- Net Sales: $936 million, up 5% from prior year, driven by a 3% benefit from price mix, a 1% benefit from volumes, and a 1% benefit from foreign currency translation.
- Gross Profit: $313 million, up $60 million or 24% versus prior year period.
- Gross Margin: 33.5%, up 510 basis points; excluding tariff refunds, gross margin was up 180 basis points over Q1 2026.
- Adjusted Operating Earnings: Up 47% versus prior year, with adjusted operating margin improvement of 550 basis points.
- Adjusted EBITDA: Up 50% versus prior year, with adjusted EBITDA margin up 630 basis points.
- Adjusted Diluted EPS: Increased 65% over prior year; after excluding tariff refunds, adjusted EPS was up 36% with 45X, and 42% excluding 45X.
- Free Cash Flow: $218 million for the quarter versus negative $32 million in prior year Q1.
- Operating Cash Flow: $230 million, offset by CapEx of only $12 million.
- Network Infrastructure Solutions Revenue: Increased 9% from prior year to $428 million, with adjusted operating margin of 10.5%, up 280 basis points.
- Industrial Mobility Solutions Revenue: Decreased 3% from prior year to $407 million, with adjusted operating margins of 9.3%, down 70 basis points.
- Precision Power Solutions Revenue: Increased 24% from prior year to $101 million, with adjusted operating margin of 18.2%, up 280 basis points.
- Orders: Q1 2027 orders were up 7% versus prior year, with book-to-bill at 1.06x.
- Data Center Orders: Up over 80% versus prior year.
- Transportation Orders: Nearly doubled versus prior year in Q1 2027.
- Material Handling Orders: Down high single digits versus prior year.
- Capital Expenditures: $12 million in the quarter versus $33 million in Q1 2026.
- Share Repurchases: Purchased 219,000 shares for $50 million at an average price of approximately $229 per share.
- Dividend: Increased quarterly dividend by 10% to $0.2875 per share for the second quarter of fiscal 2027.
Release Date: August 13, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record Q1 FY2027 results with net sales up 5% and adjusted EPS up 65% year-over-year, driven by strong price mix, higher volumes, and disciplined cost management.
- Exceptional free cash flow of $218 million in Q1, with a 187% conversion rate, supported by a $115 million tax refund and improved working capital efficiency.
- Strong growth in key markets: data center orders up over 80% year-over-year, aerospace and defense revenue up 24%, and communications delivering record shipments.
- Secured a $150 million DOE grant for a new US lithium manufacturing facility, expected to generate a mid-20% IRR and strengthen FEOC-compliant supply chain for defense applications.
- Successful launch of DataSafe Noir lithium offering with strong customer enthusiasm, 100 systems in supply chain, and over 500 units in active quotation, positioning for revenue growth in FY2028.
- Improved gross margin by 510 basis points (or 180 bps excluding tariff refunds) and adjusted operating margin by 550 basis points, reflecting operational efficiency and favorable mix.
- Capital returns to shareholders: repurchased $50 million in shares and increased quarterly dividend by 10%, with nearly $900 million remaining in buyback authorization.
- Positive leading indicators for material handling recovery, including transportation orders nearly doubling and industry data suggesting a rebound in the back half of FY2027.
Negative Points
- Industrial Mobility Solutions revenue declined 3% year-over-year due to continued weakness in material handling demand, with adjusted operating margin down 70 basis points.
- Material handling orders were down high single digits in Q1, and the recovery is expected to be delayed, with confidence in improvement only in the back half of FY2027.
- Q2 FY2027 guidance implies modest sequential revenue growth of ~2.5%, impacted by summer seasonality and a high prior-year revenue base, with stronger growth expected only in H2.
- The new lithium plant requires a significant net investment of ~$500 million, with construction starting in FY2028 and full production not expected until ~3 years later, delaying returns.
- Ongoing tariff exposure remains a risk, despite receiving $31 million in refunds, and the company continues to manage through a volatile trade policy environment.
- The company's adjusted EPS growth in Q1 was significantly boosted by one-time tariff refunds ($0.63 per share) and 45X tax benefits, which are not part of core operational performance.
- The transition to new products (e.g., Gen 2 lithium in Motive Power) may be causing customers to delay orders, potentially impacting near-term volumes in IMS.
Q & A Highlights
Q: Can you provide context around the 80% year-over-year increase in data center orders and confirm if the newly launched lithium-ion product already has orders in hand?
A: Shawn O'Connell (CEO) confirmed that the company has already placed the first 100 systems with its supplier to prime the supply chain, and the sales channel and service technicians are fully prepared. CFO Andrea Funk added that while lead-acid data center revenue is expected to grow in the high single to low teens, the strong order intake extends 12 to 36 months out, providing long-term visibility. For the DataSafe Noir lithium offering, there are over 500 units in active quotation and 110,000 campaign impressions, though revenue is not expected to materialize until fiscal 2028.
Q: What are the key assumptions driving the mid-20% IRR for the new lithium plant, and how should we model net CapEx for fiscal 2028?
A: CFO Andrea Funk explained that the high IRR is driven by the premium pricing available for FEOC-compliant cells in the aerospace and defense market, which is critical for national security. The plant will enable expansion into new areas like large-diameter drone batteries. Regarding CapEx, construction is expected to begin in the first half of fiscal 2028, with DOE grant reimbursements arriving on a one-quarter lag. The company is confident it can fund the approximately $500 million net investment entirely through operating cash flow without impacting its leverage ratio.
Q: Can you explain the implied margin expansion in Q2, given the modest sequential revenue growth but strong EPS growth?
A: CFO Andrea Funk noted that earnings growth in the first half of fiscal 2027 is driven primarily by margin expansion, shifting to top-line growth later in the year. Key drivers include the annualization of last year's restructuring actions, benefits from the Monterrey plant closure and 45X credits, additional facility rationalizations (Bellingham and Brazil), and improved cost discipline under the EnerGize framework. The service business, particularly in NIS, has turned from a headwind to a tailwind, contributing to both revenue and margin growth.
Q: How do you ascertain where we are in the material handling cycle, and what gives you confidence in a recovery?
A: CEO Shawn O'Connell cited leading indicators such as forklift truck order data and customer conversations. He noted that Hyster-Yale, a public OEM, reported its strongest booking quarter in three years, signaling green shoots. CFO Andrea Funk added that industry data is choppy but positive, and the company tracks its performance in line with the market. She also highlighted that the upcoming Gen 2 lithium offering (LFP vs. NMC) at a more attractive price point could stimulate demand. The company expects recovery to begin in Q3 of fiscal 2027.
Q: Are you seeing any acceleration in the shift from lead to lithium in the material handling market?
A: CEO Shawn O'Connell stated that the conversion rate from lead to lithium remains steady and consistent with historical trends. The current weakness in material handling is attributed to market effects and pent-up demand rather than substitution effects. CFO Andrea Funk added that the transportation market, which experienced a similar downturn, is now recovering strongly (revenue up 20% in Q1, orders up 91% year-over-year), providing a positive signal for the forklift market to follow.
Q: Are you still on track for UL certification for the DataSafe Noir lithium product, and what are your margin expectations given third-party manufacturing?
A: CEO Shawn O'Connell confirmed the company is on track for UL certification and validations, citing the speed at which they achieved UL and NFPA 855 approval for the more complex Fortix BESS system. He expects margins in line with TPPL offerings, which are higher than lead-acid. The key differentiator is that the DataSafe Noir system can replace a competitor's five-cabinet lithium solution with just two cabinets, offering significant value and space savings to data center customers.
Q: Can you elaborate on the aerospace and defense opportunity, particularly regarding international demand beyond the US?
A: CEO Shawn O'Connell highlighted the company's strong position with the US defense apparatus, built on its history of commercializing defense-developed technologies. The Ukraine conflict has demonstrated the critical role of drones, waking up governments worldwide. Notably, European A&D growth outpaced the Americas for the first time, with expansion underway at the Arras facility in France to support Bren-Tronics' work with the French Ministry of Armed Forces. CFO Andrea Funk added that European growth in 2026 was 2x that of 2025, with production also occurring in the UK and France for allied nations.
Q: How does the evolution of data center architecture, such as the shift to 800-volt systems, change the revenue opportunity per megawatt?
A: CEO Shawn O'Connell stated that the shift to 800-volt systems is a positive development, as it allows the company to sell more cells in centralized systems. He also noted that the new Greenville plant could enable a compelling offering in the battery backup unit (BBU) space for distributed rack systems, a market EnerSys has historically not played in. This aligns with the company's strategy of commercializing defense-developed technologies for commercial applications, with data centers seen as a significant future offtake opportunity for the Greenville facility.
Q: Can you provide more detail on the service business, including its size, growth, and margin contribution?
A: CEO Shawn O'Connell explained that the service business, particularly in NIS, involves specialized electrical construction and implementation. The company has invested in project management software and upskilled its labor force to improve discipline. CFO Andrea Funk noted that NIS services revenue grew around 20% year-over-year in Q1, with margins up approximately 100 basis points for total EnerSys services and even more within the NIS division. This service capability is a key differentiator and enabler for future growth initiatives, including BESS installations.
Q: What is the status of the Fortix BESS system, and how does it fit into the warehouse energy ecosystem?
A: CEO Shawn O'Connell announced that the Fortix 172 kWh BESS received UL and NFPA 855 approval, a critical step in the permitting process for commercial deployment. The system extends EnerSys' position from powering forklifts to optimizing energy across the warehouse. Combined with forklift batteries and Synova chargers, it creates an integrated energy ecosystem offering peak shaving and
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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