EnerSys(ENS) - 2025 Q4 - Earnings Call Transcript

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]