidtlein

and Dave you, Thank morning to everyone. good

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

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

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

For the and a discussion the our forth Quarterly Exchange October U.S. included Form management’s could X operation future list results condition in XXXX, Item of filed ended for forward-looking Report our which estimates, was and our see earnings XX-Q with set of of statements fiscal financial factors analysis quarter Commission. in results, including X, on affect which and Securities

presenting financial highlighted and particularly measures, certain be non-GAAP concerning consolidated certain which will diluted adjusted our performance also earnings operating adjusted In earnings addition, per we items. excludes our share,

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

it Dave. back turn me you, let Now to

David Shaffer

to Mike. Slide Thanks turn Please X.

year with quarter over reported a second was fiscal of combination market the second adjusted last segments, same but $X.XX across per inflation and challenges. results XX% slight quarter reflected which We accompanied second diluted all chain quarter ‘XX supply increase of period continued orders higher of pre-COVID year. the ‘XX, share, by our of QX than demand Our record earnings a

and is above of demand expected in Systems Power levels. double business which backlog an Energy Specialty billion, more our Strong disproportionately normalized market backlog continue Asia-sourced chain. led Motive $X of Our all-time delivered The while end record better the end primarily than indicative recovery. extremely is impacted to Specialty COVID and results, by over growth to supply robust reaching and quarter lines and demand occurred Systems exceeding our Energy businesses its be than

color provide Let take a environment. of minute me some you economic to added the current

As facing has saw theme in isolated compete still we QX labor, increases freight, with COVID this transportation, global most economic non-lead are navigating the been has all of a cycle, materials The number businesses wages, trend among sequential a earnings while cost $XX nearly continued wake for the and commodities companies industrial recovery as in of in we semiconductors. disruptions. challenges and aggressively million lead, common of

price additional mitigate take actions engineering the of redesigns. materials pressures, to continues team to resourcing increases, including Our implementation aggressive of these and

to results now I’d on will our for little of more like our turn to stabilize, a across-the-board and X. issues color more key Slide these profitability As demand reflect our financial enhanced backlog, products. Please markets. our provide record fully some

QX broadband. XX% spectrum Systems, saw over in exceptionally and rates Energy continues which ‘XX demand increasing compared see ‘XX. Let’s mid with start our with strong XG to We pre-COVID QX order to demand robust largest segment,

QX to orders fiscal in the first Shipments ramp We also received orders our QX, and program. Public public these are network safety Utilities’ California grid extended year backup from into shutdown expected XXXX. for

environment the future programs was we these growth. chain, that fact another Systems for the states through Energy supply hit cycle the is other most of longest price Energy its lengthy contractual The complicated project demand opportunity obligations quarter. longer which recapture working extended is and to the due backlog. this Systems macroeconomic addition, in nature the presenting by our has while strong be may of believe Countering In therefore business hardest to the the

additional move China orders rose and home, As to the shipped alone million quarter, QX, and pricing an the due to not semiconductor shortages. revenue actions lagged Tariff efforts ongoing higher to a Freight result, sequentially of in our mix $X margin be Energy largely service be be offsetting closer contract prior by including out not slowed delivered Systems continue could with to mitigation in or doubling strategies, for inflation manufacturing offset availability. by level. costs were more could year chip electronics that

operating to an extremely positive quarter of macro business. the disappointing, Energy and were price earnings Systems’ resourcing for point market While with this additional the increases combined trends, electronics, demand and path still long-term

catch remain Despite noted chain, price our Energy will Systems due in quarter as recapture challenges That to of especially of Please appear our of we the turn one peaked, business, commodities’ state trends However, the third availability diversification. initiatives strengths will near are the EnerSys’ our many semiconductors, supply to to we up the inflation challenged. have our said, global future. confident is of current in our Slide core X.

Motive price pre-COVID operating earnings period in from believe and positive a Margins profitability not as both ongoing top-line customers’ its nearly our secure its yet returned as by this momentum their OpEx result efficiencies to during pre-COVID improved has XX% higher Nevertheless, decreased ‘XX. Revenue reached demand due we continued European business OEM Power QX than potential the well traditional hampered as improvements been Power to with the full quarter demand $XX summer outperforming Motive holidays. enjoying has as same chips. as F business levels. Our expectations of the and million mix to ability

TPPL released generate enthusiasm variants recently market. in and NexSys Our lithium to continue the

ahead savings of on schedule and nears restructuring timing, with facility realized. completion In to addition, of Germany the be our cost Hagen beginning

savings turn this business additional other throughout extract to and our a well legacy continue of further in of recovery year. X. positioned from Specialty and offering only remains well a standardization Slide in slowed TPPL performing transformation benefit product the business also constraints with quarter. in balance transportation delivered extremely to steady our demand is strong, supply A&D business to the fiscal and We by remain initiatives. business Similar Motive, will the to We Please Europe. Americas solid

QX and improving anticipation improve. capacity their the a shortages improving the will a expect transportation ‘XX demand continue year aligning of very our result on its that robust chip of focus in truck We as will as into our that with and belief calendar growth growth result economy economic – market

Thin shortages billion with and will Lead fiscal performance run to year year. exit Our COVID-related at grow manufacturing of $X.X production Plate TPPL continues for Pure has planned chain year financial under The staffing rate per capacity been long supply hampering significant and all our we productivity. pressure the

manufacturing subside. business. We immense reductions customers variances strong Reduced Specialty next our expect backlog and record demand Slide as with X. in manufacturing significant year turn signals fiscal chain combined in future of continued us Please to issues gives the from transportation a variances confidence slowly the supply our

been the of the most but our worth making, wait. technology one long has the well is exciting product in as roadmap pipeline product advancement business the of of our Our areas

Power and our product We Group portfolio. continue to have expand fully for launched variants Motive XX lithium

and witness OEM our throughout Energy completed, approvals grow. received We for lithium The testing. to Systems also family demand our the has continues all successfully Group products to have

and the with a to performing our not on Bill. Feedback addition from for home In X. customer storage potential forward. this PUC charge high-frequency has including see continues as well. fast Corning the certainly been EV of our well level energy key success turn the are revenue We Slide least, well maturity. should of products initiative portion Infrastructure product and year. is of their focus plans positive, is telecom of UL Last charging launch recently software quickly and our this to first as all product solution next on accelerating. the Please passed partner development Progress residential networks lithium for speed California using the development go mentioned fiscal are Customer TouchSafe to earlier, but the EV very moving tests.

near-term as and shortages. rising global costs and our addressing ahead, Looking labor around as commodity revolve well issues supply chain challenges

incremental working We these alternative increases, mitigate aggressive actively are through sourcing, pressures price engineering to actions. redesigns hiring and

remember, we to changing generate fueled as real than can nimble massive adjust greater these growth is environment. a for the I such as is will there transportation. EnerSys ever remain categories about a XG and high by Despite our demand products hurdles, excitement. We to lot build-out Current

normalized increased deployment, Our levels. small include EV returning future and growth frequency material in growth, defense high significant transportation charging, rural market broadband, handling OEMs investments to cell home energy allocations storage, opportunities share

We progress forward execute to ahead. updates our providing results information our in and the provide our second will Mike on to continue ask you initiatives to strategic guidance. that, quarter With look on further quarters on go-forward I’ll now and

Mike Schmidtlein

Dave. Thanks,

along am I Slide those you starting on with For we your reference. provided the have X our webcast, Slide of on information for XX. following

line growth million. in organic XX% quarter revenues of Motive from decrease XX% Power’s Motive X% net On year volume from in in to $XXX organic Systems by and price, Motive of Power X% volume up from prior quarter and The million to X% resulting second a the second down pandemic, $XXX XX% were impacted net and Our improvement Specialty a in to was pricing. million increased to significantly net million, quarter prior basis, sales over $XXX up due X% from second Power mix. revenues an was Energy sales increase year to business volume. our the improvement mostly were XX% XX% $XXX were

two X% from Power On more comparable erosion $XXX the pre-pandemic a to geographical X% revenues in volume. mix. $XXX improvement basis, in as by negative X% up X% delayed that to offset a million Systems from improvement year-over-year increase to volume in Specialty from had was on and X% to Americas Motive as well X% decrease EMEA year, price was acquisitions this up sales volume X% Energy years We after quarter. pricing. due FX, in impact no with shipments. in increase the XX% the were but are revenue had for pricing had XX% for from including million, net ago. volume of levels a largely HX a X% a however, an had of Our

operating to season X% up vacation and a the Slide moving – quarter, to EMEA lower margin XX. due and XX% down shortages. flat holiday basis also QX. XX% Asia mostly volumes. sales were XX, million down Systems X% adjusted a geographical on earnings the growth quarter has when dollars of and chain X% from to prior for in points ago from second sequential a compared persistent excluding the Please to two Systems, while margin holidays XX% with largely years and Hagen, operating previously flat. decreased Germany. down Specialty in Motive basis, were million and revenues On as million flat. leverage. million fulfillments inflation quarter flooded a restructuring chain second On supply $XX manufacturing second of relatively X% million, addressed. Asia basis net was at mentioned our efficient order was previously to Energy are XX.X% a sales first charges the and Slide down EMEA our expenses, On GAAP eroded and recorded headwinds our announced basis to to Power Excluded from a at of quarter second XXX earnings $XX sequential our supply the million sequential which was constraints the On Americas volume me, European to $XX $X X%, on currency expenses our from exceeded operating On On pushing items, supply charges $X and with more basis, improvements. primarily spending the amortizations year basis, X.X%, the flat due site $XX of was decreased million basis, operating have business revenue in approximately from OE due pre-tax X% line year-over-year now were QX into the consolidated XX.X% out Energy in Europe Motive highlighted quarter our million in expenses growth from more was maintained in Dave excuse closure was operating turn NorthStar and related a Operating while normal basis, Power to relatively we in decreased a $X approximately the XXX in points. were Alpha operating basis, $XXX up

demand which year. business million OE from million the pandemic-related The Energy quarter’s decreased from was the operating last strong was due materials higher X.X%. Motive quarter with percentage last of million growth earnings dollars with were Operating two to year’s from operating XX.X%. OE the X.X% year generated of last Systems year’s year-on-year, or Please million favorable million of years erosion pricing Power mix was dollars easing year from XX. the sequentially were costs. charges, vacation of Slide largely from points quarter basis from the Motive OpEx shortages restrictions, XX.X%, $X the $X and improving quarter percentage pricing in along the than and supply input flat XXX ago. from restraint. the improvement caused to move ongoing operating other X.X% below posted prior quarter’s maintenance-free down Motive basis, for earnings our $XX OE Power lagging freight, offsetting increased $XX Excluding realization. constraint those and earnings a and and earnings second or second tariffs up the was cost and of over season XX.X% quarter from and million of mix lower On noted prior sequential unfavorable prior $XX $X earlier, XXX margin lead to below margin X.X% from volume. OE the the sales XX.X% higher and XX.X% decline last Power’s Specialty due improvement last dollars points in basis volume and higher first driving

second XX, operating a million or Slide million X% adjusted of was from earnings on consolidated year. the our quarter $X reflected prior $XX previously of As decrease

than consolidated prior million, net Our adjusted was year the with earnings in of lower $XX prior $XX line quarter. million but

the reflect earnings the rate. net in with operating adjusted tax earnings lower Our changes along adjusted

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

EPS to although range. bottom $X.XX, slightly quarter was Second the below rose it guidance slightly of our year-over-year

our quarter the fiscal We XX.X in million to the of expect versus the second third in weighted XXXX quarter. average approximately XX.X shares million be

ENS million our XXX,XXX last in second we acquired subsequent press nearly events shares announced release, $XX ended. just the night’s As and fiscal after for footnote quarter under

Our over that our Board purchases. the recently Last also with had the last completed million buyback X these we years in of announced place quarterly $XXX also share October Directors renewed was I authorization we this levels. recent Slides XX dividend, XX these results and intend which provided prior Please to to the for remains at XX. year-to-date unchanged are reflect from now and don’t your time. Slide turn reference, cover but week,

Our economic sheet navigate us well the to positions and remains environment. strong current balance

we borrowing million leverage on in X.Xx, $XXX July, which terms, XXXX. at is credit amended which hand nearly on allows cash In capacity. our have now million place agreement now facility We is and credit in additional of $XXX through extended our and ratio favorable

fiscal expect XXXX. We and leverage to between X.X ratio in remain X.Xx our

along annually. expanding operating revenues higher input $XXX and Included with $XX a Capital Plant, Hagen, on in our operations million million flow restructuring announced disruptions. from million flow inefficiencies in $XX the was second should induced was quarter transit with well The times, spending $XX chain cost rising cash prior the of the started in that other negative our as our inventory of meet amount guidance. costs previously in on Power year-to-date Our Germany also to supply negative – due exceed delivering is million quarters which were savings was Motive that second by from line as in cash $XX expenditures which to the million.

and gross remain battery XXXX million investment major remains XX% TPPL programs fiscal our of QX for reflects lithium to and anticipate continued expansion fiscal rate development approximately We of XXXX. in capacity. profit expectation CapEx our our $XXX Our in near

opportunities. our Dave challenges ability their these lines Near-term As business on supply products in of has restricting high described, three to all fully demand. find execute are of our

$X.XX a XX. of of to to our the Please temporary. continue reflects challenges, result, fiscal Slide in guidance we are We top-line chain third to Board the On of which these our supply – reviewed that longer move impact basis, see with a remain As confident growth final X-year as range overall renewed profitability XXXX $X.XX term years’ quarter achievable with still deliverables. our our plan our Directors. goals to respect of updated recently and or we

However, supply their have had those chain of targets, own on additional markets. as pandemic customers our the year achieved model and previously our only communicated, not to take compared Investor will an delays of Day to reflection our be and progress broader the but that challenges in

me turn Now, back Dave. to the let call

David Shaffer

Thanks, Mike.

to for intention years discuss usual of After as his with years questions, fiscal made the would announcement more the Mike night I XX last line filings. at and we an with along XX end has like company year. retire our open to than announced Chief Officer, Before we Financial the this

While are we energy transition is battery the and to will world-class person a open EnerSys questions. the Andy we maker fill line its experience, role systems for right and from to help we will miss his complete that very Funk Operator, this wisdom confident now leader. a

Operator

Thank Instructions] Oppenheimer. our Noah [Operator with question the of you. Kaye And line first from coming

is Your line now open.

Noah Kaye

of the by and the for morning And role. on I’d to you. in thank luck Andy start congratulating Good Mike his Good her upcoming taking Mike. succession Hi. and retirement you on And to questions. thanks, both

Mike Schmidtlein

Thank you, Noah.

Andrea Funk

Thank you.

Noah Kaye

outsized I to but higher Energy you and So, how have obviously make improving inflation? Systems just maybe margins, some And quarter, about constraints how cost to predictable this think ability How on of to know, were this do little ability maybe better a you surely pass with But high concerning price is, mean, about question. more Energy a chain business the a do supply dealing the long-term? is, to improving aside. quality this inflation business, this price I bit significant Systems the over now start. cost focusing that on level headwinds get think in segment rapid it

David Shaffer

Yes. shortages Thanks, of we experienced Noah. lot of sort to in ways the tariff and and a with grow This continue chain is started with Dave. pressures the The then the challenges supply challenges. headwind-wise

of they products semiconductor had significant sort of of on-shoring that to our So – mixed we’ve of together products, with some number availability. the in due are difficulty and all the

business of we’re is chain. other the than content different supply on And largely So, this the business based this much then, – in richer. businesses semiconductors its is

So, to foremost is we’re business, And kind can to are pricing. we in and what of which increases trying been do the lagging price increasing. improve of rate been the inflation has first the quality what enacting the control is we’ve which

– any So, that’s of to chasing less landscape, pressures. have we’ve it for these while. reason competitive the our is feel no And competitors in been a terms to there susceptibility

concentrated So, I customer think base. businesses, compared of more staying it’s question the it. at a And what’s this just a in of other business to it’s

the I And now. past so, are. other And than that’s a think some we’re that of customer were been customers that arm little us our But think, I able challenge longer part phase bit through. bases these said, stiff of pushing has to

mix the our these our constrained of got to due really the to content piece, hurt, prices just of get to margin – and products. overstated, mix them And inflationary been The be offset higher our higher mix availability in has of a been this been hurt we’ve lot the products. has business electronics next it’s that So can’t margin where comes need be from pressures. to we the this

the is margin we’re are enclosures, some And terms of lower in of service business so these of that but work, orders the business. batteries, lot a the the the of the can we portions pieces demand unbelievable So, side. filling

XX% that around up semiconductor significantly, as new readily now engineering that redesigning we over build resources think think available products of more have our off availability – I improves of semiconductors. addressing to to and products refocused I been we’re onto So, are our

also that’s business. a margin. the charger So the very going important piece Systems that’s not but Motive Power electronics on – Motive is smaller the been still a only The And business big in to the initiative us. Energy help but of for to

Noah, the that And I when improve, and to and think, with recovery when you’re is I these expenses, then obviously pieces more think question? think the I in improvement that mix. think, operating color price controlled there you two an these see in phase next backlog a well was needed couple going results. any dramatic you So, strong on improvement I

Noah Kaye

the That’s very on with guess, capacity good Thanks. to exiting target. improving improving exit the topic – of I hear the mix, revenue at year year and TPPL, that helpful. staying you’re track to

manufacturing think I as on revenue guess, you for there year, OE As revenue what are uplift think, the the and – is XX what variances. of for to implications that uplift maybe and next dollars? further Because want is in mixed with are something the you benefits also, some that implications that reduction for obviously and the look at there I in about terms

I can of be So, kind if very would helpful. think you components of that quantify any us, for

David Shaffer

Well, certainly significant very the manufacturing variances headwind have been year. this a

to our millions the offset been And and there a of capacity into piece on business dimensions mix rotating at – that which we’ve of help things of headwind advantages $X.X on So, transportation We’ve side. has but side. business, billion, with something that we’re our dimensioning beyond hurt we jump to here without on can and the Energy this the issues it’s that’s help resin we’ve business number sure manufacturing dramatic to is side, by – improvement, in with to is of one Specialty the been that had way in variance mix is, some semiconductors, it’s issue. constrained one substantial of we have Systems that’s I been again the able been don’t it’s I’m that have the this availability tens in as second that, Mike out in the in year. We’ve a of dollars the fingertips fighting the my our got productivity.

you of the improves, have for availability us? So, I Systems resin the do the part part as that’s of Mike, think, and some mix going story business. Energy certainly be the to dimensions help on

Mike Schmidtlein

at no, a year, was the just question, means into of we going sequentially the million TPPL additional say, about that that $XXX revenue. capacity have rate. – But on would year should exit $XXX I million billion TPPL to we will obviously $X.X I Yes. next

solution Now, a have most market variance Energy get Systems selling where we into don’t share, case an a we the taking market would you of swap transportation increase more Motive that we, incremental find any sell margin this because the perhaps really TPPL this flooded doing in capture In in Motive you over the we exclusively TPPL. part, in which TPPL. grab improvement Power maintenance-free go that taking instance, for of in are the It’s just flooded sales except flooded Specialty is to going share. where Motive Power, might or really not we’re market with Power it’s what is like

get talking higher you integration, number So, million the get talking about how if down we a and we be the is sales substantial. volume, year variances can And – could improvement pretty of put If $XX full basis. you probably incremental the plus the kind well on we you’re get amount itself down execute. it depending on additional of TPPL then earnings of operating of that you’re that about the –

Noah Kaye

to a That’s in there years. Energy with very TPPL, the seems earnings over is these increase levers, coming just helpful. It mean improvement operating clear path and the two I Systems

storage just bit development of us things this where front hear to color last on on half the little Some program? any year? revenue you’re of timing some the Can It’s doing that really you’re the additional the back think, of And more within the color of you or year. infrastructure, a at make customer? opportunity. next the specific that you’re kind I EV expecting sure sort would the plus in delivers question system, give the around the XXXX to half respect charging be of good is charging for

David Shaffer

Sure.

me of that Let project. resummarize kind

So, system that’s an together meter. that is energy we storage battery a are a behind energy going to – storage put the system

XXX let’s meter energy the and the side of battery on it’s say, hours customer and between, it’s kilowatt XXX So storage. of

picture half of container-sized battery So, it’s a system. like sea

also energy to kilowatt connected XXX charging pedestals. that And so, storage is system some

use our that to the have we the this of charging for benefits real commercial system. is the target And so provide can enjoy so, rapid And very that estate far electric and charging pedestals vehicles. those – this for mixed partners use system

renewable can a they So system only they highest that not of want battery emergency also terms backup EV solar possible shaving in at battery their their energy integration, very storage use provide charging charge rate. the available the but charging, the clientele can and rapid for power, peak to enjoy to the fastest

more our to So, than cases, most XX% system accessing. the of time, will of vehicle able in be power provide charging the capable is

So, focus This after. we’re isn’t going change. BXC that it’s a nuanced big a

limited moving partners We project have number is of and exceptionally the a well.

initial $XXX the plus as earlier, my focus very about. of have the looks I million the very, a next We And again, order for And we’re like it’s year, $XXX good going review excited the project with is that which trial start status Board million recently, phase. CTO. our to noted

there top tremendous a recently toward that, energy Infrastructure Bill And energy battery you of use separate these energy can grid the a systems. when to versus when – amount electricity. these and progress. also storage as part the modernization grid modernization. charging. in be the toward dollars vehicle you excellent to of And committed big that beauty available monies it’s in going make Infrastructure you dedicated electric systems so that And of energies is on levels noted, is That’s storage So, is have you of House-passed electricity Bill of may – of there significant introduction

just that’s related took in least billion very the on had comes for important one you billion solid. for dedicated the we to expected, to potential. have of $XX X% there that get is into a broadband a that are my of is is we’re to but rural years, than our little Bill figure $XX And initiatives. That I straight while And going topic the to So, the at that of of to be parts important business that think power. experience, that Bill, Bill longer through are lot most pieces of us many, many

I array deeper we’re to customers Frankly, closer they rural a support project providing America their our for extremely I unlevel it’s and networks positioned tremendous well this near and And so, dear broadband fully. vast my a solutions and to that’s push urban. to on It’s help of field heart. project think And between a playing America. more as power rural couldn’t

I Bill there our the Infrastructure And So, on or things improvements. energy is to even lot then, well a good the matched off is beyond investors. grid the the think vehicle finally, electric charging, of and the

Noah Kaye

Great.

So, thanks color. for all the

David Shaffer

you. Thank

Operator

our And coming Wasikowski line is from off Research. next the Greg Webber with question

line is open. Your

Greg Wasikowski

Hey. Good everyone. the Thanks questions. for morning, taking

David Shaffer

Good morning.

Greg Wasikowski

– the strength I is mostly of chain from Energy it wondering the both? you attributed to wondering was the some morning. XG is that was could combination demand this headwinds inflection the or Systems that if supply point, to seeing backlog, been we’ve start is stick, hockey or I good of pent-up maybe Thanks. speak the

David Shaffer

pieces One It’s XG for two mostly – build-out. for there orders mid-spectrum to is, it. systems power is major

electronics and like provide – power cabinet and building right XG are cabinets a with are power out their you envision can And using customers these they installing a our batteries. refrigerator-sized antennas. now, back-up mid-spectrum and the to So, are that’s they – filled maybe to

part Commission Public of is related big then, another a Utilities to that’s the backlog chunk So big And the – program. the backlog. of specifically California the other

and PG&E created in power need the prevent you for others wildfires additional to know, cut As to fires. have the California

lose it’s out for to California folks who live in power frustrating so very – often. So and

outages depending power are the And weather sometimes conditions. winds and the long on these

provide anybody backup. the California much Utilities services providing extended that Public Commission has XXX longer So, a mandated Lifeline

these potentially using extended fire these So, generators and backups. of some was options the hazard one in for know are But putting concerns generators situations. about into the there obviously I past,

a So, instead. use customers lot opting our are of to batteries

a getting So, that’s big should some that well. a little starting projects then, we but are the chunk small up And as heat yet, cell in of the starting, be bit. the much XG backlog signals of stronger not to backlog are

question, XG we systems So, there. use then more And piece now mostly – contract in isn’t backlog. the of these that your we a in for use a – manufacturers. that’s lot It’s It’s the XG the to businesses, mid-spectrum. of right

more of things now capacity the to semiconductors. availability So, the there basis. revenue of on a is for constraining What’s us a lot is do right

a on And historic preventing achieving their based these doing allocations what usage revenue. the of our allocating semiconductor So, and patterns. distributors are from is supplies us are your lot suppliers

part of So, up that’s is just is the building enough can’t reason this get chips. we

engineering that So, is very available. working department around readily as our redesign to are noted, our I chips more systems hard

b, or items some you can at and are the on chips on have wait a whether are chips long you time c a, to Some foundry. get depending they

a that’s the So, part initiative. of big

contract around So, are on is available can then chips, up the we And manufacturing our of have get on-shoring China. part be we once tariffs to we designs of some to manufacturing our to from paid going ramp able historically up. ramp avoid to that contract

haven’t the lot been a historic need And based. been they ourselves part has our simply from to Part for manufacturers contract an pressure earlier. able can’t onshore had pressure because we So, get that’s the of chips allocation of is our that the products. Chinese of our unwind Noah of to I mentioned contract manufacturing

contract So, we flex it’s about a to frustrating, that improve up going and on excited bit to ability is very but our manufacturing it piece. are

Greg Wasikowski

Got it.

this delays Thanks, end issues? beyond Dave. Is think short-term seen evolve on comment the demand in XG airline for that more up and could nature? in Could rollout you in something and impacting the have you the it’s Okay. do you XXXX or safety recent

David Shaffer

has this first is time This the – flagged. I don’t think been this concern

think something is they that a the disruption building frequencies from it’s our to one to feedback to have this expect received is be And are we specifically the the of out. business. they long-term that it’s related I – customers don’t and

different is as is some at have more there obviously there frequency. frequency the – of that people get which operates focus may well. rotate small on And they cell well possible C-band So, much other the and to as that a higher construction it’s

anybody that yet heard our a as about being So, viewed Drew or from but or – no, anything I long-term concern. salespeople from haven’t

Greg Wasikowski

you. thanks both And Andy, the And color. Great. Mike Okay. to congrats of for and

Andrea Funk

Greg. Thanks,

Mike Schmidtlein

Thanks, Greg.

Operator

our with John Sidoti. from of coming next line the And is question Franzreb

Your open. line is

John Franzreb

to a Good motive a whether not Mike curious is to quarter. morning, demand meaningful a there order the been the in this global of in or about pent-up I time good was order start used has that rates. recent year a talk last change you I I would recovery trends? Andy. once power or and everybody like the am there moved from some and with Has business, know congrats meaningfully months?

David Shaffer

– perspective I don’t from look that order coverage sort back is would you don’t a say don’t getting when I you that even told I my the anymore. much are area stick to what a measuring a normal. or seeing for as I perspective, to an want I backlog in that just rate it we I a use – know motive people, seeing are reference anything. don’t at of

back OEMs, massive year are we issues. biggest mostly, to story they constrained go our I their in everybody prior. the my semiconductor OEM on and see customers sympathetic. what line that very other am And a ship. are from And our make having ability chain perspective I motive So, very is supply

still and below – so, haven’t the backlogs backlogs orders their along we which for they are build normal rates their with have go big to batteries as of And levels the so – seen that. yet that

are to They they Their their suppliers. out. engineers the So, working doing are dig thing. with same need

are things. Ours redesigning

in Systems back And So, that there the just it that. be. left of then, a we acute gnashing is an me, There And week on more even OEM your about runway to the see semiconductor customers of in lot is Energy should content. immune not I – these of sure impact. been backlogs the margins some don’t as and in issue emotion been terms our I has miss teeth much because have. products and to accretive But the the motive earlier, point, – mix to it’s where getting Motive making to are we motive noted has in last

has very some about have. efficiency things. a got to that more in. And some prepared So, the the standardization improving chargers in I yet part leading on OEMs And and with on operating remarks keen have in the initiatives footing, our a we focus we mix stronger some modernizing come upside noted is back my expense, of business, getting motive of Shawn, who is

have am I business, amount still of runway which tremendous we left that a about. So, very on excited

John Franzreb

on much just my retail transportation for channels? and to something how the truck of to much you earlier, sold have that product maybe line, product how Okay. clarification, mentioned is OEMs And is directly sold

David Shaffer

a truck So, OEMs, of historically, the was as it with is noted calls, in our have prior the the factories. focus, we lot

John Franzreb

Right.

David Shaffer

the because this a little market. rates back build similar build have where been yet rates forklift have year we to what not But they rotated truck been truck The the to are focused. have

groups. original put have OES, done sales have on teams operating it’s they call, our more – the service the is, what So, we what equipment emphasis the

So, that’s been a tremendous opportunity.

And confident are – the achieve And and then, Day, Mike, tremendous they customers, just the the have the had and achieve you we X% still both service is A XX% opportunity TPPL feel Investor automotive. side. we the bring of are we in as capacity. that’s anything? is track from said space. market on is addition, we so add premium on market the remember to target that you noted, as I for ones for And to So, fully the yet that in share our do been OEM market if in extremely that to we Class factory share want ones the on to additional in there automotive capacity realize but amount haven’t a

Mike Schmidtlein

they to ones demand batteries that just our into I And the to requiring it. the OEM say, manufacturer thing Yes. and keep that the leasing driving market level, the truck vehicle one really to have oftentimes big are is of they put in we the companies. the on are at the mind focus you TPPL on are was some John, OEM because of operators fleet going that

So, of they it’s is replacing to us. deal great OES OEMs sooner. that battery, going more them they in pull-through poorer to generally battery, superior themselves The at a that put have likely oftentimes their the out back don’t to a the level be important really because incentive are

through pull customers So, the themselves. on focus we from the

David Shaffer

good point, That’s Yes. Mike.

John Franzreb

just Thanks. That kind one me And helps. of here. that’s question bug

looks like about $XXX number the half. did a step million but it You That’s spending just at million, you in only the you that it Where sizable is on? going CapEx money maintained What are in your $XX up to? spend. first

Mike Schmidtlein

still line remains the it build-out. TPPL Well, item the biggest is –

milestones. terms And were choppy some equipment little when of in those those and a chunks of are their makers on suppliers delivering

we fully based run like where look that’s is appear on the will confident that still that it projects use the fairly rate not will spend of million, all are see up and we the that But we that would that the them have the we case. progressing that’s $XXX million. would our $XXX So, expectation although we

John Franzreb

build-out? So, where we run do rate of What’s in we stand today? TPPL are kind the at

David Shaffer

Right.

and as are we now, right is that’s billion noted, are exit additional going we this an the to revenue year to – out billion runway. going are $X.X building a in, I number max, $X.X As have working we CapEx we And been a communicated, at so. previously

John Franzreb

Correct.

David Shaffer

at. That’s have we been where

Mike Schmidtlein

those that’s any you other Do right are color? the figures. – Hi Andy, have

Andrea Funk

Yes.

increases – price it’s year, the $XXX a Mike getting been because a more million little a quantity. of that. some little had higher I good But that about have think I of than increase actually it’s with

John Franzreb

true. That’s

David Shaffer

Okay.

John Franzreb

questions. Thank guys, for my taking Okay. you,

David Shaffer

Thanks.

Mike Schmidtlein

John. Thanks,

Operator

And question of is our Lewis with from the line next coming BTIG. Greg

Your line is open.

Greg Lewis

be kind like hurt. next looks transportation or term Really what we longer there way may been Is more trying understand everywhere of that minimize morning, and I terms EnerSys congratulations is quarter is concern, helping Hi. transportation, those remain guess, chain first the years. Mike. supply about couple me Thank to to question was well publicized concern around, margins a Thanks and Andy to can everybody are the hey, by i.e. that? anything a be aren’t last it’s for any looking at very is you good about think my thinking potentially normalized It in a to very – and over of the I hurt. logistics supply, trying doing is risks, am of medium well that returning logistics going your remain dinged – getting agreements? where there clearly going quarter is, to maybe

David Shaffer

had the are in doing. lot prepared noted we a things the We of remarks

So, on the readily chips. redesign trying are semiconductor availability, products more around to we available

mix as help and help to going – top the going that’s line to So, that’s well.

think on-shoring to up issue available big has big, and chips, once of the And free designed on-shoring. we that’s that we products tariffs. more the going accelerate our can a around readily So, the been with some get

about one of And Thailand. has terms one was of talking been a the of freight. he manufacturers about I CEO chips had was and in freight, talking call the that In contract frustrating. with our particularly I

the inventory mean to of pressured it’s piece has P&L. – I freight added So, sheet. lot our balance It’s been the unbelievably a

it’s you, We staggering. have told been

are of for unique in supply lot again, products. Asia-based terms systems a of these an chain not we Now,

– going to increases to until point, your we So or always are we be inflection a an point. but price get chasing the slowdown

for to they are freight right we specifics And can. things transport biggest team thinking they do general, congested have on any Mike, come insights? you agreements, freight of back focused been with I both it’s on us. a now big The I terms innovative have. are don’t in ports our are initiatives have will But good all sea, and what I the the what freight try any the certain some in and is of So, air and doing frustration for congested. of just am lines, you.

Mike Schmidtlein

end those our So, we through. for move the product of at labor in of drivers, all our efficient the we as to as know more looking possible. customer are are and been be can sure And and point Yes. between Greg, close we price they make most has transportation? we up truckers the our our the are the factories, rate source ways focus that under how passing of pressure with diesel going that we it

so we to we smarter, really is susceptible to to freight. focus plan so trying that’s are be the don’t on So, where have

Greg Lewis

any terms shift – acceptance. color in one we you for gaining provide be calendar of great. business talked like I me, mean more maybe kind Okay, can a then, And more maybe next year how acceptance? variants just presentation, should terms the about, there of about lithium shift lithium maybe there you ‘XX in a I in of thinking the mean,

David Shaffer

the margin a perspective years, inside from between think huge and difference in lithium a not I flooded. there is

GP the So, most the is TPPL obviously favorable best, line. our on

rate out system. of builds that the management lithium battery is to BMS, our fully with which transparent at part So, the the lithium challenges program is is be again, which

well, as well as component and availability is We a have issues constraint. electrical issues which semiconductor

some So, the of flooded I us don’t lithium, industry of by lithium it’s of cannibalize is acceptance market indicate tremendous the challenges. – we don’t the we amounts sorts losing same that, governed rate have And competitors which rate the statistics move think of – our going is availability to at to certain be and share. of semiconductors. all the I somewhat And am of

up. So, their backed pressure that challenges chain think bit are motive little right issues. tremendous obviously such slow a other bit. are own for under now just one just Things may And down supply I a customers they of things the our with power is,

foreseeable lithium. – for prospects conversion whether So selling in We some at still And the takes good of point business. place, our to are the the cash in very, which you But flooded longer footprint we of that future, rationalization the we very but really need or all be for have just going the motive TPPL dictate the is in will rate might factories term long are run. maybe busy. we needs

Greg Lewis

you Okay. hear. Great for to time. the Thank all very much

David Shaffer

Thank you.

Operator

Drab with Blair. the from line And our William is [Operator coming Instructions] next question of Brian

line Your open. is

Blake Keating

Hi, good for Blake morning. Brian. is on Keating This

David Shaffer

Blake. Hello,

Mike Schmidtlein

Blake. Hi,

Blake Keating

losing report battery the providers you curious, noticed battery to was business forklifts are other and your is in markets? that potentially several outlook with just lithium of share the the other I over kind for quarters? you next what Have

David Shaffer

would noted, shape. right we is say, our now is I as pretty business good No. in

mix I electronics with because hurt been for more batteries. so the than has chargers, lithium of availability the the the think

prospects. We backlog very have solid

and big our log for sales Our quote lithium is very CRM. force

in a there there. industry The don’t statistics recently are I indicate is out now, But just it’s of fairly basis am shifts. receive a opportunities of changes changes. a constrained big situation. on supply Blake, or aware not plenty regular shared of bit I major Right any So, we any

footing. – of it’s normal just motive back a is us, sort to getting for So,

we what the what product, X love I I over OpEx last really positioning is and the doing the think I years on then on like side. Shawn have done

– the again, certainly or stick I And I of outlook So, your don’t you aware share I But improve. not changed head months think in products to last eight in the think never have six – am semiconductors that to long. competitive any losses to sand. lithium as want I or however months going is the improve significant

Blake Keating

to you environment? you Thank then, supply didn’t And anything Have limitations Alright. kind just in compared you to noticed up noticed have normally pop normal that the visibility environment? systemic details. your you you like chain a a any – normal of don’t see for that

David Shaffer

of is forecasts word we forth, its related, can And congestion reality. think it about things setting that talking pressures, fiscal year-to-date variance a biggest has freight I and been up. come are new are going surprises so the lot manufacturing Mike part unfortunately is. of related. was port A you things significant these hate. its of think this you When how quarter A I pressure to this ship and is of aren’t. one And lot a the

don’t because One do parts of show up. significant forced of is the number the changeovers just of because reasons were to

for a now lids of and don’t something parts are parts. the and and one are boxes certain thing creates terminal where also doesn’t order So, you changeover, bunch have a up. going to lids because show sitting can’t use all the build you mismatches boxes you you and then you inventory that doesn’t on line, set And up are it getting something ready you show. you then to run It you and because

anything the have it’s worst. So, seen I been In never XX-year career, it. my like

as forward suppliers. surprise almost it’s that their surprised we surprise. level – a of continue are more from to not can. as adjust just in But But suppliers, and they most every to after look case, after it’s ops predictable said, hard they and our surprise after people, Our working service it’s our

and to which or So lot issues a cause things, of down same come the resins. semiconductors root the is

year. it that’s TPPL, that’s And of manufacturing led this of factors. inordinate amount are So, the all not all an variances we with just But frustrated to it.

Blake Keating

Alright.

David Shaffer

anything did else? Thanks. Andy, Alright, miss anything there? any Okay. – I

Blake Keating

Thank good. you. it. No. I am Appreciate

Mike Schmidtlein

Alright. Thanks, Blake.

David Shaffer

Thanks, Blake.

Operator

showing am I the further at Shaffer call I this questions David over Mr. now to for any back like no time. remarks. closing would to turn

David Shaffer

to look forward our third a I to on for want in And progress good Well, to call our time today. updates our Have the day, providing thank attend taking on call XXXX February. further everyone. we everybody quarter

Operator

that gentlemen, our Thank for you your conference does and conclude participation. Ladies today. for

disconnect. You may now

EnerSys (ENS) 11 Nov 212022 Q2 Earnings call transcript