Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EnerSys (ENS, Financial) delivered EPS at the midpoint of guidance and maintained strong pricing strategies.
- The company reported a healthy backlog with the first sequential increase in energy systems backlog in eight quarters.
- Motive Power segment showed strong performance with increased volumes and margins, driven by demand for maintenance-free offerings.
- EnerSys (ENS) is making progress on strategic priorities, including the development of a domestic lithium plant and the acquisition of Bren-Tronics.
- The company increased its full-year fiscal 2025 revenue and EPS guidance, reflecting confidence in future performance.
Negative Points
- Revenue was slightly below the low-end of guidance due to uneven demand across key end markets.
- Gross margin was impacted by lower sales and a weaker product mix, particularly in high-margin power electronics.
- The specialty segment faced challenges with a dramatic softening in the Class 8 truck OEM market.
- Operating cash flow was affected by typical year-end payouts and delayed IRA monetization.
- EnerSys (ENS) faces macroeconomic uncertainties, which could impact future demand and financial performance.
Q & A Highlights
Q: Can you explain the expected revenue growth in the second half of the fiscal year, particularly the $300 million increase from the first half?
A: David Shaffer, CEO, explained that the growth is expected from the recovery in Energy Systems (ES), stability in Motive Power, and contributions from the Bren-Tronics acquisition. Andrea Funk, CFO, added that ES will see increased demand, particularly in wireless and data centers, while Motive Power will benefit from new product introductions and specialty will see growth from aftermarket and premium auto sectors.
Q: What are the main drivers for the expected recovery in Energy Systems?
A: David Shaffer, CEO, noted that the recovery is driven by network resiliency investments in wireless and hybrid fiber coaxial networks. The deferred spending on network resiliency is now coming back, and there is momentum in order books, particularly in America, with a book-to-bill ratio of 1.09.
Q: How is the data center market impacting EnerSys, and what is the timeline for realizing revenue from new data center contracts?
A: David Shaffer, CEO, stated that data centers are a strong market for EnerSys, with a typical six-month notice for new opportunities. The demand for data centers is a bright spot, and EnerSys expects double-digit growth in this sector for the full year.
Q: Can you provide an update on the lithium plant and the impact of lithium-ion cell tariffs?
A: David Shaffer, CEO, mentioned that EnerSys is preparing for the lithium plant by working with Verkor and conducting environmental assessments. The 25% tariff on lithium-ion cells from China has been factored into their model, and they are awaiting the Department of Energy's decision on grant funding, which will influence the final budget and timeline.
Q: Is the $60 million increase in revenue guidance solely due to the Bren-Tronics acquisition?
A: Andrea Funk, CFO, confirmed that the increase is primarily due to Bren-Tronics. The guidance is conservative due to the transition period and seasonality, with expectations for revenue to ramp up in the fourth quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
