Core Viewpoint - EnerSys (NYSE: ENS) presents a significant valuation discrepancy between analyst ratings, which suggest a "Strong Buy," and quant ratings, which indicate a "Sell" [1] Company Analysis - EnerSys is not considered a flashy stock, yet it warrants closer examination due to the contrasting opinions on its valuation [1] Analyst Background - The analyst has a strong foundation in financial modeling, valuation, and data analysis, holding certifications from the Corporate Finance Institute (CFI) in Canada [2] - The focus is on technology, infrastructure, and internet services sectors, emphasizing companies with strong fundamentals and growth potential [2]

Core Insights - The Battery Cyclers Market is projected to grow from USD 1.2 Billion in 2024 to USD 1.9 Billion by 2030, with a CAGR of 8.10% [1][14]. Market Drivers - The increasing adoption of electric vehicles (EVs) and renewable energy storage systems is driving demand for efficient battery testing solutions, as battery cyclers are essential for simulating real-world charge-discharge scenarios [2][6]. - The establishment of battery manufacturing facilities, especially in the Asia-Pacific region, is amplifying the demand for high-capacity and multi-channel cyclers [3]. - Advancements in battery chemistries, such as solid-state and lithium-sulfur, necessitate sophisticated testing systems, further boosting market demand [3][7]. Market Challenges - The high capital investment required for advanced battery cyclers and testing infrastructure poses a significant challenge, particularly for smaller companies and research institutions [9][10]. - Additional costs related to supporting infrastructure and maintenance increase the total cost of ownership, which can hinder innovation in emerging economies [10]. Market Trends - The integration of advanced technologies like AI, IoT, and data analytics is enhancing battery testing outcomes, enabling predictive maintenance and remote monitoring [11][12]. - Cloud-based platforms are facilitating centralized access to performance data, promoting collaboration across R&D teams and transforming battery cyclers into intelligent, networked platforms [12]. Key Market Players - Notable companies in the battery cyclers market include Kikusui Electronics, EnerSys, Arbin Instruments, MTI Instruments, National Instruments, BIT BUDDY, Neware Technology, and Zhengzhou Dazhong Machinery [16].

Core Insights - EnerSys (ENS) reported adjusted earnings of $2.97 per share for Q4 fiscal 2025, exceeding the Zacks Consensus Estimate of $2.78, marking a 43% year-over-year increase [1] - The company's net sales for Q4 were $974.8 million, slightly missing the consensus estimate of $975 million, but reflecting a 7% year-over-year growth [2] Financial Performance - For fiscal 2025, EnerSys reported net revenues of $3.62 billion, a 1% increase year-over-year, with adjusted earnings of $10.15 per share, up 21.6% year-over-year [3] - The Energy Systems segment generated sales of $399 million, an 8% increase year-over-year, although it fell short of the consensus estimate of $416 million [3] - The Motive Power segment's sales were $392 million, down 0.6% year-over-year, missing the consensus estimate of $396 million [4] - The Specialty segment saw sales of $178 million, up 21% year-over-year, surpassing the consensus estimate of $165 million [5] Margin and Cost Analysis - EnerSys' cost of sales increased by 2.2% year-over-year to $671.1 million, while gross profit rose 19.4% to $303.7 million, resulting in a gross margin increase of 330 basis points to 31.2% [6] - Operating expenses rose 3.4% year-over-year to $162.7 million, with operating earnings increasing 62.3% to $131.3 million, leading to an operating margin increase of 460 basis points to 13.5% [6] Balance Sheet and Cash Flow - At the end of Q4 fiscal 2025, EnerSys had cash and cash equivalents of $343.1 million, up from $333.3 million at the end of fiscal 2024, while long-term debt increased to $1.08 billion from $802 million [7] - The company generated net cash of $260.3 million from operating activities in fiscal 2025, down from $457 million in the previous year, with capital expenditures totaling $121 million [8] Guidance - For Q1 fiscal 2026, EnerSys expects adjusted earnings to be in the range of $2.03–$2.13 per share, with net sales projected between $830–$870 million [9]

Core Insights - EnerSys reported Q4 FY2025 results with a 7% year-over-year revenue increase to $975 million and adjusted diluted EPS of $1.86, marking a record high [1] - The company experienced significant margin expansion across all segments and resilient order trends despite tariff challenges, alongside a leadership transition for strategic execution [1] Margin Expansion - Adjusted gross margin increased by 320 basis points to 31.2%, while adjusted operating margin improved by 360 basis points to 11.1% [2] - Motive Power achieved a record 29% sales mix from maintenance-free products, and the Specialty segment benefited from the Brentronics acquisition, contributing a 22% positive revenue impact [2][3] Tariff Mitigation - Direct tariff exposure was reduced to $92 million from $160 million following a U.S. administration update, with only 5% of U.S. supply sourced from China [4][5] - The company established a cross-functional task force for risk management and aims for full mitigation through pricing, sourcing, and operational expense reductions [4][5] Capital Allocation - EnerSys ended the year with $343 million in cash and equivalents, a leverage ratio of 1.3x EBITDA, and free cash flow of $105 million [6] - The company repurchased $40 million in shares and has approximately $200 million remaining on its buyback authorization, while seeking bolt-on acquisitions [6][7] Future Outlook - For Q1 FY2026, management projects net sales between $830 million and $870 million and adjusted diluted EPS of $2.03 to $2.13, identifying this quarter as the likely revenue and EPS trough for the year [9] - Full-year guidance for FY2026 is suspended pending clarity on tariff policy, but adjusted operating earnings growth is expected to outpace revenue growth [9]

Financial Data and Key Metrics Changes - EnerSys reported fourth quarter net sales of $975 million, a 7% increase from the prior year, driven by a 4% increase in organic volume and a 4% positive impact from the Brentronics acquisition [33][34] - Adjusted diluted EPS for the fourth quarter was a record $1.86 per share, up $0.66 from the prior year, demonstrating strong earnings power [35][36] - Full year net sales reached $3.6 billion, up 1% year over year, with adjusted diluted EPS increasing by 22% to $10.15 per share [35][36] Business Line Data and Key Metrics Changes - Energy Systems revenue increased 8% year over year to $399 million, with adjusted operating earnings growing for the fifth consecutive quarter [36][37] - Motive Power revenue remained flat at $392 million, with adjusted operating earnings up 15% to $67 million, driven by favorable price mix despite flat volumes [38][39] - Specialty revenue increased 21% year over year to $178 million, with adjusted operating earnings nearly doubling from the prior year [40][41] Market Data and Key Metrics Changes - Energy Systems saw positive order rates for three consecutive quarters, driven by data centers and communications [18][19] - Motive Power orders were stable to promising, with April ITA truck orders up over 19% compared to last year's historical lows [22][23] - Specialty markets, particularly aerospace and defense, showed robust demand, although Class eight truck OEM volume recovery was slower than anticipated [25][26] Company Strategy and Development Direction - The company is focusing on energy security and labor scarcity, aiming to help customers manage energy costs and consumption through maintenance-free products and automation [11][12] - EnerSys is committed to optimizing its manufacturing footprint and investing in high-speed, lower-cost production capacity [9][28] - The company is also enhancing its lithium strategy in alignment with national priorities, particularly in defense readiness and domestic supply assurance [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather tariff impacts and potential economic downturns, citing a resilient balance sheet and operational flexibility [15][17] - The company anticipates Q1 will be the low point of the fiscal year, with expectations for revenue recovery driven by maintenance-free offerings and strong demand in A&D and data center markets [46][47] - Management is closely monitoring macroeconomic dynamics and adjusting operational strategies to mitigate risks associated with tariffs and supply chain disruptions [12][47] Other Important Information - The company has established a dedicated tariff task force to analyze and mitigate tariff impacts on its operations [12][13] - EnerSys is actively reshaping its manufacturing footprint, including closing a flooded lead acid battery facility in Mexico to optimize costs [28][29] - The company has a strong cash position, with $932 million on hand, and plans to continue evaluating acquisition opportunities [42][44] Q&A Session Summary Question: Clarification on Q1 guidance and EPS growth - Management explained that Q1 is expected to reflect lower volumes in Motive Power, with EPS guidance up about $0.10 year on year, influenced by favorable price mix and tariff impacts [54][60][62] Question: Order recovery and full year guidance pause - Management noted that while orders in Motive Power were down 14% year on year, overall orders were flat, and the decision to pause full year guidance was due to awaiting clarity on reciprocal tariff negotiations [64][68] Question: Updates on Section 45X and IRS interactions - Management confirmed that other companies have received their Section 45X checks, and they expect to receive their refund soon, attributing delays to IRS staffing issues [81][82] Question: Thoughts on lithium plant funding - Management remains optimistic about the lithium plant funding, emphasizing strong support from the administration and ongoing development of cell technology [85][87]

Financial Data and Key Metrics Changes - EnerSys reported fourth quarter net sales of $975 million, a 7% increase year-over-year, driven by a 4% increase in organic volume and a 4% positive impact from the Brentronics acquisition [30][34] - Adjusted diluted EPS for the fourth quarter was a record $1.86 per share, up $0.66 per share versus the prior year, demonstrating strong earnings power [32][33] - Full year net sales reached $3.6 billion, up 1% year-over-year, with adjusted diluted EPS increasing by 22% to $10.15 per share [33][34] Business Line Data and Key Metrics Changes - Energy Systems revenue increased 8% year-over-year to $399 million, with adjusted operating earnings growing for the fifth consecutive quarter [34][35] - Motive Power revenue remained flat at $392 million, with adjusted operating earnings up 15% year-over-year, driven by a favorable price mix [36] - Specialty revenue increased 21% year-over-year to $178 million, significantly benefiting from the Brentronics acquisition [37] Market Data and Key Metrics Changes - Energy Systems saw a 22% year-on-year increase in quarterly data center revenue, indicating strong market momentum [17][34] - Motive Power experienced a 14% year-over-year decline in orders, reflecting the impact of tariff disruptions [60][62] - Specialty markets, particularly aerospace and defense, showed robust demand, although Class eight truck OEM volume recovery was slower than anticipated [22][37] Company Strategy and Development Direction - The company is focusing on energy security and labor scarcity, aiming to help customers manage energy costs and consumption through maintenance-free products and automation [10][11] - EnerSys is committed to optimizing its manufacturing footprint and investing in high-speed, lower-cost production capacity to strengthen its foundation for future growth [7][26] - The company plans to deepen customer relationships and expand service capabilities while maintaining operational efficiencies [10][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges and tariff impacts, emphasizing a disciplined approach to operations [11][43] - The outlook for the first quarter of fiscal 2026 anticipates typical seasonal volume softness in Motive Power, with expectations for recovery in subsequent quarters [43][44] - Management is awaiting clarity on reciprocal tariff negotiations before providing full-year guidance, indicating a cautious but optimistic approach to future performance [64][65] Other Important Information - The company has established a tariff task force to analyze and mitigate tariff impacts, with a focus on maintaining operational flexibility [11][12] - EnerSys is actively reshaping its manufacturing footprint, including closing a facility in Mexico and transitioning production to Kentucky, which is expected to optimize costs [26][27] - The company is optimistic about its domestic lithium battery manufacturing plans, with ongoing discussions with the Department of Energy [28][83] Q&A Session Summary Question: Clarification on Q1 guidance and EPS growth - Management explained that the Q1 guidance reflects lower volumes in Motive Power, with EPS growth driven by favorable price mix and operational efficiencies [51][59] Question: Order recovery and full-year guidance pause - Management noted that while there has been a rebound in orders, the pause in full-year guidance is due to uncertainty surrounding tariff negotiations [61][64] Question: Section 45X tax credits and IRS interactions - Management confirmed that other companies have received their tax credits and they expect to receive their refund soon, attributing delays to IRS staffing issues [78][79] Question: Opportunities for inorganic growth - Management indicated that the current economic uncertainty may create opportunities for acquisitions, emphasizing a proactive approach to identifying targets that fit their strategic criteria [94]

Core Insights - EnerSys reported revenue of $974.8 million for the quarter ended March 2025, reflecting a 7% increase year-over-year, with EPS at $2.97 compared to $2.08 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate by -0.06%, while the EPS exceeded the consensus estimate by +6.83% [1] Financial Performance Metrics - Specialty Net Sales reached $177.80 million, surpassing the estimated $164.85 million, marking a +21.4% change year-over-year [4] - Motive Power Net Sales were reported at $392.30 million, slightly below the average estimate of $396.19 million, indicating a -0.6% change year-over-year [4] - Energy Systems Net Sales totaled $398.80 million, compared to the average estimate of $415.83 million, reflecting an +8% change year-over-year [4] - Operating Earnings for Energy Systems were $27 million, below the estimated $30.23 million [4] - Operating Earnings for Motive Power were $57.90 million, compared to the average estimate of $61.79 million [4] - Operating Earnings for Specialty were reported at $10.20 million, below the average estimate of $12.40 million [4] Stock Performance - EnerSys shares have returned +19.4% over the past month, outperforming the Zacks S&P 500 composite's +12.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Core Insights - EnerSys reported quarterly earnings of $2.97 per share, exceeding the Zacks Consensus Estimate of $2.78 per share, and showing an increase from $2.08 per share a year ago, representing an earnings surprise of 6.83% [1] - The company posted revenues of $974.8 million for the quarter ended March 2025, slightly missing the Zacks Consensus Estimate by 0.06%, but up from $910.7 million year-over-year [2] - EnerSys has outperformed the S&P 500 with a 6.2% increase in shares since the beginning of the year, compared to the S&P 500's 1% gain [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.36, with expected revenues of $904.23 million, and for the current fiscal year, the EPS estimate is $10.19 on revenues of $3.78 billion [7] - The estimate revisions trend for EnerSys is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Industry Context - The Manufacturing - Electronics industry, to which EnerSys belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Q4'25 & FY'25 Earnings MAY 21, 2025 May 2025 2 Q4'25 & FY'25 Overview D AV E S H A F F E R Forward Looking Statements As a reminder, we will be presenting certain forward-looking statements on this call that are based on Management's current expectations and views regarding future events and operating performance and are subject to uncertainties and changes in circumstances. Our actual results may differ materially from the forward- looking statements for a number of reasons. Our forward-looking statements ...

Customer Base and Market Presence - EnerSys serves over 10,000 customers in more than 100 countries, with no single customer accounting for more than 10% of revenues[26]. - The company operates four segments: Energy Systems, Motive Power, Specialty, and New Ventures, each serving diverse markets[22]. - EnerSys has a strong presence in the industrial energy storage market, competing with companies like East Penn Manufacturing and Exide Technologies[34]. - The company’s Energy Systems customers include those in telecommunications, data centers, and electric utilities, reflecting a diverse market base[27]. - Approximately 40% of net sales were generated outside of the United States in fiscal 2025, exposing the company to significant foreign currency translation risks[125]. Acquisitions and Growth Strategy - The company completed the acquisition of Bren-Tronics Defense LLC for $206.4 million, enhancing its Specialty line of business with portable power solutions for military applications[25]. - EnerSys has made thirty-six acquisitions globally from fiscal years 2003 through 2025, with no significant acquisitions in fiscal 2023 or 2024[25]. - The growth strategy is heavily dependent on acquisitions, and failure to identify suitable candidates or integrate acquired businesses could materially affect operations[100][102]. - Future acquisitions may involve issuing equity securities, which could dilute stockholder ownership and adversely impact the market price of the stock[103]. Financial Performance and Costs - The company estimates that raw material costs account for over 50% of its cost of goods sold, and fluctuations in the prices of materials like lead, lithium, and nickel could significantly impact financial results[85]. - The Company experienced lead prices ranging from approximately $0.85 to $1.00 per pound in fiscal 2025, impacting production costs[211]. - Approximately 25% of the Company's revenue is subject to agreements that adjust pricing based on a market-based index for lead[212]. - The Company anticipates that selling prices will be higher in fiscal 2026 compared to fiscal 2025 due to inflationary cost increases[213]. - The trailing three months net sales annualized was $3,899.2 million at March 31, 2025, compared to $3,642.8 million at March 31, 2024[215]. Sustainability and Environmental Goals - The company has committed to reducing its energy intensity by 25% over the next 10 years from a 2020 baseline[56]. - The company has set net-neutral goals for Scope 1 emissions by 2040 and Scope 2 emissions by 2050[56]. - The company has published its Climate Action Plan Roadmap in October 2024, detailing plans to achieve climate goals[56]. - The company has released comprehensive Sustainability Reports in 2022 and 2023, aligned with GRI and SASB standards[56]. - The company has a dedicated sustainability steering committee that includes members of senior management to oversee sustainability performance[73]. Risks and Challenges - The company is subject to significant pricing pressures due to competition from major international manufacturers and regional competitors, which could adversely affect profitability and cash flows[77]. - The company relies on third-party relationships for key aspects of its business, and any failure of these parties could expose it to risks of business disruption and higher costs[78]. - The company faces risks related to the introduction of new products and technologies, as failure to innovate could lead to reduced market acceptance[94]. - Cybersecurity incidents, including ransomware and phishing attacks, pose significant risks to the integrity and privacy of the company's data[106][107]. - The company faces risks from public health epidemics, such as COVID-19, which have previously disrupted global operations and supply chains[115][116]. Regulatory and Compliance Issues - Regulatory scrutiny in various countries may lead to substantial fines or operational disruptions, harming the company's reputation and business[119][120]. - The company is subject to extensive environmental liability, which could result in significant fines or operational restrictions if noncompliance occurs[143]. - The company is currently subject to conflict mineral disclosure regulations, which may increase costs and affect supplier relationships[153]. - The company is impacted by the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), which impose stringent requirements on data handling[155]. Financial Position and Capital Management - The company's total consolidated debt as of March 31, 2025, was $1,113 million, which may restrict operational flexibility and increase vulnerability to economic conditions[136]. - The company has $343 million in available cash and cash equivalents as of March 31, 2025[216]. - The company has approximately $653 million available and undrawn under all lines of credit as of March 31, 2025[216]. - A third amendment to the 2017 Credit Facility provided a new incremental delayed-draw senior secured term loan of up to $300 million[217]. - The company has a share repurchase program authorized for up to $200 million, with approximately $178.9 million remaining as of March 31, 2025[164]. Employee and Labor Relations - The company reported that approximately 28% of its 10,858 employees are covered by collective bargaining agreements, with 8% of these agreements expiring in the next twelve months[45]. - The company faces significant competition for qualified personnel, which could impact its ability to retain key employees and affect business continuity[166].