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EnerSys(ENS) - 2026 Q1 - Earnings Call Transcript
2025-08-07 14:00
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]