Core Insights - EnerSys (ENS) has a stronger Zacks Rank of 2 (Buy) compared to Emerson Electric (EMR) which has a Zacks Rank of 3 (Hold), indicating a more favorable earnings outlook for ENS [3] - Value investors typically assess various fundamental metrics to identify undervalued stocks, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Valuation Metrics - ENS has a forward P/E ratio of 9.74, significantly lower than EMR's forward P/E of 22.12, suggesting that ENS may be undervalued [5] - The PEG ratio for ENS is 0.54, while EMR's PEG ratio is 2.59, indicating that ENS has a better valuation relative to its expected earnings growth [5] - ENS's P/B ratio is 2.01 compared to EMR's P/B of 3.76, further supporting the argument that ENS is more attractively valued [6] Conclusion - Given the stronger estimate revision activity and more favorable valuation metrics, ENS is positioned as the superior option for value investors at this time [7]

Core Insights - EnerSys reported adjusted earnings of $2.08 per share for Q1 fiscal 2026, exceeding the Zacks Consensus Estimate of $2.05, marking a 5% year-over-year increase [1] - The company's net sales reached $893 million, surpassing the consensus estimate of $849 million, with a year-over-year growth of 4.7% driven by data center and communications markets, as well as the Bren-Tronics acquisition [2] Financial Performance - The Energy Systems segment generated sales of $391.4 million, accounting for 43.9% of total sales, reflecting an 8.4% year-over-year increase, outperforming the consensus estimate of $375 million [3] - The Motive Power segment's sales were $349.1 million, representing 39.3% of total sales, down 4.7% year-over-year, with a volume decline of 7% [4] - The Specialty segment reported sales of $148.5 million, accounting for 16.8% of total sales, up 18.1% year-over-year, benefiting from the Bren-Tronics acquisition [5] Margin Analysis - EnerSys' cost of sales increased by 5.7% year-over-year to $566.1 million, while gross profit rose by 6.2% to $253.2 million, resulting in a gross margin increase of 40 basis points to 28.4% [6] - Operating expenses increased by 14% year-over-year to $160.9 million, leading to a 5.3% decrease in operating earnings to $86.5 million, with the operating margin down 100 basis points to 9.7% [6] Balance Sheet and Cash Flow - As of the end of Q1 fiscal 2026, EnerSys had cash and cash equivalents of $346.7 million, slightly up from $343.1 million at the end of fiscal 2025, while long-term debt rose to $1.27 billion from $1.08 billion [7] - The company generated net cash of $1 million from operating activities in the first three months of fiscal 2026, down from $10.4 million in the same period last year, with capital expenditure totaling $33 million [8] Guidance - For Q2 fiscal 2026, EnerSys expects adjusted earnings to be in the range of $2.33 to $2.43 per share, indicating a growth of 26% at the mid-point, with net sales projected between $870 million and $910 million [10][11]

Financial Data and Key Metrics Changes - Net sales increased by 5% year over year to $893 million, driven by a 4% positive impact from the Brentronics acquisition and a 1% gain from positive price mix and FX tailwinds [17][28] - Adjusted operating earnings rose by 8% to $114 million, with an adjusted operating margin of 12.8% [17][28] - Adjusted EBITDA increased by 2% to $123 million, with an adjusted EBITDA margin of 13.8%, down 40 basis points year over year [17][29] - Adjusted diluted EPS for the first quarter was $2.08, a 5% increase over the prior year, while excluding 45X benefits, adjusted EPS was $1.11, down 6% due to FX impacts [29][39] Business Line Data and Key Metrics Changes - Energy Systems revenue increased by 8% to $391 million, with adjusted operating earnings up 44% to $27 million, reflecting increased volume and favorable price mix [30] - Motive Power revenue decreased by 5% to $349 million, with adjusted operating earnings down $9 million to $47 million, impacted by lower volumes and higher inflationary costs [31] - Specialty revenue increased by 18% to $149 million, driven by a 24% positive impact from the Brentronics acquisition, despite a 7% decrease in organic volumes [34] Market Data and Key Metrics Changes - Orders in the communications sector are picking up, with expectations for continued growth in customer spending behavior [22] - Data centers remain robust, with a 14% year-over-year increase in demand [49] - The defense sector is experiencing increased budgets and demand for next-generation power technologies, although U.S. A&D revenue was flat due to procurement delays [24][25] Company Strategy and Development Direction - The company launched "Energize," a strategic framework focusing on optimizing core operations, invigorating the operating model, and accelerating growth [6][10] - A strategic organizational realignment is underway, reducing 11% of the non-production workforce to generate $80 million in annualized savings [7][40] - The company aims to leverage its market positions to deliver new products addressing energy security and labor scarcity challenges [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic uncertainties and expects improving clarity in public policy to support stable market dynamics [19][42] - The first quarter is viewed as the low point for earnings, with expectations for recovery in subsequent quarters [39][54] - The company anticipates maintaining net leverage below the low end of its target range, providing flexibility for capital allocation [38][76] Other Important Information - The Board approved a $1 billion increase in share repurchase authorization to be executed over the next five years [19][38] - The company is committed to disciplined capital allocation and continues to evaluate accretive acquisition opportunities [38][76] Q&A Session Summary Question: Can you expand on the recovery in communications and expectations for the rest of the year? - Management noted good activity in telecom and broadband, with early-stage build-outs materializing and expectations for continued trends throughout the year [46][48] Question: What is the potential margin trajectory across the business with the cost optimization underway? - Management indicated that Q1 results were in line with expectations, and they believe Q1 will be the low point, with improvements expected in Q2 and beyond [52][54] Question: How does the company view the impact of the $80 million savings on margins? - Management confirmed that the $80 million savings could significantly impact margins, with expectations for improvement as macro uncertainties dissipate [60][62] Question: What is the company's capital allocation philosophy regarding the $1 billion buyback? - Management emphasized a disciplined and opportunistic approach to capital allocation, ensuring that share repurchases do not interfere with planned investments [74][76]

Financial Data and Key Metrics Changes - Net sales increased by 5% year over year to $893 million, driven by a 4% positive impact from the Brentronics acquisition and a 1% gain from positive price mix and FX tailwinds [17][18][29] - Adjusted operating earnings rose by 8% to $114 million, with an adjusted operating margin of 12.8% [17][29] - Adjusted EBITDA increased by 2% to $123 million, with an adjusted EBITDA margin of 13.8%, down 40 basis points year over year [17][29] - Adjusted diluted EPS for the first quarter was $2.08, a 5% increase over the prior year, while excluding 45X benefits, adjusted EPS was $1.11, down 6% due to FX impacts [30][41] Business Line Data and Key Metrics Changes - Energy Systems revenue increased by 8% to $391 million, with adjusted operating earnings up 44% to $27 million, reflecting increased volume and favorable price mix [31] - Motive Power revenue decreased by 5% to $349 million, with adjusted operating earnings down $9 million to $47 million, impacted by lower volumes and higher inflationary costs [32] - Specialty revenue increased by 18% to $149 million, driven by a 24% positive impact from the Brentronics acquisition [34] Market Data and Key Metrics Changes - Orders in book to bill were up year over year, indicating ongoing steady growth, with a quarterly backlog coverage of 1.1 [22] - The U.S. defense sector showed flat revenue in A&D, temporarily delayed by procurement changes, but is expected to grow moving forward [24] - Communications orders are picking up, with expectations for customer spending to continue growing at a measured pace [22] Company Strategy and Development Direction - The company launched "Energize," a strategic framework focusing on optimizing core operations, invigorating the operating model, and accelerating growth [7][11] - A strategic organizational realignment is underway, reducing 11% of the non-production workforce, expected to generate $80 million in annualized savings [8][42] - The company aims to leverage leading market positions to deliver new products addressing energy security and labor scarcity challenges [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to offset tariff impacts and expects improving clarity in public policy to support stable market dynamics [19][21] - The first quarter is viewed as the low point for earnings, with expectations for recovery in subsequent quarters [41][56] - The company anticipates maintaining net leverage below the low end of its target range, providing flexibility for future capital allocation [39][40] Other Important Information - The Board approved a $1 billion increase in share repurchase authorization to be executed over the next five years [19][40] - The company is committed to disciplined capital allocation and continues to evaluate accretive acquisition opportunities [40][81] Q&A Session Summary Question: Insights on Energy Systems recovery - Management noted good activity in telecom and broadband, with early-stage build-outs materializing and expectations for continued trends throughout the year [48][50] Question: Margin trajectory with cost optimization - Management indicated that the cost reduction program would lead to significant margin expansion, with expectations for Q2 and beyond to track back towards record levels [56][57] Question: Capital allocation philosophy regarding buybacks - Management clarified that the $1 billion buyback authorization reflects confidence in future opportunities and does not signal a shift away from pursuing acquisitions [78][81]

Financial Performance - Q1 FY'26 - Net sales increased by 5% year-over-year to $893 million[20, 37] - Adjusted operating earnings increased by 8% year-over-year to $114 million[20, 39] - Adjusted EBITDA increased by 2% year-over-year to $123 million[20, 41] - Adjusted EPS increased by 5% year-over-year to $2.08, but decreased by 6% excluding the 45X tax credit[20, 42] - Free cash flow was negative $32 million, a decrease of $6 million year-over-year[20] - Gross margin was 28.4%, an increase of 40 bps year-over-year, but 24.1% excluding the 45X tax credit[21] Q2 FY'26 Guidance - The company expects net sales to be flat year-over-year, in the range of $870 million to $910 million[9, 60] - Adjusted EPS is expected to increase by 26% year-over-year, or 8% excluding the 45X tax credit, with a range of $2.33 to $2.43[9, 60] - The company anticipates a $35 million to $40 million benefit to the cost of sales from IRC 45X[9, 60] Strategic Initiatives - The company introduced EnerGize, a strategic framework to transform and grow the company[9, 10] - The company is restructuring for operational efficiency, including an 11% workforce reduction, expecting $80 million in annualized savings[12] - The company increased its buyback authorization by $1 billion to be executed over 5 years and returned $159 million to shareholders through buybacks and dividends[9]

Core Insights - EnerSys reported Q1 FY2026 earnings with revenue of $893.0 million, a 4.7% increase year-over-year, but missed analyst estimates of $939.8 million [1][2] - Adjusted diluted EPS (non-GAAP) rose to $2.08, reflecting a 5.1% increase from $1.98 in Q1 FY2025, but fell short of the expected $2.59 [2] - The company suspended full-year quantitative guidance for FY2026 due to external uncertainties and operational challenges [1] Financial Performance - Revenue increased by 4.7% year-over-year, driven by acquisitions, pricing improvements, and favorable currency movements [5] - Adjusted operating earnings (non-GAAP) grew by 8.1%, while EBITDA (non-GAAP) decreased by 8.8% to $103.9 million compared to $113.9 million in Q1 FY2025 [2][7] - Free cash flow (non-GAAP) was negative at $(32.1) million, attributed to seasonal working capital needs and higher inventories [7] Segment Analysis - The Energy Systems segment saw an 8.4% sales increase, with adjusted operating margins improving to 7.0% from 5.3% in Q1 FY2025 [6] - Motive Power segment sales fell by 4.7%, with adjusted operating margins decreasing from 15.3% to 13.4% due to weakened demand [6] - Specialty segment sales jumped by 18.1%, significantly boosted by the acquisition of Bren-Tronics [6] Strategic Focus - EnerSys emphasizes innovation in advanced battery technologies, including TPPL and lithium-ion batteries, while managing lead costs [4][11] - The company is implementing a new strategic framework, "EnerGize," targeting approximately $80 million in annualized cost savings through workforce reduction and reorganization [10] - Regulatory compliance and sustainability remain priorities as the company serves a diverse global customer base [4] Shareholder Returns - The quarterly dividend was raised by 9% to $0.2625 per share, reflecting a commitment to shareholder capital returns [9][14] - The company completed $150 million in share repurchases, a significant increase from $11.6 million in Q1 FY2025 [9] Future Outlook - Management forecasts Q2 FY2026 net sales between $870 million and $910 million, with adjusted diluted EPS between $2.33 and $2.43 [12] - The company did not provide full-year guidance for FY2026 due to uncertainties around tariffs and customer order behavior [12] - Key factors to watch include organic growth in core business areas, realization of cost savings, and the impact of IRC 45X tax credits on profitability [13]

Group 1 - EnerSys reported $893 million in revenue for the quarter ended June 2025, a year-over-year increase of 4.7% [1] - The EPS for the same period was $2.08, compared to $1.98 a year ago, with a surprise of +1.46% against the consensus estimate of $2.05 [1] - The revenue exceeded the Zacks Consensus Estimate of $848.99 million by +5.18% [1] Group 2 - Key metrics indicate that EnerSys shares returned +3.9% over the past month, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Group 3 - Net Sales in the Specialty segment were $148.5 million, exceeding the average estimate of $145.89 million, representing an 18.1% year-over-year change [4] - Net Sales in the Motive Power segment were $349.1 million, slightly below the estimated $333.95 million, reflecting a -4.7% change year-over-year [4] - Net Sales in the Energy Systems segment reached $391.4 million, surpassing the estimate of $375.42 million, with an 8.4% year-over-year increase [4] Group 4 - Operating Earnings for the Energy Systems segment were $13.9 million, below the average estimate of $26.55 million [4] - Operating Earnings for the Motive Power segment were $37.8 million, compared to the estimated $47.88 million [4] - Operating Earnings for the Specialty segment were $4.2 million, significantly lower than the average estimate of $10.1 million [4]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents EnerSys' unaudited consolidated condensed financial statements for the quarter ended June 29, 2025, including the balance sheets, statements of income, comprehensive income, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, acquisitions, revenue recognition, and other financial instrument details [Consolidated Condensed Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Condensed%20Balance%20Sheets%20(Unaudited)) Consolidated Condensed Balance Sheets (Unaudited) | Metric | June 29, 2025 (in Thousands) | March 31, 2025 (in Thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $4,110,987 | $3,971,248 | | Total current assets | $2,166,499 | $2,089,814 | | Cash and cash equivalents | $346,662 | $343,131 | | Accounts receivable, net | $566,766 | $597,942 | | Inventories, net | $789,340 | $739,994 | | Property, plant, and equipment, net | $607,129 | $592,433 | | Goodwill | $758,184 | $721,073 | | Total liabilities | $2,244,838 | $2,051,760 | | Total current liabilities | $721,479 | $775,068 | | Long-term debt, net | $1,269,020 | $1,083,541 | | Total equity | $1,866,149 | $1,919,488 | [Consolidated Condensed Statements of Income (Unaudited)](index=4&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income%20(Unaudited)) Consolidated Condensed Statements of Income (Unaudited) | Metric | Quarter ended June 29, 2025 (in Thousands) | Quarter ended June 30, 2024 (in Thousands) | Change (YoY) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------ | | Net sales | $893,024 | $852,916 | +4.7% | | Gross profit | $253,228 | $238,371 | +6.2% | | Operating earnings | $86,480 | $91,331 | -5.3% | | Earnings before income taxes | $65,658 | $79,329 | -17.2% | | Net earnings attributable to EnerSys stockholders | $57,458 | $70,111 | -18.1% | | Basic EPS | $1.48 | $1.74 | -14.9% | | Diluted EPS | $1.46 | $1.71 | -14.6% | | Dividends per common share | $0.24 | $0.225 | +6.7% | [Consolidated Condensed Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Consolidated Condensed Statements of Comprehensive Income (Unaudited) | Metric | Quarter ended June 29, 2025 (in Thousands) | Quarter ended June 30, 2024 (in Thousands) | | :------------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net earnings | $57,458 | $70,111 | | Total other comprehensive income (loss), net of tax | $30,414 | $(9,544) | | Total comprehensive income (loss) | $87,872 | $60,567 | | Comprehensive income (loss) attributable to EnerSys stockholders | $87,832 | $60,589 | [Consolidated Condensed Statements of Cash Flows (Unaudited)](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Condensed Statements of Cash Flows (Unaudited) | Metric | Quarter ended June 29, 2025 (in Thousands) | Quarter ended June 30, 2024 (in Thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used in) operating activities | $968 | $10,398 | | Net cash (used in) provided by investing activities | $(41,414) | $(46,984) | | Net cash provided by (used in) financing activities | $25,964 | $50,946 | | Effect of exchange rate changes on cash and cash equivalents | $18,013 | $(3,615) | | Net increase (decrease) in cash and cash equivalents | $3,531 | $10,745 | | Cash and cash equivalents at end of period | $346,662 | $344,069 | [Notes to Consolidated Condensed Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures for the consolidated condensed financial statements, covering accounting policies, recent acquisitions, revenue recognition, financial instruments, debt, equity, and segment information [1 Basis of Presentation](index=7&type=section&id=1%20Basis%20of%20Presentation) - The unaudited consolidated condensed financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, not including all footnotes required for complete financial statements[16](index=16&type=chunk) - Fiscal **2026** quarters end on June **29**, **2025**, September **28**, **2025**, December **28**, **2025**, and March **31**, **2026**. Fiscal **2025** quarters ended on June **30**, **2024**, September **29**, **2024**, December **29**, **2024**, and March **31**, **2025**[19](index=19&type=chunk) - The Company is evaluating the impact of recently issued FASB standards on income tax disclosures (effective FY25) and disaggregation of income statement expenses (effective FY27)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [2 Acquisition](index=8&type=section&id=2%20Acquisition) - On July **26**, **2024**, EnerSys acquired Bren-Tronics Defense LLC for **$206,374 thousand**, a manufacturer of portable power solutions for military and defense applications. The acquisition resulted in **$50,821 thousand** in goodwill, primarily attributable to the assembled workforce and management experience, and is tax deductible[26](index=26&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) Fair Values of Assets Acquired and Liabilities Assumed (July 26, 2024) | Item | Amount (in Thousands) | | :-------------------------- | :-------------------- | | Total assets acquired | $168,352 | | Total liabilities assumed | $12,799 | | Net assets acquired | $155,553 | | Consideration transferred | $206,374 | | Goodwill | $50,821 | [3 Revenue Recognition](index=8&type=section&id=3%20Revenue%20Recognition) - Revenues recognized over time for customized products amounted to **$37,496 thousand** for Q1 FY26 and **$52,332 thousand** for Q1 FY25[32](index=32&type=chunk) Aggregate Transaction Price Allocated to Unsatisfied Performance Obligations (June 29, 2025) | Fiscal Year | Estimated Revenue Recognition (in Thousands) | | :------------ | :----------------------------------------- | | Total | $177,104 | | 2026 | $88,477 | | 2027 | $64,948 | | 2028 | $23,679 | Contract Liabilities | Metric | June 29, 2025 (in Thousands) | March 31, 2025 (in Thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Current portion | $29,633 | $28,820 | | Non-current portion | $770 | $488 | | Revenues recognized from beginning-of-quarter contract liability (Q1 FY26) | $7,576 | N/A | | Revenues recognized from beginning-of-quarter contract liability (Q1 FY25) | N/A | $6,100 | [4 Accounts Receivable](index=9&type=section&id=4%20Accounts%20Receivable) Accounts Receivable, net | Metric | June 29, 2025 (in Thousands) | March 31, 2025 (in Thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Accounts receivable | $575,292 | $606,617 | | Allowance for doubtful accounts | $8,526 | $8,675 | | Accounts receivable, net | $566,766 | $597,942 | - Under a Receivables Purchase Agreement (RPA) maturing in December **2025**, the Company sold **$189,892 thousand** of accounts receivables in Q1 FY26 (all collected) and **$189,736 thousand** in Q1 FY25 (all collected). Total collateralized accounts receivables held by EnerSys Finance were approximately **$350,538 thousand** at June **29**, **2025**[37](index=37&type=chunk)[39](index=39&type=chunk) [5 Inventories](index=10&type=section&id=5%20Inventories) Inventories, net | Metric | June 29, 2025 (in Thousands) | March 31, 2025 (in Thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Raw materials | $309,633 | $296,365 | | Work-in-process | $130,583 | $125,459 | | Finished goods | $349,124 | $318,170 | | Total | $789,340 | $739,994 | [6 Fair Value of Financial Instruments](index=10&type=section&id=6%20Fair%20Value%20of%20Financial%20Instruments) Recurring Fair Value Measurements (Derivatives) | Derivative Type | Total Fair Value Measurement June 29, 2025 (in Thousands) | Total Fair Value Measurement March 31, 2025 (in Thousands) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------- | | Lead forward contracts | $2,484 | $(225) | | Foreign currency forward contracts | $(746) | $1,629 | | Interest Rate Swaps | $(73) | $5 | | Net investment hedges | $(87,823) | $(33,002) | | Total derivatives | $(86,158) | $(31,593) | Carrying Amounts and Estimated Fair Values of Derivatives and Senior Notes | Financial Instrument | Carrying Amount June 29, 2025 (in Thousands) | Fair Value June 29, 2025 (in Thousands) | Carrying Amount March 31, 2025 (in Thousands) | Fair Value March 31, 2025 (in Thousands) | | :------------------- | :--------------------------------------- | :------------------------------------ | :----------------------------------------- | :------------------------------------- | | Senior Notes | $600,000 | $599,550 | $600,000 | $591,420 | | Derivatives | $86,158 | $86,158 | $(31,593) | $(31,593) | [7 Derivative Financial Instruments](index=11&type=section&id=7%20Derivative%20Financial%20Instruments) - EnerSys uses derivative instruments (lead forward contracts, foreign currency forward contracts, interest rate swaps, cross currency fixed interest rate swaps) to reduce exposure to fluctuations in commodity prices, foreign exchange rates, and interest rates, not for speculative purposes[48](index=48&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The Company anticipates reclassifying **$13,251 thousand** of pretax gain from AOCI into cost of goods sold and interest expense in the coming twelve months, related to various hedging instruments[55](index=55&type=chunk) Fair Value of Derivative Instruments (June 29, 2025 and March 31, 2025) | Instrument | June 29, 2025 (Assets) | March 31, 2025 (Assets) | June 29, 2025 (Liabilities) | March 31, 2025 (Liabilities) | | :--------------------------------------- | :--------------------- | :---------------------- | :-------------------------- | :--------------------------- | | Lead forward contracts | $2,484 | $0 | $0 | $225 | | Foreign currency forward contracts (Cash Flow Hedges) | $0 | $0 | $1,248 | $290 | | Foreign currency forward contracts (Not Designated) | $502 | $1,919 | $0 | $0 | | Interest rate swaps | $0 | $5 | $72 | $0 | | Net investment hedges | $0 | $0 | $87,823 | $33,002 | Effect of Derivative Instruments on the Consolidated Condensed Statements of Income (Quarter ended June 29, 2025) | Derivative Type | Pretax Gain (Loss) Recognized in AOCI (Effective Portion) | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | | :--------------------------------------- | :------------------------------------------------------- | :----------------------------------------------------------------------- | :----------------------------------------------------------------------- | | Lead forward contracts | $1,489 | Cost of goods sold | $(1,264) | | Foreign currency forward contracts | $(1,848) | Cost of goods sold | $224 | | Interest rate swaps | $(374) | Interest expense | $(297) | | Cross currency fixed interest rate swaps (Net Investment Hedges) | $(55,994) | Interest expense | $(1,173) | | Foreign currency forward contracts (Not Designated) | N/A | Other (income) expense, net | $1,118 | [8 Income Taxes](index=14&type=section&id=8%20Income%20Taxes) - The consolidated effective income tax rate increased to **12.5%** in Q1 FY26 from **11.6%** in Q1 FY25, primarily due to the greater impact of Pillar **2** and the mix of earnings among tax jurisdictions[65](index=65&type=chunk) - Foreign income is estimated to be **52% of worldwide income** for fiscal **2026** (up from **49%** in FY25), with foreign effective tax rates increasing to **16%** in Q1 FY26 from **14%** in Q1 FY25, mainly due to Pillar **2**[66](index=66&type=chunk)[67](index=67&type=chunk) - The Company is evaluating the potential impact of the recently enacted 'One Big Beautiful Bill Act' (OBBBA) on its consolidated financial statements, which includes changes to U.S. tax law[64](index=64&type=chunk) [9 Warranty](index=15&type=section&id=9%20Warranty) Changes in Liability for Product Warranties | Metric | Quarter ended June 29, 2025 (in Thousands) | Quarter ended June 30, 2024 (in Thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Balance at beginning of period | $66,421 | $60,819 | | Current period provisions | $7,018 | $7,147 | | Costs incurred | $(6,025) | $(5,865) | | Foreign currency translation adjustment | $1,011 | $(368) | | Balance at end of period | $68,425 | $61,733 | [10 Commitments, Contingencies and Litigation](index=15&type=section&id=10%20Commitments%2C%20Contingencies%20and%20Litigation) - EnerSys is routinely involved in legal actions and regulatory examinations related to environmental, anticompetition, employment, and contract laws, with claims for substantial monetary damages asserted in some cases[69](index=69&type=chunk) - The Company is subject to environmental laws and regulations, particularly concerning hazardous substances like lead and acid, and believes it has adequate reserves for environmental liabilities[70](index=70&type=chunk) - To manage volatility, EnerSys uses lead and foreign currency forward contracts (mostly under one year) and cross-currency fixed interest rate swap agreements (maturing **2026-2029**) to hedge net investments in foreign operations[71](index=71&type=chunk) [11 Restructuring and Other Exit Charges](index=15&type=section&id=11%20Restructuring%20and%20Other%20Exit%20Charges) - On July **22**, **2025**, EnerSys announced a reduction in force plan to cut approximately **11%** (**575 employees**) of its non-production global workforce, expecting **$15,000 to $20,000 thousand in one-time cash charges** and approximately **$80,000 thousand in annualized savings** starting in fiscal **2026**[74](index=74&type=chunk)[147](index=147&type=chunk) Restructuring and Exit Charges by Segment (Q1 FY26) | Segment | Restructuring Charges (in Thousands) | Exit Charges (in Thousands) | Total (in Thousands) | | :-------------- | :--------------------------------- | :-------------------------- | :------------------- | | Energy Systems | $764 | $291 | $1,055 | | Motive Power | $488 | $4,319 | $4,807 | | Specialty | $0 | $0 | $0 | | Total | $1,252 | $4,610 | $5,862 | - The Company approved a plan on April **1**, **2025**, to close its Monterrey, Mexico facility, expecting approximately **$13,700 thousand** in pre-tax charges, with **$4,015 thousand** in severance costs recorded in Q1 FY26[76](index=76&type=chunk)[77](index=77&type=chunk) - The Ooltewah, Tennessee facility closure plan was completed as of Q1 FY26, and the Company recorded a **$1,142 thousand gain** from the sale of the building during the quarter[87](index=87&type=chunk)[91](index=91&type=chunk)[193](index=193&type=chunk) [12 Debt](index=19&type=section&id=12%20Debt) Long-Term Debt Summary | Debt Type | Principal June 29, 2025 (in Thousands) | Unamortized Issuance Costs June 29, 2025 (in Thousands) | Principal March 31, 2025 (in Thousands) | Unamortized Issuance Costs March 31, 2025 (in Thousands) | | :------------------------------------ | :--------------------------------------- | :------------------------------------------------------- | :--------------------------------------- | :------------------------------------------------------- | | Senior Notes | $600,000 | $4,994 | $600,000 | $5,276 | | Fourth Amended Credit Facility, due 2026 | $675,000 | $986 | $490,000 | $1,183 | | Total Long-term debt, net | $1,269,020 | N/A | $1,083,541 | N/A | - The Company has **$300,000 thousand** in **4.375%** Senior Notes due **2027** and **$300,000 thousand** in **6.625%** Senior Notes due **2032**, both unsecured and unsubordinated obligations[98](index=98&type=chunk)[100](index=100&type=chunk) - As of June **29**, **2025**, the Fourth Amended Credit Facility had **$465,000 thousand** outstanding under the Second Amended Revolver, **$110,000 thousand** under the Second Amended Term Loan, and **$100,000 thousand** under the Third Amended Term Loan[112](index=112&type=chunk) Short-Term Debt and Available Lines of Credit | Metric | June 29, 2025 (in Thousands) | March 31, 2025 (in Thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Short-term borrowings | $29,623 | $28,502 | | Weighted average interest rate | 4.2% | 4.7% | | Available and undrawn lines of credit | $467,853 | $652,552 | | Uncommitted lines of credit | $88,284 | $87,982 | [13 Retirement Plans](index=21&type=section&id=13%20Retirement%20Plans) Net Periodic Benefit Cost for Defined Benefit Pension Plans | Metric | United States Plans (Q1 FY26) | United States Plans (Q1 FY25) | International Plans (Q1 FY26) | International Plans (Q1 FY25) | | :------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Service cost | $0 | $0 | $266 | $239 | | Interest cost | $0 | $166 | $690 | $621 | | Expected return on plan assets | $(10) | $(47) | $(377) | $(351) | | Amortization and deferral | $0 | $(17) | $160 | $144 | | Net periodic benefit cost | $(10) | $102 | $739 | $653 | [14 Stock-Based Compensation](index=21&type=section&id=14%20Stock-Based%20Compensation) - Stock-based compensation expense was **$17,601 thousand** for Q1 FY26, a significant increase from **$7,062 thousand** in Q1 FY25[120](index=120&type=chunk) - In Q1 FY26, the Company granted **3,291 restricted stock units** to non-employee directors (vested immediately) and **18,694 restricted stock units** to management and key employees (vesting over four years)[121](index=121&type=chunk)[122](index=122&type=chunk) - As of June **29**, **2025**, there were **1,276,842 non-qualified stock options**, **926,750 restricted stock units**, and **1,146 TSRs outstanding**[122](index=122&type=chunk) [15 Stockholders' Equity and Noncontrolling Interests](index=22&type=section&id=15%20Stockholders%27%20Equity%20and%20Noncontrolling%20Interests) Common Stock Outstanding | Metric | Shares outstanding as of March 31, 2025 | Shares outstanding as of June 29, 2025 | | :------------------------------------------------------- | :-------------------------------------- | :------------------------------------- | | Beginning balance | 39,192,061 | N/A | | Purchase of treasury stock | (1,740,161) | N/A | | Shares issued under equity-based compensation plans, net | 4,708 | N/A | | Ending balance | N/A | 37,456,608 | - The Company purchased **1,740,161 shares** for **$150,034 thousand** in Q1 FY26, compared to **129,433 shares** for **$11,641 thousand** in Q1 FY25. Treasury stock held increased to **19,383,536 shares** at June **29**, **2025**, from **17,647,529 shares** at March **31**, **2025**[124](index=124&type=chunk) Accumulated Other Comprehensive Income (AOCI), net of tax | Component | March 31, 2025 (in Thousands) | June 29, 2025 (in Thousands) | | :------------------------------------ | :---------------------------- | :--------------------------- | | Pension funded status adjustment | $(10,374) | $(10,251) | | Net unrealized gain (loss) on derivative instruments | $(269) | $193 | | Foreign currency translation adjustment | $(236,836) | $(207,047) | | Total AOCI | $(247,479) | $(217,105) | Reclassifications from AOCI (Q1 FY26) | Component | Amounts Reclassified from AOCI (in Thousands) | Location of (Gain) Loss Recognized on Income Statement | | :------------------------------------ | :------------------------------------------ | :---------------------------------------------------- | | Net unrealized gain on derivative instruments (cash flow hedges) | $(1,337) | Cost of goods sold | | Net unrealized gain on derivative instruments (net investment hedges) | $(1,173) | Interest expense | | Prior service costs and deferrals (pension) | $160 | Net periodic benefit cost | Changes in Equity Attributable to EnerSys Stockholders and Nonredeemable Noncontrolling Interests (Q1 FY26) | Metric | Balance at March 31, 2025 (in Thousands) | Net Change (in Thousands) | Balance at June 29, 2025 (in Thousands) | | :------------------------------------ | :--------------------------------------- | :------------------------ | :-------------------------------------- | | Total EnerSys stockholders' equity | $1,916,078 | $(53,379) | $1,862,699 | | Total equity | $1,919,488 | $(53,339) | $1,866,149 | [16 Earnings Per Share](index=26&type=section&id=16%20Earnings%20Per%20Share) EPS Reconciliation | Metric | Quarter ended June 29, 2025 | Quarter ended June 30, 2024 | | :------------------------------------------------------- | :-------------------------- | :-------------------------- | | Net earnings attributable to EnerSys stockholders (in Thousands) | $57,458 | $70,111 | | Basic weighted-average common shares outstanding | 38,798,263 | 40,204,013 | | Diluted weighted-average common shares outstanding | 39,295,773 | 40,986,116 | | Basic EPS | $1.48 | $1.74 | | Diluted EPS | $1.46 | $1.71 | | Anti-dilutive equity awards not included | 661,088 | 347,099 | [17 Business Segments](index=26&type=section&id=17%20Business%20Segments) - EnerSys operates through four segments: Energy Systems (UPS, telecom, data centers), Motive Power (forklifts, material handling), Specialty (transportation, aerospace, defense, medical), and New Ventures (energy storage and EV charging)[133](index=133&type=chunk)[135](index=135&type=chunk) Net Sales by Segment to Unaffiliated Customers | Segment | Quarter ended June 29, 2025 (in Millions) | Quarter ended June 30, 2024 (in Millions) | Change (YoY) | | :-------------- | :--------------------------------------- | :--------------------------------------- | :------------ | | Energy Systems | $391.4 | $361.0 | +8.4% | | Motive Power | $349.1 | $366.2 | -4.7% | | Specialty | $148.5 | $125.7 | +18.1% | | Other | $4.0 | $0 | NM | | Total Net Sales | $893.0 | $852.9 | +4.7% | Capital Expenditures by Segment | Segment | Quarter ended June 29, 2025 (in Thousands) | Quarter ended June 30, 2024 (in Thousands) | | :-------------- | :--------------------------------------- | :--------------------------------------- | | Energy Systems | $13,678 | $8,776 | | Motive Power | $9,187 | $6,445 | | Specialty | $8,562 | $11,576 | | Other | $1,592 | $9,340 | | Total | $33,019 | $36,137 | Property, Plant and Equipment, net by Segment | Segment | June 29, 2025 (in Thousands) | June 30, 2024 (in Thousands) | | :-------------- | :----------------------------- | :----------------------------- | | Energy Systems | $202,796 | $181,992 | | Motive Power | $134,403 | $132,209 | | Specialty | $255,561 | $223,153 | | Other | $14,369 | $9,716 | | Total | $607,129 | $547,070 | [18 Subsequent Events](index=28&type=section&id=18%20Subsequent%20Events) - On August **6**, **2025**, the Board of Directors approved a quarterly cash dividend of **$0.2625 per share**, payable on September **26**, **2025**, to stockholders of record as of September **12**, **2025**[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on EnerSys' financial condition and results of operations for the quarter ended June 29, 2025, discussing net sales, gross profit, operating expenses, and segment performance, alongside insights into liquidity, capital resources, economic climate, and market risks [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=29&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements, which are subject to risks, uncertainties, and assumptions, and actual results may differ materially from those expressed[141](index=141&type=chunk)[142](index=142&type=chunk) - Key factors that may affect future performance include global economic trends, supply chain disruptions, commodity price volatility, geopolitical risks, and the ability to implement business strategies[143](index=143&type=chunk) [Overview](index=31&type=section&id=Overview) - EnerSys is a global leader in stored energy solutions for industrial applications, designing, manufacturing, and distributing energy systems, motive power batteries, specialty batteries, and related equipment across four operating segments: Energy Systems, Motive Power, Specialty, and New Ventures[146](index=146&type=chunk)[150](index=150&type=chunk) - On July **22**, **2025**, the Company announced a strategic reduction in force plan, targeting an **11% reduction** in non-production global workforce (approximately **575 employees**), expecting **$15.0 million to $20.0 million in one-time cash charges** and approximately **$80.0 million in annualized savings** starting in fiscal **2026**[147](index=147&type=chunk) - On July **26**, **2024**, EnerSys completed the acquisition of Bren-Tronics Defense LLC for **$206.4 million**, a leading manufacturer of portable power solutions for military and defense applications, with financial results reported within the Specialty segment[148](index=148&type=chunk) [Economic Climate](index=31&type=section&id=Economic%20Climate) - Global economic conditions are mixed, influenced by U.S. tariffs, elevated interest rates, and heightened geopolitical tensions (e.g., Ukraine war, Israel-Hamas conflict), with potential impacts on supply chains and ocean freight costs[149](index=149&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) - Inflation remains a challenge, though showing signs of cooling in the U.S. and Europe, with central banks cutting interest rates. China's economy faces challenges from a weakened real estate market and declining exports, despite proactive fiscal measures[152](index=152&type=chunk) - Market demand in forklift and Class **8** truck sectors is impacted by tariff policy uncertainty, while data center and communications markets are less sensitive, with data centers experiencing growth driven by AI and digitization, and defense budgets increasing due to geopolitical tensions[154](index=154&type=chunk) [Volatility of Commodities and Foreign Currencies](index=32&type=section&id=Volatility%20of%20Commodities%20and%20Foreign%20Currencies) - EnerSys' most significant commodity and foreign currency exposures are related to lead and the Euro, respectively, with lead prices ranging from **$1.00 to $0.90 per pound** in fiscal year **2025**[155](index=155&type=chunk) - Costs for other raw materials like steel, acid, separator paper, and electronics have moderated since mid-fiscal year **2024**, but copper prices have seen increases since the beginning of fiscal year **2025**[155](index=155&type=chunk) [Customer Pricing](index=32&type=section&id=Customer%20Pricing) - Customer selling prices have fluctuated to offset volatile commodity costs, with approximately **25% of revenue** subject to market-based lead index adjustments, typically lagging movements by six to nine months[155](index=155&type=chunk) - Customer pricing is expected to be higher in fiscal **2025** compared to fiscal **2024** due to the lag in adjusting for inflationary cost increases, and the emphasis on lead is expected to decline as the company focuses on energy systems and non-lead chemistries[156](index=156&type=chunk) [Primary Operating Capital](index=32&type=section&id=Primary%20Operating%20Capital) Primary Operating Capital and Percentage of Annualized Net Sales | ($ in Millions) | June 29, 2025 | March 31, 2025 | June 30, 2024 | | :---------------------------------------- | :------------ | :------------- | :------------ | | Accounts receivable, net | $566.8 | $597.9 | $507.9 | | Inventory, net | $789.3 | $740.0 | $713.7 | | Accounts payable | $(363.1) | $(405.7) | $(354.7) | | Total primary operating capital | $993.0 | $932.2 | $866.9 | | Trailing 3 months net sales annualized | $3,572.0 | $3,899.2 | $3,411.6 | | Primary operating capital as a % of annualized net sales | 27.8 % | 23.9 % | 25.4 % | - The primary operating capital percentage increased by **390 basis points** to **27.8%** at June **29**, **2025**, compared to March **31**, **2025**, primarily due to increases in inventory for strategic build-up and decreases in accounts payable[157](index=157&type=chunk) - Compared to June **30**, **2024**, the primary operating capital percentage increased by **240 basis points**, driven by the addition of Bren-Tronics balances and strategic inventory build-up, with accounts receivable also increasing due to longer collection terms[158](index=158&type=chunk) [Liquidity and Capital Resources (MD&A section)](index=33&type=section&id=Liquidity%20and%20Capital%20Resources%20(MD%26A%20section)) - EnerSys maintains a strong financial position with **$346.7 million** in cash and cash equivalents and approximately **$468 million** in available and undrawn committed credit lines at June **29**, **2025**, providing substantial liquidity for short-term requirements and anticipated growth[160](index=160&type=chunk) - A substantial majority of the Company's cash and investments are held by foreign subsidiaries for indefinite reinvestment to fund local operations, capital expenditures, and acquisitions[161](index=161&type=chunk) - The Company issued **$300 million** in **6.625%** Senior Notes due **2032** on January **11**, **2024**, using the proceeds to pay down the Fourth Amended Credit Facility, and purchased **$150.0 million** in treasury stock during Q1 FY26[165](index=165&type=chunk)[166](index=166&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section details the financial performance for the first quarter of fiscal 2026 compared to fiscal 2025, highlighting changes in net sales, gross profit, operating expenses, and segment-specific results, along with the impact of restructuring activities and tax rates [Net Sales](index=34&type=section&id=Net%20Sales) Net Sales Performance | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | Change (in Millions) | % Change | | :---------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Net sales | $893.0 | $852.9 | $40.1 | 4.7% | - The **4.7% increase in net sales** was driven by a **4% increase** from acquisitions, a **1% increase** in price/mix, and a **1% increase** from foreign currency translation, partially offset by a **1% decrease** in organic volume[167](index=167&type=chunk) [Segment sales](index=34&type=section&id=Segment%20sales) Net Sales by Segment to Unaffiliated Customers | Segment | Quarter ended June 29, 2025 (in Millions) | Quarter ended June 30, 2024 (in Millions) | Change (YoY) | | :-------------- | :--------------------------------------- | :--------------------------------------- | :------------ | | Energy Systems | $391.4 | $361.0 | +8.4% | | Motive Power | $349.1 | $366.2 | -4.7% | | Specialty | $148.5 | $125.7 | +18.1% | | Other | $4.0 | $0 | NM | | Total Net Sales | $893.0 | $852.9 | +4.7% | - Energy Systems net sales increased **8.4%** due to higher organic volume (**5%**), price/mix (**2%**), and foreign currency translation (**1%**), driven by network communication and data center customers[168](index=168&type=chunk) - Motive Power net sales decreased **4.7%** primarily due to a **7% decrease** in organic volume from macro uncertainty, partially offset by a **2% increase** from foreign currency translation[169](index=169&type=chunk) - Specialty net sales increased **18.1%** due to a **24% increase** from acquisitions (Bren-Tronics) and **1%** from foreign currency translation, partially offset by a **7% decrease** in organic volume from transportation customers[170](index=170&type=chunk) [Gross Profit](index=34&type=section&id=Gross%20Profit) Gross Profit Performance | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Net Sales (Q1 FY26) | % of Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :----------- | :-------------------- | :-------------------- | :----------------------- | :----------------------- | :------------------- | :--------- | | Gross Profit | $253.2 | $238.4 | 28.4% | 28.0% | $14.8 | 6.2% | - Gross profit increased by **$14.8 million** or **6.2% YoY**, with the gross profit margin as a percentage of net sales remaining flat, reflecting the greater impact of **45X** benefits and favorable price/mix offset by higher freight and materials costs[171](index=171&type=chunk) [Operating Items](index=35&type=section&id=Operating%20Items) Operating Expenses and Restructuring Charges | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Total Net Sales (Q1 FY26) | % of Total Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Operating expenses | $160.8 | $141.2 | 18.0% | 16.5% | $19.6 | 14.0% | | Restructuring and other exit charges | $5.9 | $5.9 | 0.7% | 0.7% | $0 | -1.3% | - Operating expenses increased by **$19.6 million** or **14.0% YoY**, and as a percentage of sales, increased by **150 basis points**, driven by a **$3.5 million increase** in selling expenses and an additional **$10.2 million** in accelerated stock compensation expense[172](index=172&type=chunk)[173](index=173&type=chunk) [Restructuring and Other Exit Charges (MD&A)](index=35&type=section&id=Restructuring%20and%20Other%20Exit%20Charges%20(MD%26A)) - Q1 FY26 restructuring charges included **$0.8 million** for Energy Systems and **$0.5 million** for Motive Power. Q1 FY25 charges included **$3.0 million** for Energy Systems, **$0.8 million** for Motive Power, and **$0.3 million** for Specialty[174](index=174&type=chunk)[175](index=175&type=chunk) - The July **22**, **2025** reduction in force plan is expected to incur **$15.0 million to $20.0 million in one-time cash charges**, primarily in Q2 and Q3 FY26[176](index=176&type=chunk) - The plan to close the Monterrey, Mexico facility, approved April **1**, **2025**, is expected to incur approximately **$13.7 million** in pre-tax charges, with **$4.0 million** in severance costs recorded in Q1 FY26[177](index=177&type=chunk)[178](index=178&type=chunk) - The Ooltewah, Tennessee facility closure plan was completed in Q1 FY26, resulting in a **$1.1 million gain** from the sale of the building during the quarter[189](index=189&type=chunk)[193](index=193&type=chunk) [Operating Earnings](index=38&type=section&id=Operating%20Earnings) Operating Earnings by Segment | Metric | Energy Systems (Q1 FY26) | Motive Power (Q1 FY26) | Specialty (Q1 FY26) | Total (Q1 FY26) | Energy Systems (Q1 FY25) | Motive Power (Q1 FY25) | Specialty (Q1 FY25) | Total (Q1 FY25) | | :--------------------------------------- | :----------------------- | :--------------------- | :-------------------- | :---------------- | :----------------------- | :--------------------- | :-------------------- | :---------------- | | Segment income (in Millions) | $27.4 | $46.7 | $9.6 | $114.3 | $19.0 | $56.0 | $4.9 | $105.7 | | Total operating earnings (in Millions) | $13.9 | $37.8 | $4.2 | $86.5 | $9.0 | $54.4 | $2.1 | $91.3 | - Overall operating earnings decreased by **$4.8 million** or **5.3% YoY**, with operating earnings as a percentage of net sales decreasing by **100 basis points**[201](index=201&type=chunk) - Energy Systems operating earnings as a percentage of sales increased by **170 basis points** due to improved price/mix, higher volumes, and lower operating costs. Specialty operating earnings as a percentage of sales increased by **260 basis points**, primarily from the accretive benefit of the Bren-Tronics acquisition[202](index=202&type=chunk)[204](index=204&type=chunk) - Motive Power operating earnings as a percentage of sales decreased by **190 basis points**, driven by lower sales volumes and higher commodity costs, partially offset by favorable price/mix[203](index=203&type=chunk) [Interest Expense](index=39&type=section&id=Interest%20Expense) Interest Expense Comparison | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Total Net Sales (Q1 FY26) | % of Total Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :------------- | :-------------------- | :-------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Interest expense | $11.3 | $11.0 | 1.3% | 1.3% | $0.3 | 3.0% | - Interest expense increased by **$0.3 million** or **3.0% YoY**, primarily due to higher average debt outstanding (**$1,174.9 million** in Q1 FY26 vs. **$910.1 million** in Q1 FY25)[206](index=206&type=chunk) [Other (Income) Expense, Net](index=39&type=section&id=Other%20(Income)%20Expense%2C%20Net) Other (Income) Expense, Net Comparison | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Total Net Sales (Q1 FY26) | % of Total Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Other (income) expense, net | $9.5 | $1.0 | 1% | 0.1% | $8.5 | NM | - Other (income) expense, net, was an expense of **$9.5 million** in Q1 FY26, compared to an expense of **$1.0 million** in Q1 FY25, primarily due to a foreign currency loss of **$6.2 million** in Q1 FY26 (vs. a gain of **$1.3 million** in Q1 FY25)[208](index=208&type=chunk) [Earnings Before Income Taxes](index=39&type=section&id=Earnings%20Before%20Income%20Taxes) Earnings Before Income Taxes Comparison | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Total Net Sales (Q1 FY26) | % of Total Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :--------------------------- | :-------------------- | :-------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Earnings before income taxes | $65.7 | $79.3 | 7.4% | 9.3% | $(13.6) | -17.2% | [Income Tax Expense (MD&A)](index=40&type=section&id=Income%20Tax%20Expense%20(MD%26A)) Income Tax Expense and Effective Tax Rate | Metric | Q1 FY26 (in Millions) | Q1 FY25 (in Millions) | % of Total Net Sales (Q1 FY26) | % of Total Net Sales (Q1 FY25) | Change (in Millions) | % Change | | :---------------- | :-------------------- | :-------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Income tax expense | $8.2 | $9.2 | 1.0% | 1.1% | $(1.0) | -11.0% | | Effective tax rate | 12.5% | 11.6% | N/A | N/A | +0.9% | N/A | - The effective income tax rate increased to **12.5%** in Q1 FY26 from **11.6%** in Q1 FY25, primarily due to the greater impact of Pillar **2** and the mix of earnings among tax jurisdictions[215](index=215&type=chunk) - Foreign income is estimated to be **52% of worldwide income** for fiscal **2026** (vs. **49%** for FY25), with foreign effective tax rates increasing to **16%** in Q1 FY26 from **14%** in Q1 FY25, mainly due to Pillar **2**[216](index=216&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the Company's critical accounting policies from those discussed in the **2025** Annual Report[217](index=217&type=chunk) [Liquidity and Capital Resources (Cash Flow and Financing Activities)](index=41&type=section&id=Liquidity%20and%20Capital%20Resources%20(Cash%20Flow%20and%20Financing%20Activities)) - Operating activities provided **$1.0 million** in cash in Q1 FY26, a decrease from **$10.4 million** in Q1 FY25, mainly due to changes in accounts receivable, inventory, prepaid assets, accrued expenses, and accounts payable[218](index=218&type=chunk) - Investing activities used **$41.4 million** in Q1 FY26, primarily for acquisitions (**$12.6 million**) and capital expenditures (**$33.0 million**), partially offset by **$4.2 million** from asset disposals[219](index=219&type=chunk) - Financing activities provided **$26.0 million** in cash in Q1 FY26, including **$231.7 million** in revolver borrowings, **$150.0 million** in treasury stock purchases, and **$9.1 million** in dividends paid[221](index=221&type=chunk) - The effect of exchange rate changes had a positive impact of **$18.0 million** on cash in Q1 FY26, leading to a total cash and cash equivalents increase of **$3.5 million** to **$346.7 million**[223](index=223&type=chunk)[224](index=224&type=chunk) [Compliance with Debt Covenants](index=41&type=section&id=Compliance%20with%20Debt%20Covenants) - EnerSys is in compliance with all covenants and conditions under its Fourth Amended Credit Facility and Senior Notes, and expects to continue to comply, with sufficient financial resources for organic growth and acquisitions[230](index=230&type=chunk) - The Fourth Amended Credit Facility, maturing September **30**, **2026**, includes a **$130.0 million** senior secured term loan, a CAD **106.4 million** term loan, and an **$850.0 million** senior secured revolving credit facility, with interest calculated using SOFR[225](index=225&type=chunk)[228](index=228&type=chunk) [Contractual Obligations and Commercial Commitments](index=42&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) - As of June **29**, **2025**, there were no significant changes to the Company's contractual obligations table presented in its **2025** Annual Report[231](index=231&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details EnerSys' exposure to market risks, including raw material costs, foreign currency exchange rates, and interest rates, and outlines the strategies and derivative instruments used to manage these risks [Market Risks](index=42&type=section&id=Market%20Risks) - EnerSys' cash flows and earnings are exposed to fluctuations in raw material costs, foreign currency exchange rates, and interest rates, which are managed through internal policies and derivative financial instruments, without engaging in speculative trading[232](index=232&type=chunk) [Counterparty Risks](index=42&type=section&id=Counterparty%20Risks) - The Company uses lead forward purchase contracts, foreign exchange forward and option contracts, interest rate swaps, and cross currency fixed interest rate swaps with creditworthy financial institutions to manage market risks[233](index=233&type=chunk) - Cross-currency fixed interest rate swap contracts with an aggregate notional amount of **$600 million** are used to hedge net investments in foreign operations against U.S. dollar and Euro exchange rate volatility, maturing between December **2026** and January **2029**[234](index=234&type=chunk) [Interest Rate Risks](index=43&type=section&id=Interest%20Rate%20Risks) - EnerSys is exposed to variable U.S. interest rates on its credit agreements and foreign short-term borrowings, using interest rate swap agreements to convert **$200.0 million** of variable-rate debt to a fixed-rate basis[236](index=236&type=chunk) - A **100 basis point increase** in interest rates would have increased annual interest expense by approximately **$5.0 million** on the variable rate portions of the Company's debt[237](index=237&type=chunk) [Commodity Cost Risks – Lead Contracts](index=43&type=section&id=Commodity%20Cost%20Risks%20–%20Lead%20Contracts) Lead Forward Contracts Outstanding | Date | $'s Under Contract (in millions) | Pounds Purchased (in millions) | Average Cost/Pound | Approximate % of Lead Requirements (1) | | :------------- | :----------------------------- | :------------------------------- | :----------------- | :------------------------------------- | | June 29, 2025 | $96.1 | 107.0 | $0.90 | 23% | | March 31, 2025 | $63.8 | 70.0 | $0.91 | 8% | | June 30, 2024 | $45.2 | 45.0 | $1.01 | 9% | - Approximately **66% of the Company's lead cost requirements** for the remaining quarter of this fiscal year are known, considering existing hedge contracts, purchased lead, and the lead tolling program[239](index=239&type=chunk) - A **10% increase** in the cost of lead is estimated to have increased the cost of goods sold by approximately **$16.0 million** in the three months of fiscal **2026**[239](index=239&type=chunk) [Foreign Currency Exchange Rate Risks](index=43&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risks) - Approximately **40% of EnerSys' sales** and related expenses are transacted in foreign currencies, with the largest exposure from the purchase and conversion of U.S. dollar-based lead costs into local European currencies[240](index=240&type=chunk)[241](index=241&type=chunk) - The Company hedges **5% - 10% of its known annual foreign exchange transactional exposures**, primarily using foreign currency forward contracts that generally settle within one year[243](index=243&type=chunk) - An unfavorable **10% movement** in exchange rates would have adversely changed hedge valuations by approximately **$80.5 million** at June **29**, **2025**, compared to **$28.2 million** at June **30**, **2024**[245](index=245&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of EnerSys' disclosure controls and procedures and reports no material changes to internal control over financial reporting, while noting the ongoing assessment for the recently acquired Bren-Tronics [Disclosure Controls and Procedures](index=44&type=section&id=Disclosure%20Controls%20and%20Procedures) - Management, with the participation of the CEO and CFO, concluded that EnerSys' disclosure controls and procedures were effective as of June **29**, **2025**[246](index=246&type=chunk) [Internal Control Over Financial Reporting](index=44&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) - There was no material change in EnerSys' internal control over financial reporting during the quarter ended June **29**, **2025**[247](index=247&type=chunk) - The assessment of internal control over financial reporting excludes the recently acquired Bren-Tronics, which accounted for approximately **3% of sales** and **5% of total assets** as of June **29**, **2025**[247](index=247&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 for details on legal proceedings, indicating the company is routinely involved in litigation incidental to its business - EnerSys is routinely involved in litigation incidental to the conduct of its business, with further details provided in Note **10** to the Consolidated Condensed Financial Statements[248](index=248&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the Company's 2025 Annual Report on Form 10-K for a comprehensive discussion of risk factors that could materially affect the business - Readers should refer to Part I, Item **1A**. Risk Factors in the Company's **2025** Annual Report on Form **10-K** for a detailed discussion of factors that could materially affect the business, financial condition, or future results[249](index=249&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes the company's purchases of equity securities, including shares bought from equity incentive plan participants and repurchases authorized by the Board of Directors [Purchases of Equity Securities](index=46&type=section&id=Purchases%20of%20Equity%20Securities) Purchases of Equity Securities | Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs | | :---------------------- | :---------------------------------------- | :------------------------------------- | :------------------------------------------------------------------------ | :---------------------------------------------------------------------------------------------------------------- | | April 1- April 30, 2025 | 0 | $0 | 0 | $207,554,607 | | May 1 - May 31, 2025 | 323,782 | $83.17 | 323,560 | $180,642,954 | | June 1 - June 29, 2025 | 1,416,601 | $86.91 | 1,416,601 | $57,520,613 | | Total | 1,740,383 | $86.22 | 1,740,161 | N/A | - The Board of Directors authorized repurchases up to the dilutive effects of equity-based awards and stock option exercises (approximately **$34.0 million**). Additionally, a **$200.0 million** stock repurchase authorization was established on November **6**, **2024**, with no expiration date[252](index=252&type=chunk)[253](index=253&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable', indicating no mine safety disclosures are required for EnerSys - This item is not applicable to EnerSys[254](index=254&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section states that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - During the quarter ended June **29**, **2025**, no directors or officers adopted or terminated a "Rule **10b5-1** trading arrangement" or a "non-Rule **10b5-1** trading arrangement"[255](index=255&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, certifications, and XBRL taxonomy documents - The report includes a list of exhibits, such as the Fifth Restated Certificate of Incorporation, Fifth Amended and Restated Bylaws, various letter agreements, and certifications (e.g., Rule **13a-14(a)/15d-14(a)**, **18** U.S.C. Section **1350**), along with XBRL taxonomy documents[256](index=256&type=chunk) [SIGNATURES](index=48&type=section&id=SIGNATURES) This section contains the required signatures, certifying the filing of the report on behalf of EnerSys by its Chief Financial Officer - The report is duly signed on behalf of EnerSys by Andrea J. Funk, Chief Financial Officer, on August **6**, **2025**[260](index=260&type=chunk)

Company Overview - EnerSys shares have increased by approximately 2.8% since the last earnings report, outperforming the S&P 500 [1] - Recent estimates for EnerSys have trended downward, with a consensus estimate shift of -13.23% [2] Performance Metrics - EnerSys has a Growth Score of B and a Momentum Score of C, while it received an A grade for value, placing it in the top 20% for this investment strategy [3] - The overall VGM Score for EnerSys is A, indicating strong performance across multiple investment strategies [3] Outlook - The downward trend in estimates suggests a negative outlook for EnerSys, reflected in its Zacks Rank of 4 (Sell), indicating expectations of below-average returns in the coming months [4] Industry Comparison - EnerSys is part of the Zacks Manufacturing - Electronics industry, where Emerson Electric has seen a 9.6% increase in shares over the past month [5] - Emerson Electric reported revenues of $4.43 billion for the last quarter, with a year-over-year change of +1.3% and an EPS of $1.48, up from $1.36 a year ago [5] - For the current quarter, Emerson Electric is expected to post earnings of $1.51 per share, reflecting a +5.6% change from the previous year [6]

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]