Earnings call transcript Q4 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 Fiscal Year 2023 EnerSys Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded.

I would now like to turn the conference over to Lisa Hartman, Vice President of Investor Relations.

begin. may You

Lisa Hartman

good today and year Thank for you year Thank discuss morning, EnerSys’ us to results. full fourth joining XXXX you everyone. quarter fiscal and

EnerSys’ this On with Vice President Officer. Andrea morning President Financial Executive and Chief are Funk, the EnerSys’ Chief me David call and Officer; Executive Shaffer,

XX-K fourth our which SEC, are available on published Last fiscal XXXX the evening, our we results with year website. and quarter and filed our currently

slides The available We Relations referencing slides during Presentations also within on that be page call. posted the will section we this of are the Investor our website.

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

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

Our forward-looking statements are made as of today.

and results, our statements XX-K could For our recent of factors please with to a future the SEC. filed forward-looking affect refer which list

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

the X-K, XXXX. of metrics, company’s our For an press see please differences Form financial non-GAAP GAAP includes dated the May and release our XX, which explanation between

the EnerSys’ CEO, Shaffer. President Now, over Dave I’ll and call turn to

David Shaffer

turn Thanks, X. Lisa. to Please slide

across strategic delivered on have markets. We momentum were steady quarter our year and And full ‘XX. build outstanding pleased to we to our I’m performance, record our an as revenue remains earnings demand fourth achieving fiscal continue team’s of proud objectives. and operating

we EnerSys products a will driving good global the the of more I the to Inflation our impact and Reduction remarks. provide. background EnerSys for detail, these I implications the the discuss our the Before IRA IRC critical is the on my in leader the reinforces of prepared and of and for credits to credits Andy want EnerSys walk following rest XXX financial provide through in nature services regarding report transition there is news energy eligibility results, from some Act.

investments we that technologies. domestic we of plan IRA capacity by clear from the be intended to want accelerate battery as lithium-ion receive energy make funds and to I dense However, that use our to other law and sourcing the

to trillion fourth price solid quarter demand from for credits. realization. quarter even additional in organic Systems our but driven fourth growth XXX XG revenue year-over-year mix offsetting technologies the benefit uniquely was significant the small supply. color the we’re strong spending. inflation, continued efficiency, improvement Law trends are gross are from by These Infrastructure driving the demand $X positioned to We defense energy margin positioned provide Longer Now, results. and leveling term, margins, more on Record growing we cell and electrification, benefit well to of and before the that representing Energy maintained out pressure IRA, battery build for

slowdown, of We’re on a alert staying EMEA. signs Power, Motive particularly in especially in for

However, line levels. Motive Power orders with pre-COVID overall remain in

are Supply buffers consecutive costs to headwinds We finally in of beginning higher quarters were against chain inventory from and to after seven reduce able strategic disruptions. builds QX supply inventory ease.

$XXX million strengthen further of improved operating net our strong a transitioning our quarter on capital to flow This us cash. to with leverage balance a of free and flow had earnings sheet. We and allowed cash reduce cash primary source

efforts, improve to benefits. IRA and inflation with reductions and projected targeted the cash of well cash expect to We ongoing turn X. slide our flow to as from POC leveling Please continue reduction the higher additional as earnings inventory

down QX currently X levels, prior but versus slightly from just sits compared ‘XX Backlog XX% healthy X% $X.X below were up the order pre-COVID and above to remains with eased healthy year. times quarter roughly rates. prior to the and billion Orders

opening from supply back we Energy it up, and intake this COVID-related customer lockdowns for Systems in received Motive customer We a comps. and chains was orders disruptions demand. possible satisfy XXXX, loosening view positive, Power’s in order with impacted had to as skews reminder, supply which program making order elevated patterns a and As year-on-year large chain us

across improvements to see normalize business will turn We and lines stable direct our quarters. the backlog operational to X. to believe demand continue of levels few next slide continue to Please over

our and as as our testing at for priority. always most Intertek We forefront safety is deliver charging, on to believe our of industry the safety we’re bodies is power many innovation certification UL. the industry This and systems such and to roadmap. the a strides technology our make wireless advanced among are advanced why of such pursue and continue our technologies, systems, lithium significant first to from On top journey

For testing planned product, for safety early field with underway example, trials our XXXX. touch-safe customer is calendar rigorous for

first We mark authorization certifying our health, customer environmental shipped XX-volt, customer of received units also requirements, Lithium-ion which CE, our AMEA met NexSys and ensuring we safety, that to safety. EU

Electrical We energy Power Center Review & in commitment is This Year Data Award and power testament the sustainability were week. the storage last Awards Review excellence, proud a to the our receive center to data Excellence to at management. recognition and Project XXXX innovation, of

with Our on complete. charging initiatives, manufacturing and good chain for fast our and storage production roadmap supply now initiatives progress a design are advancing

global is top components and secured Sourcing And partners. our as mind chain qualify qualification times, related manufacturer. EV being all in our which production our to lead tax of requirements for long credit supply contract inventory at and are already held we with we’ve domestic customers

progress system, AIR and storage about wireless Day featuring June and during to showcase charger forward our our our fast-charging look Investor other NexSys technologies, product at among XXth. excited We’re on

fourth slide results discuss highlights. segment IRA benefit earnings, Please of performance operating comparability of the excluding line our through the walk operating adjusted our the we cost of note, business. X. this better in goods each quarter. view into sold recorded Please in a briefly will I now credit segment believe reviewing to and provides turn I’ll We business without

data up and over operating and telecom endured versus XX% year two growth primarily actions pricing cost with were years. our had sales unprecedented the ‘XX, XX%, earnings catching in Energy strong and full-year Systems increases we’ve $X.X driven up the billion, of fiscal up center broadband, past adjusted by

our chip we better, unpredictability of pre-COVID continued Backlog supply will getting a higher while normalizing addition, toward production rate bookings, levels. is quarter anticipate one to modestly impact approximately In settle than that to run plants.

for portion installations, Our account $XX of in which a million our the backlog to CPUC deployments large track begin lithium-ion of on second CPUC quarter. are

are plans While healthy, trends current demand spending monitoring customer CapEx key we’re our closely.

megatrends long-term for for the a Systems, key about excited opportunity remain our power driven which solutions the critical by We global enabler. are Energy

Power the adjusted Our stable a Demand had that with more Despite backlog recession, up business and X% revenue X% earnings up remains pre-COVID healthy. of than are business approximate operating Motive normalized this pressures of year-on-year. year strong and trends EAMEA and times pre-COVID. potential with levels X in

fiscal on-time year for order ‘XX, in and driven stable the order up variant deliveries high, ‘XX, new in has book. our hit XX% climb a were resulted end softening in times of record proprietary XX-volt Lithium trials was enthusiasm from the customer over XX% by Maintenance-free CE new TPPL customer rating fiscal the despite technology. to at lead our rates and continue EMEA. EMEA mix year of European revenue

year, first over our of quarter. vacating and which an Specialty temporary full pressures though were in at the our up down cost from headwinds factories by prior impressive impacted year XX% are operating over the adjusted was previous Missouri end the XX% Sylmar earnings productivity sales year, facility,

We transitioning Sylmar sites. existing to continue our and our are footprint activities to other rationalize

Missouri are TPPL improving. output and costs

an it remains unmet opportunity, incredibly for with significant we our of Although customers. area this and as see focus technology demand transportation

top U.S. achieving transportation of saw deliveries strong revenue be in only by paced transportation orders greater continues to with We QX capacity. such, the As X ratio a on quarter. book-to-bill than in record

production strength Class X Aerospace is XX% stable, projections year-on-year, positive. and truck remain defense and up demand continues. growth

at has in commercial our at resulted in to defense which and Day. capability unique pipeline, will projects several be scale Investor talking production Our combine Mark about exciting

toward achieved the sustainability continue to year which accurate turn our announced our goals XXXX and solid week, ensure ESG our Last last long-term slide to we includes X. progress and published Please are update, we towards We metrics milestones goals. that auditable. impressive

develop Resources and as I’m announced our to On I a will team, front, Shannon employees. strategic instrumental Thomas and inclusion culture Chief the leadership supports from goal leadership equity, values our of attract, our ongoing talent our as retain to delighted we diversity, have top and join being while valued Human that where continue believe for fostering world, around her the Officer. the employer choice we and vision executive be of leadership new Shannon

will We objectives. to to these Please important slide continue update turn X. you on

progress full business XXXX the year and results our In continued electric and demonstrate achieving financial provide outlook. to have near fast pleased results growth past We are position believe three as material closing, operational years such QX megatrends our opportunities the goals. over handling and better taken all steps electrification long-term automation, stabilization towards I’m long-term we excellent our growth, and of benefit data and us from center global in grid materializing charging, XG, both our financial and that which vehicle that

these that criticality markets as services the In [Opportunity] Rural and funding are because such of and mandates expansion trends, us broadband driving opportunities Fund the to to Operating Digital goods to U.S. we’re about government and (sic) benefit excited from addition we IRA. of our to the the provide,

and from XXXX, of interest and our from supply as well team potential proud achieved geopolitical uncertainties am everything recession, lingering FX. inflation, tensions headwinds year ongoing I rates, fiscal in despite as chains,

hard and head-on. consistently at to in I on next work, June challenges confronting weeks look few opportunities our Investor City. their York the capitalizing to dedication in Day on I XXth for thank New and forward seeing you want employees our

our now go-forward I’ll on fiscal fourth ‘XX provide further and and Andy information quarter ask to results guidance.

Andrea Funk

turn Please to slide Dave. Thanks, XX.

by from million and net year X% increased mix Our over erosion partially mix X% to foreign Full X% prior headwind. increase prior X% due $XXX XX% X% and price partially the offset the in to a an billion year in increased volume, price from net FX to X% sales increase exchange. due fourth X% quarter a growth sales improvement $X.X to a offset by year over and volume,

this cost marks the EnerSys $XXX full fourth million mix versus inclusive another of of quarter Operating in million record to prior $XX earnings sequentially, and Even achieve line. IRA $XX savings QX. be beginning offsetting million our Adjusted $XXX price year, fiscal up bottom year, operating impact, million excluding benefit visible System three recapture the quarter, the the and enabling adjusted on up our in improvements the quarters $XX million Company booked to consecutive operating our inflation earnings IRA and improvement, were for with sequential

X.X% EBITDA $XXX Adjusted sales the quarter. and for compared sales, and in fourth million quarter $XX net million year of the net prior to fourth was XX.X% of

XX.X% of net XX.X% full and the $XXX $XXX EBITDA the year. XXXX, million was of fiscal sales million For net and adjusted compared in to sales, prior

$X.XX of from $X.XX record previous annual due fiscal adjusted increase up achieved approximately approximately an $X.XX per Our benefit ‘XX. adjusted $X.XX of over as represents share. EPS year FX fourth matching operating previously was adjusted as improvements share the quarter that share, share IRA, the $X.XX the of ‘XX, ‘XX, $X.XX the earnings year of year was which third and mentioned, our adjusted per impact IRA before the the EPS full in quarter, EPS XX% Full interest contributed of despite rate Note favorable fiscal in in fiscal per well per the EPS level to pressure.

batteries slide States Please the with manufacturing receive the introduced and XXX production XXXX. Section to for XX, produced on the produced be on energy of Reduction based I over Credits XXXX expect additional tax determined qualifying credits through cells products the XX-year December the United turn through sales specified provide IRA details we from X, Inflation battery advanced U.S. now January XX. the in will to a of third-party Act. will density. in period benefits

qualifications, proprietary the our the much batteries, produced tax current will Based on Pure Thin portion including credit of tax on credits. we our batteries flooded acid battery the Lead and Plate lead information qualify portion and material a cells, available U.S. batteries expect our of these of for

cells battery we specifics of from law, of awaiting some goods a million, qualify U.S. credits based the batteries have which on reduction of While clarification sold. this our further we IRS as for the on in still produced we sales calculated we to cost that reported $XX quarter, and are of

capacity consistent of the mentioned, products. plan we qualifying Thin use the intent Dave our of Pure in Plate law, to credits accelerate including the batteries, U.S. to lithium and As received Lead investment with

IRS and to guidance, We of XX. to the will continue provide Treasury to IRA further benefits provide potential you appropriate. the evaluate as updates the Please and implementation specific turn as we’ll slide

price growth quarter impact lines On Systems a for compared by by which adjusted strong improvements foreign the of price prior segment mix mix in quarter costs higher business headwinds. Energy and revenue exchange substantial more partially offset posted driven the were The than earnings year, favorable improvements on Specialty, and basis, in offset volumes to all operating the of higher year-on-year. the

like better comparability will segment on I note, operating Please earnings, for purposes the insight the adjusted also figures into IRA the performance. benefit exclude present Dave, operating of and

Dave mix XX% second Energy Systems cost improvement for earnings As improvement price consecutive as quarter adjusted OE adjusted delivered of has with hold to improvement prior and year result the a mentioned, XX% significant almost recapture taking versus sequentially. over operating

this Asian has other be chains the anticipated, recapture price manifest slower nature supply to due segments when business. recapture reversed versus that pleased Energy are mix in had Systems as we We the to and we inherent in historically would lag Energy Systems contractual based our in cost advised

note, earnings Americas X% price by quarter mix improvements the driven very TPPL cost XX% positive strong recapture. Motive operating positive well improved as prior year in the adjusted sequentially, fourth over another On ongoing Power and as

costs are we Sylmar in fourth elevated adjusted Missouri our XX% third this the finally, and as performance result million transferring higher closing quarter. the in And revenue, which quarter year issues plant of factories plant, our a were down Specialty in and other production $X prior out in earnings incurred million $X in higher costs our on versus op was quarter. approximately to These segment

consolidation the million. factory annual provide cost Sylmar of of expect savings approximately $X the We to

Please improvement slide lines dynamics, in in be quarterly and momentum in XX. of sequential healthy going forward. results press market coupled resulted release Accomplishments supplemental with and in OE adjusted solid geographic slides. found across increasing all turn our More detailed and results our of can to our business, the

Sequential price basis, sequential we share offset realized an which of million $X.XX of a $XX in quarter quarter. on mix of million incurred to price or exceptional improvement mix, more in per $X.XX over of $XX in mix had improvements improvements over price sequential million than QX the $XX share QX, adding costs On the per incremental or ‘XX. volume-adjusted fiscal the fourth QX, ‘XX, during realized we

recapture, of While incurring on two cost $X.XX endured over price positive increases price significant share, the mix we cost is QX’s a recapture, we’ve quarter the third net gap the per still mix past years. are favorable our cost closing increases, cost consecutive unprecedented

well commodity but quarter and continued in increases in particularly Cost Missouri in productivity challenges fourth by the as were driven energy rates, leveling inflation, our as Europe, including plants.

to see are related P&L While realizing that in a we in beginning our the costs to is cost stabilize, it there until product important sold. remember is delay is inventory

Fortunately, if inflection margin accounting provide improvement. to deflation now is And consecutive margin we gross turns an when price-cost adjustments, that near very quarters three should inflation lagging with we’ve treatment, normalize. tailwinds more are costs inflation coupled and point, seen solid nice as of this optimistic and

and IRA XXX impact. Our IRA benefits inclusive bps year the gross before ‘XX adjusted bps prior expanded margin over in XXX of QX the

benefit, IRA margins sequentially. the we maintained Excluding

increases surpass as well turn our XX. savings reductions as rationalization realization as accomplishments, conversions, and drop such line. lean our benefit loosening, mix pass-through products, to of continue ongoing supply chains higher-margin improvements to the especially should bottom price from forward, and initiatives, to slide Please mix for from footprint gains all due electronics margin cost our Going should EOS maintenance-free of to price-cost other which cost

adjusted share the came the our Looking in $X.XX share ‘XX bridge. at IRA. per share, midpoint quarterly of our EPS additional than $X.XX at diluted at benefit QX sequential per EPS the from $X.XX guidance per higher adjusted before

net EPS share over an Year-over-year, endured impact QX quarter, costs the of $X share price higher of volumes Our nearly share which in $X.XX more the improvements. higher previously cost pressure from mix by mix adjusted impressive quarterly by $X.XX results sequential ‘XX per than per price of were discussed. and were driven per recovered

turn to slide XX. Please

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

over our had $XXX XX, leverage range. low-end agreement EBITDA, March hand, of XXXX, times on of was below at cash X.X ratio her of As target we credit million and the

$XXX inventory cash has reduction hedge cash effective been risk million, balance of a operating during a against our full year, important sheet. quarter. significant on primary very to in is note historically the capital aided by generator we generated flow recessionary periods, providing natural that of It downturn this a For the a

Capital remain year fiscal to for continued expenditures on headwinds of capacity our below million $XX projects. $XXX TPPL capital our year of We million to of in per expansion due XXXX guidance the fiscal were our and annum impact original chain increases incremental full million through ‘XX. for $XXX on fiscal ‘XX track supply

strategy investing competitive growth, strategic remains M&A allocation dividends priorities, to excess key organic shareholders on by cash capital buybacks. and focused Our and share opportunistic complemented then three returning in through

to mitigate dry We an have times lower higher target ratio in adjusted EBITDA investment the range, for provide the interest leverage of powder or X to end of our to and opportunities. rates X effort impact

should first motive a a under we million. UK IBCS power acquisition completed small $XX of bolt-on that distributor quarter, in I note the for

Our fiscal return approximately million repurchased invest thoughtfully growth shares ‘XX shareholders a during paid flexibility million M&A fiscal in little capital $XX allocation to and in of to in demonstrates We organic XXXX. to $XX period dividends no cash activity. and of our

needs. the the goal sheet ample We And shareholders. will on with balance to to our fiscal we returns meet flexible entering room term long capital to to of allocate XXXX our best continue are remain delivering business with our

XX. slide to turn Please

persist to environment demand headwinds to and fiscal a geopolitical we macro trends enter FX, tensions, and a continue in challenges some supply we expect time. with stable dynamic the chain for a inflation including healthy While backlog, operate year anticipate new and XXXX to

IRA XXXX share, inclusive $X.XX of to adjusted diluted $X.XX from per quarter $X.XX, range fiscal $X.XX is per to share earnings benefits. Our first guidance

approximately improvements drag increase credits, mix and of the reflecting over the anticipate will impressive XX.X%, is continuing to million when margin prior over IRA you have XXX recaptured represents approximately basis. past IRA, that savings cost of pass-through especially zero XX% on XXX EOS realizing an drive that consider expansion. absorbed of the our this XX.X% two annualized to margin $XXX from we This gross years our expectations an price margins bps year. the We including Excluding

TPPL full from approximately capacity continued products, turn additional Our CapEx in is Please slide expectation and fiscal for the deploy our expansion over increase XXXX investments credits. new year production and as $XXX time investment reflecting IRA will of to we million, including lithium the lines, XX.

that growth here plans, the forward reminder to Investor virtually. and person three outlook join A our we we during in our strategic in look on New Exchange, York presenting and drivers, June XXth, Day will long-term hope you Stock weeks or us at

our may now Operator, call questions. concludes for prepared you This remarks. the open

Operator

[Operator of comes Olivia first you. the with Instructions] Young from Thank [ph] line Our Oppenheimer. question

Noah Kaye

Good morning. you hear me? Yes. is Noah. This Can

David Shaffer

Hi, is Noah. Dave. This

Noah Kaye

sure, this make right. All is just Thank from Noah Kaye you. Yes, to Oppenheimer.

of of end the So, just the credit, drive in a production it factors higher for batteries batteries? the those factors the or $X.XX would the what that Are tax-related just to start, of selling range guess, help really the quick to the Just variables? to Is question tax quarter. benefit understand lower or next range? on other I us of $X.XX calculation. there

David Shaffer

going and of be In and quarter. mostly the the to It’s of build like production more shipped just the was But forward in had to -- mix, QX, from if issues ship or quarter we you in know, unforeseen, QX, there’s rest qualify, the some in look. that inventory. obviously, to our to so, is any for go-forward, the going year be you

is -- beginning. to market since to density. mix. have key for full fairly QX. So energy be the new terms I this always have density with And towards going volumetric move The that’s the in energy engineers to energy our with it. consistent the has one get Noah, a move why predictable think have work, and and certainly, of reality we should benefit But clearly we go-forward strived in things didn’t Thankfully, product of we been

Our customers the smallest energy available in want most available the space.

volumetric driven high density. always we’ve energy So, for

my the resources make dedicated market. team to keep market -- number. move but and a to going allocated predictable I pace fairly that we And is largely continue it’s we’ve to so way. the think that sure -- with And But

Noah Kaye

Is it we right? just your That’s much you’re if very here helpful. can already really is that produce, just add, function it capacity. capacity-limited what If up Theoretically, here. from kind guess, I number you you forward, TPPL capacity as of of fair? that a would drive really can that how expansion, And is and of and lithium-ion and sort grow carry manufacturing from

David Shaffer

point, is far mostly now. story is density TPPL certainly going those your to This lithium exceed to right a volumetric But energy Absolutely. criterion.

it you up I summed So, really think well.

benefit. out execute can higher hour see to of factories, output we levels kilowatt of production we TPPL of As should our more this

will level be factories of our again, make we of terms there in deciding where. optimization what And some balancing required

think it some there’s well. up summed So, around edges. you the certainly some I -- opportunities But,

Noah Kaye

it’s you to versus quarters. Thanks. think out that Can you couple normalization said of about view I how have order I double out? click just see on still directional historical. conversion the it playing pretty backlog and commentary improving of you of how us would a be actual versus playing timing orders? on maybe elevated rates you any see the Talk Obviously, around had

David Shaffer

getting to point, they’re feel back normal, more still even Yes. they would are orders elevated. say, I consider what to largely your I though

going they’re to of as well. their through I on think get a depend work how is be clear necessary challenges down that able their their our going their supply to in backlogs to lot chain ability much to staffing customers to and

our customers. of have So, but the gets which every own we’re our that control certainly challenges not do at rate We to -- have we day, entirely wrestle so that absorbed. with backlog in

lot the getting down order of are their in a check. ability out. come things terms in release rates And go-forward, to of to But backlog clear will so that back the

that’s on a Eastern over ion. we’re bloc know EF it’s projection the unique to certainly would the we have So, track. related one largely pre-COVID keep lumpy. have an project that I I’ve disrupted. Europe, we so say everything extrapolated craziness, all very this what beginning They’ve part our because certainly order since tried challenges Noah, in world got of some largely of from team the would be And the on standpoint, always, activity focused of space, always ion, always wins. in things big of a has -- of big space a I would But demand countries, the to has one and energy big in There’s our lot I the telco in the CapEx evaporated. that the our slowdown. customers of And U.S. announced say

got So that eyes our certainly, we’ve on impact.

far, so I or that has think Drew or to know or isolated see, you I one seems that anything think different. if Andy, I don’t be to don’t anybody said customer. John Paul

Andrea Funk

Yes.

of Noah, right now, actually, it’s to see We some don’t what And backlog. strong orders very customer in going is happened a we’d as it’s to it backlog order drop-off be return to to What I’m pre-COVID happy be to I be But in line we’re landing we expect one the the to kind them with soft like more real we’d levels. our normalized with and think, of levels. pre-COVID expect quarter. big levels customer. normalized seeing think to where still patterns

David Shaffer

to that through. little going to burn a It’s while take

Noah Kaye

there? or kind related that kind issues us is, give just the production more volume to within Can dynamics markets? related guess, slightly of to just I the going motive, Okay. Was some negative. volume color on of end you last that the question is

David Shaffer

mostly Europe Europe, mostly it’s story. say would I

pressure most So, any of is. the of where that’s if the

Andrea Funk

Americas. Power softening -- had EMEA. bit America pickup the maintenance-free incredible in Motive in strong. We it’s mix a of remained has an But Yes. little

We’re you because with, the not same keeping yet we’re close we’re but that the we concerned guys things read really on in seeing a it newspapers anything eye do.

David Shaffer

great fantastic and really, job. really a I what group. effort. of forward proud team’s in that they’re that is group look, really their doing roadmap doing I’m -- love product a No, That’s the

Noah Kaye

Okay. come margins. We’ll And IRA you the on great see through. to Day. see nice at Investor Well, job look, the benefits

Andrea Funk

Thanks Noah.

Operator

Our Advisory. next Weber Wasikowski the of and line from comes with Research Greg question

is Your open. line

Greg Wasikowski

our questions. for Hey. taking Thanks

and tax material the First one portion is credits being qualified. on

second product within regarding you what So, words, remind plan that, And just kind benchmark, other I that the product year. of the guidance guys half of how -- of And with know ultimately are that portion two-parter it. I’m qualify maybe, X the right when putting what guess within thinking, currently to other U.S. in you I us qualify, can Can of want for And just of we produced a the on in establish that yes, percent your we side now? is to then, ultimately a -- what portion U.S.? to this treasury credits? in does you will you is get compare plan expect to that

David Shaffer

Yes. is This just XXX. batteries for

the I So, of Noah, I I drag I It’s to as it I as that code. have that that. it then, probably that is along terms way QX shouldn’t capacity, as say, and reasonably in And said of projection production don’t be our we to stable to increase as is, additional TPPL benefit think able revenue, a model is U.S. should percentage it that extrapolate north of from of well. IRA ZIP would batteries to a little XX%. exactly. apologize. But think in are

Greg Wasikowski

sense. Okay. on lines, then, That just facility the along And makes those closures.

still facilities there thinking the to Just curious related credits point, tax now savings, purely is you’ve qualify and to future? about the in that draw for this any between at you products that to closed be should closing cost or the this here sort or correlation is of expect

David Shaffer

got One evicted. we case,

redevelop that to So the it. wanted industrial developer, park

out that We in scramble to was California. had didn’t we -- So, frankly.

we team a for first new a success we were product on made some to. has had The supportive. some luckily, medical facility. our had been able great I really So just batteries in we call. And

great with with happy other instance, into thankfully, pick there...? cases. the been has really team some we moved. there And Andy that able and folks out up team And the locations. the of I’m one And that. move then, So, we’re then, that the But is happy members equipment in that were and physically that’s to really of

Andrea Funk

I’d Yes. things. two add

little is a year. are on of even save of to which comment million though shy going $X Sylmar it’s million we’ll closure, the we just but cash, us cost $X evicted, a non First, $X million, to

So plan, we the positive. I we closures, always is our with aligned footprint, are, these Ooltewah Thin Lead objectives optimize more it’s just products, Greg, savings flooded plant how closing something as like closing really and our energy a with Inflation net strategic show to to think look But at interesting while us Hagen, Reduction really to lithium. what our when cost dense we term closing our strategic of Act some Plate of migrate Pure long it’s

consistent we really initiatives in place already. the had with strategic it’s So,

David Shaffer

as Yes. element we is of that And well for where the maintenance-free intended. critical

density maintenance-free are exactly volumetric all exactly what we’ve on So, along. been focused Andy’s right. energy and

So, the plan. that go-forward is

Greg Wasikowski

it. Got

That I Okay. just very are on more helpful for if which charts, the always One price could XX, sense. mix makes us. slide

Just if mix and a at that catch-up contributing level, which down segment for remind segments break a us, price high are which could you lagging are the at most that moment? wondering to

David Shaffer

and QX price have I’m go would to all some an And let say that just these costs. mix It’s it’s her going be And good tried been I -- in lags. Andy to catch-up. been our here. there the reasonable. groups start recouping we’ve computer prior reasonable say a to to and magic period customers had certainly unprecedented were have as been well But I

Our have EOS those had do Andy, good longer nature I got in started. But of all think performance -- to the that it in of due numbers pretty much three you front groups the took get you? quarter. to business

Andrea Funk

talked Number there’s think of before a commenting. worth things there was that I are one couple in is a I Systems, had really Energy we lag. about Yes. mean,

little that, products due gate. talked we their they was really slower to a of So, a had of of previously, getting sourced the they from And lot that about the China. fact a lot were as out

lead a quote longer was there the ship. So, time between to

And a time… so just really it took long

David Shaffer

as More contracts well.

Andrea Funk

Yes.

So, it took to through. and a coming pleased very little to it begin to see manifest, while we’re

So get cost to that continue price -- we recapture. positive

quarter last outstanding this thing toward and other Motive that quarter, just Power, migration our as this maintenance-free. we The quarter mix improvement an is mentioned, had happened with

So, that’s well. as very positive

we’ve continue at caught will being of mix and the up. being as and -- the mix, recapture more improvement of a pricing price a And you go mentioned, cost I narrative certainly now three think pivot -- quarters move reduction. I from after look when our the trend positive we we’ll last to probably inflation, it’s towards price-cost think price-cost,

David Shaffer

three right? the the it meaningfully three consistent, to the Yes. was All fairly terms contributed results. of between But in groups balance LoBs,

Andrea Funk

bit Yes. the plant. had Missouri right, of yes, otherwise, Especially, a we all little struggle Dave. from But

Greg Wasikowski

Andy. Dave right. All see you I’ll in and Thanks, June.

David Shaffer

you. Thank

Operator

Thank BTIG. line next with Instructions] a Elmaghrabi comes from of you. [Operator question Sherif Our

is line Your open.

Sherif Elmaghrabi

production and through focus QX? a those to TPPL constraints? Are How on of see want past margins you trending they working Missouri I Specialty. capacity just function do

David Shaffer

Yes, and just Sylmar we facility talked move the about.

smaller. a was the it’s tough of combination because we and in it -- So, costs specialty P&L those had hurt disproportionately pretty QX a Missouri,

So, costs then sales, Sylmar facility. as and revenue, return of problematic the the those percentage on a more are for

the is So growth, yes, in of price nicely. business that along I terms the roadmap, revenue that mix, would moving product the say

there’s a defense think I us. lot of for building momentum

temporary are think move issues these really we plant exactly So, we said, it’s that as improve and as should forward. you it’s

Andrea Funk

be Yes. output us double-digit But, and might quarter as back an Specialty on in standpoint our pickup as That the course It’ll in gradual or we’ve plants, Missouri us. get take as continuous definitely as see could two, next improvement a the standpoint. both then mentioned, over a fiscal we year. of a Sylmar returning I cost behind to well

David Shaffer

right. have Yes. You it

Sherif Elmaghrabi

my perfectly into The for increased sequentially backlog follow-up. leads Specialty. That

I’m broadly? So, limited the demand But, your about from is I’m Obviously, are capacity. side. customers just wondering, you said what Class growth just you hearing X curious more by

David Shaffer

A today lot X our OEM. is with Class business of the

of related dominates us. the of is. And focus And the we there the discussion the into sort OEMs have selling our that’s is new lot with is narrative trucks. the OEM amount of that a with where portion backlog we’re most to business. the And for still tremendous of So, of the

sort one pent-up releasing of that’s trouble fleet. new trucks industries had And So, new a the demand just of for efficiency, trucks. better want fuel modernizing of really folks that the lot for

still a of that through. opportunity as see we lot -- way backlog its So that works

But would the is, And any signals activity, of are way. the OEMs we of the one still But expand we these say focus miles capacity there’s in four our that factory-fit fleets. production elements business. our to times three, service improves, any economic we remind beyond to OEM terms just been big you that have as on given of haven’t the the driven do opportunities in business for I want service much in the maybe of overall strong negative these or that as

sector. So, the in in just anything that general, The still is strong there’s Andy, transportation very still optimistic. is I very that But in -- there backlog so much upside missed? in this very, business. team’s

Andrea Funk

really this hopefully other as what’s holding that [OES] the Dave The exciting, make, Mark on. reins Yes. that I’d and is we’ve Investor get only mentioned, comment really message side from the Day, you’ll been

go We already have gate. we have higher It’s transportation to out Mark the soon that the Day. getting available And of to lot a Investor color capacity as more on a provide start will margin. DC as new at

and backlog in pretty a is piece the in isn’t mind much at keep to our The other order, in really business. you indicator is so look good that defense when aggregate aerospace backlog Specialty that to made

Operator

[Operator Instructions] Blake question line Our next of the William Blair. with Keating from comes

Blake Keating

Good guys. Blake This on for Hi, Brian. is morning.

Andrea Funk

Good morning, Blake.

Blake Keating

to the I about just wanted ask maintenance-free.

guys a see And margin XX%, into bit we kind how talk what this have full seen should forward? up almost think tailwind -- and for was the from year. then, year, in little It a maintenance-free? touched the you You more little should dive moving about you’ve bit. of demand Can it on we drivers year-over-year growth growth

David Shaffer

is availability I it’s maintenance human of of driver to mainly demand lack think, capital related do task. just to the for this the

So, maintain to available there’s these just batteries. anymore not people --

key driver. the So, that’s

a -- but -- a or automation, form advancement. it’s it’s it’s sense, in of technology So,

continue it key just been that’s along, will So, all and to the be. driver

element being the products So operate tend maintenance-free of is the other high-performance beyond end. our we at to

an emergency on But tends not frequent. was the days, called really very service or was sort batteries In was to duty had that do to battery which cycle abused. get amount just the the get the old And batteries backup more job, just one battery of tough. engine The to time. every of one to increasingly today, the just the demands, electrical crank year

to quality, application. the today’s up customers abuses more advanced stand of So products to need higher

electronic more years the the anything as or a electronic much So, just from more having is such, did rig the much, forklift are content other work in big driver batteries a truck, content. Class -- past. just that’s the X in there’s to other And they harder than

are high-performance identified noted, the need maintenance-free us these. a well that it’s as Andy products. to beginning lines drivers coincidence have think with these So, And don’t the IRA I for the this is is is all the from these And for things main this so what up we about.

that going path, on and path. we’re we’ve So, been stay on the to right

Blake Keating

project beginning projects level we Got it. up then, Understood. to access? you’re and lastly, or the are companies for activity you. the pick expecting what potential activity of talk you Can how should just you the to broadband Bill. seeing expansion Infrastructure growth like quoting Are we’re hearing Thank And see related think you with of about activity there? seeing are tailwinds about

David Shaffer

that I through the my RDOF, of attention television that one cable is the area. taken And book their I our, one and lead identified most a with radar think, directly for that RDOF pretty these has law. a guess, gets the Rural some seen Opportunity strong of of customers we’ve in bill, has on associated been came Fund, I think order funding which the the And good really chunk broadband screen us bill. specifically RDOF Digital

encouraging. So, that’s

-- We expect out customers certainly our of they’re more front.

customers world of will these also We see [ph] opportunities type other customers cable to expect our push ILAC areas. rural television fiber and deeper the in more into

for the very that’s we’re a off good So, me. that’s start. one And most prominent the to

Operator

turn to remarks. the President for you. CEO, Shaffer, and to would showing further closing no Thank now over the I’m David like questions in I queue. call back

David Shaffer

want today, to into of have level really everybody and detail time to I we the importantly, I’m and for excited higher product most can initiatives time June thank demonstrate and strategic hope can roadmap certainly really Take go your just going at a the Thank dial Stock the you in. Investor Day, make your I least Exchange. hope care. today. much XXth or New you I for you York so our it, at at

Operator

your for Thank today’s call. Ladies conference concludes and you gentlemen, participation. this

You may disconnect. now

EnerSys (ENS) 25 May 232023 Q4 Earnings call transcript