Core Insights - EnerSys reported Q3 CY2025 revenue of $951.3 million, exceeding analyst expectations of $890.3 million, reflecting a year-on-year growth of 7.6% [1][6] - The company’s non-GAAP profit per share was $2.56, surpassing analysts' consensus estimates by 8.8% [1][6] - EnerSys raised its revenue guidance for Q4 CY2025 to $940 million at the midpoint, which is 1.4% above analyst estimates [1][6] Financial Performance - Adjusted EBITDA for the quarter was $146 million, with a margin of 15.3%, beating analyst estimates of $132.3 million [6] - Operating margin decreased to 9.7% from 11.2% in the same quarter last year [6] - Sales volumes increased by 3% year on year, compared to a decline of 3% in the same quarter last year [6] Market and Strategic Insights - The positive performance was attributed to growth in data center and aerospace and defense markets, along with strength in the Energy Systems segment [3] - Management emphasized operational improvements from the EnerGize strategic framework, focusing on reallocating resources to high-impact projects [3] - Anticipated benefits from ongoing cost reductions and expanding data center demand are expected to drive future growth [4] Future Outlook - The company expects continued margin improvement in Energy Systems and a targeted ramp-up in lithium battery production [4] - CFO noted that while lithium-related costs may temporarily pressure margins, ongoing improvements in gross margin are anticipated [4] - Management is optimistic about restructuring benefits and new product introductions driving operating leverage despite mixed end market conditions [4]

Group 1 - The article emphasizes the importance of enabling Javascript and cookies in browsers to prevent access issues [1] - It highlights that users with ad-blockers may face restrictions when trying to access content [1]

Financial Data and Key Metrics Changes - Net sales increased by 8% year over year, reaching a record high of $951 million for the second quarter [4][15] - Adjusted diluted EPS rose by 21% to $2.56 per share, marking a record high for the fiscal second quarter [16] - Adjusted operating earnings increased by 13%, with adjusted EBITDA also up by 13% [4][15] Business Line Data and Key Metrics Changes - Energy systems revenue grew by 14% year over year to $435 million, with adjusted operating earnings up 38% [17] - Motive power revenue decreased by 2% to $360 million, with adjusted operating earnings down by $10 million [18] - Specialty revenue increased by 16% to $157 million, driven by organic volume growth and the Bren-Tronics acquisition [19] Market Data and Key Metrics Changes - Data center market revenue grew by 29% year over year, indicating strong demand [35] - Communications sector showed signs of recovery, with increased spending on network refreshes rather than expansions [11][39] - A&D (Aerospace and Defense) demand remained robust, with expectations for increasing sales in upcoming quarters [12][40] Company Strategy and Development Direction - The company is focusing on its Energize strategic framework to optimize core operations and accelerate growth [5][6] - Three centers of excellence have been launched to enhance innovation and reduce costs [6][7] - The company is evaluating its lithium cell supply options and plans to provide updates on a new lithium factory [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in offsetting tariff impacts through proactive supply chain actions [10] - The order book reflects dynamic market conditions, with expectations for improving macro conditions to stabilize demand [11] - The company anticipates continued earnings growth, with adjusted operating earnings growth expected to outpace revenue growth [25][46] Other Important Information - Free cash flow for the quarter was strong at $197 million, with a conversion rate of 288% [21] - The company repurchased 636,000 shares for $68 million during the quarter, demonstrating a commitment to returning value to shareholders [23] - The next Investor Day is scheduled for June 11, 2026, in New York City [14] Q&A Session Summary Question: What end markets are most impacted by demand pull-ins and customer spending shifts? - Management noted that the communication sector was significantly impacted, with customers front-loading their orders due to large acquisitions [27][28] Question: How are elevated lithium costs affecting margins? - Management explained that higher costs are due to sourcing from China and that margins will be pressured until production ramps up [30] Question: What is the outlook for gross margins? - Management indicated that gross margins are expected to improve, driven by price mix improvements and ongoing cost reduction initiatives [32][34] Question: Can you provide an update on the data center revenue? - Data center revenue was up 29% year over year, with strong opportunities for growth in lead-acid and UPS systems [35][36] Question: What is the impact of the government shutdown on A&D demand? - Management reported that while there were some impacts, overall A&D demand remains strong, particularly in advanced defense applications [40]

Q2 FY'26 Performance - Net sales reached $951 million, an increase of 8% year-over-year[12,37] - Adjusted EPS ex 45X was $1.51, up 15% year-over-year[11,12] - Adjusted operating earnings were $130 million, a 13% increase year-over-year, or a 10% increase excluding 45X benefits[12] - Free cash flow was $197 million, a significant increase of $194 million year-over-year[12] - Adjusted gross margin was 29.1%, up 40 bps year-over-year, but excluding 45X, it was 24.9%, flat year-over-year[13] Tariff Mitigation - The company faces approximately $70 million in annualized tariff exposure[17] - 78% of US supply is sourced from US or USMCA compliant regions, limiting tariff exposure[22] - 65% of global revenue is in the US[22] Demand Trends - Q2'26 orders decreased 1% year-over-year and 7% quarter-over-quarter[28] - Q2'26 book-to-bill ratio was 0.90, down year-over-year and quarter-over-quarter[28] - Q2'26 backlog decreased 8% year-over-year and 10% quarter-over-quarter[26] Q3'26 Guidance - Net sales are projected to be between $920 million and $960 million, representing a 4% year-over-year increase at the midpoint[57] - Adjusted EPS is expected to be between $2.71 and $2.81, but excluding 45X, it's projected at $1.64 to $1.74, a 46% increase[57] - The company anticipates a $35 million to $40 million IRC 45X benefit to the cost of sales[57]

Core Insights - EnerSys reported revenue of $951.3 million for the quarter ended September 2025, reflecting a year-over-year increase of 7.7% and a surprise of +7.1% over the Zacks Consensus Estimate of $888.23 million [1] - The company's EPS for the quarter was $2.56, up from $2.12 in the same quarter last year, resulting in an EPS surprise of +8.47% compared to the consensus estimate of $2.36 [1] Revenue Breakdown - Specialty Net Sales reached $156.9 million, exceeding the two-analyst average estimate of $137.45 million, with a year-over-year change of +16.4% [4] - Motive Power Net Sales were reported at $359.7 million, slightly above the average estimate of $355.69 million, but showing a year-over-year decline of -1.9% [4] - Energy Systems Net Sales amounted to $434.7 million, surpassing the two-analyst average estimate of $394.33 million, with a year-over-year increase of +13.8% [4] Stock Performance - EnerSys shares have returned +8.8% over the past month, outperforming the Zacks S&P 500 composite, which saw a +1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Insights - EnerSys reported quarterly earnings of $2.56 per share, exceeding the Zacks Consensus Estimate of $2.36 per share, and showing an increase from $2.12 per share a year ago, representing an earnings surprise of +8.47% [1] - The company achieved revenues of $951.3 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 7.10% and up from $883.7 million year-over-year [2] - EnerSys shares have increased by approximately 33.2% since the beginning of the year, outperforming the S&P 500's gain of 15.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.53, with expected revenues of $927.95 million, and for the current fiscal year, the EPS estimate is $9.76 on revenues of $3.69 billion [7] - The estimate revisions trend for EnerSys was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Manufacturing - Electronics industry, to which EnerSys belongs, is currently ranked in the top 17% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Core Viewpoint - EnerSys, a global leader in stored energy solutions, has declared a quarterly cash dividend of $0.2625 per share, payable on December 26, 2025, to shareholders of record as of December 12, 2025 [1] Company Overview - EnerSys specializes in stored energy solutions for industrial applications, including the design, manufacturing, and distribution of energy systems solutions and motive power batteries, as well as specialty batteries [1]

Workforce Reduction and Restructuring - The company announced a reduction in force plan to reduce non-production global workforce by approximately 11%, or about 575 employees, with estimated one-time cash charges between $15.0 million to $20.0 million[160] - The company announced a reduction in force plan expected to reduce the global workforce by approximately 11%, or about 575 employees, with one-time cash charges estimated at $20.0 million[195] - The company plans to close its Monterrey, Mexico facility, incurring a pre-tax charge of approximately $13.7 million, with $12.2 million in cash charges expected for severance and related costs[196] - The company recorded a $3.9 million severance cost during the first half of fiscal 2026 related to restructuring efforts[197] - The company incurred cash charges of $9.2 million related to the closure of the Ooltewah, Tennessee facility, which produced flooded motive power batteries[207] Financial Performance - Net sales increased by $67.6 million or 7.7% in Q2 fiscal 2026 compared to Q2 fiscal 2025, driven by a 3% increase in organic volume and pricing[182] - Net sales for the first six months of fiscal 2026 rose by $107.7 million or 6.2% compared to the same period in fiscal 2025, attributed to a 2% increase in acquisitions and pricing[183] - Gross profit increased by $25.1 million or 9.9% in Q2 fiscal 2026, with gross profit margin improving by 60 basis points compared to Q2 fiscal 2025[189] - Operating earnings for the quarter ended September 28, 2025, were $92.0 million, a decrease of 7.4% from $99.4 million in the same quarter of the previous year[217] - Operating earnings decreased by $12.2 million or 6.4% for the six months of fiscal 2026 compared to the same period in fiscal 2025[220] - Earnings before income taxes for the six months ended September 28, 2025, were $142.1 million, down 13.1% from $163.5 million in the prior year[231] - Income tax expense for the six months ended September 28, 2025, was $16.2 million, a 45.8% increase from $11.1 million in the same period of 2024[233] - Interest expense remained flat at $23.5 million for the six months of fiscal 2026, compared to the same period in fiscal 2025[224] - Other (income) expense, net for the six months ended September 28, 2025, was an expense of $12.9 million, significantly higher than $3.7 million in the prior year[229] Segment Performance - Energy Systems segment net sales increased by $52.6 million or 13.8% in Q2 fiscal 2026, with a 10% increase in organic volume[185] - Motive Power segment net sales decreased by $7.0 million or 1.9% in Q2 fiscal 2026, primarily due to a 6% decrease in organic volume[186] - Specialty segment net sales increased by $22.0 million or 16.3% in Q2 fiscal 2026, driven by a 7% increase from acquisitions and organic volume[187] - The Energy Systems segment reported operating earnings of $33.6 million, a 37.8% increase from $24.2 million in the prior year[217] - The Motive Power segment experienced a decline in operating earnings to $47.9 million, down 16.7% from $57.6 million year-over-year[217] - The Specialty segment saw a significant increase in operating earnings to $14.6 million, up 97.7% from $7.5 million in the previous year[217] Cash and Liquidity - The company has $388.6 million in available cash and cash equivalents and $489.3 million in undrawn committed credit lines as of September 28, 2025[172] - The company purchased 2,375,741 shares for $217.8 million during the first six months of fiscal 2026, indicating strong capital structure and liquidity[181] - Operating activities generated cash of $219.0 million in the first six months of fiscal 2026, a significant increase from $44.0 million in the same period of fiscal 2025[240] - Investing activities used cash of $62.4 million in the first half of fiscal 2026, primarily for capital expenditures of $53.9 million and acquisitions of $12.7 million[242] - Financing activities used cash of $128.2 million in the first six months of fiscal 2026, including treasury stock purchases totaling $217.8 million[244] - Total cash and cash equivalents increased by $45.5 million to $388.6 million in the first half of fiscal 2026, compared to an increase of $74.6 million to $407.9 million in fiscal 2025[246] Market Conditions and Economic Factors - The ongoing geopolitical tensions, including the war in Ukraine and the Israel-Hamas conflict, are impacting global economic conditions and supply chains[164] - Inflation remains a challenge in North America, China, and EMEA, although it is somewhat more controlled compared to sharp increases in 2023[165] - The data center market is currently in a growth cycle driven by AI and increasing digitization, while the communications market is experiencing a slow spending recovery[167] - The company anticipates that selling prices will be higher in fiscal 2025 compared to fiscal 2024 due to inflationary cost increases[169] Commodity and Foreign Exchange Exposure - The company experienced fluctuations in lead prices, ranging from approximately $1.00 per pound to $0.90 per pound in fiscal year 2025, impacting production costs[168] - Approximately 25% of the company's revenue is now subject to agreements that adjust pricing based on a market-based index for lead, with customer pricing changes generally lagging behind commodity price movements by six to nine months[168] - The company has forward contracts for lead, with a total value of $95.2 million for 104.4 million pounds at an average cost of $0.91 per pound, covering 18% of lead requirements[262] - Approximately 93% of the cost of lead requirements is known for the remaining quarter of the fiscal year, considering hedge contracts and FIFO accounting policy[263] - A 10% increase in the cost of lead would have raised the cost of goods sold by approximately $18.0 million in the three months of fiscal 2026[264] - About 40% of sales and related expenses are transacted in foreign currencies, impacting sales revenue and profit margins[265] - The largest foreign currency exposure arises from converting U.S. dollar-based lead costs into local currencies in Europe[266] - The company hedges approximately 5% - 10% of its known annual foreign exchange transactional exposures[267] - Gains and losses from hedging instruments offset foreign exchange gains or losses on the underlying assets and liabilities[268] - An unfavorable 10% movement in exchange rates would have adversely changed hedge valuations by approximately $81.0 million and $48.8 million at September 28, 2025, and September 29, 2024, respectively[269] Taxation - The company continues to monitor the impact of global tax legislation, including the OECD's Pillar 2, which may affect future tax rates[234] - The consolidated effective income tax rates for Q2 fiscal 2026 and 2025 were 10.5% and 2.3%, respectively, with a six-month rate of 11.4% for fiscal 2026 compared to 6.8% for fiscal 2025[237] - Foreign income accounted for 53% of worldwide income for both fiscal 2026 and 2025, with foreign effective tax rates increasing from 15% in fiscal 2025 to 17% in fiscal 2026[238]

Core Insights - EnerSys reported a strong performance in its second quarter of fiscal 2026, with net sales increasing by 8% compared to the previous year [1] Financial Performance - The company achieved net sales growth of 8% in the second quarter, reflecting solid execution and a commitment to continuous improvement [1] - Adjusted diluted earnings per share (EPS) figures were also highlighted, indicating positive financial health [1] Management Commentary - Shawn O'Connell, President and CEO of EnerSys, emphasized the importance of collaboration across the organization in driving performance [1]

Core Points - EnerSys will release its second quarter fiscal 2026 financial results on November 5, 2025, after market close, with a conference call scheduled for November 6, 2025, at 9:00 AM ET [1][2] - The company is a global leader in stored energy solutions for industrial applications, offering a range of products including energy systems, motive power batteries, specialty batteries, and battery chargers [3] Financial Information - The second quarter fiscal 2026 results will cover the period ending September 28, 2025 [1] - EnerSys has previously reported a revenue of $893 million for the first quarter fiscal 2026, reflecting a 5% year-over-year increase [9] Company Overview - EnerSys designs, manufactures, and distributes energy systems solutions and batteries for various applications, including telecommunications, utilities, and electric vehicles [3] - The company operates through four business lines: Energy Systems, Motive Power, Specialty, and New Ventures [3] - EnerSys provides customer support services in over 100 countries [3]